BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 321|
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THIRD READING
Bill No: SB 321
Author: Beall (D)
Amended: 5/27/15
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/15/15
AYES: Hertzberg, Nguyen, Bates, Beall, Hernandez, Lara, Pavley
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Motor vehicle fuel taxes: rates: adjustments
SOURCE: Author
DIGEST: This bill changes the methodology used to determine the
fuel tax rates.
Senate Floor Amendments of 5/27/15 remove the urgency clause
from the bill.
ANALYSIS:
Existing law:
1)Requires the Board of Equalization (BOE) to annually adjust
the gasoline and diesel fuel excise tax rates either upward or
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downward. For gasoline, the BOE determines: (a) whether the
sales and use tax revenue loss related to the partial
exemption was fully offset by the adjusted rate, and (b) the
projected sales and use tax revenue loss for the next fiscal
year, considering forecasted gasoline prices and consumption.
For diesel fuel, the BOE determines: (a) whether the revenue
gain from the increased sales and use tax rate on diesel fuel
sales and purchases was fully offset by the adjusted diesel
fuel excise tax rate, and (b) the projected sales and use tax
revenue gain for the next fiscal year, considering forecasted
diesel fuel prices and consumption. By March 1 each year, the
BOE must determine the rate adjustments, and the adjusted rate
applies on the following July 1.
2)Requires BOE to maintain revenue neutrality, so that the
revenues derived from the increased gasoline excise tax and
the increased diesel sales and use tax equals the revenues
that would have been derived had the gasoline sales and use
tax partial exemption and the diesel fuel excise tax
reduction, respectively, not occurred.
3)Requires BOE Members approve these rates annually in a public
meeting.
This bill:
1)Requires BOE to adjust the excise tax rate based on a
five-year average that relies on fuel price data, from the
immediately preceding four years and estimated fuel prices for
the current fiscal year, to generate a forecasted fuel price
that is weighted primarily by known fuel price data. That
adjusted rate must be determined by July 1, 2015, and that
rate would be effective for fiscal year (FY) 2015-16.
2)Requires BOE follow the same estimate methodology as above,
but the rate be adjusted by March 1 of the fiscal year
immediately preceding the applicable fiscal year, beginning FY
2016-17.
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3)Allows BOE to adjust the rate before March 1, but not sooner
than six months between the intervening adjustments, if
changes in either fuel prices or consumption in the state
occur.
Background
In 2010, the Legislature enacted two "fuel tax swap" measures
that changed the imposition and rates of state taxes on gasoline
and diesel fuel, and required the BOE to annually determine the
appropriate excise tax rate adjustments to maintain revenue
neutrality (ABX8-6, Committee on Budget, Chapter 11) and (SB 70,
Committee on Budget and Fiscal Review, Chapter 9). The gasoline
tax changes became operative on July 1, 2010, and the diesel
fuel tax changes on July 1, 2011.
The fuel tax swap was partly enacted, to allow the use of
additional existing transportation revenue for highway purposes,
including General Obligation bond debt service, where that debt
service was related to transportation projects.
The swap bills exempted sales and purchases of gasoline from the
state sales and use tax rate. To offset the revenue loss
related to this partial exemption, the law increased the
gasoline excise tax rate from $0.18 per gallon to $0.353 per
gallon. Conversely, the measure reduced the diesel fuel excise
tax rate from $0.18 to $0.13 per gallon, but increased the sales
and use tax rate on diesel fuel sales to offset the loss related
from the reduction, resulting in the following rates:
1.87%, effective July 1, 2011,
2.17%, effective July 1, 2012,
1.94%, effective July 1, 2013,
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1.75%, effective July 1, 2014, and thereafter.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified5/29/15)
Associated General Contractors
California Alliance for Jobs
California Association of Councils of Government
California State Association of Counties
California Transit Association
California Transportation Commission
City of Crescent City
City of Lakewood
City of Rolling Hills Estates
City of Saratoga
County of Los Angeles
Glendale City Employees Association
League of California Cities
Orange County Transportation Authority
Organization of SMUD Employees
Rural County Representatives of California
San Bernardino Public Employees Association
San Diego County Court Employees Association
San Luis Obispo County Employees Association
Santa Clara Valley Transportation Authority
Self-Help Counties Coalition
State Board of Equalization
Transportation Agency for Monterey County
Transportation California
Urban Counties Caucus
OPPOSITION: (Verified5/29/15)
None received
ARGUMENTS IN SUPPORT: According to the author, "The Board of
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Equalization (BOE) annually adjusts the price-based portion of
the excise tax on gasoline in order to collect roughly the same
amount of revenue, as the state would have collected if it still
charged a sales tax on gasoline. Difficulty in forecasting gas
prices inevitably results in either over- or under-collecting
revenue and future adjustments must reconcile this discrepancy.
The reconciling adjustment, or "true up," leads to volatility
from year to year. Uncertainty, in future revenue puts a
significant strain on state and local governments when preparing
their multiyear transportation budgets. SB 321 makes changes to
the administrative process, for setting the price-based excise
tax in order to give BOE the tools necessary to reduce the
overall volatility of this revenue."
Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119
5/31/15 13:51:22
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