The Office of State Budget Director reported that both General Fund and Road Fund receipts declined in August compared to last year. The declines were highly affected by tax rate reductions. Total General Fund collections equaled $1,028.2 million, a decline of 4.5 percent. Through the first two months of fiscal year 2025 (FY25), General Fund receipts have increased 4.2 percent.
The official revenue estimate for FY25 calls for General Fund revenues to essentially equal FY24 actual receipts, or no growth. Based on Augusts’ results, receipts can decline 0.7 percent for the remainder of the fiscal year and still meet the official estimate.
State Budget Director John Hicks said, “The combination of large business tax refunds and the lower income tax rate resulted in a decline in total receipts. The 4.6 percent growth in sales tax and the growth in underlying salaries and wages reflect continued growth in the Kentucky economy.”
Among the major accounts:
• Individual income tax collections declined 12.8 percent. Withholding declined 7.4 percent due to an 11.1 reduction in the individual income tax rate, from 4.5 percent to 4.0 percent. Net returns and the pass-through entity tax payments were down compared to last August.
• Sales tax revenues grew 4.6 percent in August, which is on par with the growth expected.
• Corporation income tax and Limited Liability Entity tax receipts both had significant refunds processed yielding negative revenues collections totaling -$8.2 million compared to last August. Year-to-date receipts are much higher due to the large corporate income tax collection in July.
• Cigarette taxes declined by 17.3 percent and have declined 8.7 percent for the year.
• Property taxes increased by 68.3 percent in August and have increased by 15.7 percent for the fiscal year. Large swings in the timing of receipts are not unusual early in a fiscal year for this account.
• Coal severance tax collections in August declined 11.6 percent to $5.9 million and are down 17.9 percent through the first two months of the fiscal year.
• Lottery revenues rose 3.9 percent to $26.5 million in August and are up 4.0 percent through the first two months of FY25.
• Income from investments grew $10.2 million in August with total receipts of $33.3 million.
Road Fund
Road Fund receipts for August totaled $164.4 million, a decline of 2.1 percent from August 2023 levels. Through the first two months of the fiscal year, collections in this fund have grown 5.6 percent. The official Road Fund revenue estimate calls for a 2.6 percent decline in receipts for FY25. The expected decline is due to a statutory reduction in the motor fuels tax rate. The tax rate was reduced by 2.1 cents per gallon, a 7.6 percent decline for FY25. The August receipts are the first month of collections with the new tax rate. Based on year-to-date collections, revenues can fall 4.3 percent for the remainder of the fiscal year and still meet the official estimate.
Road Fund receipts for August totaled $164.4 million, a decline of 2.1 percent from August 2023 levels. Through the first two months of the fiscal year, collections in this fund have grown 5.6 percent. The official Road Fund revenue estimate calls for a 2.6 percent decline in receipts for FY25. The expected decline is due to a statutory reduction in the motor fuels tax rate. The tax rate was reduced by 2.1 cents per gallon, a 7.6 percent decline for FY25. The August receipts are the first month of collections with the new tax rate. Based on year-to-date collections, revenues can fall 4.3 percent for the remainder of the fiscal year and still meet the official estimate.
Among the accounts:
• Motor fuels tax receipts fell 8.3 percent in August due to the reduction in the tax rate and have fallen 0.4 percent for the year.
• Motor vehicle usage collections grew 2.3 percent for the month and have grown 12.0 percent for the first two months of the fiscal year.
• License and privilege tax declined 1.4 percent in August and have declined 1.4 percent year-to-date.