House Appropriations hears plan to shift purchase-and-use tax from education to transportation

House Appropriations Committee members on Tuesday heard a briefing from the Joint Fiscal Office on the motor-vehicle purchase-and-use tax and a governor’s recommendation to phase $10 million a year from the education fund to the transportation fund.

Logan Moberg of the Joint Fiscal Office began the presentation by defining the levy: “So we call it purchase and use tax. The full name is the motor vehicle purchase and use tax,” and explained it is levied at 6% of a vehicle’s value, with a $2,486 cap that applies to certain heavy trucks (those registered over 10,099 pounds), plus a separate 9% tax on short-term rental vehicles.

Moberg reviewed the tax’s history and current allocations. He said that after several changes the state now directs one-third of purchase-and-use revenues to the education fund and two-thirds to the transportation fund, a split that traces to late-1990s and early-2000s legislation. “In FY ’31, under the governor’s proposal, the purchase and use tax would be fully allocated to the T fund,” Moberg said, describing the phase-down as $10 million transferred each year into the transportation fund until the shift is complete.

Committee members pressed on the fiscal consequences. The chair and several members warned that removing purchase-and-use revenue from the education fund would create a budget gap for schools and argued it would exert upward pressure on local property taxes unless the general fund backfilled the difference. One member summarized the arithmetic concern: the shift was described during the hearing as creating roughly a $50 million shortfall over five years if no offsets are found.

Moberg said the governor’s budget includes a one-time $10 million general-fund transfer this year to partially offset the first-year impact, and that the administration’s budget balances with that transfer included. Committee members said the proposal therefore represents explicit trade-offs and asked the administration where additional offsets would come from in subsequent years.

Members also asked about related charges for electric vehicles. A committee member noted paying an additional registration fee for an EV and asked where that money goes; Moberg said the EV infrastructure supply fee (the extra $89 cited by a member) was dedicated to expanding charging stations through a program run by ACCD rather than flowing into the transportation fund general account.

Several lawmakers framed the policy choice as a question of priorities: shifting recurring purchase-and-use revenues increases the transportation fund’s reliance on vehicle-value–based receipts while reducing the education fund’s non-property revenue, which could widen the need for either increased state general fund support or higher local property taxes. Lawmakers said Ways and Means and other committees will review the proposal further and that committee letters and budget deliberations will determine the next steps.

The committee did not vote on the proposal during the briefing; members were told the governor’s budget includes the transfer and that staff and other committees will provide recommendations moving forward.