Kentucky Puts Future Construction Projects on Hold
Not long after Greg Thomas became deputy secretary of Kentucky’s Transportation Cabinet in February, the organization’s leadership gathered for a meeting.
Thomas asked the cost of the projects scheduled to be let for the rest of the fiscal year. The answer was $162 million. Thomas then asked how much revenue the cabinet expected to take in during that period. The answer was $80 million.
“[It] was like pulling a thread and then everything comes apart,” Asa James Swan, now-Secretary Thomas’ chief of staff told Transport Topics. “The previous administration was basically spending double [what it was receiving]. That’s when we began to look at our finances and see that we had inherited quite a mess. Thankfully, we got to the bottom of it before that happened. We had to restore some fiscal balance.”
To do so, Thomas has implemented a 10% reduction, about $150 million, by putting all state-funded construction projects not underway on hold for the fiscal year that begins July 1. The goal of “Pause-50” is to spend $50 million on such projects in fiscal 2018 and then return to business as usual in fiscal 2019.
“For the first time in recent history, the Cabinet faces a low road fund cash balance, which compromises our ability to authorize new state road projects over the next biennium,” Thomas testified June 7 before the Legislature’s Interim Joint Committee on Transportation. “... Our current level of spending is unsustainable, and quite frankly, unacceptable. However, we feel that we have the situation under control.”
Kentucky’s road fund is constitutionally separate from its general fund. Swan said the Transportation Cabinet wants to have a minimum of $100 million in the road fund before resuming normal operations. According to KYTC, the last time the fund’s balance neared zero was in 2004 when it sank to $30 million. However, it could have gone negative this August if Thomas hadn’t acted because summer is the heaviest spending season.
“What has helped us make our case [for the pause in construction letting] is that we lost 6.5 cents of our gas tax about 18 months ago because of the drop in wholesale prices,” Swan said, noting that such revenues are projected $152 million below those from fiscal 2014.
Under the previous administration, Kentucky’s Legislature set a floor for the gas tax at 26 cents and for diesel at 23 cents.
