Beshear says lawmakers must change gas tax calculation to avoid 'disasterous' drop in road funds

01/09/2014 03:26 PM

LEXINGTON — Kentucky legislators need to establish a new minimum price in its calculation of the gasoline tax so volatile gas prices don’t inadvertently shrink the amount Kentucky brings into the road fund used to build and repave roads, Gov. Steve Beshear told transportation officials Thursday.

Because of a drop in wholesale prices of gas over the last year, Kentucky’s tax on a gallon of gasoline dropped Jan. 1 by 1.5 cents.

Speaking to the Kentucky Transportation Conference in Lexington, Beshear estimated that that the drop from 25.9 cents to 24.4 cents per gallon will result in a $45 million dip in road revenue for 2014. And he said possible future drops of an additional 8.3 cents per gallon could result in an annual loss of $294 million in state road fund revenues.

That, Beshear said, would have serious ramifications on the state’s ability to build roads.

“I am going to lead a serious discussion this legislative session about raising the gas tax floor to guard against the disastrous drop in road fund revenues,” said Beshear.

The variable excise tax is a percentage of the average wholesale price of gas and diesel.

The variable excise tax rises, fall or stays unchanged from quarter to quarter on the basis of a survey of the average wholesale price of motor fuels. Surveys are conducted by the Department of Revenue in the first month of each quarter, (January, April, July, October) and the change in rate-if any- takes effect on the first day of the first month of the following quarter.

October 2010 was the last time that there was a decrease in the excise tax.

The current rate is 1.786, which is the lowest wholesale price of gasoline in years in which the variable tax rate has been based.

In the final report of the Blueribbon Commission on Tax Reform, released in December 2012, it was recommended to set the minimum gasoline tax price at $2.616 per gallon.


Subscribe to email updates.

Subscribe and get the latest political intelligence delivered to your inbox.