Call to Order and Roll Call
The first meeting of the Budget Review Subcommittee on Transportation of the Interim Joint Committee on Appropriations and Revenue was held on Thursday, June 28, 2012, at<MeetTime> 10:30 AM, in Room 131 of the Capitol Annex. Representative Sannie Overly, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Sannie Overly, Co-Chair; Senator R.J. Palmer II; Representatives Hubert Collins, Tim Couch, Danny Ford, Jim Gooch Jr., Keith Hall, Sal Santoro, John Short, and Jim Stewart III.
Guests: Mike Hancock, Secretary, Transportation Cabinet; Russ Romine, Executive Advisor to Cabinet Secretary; Tammy Branham, Executive Director, Office of Budget and Fiscal Management; and, Steve Waddle, State Highway Engineer, Department of Highways.
LRC Staff: Jennifer Anglin, Chuck Truesdell, and Christina Williams.
Road Fund Update
State Gas Tax Rate and Historical Background
Ms. Branham provided a brief presentation regarding the Road Fund. The official Road Fund revenue estimate was $1,412,500,000 and through the end of May the Cabinet had collected just over $1.3 billion, leaving $102.4 million to make up through the month of June in order to meet the official revenue estimate. Chair Overly asked if the Cabinet expects to meet that revenue estimate in June. Ms. Branham replied she has no reason to believe the Cabinet will not.
Ms. Branham said the Cabinet had experienced moderate growth in fiscal year 2012 as compared to fiscal year 2011. Through May 2011, the Cabinet had collected $1.2 billion, and through May 2012 it had exceeded that by 6.8 percent, having collected $1.3 billion. June 2011, the Cabinet had collected $111.7 million and will need $102.4 million in June 2012 to meet the revenue estimate. Ms. Branham said that the official Road Fund revenue estimate for fiscal year 2013 is almost $1.5 billion and for fiscal year 2014 it is $1.568 billion.
Mr. Branham said the calculated average wholesale price (AWP) of fuel would increase to $2.62 effective July 1. She said that would provide an additional 2.1 cents per gallon on the variable rate, bringing the entire motor fuel tax to 29.9 cents per gallon.
In response to a question from Representative Collins, Ms. Branham replied the AWP would be guaranteed from July 1 through the first quarter of fiscal year 2013. She added that the second quarter rate would be based on the rolling average price during July and would be effective October 1.
In response to a question from Representative Couch, Ms. Branham said diesel fuel tax rates were included in the total motor fuel tax rate. Representative Couch expressed concern regarding the effect of coal industry employee lay-offs on the diesel fuel portion of the tax.
In response to questions from Representative Hall, Ms. Branham said gasoline is taxed at nine percent of the AWP. She said there were other taxes, such as the five-cent flat motor fuel user tax and the surtax which consists of an additional two percent of AWP for gasoline and 4.7 percent of the AWP for diesel or special fuel. The $2.62 rate is the maximum for the fiscal year. July is typically the highest AWP for fuels in the entire fiscal year. Representative Hall commended the Cabinet for doing such a great job managing the Road Fund.
In response to a question from Senator Palmer, Ms. Branham said that in calendar year 2011, the taxable gallons category was down in every month except February. There was an uptick in January, February, and March of 2012, but it was not a significant amount. The Cabinet recently received a report showing that usage had fallen off again in April. Senator Palmer requested a report on the consumption of motor fuels.
In response to questions from Representative Collins, Ms. Branham said everyone is bracing for the downturn in fuel consumption as more and more hybrid cars come online, but exactly when the pinch will be felt is unknown. Secretary Hancock said national leadership is needed. He said the Federal Highway Administration and Congress are looking hard at the subject and some pilot studies regarding motor fuel tax collection had been conducted across the country. Chair Overly inquired about a flat fee for owners of hybrid or all-electric vehicles. Secretary Hancock said it was a good idea to have an annual fee for those vehicles, but he had not heard any national discussions on the issue.
In response to a question from Chair Overly, Ms. Branham said the annual estimate assumes the 2.1 cents would stick for all four quarters, which would be $57 million to $60 million on an annual basis. For fiscal year 2013, the revenue estimate is based on the 2.1 cents sticking all four quarters. Secretary Hancock said an increase of one penny of additional gas tax equates to approximately $30 million annually.
Federal Funding Update
Secretary Hancock and Mr. Romine provided a brief overview and update of federal funding.
Chair Overly commented that the committee would look forward to future meetings and hearing more information on federal funding. She inquired about TIGER grants. Secretary Hancock replied that Kentucky had made applications for TIGER grants. Mr. Romine said the Cabinet supported grant applications that had not been successful, such as the Kentucky Railway Museum. Secretary Hancock said each state was limited to three requests.
Eggner’s Ferry Bridge Damage Repaired and Reopened
Steve Waddle, State Highway Engineer, provided an overview of the condition of the Eggner’s Ferry Bridge which crosses Kentucky Lake.
In response to questions from Representative Collins, Mr. Waddle said the age of the bridge was a factor in its collapse. Mr. Waddle stated there is still debris in the lake that needs to be removed. Representative Stewart commented that the Cabinet did a great job replacing the span within the given timeline.
In response to questions from Representative Stewart, Mr. Waddle said he would provide information at a later date regarding the amount of the debris and cost of its removal.
In response to a question from Chair Overly, Secretary Hancock said the debris on the front of the ship was collected, but there is still more debris in the lake. The Cabinet is working with the Corps of Engineers and others on the issue. Secretary Hancock commended Hall Contracting for their work on the bridge.
In response to questions from Chair Overly, Mr. Waddle said the disaster had been fully funded with emergency funds. He said the approximately $7 million for engineering and inspection costs had been covered by federal funds. Secretary Hancock added that when the Governor declared the disaster an emergency, the federal funds followed. He also said the bridge replacement project is still on the Six-Year Road Plan.
There being no further business before the subcommittee, the meeting was adjourned at 11:30 AM.