EV Owners Don’t Pay Gas. Where Will States Get Road Money?
PORTLAND, Ore. (AP) — The pothole outside Timothy Taylor’s home was so deep, he could hear the clunk of cars hitting it from inside his house.
The Portland, Oregon, resident could sympathize with those drivers: He knew to avoid his own neighborhood pothole, but another one damaged his car’s suspension to the tune of $1,000.
“Hearing that awful sound of your car bottoming out — it’s horrible,” he said.
Oregon transportation officials say that without more funding, residents like Taylor could see further declines in the quality of roads, highways, and bridges. But revenues from gas taxes, paid by drivers at the pump, are projected to decrease as more people adopt electric and fuel-efficient cars. This trend is forcing officials to look for new ways to fund vital transportation infrastructure.
States with ambitious climate goals, such as Oregon, face a challenge: EVs can help reduce emissions in the transportation sector, the nation’s largest source of greenhouse gases. However, they also mean less gas tax revenue flowing into 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 Set to Fall
Motor fuel taxes are the largest source of transportation revenue for states, according to the National Association of State Budget Officers’ report on state expenditures.
However, gas tax revenue is dropping. According to the National Association of State Budget Officers, gas taxes raised 41% of transportation revenue in fiscal year 2016, compared to roughly 36% in fiscal year 2024.
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. Both California and Oregon will require all new passenger cars sold to be zero-emission vehicles by 2035.
The downward revenue trend is already evident in Pennsylvania, where gas tax revenues dropped an estimated $250 million last year compared with 2019, according to the state’s independent fiscal office. Inflation has also increased the cost of transportation materials, worsening budget concerns.
What Is Happening in Oregon?
The Oregon Department of Transportation, citing inflation, projections of declining gas tax revenues, and certain spending limitations, has estimated a shortfall exceeding $350 million for the next budget cycle.
This shortfall could lead to cuts in winter snow plowing, road striping and paving, and layoffs of up to 1,000 transportation employees.
Republican lawmakers suggest the gas tax revenue issue has been exacerbated by the department’s financial mismanagement. An audit released in January found that the department overestimated its revenue for the current budget cycle by over $1 billion and failed to properly 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 offset 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 in 1919 became the first state to implement a gas tax, 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 significant opposition, lawmakers are debating their next steps. Oregon is among the states that have already raised registration fees for EVs.
Other states have taken steps such as indexing their gas tax to inflation or taxing EV charging stations. To bolster transportation funds, some have reorganized their budgets. In Michigan, some revenues from marijuana taxes and personal income taxes now go toward transportation. In Connecticut, the sales tax now brings in more money for its special transportation fund than gas tax revenues, a 2024 fiscal report shows.
Another concept that could provide a long-term solution is 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.
This article has been corrected to reflect the correct name of the National Association of State Budget Officers.
Updated March 18, 2025, 7:47 p.m.
By CLAIRE RUSH, Associated Press
