BILL ANALYSIS Ó SB 81 Page 1 SENATE THIRD READING SB 81 (Budget and Fiscal Review Committee) As Amended March 14, 2011 2/3 vote. Urgency SENATE VOTE :Vote not relevant SUMMARY : This is the transportation budget trailer bill for the 2011-12 Budget. It contains provisions necessary to modify the 2010-11 Budget and implement the 2011 Budget Act. Specifically, this bill: 1)Provides General Fund (GF) relief of $1.7 billion through the use of truck weight fees and other transportation revenues for bond debt service and loans to the GF. Provides protection to safeguard billions of dollars of transportation revenues by re-enacting the fuel tax swap. 2)Re-enacts the fuel tax swap, which was originally enacted in early 2010 as AB 6 X8 (Budget Committee), Chapter 11, Statutes of 2010 Eighth Extraordinary Session and SB 70 (Budget and Fiscal Review Committee), Chapter 9, Statutes of 2010. The 2010 tax swap was revenue neutral overall, but increased some taxes and reduced others. Proposition (Prop) 26 on the November 2010 ballot was approved by voters, and amended the Constitution to require a two-thirds vote for such tax neutral measures. Prop 26 voids any conflicting measure enacted after January 1, 2010, effective 12 months after the election. Since AB 6 X8 (Budget Committee) and SB 70 (Budget and Fiscal Review Committee) were enacted after January 1, 2010, with a simple majority vote, this bill would re-enact these provisions with a two-thirds vote to ensure the fuel tax swap meets the new constitutional requirements. The re-enacted fuel tax swap includes four main tax adjustments: a) Exempts gasoline from the state 6.0% sales tax on July 1, 2010; b) Increases the excise tax on gasoline by 17.3 cents per gallon, to a total of 35.3 cents per gallon, on July 1, 2010; c) Increases the sales tax applied to diesel fuel by 1.87% on July 1, 2011; and, SB 81 Page 2 d) Decreases the excise tax on diesel by 6.2 cents per gallon, to 13 cents per gallon on July 1, 2011. The re-enacted swap is similar to last year's swap, but some of the diesel rates have changed a small amount to address the requirements of Prop 22, which was also approved by voters on the November 2010 ballot, and to address changes in the forecast of quantity and price of diesel fuel. As before, the tax swap is revenue neutral and an out-year adjustment is made each July 1, to maintain the tax-neutrality. The re-enacted swap excludes off-road users, such as railroads, farm equipment, and aviation gasoline from the certain provisions of the swap to maintain the tax neutrality for those users that already enjoy certain exemptions. The tax swap was not enacted to increase revenue, but rather to allow the use of more existing transportation revenue for highway purposes, including General Obligation bond debt service (GO bond debt), where that debt service was related to transportation projects. Prop 22 placed new restrictions on the use of fuel excise taxes for bond debt, but this fuel tax revenue in this bill would backfill the other highway funds used to reimburse bond debt. This bill specifies that the fuel tax swap would have no negative effect upon the amounts that would otherwise be calculated under Test 1 of the Proposition 98 minimum education funding guarantee. 3)Directs truck weight fee revenue, which totals approximately $900 million per year, to fund GO bond debt for transportation-related bonds and for loans to the GF. Over 2010-11 and 2011-12, total GF relief is $1.6 billion. Truck weight fees are paid by the owners of heavy vehicles and compensate the state for the damage large trucks do to roadways. This new use of truck weight fees is related to prohibitions placed on gasoline excise revenues by Prop 22, approved by voters in November 2010. Under Prop 22, gasoline excise revenues can no longer be used for loans to the GF, and the use of these revenues for GO debt is more limited. However, truck weight fees can be used for these purposes. The applicable gasoline excise revenue is instead directed SB 81 Page 3 into the State Highway Account to hold harmless transportation programs that would otherwise receive the weight fee revenue. 4)Provides GF relief of $78 million by directing non-Article XIX revenue to the payment of transportation-related GO bond debt. Each year, the Department of Transportation (Caltrans) receives about $78 million in revenue from the sale of state property, as well as rental revenue and other miscellaneous revenues. These revenues are not restricted in use by Article XIX of Constitution and are more flexible in expenditure. 