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Low Gas Prices May Be Good For Motorists, But Not Kentucky's Road Fund

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Kentucky lawmakers are preparing for a drop in funding for the state’s Road Fund.

The state’s gas tax is a major source of revenue for funding road maintenance, and it's adjusted every three months based on the average wholesale price of fuel.

The recent drop in gas prices means Kentucky could see an estimated $250 million shortfall in revenues lawmakers had budgeted for the current and upcoming fiscal years.

State Transportation Secretary Mike Hancock has told county officials they will see a reduction in the amount of state revenue-sharing funds they receive each January.

Because of this and other concerns, state Rep. David Floyd, a Bardstown Republican, recently said the state may soon have to consider revamping the way it funds road maintenance programs.

“As we transition to higher and higher gas mileage on our vehicles, as we transition to even electric vehicles or other methods of propelling an engine, well—we do have to look at something else," he said.

He said—on one hand—state law places a ceiling on the amount the gas tax can increase during times of high fuel prices.

"On the other hand, if the price of gasoline—the average wholesale cost—drops dramatically, there is no floor on the amount it could drop," he said. "And therefore our revenues drop. For this last 4.3 cents of gasoline tax drop, we lost about $160 million for the Road Plan."

Sen. Ernie Harris, a Prospect Republican and chair of the Senate transportation committee, has filed a bill that would freeze Kentucky’s gas tax at its current rate, protecting the Road Fund from any further declines in tax receipts.

Governor Steve Beshear last year proposed that the gas tax be maintained at the level where it was set near the end of 2013.

The bill was passed by the House, but not the Senate.