Top 5 Issues for 2018: Transportation & Infrastructure: States Seeking Transportation Funding Solutions
Issue: Seven states (CA, IN, MT, OR, SC, TN and WV) raised gas taxes in 2017 while Utah modified its gas tax formula to allow for more robust revenue growth. Other states including Colorado, Idaho, New Hampshire, Utah and Wisconsin approved one-time transportation funding. Wyoming, which raised its gas tax in 2013, increased vehicle registration and other fees. Ten states approved new fees for electric and/or hybrid vehicles in 2017. Meanwhile states like California, Oregon and Washington continued their experiments with mileage-based user fees, which some believe could one day replace gas taxes. Will 2018, an election year in most places, continue to see state activity on the state funding front and how will a change in philosophy from Washington influence states?
What the States Did in 2017
The workhorse of state transportation funding—the gas tax—was back in a big way in 2017 despite lingering concerns about its long-term sustainability. States also borrowed and tapped into surpluses and rainy-day funds to tackle infrastructure needs. Ten states approved new fees for electric and/or hybrid vehicles.
The American Road and Transportation Builders Association estimated that states approved a total of more than $69 billion in new funding for transportation during the 2017 legislative sessions. Since 2012, more than 30 states have enacted some kind of increase in transportation funding.
States increasingly are concluding that just raising the gas tax is not enough as well. They also need to be indexed to automatically adjust over time. Twenty states now have variable gas tax rates.
Here’s a look at what happened—and in some cases didn’t happen—in a number of states in 2017:
- California approved a $52 billion plan to repair roads and bridges. The state raised its base excise tax on gasoline by 12 cents. A price-based excise tax will increase by 8 cents starting in 2019. The base diesel fuel excise tax was increased 20 cents. The 1.75 percent diesel fuel sales tax will increase to 5.75 percent. The combined gasoline excise tax and the base diesel fuel excise tax will be adjusted for inflation beginning in 2020. Californians will pay a new “transportation improvement fee” that will range from $25 to $175 depending on the value of their vehicle. That fee will also be adjusted for inflation in 2020. A new “road improvement fee” of $100 will be charged for zero emission vehicles starting in 2020 with indexing starting in 2021.
- Colorado initially had big plans for an ambitious sales tax measure that appeared to have bipartisan support. But when that fell apart, lawmakers ended up approving a $1.8 billion bond measure for road work over the next 10 years. At least 25 percent of that—around $450 million—is required to be spent on projects in counties with fewer than 50,000 residents.
- Idaho did several things in 2017. They did not increase their gas tax; they did that back in 2015. But lawmakers did provide $52 million from the budget surplus for emergency road funding, to be used for counties that have received a gubernatorial disaster declaration. And in a separate bill they approved some one-time funding--$300 million in GARVEE bonds, borrowing against future federal highway allocations. In addition, they extended the surplus eliminator for another two years and created a new Transportation Expansion and Congestion Mitigation Fund using a 1 percent share of the state sales tax and rerouting cigarette taxes currently being directed to the Idaho Transportation Department’s strategic initiatives program.
- Indiana is raising its gas tax in two steps, starting with a 5-cent increase in July 2017 followed by another one in 2018. The diesel tax is going up by 6 cents in two steps. Both will be subject to annual inflation index increases of up to a penny a gallon for six years starting in 2019. The state also increased various registration fees, including a 50 percent increase in the decal fee for alternative fuel vehicles. In addition, Indiana added a $150 supplemental registration fee on electric vehicles and a $75 fee for alternative fuel vehicles. They also raised the fee on the sale of new vehicle tires. The aviation fuel tax is going up by 10 cents a gallon as well. Also, the legislation allows the Indiana Department of Transportation with the governor’s approval to seek a federal waiver in order to toll interstate highways and provides for a tolling feasibility study.
- Montana approved a 6-cent gas tax increase and a 2-cent diesel tax increase phased in by 2023. They increased the vehicle registration fee and put in a new tax on cars and recreational vehicles worth more than $150,000.
- In New Hampshire, Gov. Chris Sununu had hoped to create a permanent infrastructure trust fund to be capitalized with general fund revenues. He ended up settling for the one-time transfer of $38 million in surplus funds from the revenue stabilization reserve account to the highway and bridge betterment account. Of that $38 million, $6.8 million will go to the state DOT for critical bridge work and the rest to cities and towns.
