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PORTLAND 鈥� The pothole outside Timothy Taylor鈥檚 home was so deep, he could hear the clunk of cars hitting it from inside his house.

The Portland resident could sympathize with those drivers: He knew to avoid his own neighborhood pothole, but another one damaged his car鈥檚 suspension to the tune of a $1,000 repair.

鈥淗earing that awful sound of your car bottoming out 鈥� it鈥檚 horrible,鈥� he said.

Oregon transportation officials say that without more funding, residents like Taylor could see further declines in the quality of roads, highways and bridges starting this year. But revenues from gas taxes paid by drivers at the pump are projected to decrease as more people adopt electric and fuel-efficient cars, forcing officials to look for new ways to fund transportation infrastructure.

States with aggressive climate goals like Oregon face a conundrum: EVs can help reduce emissions in the transportation sector, the nation鈥檚 largest source of greenhouse gas emissions, but they also mean less gas tax revenue in government coffers.

鈥淲e now find ourselves right now in a position where we want to address fuel use and drive down reliance on gases and internal combustion engines,鈥� said Carra Sahler, director of the Green Energy Institute at Lewis & Clark Law School. 鈥淏ut we need the funds to operate our roads that EVs need to use as well.鈥�

Gas tax revenues are falling

Motor fuel taxes are the largest source of transportation revenue for states, according to the National Association of State Budget Officers鈥櫬爉ost recent report on state expenditures. But the money they bring in has fallen: Gas taxes raised 41 percent of transportation revenue in fiscal year 2016, compared with roughly 36 percent in fiscal year 2024, the group found.

In California, where zero-emission vehicles accounted for about聽a quarter of car sales聽last year, legislative analysts predict聽gas tax collections will decrease by $5 billion 鈥� or 64 percent 鈥� by 2035, in a scenario where the state successfully meets its climate goals. Oregon and California are among the states that will require all new passenger cars sold to be zero-emission by 2035.

The downward revenue trend is already playing out in Pennsylvania, where gas tax revenues last year dropped by an estimated $250 million compared with 2019, according to the state鈥檚 independent fiscal office.

Inflation has also driven up the costs of transportation materials, exacerbating budget concerns.

What is going on in Oregon?

The Oregon Department of Transportation 鈥� citing inflation, projections of declining gas tax revenues and certain spending limitations 鈥� estimated a shortfall topping $350 million for the next budget cycle.

That could mean cuts to winter snow plowing and the striping and paving of roads, as well as layoffs of as many as 1,000 transportation employees.

Republican lawmakers say the gas tax revenue issue has been compounded by ODOT mismanaging its money.聽An audit聽released in January found ODOT overestimated its revenue for the current budget cycle by over $1 billion and failed to properly track certain funds.

鈥淚t really is about making sure that the existing dollars that are being spent by the department are being spent efficiently and effectively,鈥� said state Sen. Bruce Starr, GOP co-vice chair of the joint transportation committee.

How states are responding

To make up for lost revenue, 34 states have raised their gas tax since 2013, according to the National Conference of State Legislatures. California has the highest gas tax at over 69 cents per gallon when including other taxes and fees, while Alaska has the lowest at 9 cents per gallon, according to figures from the U.S. Energy Information Administration. In Oregon 鈥� which in 1919 became the first state to implement a gas tax 鈥� it is 40 cents per gallon.

The federal gas tax of 18 cents per gallon, not adjusted for inflation, hasn鈥檛 been raised in over three decades.

In Oregon, where there is no sales tax and聽tolling has met fierce opposition, lawmakers are debating next steps.

Other states have taken such steps as indexing their gas tax to inflation, raising registration fees for EVs and taxing EV charging stations.

To bolster transportation dollars, some officials have reorganized their budgets. In Michigan, where Gov. Gretchen Whitmer was first elected using the slogan聽鈥淔ix the Damn Roads,鈥澛爏ome revenues from marijuana taxes and personal income taxes now go toward transportation. In Connecticut, the sales tax now brings in more money for its special transportation fund than the gas tax does,聽a 2024 fiscal report shows.

Another concept that could provide a long-term solution is what鈥檚 often known as a聽road usage charge. Under such a system, drivers pay a fee based on the distance they travel.

In 2023, Hawaii established a聽road usage charge program聽for EV drivers that will phase in starting this July. In 2028, all EV drivers will be automatically enrolled, with odometers read at annual vehicle inspections.

Three other states 鈥� Oregon, Utah and Virginia 鈥� have voluntary road usage fee programs. Drivers can opt to use GPS tools to track and report their mileage.