Kentucky Chamber expresses support for road fund stabilization

With the decreasing price of gas, the Kentucky Transportation Cabinet estimates the state’s road fund could lose a substantial amount of revenue, which would impact businesses across the state.

Because of this harsh reality, the Kentucky Chamber of Commerce is calling on lawmakers to find a way to stabilize the road fund. Tax revenues from gas sales have already been allocated, but because of the all-time lows the money will not be there for important transportation projects.

The pending decline in gas tax revenue affects the business community as the conditions of our roads impact all aspects of business and economic competitiveness. A well-performing transportation network supports and grows jobs, helping consumers and families.

Analysis of the latest U.S. Census Bureau data shows the design, construction and maintenance of transportation infrastructure supports the equivalent of 40,906 full-time jobs in Kentucky. These employees earn a total annual payroll of $1.5 billion and contribute an estimated $128 million in state and federal payroll tax revenue.

The Senate Standing Committee on Transportation heard testimony Wednesday from Kentucky Chamber President and CEO Dave Adkisson who expressed the business community’s concern over the potential decline.

Kentucky’s road fund – which provides the money to construct and maintain our roads and bridges – receives funding through several sources. Revenue comes from the state gas tax, the motor vehicle usage tax (sales tax on cars), license fees, a weight-distance tax on heavy trucks, and funds from the federal gas tax.

By law, Kentucky’s gas tax rate is adjusted every three months based on the average wholesale price of gas, which has fallen $1.46 a gallon since July 1. Because of this state law, the tax has dropped from 31.9 cents to 27.6 cents per gallon since Jan. 1. The continuing fall in gas prices will cause the rate to be reduced to 22.5 cents a gallon in April.

Kentucky’s two reductions combined will result in a shortfall of about $250 million in revenues anticipated in the state budget: about $56 million less than budgeted for the current fiscal year that ends June 30 and a shortfall of about $194 million in the 2015-16 fiscal year.

The Kentucky Chamber supports finding a way to ensure funding for the long-term maintenance of our roads and bridges by addressing the indexed portion of the state gas tax.

While gas prices could rise again and make up for some of the lost revenue, the fluctuations make it difficult to plan and fund highway and bridge projects in the state.

The Chamber suggests setting the gas tax “floor” at a level that would more adequately support the road plan and allow the state to continue current road projects. Another step to ensure a stable road fund would be the implementation of a limit that will prevent the tax from falling more than 10% per year.