"We are falling behind," Gottlieb said Tuesday in La Crosse during the first of nine planned town hall meetings.
The department faces a $600 million funding gap in the next two-year budget cycle, according to the La Crosse Tribune.
Fuel tax revenues are projected to decline 20 percent over the next decade due to Americans driving fewer miles in more efficient vehicles, he said. The tax is the DOT's single largest source of funding.
The Legislature hasn't approved an increase for the fuel tax since 1997, and the 30.9 cents per gallon tax hasn't been adjusted for inflation since 2006.
Gottlieb highlighted recommendations of the Transportation Finance and Policy Commission, which called for an additional $680 million a year to maintain the current system. About 96 percent of that money would go toward improving roads and closing the current funding deficit; the rest would be split among other modes of transportation, such as rail, water, air, bike and pedestrian.
The goal of the town hall meetings is to get feedback on transportation needs and how the state should finance them into the future, Gottlieb said.
With about 3,500 workers and a budget of more than $3.5 billion, the Department of Transportation is one of Wisconsin's largest state agencies, supporting all modes of transportation, including state highways, local roads, railroads, public transit systems, airports, harbors and bicycle and pedestrian facilities.
Some people who attended the meeting Tuesday called for better support for passenger rail. Others complained that crumbling rural roads and bridges are preventing farmers from getting their crops to market.
Matthew Christen, who said he's put 17,000 miles on his bicycle in the past six years, called on the DOT to recognize bicycles as a bona fide mode of transportation.
Gottlieb said additional funding for bike-pedestrian infrastructure is unlikely unless the state solves the larger funding issue.
"I try to be a realist," he said. "I kind of have to be in my job."
Many complained about roundabouts.
Gottlieb said roundabouts aren't the answer in every situation, but he cited a University of Wisconsin study that showed a 38 percent reduction in fatalities.