Transportation Funding in Oregon

Sufficient and Sustainable Funding for Oregon’s Transportation System

Maintaining Oregon’s transportation system is something most people can agree the government should do. People walking, driving, biking and rolling value smooth roads, safe ways to cross the street, snow clearing in winter, highways free of trash and graffiti, and excellent customer service. But ODOT and other transportation agencies across Oregon are cutting back on staffing levels and maintenance spending. Why is that?

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 as it is today won’t be able to support the maintenance, operation, and safety of our system, and of ODOT, into the future. This is due to three main causes:

Declining 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 60% over the next 25 years. But with increased fuel efficiency and more EVs, Oregon sees lower tax revenues and less money available to maintain the transportation system.
High inflation: Inflation has made maintaining 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 is static and isn’t tied to inflation. Our 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.
Restrictions on available funding: Only a small share of the funding that comes into ODOT can be used to maintain the state’s transportation system and run the agency. State law directs almost half of total state highway fund dollars to cities and counties and then dedicates over half of what’s left to pay back bonds for past projects and invest in new projects, leaving only about 20 percent of every dollar available for state highway maintenance.

Tough Road Ahead for Travelers

Oregonians can expect longer road closures, more trash and graffiti, worse winter driving conditions, more potholes, and slower DMV customer service because of this structural revenue issue. The decline in Oregon’s transportation system won’t be limited to state highways because counties and cities rely on the state highway fund for their maintenance services too. State, local, and neighborhood roads, sidewalks and bike lanes will all decline.

Road Map to Sustainably Fund Oregon’s Transportation System

Sufficient, sustainable, and resilient funding is key to maintaining and modernizing our state’s transportation system. Other states choose a variety of ways to sustainably fund a modern transportation system such as raising or indexing transportation fees to inflation, establishing new user fees like a road usage charge or tolls, or transfers from the general fund.

Funding options include user fees, general fund, other taxes

There are several options for sustainable funding.

Urgent Action Needed for the Service Oregonians Deserve

ODOT has enough funding to keep state highway maintenance levels roughly stable until the middle of 2025. After that, in the absence of additional revenue or revenue reform, Oregonians will see a rapid decline in the safety, quality, and reliability of their transportation system.

The legislature is working toward a comprehensive transportation modernization package in the 2025 legislative session. To learn more about this work, and attend planned public comment sessions held by the legislature around the state, visit the legislative committee's website.

We look forward to working with our partners to help the legislature identify sustainable solutions to Oregon’s structural transportation budget issues.

Additional Information

Governor Kotek released the Governor’s 2025-27 Budget on Dec. 2, 2024. It recommends the Oregon Legislature provide an additional $1.75 billion in funding for ODOT for the upcoming biennium. If approved, this funding would prevent deep cuts to services ODOT provides to Oregonians, improve service through additional investments in maintenance, the DMV, and other critical work; and allow the agency to invest in preserving and improving the transportation system.

Governor's Budget explained

Every state agency is required to model what services could be provided based on expected available funding. The purpose of this budget modelling exercise is to help the governor and Oregon lawmakers understand the impacts of an available budget and decide on whether additional funding is necessary. The link below provides more information on ODOT's 2025-2027 Agency Request Budget and related service impacts.

Agency Request Budget Explained

Agency Request Budget 2025-2027

Federal Transportation Funding

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

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. ederal dollars cannot be used for day-to-day maintenance services or ODOT operations; federal funds can only be spent on capital construction projects. Some funds can also be used for transit and bicycle/pedestrian capital projects. All federal highway formula funds flow through ODOT. We distribute about 30 percent of those funds to local governments. Oregon also receives about $150 million in public transportation funding from the Federal Transit Administration each year. ODOT also 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.

State Highway Fund

Oregon’s State Highway Fund collects resources from three 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.

Other State Funding

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 communitities.
A 0.5 percent vehicle dealer privilege tax on new car sales funds rebates for electric vehicles and provides ongoing funing 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 of cigarette tax revenues are dedicated to transit services for seniors and disabled people.
Custom license plate fees are dedicated to operating passenger rail.

Oregon's transportation system works best when we keep our roads, bike lanes, and sidewalks open and safe for travel, and our communities clean and livable. This document identifies the transportation funding needs for the Oregon Department of Transportation.

The focus of this document is on operations, maintenance and safety needs that are eligible for State Highway Fund investments. Needs are based on the goal to ensure our transportation system serves people, grows the economy, and improves Oregon's future.

The needs described in the table and this document are for ODOT-only State Highway Fund eligible investments. Local and other transportation funding needs exist but are not estimated in this document.