Final Kentucky Road Revenues Revealed

Kentucky road revenues increased in fiscal year 2021 but are still below “healthy” levels needed to adequately fund infrastructure essentials across the Commonwealth.

Tuesday, the Interim Joint Committee on Transportation received testimony from Office of Budget and Fiscal Management Executive Director Robin Brewer. Brewer testified that a fourth-quarter surge in growth brought 2021 to a close at more than $1.64 billion.

She said revenues were nearly flat through the first three quarters as the Road Fund experienced a 1.9% increase in Q1, .07% increase in Q2, and .4% decrease before a 43.8% Q4 increase. Brewer credited the Q4 increase to an absence of pandemic restrictions in place at the same period of FY20.

Motor vehicle usage fees increased $121.6 million in FY21 closing the year at $620.9 million. That category finished the year ahead of estimates, but Brewer warned the revenue stream is not expected to remain that way long-term.

While overall revenues closed 2021 ahead of 2020, motor fuel revenues finished the year at $748.4 million compared to $741.6 million the previous year. That small increase was nearly $25 million lower than 2019 revenues and nearly $140 million behind record levels in FY14.

The Kentucky Infrastructure Coalition (KIC), of which the Kentucky League of Cities (KLC) is a member, wrote a letter to committee members stating that KIC was encouraged that the General Assembly has continued to devote a great deal of time studying and discussing the issue during the Interim Session. It explained that KIC appreciates the Kentucky Transportation Cabinet’s (KYTC) work to inform all parties on Road Fund status. But the data also revealed further evidence to justify funding concerns.

“While we are happy to see the growth in the FY21 road funding, it is worth noting that if you take the total revenues over the last two years and average them, we end up at about $1.567 billion/year, which is right in line with revenues from FY19.  This makes funding essentially flat for the last three fiscal years,” wrote Chad LaRue, Executive Director of the Kentucky Association of Highway Contractors, Inc. (KAHC).

LaRue continued, “while overall funding is up, the motor fuels tax in FY21 is $138 million less than what we collected in FY14 (the previous high), which means 18.4% less funding for counties, cities, and rural secondary programs in FY21 than they received in FY14.”

The motor fuels tax is the only portion for the Road Fund that is shared with local governments to ensure the maintenance and construction of community streets and bridges. The formula used to divide that local portion, the Formula of Fifths, was established in 1948 and the legislature created the municipal road aid program in 1972. No update has occurred in the past 48 years despite population shifts and growth.

Brewer told committee members that the Road Fund revenue estimate for FY22 is $1,609,200,000.

KLC continues to advocate to increase funding and modernize the state road funding formula. Cities have seen spending on streets and roads climb 36% from FY 2010 to FY 2019, while state and federal support has dropped nearly 24%. Cities maintain more than 10,000 miles of public roads – streets are more expensive to build and preserve due to requirements such as curbs and gutters, Americans with Disabilities Act (ADA) required sidewalks, and stormwater drainage.

Recently, the KLC Board of Directors voted to work with the legislature to fix the state’s road funding shortage in the 2022 session.