BRADENTON, Fla. — Kentucky residents and commercial haulers will ring in the New Year with a 4.3-cent per gallon drop in motor fuel taxes, a drop in costs at filling stations that represents a "crippling" loss of funding for state roads, officials warned.
The Jan. 1 price drop will result in a loss of about $129 million on an annualized basis for the state road fund, according to Kentucky Transportation Cabinet Secretary Mike Hancock.
A loss of $129 million would amount to about 6% of the funding for the state'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 gas tax accounts for more than half of the revenue in the Kentucky Road Fund," 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," he added.
The highway program is a classic example of a user fee system, said Hancock. Rather than being funded through general taxes on sales, income, payroll or property, Kentucky roads and bridges are paid for by those who use them.
The decrease in fuel price reflects a drop in the calculated average wholesale price of motor fuels under Kentucky law that is collected through a 9% excise tax at the pump. So the rate changes quarterly.
In addition to the excise tax, the state charges 5 cents per gallon for gas and 2 cents per gallon for diesel at the pump, as well as 1.4 cents per gallon earmarked for cleanup of old underground fuel storage tanks.
Federal taxes of 18.4 cents per gallon of gas and 24.4 cents per gallon of diesel are also charged, but have remained that amount since 1993.
The Kentucky Transportation Cabinet relies on the road fund to pay for its activities, and a dramatic decrease in motor fuels tax revenue could delay or require cancellation of planned projects, state officials said.
Local governments also would feel the pinch because 48% of the motor fuel tax is returned to cities and counties as revenue sharing for local streets and roads.
Chuck Wolfe, spokesman for the Transportation Cabinet, said Dec. 1 that no proposals have been suggested by the secretary - or anyone else - so far to address the decline in road funding.
"Any legislative proposals, of whatever kind, would be put forth in conjunction and cooperation with the governor's office," Wolfe said. "We're not yet to the point of having adopted a legislative agenda."
The Kentucky General Assembly's annual session begins on Jan. 6 and runs through h March 24.