BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 11X
Author: Ducheny (D)
Amended: 12/18/08
Vote: 21
SENATE FLOOR : Not relevant
ASSEMBLY FLOOR : Not available
SUBJECT : Budget Act of 2008: motor vehicle fuel fees
SOURCE : Author
DIGEST : This bill enacts new motor vehicle fuel fees in
order to finance state and local transportation projects.
Assembly Amendments add provisions to the bill pertaining
to motor vehicle fuel fees.
ANALYSIS :
This bill:
1. Enacts a 39 cents-per-gallon gasoline fee, effective
April 1, 2009.
2. Enacts a 31 cents-per-gallon diesel fuel fee, effective
April 1, 2009.
3. Indexes the fees to inflation.
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4. Allocates the resulting fee revenue in the following
manner:
A. 33 percent of total fee revenues to cities and
counties ($2.3 billion total, or $640 million above
the current funding level). This allocation relies
on current statutory methodology plus the current
Proposition 42 methodology for any excess needed to
achieve the 33-percent level.
B. 45 percent to the State Highway Account (SHA)
(about $3.1 billion total, or about $400 million
above current SHA revenues). Of this amount, 20
percent would be reserved for State Transportation
Improvement Program - which is similar to the
current funding level from the Proposition 42
allocation.
C. 22 percent to the new Transportation Funding
Stabilization Account (TFSA) (about $1.5 billion
total, which is all net new revenue for State
transportation). Future legislation will allocate
funds in the TFSA.
Comments :
1. The motor vehicle fuel excise tax was first imposed on
October 1, 1923 at a rate of two cents per gallon. The
excise tax is allocated by statutory formula to the
State and to local governments. The tax was increased
five times over the next 60 years, and was set at nine
cents per gallon on January 1, 1983. In the early 1990s
the tax was increased in increments over several years,
until it was set at the current level of 18 cents per
gallon on January 1, 1994. The Legislative Analyst
evaluated the erosion in the purchasing power of the
excise tax in Analysis of the 2008-09 Budget Bill and
found that based on the Producer Price Index for Highway
and Street Construction, the 18 cent gas tax implemented
in 1994 is worth 11 cents in purchasing-power today.
2. California levies a sales and use tax on transactions
involving tangible personal property. The sales tax was
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broadened to include gasoline in 1972. Chapter 1400,
Statutes of 1971, relinquished 0.25 cent of the State's
then 4.0 cent sales tax to local governments to fund
transportation development (primarily mass transit). To
hold the State harmless, the tax base was broadened to
include gasoline. The legislation further provided a
mechanism to assure that the General Fund would not
benefit as a result of the broadened tax base. This
"spillover" formula transfers any net General Fund
revenue gain to the Public Transportation Account. In
most years, there was no "spillover" transfer, and all
of the revenue from the sales tax on gasoline went to
the General Fund. When the excise tax was increased in
the early 1990s by Proposition 111, the sales tax
derived from the nine cent per gallon excise tax
increase was directed to the Public Transportation
Account. Chapter 91, Statutes of 2000, created the
six-year Traffic Congestion Relief Program which
transferred all the non-spillover, non-Prop 111,
gasoline sales tax from the General Fund to
transportation accounts. At that time, the General Fund
cost was about $1.1 billion annually. The budget
shortfall in 2001-02 and 2002-03 resulted in the
suspension of the Traffic Congestion Relief Program in
those two years.
3. Proposition 42, approved by voters in 2002, was part of
the package developed when the Traffic Congestion Relief
Program was suspended in 2001-02 and 2002-03.
Proposition 42 made the transfer of gasoline sales tax
to transportation permanent, but also included a
constitutional provision that would allow suspension of
the transfer. Full or partial Proposition 42
suspensions occurred in 2003-04 and 2004-05, but the
full transfer has occurred in all years since. In
2008-09, Proposition 42 revenue is approximately $1.4
billion.
4. Proposition 1A, approved by voters in 2006, strengthened
the Proposition 42 constitutional provisions by
requiring full repayment of the 2003-04 and 2004-05
suspensions, and by limiting future suspensions to two
times every 10 years and requiring repayment within
three years.
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5. The new fees on gasoline and diesel fuel are set to a
level that compensates for the lost purchasing power
that has occurred since the excise taxes were last
raised in 1994. Going forward, the new fees would be
indexed for inflation with adjustments in every third
year. Another bill in the current special session
eliminates the base excise taxes and sales taxes.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Assembly Floor analysis:
1. Total revenue raised by the new fee would be about $6.9
billion - approximately $4.7 billion for the State and
$2.3 billion for local transportation.
2. Relative to current-law revenue and current fuel prices,
the new fees would result in a net gain of about $1.9
billion for state transportation projects and a net gain
of about $640 million for local transportation projects.
3. Revenue to the Public Transportation Account would be
reduced by about $345 million. However, the retention of
the sales tax on diesel fuel will provide an ongoing
source of funding available for transit operations.
JA:do 12/18/08 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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