A panel of lawmakers learned today that an account that helps fund the system that issues motor-vehicle titles is at risk of becoming insolvent by 2011–and one option on the table is a fee hike.

The Colorado State Titling and Registration System , or CSTARS, is a statewide system to coordinate vehicle registration and titling between county clerks, who make the transactions with people titling and registering their newly acquired vehicles, and the state.  A fee of $7.20, charged when the vehicle is titled, goes to the system. It’s now not enough, lawmakers were told, and there’s a projected negative balance of $1.5 million by the year after next.

The decline in fee-revenue is being attributed to fewer vehicles being titled in Colorado as a result of the recession, according to Joint Budget Committee staffer David Meng. Meng projected that there will need to be a fee increase or a change in the administration of the program to bridge the funding gap.

The potential for a title-fee increase–on the heels of a $250 million-a-year increase in auto-registration fees, passed by the General Assembly and signed into law by Gov. Bill Ritter last spring–got the attention of at least one Joint Budget Committee member sitting on the powerful budget-writing panel.

“Is there room to lower somehow, the expenditures, to keep it in balance — rather than looking at the fee side?”  asked Rep. Mark Ferrandino, D-Denver.

“I suspect that will be part of what their (the Department of Revenue) plan is,” Meng said.

CSTARS was implemented in 2007 amid some significant kinks in the system that were later resolved.

At least one member of the legislature who isn’t on the budget committee said CSTARS needs some retooling. Sen.Ted Harvey, R-Highlands Ranch, noted that CSTARS is not working well for lenders who often have to wait months before a title is processed on vehicles that have been long since driven off the lot by customers at Colorado dealerships.

Harvey said he is working on legislation to improve the system and address the problems lenders are experiencing, but he said he wants to avoid a fee increase altogether.

“My bill will fix or replace a system that is broken without having to raise fees or taxes,” he said, noting that the measure’s funding would come from gifts, grants and donations.  “Consumers, auto dealers, and the lending community will all benefit from this bill”.

A bill that would have raised the registration fee by 60 cents was introduced during the 2009 legislative session but was not adopted.