FRANKFORT, Ky. — Kentucky's state government ended its 2025-26 fiscal year with significantly higher general fund revenues than predicted, while the road fund fell short of expectations due to a temporary gas tax suspension implemented by Gov. Andy Beshear.

State Budget Director John Hicks reported to the Interim Joint Committee on Appropriations and Revenue that the general fund exceeded its official revenue estimate by $476 million. The report also showed the budget reserve trust fund now stands at $2.9 billion.

The strong performance came from multiple revenue sources. Sales and use tax collections grew 6.4%, which Hicks described as "a really good year" that demonstrates national consumption patterns. Individual income tax receipts rose 4.6% despite an income tax rate reduction from 4% to 3.5% that took effect in January, reflecting wage and salary growth. Lottery receipts also increased 5.5%.

Sen. Amanda Mays Bledsoe, R-Lexington, questioned the lottery growth given concerns about the impact of sports wagering on education funding. Hicks said high Powerball jackpots and strong scratch-off ticket sales drove the increase, and his office is tracking sports wagering revenue, which he described as "healthy and exceeding expectations."

In contrast, the road fund faced challenges. The fund recorded a $72.4 million shortfall, primarily from lower motor fuel tax revenues. Beshear suspended the gas tax in May 2026, reducing the rate by 10 cents per gallon during a six-week period at the end of the fiscal year. Committee co-chair Sen. Christian McDaniel, R-Ryland Heights, noted that without this suspension, the road fund would have met its revenue estimate.

Motor vehicle usage tax collections offset some losses, reaching a record $734 million — the third consecutive year of record highs in this revenue category. However, the shortfall still required action. Hicks said officials adjusted revenue sharing for cities and counties, transferred unexpended appropriations from other transportation budget areas, and implemented overall budget reductions to address the shortfall.

McDaniel expressed concern about the impact on local governments. "They're certainly bearing a fairly disproportionate burden of the shortfall," he said.

The next meeting of the Interim Joint Committee on Appropriations and Revenue is scheduled for Sept. 2 at 1 p.m. More information is available at legislature.ky.gov.