Kentucky’s road fund, which in years past has been the place many road improvement projects have gone to die for lack of money, could get a boost from legislation being considered by the Kentucky House of Representatives.
House Bill 580, currently awaiting action in the House Appropriations and Revenue Committee, would do away with tying the excise tax paid at the gas pump to the average wholesale price of gasoline and add other revenue-enhancing features aimed at pumping more tax dollars into the fund used by the Kentucky Transportation Cabinet.
The bill would establish a single excise tax of 34.4 cents per gallon on gasoline and special fuels, subject to annual adjustment. That would be nearly nine cents per gallon higher than the current tax of 26 cents and would put Kentucky above the national average of 29.15 cents per gallon.
That hefty bump wouldn’t be the only change in how the road fund receives money. The bill, sponsored by Rep. Sal Santoro, R-Florence, would also impose a $200 fee on electric vehicles and a highway preservation fee on all noncommercial vehicles based on their fuel efficiency ratings. It would also hike vehicle registration fees.
According to the Legislative Research Commission documents about the bill, road fund revenue for the 2021 fiscal year would jump from $371.9 million under the current system to nearly $528 million if the bill is passed. In addition, funding for rural secondary roads would go from $159.4 million to $226.3 million.
Such a funding boost would go a long way toward ensuring that long-delayed local projects like improvements to Ky. 185 and U.S. 31-W would finally happen. Because of the uncertainty of tax revenue that fluctuates depending on the wholesale price of gasoline, such projects can often be included in the road plan but then get cut when revenue comes up short.
With the potential boost in money to improve state and county roads, the bill is getting support from members of both parties and from pro-business groups such as the Kentucky Infrastructure Coalition.
“We’re trying to find ways to create more revenue,” said Chad LaRue, executive director of the Kentucky Association of Highway Contractors. “We think this bill is a good approach. The additional funding would create a safer, more efficient transportation system.”
LaRue and other members of the Infrastructure Coalition took that message to Frankfort last week, holding a rally Tuesday in support of HB 580 in the State Capitol Rotunda.
Although a good number of anti-tax protesters showed up, Kentucky Chamber of Commerce President and CEO Ashli Watts said the rally demonstrated that the bill has bipartisan support.
“We don’t have enough money now to maintain our transportation infrastructure,” Watts said. “I feel optimistic. This is one of those issues that has broad support.”
Broad enough to appeal to Rep. Michael Meredith, R-Brownsville, who is on board with the legislation despite his conservative leanings.
“If it comes up as it is, I’ll vote for it,” said Meredith, who was at Tuesday’s rally. “We gotta have good roads.”
Meredith said he has seen many road projects during nearly a decade in the General Assembly make it onto the state’s road plan only to be detoured by a lack of funding. He rationalizes that the tax hikes in HB 580 would affect both Kentucky residents and travelers.
“About 60 percent of our gas tax is paid by people traveling through the state,” Meredith said. “That’s a number we’ve heard for several years.”
Meredith’s fellow House member Steve Sheldon, R-Bowling Green, isn’t as enthusiastic about the bill, saying: “It has several parts that still need discussion.”
“I believe it has some much-needed funding,” Sheldon said. “Our infrastructure needs it.”
A representative of one of Kentucky’s largest paving contractors is a big proponent of HB 580.
Scotty’s Contracting Vice President Mike Law, in Frankfort for the Kentucky Infrastructure Coalition rally, said the legislation and the revenue it would generate is “much-needed.”
“Infrastructure and transportation are so important to industrial development,” Law said.
He might not argue with that, but the leader of the conservative Bluegrass Institute for Public Policy sees flaws in HB 580 and questions if its projected impact is inflated.
“The problem is, when you raise taxes you change the incentive,” said Jim Waters, president of BIPP. “The numbers (on projected revenue) are assuming that everybody buys the same amount of fuel. When you raise taxes, you create incentives for people to avoid purchasing as much fuel.”
Waters also questions the need for such a significant tax hike.
“They’re saying we need more dollars to fix our roads and bridges,” Waters said. “But a lot of money from the road fund is still being swiped from it and used for other projects.
“When we start spending all the money in the road fund for road projects, then we can evaluate the need for more revenue.”
HB 580 was referred to the House Appropriations and Revenue Committee on March 4. If it passes a vote in that committee, it still must make it through the full House and Senate before landing on the desk of Gov. Andy Beshear.
