BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 433|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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THIRD READING
Bill No: SB 433
Author: Berryhill (R)
Amended: 5/7/15
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 4/22/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach
NO VOTE RECORDED: Pavley
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Motor vehicle fuel taxes: diesel fuel taxes:
rates: adjustments
SOURCE: Author
DIGEST: This bill requires the Department of Finance (DOF),
instead of the Board of Equalization (BOE), to determine the
annual the fuel tax swap rates.
Senate Floor Amendments of 5/7/15 add a sunset date, and delay
both the rate adjustment and reporting date to May 15 each year.
ANALYSIS:
Existing law:
SB 433
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1)Requires BOE to annually adjust the gasoline and diesel fuel
excise tax rates either upward or 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, 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, 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 DOF beginning on May 15, 2016, and every May 15 going
forward, to annually calculate and adjust the gasoline and
diesel tax rates.
2)Requires DOF to notify BOE of the calculated rates by May 15,
2016, and each May 15 thereafter.
3)Becomes effective January 1, 2016.
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4)Becomes inoperative July 1, 2021.
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 require BOE to annually determine the
appropriate excise tax rate adjustments to maintain revenue
neutrality (ABX8-6, Committee on Budget, Chapter 11, Eighth
Extraordinary Session) 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 bills 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,
1.75%, effective July 1, 2014, and thereafter.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified5/5/15)
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Board of Equalization
OPPOSITION: (Verified5/5/15)
None received
ARGUMENTS IN SUPPORT: According to the author, "The
determination of the gasoline and diesel fuel excise tax rate is
a ministerial function that the Department of Finance (DOF)
already calculates in the Governor's yearly budget. The Board
of Equalization (BOE) staff simply calculate a 'true-up' of the
DOF calculation to set the tax rate. Because the fuel tax rate
is voted on by elected officials from different parties in a
public hearing, the issue is often politicized. Additionally,
the BOE is an agency that collects taxes and performs tax
audits. The agency was not designed to forecast prices on goods
like gasoline. SB 433 will shift the responsibility of setting
the gasoline and diesel fuel excise tax rate to the DOF
beginning in the 2016-17 fiscal year. The Department already
performs these calculations, so no additional responsibility
would be given to the DOF. SB 433 will make this process less
political and help reduce redundancy in state government."
Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119
5/22/15 14:04:40
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