Kentucky's General Fund revenues reached an impressive $15.7 billion in fiscal year 2025, marking a slight bump compared to the previous year's figure.
**Kentucky's Fiscal Year 2025: A Mixed Bag of Revenue Results**
Kentucky's fiscal year 2025 (FY25) saw a mixed performance in revenue collections, with some sectors experiencing growth while others faced declines.
The Office of State Budget Director reported that major business taxes in Kentucky significantly exceeded the official revenue estimates for FY25, totaling $1,863.5 million. This growth was a key factor offsetting lower-than-expected income and sales tax receipts. The increase in business taxes reflects that Kentucky businesses were operating at a profitable level during the fiscal year.
Property tax receipts rose by 3.9% in FY25, driven mainly by increases in motor vehicles and tangible property, which grew by $26.7 million. This increase in tangible business property values contributed to higher business tax collections.
The growth in business taxes was primarily due to higher-than-expected business profitability, increased tangible property tax receipts linked to motor vehicles and tangible assets, and legislative changes affecting corporate income tax. Senate Bill 1 and other tax reform measures enacted in Kentucky effective in 2025 included changes that impacted corporate income tax and business-related taxation, contributing to the revenue growth from this sector.
However, not all sectors fared as well. Individual income tax revenues were $488.3 million less than what was collected in the previous year. Motor fuels tax revenues decreased by 7.6 percent compared to FY24, largely due to a 7.6 percent drop in the tax rate per gallon. Coal severance tax revenues declined by 28.0 percent in FY25 compared to the previous year.
Road Fund collections for FY25 totaled $1,534.8 million, a decrease of 0.6 percent from the previous fiscal year. Despite this decrease, the actual Road Fund revenues exceeded the official FY25 estimate by $38.5 million. Motor vehicle usage tax collections reached an all-time high for the fourth consecutive year, with a 7.2 percent increase over FY24.
Collections from the Kentucky Lottery Corporation increased $7.1 million, or 2.1 percent, for the year just ended. Combined corporation income tax and the Limited Liability Entity Tax (LLET) collections grew by 46.9 percent compared to the previous year.
The General Fund receipts for FY25 totaled $15,703.2 million. The "other" category of General Fund Revenues grew 2.2 percent in FY25, with investment income exceeding $300 million for the second straight year.
Cigarette tax revenues declined for the fifth consecutive year in FY25, falling $26.9 million, or 9.9 percent. Three accounts in the Road Fund were below the estimated amount, while four accounts exceeded the official estimate.
In summary, while Kentucky's business sector experienced growth, other sectors such as individual income tax and coal severance tax faced declines. The strong economic environment, increased business profitability, and legislative changes contributed to the growth in business taxes, while decreases in individual income tax and motor fuels tax revenues were due to various factors. The General Fund revenues exceeded the official revenue estimates, with the Kentucky Lottery Corporation and combined corporation income tax and LLET collections seeing significant growth. Cigarette tax revenues continued their downward trend, falling for the fifth consecutive year.
The growth in business taxes in Kentucky during FY25 was a significant factor in offsetting lower-than-expected income and sales tax receipts, as businesses were operating at a profitable level and the increase in business taxes was due to higher-than-expected business profitability, increased tangible property tax receipts linked to motor vehicles and tangible assets, and legislative changes affecting corporate income tax.
The strong economic environment, increased tangible property tax receipts, legislative changes, and higher-than-expected business profitability contributed to the growth in Kentucky's business sector during FY25, while individual income tax and coal severance tax revenues faced declines.
