Policy Position

Highways and Interstates

in Budget, Taxation, and the Economy
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North Carolina’s road quality has been steadily improving
in recent years. It is now at or above the national average in
some studies.
Importantly, recent reform of the state transportation
funding formula promises to keep this improvement on an
upward trajectory. The state’s new approach puts greater
weight on easing congestion, promoting economic growth,
and improving highway safety.
Transportation dollars are scarce, and people
understandably dislike being made to pay more, no matter the
mechanism. All the more reason that making more effective
use of existing funds is wise, responsible policy

Key Facts

  • Combined spending by North Carolina governments on
    transportation comes to about $4.5 billion a year. About
    90 percent of that goes to roads and bridges.
  • • In 2013 Gov. Pat McCrory and the General Assembly
    enacted a new state transportation policy, the Strategic
    Transportation Investments law, a significant reform
    that changed how states, regions, and localities set
    transportation priorities. The new law has clearly stated
    goals upon which transportation projects compete with
    each other for funding: congestion relief, safety improvement,
    economic competitiveness, and the efficient
    movement of people and freight.
  • With data-driven project prioritization, North Carolinians
    should expect better, more efficient use of highway
    funds. A 2013 study by transportation experts at the
    Hartgen Group and the Reason Foundation found that
    through better prioritization of projects, North Carolina
    could meet its highway needs without additional taxes.
  • Data-driven project prioritization can be good even for
    North Carolinians who live outside of the most populous
    areas. Congested urban freeways can be a deterrent
    to business locations and also expansions. Keeping them
    more open means rural residents will have more opportunities
    to connect with more jobs, retail, and other
    amenities across metropolitan areas.
  • North Carolina’s reform is ahead of the curve. In February
    2016 the Congressional Budget Office released a
    study of federal transportation priorities. Among other
    things, it found that transportation spending would
    produce greater benefits relative to costs if put toward
    these purposes:
    – adding interstate lanes in urban areas
    – making major repairs of interstates and other
    highways in urban areas
    – repairing bridges, especially on rural interstates
    and also primary and secondary roads
  • Other changes have added hundreds of millions of dollars
    a year to North Carolina transportation budgets.
  • Notably, in the 2015-16 state budget, the legislature
    ended the transfer of gas tax revenue from the Highway
    Fund to the General Fund. Ending the transfer kept
    over $215 million of revenue per year raised from motorists
    for use to maintain and expand North Carolina
    roads and bridges. That money no longer is taken for
    use in other state programs.
  • A similar change under the latter Easley and Perdue
    administrations phased out the Highway Trust Fund
    transfer, keeping over $172 million in revenue per year
    to maintain and expand North Carolina roads and
  • State spending for bridge repair and construction went
    up by 58 percent (to $242 million) in the 2015-16 budget.
    Spending on road resurfacing went up 22 percent
    (to $498 million).
  • Other road maintenance and resurfacing went up by
    $68 million. Also, the Highway Trust Fund finances
    $337 million for new highway construction projects
  • Other recent changes include increasing Division of
    Motor Vehicles fees and changing how the state’s excise
    tax on gasoline is calculated.
  • The gas-tax change lowered tax collections in the short
    term, but it should allow greater revenues in the future
    along with inflation.
  • A March 2016 poll from High Point University found
    North Carolina strongly opposed to several options for
    raising highway revenue: 63 percent opposed toll roads,
    72 percent opposed increasing the gas tax, and 87 percent
    opposed taxing motorists per-vehicle-mile traveled.
    Such findings underscore the wisdom in making state
    transportation expenditures more efficient and effective.


  1. Stay the course on recent reforms. North Carolina
    is at the vanguard of aligning scarce transportation
    dollars with high-priority transportation needs. Her
    motorists can expect better returns from a transportation
    policy that makes more efficient use of existing resources
    to improve transportation infrastructure where
    it’s most needed.
  2. Continue to look for projects and programs funded
    with transportation dollars that would be more appropriately
    funded with General Fund dollars


Revenue Transferred Into the General Fund From The Highway Fund

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