All states are in the same predicament as Pennsylvania as they try to find sources to fund transportation projects: The long-used gasoline tax is stagnant, and in many instances it’s been hard to sell the public on other sources of revenue to pay for roads, bridges and public transit.
A report last week from Pew Charitable Trusts said many states could face “critical” transportation funding shortfalls in the next few years unless they make substantial changes to their funding methods. That’s because the growth of electric vehicles, improved fuel efficiency for gas engines and inflation have combined to eat away state transportation funds at a time when the future of federal funding already is shaky at best.
As a result, many states are scrambling, either postponing some projects or establishing new fees and other sources of funding so they don’t fall too far behind on needed work. Pennsylvania’s first fee for electric vehicle owners begins this year, but the state hasn’t been willing to add other fees so far.
“The legacy approach to funding our nation’s surface transportation infrastructure through a fuel tax will soon be far too insufficient,” Syracuse University said in a 2024 report commissioned by Pew. “States across the country must quickly develop new transportation funding strategies, or we will face a significant national crisis.”
Growing problem
Pew’s report highlights the factors fueling the crisis with real numbers in areas that states have been alluding to for years.
The sale of electric vehicles has been the biggest factor, growing from 2% of all new vehicle sales in 2020 to 9% in 2023, the most recent year available. That means those owners are no longer contributing to gas tax revenues.
Pew highlighted several states facing problems already:
- Maryland is in the process of cutting $1.3 billion from the state’s six-year, $20 billion transportation plan, the second straight year of cuts.
- Oregon is $1.8 billion short on its transportation budget for ongoing projects and regular maintenance. The state is projecting gas tax revenue reductions for all but one year through 2033.
- Washington is projecting its transportation budget to come up multibillion dollars short in the next few years.
Oregon, which had relied heavily on the gas tax, has added a 0.1% payroll tax and a fee on new car purchases in recent years, but state Rep. Susan McLain, a Democrat who co-chairs the transportation committee, told Pew the state needs to do more.
“We are at the point where the gas tax has gone down so much, there’s a real need for urgency to ensure that our foundational funding for the state … and its infrastructure is sufficient, stable and diversified,” McLain said. “We’re not going to put it all in one basket again.”
So far, 39 states have enacted some sort of registration fee for electric vehicle owners to try to make up for the lost revenue because they don’t pay the gas tax that all states use at various levels to pay for transportation needs.
But that is only one of many steps some states are exploring to diversify because the gas tax has “devolved,” according to Susan Howard, director of policy and government relations at the American Association of State Highway Transportation Officials. The association works with states to develop construction standards and technical expertise in funding and other areas.
In Colorado, for example, the state has established a 29-cent delivery fee for any package subject to the state’s sales tax. Four states — Oregon, Virginia, Hawaii and Utah — are experimenting with voluntary programs where vehicle owners can pay a mileage-based fee instead of the gas tax.
The key effort, Howard said in an interview, is trying to “spread the pain” of paying for transportation projects. Many states — Pennsylvania, Massachusetts, Maryland, Maine and New Mexico among them — have had or currently have special committees to recommend funding changes.
“The one thing they all have is some version of the gas tax and a registration fee,” Howard said. “What is very common about the recommendations now is there is a menu.
“There’s no shortage of ideas, but the question is what can meet the approval of the Legislature?”
Pennsylvania’s status
Former Gov. Tom Wolf learned the hard way how difficult it is to change a long-standing funding stream like the gas tax, which provides more than 78% of the state’s transportation dollars.
During the Democrat’s last year in office, the bipartisan 42-member Transportation Revenue Options Commission recommended a three-phase series of changes to eliminate the gasoline tax over time and raise enough money to cover an estimated $8.1 billion funding gap. Those changes included charging fees for package delivery and trips with ride-hailing services such as Uber and Lyft, raising registration fees for owners of all types of vehicles and requiring drivers to pay a fee based on miles driven instead of fuel purchased.
Additionally, the state Department of Transportation proposed establishing tolls to help pay for the replacement of nine major bridges at a cost of $2.5 billion. It said the state had no other way to raise funds for these projects that were critical to moving freight by trucks.
Before Wolf left office at the end of 2022, the Legislature never took action on the revenue options recommended by the commission. The toll idea was defeated in court through challenges by communities near the structures, including residents in the South Fayette area opposed to tolls to replace the Interstate 79 bridge near Bridgeville.
Under Wolf’s successor, Gov. Josh Shapiro, PennDOT stopped pursuing the overhaul of transportation funding to concentrate on obtaining as much money as it could from the Biden administration’s $2 trillion infrastructure improvement program.
On the positive side, the state this year will begin charging a $200 registration fee to the owners of electric vehicles to make up for some of the lost gas tax revenue. And the Legislature approved transferring the cost of state police patrols on state highways back to the general budget over several years, returning $500 million to PennDOT for road and bridge work.
For now, those changes are averting a crisis in Pennsylvania. But PennDOT Secretary Mike Carroll acknowledges the need for a change in transportation funding grows stronger each year, an effort he believes has to involve all states moving in the same direction.
Federal role
Two years from now, the federal authorization for transportation funding, which usually amounts to about 40% of total state spending, is up for renewal. At the same time, the unprecedented infrastructure spending under Biden officially expires.
Although transportation funding generally isn’t a partisan issue, it’s anybody’s guess what will happen under the Trump administration and a Republican Congress. The work to increase transportation funding already has begun.
AASHTO’s Howard said the organization is taking the approach that this is a “great opportunity” to set the base for future funding at the level Biden established. There also should be some consideration to raising the federal gas tax, which hasn’t been increased from 18.4 cents a gallon since 1993, or moving away from it, Howard said.
The reality is that raising the gas tax doesn’t seem likely.
“That doesn’t seem to have a lot of community support no matter which party is in charge,” Howard said.
Because gas tax revenue hasn’t been growing, federal officials have been supplementing the highway trust fund with general fund money and advanced appropriations. AASHTO would like to set a more reliable funding stream.
Until then — and maybe even thereafter — states will have to adjust and do more to find their own financing.
“I do think states have been in that position and will continue to be,” Howard said.
Ed covers transportation at the Pittsburgh Post-Gazette, but he's currently on strike. Email him at eblazina@unionprogress.com.