As reported in the CSAC Budget Action Bulletin on January 9, the Department of Finance is projecting a significant decrease in gasoline excise tax revenues in FY 2015-16 and beyond. To cut to the chase, this has caused a flurry of early attention to find sustainable new revenue sources for transportation infrastructure in 2015. CSAC staff has spent the month of January meeting with transportation leaders in the Legislature and the transportation stakeholder community at large to discuss funding options and strategies for increasing revenue for transportation this year. Everything seems to be on the table at this point, except additional infrastructure bonds (did you know that half of every dollar we invest in transportation today goes to paying down transportation related bond debt?). Only time, and a lot of negotiating, will tell whether the winning solution is a gas tax increase, an increase in the vehicle license or registration fee, returning truck weight fees (current being diverted for transportation bond debt service) back to transportation, or a combination of these or other options. We will keep you posted about the transportation funding conversation with regular updates like these. Achieving new revenues for transportation will be no small feat so CSAC staff will be calling on you to communicate our proposals and positions to your legislative delegation throughout the year.

For those of you that like the more mundane details (as your friendly CSAC staff does), the state gas tax is now comprised of a statutorily set rate of 18-cents (base tax) and a price-based rate that is adjusted annually to function like a sales tax (price-based tax). The base excise tax revenues have been declining (around 8% in FY 2015-16) for some time and will continue this trend into the future on account of increases in fuel efficiency, alternative fuels and electric vehicles and until recently reduced overall consumption from the flagging economy. The price-based tax will see precipitous reductions (over 50% in FY 2015-16) because of the steep drop in the price of gasoline. While this is great for our individual pocket books, it’s not so great for owners and operators of the transportation network which has been failing into a state of disrepair for many years.

In terms of dollars and cents, this means a projected reduction of over $700 million for transportation in FY 2015-16. This is occurring in the face of on-going shortfalls at both the state and local levels. The 2014 California Statewide Local Streets and Roads Needs Assessment Report found that cities and counties need $7.8 billion annually to bring the local system into a state of good repair (the most cost-effective infrastructure condition). More alarming, without additional investments into county and city transportation systems, 25% of local roads will fail in the next decade (compared to just over 6% in failed condition today). Rebuilding a failed road can cost as much as 40 times more than maintaining a road in good condition. Similarly, Caltrans faces a $6 billion shortfall to address deferred maintenance on the state highway system. Considering these facts, CSAC has made transportation funding a top priority for the Association for the coming year.