FRANKFORT, Ky. — The Office of State Budget Director reported that Kentucky’s fiscal year 2022 General Fund receipts grew at the highest rate in 31 years, by 14.6 percent over last year.
General Fund receipts totaled $14.7 billion, exceeding the budgeted estimate by $945.4 million. The final budget surplus amount will be known once the accounting records for expenditures are completed later this month. Road Fund revenues totaled $1.67 billion, 2.0 percent over last year, just under the budgeted estimate.
June’s General Fund revenue growth of 13.0 percent punctuated a second consecutive fiscal year of double-digit revenue growth and higher than anticipated receipts. “The 14.6 percent growth rate experienced in FY22 surpassed the 10.9 percent growth rate in FY21, the two highest growth years since FY91, the first year of the tax increases passed in 1990. June’s revenue growth pattern was a microcosm of FY22, highlighted by strong growth in the largest three revenue accounts.
The individual income tax, business taxes, and sales tax all grew by double-digits in June and throughout FY22. Of the three, perhaps the most impressive gains came from the individual income tax, which grew 17.6 percent or over $900 million during the course of FY22.
Wage and employment growth bolstered the withholding component of the individual income tax, while stronger profitability and increased taxable income propelled the declaration payments and net returns. The 17.6 percent growth rate for the individual income tax in FY22 marks the highest growth since 1991, and the highest growth in the recorded history of Kentucky during a fiscal year where the income tax did not experience a rate increase.
The $945.4 million General Fund revenue surplus is the second-highest year on record, exceeded only by the $1.1 billion revenue surplus from last year.”
Quarterly revenue collections were strong through the year, posting double-digit growth in three of the four quarters. Growth rates for the four quarters were 20.0 percent, 12.3 percent, 9.0 percent, and 16.9 percent.
Sales and Use Taxes:Sales and use tax receipts rose 11.0 percent, or $501.9 million, compared to a very strong 12.0 percent growth rate in FY21. Receipts throughout the entire fiscal year were robust with double-digit growth rates in eight of the twelve months. Quarterly growth rates were 9.9 percent, 16.8 percent, 14.3 percent and 4.5 percent. Continued strength in the sales tax during FY22 demonstrates the sustained purchasing power of Kentucky households, as significant growth occurred without the issuance of broad-based federal stimulus payments.
Individual Income Tax:Individual income tax receipts grew strongly for the year and had the largest dollar increase over FY21 levels. Revenues grew 17.6 percent or $903.8 million. The percentage growth hit a 30-year peak while the absolute dollar growth was the highest on record. All of the components of the tax, withholding, declarations, net balances on returns and fiduciary were up sharply. Growth rates for the four quarters were 6.5 percent, 11.0 percent, 17.3 percent, and 30.5 percent.
Business Taxes:Combined corporation income and the limited liability entity taxes (LLET) collections grew 34.4 percent, or $303.8 million, compared to last year. Much like the sales tax, the business taxes had a second consecutive year of unusually high growth rates with a 38.1 percent growth rate last year. Quarterly growth rates for the taxes in FY22 were 76.0 percent, 22.9 percent, 30.1 percent, and 24.9 percent.
Coal Severance Taxes:Coal severance tax revenues were the strongest since FY19 with collections of $70.7 million, an increase of 26.0 percent as energy prices surged especially late in the fiscal year. Quarterly growth rates for this account were 6.1 percent, 4.6 percent, 40.4 percent, and 55.4 percent.
Tobacco Taxes:The cigarette tax was the only major account to decline in FY22, falling $25.5 million, or 7.3 percent. Collections were lower in all four quarters. The quarterly changes from last year were -4.4 percent, -11.8 percent, -4.3 percent, and -7.9 percent.
Property Taxes:Property tax receipts increased 3.0 percent, or $21.4 million, in FY22. The quarterly percentage changes for the four quarters were 16.5 percent, 5.3 percent, -2.3 percent, and -5.8 percent.
Lottery and Other Revenues:Collections from the Kentucky Lottery Corporation that flowed to the General Fund rose $5.9 million, or 2.0 percent for the year just ended. An additional $52.3 million in lottery dividends were received but diverted to a separate account as required by the budget bill. The “other” category, which includes multiple taxes and fees such as alcohol, inheritance, insurance premium, telecommunications, other mineral taxes and settlements increased 17.7 percent, or $149.3 million. The high growth rate was a result of a $225 million legal settlement as offset by the repeal of the bank franchise tax.
For the year, the three largest tax categories exceeded the official revenue estimate by substantial amounts, led by the individual income tax receipts at $622.8 million, or 11.5 percent. Sales and use tax receipts exceeded the estimate by 2.3 percent, or $112.2 million. Major business tax receipts exceeded the forecasted level by $216.1 million.
Road Fund revenues for FY22 totaled $1.67 billion, an increase of 2.0 percent from the previous fiscal year. Total receipts were $33.0 million more than FY21 as all but two of the major accounts grew. Collections showed modest growth for the first three quarters of the fiscal year before turning negative in the final three months of the year. Growth rates for the four quarters were 3.5 percent, 2.8 percent, 5.2 percent, and -2.6 percent.
Motor fuels tax receipts grew by 3.5 percent despite higher gas prices and were robust in each of the first three quarters before declining in the final quarter in response to faster rising gas prices. Quarterly growth rates for motor fuels taxes were 4.9 percent, 4.7 percent, 5.7 percent, and -0.8 percent.
Motor vehicle usage tax collections from the sale of vehicles reached an all-time high of $629.1 million, edging out last year’s high of $620.9 million, and grew by 1.3 percent. Growth rates for the four quarters were 3.8 percent, 2.3 percent, 7.8 percent, and -6.7 percent.
Motor vehicle license receipts fell $1.8 million while motor vehicle operators’ receipts rose by $6.4 million. Investment income fell to -$10.9 million while “other” income grew $0.8 million.
Road Fund collections for FY22 were below the official consensus forecast by $4.7 million, or 0.3 percent, as shown in Table 4. This shortfall will not result in spending reductions as the General Assembly did not appropriate all of the estimated Road Fund revenues.
Four of the seven forecasted Road Fund accounts were above estimated levels and the fund as a whole was below the estimate by $4.7 million. The motor vehicle usage tax collections were $9.4 million above estimate while motor fuels revenues were $13.7 million below the estimate. All other accounts, taken together, were $500,000 under forecasted levels.
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