Kentucky’s gas tax will decrease to 26.4 cents per gallon in less than a month.  

Governor Andy Beshear shared this week that the gas tax will decrease on July 1, decreasing the cost per gallon of gas by 1.4%.  

The decrease in the tax is an overall drop of 12% over the last two years to the tax, following a high of 30.1 cents in 2024. 

The tax reduction was briefly discussed during last week’s  Interim Joint Transportation Committee, with Senate Transportation Committee Chair Jimmy Higdon, R-Marion, advocating for a fix to the tax. He said the Transportation Committee will meet this summer to discuss the road funding shortfall.      

The gas tax rate is tied to the average wholesale price of fuel, adjusted quarterly through a statutory formula. As wholesale prices decline, so does the tax, and with it, the revenue for road maintenance. 

Gas tax revenue flows into the state Road Fund and is divided among the state, counties, cities, and rural roads. Under current law: 

51.8% goes to the state 

22.2% to rural secondary roads 

18.3% to counties 

7.7% to cities 

Modernizing the road funding formula has been a long-standing top priority for the Kentucky League of Cities. KLC seeks a more equitable distribution of funds between cities and counties.  Despite managing denser traffic patterns, more infrastructure per square mile, and the needs of both residents and non-residents, cities receive the smallest share of Road Fund dollars.  KLC had previously sought funds above a certain threshold to be split evenly between city and county road aid programs. The KLC Board will meet this summer to determine the 2026 legislative priorities, and this issue is expected to again be a top priority.