Transportation Cabinet hearing from local officials "virtually daily" on declining road maintenance funds, secretary says

06/02/2015 08:05 PM

FRANKFORT — Gasoline tax revenues in Kentucky’s biennial road budget are expected to drop an estimated $165.1 million, but the General Assembly staved off a further decline of another $125.9 million by passing House Bill 299 this session, Transportation Cabinet officials told a legislative panel Tuesday.

Still, the anticipated downturn in gas tax receipts has left some state highway projects in limbo and local officials reaching for their phones as they try to find out exactly how much less they’ll receive next fiscal year for basic road maintenance.

Lawmakers this session addressed Kentucky’s gas tax rate, which plummeted at the start of the year after a sharp decline in gas prices. HB 299 set a new floor for the average wholesale price of gas, on which the fuel tax is based; created a 10 percent limit on annual declines in average wholesale gas prices; and moved from quarterly annual wholesale price adjustments to annual adjustments starting with the 2017 fiscal year that begins July 1, 2016.

While the current gas tax rate is down to its new statutory floor of 26 cents per gallon — a 20 percent decline from the 32.5-cents-per-gallon rate from July through September — Deputy Transportation Cabinet Secretary Russ Romine said the tax would be 22.5 cents per gallon without legislative action.

“Instead of losing the full 10 cents, we only lost six and a half cents off the gas tax,” Romine told lawmakers on the Interim Joint Committee on Transportation.

Local governments are expected to lose an estimated $8.4 million for road maintenance in the final quarter of the current fiscal year, but the legislature directed $7.8 million in this year’s House Bill 510 to offset much of the lost revenue.

Similar relief isn’t planned for next fiscal year, when local road maintenance losses are projected to hit $34.6 million.

That has some local officials checking in with the Transportation Cabinet to get a clearer understanding of how much road maintenance money will be available to them when the next fiscal year begins July 1, said Transportation Cabinet Secretary Mike Hancock.

“We’re hearing virtually daily from counties and cities that are asking us questions about, you know, how much is that first allocation going to be, how much money can they reasonably expect, and then they’re all having to make those very difficult decisions about how to accommodate that,” Hancock told reporters after the meeting.

The cabinet has also begun looking at state projects that may be delayed with declining resources, Hancock said. He and Romine presented figures that show gas tax receipts for state construction are expected to drop $16.7 million in the current fiscal year and $68.8 million in the fiscal year beginning July 1.

“Obviously the lesser amounts of money will necessitate that some things be delayed,” Hancock said. “At this point we haven’t settled in on specific projects that we are electing to hold off on.”

“We’re looking at creating the opportunity for the incoming administration to have the full view of field and be able to make decisions, wise decisions, about how to appropriately use money that’s available for next year,” he added.

Timing can make a multimillion-dollar difference in legislation like HB 299.

Rep. Leslie Combs said the state could have kept its gas tax receipt losses to between $12 million and $30 million in the next fiscal year instead of the projected $132.9 million decline had the annual wholesale gas price adjustments taken effect immediately rather than in fiscal year 2017.

“That’s $100 million,” Combs, D-Pikeville, said during the meeting. “That’s a big number, and I just think it’s important for everybody to know when we make these decisions, here we are months later, the kind of impacts they make.”

Hancock said the gas tax issue ultimately became “the art of the possible” as this year’s session neared sine die.

“From the standpoint of our cabinet and the revenues we have available, we’d love to have seen those numbers been as high as they possibly could be,” he said after the meeting. “The fact is at the end of the day the General Assembly did what it could. We’re incredibly appreciative of what they did, but as she said, there definitely is a difference between what could have been and what is.”


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