Kentucky will likely face a budget shortfall this year, official warns

Kentucky will likely face a budget shortfall in coming months, State Budget Director John Chilton warned Monday.

Chilton painted a dismal financial picture for the state as he released data about how much money state government collected in March.

He said revenue receipts for the General Fund, which pays for most state programs, fell 11.4 percent in March compared to March of last year, a decrease of $99.2 million.

That means state revenue collections must grow 6.6 percent over the next three months in order for Kentucky to have a balanced budget when the fiscal year ends June 30, Chilton said.

From January to March, revenue declined 3.2 percent, which was the first quarterly decline since the second quarter of fiscal year 2014, Chilton said.

In the first nine months of the fiscal year, receipts grew 1.2 percent.

Official revenue forecasts that were used to build the state budget call for 2.7 percent revenue growth for the entire year. To meet that estimate, receipts must grow 6.6 percent in the last three months of the fiscal year.

Chilton said “strong growth” remains possible in the fourth quarter, which would put the state “somewhere near, yet likely below, the official estimate.”

The state Constitution requires a balanced budget. Depending on the size of any shortfall, either Gov. Matt Bevin or the legislature would have to balance the budget, either by cutting spending or tapping reserve funds.

Chilton said General Fund revenue declined last month because of weakness in individual and corporation income tax collections.

“We believe that the decline involves issues of administrative timing and that seems to be the case in March,” Chilton said.

“On the corporate side, the due date for federal corporate tax returns was permanently changed from March 15 until April 15, so we expect April receipts to include payments that in the past that would have been made in March.”

Among the major taxes, sales and use tax receipts decreased 1.1 percent for the month but have grown 0.6 percent year-to-date. Still, sales tax receipts have fallen in five of the last six months.

Corporation income tax receipts fell 89.3 percent as both declarations and net returns declined. For the year, collections have decreased 6.7 percent.

Individual income tax collections declined 15 percent in March. Collections have grown 2.4 percent through the first nine months of this year.

Property tax collections fell 1.9 percent for the month but have grown 2.8 percent year-to-date.

Cigarette tax receipts increased 8.3 percent but have declined 2.2 percent year-to-date.

Coal severance tax collections were up 8.2 percent in March but have decreased 20.7 percent through the first nine months of the fiscal year.

Meanwhile, tax receipts for the Road Fund, which pays for road expansions and repairs, grew 3.2 percent in March with collections of $130.7 million, $4.1 million more than last March.

Through the first nine months of this fiscal year, Road Fund receipts have increased 1.8 percent.

The official Road Fund revenue estimate calls for revenue to decline 1.7 percent for the fiscal year. Based on year-to-date tax collections, revenues can fall 11.8 percent for the remainder of this year and still meet the estimate.

This story was originally published April 10, 2017 at 4:00 PM with the headline "Kentucky will likely face a budget shortfall this year, official warns."