Fiscal Notes: June/July 2019 Page: 4
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Motor Fuels Taxes in a Changini Toxas Tonsoirtotion Scene
Fuel efficiency is likely to continue
improving - meaning less motor
fuel use and less tax revenue
per mile.
Experts at the Texas A&M Transportation Institute
(TTI) have suggested that Texas' motor fuel revenue is
likely to peak around 2030 and then begin to fall, thanks
to increasing fuel efficiency and an apparent leveling off
of per-capita vehicle miles traveled.
Since 1978, the fuel economy of American cars and
light trucks has been governed by the National Highway
Traffic Safety Administration's Corporate Average Fuel
Economy (CAFE) standards. Over time, CAFE standards
have gradually increased; the current rule would
require automakers to have an average fuel economy
of 54.5 miles per gallon by model year 2025. While
Congressional attempts are under way to freeze those
increases, fuel efficiency is likely to continue improving
- meaning less motor fuel use and less tax revenue
per mile.
Alternative-fuel vehicles - hybrids, all-electric cars
and trucks and those fueled by natural gas and propane
- will have a growing impact. While the number of
alternative-fuel vehicles has risen by about 10 percent
annually over the last few years, they made up only
1 percent of the 24.6 million registered vehicles on Texas
roads in fiscal 2018. Even so, TTI predicts that these
vehicles will account for 18 percent of U.S. domestic cars
and trucks and 11 percent of commercial vehicles by
2040 - and that increasing use of alternative fuels could
reduce annual state revenue by almost $200 million
by 2035.
RISING ROAD COSTS
While motor fuels tax revenue is showing little growth
and may even decline, the cost of maintaining our aging
highways and roads - and building more - is risingdramatically.
The Federal Highway Administration's National
Highway Construction Cost Index, used by planners
and policymakers to calculate the inflation of highway-
construction costs for items such as asphalt and
machinery, has risen by 84percent since 2003, far
surpassing the general inflation rate of 33 percent
during the same period. According to 2016 testimony
from theTTI, due to rapid inflation the 20-cent motor
fuels tax "now purchases less than 10 cents' worth of
construction."7--
~14~8I
While the challenge is particularly acute in Texas
because of our rapid growth, it's a nationwide problem.
In fiscal 2013, according to the Tax Foundation, state-
level gas taxes, tolls and license fees produced enough
revenue to cover only 41.4 percent of state spending on
roads. At the federal level, the Congressional Budget
Office has estimated the Highway Trust Fund may be
insolvent as soon as 2021, while the National Surface
Transportation Infrastructure Financing Commission
projects a cumulative, nationwide highway investment
funding shortfall of $2.3 trillion through 2035.
OTHER STATES LOOK FOR MONEY
Many states have recognized that existing motor fuels
taxes can't fully support rising needs and costs. In its
2016 testimony before the Texas House, TTI noted that
26 states were funding road construction projects
with revenue bonds; 24 states were using general
obligation bonds; and 33 had employed public-private
partnerships. In addition, many states have financed4 GLENN HEGAR, TEXAS COMPTROLLER OF PUBLIC ACCOUNTS
L AMC- Tom"
927
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Texas. Comptroller's Office. Fiscal Notes: June/July 2019, periodical, June 2019; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth1577977/m1/4/: accessed July 7, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.