I am using kenney's rouge-like texture map. Based on my reading from other posts around the forum this occurs when the terrain tool doesn't have the proper information to make a transition correctly. How would I go about fixing this issue?
From the screenshot I can see two mistakes:
You marked all pieces completely, making the terrain tool think they are all entirely covered with that terrain. This is why it just picks randomly from those tiles. However, the outer corners and sides are not "ground path" so you should erase that part.
You forgot to mark the 4 corner tiles directly left of the part you did mark. Having both inner and outer corners defined is important, otherwise the tool will run into problems in many situations.
Did you read Using the Terrain Tool?