The Office of State Budget Director on Friday reported General Fund receipts for fiscal year 2025 (FY25) totaled $15,703.2 million, exceeding FY24 total revenue by $131.9 million, or 0.8 percent. General Fund revenues exceeded the official revenue estimates by a nearly identical amount, $131.3 million.
The final budget surplus amount for FY25 will be known once the accounting records for expenditures are completed later this month. Road Fund revenues totaled $1,863.5 million, 0.6 percent less than the FY24 total. Compared to the official FY25 Road Fund estimate of $1,825.0 million, actual revenues exceeded the estimate by $38.5 million.
“Both funds produced revenues in excess of the enacted estimates,” said State Budget Director John Hicks stated. “Major business taxes far exceeded the official estimates offsetting lower than forecasted income and sales tax receipts. Strength in business taxes demonstrates that Kentucky businesses are producing at a profitable level.
“On the Road Fund ledger, the use tax paid on the sales price of new and used vehicles provided the collections needed to surpass the official estimate by $38.5 million. Car and truck sales are evidence that Kentucky consumers are earning working wages sufficient to finance these purchases.”
Four accounts had differences that were within $10 million of the actual amounts. Another four accounts had variations ranging from $125 million to $500 million. The larger differences cancelled each other out so that, in total, General Fund estimates were within 1 percent of actual receipts
For the year, receipts grew 0.8 percent, or $131.9 million over FY24 levels. The accounts with significant changes were the individual income and the major business taxes. Individual income tax revenues were $488.3 million less than what was collected last year while the major business tax collections exceeded FY24 receipts by $585.4 million.
Sales and Use Taxes:
Sales and use tax receipts were essentially unchanged from FY24 levels with growth of 0.3 percent. Growth rates were modest in all four quarters with growth in the first and fourth quarters and declines in the two middle periods. Growth rates for the quarters were 1.3 percent, -0.3 percent, -2.9 percent and 3.1 percent.
Individual Income Tax:
Individual income tax receipts experienced a sharp decline due to a drop in the tax rate as well as timing associated with the Pass-Through Entity Tax (PTET). Receipts for the year were $488.3 million less than FY24 collections. The PTET created timing issues regarding payments and credits in FY24 and FY25. The result is that substantial PTET credits from prior tax years were taken in FY25 and caused a significant reduction to individual income tax receipts for the fiscal year. Additionally, the tax rate for the individual income tax declined from 4.5 to 4.0 percent effective on January 1, 2024. This rate reduction led to lower collections in the first half of FY25 from July through December. Among the accounts, withholding collections fell by 4.0 percent, declarations were down 23.6 percent and PTET revenue fell by 35.6 percent. The $5.3 billion in individual income tax receipts compares to $6.0 billion in FY22 when the tax rate was 5 percent.
Business Taxes:
Combined corporation income tax and the Limited Liability Entity Tax (LLET) collections grew 46.9 percent, or $585.4 million, compared to last year. The $1.8 billion in receipts from these two accounts shattered the previous fiscal year record of $1.25 billion set in FY24. The strong growth in FY25 can be attributed to estimated payments. Quarterly growth rates for the taxes were 73.5 percent, 79.3 percent, 124.4 percent and 9.6 percent.
Coal Severance Taxes:
After temporarily rebounding in FY23, coal severance tax revenues returned to their long-term trend declining 19.4 percent in FY24 and 28.0 percent in FY25. Receipts for the year were $56.1 million, $21.8 million less than what was collected last year. Quarterly growth rates for this account were -27.5 percent, 66.4 percent, -47.2 percent and -58.1 percent.
Tobacco Taxes:
Revenues from the cigarette tax declined for the fifth consecutive year in FY25, falling $26.9 million, or 9.9 percent. Cigarette tax revenues declined in all four quarters. The rates were -6.8 percent, -10.9 percent, -15.0 percent and -8.0 percent.
Property Taxes:
Property tax receipts rose 3.9 percent in FY25 on the strength of motor vehicles and tangible property which combined to grow by $26.7 million. Growth was strongest in the first and fourth quarters of the year. Growth rates for the four quarters were 11.1 percent, 0.8 percent, 0.6 percent and 22.5 percent.
Lottery and Other Revenues:
Collections from the Kentucky Lottery Corporation that are deposited into the General Fund rose $7.1 million, or 2.1 percent for the year just ended. The “other” category – which includes multiple taxes, fees, and nontax revenues – grew 2.2 percent in FY25. Accounts such as investment income, inheritance taxes, and insurance premium taxes are included in this category of General Fund Revenues. Investment income exceeded $300 million for the second straight year, driven by historically high reserve balances. Quarterly growth rates for the “other” account were 23.0 percent, -0.9 percent, -1.9 percent and -7.5 percent.
Road Fund
Road Fund revenues for FY25 totaled $1,863.5 million, a decrease of 0.6 percent from the previous fiscal year. Total receipts were $11.1 million less than FY24 levels, but four of the seven major accounts had increases. Revenues grew only in the first quarter of the year. Growth rates for the four quarters were 3.6 percent, -3.3 percent, -2.2 percent and -0.6 percent.
Motor fuels tax revenues had the largest change when compared to FY24 receipts. The decrease was largely the result of a 7.6 percent drop in the tax rate per gallon. Collections were $69.0 million, or 7.6 percent, less than what was received in the prior year. Quarterly growth rates for motor fuels taxes were -2.1 percent, -8.1 percent, -12.4 percent and -8.2 percent.
Motor vehicle usage tax collections reached an all-time high for the fourth consecutive year with receipts of $719.5 million, a 7.2 percent increase over FY24. Revenues were strong throughout the year with growth rates of 9.4 percent, 3.1 percent, 6.1 percent and 9.8 percent for the four quarters.
Motor vehicle license receipts declined $2.2 million, or 1.9 percent while motor vehicle operators’ receipts increased by $1.0 million. Weight distance revenues fell $0.5 million. Investment income continued to improve with receipts of $19.0 million this year. Lastly, “other” income grew $6.8 million.
Road Fund collections for FY25 were $38.5 million more than the official revenue estimate.
Three accounts were below the estimated amount while four accounts exceeded the official estimate. The forecasting differences ranged in magnitude from -$30.4 million to $69.4 million. Among the accounts, motor vehicle usage tax was $69.4 million over the official estimate while motor fuels revenues came in $30.4 million under the estimate. All other accounts, taken together, were $0.5 million below forecasted levels.
To access OSBD’s full report, visit osbd.ky.gov.
Office of State Budget Director