Analyst: Major DMV account heading toward collapse

The clock is ticking on a major funding source for California’s Department of Motor Vehicles.

An account used to fund 95 percent of the DMV’s expenses will soon become insolvent, according to a nonpartisan report published on Tuesday.

The Legislative Analyst’s Office predicts the $3.9 billion Motor Vehicle Account, which primarily funds the California Highway Patrol and DMV, will collapse in a few years.

By 2021-2022, California will be unable to pay down its debts, according to Anthony Simbol, deputy legislative analyst.

“We’ve just been dipping into our reserves, but at some point, the fund will go insolvent,” Simbol said. “The Legislature has to raise fees, provide general fund support, or cut down on expenses.”

If lawmakers don’t take immediate action, DMV customers could soon face longer wait times or sizable fee increases when they register their cars, Simbol added.

The vast majority of money in the $3.9 billion account comes from vehicle registration fees, which total $86 per vehicle. Nearly 60 percent of the money from the account is given to CHP, while about 30 percent goes to the DMV. One-tenth of the account is used for other purposes.

In recent years, the DMV has faced an increased workload as a result of new state and federal regulations. The DMV has struggled to implement the state’s Motor Voter program, which automatically registers people to vote when they visit the DMV. The department also faced challenges when issuing new federally-mandated Real ID cards.

But as the DMV’s costs have risen to adapt to changes, it has not gotten enough money to support itself, which has forced the department to dip into its reserves.

The Legislative Analyst’s Office said in its report that Gov. Gavin Newsom’s budget helps address the problem by halting a few ongoing DMV and CHP projects. Still, Newsom’s plans only delay the insolvency by a year, it said.

The main ways to address the problem are to increase registration fees or make the DMV more efficient, the report said. An audit and strike team report are expected to come out over the next two months, which could help the state find solutions.