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May 20, 2008

The highway fund transfer

There's an ongoing debate about money in the state's highway fund not being used for roads but being transferred to another government fund for other uses. Can you enlighten us on the details of this debate? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"And this is a debate, and you hear it being mentioned now, and let me try to set the record straight. A couple of years ago, there was a new highway fund established that in part was going to be funded by a special sales tax on vehicles. Now up until that time, vehicle sales had been subject to the regular sales tax, and those sales taxes generated from people buying vehicles were sent to the what's called the general fund, which is the money that the legislature spends on everything outside of highways. Now, when the legislature established this special highway fund, and they said, 'Ok, in the future, now this special sales tax on vehicles, those moneys are going to go into this new highway fund.' the general fund was left lacking. In other words, it had been receiving money from sales of vehicles, and now it wasn't. And so what the general assembly did to make sure that the general fund was not disadvantaged, they said, 'Ok, we're going to figure out how much this new highway fund and this new sales tax on vehicles - where the money goes to the highway fund - how much money is the general fund losing as a consequence of that, and we're going to make this transfer from the new highway fund to the general fund.' So the transfer was simply to pay for the losses to the general fund caused by this new special sales tax on vehicles. Now this has caused all kinds of controversy, which you have mentioned. And last year the general assembly said, 'Ok look, what we're going to do is, we're going to vote to try to - within a few years - stop this transfer.' But there was a logic, my point here is there was a logic to the transfers going on."

Posted by Dave at May 20, 2008 08:00 AM