FRANKFORT, Ky. — State Budget Director John Chilton reported Monday that General Fund receipts jumped 20.9% in May with revenues of $850 million. May’s receipts compare favorably to the $703.1 million collected in May 2018.
Through the first 11 months of FY19, the General Fund has grown 6.0%. The official General Fund revenue estimate for FY19 calls for revenue to grow 3.3% compared to FY18 actual receipts. After May’s collections are included, General Fund revenues could fall 20.6% in June and still meet the official estimate.
Chilton has identified the primary driver of the May outburst of revenue. “As mentioned in recent months, 2018 tax reform contributed to the increase in General Fund revenue. The sales and cigarette taxes produced large increases (16.8% and 67.9%, respectively) due to the 83.3% increase in the cigarette tax rate and the extension of sales taxes to selected services. Aside from growth in those consumption taxes, total income taxes grew 17.1% — largely due to a timing issue that overstated the net returns portion of the individual income tax in April 2018, and understated May 2018, by $41.2 million.
Notwithstanding the timing issues, the trend in FY19 has shown net increases in the amount paid on filed individual income tax returns. The large swing in net amount paid on individual income tax returns, and smaller refunds, is attributable to the income tax changes that eliminated certain deductions, thereby increasing the amount of individual income subject to the tax — albeit at the reduced income tax rate. The growth in tax revenues has put the General Fund in excellent position to exceed the official budgeted estimate of fiscal year revenue of $11,198.2 million. Kentucky is not alone among states that are also well poised to exceed their FY19 estimates, due in large part to a continued strong economy.”
Among the major General Fund accounts:
- Individual income taxes grew 14.9%, largely due to a timing issue that overstated April 2018, and understated May 2018, by $41.2 million. Year-to-date collections are down 0.9%. This annual decline was expected due to the reduction of the top income tax rate from 6% to 5%. That tax-rate decline was partially offset by increased profitability of small businesses in Kentucky and the elimination of certain itemized deductions.
- Corporation income tax receipts and the limited liability entity tax (LLET) grew by $6.7 million for the month and have risen 9.8% thus far in FY19.
- Sales tax revenues grew by a bountiful 16.8% in May. Sales tax collections have increased 9.5% through the first eleven months of FY19, a pace slightly ahead of 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 67.9% for the month and have grown 70.3% through the first eleven months of the fiscal year. The revenue increase coincides with the 83.3% increase in the cigarette tax from $0.60 per pack to $1.10 per 2018 HB 487.
- Property tax receipts rose 14.1% in May and are up 4.9% for the year.
- Coal severance tax receipts grew 44.5% in May. Year-to-date collections are actually 2.3% higher than the same period in FY18.
- Lottery revenues in May exceeded last year’s dividend payment by $0.5 million and are up 4.2% for the fiscal year.
Road Fund receipts rose 6.1% in May with collections of $143.8 million. Year-to-date collections have grown 3.7% compared to last year’s total. The official Road Fund revenue estimate calls for a 0.3% decrease in receipts for the entire FY19. Based on year-to-date collections, revenues can fall 42.0% in June and still meet that estimate.
Among the Road Fund accounts:
- Motor fuels receipts grew 3.3% in May due to an increase in gallons purchased.
- Motor vehicle usage collections from vehicle sales rose 1.3% for the month with receipts of $43.0 million. Year-to-date collections are up 4.5%.
- License and privilege taxes were up 11.3% in May. Year-to-date growth is a healthy 5.2%.
- Nontax receipts continued a high rate of growth, primarily due to income on investments. Growth in nontax receipts is a robust 39.9% through the first 11 months of FY19.
Additional information is available here https://osbd.ky.gov/Pages/default.aspx.ky.gov.
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