The Constitution's Highway Fund Wall and the 2025 Budget Fight

Few sentences in the Idaho Constitution shape public budgets as directly as the provision on gasoline taxes and registration fees that took effect July 1, 1941. Legislators invoke it in floor debates, agencies cite it when they turn down requests and candidates mention it in stump speeches, often loosely. A speaker may say "the constitution says all transportation money has to go to roads" (it does not), or "the Senate killed the transportation budget because it violated the highway fund rules" (the April 2025 objection was about a different section). Each mistake changes what you would conclude about a real dispute.

This lesson reads the provision closely, walks through what courts and the attorney general have said about it, traces the Idaho State Police funding history, and then reconstructs the April 2025 budget fight and what followed in 2026. It ends with a method for testing any constitutional claim about road money. The facts here are current as of October 2026. No court has ruled on the 2025 dispute, so where this lesson describes competing legal arguments, it reports them rather than declaring a winner.

What Article VII, section 17 says

Here is the full text of Article VII, section 17, titled "Gasoline taxes and motor vehicle registration fees to be expended on highways":

"On and after July 1, 1941 the proceeds from the imposition of any tax on gasoline and like motor vehicle fuels sold or used to propel motor vehicles upon the highways of this state and from any tax or fee for the registration of motor vehicles, in excess of the necessary costs of collection and administration and any refund or credits authorized by law, shall be used exclusively for the construction, repair, maintenance and traffic supervision of the public highways of this state and the payment of the interest and principal of obligations incurred for said purposes; and no part of such revenues shall, by transfer of funds or otherwise, be diverted to any other purposes whatsoever."

Read it as four parts.

1. What money it covers

Two sources only: (a) taxes on gasoline "and like motor vehicle fuels" used to propel vehicles on Idaho highways, and (b) taxes or fees for registering motor vehicles. Diesel and other road fuels count as "like motor vehicle fuels." The section does not mention sales tax, income tax, property tax, General Fund appropriations, federal aid, development impact fees, driver's license fees, or tolls. Money from those sources may be restricted by statute or federal law, but not by this section.

The Legislature has sometimes written that line into statute. When it created an optional $10 state parks passport sold with vehicle registration, it declared in Idaho Code 49-402(11) that passport fees "shall not be considered a motor vehicle registration fee" under section 17. Labels like that are only a starting point: in the 1996 case below, the court looked past the label "fee" to what the charge actually was.

2. What comes off the top

The "necessary costs of collection and administration" and authorized refunds or credits are excluded. That is why the Tax Commission keeps its collection costs and pays fuel tax refunds before distributing the rest (Lesson 2), and why the Legislature funds ITD's Division of Motor Vehicles from the State Highway (Dedicated) Fund, as the 2025 budget bill S1218 shows.

3. What the money may be used for

Five purposes: construction, repair, maintenance and "traffic supervision" of public highways, plus principal and interest on debt incurred for those purposes. "Public highways of this state" is not limited to state highways; local roads are public highways too, which is how the Highway Distribution Account can lawfully send 40 percent to cities, counties and highway districts. "Traffic supervision" is the phrase that supported Idaho State Police funding from the account for many years.

4. The anti-diversion clause

"No part of such revenues shall, by transfer of funds or otherwise, be diverted to any other purposes whatsoever." The clause anticipates creative accounting, such as moving highway money into another fund and backfilling the highway fund later.

What the courts and the attorney general have said

State ex rel. Moon v. Jonasson (1956): no tourism ads from highway money

In 1955, the Legislature created a Department of Commerce and Development and, in section 6 of Chapter 234 of the 1955 Session Laws, transferred $50,000 from the State Highway Fund to an Idaho Development and Publicity Fund to advertise the state's highways and encourage travel. The state treasurer challenged it. In State ex rel. Moon v. Jonasson, 78 Idaho 205, 299 P.2d 755 (1956), the Idaho Supreme Court affirmed a ruling that the transfer was unconstitutional. The court called section 17 plain and unambiguous and rejected the argument that advertising fit within "administration" or "maintenance." In the court's words, "Advertising the State is not within any of the categories above enumerated." The court also said that because the treasurer does not segregate dollars by source, the Legislature could not avoid the problem by assuming the money would come from some other revenue.

Attorney General Opinion 89-8 (1989): interest stays with the highway money

In 1989 the Idaho Transportation Board asked whether interest earned on idle highway funds could be credited to the General Fund. Attorney General Opinion No. 89-8, issued September 20, 1989, under Attorney General Jim Jones, concluded that interest earnings on funds dedicated by section 17 should be credited to the Highway Distribution Account. The opinion relied on Moon v. Jonasson's strict reading, on a 1986 Idaho Supreme Court decision about interest on school endowment funds, and on an Oregon Supreme Court case reaching the same result for Oregon's highway fund. Idaho law now builds this in: Idaho Code 40-701(3) and (4) keep interest on idle Highway Distribution Account and dedicated highway account money with those accounts. An attorney general opinion is legal advice, not a court ruling, but agencies and legislators treat it as a strong signal of how a court would rule.

