TransportationNews2008 02 22 by DSd6m6o5



 Transportation News
   Vol. XX, No. 5      Published by Kentuckians for Better Transportation             February 22, 2008

Getting Back Diverted Funds Critical to Sustainability
The impact of diversion of Road Fund revenue to the General Fund was once again made painfully
obvious this week as Acting KYTC Budget Director Russ Romine met with the House Budget Review
Subcommittee on Transportation to discuss the budget. Getting back the diverted funds is an important
part of having an adequately funded highway program.

The Administration’s proposed budget (HB 406) would continue to have the Road Fund paying out big
dollars -- as highway funds go -- to support General Fund programs. While the General Fund is
obviously in extremely serious straits, its growth from 2000 to 2007 was 32.2 percent compared to the
Road Fund’s growth of 12.4 percent.

The proposed Six Year Highway Plan has some $8.1 billion in projects with a projected $5.1 billion in
state and federal funds to pay for them. Unless there is General Assembly action to reduce Road Fund
diversion and/or otherwise raise Road Fund revenue, the state will have $3 billion worth of projects that
will not be advanced. Many of these projects would help prevent crashes, reduce injuries, reduce
congestion, and promote economic opportunity.

The kind of education and transportation systems our state and nation have will be major factors in
determining our future -- whether we are a leader in the global economy or gradually slip into a sort of
Third World status, whether our children and grandchildren end up working for Chinese and Middle
Eastern companies. Unless there is significant action during this session of the General Assembly, it
appears Kentucky education and transportation are in serious trouble -- at least over the short run. And,
once the momentum is lost, is it ever possible to really catch up?

The expanded gaming proposal appears to be the only significant help in the offing to bolster the
General Fund. And, additional General Fund revenue is very important to Kentucky transportation.
Riverports, public transit, airports, rail -- and highways could all benefit from a healthier General Fund.

Last year, Beshear told the KBT Gubernatorial Forum a better financed General Fund could help reduce
Road Fund diversion. Beshear said he would use Road Fund revenue for Road Fund purposes as part of
the answer to meeting transportation needs.

Stopping Road Fund diversion and raising the state’s motor fuels user fee to the average of adjacent
states could obviously be major factors in reducing the backlog of needed highway work.

The Administration’s proposed budget transfers some $411 million in special and trust funds from
various state programs to the General Fund, including some $93.8 million in funds directly contributed
by highway users. Of this, $81.5 million is from the Petroleum Storage Tank Assurance Fund, and $12.3
million is funds from the Department of Vehicle Regulation. The budget would authorize $25 million in
bonds to partially replace the taking of the tank funds. In 2006, some $60.2 million was transferred from
the tank fund to the General Fund and was replaced with $25 million in bonds.

(The tank remediation program and oil company indemnity is financed with a 1.4 cents fee levied on
motor fuels. The fee generates some $44 million annually. KBT has urged the return of the revenue to
the Road Fund. If the General Assembly goes along with the current transfer, a total of $316.5 million
will have been diverted to the General Fund from the tank fund since its creation.)

The proposed budget continues the $50 million annual transfer from the Road Fund to the State Police.
The transfer has been at that level since FY 06 when it was at $29.8 million. An additional $13.9
million annually goes into Vehicle Enforcement. In all, $67.9 million annually is transferred directly
from the Transportation Cabinet to other agencies.

Among the absurd diversions from the Road Fund proposed by the Administration’s budget is
$985,000 for the biennium tucked away in the Commerce Cabinet budget for the Kentucky Artisan
Center and the Kentucky Heritage Council. The Artisan Center would get $700,000 and the Heritage
Council would get $285,000. We all want these two programs to be successful, but there is absolutely
no justification to fund them out of the Road Fund.

The proposed budget would continue the transfer of the Aviation Economic Development Fund proceeds
to the General Fund, and aviation would continue to be funded -- as much as $19 million in FY 09 -- out
of the struggling Road Fund. The operation of the Department of Aviation would be funded with $3
million in Road Fund revenue, and up to $7 million more would be authorized for airport grants and
other aviation programming. And, on top of this, $9 million would go to the Blue Grass Airport for
runway construction. Funding the aviation program with Road Fund revenue is, of course, patently
unconstitutional. Section 230 of the Kentucky Constitution provides that highway user revenues are to
be used for highway purposes. KBT supports a strong aviation program, but the Road Fund has no
ability to fund the program considering the unmet needs on the state’s highways.

Resurfacing -- Subcommittee Chair Don Pasley wanted to know if the increase in the resurfacing outlay
was sufficient to keep pace with the inflated cost of materials. (The Resurfacing Program would be
funded at $87 million for FY 09 and $97 million for FY 10, compared to the enacted $80.4 million for

         Comparing Motor Fuels User Fees
                    (Cents Per Gallon)

                                                              The average gasoline user fee for these
       IL          IN            OH                           Kentucky border states is nearly 6
    34.0 cpg     28.9 cpg      28.0 cpg                       cents higher than Kentucky.

