Interim Joint Committee on Transportation Hears Concerns Over Road Fund Impact Amid Gas Tax Freeze

The temporary reduction in Kentucky’s motor fuels tax is costing the state’s Road Fund an estimated $26.5 million per month — while saving the average driver just $5 a month at the pump, according to testimony presented this week before the Interim Joint Committee on Transportation.

Governor Andy Beshear signed an emergency order on May 5 to reduce the state gas tax by 10 cents per gallon as fuel prices had been rising amid ongoing tensions in the Middle East. The reduction took effect May 11. The governor also signed a separate order freezing the gas tax rate, preventing a scheduled increase on July 1. The orders expire June 10, though Kentucky law allows local governments to request extensions.

Chad LaRue, executive director of the Kentucky Association of Highway Contractors, told the committee that the impact on transportation funding is substantial. Kentucky’s central location puts it within 600 miles of 65 percent of the U.S. population, drawing significant out-of-state traffic. About 30 percent of gas tax revenue comes from those drivers, who continue to use Kentucky roads without paying into the state’s transportation funding while the gas tax is suspended.

Kentucky’s Road Fund supports road and bridge maintenance, resurfacing projects, highway safety improvements, and local road aid distributed to counties and cities. LaRue warned that resurfacing projects would likely be among the first cut if the suspension continues.

Kentucky Transportation Cabinet Deputy Secretary Mike Hancock and Shaun McKiernan, Executive Director of the Office of Budget and Fiscal Management, also testified on behalf of the Transportation Cabinet. McKiernan stated that the 10-cent reduction would have a direct impact on local road aid programs — including county road aid, rural secondary, and municipal road aid — estimating a combined loss of $11.8 million for the month of the suspension.

Committee members also raised concerns about the broader ripple effects of deferred road maintenance. Deteriorating roads put wear and tear on vehicles, with one lawmaker noting a $1,000 tire repair after hitting a pothole — quickly wiping out any savings at the pump. Committee members also expressed concern that the slowdown in project authorizations threatens jobs for the workers who build and maintain Kentucky’s roads.

The Kentucky Chamber, which has advocated for increased infrastructure funding, issued the following statement from president and CEO Ashli Watts:

“Affordability remains a real concern for Kentucky families, and we have advocated for policies that help address those challenges, including reducing the income tax, improving child care affordability, and increasing housing supply. At the same time, Kentucky must have the resources needed to maintain and improve the infrastructure that drives our economy and connects our communities. Even a relatively small reduction in the gas tax can have a significant impact on transportation revenues, limiting our ability to build and maintain the roads and bridges Kentuckians rely on every day. The Kentucky Chamber urges policymakers to protect infrastructure funding and pursue more effective, long-term solutions to improve affordability.”

The executive order expires June 10. At that point, county judges and mayors may request extensions for their jurisdictions — a decision committee members urged local officials to avoid.

Stay tuned to The Bottom Line for more.