PORTLAND, Ore. — Outside Timothy Taylor’s residence in Portland, Oregon, a deep pothole echoed the sound of vehicles colliding with it, so loud it was audible from within his home. Although Taylor has learned to steer clear of this particular pothole on his street, he was not as fortunate elsewhere, where another pothole inflicted $1,000 worth of damage to his vehicle’s suspension.
“Hearing that dreadful sound of your car scraping the ground is terrible,” Taylor expressed.
Officials in Oregon have warned that without increased funding, road, highway, and bridge quality may further deteriorate starting this year. With more people transitioning to electric and fuel-efficient cars, revenue from gas taxes collected at the fuel pump is expected to decrease, prompting officials to explore alternative funding avenues for transportation infrastructure.
Oregon, like other states with ambitious climate objectives, faces a dilemma. Electric vehicles (EVs) are instrumental in reducing emissions within the transportation sector – the largest contributor to greenhouse gases – but they simultaneously reduce gas tax revenue.
“We now find ourselves needing to both lower fuel consumption and simultaneously seek funds to maintain roads for EVs,” explained Carra Sahler, Director of the Green Energy Institute at Lewis & Clark Law School.
Gasoline tax revenue is declining, with motor fuel taxes being the principal source of transportation funding for states, as reported by the National Association of State Budget Officers. Revenue from gas taxes decreased, accounting for 41% of transportation revenue in fiscal year 2016 but dropping to approximately 36% in 2024.
In California, where zero-emission vehicles represented about a quarter of vehicle sales last year, gas tax collections are projected to reduce by $5 billion (or 64%) by 2035 if climate targets are met. Like Oregon, California mandates that all new passenger vehicles sold must be zero-emission by 2035.
The trend of decreasing revenue has already manifested in Pennsylvania, where gas tax revenue dropped by an estimated $250 million in comparison to 2019, shared by the state’s independent fiscal office. Inflation has further exacerbated the cost of transportation materials, which adds to budget challenges.
In Oregon, the Department of Transportation has predicted a shortfall exceeding $350 million for the next budget cycle, citing inflation and expected declines in gas tax revenue. This financial strain might necessitate reductions in snow plowing services, as well as road marking and paving activities, potentially leading to layoffs for up to 1,000 transportation employees.
Some Republican lawmakers argue that mismanagement within the department has worsened the situation, citing a January audit revealing overestimations of revenue by over $1 billion.
Boosting transportation funding has pushed 34 states to increase their gas taxes since 2013. California leads with a gas tax exceeding 69 cents per gallon, contrasted by Alaska’s 9 cents per gallon, according to the U.S. Energy Information Administration. Meanwhile, Oregon, which first implemented a gas tax in 1919, currently levies 40 cents per gallon.
The federal gas tax, unaltered in over thirty years and standing at 18 cents per gallon, isn’t adjusted for inflation.
With no sales tax and opposition to tolling in Oregon, lawmakers are deliberating future strategies. They have already increased registration fees for EVs, reflecting trends in other states that have adjusted measures to inflation.
States have explored various avenues to secure transportation revenue, such as Michigan allocating marijuana and personal income taxes to their road funds. In Connecticut, sales tax revenue surpasses income from gas tax revenues for the special transportation fund.
One potential long-term solution is a road user charge, where drivers pay based on their traveled distance. Hawaii, for instance, is initiating a road usage charge for EV drivers that will begin a gradual implementation starting this July, eventually enrolling all EV drivers by 2028. This involves annual vehicle inspection odometer readings.
Oregon, Utah, and Virginia currently run voluntary road usage fee programs, where drivers can choose to report their mileage using GPS tools.