California Faces Transportation Funding Decline as Shift to Electric Vehicles Looms

A new report warns of a projected decline in transportation funding as California transitions away from gas-powered vehicles to electric, prompting the need for alternative revenue sources.

California’s reliance on taxes on gas and vehicle fees to fund transportation spending is set to face a significant challenge as the state moves towards electric vehicles (EVs). A report from the state’s Legislative Analyst’s Office (LAO) projects a net transportation funding decline of approximately $4.4 billion, or 31%, over the next decade. This decline in revenue poses a threat to highway maintenance and could lead to deteriorating road conditions if left unchecked. As the state’s vehicle fleet transitions, the report emphasizes the need for proactive planning and the exploration of potential solutions to address this long-term problem.

Declining Fuel Tax Revenues and Implications for Highway Maintenance

The report highlights the projected revenue decreases in various areas:

– $5 billion, or 64%, from the state’s gasoline excise tax
– $290 million, or 20%, from the state’s diesel excise tax
– $420 million, or 20%, from the state’s diesel sales tax

While the decline in gasoline consumption over the past five years may be attributed to factors beyond the transition to EVs, such as the impact of the pandemic, the report asserts that a decline in revenue is inevitable given California’s plans to shift away from gas-powered vehicles. The reduction in funds could lead to deteriorating highway conditions, necessitating immediate attention and planning.

The Historical Role of Gas Taxes and the Need for Alternatives

For decades, states have relied on gas taxes as a user fee to fund transportation systems. The of the first gas tax in Oregon in 1919 paved the way for its adoption nationwide in the 1930s. The revenue generated from gas taxes was directly reinvested in building and maintaining transportation infrastructure. However, as the transition to EVs gains momentum, alternative sources of funding must be explored.

The report suggests several potential solutions, including:

– Increasing existing fuel taxes and vehicle fees
– Shifting transportation costs to other existing sources of funding
– Implementing a road charge, also known as a mileage fee, based on the number of miles driven

The Promise of a Mileage Fee and Potential Challenges

Among the proposed solutions, the report highlights the potential benefits of a mileage fee, similar to the original concept behind the gas tax. This fee would be directly tailored to individual usage, charging drivers based on the number of miles driven. States like Oregon and Hawaii have already implemented their own versions of this charge in recent years.

Asha Weinstein Agrawal, a professor of regional and urban planning at San Jose State, sees the mileage fee as a promising solution. However, the success of its implementation in California hinges on crucial considerations, such as the frequency of payment and the method of tracking mileage. Different approaches, such as annual charges based on odometer readings during vehicle inspections, may be necessary depending on the state’s existing infrastructure.


As California moves towards a future dominated by zero-emission vehicles, the decline in transportation funding from gas taxes poses a significant challenge. The state must proactively seek alternative revenue sources to ensure the maintenance and improvement of its highways. The proposed solutions, including increasing fuel taxes, implementing a mileage fee, or shifting costs to other funding sources, require careful consideration and planning. With the transition to EVs becoming increasingly imminent, policymakers must address this issue sooner rather than later to sustain the state’s transportation infrastructure.

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