V-1 Oil Co. v. Idaho Petroleum Clean Water Trust Fund (1996): a "fee" can be a fuel tax

Idaho created a Petroleum Clean Water Trust Fund to insure against leaking petroleum storage tanks and paid for it with a 1-cent-per-gallon "transfer fee" on the first licensed distributor to transfer title to petroleum in Idaho. In V-1 Oil Co. v. Idaho Petroleum Clean Water Trust Fund, 128 Idaho 890, 920 P.2d 909 (1996), the Idaho Supreme Court held that the charge was not reasonably related to the benefits the trust fund provided, so to the extent it was assessed on gasoline and like motor fuels it was a tax on those fuels, and that sending its proceeds to the trust fund rather than to highways violated Article VII, section 17. The court did not order a refund to the company. The lesson: calling a charge a "fee" does not take it outside section 17 if, in substance, it taxes motor fuel.

What the wall does not do

Section 17 is narrower than its reputation. It does not:

• Require any level of road spending. It restricts how two revenue streams are spent. It does not require the Legislature to raise fuel taxes or appropriate any amount.
• Protect sales tax, General Fund or one-time money. The $165 million and $110 million General Fund transfers that S1218 sent to roads for fiscal 2026 were not constitutionally protected. The Legislature could, and for fiscal 2027 did, decline to repeat them. Sales tax distributions to TECM and local roads exist only because Idaho Code 63-3638(16) says so, and the Legislature can amend that statute.
• Decide the state and local split. The 60/40 split of the Highway Distribution Account and the local formula are statutory choices. Both shares go to public highways, so either could change without violating section 17.
• Govern federal aid or local revenue. Federal highway money comes with federal rules. Local property taxes for roads are limited by Idaho Code 40-801 and the budget cap in 63-802, not section 17. Voter-approved local registration fees are an exception: the statutes that authorize them (40-827 and 40-1416) use language that tracks section 17's list of purposes.
• Settle every "is this a highway purpose" question. Whether a particular item, such as a sidewalk, bike lane, transit stop, rest area or maintenance shed, counts as construction, repair, maintenance or traffic supervision of a public highway is a legal question. This lesson found no Idaho Supreme Court decision drawing those lines for modern items like bike lanes, and none is cited here. If you see a confident claim either way, ask for the authority.

The Idaho State Police and "traffic supervision"

For many years the Idaho State Police received a share of the Highway Distribution Account, on the theory that patrolling highways and enforcing traffic laws is "traffic supervision" of public highways, one of section 17's listed purposes. By the 2010s the share was 5 percent of the account (applied to the original 25-cent fuel tax portion and older fees, not the revenue added in 2015). Associated Press reporting carried by Idaho News 6 in February 2016 described the arrangement as ISP receiving 5 percent of the first 25 cents of fuel tax revenue, and said a Senate proposal to end it would cut about $16.7 million from ISP, about 21 percent of its budget.

The 2016 proposal stalled. In February 2017, the House killed a similar measure that would have shifted about $17 million; the Associated Press reported that Rep. Maxine Bell of Jerome, then co-chair of the budget committee, said the state should not open a large hole in the ISP budget to patch the transportation budget.

The change finally passed as Senate Bill 1201 of 2019, sponsored by Sen. Bert Brackett. It passed the Senate 19-15-1 and the House 56-13-1 and was signed April 4, 2019 (Session Law Chapter 308). Its statement of purpose framed the goal as moving ISP's fuel tax funding to the General Fund so ISP would be "unencumbered" in allocating its money, since highway-dedicated dollars could be used only for limited purposes. Boise State Public Radio reported that about $17 million of ISP's roughly $75 million budget then came from the account, and quoted Brackett saying "This is not about defunding the state police."

The bill text set a schedule: 5 percent in fiscal 2021, then 4, 3, 2 and 1 percent in fiscal 2022 through 2025, and zero thereafter, with the freed points divided between the state highway account and local governments each year until the split reached 60 percent state and 40 percent local in fiscal 2026. Seven years later, House Bill 716 of 2026 (passed 70-0 and 34-0, signed March 20, 2026) cleaned up the statute. Its statement of purpose said that after ISP was removed there was "no longer a need to track items separately," and the account now splits 60/40 with no ISP line.

