PORTLAND, Ore. (AP) — The pothole outside Timothy Taylor’s home was a menace. Deep enough to be heard from inside, it caused a $1,000 repair bill for his car’s suspension.
“Hearing that awful sound of your car bottoming out — it’s horrible,” said Taylor, a Portland resident. He could sympathize with other drivers who fell victim to it.
Taylor’s experience highlights a growing problem facing state transportation officials: declining gas tax revenues. As more drivers switch to electric and fuel-efficient vehicles, states are searching for new ways to fund vital infrastructure projects.
Oregon transportation officials warn that without new funding, residents like Taylor could see a further decline in the quality of roads, highways, and bridges soon.
States with ambitious climate goals, such as Oregon, face a challenge: while electric vehicles help reduce greenhouse gas emissions, they also diminish gas tax revenue.
Carra Sahler, director of the Green Energy Institute at Lewis & Clark Law School, explained, “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 remain the largest source of transportation revenue for states. However, the National Association of State Budget Officers reports that the revenue has fallen. Gas taxes accounted for 41% of transportation revenue in 2016, but only about 36% in 2024.
In California, where zero-emission vehicles composed around a quarter of car sales last year, analysts predict gas tax collections will decrease by $5 billion, or 64%, by 2035 with sufficient climate goal progress. California and Oregon are among those with zero-emission vehicle mandates by 2035.
This revenue drop is apparent in Pennsylvania, where gas tax revenues decreased by approximately $250 million last year compared to 2019, according to the state’s fiscal office.
Inflation has also increased the cost of transportation materials, worsening budget concerns.
The Oregon Department of Transportation estimates a shortfall of over $350 million for the upcoming budget cycle, citing inflation, falling gas tax revenues, and spending restrictions.
This could lead to cuts in winter snow plowing and road maintenance, potentially resulting in layoffs of up to 1,000 transportation employees.
To address the revenue shortfall, 34 states have increased their gas tax since 2013, according to the National Conference of State Legislatures. California has the highest gas tax, over 69 cents per gallon when including other taxes and fees, while Alaska has the lowest at 9 cents per gallon.
Oregon, which implemented the first gas tax in 1919, has a gas tax rate of 40 cents per gallon.
The federal gas tax of 18 cents per gallon has not been increased in over three decades.
In Oregon, lawmakers are currently debating the next steps, as the state has no sales tax and has faced strong resistance to tolling.
Oregon is among the states to have already raised registration fees for electric vehicles.
Other states have taken steps such as indexing gas taxes to inflation and taxing electric vehicle charging stations.
Some states have reorganized their budgets to bolster transportation funding. Michigan uses revenue from marijuana and personal income taxes for transportation projects. In Connecticut, sales tax revenue now contributes more to the transportation fund than gas tax revenues.
Another potential long-term solution is a road user charge, where drivers pay based on distance traveled.
In 2023, Hawaii implemented a road usage charge program for EV drivers that begins phasing in this July. In 2028, all EV drivers will be automatically enrolled, with odometer readings taken 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.
