Lower Fuel Prices Take a Toll on California’s Transportation Funding
Posted in Policy

Lower gas prices and decreased revenue from California’s Price Based Excise Tax (PBET) on gasoline are taking their toll on the state’s transportation funding.  California Transportation Commission (CTC) staff recently recommended enormous decreases in the upcoming five-year State Transportation Improvement Program (STIP).  The CTC Commission will consider the staff’s recommendations and is expected to make a final decision at its meeting on May 18 and 19.

The staff’s recommendations include no new transportation projects in the next five years, as well as cancelling already programmed projects and delaying many other projects.  Due to insufficient funds, not all projects programmed in fiscal year 2015-16 could receive allocations. To fully allocate funding to fiscal year 2015-16 projects, the staff recommendations include the delay of projects programmed in fiscal year 2016-17 of at least one year.

The 2016 Amended STIP Fund Estimate for the upcoming five-year term estimates a total statewide new programming capacity of negative $754 million.  This shortfall is largely caused by a decline in revenue from the PBET on gasoline, which is the primary source of funding for the STIP.  The PBET is adjusted annually by the Board of Equalization based on the price of gasoline.  Because gas prices have remained relatively low, the revenue from the PBET has remained low as well.

The PBET was first implemented in 2010 to replace a state sales tax on fuel.  At the time, it was set at 17.3 cents per gallon.  Since then, the level has dropped precipitously and will fall to less than 10 cents per gallon on July 1 of this year.   In addition to a decrease in revenue per gallon, the funding crisis has been exacerbated by an increase in the fuel efficiency of cars on the road.

According to Will Kempton, Executive Director of Transportation California, The action pending before the California Transportation Commission constitutes the worst cuts in the State Transportation Improvement Program since the creation of the STIP funding structure nearly 20 years ago.  Mr. Kempton went on to explain that without additional new revenue, California’s crumbling transportation infrastructure will get much worse and the costs to fix it will grow much higher.

Several members of California’s legislature have proposed legislation to provide additional resources for the program.  State Senator Jim Beall, a Democrat and Chair of the Senate Transportation and Housing Committee, introduced amendments to his bill (SB X 1-1) that include new revenues in support of transportation.  Several Republican legislators have proposed measures to shift existing revenue to transportation work.  Despite these efforts from both sides of the aisle, there is no agreement yet.

Without additional funding for the STIP, the budget shortfalls outlined in the Commission staff’s recommendations will only continue, with no relief for California residents and those businesses and other entities that rely on the state’s transportation infrastructure.

The Commission Staff Recommendations can be found here.

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