- Oregon approved a 4-cent gas tax increase that will take effect in 2018 and the state is going to gradually add another 6 cents. They also increased vehicle fees, approved a new tax on new vehicle sales, put in a payroll tax for transit and a bike tax.
- In South Carolina, the Legislature overrode the veto of the governor to enact a 12-cent gas tax increase that will be phased in in 2-cent increments over six years. The measure will also raise fees on driver’s licenses and vehicle registrations, increase vehicle sales taxes, and set a new one-time fee for vehicles purchased out of state and later registered in South Carolina. There are new fees on electric or hydrogen-powered vehicles and new fees on hybrids as well. And there is a new “road use fee” on large commercial vehicles that will start in 2019.
- Tennessee will phase in its 6-cent gas tax increase and 10-cent diesel tax increase over three years. They’re going to increase vehicle registration and other fees as well.
- Utah lawmakers approved $1 billion in bonding over the next four years to speed up projects. They did their gas tax increase in 2015. But in 2017 they also modified the gas tax formula to allow for more robust revenue growth.
- West Virginia increased their variable minimum wholesale gas tax, did a vehicle sales tax increase, increased tolls and tolling authority, and sent a ballot referendum to voters to allow them to issue $1.6 billion in bonds. The referendum was approved in October.
- Wisconsin struggled with a months-long standoff over the budget. They ended up borrowing $400 million for transportation, but the budget actually cuts funding for major highway projects outside southeastern Wisconsin by 15 percent. Highway rehabilitation project funding was also cut. The budget calls for eliminating 200 workers at the Wisconsin Department of Transportation. Wisconsin was one of the 10 states that imposed new registration fees for electric and hybrid vehicles—in their case $100 for EVs and $75 for hybrids. Gov. Scott Walker used his line-item veto to nix a study of tolling federal highways in the state.
- Wyoming, which enacted a gas tax increase in 2013, increased vehicle registration fees, commercial vehicle weight fees and DMV license fees in 2017.
Future of State Transportation Funding
In addition to falling back on trusted transportation revenue mechanisms, there was also fresh evidence of states contemplating the future of transportation funding in 2017:
- As mentioned above, 10 states approved new fees for electric and/or hybrid vehicles. In addition to an effort to add additional revenues to state coffers, the fees are a recognition that climbing electric vehicle sales mean less gas tax revenues for the future and drivers of such vehicles should pay their “fair share” for upkeep of the nation’s transportation system.
- States such as California, Oregon and Washington continued to experiment with the concept of mileage-based user fees, which some advocates hope can one day replace gas taxes if concerns about administrative costs and privacy implications can be overcome. All three states received grants in the latest round of funding from the Federal Highway Administration’s Surface Transportation System Funding Alternatives program, established under 2015’s FAST (Fixing America’s Surface Transportation) Act. Colorado, Delaware and Missouri were also awarded funding.
Other states took moves in 2017 to look to the future when they too might consider increasing revenues for transportation. Connecticut and Delaware both took steps towards enacting lockbox measures to prevent the use of transportation funds for other budget purposes. There were also three states that enacted measures to empower localities to seek additional tax revenues for transportation in the future.
States to Watch in 2018
While many states have had success in recent years in increasing transportation revenues, some that have faced political struggles could be on deck to give it another go in 2018. The 2017 legislative sessions also set in motion studies and advisory committees in a number of states that could bear fruit for 2018.
Among the states to watch for on the transportation funding front in 2018 based on early indications: Alabama, Arkansas, Louisiana, Mississippi, Missouri and Ohio.
Missouri and Utah—a state that has increased revenues in recent years—both had task forces in place in 2017 to study transportation project funding needs and make recommendations to the legislature and/or governor prior to the 2018 legislative sessions.
Other states, notably Connecticut, Indiana, Massachusetts and Minnesota, are in the process of studying how expanded tolling could help them fund transportation in the years ahead.
