A publication of the Kentucky Center for Public Service Journalism

State ending fiscal year Saturday with at least a $114.4m budget surplus; lottery, individual taxes up

By Tom Latek
Kentucky Today

Despite dire predictions of the state’s financial future over the past 12 months, Kentucky’s General Fund is going to finish the fiscal year that ends Saturday with a $114.4 million budget surplus.
Deputy State Budget Director Greg Harkenrider announced the budget figure during a Thursday meeting of the Interim Joint Appropriations and Revenue Committee.

He says there was some uncertainty on how state and federal tax changes would affect June, but those fears were unfounded. 

Deputy State Budget Director Greg Harkenrider says the state will finish with a $114 budget surplus for the fiscal year that ends June 30. (Kentucky Today/Tom Latek)

“With a couple days to go, I know sales and withholding taxes are going to be good, because they have already exceeded the June 2017 totals. Anything we get now is gravy.”

Harkenrider told lawmakers there was another reason he was so bullish on the month of June and the end of the fiscal year.

“Sometimes the Kentucky Lottery has some extra money from their earnings to give a higher dividend to the state. Right now, we’re expecting a $35.5 million dividend on Friday. That’s $10 million in excess of the estimate.”

Another factor in the better financial outlook is individual income taxes exceeded last year, while refunds have been significantly lower.

The Road Fund, which is used to pay for highway projects does not have as rosy an outlook, according to Harkenrider.  

“It will be very close to our estimate of $1.5 billion, within $10 million either way. The unfortunate part is our estimate wasn’t that great in terms of being able to fund our basic infrastructure and roads.”  

He says the state is having to close its books early, due to a software upgrade to the eMars accounting system used by state government, so some revenue that is actually received before June 30 will end up being put on the books in July, helping the start of the next fiscal year.

Looking ahead to the 2019 fiscal year that begins Sunday, Harkenrider says changes in where state sales tax is collected, including an increase in the tobacco tax by 50 cents per pack of cigarettes and collecting tax on some services for this first time ever, is expected to generate an additional $192 million.

He said it was too soon to tell what effect the recent U.S. Supreme Court ruling allowing the collection of sales on out-of-state internet purchases and catalog sales will have on Kentucky’s finances.

While the Government Accounting Office in Washington estimates Kentucky could see an additional $90 to $140 million in revenue, Harkenrider said was less confident.

“These are a little on the high side and we won’t have enough information to make a prediction until we see how many out-of-state businesses enroll in our collection system.”

The taxes may be collected from out-of-state firms that have either 200 transactions or $100,000 in annual sales in Kentucky.  

Harkenrider says legislation passed by the 2018 General Assembly in anticipation of the high court decision mirrors the South Dakota law upheld by the justices.

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