Committee hears update on state road fund
Committee co-chair Sen. Jimmy Higdon, R-Lebanon, speaks on how lower motor fuel sales tax revenue leads to less funding for local road projects across the state. The discussion was part of Monday’s Interim Joint Committee on Transportation meeting. A high-resolution photo can be found here.
FRANKFORT — Lawmakers on the Interim Joint Committee on Transportation had questions for the Transportation Cabinet following a state road fund update during the committee’s Monday meeting.
Shaun McKiernan, the cabinet’s executive director of budget and fiscal management, told the committee the state ended the 2024-25 fiscal year with a $61.6 million surplus in the road fund.
The motor fuels revenue total was 3.5% below the estimate, but the motor vehicle usage tax revenue performed nearly 11% stronger than predicted, McKiernan said.
“The bottom line is the road fund revenue was $38.5 million greater than the enacted estimate,” McKiernan added.
A drop in the motor fuels tax rate went into effect at the beginning of 2025, which is the main reason the revenue estimate was lower than predicted, McKiernan said.
A surprise increase in motor vehicle tax revenue is not the only reason the road fund surplus is higher than estimated.
“Net spending coming in below budget added $8.3 million to the surplus,” McKiernan said. He added that the 2024-26 biennium budget directs any road fund surplus to be allocated to the highway construction program.
Committee co-chair Sen. Jimmy Higdon, R-Lebanon, said the drop in motor fuels tax revenue will be a “big hit” to the funding allocated for city, county and rural secondary roads. Statute currently allocates a portion of motor fuels tax revenue to the Local Assistance Road Program.
“I just want to emphasize why we’re not blacktopping and repairing all the rural secondary roads that we should,” Higdon said.
Higdon also noted the reason motor vehicle usage tax revenue is up is because of inflation.
Rep. Matthew Lehman, D-Newport, asked McKiernan if there are other reasons why motor fuel tax revenues are down.
“Is fuel efficiency (and) the rise in electric vehicles … is that also a factor? Or is that a relatively minor factor?” Lehman asked.
McKiernan said drivers using less motor fuel due to more fuel-efficient vehicles is a factor in the drop in revenue.
In addition to questions about tax revenue, a few lawmakers wanted to discuss the length of time it takes for road projects to be completed in Kentucky.
Rep. Samara Heavrin, R-Leitchfield, said she’s heard complaints about how long it takes for road projects to be completed.
“Could you give us any update of why it’s taken so long for projects to (be completed), even though the money is there, it’s in the transportation plan and has been probably for several cycles?” she asked.
Mike Hancock, deputy secretary for the Transportation Cabinet, said the cabinet works hard to complete every project.
“We have a tremendous load of projects in the highway plan,” Hancock said. “We’ve had conversations about funding and about how much funding there is and how we could stretch those across as many projects as we can.”
Hancock said a lot goes into executing these projects, such as utility relocation.
“There’s so much that’s going on, and that’s not always readily obvious,” Hancock said. “It’s like the duck paddling on top of the water. You don’t always see the feet churning underneath.”
Sen. Donald Douglas, R-Nicholasville, told the committee that land acquisition delays slow down projects in his district.
“Could you give us an idea of sort of what percentage of the slowdown issue that might be, because I know in my district that’s a significant issue?” Douglas asked.
Hancock said right-of-way purchases are often a long, difficult process.
“We’re anxious to acquire the property to help move the project along, but the person that’s being affected has rights as well. And they quite often exercise those,” Hancock added. “As we work together to try to resolve those issues, sometimes that just takes longer than we would like. But at the end of the day, we’re abiding by all the rules governing right-of-way acquisition.”
Hancock said when lawmakers do hear about a project moving quickly, it’s usually because the right-of-way acquisition process or the utility relocation phase moved quicker than anticipated.
