FY 2024- 2025 County Road Revenue Forecasts – April Update

Executive Summary: Oregon Department of Transportation’s (ODOT) April State Highway Fund (SHF) forecast predicts declining motor fuels sales will drop county revenue by $9.8 million (-2.5%) compared to their last estimate. Additionally, vehicle registration data has shifted the share of SHF apportionments across counties, which has most heavily impacted our forecast for metro counties. 

The Secure Rural Schools (SRS) Act has not been reauthorized by congress for Federal Fiscal Year 2024 and beyond (County Fiscal Year 2025 payment). Our partners at the National Association of Counties (NACo) have reported that SRS may be added by the Chair of the House Agriculture Committee to the next Farm Bill. 

If SRS is not reauthorized, counties will receive United States Forest Service (USFS) Timber Harvest Receipts. Timber sales can vary widely from year to year, to smooth out the impact of the commodities market, the USFS calculates payments using a seven year rolling average. Unfortunately, timber harvest receipts have not been calculated between 2014 and 2024, which leaves our forecast with a large margin for error. 

This article provides estimates for both alternatives, however USFS Timber Harvest Receipts are used for the baseline conservative estimate.

Baseline USFS Timber Harvest Receipts Estimate: The SHF, USFS, and FEX payments in FY 2025 are estimated to decrease by $9.8 million (-2.5%) under our previous estimates for FY 2025.

  • FY 2025 SHF estimate Decreased by 9.8 million (-2.6%) to $357.6 million
  • FY 2025 FEX estimate stayed the same (0%) at  $18.4 million.
  • FY 2025 USFS Timber Harvest Receipts stayed the same (0%) at 6.7 million.
  • FY 2025 Total estimate Decreased by 9.8 million (-2.5%) at $382.8  million.

Alternative SRS Reauthorization Estimate: The SHF, SRS, and FEX revenue payments in FY 2025 are estimated to decrease by $8.3 million (-1.9%) under our previous estimates for FY 2025.

  • FY 2025 SHF estimate Decreased by 9.8 million (-2.5%) to $367.5 million
  • FY 2025 FEX estimate stayed the same (0%) at  $18.4 million.
  • FY 2025 SRS estimate Increased by 1.5 million (4.79%) at $33.2 million.
  • FY 2025 Total estimate Decreased by 10.2 million (-2.4%) at $407.4 million

Please Click here for the County Road Revenue Forecasts for Fiscal Year July 1, 2024 – June 30, 2025 April Update (County FY 2025).

State Highway Fund (SHF): ODOT releases their State Transportation Revenue Forecasts twice a year, in April and October. Click here for the full report on the State Transportation Revenue Forecast

The October update is consistently more optimistic, and projected county SHF revenues to increase by 14 million (+3.9%) in the next fiscal year. The April update is consistently more restrained and projects county SHF revenues will increase by 4.2 million (+1.2%), which is a decrease or 9.8 million (-2.6%) from our last publication. 

Motor fuels tax revenue is estimated using fuel prices, passenger vehicle stock, fuel efficiency, and diesel price. Fuel sales in the first two quarters of fiscal year 2024 underperformed the October 2023 forecast, and have remained volatile. Inflation is reducing spending, and fuel efficiency is reducing fuel consumption, both factors are expected to reduce fuels revenue in coming years.

Vehicle registration data has shifted the share of SHF apportionments across counties, which has most heavily impacted our forecast for metro counties. ODOT’s Revenue Finance and Compliance Assistant Director Travis Brouwer has approached metro counties’ public works departments to discuss convening a working group to increase registration rates and re-registration rates.

  • FY 2025 SHF estimate Decreased by 9.8 million (-2.6%) to $357.6 million

Fund Exchange Program (FEX) / Surface Transportation Block Grant (STBG): The Association of Oregon Counties (AOC) and the Oregon Association of County Engineers and Surveyors (OACES) negotiated a legislative fix, House Bill 2101, to secure this vital program and head off a proposal from the Oregon Department of Transportation (ODOT) to reduce the fund exchange program by 50%. 

