About Alabama — Finding the Money to Build and Maintain Alabama’s Roads

Few governmental responsibilities affect people more directly than providing the roadways on which we travel. Alabama has 3.8 million licensed drivers. We drive on more than 100,000 miles of streets and highways, which carried about 64 billion miles of travel in 2010.

Operating this network requires a substantial public investment. Alabama’s state and local governments spent about $2.2 billion, or $460 per capita, on building and maintaining roads in 2011, about 7 percent below the national average.

Today serious funding issues threaten the capacity to sustain Alabama’s road network. They stem from lack of growth in gas-tax revenues, increases in construction costs and budget maneuvers.

Highway money comes mainly from federal, state and local taxes on motor fuels. On a purchase of gasoline in Alabama, these taxes total about 39 cents per gallon.

The state’s 18-cent tax rate was set in 1992. Since then, travel mileage on the roads has increased, but automobiles are becoming much more fuel-efficient. As a result, the number of gallons sold in Alabama, and therefore gas-tax revenues, are not growing.

Meanwhile the buying power of each tax dollar has been eroded by substantial increases in construction costs over time.

In recent years, the Legislature has diverted up to $60 million annually from revenues that normally go toward highways to cover funding shortfalls in the state’s general fund.

At the federal level, an 18.4-cent gasoline tax has been in place since 1993. Congress has been authorizing more highway spending than these taxes produce, depleting the account and endangering future grants to the states. The answer thus far has been to move money from other sources into the highway account, but federal budget problems make this a short-term solution. Recent estimates are that the highway trust fund will run out of money in August.

One way to improve the balance between highway revenues and construction-related spending requirements is to create a sales tax for gasoline. For example, Georgia’s state gas tax rate is 7.5 cents per gallon plus 4 percent of the sales price.

Borrowing is another way to bolster highway revenues. Alabama is in the midst of borrowing up to $1 billion in anticipation of future federal highway grant money. Of course, these bonds will have to be repaid. The state has not yet finished paying for similar bonds authorized in 2000.