The ISP debate illustrates how section 17 arguments usually work. Nobody seriously argued that ISP's highway share was unconstitutional; "traffic supervision" is right there in the text. The argument was about priorities. Supporters of the shift said road and bridge needs were large, that fuel tax payers expected their money to go to pavement, and that ISP would be better off with flexible General Fund money. Opponents worried the General Fund would not reliably replace the money in tight years and that public safety would suffer. Both sides were making policy arguments within the constitutional limit.

The April 2025 budget fight

What the bill said

Each year the Joint Finance-Appropriations Committee (JFAC) writes the ITD budget in pieces. In 2025, after a maintenance budget passed earlier in the session, JFAC sent the Senate an "enhancement" budget for fiscal 2026: Senate Bill 1205. The bill text appropriated about $237.0 million in additional ITD spending authority and transferred $165 million from the General Fund to the Strategic Initiatives Program fund and $110 million from the General Fund to the Local Highway Distribution Fund. BoiseDev reported the enhancements included employee raises, IT upgrades, deferred maintenance, equipment and nearly $10 million to start renovating ITD's flooded former headquarters on State Street.

Sections 9 and 10 caused the trouble. Section 9 said that of the sales tax money distributed to local governments under section 63-3638(16), "any single countywide highway district" must use at least $8 million toward a road widening and bridge reconstruction project on a "residential mobility arterial" that connects a state highway to a U.S. highway. Section 10 required the same district to put at least $19.2 million of its share of the $110 million General Fund transfer toward the same kind of project. Both sections defined the road type by reference to each district's master street map as of June 26, 2024. That adds up to $27.2 million.

The bill never named ACHD or Linder Road, but only one countywide highway district exists, and news coverage identified the target. BoiseDev reported that the language would require ACHD to spend $27.2 million widening Linder Road between State Highway 44 and U.S. 20/26, and that an earlier draft had sought $50 million for Linder Road in a single year plus $13.2 million on State Street in Boise. The Idaho Press reported that JFAC's version had also directed ACHD to change its State Street plan from reducing the road from five lanes to three to reducing it to four.

The Senate vote

On April 1, 2025, the Senate voted 3-31-1 to kill S1205, according to the bill's official status page. Only Sens. Van Burtenshaw, Codi Galloway and Scott Grow, the floor sponsor and JFAC co-chair, voted yes. The Idaho Capital Sun called it one of the most lopsided votes of the year.

Senate Majority Leader Lori Den Hartog of Meridian gave the only floor debate. As quoted by the Capital Sun, she said sections 9 and 10 "potentially are in violation of Article Three, Section 19 of our Constitution," and added: "There is only one highway district and one road in one county that is being directed to spend a certain amount of money in this budget, and for that reason, I cannot support this." BoiseDev reported that House Speaker Mike Moyle said he had no problem with the Senate's vote.

Which constitutional provision?

The objection was not about section 17. Nobody argued that the money in S1205 was fuel tax diverted to non-highway uses; both directives spent road money on a road. The claim was under Article III, section 19, which lists subjects on which "the legislature shall not pass local or special laws." One item on the list is "Authorizing the laying out, opening, altering, maintaining, working on, or vacating roads, highways, streets, alleys, town plats, parks, cemeteries, or any public grounds not owned by the state." Another bars local or special laws "Regulating county and township business." Linder Road is a local road owned by ACHD, not the state.

The legal arguments on each side, as a reader can reconstruct them from the text:

• The case that the language was a forbidden special law: It singled out one local road agency and effectively one road, directing work on a road the state does not own. A law written in general words ("any single countywide highway district") can still be special if, in practice, it can only ever apply to one place. Den Hartog's point that only one district and one road were affected goes to that test.
• The case that it was permissible: The language was framed generally and did not name a district or road. It attached conditions to state money (sales tax distributions and a General Fund transfer) that the Legislature was under no obligation to provide, and the Legislature has broad power to set conditions on appropriations. A district that disliked the condition could, in theory, decline the money.

No court ruled. The Senate's vote ended the question for 2025, and the record is the floor debate and news coverage. If you write or speak about it, say that a constitutional concern was raised and persuaded the Senate, not that the language was held unconstitutional.

The same session shows the alternative path the Legislature can use when it wants to influence local road design. Senate Bill 1144 of 2025 (signed March 31, 2025, Session Law Chapter 243) rewrote Idaho Code 40-605 as a general law for all road commissioners. Its statement of purpose says it limits pedestrian and bicycle improvements to a "secondary or collateral benefit" of a highway project and bars reducing the width of non-residential collector and arterial roads. Because it applies statewide, it does not raise the special-law problem, even though its practical effect was widely discussed in the context of Boise's State Street plans. In 2026, House Bill 508 (Session Law Chapter 299) amended related sections to allow federal funds or grants to be used to improve bike and pedestrian facilities, according to its statement of purpose.

