Tennessee Faced With $1 Billion Transportation Funding Gap

A new report identifies a significant shortfall in road maintenance funds projected for fiscal year 2027-28.

Updated on Sept. 28, 2026 in Electric Vehicles

Isometric editorial illustration featuring geometric concrete highway overpass structures and steel girders in a muted palette, representing infrastructure investment. — The Tennessee Advisory Commission on Intergovernmental Relations reports a projected $1 billion funding shortfall for state transportation projects in fiscal year 2027-28. AI Illustration. Upload story photo >

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Should your state raise taxes or fees to cover increasing road and bridge maintenance costs?

The Tennessee Advisory Commission on Intergovernmental Relations has released a report detailing a $1 billion projected funding gap for the state's transportation needs. Officials estimated that the state will require $3.6 billion for road and bridge investments during the 2027-28 fiscal year while only $2.6 billion in recurring revenue is currently expected.

Why it matters

Rising construction costs and rapid population growth have significantly increased the demand for infrastructure investment across the state. Furthermore, the transition toward electric vehicle adoption and increased fuel efficiency are actively reducing traditional fuel tax revenues.

The report identifies a total required investment of $3.6 billion against an anticipated $2.6 billion in existing recurring revenue. This leaves a deficit of $1 billion for essential road and bridge maintenance and capacity projects in fiscal year 2027-28.

The players

Tennessee Advisory Commission on Intergovernmental Relations

This state body is responsible for studying and providing recommendations to the Tennessee General Assembly regarding intergovernmental cooperation and fiscal policies.

The details

The commission suggested that lawmakers evaluate several funding mechanisms to address the deficit, including fuel tax increases, mileage-based fees, and new toll lanes. The report also proposed utilizing debt for specific infrastructure projects that are not well-suited for public-private partnerships.

Fiscal year 2027-28 is the period in which the $1 billion transportation shortfall is projected to occur.

Roadmap

The reliance on traditional fuel taxes is becoming increasingly unsustainable as the automotive industry shifts toward electric vehicle technology. This funding gap illustrates how states must fundamentally restructure transportation financing to account for the loss of legacy revenue streams.

Tennessee residents may see shifts in future state tax policies or the implementation of new mileage-based fees to maintain road quality. These adjustments could influence the total cost of vehicle ownership for drivers as the state seeks to fill the $1 billion budgetary hole.

The takeaway

The transition to electric vehicles requires a broader rethink of how state governments fund critical infrastructure maintenance. Drivers should prepare for potential legislative changes to how road usage is taxed in the coming years.