The Consensus Forecasting Group met today in Frankfort to review tax receipts for the 1st quarter Fiscal Year 2010 and to revise their previous revenue forecasts made in May and August of this year. The group is made up of the state's economists and they come together several times a year to forecast the revenues that the state budget is based upon.
The CFG remained overall not optimistic about Kentucky's economy over the next three fiscal years and their forecast for the General Fund reflects that. The bottom line is state revenues are still substantially below the 2008 levels and look to remain that way at least until 2012. Federal Stimulus funds helped close the gap between expenditures and revenue this past year, but only a small amount remains for the next biennium.
1st Quarter FY 2010 Receipts
The first quarter of FY 2010 ended September 30, 2009 and the General Fund tax receipts were down 5.6% over the same period a year ago. Most of the reason for the decline is negative growth in the sales tax, Kentucky's 2nd largest revenue source, and the individual income tax, which is the largest source of state revenues. The sales tax was down 6.6% and the individual income tax was down 9.9% in September 2009 alone.
The Road Fund's first quarter receipts were down 3% over the same period a year ago. Revenues were buoyed somewhat by a 2.7% increase in motor fuels taxes over the first quarter, which is the largest component of road fund revenue.
Click Here to see the full details on the 1st quarter receipts.
Click Here to access the CFG handouts.
The CFG revised their previous revenue estimates for FY 2010 further down to a 3.5 % decline resulting in a decrease in General Fund revenues of around $160 million. This due in large part to the slumping sales tax receipts that have been negative for 4 straight quarters.
For FY 2011-FY 2012 the economists lowered their levels of increasing revenues from previous estimates. They do see revenue growth in these fiscal years, but not at the levels they predicted two months ago. They forecast revenue growth of 2.2% for FY 2011 and 3.7% for FY 2012.
The CFG revised their previous revenue estimates for FY 2010 up slightly from a -4.0% to -1.6% which will result in an increase in road fund revenues of roughly $ 28 million. The primary reasons given for this bump in FY 2010 is due to an increase in the motor fuels tax set to roll on this month and fewer people are taking advantage of the changes to the automobile tax credit put ion place by the legislature this summer. Only $1.4 million of the $25 million credit has been used as of Friday, October 9, and the economists had predicted the cap would be used up more quickly.
For FY 2011-FY 2012 the economists see moderate growth in Road Fund revenues of 4.2% in FY 2011 and 6.6% in FY 2012. This is due to the likelihood of an increase in the motor fuels tax for these years, because the average wholesale price is predicted to stay above the current floor.
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