Declining revenue could signal a rough road ahead for Kentucky’s County Road Aid program.
Under state law, 18.3% of Kentucky’s motor fuels tax receipts go toward County Road Aid (CRA), which supports the maintenance and construction of county roads and bridges. CRA is then distributed to counties through the Fifths Formula: 20% of funds equally to all counties, 20% based on rural road mileage, 20% based on rural population, and 40% based on rural land area.
Final revenue figures for fiscal year 2026 show that CRA totaled $132.6 million, a 13% decrease from the $152.3 million counties received in FY2024.
Declining gas tax rates
This recent decline in CRA revenue is largely the result of decreases in Kentucky’s motor fuels tax rate.
The rate is adjusted annually based on the average wholesale price (AWP) of gasoline. When the AWP increases, the tax rate generally increases, and when the AWP decreases, the tax rate decreases.
The motor fuels tax rate was 30.1 cents per gallon (cpg) in FY2024 before falling to 27.8 cpg in FY2025 and 26.4 cpg in FY2026.
In addition to the automatic reduction in the motor fuels tax rate in FY2026, Governor Andy Beshear declared an emergency in May that temporarily reduced the motor fuels tax by an additional 10 cents per gallon for 30 days.
The reduction is estimated to have lowered total motor fuels tax receipts by approximately $20 million, resulting in an estimated $3.7 million reduction in CRA revenue.
CRA is forecast to decrease another 2.7% in FY2027 to $129.0 million based on an official estimate of motor fuels tax revenues from the state’s Consensus Forecasting Group.
Rising construction costs compound county road funding shortfall
The decline in CRA is especially concerning amid significantly higher construction costs. The National Highway Construction Cost Index has increased by 100% since FY2014, meaning highway construction costs have doubled over the past 12 years.
By not keeping pace with highway construction costs, the cumulative purchasing-power gap for counties has reached $1.2 billion since FY2014.
In FY2026 alone, CRA was approximately $171 million below the level needed to maintain the purchasing power counties had in FY2014.
Long term impact on counties
In practical terms, counties today have less than half the purchasing power they did over a decade ago.
This funding gap means fewer miles of road can be resurfaced each year as more roads deteriorate into poor or failing condition. As routine maintenance is deferred, relatively minor repairs can quickly become more costly rehabilitation or reconstruction projects.
The longer this funding gap persists and the larger it grows, the more the maintenance backlog will increase—and the more expensive it will become for counties to ever catch up. Many counties are already dedicating more resources simply to restoring deteriorating roads, leaving fewer resources available for routine maintenance and improvements.
Without additional resources, counties will increasingly be forced to prioritize the most critical needs rather than maintaining roads on a regular, cost-effective cycle.
Sustainable funding is key
Recognizing the County Road Aid funding gap, the General Assembly in recent years has provided funding to counties through programs such as the Local Assistance Road Program (LARP), County-City Bridge Improvement Program, and Grant Pool Program.
While these programs provide important relief to counties, they are not sufficient to address the underlying structural funding imbalance. These programs can help counties address specific projects and short-term needs, but they do not provide the predictable, ongoing revenue necessary to maintain the county road system.
Without a long-term, sustainable funding solution, counties will continue to fall behind on road and bridge maintenance. The result will be more deferred projects, higher costs to address deteriorating infrastructure, and a growing backlog that becomes increasingly difficult for future county budgets to overcome.
