Interim Committee Studies Future of Transportation Funding

This interim, North Dakota lawmakers serving on the Government Finance Committee are discussing how to fund state and local roads in the future. Part of that discussion, includes exploring possible increases to the state’s gas tax and registration fees as well as alternative revenue ideas. The committee meet December 7^th to discuss transportation funding and the future. 

 “The current funding formula is inadequate,” said NDACo Assistant Director Terry Traynor. “The federal funds have essentially been flat over that same time period, clearly, our foundational revenues have not been keeping up with the costs. It is time to explore other funding options to support our transportation system in the near future and long-term.”

County road funding has consisted of property tax, highway distribution funds, and federal highway formula funds and in the most recent years, a great deal of one-time state funding. That one-time funding has been the salvation for county roads with the injection of close to $1 Billion in both oil producing and non-oil producing counties. For about four years, counties have made great strides in addressing the backlog of road and bridge improvement projects.

Traynor highlighted how the one-time investments have made a profound difference across our state. 413 major projects in every county were completed with the one-time funding. The most recent Upper Great Plains Transportation Institute (UGPTI) study shows dramatic improvement in road conditions because of this. The miles of “poor” pavement have been cut in half and the miles of “good” have increased by at least a third.

“But more than the chart, you can see it in the results, and hear it from our local officials,” said Traynor.

Traynor showed committee members examples of what the funding as done from a $1.32 million bridge in Barnes County to a $2.2 million gravel truck route in Ramsey County to a $3.7 million bridge replacement in Stark County.

“The UGPTI study says we should be spending $450-$500 million a biennium on local roads if we want to maintain the improvements made and provide the transportation system necessary for our ag, energy and other industries,” said Traynor. “We are actually spending about 60% of that need, and much of that is on things like snow and ice removal that contribute little to the long-term maintenance of roadways. So obviously we have a challenge.”

North Dakota Department of Transportation officials pointed out that because there was no appropriation for a state funded construction program during the 2017 Legislative Session; North Dakota is solely dependent on federal funds (and the minimal state match) for any road improvements this biennium. Federal funds can only be used on federal roads; which make up 17.65% of all the roads in the state. This makes the state very reliant on federal funds for any construction work.

Traynor pointed out that the Highway Distribution Fund is supplied by motor vehicle taxes and fees. Two-thirds of the revenue is fuel taxes, and one-third vehicle registrations. And unlike in some states, the motor vehicle excise tax does not go into funding roads but into the State’s General Fund.

It has been a number of years since any increases have been made. In 2005, lawmakers approved a 2-cent fuel tax and an across-the-board registration fee increase of $10. In 2009, a $3 registration increase was approved. A 1-cent increase in the gas tax would generate $7.4 million for state, county, city and township roads.

Comparing registration fees with other states in our region, North Dakota is significantly less. Wyoming for example is three times higher, Montana twice as much and South Dakota is similar but has a local option as well, which makes their fees higher than North Dakota.  North Dakota is surrounded by states with higher fuel taxes with the exception of Montana which is similar.

Transportation officials at all levels across the country are exploring additional ways beyond the traditional methods to provide funding for transportation programs as revenue generated by fuel taxes have dropped due to greater vehicle fuel efficiency.