View in your browser.

Many of us followed the state budget debate throughout the summer.  Most of the debate was focused on the General Fund, which is the primary fund for state government spending.  The General Fund includes the state’s operating expenses that are not assigned to special purpose funds, similar to a private firm’s general ledger account.  Essentially, it provides the necessary funding to support the everyday activities of state government.  However, one large part of state government that is not included in the General Fund is the Department of Transportation.   

North Carolina’s Department of Transportation budget is approximately $4.4 billion, and is generally comprised of 75 percent state revenues and 25 percent federal.  The revenues that make up the state portion are derived from user fees.  The motor fuels tax, added to the cost of each gallon of gasoline and diesel sold in the state, is actually considered a fee for using the roads in North Carolina.  As of right now, the state gas tax is set at 36.5 cents per gallon.  Other sources of state transportation revenue are driver and vehicle fees that range between $1.75 and $150 and a highway use tax on vehicle title transfers that is 3 percent of the value of the vehicle.  Revenue from these sources is divided between the state’ two major transportation funds, the Highway Fund and the Highway Trust Fund. 

Highway Fund

Highway Trust Fund

Motor Fuel Tax



DMV Fees



Highway Use Tax


The Highway Trust Fund

Created in 1989, this fund was created to support large four-lane highways in an effort to complete the interstate system as well as build urban loops around the state’s largest cities.  In 2013, the legislature implemented Strategic Transportation Investments and reworked the Highway Fund’s priorities to give aid to municipalities and focus on maintenance activities in an effort to complete more projects.

The Highway Trust Fund was appropriated a total of $1.1 billion last year.  This year it grew by 5.2 percent, or $57 million, to almost $1.2 billion.  The major budget changes for the Highway Trust Fund were a reduction of $11 million to realign the budget to reflect actual spending levels and an increase of nearly $68 million to fund Strategic Transportation Investments.

The Highway Fund

The Highway Fund was created in 1921 when the first gasoline tax was levied in North Carolina at 1 cent per gallon.  In its infancy, the fund’s primary use was to fund the construction of new roads and the maintenance of existing roads throughout the state.  The fund now also pays for the State Highway Patrol, the Division of Motor Vehicles, and public transportation such as rail and ferry. 

Last year the Highway Fund budget was $1.9 billion.  This year the total appropriation was almost $2 billion, a 3.5 percent increase from last year amounting to $67.8 million of new spending.  Below are some of the items from this year’s Highway Fund budget:

  • Repeals the Motor Fuels Tax refund for taxicabs
  • Transfers $1.7 million to the Shallow Draft Navigation Channel and Lake Dredging Fund

  • Makes flexibility cuts of 2 percent to management and administration

  • Reduces funding for the OSHA Program by 2 percent

  • Eliminates 27 administrative positions and 270 vacant positions for a total savings of $2 million

  • Appropriates an additional $9.5 million for the Aid to Municipalities program

  • Realigns funding for payments to card vendors for credit/debit transactions to reflect actual transactions, reduced by $4.4 million

  • Increases funding for the production of new format driver licenses and identification cards issued by the DMV by $1.6 million
  • Funds fourteen new Driver License Examiners to reduce customer wait time at a cost of $822,397
  • Increases funding for the DMV information technology division by $6 million to modernize the current system and fund the State Automated Driver License System replacement project

  • Increases funding for maintenance and licensing for the data security standards associated with credit card transactions by $1 million

  • Reduces operating and grant funding for the Divisions of Aviation, Rail, Ferry, Bicycle, and Pedestrian Transportation by $3.3 million

  • Reduces funding for Primary System Maintenance Program by $6.7 million

  • Increases funding for Contract Resurfacing by $5.8 million

  • Reduces funding for the Secondary System Maintenance Program by $10.7 million

  • Establishes funding for the Pavement Preservation Program of $65 million

  • Provides a $1,000 salary increase for permanent full-time employees at a cost of $9.3 million

  • Contributes to the retirement system and gives retired employees a 1 percent cost-of-living adjustment totaling $1.5 million

  • Eliminates the $1.7 million Highway Fund reserve for future benefit needs

  • Reduces the operating transfer to the Global TransPark Authority by $250,000

The state’s transportation budget for fiscal year 2014-15 is $3.1 billion with the remainder of the funding coming from the federal government.  We don’t know how much the federal government will send to North Carolina yet, since their fiscal year ends on September 30th, and final distributions to the states won’t be completed until later this year.

Click here for the Fiscal Update archive.

You can unsubscribe to this and all future e-mails from the John Locke Foundation by clicking the "Manage Subscriptions" button at the top of this newsletter.