Can Oregon use Highway Fund money to start up specialty license plate programs that benefit non-highway causes?
Plain-English summary
Senators Baker and Dukes asked four questions about Oregon's specialty license plate programs. Two new bills (SB 372 for veterans recognition plates and SB 1099 for higher-education plates) followed the pattern of existing programs: collect an extra fee at registration, use Highway Fund money to cover start-up and administration, and eventually reimburse the Highway Fund from plate revenues. Was any of this constitutional?
Attorney General Hardy Myers answered: the extra plate fees themselves were not a constitutionally dedicated motor vehicle tax (so they could lawfully flow to non-highway causes), but using Highway Fund money to launch and run programs serving non-highway purposes was a forbidden diversion under Article IX, section 3a. Existing programs that had already drawn on Highway Funds had to be made whole, including reimbursement of the interest the Fund would have earned. New programs needed funding from sources other than the Highway Fund (General Fund appropriations or up-front contributions from beneficiary organizations).
Currency note
This opinion was issued in 1997. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Common questions
Q: Why isn't a license plate fee a "tax on the use of motor vehicles"?
A: The extra fee is voluntary. The motorist chooses to pay more for a custom or specialty plate. The fee buys the privilege of having a particular plate design, not the privilege of operating a vehicle. The standard registration fee is the constitutionally dedicated charge; specialty surcharges are separate.
Q: But the program runs through DMV. Why aren't its costs administrative expenses of the Highway Fund?
A: Article IX, section 3a allows Highway Fund use for "the costs of administration," but only of programs that themselves serve highway purposes. Administering a fundraising program for a non-highway cause is not a highway purpose, even if DMV staff handle the paperwork.
Q: What's the remedy for past diversions?
A: Full repayment to the Highway Fund of all diverted amounts, plus the interest the Fund would have earned on those amounts at its normal investment rate. The repayment has to come from a non-dedicated source.
Q: Can the General Fund pay for these programs?
A: Probably, but the legislature would have to make a public-purpose finding, since several beneficiary organizations are private nonprofits. The opinion recommended specific legislative findings on the public purpose. If a public purpose cannot be supported, General Funds also cannot be used.
Q: What's the underlying constitutional concern?
A: Article IX, section 3a (and its predecessor section 3) was adopted to keep gas-tax and vehicle-fee revenue from being diverted to non-highway purposes. The opinion reads the Oregon Supreme Court cases (Sprague v. Straub, Rogers v. Lane County, Automobile Club of Oregon) as guarding against any such diversion.
Background and statutory framework
Article IX, section 3a of the Oregon Constitution dedicates "any tax or excise on the ownership, operation or use of motor vehicles" to highway purposes. The Oregon Supreme Court has read that dedication strictly, to prevent diversion of the Highway Fund to nonhighway purposes.
ORS 805.205 created specialty plates for nonprofit groups, higher-education institutions, and veterans' organizations. The Oregon Trail commemorative plate program ran under Oregon Laws 1993, chapter 741, section 113. Both programs depended on Highway Fund money to start up and run, with revenues from the plates eventually flowing to the sponsoring organizations after DMV recovered its costs.
The 1979 advice in 39 Op Atty Gen 492 had already laid down the rule that the Highway Fund could not be tapped for non-highway programs, even temporarily.
Citations and references
Constitutional provisions and statutes:
- Article IX, section 3a, Oregon Constitution
- ORS 805.205, ORS 805.240, ORS 803.420, vehicle plates and registration fees
- Oregon Laws 1993, chapter 741, sections 113-114, Oregon Trail commemorative plates
Cases:
- State ex rel Sprague v. Straub, 240 Or 272, 400 P2d 229, 401 P2d 29 (1965), no diversion of dedicated highway funds
- Rogers v. Lane County, 307 Or 534, 771 P2d 254 (1989), narrow construction of "highway purposes"
- Automobile Club of Oregon v. State of Oregon, 314 Or 479, 840 P2d 674 (1992), invalid uses of fees
- Cross of Malta Bldg. Corp. v. Straub, 257 Or 376, 476 P2d 921, 479 P2d 505 (1971), diverted funds must be returned
Source
- Landing page: https://www.doj.state.or.us/oregon-department-of-justice/office-of-the-attorney-general/attorney-general-opinions/
- Original PDF: https://www.doj.state.or.us/wp-content/uploads/1997/06/op8250.pdf
Original opinion text
June 2, 1997
No. 8250
This opinion is issued in response to questions presented by The Honorable Ken Baker, State Senator, and The Honorable
Joan Dukes, State Senator, concerning special motor vehicle license plate programs.
FIRST QUESTION PRESENTED
Senate Bills 372 and 1099 propose to establish programs for special motor vehicle license plates similar to
ORS 805.205 and Oregon Laws 1993, chapter 741, section 113, in order to generate revenue for
nonhighway purposes. Each program charges a fee in addition to the usual fee for registering a vehicle or
renewing the registration. Are such additional fees a "tax or excise on the ownership, operation or use of
motor vehicles" within the meaning of Article IX, section 3a, of the Oregon Constitution?
