Structural Revenue Difficulties
Updated Dec. 7, 2023
Earlier this year, we announced that due to a structural revenue issue, we would need to reduce our maintenance activities.
To make sure Oregonians could continue to rely on ODOT’s winter maintenance services, Governor Kotek requested $19 million from the Oregon Legislature to better fund road maintenance activities through the biennium. Leaders from the Oregon Legislature responded that they will provide ODOT with $19 million of additional funding for winter maintenance activities during the short legislative session in 2024.
In anticipation of receiving this funding, we will immediately resume some winter maintenance activities. We will also be able to fix more potholes, resume striping fog lines on lower-volume roads, and purchase additional snowplows.
While weather is always a factor, and we already took some actions that can’t be undone (hiring at a lower level and purchasing less materials in long-term contracts are two examples), travelers on Oregon highways should expect winter maintenance service levels to be roughly similar to what they were last year.
This one-time additional funding will help keep our maintenance service levels stable for this year and next. It does not address the structural revenue issue that is affecting transportation agencies across Oregon.
What has happened to transportation revenue?
Transportation agencies across the country are grappling with flattening and declining fuels tax revenues as cars become more efficient and drivers make the switch to electric vehicles.
Burning less gas is great news for the environment. Oregonians making the switch to more fuel-efficient, hybrid, and electric vehicles is a central reason why Oregon is on track to reduce carbon emissions from transportation by 60 percent by 2050.
However, the transportation system is primarily funded by a tax on gasoline consumption, resulting in an increasingly unfunded transportation system.
At the same time, material costs have gone up dramatically during the last few years of high inflation and labor costs have also risen significantly.
Lastly, we face restrictions on how we can use the funding we receive from state and federal sources. Federal funding, including from the recent infrastructure package, cannot be used for maintenance or agency operations, with few exceptions. Of the funding we receive from state transportation taxes, almost half is sent to cities and counties. Another quarter is dedicated by the legislature to paying for construction projects and paying debt connected to past projects. We’re not able to shift money specifically dedicated to projects or programs to pay for maintenance.
As a result, before the one-time infusion of funding identified above, the state funding available for maintenance and agency operations went down compared to last biennium, even as our costs are increasing.
Funding Overview
ODOT receives funding for specific purposes from payroll tax, cigarette tax revenues, general funds, lottery funds, and a variety of transportation-related permits and fees. ODOT will receive about $5.9 billion for our operating budget during the 2023-2025 biennium. An additional $1.4 billion will flow through ODOT to be distributed to Oregon cities, counties and other agencies.