Date: 07-10-2015
Kentucky’s tax revenues grow by more than 5 percent over 2014 figures
Coal severance taxes fell 8.7 percent, are the lowest since FY04…
Kentucky Press News Service
FRANKFORT – State Budget Director Jane C. Driskell reported Friday that Kentucky’s General Fund receipts rose for the fifth consecutive year, primarily due to the strength of income and sales taxes.
For the fiscal year that ended June 30, bolstered by strong June receipts of 4.4 percent, General Fund receipts totaled $9.9 billion, which is $504.6 million, or 5.3 percent more than Fiscal Year 2014 receipts. Fiscal year 2011 was the last time the General Fund grew by more than 5 percent. Final FY15 General Fund revenues exceeded the official revenue estimate by $165.4
million.
“We are pleased to see that all the major taxes reflect healthy growth for the year, exceeding budgeted levels. This pattern of receipts suggests that the economic recovery was stronger than
predicted when the official revenue estimates were made in December 2013. Revenues picked up momentum as FY15 progressed – and we remain confident that FY16 will continue with positive momentum,” Driskell said. “We have now closed the books on revenues and will close the books on the expenditure side later this month. The determination of the budget surplus will be made at that time.
“The enacted budget directs that any General Fund surplus can only be used to pay Necessary Government Expenses and to make deposits to the Budget Reserve Trust Fund.”
Revenue collections increased in all four quarters of the fiscal year as the rate of growth surged throughout the year. Growth was strongest in the final quarter and the quarterly rate of increase was the largest since the fourth quarter of FY11. Growth rates for the four quarters were 1.1 percent, 5.8 percent,
5.4 percent and 8.6 percent, respectively.
Individual Income Tax:
Individual income tax receipts posted the largest increase over FY14 levels, increasing $320.2 million, or 8.5 percent, from last year as all four components of the tax (withholding, fiduciary,
declaration payments and net payments with returns) increased. Growth of 8.5 percent is largest since
this account grew 14.5 percent in FY08.
Sales and Use Taxes:
Sales and use tax receipts grew $136.2 million, or 4.4 percent in FY15. Growth in this account was the highest since FY12 and showed steady growth throughout the year The sales tax has benefited greatly from growth in Kentucky wages, lower fuel prices, and high consumer sentiment.
Tobacco and Alcohol Taxes:
Cigarette tax receipts continued their long-run decline, falling $7.2 million, or 3.1 percent.
Fiscal Year 2015 marks the fifth consecutive annual decline in cigarette tax collections. Taxes on beer, wine, and distilled spirits partially offset the decline in tobacco taxes. As a group, alcohol taxes increased $3.4 million, or 2.7 percent, in FY15 with only the taxes on beer declining slightly.
Business Taxes:
Corporation income tax collections rose $53.0 million, or 11.2 percent, for the year. However, collections fell in the first quarter of the fiscal year before accelerating sharply over the remaining nine months. Fiscal Year 2015 marks the third time in the past five years in which receipts in this account
increased at least 10 percent.
The limited liability entity tax (LLET) increased 12.3 percent from last year, or $24.4 million.
After declining in the first six months of the year, collections exploded over the final two quarters.
Coal Severance Taxes:
Coal severance taxes fell 8.7 percent, or $17.2 million, in FY15. Total collections for the fiscal year were $180.3 million and are the lowest since FY04 when receipts totaled $147.5 million.
Collections have now fallen in 13 consecutive quarters and dropped almost 40 percent since peaking in
FY12 — just three years ago.
Property Taxes:
Property tax receipts increased 0.2 percent or $1.0 million in FY15. Tax receipts on real property grew only 0.4 percent as the state continues to recover from the national housing recession.
The state real property tax rate, which declines when assessment growth exceeds 4 percent, has remained unchanged since 2008. By comparison, in the 28 years between 1980 and 2008, the rate fell 26 of the 28 years. Both of the major accounts, real and tangible property, increased for the year with only minor
accounts declining. Together real and tangible property account for over 85 percent of total property tax
collections.
Lottery and Other Revenues:
Receipts from the Kentucky Lottery Corporation grew 0.9 percent, or $2.0 million, to post a dividend to the Commonwealth of $221.5 million. The official estimate for the Lottery was $238.0
million. The “other” category, which includes multiple oth
bank franchise taxes, and insurance premium taxes decreased 1.0 percent or $7.1 million.
Table 2 compares General Fund collections to the official revenue forecast. Actual receipts were $165.4 million or 1.7 percent more than the official estimate.
“In January I told lawmakers that Kentucky was back with a vengeance, and today’s news of the more than 5 percent growth in general fund revenues for FY 15 is further proof our momentum continues to accelerate, Gov. Steve Beshear said in a statement on Friday.
“Over the last seven years, we have worked through the worst recession of our lifetime to grow Kentucky’s economy, and we get more and more good news every day. The excess revenues are broad based, led by growth in individual income and sales taxes, indicating that salaries and jobs are on the rise and consumer confidence is higher. Plus our hard work in economic development efforts is paying off with the growth in business taxes. This level of activity demonstrates that corporations continue to find the Commonwealth a favorable destination for business retention, expansion, and new business formation. Yes, we have some challenges, and more work to do, but we are seeing positive trends in almost all areas of the economy. Today’s revenue report certainly tells us that our economy continues to grow and, as a state, that we are moving in the right direction.”
