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State Highway Funding Sources and Distribution

($2.31 billion in fiscal year 2010) 

The Minnesota Constitution establishes a basic framework for financing state highways. It:

1.  dedicates certain funding to be "used solely for highway purposes" through taxes on motor fuels, motor vehicle registration, and motor vehicle sales;
2. establishes various accounting funds including a highway user tax distribution (HUTD) fund for distributing the tax revenues;
3. allocates revenues among the state, county, and municipal roads; and
4. establishes requirements related to the use of the funds and characteristics of each road system.

State statutes further specify finance and policy elements such as taxation rates, allocation formulas, and local aid program requirements. A portion of the motor vehicle sales tax revenue goes to transit, while the registration tax and motor fuels tax revenue (after some deductions) go exclusively to state and local highways.

Highway Funding Sources

Most funding for the trunk highway system, as well as for state assistance to local government for their roads, comes from transportation-related taxes and federal aid.

• The motor fuels tax is imposed at a per-gallon rate. A law passed in 2008 phases in an 8.5-cent tax increase over fiscal years 2008 to 2013.
• The registration tax (also known as tab fees) applies annually to motor vehicles domiciled in Minnesota that use public streets and highways. For passenger vehicles, the tax depends on a combination of the vehicle's original value and its age. Trucks are taxed on the basis of weight and age.
• The motor vehicle sales tax, or MVST, is a 6.5 percent tax applied to the sale of new and used motor vehicles based on the purchase price of the vehicle. Voters in 2006 approved a constitutional amendment that dedicates all MVST revenue to transportation purposes, phased in over fiscal years 2008 to 2012.
• Federal aid is another significant highway funding source for both state and local road systems. It can be further divided between regular program funding and onetime federal stimulus funds.

Motor Fuels Tax Phase-In

*Rates apply to gasoline, diesel, and certain gasoline blends.

Highway Funding Sources ($2.31 billion in FY 2010)

 

	Amount FY 2010 (millions)
Motor Fuels Tax	$823.4
Tab Fees	531.6
MVST	216.7
Federal Funding	414.2
One-time Federal Stimulus Funding	275.4
Miscellaneous	52.1

Related link:

• Legislative Reference Library Links to the World: Transportation

Originally published January 2011.