The ongoing impact of the COVID-19 pandemic on general fund and transportation-specific revenues is among the most prominent challenges facing U.S. states in 2021. Some states might delay raising taxes or fees until their economies stabilize. Others might wait to see what the new Biden administration does regarding financial aid to states, in general, or transportation departments and agencies, in particular, before changing their own funding methods.
Low interest rates are another factor that could sway states to provide needed revenue for transportation infrastructure maintenance and construction. If low rates persist through 2021, it could help finance projects that provide employment and stimulate state economies. Additionally, odd-numbered years, especially after a presidential election, typically generate more legislative and grassroots action to increase state revenue for transportation.
In 2020, despite the unprecedented challenges of the pandemic, 10 states approved a combined $5 billion in one-time and recurring transportation revenue. Here are some trends and states to watch in 2021 and beyond:
Governor in their last term: A common theme of successful transportation funding campaigns includes the governor acting as a champion. Looking at recent successes, a governor may be more inclined to take that role if they will soon be leaving office due to term limits. An example from 2020 includes Arkansas Gov. Asa Hutchinson’s (R) enthusiastic endorsement of extending the state’s half-cent sales tax. His term ends in 2022.
The governors of several states will leave office in the next two years due to term limits. In Pennsylvania, the state’s department of transportation is grappling with an $8.1 billion funding gap to maintain the highway and bridge system in a state of good repair.
Maryland is facing a $2.05 billion capital funding shortfall over the next 10 years, according to a 2019 study.
New trifecta status: A state government trifecta occurs when the governor and majority party in each legislative chamber are from the same party. When this occurs governments may have an easier time passing legislation. In Virginia’s 2019 general election, Democrats became the majority party in the state legislature and achieved a trifecta with the governor; the state gas tax legislation was subsequently enacted in April.
In November Montana changed from divided government to a Republican trifecta. A July report by TRIP found that 11 percent of the state’s bridges need repair or replacement.
Recent bond packages: Looking back to 2013, several states approved significant bond initiatives in the years before passing a major funding bill. In 2016 South Carolina approved a $2.2 billion bond to fund major interstate and bridge projects over the next decade. The following year the state increased the gas tax and vehicle registration fees for an estimated $640 million annually in recurring revenue for road repair and maintenance.
In 2020 several states took advantage of low interest rates to utilize bonds for transportation improvements, including Connecticut, Massachusetts, Michigan, and Minnesota. The estimated need for transportation investment in these states indicate further, longer-term funding measures could follow.
Urgent need: Some states may be forced to take action due to the critical status of their transportation funding needs.
Louisiana is currently facing a $14 billion backlog of road and bridge projects. Kentucky is also grappling with a $500 million statewide maintenance backlog.
Georgia Transportation Alliance Executive Director Seth Millican in February warned that the state’s unmet investment needs could top $120 billion over the next 30 years. Additionally, in July 2022 a portion of the state’s gas tax that is indexed to inflation is scheduled to sunset, which could have a sizable impact on Georgia’s transportation revenue. Lawmakers may choose to renew their extension of that funding method, which was approved in 2015 and initially renewed in 2019.
Lastly, the Colorado legislature had intended to put a transportation investment bond measure before voters in 2020. That measure was delayed after Covid-19 impacted the state, with the intention of placing it on a future ballot. Missouri may also consider moving forward with a ballot measure in the near future.