BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 747 |Hearing |4/29/15 |
| | |Date: | |
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|Author: |McGuire |Tax Levy: |No |
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|Version: |4/23/15 |Fiscal: |Yes |
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|Consultant|Bouaziz |
|: | |
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AIRPORTS: FINANCIAL ASSISTANCE
Appropriates aviation fuel tax revenues from the General Fund to
the Aeronautics Account.
Background and Existing Law
Existing law establishes the Aeronautics Account within the
State Transportation Fund. This account is funded by revenues
from fuel excise taxes of 18 cents per gallon on general
aviation fuel and 2 cents per gallon on aviation fuel. These
rates were set in 1994 and 1969, respectively.
The Airport Improvement Program (AIP), administered by the
Federal Aviation Administration (FAA), provides grants to public
agencies for the planning and development of public-use
airports. In general, the federal grant covers 75% of eligible
costs for large and medium primary hub airports, and 90% to 95%
of eligible costs for small primary, reliever, and general
aviation airports. Eligible projects include capital
improvements related to safety, capacity, security, and
environment. Operational and maintenance costs are generally
not eligible for AIP assistance. To supplement AIP, Caltrans
administers a State AIP Matching Grant Program. This program,
which provides a state matching grant equal to 5% of the federal
grant, is funded from the Aeronautics Account.
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In November 2014, the FAA issued a directive (Docket No.
FAA-2013-0988) to confirm its longstanding policy, based on
federal law, that aviation fuel taxes be used for airport
purposes and state aviation programs. The directive does not
apply to state and local taxes on aviation fuel in effect prior
to December 30, 1987. The directive provides states one year to
submit an action plan to the FAA. The action plan will detail
the process of amending any non-compliant state laws and local
ordinances as necessary for compliance, as well as detailing the
process to develop reporting requirements and tracking systems
for aviation fuel tax revenues. The plan must be implemented
within three years of the FAA directive, which took effect
December 8, 2014. Failure to comply with the FAA mandate could
result in ineligibility for AIP grants and possible civil
penalties.
California's Sales and Use Tax Law currently imposes a state,
local, and district sales tax on retailers' gross receipts
derived from tangible personal property sold at retail in this
state, unless the sale is specifically exempted from the tax.
Sales tax generally applies to sales of aviation fuel to air
common carriers. However, existing law provides an exemption
from tax for the sale of fuel and petroleum products to air
common carriers for immediate consumption or shipment in the
conduct of its business as an air common carrier on an
international flight.
Proposed Law
Senate Bill 747 transfers 4.1875% of the revenues derived from
aviation fuel taxes from the General Fund to the Aeronautics
Account. SB 747 requires Caltrans' Division of Aeronautics to
annually allocate these funds to eligible recipients, for
airports and aviation-related purposes, as follows:
1. 12% to the state's 215 general aviation airports (e.g.,
Sacramento Executive Airport)
2. 2.4% to be divided among the state's 33 commercial
service airports as follows:
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21% for the 20 non-hub commercial airports (e.g.,
Crescent City, Sonoma County, and Oxnard)
34% for the three large hub commercial airports (Los
Angeles, San Diego, and San Francisco);
14% for the 6 medium hub commercial airports (e.g.,
Sacramento, Oakland, and San Jose international airports)
31% for the four small hub commercial airports (Fresno,
Long Beach, Palm Springs, and Santa Barbara)
3. 27% for grants for non-hub airports with less than
300,000 enplanements annually to attract, establish, and
expand airline service through incentives, marketing,
passenger studies, route analysis, and acquisition of
consultants.
4. 1% for aviation education grants, including but not
limited to, scholarships for flight training and
aviation-related degrees from accredited universities, with
priority given to under-represented students, women, veterans,
and low-income persons.
5. 5% for administrative costs
6. 15% for other state aviation programs and aviation
related purposes pursuant to this bill
SB 747 goes into effect on January 1, 2016.
State Revenue Impact
Pending.
Comments
1. Purpose of the bill. According to the author, "California
has been out of compliance with federal law on aviation tax
revenues for decades. The state has transferred a total of
nearly $15 million in aviation fuel tax revenues from the
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Aeronautics Account to the General Fund over three different
fiscal years (2002-03, 2003-04, and 2010-11). Due to lack of
funds, Caltrans was unable to administer any grants for general
aviation airports in fiscal years 2011-12 and 2012-13, and could
only partially fund the State Matching AIP Grant Program. In
the last year alone, four commercial airports in California have
announced that they have lost or will soon lose all commercial
service activity: Modesto Airport, Chico Municipal Airport,
Inyo-Kern Airport, and McClellan-Palomar Airport. This bill
will help the state comply with the FAA mandate by directing
revenue from aviation fuel sales taxes to the state's
underfunded aviation program and thereby provide relief to the
state's aviation industry."
2. Why now? The FAA directive requires each state to submit an
action plan by December 8, 2015. The action plan should detail
the process necessary to develop reporting requirements and
tracking systems on aviation fuel tax revenues, and outline the
process to amend any non-compliant state laws and local
ordinances as necessary to conform. The plan must be fully
implemented by December 8, 2017. To date, an action plan has
not been adopted or drafted. This begs the question, is SB 747
premature? A comprehensive action plan has not been drafted to
address the FAA directive, and California still has over 7
months to develop one. Alternatively, SB 747 may be the impetus
to start the conversation, moving California in the direction of
developing the required action plan before the deadline.
3. 4.1875%. The percentage is comprised of the General Fund
component and the Education Protection Account portion of the
sales and use tax rate. The current rates are 3.9375% and 0.25%
respectively. The Education Protection Account portion is set
to expire on January 1, 2017 and was approved by the voters as a
part of 2012's Proposition 30. This percentage represents the
portion on the sales and use tax rate that is not earmarked for
a specific fund or spending purpose.
4. Double-referral. The Senate Rules Committee ordered a
double-referral of SB 747 to the Senate Committee on
Transportation and Housing, which considered the bills'
transportation funding provisions, and to the Senate Governance
and Finance Committee, which will consider the bills' tax
provision. The bill was heard in the Senate Committee on
Transportation and Housing on April 21, 2015.
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5. Technical amendments. The author suggests the following
technical amendments to correct a drafting error:
Reverse the percentage allocations in Public and
Utilities Code Section 21689 (a) (2).
Change the operative date to December 8, 2017.
Senate Actions
Senate Committee on Transportation and Housing9-0
Support and
Opposition (4/23/15)
Support : Aircraft Owners and Pilots Association; American
Association of Airport Executives, Southwest Chapter;
Association of California Airports; California Airports Council;
California Pilots Association; Marin County Board of
Supervisors.
Opposition : Unknown.
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