Kentucky to ‘Pause’ New Project Starts to Build Cash Balance in Ailing Road Fund

AASHTO Journal, 10 June 2016

Saying Kentucky needs to restore its Road Fund cash balance “to normal operating levels,” Transportation Cabinet Secretary Greg Thomas outlined a plan to “delay the starts of new projects so that we can pay current expenditures, recoup lost revenue and rebuild our funding base.”

Thomas told the Legislature’s Interim Joint Committee on Transportation June 7 that “for the first time in recent history, the Cabinet faces a low Road Fund cash balance, which compromises our ability to authorize new state road projects over the next biennium.”

capitol040116.jpgHe said the KYTC tries to maintain a cash balance in that fund of at least $100 million, but did not say how low it had reached.

A spokesman told the AASHTO Journal that without the pause “we could possibly risk near-zero or negative” Road Fund cash balances. The KYTC said the last time the fund’s cash balance headed that low was in 2004, when it fell to $30 million.

The last monthly tax receipts report, for April, showed the Road Fund growing 13.3 percent that month from a year earlier to take in $130 million, but that still left receipts down 3.8 percent for the first 10 months of the 2016 fiscal year. For July through April the Road Fund took in almost $1.23 billion, the report said, down from nearly $1.28 billion at the same point in fiscal 2015.

This is the latest in a series of belt-tightening measures at the department as budget receipts suffered in recent years. And it comes despite a mild increase in federal highway funding allocations to states under the new five-year FAST Act.

The KYTC said that for the next two-year budget cycle that begins in July it will implement what it called a “Pause-50” plan “by halting the starts of new state-funded projects in all phases, which includes design, right of way/utilities, and construction for the first year of the biennium; and in the second year, aim for a goal of $50 million to allocate on state-funded projects starts.”

While for the plan’s second year the Cabinet expects to make $50 million available for new project starts, it added that the actual dollar amount “could be higher or lower depending on actual expenditures of current projects and the flow of state revenue funding.”

The WFPL news site reported that the KYTC initiative will delay about $145 million in projects. In preparing the plan, Thomas told the committee, “we went to the districts, we determined what the priorities were; we also looked at projects that hadn’t fully developed or fully started in terms of the right of way and utility phase, and those were the projects that came up.”

The KYTC announcement said the department had been “overspending with limited funds.” It said Road Fund receipts totaled $4.5 billion for the fiscal 2014-16 period, while expenses of $5.035 billion outspent revenue by $498 million.

A contributing factor, it added, was that the department’s price-based motor fuel tax level had fallen 6.5 cents a gallon in fiscal 2015 before the Legislature last year set a statutory floor price of 26 cents. But that left projected receipts through 2016 down $152 million, and the KYTC expects the fuel tax price to remain at statutory floor for the next two years.

With all of that, the agency said, “the start of new state-funded projects must be delayed in order to meet payment of current expenditures as well as restoring the $100 million cash balance threshold.”

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