• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Kentucky Center for Economic Policy

Kentucky Center for Economic Policy

   

  • About Us
  • Press Room
  • Donate
  • Summer Policy Institute 2023

Research That Works for Kentucky

  • Topics
    • Budget & Tax
    • Criminal Justice
    • Economic Security
    • Education
    • Health Care
    • Jobs & The Economy
  • Types
    • News
    • Op-Ed
    • Research

   

  • About Us
  • Press Room
  • Donate
  • Summer Policy Institute 2023

Copyright © 2023 KyPolicy Privacy Policy Terms & Conditions Sitemap

Analysis

New Forecast Shows Collapse in State Tax Revenues from COVID-19

Pam Thomas | April 30, 2020

Kentucky’s General Fund tax revenues will crater in the coming months due to the COVID-19 downturn, according to a new unofficial forecast released today by the Office of the State Budget Director (OSBD). The forecast offers both a “control” and “pessimistic” scenario, and estimates that General Fund revenues in the fourth quarter of the current fiscal year will be 18.2% to 23.7% less than the same period last year. For the first two quarters of the next fiscal year, revenues are expected to fall between 10.5% and 17.2%.

The numbers suggest a shortfall in the current fiscal year, which ends on June 30, 2020, of between $319 and $495 million, and another major shortfall in 2021 that could easily exceed $1 billion.

More On Budget & Tax: What Could Kentucky Do With $1.2 Billion a Year? 

With unprecedented levels of job loss and deep reductions in spending related to business closures and social distancing measures, corporate and sales tax receipts are anticipated to take a particularly hard hit. Corporate tax receipts are expected to fall between 68.2% and 79.1% in the next quarter (the final quarter of FY 2020) compared to the same quarter last year, and by between 43.3% and 48.4% the first two quarters of fiscal year 2021. Sales taxes are expected to decline by between 18.1% and 20.4% in the current quarter, and by between 13.8% and 16.4% in the first two quarters of 2021. Individual income taxes, which provide the largest contribution to the General Fund, are expected to fall by 4.8% during the fourth quarter of this fiscal year, and between 5.2% and 18.6% in the first half of the next fiscal year. Lottery receipts, which support several scholarship programs, are expected to be down by 38% in the current quarter, and 13.7% in the first two quarters of fiscal year 2021.

To provide some context, the anticipated shortfall for the current fiscal year will likely be more than the total General Fund appropriations for this year for made for commonwealth’s attorneys, county attorneys, public defenders, the offices of the Attorney General, the Secretary of State, the State Auditor, the Department of Agriculture, Family and Youth Resources Centers, Property Valuation Administrators, the Department of Juvenile Justice, and Environmental Protection added together. Kentucky’s schools, colleges, public health departments, social services and more are already hurting from more than a decade of cuts set in motion by the Great Recession and additional cuts of the magnitude suggested by the forecast would be devastating.

Road fund revenues are also projected to collapse

The OSBD also projects that Kentucky’s Road Fund revenues will crater, resulting in a projected shortfall of between $116.4 to $194.6 million in the current fiscal year – an amount that is 7.5% to 12.5% less than the official estimate. The shortfall in the current quarter is predicted to be between 36.8% and 55.2% less than the same period last year, leveling out to reductions of between 5% and 7% for the first two quarters of the 2021 fiscal year. It should be noted that there are some timing issues with receipt of fees for renewal of various licenses and permits as renewal dates were extended by 90 days, which will move some revenue normally received in 2020 to 2021. The significant reduction in motor fuels tax revenues will also harm counties and cities, as the revenue sharing program that provides support to local governments is based on motor fuels tax receipts. Kentucky came into the most recent budget session with over a $1 billion maintenance backlogs in the state highway plan along with many other needs. The pandemic will set even further back the state’s ability to repair and update roads and bridges.

Some federal relief has been provided, but significantly more is needed

Given the projected magnitude of Kentucky’s revenue shortfalls and significant increase in costs related to the crisis, the limited and targeted federal assistance provided thus far is inadequate. Much more is needed to prevent significant and painful cuts to critical government services and programs and to avoid lengthening and deepening the economic downturn. Unlike the assistance provided during the Great Recession, which was not scaled to the depth of the crisis and ended too early, federal assistance to help address the impacts of COVID-19 should be robust, and should continue until there is a full recovery.

FacebookTweetLinkedInEmail

Primary Sidebar

Get KyPolicy news updates in your inbox

Sign Up

Sidebar

Perspectives

Income Tax Reduction Is Another Blow to Rural Kentucky

Kentucky Should Not Volunteer for Greater Inequality by Becoming More Like Tennessee

Regressive Kentucky Laws Are Bringing Back the Bad Old Days

Coalition of Kentucky Organizations Sends Letter to Lawmakers: Fund Kentucky’s Future, Not Tax Cuts

SNAP Is a Vital Tool for Fighting Hunger That Should Be Strengthened, Not Attacked

Other Budget & Tax Items

ky house of representatives

Analysis

Top House Priorities Show Conflict Between Reducing Revenues and Rising Costs

capitol

Analysis

Reducing the Income Tax Will Weaken the Commonwealth

bourbon barrels

Analysis

Kentucky’s ‘Booming’ Bourbon Industry Doesn’t Need Another Tax Cut

Ky. Policy

Footer

Research that works for Kentucky

433 Chestnut Street, Berea, KY 40403

Phone: 859-756-4605

General information and inquiries: info@kypolicy.org

   

Help us make the facts free and accessible to everyone. That’s how Kentucky will thrive.

Donate

  • Topics
    • Budget & Tax
    • Criminal Justice
    • Economic Security
    • Education
    • Health Care
    • Jobs & The Economy
  • Work
    • News
    • Op-Ed
    • Research
  • About Us
  • Press Room
  • Contact

Get KyPolicy news updates in your inbox

Sign Up

Copyright © 2023 KyPolicy Privacy Policy Terms & Conditions Sitemap

made by P&P
Share this ArticleLike this article? Email it to a friend!

Email sent!