Californians Could Soon Be Driving Electric Vehicles on Bumpy Roads as Gas Tax Revenue Drops

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Having some of the worst-ranked roads in the U.S., California’s push for zero-emission vehicles will leave road repair budgets unfunded, analysts say.

Having some of the worst-ranked roads in the country, California’s push to replace combustion engine cars and trucks with zero-emission vehicles will leave repair budgets unfunded, according to the state’s nonpartisan Legislative Analyst’s Office.

In a December report describing the implications of implementing the state’s greenhouse gas reduction initiatives, analysts found that transportation revenues would be significantly impacted. Funding traditionally comes from fuel taxes, and any decrease in consumption negatively affects revenues.

“Caltrans’ highway maintenance and rehabilitation programs—which face significant funding declines and rely heavily on state resources—will experience an overall reduction in the number of projects the department can complete on the state highway system,” analysts wrote. “This likely will result in a decline in highway conditions for drivers.”

Drivers in California pay 57.9 cents per gallon in taxes, with a portion of the proceeds going to Caltrans and local governments to fund road repairs. Revenues are expected to decline by 26 percent by 2035, amounting to reductions of about $1.5 billion for the transportation agency and $900 million for local governments annually, the analysts said.

Projecting “notable revenue declines over the next decade,” analysts estimate nearly $6 billion in annual reductions from gas and diesel taxes—though slightly offset by registration applied to electric vehicles.

Contributing to the dilemma is a discrepancy between fees paid by drivers of electric and combustion engine vehicles. A $108 fee is added to registration costs for electric vehicles in California to account for no fuel tax collection, while analysts estimate owners of gas-powered vehicles pay approximately $280 per year in fuel taxes.

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The report highlights that advances in fuel efficiency and the introduction of more electric vehicles are already putting pressure on tax revenues, with recently passed laws mandating greenhouse gas reductions further challenging the funding structure.

“The state’s recently adopted and planned policies will expedite these underlying trends significantly,” analysts wrote in the report.

The problem is not isolated to California, though the Golden State is encountering the issue before the rest of the nation, according to transportation experts.

“The entire country faces the same identical challenge, though sooner in California because EVs are gaining market share sooner,” Daniel Sperling, founding director of the Institute of Transportation Studies at the University of California–Davis, told The Epoch Times by email Jan. 15.

States and the federal government have relied on fuel taxes as user fees to cover repair costs, though revenues have failed to keep pace as new technologies are changing the nature of transportation, he said.

“Congress and, to some extent, states have been reluctant to increase fuel taxes to account for inflation, vehicle fuel efficiency increases, alternative fuel use increases, and now the transition to EVs,” Mr. Sperling said. “As a result, an increasing amount of funding has been pulled from general revenues at the state and federal levels to cover the growing funding gap.”

A faster transition to electric vehicles mandated by California law will further contribute to the gap, he said.

One potential solution where drivers are charged by the mile is mentioned by the report, though the idea has proven controversial when introduced in recent years and reconsidered in 2023 at regional meetings in San Diego. Critics are concerned about how data is collected and secured, citing privacy issues and potential legal obstacles to such a plan.

Additional fees added to registration and electricity charges are also being considered for revenue sources by the state. Some are opposed to both ideas and say that any additional fees for electric vehicles will discourage the switch by drivers.

Analysts advise legislators that revenues could be raised by increasing existing fuel taxes and registration fees, or road repairs will need to be reduced.

“We therefore recommend that the Legislature continue to track this issue closely over the coming year … [and] begin to develop a plan for how it will address impending declines in state transportation revenues,” the report said. “Beginning to weigh these options now would better position the state to act in the future when revenue declines become more significant.”

If no solution is found, analysts say communities across the state will face funding shortfalls for road projects, with those most in need likely to face the toughest consequences.

“The magnitude of the impacts will vary across jurisdictions,” analysts wrote in the report. “In general, jurisdictions that historically have been more dependent on state funding for their local efforts will experience greater impacts across their transportation systems, likely resulting in reduced services and/or poorer road conditions for their residents.”

Roads in the state already rank as some of the bumpiest to drive on in the nation, according to a 2022 study by the American Society of Civil Engineers, which found only Mississippi’s roads to be in worse shape.

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