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NDOT warns of inflation and fuel‑efficiency driven shortfalls; preservation prioritized over expansion
Summary
Indiana Department of Transportation officials told the State Budget Committee that inflation, higher material costs and increased vehicle fuel efficiency are eroding highway purchasing power. NDOT said it is prioritizing preservation and debt service over capacity projects and has deferred hundreds of projects to manage a constrained capital
INDIANAPOLIS — Department of Transportation officials told the State Budget Committee that rising construction costs and long‑term declines in fuel tax revenue due to more fuel‑efficient vehicles and electric vehicle adoption are squeezing the state’s ability to pay for road and bridge projects.
“Preservation takes precedence over capacity expansion,” NDOT Secretary Matt Huebler told senators, summarizing the agency’s asset management approach as it faces higher unit costs for materials and declining motor‑fuel tax revenue per mile.
Why it matters: NDOT manages roughly 29,000 lane miles and 5,000 bridges statewide. Officials reported that about 94.3% of state‑maintained roads and 97.1% of state‑maintained bridges were in fair or better condition at the end of calendar 2023, above national averages; continued maintenance is expensive and more so when costs rise or revenue falls.
What NDOT told lawmakers - Budget and priorities: NDOT’s biennial budget request includes a multiyear capital program primarily supported by state highway revenue and federal aid. NDOT said about 59% of its budget is the state capital program and that debt service and preservation are the first uses of funds. - Inflation and purchasing power: NDOT said earlier assumptions of 2.5% annual inflation no longer hold. Higher rates over the last several years have reduced the state’s purchasing power and forced NDOT to delay or “lay over” about 300 projects while it re‑scopes or reprioritizes work. - Fuel‑efficiency and revenue erosion: NDOT warned that as vehicles become more fuel efficient and as EV adoption grows, motor fuel tax receipts (a principal revenue source for the road fund) will decline unless the state or Congress changes the revenue structure.
Senators’ questions and agency responses - Revenue solutions: Senators asked about revenue fixes and how Indiana compares nationally. NDOT said states differ; Huebler endorsed House members’ work on revenue diversification proposals (e.g., House Bill 1461) and suggested the state study multiple revenue options including indexing or alternative mechanisms. - Project impacts: Senators asked whether deferred projects will increase overall cost later. NDOT acknowledged delaying work can increase long‑term costs and stressed that prioritizing preservation now helps prevent higher future costs but cannot eliminate growing price pressures.
Context and next steps - Community Crossings: NDOT highlighted the long‑running Community Crossings program that provides matching grants to cities and towns. For the most recent calls the agency awarded $200 million to local projects; since 2016 the program has awarded roughly $1.8 billion to local governments. - Legislative work: NDOT asked lawmakers to weigh in on long‑term funding options during the session and thanked Representative Presley and Senator Kreider for work on a bill aimed at revenue diversification.
— Reporting by State Budget Committee hearing staff, based on testimony from Matt Huebler, Secretary of the Indiana Department of Transportation.
