, Corbin, KY

State News

November 11, 2010

Kentucky state tax receipts growing slowly

CORBIN — By Ronnie Ellis/CNHI News Service

Kentucky state government tax receipts continue to grow at a slightly higher than predicted rate giving state policymakers hope that a series of revenue shortfalls may be over.

State Budget Directory Mary Lassiter reported Wednesday that October receipts in the state’s General Fund grew 8.1 percent over the same month last year. Receipts have grown 5.3 percent for the first four months of the fiscal year that began July 1 and need to increase by 3.7 percent over the next eight months (compared to last year) to meet the state budget’s revenue estimates.

Road Fund receipts also grew, by 12.2 percent over October 2009. Road Fund receipts for the fiscal year are up 12 percent and a 1.5 percent increase over last year in the final eight months of the year will be enough to meet official budgeted estimates for the year.

Continuing increases in the corporate income tax, sales taxes and individual income taxes indicate Kentucky’s economy may be recovering from the deep recession that has produced a series of budget cuts and adjustments over the past two and a half year.

“Strong revenue growth in the first half of the fiscal year was predicted and budgeted,” Lassiter said. “We are pleased to see that tax revenues are responding very favorably to the slow but steady recovery from the national recession.”

That’s not to say lawmakers won’t continue at least for the short term to confront budget challenges. The state faces a significant deficit in the Medicaid budget and unemployment rates remain above 9 percent in Kentucky. And Lassiter said the strong growth in October isn’t likely to continue at the same rate.

“October’s revenue growth is not sustainable going forward, but it is certainly encouraging to see the Kentucky economy and the corresponding tax receipts, advancing forward in the manner projected by the revenue forecasters and relied upon in the enacted budget.”

Total revenues in the General Fund for October were $705.3 million compared to $652.4 million in October of last year. Corporate income tax receipts grew by $12.2 million and are up 67.8 percent for the fiscal year thus far. Sales and usage tax receipts rose 7 percent and are up 3.9 percent for the first four months of the fiscal year, although that is slightly behind budgeted projections. Individual income tax collections rose 7 percent — up 4.6 percent for the year and again, slightly behind projections.

Coal severance taxes grew 6.1 percent in October — reversing the trend for the first three months of the year. For the four months combined, coal severance taxes are down 4 percent over last year. Lottery receipts didn’t grow though they are up 1.7 percent for the year.

Motor fuels and vehicle usage taxes fueled the 12.2 percent growth in the Road Fund collections. Those taxes are up 19.3 percent for the year, mostly Lassiter said because of rising fuel prices. Usage taxes grew 16 percent.

The Road Fund receipts are ahead of official estimates but Lassiter expects the growth rate to level off in the second half of the year.

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