PORTLAND, Ore. (AP) — Timothy Taylor knows the sinking feeling all too well. The Portland resident could hear the telltale clunk of cars bottoming out on the pothole outside his home, a sound that foreshadowed the damage to come. After his own car’s suspension was negatively affected, he knew he had to take action. The repairs cost him $1,000.
“Hearing that awful sound of your car bottoming out — it’s horrible,” Taylor said.
Oregon transportation officials warn that residents like Taylor may see a decline in the quality of their roads, highways, and bridges, starting this year, unless more funding is secured. The shift to electric and fuel-efficient vehicles means decreasing revenue from gas taxes, which drivers pay at the pump. This is forcing officials to look for new funding streams for critical transportation infrastructure.
States with ambitious climate goals, such as Oregon, are facing a dilemma. EVs can help reduce emissions in the transportation sector, the largest source of greenhouse gas emissions in the nation, but they also mean less gas tax revenue for government coffers.
“We now find ourselves right now in a position where we want to address fuel use and drive down reliance on gases and internal combustion engines. But we need the funds to operate our roads that EVs need to use as well,” said Carra Sahler, director of the Green Energy Institute at Lewis & Clark Law School.
Declining Gas Tax Revenue
Motor fuel taxes provide the largest source of transportation revenue for states, according to the National Association of State Budget Officers’ most recent report on state expenditures, but these revenues are in decline. Gas taxes generated roughly 41% of transportation revenue in fiscal year 2016, compared with approximately 36% in fiscal year 2024.
In California, where zero-emission vehicles made up about a quarter of car sales last year, legislative analysts forecast that gas tax collections will decrease by $5 billion — or 64% — by 2035 if the state successfully meets its climate goals. Both California and Oregon are among the states that will require all new passenger cars sold to be zero-emission vehicles by 2035.
The trend of falling revenue is already being seen in Pennsylvania, where gas tax revenues decreased by an estimated $250 million last year compared with 2019, according to the state’s independent fiscal office.
Inflation has also driven the cost of transportation materials up, making budget concerns even worse.
What’s Happening in Oregon?
The Oregon Department of Transportation (ODOT) has estimated a shortfall of over $350 million for the next budget cycle, citing inflation, projected declines in gas tax revenues, and specific spending limitations. This could result in cuts to winter snow plowing, road striping and paving, and potentially the layoff of up to 1,000 transportation employees.
Republican lawmakers claim the gas tax revenue problem has been compounded by the department’s poor financial management. An audit released in January revealed the department overstated its revenue for the current budget cycle by over $1 billion and didn’t properly track certain funds.
“It really is about making sure that the existing dollars that are being spent by the department are being spent efficiently and effectively,” said state Sen. Bruce Starr, GOP co-vice chair of the joint transportation committee.
How States Are Boosting Transportation Funding
To address revenue shortfalls, 34 states have increased their gas taxes since 2013, according to the National Conference of State Legislatures. California has the highest gas tax at over 69 cents a gallon, including other taxes and fees, while Alaska has the lowest at 9 cents a gallon, according to figures from the U.S. Energy Information Administration. In Oregon — which in 1919 became the first state to implement a gas tax — it is 40 cents a gallon.
The federal gas tax of 18 cents a gallon, which isn’t adjusted for inflation, hasn’t been raised in over three decades.
In Oregon, where there is no sales tax and tolling has faced significant opposition, lawmakers are discussing next steps. Oregon is one of several states that have already increased registration fees for electric vehicles.
Other states have taken actions such as indexing gas taxes to inflation and taxing EV charging stations.
To increase transportation funding, some states have reorganized their budgets. In Michigan, certain revenues from marijuana taxes and personal income taxes are now directed toward transportation. In Connecticut, revenue from sales tax now generates more money for its special transportation fund than gas tax revenues, as indicated by a 2024 fiscal report.
Another concept that could be a long-term solution is road user charges. These systems would charge drivers based on the distance they travel.
Hawaii established a road usage charge program for EV drivers in 2023, with a phased rollout beginning this July. By 2028, all EV drivers will be automatically enrolled, with annual vehicle inspections including odometer readings.
Three additional states — Oregon, Utah, and Virginia — currently have voluntary road usage fee programs. These programs provide drivers with the option to use GPS tools to track and report their mileage.
Updated March 18, 2025 10:47 p.m. By CLAIRE RUSH, Associated Press
