Record revenues, better credit rating comes for Kentucky

(The Center Square) – Kentucky’s economy got a double dose of good news this week with the state reporting record revenues in two tax categories and a leading credit rating agency upgrading the state’s financial outlook.

On Thursday afternoon, Gov. Andy Beshear said preliminary reports show the state posted all-time highs in both sales and motor vehicle usage taxes.

The state’s sales tax receipts were $486.5 million for the month. Not only was it a historic figure, it marked a 40% improvement from April 2020 totals.

According to a release from the governor’s office, the State Budget Director said the $1,400 stimulus checks sent to most residents as part of the American Rescue Plan was a likely factor in the record month.

Collection of the 6% sales tax are based on the previous month’s sales.

However, the state said it’s not just a short-term trend. For the fiscal year, which started in July, sales tax revenue is up 9.5%.

“The dramatic increases are not just in comparison to the prior year COVID-suppressed receipts but in comparison to any prior periods in history,” Beshear said.

The motor vehicle usage tax, a 6% fee paid on every vehicle registered in the state, brought in $64 million, another all-time high.

Those dollars go to the state’s road fund.

Both the road fund and the state’s general fund are on pace to end the fiscal year with surpluses. The road fund has a $12 million surplus, while the general fund is projected to have more than $586 million surplus.

It ended the last fiscal year with a $177.5 million surplus.

In addition, Beshear said the state will likely have more than $1 billion in its rainy day fund when the fiscal year ends next month, another all-time high.

The tax revenue news comes just two days after Fitch Ratings announced it upgraded the state’s financial outlook from “negative” to “stable.”

In explaining its decision, Fitch credited Kentucky’s “solid economic recovery” from the onset of the pandemic and also lauded the state’s “solid ability to control revenues and expenditures to maintain fiscal balance.”

Beshear, a Democrat, in a statement credited his administration’s “responsible fiscal management” for the rating upgrade.

However, he wasn’t the only state leader taking credit. House Speaker David Osborne, R-Prospect, said Fitch’s decision was a “clear indicator” that conservative fiscal policies are the right way to go.

However, Osborne added that the economic uncertainty brought on by COVID-19 is far from over.

“We didn’t get here by spending millions on services that are not effective or by using one-time monies to make long-term commitments,” the speaker said.

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