LEXINGTON, Ky. – Reduced revenue because of the ongoing COVID-19 pandemic has taken a financial toll on the operation and maintenance of the country’s transportation networks, forcing delays of road projects. Kentucky is no exception.
What You Need To Know
- No projects bid on in May or June
- Gas and car sales tax hurt revenue
- Shortfall not as large as predicted
- Bidding resumed in July
The Kentucky Transportation Cabinet canceled putting projects out for bid in May and June.
“That was about $83 million of projects Kentucky didn’t move forward with,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials (AASHTO), of which Kentucky is a member. “Kentucky also suspended work on about 100 different projects totaling $150 million across the state.”
AASHTO is the trade association representing state departments of transportation and has been advocating for a backstop to help DOTs that have been affected by revenue losses. Most states rely on gas taxes to help fund construction projects.
Chuck Wolfe, deputy executive director of the Kentucky Transportation Cabinet Office of Public Affairs, said when the coronavirus pandemic hit and the economy shut down, people were staying home and not driving.
“Motor fuel sales went way down,” he said. “Car dealerships were not considered essential businesses, so nobody was buying vehicles. The transportation cabinet is funded by the road fund, and motor fuel taxes and motor vehicle sales taxes are two very large revenue streams into the road fund. So, the road fund revenues really dropped precipitously.”
Putting projects on hold is not uncommon during a financial hardship, Wolfe said.
“It’s not terribly different from what a household would do,” he said. “If you had a sudden drop in your income, a drastic drop, you would have to start making some decisions and you would put off, in all likelihood, any major purchases. The concept is pretty much the same. The transportation cabinet had to hang on to its state dollars. There were reasons for doing that. But, we didn't know what was coming up on the horizon and we already had a lot of projects going on for which oftentimes you’re paying debt service, and since, especially at the beginning, no one could tell how long the pandemic was going to be. So, we pulled back and made the decision not to put any new projects out for bid in the months of May and June.”
Putting projects out for bid resumed in July, but Kentucky is far behind its annual average spent, which is around $700 million. There were 99 resurfacing contracts awarded but were suspended temporarily because of the pandemic. Those projects have since moved ahead as well, Wolfe said.
“When the revenues fell, and it wasn’t just the road fund, the general fund revenue receipts really took a nosedive as well, and the governor reconvened the panel of economists that does the official revenue forecasts on which your state budget is based – it's called the consensus forecasting group,” Wolfe said. “These are all university economists, and they tend to be pretty conservative, in my opinion. They projected receipts to the road fund for fiscal year 2020 we’re going to come in $162 million below what had been expected at the beginning of the fiscal year. This is what prompted the decision to hold off on new projects for the months of May in June.”
The loss of revenue was not as bad as the panel projected and instead totaled $60 million, which was absorbed through things such as putting off major equipment purchases and spending less on road maintenance.
“By doing that, we were able to go ahead and give the green light to those surfacing projects that had been temporarily suspended,” Wolfe said. “In July, we resumed putting projects out for bids and awarded about $24 million worth of projects – still below what we ordinarily do. In August the awards increased to about $40 million and we’ll award more contracts on Sept. 25 that have field estimates of about $120 million. We're ramping back up again.”
Tymon recently spoke to the Americans for Transportation Mobility (ATM) Coalition for a podcast to provide a perspective on why transportation infrastructure is needed: staggering job losses and an economic downturn are intertwined with the issue of overburdened and aging roads, bridges, and public transit that need federal financing and funding through new reauthorization.
“America and its leaders sit at an unprecedented intersection as the demand for a bipartisan infrastructure-investment bill grows,” he said. “The need to modernize infrastructure, a legislative and federal requirement to fund surface transportation, the pandemic, and a call to secure America’s economic footing has produced a cacophony of factors.”
Though Americans are traveling more now, AASHTO has asked Congress to provide relief directly to state DOTs and is also pushing for a bipartisan and long-term surface transportation reauthorization bill. Tymon, who once served as the staff director of the Highways and Transit Subcommittee of the House Transportation and Infrastructure Committee and guided several infrastructure-investment bills, believes infrastructure projects and interstate commerce will help keep America strong and safe in a global arena.
“I think that this still is a bipartisan issue,” he said. “Transportation is an area that Democrats and Republicans in both the House and the Senate can rally around. As we come up to the elections in November, there’s not a whole lot that senators and congressmen can go back to their districts and talk about [regarding] pieces of legislation that they’ve been able to get done. Outside of what’s been done on COVID relief, there haven't been a lot of signature pieces of legislation that either side can go out there and champion. This is a great opportunity for them to show that they can work together to get something done on transportation.”
Kentucky’s Office of the State Budget Director posts news releases every month showing revenue receipts for both the general fund and road fund on its website. The more recent news release shows motor vehicle sales and user fees have made a fairly substantial increase over the past two months.