Where Does the Gasoline Tax Go?

Dick Lavine, Senior Fiscal Analyst at the Center for Public Policy Priorities

Texas is looking for more money for roads, and the question of how the state spends its motor fuels tax funds is likely to gain traction in the legislative session. In 2014 motor fuels tax revenue was $3.3 billion, or 6.5 percent of all state tax collections. This substantial pot of money results from the state’s 20 cents per gallon motor fuels tax on gasoline and diesel, a rate that hasn’t changed since 1991. Everyone agrees that the Texas Department of Transportation (TxDOT) needs more funding, but with little political will to raise taxes and a demonstrated need to find money for Texas highways, the “diversions” from the State Highway Fund are raising some eyebrows.

What is the Gas Tax?

Texas’ tax on gasoline and diesel primarily funds TxDOT and education, as defined in the state Constitution. But millions of gas tax dollars fund other needs, and ending diversions from the gas tax revenue could place a number of other activities into competition for General Revenue with investments in education and health and human services.

The Constitution says one-quarter of motor fuel taxes must go directly to the Available School Fund (ASF), which funds instructional materials, and then is distributed to school districts on a per-student basis. In 2014 the ASF received $810 million in motor fuel taxes. The remaining three-quarters is sent to the State Highway Fund, which received $2.42 billion in motor fuel taxes in 2014.


But the Highway Fund is used for a variety of purposes other than funding TxDOT, known as “diversions,” but which are related to the constitutionally designated responsibilities of policing public roadways and administering laws regarding traffic and road safety. As a result, the Legislature allows appropriations from the Highway Fund to the Department of Public Safety ($475 million in 2014) and the Department of Motor Vehicles ($49 million). Notably, the Legislature reduced the appropriation to DMV from $156 million in 2013. Other diversions for related needs accounted for only $22.6 million:

DivisionAppropriation Amount (millions)
State Office of Administrative Hearings*$3.2
Department of Insurance**$5.0
Attorney General (TxDOT legal services)$5.9
Texas A&M Transportation Institute (research)$8.4

*DPS administrative license revocation program  **Database for instant auto insurance verification by law enforcement

The Legislature also used the Highway Fund to support salary increases for state employees in the agencies listed above ($13.5 million), with a separate increase for DPS troopers ($28.1 million). As done throughout the budget, the Legislature also made separate line-item appropriations from the Highway Fund for associated employee benefits ($376 million).

If the Legislature decides to end the diversion of the motor fuels tax but still wishes to fund DPS, DMV, and the related smaller programs, then the Finance and Appropriations Committees will have to identify another source of support for these programs. With public schools still not funded at their pre-recession per-student level and numerous unmet health and human service needs, the Legislature should go slow on redirecting gasoline tax revenue exclusively to TxDOT.

At the Center for Public Policy Priorities, we believe in a Texas that offers everyone the chance to compete and succeed in life. We envision a Texas where everyone is healthy, well-educated, and financially secure. We want the best Texas - a proud state that sets the bar nationally by expanding opportunity for all. CPPP is an independent public policy organization that uses data and analysis to advocate for solutions that enable Texans of all backgrounds to reach their full potential. We dare Texas to be the best state for hard-working people and their families.

1 Comment

  • I beg to differ sir. Gasoline Tax should be used for what it is intended for. ROADS. Property Taxes pay for schools and education, emergency services etc. Stop sugar coating the reality of our legislative ineptitude. They are so blatantly lost, so hopelessly lacking in financial acumen and so careless that they have created a system that the citizens must now interfere and tell them what to do.

    Gas Tax for roads
    Property taxes for schools & education & Emegency services
    Sales tax for General funds

    The Texas Toll Road Class Action Lawsuit seeks to abolish toll roads in Texas…like the failed SH130 project that is now in Bankruptcy! Citizens funded it and now they are on the hook to pay for it anyway out of foreclosure.

    Your facts are inadequate and frankly read like you’re on the payroll for the lobbyists that want tolls.

    Chris Norman 16.03.2016

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