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State Road Fund Has Surplus, But Officials Say It's Unsustainable

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After years of dwindling returns, revenue into Kentucky’s road fund was higher than expected during the fiscal year that ended on June 30.

But state officials say that won’t happen again this year because money gleaned from motor fuels is due to be flat and vehicle registration taxes aren’t expected to surpass projections again.

The road fund finances state road and bridge construction across Kentucky. The fund’s main sources of money are gas tax revenues, which are pegged to the price of gas, and the motor vehicle usage tax, which is paid when someone buys or transfers ownership of a car.

This year, the road fund ended up with $51.1 million more than officials had predicted, mostly due to lots of Kentuckians buying or transferring ownership of cars.

Robin Brewer, budget director for the Kentucky Transportation Cabinet, said the growth was unexpected and unsustainable.

“It’s just not a long-term solution to our motor fuels situation,” Brewer said. “Just for the simple fact that the demand for the purchase of vehicles is obviously going to slow at some point. We do expect for that revenue source to decline very soon.”

Kentucky’s road fund has struggled in recent years because the low price of gas has meant the state hasn’t gleaned as much revenue through the motor fuels tax.

In 2015, the General Assembly set a “floor” to the fuel tax — meaning even if gas prices continue to drop, the state continues to receive 26 cents per gallon.

Transportation officials estimated the move saved the state about $291 million in lost revenue.

But Brewer said the wholesale price of gas isn’t expected to rise to the point where the fuel tax increases in the coming year, predicting that the road fund will collect $30 million less than it did in the recently finished fiscal year.

During an interim joint Transportation Committee hearing on Thursday, Sen. Ernie Harris said it “took a lot of courage” for lawmakers to stabilize the fuel tax, but suggested the road fund needs more significant revenue.

“If I were king for a day I would raise the gas tax by another six or seven cents, but that’s probably why I’m not going to be king for a day,” Harris said. “But seriously we have a lot of needs.”

Last year, the Transportation Cabinet halted new road construction in Kentucky to help stabilize the road fund. The state is easing back into new construction during the new fiscal year.

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