State report says Tennessee should increase taxes or start borrowing to fund road construction

Tennessee lawmakers likely need to increase taxes or allow borrowing if the state wants to meet its growing transportation cost needs, a recently released report by the state’s intergovernmental agency found. 

Officials with Tennessee Advisory Commission on Intergovernmental Relations, TACIR, said Tennessee needs $3.6 billion for its highway operations, maintenance and improvements, but currently only generates at $3.2 billion in revenue, leaving a $400 million gap.

“Tennessee’s transportation network is performing well in many ways, but continued growth is driving needs for additional long-term investment,” said Cliff Lippard, the executive director of TACIR, in his letter to lawmakers delivering the report. 

TACIR added in the report lawmakers could increase the existing fuel taxes, implement a new tax or remove Tennessee’s restriction on borrowing money for some road projects. Tennessee is one of six states that has a “pay as go” restriction, preventing state officials from borrowing money to pay for road construction. 

The report’s publication comes amid a growing chorus of concerns about the future of the state’s road funding. 

Bryan Ledford, the major projects bureau chief at the Tennessee Department of Transportation, previously told state officials that the department’s toll lane project was a start in finding alternative ways to fund roads but “not a silver bullet.”

The Sycamore Institute, a nonpartisan think tank, forecast in its latest state budget report the state’s current gas tax revenues aren’t keeping up with inflation, causing a structural deficit. 

Warnings continue over TN’s lack of sustainable transportation funding, even with toll lane project

Tennessee’s road funding problem dates back years and as cars have become more fuel efficient, drivers are purchasing less gas, causing stagnation of gas taxes collected. 

“Increased fuel efficiency and rising construction costs are reducing the ability of existing revenue streams to provide enough funding to both maintain existing infrastructure and keep up with demand for improvements,” Lippard said. 

In 2017, Tennessee lawmakers agreed to raise the state’s fuel taxes by 30%. At the time, experts warned that the gas tax increase would only be a temporary solution.

Gov. Bill Lee in 2023 pushed through the Transportation Modernization Act, which allowed the state to pursue toll lanes and dedicated around $3 billion in one-time funds for road construction. Lee’s administration helped move another $1.7 billion in one-time transfers, but did not push for tax increases or borrowing for roads.

TACIR projected that by 2055 the state will have around $7.8 billion in yearly road construction costs, and gas taxes have little chance of keeping pace, potentially creating a $4 billion yearly deficit. 

Tennessee currently generates $30 billion in tax revenues to fund its entire budget.

Beth Emmons, the spokesperson for the state Department of Transportation, said “the report highlights the significant investment required,” but declined to say whether the department would ask for a tax increase during the next legislative session starting in January.

In the past, Tennessee’s governor has been the primary advocate for any increase to road construction funding. Lee is term-limited and a new Tennessee governor will be elected in November. 

The report