Reforming State Fuel Taxes Can Help Make Up Huge Transit Shortfalls

A shocking $142 billion is what it will take to fix and maintain public transportation over the next decade statewide according to the California Transportation Commission’s Statewide Transportation Needs Assessment. 

Frighteningly, there’s nowhere near enough projected revenue to cover these basic system preservation costs, let alone what it will cost to expand and improve the system to meet Californians real needs.

And this funding crisis has been exacerbated in recent years as billions of dollars intended for public transportation have been redirected to help balance the state budget.

Here’s one of the key strategies we’ll focus on over the next year to increase state funding for public transportation: reforming state fuel taxes.

Indexing the gas excise tax to inflation is the first step. The state gas excise tax is a major source of funding for transportation but it has never been indexed to inflation so every year it loses value. Nobody today would expect to buy a cup of coffee for a quarter like you could years ago – it would taste awful for sure – but that is what is happening with the excise tax which we’ve relied on to generate a sizable portion of state transportation funding even as we’ve failed to index it to inflation to maintain the value of the revenues. If we fail to index the excise tax, the deterioration of the purchasing power of this critical mechanism will only get worse as vehicles become more efficient and overall gas purchases drop.

It is important to emphasize that indexing the excise tax would have an almost unnoticeable impact on prices at the pump -- between 1 and 2 cents per gallon the first year -- but this change would at least “stop the bleeding” in terms of the deterioration of value and allow us to prioritize the most important investments.

We ultimately need to adopt a package of reforms.  Indexing the gas excise tax has a serious limitation because Article XIX of the California Constitution prohibits the use of the revenues for most transit operations and maintenance costs -- and these are the most pressing and critical unmet costs. In order to adequately fund transit operations and maintenance, we need a package of reforms that includes mechanisms such as an increased fuels sales tax and a modified vehicle license fee because revenues from these mechanisms are not restricted by Article XIX and can be used for transit operations and maintenance.

None of these reforms will be easy. The political gridlock and ongoing economic malaise mean that every significant policy reform effort is a major uphill battle in Sacramento. But given the incredible state of disrepair of our transportation system -- and the fact that  the price tag will only continue to increase exponentially if we don’t secure new revenues -- we simply must push for major funding reforms this next year.

The only way to secure the ultimate package of necessary reforms will be to work over a sustained period -- almost certainly two years or more -- with a large and diverse coalition delivering a consistent and forceful message to state leaders. Combining excise tax and sales tax reforms gives every key stakeholder a solid motivation to stay at the table and work in partnership.
 
TransForm is excited to work with our partners in the Invest in Transit campaign and other stakeholders to advance this challenging but critically important policy agenda in 2012 and beyond.  For more information, please contact our State Transportation Organizer, Ahmad Chapman, in our Sacramento office at 916-441-0204, ext. 301 or achapman@transformca.org.