Kentucky’s Road Fund ended the 2025-26 fiscal year with a revenue shortfall of more than $72 million, prompting lawmakers Tuesday to question whether the state’s current gas tax can continue to support highway construction and maintenance.
The issue was discussed during a meeting of the Interim Joint Committee on Transportation, where Kentucky Transportation Cabinet Executive Director of Budget and Fiscal Management Shaun McKiernan presented the fiscal year-end Road Fund report.
McKiernan told lawmakers the Road Fund collected $1.82 billion during fiscal year 2025-26, a 2.2% decrease from the previous year. The decline was largely driven by lower motor fuels tax collections after the state gas tax rate dropped from 27.8 cents per gallon to 26.4 cents per gallon. The current rate includes 1.4 cents dedicated to the Petroleum Storage Tank Fund.
While fuel tax collections declined, one major revenue source continued to grow.
Motor vehicle usage tax collections reached a record $734.2 million, exceeding budget estimates by 11.2% and becoming the highest annual total in state history.
Despite that record, it was not enough to offset losses in fuel tax revenue.
Overall Road Fund receipts came in $72.4 million below the enacted budget. Combined with other budget obligations, the Transportation Cabinet faced a funding gap of $78.6 million at the close of the fiscal year.
To balance the budget, the cabinet reduced revenue-sharing payments to cities and counties by $65.1 million, eliminated nearly $4.8 million in unspent appropriations, used $600,000 in additional fund transfers, and reduced state highway construction spending by $8 million.
Committee Chairman Rep. John Blanton questioned McKiernan about how recent changes to Kentucky’s gas tax affected the Road Fund.
click to download audioBlanton said those numbers illustrate a growing challenge for Kentucky’s transportation system, but added lawmakers must address the long-term impact on transportation funding.
He said rising construction costs and flat fuel tax revenue are making it increasingly difficult to maintain Kentucky’s highways, bridges and rural roads.
