Solid recovery a roadblock for gas-tax hike

Editor’s Note: The Bluegrass Beacon is a weekly syndicated newspaper column posted on the Bluegrass Institute’s website after being published by newspapers statewide.

Kentucky’s economy is recovering despite the pummeling it’s taken from the lockdowns imposed as part of Gov. Andy Beshear’s power grab during the pandemic.

Not only was there a General Fund revenue surplus surpassing $1 billion during the last fiscal year, which ended on June 30, but the state’s Consensus Forecasting Group is estimating an even greater overflow for 2022.

State budget officials report the Road Fund, financed by the tax dollars you pay at the gasoline pump, had a $65 million surplus when last fiscal year’s books were closed.

Road Fund revenues, which totaled $1.6 billion for the year, were up 10% over 2020.

It’s understandable if taxpayers feel relieved, assuming such increases and surpluses would offer at least a respite from government attempts to take more of their hard-earned dough while still providing needed infrastructure monies.

However, don’t expect the bread-snatchers to head for hibernation during the upcoming General Assembly session.

Powerful groups and their political bedfellows in Frankfort are incredibly frustrated over an inability for several years now to hike the gas tax.

At least the reports of a stout post-pandemic economy will continue to provide roadblocks to their efforts by reducing the credibility of their oft-repeated claims that Frankfort just doesn’t have enough revenue to provide needed services and transportation projects.

The economic news should also make lawmakers leery about buying into arguably the pro-tax lobby’s strongest argument: gas-tax revenues – money designated for building, repairing and maintaining Kentucky’s roads and bridges – suffer with more fuel-efficient and electric automobiles traveling our roads.

However, the latest revenue reports, indicating nearly $138 million poured into the Road Fund in September – 5% higher than during the same time last year – suggest the commonwealth has sufficient revenue to fund its priorities, including needed transportation projects.

Neither was September a single-month outlier.

The same reports indicate that road-fund collections were up 3.5% for the first quarter of the state’s fiscal year (July through September), compared to the same stretch in 2020.

What’s needed here is smarter allocation of existing resources, not simply raising the gas tax so more of taxpayers’ hard-earned dollars can be poured into the road fund’s tank.

Positive action was taken during this year’s General Assembly when Senate Budget Chairman Chris McDaniel, R-Taylor Mill, announced additional tens of millions of dollars would remain in the Road Fund instead of the usual practice of diverting those funds to non-transportation-related spending.

The move will reduce by roughly half the dollars being swept out of the fund for other government spending and ensures more can get done when it comes to transportation priorities.

Another spending habit which eats into Road Fund resources continues as the Kentucky Transportation Cabinet officials incredulously insist on awarding single-bid contracts costing taxpayers more than the estimates of the cabinet’s own engineers.

Twenty-six such contracts were awarded in September alone, totaling nearly $17 million and costing taxpayers nearly a half-million dollars more than the estimated costs just for that month.

The cabinet so far this year has forked over $174 million for 151 such single-bid contracts.

The left-leaning Massachusetts Budget and Policy Center maintains that gas taxes negatively affect the working poor the hardest, noting: “The effect is particularly acute in rural areas, where people must drive longer distances for everything from work to grocery shopping, and there are often not viable public transportation alternatives.”

Shouldn’t we address these problems before we even have a serious discussion about raising regressive taxes – especially when significantly more revenues are flowing into state coffers?

Doing so could be politically popular as we saw during Glenn Youngkin’s successful campaign to become Virginia’s next governor.

Youngkin reiterated during his victory speech what he promised throughout his campaign: to “suspend the most recent hike in the gas tax.”

Kentucky’s governor and legislative leaders would do well to understand, as Youngkin obviously does, how raising such a tax increases its unpopularity and harmful consequences.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free market think tank. Reach him at jwaters@freedomkentucky.com and @bipps on Twitter.