ANSWER GIVEN
No. The special plate fee is not a tax or excise on the ownership, operation or use of motor vehicles and does not accrue
from the licensing of motor vehicles. Accordingly, that fee is not dedicated to the Highway Fund.
SECOND QUESTION PRESENTED
The special license plate programs initially use Highway Funds dedicated under Article IX, section 3a, of
the Oregon Constitution to fund start-up and administrative costs. Is such use of Highway Funds
constitutional?
ANSWER GIVEN
No. The use of Highway Funds to generate revenue for nonhighway purposes violates Article IX, Section 3a, of the
Oregon Constitution.
THIRD QUESTION PRESENTED
If the answer to the second question is "no," how can the proposed bills be modified to eliminate the
constitutional problem?
ANSWER GIVEN
The bills must provide that all funding for special license plate programs come from sources other than the Highway Fund.
FOURTH QUESTION PRESENTED
If the answer to the second question is "no," how can the existing programs be brought into constitutional
compliance?
ANSWER GIVEN
At a minimum, the Highway Fund must be made whole. This will require repayment to the Highway Fund of all start-up
costs and costs of administering and operating the programs, as well as reimbursement to the Highway Fund of income the
Fund would have earned from normal investments of such amounts.
DISCUSSION
Two special motor vehicle license plate programs currently are in existence. ORS 805.205 authorizes the issuance of
special plates for certain nonprofit groups, institutions of higher education and veterans' organizations and Oregon Laws
1993, chapter 741, section 113, authorizes the issuance of commemorative plates for the 150th anniversary of the Oregon
Trail. Under both programs, a fee in addition to the vehicle registration fee under ORS 803.420 and any other applicable
fees is collected if the owner of the vehicle requests a set of special plates. The vehicle owner's decision to request the
special plate and pay the additional fee is voluntary; the fee is separate from the normal registration fee; and the special
plate is issued in lieu of the plate otherwise issued.
We are informed that each of the special plate programs used Highway Funds to pay for start-up costs and ongoing
administrative costs incurred to ensure that the special plates are manufactured and assigned to the correct vehicle and to
account for the different funds. We are also informed that ODOT has kept one-half of the surcharges on some of these
plates until the initial costs are reimbursed, and that there remains over $100,000 in costs yet to be paid. Because of
lagging sales of certain plates, sufficient revenue might never be generated to totally reimburse the fund.
After payment of Oregon Department of Transportation (ODOT) administrative costs, the fees from the special plates
issued under ORS 805.205 are deposited in accounts specified by the applicable nonprofit group, institution of higher
education or veterans' organization. Although the purpose for which these moneys will be used is not statutorily specified,
we assume it is for nonhighway purposes. The revenue from the Oregon Trail plates, after expenses are deducted, is
"transferred to the Oregon Trail Coordinating Council for the purpose of developing interpretative facilities along national
historic trails in Oregon." Or Laws 1993, ch 741, § 114.
The two bills mentioned in the opinion request, SB 1099 and SB 372, similarly would create special plates and generate
revenue for nonhighway purposes. SB 1099 amends ORS 805.205 and authorizes the issuance of special plates for public
institutions of higher education with the moneys generated used for academic enhancement. SB 372 authorizes the
issuance of veterans' recognition plates with the moneys generated placed in a trust fund for operation of the Oregon
Veterans' Home.
I. Status of Special License Plate Fees
Article IX, section 3a, of the Oregon Constitution dedicates "any tax or excise on the ownership, operation or use of motor
vehicles" to highway purposes. The first question asks whether the special license plate fee is a "tax or excise on the
ownership, operation or use of a motor vehicle."
In a Letter of Advice dated July 2, 1981, to H.S. Coulter, State Highway Engineer (OP-5151), we addressed whether
money collected from the $25 custom license plate fee, formerly ORS 481.285 and now ORS 805.240, is money accruing
from the licensing of motor vehicles and thereby part of the Highway Fund. We concluded that the fee is not a tax or
excise on the use of motor vehicles and does not accrue from the licensing of motor vehicles. Because the $25 fee is
collected in addition to the regular vehicle license fee and is for the privilege of having a custom license plate and because
the decision to request and pay for a custom plate is totally voluntary, we concluded that the $25 fee is not dedicated to the
Highway Fund.
We adhere to that earlier advice and believe the reasoning is equally applicable to the special plates under consideration at
this time. The current opinion request also concerns the initial use of Highway Funds to establish these programs,
however, and we did not address that issue in our earlier opinion.
II. Use of Highway Funds
Each of the license plate programs that we have been asked to address has provisions for the payment of ODOT
administrative expenses from the revenue generated by the special plate fees. Because no other appropriation is made for
the programs, Highway Funds are used to initiate the programs and to pay for start-up costs. The revenue generated by the
special plate fees is then used to reimburse the fund for the start-up costs, with the revenue remaining after payment of
these costs and after costs of administration going to the nonhighway purposes.
The Highway Fund is dedicated for highway purposes under Article IX, section 3a. Thus, the next question is whether the
use of Highway Fund moneys to pay the start-up costs of a nonhighway program is constitutional, even if the funds will be
repaid at some future time.
