BACKGROUND
California spends about $20 billion a year to
maintain, operate, and improve its highways,
streets and roads, passenger rail, and transit
systems. About one-half of the funding comes
from various local sources, including local sales
and property taxes, as well as transit fares. The
remainder comes from the state and federal levels,
largely from gasoline and diesel fuel taxes, and
truck weight fees.
Currently, the state levies two types of taxes on
motor fuels:
• An excise tax of 18 cents per gallon on gasoline
and diesel fuel. (This is generally referred to as
the gas tax.)
• A statewide 6 percent tax on the sale of gasoline
and diesel fuel (“sales tax”).
Gas Tax. Revenues from the state excise tax on
gasoline and diesel fuel used on public roads total
about $3.4 billion per year. The State Constitution restricts the use of these revenues to specific
transportation purposes. These include constructing,
maintaining, and operating public streets and
highways, acquiring right of way and constructing
public transit systems, as well as mitigating the
environmental effects of these facilities.
Sales Tax. The state’s sales tax on gasoline and
diesel fuel currently provides about $2 billion
a year. Until 2002, most of the revenues from
the state sales tax on gasoline were not used for
transportation purposes. Instead, these revenues
were used for various general purposes including
education, health, social services, and corrections.
Proposition 42, which was approved by voters in
2002, amended the State Constitution to dedicate
most of the revenue from the sales tax on gasoline
to transportation uses. Specifically, Proposition 42
requires those revenues that previously went to the
General Fund be transferred to the Transportation
Investment Fund to provide for improvements to
highways, streets and roads, and transit systems.
Proposition 42, however, allows the transfer to be
suspended when the state faces fiscal difficulties.
Proposition 42 is silent as to whether suspended
transfer amounts are to be repaid to transportation.
Since 2002, the state has suspended the
Proposition 42 transfer twice because of the
state’s fiscal condition. In 2003–04, the transfer
was suspended partially, and in 2004–05, the full
amount of the transfer was suspended. Existing
law requires that these suspended amounts, with
interest, be repaid to transportation by 2008–09
and 2007–08, respectively.
PROPOSAL
This measure amends the State Constitution
to further limit the conditions under which the
Proposition 42 transfer of gasoline sales tax
revenues for transportation uses can be suspended.
Specifically, the measure requires Proposition 42
suspensions to be treated as loans to the General
Fund that must be repaid in full, including interest,
within three years of suspension. Furthermore, the
measure only allows suspension to occur twice in
ten consecutive fiscal years. No suspension could
occur unless prior suspensions (excluding those
made prior to 2007–08) have been repaid in full.
In addition, the measure lays out a new schedule
to repay the Proposition 42 suspensions that
occurred in 2003–04 and 2004–05. Specifically, the
suspended amounts must be repaid and dedicated
to transportation uses no later than June 30, 2016,
at a specified minimum annual rate of repayment.
FISCAL EFFECTS
This measure would have no direct revenue or cost
effect. By limiting the frequency and the conditions
under which Proposition 42 transfers may be
suspended in a ten-year period, the measure would
make it more difficult to use Proposition 42 gasoline
sales tax revenues for nontransportation purposes
when the state experiences fiscal difficulties. As a
result, the measure would increase the stability of
funding to state and local transportation in 2007 and
thereafter. However, the state’s authority to direct
available funds to meet other nontransportation
priorities in the event the state faces fiscal difficulties
would be somewhat reduced.
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