BILL ANALYSIS Ó
SB 321
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Date of Hearing: August 26, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 321
(Beall) - As Amended August 18, 2015
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|Policy |Revenue and Taxation |Vote:|9 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill modifies, for FY 2016-17 and each FY thereafter, the
method by which the Board of Equalization (BOE) annually adjusts
the motor vehicle fuel (gasoline) tax swap to reflect a combined
five-year average of fuel prices instead of single-year fuel
prices when determining the motor vehicle fuel excise tax,
reducing revenue volatility. The bill stipulates the change in
methodology is not intended to produce a net revenue gain.
FISCAL EFFECT:
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Minor and absorbable administrative costs to BOE; insignificant
impact to state revenue.
COMMENTS:
1)Purpose. The fuel tax swap was enacted in 2010, partly to
allow the use of additional existing transportation revenue to
fund transportation projects. The tax swap requires BOE to
annually adjust the state gasoline excise tax rate to ensure
the state collects approximately the same amount of revenue
from the excise tax as it would have collected under the
previous sales tax. The rate adjustment requires BOE to
forecast gasoline prices and consumption for each coming year,
often leading to over- or under-collection of revenue as a
result of price volatility and requiring further adjustment to
reconcile discrepancies.
The author and supporters contend the adjustments can cause
significant volatility in the amount of revenue collected from
gasoline sales, leading to state and local budgeting
difficulties, and cause uncertainty for consumers over prices
at the pump. This bill is intended to smooth that volatility
by requiring BOE to base the gas price estimate on an average
of the previous four years' actual prices and the estimated
price for the current year. Actual pricing data over the past
five years suggest this methodology would have reduced excise
tax volatility, albeit moderately.
2)Short-Term Stability, Long-Term Revenue Neutrality. The fuel
tax swap requires BOE to maintain revenue neutrality, and this
bill reaffirms that requirement while expanding the look-back
period. As a result, excise tax adjustments will begin to lag
behind actual fluctuations in price and consumption. In
periods of declining prices and/or consumption, prior periods
of higher demand may artificially inflate the revenue forecast
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and lead to higher excise taxes, while in periods of rising
prices and/or consumption, prior periods of weaker demand may
artificially constrain the revenue forecast and lead to lower
excise taxes. Over time, these effects will offset, and BOE
expects the overall revenue impact to be neutral.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081