State Road Fund Revenue Collection Processes: Differences and Opportunities of Improved Efficiency

Eger III, Robert J.; Hackbart, Meryl M. · 2001 · ROSA P / University of Kentucky Transportation Center

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Summary

This study addresses the inefficiencies in state road fund revenue collection, specifically focusing on how assessment, collection, audit, and enforcement processes impact tax evasion. While previous research concentrated on the motivations and magnitude of evasion, this work examines the administrative mechanisms that influence compliance. The research was motivated by the need to improve the efficiency and effectiveness of Kentucky’s road fund administration amidst fiscal constraints and the risk of deferred infrastructure investment. The methodology involved a comprehensive review of legislative acts and Federal Highway Administration (FHWA) data to map revenue sources and collection systems across all 50 states and Washington D.C. The authors categorized states by U.S. Census region, Regional Processing Center (RPC) membership, and Kentucky’s seven border states to identify structural similarities and differences. Additionally, an electronic survey was administered to road fund tax administrators in all states, achieving a 94% response rate. This survey gathered data on total tax assessments from audits, the number of field and desk auditors, and other administrative metrics for fiscal years 1997 and 1998. The authors developed statistical models to analyze the relationship between enforcement resources, such as auditor counts, and revenue assessments, controlling for variables like population, vehicle miles traveled, and federal tax contributions. The findings reveal significant diversity in road fund revenue structures, with Kentucky relying heavily on fee receipts (41%), particularly the Special Title Fee, compared to the national average. Kentucky’s registration fees were found to be substantially lower than those of its border states and RPC members. Statistical analysis demonstrated that the number of field auditors is a statistically significant predictor of revenue assessments. Specifically, the models indicated that increasing the number of auditors leads to a substantial increase in assessed taxes, with elasticity estimates suggesting a 10% increase in auditors could raise assessments by approximately 19.6%. Conversely, the location of the audit group and whether a state was a border state were not statistically significant factors in determining assessment levels. The study concludes with six policy recommendations to enhance efficiency. Key suggestions include pursuing uniformity and coordination with border states to reduce evasion incentives, revising Kentucky’s low registration fee structure to align with regional norms, and consolidating multiple audit groups to reduce administrative costs. The authors also recommend re-evaluating the marginal costs of hiring additional field auditors, given their high return on investment, and developing better estimates of the total revenue impact of audits, including the deterrent effect on potential evaders. These measures aim to strengthen the stability of Kentucky’s road fund revenue base.

Key finding

An increase of one field auditor results in an average increase of $173,583.59 in total road fund assessments, while the location of the audit group has no statistically significant effect on assessment amounts.

Methodology

survey

Sample size: 48

Provenance

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