FRANKFORT, Ky. — The Office of State Budget Director reported that March’s General Fund receipts rose 0.5 percent compared to last year’s March. Collections for the month were $1,045.9 million, the largest March receipt total on record. Among the significant accounts, the sales and use tax grew the most in March, with a $39.4 million increase compared to last year’s March.
The official General Fund revenue estimate, which revised the FY23 estimate upward by $1.4 billion and the FY24 estimate by $1.3 billion in December 2022, calls for 3.4 percent revenue growth in FY23. The only use of the upward revision in the revenue estimates by the 2023 Session of the General Assembly was to offset the income tax rate reduction affecting FY24. To meet the official revenue estimate, receipts can fall 2.2 percent over the last three months of the fiscal year.
State Budget Director John Hicks noted that the long stretch of revenue growth has coincided with a sustained period of overall prosperity in the Kentucky economy.
Among the major accounts:
- In March, individual income tax collections fell 10.6 percent, or $46.8 million, with two-thirds of the decline attributable to withholding, which declined 6.4 percent following the ten percent tax reduction in January 2023. Early filing and payment of tax-year 2022 refunds comprised the remainder of the revenue decline. Total income tax collections have grown 4.4 percent throughout the year’s first nine months.
- Sales and use tax receipts increased 10.7 percent for the month and have grown 10.7 percent year-to-date. This follows two consecutive fiscal years with double-digit growth. March receipts included the second month of collections, with the 34 new services added to the sales tax in January.
- Combined corporation income and limited liability entity tax (LLET) tax receipts declined $13.7 million compared to March 2022, with net collections of $43.2 million. LLET receipts declined by 41.8 percent, while corporate income tax collections improved by 22.2 percent, with revenues of $19.3 million. For the year, combined revenues have increased by 3.0 percent.
- Property tax collections fell 1.4 percent for the month but have increased 7.2 percent year-to-date.
- Cigarette tax receipts fell 15.9 percent for the month and have decreased 7.2 percent year-to-date.
- Coal severance tax receipts rose 7.4 percent in March and have increased 50.2 percent through the first three quarters of the fiscal year.
- Investment income contributed $19.4 million in General Fund receipts due to higher interest rates and investable balances.
Road Fund receipts grew 7.0 percent in March as collections totaled $151.5 million. Total revenue has risen 4.1 percent through the first nine months of FY23. The official Road Fund revenue estimate calls for payments to increase by 2.7 percent for the fiscal year. Based on year-to-date tax collections, revenues can decline 1.1 percent during the final quarter of the fiscal year and still meet the official estimate.
Motor fuel collections grew 2.1 percent, while gasoline usage tax receipts surged 7.2 percent higher. The statutorily required tax rate increase of two cents per gallon on motor fuels, effective March 1, will not affect Road Fund revenue receipts until April collections. License and privilege collections fell 12.5 percent due to timing differences from the prior fiscal year but remained 1.8 percent higher through the first three quarters. Road Fund receipts were also positively impacted by a $7.1 million swing in income from investments compared to the prior year.