Gov. Andy Beshear issued a state of emergency on May 5 citing that the “pain at the pump” is hurting Kentucky families due to the rising cost of gas. Beshear also wrote that the price increase on gas was creating an increase on food, consumer goods, and other services.
An executive order signed by Beshear went into effect on May 11 to alleviate the 10-cents of the 26.4 cent gas tax. This order also freezes an automatic increase of .06 cents that would go into effect on July 1.
The interim joint committee on transportation and the Kentucky Association of Counties agree that removing the tax will be detrimental to Kentucky’s road funding.
According to Chad LaRue, executive director for Kentucky Association of Highway Contractors, the impact on Kentucky’s road fund will be much greater than the impact at the pump. Based on the average person driving 15,000 miles a year in a vehicle that averages 25 miles per gallon, the savings is $5 per month.
The automatic increase of .06 cents will save the average driver .30 cents per month but reduce revenue for Kentucky’s road fund by $1.5 million per month.
However, the 10-cent reduction will reduce the road funds by nearly $26.8 million per month. This will reduce funding for state roads by $15 million and county and city roads by $11.8 million for each month it is in place.
“Certainly not trying to diminish the savings,” LaRue said, “but the impacts that these pennies and dollars make on the road fund and our ability to maintain and improve those roadways is significant.”
Alleviating this tax could do more harm than good for Kentuckians. The one-month loss in revenue is equivalent to all the money allocated to the Local Assistance Road Program for counties and cities for the entire fiscal year.
“If the 10-cent suspension stays in place through the end of June through the fiscal year, we could see upwards of a 50 million dollar decline in gas tax revenues,” LaRue said.
LaRue presented several facts to the Interim Joint Committee on Transportation on June 2. The impacts of the tax suspension will cause roadway maintenance and improvement of roadways to be delayed or deferred. It could potentially cause more wear and tear on vehicles.
He also said that about 30 percent of the gas purchased in Kentucky is from vehicles from other states. The loss of that revenue would be $8 million per month.
The gas tax revenue is the only dedicated funding source for rural secondary, county and city roads. The decrease in funding could have an impact on Adair County. For the next fiscal year, Adair County is slated to receive $1.33 million in Local Assistance Road Program funding. An additional $1 million is also slated for other road projects in the city and county.
This funding could potentially be cut or placed on hold due to the suspension of the tax. For every 30 days that the reduction is in place, “It’s an amount of money that will have a detrimental impact to our road funding because ultimately it will mean less funds for county and city roads and state roads as well,” said State Representative Amy Neighbors. Neighbors represents Adair, Cumberland, Metcalfe and Monroe counties.
