Daily Independent (Ashland, KY)

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September 10, 2009

State tax receipts continue downward

By RONNIE ELLIS

FRANKFORT — The downward trend in state receipts continues.

State Budget Director Mary Lassiter announced Thursday general fund receipts for August fell 1.8 percent from the same month last year and so far this fiscal year – which began July 1 – receipts are down 2.9 percent.

Total revenues for August were $622.4 million compared to $633.7 million in August 2008. Road fund receipts are also down four-tenths of a percent from a year ago.

Lassiter said Kentucky’s labor market continues to struggle during the recession despite some signs of improvement in the national economy.

“Until our employment and wage situation improves,” Lassiter said, “revenues are expected to decline.”

The gloomy figures for the first two months of the new fiscal year follow a 2.7 percent decline in revenues for fiscal year 2009 which ended June 30. And the 2.9 percent drop in the first two months exceed a projected decline for the entire year of 1.5 percent by the Consensus Forecasting Group – independent economists who project state revenues for the budget office and legislature.

The legislature met in special session in June to approve a budget reduction measure to cover a projected $1 billion shortfall in the previously enacted two-year budget. As a result of that plan, Gov. Steve Beshear has said most agencies will see their budgets cut by 4 percent this year. Some programs, like the school funding formula, Medicaid and corrections were spared those cuts.

Lassiter’s office Thursday estimated general fund receipts can fall 1.3 percent for the remaining 10 months of the year and still meet official revenue estimates.

Among specific revenue accounts, individual income taxes fell 4.2 percent and sales taxes fell 8.1 percent. Those two accounts make up nearly 75 percent of general fund revenues, Lassiter said.

Corporate income taxes increased $6.1 million and cigarette taxes increased 83.3 percent due to the higher cigarette taxes passed last spring as part of another budget reduction plan to cover a $456 million shortfall. Coal severance taxes fell 11.9 percent, due to mild weather and the falling price of coal. Lottery revenues were up 3.6 percent.

The road fund, while down slightly, did better than expected because of the “Cash for Clunkers” sales promotion. That prompted an 11.4 percent increase in the motor vehicle usage tax collections.

“The Cash for Clunkers program clearly had an impact on August collections,” Lassiter said, “but growth of that magnitude will be difficult to sustain.” But some of those sales would likely have occurred later in the year but now won’t produce state taxes in subsequent months.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com.

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