What Impact Will Trump Infrastructure Plans Have
All of this state activity could prove pivotal if President Donald Trump’s vision for infrastructure investment comes to pass. That vision could expect states and localities to play substantially different roles from the ones they’ve become accustomed to. While the President had yet to offer a comprehensive infrastructure plan by the end of 2017, the priorities he offered in June included the suggestion that federal funds in the future could be used to encourage states that help themselves.
At an event in May 2017, U.S. Secretary of Transportation Elaine Chao described the shift this way: “This administration wants to retain the primacy of state and local spending and use federal funding as leverage to increase the total amount of funding available for infrastructure. … States and localities that have secured some funding or financing of their own for infrastructure projects will be given higher priority access to new federal funds.”
It remains to be seen what this could mean for things like the Highway Trust Fund and the formula-based federal funding states have become accustomed to. Despite states increasing their available transportation revenues in recent years, many continue to rely heavily on those federal dollars for a substantial portion of their overall transportation spending. Many of the states that have authorized the collection of additional state revenues have done so not with the idea of replacing federal dollars, but to meet their matching dollar requirements in order to use all available federal funds or to pay for needed road system improvements that federal funds don’t stretch far enough to cover. It’s clear that any decrease in the federal share of dollars available for new transportation projects could challenge state governments in significant ways. Even those that have successfully advanced their own transportation funding solutions in recent years.
Even as the Trump administration advocates a “self-help” philosophy, some states may also have to gird themselves for battle with factions seeking to undo recent transportation revenue measures in 2018 and beyond. In California, some Republican policy makers, business groups and construction companies are supporting proposed November 2018 ballot measures that would undo that state’s 2017 gas tax hike.
- “States to Watch in 2018: Transportation Funding,” CSG Blog Post, November 15, 2017.
- “Latest Round of Federal Grants Allow Six States to Test Highway Funding Alternatives,” CSG Blog Post, October 10, 2017.
- “State Transportation Funding Trends 2017,” Capitol Research policy brief, July 2017.
Further Reading: State Transportation Funding 2017
- “New year to bring in taxes on bikes, vehicles (Oregon),” East Oregonian, December 18, 2017.
- “Idaho Refinances Second Round of GARVEE Bonds to Lower Rates, Saving $13.1M,” AASHTO Journal, October 20, 2017.
- “With bond victory, DOT secretary outlines WV road construction plans,” Charleston Gazette-Mail, October 15, 2017.
- “Voters approve West Virginia road bond,” Williamson Daily News, October 10, 2017.
- “Wisconsin transportation budget excludes fuel tax increase, toll study,” Land Line, September 26, 2017.
- “SCDOT reveals specifics on how it will spend gas tax revenue,” News 2, September 18, 2017.
- “New tax, fees expected to reduce deficient bridges,” CNHI News Indiana, September 10, 2017.
- “Passing Oregon’s transportation package was just the beginning of the hard work,” Transportation for America, August 31, 2017.
- “Oregon governor signs transportation bill raising truck, fuel taxes,” Land Line Magazine, August 28, 2017.
- “Caltrans Advances $690M in Projects With ‘Anticipated Funding’ From New Revenue Measure,” AASHTO Journal, August 25, 2017.
- “Maine Lawmakers Endorse $105M Transportation Bond, as Student Debt Relief Measure Stalls,” Maine Public, July 21, 2017.
- “5-year, $4.7 billion road plan to include work on I-465, Holcomb announces,” Indianapolis Star, July 13, 2017.
- “(Tennessee Department of Transportation) chief: Investments funded by gas tax increase must not become obsolete in 10 years,” Times Free Press, July 5, 2017.
- “West Virginia Becomes the Seventh State to Hike Gas Taxes, But Not By Much,” Planetizen, July 2, 2017.
- “State Funding Initiatives Report,” Transportation Investment Advocacy Center, July 2017.
- “With Trump’s Infrastructure Plans Still Fuzzy, Utah Charts its Own Path,” KUER 90.1, June 7, 2017.
- “Tennessee Governor, TDOT Chief Use New Funding to Beef Up Project Investment,” AASHTO Journal, May 19, 2017.
- “Understanding California’s New Transportation Package,” California Budget & Policy Center, May 18, 2017.
- “South Carolina Legislature Overrides Veto, Enacts Fuel Tax Hike to Boost Project Funding,” AASHTO Journal, May 12, 2017.
