As vehicles become more fuel-efficient and annual inflation increases the cost of materials and labor, transportation agencies are faced with declining revenue and difficult budget decisions. In addition to the ongoing decline in purchasing power of the gas tax, the Oregon Department of Transportation (ODOT) has recently estimated a budget deficit to start at $30 million in 2021, and reach insolvency by 2024—specific to the State Highway Fund resources that are available to cover the costs of operating the agency. Many will wonder how ODOT can face a shortfall of operating funding after the recent passage of the largest transportation investment package in the state’s history. For the agency, the reality is that virtually all of the funding from HB 2017 and other recent transportation investment packages was directed by law to the transportation system rather than to cover the agency’s operating costs and maintenance.
On Thursday, May 14th, the Oregon Transportation Commission will hear a presentation from Travis Brouwer, ODOT Director of Revenue, Finance, and Compliance, on ODOT’s impending budget shortfalls. In addition, the public is invited to participate in a webinar on Tuesday, May 19 from 3:00 p.m. - 4:00 p.m. at which ODOT will be taking questions. For more supplementary documents, including the meeting’s agenda and how to watch, see the OTC website.
The recent COVID-19 pandemic has exacerbated the agency’s budget uncertainty as vehicle travel rapidly declined the last few months as the Governor’s social distancing directives are implemented. Preliminary estimates show $120 million of lost revenue to the State Highway Fund from COVID-19 impacts on fuel sales and vehicle registrations. For counties’ share of SHF, this includes $19.8 million reductions for the remainder of FY 2020 and a $22.6 million reductions for FY 2021. While the forecast comes with an unprecedented level of uncertainty, the travel trends make it clear that a large impact to the State Highway Fund will occur.
The agency has identified five strategies to address both the short-term and the long-term budget deficit.
- Focus limited resources on the most critical programs.
- Become more efficient
- Realign service levels.
- Shift costs from the State Highway Fund to other sources.
- Seek additional resources to help cover costs.
Oregon is not the only state or local agency facing budget uncertainty due to COVID-19. The American Association of State Highway and Transportation Officials (AASHTO) recently published an article on the wide-spanning impacts of the virus on travel and subsequent fuel revenue. The association calls for federal intervention in the form of an economic stimulus to ensure states are able to maintain their workforce and divert potentially disastrous consequences later on.