California $52 billion transportation deal includes fuel tax overhaul

By Keith Goble, Land Line state legislative editor | Wednesday, April 05, 2017

A long-awaited deal to fund transportation work in California is nearing reality.

Gov. Jerry Brown and leading Democrats have unveiled a transportation funding plan to raise $5.2 billion annually over the next decade for state and local roads, trade corridors, and public transit. Professional drivers are eyed as major contributors for the funding plan.

“California has a massive backlog of broken infrastructure that has been neglected far too long,” Brown said in prepared remarks. “Fixing the roads will not get cheaper by waiting – or ignoring the problem.”

Sen Jim Beall, D-San Jose, said his bill would split $30 billion equally between state and local needs.

The funding package 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.

SB1 awaits a final Senate floor vote before it advances to the Assembly. Changes called for by the governor and Democrats in both chambers would raise nearly $3.8 billion annually mostly via increases in the gas and diesel tax rates.

The Democratic governor’s administration says the plan is guided by the principles set forth by Ronald Reagan. The Republican president increased the federal fuel tax in 1982.

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 to raise $24.4 billion. 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 $7.3 billion. 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 $3.5 billion.

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 up to $175 and apply an annual $100 fee for zero-emission vehicles. The fees would raise $1.3 billion.

All tax and fee rates would be indexed to inflation to allow for increases in future 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.”

Senate President pro Tempore Kevin de Leon, D-Los Angeles, said legislators cannot afford to keep kicking the can down the road.

“Californians are tired of the constant traffic jams and crumbling roads, and they expect us to find solutions,” de Leon stated.

Another provision in the bill would exempt certain trucks from the recent Air Resources Board decision to strengthen rules on indirect emission sources.

Critics say that exempting trucks from clean air rules has no place in a package to fix roads and improve transit.

Also included in the bill is reference to SCA2 – a constitutional amendment to be included on the 2018 ballot for voters to ensure all revenue is spent for transportation purposes.

SB1 is expected to be approved at the statehouse by Thursday, April 6 – when the Legislature’s spring break begins.

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

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