Less driving in Oregon estimated to cost $125 million in lost gas tax revenue
People are driving less, but roads could suffer because of it.
Early projections are gas tax revenues in Oregon will decline $125 million from March 2020 through March 2021 — the taxes raised $625 million in the 2019 fiscal year — in conjunction with stay-home orders due to the COVID-19 pandemic and could fall further if traffic remains light.
The Oregon Department of Transportation estimated traffic in Oregon dropped about 50% in early April and is down about 20% despite gasoline being at its lowest price since 2009.
Gas taxes Oregon collects are a major funding source for road construction and maintenance for the state as well as counties and cities. Marion County, for example, is projecting a $2.6 million drop in its share.
“You might have to go back to fixing holes instead of paving roads,” Marion County Commissioner Sam Brentano said.
Throughout Oregon, this year’s planned construction and maintenance projects are proceeding as many of those are tied up with funds from other sources such as local or federal governments, and some of those projects have strict deadlines.
It’s too early to project which future projects may have to be put off or scaled back, but some in the planning stages will have to be rethought.
“We don’t anticipate making any cuts or reductions to projects that are already in process,” said Travis Brouwer, assistant director for Revenue, Finance and Compliance for the Oregon Department of Transportation.
What is Oregon's gas tax used for?
Oregon was the first state with a per gallon gas tax in 1919, according to Robert W. Pool Jr., director of transportation policy at Reason Foundation and the Badger Institute.
Gas taxes, a pay-by-mile tax on heavy trucks and fees on drivers and vehicles are the three major funding streams for the $3.4 billion state highway fund; the gas tax makes up about 40% of that total.
The state gas tax rate is 36 cents per gallon to go along with an 18.4 cent-per-gallon federal gas tax, which has been the same rate for 27 years.
Counties receive 21% of the $3.4 billion and cities receive 14% of that fund for their roads.
In addition, some cities — including Silverton (2 cents), Stayton (3 cents) and Woodburn (1 cent) — and counties have gas taxes.
Local gas taxes in Oregon can only be used for maintenance of streets, bridges, sidewalks and bicycle facilities. They can’t be used to fund things like public safety, parks or libraries.
When Stayton voters passed its gas tax in 2017, the city estimated it had a $23 million backlog of repairs and improvements to roads.
“The challenge for us, when you look at that gas tax, the city was way behind in where we were at in taking care of our streets,” Stayton city manager Keith Campbell said. “The gas tax we received from the state and the local tax had helped us in getting to that going forward.”
Stayton’s gas tax was estimated to raise $165,000 each year. Stayton also estimates it receives $500,000 per year from the state derived from its gas taxes.
Gas tax revenue in Oregon has increased significantly in the past decade as the state gas tax has increased from 24 cents per gallon in 2009 and will continue to increase to 40 cents in 2024.
The increases are due to fuels tax increases in conjunction with the 2009 Jobs and Transportation Act (6 cents) and the 2017 Keep Oregon Moving Bill (10 cents in four increases through 2024), and those funds are earmarked for specific projects.
ODOT and local entities also receive some funding from federal gas taxes.
By Oregon relying on revenue streams other than gas tax such as registration fees, it isn’t in as dire of straits as other states with the recent decrease in gas tax revenue.
“Actually, that’s one of the reasons why our projects aren’t going to be as impacted as they could be,” Brouwer said.
People stopped driving
No event in history has precipitated such a rapid decline in driving as the COVID-19 pandemic.
During the worst of the Great Recession in 2008, the largest drop in gasoline purchases was 7% in a quarter, according to ODOT, and there were fall-offs during gas rationing in the 1970s and during World War II.
According to data compiled by traffic analytics company INRIX, traffic had its most significant month-to-month drop off in years in conjunction with the COVID-19 pandemic.
In the United States, there were more than 1.6 million trips by passenger cars on March 8, which dropped to about 700,000 trips as of April 12 as many states enacted stay-home orders. There were about 1.2 million trips on May 23, but that is still far short of the rate in previous years.
Vehicle counts across Oregon dropped about 50% in the early weeks of Gov. Kate Brown’s executive order, according to an April report by the Oregon Department of Transportation.
Though some restrictions have been eased as businesses return to operation, drivers have not returned to Oregon’s roads at the same level as before; people in the state are driving 21% less than usual, according to data from INRIX.
The American Association of State Highway and Transportation Officials estimated gas tax revenue will decline 30% nationwide and has asked Congress to appropriate $50 billion to compensate for lost state revenues.
Uncertainty of when drivers go back to normal
State agencies were told in May to plan on budget cuts of 17% by Brown, but ODOT is classified a non-general fund agency, which means its department gets its revenue from sources outside the general fund.
Of ODOT’s total budget of over $5 billion, the $125 million reduction doesn’t seem like a lot.
“It’s reasonably modest in comparison to other parts of the state budget,” Brouwer said.
The lost gas tax revenue could hurt smaller governments harder, where those revenues can make up a larger portion of their budget and some have hundreds of miles of roads to maintain.
The latest numbers Marion County received from ODOT say it will see a decrease of about $2.6 million in gas tax revenue over the next 12 months due to the decrease in gas sales.
Marion County Public Works Director Brian Nicholas said the county is balancing its transportation budget by deferring some equipment purchases, downsizing some projects, putting off other projects and using some of the contingency funds it has.
“For Marion County, the decreased revenue isn’t going to translate into a noticeable decrease in service on the roads,” Nicholas said.
Silverton finance director Kathleen Zaragoza said the city received $624,603 of a budgeted $640,000 from state gas tax revenues as of May and $71,718 of a budgeted $95,000 from the local fuels tax and has revised the local revenue down by over $10,000.
The uncertainty of when people will resume driving and creating gas tax revenue as much as they once did means future roads projects could be delayed for years.
“What are we going to see in three months, six months, a year? That’s kind of the uncertainty,” Campbell said. “Short term this is pretty devastating. What will be the long-term impacts in terms of consumers driving?”