Bill would raise Ky.'s motor fuels tax rate

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Associated Press

Posted on March 12, 2014 at 11:01 AM

FRANKFORT, Ky. (AP) — Kentucky's motor fuels tax would rise under a bill advanced Tuesday by a key House committee, which endorsed restoring a higher rate in place last year to generate more revenue for transportation projects statewide.

The measure would increase the tax at the pump by 1.5 cents a gallon from the current level, which automatically took effect at the start of 2014.

The tax is scheduled to drop another seven-tenths of a cent per gallon on April 1 without the proposed change.

The bill, part of a broader revenue measure, would adjust the formula that helps set the tax on sales of gasoline, diesel and ethanol.

Gov. Steve Beshear proposed the change in January to supply additional revenue for road and bridge work across the state.

The House Appropriations and Revenue Committee endorsed the change Tuesday while passing the revenue measure.

"I can't imagine ... how we can keep our roads in any kind condition if we cut that tax," said Rep. Robert Damron, D-Nicholasville.

The bill next goes to the full Democratic-run House for a vote that could come as soon as Wednesday. It then would shift to the Republican-led Senate.

It's seen as a companion to the state budget proposal, which the committee also sent to the full House on Tuesday.

The proposed $20.3 billion, two-year state budget closely resembles the governor's spending recommendations.

The House version maintains Beshear's request to increase the main state funding formula for kindergarten through 12th-grade classrooms. It proposes more funding for textbooks and preschools but at lower amounts than Beshear recommended.

It proposes pay raises for state employees, teachers and other school workers.

It also goes along with spending cuts across a range of agencies to free up money for schools.

The House version also sticks with the governor's proposed 2.5 percent cut in operating funds for universities and community and technical colleges. It keeps the governor's proposals for bond-funded construction projects for the universities and colleges.

The House panel's action on the budget drew a favorable response from the governor's office.

"Overall, the governor is pleased that the committee agrees with his commitment to supporting education, job creation and better health for our citizens," said Beshear spokeswoman Kerri Richardson, adding that the governor's office is still reviewing the panel's changes.

Meanwhile, the higher fuel tax in the revenue bill is expected to generate tens of millions more dollars for the state Road Fund.

The governor is proposing about $1 billion in road construction projects each year of the two-year budget cycle that begins July 1.

Damron said restoring the gas tax to the level in effect three months ago is needed to help keep up with demands for road work.

The state's gas tax is tied to the average wholesale price of motor fuels, allowing it to shift up or down or stay unchanged every three months. As part of the formula, the bill would increase the minimum wholesale price.

The current state gas tax is 30.8 cents per gallon. That tax has three components; the largest is the state variable excise tax, which declined by 1.5 cents per gallon this Jan. 1, going from 25.9 cents per gallon to 24.4 cents per gallon. The other two components are fixed.

The bill would have the effect of raising the overall gas tax by 1.5 cents per gallon if it becomes law, though the tax could change every three months.

The proposal to return the tax to the late-2013 level drew some resistance during the committee hearing.

"That's a tougher pill to swallow," Republican Rep. Steven Rudy said.

Several Republican committee members abstained from voting on the revenue bill. That measure would make a number of other changes.

It would restore a tax on Instant Racing gambling machines after a state Supreme Court ruling. Money raised by the state would go to the state Thoroughbred Development Fund.

The court ruled last month that Kentucky can license and regulate the slots-like games but returned the case to a lower court for more arguments on whether Instant Racing qualifies as a horse race or is illegal gambling.

Instant Racing games allow people to bet on the outcome of old horse races without knowing which contests they are betting on. The game is offered at Kentucky Downs in Franklin and Ellis Park in Henderson.

The bill also would lift the ban that prevents any advertising on how state lottery proceeds are used.

Some lawmakers said it's one of the most common questions they hear from constituents: How do lottery revenues benefit the state?

Lottery proceeds support college scholarships.

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The revenue legislation is House Bill 445. The budget legislation is House Bill 235.

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