Special license plates : new fee structure has increased special plate revenue

Follow-Up Review 12-12

September 2012

Georgia Department of Audits and Accounts Performance Audit Division
Greg S. Griffin, State Auditor Leslie McGuire, Director

Why we did this review
This follow-up review was conducted to determine the extent to which the recommendations presented in our January 2010 performance audit (0916) have been addressed.
The purpose of the January 2010 audit was to determine 1) if the state is maximizing revenues generated from special license plates, particularly those benefiting state agencies and 2) if the use of special license plate revenues by state agencies is appropriate.
Who we are
The Performance Audit Division was established in 1971 to conduct indepth reviews of state programs. The purpose of our reviews is to determine if programs are meeting their goals and objectives; provide measurements of program results and effectiveness; identify other means of meeting goals; evaluate the efficiency of resource allocation; assess compliance with laws and regulations; and provide credible management information to decision-makers.
Website: www.audits.ga.gov Phone: 404-657-5220 Fax: 404-656-7535

Follow-Up Review Special License Plates
New fee structure has increased special plate revenue
What we found Although additional steps are needed to improve the administration and sale of special plates, special license plate revenues have increased since our performance audit was released in 2010. Based on recommendations in our audit, the General Assembly passed HB 1055 (effective beginning in fiscal year 2011), which standardized the fee structure for most special license plates. By standardizing the types of fees charged and increasing renewal fees, we estimate that the new fee structure generated an additional $17 million in fiscal year 2011 and an additional $13 million in fiscal year 2012 for the state general fund. Despite the increase in revenues, the number of plates newly issued and renewed decreased by 60% and 35%, respectively. While sales have decreased for a variety of reasons, there are additional recommendations in our 2010 report that, if implemented, could further increase special plate sales and revenues.
At the time of our original report, motorists had the option of selecting from over 100 special plate designs with the proceeds for some of the plates directly benefitting state programs or special interest groups and some of the proceeds going to the state general fund. Despite the decrease in the number of renewals and new issuances in fiscal years 2011 and 2012 for the 14 plates that specifically benefit state programs, state agencies saw an estimated overall increase of $2.4 million in fiscal year 2011 and $1.1 million in 2012 over 2010 revenues. However, two of six state agencies saw a decrease in new issuances, renewals, and annual revenues. Appendix A provides information on the revenue and number of renewals and new issuances for plates benefitting sponsor organizations such as state agencies and

Special License Plates

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nonprofits before and after the passage of HB 1055. The exhibit below shows the percentage decrease in renewals and new issuances as well as the increase in annual revenue for plates sponsored by state agencies. As shown in the exhibit, renewals and new issuances of special license plates were decreasing prior to HB 1055.

Change in Revenue After HB 1055 Plates Sponsored by State Agencies

25%
HB 1055 Effective

0%

Renewals

-25%
New Issuances
-50%

$2,500,000 $2,000,000 $1,500,000 $1,000,000

% Change in Number of Licenses
$2,347,991 $1,098,428
$ Increase in Revenue Remitted Since FY 2010

-75%

$500,000

-100%

FY 2010

FY 2011

FY 2012

Source: DOR Motor Vehicle Division Issuance & Renewal Data; DOR Remittances to Sponsor Organizations

As recommended in our report, HB 1055 also removed the three by three inch square design limitation for special license plates and now allows the Motor Vehicle Division (MVD) within the Department of Revenue and other plate sponsors to utilize the full background surface of the plate for designs. MVD began issuing full plate designs for standard plates in May 2012. Because MVD's focus has been on producing standard plates, few sponsors of special license plates have developed full plate designs. Full plate designs on special license plates will not be available until MVD has an inventory of standard plates. There is still the possibility that new full plate designs will improve sales of special license plates.

MVD has not improved efforts to market or administer special license plates which could further increase revenue to the state. No steps have been taken to provide county tag offices with marketing materials, or work with sponsors to promote special plates. Although recommended in the original audit, MVD has not: hired a staff member to manage special license plates on a full-time basis, produced a strategic plan for maximizing special license plate revenues, or used GRATIS (Georgia Registration and Tilting Information System) to evaluate and track plate trends.

