State Highway Funding in New England : The Road to Greater Fiscal Sustainability

Many of the region's roads and bridges are in need of significant repair and improvement. There is concern that current revenue sources are inadequate relative to the projected expense of maintaining and keeping New England's roads, bridges, and other transportation assets in good condition. How to address the projected gap in transportation revenues and expenditures is largely a policy choice. Most states rely on the motor fuel excise tax or "gas tax" but this revenue source is widely recognized as not fiscally sustainable. The tax does not automatically grow with inflation, whereas the costs associated with maintaining, constructing, and reconstructing roads tend to increase as prices and wages rise. And, as vehicle fuel efficiency increases, the gas tax will generate less revenue for a given amount of road use than in the past. This research compares existing gas taxes in the New England states and examines alternative tax structures that could improve fiscal sustainability. It simulates tax revenues under various alternatives and compares them to estimates of revenues generated by actual gas taxes in the New England states between 1993 and 2012. Forward-looking projections for selected alternatives are also provided