Thanks to a combination of declining revenue and higher costs, the state of Wisconsin soon may not be able to rely on general fund revenues to address its transportation needs, according to a report by the Wisconsin Policy Forum (WPF).
“Roadmap: Assessing and Funding Wisconsin’s Transportation Needs,” was co-authored by Jason Stein, president of the WPF, and Tyler Byrnes, its senior research associate. It concludes that even with recent general fund allocations supporting segregated “use” fees dedicated to the state’s transportation fund, Wisconsin is still behind the curve in paying for the maintenance of its 115,000 miles of roads and highways.
Gov. Tony Evers’ administration and the Republican-dominated Legislature are wrestling with this issue as they shape the 2025-27 biennial budget. Once again, they face slow growth in revenue from traditional sources such as the gas tax — attributable to the growing adoption of hybrids and electric vehicles — higher costs associated with upgrading Wisconsin’s aging road infrastructure (exacerbated by inflation), and the 2006 decision to stop indexing the gas tax to inflation, which has prevented the fund from capturing inflationary increases. Recent increases in registration and title fees on vehicles have only partially offset lagging gas tax revenue.
With more “mega-projects” on tap — including the I-94 East-West freeway expansion — the cost pressures aren’t likely to moderate. In addition, the state’s increasing use of general fund revenues such as income and sales tax dollars to fund transportation needs may only be sustainable as long as the state can maintain a large budget surplus, now pegged at $4.5 billion.
According to the WPF, the combination of increased vehicle registration fees, borrowing, and general fund support has provided enough funding to improve the quality of the state highway system, but local road conditions and transit services have declined even with recent funding increases.
“We have a vital transportation system that’s going to have ongoing, very large costs into the future, and if we don’t address those, there’s going to be consequences for commerce in the state, people’s general well-being, and traffic safety,” Byrnes said. “Going forward, if we want to have a sustainable funding source, we need to find some growth somewhere, and the existing sources just haven’t shown natural growth.”
The WPF built three scenarios for the next two state budgets, showing high, medium, and low-cost investment options that illustrate the tradeoffs of each alternative. In addition, it outlines several options to raise more revenue, including a new mileage-based fee to augment the gas tax, a sales tax on fuel, toll booths, and local options such as a county sales tax or municipal wheel tax. Yet other states that have pursued these options have shown uneven revenue generation, and few of these alternatives are popular with voters.
Other tidbits from the study include:
- The state transportation fund is the primary vehicle for financing infrastructure spending in Wisconsin, taking in $5.2 billion in projected state revenue over the current two-year state budget.
- Revenue from the gas tax and registration fees make up nearly 77.6% of the state’s transportation fund. Transfers from the general fund make up the next largest portion, accounting for 14.5%.
- In 2004, the gas tax accounted for 65% of the total user-fee revenue in the transportation fund. By 2024, the share had dropped to 38% due to slow growth in the gas tax, registration fee increases, and reliance on general tax revenue.
- If the state had not repealed indexing, the gas tax would have generated $360.7 million more in 2022 alone.
- To protect transportation revenue, the state budget now requires that taxes on electric vehicle sales be transferred from the state’s general fund into the transportation fund. That amount was estimated at $39.3 million for 2024 and $55.1 million for 2025.
Source: Wisconsin Policy Forum
