Transportation Funding in Oregon

Sufficient and Sustainable Funding Needed for Oregon’s Transportation System

ODOT funding comes from gas tax and fees

The state relies on gas tax receipts combined with fees on vehicles and freight haulers to form the State Highway Fund, which then distributes money to transportation agencies across the state. While this structure has supported the state’s transportation system for a long time, the State Highway Fund can no longer support the maintenance, operation, and safety of our system, and of ODOT, into the future. This is due to two main causes:

Flattening gas tax revenue: Oregonians are driving increasingly fuel-efficient vehicles and switching to electric vehicles at a high rate – this is good as it will drive carbon emissions from transportation down significantly. But with increased fuel efficiency and more EVs, Oregon sees lower fuels tax revenue per mile driven. This trend is projected to result in declining gas tax revenues in coming years.
Persistent inflation: Inflation has made preserving and improving the transportation system more expensive. The materials and staffing necessary to provide the services Oregonians rely on have gone up dramatically in cost. Unlike many other states, Oregon’s gas tax isn’t tied to inflation. Oregon’s vehicle and freight hauler fees are also not tied to inflation. With every year that passes, the same dollar purchases fewer materials and less service.

Legislative Action 2025-2026

The Oregon Legislature provided more funding to the State Highway Fund in 2025 in HB 3991. However, most of the fee and tax increases in the bill are now delayed, pending a vote at an upcoming statewide election.

Not all parts of HB 3991 are delayed, as of Dec. 31, 2025, Oregonians are seeing some cost increases to support Oregon’s transportation system. Vehicles with 40+ mpg will see a $30 increase in supplemental registration fees. Additionally, a new mandatory per-mile road usage charge will begin on July 1, 2027 for existing electric vehicles, followed by new EVs and hybrids/plug-in hybrids the following year.

During the 2026 legislative session, lawmakers passed two bills to avoid layoffs and deep service cuts at ODOT, addressing a $297 million budget shortfall for the agency's maintenance and operations work. While this legislative action stabilizes operations for the remainder of the current budget cycle, it does not resolve the underlying funding challenges facing Oregon's State Highway Fund.

The federal government provides revenues from federal fuels taxes and heavy truck taxes to states and local governments. Most federal funding is distributed to state and local governments by funding formulas.

All federal highway formula funds flow through ODOT. The agency distributes about 30% of those funds to local governments. Oregon receives about $700 million in funding from the Federal Highway Administration each year for construction projects on the state’s roads, including the interstate, as well as planning and engineering. Oregon also receives about $150 million in public transportation funding from the Federal Transit Administration each year.

ODOT applies for, and sometimes receives, grant funding from the federal government which must be spent on the specific project for which the grant was submitted.  Federal funding cannot be used for day-to-day maintenance services or ODOT operations; federal funds can only be spent on capital construction projects.

Oregon’s State Highway Fund collects resources from these main sources:

Taxes on motor fuels, including gas tax and diesel tax.
Taxes on heavy trucks, including the weight mile tax and truck registrations.
Driver and vehicle fees, including licenses and vehicle title and registration.
Starting in 2027, efficient vehicles that pay little or no gas tax will start paying a per-mile road usage charge.

ODOT also receives revenue from other state sources, including:

A 0.1 percent employee payroll tax ($1 for $1,000 in payroll) pays for public transportation service in both rural and urban communities. This payroll tax will increase to 0.2 percent on Jan. 1, 2026 and revert to 0.1 percent on Jan. 1, 2028.
A 0.5 percent vehicle dealer privilege tax on new car sales funds rebates for electric vehicles and provides ongoing funding for the multimodal Connect Oregon program.
A $15 tax on the sale of new bicycles with tires over 26 inches and that cost at least $200 goes to off-road bicycle and pedestrian paths that serve commuters.
A small portion ofcigarette tax revenues are dedicated to transit services for seniors and disabled people.
Custom license plate fees are dedicated to operating passenger rail