Legislative Research Commission
Glasgow News 1
FRANKFORT — Kentucky saw a higher than predicted increase in general fund revenue at the end of the 2025-26 fiscal year, while the state’s road fund did not.
State Budget Director John Hicks gave the Interim Joint Committee on Appropriations and Revenue an update on the numbers Wednesday.
At the conclusion of the 2025-26 fiscal year, Hicks said the state general fund received $476 million more in revenue than the official estimated total. The budget reserve trust fund also now sits at $2.9 billion.
Sales and use tax, individual income tax and major business tax receipts were major contributors to the general fund revenue in the last fiscal year, according to Hicks.
“The headliner is sales and use (tax) at 6.4% (growth),” he said. “… Having 6.4 is a really good year. It shows, again, that nationally, consumption drives the U.S. economy.”
The individual income tax receipts also grew by 4.6%, despite the individual tax rate dropping from 4% to 3.5% in January.
“That’s always a good statement about wages and salaries,” Hicks said about the growth.
During the presentation, Hicks noted that lottery receipts grew by 5.5%.
“We continue to find that interesting given we have sports wagering in Kentucky,” Hicks added.
Sen. Amanda Mays Bledsoe, R-Lexington, said the lottery receipts caught her attention as well.
“Especially since we consistently hear how much it’s dropping and the impact that has on some of our higher education dollars,” she said. “Any indication on why that raised? … Are you tracking the impact of both moving forward to see if there’s any trends related to the lottery or sports gambling?”
Hicks said that, according to a member of his staff, revenues increase in a year with high Powerball jackpots.
“Scratch-off tickets are a major component of their revenue streams,” Hicks said. “Both of those did well. The thing that is kind of hard to guess is those Powerball jackpots rising … They did pretty-well on scratch-offs. We did really well on high Powerball.”
Hicks said his office is also tracking the impact of sports wagering, and described the revenues as “healthy and exceeding expectations.”
The second half of Hicks’s presentation focused on the 2025-26 fiscal year road fund receipts. Hicks told the committee the road fund saw a $72.4 million revenue shortfall primarily due to lower motor fuel revenues.
Committee co-chair Sen. Christian McDaniel, R-Ryland Heights, noted the governor suspended the state’s gas tax for six weeks at the end of the fiscal year.
“If you look at the official estimate versus the actuals, but for the action of the governor, we would have met the official estimate?” McDaniel asked.
Hicks said “yes.”
While gas tax revenues were down, Hicks noted motor vehicle usage taxes were higher than estimated. He said $734 million in revenue is another record high.
“We’ve had like three straight years of record high, at least, of motor vehicle usage tax,” he said. “So that offsets the gas tax and the other elements that are much smaller pieces of the road fund.”
Hicks also told the committee there were several steps taken to address the shortfall. There was an adjustment in the revenue sharing appropriation for cities and counties. Unexpended appropriations in other areas of the transportation budget were transferred to the road fund and overall budget reductions were made.
McDaniel expressed concern over the shortfall’s impact on cities and counties.
“They’re certainly bearing a fairly disproportionate burden of the shortfall,” he said.
The next Interim Joint Committee on Appropriations and Revenue meeting is scheduled for Sept. 2 at 1 p.m. For more information, visit legislature.ky.gov.
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