by Tom Loftus, @TomLoftus_CJ –
FRANKFORT, Ky. – Kentucky tax revenues that showed solid growth through the first 10 months of this fiscal year plunged in May, and down with the revenues went hopes of a nice surplus when the year ends June 30.
Revenues to Kentucky’s General Fund in May totaled $706 million, down from $763 million in May of 2015, the Office of State Budget Director reported Friday.
It was the largest monthly percentage drop in revenues since December 2009 during the depth of a national recession.
And it followed months of solid growth. At the end of April, state tax revenues had grown by 5 percent through the first 10 months of the fiscal year. That put the state on pace of producing a strong surplus because the state budget anticipates just 3.2 percent revenue growth this year.
But after May tax receipts were counted, the General Fund has now grown 3.9 percent through the first 11 months of the fiscal year.
State Budget Director John Chilton noted in his monthly report that means revenues are still on track to meet the budgeted estimate. He said receipts for June can fall 2.9 percent below June of last year and the state will still hit the budget requirement.
“Monthly revenue collections were hampered by declines in several accounts, some expected and some not,” Chilton said. The main reason for the decline was a drop of 14.8 percent in collections from the individual income tax compared to May of 2015. The income tax is the state’s largest source of revenue.
Even with its awful performance in May, the income tax has done well this fiscal year – growing by 5.6 percent through the first 11 months of the year, Chilton said.
The May revenue report also further documented the downward trajectory of Kentucky’s coal industry: collections from the coal severance tax dropped 48 percent compared to May of a year ago, producing just $7.4 million. Chilton said that is a record monthly low for the tax on the value of mined coal which was established in 1972.
Cigarette tax and insurance premium taxes were also down. Other taxes grew during the month, including sales tax, which is the state’s second-largest source of revenue.
The General Fund is expected to take in about $10 billion this year. It collects revenues from most state taxes (income tax, sales tax, property taxes, the lottery, etc.) and the money pays for most state programs including education.
The second major state fund is the much smaller Road Fund, which also saw a drop in revenues last month. The Road Fund receipts fell 5.9 percent in May compared to May of a year ago. Through 11 months of the fiscal year, Road Fund collections have fallen 4 percent. But the state budget anticipates revenues to fall by 5.3 percent this year, so it also is on pace to end the year in balance.
The Road Fund is expected to take in about $1.5 billion this year. It gets most of its money from the gas tax and the sales tax on vehicle transactions. It pays for highway construction and maintenance, other transportation programs and part of the Kentucky State Police budget.