Washington drivers are paying more at the pump as oil prices rise amid the war in Iran, and soon they will be paying even more. Yet Washington’s transportation revenue remains below earlier projections.
The state’s gas tax will increase from 55.4 cents to 56.5 cents per gallon on July 1, in line with the 2% annual increase adopted in the 2025 transportation package.
Why Washington Transportation Revenue is Under Pressure
The June 22 revenue forecast shows a tighter outlook. Washington transportation revenue for the 2027-2029 biennium is now projected at $10.62 billion.
That forecast is $130 million lower than the February projection, and over the 10-year forecast, projected baseline revenue is down by $1.12 billion.
Several sources drive the decrease, including lower expected fuel tax revenue, license and permit fees, and Climate Commitment Act revenue.
The biennial transportation budget relies on dedicated revenue sources. When those sources weaken, lawmakers face harder choices about projects and services.
Local Governments Sounds the Alarm
At this week’s Joint Transportation Committee meeting, cities identified an estimated $2.37 billion annual gap in funding for transportation infrastructure needs.
The shortfall is calculated by finding the gap between current transportation spending and the estimated amount needed to maintain city systems in good repair.
City staff cited rising infrastructure preservation costs, limited local revenue tools, declining gas tax revenue, and increasingly complex project requirements as key challenges.
Gas Prices and Fuel Taxes Drive Uncertainty
The June forecast expects regular gasoline prices to reach a statewide average of $5.54 per gallon by September. Those higher costs could affect household budgets, change driving behavior, and create uncertainty for the biennial transportation budget.
Vehicle registrations further exacerbate transportation revenue. The Forecast revised car and truck registrations downward, affecting license, permit, and fee revenues.
Looking Toward the 2027 Session
The latest forecast sets the stage for another year of difficult conversations about transportation funding before the 2027 legislative session. These projections show that Washington transportation revenue remains vulnerable to dynamic economic conditions and changing driver behaviors.