State Transportation Funding

Lawmakers have had trouble developing workable long-term solutions for shrinking revenue sources to fund the dependable transportation network businesses and commuters rely on. States collect revenues to support the expansion and repair of transportation infrastructure primarily through user fees such as tolls and fuel taxes. This revenue is further supplemented by the federal government’s Highway Trust Fund, which itself is funded primarily through the 18.4 cents-per-gallon tax on gasoline and 24.4 cents-per-gallon tax on diesel fuel. However, the transportation funding mechanism, which relies heavily on fuel taxes, both on the state and federal level, has eroded over the past decade. The federal gas tax and the fuel taxes in most states are not indexed to inflation and haven’t been raised in years. The federal gas tax was last increased in 1993. In fact, the United States has significantly lower gas taxes (combined state and federal) then all other industrialized nations of the OECD (except Mexico, which doesn't levy a gas tax). Other factors for the gas tax’s growing ineffectiveness include more fuel-efficient vehicles, the growth of electric and hybrid cars, and rising construction costs.

Non-election years are a popular time to tackle tough issues like transportation funding. Since 2013, 28 states have raised fuel taxes to invest in roads and bridges. 

Options for states to raise transportation revenue include increasing and indexing for inflation state fuel taxes, switching from a cents-per-gallon fuel tax to a wholesale tax, adding a sales tax to gasoline purchases, adding a vehicle fee for hybrid or electric vehicles, increasing state sales and use taxes and earmarking the increased revenue for transportation projects, issuing bonds, and relying more on toll roads and public-private partnerships to construct and maintain infrastructure.

Recently, state lawmakers have settled on a similar package of user-fee revenue raisers that Republicans, who still control most statehouses today, can embrace. Generally, this package includes an increase in fuel taxes paired with new annual fees for electric or hybrid vehicles.

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Research & Resources

Chamber Resources

• James DeChene (Delaware Chamber blog post) - Another case for raising Delaware’s gas tax to fund infrastructure spending (Sept 8, 2015).
• Wisconsin Manufacturers & Commerce - Fixing Wisconsin’s Transportation Finance Shortfall (Oct. 19, 2015).
• Kentucky Chamber's Road Fund Stabilization campaign (blog post and radio ad) (2015).
• Florida Chamber - Transportation: The Path to Florida’s Future (video) (Dec. 2015).
• Mississippi Economic Council (MEC) - Ramping Up Mississippi’s Economy Through Transportation (Dec. 2015) ( determining that "$375 million in new revenue - $300 million for state needs and $75 million for local needs - is required each year to respond to [Mississippi's] immediate transportation needs.").

Research

• AASHTO - State Transportation Funding Proposals Since 2013 (updated 3/2/15).
• Aaron M. Renn (Manhattan Institute) - Beyond Repair? America's Infrastructure Crisis is Local (Oct. 2015).
• Mark Burton, David Greene, & Matthew Murray (Univ. Tennessee's Baker Center for Public Policy) - The Future of Roadway Funding in Tennessee (Nov. 2015).
• Transportation for America - Twelve Innovations in Transportation Policy States Should Consider in 2016 (Jan. 2016).
• AASHTO - Transportation Funding & Financing (updated Feb. 2016) (includes descriptions and summaries of Federal, state and local legislation establishing transportation funding sources and governing their distribution and uses, as well as legislation establishing and regulating the use of the transportation finance mechanisms).
• Transportation for America - Tracking State Policy & Funding Legislation (regularly updated).
• ARTBA - Analysis Shows Voting For a State Gas Tax Increase Does Not Hurt Reelection Chances (Apr. 2017).
• Transportation Investment Advocacy Center - Variable-Rate State Gas Taxes Variable-Rate State Gas Taxes: A Resource Guide of Current Laws (Aug. 2017).

Journalism & Opinion

• Daniel C. Vock (Governing) - States, Not Just Feds, Struggle to Keep Gas Tax Revenue Flowing (May 18, 2015) (finding that nearly two-thirds of states' fuel taxes have not kept up with inflation for two decades).
• Michael Russell (T4America blog post) - Utah makes a bipartisan move to increase state and local transportation funding to help meet the demands of high population growth (Aug. 13, 2015).
• Bill Kramer (MultiState Insider) - States Continue to Raise Gas Taxes While Congress Fails to Act (May 15, 2019).