PORTLAND, Ore. (AP) — The deep pothole outside Timothy Taylor’s home was impossible to miss. The Portland resident could hear the telltale clunk of cars hitting it regularly from inside his house.
He knew well enough to avoid the hazard in his own neighborhood. Unfortunately, another pothole damaged his car’s suspension, costing him $1,000 to fix.
“Hearing that awful sound of your car bottoming out — it’s horrible,” Taylor said.
Oregon transportation officials warn that residents like Taylor could see a further decline in road, highway, and bridge quality starting this year without additional funding. But revenues from gas taxes are projected to decrease as more people drive electric and fuel-efficient cars. That shift is forcing officials to seek new ways to fund transportation infrastructure.
States with aggressive climate goals, such as Oregon, grapple with a growing challenge. While EVs can lower emissions in the transportation sector, the largest source of greenhouse gases nationally, they also mean less gas tax revenue for 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.
Gas Tax Revenue on the Decline
Motor fuel taxes represent the largest source of transportation revenue for states, according to the National Association of State Budget Officers’ most recent report on state expenditures. But the money brought in has fallen. Gas taxes generated 41% of transportation revenue in fiscal year 2016, compared to roughly 36% in fiscal year 2024, the group found.
In California, where zero-emission vehicles accounted for 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 meets its climate goals. California and Oregon are two of several states that will require all new passenger cars sold to be zero-emission vehicles by 2035.
The downward revenue trend is already impacting states like Pennsylvania, where gas tax revenues fell an estimated $250 million last year compared to 2019, according to the state’s independent fiscal office.
Inflation has further compounded budget concerns by increasing the cost of transportation materials.
What’s Happening in Oregon?
The Oregon Department of Transportation (ODOT) estimates a shortfall exceeding $350 million for the next budget cycle, citing inflation, declining gas tax revenues, and specific spending limitations.
That could mean cuts to projects such as winter snow plowing and road striping and paving, as well as as many as 1,000 transportation employee layoffs.
Some Republican lawmakers claim that the gas tax revenue challenges have been made worse by the department’s alleged mismanagement of funds. An audit released in January showed that ODOT overestimated its revenue for the current budget cycle by over $1 billion and failed to correctly track certain funds.
“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.
How States Are Boosting Transportation Funding
To compensate for the lost revenue, 34 states have raised 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. Oregon, which in 1919 became the first state to implement a gas tax, charges 40 cents a gallon.
The federal gas tax of 18 cents a gallon, which isn’t adjusted for inflation, hasn’t been raised in more than three decades.
In Oregon, where there is no sales tax and tolling has faced strong opposition, lawmakers are debating next steps.
Oregon is among the states that have already increased registration fees for EVs.
Other states have implemented methods such as indexing their gas tax to inflation and taxing EV charging stations.
To bolster transportation funds, some states have reorganized their budgets. In Michigan, where Gov. Gretchen Whitmer was first elected using the slogan “Fix the Damn Roads,” some tax revenues from marijuana and personal income taxes go to transportation.
In Connecticut, the sales tax now contributes more money to its special transportation fund than gas tax revenues, according to a 2024 fiscal report.
Another long-term solution is the 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 choose to use GPS tools to track and report their mileage.
