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General and Road Fund receipts reported for FY2021 General Fund receipts increase by 10.9 percent for a record surplus Road Fund receipts increase by 10.1 percent By John Hicks/Greg Harkenrider Frankfort, KY - The Office of State Budget Director reported on Friday that Kentucky's General Fund receipts rose well above expected levels for the fiscal year that ended June 30, 2021 (FY21). General Fund receipts totaled $12.8 billion, which is a 10.9 percent increase over FY20 collections. General Fund revenues exceeded the budgeted estimate by $1.1 billion. Road Fund revenues totaled $1.6 billion, 10.1 percent over last year resulting in a $64.6 million revenue surplus. State Budget Director John Hicks noted that General Fund revenues for FY21 set many milestones. "The FY21 General Fund revenue surplus is over $1.1 billion, the highest ever by a multiple of three. The revenue surplus will be deposited into Kentucky's Rainy Day Fund, the Budget Reserve Trust Fund, bringing it up to nearly $1.9 billion, or over 16 percent of General Fund spending. The $1.9 billion balance is up from just $303 million at the end of last year. The final surplus amount will be known once the accounting records for expenditures are completed later this month. General Fund receipts grew by 10.9 percent in FY21, the highest annual growth rate in 26 years. Kentucky's economy has been recovering and income and consumption growth have followed, at a much greater pace than expected. The forces of vaccination progress, federal government aid to individuals and businesses, and employment growth have all contributed to an improved Kentucky economy. All three of the largest tax areas, individual income, sales, and business tax receipts, which account for 80 percent of total General Fund receipts, grew significantly. Sales tax receipts grew by 12.0 percent, the highest annual growth rate since the tax rate was raised from 5 percent to 6 percent in 1990. Individual income taxes grew by 7.9 percent. Business tax receipts from the corporation income tax and the limited liability entity tax grew 38.1 percent, after yearly growth of less than two percent over the prior five years. General Fund revenues tracked higher than the budgeted revenue estimate all year, which called for a 1.2 percent growth rate. General Fund growth rate had been hovering around 5.5 percent through the first nine months of FY21, then the final three months spiked by 24 percent to result in the year-ending 10.9 percent growth rate. Road Fund revenues bounced back this year, growing by 10.1 percent over the previous year, after last year's 4.8 percent drop due to a large decline in vehicle travel and sales due to COVID-19. A record year for the motor vehicle usage tax receipts, equivalent to a sales tax on vehicle purchases, accounted for most of the Road Fund's revenue increase this year. The $64.6 million Road Fund revenue surplus will be deposited into the Highways budget and used to support projects in the 2020-2022 biennial highway construction program." Individual Income Tax: Individual income tax receipts grew strongly for the year, increasing by 7.9 percent or $378.5 million. All of the major components of the tax, withholding, declarations and net tax returns were up sharply. Withholding receipts, which make up over 88 percent of individual income tax collections, grew 5.9 percent. Individual income tax growth rates for the four quarters were 4.5 percent, 5.5 percent, 4.8 percent and 15.1 percent. Sales and Use Taxes: Sales and use tax receipts had the largest dollar increase over FY20, growing $490.1 million, or 12.0 percent. Receipts were robust throughout the year. Quarterly growth rates were 7.0 percent, 4.8 percent, 5.8 percent, and 31.4 percent. Sales tax collections from online sales grew an estimated 47.0 percent in FY21, with total collections reaching nearly $270.0 million. Business Taxes: The combination of corporation income tax and limited liability entity tax (LLET) collections grew 38.1 percent, or $243.7 million more than last year. Quarterly changes for these business taxes were -5.3 percent, -28.6 percent, 146.6 percent and 51.6 percent. The 38.1 percent increase was the highest business tax growth rate since 2006, improving after yearly growth of no more than two percent over the prior five years. Tobacco Taxes: Cigarette taxes were one of two accounts to decline in FY21, falling $5.0 million, or 1.4 percent. Growth rates were -3.3 percent, 4.5 percent, -11.5 percent and 4.7 percent. Other tobacco products grew by $19.0 million with the new vaping tax bringing in $17.6 million. Coal Severance Taxes: After increasing last year, coal severance tax collections reverted to their long-run trend, falling $2.7 million, or 4.7 percent. Quarterly growth rates for this account were -31.1 percent, 12.7 percent, -14.5 percent and 29.2 percent. Property Taxes: Property tax receipts increased 9.2 percent, or $59.4 million, in FY21. Much of that growth was from tangible property tax collections which grew by 15.9 percent Growth rates for the four quarters were 23.5 percent, 1.6 percent, 7.4 percent and 63.7 percent. Real property grew 4.4 percent. Lottery and Other Revenues: Lottery revenues deposited into the General Fund were $289.1 million, or 6.5 percent over last year, and $3.0 million in excess of the budgeted estimate. An additional $58 million in lottery revenues was deposited into a holding account until the next budget cycle. Together, lottery revenues jumped to $347.1 million compared to $271.4 million last year. The "other" category, which includes multiple taxes and fees such as insurance premium taxes, bank franchise, telecommunications, and inheritance taxes increased 10.4 percent, or $79.1 million. For the year, actual revenues exceeded the official estimate by $1.1 billion with all of the nine major accounts exceeding the estimate. The effects of the pandemic made forecasting difficult due to the uncertainty surrounding the impact the virus would have on the country as well as the Commonwealth. The largest three tax types, individual income, sales, and business tax receipts, accounted for $994.3 million of the $1.1 billion of the revenue surplus. Road Fund Road Fund revenues for FY21 totaled $1.6 billion, an increase of 10.1 percent from the previous fiscal year, and $64.6 million more than the budgeted estimate. Total receipts were $150.8 million more than FY20 levels. Motor vehicle usage receipts, equivalent to a sales tax on vehicle purchases, totaled $620.9 million, a record amount by more than $100 million. The $121.6 million increase in the motor vehicle usage receipts accounted for about 80 percent of the Road Fund's annual increase. Total Road Fund collections were tepid for the first three quarters of the fiscal year before taking off in the final three months of the year. Growth rates for the four quarters were 1.9 percent, 0.7 percent, -0.4 percent and 43.8 percent. Motor fuels tax receipts increased by 0.9 percent for the year. They declined in each of the first three quarters and stood at -5.6 percent through nine months before predictably rebounding in the final quarter. Quarterly growth rates for motor fuels taxes were -5.3 percent, - 4.9 percent, -6.6 percent, and 24.5 percent. Motor vehicle usage tax collections reached an all-time high of $620.9 million, far exceeding the previous high of $514.5 million. Growth rates for the four quarters were 12.1 percent, 10.2 percent, 8.3 percent and 80.9 percent. Motor vehicle license receipts increased $16.9 million while motor vehicle operators' receipts rose by $9.1 million. The motor vehicle license fees experienced a COVID-related decline in the previous year. Investment income fell by $6.8 million while "other" income grew $3.5 million. Five of the seven of the forecasted Road Fund accounts were above estimated levels and the fund as a whole exceeded the estimate by $64.6 million. The motor vehicle usage tax was $52.3 million above estimate. All other accounts, taken together, were $12.3 million over forecasted levels. This story was posted on 2021-07-10 15:56:40
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