PORTLAND, Ore. (AP) — Timothy Taylor, a Portland, Oregon resident, knew all too well the destructive power of a neglected pothole. The clunk of cars hitting the one outside his home was loud enough to hear inside. He also knew the pain of car damage; another pothole cost him $1,000 in repairs.
“Hearing that awful sound of your car bottoming out — it’s horrible,” Taylor said.
Oregon transportation officials are warning that without more funding, residents like Taylor could face a further decline in the condition of roads, highways, and bridges, starting this year. The rise of electric vehicles (EVs) is at least partly to blame. As more people switch to EVs and fuel-efficient cars, revenue from gas taxes — which drivers pay at the pump — is projected to shrink, forcing officials to seek new ways to fund transportation infrastructure.
States with aggressive climate goals, such as Oregon, face a challenge. While EVs help reduce emissions in the transportation sector, the nation’s largest source of greenhouse gases, they also diminish gas tax revenue in 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.
Motor fuel taxes are the primary source of transportation revenue for states, according to the National Association of State Budget Officers. But the money generated has fallen. Gas taxes accounted for 41% of transportation revenue in fiscal year 2016, but roughly 36% in fiscal year 2024.
In California, where zero-emission vehicles made up about a quarter of car sales last year, legislative analysts predict gas tax collections will decrease by $5 billion — or 64% — by 2035 if the state successfully meets its climate goals. California and Oregon are among several others that will require all new passenger cars sold to be zero-emission vehicles by 2035.
The revenue decline is already apparent in Pennsylvania, where gas tax revenues dropped an estimated $250 million last year compared to 2019, according to the state’s independent fiscal office.
Inflation is also driving up the cost of transportation materials, compounding budget concerns.
Oregon’s Situation
The Oregon Department of Transportation, citing inflation, declining gas tax revenue projections, and spending limitations, anticipates a shortfall exceeding $350 million for the next budget cycle.
That could mean cuts to winter snow plowing, road striping, and paving, as well as the potential layoffs of up to 1,000 transportation employees.
Republican lawmakers argue the gas tax revenue issue has been exacerbated by the department’s mismanagement of funds. An audit released in January found the department overestimated its revenue for the current budget cycle by over $1 billion and failed to track certain funds adequately.
“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.
Potential Funding Solutions
To compensate for lost revenue, 34 states have increased their gas tax since 2013, according to the National Conference of State Legislatures. California has the highest gas tax, at over 69 cents a gallon when 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 was the first state to implement a gas tax in 1919 — 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 strong opposition, lawmakers are debating their next steps. The state has already increased registration fees for EVs.
Other states have taken measures such as indexing their gas tax to inflation or taxing EV charging stations. To bolster transportation funds, some have reorganized their budgets.
In Michigan, where Gov. Gretchen Whitmer was first elected using the slogan “Fix the Damn Roads,” some revenue from marijuana taxes and personal income taxes now goes toward transportation. In Connecticut, the sales tax generates more money for its special transportation fund than gas tax revenues, according to a 2024 fiscal report.
Another solution that could provide a long-term fix is what is often known as a road user charge. Under such a system, drivers pay a fee based on the distance they travel.
In 2023, Hawaii established a road usage charge program for EV drivers that will phase in starting this July. In 2028, all EV drivers will be automatically enrolled, with odometers read at annual vehicle inspections.
Three other states — Oregon, Utah, and Virginia — have voluntary road usage fee programs.
Drivers can opt to use GPS tools to track and report their mileage.
