May 8, 2020

By Vicki Kitchin

Among the many issues currently facing state and local government leaders is the downturn in road funding caused by the Covid-19 pandemic. As Congress negotiates future stimulus packages, they should include relief for road funding budgets to ensure that planned transportation projects move forward. The pandemic has highlighted and reinforced that a safe, efficient, and reliable transportation system is vital to delivering raw materials, goods, and services needed by first responder and healthcare operations, businesses, and all Americans during a national emergency.


Negative Factors Affecting Indiana Road Funding

In Indiana, the state has not released specific forecasts for the downturn in road funding. However, they are monitoring the situation closely. In April, the Indiana Department of Transportation announced that “traffic was down approximately 40 percent, on average, across the area compared to the week before the stay-at-home order went in effect.” (See Figure 1 below.)

Without a doubt, decreased traffic volume can be correlated to decreased fuel sales. This, in turn, means a dramatic downturn in fuel tax receipts, which in Indiana are used to fund state and local road improvements and to match federal highway funds for the same purpose.

Another factor in Indiana is the low price of fuel. Some funding for local roads is currently based on the sales tax on gasoline and beginning this fiscal year, an ever-growing part of INDOT’s budget will rely on this same funding mechanism. With the price of gasoline depressed, the sales tax revenue will be lower than original projections. The Indiana Department of Revenue recently posted the gasoline use tax rate for May 2020 at 8.0 cents per gallon. That compares to 15.1 cents per gallon one year ago – a 47% decrease. It should be noted that revenue from sales tax on gasoline will be doubly affected by the downturn since gallons sold are also down, as described above.


State Transportation Departments Request $49.95 Billion in Relief

In early April, the American Association of State Highway and Transportation Officials (AASHTO) sent a letter to congressional leaders requesting immediate emergency relief of $49.95 billion in flexible federal funding to offset what they estimate will be at least a 30 percent loss to state transportation revenues in the next 18 months. They said this federal backstop will help ensure state DOTs “can operate and maintain their systems without disruption and allow current transportation projects and plans to continue.” (Click here for a copy of the AASHTO letter.)


BIC Request for Federal Relief

As Congress considers the next Covid-19 relief package, we ask that funding be included for state DOTs so the Indiana highway program can stay on schedule without cuts to future projects. We also ask that the Indiana share of such relief package be calculated in a fair manner. In Indiana, we are fortunate that INDOT construction has continued throughout the pandemic. However, we understand that the downturn in state highway revenues will result in projects being cut from future lettings. Already our members are seeing local projects shelved or delayed due to the uncertainty of funding streams.

Note that this request for immediate relief is separate from the need to reauthorize the federal highway program (FAST Act) before it expires in September 2020. We have very specific concerns related to how Indiana will fare in a new highway bill as described elsewhere on the BIC website.