MnDOT presents 20‑year road funding gap; 2023 changes narrow but do not close shortfall

MnDOT staff presented the agency’s statutorily required Road Funding Gap Report to the Senate Transportation Committee, describing long‑term pressures on Highway User Tax Distribution (HUTD) revenues and options to close an estimated multi‑billion‑dollar shortfall over the next 20 years.

Josh Kannadar Hoebinger, MnDOT chief financial officer, summarized the drivers: inflation, aging infrastructure, and growing needs. He said recent revenue changes enacted in 2023 (including a gas‑tax indexing provision and a revised vehicle registration tax formula) produced a substantial one‑time boost but did not eliminate a long‑term gap. “In the most recent state fiscal year 2024, we’re looking at about $2,700,000,000 working its way through the HUTD fund,” Kannadar Hoebinger said, and described trunk highway construction as MnDOT’s principal HUTD use.

MnDOT’s 20‑year analysis starts from its Minnesota Highway Investment Plan (MnSHIP). Kannadar Hoebinger summarized prior MnSHIP gap estimates—about $600 million per year in 2013, about $900 million in 2017, and about $1.15 billion in the most recent pre‑2023 update—and said the agency’s updated analysis shows a remaining trunk‑highway construction shortfall of roughly $890 million per year. When the agency prorates needs for counties and cities and totals HUTD shortfalls across all three distributions, the 20‑year report estimates a gap in the high‑teens of billions of dollars (report: roughly $18.7 billion over 20 years).

Kannadar Hoebinger reviewed main revenue sources in HUTD: a newly indexed gas tax (31.8¢/gallon composed of a base, a 3.5¢ surcharge and an inflation adjustment), a reformed registration tax based on a percentage of sticker price with a 10‑year depreciation schedule, and the motor vehicle sales tax (MVST) split between HUTD and transit. He listed 22 policy options the report analyzed—statewide revenue changes (gas or registration tax increases), road user charges, local funding options, and project‑level financing strategies such as tolling or expanding electronic toll collection and using federal financing programs like TIFIA.

Kannadar Hoebinger told senators MnDOT is also tracking efficiencies: required statutory efficiency targets identify at least 15% of new money since 2018; MnDOT reported cumulative efficiencies of about $600 million from 2018–2024, above the $350 million statutory calculation target.

Senators asked follow‑up questions about whether specific items (for example, a proposed State Patrol facility) are counted in the gap and about the cost impact of greenhouse‑gas requirements; MnDOT staff said some items are accounted for in the non‑construction portion of HUTD and that GHG cost impacts were under review with no single statewide estimate yet.

Committee members discussed federal discretionary grants under IIJA: Kannadar Hoebinger said Minnesota has received about $1.2 billion in discretionary grants to date, with varying stages of obligation; he said that uncertainty about future federal awards creates planning risks for the state. Committee members also discussed the Blatnik Bridge project’s effect on bridge condition measures and the degree to which maintenance and rehabilitation needs will rise if additional revenue is not secured.

MnDOT recommended a multi‑pronged approach to close the gap rather than a single new tax, and the agency committed to follow up with more specific impacts and options for committee consideration.