March 2015

The Road Use Tax Fund in Iowa

By Amy K. Frantz

Iowa’s Constitution was amended in 1942 to provide a dedicated funding stream for transportation costs.  The Amendment, Article VII, Section 8, reads:

Motor vehicle fees and fuel taxes.  Sec. 8.  All motor vehicle registration fees and all licenses and excise taxes on motor vehicle fuel, except cost of administration, shall be used exclusively for the construction, maintenance and supervision of the public highways exclusively within the state or for the payment of bonds issued or to be issued for the construction of such public highways and the payment of interest on such bonds.  Added 1942, Amendment [18].[1] 

In 1949, the Iowa General Assembly adopted legislation to create the Road Use Tax Fund (RUTF).  Revenue raised from the state’s fuel tax, motor vehicle registration fees[2], underground storage tank fees, among other sources, are deposited in the RUTF.  Some funding is taken “off-the-top” from the RUTF for Iowa Department of Transportation operations and other uses such as the Revitalize Iowa’s Sound Economy (RISE) program, park and institutional roads, and the 511 Travel/Weather Information Systems.  The remaining funding is distributed for use on state, county, and city road projects.

The RUTF established a formula to divide the transportation pie among the three levels of government.  The formula has been changed four times since 1949, with the most recent change coming in 1989.[3]  Counties receive separate funding amounts for secondary roads and for farm-to-market roads (roads that connect rural or agricultural areas to the markets in nearby towns).  As you can see, each time the formula has changed, the percentage of county funding has been decreased in order to give a larger share of the pie to state and city roads.[4]  This has led a number of counties to turn to bonding for road projects.


Year Primary Road Fund (state) Secondary Road Fund (counties) Farm-to-Market Road Fund (counties) Municipal Road Fund (cities)
1949 42.0 35.0 15.0 8.0
1962 47.0 30.0 10.0 13.0
1969 47.0 29.0 9.0 15.0
1978 45.0 28.0 9.0 18.0
1989 47.5 24.5 8.0 20.0

The Iowa Department of Transportation reports that in 2014, there were 9,410 miles of primary roads, 59,306 miles of secondary roads, 30,518 miles of Farm-to-Market roads, and 14,965 miles of municipal roads.[5]  This translates into the state being responsible for 8 percent of roads, the counties for 79 percent, and the cities for 13 percent of the total road miles in Iowa.

Instead of simply increasing our state’s fuel tax, the Iowa Legislature should also look at the RUTF formula.  It has not been changed in more than 25 years.  Are the funds being targeted to the most critical areas?  Are the majority of the deficient bridges and roads, which are often cited as a reason for the fuel tax increase, under the responsibility of the Primary Road Fund, handled by the state, which receives nearly half of RUTF funding?    Or should more of the RUTF funding be directed to other, more crucial areas?  An evaluation of the RUTF formula at least deserves a look.

Amy K. Frantz is Vice President of Public Interest Institute.

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation.  They are brought to you in the interest of a better-informed citizenry.

[1] Iowa Constitution, pp. 27-28, <> accessed February 24, 2015.

[2] In 2007, the Iowa Legislature created the TIME-21 Fund.  Part of the revenue from motor vehicle registration fees now goes to the TIME-21 fund rather than RUTF.

[3] “History of Changes to Road Funding Distributions in Iowa,” Fiscal Topics, Legislative Services Agency, November 2009, <> accessed February 4, 2015.

[4] Ibid.

[5]“2014 Iowa Factbook,” Legislative Services Agency Fiscal Services Division, p. 252, <> accessed February 24, 2015.