Oregon’s Transportation Funding Faces Challenges
PORTLAND, Ore. (AP) — Timothy Taylor, a Portland resident, knows the frustration of damaged roads all too well. The pothole outside his home was so deep that he could hear the impact of cars hitting it from inside, and another one cost him $1,000 to repair his vehicle. “Hearing that awful sound of your car bottoming out — it’s horrible,” he said.
Oregon transportation officials are warning that residents like Taylor could see further declines in road, highway, and bridge quality starting this year. This is due to decreasing gas tax revenues as more people adopt electric vehicles (EVs) and fuel-efficient cars.
States with strong climate goals, like Oregon, are facing a significant challenge: EVs help cut emissions, but they also reduce gas tax revenue, the primary source of transportation funding. Carra Sahler, director of the Green Energy Institute at Lewis & Clark Law School, explained the problem. “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.”
Gas Tax Revenue Declines
Motor fuel taxes are a primary source of transportation revenue for states. However, this revenue is decreasing. According to the National Association of State Budget Officers’ most recent report on state expenditures, gas taxes accounted for 41% of transportation revenue in fiscal year 2016, but only 36% in fiscal year 2024.
California, where zero-emission vehicles made up about a quarter of car sales last year, anticipates a $5 billion (64%) decrease in gas tax collections by 2035 if it achieves its climate goals. California and Oregon are among several states that will require all new passenger cars sold to be zero-emission vehicles by 2035.
The declining revenue trend is already evident in Pennsylvania, where gas tax revenues fell by an estimated $250 million last year compared to 2019, according to the state’s independent fiscal office. Inflation has also increased the cost of transportation materials, worsening budget issues.
Oregon’s Budget Shortfall
The Oregon Department of Transportation estimates a shortfall of over $350 million for the next budget cycle due to inflation, declining gas tax revenues, and spending limitations. This could result in cuts to road maintenance, snow plowing, and potential layoffs of up to 1,000 transportation employees.
Republican lawmakers claim the department has mismanaged its finances. An audit released in January revealed the department overestimated its revenue for the current budget cycle by over $1 billion and failed to properly track certain funds.
State Sen. Bruce Starr, GOP co-vice chair of the joint transportation committee, stated, “It really is about making sure that the existing dollars that are being spent by the department are being spent efficiently and effectively.”
Potential Funding Solutions
To address the revenue loss, 34 states have raised their gas taxes since 2013, according to the National Conference of State Legislatures. California has the highest gas tax at over 69 cents per gallon, including other taxes and fees, while Alaska has the lowest at 9 cents per gallon, according to the U.S. Energy Information Administration. Oregon’s gas tax is 40 cents per gallon.
The federal gas tax, which is 18 cents per gallon, has not been adjusted for inflation in over three decades.
In Oregon, where there is no sales tax, lawmakers are considering different approaches. The state has already raised registration fees for EVs. Other states have indexed their gas taxes to inflation, increased EV registration fees, and taxed EV charging stations.
Some states are reorganizing their budgets. In Michigan, revenue from marijuana and personal income taxes now supports transportation. In Connecticut, sales tax revenue generates more money for its special transportation fund than gas tax revenue, according to a 2024 fiscal report.
Another potential long-term solution is road user charges where drivers pay based on the distance they travel. Hawaii established a road usage charge program for EV drivers in 2023, and it will be fully implemented by 2028. Three other states — Oregon, Utah, and Virginia — have voluntary road usage fee programs.
The name of the National Association of State Budget Officers has been corrected to include the word “State.”