5)Maintains annual ongoing funding for local transit operations at approximately $350 million. The 2010 fuel tax swap package of legislation, specifically AB 9 X8 (Budget Committee), Chapter 12, Statutes of 2010, Eighth Extraordinary Session, included the restoration of state funding for local transit operations. Prop 22 placed new restrictions on the base diesel sales tax that resulted in a loss of funding for transit operations. This bill would shift all of the new sales tax on diesel revenue to transit operations to maintain funding levels near the level planned in last year's fuel tax swap. 6)Defers payment of a $135 million loan made from the State Highway Account to the GF in the 2009 Budget Act. The loan will be repaid in 2012-13 instead of in 2011-12. Specifies that this 2009-10 loan was made from truck weight fee revenue. Specifies that a $328 million loan from the fuel excise revenues to the GF in the 2010 Budget Act be held in reverse for future appropriation by the Legislature when repaid in 2012-13. 7)Requires the California Transportation Commission (CTC) to report to the Legislature semiannually on the expenditure of Transportation Corridor Improvement Funds (TCIF) for railroad projects. Additionally, requires the CTC to report and provide a copy of any memorandum of understanding executed between a railroad company and any state or local transportation agency where TCIF funds are a funding source for the project. 8)Extends, for recipients of Prop 1B bond funds for regional public waterborne transit, the expenditure period from three years to four years for any funds allocated prior to June 30, SB 81 Page 4 2011. Prop 1B provides $250 million to regional public waterborne transit agencies. The funds are available to build ferry terminals, among other uses. 9)Provides cities and counties a one-year extension to expend Prop 1B Local Streets and Roads funds for any year in which Highway Users Tax Account (HUTA) funds for local transportation projects are borrowed, deferred, or shifted. 10)Extends the sunset from June 30, 2011 to June 30, 2014, for cashflow borrowing among transportation special funds. The transportation special funds that are eligible for cashflow borrowing are the State Highway Account, and the Traffic Congestion Relief Fund. 11)Authorizes the Governor to appoint six management level exempt positions to the High Speed Rail Authority (HSRA) upon the recommendation of the executive director. Compensation for these positions shall not exceed the highest comparable compensation for a position of that type, as established through a salary survey, and shall require approval of the Department of Personnel Administration. 12)Requires the HSRA to report by February 14, 2011, on the following: community outreach; the HSRA strategic plan as required by the State Administrative Manual; the performance of the program-manager contractor; and actions of the HSRA related to the Bureau of State Audits report. Requires the HSRA to report by October 14, 2011, on a complete legal analysis of the revenue guarantee and the updated financial plan for the project. In both cases, for each applicable fiscal year, 25% of the budgeted funding for the HSRA is contingent on completion of the reporting requirements. 13)Requires Caltrans to report annually to the Legislature with supplemental information on the Capital Outlay Support budget request, including anticipated and realized project costs and schedules for the Capital Outlay Support Program. 14)Provides additional clarification that local governments are not subject to the same maintenance-of-effort and other requirements under Prop 42 when they are apportioned fuel excise tax revenues. SB 81 Page 5 15)Requires the Department of Motor Vehicles (DMV) to update application forms to provide a space for an applicant to indicate whether they served in the armed forces. Data collected from willing veterans will be shared with the Department of Veteran's affairs in order to identify if they are eligible for federal benefits. 16)Authorizes the DMV to make changes to its procedures related to car registration for a limited period ending January 1, 2012. The new authority is related to an anticipated vote of the people in June 2011, on the question of whether the tax rates for the Vehicle License Fee (VLF) should be maintained at current levels for a five-year period. Depending on the outcome of the election, the VLF rates may, or may not, change on July 1, 2011. To avoid erroneous billing, multiple billing, or other confusion, this bill would allow DMV to reduce the time between the mailing of the car registration bill, and the due date of that bill. However, in no case would the bill be due less than 30-days from when the notice is mailed by DMV. 17)Adds an urgency clause allowing this bill to take effect immediately upon enactment. FISCAL EFFECT : Enactment of this bill results in over $1 billion in GF solutions, as assumed in the 2011-12 Budget Bill. Analysis Prepared by : Christian Griffith / BUDGET / (916) 319-2099 FN: 0000061