Although transportation needs appear to be growing, the revenues available for transportation spending are becoming more uncertain. Motor fuel and vehicle taxes-which account for approximately 64 percent of state funding for transportation projects-have not kept pace with inflation in many states and nationally have declined in value and purchasing power. With the cost of gasoline remaining high at the pump, motor vehicle fuel tax increases to pay for transportation projects are politically unpopular. In Georgia, motor fuel taxes were actually suspended temporarily, and increases in other jurisdictions have been under attack.
Other sources of state transportation funding-such as tolls, registration fees, driver's license fees, truck fees, and a host of miscellaneous taxes and fees-can be politically unpopular, making it difficult to derive additional funding from these mechanisms to compensate for the increased need for transportation funding.
State general fund budgets-which account for about 4 percent of transportation spending-have faced various challenges in recent years, from declining revenue collections to rapidly increasing costs for programs such as Medicaid and education. The availability of state resources for programs other than Medicaid, elementary and secondary education, corrections and public welfare continues to diminish. According to NCSL's State Budget Actions reports, Medicaid has been the fastest growing major program in state budgets since 2000.44 State general expenditures for Medicaid in FY 2005 grew an estimated 14.6 percent, while state general fund expenditures as a whole grew 6.8 percent during the same period.
The second fastest growth in a major program in FY 2005 was in corrections, which grew an estimated 8.4 percent. Although revenues in 2005 are generally recovering after several years of underperformance, additional spending requirements for Medicaid and K-12 education will continue to limit state legislatures' flexibility to use general funds to cover transportation expenditures. In 1995, 59 percent of state budgets were dedicated to K-12 education, Medicaid, higher education and corrections. In 2005, 68 percent of state budgets were dedicated to those programs, leaving only 32 percent of state revenue for all other programs, including transportation.