States Face Funding Challenges with the Rise of Electric Vehicles
PORTLAND, Ore. (AP) — Timothy Taylor, a Portland, Oregon, resident, experienced the frustrating reality of deteriorating roads when a pothole damaged his car. “Hearing that awful sound of your car bottoming out — it’s horrible,” he said. The repair cost Taylor $1,000, but it reflects a larger problem: as more drivers switch to electric vehicles (EVs), states face a shortfall in gas tax revenue, traditionally a primary source of road and bridge funding.
Declining Gas Tax Revenue
Historically, motor fuel taxes have been the primary revenue source for state transportation budgets. According to the National Association of State Budget Officers, gas taxes accounted for approximately 41% of transportation revenue in fiscal year 2016, but this figure dropped to roughly 36% by fiscal year 2024. The shift towards EVs, which do not require gasoline, is accelerating this trend.
In California, where roughly a quarter of new car sales last year were zero-emission vehicles, legislative analysts predict a $5 billion (64%) decline in gas tax collections by 2035, provided the state meets its climate goals. Both California and Oregon have mandated that all new passenger cars sold will be zero-emission vehicles by 2035.
Pennsylvania is also witnessing this revenue decrease. The state’s independent fiscal office estimates that gas tax revenues fell by $250 million in 2024 compared to 2019.
Impact on Infrastructure and State Responses
Transportation officials in Oregon have projected a funding shortfall exceeding $350 million for the next budget cycle, citing decreasing gas tax revenues, inflation, and certain spending limitations. This could lead to budget cuts, including reduced road maintenance and potential layoffs within the transportation department.
“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.
To make up for the shrinking revenue, 34 states have increased their gas tax since 2013. 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. Oregon, which was the first state to implement a gas tax in 1919, charges 40 cents per gallon.
Other approaches include indexing gas taxes to inflation and taxing EV charging stations. Some states are also reorganizing their budgets. For example, Michigan is now allocating revenue from marijuana and personal income taxes towards transportation projects. Connecticut’s special transportation fund receives more money from sales tax revenues than gas tax revenues, according to a 2024 fiscal report. A potential long-term solution is road user charges, where drivers pay based on the distance they travel. Hawaii launched a road usage charge program for EVs in July 2023, with full enrollment for all EV drivers scheduled for 2028. Oregon, Utah, and Virginia also have voluntary road usage programs.
March 18, 2025 CLAIRE RUSH
