The Interim Joint Committee on Transportation met on June 2, and one of the topics included the impact of Governor Beshear's executive order reducing Kentucky's motor fuels tax by 10 cents per gallon. Testimony focused on the effect of the reduction on state transportation revenues and local road funding.

 Kentucky Transportation Cabinet Deputy Secretary Mike Hancock and Office of Budget and Fiscal Management Executive Director Shaun McKiernan testified that the reduction will decrease Road Fund revenues by approximately $26.8 million for every 30 days the executive order remains in effect, approximately $8 million of which would otherwise be paid by out-of-state motorists purchasing fuel in Kentucky. Because a portion of motor fuels tax revenues is shared with local governments through Municipal Road Aid and County Road Aid programs, cities are expected to lose approximately $1.9 million in Municipal Road Aid funding for every 30-day period the order remains in place. 

Chad LaRue, Executive Director of the Kentucky Association of Highway Contractors, testified that while the tax reduction provides some short-term savings to drivers, it comes at a high cost to transportation infrastructure funding. According to LaRue, the average Kentucky driver who travels 15,000 miles annually in a vehicle averaging 25 miles per gallon would save approximately $5 per month as a result of the tax reduction. He emphasized that the motor fuels tax remains the only dedicated funding source for city streets and a primary funding source for state and local road projects. 

Several legislators expressed concern about the long-term impact on transportation funding. House Transportation Chairman John Blanton (R-Salyersville) noted that the General Assembly recently appropriated for FY 2025 $20 million for the Local Assistance Road Program (LARP), which provides grant funding for local road projects. He stated that the revenue loss resulting from the executive order effectively offsets the funding that lawmakers had allocated for the program. 

Discussion also focused on the process for extending the executive order. Under KRS 39A.090, local chief executive officers or legislative bodies may request extensions of certain emergency executive actions. Multiple legislators urged local officials not to seek extensions of the order due to its impact on local transportation funding. 

Budget Review Subcommittee on Transportation Chairman Ken Upchurch (R- Monticello) called the measure an “unnecessary, self-inflicted wound,” the benefits of which do not outweigh the detriment. Chairman Upchurch stated, "If you are a county judge or mayor, do not do this because you are doing it to your own detriment." 

Senator Greg Elkins (R-Winchester) stated that he would encourage mayors and county judge/executives not to extend the order. Senate Transportation Chairman Jimmy Higdon (R- Lebanon) encouraged local officials to carefully consider the financial impact on their communities before supporting an extension, and stated that he believes the General Assembly should consider withholding LARP funding from cities and counties that choose to extend the order. 

The committee approved a motion requesting a list of all mayors and county judge/executives who request extensions of the executive order. 

KLC will continue monitoring discussions regarding transportation funding and the potential impact on Municipal Road Aid revenues available to Kentucky cities. If you have any questions regarding the executive order or your role as a local leader, please email KLC Director of Government Affairs, Gracie Kelly.

Watch the full meeting HERE.