Protect infrastructure funding from rise of electric vehicles

Transportation is undergoing a fundamental shift. Electric vehicles are becoming increasingly popular, supported by a combination of government policy and personal preference. There is no doubt that by reducing emissions and dependency on oil, this transition offers real benefits to individuals, businesses and communities. Less widely discussed, however, is the threat this poses to transportation funding both in Illinois and at the federal level.

Ultimately, the shift to EVs will steadily erode the most significant revenue stream for road and bridge maintenance, and other vital transportation infrastructure projects. This is because funding for these projects is directly tied to the purchase of motor fuels, upon which EVs do not rely.

The use of EVs has grown exponentially in recent years. The number of EV registrations in Illinois grew by 500% between 2017 and 2022. In the last six months alone, there has been a 22% increase in registrations, from 57,000 in December 2022 to 70,000 in May 2023.

This is partially due to newly adopted state and federal policies. The 2021 Climate and Equitable Jobs Act provides rebates for drivers and expressly supports EVs with a goal of 1 million on the road by 2030. The 2021 Reimagining Electric Vehicles in Illinois Act offers incentives to manufacturers of EV parts.

The 2021 federal Infrastructure Investment and Jobs Act includes $18 billion for EV investments, with Illinois guaranteed to receive $149 million. And finally, the 2022 federal Inflation Reduction Act offers a variety of tax credits for the purchase of both new and used EVs.

Overall, motor fuel tax (MFT) revenues make up 52% of Illinois’ transportation funding and 82% of the Federal Highway Trust Fund. The MFT was designed to charge a user fee commensurate with a person’s driving habits. Because it is a tax per gallon, revenues will fall as vehicles become more fuel-efficient or no longer depend on motor fuel.

According to a recent report by the Illinois Economic Policy Institute, the price of reaching our state’s stated goal of 1 million EVs on the road in Illinois by 2030 could result in the loss of $1.1 billion in transportation funding. When combined with expected improvements in fuel economy for gasoline-powered vehicles, the impact on Illinois transportation revenues rises to $4.3 billion.

This translates to less funding to support crucial road and bridge maintenance, address safety and congestion issues, provide bicycle and pedestrian facilities, or support transit maintenance and expansions.

It is imperative that Illinois policymakers begin to consider new strategies that can address these anticipated future shortfalls. The most straight forward and equitable solution would be replacing the motor fuel tax with a vehicle miles traveled fee (VMT). A solution that has already been successfully piloted in multiple states, the biggest benefit of a VMT is that it ensures all vehicle types are sharing in the cost of maintaining our state’s transportation infrastructure, instead of forcing gas-powered vehicles to shoulder a disproportionate share of the burden.

In the interim, minor policy changes — like increasing state EV registration fees, adding hybrid vehicle registration fees and assessing a kilowatt per hour fee on public EV charging stations — have also shown promise and could be considered.

In the final analysis, the biggest risk of failing to get in front of this issue is the possibility of history repeating itself. Before the adoption of Rebuild Illinois in 2019, Illinois went 10 years without a capital bill or substantive changes to transportation funding.

The impact of this neglect was not just measured in terms of needless congestion and safety risks on our roadways, but hundreds of dollars in annual preventable maintenance costs for every driver on the road. Rebuild Illinois was a historic, bipartisan achievement that made huge strides to reverse these trends, but it doesn’t change the fact that our state is continuing to play catch-up.

Now Illinois lawmakers have a chance to be forward-thinking, and to reimagine how we fund transportation improvements for a new age that will be less reliant on gasoline and render our existing transportation funding models obsolete. If policymakers are proactive, they can create a sustainable financing model that can ensure we will have safe, reliable and well-maintained transportation networks for generations to come.

Mary Tyler, AICP, is the transportation director for the nonpartisan Illinois Economic Policy Institute.

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