Kentucky road fund expects $165 million shortfall in coming year - WDRB 41 Louisville News

Kentucky road fund expects $165 million shortfall in coming years despite gas tax bill

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FRANKFORT, Ky. (WDRB) -- Kentucky stands to bring in $165 million less from the state's gasoline tax over the next two years, a shortfall that will affect work planned for city and rural roads alike, state transportation officials said Tuesday.

The shortfall could have been worse – up to an estimated $291 million – but lawmakers stopped the tax from plummeting further in the waning hours of the General Assembly in March. They approved a bill meant to keep revenue from the tax that supports the state road fund from falling when gas prices drop.

Kentucky Transportation Secretary Mike Hancock told members of the legislature's Interim Joint Committee on Transportation on Tuesday that he expects a drop in the state's roughly $1 billion annual road construction budget, although he said he doesn't foresee a “series of peaks and valleys.”

“We will continue to work hard,” Hancock said. “We think we can keep our heads above water at this level and hope that the future brings appropriate funding as needed. … We have lost a considerable amount of money that we would have otherwise enjoyed had we not had the free fall.”

Kentucky's gas tax is tied to average wholesale prices. Because of falling prices at the pump, the tax would have dropped to 22.5 cents per gallon on April 1, or about 10 cents lower than budget estimates, had lawmakers not stepped in, according to the Transportation Cabinet.

In passing House Bill 299, the General Assembly set a floor for the wholesale price, set a tax of 26 cents per gallon for the next year, changed a set of price calculations and limited the wholesale price from increasing or decreasing by more than 10 percent in a year.

A separate bill provides some relief for the fiscal year that starts July 1, setting aside $7.8 million to accounts for county and municipal road aid. Those programs had been set to lose $8.4 million.

However, House Bill 510 doesn't set aside funds for the following year, when those accounts are set to get more than $35 million less gas tax revenues than anticipated.

The overall shortfall for the state road fund in fiscal 2017 is nearly $133 million below estimates. Those losses could have been less had House and Senate conference committee members chosen to calculate the average wholesale prices on an annual basis right away, rather than wait until the following year, said Rep. Leslie Combs.

“I feel confident and I feel comfortable that $100 million would have been saved,” Combs, a Pikeville Democrat who chairs the House budget review subcommittee on transportation, said in an interview.

The Transportation Cabinet wasn't able to provide lawmakers with a total economic impact from the declining gas tax revenue, which will likely curb the ripple effect from overall transportation spending, said Russ Romine, the Cabinet's deputy secretary.

Hancock told reporters after Tuesday's meeting that he hears from county officials “virtually daily” about the impact of declining gas tax revenues. He said construction and maintenance work will be affected in some areas.

“At this point we haven't settled in on specific projects that we are electing to hold off on,” he said.

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