The Office of State Budget Director on Thursday reported General Fund receipts for Fiscal Year 2024 (FY24) totaled $15,571.3 million, exceeding FY23 total revenue by $423.6 million, or 2.8 percent.
General Fund revenues narrowly exceeded the revised, official revenue estimates by $16.8 million in FY24, the most accurate revenue forecast since Kentucky’s consensus forecasting process began in 1996. Final General Fund receipts were $1.4 billion more than the original estimate used when the FY24 budget was set in the 2022 legislative session. That estimate was revised in December 2023 and the General Assembly appropriated all of that forecasted revenue surplus to the Budget Reserve Trust Fund in the 2024 legislative session.
Once the fiscal year’s accounting records are closed later this month, FY24 will reflect the fourth consecutive year with a surplus over $1 billion.
Road Fund revenues totaled $1,874.6 million, $121.3 million, or 6.9 percent greater than the FY23 total. Road Fund revenues narrowly differed from the revised, official FY24 Road Fund estimate, coming in $7.1 million less. The Road Fund receipts for FY24 were $195 million more than the original estimate used when the FY24 budget was set in the 2022 legislative session. That forecasted surplus was appropriated to the Biennial Highway Plan in the 2024 legislative session.
State Budget Director John Hicks stated, “The fiscal health of the Commonwealth is apparent when reviewing the FY24 final General Fund and Road Fund revenue totals. While both funds produced revenues nearly identical to the revised FY24 estimates, they resulted in a substantial surplus when compared to the revenue estimates used in the development of the original FY24 budget. Beyond the economic gains underlying the revenues, the emergence of investment income as a significant General Fund revenue source has occurred in a span of just two fiscal years: $300 million in FY24 and $150 million in FY23, due to higher investible balances and favorable rates of return. By way of comparison, for the ten-year period from FY13 until FY22, investment income averaged negative $2.4 million annually.”
For the year, six of the eight major revenue accounts were within 2.2 percent of the official estimates. Overall, the forecasting differences mostly cancelled each other out, leaving the General Fund collections within 0.1 percent of the official estimate. The “Other” category, which contains investment income, had the largest difference. Individual income taxes were above the estimate by $29.2 million. Corporate and the Limited Liability Entity (LLET) taxes were below the estimate by $28.3 million.
For the year, receipts grew 2.8 percent, or $423.6 million over FY23 levels. Sales and use taxes as well as “Other” receipts both grew by over $200 million while the remaining accounts had only modest changes.
Sales and Use Taxes: Sales and use tax receipts rose $226.3 million over FY23 collections. Receipts were consistent over the first three quarters of the year with revenues growing in the five-to-six percent range in each quarter. The growth slowed over the final quarter. Growth rates for the quarters were 5.5 percent, 5.9 percent, 5.1 percent, and 0.0 percent.
Individual Income Tax: Individual income tax receipts declined due to the tax rate change from 4.5 percent to 4.0 percent as of January 2024, an 11.1 percent reduction. The 2024 rate change is the second tax rate reduction directly linked to House Bill 8 from the 2022 legislative session when the rate was 5.0 percent. While the tax rate was reduced by 11.1 percent, withholding receipts declined by only 6.5 percent, reflecting an increase in wages and salaries in Kentucky. Individual income tax collections were also impacted by the Pass-Through Entity Tax, or PTET, that was enacted in House Bill 5 from the 2023 legislative session. The PTET collects tax payments from a new entity-level tax, tied to the Kentucky individual income tax by a refundable credit that flows through to the members/owners of the pass-through entity. The PTET collections were $791.9 million in FY24. The reductions to the individual income tax associated with the refundable credit are difficult to precisely quantify since they are transactions that are commingled with other tax accounts with activity other than the pass-through entity tax. Therefore, the amount of the PTET collections net of the credits is not available.
Business Taxes: Combined corporation income and Limited Liability Entity tax (LLET) collections grew 2.3 percent, or $27.5 million, compared to last year. Receipts in these accounts were lower than FY23 in each of the first three quarters but grew strongly in the final quarter. Quarterly growth rates for the taxes were -4.4 percent, -4.8 percent, -25.8 percent, and 15.5 percent.
Coal Severance Taxes: After seeing exceptional growth in the past two years, coal severance tax revenues returned to their long-term trend as receipts declined by 19.4 percent. Receipts for the year were $77.8 million, $18.7 million less than what was collected last year. Quarterly growth rates for this account were 2.4 percent, -55.1 percent, -7.8 percent, and -15.9 percent.
Tobacco Taxes: Revenues from the cigarette tax declined for the fourth consecutive year in FY24, falling $28.8 million, or 9.6 percent. Growth rates for this account were negative in all four quarters. The rates of growth were -7.3 percent, -13.1 percent, -9.4 percent, and -8.9 percent. Receipts from other tobacco products increased by 1.5 percent.
Property Taxes: Property tax receipts rose 4.4 percent in FY24 on the strength of real property which grew 6.6 percent. Growth was strongest in the second half of the year after growing only one percent during the first six months. Growth rates for the four quarters were 4.1 percent, 0.6 percent, 14.2 percent, and 3.7 percent.
Lottery and Other Revenues: Collections from the Kentucky Lottery Corporation rose $6.6 million, or 2.0 percent for the year just ended. The “other” category, which includes multiple taxes and fees such as investment income, inheritance, and insurance premium taxes, grew 21.4 percent for the year. Growth in the “other” account was boosted by income on investments which nearly doubled FY23 collections of $150.5 million. Quarterly growth rates for the “other” account were 22.0 percent, 31.9 percent, 19.5 percent, and 14.8 percent.
Road Fund
Road Fund revenues for FY24 totaled $1.87 billion, an increase of 6.9 percent from the previous fiscal year. Total receipts were $121.2 million more than FY23 levels as all but two of the major accounts had increases. Both motor fuels and motor vehicle usage revenues were historic highs. Revenue growth was strong in all four quarters. Growth rates for the four quarters were 10.2 percent, 7.4 percent, 5.4 percent, and 5.8 percent.
Motor fuels tax revenues easily exceeded FY23 totals and accounted for most of the increase in Road Fund revenues for FY24. Collections in FY24 were $107.2 million, or 13.4 percent, greater than what was received in the prior fiscal year. Quarterly growth rates for motor fuels taxes were 14.0 percent, 12.2 percent, 19.4 percent, and 9.1 percent.
Motor vehicle usage tax collections reached an all-time high for the third consecutive year with receipts of $671.0 million. Revenues were strong throughout the year with the exception of the third quarter. Growth rates for the four quarters were 3.4 percent, 6.5 percent, -5.9 percent, and 3.0 percent.
Motor vehicle license receipts declined $7.2 million, or 5.7 percent while motor vehicle operators’ receipts increased by $3.0 million. Weight distance revenues fell $0.9 million. Investment income continued to improve with receipts of $14.6 million this year. Lastly, “other” income grew $0.3 million.
Road Fund collections for FY24 were $7.1 million short of the revised, official forecast as shown in Table 4. Lower than budgeted Road Fund spending will more than offset the $7.1 million revenue variance.
Four accounts were below the estimated amount while three accounts exceeded the official estimate. The differences ranged in magnitude from -$7.3 million to $2.8 million. Among the accounts, motor vehicle usage tax was $1.2 million below estimate while motor fuels revenues were $0.3 million above the estimate. All other accounts, taken together, were $6.1 million below forecasted levels.
To access the full report, visit www.osbd.ky.gov.
Office of State Budget Director