Reduced traffic leads to drop in Oregon fuel tax collections
Oregonians have been driving less during the coronavirus pandemic — though steep drops have eased off in recent weeks — and the state, counties and cities will see less in fuel taxes to maintain roads and bridges.
The overall decline for the state's two-year budget cycle ending June 30 is projected from $1.55 billion to $1.45 billion, about $130 million.
But Daniel Porter, chief economist for the Oregon Department of Transportation, said that figure masks the sharp drops of 40% in fuel tax collections during April, 30% during May and an anticipated 20% in June.
He told lawmakers Monday, June 8, that the drops coincide with steep traffic reductions following the first of Gov. Kate Brown's executive orders that shut down or curtailed business activity and public life to slow the spread of the COVID-19 coronavirus.
For the week of March 23, ODOT said statewide traffic dropped by 47% compared with the same week in 2019 — a decline Porter said was unprecedented — but has settled back gradually to a 24% decline for the week of May 25. The decline was 26% the week of March 16.
"There is a direct connection between traffic reduction and fuel tax revenues," Porter told members of the Legislature's Joint Committee on Transportation at a virtual meeting.
Oregon's fuel tax is 36 cents per gallon. Under a 2017 law, the tax will go up 2 cents in 2022 and again in 2024 if ODOT meets specified performance measures. The 2017 law changed the split to 50.2% for the state, 29.2% for counties, 20% for cities — based on population — and the balance for a special fund for small cities.
Porter said economists are preparing an update in July, and one of the unanswered questions is whether traffic volumes — and fuel tax collections — will remain reduced even as businesses reopen and activity resumes.
"What is the recession going to do? What are the permanent changes in our behavior that are going to come out of this?" Porter said.
"Teleworking is an obvious example. Are businesses going to have their employees telework more often? If that is the case, we should see some sort of more permanent effect on traffic reduction and fuel consumption. That is great from a greenhouse gas perspective, but not so great from a revenue perspective."
While traffic reductions have helped regional air pollutants to decline, some experts say it will take far deeper drops to achieve sustained improvements in air quality and lower the levels of greenhouse gases linked to climate change.
Fuel taxes are the biggest share but not the only source of money for the state highway fund, which under a 1980 constitutional amendment is reserved for road and bridge work by the state, counties and cities.
In contrast, Porter said, weight-mile taxes levied on trucks generally held up, mainly because commercial freight continued to move around Oregon. "A lot of activity took place" during the second quarter of 2020, he said.
But Porter said he still expects a decline in projected weight-mile taxes in the state's next two-year budget cycle, which begins July 1. Economists now say a national downturn started in February, before the pandemic-related business shutdowns, after a record 128-month economic expansion dating back to 2009.
The third component of the state highway fund is a portion of Oregon vehicle registration fees, which can be paid online without in-person visits to the Division of Motor Vehicle Services. But registration in the Portland and Medford-Ashland metro areas require prior vehicle inspections by the Department of Environmental Quality. Emissions testing stations are set to reopen in mid-June.
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