GENERAL FUND AND ROAD FUND RECEIPTS
FOR FISCAL YEAR 2020
General Fund receipts rose 1.5 percent, 4th Quarter down 4.5 percent
Road Fund receipts fell 4.8 percent, 4th Quarter down 23.6 percent
July 28, 2020
FRANKFORT, KY (Tuesday, July 28, 2020)— State Budget Director John Hicks reported today that Kentucky's General Fund receipts for Fiscal Year 2020 (FY20) ended better than expected: $104.6 million more than the budget enacted in April 2020 and $575 million more than the late May 2020 revised revenue estimate. Road Fund collections were $60.3 million less than the enacted budget and $101.5 million more than the May revised estimate. The fiscal year's revenues are the result of two significantly different revenue trends during the year–solid revenue growth during first nine months of the year, followed by significant declines in the last three months of the year due to the COVID-19 pandemic.
General Fund receipts for FY20 totaled $11,566.6 million which is a 1.5 percent increase over FY19 collections. Receipts for the April-June quarter declined by 4.5 percent over last year primarily due to the impact of reducing the spread of the COVID-19 virus since March, and is the biggest quarterly decline since the Great Recession. Road Fund receipts fell 4.8 percent for the fiscal year and declined by 23.6 percent in the fourth quarter.
In response to the COVID-19 virus, Governor Beshear extended the April 15 income tax filing deadline to July 15 to provides up port at that time. During July, net payments from the extended filings totaled $467 million. Half of that amount was from 2019 tax year returns which were unaffected by the pandemic; the other half was from estimated payments for the current tax year. Estimated payments for the fourth quarter declined from last year by $100 million, 22 percent lower.
The year-end General Fund surplus is $177.5 million: $105.8 million from higher resources than estimated and $71.7 million due to the actions of state agencies in limiting their spending in the last two months of the fiscal year. From the surplus, $162.5 million will be deposited to the Budget Reserve Trust Fund, the state's rainy day fund. That deposit will raise its balance to $465.7 million, which will provide helpful assistance in contending with the upcoming impacts of the recession.
State Budget Director John Hicks, “The global pandemic has clearly impacted employment and income of Kentuckians and Kentucky businesses”, said Hicks. “The spread of COVID-19 is the biggest threat to the Commonwealth's economic and fiscal health. The short-term revenue news is positive, but there are many strong signals that Fiscal Year 2021 will bring a significant budgetary challenge. Without federal fiscal relief Kentucky state and local governments will be facing a substantial retrenchment in critical public services.”
A summary of General Fund collections for FY20 shown in Table 1.
| FY2019 Actuals | Enacted FY2020 Estimate | Revised FY2020 Estimate | FY2020 Actuals | Difference from Enacted | % Change from FY2019 |
|---|---|---|---|---|---|---|
General Fund Revenues | (in millions of $) | |||||
Individual Income | $4,544.7 | $4,664.4 | $4,526.0 | $4,765.2 | $100.8 | 4.9% |
Sales&Use | 3,937.6 | 4,129.8 | 3,931.6 | 4,070.9 | (58.9) | 3.4% |
Corporate Income | 556.0 | 423.6 | 356.0 | 346.4 | (77.2) | -37.7% |
Limited Liability Entity | 206.7 | 157.5 | 132.4 | 292.8 | 135.3 | 41.6% |
Property | 647.0 | 657.1 | 632.4 | 643.0 | (14.1) | -0.6% |
Lottery | 263.9 | 271.0 | 262.4 | 271.4 | 0.4 | 2.8% |
Cigarette | 353.5 | 344.9 | 352.0 | 355.0 | 10.1 | 0.4% |
Coal Severance | 92.9 | 55.9 | 62.7 | 58.8 | 2.9 | -36.7% |
Other | 790.4 | 757.8 | 736.0 | 763.2 | 5.4 | -3.4% |
General Fund Total | $11,392.7 | $11,462.0 | $10,991.5 | $11,566.6 | $104.6 | 1.5% |
Fourth Quarter COVID-19 Impacts:
General Fund revenues were up 3.9 percent through March, 2020. The post-COVID-19 April through June quarter's receipts declined by -4.5 percent compared to last year. The following are several tax areas where fourth quarter revenues reflected lower economic activity, primarily due to the COVID-19 virus:
Sales and Use -5.9%
Corporation Income -37.7%
Estimated Individual and Corporate Income Payments -21.8%
Withholding, excluding Unemployment Insurance benefit withholding -5.5%
Major General Fund Categories, Annual Totals, FY20
Individual Income Tax:
Individual income tax receipts increased by 4.9 percent, $220.6 million, led by a 12.2 percent increase in the third quarter. Among the major components of the tax, net tax return payments were up sharply reflecting the improved personal income picture for tax year 2019. Estimated payments, or declarations, declined by 8.5 percent in the fourth quarter, indicative of lower expectations for 2020 personal income from sources other payroll.Growth rates for the four quarters were 1.6 percent, 2.3 percent, 12.2 percent and 4.1 percent. Withholding receipts showed 1.0 percent growth in the fourth quarter, which was supported substantially from withholding receipt so nun employment insurance benefits. Excluding those, withholding for the fourth quarter declined by 5.5 percent.