- “Indiana Legislature Passes 10-Cents Fuel Tax Hike on Final Day of Session,” Planetizen, April 28, 2017.
- “Tennessee Governor Signs Measure That Hikes Vehicle Fuel Taxes, Cuts Other Taxes,” AASHTO Journal, April 28, 2017.
- “Montana House Sends Governor Scaled-Down Measure to Boost Road Project Funding,” AASHTO Journal, April 28, 2017.
Further Reading: Future of Transportation Funding
- “Utah’s governor proposes taking gas tax money to pay for transit improvements,” Fox 13, January 18, 2018.
- “More States Turning to Toll Roads to Raise Cash for Infrastructure,” National Public Radio, January 18, 2018.
- “Washington pay-by-mile progress report expected Thursday,” KING 5, January 18, 2018.
- “Car registration fee boost (in Arizona) proposed to end raid on road cash,” Associated Press, January 17, 2018.
- “With Gas Taxes in Peril, More States Study Alternatives,” Governing, January 16, 2018.
- “State of the State: (Colorado) Governor Seeks Money for Education and Transportation,” Colorado Public Radio, January 11, 2018.
- “Major transportation plan to be revealed, includes work in Baton Rouge and New Orleans,” The Advocate, January 11, 2018.
- “Alabama lawmakers return to work with eyes on election,” AL.com, January 7, 2018.
- “New Hampshire Bills Target Vehicles That Don’t Guzzle Enough Fuel,” Planetizen, January 5, 2018.
- “Report of the 21st Century Missouri Transportation System Task Force,” January 1, 2018.
- “Mississippi lawmakers seek to end road money stalemate,” The News Tribune, December 28, 2017.
- “Report: State could generate up to $53 billion with additional tolling,” The Michigan City News-Dispatch, December 28, 2017.
- “Missouri transportation task force to recommend gasoline and diesel tax increase,” Missourinet, December 20, 2017.
- “Ige Seeks $1.5 Billion Budget Hike for Infrastructure, Capital Improvements,” Honolulu Civil Beat, December 18, 2017.
- “Washington Joins Oregon In Pay-By-The-Mile Experiment,” NW News Network, December 14, 2017.
- “$2.2B needed for Northern Colorado highways; tax question possible,” Reporter-Herald, December 13, 2017.
- “As gas taxes fall short of funding Colorado’s roads, CDOT gets good reviews on test of mileage-based system but concerns remain,” The Denver Post, December 12, 2017.
- “Chokepoints: Pay-per-mile experiment (in Washington) needs more diverse driver pool,” KIRO Radio, December 7, 2017.
- “Missouri bill would increase fuel tax 10 cents,” Land Line Magazine, December 7, 2017.
- “’Dynamic tolls’: How highways can charge $40 for driving just 10 miles,” USA Today, December 7, 2017.
- “Toll roads possible?” (North Dakota), KFYR-TV, December 7, 2017.
- “Agency floats $8.4B funding plan for Arkansas roads; proposal adds 6.5% fuel excise tax,” Arkansas Online, December 7, 2017.
- “Georgia lawmakers may address metro Atlanta transit next year,” Atlanta Journal-Constitution, December 6, 2017.
- “The new $40 I-66 tolls offer great insight into commuter psychology,” Greater Greater Washington, December 5, 2017.
- “’No one has to pay a toll.’ Virginia transportation chief defends high tolls on I-66,” The Washington Post, December 5, 2017.
- “Indiana lawmakers want to add tolls to more highways,” WSBT 22, December 1, 2017.
- “(Missouri) Task force to meet with governor over transportation funding,” The Joplin Globe, December 1, 2017.
- “(Colorado) Governor calls for statewide tax increase for road improvements: Colorado has $1 billion annual funding shortfall,” NewsChannel 13, November 29, 2017.
- “TxDOT eyeing accounting trick to get around toll road prohibition,” The Texas Tribune, November 16, 2017.
- “Mileage tax topic of discussion at (Missouri) transportation task force meeting,” Southeast Missourian, November 16, 2017.
- “The toll of driving: (Indiana) Lawmakers plan for a future where gas taxes are obsolete,” The Journal Gazette, November 12, 2017.
- “Study: I-69 toll could raise up to $11 billion,” The Journal Gazette, November 1, 2017.
