Portland, Ore. (AP) — Timothy Taylor, a Portland, Oregon, resident, knows the frustration of a damaged car. A pothole near his home was so substantial that he could hear the noise of vehicles hitting it from inside. Taylor’s own experience with a pothole that cost him $1,000 in repairs illustrates the tangible impact of deteriorating infrastructure.
Oregon transportation officials are sounding the alarm: Without additional funding, residents may experience a decline in the quality of roads, highways, and bridges, starting this year. The core of the problem lies in the changing automotive landscape. As more people switch to electric and fuel-efficient vehicles, revenues from gas taxes, a primary source of transportation funding, are diminishing. This forces officials to seek innovative funding solutions to maintain and improve vital transportation systems.
This shift presents a significant challenge for states with aggressive climate goals, such as Oregon. While electric vehicles (EVs) contribute to reducing emissions, the largest source of greenhouse gases in the nation, they also lead to reduced gas tax revenue. Carra Sahler, director of the Green Energy Institute at Lewis & Clark Law School, highlighted this issue: “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.”
Motor fuel taxes comprise the largest source of transportation revenue for states, according to the National Association of State Budget Officers’ (NASBO) most recent report on state expenditures. However, the financial contribution of these taxes continues to fall. In fiscal year 2016, gas taxes accounted for 41% of transportation revenue, while in fiscal year 2024, this figure decreased to roughly 36%, according to NASBO. In California, where zero-emission vehicles made up approximately a quarter of car sales last year, legislative analysts predict that gas tax collections could decrease by $5 billion—or 64%—by 2035, assuming the state meets its climate goals. California and Oregon are among multiple states that will require all new passenger cars sold to be zero-emission vehicles by 2035.
The downward revenue trend is already apparent in Pennsylvania, where gas tax revenues saw an estimated drop of $250 million last year compared to 2019, according to the state’s independent fiscal office. This is further complicated by inflation, which has increased the cost of transportation materials, adding to budget concerns.
The Oregon Department of Transportation (ODOT) is facing its own financial constraints. Citing inflation, decreasing gas tax revenues, and certain spending limitations, they anticipate a shortfall exceeding $350 million for the next budget cycle. This could potentially lead to reductions in essential services, such as winter snow plowing and road maintenance, and possibly result in layoffs for up to 1,000 transportation employees.
Republican lawmakers have also raised concerns, alleging mismanagement of funds within the department. A January audit revealed that ODOT overestimated its revenue for the current budget cycle by over $1 billion and failed to properly track specific funds. State Sen. Bruce Starr, co-vice chair of the joint transportation committee, emphasized the importance of fiscal responsibility: “It really is about making sure that the existing dollars that are being spent by the department are being spent efficiently and effectively.”
To mitigate the revenue losses, various states have implemented different strategies. Since 2013, 34 states have increased their gas tax, according to the National Conference of State Legislatures. California has the highest gas tax, exceeding 69 cents a gallon when including other taxes and fees, while Alaska has the lowest at 9 cents a gallon, based on data from the U.S. Energy Information Administration. Oregon, the first state to implement a gas tax in 1919, currently has a tax of 40 cents a gallon. The federal gas tax of 18 cents a gallon, which has not been adjusted for inflation, has remained unchanged for over three decades.
In Oregon, where sales tax is absent , and tolling has met opposition, lawmakers are debating next steps. Oregon is among states that have already raised registration fees for EVs. Some states have also indexed their gas tax to inflation, increased registration fees for EVs, and taxed EV charging stations. Some regions have also reorganized their transportation budgets to find new sources of funds.
Michigan, where Governor Gretchen Whitmer was elected partly on the promise to “Fix the Damn Roads,” has allocated revenue from marijuana and personal income taxes towards transportation. In Connecticut, revenue generated from sales tax now surpasses gas tax revenues supporting the special transportation fund, according to a 2024 fiscal report. Another solution gaining interest is the implementation of road usage charges, where drivers are charged based on the distance they travel.
Hawaii established a road usage charge program for EV drivers in 2023, which will be phased in starting this July. By 2028, all EV drivers will be enrolled, with odometers read at annual vehicle inspections. Oregon, Utah, and Virginia have established voluntary road usage fee programs. Drivers in these states can use GPS tools to track and report their mileage to participate in the program.
