Kentucky has a "rainy day fund" that is used as a resource during difficult fiscal times. It is a fund created by state law and is referred to as the Budget Reserve Trust Fund. That state law allows the amount of the Budget Reserve Trust Fund to accumulate to five percent of annual General fund revenues.
The Budget Reserve Trust Fund usually receives its deposits from surplus funds at the end of a fiscal year. This represents either greater General Fund tax revenues than anticipated or unspent General Fund expenditures. The Legislature may also direct funds to the Budget Reserve Trust Fund through the appropriation bills it passes.
The most common use of the Budget Reserve Trust Fund has been to help keep the state's budget balanced when tax revenues are less than anticipated. There also have been times when the Legislature chooses to use the Budget Reserve Trust Fund to finance general spending through the budget bills it passes.
The Budget Reserve Trust Fund was first established in 1988 with an appropriation by the Legislature of $2 million. It grew to a balance of $279 million in 2001. To contend with revenue shortfalls from the recession in the early 2000's the Fund was fully depleted by the end of 2002. During the five year period ending in 2007, the Fund was replenished to a balance of $231 million, mostly from the deposits of a portion of year-end surpluses. That balance was drawn down to $0 during the 2008-2010 recessionary period to prevent significant cutbacks to education and other critical services. A surplus in the General Fund at the end of fiscal year 2011 enabled about $122 million to be deposited; gaining back nearly half of the Fund's pre-recession balance.