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Portland, Oregon—As the adoption of electric vehicle (EV) rises, states reliant on gas taxes for road maintenance are facing a funding crisis. Oregon, California, and other states with ambitious zero-emission goals now grapple with declining revenue, forcing policymakers to explore new ways to fund infrastructure.
The Decline of Gas Tax Revenue
Motor fuel taxes are the largest source of transportation funding, yet their share of total revenue has dropped from 41% in 2016 to 36% in 2024, according to the National Association of Budget Officers.
- California projects a $5 billion drop in gas tax revenue by 2035 due to EV adoption.
- Pennsylvania saw gas tax collections fall by $250 million in 2023 compared to 2019.
- Oregon faces a $350 million budget shortfall in its next cycle, leading to possible cuts in snow plowing, road maintenance, and transportation jobs.
Oregon’s Budget Crisis and Lawmaker Response
The Oregon Department of Transportation (ODOT) cites inflation, declining fuel tax revenue, and poor budget management as factors behind its financial struggles. A January audit revealed that ODOT overestimated revenue by $1 billion and mismanaged certain funds, prompting criticism from Republican lawmakers.
“It’s about ensuring existing dollars are spent efficiently before raising new taxes,” said State Sen. Bruce Starr, GOP co-vice chair of the Joint Transportation Committee.
How States Are Filling the Funding Gap
To offset gas tax losses, 34 states have increased fuel taxes since 2013, while others explore alternative funding models:
- Higher EV Fees – Many states, including California and Texas, have increased registration fees for EV owners.
- Indexing Gas Tax to Inflation – States like Florida and Indiana automatically adjust gas taxes to reflect economic changes.
- Alternative Revenue Streams – Michigan redirects marijuana and personal income tax revenue to road repairs, while Connecticut relies more on sales tax than gas tax for its transportation fund.
- Road Usage Charges (RUCs) – States such as Hawaii, Oregon, Utah, and Virginia are testing programs where drivers pay based on mileage instead of fuel consumption.
The Future of Road Funding
As EV adoption accelerates, traditional gas taxes will become increasingly obsolete. Policymakers must act swiftly to implement sustainable, fair revenue models to ensure road maintenance and infrastructure investments keep pace with evolving transportation trends.
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