As new budget year begins, state revenue continues to climb

FRANKFORT, Ky. (WTVQ) Kentucky’s General Fund receipts for July, the first month of Fiscal Year 2022 (FY22), totaled $981.5 million, an 8.4 percent increase compared to July 2020 receipts.

The $76.4 million increase in revenues was concentrated in the sales tax and business taxes.

Most of the major revenue categories increased.

Due to the large revenue surplus from FY21, revenues can still decline by 7.7 percent compared to FY21 actual receipts to meet the official revenue estimate.

Both the General Fund and Road Fund estimates for FY22 will be revised this fall to provide new revenue forecasts before the next budget cycle.

State Budget Director John Hicks noted that in the first month of the new fiscal year, many accounts continued the strong growth patterns witnessed in FY21.

“Major business taxes were the primary source of new money in July, with the combination of the corporation income tax and the limited liability entity tax contributing $33.9 million of the $76.4 million of nominal growth for the month. These major business taxes grew 38.1 percent in FY21, and this pattern has continued in the first month of FY22. Kentucky businesses are seeing increased corporate profits with a 14.3 percent growth rate in FY21 over the prior year,” Hicks said. “Sales tax receipts also continued their path of robust performance with the sales tax growing by 7.5 percent in July, adding an additional $30.7 million in nominal growth.  The Consensus Forecasting Group (CFG) will meet on August 13th for the first in a series of three meetings culminating in December with the official consensus estimates for FY22 through FY24.”

Among the major accounts:

  • Individual income tax receipts grew 1.5 percent as withholding collections rose 4.1 percent to offset a significant decline in estimated payments.
  • Sales tax revenues grew 7.5 percent totaling $441.9 million.
  • Combined corporation income and LLET receipts were $33.9 million more than last July.
  • Cigarette tax collections fell 27.9 percent for the month, extending a recent trend of volatile receipts.
  • Property tax receipts fell 3.4 percent, primarily due to declines in tangible property and the public service property tax. July s historically a low month for property tax collections.
  • Coal severance tax revenues grew 54.4 percent to $5.0 million.
  • Lottery revenues increased by $3 million to $22.0 million.

Road Fund revenues for July totaled $137.9 million, a 0.3 percent increase compared to last July.

To meet the official Road Fund revenue estimate for FY22 revenues can decline 2.0 percent compared to FY21 actual receipts.

Based on the first month’s receipts, revenues can fall 2.2 percent for the rest of the fiscal year and still meet budgeted levels. Like the General Fund, new official Road Fund revenues estimates will be established by the CFG in December.

Among the major Road Fund categories:

  • Motor fuels tax receipts grew 5.5 percent.
  • Motor vehicle usage tax rose just 0.9 percent, but the level of collections remained quite high at $53.7 million.
  • License and privilege taxes fell 20.8 percent due to a large decline in motor vehicle license taxes.
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