The House and Senate released their respective transportation budget proposals earlier this week; both rely on an increase to the motor vehicle fuel tax to help close the budget shortfall, but only one includes distribution of the additional revenues to cities.

The House budget totals $15 billion in the 2025-27 biennium; the Senate budget is a little larger at $16.2 billion.

House proposals

• HB 1227 – Biennial appropriations bill
• HB 2043 – Transportation resources bill contemplating newly proposed revenues

Senate proposals

• SB 5160 – Spending bill
• SB 5161 – Biennial budget supported only by existing revenues
• SB 5801 – Transportation resources bill contemplating newly proposed revenues

New revenues

The House proposal seeks to increase the gas tax by 9 cents per gallon and to index it to inflation, beginning July 1, 2025. The current 6% statutory distribution of gas tax revenues to cities would apply, increasing the city share by $123 million over the next three biennia.

The Senate also seeks to increase the tax, by 6 cents per gallon, starting this year, with an automatic 2% annual rise to account for inflation. The Senate proposal does not apply the 6% city share to the new revenues generated by the 6-cent increase, resulting in no new gas tax revenues for cities.

Interestingly, the House’s statewide road usage charge proposal from earlier this year shape-shifted as it was incorporated into the House transportation budget. Now it would function as a flat, annual highway use fee calculated based on a car’s fuel economy, meaning more efficient vehicles would pay a higher fee. The implementation of this system would be simpler and less expensive to implement than a road usage charge.

Other proposed new revenue sources include a permanent 0.3% sales tax transfer from the general fund, a $50 increase to the electric vehicle (EV) registration fee, and a handful of smaller new and increased taxes and fees, all from the Senate side. The Transportation Improvement Board (TIB), a longtime, essential source of state funding for city transportation projects, currently receives a share of EV fee revenues. However, TIB would receive no share of the revenues from the Senate-proposed $50 increase.

On the House side, in addition to the increased gas tax and highway use fee, the budget proposes to increase the vehicle sales tax from 0.3% to 1% to generate new revenues.

Benefits to cities

House transportation budget

• Motor vehicle fuel tax statutory distribution to cities: Additional $123 million over the next three biennia from proposed 9-cent increase to the fuel tax
• Transportation Improvement Board: $310.8 million, including:
  • $3.9 million to Small City Pavement and Sidewalk Program
  • $24.6 million for Complete Streets grants
  • $9.3 in preservation funding for cities
• Safe Routes to Schools grants: $83.3 million
• Pedestrian and bicycle safety: $82 million
• Encampment response: $9.2 million to address homeless encampments on state-owned rights-of-way in coordination with, and directing funding to, local governments and social service organizations, focused on housing individuals.

Senate transportation budget

• Transportation Improvement Board: $330.8 million, including:
  • $3.9 million to Small City Pavement and Sidewalk Program
  • $24.6 million for Complete Streets grants
  • $9.3 in preservation funding for cities.
  • Additional $20 million for Complete Streets grants
• Safe Routes to Schools grants: $83.3 million
• Pedestrian and bicycle safety: $87 million
• Highway preservation in pop. centers, including city streets as state highways: $100 million
• Encampment response: $8 million to address homeless encampments on state-owned rights-of-way in coordination with local governments and social service organizations to direct people to housing and prevent future encampments.

View AWC’s full budget matrix here.

Dates to remember

Both chambers held public hearings for the transportation bills this week and plan to vote them out of committee on Thursday, March 27, allowing the budget leaders more time to negotiate the final transportation budget before sine die on April 27.