Kentucky ended budget year 2015 with a $20 million shortfall in Road Fund receipts, meaning slightly less money has come in than what was budgeted to invest in and maintain our transportation network.
Drops in the average wholesale price of gasoline — to which Kentucky’s gas tax is tied — are largely to blame. Taken together, all other Road Fund revenue was essentially flat with 0.3 percent growth, but gas tax receipts fell by 4.0 percent compared to budget year 2014. In dollars, the gas tax generated $35.9 million less in 2015 than in 2014. Since about 50 percent of motor fuels receipts go back to local governments through the County, Municipal and Rural Road Aid programs, funding for local roads and bridges are harmed as well.
Despite previous proposals from Gov. Beshear and the House to prevent these price drops by raising the gas tax floor, the legislature did not act until 2015. As a result, the tax fell by a steep 4.3 cents in the second quarter of fiscal year 2015. In the final moments of the 2015 session, the General Assembly prevented two-thirds of the additional 5.1 cent drop slated to take effect on April 1 by raising the gas tax floor to 26 cents (this figure includes the variable portion of the tax based on the price of gasoline, the 5 cent supplemental user fee and the 1.4 cent underground storage tank clean up fee).
And that’s where the tax will stay through budget year 2016 — about 4.4 cents lower on average than was forecast when the biennial budget was created. Transportation officials estimate that each penny amounts to $30 million in revenue over the course of a year.
To somewhat blunt the impact of gas tax losses in budget year 2015 on local governments, in the 2015 session lawmakers also boosted General Fund revenue sharing with the County and Municipal Road Aid Programs by $7.8 million. To support that increase, they transferred $3 million from the petroleum storage tank clean-up fund to the General Fund — on top of $7.5 million in 2015 and $7.7 in 2016 transferred from that fund in the 2014-2016 biennial budget.
The changes the legislature made to the gas tax in 2015 were important. By raising the floor, shifting to an annual rather than quarterly rate-setting process, and ensuring it falls by no more than 10 percent from year to year, they mitigated future losses and limited volatility.
But the state’s problems with transportation funding need a more comprehensive strategy that addresses increasing fuel efficiency standards and keeps up with the true cost of building and maintaining a state-of-the-art transportation network. Recent headlines about the Transportation Cabinet’s challenge with inadequate salaries for engineers who are fleeing the public sector show that cost-cutting has real consequences.
