Thursday, February 11, 2016 The CSAC Bulletin
Housing, Land Use and Transportation
 For more information, please contact Kiana Valentine at, or 916.650.818;  or Chris Lee at, or 916.650.8180.

Transportation Funding Update: Price-Based Excise Tax Adjustment

As we reported in last week’s CSAC Bulletin, the California Transportation Commission (CTC) recently announced that it was deprogramming (cutting) $754 million from the State Transportation Improvement Program (STIP) because fuel excise tax revenue is falling well below projections due to declining gas prices. Counties recall that the gas tax swap requires the new excise tax to keep pace with the revenue that would’ve been raised under the former sales tax, therefore requiring adjustments to the tax rate when prices and consumption are expected to change. State law requires the Board of Equalization (BOE) to set the excise rate for the upcoming fiscal year by March 1, so the BOE must take action at its February 23-25 meeting in Culver City.

If current methods are maintained, we expect that the BOE will reduce the excise rate by about three cents. This would represent at nearly 75% reduction in this funding source over a three-year period for county road maintenance. For our part, CSAC has continued to advocate for the implementation of smoothing measures that will partially mitigate the reduction in the coming year. It would also mitigate against over-shooting and raising too much revenue that later has to be offset when prices inevitably increase in the future. CSAC will keep counties and public works departments informed on the BOE actions.

CSAC will also be testifying before the Senate Transportation and Housing Committee on Tuesday, February 16, about the impacts of the continuing price-based excise tax cuts on local street and road maintenance. We have surveyed counties about the reductions in projects and services, including layoffs and unfilled vacancies in local road crews, which have resulted from the continuous decreases in funding. Whether smoothing measures are implemented this year or not, CSAC will continue to advocate for a longer-term solution that would do away with the annual true-up process and instead index the gas tax to inflation.