We addressed a similar issue in 39 Op Atty Gen 492 (1979) when we were asked whether the Division of Motor Vehicles
(DMV) could constitutionally expend moneys from the Highway Fund to distribute voter registration material and to
provide voter assistance as required by Oregon Laws 1977, chapter 163. Because no funds were appropriated for DMV to
implement the statutory mandate, DMV proposed to use dedicated highway trust funds in order to do so. We concluded
that Highway Funds could not constitutionally be used for such a purpose and that the General Fund must reimburse the
Highway Fund for such expenditures.
In State ex rel Sprague v. Straub, 240 Or 272, 400 P2d 229, 401 P2d 29 (1965), the Oregon Supreme Court held that the
intent of the people when they adopted Article IX, Section 3, was to guarantee that none of the proceeds of the taxes and
fees listed in the amendment would be diverted to any other purpose. Although Article IX, Section 3, was repealed and
replaced in 1980 by current Section 3a, the Oregon Supreme Court found that the intent of the people continued to be
preventing diversion of the Highway Fund to nonhighway purposes. Rogers v. Lane County, 307 Or 534, 771 P2d 254
(1989); Automobile Club of Oregon v. State of Oregon, 314 Or 479, 840 P2d 674 (1992).
The use of Highway Funds to pay for a nonhighway program, i.e., a program generating revenue for a nonhighway
purpose, is a diversion of funds from the constitutionally allowable uses. SB 372 and SB 1099, as proposed, and ORS
805.205 and Oregon Laws 1993, chapter 741, section 113 may not be implemented through the use of moneys from the
Highway Fund. Implementation of the existing programs using such funds was an unconstitutional diversion of dedicated
trust funds.
III. SB 372 and SB 1099
Because we find that the two proposed bills as written would likely require an unconstitutional diversion of moneys from
the Highway Fund, we address the third question. The proposed legislation must be modified to eliminate Highway Funds
as a source of moneys for start-up costs and costs of administration. It is possible that General Fund appropriations could
be used to cover such costs.(1) It is also possible to require the various organizations benefitting from the special plate
programs to provide up-front money to pay for these costs. If ongoing costs of operation and administration are paid out of
the special plate fees, then additional appropriations would not be needed for those costs. However, if the special plate fees
are not capable of covering ongoing costs, then other nondedicated funding is required as Highway Funds cannot in any
way support such programs.
IV. Existing Special Plate Programs
The fourth question asks about the impact to the existing special plate laws if Highway Funds may not be used for those
programs. If the legislature wishes to continue the existing programs, those programs must be funded from nondedicated
sources. In addition, since Highway Funds have been used to support these programs, the Highway Fund must be made
whole. It is clear from the long line of cases on the diversion of dedicated funds, including Cross of Malta Bldg. Corp. v.
Straub, 257 Or 376, 476 P2d 921, 479 P2d 505 (1971), Sprague and Automobile Club of America, that diverted moneys
must be returned to the dedicated fund. It is also clear that the dedicated fund is entitled to be repaid interest that the Fund
would have been earned from appropriate investments of the diverted moneys. For some of the special plate programs, the
amount of the Highway Fund diverted for these programs has already been repaid from revenues generated. In all cases,
the Highway Fund must also be repaid the interest that the Fund would have earned.(2) Such moneys must come from a
nondedicated source.
V. Conclusion
Constitutionally dedicated Highway Funds may not be used to fund, operate or administer a special motor vehicle license
plate program the purpose of which is to generate money for nonhighway purposes. We conclude that the special plate
programs authorized by ORS 805.205 and Oregon Laws 1993, chapter 741, section 113, as well as those proposed by SB
372 and SB 1099 unconstitutionally use Highway Funds.
In order to have a special plate program that generates revenue for a nonhighway program, the program must be funded
from moneys other than the Highway Fund, and all costs must be paid from a nondedicated source. To the extent dedicated
funds have been used in a manner inconsistent with the allowable uses of the Highway Fund, the Fund must be repaid the
amount of money diverted and all income lost by the diversion.
HARDY MYERS
Attorney General
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In order to use General Fund moneys for the special plate programs, the Legislature must find that the programs serve a public purpose. Because several of the organizations receiving funds from the special plate program will be private nonprofit organizations, this public purpose is not apparent on the face of the legislation, and we recommend that specific legislative findings on this issue be included in the bill. If a public purpose cannot be found, then General Funds could not be used to support the programs.
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In a Letter of Advice dated June 16, 1989, to Robert N. Bothman, Director, ODOT (OP-6329), we examined whether the cost of the voter registration program could be defrayed with fees obtained from the sale of DMV records produced with Highway Funds and concluded that since DMV used moneys from dedicated Highway Funds to generate the records, income from their sale would also be dedicated and could not be used to support the voter registration program. This Letter of Advice and other opinions raise the question whether revenue generated by the special license plate programs should be returned to the Highway Fund. Because of the limited time available to prepare this opinion, we have not addressed that question.