State faces looming funding crunch to pay for road construction, repairs

SANTA FE — A shift toward more fuel-efficient vehicles is posing big challenges to New Mexico’s future ability to keep up with road construction and repair projects statewide.

Despite a recent infusion of federal infrastructure funds, New Mexico faces a $471.6 million gap in funding for priority projects around the state, top state Department of Transportation officials told lawmakers during a recent interim committee hearing.

Already, the percentage of acceptable roads in New Mexico has decreased in recent years, from 75% in 2011 to 69% in 2023.

DOT Secretary Ricky Serna said the troubling trend is due largely to inflation — it now costs about $3 million for each mile of road construction — and lawmakers’ reluctance to adjust the state’s 17-cent per gallon gas tax. That gas tax rate is currently the fourth-lowest in the nation.

“We basically are holding firm, while other states are moving the needle to keep up with inflation,” Serna told members of the Transportation Infrastructure Revenue Subcommittee during a meeting in Silver City.

In some cases, the budget crunch is already forcing the Department of Transportation to seek creative funding sources to ensure federal grant funds are not lost, Serna told the Journal.

Specifically, he cited $125 million in state funds that must be obligated by mid-September to move forward with a border highway connector project in southern New Mexico linking the Santa Teresa Port of Entry to Sunland Park.

While lawmakers expressed concern about the projected trends, there appears to be a lack of agreement on how to best address the state’s brewing budget crunch for road work.

Sen. Antonio “Moe” Maestas, D-Albuquerque, said it’s been a “failure of government” not to gradually increase the gas tax rate over the past 30 years. While multiple bills have been filed on the topic, none have ultimately been signed into law.

But Maestas acknowledged it’s difficult politically to support tax hikes at a time that rising overall state revenues have led to lawmakers setting aside money in new trust funds for future use.

“Paying an extra 5 cents a gallon sucks, but paying $1,200 for four new tires sucks worse,” he said during the recent legislative hearing.

“Without roads, this state is nothing,” Maestas later added.

But Rep. Rebecca Dow, R-Truth or Consequences, pointed out New Mexico currently has more than $64 billion invested in various state permanent funds.

“It’s just really hard to think about taxing folks more,” Dow said.

State road fund revenues declining

New Mexico’s state road fund gets its money from several revenue sources, including the gas tax, vehicle registration fees and the vehicle excise tax levied on purchases.

The road fund, which is used to pay for repair and construction projects statewide, is projected to gradually increase to nearly $600 million in 2030. But its value is then projected to decrease by 13% by 2050.

In large part, that’s because of a projected increase in fuel efficiency — as measured in miles per gallon of gasoline — in new vehicles.

The trend is driving the road fund’s projected decline, as it’s expected to cost the state nearly $36 million from the 2024 budget year through 2030, according to DOT data.

“You’re paying less (in gas tax) because you’re at the pump less,” Serna explained during the recent legislative hearing.

The Department of Transportation sought to shore up its fiscal outlook during this year’s 60-day legislative session by pushing legislation that would have given the agency up to $1.5 billion in bonding authority, along with increased vehicle registration fees.

But that bill stalled in the Senate after passing the House without a single “no” vote, forcing supporters to regroup.

Serna said he expects similar legislation to be filed during the 30-day legislative session that starts in January, but said the delay could lead to an even larger budget gap for many planned transportation projects.

How road funding works

Unlike other state infrastructure projects, road construction and repair projects must be entirely funded before work can begin.

That means state transportation officials prefer stability and certainty over big revenue swings, Serna said.

In recent years, lawmakers have earmarked hefty one-time appropriations to help pay for road projects statewide, but those appropriations typically include a spending deadline, Serna said.

In addition, much of the funding New Mexico received under a federal infrastructure bill has been earmarked for specific uses, and not made available for discretionary spending, Serna said.

In other words, while the $2.1 billion in one-time appropriations the DOT received from 2019 to 2024 was happily put to use on road construction, wildlife corridors, rest areas and electric vehicle charging stations, it did not necessarily put the agency on better financial footing for future years.

And with some of those outside funding infusions now drying up, the state still has a long list of road repair and construction projects.

Rep. Cynthia Borrego, D-Albuquerque, was among the lawmakers to express concern over DOT data that shows New Mexico residents are currently paying about $2,000 per year in costs related to the state’s deteriorated roads, even after the federal spending infusion.

While the state might not yet be facing a crisis, “It’s not a pretty picture,” said Borrego.