Road fund bulletin highlights need for additional pension reform

Kentucky Auditor Mike Harmon released a data bulletin this week focused on expenditures and sources of revenue for the commonwealth’s road fund.

The Bluegrass Institute has been actively opposing any increase in the state’s gas tax until an audit can be completed for the Kentucky Transportation Cabinet (KYTC) which would include a report on tax revenue meant to be used for the road fund but is instead diverted to other areas of government spending and an investigation into the cabinet’s single-bid contract practice that often results in project costs exceeding their own engineers’ internal estimates. BIPPS is also calling for any raise in the gas tax to be offset elsewhere so as not to increase the overall tax burden on Kentuckians.

Though not an audit, the bulletin compiles publicly available data on road-fund usage and illustrates BIPPS’ frequent warnings on how rising pension costs crowd out other areas of necessary government spending such as infrastructure. The bulletin notes that increasing Pension and Other Post Employment Benefits (OPEB) costs are outpacing road fund revenue growth and the rate of inflation (see charts from the auditor’s report below).

According to Auditor Harmon’s bulletin: ”Although the Commonwealth has significantly increased contributions to its various pension plans in recent years, economic developments or unforeseen budgetary challenges could render this commitment more difficult. Additionally, continued increases in pension obligations could further diminish the availability of Road Fund dollars to be used for purposes such as construction and maintenance of roads and bridges.”

Clearly, current costly state-offered pensions and other benefits are unsustainable and more work must be done to move us toward pension solvency.