Sales and Use Taxes:
Sales and use tax receipts grew $133.3 million, 3.4 percent, in FY20. Receipts were robust for the first three quarters of the year before nonessential retail establishments shut down for part of the fourth quarter in the Commonwealth due to the coronavirus. Growth in tax revenue over the first nine months was strong followed by a fourth quarter decline of 5.9 percent. Quarterly growth rates were 7.8 percent, 4.9 percent, 7.6 percent and -5.9 percent. Part of the fourth-quarter decline in brick and mortar sales was offset by record collections from remote retailers and marketplace providers that remit sales tax from internet purchases.
Tobacco Taxes:
Cigarette taxes were able to eke out a small increase in FY20 as revenue grew 0.4 percent, $1.5 million. Like many of the General Fund accounts, cigarette collections were positive in the first three quarters before declining in the final quarter. Quarterly growth rates for the year were 0.1 percent, 3.0 percent, 5.4 percent and -6.2 percent.
Business Taxes:
Corporation income tax collections fell 37.7 percent, $209.6 million, compared to last year while the limited liability entity tax (LLET) grew by $86.1 million for a net decrease of $123.5 million. Both the corporation income and LLET tax receipts experienced large quarterly fluctuations throughout the year. There is a strong interplay between the two taxes so they are discussed together here. Growth rates for the corporation income tax were -7.9 percent, -25.3 percent, -209.4 percent and -48.8 percent while the LLET had growth rates of -18.3 percent, 100.8 percent, -3.7 percent and 92.3 percent.
Property Taxes:
Property tax receipts decreased 0.6 percent, $4.0 million, in FY20. This was the first yearly decline since FY10. Real property was the only account to show a significant increase in revenues as the other major accounts (tangible,public service and omitted and delinquent) all declined. Growth rates for the four quarters were -9.8 percent, 1.5 percent, 13.4 percent and -33.5 percent. Property taxes fell in the fourth quarter primarily due to the inability for taxpayers to physically pay their motor vehicle property taxes as many collection points were closed during the quarter.
Coal Severance Taxes:
Collections in FY20 fell by $34.1 million to an all-time annual low of $58.8 million as quarterly growth rates worsened throughout the year. Quarterly growth rates for this account were -11.9 percent, -25.2 percent, -39.7 percent and -60.4 percent.
Lottery:
Collections from the lottery rose $7.4 million, or 2.8 percent for the year just ended. The Lottery Corporation was able to make their originally projected dividend payment of $271 million despite challenges to some games during the fourth quarter.
Other Revenues:
The “other” category, comprised of many taxes and fees led by insurance premium, alcohol, bank franchise, telecommunications and inheritance taxes decreased 3.5 percent, $27.3 million. Alcohol taxes grew by 8.1 percent and telecommunications taxes increased by 22.1 percent. Insurance premium taxes grew 2 percent and the bank franchise tax, in its last year after being repealed in the 2019 legislative session, grew by 2.7 percent. Abandoned property receipts, fines and fees, and other severance taxes dropped substantially from the prior year.
Road Fund
Road Fund revenues for FY20 totaled $1.5 billion, a decrease of 4.8 percent from the previous fiscal year. Road Fund collections were $60.3 million less than the enacted budget and $101.5 million more than the May revised estimate. Due to lower spending and the automatic reduction in Revenue Sharing of motor fuels taxes with local governments, the Road Fund budget ended with a minor balance of $140,000.
Total receipts were $74.6 million less than FY19 levels as all of the major accounts declined. Like the General Fund, Road Fund receipts were performing to expectations prior to the pandemic as revenues declined in the fourth quarter. The only difference being the decline was more pronounced in the Road Fund. Growth rates for the four quarters were 1.1 percent, 1.1 percent, 4.6 percent and -23.6 percent.
Details of Road Fund collections for FY20 and FY19 are shown in Table 2.
| FY2019 Actuals | Enacted FY2020 Estimate | Revised FY2020 Estimate | FY2020 Actuals | Difference from Enacted | %Change from from FY2019 |
|---|---|---|---|---|---|---|
Road Fund Revenues | (in millions of $) | |||||
Motor Fuels | $773.2 | $773.2 | $696.2 | $741.6 | ($31.6) | -4.1% |
Motor Vehicle Usage | 514.5 | 518.6 | 458.1 | 499.3 | (19.3) | -3.0% |
Motor Vehicle License | 120.9 | 115.4 | 105.7 | 108.6 | (6.8) | -10.1% |
Motor Vehicle Operators | 16.6 | 17.1 | 14.0 | 12.9 | (4.2) | -22.3% |
Weight Distance | 83.7 | 83.8 | 73.9 | 83.4 | (0.4) | -0.4% |
Other | 57.1 | 43.7 | 42.1 | 45.7 | $2.0 | -20.0% |
Road Fund Total | $1,566.1 | $1,551.8 | $1,390.0 | $1,491.5 | ($60.3) | -4.8% |
Motor fuels tax receipts were up 1.0 percent through the first three quarters of the year and then the coronavirus hit. Healthy-at-home directives as well as the closing of nonessential businesses limited travel, causing collections to fall 19.0 percent in the final three months of FY20. Quarterly growth rates for motor fuels taxes were 0.8 percent, 0.5 percent, 1.9 percent and -19.0 percent.
Motor vehicle usage taxes fell $15.2 million, or 3.0 percent, in FY20. Collections in this account were robust for the first three quarters before plummeting in the fourth. Growth rates for the four quarters were 5.9 percent, 3.9 percent, 8.7 percent and -27.8 percent.
Motor vehicle license receipts decreased $12.3 million while motor vehicle operators' receipts declined by $3.7 million. Investment income fell by $5.2 million while “other” income declined $6.1 million.
