Lane elimination or reduction and road funding. Provides that a county, city, or town that either eliminates or reduces the width of a lane of road or street will have a percentage of the money distributed from the local road and street account reduced for the following year. Specifies that the percentage of distribution reduced is based upon the years of use of the lane and the length of the elimination or width reduction of the lane. Provides for a maximum percentage of distribution reduction. Provides that the section does not apply to temporary lane closures and width reductions. Provides that the Indiana department of transportation (department) when notified in writing shall inspect the lane for elimination or width reduction. Provides that the department will notify the auditor of the state of the percentage of distribution to be withheld. Provides that the department may adopt rules. Provides that a county, city, or town with a road or street construction project that eliminates or reduces a lane is ineligible for state and federal funding and grants for the project.