The Office of State Budget Director reported ton Monday that General Fund receipts declined by 7.2 percent in May compared to May 2022. Total revenues for the month were $1,146.0 million.
This is only the third time that May receipts exceeded $1.0 billion. Receipts have now grown 3.4 percent for the first 11 months of FY23.
Individual income tax receipts declined by $148 million due to the 10 percent reduction in the tax rate and a higher amount of tax refunds. Sales and gross receipts rose by 6.2 percent, or $40.0 million, and earnings on investment rose by $19.4 million.
General Fund receipts are still on pace to result in a third consecutive year with a budget surplus in excess of $1 billion.
“Year-over-year monthly revenue declines are now to be expected given the reduction to the individual income tax rate that became effective January 2023,” said State Budget Director John Hicks. “The payroll withholding base continues to rise reflecting higher total Kentucky wages and salaries. The tax rate impact has already been considered in our revenue forecasting. A revenue surplus in excess of $1.0 billion is still expected when the annual revenue total is compared to the estimate used in the creation of the current budget.”
Among the major accounts:
• Sales and use tax receipts increased 6.2 percent for the month and have grown 10.0 percent year-to-date.
• Corporation income and Limited Liability Entity Tax (LLET) tax receipts declined 26.7 percent for the month but have grown 5.1 percent year-to-date.
• Individual income tax collections decreased 25.3 percent, or $147.7 million. All components of the tax were lower than what was collected last May. Prior to the tax rate reduction, individual income tax receipts grew by 8.6 percent through December 2022. Receipts have now decreased 2.2 percent though the 11 months of FY23. May marked the first month in which revenue was collected from the new Pass-Through Entity tax enacted in the 2023 legislative session. Collections for the month were $175,021.
• Property tax collections grew 3.7 percent in May. The public service as well as omitted and delinquent categories increased in May while the remaining components all decreased. Year-to-date receipts are up 7.3 percent.
• Cigarette tax receipts fell 10.5 percent in May and are down 10.1 percent year-to-date.
• Coal severance tax receipts had their first monthly decline in FY23, falling 3.3 percent. Collections have increased 41.5 percent through the first eleven months of the fiscal year.
Road Fund receipts for May totaled $165.3 million, an 11.2 percent increase compared to May 2022 levels. Year-to-date receipts have increased 4.7 percent. The official Road Fund revenue estimate calls for a 2.7 percent increase in revenues for the fiscal year.
The Road Fund is now expected to yield a revenue surplus for FY23. Based on year-to-date tax collections, revenues can decline 16.7 percent in June and still meet the estimate. Among the accounts, motor fuels revenue rose 9.5 percent and motor vehicle usage collections grew 10.9 percent.
License and privilege taxes also posted double digit growth with a 24.2 percent, bringing growth through the first 11 months up to 3.1 percent.
Report is available for review: http://www.osbd.ky.gov