This week, the SCDOT Modernization Ad Hoc Committee heard from Frank Rainwater, Director of the Revenue and Fiscal Affairs Office (RFA) on the challenges the state faces in funding infrastructure amid population growth, rising vehicle miles traveled, and rising costs.
South Carolina is growing, and this growth is not expected to slow anytime soon. The state’s population is expected to increase by one million people by 2040. Rainwater noted that current figures show that average daily vehicle traffic has increased by 1.6% annually, outpacing the population growth rate of 1.2%.
The problem is, South Carolina growing, but our transportation revenue streams are not. This presents a significant challenge for the state’s ability to maintain and repair existing infrastructure, not to mention the demands associated with growth.
South Carolina relies heavily on the fuel tax to fund transportation infrastructure. South Carolina’s revenue trajectory changed with the passage of the road funding bill (Act 40) in 2017, which included an increase in the fuel tax of 12 cents, phased in at two cents per year over six years (2017 – 2022). As you can see, this legislation has been the sole driver of the increase in revenues for the state.
Source: RFA presentation to SCDOT Modernization Ad Hoc Committee 12/2/25
Rainwater cautioned that despite a growing population, the gas tax will see very little growth moving forward. “You are having to maintain roads with more cars, with less revenue because of fuel efficiency,” he said.
Let’s not forget about inflation. Inflation continues to erode purchasing power. If you had $100 in 1986, it would be worth about $40 today. Many states now index their motor fuel taxes to help revenues keep pace with economic factors. Currently, 25 states index their rates using specific formulas to adjust for inflation (CPI), the wholesale price of fuel, highway construction costs, or other factors. Depending on the formula methodology used, rates can increase or decrease.
Rainwater provided estimates for how an index to inflation would impact the state’s gas tax. If the gas tax were indexed to inflation today, it would reach 51 cents per gallon by 2050. (Which aligns with trends from other states that index to inflation, as their rates tend to fluctuate 1-2 cents per year.)
He went on to outline other revenues sources dedicated to transportation, including the state’s second most relied upon revenue source, the infrastructure maintenance fee ($500 vehicle sales tax), and provided data and trends for various scenarios for informational purposes.
Rainwater’s presentation further solidified what we already know – that existing revenues are insufficient to meet the growing demands on our transportation network. With a $1 billion funding gap identified through 2050, legislators must weigh funding options as they impact users (residents, businesses, and tourists) differently.