Baker Center Releases Paper on Future of Roadway Funding

Tennessee spends less on a per capita basis than almost any other state on its highways and roads yet enjoys roadways that are better than those in most states. But according to a new paper produced by researchers at UT’s Howard H. Baker Jr. Center for Public Policy, roadway quality is now at risk unless new funding is found.

Fuel tax rates are among the lowest in the nation, yet Tennessee boasts a roadway network that has better pavement, better bridges, and less congestion than most comparable state systems. Concerns are mounting that these benefits are at risk due to a funding outlook that continues to deteriorate.

The state’s gasoline tax was last raised—from sixteen to twenty cents a gallon— more than 25 years ago, in 1989.

Currently, the state’s gasoline tax of 21.4 cents a gallon (which includes a special petroleum products tax) ranks twelfth lowest in the US, and Tennessee is one of only five states that are free of highway-related debt. Gasoline and diesel tax revenues not only support state roadways but are shared with cities and counties across the state.

According to the report’s authors, Congress appears to be poised to provide some near-term stability through the passage of a federal transportation bill that will provide six years of funding. Unfortunately, there are concerns over the adequacy of the proposed funding streams from the federal government that will flow to the states.

Diesel tax revenues will continue to grow in the years ahead, though growth rates will decline as heavy trucks become more fuel efficient. Heavy trucks are the major source of wear and tear on the state’s roads and bridges.

The report concludes that the greatest threat to Tennessee’s roadway finances is the state’s low gasoline tax, which accounts for nearly 50 percent of all Tennessee highway trust fund revenues, the source of state funds for roads.

Additionally, since road funding is dependent on residents buying large amounts of gas, as the fuel efficiency of cars improves there will be even fewer dollars to fund roads. These trends will continue as the state’s population grows.

The report suggests that Tennessee has a variety of options to enhance gasoline and diesel tax collections: a hypothetical five-cent increase, indexing the current gasoline tax rate to meet inflation, or a combination of an inflation-indexed rate along with a five-cent increase. The authors argue that the best path for the state to pursue to raise funds is to increase the gas tax and adjust it for inflation and improved fuel economy over time.

The authors claim that unless one of these options is implemented, Tennessee will be challenged to maintain the quality of its roadways.

View the full report, “The Future of Roadway Funding in East Tennessee.”

CONTACT:

Matt Murray (865-974-6084, mmurray1@utk.edu)

Nissa Dahlin-Brown (865-974-8681, nissa@utk.edu)