                                       WV                     If Kentucky’s motor fuels user fee were
                                     31.5 cpg     VA
                      KY                                      increased by 6 cents per gallon, it
                                                18.1 cpg
                    21.0 cpg                                  would generate an additional $190
                                                              million annually.
               21.4 cpg

                      July, 2007
                    Source: KYTC
                                     Road Fund -- Where It Comes From
                                              FY 07 - FY 10
                                            (millions of dollars)
                                                 FY 07            FY 08               FY 09                FY 10
                                                 Actual         Estimated*          Estimated*           Estimated*
Motor Fuels & MF Use/Surtax                       563.2**          611.3**              661.0**           724.0**
Motor Vehicle Usage & Rental                      411.2            411.7                411.9             425.3
Truck License (state share)                        21.3             23.9                 23.3               23.8
Truck Proportional Registration                    42.7             43.2                 44.1               44.6
Passenger Car License                              26.6             29.6                 29.2               29.8
Weight Distance Tax                                85.4             85.5                 85.9               87.7
Tolls                                               3.7              0                    0                  0
Investment                                         16.1             15.8                  5.8                3.7
Other                                              55.7             61.8                 63.6               66.2
Total Road Fund                                1,225.9            1,282.8             1,324.8            1,405.1
*FY 08, 09 and 10 based on the January 2008 Consensus Forecasting Group Estimate.
**Does not include $44 million diverted to Petroleum Storage Tank Assurance Fund.

                                          Road Fund -- Where It Goes
                                                FY 07 - FY 10
                                              (millions of dollars)
                                       FY 07               FY 08               FY 09                    FY 10
                                     As Enacted          As Enacted         Administration           Administration
State Police
Other Non KTC Agencies                   68.51                67.21                  67.91                    67.91
Aviation Admin. /Grants                   4.02                 4.02                   3.02                     3.02
General Admin. & Support                 69.2                 70.1                   72.6                     74.4
Revenue Sharing
  Rural Secondary                      110.9                 111.9                  131.8                   145.8
  County Road Aid                       91.4                  92.3                  108.6                   120.2
  Municipal Aid                         38.5                  38.8                   45.7                    50.6
Debt Service                           162.7                 181.1                  148.5                   136.6
Federal Aid Match                       40.23                 40.23                  40.23                   40.23
Maintenance                            278.3                 285.8                  310.0                   335.0
State Construction                     188.54                175.24                 182.9                   220.64
Contingency Account                     37.74                 37.74                  35.0                    37.74
Resurfacing                             80.4                  87.3                   87.0                    97.0
Vehicle Regulation                      17.4                  18.3                   19.3                    20.6
Highway Operations                      24.0                  24.9                   22.2                    23.0
Capital Construction                    10.3                   6.8                   27.25                    7.3
Other6                                  18.2                  20.3                   23.0                    25.4
Total                                1,240.2                1,261.9               1324.8                  1,405.1
  Includes $50 million for State Police.
  An additional $7 million annually may be authorized by the Cabinet from the Construction Account.
  Toll road credits will be used to match the bulk of federal funds, but Federal law does not allow their use in all
   Includes $2.5 million for Kentucky Pride.
  Includes $9 million for Blue Grass Airport runway; $10.3 million for Kentucky Horse Park roads and pedways.
  Includes Research, Engineering Administration, Planning.
Note: Federal funds and proposed bond funds are not included.
FY 07 and $87.3 million for FY 08.) Chief of Staff Mike Hancock said the resurfacing cycle of some
classes of highways is slipping.

Transit Funding -- Chair Pasley and Rep. Danny Ford wanted to know if Kentucky is missing out on
any federal funds by not having more state matching money. (The proposed budget would provide
General Fund revenue in the amount of $4,528,200 in each year of the biennium, compared to the
current biennium of $7,703,400 in FY 07 and $5,203,400 in FY 08. The General Assembly raised
funding for transit in FY 07 by $2,500,000 to help metro systems match federal funds. A major portion
of transit money -- $2,950,000 annually -- continues to be designated for non-public school
transportation.) Vickie Bourne, executive director of KYTC’s Office of Transportation Delivery, told
the subcommittee toll road credits were available from the state to match federal transit funds. She
noted the credits have no cash value but do prevent the “loss” of federal funds.

Legislative Update
House Bill 55, providing for booster seats, which passed the House last week by a vote of 68-28 is
now in the Senate Judiciary Committee. Members of the committee are listed at KBT supports the legislation.

HB 491, Riverport Development, and HB 532, to provide tax credits to class II and III rail
companies for infrastructure are posted in the House Transportation Committee. Members of the
committee are listed at

HB 537, Governor Beshear’s proposal for expanded gaming is in the House Licensing &
Occupations Committee and being discussed, though no vote has been taken, and its final form is

The House task force formed specifically to study casino gambling in Kentucky voted this week to
recommend an amendment to the state constitution -- subject to voter approval -- that allows only up to
nine casinos in Kentucky, rather than the 12 Beshear had proposed. The task force would not guarantee
any casino licenses for the state's racetracks, as Beshear and many other supporters had wanted.

Subsequently, the House Elections and Constitutional Amendments Committee -- where HB 550, the
Casino Constitutional Amendment is being considered -- took up the recommendation, and amendments
were proposed specifying that tracks get up to five of the nine licenses. The committee adjourned
without taking action on either the amendments or the bill. Members of the committee are at

KBT’s list of some transportation and related legislation under consideration in the 2008 General
Assembly session is at

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