State legislatures continue search for transportation funding

With the new year less than six weeks away, state legislatures around the country will soon take up pursuits to raise transportation revenue.

Addressing transportation funding shortfalls is an annual endeavor in seemingly all states. Multiple factors are attributed for the constant funding pursuits.

Most states attribute a decline in fuel use for shortfalls. State lawmakers and agencies say fuel efficiency improvements and increased use of electric vehicles are the primary factors of diminished road revenue.

The National Association of State Budget Officers notes that fuel tax revenue now makes up about one-third of overall state transportation revenue. The percentage is down about 4% from 2018.

The decline comes despite moves to increase fuel tax rates in many states.

Transportation budget forecasts show the trend of diminishing fuel tax revenue available does not appear to be slowing. They cite factors that include inflation-related increases in construction costs.

Electric vehicles

One option pursued by states to help turn the transportation funding tide is collecting more money from owners of electric vehicles.

In 2024, states that include Maryland, New Jersey, Pennsylvania and Vermont created annual electric and/or hybrid vehicle registration fees.

The National Conferences of State Legislatures reported at least 39 states now require an additional fee to register non-emission or alternative-fuel vehicles.

At least a half dozen states structure registration fees for electric vehicles and/or hybrid vehicles to grow over time by linking the fees to the consumer price index or another inflation-related metric.

Over the next year, more states are likely to seek raising annual fees on electric and hybrid vehicles. Elsewhere, states are anticipated to pursue enacting fees on affected vehicles.

Other options

Transportation officials around the country add that multiple revenue sources are necessary to combat diminished road dollars.

Per-hour charging taxes for alternative fuel vehicles are one option receiving attention at statehouses. Road usage charges, tolls, vehicle weight fees and higher annual vehicle registrations also are among the options expected to receive consideration.

Advocates of a road usage tax have said it is a more equitable option than the fuel tax. With fuel efficiency improvements over time, they’ve contended that paying for miles driven is more equitable for everyone and provides more sustainable funding.

Fuel tax

While discussion continues at statehouses about alternatives to fuel tax collection, fuel rate increases continue around the country.

Starting Jan. 1, 2025, changes of one penny or less will be implemented in states that include Alabama, Florida, Georgia, Michigan, Nebraska, New York, North Carolina, Pennsylvania and West Virginia. The changes are based on automatic adjustments.

Truckers and others fueling in Minnesota will see the biggest increase. The gas and diesel tax rates in the state are set to increase by 3.3 cents.

In Texas, a transportation bill filed for consideration during the upcoming regular session would authorize a fuel tax increase.

The Lone Star State collects a 20-cent-per-gallon excise tax on fuel purchases. The tax rate has remained unchanged for over three decades.

One House bill would index the excise tax to the highway cost index. The change would authorize the tax to be adjusted annually. LL

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