The AOC County Road Program (CRP) Budget Advisory Committee is planning a possible 5% increase for FY 2025 to the AOC CRP off the top allocation that funds AOC advocacy, services, IRIS, and support for OACES. The advisory committee believes a modest increase is necessary to combat inflation, rising labor costs and prepare AOC to advocate for the upcoming 2025 transportation package, and the adoption of IRIS 10. The AOC CRP off the top allocation is a small percentage of the Fund Exchange Program and Costs are divided proportionally across counties. 

ODOT released the FY 2023 allocation in September 2023 and 2024 FEX allocations have recently been distributed under the provisions of HB 2101. ODOT, AOC, and the League of Oregon Cities (LOC) are negotiating an updated Intergovernmental Agreement to fully implement HB 2101. Please Note: 2022 and prior banked FEX allocations must be exchanged or utilized by 12/31/2024.

Current program details and individual county allocation balances are available on the Oregon Department of Transportation : Local Government Funding Overview : Local Government : State of Oregon website. Please reach out to Hope.DERRICKSON@odot.oregon.gov with questions and concerns.

  • FY 2025 FEX estimate stayed the same (0%) at  $18.4 million.

Secure Rural Schools: With the passage of the Bipartisan Infrastructure Law (BIL), SRS Payments were authorized at the amount from Federal FFY 2017 for FFY 2021, FFY 2022, and FFY 2023. AOC and OACES are tracking SRS Reauthorization as bills move through congress. Our partners at the National Association of Counties (NACo) have reported that SRS may be added by the Chair of the House Agriculture Committee to the next Farm Bill. We are grateful for the support of Chair Thompson and will be closely following the bill. The next committee working session is on May 23rd. 

SRS estimates are not subject to the typical 5% annual decrease, however sequestration rules, which typically fall between 5% and 6%, are included. Other small adjustments to the revenue forecast are due to changes in median national income and county median income.

SRS Payments are divided between Title I, II, and III, with Title I providing funding for roads. Oregon Counties can elect to change their allocation every two years, along with their Timber harvest selection. All Oregon counties completed their election allocations between Title I, II, and III by the deadline on August 1, 2023.

It is strongly recommended that counties budget around the USFS Timber Harvest Receipts included in the forecast. Read more and take action in the latest AOC Article: Counties Face Fiscal Insecurity Due to Congress’s Failure to Reauthorize the Secure Rural Schools Act.

  • FY 2025 SRS estimate Increased by 1.5 million (4.79%) at $33.2 million.

USFS Timber Harvest Receipts: The USFS estimates are based on 25% timber harvest receipts (1908 Act 25-percent payments) from Federal Fiscal Year 2021 (County Fiscal Year 2022), which is the most recent data released by the Forest Service. Please remember that counties only receive USFS receipts if a county selects not to receive SRS payments, or if SRS payments are not appropriated, In most cases, this would represent the minimum budget option.

In FY 2023 Timber Harvests saw a banner year as inflation in construction materials had increased sale values. This increase in timber harvest was temporary as markets remain volatile and vulnerable to wildfire and swings in price and demand. At this time, average monthly timber harvest sales are 52% of what they were in the last fiscal year.

Timber sales can vary widely from year to year, to smooth out the impact of the commodities market, the USFS calculates payments using a seven year rolling average. Unfortunately, timber harvest receipts have not been calculated between 2014 and 2024, which leaves our forecast with a large margin for error.

Counties can elect to receive USFS timber harvest receipts or SRS payments every two years. The next deadline for electing to receive SRS / USFS timber harvest receipts has not been announced, but is likely to fall between August and September 2025 and every odd year thereafter.

  • FY 2025 USFS Timber Harvest Receipts stayed the same (+0%) at 6.7 million.

Forecasting Uncertainty and FY 2024-25 Outlook: This FY 2024-25 forecast represents a conservative baseline county funding model estimate approach for dedicated funding budget planning purposes.

Please reach out to Jordan Cole for more information or with any questions or concerns.