News: CJ Exclusives

Lawmakers Trying To Halt Highway Fund Diversions

$250 million shifted to state General Fund every year

RALEIGH — State lawmakers are making efforts to free more money for highway construction and maintenance by paying for driver’s education and state troopers out of General Fund revenues rather than depleting the state’s highway funds.

“Every year, we’re faced with this same off-loading of transportation dollars into the General Fund,” said Rep. John Torbett, R-Gaston, who chairs the House Transportation Committee and is vice chairman of the House Finance Committee.

The General Fund pays for most state government programs, including public schools, higher education, prisons, and human services programs. Most highway programs are financed by either the Highway Fund or the Highway Trust Fund, which get their revenues from gasoline taxes, highway use taxes, auto sales taxes, and vehicle registration fees.

Between $250 million to $260 million annually, however, is diverted from those highway funds to pay for the Highway Patrol and driver’s education, Torbett said. Driver’s ed accounts for $26 million of the total.

Lawmakers may have a “fix” for the driver’s ed component, he said, by finding another funding source to cover the costs of the program that teaches new drivers the rules of the road. One alternative Torbett suggested would be to use money the state receives from fines and forfeitures — which already goes to the state’s public schools — for driver’s ed.

Funding for driver’s education goes to the N.C. Department of Public Instruction. State Superintendent of Public Instruction June Atkinson did not respond to a request for comment about suggestions for alternative revenue sources.

Finding other ways to pay for the Highway Patrol would be more difficult because it has a much larger price tag.

Rep. Dana Bumgardner, R-Gaston, has introduced a bill phasing out the transfer by reducing the money going from the Highway Fund to the General Fund by $49 million a year over the next four years. Sen. Bill Rabon, R-Brunswick, has filed a similar bill in the Senate.

Rep. Nelson Dollar, R-Wake, who is senior chairman of the House Appropriations Committee, said budget writers are taking a hard look at what can be done to end the transfers.

“This is an issue that’s been explored for a number of years,” Dollar said.

“The funds simply aren’t there to contemplate the movement of funding the Highway Patrol out of the General Fund this year,” Dollar said. “We would certainly like to be in a position to consider it. We’re not there yet.”

Dollar said budget writers are still exploring options that would end diversions from the Highway Fund to pay for driver’s education.

“You’ve got other budget pressures — increased enrollment in K-12 education, increased enrollment in higher education, [and] increased enrollment in Medicaid,” Dollar said. “Those are just the big-ticket items.”

Dollar noted that last year, lawmakers made the transfer for driver’s education nonrecurring, meaning they did not intend the annual transfer to remain a permanent part of the budgeting process.

Dollar noted that for decades, the General Assembly transferred about $170 million annually from the Highway Trust Fund to the General Fund. He said in recent years, lawmakers have worked to end that transfer and protect the Highway Trust Fund.

The Highway Trust Fund, established in 1989, primarily pays for multilane highways and urban loops. The Highway Fund, established in 1921, is the state’s main transportation fund and finances highway construction and maintenance, along with the Highway Patrol and the Division of Motor Vehicles.

In the 1990s, the Highway Fund began supporting public transportation and rail programs.

During the most recently completed fiscal year, the state spent $4.3 billion on transportation programs. The largest share of the money — $2 billion or 47.3 percent —came through the Highway Fund, and $1.1 billion or 25.5 percent was funneled through the Highway Trust Fund. The state received nearly $2.2 billion, or 27.2 percent of its transportation budget, from the federal government.

Of the $2 billion Highway Fund revenues, nearly $1.4 billion came from motor fuels (gasoline) taxes, $392 million from DMV registrations, $123 million from licenses, and $170 million from other sources.

The largest share of the Highway Fund spending was used for road maintenance — $940 million. Another $180 million went to bridge preservation, and $62 million was spent on construction.

An additional $142 million went to the Powell Bill program, which is allocated to municipalities across the state for street maintenance and construction.

The Department of Transportation spent another $196 million on multimodal (nonhighway) transportation, including bike and pedestrian paths, rail, and aviation.

An additional $245 million went to DMV and administration, with $26 million going to other spending.

The Highway Trust Fund gets its revenues from a portion of the motor fuels tax, highway use (sales) tax, and title fees. The trust fund, along with federal funds, pays for multilane highways and urban loops.

Barry Smith (@Barry_Smith) is an associate editor of Carolina Journal.