The Legislative Oversight and Investigations Committee heard testimony this week from representatives of the highway construction industry and the Kentucky Transportation Cabinet on the challenges facing highway construction in Kentucky.
Rachel Bayens, Managing Partner with Government Strategies, testified on behalf of the Kentucky Association of Highway Contractors about highway letting trends over the past decade.
From 2016 through 2025, KYTC let an average of more than 600 highway projects each year, with an average of just over $1 billion in awards annually. Through July 2026, however, KYTC had let only 175 projects, totaling just over $512 million. Additional projects were let in August, followed by a special letting in September after concerns were raised about the low number of projects.
Bayens discussed the impact the decline in lettings is having on the highway construction industry, including challenges with maintaining work crews and retaining employees as the amount of available work becomes more limited.
She also highlighted the impact inflation has had on the cost of highway construction and the growing gap between road funding and construction costs.
According to Bayens, Road Fund revenue has increased by approximately 23% over the past decade, from about $1.5 billion to $1.8 billion. When recent General Fund transfers to the Road Fund are included, the increase is approximately 39%.
Over the same period, however, inflation increased by 72%.
KYTC officials also pointed to inflation as a significant factor. Shaun McKiernan, Executive Director, of KYTC’s Office for Budget and Fiscal Management, told lawmakers that while the National Highway Construction Cost Index increased 75% over the past five years, KYTC’s maintenance budget has increased by only 30%.
Significant winter weather also has added to maintenance costs and reduced funding available for other transportation needs.
KYTC spent $47 million on snow and ice activities in 2024, compared with $85 million in 2025 and $95 million in 2026. KYTC said when those costs cannot be absorbed within the maintenance budget, other areas—including highway lettings—are affected.
KYTC also pointed to changes in federal policy that have significantly increased the amount of state funding required to match federal transportation dollars.
In FY2020, KYTC had $39 million in state funding requirements for federal matches. By FY2026, that amount had increased to $239 million.
While the federal construction program has grown, KYTC said the increase in state matching requirements has put additional pressure on the dollars available for state-funded construction.
Funding system struggles to meet transportation needsThe discussion highlighted the broader financial pressures facing Kentucky’s transportation system. Rising construction and maintenance costs, combined with limited Road Fund growth and increasing federal match requirements, are creating greater competition for the state’s available transportation resources.
These challenges reinforce the importance of maintaining a sustainable and predictable source of funding for roads and bridges in Kentucky. Counties face many of the same pressures as the state, including rising construction costs and the need to stretch limited transportation dollars to maintain aging infrastructure.
- To watch the Sept. 10, 2026 meeting of the Legislative Oversight & Investigations Committee, click here.
- For more information on the challenges facing the county road system, click here.
