Despite a 3.0 percent drop in General Fund receipts during May, Kentucky's economy is showing resilience with robust consumer spending helping the state offset the monthly decline, according to a report from the Office of State Budget Director.

Total May revenues reached $1,163.9 million, down from $1,200.3 million in May 2025. However, year-to-date collections through the first eleven months of the fiscal year have grown 1.3 percent, putting the state on track to potentially exceed its official General Fund estimate of $15,498.9 million despite earlier forecasts of a $156 million shortfall.

State Budget Director John Hicks highlighted the strength in consumer spending as a key factor in Kentucky's economic performance. Sales and use tax receipts surged 7.9 percent in May and are up 6.0 percent year-to-date, suggesting strong household purchasing power even as gasoline prices have consumed a larger share of household budgets. Individual income tax withholding collections fell only 5.2 percent despite the income tax rate dropping to 3.5 percent in January, indicating that wage and employment growth have more than offset half of the rate-lowering effect.

"Despite General Fund receipts falling 3.0 percent in May, receipts are on pace to exceed the official revenue estimate, in part due to 6.0 percent year-to-date growth in the sales and use tax," Hicks said in a statement.

The report showed mixed results across major revenue categories. Individual income tax collections fell 12.9 percent while corporate income and limited liability entity tax receipts declined 20.2 percent. However, property tax collections grew 2.8 percent, and cigarette tax receipts increased 16.5 percent in May, bolstered by a shift in cross-border purchasing after Indiana raised its cigarette tax from $0.98 to $2.98 per pack in July 2025.

Road Fund receipts declined 3.9 percent in May to $159.2 million, though collections remain only 1.1 percent below the prior year level. The official Road Fund estimate calls for a 1.0 percent decrease for the full fiscal year.

With one month remaining in the fiscal year ending June 30, Kentucky's General Fund collections can decline as much as 27.2 percent in June and still meet the official estimate. The state's fiscal position has been bolstered by its Budget Reserve Trust Fund, which is expected to hold approximately $3.1 billion at year-end.