Over the past five years, more than half of the states have taken actions to raise their fuel tax revenues. Many of the actions were the result of multi-year transportation plans and were combined with other revenue-raising actions. One of the more notable recent actions has been the institution of registration fees on electric and hybrid vehicles. States are concerned that in the long-term, the current structure of state and federal fuel tax revenue will not be able to meet transportation needs as most gas taxes are set at fixed rates and do not rise with inflation, and the average vehicle fuel economy continues to grow.
In this year’s State Expenditure Report, for the first time states were asked to detail transportation fund revenue sources, if their state has a transportation fund. Forty-six states reported having a separate transportation fund. Motor fuel taxes represented the largest revenue source for transportation funds at 41.1 percent, followed by license and registration fees (19.4 percent), vehicle sales and use taxes (8.8 percent), tolls (1.5 percent), and all other (29.2 percent). Transportation fund revenue sources totaled $90.8 billion in fiscal 2016, $96.7 billion in fiscal 2017, and $103.6 billion in estimated fiscal 2018. Over the last two years, transportation fund revenues have grown at an average annual rate of almost 7 percent, and spending from state transportation funds have grown accordingly.
The state share of total transportation spending (including funding from both federal and state funds, but not local funds) has risen in recent years due to the combination of state actions to raise revenue and limited changes in federal transportation resources, going from 67.1 percent in fiscal 2010 to 70.9 percent in fiscal 2018. Approximately 61.2 percent of fiscal 2018 transportation expenditures are funded from earmarked revenues placed in special transportation funds, captured in the “Other State Funds” category in the State Expenditure Report. States also contribute to transportation spending through both bonds (accounting for 6.4 percent of total transportation expenditures) and general funds (3.3 percent). Federal funds represented 29.1 percent of total transportation spending.
Additionally, state funds (general funds and other state funds combined, excluding bonds) for transportation increased 8.8 percent in fiscal 2018, the highest growth rate of any program area.
Looking forward, states will likely take further steps to ensure that their transportation revenue structures are able to meet both changes in driving habits and technological advancements, and are hopeful that the federal government will continue to partner with states to ensure that the nation’s infrastructure demands are being met.