California Faces Transportation Funding Decline as State Shifts to Electric Vehicles

A new report warns of a significant decline in transportation funding in California as the state transitions away from gas-powered vehicles to electric.

California’s reliance on taxes on gas and vehicle fees to fund transportation spending is facing a major challenge as the state moves towards electric vehicles (EVs). A report from the Legislative Analyst’s Office (LAO) projects a significant decline in transportation funding, which could result in deteriorating highway conditions if left unchecked. The report highlights the need for careful planning and the exploration of alternative funding sources to address this long-term problem.

Declining Fuel Tax Revenues and Revenue Projections

The report from the LAO projects a net transportation funding decline of approximately $4.4 billion, or 31%, within the next decade. This decline is based on the assumption that other fees, such as registration fees for zero-emission vehicles, will only partially offset the decreasing fuel tax revenues. The report outlines the projected revenue decreases from the state’s gasoline excise tax, diesel excise tax, and diesel sales tax, highlighting the potential impact on highway maintenance.

Factors Contributing to Declining Gasoline Consumption

According to Frank Jimenez, a senior fiscal and policy analyst with the LAO, gasoline consumption has already been declining in California for the past five years, although the transition to electric vehicles is not the sole factor. Other factors, such as the lingering impacts of the pandemic, may also be influencing this decline. However, with the state’s plans to transition away from gas-powered vehicles, a decline in fuel tax revenues is inevitable.

Potential Consequences and the Need for Planning

The report warns that if left unaddressed, the revenue decreases could lead to deteriorating highway conditions for drivers. It emphasizes the importance of further planning to identify potential solutions for this long-term funding problem. The transition to electric vehicles is still in its early stages, and the report calls for proactive measures to address the projected decline in transportation funding.

Historical Significance of Gas Taxes and User Fees

Asha Weinstein Agrawal, a professor of regional and urban planning for San Jose State, highlights the historical significance of gas taxes as a means to fund transportation systems. Gas taxes were introduced in the early 20th century as a user fee, charging drivers for their use of the roads and reinvesting the money into building and maintaining the transportation infrastructure.

Potential Solutions and the Role of Mileage Fees

The report suggests various solutions to address the funding decline, including increasing existing fuel taxes and vehicle fees or shifting transportation costs to other funding sources. One promising solution mentioned is the implementation of a road charge or mileage fee. This fee would be based on the number of miles driven in an individual vehicle. States like Oregon and Hawaii have already implemented their versions of this charge. Agrawal sees the mileage fee as a viable solution, similar to the original concept of the gas tax, as it directly correlates to usage.

Challenges and Considerations for Implementing Mileage Fees

The success of implementing mileage fees in California depends on the state’s approach and the specific details of the fee structure. Agrawal highlights potential issues related to how the fee is issued, such as frequency of payment and tracking mileage. The report mentions Hawaii’s approach, which involves a yearly charge based on an odometer reading taken during an annual vehicle inspection. However, California does not conduct annual inspections, suggesting that a different approach may be necessary.


As California progresses towards its goal of zero-emission vehicles by 2035, the state faces a significant decline in transportation funding. The report from the LAO underscores the need for proactive planning and the exploration of alternative funding sources to address this long-term problem. The implementation of mileage fees, similar to the original concept of gas taxes, is one potential solution that could help sustain transportation funding while accounting for the transition to electric vehicles. Policymakers must act swiftly to ensure the continued maintenance and improvement of the state’s transportation infrastructure.

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