- “Missouri lawmakers surveying residents on how they want to pay for transportation needs,” St. Louis Public Radio, October 28, 2017.
- “(Mississippi) Governor advocating for two statewide votes: state flag, transportation tax,” Daily Journal, October 27, 2017.
- “State senator’s bill paves way for expanded Mass. Tolls,” Boston Herald, October 26, 2017.
- “Federal Highway Administration Opens Bids for Three Interstate Tolling Slots,” International Bridge, Tunnel and Turnpike Association, October 25, 2017.
- “(Indiana) Lawmaker trying to head off tolling for I-465 commuters after state wouldn’t rule it out,” Indianapolis Star, October 25, 2017.
- “Tolling the Interstates: Will Indiana be the First?” Planetizen, October 23, 2017.
- “California, Oregon Testing Per-Mile Fee in Lieu of Fuel Tax,” Bloomberg BNA, October 17, 2017.
- “Drivers like gas tax over pay-by-mile, researchers say,” KING 5, October 17, 2017.
- “General revenue for roads a no-go, Arkansas governor says,” Arkansas Online, October 17, 2017.
- “Missouri) Transportation task force debates increase in gas tax,” Columbia Missourian, October 17, 2017.
- “(North Dakota) counties look to gas tax to fund roads and bridges,” The Bismarck Tribune, October 10, 2017.
- “Kirby plan would let voters decide on tax increases, new fees for roads, bridges,” The Clarion-Ledger, October 9, 2017.
- “California Gas Tax Repeal Wins Significant Judicial Victory,” Planetizen, October 7, 2017.
- “(Utah) lawmakers looking at new fees for clean fuel cars, raising price for express lane use,” Deseret News, October 4, 2017.
- “NCDOT chief: Electric, driverless cars could dry up road funds,” Associated Press, October 2, 2017.
- “Colorado Transportation Tax Proposal Will Be About More Than Highway Lanes,” Colorado Public Radio, October 2, 2017.
- “Transportation task force (Missouri) holds meeting in Kirksville,” Kirksville Daily Express, September 20, 2017.
- “Missouri looking at changes to what people pay for license plates,” St. Louis Post-Dispatch, September 11, 2017.
- “(Kentucky) House transportation workgroup looks at how other states have grappled with funding woes,” Spectrum News, September 7, 2017.
- “Chasing the Gas Tax in the Golden State,” Route Fifty, August 31, 2017.
- “State transportation woes reiterated to (Mississippi) Senate panel,” Daily Journal, August 26, 2017.
- “Missouri Transportation Task Force seeks road funding ideas in Springfield,” Missourinet, August 24, 2017.
- “Cash-strapped states eye self-driving car taxes,” The Detroit News, August 21, 2017.
- “(Utah) task force considering new revenue models for transportation infrastructure,” Deseret News, August 20, 2017.
- “Transportation funding cliff looms over Louisiana,” ArkLaTex Homepage, August 16, 2017.
- “Could lawmakers raise Alabama’s gasoline tax during an election year?” AL.com, July 18, 2017.
- “(Utah) task force warned gas tax like ‘a rock star playing final concert,’” Deseret News, July 13, 2017.
- “Task force looks for more road and bridge money in Missouri,” St. Louis Post-Dispatch, June 28, 2017.
- “AR Eyeing New Funding for Failing Roads,” Ozarks First, June 26, 2017.
- “For whom the highway tolls: Minnesota to study expanding toll roads,” Valley News Live, June 14, 2017.
- “Voter Backlash Expected From (California) Gas Tax Hike,” Planetizen, June 12, 2017.
- “Missouri, Utah Task Forces to Study Project Funding Needs, Make Recommendations,” AASHTO Journal, May 19, 2017.
Further Reading: State Funding Struggles
- “Sununu: Draft transportation plan ‘living within our means,’” Associated Press, January 17, 2018.
- “Gov. Mark Dayton wants $1.5B for Minnesota infrastructure projects,” Star Tribune, January 17, 2018.
- “California Gas-Tax Initiative Fails but Another Gains Steam,” FOX 40, January 12, 2018.
- “’We have to fix it:’ Lots of work ahead, but state rep not ready to give up on Louisiana roads,” The Advocate, January 7, 2018.
