Highway and transportation funding has received its share of attention in the news lately – and for good reason. In Arizona and across the country, transportation officials face the challenge of planning for much-needed improvements at a time when current funding sources are stagnant. Without some changes, Arizona may be forced within seven years to use available funds for “preservation-only” work to maintain current roadways, but not construct anything new outside of regions that have voted to collect additional transportation taxes.

While Arizona has been among the fastest growing states in the nation, state and federal gas taxes have been frozen at the same levels since the early 1990s. And even on a trip to the gas station, many Arizonans likely aren’t familiar with answers to questions like, “How much do I pay in gas taxes and how much does ADOT receive to build and maintain our highways?”

Federal Gas Tax

The federal gasoline tax collected across the country is 18.4 cents per gallon. It has remained at that level since 1993. Federal gas tax revenue is tracked by the Federal Highway Administration, which also oversees the distribution of the funds according to formulas approved by Congress. Diesel fuel taxes and federal motor carrier (or commercial trucking) fees are additional sources for transportation funding. For the record, Arizona receives about 92 cents for every dollar we send to Washington, D.C. for fuel taxes.

Federal funds represent a major portion of the transportation funding Arizona and ADOT receive each year. For example, in 2007 Arizona received approximately $650 million in federal highway funds.

State Gas Tax

Meanwhile, the Arizona gas tax is nearly the same as the federal tax - 19 cents per gallon. Of that, 18 cents is designated for roads and highways, both at the state and local levels (the extra penny supports underground fuel tank cleanup). It has been at that level since 1990. Revenue from the state gas tax is placed into the Highway User Revenue Fund, or HURF, which helps pay for many state highway projects, and even local street improvements. In 2007, state gasoline tax revenue totaled $497 million, about 40 percent of the total HURF amount of $1.38 billion (FY 07).

In addition to the tax on gasoline, other sources for transportation funding in Arizona include vehicle license taxes, vehicle registration fees, diesel (or use fuel) charges and commercial trucking fees.

Out of that total, about 50 percent goes into the State Highway Fund, while the other half goes to cities, towns and counties. A portion of the State Highway Fund is used to help build, maintain and improve our highway system.

And in case you were wondering, ADOT does not receive State Lottery funds for building or maintaining state highways. Those revenues do support local road projects and mass transit throughout the state, contributing about $33 million in 2007.

Freeway Funding

In Maricopa County, a separate half-cent sales tax for transportation was extended for 20 years under a plan approved by voters in 2004. That sales tax is expected to raise nearly $14 billion between 2006 and 2025. More than half of those funds – about $8 billion – are used for freeway improvements in the Phoenix area. In addition to freeway funds used by ADOT, revenue is also used for transit, light rail and local street improvements.

Funding Challenges

While many of the funding figures are significant, they do not provide enough funding for all the needed highway and road improvements across Arizona. ADOT’s just-released Preliminary Critical Needs Definition Study lists $42.5 billion in potential costs for critical transportation needs between now and 2030 across our state. These needs are seen as vital for helping to move people and commerce in Arizona while also reducing the “time tax” we all pay while stuck in traffic backups.

On a national basis, the Federal Highway Fund is declining in size at a time when states are counting on dollars to pay for planned highway improvements. A key factor is the limited buying power of the federal gasoline tax, due to inflation and increased fuel economy in vehicles.

It’s no secret that construction and maintenance costs have risen significantly in recent years, following natural disasters like the Gulf hurricanes, increased petroleum prices and higher costs for materials such as steel and cement.

We hope this review provides a better understanding of the funding challenges involved in providing you, your neighbors and our state’s visitors with one of the best highway systems in the nation.

For more information on funding for the state’s highway and freeways, visit ADOT Financial Management Services or Contact Us.