California Legislature Passes Legislation to Restore STA Funding

Actually encouraging news … from Sacramento? Could it be?  Dare we hope?

The State Legislature, as part of the ongoing state budget effort, has passed a pair of bills, AB X8 6 and AB X8 9, which would establish a tax swap and restore State Transit Assistance (STA) funding, a critical source of money that transit agencies throughout California had previously relied on to fund operations until it was suspended by the State.  While there is no doubt that transit agencies across the nation are struggling, California’s transit agencies have been hit particularly hard, thanks to the elimination of the STA funds.  But relief may be on the way, if Governor Schwarzenegger cooperates.  This is a prime opportunity for the “Green Governor” to show his quality.

AB X8 6 makes various adjustments to the taxes that are assessed on motor vehicle fuel and diesel fuel.  Currently, gasoline is subject to both sales tax and per-gallon excise tax.  Article XIX of the California Constitution generally requires that the proceeds from the excise tax be applied to fund road maintenance, as well as the “research, planning, construction, and improvement” of transit guideways, streets, and highways.  The revenue may also be used to maintain physical transit guideways, but it may not be used for other transit operation and maintenance costs.  This constitutional provision was of interest to the Governor, because it would allow him to take a revenue stream technically dedicated to transit and replace it with an increased excise tax, the proceeds from which could instead be used to patch up the General Fund.

As set forth in the Revenue and Taxation Code, an excise tax of 18 cents is currently assessed per gallon of motor vehicle fuel (§ 7360) and diesel fuel (§ 60050).  Starting July 1, 2010, AB X8 6 would exempt motor vehicle fuel from the sales tax.  Also on July 1, 2010, the excise tax per gallon of motor vehicle fuel would be increased by 17.3 cents, and retailers would pay a 17.3-cent storage tax per gallon of motor vehicle fuel stored.  For diesel fuel, the per-gallon excise tax would decrease to 13.6 cents starting July 1, 2010; a 1.75% tax would also be imposed starting July 1, 2011.  Finally, the State Board of Equalization would be responsible for ensuring each year that these amendments remain revenue-neutral.  That is, the revenue gained by the motor vehicle excise tax increase should not exceed the revenue lost by eliminating the sales tax.  BOE would also be assigned an analogous task for diesel fuel.

The revenue generated from these adjustments would then be used in the gas tax swap mechanism.  I can explain this in more detail if someone is really fascinated, but to skip straight to the juicy part, AB X8 9 provides for an infusion of STA funding for transit operations.  Initially, the bill appropriates $400 million of STA funding statewide that would last through FY11.  An estimated $350 million would then be distributed by formula each year thereafter.

San Francisco MTA’s recent budget-balancing exercise helps demonstrate how this influx of funding will have a tangible effect.  The MTA Board recently approved a 10% system-wide service cut, expecting to save $4.8 million this fiscal year (accounting for the months of May and June).  Cutting 313,000 service hours each year was projected to save $28.5 million annually.  But MTA estimates it would initially receive $36 million of STA funding if these bills are passed — $7.2 million for the remainder of this fiscal year, $28.8 million in FY11, and $31.4 million in FY12.

In other words, San Francisco’s share of the proposed funding more than covers the money that the MTA expected to save by implementing the 10% service cut.  Although the $179 million of STA funds that the MTA has lost over the past three years would not be fully restored in the next three years, this legislation, if signed into law, will nonetheless make a valuable contribution.

But the Governor — naturally, being the Governor — is reluctant about signing these bills.  To justify his reluctance, he offered the nearly brain-dead explanation that the Legislature has “failed to address job creation,” overlooking that new STA funding will allow agencies to preserve service and thereby avoid laying off operators.  His lackluster response, while disappointing, is not surprising.  After all, this legislation aims to mitigate the damage that he is personally responsible for propagating — most recently when he flagrantly ignored state court decisions that invalidated transit funding raids.

But you, the transit-savvy reader, can still help the Governor see the light.  At least we can try.

Here’s where you come in: Please call the Governor’s office as soon as you can.  Urge him to sign these bills into law, so that agencies throughout the Bay Area and California can be provided with much-needed relief, and vital transit service can be preserved:

Governor Arnold Schwarzenegger
State Capitol Building
Sacramento, CA 95814
Phone: 916-445-2841
Fax: 916-558-3160

Alternatively, you can email the Governor by clicking this link. Thanks in advance for your participation.