Special plate designs have not been expanded to include motorcycles, disabled persons, or prestige plates. Seventeen out of eighteen University System of Georgia (USG) institutions with special license plates have established revenue sharing agreements with the Department of Revenue as of August 2012, and one institution is in the process of negotiating an agreement. Each USG institution reports that it has expanded or has plans to expand the marketing of their plates. Revenue sharing with colleges and universities was intended to provide an incentive for colleges and universities to market, and thereby increase sales of these plates.

State agencies receiving remittances improved their use of special plate revenue. The Department of Community Health now funds both its own breast cancer screening program and a similar one managed by the Department of Public Health. Funds derived from the sale of educator plates now fund the Department of Education's Georgia Foundation for Public Education instead of the Public School Personnel Indemnification Fund. The Department of Agriculture's Dog and Cat Sterilization Program has increased the number of subsidized sterilization procedures a veterinarian can perform per month and

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has developed block grants for local animal shelters.
DOR's Response: Funding is the limiting factor for not implementing the four recommendations labeled "not implemented" in the follow-up review. The Department of Revenue (DOR), like most state agencies, has experienced budgetary cuts the past five fiscal years, which did not allow for the hiring of additional staff or provide marketing materials for the promotion of special license plates. Unless additional appropriations are received to address the "not implemented" recommendations, the issues will not be resolved.
DOR is in agreement with all other points outlined in the follow-up review and continues to work on the "partially implemented" recommendations.
The following table summarizes the findings and recommendations in our 2010 report and actions taken by the Department to address them. A copy of the 2010 performance audit may be accessed at http://www.audits.ga.gov/rsaAudits.

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Special License Plates Follow-Up Review, September 2012

Original Findings/Recommendations

Current Status

The state could generate additional revenue if Summary Finding. Action taken is addressed in the following

it takes recommended steps to maximize

findings.

special license plate sales.

Standardization of the types of fees charged for special license plates could generate additional revenue for the state and sponsor organizations.

Fully Implemented Based on recommendations in our audit, the General Assembly passed HB 1055 (effective beginning in fiscal year 2011), which standardized the fee structure for most special license plates. By standardizing the types of fees charged and increasing renewal fees, we estimate that the new fee structure generated an additional $17 million for the state general fund in fiscal year 2011 and an additional $13 million in fiscal year 2012. Special plate revenues increased overall despite a 60% decrease in the new issuance and a 35% decrease in the renewal of special plates.
Below are examples of the impact of HB 1055 on specific plates:
All 14 special interest plates benefitting state agencies charge an annual renewal fee of $35, an increase from four plates charging $25 in fiscal year 2009. Remittances to state agency sponsors increased by 75% between fiscal years 2010 and 2011, even though annual renewals decreased by 34% and new plate issuances decreased by 76%. These plates added an estimated $12.7 million in new fees to the general fund. Appendix A provides information on the revenue and number of renewals and new issuances for plates benefitting state agencies before and after the passage of HB 1055.
Hobby antique, amateur radio, alternative fuel, foreign organization and certified firefighter plates charged a $35 annual renewal fee for the first time in fiscal year 2011. This was also the first year that all of these plates, except firefighters, charged a $25 manufacturing fee for new issuances. Three of these plates saw decreases in both annual renewals (51%) and new issuances (87%), but collectively added an estimated $2.1 million in new fees to the general fund.
Military and veterans plates were not altered by the passage of HB 1055. Fee exemptions for these plates remain inconsistent. Some veterans' plates were eliminated and are no longer available for issuance.

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Special License Plates Follow-Up Review, September 2012

Original Findings/Recommendations

Current Status

The state could potentially generate additional revenue by expanding the selection of special plates and by offering personalized special plates and special plates for disabled persons and motorcycles.

Not Implemented MVD has not taken action to offer personalized special plates or special plates for disabled persons and motorcycles.

Expanding special license plate designs across the entire plate could improve the product by increasing the attractiveness of the plate, and thereby, increase sales.

Partially Implemented HB 1055 eliminated placement and size restrictions on special license plate designs, thereby allowing for full plate designs. MVD has produced standard plates with full plate designs, but has not yet manufactured special plates with full plate designs. According to MVD staff, the first priority was producing the new standard plate.
Sponsors of 8 out of the over 130 special license plates have submitted new full plate designs. Although MVD has worked with these sponsors and has approved three new designs, it has not yet made widespread efforts to recruit sponsors for new designs due to the priority of producing the new standard plates.

