California inches forward on transportation deal that includes fuel tax hikes

By Keith Goble, Land Line state legislative editor | Tuesday, February 28, 2017

An effort moving through the California statehouse would raise $5.5 billion annually for state and local roads, trade corridors, and public transit. Professional drivers are eyed as major contributors for the funding plan.

Sen Jim Beall, D-San Jose, said the need to get a deal done quickly has taken on greater significance in the aftermath of winter storms that have wreaked havoc with highways around the state.

He estimates that addressing storm damage will cost the state more than $200 million for emergency repairs.

The funding package offered by Beall, which includes a mix of higher taxes and fees, is described as a “first step” toward making roadways safer and providing a boost to the state’s economy. In addition, he said the package would help the state address some of the nearly $140 billion in state and local needs over the next decade.

“With projected funding levels insufficient even to maintain the status quo, it is going to get worse if we do nothing. It’s going to get worse real quick,” Beall said during discussion in the Senate Transportation and Housing Committee. “To help address these issues we have introduced SB1.”

SB1 has received approval in the transportation committee and Senate Environmental Quality Committee in each of the past two weeks. A third committee, the Senate Government and Finance Committee, is scheduled to discuss the bill on Wednesday, March 1.

The main component of the package would raise nearly $3.8 billion mostly via increases in the gas and diesel tax rates.

The state’s current tax rates are about 38 cents per gallon, according to the American Petroleum Institute. The excise components making up the tax rates are 27.8 cents for gas and 16 cents for diesel.

Beall’s bill would increase the excise rate on gas by 12 cents. The increase would be phased-in over three years. The tax would be raised by 6 cents the first year, and another 3 cents each of the next two years.

Not to be outdone, the excise rate on diesel would be increased by 20 cents to raise $600 million annually. The money would be designated for freight, trade corridors and goods movement.

In exchange for collecting more in excise taxes, California’s current collection method for fuel taxes would be abandoned. No longer would the state Board of Equalization annually adjust the fuel tax rates. Instead, price-based tax rates would be restored.

In addition, the 1.75 percent sales tax applied to diesel purchases would be increased by 4 percent to 5.75 percent. The increase is estimated to raise $1.3 billion annually.

Revenue from the diesel sales tax increase, however, would not directly benefit trucking. The money would be deposited into an account for transit and intercity rail projects.

The Owner-Operator Independent Drivers Association supports efforts to raise revenue for transportation work in the state. However, the group opposes any plan that calls for truckers to foot more of the responsibility to help bail the state out of its funding hole.

Additional components in the funding plan would increase annual vehicle registration fees by $38 and apply an annual $100 fee for zero-emission vehicles. The changes would raise $1.3 billion annually.

All tax and fee rates would be indexed to inflation to allow for increases every three years.

Beall says all new revenues will provide a significant benefit for business in the state.

“Businesses will benefit from improved transportation corridors that will cut down their shipping costs and bring more Pacific Rim tonnage through California ports, making them indispensable in a highly competitive race with Pacific Northwest ports.”

Touted as a way to benefit highways, local streets, transit, bikes and pedestrians, the Democrat-led initiative would divide new revenue between the state and local governments for road maintenance and rehabilitation.

A two-thirds majority vote is needed for passage in each chamber. The required margin was enough to derail recent efforts because Democrats have been unable to secure enough Republicans votes.

As a result of the November election, Democrats have achieved the supermajority necessary at the statehouse to push through legislation without needing to woo any Republicans to their side.

Multiple initiatives sought by GOP lawmakers, however, are included in the Democratic plan. The initiative calls for establishing an Office of Transportation Inspector General to monitor the efficiency and effectiveness of agencies that spend transportation-related revenues.

A requirement to shift half of the $500 million in existing truck weight fees back to roads is also included. The fees collected top out at $2,271 per truck.

Since 2010 state lawmakers have diverted from the state’s highway account to the general fund the vehicle fees paid by commercial drivers. The revenue is used to repay transportation bond debt.

If approved, the shift would be completed over five years.

Gov. Jerry Brown has put forward his own plan that would raise about $4.2 billion annually. The Democratic governor’s plan includes a smaller fuel tax increase, while setting up a new road-improvement charge on all vehicles.

State lawmakers and the governor are trying to work quickly in hopes of getting a deal through the statehouse before April 6 – when the Legislature’s spring break begins.

To view other legislative activities of interest for California, click here.

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