In an effort to provide relief from rising gas prices, Gov. Andy Beshear declared a state of emergency Tuesday and signed an executive order reducing Kentucky’s gas tax by 10 cents per gallon. Beshear said this reduction could save Kentuckians about $27 million per month.
The reduction is set to take effect May 11, 2026 following Attorney General Russell Coleman’s approval on Thursday.
The emergency declaration expires in 30 days. Under KRS 39A.090, local governments may submit written requests for extensions or early termination.
In a conference call this week, Beshear told judge/executives and mayors that gas prices are expected to remain high for months. He said it would be easier for gas distributors to calculate the gas tax if the emergency declaration remains in effect statewide, rather than in a patchwork of counties and cities.
Beshear said additional guidance will be sent on how judges and mayors can request an extension of the gas tax reduction.
Understanding Kentucky’s gas excise tax
Unlike the full retail price of gas, which can fluctuate from day to day and week to week, the state gas tax is a fixed amount per gallon. The rate is recalculated annually based on the average wholesale price of motor fuels.
For fiscal year 2026, Kentucky’s gas tax is 26.4 cents per gallon (25 cents for gasoline plus 1.4 cents environmental fee). The federal gas tax is 18.4 cents per gallon.
With the start of the new fiscal year on July 1, Kentucky’s gas tax was expected to automatically increase to 27 cents per gallon based on the annual calculation. However, Beshear’s executive order also directs the Kentucky Department of Revenue to freeze the gas tax at its current rate of 26.4 cents.
Big picture revenue perspective
Kentucky’s gas tax has decreased in recent years as the average wholesale price has decreased. It was 27.8 cents per gallon in FY25 and 30.1 cents per gallon in FY24.
Because gas tax revenue supports the state and county road funding, lower prices at the pump ultimately mean less funding for paving and road projects. Road fund revenue is distributed through a formula that allocates 18.3% of the gas tax to counties for road construction and maintenance.
The governor said Thursday that any gaps in the transportation budget caused by a decrease in gas tax funding can be filled by the state’s Budget Reserve Trust Fund (rainy day fund). Beshear indicated he would make that request to lawmakers during the 2027 legislative session in January.
On the horizon: vehicle property taxes
Beshear signed a second executive order Tuesday related to the property taxes on motor vehicles. This order prevents potential increases when standard valuations on vehicles are calculated for calendar year 2027.
