NC lawmakers move to fix an accounting error that short-changed the DMV
Two years ago, state lawmakers allowed the N.C. Division of Motor Vehicles to charge fees to cover the cost of processing debit and credit cards. They assumed those fees would generate about $24 million a year for the DMV.
But it turns out the fees fell far short of that, on the order of about $13 million a year.
Now the General Assembly is planning to cover the shortfall by drawing money from the State Highway Fund, which is used primarily to maintain roads and bridges.
The Medicaid funding bill approved by the House last week would shift $21.6 million from the Highway Fund to the DMV. That includes a one-time move of $8.5 million to make up for the deficit two years ago and a recurring $13.1 million for the shortfall this year and in coming years.
The Senate is expected to take up the bill Tuesday.
There are two primary reasons for the shortfall, said DMV spokesman Marty Homan.
The first is that the budget approved by lawmakers in 2024 assumed the DMV would collect 2% of all debit and credit transactions to cover what banks charge for using the cards.
In fact, customers pay that much only for transactions at the DMV’s grocery store kiosks. The fee is 1.85% for online business and 1.22% for transactions completed in person at a DMV office.
The other reason for the shortfall is that the DMV has hired private companies to operate its kiosks and online services, and those companies assess and keep their own processing fees that don’t come to the agency.
“Online transaction fees are now charged directly to the customer and don’t flow through to the DMV anymore,” Homan wrote in a text. “What the legislation is doing is basically bringing the budget back in line with what we’re actually collecting today.”
The DMV began collecting debit and credit card processing fees on July 1, 2024. In the first year, those fees generated $11,347,712, Homan said. In the current fiscal year, which ends June 30, the agency expects to collect a little less, about $10.8 million, because more business is being done online.
The card fees are meant to cover what banks charge the agency to process transactions. For example, customers pay the DMV $52 for a regular Class C driver’s license good for eight years. A customer using a credit card at a driver’s license office would pay an additional 1.22% processing fee, or about 63 cents more.
