Not long ago, the idea that red states can be blue too interested me. The idea being, even though Kentucky politics are predominantly Republican, decades of Democratic control in Frankfort had entrenched government with a size-and-scope more in line with liberal blue states than conservative red states.

Whether the Republican super-majorities in the General Assembly were up to the task of realigning us with those limited-government states was a relevant question.

Evidence continues to pile up that our current course is a far-reaching departure from the past. Exhibit one: last month, Kentucky closed the fiscal year with $3.7 billion in our “rainy-day fund.”

To put this in perspective, when Steve Beshear left office in 2015, there was only $209 million in that fund. Matt Bevin’s balances weren’t much better, although he dedicated annual surpluses to shoring up the state’s pension systems.

The massive influx of federal COVID relief allowed our state general fund surpluses to begin accumulating. For the past few years, steady economic growth and low unemployment have been driving record revenues to the state treasury.

Still, 2021 was an inflection point. The critical decision was deciding not to spend every dollar available, something that is much easier said than done in legislative politics.

Building budget reserves isn’t much of a rallying cry. The benefits of doing so, however, shouldn’t be ignored.

In a period of seven months, two separate natural disasters ravaged eastern and western Kentucky. Because Frankfort had prioritized savings, state government was positioned to provide hundreds of millions of dollars in immediate aid and relief to the devastated communities in those regions.

The improvement in our fiscal health is getting noticed. Credit rating upgrades send a signal to business and investors that we’re getting our financial house in order.

When the economy slows down, a strong rainy-day fund is the best defense against a tax increase. And now, the glide path to a lower, more competitive tax structure is conditioned on sufficient budget reserves.

Kentucky’s personal income tax rate has already dropped a full percentage point. Further reductions are almost certain with the latest good news.

Claiming it “(threatened) Kentucky’s economic future,” Gov. Andy Beshear vetoed the legislation that, over time, will eliminate the state income tax. In this election year, he’s trying to share the credit for the legislature’s bold move.

So, Beshear opposed cutting taxes before he was for it? Somewhere John Kerry is beaming with pride.

2024 is a budget session. The discussion should start with how to maintain the spending restraint delivering these benefits to Kentucky. A debate on what to do with the accumulated balances is also warranted.

Liberal organizations will go back to page one of their playbook, claiming any dollar not spent on government programs will result in the sky falling on Kentuckians. The Republican-controlled Appropriations and Revenue committees will listen respectfully before soundly rejecting these tired and discredited predictions.

In the past, Sen. Chris McDaniel, R-Latonia, has supported rebating the surplus to the taxpayers and, hopefully, will continue to lead that charge. Returning the money to the people who paid it should be the priority. Additional structural changes to the tax code to enhance Kentucky’s long-term competitiveness — like eliminating the death tax — should also be in the mix.

There’s still room for improvement. Frankfort collects and spends far more from taxpayers than Tennessee. Also, we can’t ignore Kentucky’s finances, while improving, still rank near the bottom of states.

The decision by Republicans to set a new course based on pro-growth, conservative fiscal principles is paying off in big ways. Continuing to firm up the new ground we’re standing on is the right path forward.

Andrew McNeill is President of the Kentucky Forum for Rights, Economics & Education and a former Deputy State Budget and Policy Director. His email is amcneill@kyfree.org.