Nov 20, 2023; Los Angeles, California, USA; Traffic rolls onto an onramp onto Interstate 10 near Alameda St. in downtown Los Angele on November 20, 2023. Interstate10 Freeway south of downtown Los Angeles reopened Sunday night, earlier than previously expected and weeks ahead of original projections. Traffic started flowing on the freeway at around 7 p.m., according to the California Highway Patrol. A mile-long section of the freeway had been closed for more than a week, since a massive pallet fire broke out below it on Nov. 11. Photo by Robert Hanashiro, USA TODAY
Sacramento, California – As California witnesses a surge in electric vehicle adoption, the state is exploring a significant shift in how it funds road maintenance. The traditional gas tax, currently the nation’s highest at approximately 59 cents per gallon, is facing a looming decline in revenue, prompting lawmakers to consider a mileage-based user fee, known as the California Road Charge.
The current gas tax, which generates millions for road repairs, is becoming increasingly unsustainable as more drivers switch to zero-emission vehicles that do not require gasoline. Caltrans estimates that Californians with gas-powered vehicles pay around $300 annually in state gas taxes. However, with electric vehicles accounting for roughly a quarter of new car sales in 2023, this revenue stream is projected to dwindle significantly.
To address this, Caltrans initiated a pilot program in August 2024 to test the feasibility of a road charge system, which would replace the gas tax with a fee based on miles driven. The pilot program, which concluded in January, aimed to evaluate the practicality and potential impact of charging drivers by the mile rather than by the tank. The results of this pilot are expected to be released later this year.
The shift towards electric vehicles is not unique to California. According to the National Association of State Budget Officers, motor fuel taxes, which are the largest source of transportation revenue for states, have seen a decline. In fiscal year 2016, gas taxes accounted for 41% of transportation revenue, but this figure dropped to approximately 36% in fiscal year 2024.
California’s legislative analysts predict a dramatic $5 billion, or 64%, decrease in gas tax collections by 2035 if the state meets its climate goals. This projection aligns with California and Oregon’s mandates requiring all new passenger cars sold to be zero-emission vehicles by 2035.
The revenue decline is already evident in other states, such as Pennsylvania, where gas tax revenues fell by an estimated $250 million last year compared to 2019, as reported by the state’s independent fiscal office. Additionally, rising inflation has increased the cost of transportation materials, further compounding budget concerns.
The implementation of a road charge system represents a significant policy shift, aiming to ensure sustainable funding for California’s transportation infrastructure in an era of increasing electric vehicle adoption. The state’s decision will likely have implications for other states grappling with similar challenges.
