Blogging the Budget – Just what is this Highway Trust Fund everyone is so keen on saving?
As I get into the transportation section of the state budget, I'm thinking about how some budget watchers have, for years, spoken strongly against the transfer of money from the Highway Trust Fund into the state’s general fund. Our roads need all the help they can get after all. But the Highway Trust Fund (despite its seemingly all-encompassing name) is only a part of the state funding for roads. There’s also the cleverly named Highway Fund, which is in no way confusing.
North Carolina ranks second in number of miles of state roads, just behind Texas. This creates a huge financial obligation for the state. The major funding sources for state road construction and maintenance are the highway use tax (HUT), gasoline tax, and license, title and registration fees. In addition, the state receives its share of federal highway dollars. The HUT is a three percent tax on vehicle sales, established in 1989 as a replacement to sales taxes on vehicles. The HUT revenue flows into the Highway Trust Fund, which funds most major construction projects in the state. The Trust Fund also provides funding for paving of secondary roads in the state and funding for street improvements in municipalities under the Powell Bill. When the HUT was created, part of the revenue was designated to the state’s general fund to replace some of the lost sales tax revenue. But that diversion is shrinking as more legislators push for additional transportation funding. The Highway Trust Fund is budgeted for nearly $1 billion this year.
The Highway Fund (without the Trust) receives revenue from several sources, including the state’s gas tax and registration fees. It is used to fund highway maintenance, secondary road improvements, Powell Bill funds for municipalities, the Division of Motor Vehicles, public transportation and rail, and the State Highway Patrol. The Highway Fund is budgeted for nearly $1.8 billion in this fiscal year.
Because of these two dedicated funds, there is no general fund money used for road construction in North Carolina.
This year legislators also created the Mobility Fund, which will take unneeded gap funding of $39 million from the North Carolina Turnpike Authority in FY 2010-11 to fund projects selected by the Department of Transportation. The bill states that the first project will be the second phase of the Yadkin River Bridge project. In future years the Mobility Fund will receive funds freed up from phasing out the annual transfer from the Highway Trust Fund to the General Fund.
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