Pa.’s roads would get more gas tax money in next budget, but a highway funding gap remains

PennDOT paving crews. (Commonwealth of Pennsylvania photo).

When Pennsylvania lawmakers talk about how taxpayers should foot the bill for getting around the Keystone State, debate generally centers on a dichotomy between mass transit and everything else under PennDOT’s umbrella.

In that respect, this budget season is shaping up to closely track that of recent years, with Gov. Josh Shapiro again proposing a shift in sales tax revenue to help transit agencies, primarily in the Philadelphia and Pittsburgh regions, and calling for more money for roads and bridges.

“It should not be an either or, this should be a both,” Shapiro said in his Feb. 7 budget address. “Whether you’re a mom in Mantua, McKeesport or in Manheim, you deserve a transportation network that gets you to work and home again in time for dinner safely.”

But lawmakers in rural parts of the commonwealth opposed the transit part of Shapiro’s plan last year, blocking $283 million in additional funding for transit while highlighting the massive gap in money available for roads, bridges and other transportation like regional airports.

Transportation Secretary Mike Carroll is set to appear before the state House Appropriations Committee in a budget hearing Wednesday.

This year, Shapiro’s $51.5 billion budget includes $292.5 million in additional revenue for transit by increasing the share of Pennsylvania’s sales tax that goes to transit by 1.75%. And his budget messaging touts $750 million in additional funding for highways over the next five years.

However, that $750 million figure includes more than $500 million in annual funding that is already going to PennDOT. Nearly a decade ago, lawmakers started the process of weaning the Pennsylvania State Police off of fuel tax and registration fee revenue that otherwise would have been available for highway construction. 

That pool of money, called the Motor License Fund (MLF), accounts for 25% of PennDOT’s $11.6 billion 2025-26 budget request.

Robert Latham, executive director of the Associated Pennsylvania Constructors, which represents hundreds of companies in the road-building industry, said Shapiro’s proposal would actually slow progress toward his goal of eventually eliminating the transfers from the MLF to the state police. 

“We are disappointed that the proposed budget does not reflect the General Assembly’s previous commitment to reducing the diversion of funds from the Motor License Fund for State Police operations,” Latham said.

Faced with an impasse over transit and highway funding last year, the compromise House Democrats and Senate Republicans reached to pass the current budget — $80.5 million each for transit and highways — fell short. 

Shapiro in November “flexed” $153 million in federal highway funding to arrest what a Southeastern Pennsylvania Transportation Authority (SEPTA) board member described as a “death spiral” and stave off fare hikes and service cuts. 

GOP leaders accused Shapiro of “pillaging” infrastructure projects to address a crisis of his own making when he prioritized a historic increase in public education spending over transit. While Democratic lawmakers vowed to pass a comprehensive transportation package this session, Republicans said they still want a reassessment of SEPTA’s service model, given reductions in ridership as a result of the pandemic and a widespread increase in telecommuting.

The MLF is one of the state’s restricted revenue accounts, meaning that it collects money through certain taxes and fees that can be used only for specific purposes. In the case of the MLF, those are taxes on liquid fuels such as gasoline and diesel and fees for driver’s licenses and vehicle registrations.

The MLF has provided funding for state police for decades under an interpretation of the law that it can be used for public safety as well as highway construction and maintenance, Latham said. At its zenith, state police funding from the MLF reached $800 million in 2016. That year, the state fiscal code included legislation to step down the amount going to state police to $500 million.

It reached that amount in 2021 and remained level until 2023, when the General Assembly passed Shapiro’s plan to continue reducing the transfers by $125 million with the goal of eliminating MLF funding for state police by 2027.

Under Shapiro’s new proposal, stepping down the transfers by $50 million a year, state police funding from the MLF would not reach $0 until 2029. 

“Everyone kind of agreed that we were on this $125 million a year path,” Latham said, noting that Shapiro’s first budget also created a dedicated public safety fund to support state police by paying for additional classes of state police cadets. “We’d rather stick with the two-year plan.”

House Transportation Committee Chairperson Ed Neilson (D-Philadelphia) said he agrees Pennsylvania’s fuel tax — among the highest in the nation at about 58 cents per gallon — should all benefit road users.

“I want all the money in the Motor License Fund to go to fixing roads and bridges. The faster we’re out of it the better we are,” he said. 

Rep. Kerry Benninghoff (R-Centre), who is the ranking Republican member of the Transportation Committee, did not respond to an interview request for this story. Sen. Judy Ward (R-Blair), who is chair of the Senate Transportation Committee, also did not respond to an interview request. 

Neilson noted the $250 million for state police in the current budget is a pittance compared to what state officials estimate PennDOT needs to fully fund the highway system.

Next year’s proposed budget projects about $2.2 billion in MLF funding for highway and bridge construction and maintenance, a $65 million increase over the current budget. PennDOT’s overall budget request is about $11.6 billion. 

A report by the Pennsylvania Transportation Revenue Options Commission, a group appointed by Gov. Tom Wolf to study potential new sources of funding, estimated a shortfall in transportation funding of about $9 billion in 2021 that was projected to increase to about $14 billion within a decade.

Senate Majority Leader Joe Pittman (R-Indiana) said in a statement to the Capital-Star the need for transportation safety improvements and economic expansion, of which transportation is a key part, continues to grow across Pennsylvania.

“It is abundantly clear the Motor License Fund cannot serve to fund critical projects and the State Police (PSP) simultaneously. We remain focused on the continuation of the process to phase out the PSP from the Motor License Fund,” Pittman said.

“While the acceleration of the rate two years ago was beneficial,” Pittman added, “the pace at which the transfers have taken place has been in flux throughout the last several years due in large part to the limitations of the general fund to carry more costs associated with the very important work of the PSP.”

Governors and lawmakers have explored new revenue streams, such as tolling interstate highways (which the federal government nixed nearly 15 years ago) or certain bridges, which a state court blocked in 2022. Taxing and regulating recreational cannabis and skill games is part of Shapiro’s current proposal.

A new $200 registration fee for electric vehicle owners is set to begin in April, which a House Appropriations Committee analysis projects will generate $16 million in its first year.

The 2021 revenue commission report explored a combination of new funding sources including a mileage-based user fee instead of a gas tax, tolls on certain highway corridors and carpool lanes, adjustments to vehicle sales taxes, and fees on transportation services such as Uber and Lyft could generate as much as $11 billion in new revenue.

One of the new fees the commission considered, a surcharge on package deliveries from companies like Amazon and DoorDash, was proposed as part of Maryland Gov. Wes Moore’s budget to help pay for transportation improvements.

“Those vehicles are using the roads. Drive up and down our highways and where there used to be farms there are 1- and 2-million-square-foot distribution centers,” Latham said, noting that transportation funding should take into account how road use is changing. “We’re in a distribution economy now and people aren’t going to brick and mortar stores as much so they aren’t buying gas.”