The decrease reflects a drop in the calculated average wholesale price of motor fuels, as provided under Kentucky law. The decline in the tax will be the fourth drop in the last five quarters. The decline will have been 4.9 cents – a $147 million annualized impact – since the fiscal year began on July 1.
A loss of $129 million would amount to about 6 percent of Kentucky’s highway program, which was forecast to have $2.25 billion in the current fiscal year from all sources, including state and federal motor-fuels taxes and a state usage tax on motor vehicles.
The highway program is a classic example of a user fee system, where those who use the roads pay for them, rather than being funded through general taxes on sales, income, payroll or property.
The Cabinet says local governments also would feel the pinch because nearly half of the motor-fuels tax – 48 percent – is returned to cities and counties in the form of revenue sharing for local streets and roads. State officials say if the AWP declines even more in the January survey, as happened in January 2014, it will take years for the tax rate to recover to the July 2014 level.
“The gas tax accounts for more than half of the revenue in the Kentucky Road Fund,” Kentucky Transportation Secretary Mike Hancock said. “A loss of revenue is always concerning, but a revenue impact of this magnitude is crippling. It means less money for building, improving, maintaining and repairing our roads, streets and bridges.”
In testimony this week to the Legislature’s Interim Budget Review Subcommittee on Transportation, Russ Romine, Deputy Secretary of the Kentucky Transportation Cabinet, pointed out that the January 2015 survey will determine the tax rate for the final quarter of fiscal 2015. Any increase after that would be capped at 10 percent for all of fiscal 2016.