- “Transportation Official Worries About Funding for Ohio’s Roads,” WKSU, January 1, 2018.
- “State DOT: Failing to Keep Up Highways and Mass Transit Would Hurt Connecticut,” Hartford Courant, January 1, 2018.
- “Malloy: Election politics must not stop transportation fix,” The CT Mirror, December 27, 2017.
- “Malloy tight-lipped on whether he will propose tolls,” The CT Mirror, December 20, 2017.
- “Malloy: Transportation Investment Crucial in Next Session,” Hartford Courant, December 20, 2017.
- “Nebraska DOT projects roads budget gap of $6 billion over next 20 years,” Omaha World-Herald, December 14, 2017.
- “Is Connecticut’s transportation funding crisis real?” WTNH News 8, December 12, 2017.
- “EDITORIAL: The time for interstate toll roads across Colorado is now,” Aurora Sentinel, December 11, 2017.
- “(Ohio) Public transit sputters as state funding falls short: Local transit is eyeing regional solutions to a statewide problem as funding woes mount,” Crain’s Cleveland Business, December 9, 2017.
- “(Connecticut) Budget woes could curtail transportation upgrade efforts,” Connecticut Mirror, December 6, 2017.
- “(Illinois) Public Transit Advocates Urge Override of Rauner Veto on Gas Tax Funds,” WTTW Chicago Tonight, October 31, 2017.
- “ARDOT considering two options for lack of highway funding,” KATV, October 18, 2017.
- “(Virginia) Transportation secretary wants to keep politics out of road funding,” Richmond Times-Dispatch, October 17, 2017.
- “(Connecticut) Officials see lots of transportation needs, little funding,” Stamford Advocate, October 12, 2017.
- “Highway Funding Impasse Hits Home in Milwaukee: A major highway expansion is now on hold because Wisconsin Republicans couldn’t agree on how to pay for it,” Governing, October 11, 2017.
- “Georgia Lawmaker: Funding for mass transit is ‘the next big lift,’” Atlanta Journal-Constitution, October 10, 2017.
- “ODOT to shut down several road projects across Oklahoma,” KOCO News 5, October 2, 2017.
- “Next debate on a higher gas tax (in Louisiana)? Likely be 2021, at the earliest,” The Advocate, June 12, 2017.
- “Legislature largely fails to deal with transportation leaving Colorado at a crossroads,” The Gazette, June 11, 2017.
- “Tolls left for dead, this year,” CT Post, June 6, 2017.
- “Minnesota Carves Out $555M More for Transportation,” AASHTO Journal, June 2, 2017.
- “(Hawaii) lawmakers pass on fuel tax again, putting major road projects in jeopardy,” Hawaii News Now, May 24, 2017.
- “States Across the Nation Raising Gas Taxes to Shore Up Roads, But New Mexico Governor Says No,” KRWG TV/FM, May 6, 2017.
- “Death of a State Transportation Sales Tax Measure,” Planetizen, May 3, 2017.
Further Reading: General State Transportation Funding
- “Should Public Transit Be Free?” Fast Company, December 1, 2017.
- “From P3s to ‘invisible collection’: How state and local agencies are financing fixes to US infrastructure,” Construction Dive, October 26, 2017.
- “Americans Spend Less on Transportation Than in 1989,” 24/7 Wall Street, October 2, 2017.
- “Infrastructure borrowing drops as U.S. states await Trump plan details,” Reuters, August 6, 2017.
- “Reluctant States Raise Gas Taxes to Repair Roads,” Stateline, July 26, 2017.
- “As Washington debates infrastructure, states aren’t waiting for help,” Washington Examiner, June 26, 2017.
- “States raising gas taxes to fund transportation improvements,” Fox News, June 20, 2017.
- “States Wrap Up 2017 Legislative Session,” American Society of Civil Engineers, June 15, 2017.
- “Raising the Gas Tax is No Longer Taboo in Many States,” Governing, May 8, 2017.
- “Many States, Like Oklahoma, Searching for Transportation Dollars,” KWGS News, May 7, 2017.
- “Amid Gas-Tax Revenue Decline, New Fees on Fuel-Efficient Cars,” Stateline, May 5, 2017.