Governor Ernie Fletcher’s Communications Office
General Fund Receipts for First Quarter Rise 3.6 Percent
Expected Revenues for FY07 Up $278.9 Million
FRANKFORT, Ky. – The Office of State Budget Director released the Quarterly Economic and Revenue Report for the first quarter of Fiscal Year 2007 (FY07) today. For the first quarter, General Fund revenues were $2,035.7 million, an increase of 3.6 percent from the first quarter of previous fiscal year.
The report, which is required by law, also contained an interim revenue forecast for the remainder of FY07. The latest estimate projects that General Fund receipts will exceed the official estimate by $278.9 million.
State Budget Director Brad Cowgill stated that underlying economic factors were responsible for the increase in the outlook for revenues. “Kentucky’s economy has responded well to Governor Fletcher’s tax modernization, and we believe we are on the right track for continued good growth in jobs and personal income.” Cowgill noted that although Kentucky largely did not participate in the housing boom that led to inflated prices in the housing market, it also likely will not suffer accordingly as the real estate market recedes.
General Fund revenue growth for the first quarter was led by a surge in combined corporation income tax and license taxes, which rose by 34.4 percent compared to one year earlier. This was offset by a decrease of 3.8 percent in individual income tax receipts, which fell as a result of tax cuts enacted in 2005. Sales taxes were up by 2.7 percent, and coal severance taxes expanded by 4.7 percent.
Economic growth in Kentucky was marked by a 5.5 percent rise in personal income. This was boosted by higher gains in wage and salary income, which was up 6.3 percent. “Wage and salary income is a good gauge of our economic strength, since this is income earned by working Kentuckians,” Cowgill stated.
Employment in nonagricultural industries was higher by 18,200 jobs compared to a year earlier, a rise of 1.0 percent. Employment in goods-producing sectors (construction, mining, and manufacturing) was positive, with 4,200 new jobs added to the payroll. Among the services sector, employment growth was most pronounced in educational services, which rose by 4,900 jobs.
The projected increase in the General Fund for FY07, compared to the estimated “official” growth from 0.0 percent, appears likely to reach a revised 3.4 percent. “Official” estimates are based on the December 2005 consensus revenue estimate, adjusted for impacts of legislation passed by the 2006 Regular Session and Special Session of the General Assembly.
Cowgill stated that much of the reason for the improved revenue estimate is the excess revenue realized in FY06 and the strong growth in the first quarter of FY07. “We ended Fiscal Year 2006 with receipts above the official estimate by almost $139 million, and the year-to-date growth in several accounts is above that needed to meet the FY07 official estimate.” A forecast of 3.4 percent growth, Cowgill explained, is reasonable given the current economic climate as well as phased-in impacts of tax modernization and business tax legislation enacted by the Special Session.
For the first quarter of FY07, Road Fund revenues dipped by 0.4 percent, dragged down by a 7.6-percent drop in the motor vehicle usage tax. For the entire fiscal year, it is now projected that the Road Fund will rise by 4.8 percent, but will finish the year $17.0 million below the official estimate.