KY economy is ‘on fire.’ Beshear announces a record $1.1 billion budget surplus.

Kentucky’s “economy is on fire,” an ebullient Gov. Andy Beshear said Friday after a record $1.1 billion budget surplus was reported for the state.

Beshear’s excitement was contained in a 58-second video he posted on his Facebook page after state budget director John Hicks reported several state budget milestones for the fiscal year that ended June 30

Hicks said the good financial news is due to progress in COVID-19 vaccinations, federal government aid to individuals and businesses, and employment growth.

Hicks reported that receipts for Kentucky’s General Fund, which pays for most state programs, rose well above expected levels for the fiscal year that ended June 30,

General Fund receipts totaled $12.8 billion, which is a 10.9 percent increase over last year, Hicks said. That is the highest annual growth rate in 26 years.

He noted that General Fund revenues exceeded the budgeted estimate by $1.1 billion for a record surplus and Road Fund revenues totaled $1.6 billion, 10.1 percent over last year, resulting in a $64.6 million revenue surplus.

Hicks said the General Fund revenue surplus will be deposited into Kentucky’s Rainy Day Fund for emergencies, bringing it up to nearly $1.9 billion, or over 16 percent of General Fund spending.

The $1.9 billion balance is up from just $303 million at the end of last year, he said, adding that the final surplus amount will be known once the accounting records for expenditures are completed later this month.

“Kentucky’s economy has been recovering and income and consumption growth have followed, at a much greater pace than expected,” said Hicks.

HIcks reported that all three of the largest tax areas — individual income, sales, and business tax receipts, which account for 80 percent of total General Fund receipts — grew significantly.

Sales tax receipts grew by 12 percent, the highest annual growth rate since the tax rate was raised from 5 percent to 6 percent in 1990.

Individual income taxes grew by 7.9 percent. Business tax receipts from the corporate income tax and the limited liability entity tax grew 38.1 percent, after yearly growth of less than two percent over the prior five years.

General Fund revenues tracked higher than the budgeted revenue estimate all year, which called for a 1.2 percent growth rate.

Hicks also had encouraging news for the Road Fund.

He said its revenues bounced back this year, growing by 10.1 percent over the previous year, after last year’s 4.8 percent drop due to a large decline in vehicle travel and sales caused by COVID-19.

A record year for the motor vehicle usage tax receipts, equivalent to a sales tax on vehicle purchases, accounted for most of the Road Fund’s revenue increase this year.

The $64.6 million Road Fund revenue surplus will be deposited into the highways budget and used to support projects in the 2020-2022 biennial highway construction program, Hicks said.

Motor vehicle usage tax collections reached an all-time high of $620.9 million, far exceeding the previous high of $514.5 million. Growth rates for the four quarters were 12.1 percent, 10.2 percent, 8.3 percent and 80.9 percent.

Motor vehicle license receipts increased $16.9 million while motor vehicle operators’ receipts rose by $9.1 million. The motor vehicle license fees experienced a COVID-related decline in the previous year.

“The economic news today related to our state budget is nothing short of incredible,” said Beshear.

Senate budget chairman Chris McDaniel, R-Taylor Mill, and his House colleague, Steven Rudy, R-Paducah, could not be immediately reached for comment.

Mike Lonergan, spokesman for the Kentucky Republican Party, said, “Thanks to the Republican-led legislature’s commitment to a fiscally disciplined and responsible approach to budgeting and allocating federal relief dollars — and in spite of the governor’s overridden vetoes — Kentucky is on a more solid financial footing.”

Marisa McNee, spokeswoman for the state Democratic Party, said, “Over the last year Gov. Beshear has become well known for his strong, compassionate leadership during a crisis. And now, thanks to strong fiscal management from his administration, Kentuckians can feel confident in the health of Kentucky’s budget.”

The Democratic governor said he is going to make sure the strong economy “reaches every part of Kentucky and, most importantly, it benefits each and every one of our families. Good news today for Kentucky, so buckle up, we’re going places.”

The Republican-led legislature will consider a two-year budget when it meets in the 2022 General Assembly in January.