This week, members of the House Tax Conference Committee proposed a $0.03 increase in Motor Fuels Tax paired with a redirection of the sales tax from the State Highway Fund to the State General Fund for the next three years and potentially beyond.This week, members of the House Tax Conference Committee proposed a $0.03 increase in Motor Fuels Tax paired with a redirection of the sales tax from the State Highway Fund to the State General Fund for the next three years and potentially beyond.
While this suggestion wasn’t ultimately included in the final committee report submitted to the legislature this week, there remains some possibility it could resurface during forthcoming legislative discussions, negotiations and debate. Consequently, it is important to clarify the impacts of the proposal as a final tax policy and budget are assembled.
This proposal does not allow the agency to fully fund preservation projects necessary to maintain the system in its current condition. KDOT has calculated the required level of preservation investment to be $380 million annually. The proposed $0.03 fuel tax increase would add roughly $50 million annually to the State Highway Fund. Unfortunately, KDOT’s current cash flow allows only a $44 million preservation investment in FY18, so adding $50 million in additional revenue still leaves KDOT woefully short of providing the critical $380 million preservation investment.
To compound the downside of the proposal, KDOT has acknowledged that today’s funding picture results in significantly less than a $380 million preservation program again in FY19. Redirecting the sales tax in FY20 and beyond will only add more strain to the KDOT cash flow and result in FY19 preservation spending being even lower than the current inadequate amount.
This idea is not a solution that helps the state to maintain its highway system and keep it in good condition, but rather reduces the ability for KDOT to adequately fund preservation needs in the short term and creates funding uncertainty over the long term.
We are thankful that the legislature is concerned about putting additional dollars into maintaining our state transportation system but any proposal that includes the sales tax redirection creates more problems than it solves.
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