Kentucky’s General Fund up, Road Fund down in March
STATE BUDGET DIRECTOR’S OFFICE
FRANKFORT — State Budget Director John Chilton reported today that General Fund receipts climbed 10.7 percent in March with revenues of $820.1 million. March’s receipts compare favorably to the $740.6 million collected in March 2018. Through the first nine months of FY19, the General Fund has grown 3.9 percent.
The official General Fund revenue estimate for FY19 calls for revenue to grow 3.3 percent compared to FY18 actual receipts. After March’s results are considered, General Fund revenues must increase 1.7 percent for the remainder of the fiscal year to meet the official estimate.
Chilton noted that the growth in March receipts came from unlikely sources, namely the income-based taxes. “The pattern for FY19 has been healthy growth in the sales tax and cigarette taxes due to the passage of HB 487 in 2018. March saw strength in both of those revenue sources as the sales tax grew 6.2 percent and cigarette taxes grew 39.6 percent.”
“Prior to February, however, the individual income tax had fallen consistently due to the rate reduction in HB 487. Both February and March demonstrated growth in the individual income tax – primarily in the category of net refunds. Refunds were down $36.6 million in February and another $25.3 million in March. One possible reason for this behavior is simply timing; income tax filers seem to have delayed filing returns this year and everything will catch up when all of the returns get processed.
Another explanation is that 2018 HB 487 broadened the individual income tax base by removing many deductions that were available on returns filed in last year. The result is lower refunds and more pay returns. While volatility is typical during the refund season, the tax law changes have magnified these differences and led to more uncertainty in collections during this transition year.”
Among the major General Fund accounts:
- Individual income taxes grew 12.1 percent in March. Year-to-date collections are down 2.3 percent. In 2018, the top corporate and individual income tax rates were decreased from 6.0 percent to 5.0 percent.
- Corporation income tax receipts and the limited liability entity tax (LLET) grew 37.6 percent but have fallen 2.7 percent thus far in FY19.
- Sales tax revenues grew 6.2 percent in March following a very strong holiday season of growth. Sales tax collections have increased 8.4 percent through the first nine months of FY19, right on par with the official projections. In 2018, the sales tax was expanded to include many services that were not previously subject to tax.
- Cigarette taxes were up 39.6 percent for the month and have grown 67.6 percent for the first nine months of the fiscal year. The revenue increase combines the 83.3 percent increase in the cigarette tax from $0.60 per pack to $1.10 per HB 487 with slightly lower consumption.
- Property taxes grew 7.5 percent in March and are up 4.0 percent for the year.
- Coal severance tax receipts grew 48.5 percent in March. Year-to-date collections are down 4.3 percent.
- Lottery revenues exceeded last year’s dividend payment by $1.5 million in March and are up 4.3 percent for the fiscal year.
- Road Fund receipts fell 11.7 percent in March with collections of $120.1 million. Year-to-date collections have grown 2.9 percent compared to last year’s total. The official Road Fund revenue estimate calls for a 0.3 percent decrease in receipts for the entire FY19. Based on year-to-date collections, revenues can fall 9.0 percent for the remainder of the fiscal year to meet that estimate.
Among the Road Fund accounts:
- Motor fuels receipts plummeted 15.5 percent in March due to an unusually large collections in March 2018. (Last month showed abnormally large growth in motor fuels due to the same base problem with 2018.)
- Motor vehicle usage collections also dropped 8.5 percent for the month due to falling auto sales. Year-to-date collections are still up 3.2 percent.
- License and privilege taxes fell 9.3 percent in March. Year-to-date growth is a healthy 4.3 percent.
- Nontax receipts climbed sharply in March and have grown 35.1 percent for the year.
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