Oregon’s Road to Repair: Funding Fears in the Era of Electric Vehicles
PORTLAND, Ore. (AP) — Timothy Taylor winces at the memory of the “awful sound” of his car bottoming out on a pothole near his home. “It’s horrible,” he said. As an Oregon resident, Taylor’s experience might become more common. State transportation officials warn that without a new funding solution, the quality of Oregon’s roads, highways, and bridges could decline, starting this year.
The issue stems from a shift in how transportation is funded. Traditionally, gas taxes have been the primary revenue source. However, this income stream is shrinking as more drivers embrace electric and fuel-efficient vehicles. This trend has put states, including Oregon, in a difficult position as they seek innovative ways to maintain and improve vital transportation systems.
States with ambitious climate goals, like Oregon, are at the forefront of this challenge. Electric vehicles offer a means to reduce greenhouse gas emissions, but they also erode the tax base that supports road maintenance. Carra Sahler, director of the Green Energy Institute at Lewis & Clark Law School, sums up the situation, “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.”
Declining Gas Tax Revenue
Motor fuel taxes have historically been the largest source of transportation revenue for states. According to the National Association of Budget Officers, this source is shrinking. Gas taxes accounted for 41% of transportation revenue in fiscal year 2016, but that fell to roughly 36% in fiscal year 2024.
California, where roughly a quarter of car sales last year were zero-emission vehicles, anticipates a $5 billion reduction— or 64%— in gas tax revenue by 2035, if the state meets its climate goals. Both California and Oregon have mandated that all new passenger car sales be zero-emission vehicles by 2035.
This downward trend is already evident. Pennsylvania’s gas tax revenue dropped by approximately $250 million in 2023 compared to 2019. Inflation has also increased the cost of transportation materials, placing additional strain on budgets.
The Oregon Department of Transportation (ODOT) projects a budget shortfall of over $350 million for the upcoming budget cycle, citing declining gas tax revenues, spending limits, and inflation. These cuts could include a reduction in winter snow plowing services, fewer road paving and striping projects, and potential layoffs of up to 1,000 transportation employees.
Addressing the Funding Gap
To combat the shortfall, several states have implemented various strategies. Since 2013, 34 states have increased their gas tax. California currently has the highest gas tax at more than 69 cents per gallon (including all taxes and fees), while Alaska has the lowest at 9 cents a gallon. In Oregon—which was the first state to implement a gas tax in 1919— the gas tax is currently 40 cents a gallon.
Other states have explored alternative approaches. Some have indexed their gas taxes to inflation, while others are raising registration fees for electric vehicles or taxing EV charging stations. Some states have reallocated funds, like Michigan, which now uses revenue from marijuana and income taxes for transportation, or Connecticut, where sales tax revenue now surpasses gas tax revenue for its transportation fund.
A potential long-term solution is a road usage charge, where drivers pay based on the distance they travel. Hawaii launched a road usage charge program for EV drivers in 2023, with full implementation scheduled for 2028. Oregon, Utah, and Virginia currently have voluntary programs for road usage fees where residents can track their mileage using GPS tools. The implementation in each state varies, but it’s clear that states are diligently searching for new funding to sustain the road infrastructure.