What happened next in 2025

JFAC met the next day and rewrote the budget. The Idaho Press reported that the new version removed the State Street language and all language requiring ACHD to work on specific projects, and that because legislative rules require a rejected bill to be substantially different when reconsidered, budget writers cut the overall budget by $200, $100 each from two divisions. The bill texts confirm the difference: S1205's fiscal 2026 grand total was $237,022,100 and the replacement's was $237,021,900.

The replacement, Senate Bill 1218, passed the Senate 25-8-2 and the House 46-21-3 and was signed April 14, 2025 (Session Law Chapter 337). It kept the $165 million General Fund transfer to the Strategic Initiatives Program fund and the $110 million transfer to the Local Highway Distribution Fund, paid with the first fiscal 2026 HDA distribution, with no project directives attached.

What happened in 2026

The $275 million in S1218 was General Fund money, outside section 17's protection, and it was not renewed:

• January 2026: Gov. Brad Little's fiscal 2027 budget proposed removing $275 million from ITD's Strategic Initiatives Fund, including $110 million for local highway jurisdictions, describing it as "a one-time reduction in transportation investments," according to the Idaho Association of Counties. The association warned that a cut described as one-time could prove lasting.
• March 2026: The fiscal 2027 ITD enhancement budget, Senate Bill 1426 (passed 30-4-1 and 50-18-2, signed March 31, 2026, Session Law Chapter 257), brought ITD's total fiscal 2027 appropriation to about $1.037 billion, with $0 from the General Fund, about $544.6 million in dedicated funds and about $492.4 million in federal funds, according to its fiscal note. News coverage linked the $275 million elimination to S1426; the bill itself does not mention the Strategic Initiatives fund. The money disappeared because no bill transferred it.
• April 2026: House Bill 968 (Session Law Chapter 311) moved about $12.9 million in interest from each of the Strategic Initiatives state and local funds, and $4.15 million from a local grant closeout, to the General Fund for fiscal 2027, while sending about $32.9 million in federal ARPA interest into Strategic Initiatives for fiscal 2026, per its fiscal note. Compare AG Opinion 89-8: interest on constitutionally dedicated fuel tax and registration money must stay with highways, but Strategic Initiatives money came from the General Fund, so the 1989 reasoning does not obviously apply. This lesson found no published legal analysis of the transfer.
• July 2026: ITD's draft seven-year plan moved about $1.3 billion in highway work, 68 projects, to an "unfunded" category and showed about $1.5 billion in TECM work, 12 more projects, not advancing to bonding, East Idaho News reported, republishing the Idaho Statesman; it said the plan assumes the Strategic Initiatives fund stays at $0 through 2033. Lesson 5 covers that plan.
• Local effects: ACHD put an extension of its local vehicle registration fee on the November 3, 2026, ballot. Commission Vice President Alexis Pickering told BoiseDev the fee mattered "especially considering we've had less and less support from our state." (See Lesson 2.)

People disagree about what this sequence means. Those who supported the budget choices point out that the General Fund transfers were always described as one-time, that state revenue forecasts weakened, that dedicated user fees and growing sales tax transfers (rising to $185 million a year from fiscal 2028) remain, and that ITD can still maintain what it has. Those who opposed them argue that Idaho built its expansion pipeline on surplus money, that losing about 18 percent of ITD's 2025 revenue (the East Idaho News figure) stalls projects in fast-growing regions, and that local agencies lost $110 million they had begun to count on. Both positions are about policy, not section 17. The constitution protected the fuel tax and registration revenue throughout, and that revenue was never diverted.

How to read a constitutional claim about road money

Where this fits in the rest of the course

• Lesson 1: Who Owns Your Road? explains why a road like Linder belongs to ACHD and not to the state or a city.
• Lesson 2: Where Road Money Comes From describes each revenue source this lesson classifies.
• Lesson 4: TECM, GARVEE Bonds and the Strategic Initiatives Fund follows the sales tax and surplus streams and bonding.
• Lesson 5: Reading ITD's Seven-Year Plan shows how the 2026 funding changes moved projects to "unfunded."
• Lesson 6: Highway Districts Up Close, Lesson 9 and Lesson 10 take the analysis to local budgets, advocacy and reporting.

Related courses on this site:

• The Idaho Constitution course, for Article III, Article VII and Article VIII in context.
• Course 27: Laws and Rules, especially how an Idaho bill becomes law and testimony and comments, for following JFAC and floor votes.
• Course 26: Local Government, including the budget cycle.
• Course 49: Testifying and Public Comment and Course 47: Idaho Public Records Requests, for getting budget documents and speaking up.
• Course 20: The Power Grid, for a comparison with how dedicated utility revenues and rate cases are argued.
• Budgets and Fiscal Duty for elected officials.