When raising fees saves taxpayers money

As we face tightening finances in state government, the Legislature’s decision to raise DMV fees for the first time in years was the fiscally responsible thing to do

Sara Coffey, a Democrat, represents Guilford and Vernon in the Vermont House of Representatives, where she chairs the House Transportation Committee.

What does it mean to be fiscally responsible? When it comes to Vermont transportation, it means being clear about where the rubber meets the road.

Like other states, we in Vermont pay for our transportation program using a mix of funding sources. Revenue comes from the gas and diesel tax, a portion of the motor vehicle purchase and use tax, revenue and fees associated with the use of the state's airports, and fees for driver's licenses and vehicle registrations.

In turn, these state transportation revenues unlock federal dollars to maintain and repair state and town roads and bridges, improve Vermont's railways and airports, fund public transportation, provide municipal grants to address clean water and climate resiliency, and create a 21st-century transportation system that's clean and affordable for everyone.

In most cases, for every $2 the state invests, we can draw down $8 in federal matching-grant funds.

Since entering office, Gov. Scott has touted his track record for not raising fees. In his State of the State address on Jan. 4, the governor continued to bash what the Legislature did last year in increasing fees for Department of Motor Vehicles.

On the face of it, his approach might appear to benefit Vermonters, especially in what we all expect will be a very, very tight fiscal year. But in fact, it means that Vermont is losing out on opportunities to receive federal funding. This places an additional tax burden on Vermonters to make up the difference not collected in nominal fees.

Vermonters should understand that raising fees (which for most of us will have an impact of $9 for a two-year license renewal) was the fiscally responsible thing to do in order to both balance the transportation budget and leverage some of the one-time opportunities with federal grants.

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Last February, the chief fiscal officer from the governor's Agency of Transportation testified to the House Transportation Committee that our state transportation fund was on trend to be $15 million short.

In other words, we wouldn't have enough money to cover the projected budget or to "meet the match" - the amount Vermont must contribute to tap into those important federal funds.

Rather than provide a solution to address this financial gap, last winter the governor presented a transportation budget that had a $10 million deficit. His solution was to fill the $10 million gap using a transfer from our general fund, rather than cutting expenses or proposing a new source of revenue.

When Vermonters are struggling to make ends meet, redirecting dollars from public safety or human services did not seem socially or fiscally responsible.

* * *

In 2021, Congress passed the bipartisan Infrastructure Investment and Jobs Act (IIJA), which authorized $1.2 trillion for transportation. This federal law presents Vermont with amazing opportunities to address many of our transportation infrastructure needs and provide good-paying jobs for Vermonters.

To tap into these opportunities, we must come up with state dollars to leverage the federal match, but we cannot do that at the expense of the most vulnerable Vermonters.

Last year, instead of siphoning away precious general fund dollars - dollars that pay for things like housing and child care - the Legislature rejected the governor's proposal and came up with a responsible long-term fiscal solution: We raised fees for transportation-related services, fees that had not been raised since July 1, 2016.

The new Department of Motor Vehicles fee increases (effective Jan. 1) are expected to yield $10 million for the current fiscal year to fill that $10 million gap. For most Vermonters, the impact will be a $9 increase for two-year driver's license renewal and a $15 increase for annual car registration.

These revenues maintain the transportation infrastructure we all use and depend on.

Had Gov. Scott followed Vermont's prior, longstanding practice of proposing a fee bill once every three years, these fee adjustments would have been much smaller and more incremental. However, even with this increase, Vermont's driver's license fees remain among the lowest in the Northeast.

* * *

In early January, the House Transportation Committee received a transportation revenue update from the Joint Fiscal Office. Transportation revenues are coming in $5 million below budget for the current fiscal year. Had we not increased the fees, we'd be looking at a $15 million gap - much more difficult to manage.

On Jan. 12, Gov. Scott's administration presented a proposal for the midyear FY24 budget adjustment, which was thin on details about how we might address this shortfall in the current fiscal year.

With or without the collaboration of the governor, House Democrats are committed to finding equitable solutions to the fiscal challenges we face across the board.

We know we will be facing difficult budget decisions, and we hope that we will have a more collaborative relationship with Gov. Scott, so we can create a Vermont that works for everyone - not just the select few.

And a responsible transportation budget will help us get there.

This Voices Legislative Update was submitted to The Commons.

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