At the moment, there is funding readily available for Texas roads. That’s a very good thing … but future funding could be a different story.
Image from the Oregon Department of Transportation licensed under CC BY 2.0.
Money has been transferred from the state’s oil and gas revenues to a fund for highway infrastructure. Even more funding will be transferred from vehicle sales tax revenue beginning in 2017 as a result of the passage of Proposition 7 last November. And another chunk of money will be available for Texas highways because the legislature ended the practice of diverting money from the highway fund to other areas of the state budget.
These are all positive things. But the state historically has relied on motor fuel taxes (i.e., the gas tax) to finance road construction and repair, and that source of funding has declined significantly. And, in spite of reduced revenue, elected officials have not raised the gas tax since 1991. That has created a problem.
Texans pay 20 cents per gallon in state gas taxes (in addition to the 18.4 cents-per-gallon federal gas tax). The Texas Department of Transportation (TxDOT) estimates that the highway fund would see about $110 million in additional revenue for every 1-cent increase in the gas tax. But, any effort to raise the tax has been met with strenuous opposition, and that doesn’t appear likely to change in the near future.
Because of inflation, and the mere fact that a dollar today buys much less than a dollar in 1991 did, the lack of a gas tax increase has adversely affected TxDOT’s budget for years, and the impact grows each year. Automobiles today are much more fuel-efficient than they were in 1991. Cars travel many more miles on a gallon of gasoline today and fuel efficiency is continually increasing. That means that drivers buy less gas and Texas receives less funding. With the additional impact that alternative fueled vehicles and fleets (which are not taxed) place on funding, revenues available for transportation in Texas could plummet rather rapidly.
A 2015 report from the Texas A&M Transportation Institute (TTI) found that the impact from lost revenue from vehicles that will not be required to pay any fuel taxes may approach $200 million a year by 2035.
One suggestion considered by transportation planners is to replace the current per-gallon fuel tax with a vehicle-miles-traveled tax. This would result in fees from drivers who are actually using the roads the state must build and repair. It also would compensate for the increased fuel efficiency of newer cars. However, even that concept is no long-term remedy. The number of miles driven in the United States has actually declined since 2007. Some of that is due to the recession and higher gas prices, but a large part of the decline has been attributed to changing driving habits of Americans.
Some have suggested an alternative fuel vehicle fee. This fee would be charged to owners of cars that are powered by alternative fuels. Michigan voters rejected a statewide referendum in 2015 that would have imposed a $75 annual registration fee on electric vehicles and a $25 fee for most hybrid vehicles. But, states from Washington to Georgia and Nebraska all charge annual fees on hybrid and/or electric vehicles. In fact, the Georgia state legislature in 2015 revoked a $5,000 incentive to purchase electric vehicles and put in place the annual fee instead.
California Gov. Jerry Brown last week suggested a $65 annual fee for all vehicles to fund road improvements. Members of the state assembly are advocating for an alternative fuel vehicle fee instead.
Should Texas consider a fee on cars that don’t rely exclusively on gasoline? Interesting question! The legislature did make a move in this direction in 2013 when it imposed a 15 cents-per-gallon tax on both compressed natural gas (CNG) and liquefied natural gas (LNG) for motor vehicles.
Alternative fuel vehicles may represent 18 percent of the U.S. domestic passenger fleet and 11 percent of the commercial vehicle fleet by 2040. If the State Highway Fund is already losing $24 million per year because of non-taxed alternative fueled vehicles, some move toward fees or taxes may become justified in the near future.
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