Kentucky Sees Decline in February State Receipts Amid Economic Trends

FRANKFORT, Ky. – February brought a decline in both the General Fund and Road Fund receipts for the state of Kentucky, as reported by the Office of the Kentucky State Budget Director on Tuesday. Total General Fund receipts for February reached $970.8 million, reflecting a decrease of 0.6 percent compared to $977.1 million in February 2025. Over the first eight months of Fiscal Year 2026, which ends on June 30, the receipts have decreased by 1.1 percent.

The official Consensus Forecasting Group has projected a 1.3 percent decline in revenues for the current fiscal year. According to Budget Director John Hicks, receipts can still decline by 1.7 percent over the last four months of the fiscal year while meeting the official revenue estimate.

Hicks highlighted that the withholding component of the individual income tax, along with sales tax, accounted for $864.2 million of the total General Fund revenue, or 89 percent of February’s total. The withholding component experienced a modest decrease of 2.6 percent, despite a 12.5 percent reduction in the income tax rate that took effect last month. This stability is partially attributed to the filing schedule of certain businesses, which resulted in a February deposit of withholding taxes from December at the higher 4 percent tax rate.

Income tax refunds and the number of returns requesting refunds in February rose compared to the previous year. The sales tax, on the other hand, remained stable, increasing by 3.3 percent for the month and 4.8 percent year-to-date.

Road Fund Receipts Drop Significantly

In contrast to the General Fund, Road Fund receipts fell sharply by 11.3 percent in February, amounting to $131.5 million, the lowest total recorded for Fiscal Year 2026. Overall revenue from the Road Fund has decreased by 1.3 percent through the first eight months of FY26.

Motor fuel collections dropped by 12.1 percent, while motor vehicle usage tax receipts declined by 7.5 percent. The official forecast for the Road Fund anticipates a 1.0 percent decrease in revenues for the fiscal year. Current year-to-date collections indicate that revenues can afford to decline by 0.6 percent for the remainder of the fiscal year and still meet the official estimate of $1,844.0 million.

As Kentucky navigates these revenue challenges, the implications for future funding and budget allocations remain critical. Stakeholders will need to monitor economic indicators closely to adapt to evolving fiscal conditions.