Kentucky Closes Out Fiscal Year 2026 With General Fund Revenue Ahead of Projections

Kentucky’s General Fund outperformed expectations for fiscal year 2026, even as officials had projected a decline for the year, according to a year-end report released July 10 by the Office of the State Budget Director (OSBD).

The General Fund brought in $15,975.5 million for the year, a 1.7% increase over FY25 and $476.6 million more than officials had projected. State Budget Director John Hicks noted that fourth-quarter receipts climbed 7.2%, capping a strong close to the year, and said the growth in the state’s largest revenue sources — along with stronger-than-expected business tax collections — reflects strength in the earnings of both Kentuckians and Kentucky businesses.

In a statement about the report, Kentucky Chamber President and CEO Ashli Watts pointed to the numbers as a sign of the value of disciplined budgeting and a competitive tax climate. “These results show what careful, disciplined budgeting and pro-growth tax policy can deliver for Kentucky. Keeping our tax structure competitive lets Kentuckians and Kentucky businesses keep more of what they earn, while giving the state the resources it needs to invest in the infrastructure and services that support long-term growth.”

Consumer Spending and Wages

Sales tax collections grew 6.4% for the year, with growth accelerating each quarter — from 3.9% in the first quarter to 8.0% by the fourth — a trend that points to sustained consumer spending.

Individual income tax collections grew 4.6%, adding $247.3 million over the previous year, driven largely by a 29.4% jump in estimated payments. Withholding collections, which reflect wages paid to Kentucky workers, grew 6.1% in the first half of the year before easing after a state income tax rate cut, from 4.0% to 3.5%, took effect January 1.

Business Taxes

Combined corporate income and Limited Liability Entity tax collections fell 21.9 % from FY25, though they still beat the state’s estimate. The OSBD attributed the year-over-year decline to unusually high, one-time estimated payments the state received the prior year, rather than to any underlying softening in business activity.

Road Fund

The state’s Road Fund, a separate account that funds roads, bridges, and highway safety, came in below its year-end target, totaling $1,821.9 million against a goal of $1,894.3 million.

The OSBD attributed the gap primarily to the motor fuels tax, where the fuel tax rate came in lower than budgeted. Motor vehicle usage tax collections were a bright spot within the fund, beating expectations by $73.9 million and reaching an all-time high.

Motor fuels tax collections were impacted by an executive order signed by Governor Andy Beshear, which temporarily cut the state gas tax by 10 cents per gallon during the FY26 reporting period. The Kentucky Chamber raised concerns about the potential impact at the time.