Lower Fuel Tax Receipts Lead to $112.5M Cut in Kentucky Transportation Funds

AASHTO Journal, 8 January 2016

Gov. Matt Bevin’s administration ordered a $112.5 million reduction in the budget of the Kentucky Transportation Cabinet, news agencies reported, citing lower projected receipts from the percentage sales tax on motor fuels as gas prices continue to fall.

The Courier-Journal newspaper reported that the order calls for $62 million of that reduction to be achieved by a cut in state road aid to cities and counties, about 12 percent of what was originally budgeted for the revenue-sharing program with local governments.

It said a KYTC spokesman and two key lawmakers said the cut comes as no surprise, given the downtrend in pump prices.

Bevin’s action, the story said, was triggered by a December forecast that revenues for the state’s Road Fund would fall $112.5 million below the budgeted $1.56 billion.

Last year, Transportation Secretary Mike Hancock and then-Gov. Steve Beshear warned that falling motor fuel prices had cut the gas tax rate from 32.5 cents a gallon in the fall of 2014 to 27.6 cents in early 2015, the newspaper noted. Those officials urged legislators to set 27.6 cents as the new minimum state rate, but lawmakers instead set it at 26 cents.

The order cuts the budget of the Department of Highways by nearly $29 million, which a spokesman said will delay work on some projects. The Department of Vehicle Regulation is cut by $2.5 million, and other transportation programs will take small cuts, the report said.

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