Kentucky Misses Revenue Prediction By $135 Million
Though tax receipts into Kentucky’s general fund grew for the seventh year in a row, the state was still short about $135 million compared to predictions.
According to State Budget Director John Chilton, Kentucky was on track to meet predictions until March, when the state saw revenue decline by $50.2 million over three months due to a decrease in corporate revenues.
“The forecasting challenge going forward will be predicting when revenues will reverse the current four-month slide and resume collections more closely aligned with underlying economic growth,” Chilton said in a news release.
The state had predicted a 2.7 percent increase in revenue over the year, but instead tax receipts only grew by 1.3 percent.
Kentucky’s fiscal year started on July 1 and the state is still tallying up how much money it spent over the previous year, which ended on June 30.
The state constitution requires the governor to make sure the fiscal year ends with a balanced budget, meaning if the state spent more than it took in, Bevin might have to reduce spending in some agencies or tap the state’s $209 million rainy day fund.
In 2014, then-Gov. Steve Beshear filled a $90.9 million budget shortfall through a combination of agency cuts, an infusion from the rainy day fund and other measures.
Earlier this year, Budget Director Chilton warned that the state might be headed for a spending shortfall, blaming the lackluster performance on weak jobs growth leading to less-than-expected revenues from the income tax and sales tax.
In Monday’s report, Chilton said that growth in individual income tax receipts was the lowest since 2014 and growth in sales and use taxes were the lowest since 2013.
The announcement could be a boost to Bevin’s argument that the state needs to revamp its tax code.
Bevin said he wants to call lawmakers back to Frankfort to negotiate tax and pension changes later this year and has signaled he wants to shift the state away from being dependent on income taxes and more dependent on consumption like sales or property taxes.
However, leaders of the Republican-led legislature have been hesitant to hop on board Bevin’s call for tax reform if it includes tax increases.