BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 81
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          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          2)Re-enacts the fuel tax swap, which was originally enacted in 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,








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             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 








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            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, 








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            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. 









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          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


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