“We’re currently seeing a funding shortfall of more than $2 billion in six years, just to deliver many of the existing projects that we’ve outlined in the past,” Transportation Secretary Paul J. Wiedefeld said Wednesday during a briefing in Annapolis.
Inflation has driven up the cost of construction and labor, making projects in process more costly. At the same time, gasoline usage has fallen because of more fuel-efficient cars, pandemic-era commuting patterns and the adoption of electric vehicles, flattening a key revenue stream that financed transportation projects.
Even as billions of federal dollars are available through the $1.2 trillion infrastructure bill, Maryland transportation officials cautioned the state might not be able to access enough money without more transportation revenue or tough decisions about which projects to leave behind.
The state expects to have enough money for fiscal 2023 and 2024, but projects a $100 million deficit in fiscal 2025 that grows to about $500 million in each of the following four years and adds up to the $2.1 billion shortfall by fiscal 2029.
Wiedefeld also addressed the fiscal situation earlier this month in a letter that accompanied a 521-page draft plan of which transportation projects will be built over the next six years.
“Simply put, current funding levels do not provide the investment levels needed to transform our system to meet shared goals of a safe, sustainable, equitable system that spurs our economic competitiveness,” he wrote.
Moore also has rung warning bells about the state lacking the financial resources to pay for other key goals, warning that “our economic engine does not support our ambition” and calling on government leaders to use “discipline” while he determines how to revamp a lackluster state economy that has barely grown over the past four years.
On Wednesday, Wiedefeld was speaking to a state committee convened to determine how to pay for transportation projects by the end of the year. The General Assembly formed the panel, acknowledging a hard-fought gas tax increase in 2013 wasn’t going to be the long-standing funding solution lawmakers had sought.
As in Maryland, transportation officials across the country are planning for a future in which the widespread adoption of electric vehicles eats into gas tax revenue.
Two states tax some drivers by the mile. Many more want to give it a try.
A handful of states are testing systems that charge drivers a flat fee for each mile they travel, an approach widely seen in the transportation industry as a long-term solution. But the systems can be complicated and often involve an element of tracking drivers. In the meantime, a number of states have imposed fees on electric vehicles to generate revenue.
At the federal level, gas tax revenue has long failed to cover the costs of transportation spending. Increased fuel efficiency in vehicles has been a factor, but the gap is mostly the result of Congress not raising the tax since 1993.
To fill the hole, lawmakers have resorted to topping off a federal transportation trust fund with general funds. The infrastructure law also required the U.S. Transportation Department to pilot a national mileage fee system, but little of the groundwork for the project has been established.
The transportation shortfall is an anomaly in Maryland, compared with previous years, since state officials in the past had simply responded to fewer resources by delaying or removing transportation projects from a six-year plan.
On Wednesday, Wiedefeld said his agency wanted to have a public discussion about how to allocate resources.
“I chose a different path,” he said. “There is a need to be more transparent, to have more transparency in the funding decisions made for the state’s transportation capital program,” he said. “Decisions about how we prioritize our projects should be based on our shared values and priorities.”
Gas tax revenue makes up about 20 percent of the state’s transportation trust fund budget, the largest source outside of federal money. Though gasoline sales have rebounded from pandemic lows, 4.4 percent fewer gallons were sold in 2022 compared with 2019, according to Ed Regan, a transportation consultant hired by the state. Maryland officials predict gas tax revenue will remain flat in the coming years as fuel efficiency increases and electric vehicles continue to gain traction.
At the same time as Maryland’s construction budget shortfall, the state is facing a looming bill to help bail out the Washington region’s Metro system, which has projected a $750 million shortfall in the next fiscal year, due to ballooning personnel costs and a drop in ridership. The state shares financial responsibility for the transit system with Virginia, D.C. and the federal government.