PA Independent Fiscal Office Reports Drop in 2024 Gas Tax Revenue

The Independent Fiscal Office (IFO) recently published a report on the drop in gas tax revenue citing increased fuel-efficiency vehicles and fewer daily commutes. The state is projected to have a revenue shortfall of around $250 million from its gas tax in 2024, compared to 2019, pre-COVID. The change in lifestyle, with an increasing number of employees working from home, and a shift towards more fuel-efficient vehicles contribute to this shortfall.

Annual consumption declined 15% from 2019 to 2020, then partially recovered in 2021 as gasoline consumption reached 92% of pre-Covid levels. For 2022 and 2023, consumption fell to roughly 91% of 2019 levels. For 2024, Pennsylvania’s gasoline consumption is expected to decline 0.6% from the prior year. The annual reduction of 430 million gallons from 2019 translates to roughly $250 million (430 million gallons * $0.576 state gasoline tax rate for 2024) less tax revenue available for transportation infrastructure projects (includes restricted and unrestricted Motor License Fund revenue).

For years, there have been debates over the falling gas tax revenue at the Capitol and an unsuccessful proposal in 2021 to switch from relying on gas tax to a fee based on the number of miles traveled by motorists.

Governor Josh Shapiro announced last month he would divert more than $150 million in federal highway funding to support Philadelphia’s mass transit system, avoiding immediate service cutbacks and fare hikes. His decision faced opposition from Republican lawmakers who claim their districts will incur losses.

In 2021, the Wolf administration proposed plans to collaborate with private entities to repair major bridges, which would require the addition of tolls. However, due to public outcry, the proposal has been halted.

On the other hand, there has been a decrease in the number of personal vehicles owned in Pennsylvania. The average fuel efficiency improved from just under 25 miles per gallon (mpg) in 2019 to 29 mpg in 2024, according to the IFO. As of 2023, PennDOT recorded a drop in registered passenger vehicles to 7.8 million, the lowest since 2010.

Starting April 1, owners of electric vehicles will be required to pay an annual fee to cover the gas tax not applicable to them. In the first year, the fee will be set at $200 for electric vehicles and $50 for plug-in hybrids, and incremental increases will be applied in the following years. Despite these added fees, the expected $20 million annual revenue from the electric vehicle fees still falls short in offsetting the loss in gas tax revenue.