Kentucky Legislature Stabilizes the Road Fund at 26 Cents Per Gallon Floor

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In the wee hours of the morning today, the Kentucky Senate and House voted to stabilize Kentucky’s Road Fund.  Votes were taken upon a conference committee report developed by members of both the House and Senate, with the House passing the measure 67-29 and the Senate 29-9.

The vote stabilizes the Road Fund with a tax fixed at 26 cents per gallon effective April 1, 2015.   The tax on motor fuels in Kentucky will drop from 27.6 cents per gallon currently to the 26.0 cents.  However, this decrease is in contrast to a decrease of over 5 cents that would have otherwise occurred.   The 26 cents tax will be in place until July 1, 2016, by which time it is hoped next year’s legislative session might address the issue more thoroughly.   The law also limits the downward adjustment of the tax in the future to 10% per year, to match the 10% increase limitation already in place.  32 states tax motor fuels at a flat rate.  Kentucky used to be part of that group, but during the upswing in gas prices some years ago, shifted to a percentage approach like 14 states, causing more uncertainty.

The tax had already dropped from just under 32 cents per gallon to the 27.6 cent figure.  Dropping further down to around 22 cents would cost the state over $250 million in revenue for roadway improvements (all of the money collected goes to the state road fund specifically or to county and city roads).

The industry is still awaiting action in Washington to fix the highway trust fund, however.  The federal tax–18.3 cents per gallon, has not been increased since 1993.