Economists Forecast State Revenues

A group of economists who set Kentucky’s economic forecast wrestled with an uncertain view on the future economy when establishing future revenues for the Commonwealth in the next biennium.  

The Consensus Forecasting Group (CFG) is comprised of 10 economists and professors from across the state. It operates independently of the legislature and establishes the forecast legislators use to develop the state’s biennial budget. 

The outlook means that Kentucky’s General Fund will experience minimal growth from the current year to $15.5 billion in FY 2025 and 2.9% growth in FY 2026 to $16 billion. 

The selected forecast aligns with the group’s more risk-averse views due to unknowns with international conflicts, a slowing labor market, and changes in inflationary pressure on the economy. Members noted that they were struggling with future year growth, particularly with the individual income tax, due to statutory changes and the money supply. 

The FY 2025 individual income tax is the real wild card, one member remarked as to why the group shared the uncertain views, highlighting the 4.0% decline in the tax.  

The Group also adopted the final revision estimates for both the general and road funds in FY 2024. The general fund estimate was $ 15.5 billion, and the road fund was $1.9 billion. This represents a growth of 2.7% in the general fund and 7.3% in the road fund.  

The robust growth in the road fund was due to a rate freeze in the early part of FY 2022 due to the Covid-19 pandemic. However, staff from the Office of the State Budget Office told CFG members despite this freeze the motor fuels tax would still experience significant growth. 

The group used the same blend of weights in determining the FY 2025 and 2026 road fund estimates. The estimates are $1.8 in FY 2025 and $1.9 in FY 2026. Revenues will decline 3.0% from the current year in FY 2025 but will grow 3.8% in FY 2026. 

General Fund Forecast 

FY 2024- 26  

(In $ billions) 

Road Fund Forecast 

FY 2024- 26  

(In $ billions) 

The estimates set by the CFG for FY 2025 and 2026 will be used by the Kentucky General Assembly to adopt the upcoming biannual budget for both the general fund and road fund. 

To view the December meeting’s official CSG estimates, please visit here