In its response to the follow-up review, DOR indicated that it has contacted the sponsors of the specialty plates to determine if they would like to redesign their plate, utilizing the entire plate dimension. The redesign process is slow and many revisions are necessary before a final design is approved.

Increasing the promotion and marketing of special license plates could increase sales.

Not Implemented MVD has not taken steps to increase promotion or marketing of special license plates. While state agencies have the authority to market their plates, some state agencies that receive funds from special license plates are not consistently promoting or marketing the plates. HB 1055 did not create any legal requirements for MVD or state agencies to market special license plates.

Implementing other states' strategies could increase sales of college and university special license plates.

Partially Implemented HB 1055 allows University System of Georgia colleges and universities to share in the revenue from special license plates. As of August 2012, seventeen out of eighteen USG institutions with special license plates have executed a revenue sharing agreement with DOR. The remaining institution is in the process of negotiating an agreement. Each USG institution reports that it has expanded or has plans to expand the marketing of their plates.

MVD should place greater emphasis on maximizing special license plate sales and revenues by managing it as a true business function.

Not Implemented MVD has not changed its management of special license plates. No staff member has been hired to handle special license plates, marketing and reporting information have not been improved, and MVD has not developed a business plan for special plates.

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Special License Plates Follow-Up Review, September 2012

Original Findings/Recommendations

Current Status

The oversight of special license plate funds expended by state agencies could be improved by establishing consistent and sufficient reporting requirements and by establishing, as other states have, a single oversight entity that is responsible for assessing the use of special plate funds collectively.

Not Implemented The oversight of special license plate funds was not altered by HB 1055.

The Department of Community Health should consider consolidating duplicative programs that are providing breast cancer screening and treatment services.

Fully Implemented The Department of Community Health (DCH) reassessed and re-organized its cancer screening programs. DCH now uses license plate revenue to fund its breast cancer screening program and one administered by the Department of Public Health.

The Public School Personnel Indemnification Fund has not received a claim since the Fund's inception 10 years ago. As a result, the General Assembly should consider either redirecting special license plate revenues to programs that directly support teachers or educational programs or loosen restrictions on use of the Fund.

Fully Implemented HB 1055 redirected special plate revenues away from the Public School Personnel Indemnification Fund. Revenue will now be directed to the Georgia Foundation for Public Education which supports educational excellence in Georgia and the Atlanta Area School for the Deaf, the Georgia Academy for the Blind, the Georgia School for the Deaf, and the Georgia Governor's Honors Program.
Administered by the Department of Administrative Services (DOAS), the Indemnification Fund is intended to compensate teachers that are victims of school violence. According to DOAS, the Indemnification Fund remains robust with a balance over $3.5 million and has not received a claim.

Improvements are needed to increase the effectiveness of the Dog and Cat Sterilization Program.

Partially Implemented Starting in the Summer of 2012, the Department of Agriculture will expand the program by offering grants to local animal shelters for spay/neuter procedures. As of May 2012, due to an increase in revenue, the total number of procedures which could be performed was increased.
According to the department, the program does not offer subsidies in exchange for reduced procedural fees because most veterinarians already subsidize the cost of the procedures. Program services do not target low-income pet owners, and the program remains open to all Georgians regardless of income.

