Road Worrier

Where do gas taxes really go?

Staff WriterAugust 12, 2008 

  • Starting in 1989, the General Assembly has moved $170 million each year from the Highway Trust Fund, which pays for roads and bridges, to the General Fund, which pays for schools, public health, courts, etc.

    The transfers are meant to compensate the General Fund for lost revenue from a sales tax on cars, which was abolished in 1989.

    From 2001 through 2005, Gov. Mike Easley and legislative leaders took an extra $80 million a year to help balance the General Fund. These extra transfers were not repaid to the Highway Trust Fund.

    In 2002, the legislature "borrowed" an extra $125 million from the Highway Trust Fund. The money was repaid from the General Fund in 2006.

    Here's how the money moves have added up since 1989:

    * Yearly transfers of $170 million from Highway Trust Fund to General Fund, authorized by 1989 law: $3.1 billion total

    * Extra transfers, $80 million a year for five years, not repaid: $400 million


If North Carolina truly is running low on money for roads, buses and bridges, Marjorie Minor says, don't blame drivers who buy less gas.

Blame state political leaders who take gas tax money from the Highway Trust Fund -- and then spend it on other stuff.

"For the last couple of years, they've taken hundreds of millions of dollars," said Minor, 60, a Raleigh legal secretary. "This is money they charged us for gas taxes. It's supposed to be for roads. They keep taking it away."

Several readers were skeptical when The News & Observer reported last week that the state Department of Transportation is suffering as drivers cut spending on two big sources of DOT taxes: gas and car sales.

"You never mentioned the way the governor has 'robbed' the funds collected from gas tax and licensing fees to help balance the general budget," Bob Eby, 70, of Fearrington Village said by e-mail.

Eby and other readers asked for an accounting of the money that moves every year from the Highway Trust Fund to a general operating fund, where it helps pay for schools, hospitals and nearly everything other than roads.

Is this a lawful, bipartisan transfer, as mostly Democratic defenders say? Or -- as mostly Republican critics like to spin it -- is it a pork-barrel raiding party?

Have we misspent enough loot to rebuild 3,000 bridges and upgrade every inch of Interstate 95? Or is this just enough cash to fuel a steady, smudge-pot cynicism about government waste?

The issue has bounced around for years on blogs and talk radio, and in campaign debates. The Road Worrier dug out the numbers with the help of the legislature's fiscal research staff.

Marjorie Minor is mostly right.

Before 1989, North Carolina collected a sales tax on cars that generated money for the General Fund -- not for roads. In 1989, Republican Gov. Jim Martin and the Democrat-controlled legislature replaced the car sales tax with a highway use tax on cars. This money went to a new Highway Trust Fund, to help build bridges and highways.

To make up for the money lost to the General Fund, legislators would have to raise taxes or cut spending. Instead, they agreed that $170 million would move each year from the Highway Trust Fund to the General Fund. (Today the highway use tax generates a lot more for the Highway Trust Fund -- $565 million last year.)

What critics call raiding started in 2001 and continued through 2005. Democratic Gov. Mike Easley and the legislature upped the transfer by $80 million, to $250 million a year. This added up to an extra $400 million removed from the Highway Trust Fund over five years.

They grabbed another $125 million in 2002. But they called this a loan, and they reimbursed the Highway Trust Fund in 2006.

These days, pundits and press accounts frequently say that the extra money taken from the Highway Trust Fund was repaid.

But most of it never was. The only money paid back was the $125 million "loan."

The other $400 million, moved to the General Fund between 2001 and 2005, never came back to the Highway Trust Fund.

In all, $3.1 billion has been moved to the General Fund in the yearly $170 million transfers authorized by the 1989 Highway Trust Fund Act. It's hard to call that a raid, but some people do.

On top of that, if you want to call the extra $400 million highway robbery, be my guest. This money was spent for other stuff our legislature decided we needed. We won't see it again.

This year, the legislature finally began phasing out the yearly transfer. The shift to the General Fund will fall from $145 million this year to $71 million in 2010.

Where will that money go? Starting this year at $25 million a year, it will help the N.C. Turnpike Authority build toll roads -- including the Triangle Expressway, set to start construction in December.

Four hundred million dollars is a lot of money. But state planners figure North Carolina will fall at least $65 billion short of the money it needs for transportation over the next 25 years.

Brad Wilson of Raleigh, an insurance executive, is chairman of a statewide committee that will meet next week to talk about ideas for closing that $65 billion gap.

"I think if they never had that $170 million transfer, and we'd had that $170 million over time for transportation, we'd still be having this conversation today," Wilson said.

Enlighten the Road Worrier: or (919)829-4527 or Comments, questions and tips welcome. Plea

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