Tennessee leaders weigh new transportation funding tools as congestion grows and gas-tax revenue weakens statewide

State seeks long-term revenue as growth strains highways

Tennessee transportation officials and lawmakers are taking new steps to identify durable funding sources for road and bridge work as congestion worsens in major corridors and traditional revenue streams face increasing pressure. The debate comes after the state committed several large infusions of non-recurring dollars for transportation while acknowledging that long-term needs exceed what existing user taxes and fees can reliably support.

A central focus is a legislatively directed study intended to quantify Tennessee’s transportation funding gap and evaluate replacement revenue options as fuel-tax collections soften due to more fuel-efficient vehicles and the growth of electric vehicles. Under House Bill 736, the Tennessee Advisory Commission on Intergovernmental Relations is tasked with analyzing how much money is needed to maintain and improve roads and bridges, reviewing ongoing costs, and presenting a set of long-term funding recommendations. The report is due Sept. 30, 2026.

Recent investments highlight both urgency and limits

In April 2023, Tennessee enacted the Transportation Modernization Act, a major policy package that expanded the state’s authority to use public-private partnerships and established a funding approach that accounts for electric and hybrid vehicles. The legislation was paired with a multibillion-dollar general-fund investment strategy aimed at accelerating priority projects and addressing congestion.

More recently, state budget actions for transportation have included a one-time $1 billion allocation for additional statewide projects and an annual shift of recurring revenue from tire sales taxes into TDOT’s Highway Fund. The tire-tax redirection is intended to provide a steady funding stream for paving and bridge work, including preservation programs that TDOT has said will add capacity for resurfacing and bridge-deck treatments each year.

Choice Lanes raise new financing questions

Alongside funding debates, Tennessee is advancing “Choice Lanes,” a managed-lane concept in which new, additional lanes are financed and operated through public-private partnerships, with drivers able to pay a variable user fee for more reliable travel times. State transportation planning documents and project materials identify the I-24 corridor southeast of Nashville as the leading candidate for the first project, with procurement activity underway since late 2024.

State officials have described Choice Lanes as distinct from traditional toll roads because existing general-purpose lanes remain free. The model is also framed as a way to add capacity in heavily congested corridors without concentrating the state’s annual transportation work program in a single metro area.

Revenue options under consideration

The long-term study required by HB 736 is directed to evaluate potential alternatives and their impacts on residents and industries, including approaches that have been used in other states. Options referenced in the legislation include:

• Road-usage style fees
• Fees tied to rental cars, delivery services, or large commercial vehicles
• Allocating portions of existing sales-tax collections connected to vehicles and tires

The study is expected to pair a quantified funding gap with policy alternatives, providing lawmakers a framework for decisions ahead of the Sept. 30, 2026 deadline.

For Tennessee’s fastest-growing regions, the outcome will shape the mix of pay-as-you-go funding, dedicated recurring revenues, and private-sector financing used to deliver projects intended to reduce congestion and maintain the state’s road network.