10 Recommendations

3 Fully Implemented 3 Partially Implemented 4 Not Implemented

Special License Plates

Appendix A Special License Plate Remittances to Sponsor Organizations

Sponsor Organization

Plate Type

Remittances

Renewed Registrations

New Issuances

FY 2010

FY 2011 FY 20125 FY 2010 FY 2011 FY 20125 FY 2010 FY 2011 FY 2012

Deaprtment of Agriculture Dog and Cat Sterilization Program1

Buddy/Golden Retriever

$135,680 $251,660 $200,856 33,747 24,410 18,492 5,924 1,385 1,107

Dog and Cat/ Animal Friend

$53,534 $253,920 $197,532 38,028 25,636 18,353 2,061

439

418

Cat/Feline Friend

$75,299 $39,560 $37,404

2,962

3,604

3,471 3,426

749

502

Total

$264,513 $545,140 $435,792 74,737 53,650 40,316 11,411 2,573 2,027

Department of Natural Resources

Historic Preservation Division Wildlife Resources Division2

Historic Preservation Bobwhite Quail

$50,644 $45,474 $359,794 $1,010,290

$42,161 $733,223

1,906 172,359

1,896 99,971

1,797

671

66,557 14,915

263 2,683

194 2,436

Trout Unlimited

$29,498 $66,580 $54,996

8,706

6,521

5,156 1,283

392

317

Wildlife- Eagle

$600,295 $1,626,690 $1,188,852 269,781 162,336 108,149 23,378 6,478 3,629

Wildlife- Hummingbird

$246,628 $374,850 $279,096 52,142 36,034 25,460 10,914 2,140 1,262

Department of Education 3

Total

$1,286,859 $3,123,884 $2,298,328 504,894 306,758 207,121 51,161 11,956 7,838

Georgia Foundation for Public Education1

Educator

$158,647 $415,410 $354,132 50,824 40,120 32,769 6,803 1,834 1,736

Departmnet of Transporation Roadside Enhancement and Beautification Fund1

Wildflower- Black-eyed Susan

$100,158 $384,470 $288,408 59,572 38,236 26,700 4,474 1,183

967

Wildflower- Purple Cone

$168,494 $103,380 $85,980 10,349

9,756

7,850 7,635

931

728

Total

$268,651 $487,850 $374,388 69,921 47,992 34,550 12,109 2,114 1,695

Department of Community Health Indigent Care Trust Fund4

Breast Cancer

$950,327 $733,405 $610,062 38,972 31,978 25,478 4,912 1,394 1,311

Department of Public Service Governor's Office of Highway Safety4

NASCAR

$58,825 $45,854 $37,942

3,245

2,649

2,244

877

338

233

Share the Road

$153,912 $138,182 $129,518

6,016

5,853

5,549 1,509

659

734

Total

$212,737 $184,036 $167,460

9,261

8,502

7,793 2,386

997

967

State Agencies Total

$3,141,734 $5,489,725 $4,240,161 748,609 489,000 348,026 88,782 20,868 15,574

Nonprofit Corporation 4

Automobile Racing Hall of Fame Association

Race Car

$2,978

$6,980

$6,072

765

649

567

111

77

54

Choose Life

Choose Life

$66,820 $50,180 $40,956

4,603

4,560

4,369 1,291

566

452

Children's Healthcare of Atlanta

Children's Healthcare

$15,720 $14,830 $11,796

857

1,041

1,110

571

273

195

Georgia 4-H

Support Agriculture

$17,110 $12,880 $12,894

1,152

1,121

1,180

296

149

171

Georgia Association of Future Farmers of America Georgia Commission for Equines2

Support Agriculture Equine

$17,110 $12,880 $12,894

1,152

1,121

1,180

296

149

171

$44,050 $30,370 $29,796

2,531

2,685

2,783 1,228

484

410

Georgia Junior Golf Foundation

Junior Golf

$22,860 $16,670 $17,352

971

1,397

1,597

886

430

329

Georgia State Soccer Association

Georgia Soccer

$7,840

$6,970

$6,804

487

595

645

211

185

120

JoAnna McAffee Childhood Cancer Foundation

Pediatric Cancer

$47,290 $37,370 $32,916

2,985

3,073

2,985 1,019

546

371

Sons of Confederate Veterans

Confederate Veterans

$57,718 $108,698 $38,256

4,868

4,130

3,570

534

271

254

U.S. Disabled Athletes Fund

Disabled Athlete\ BlazeSports

$19,116 $66,264 $55,308

3,743

2,933

2,286

165

72

45

Total

$318,612 $364,092 $265,044 24,114 23,305 22,271 6,607 3,201 2,572

Total Amount Remitted to Sponsors

$3,460,346 $5,853,817 $4,505,205 772,723 512,305 370,297 95,389 24,069 18,146

Note: DOR remitted an additional $68,760 to sponsor organizations in fiscal year 2011 and $94,572 in 2012. These funds were not included as their respective plates did not exist during the original audit. 1Remittances to the sponsor organization decreased from $22.05 to $10. 2Remittances to the sponsor organization decreased from $22 to $10. 3In fiscal year 2011, the sponsor of Educator license plate switched from the Department of Administrative Services to the Department of Education. 4Plate charged an annual renewal prior to fiscal year 2011. 5May & June remittances were annualized based on the average remittances per month; June renewals were annualized based on the average change per month. Source: DOR remittance data; MVD unaudited registration data

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For additional information or for copies of this report call 404-657-5220 or see our website: http://www.audits.ga.gov/rsaAudits