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
Alternatively, you can email the Governor by clicking this link. Thanks in advance for your participation.
Just tried calling, but forgot that it was a furlough Friday. How I love California.
This is awesome news! Of course, the Govenator being the Govenator, I’m sure he’s gonna shoot this down as he typically does.
Forgive me for being a dummy, but I’m confused by the excise tax. How does it relate to the prices I see at the pump (or does it)?
Actually the Governator should be indicted and tried for embezzlement. While this new scheme may sound nice, keeping it revenue neutral is nowhere as good as the old deal when not stolen. We should also ask what will happen to what was called the “spillover” fund.
It’s not clear to me how this is a good thing. It seems that overall we lose all dedicated funding for transit, and in exchange we get a fraction of what has already been stolen from transit back.
I could certainly be misunderstanding the situtation.
The news lately has just been fairly depressing, so I wanted to seize on an opportunity to be more upbeat and lift things somewhat from the doom and gloom, though based on your comment I may have given off somewhat of the wrong impression.
It’s less that this is a “good thing,” and more that this is a lukewarm thing, relative to a much larger mess. There is more to this legislation, and to the situation generally, than what I’ve described here. There are just too many topics to write about it. I’m behind on some posts I’d rather be writing, and the amount of time I can set aside to blog has been very limited.
Suffice it to say that there are certainly flaws with the legislation, and it’s not what I would’ve drafted if my opinion counted for anything. It bears all the stamps of compromise. That said, the STA funds were zeroed out for at least the next few years, and this legislation does provide a funding stream, as well as an immediate appropriation, for transit. While it won’t make up for past losses, it provides a reprieve for struggling agencies, and hopefully in the meantime, we’ll move forward on legislative solutions that will give localities more authority to generate additional revenue.
Should the Legislature and the Governor somehow agree on a transit funding solution that is superior (and please don’t get me wrong — there are many scenarios better than this one), I would instead support that solution. In this economic and political climate, we’re probably not going to get what we’d ideally like to see.
The discussion of how we fund transit in California moving forward is really a work in progress, and there are many tools that have to date been left unexplored.
Typical “bait & switch” tactics. This excise TAX will be adjusted in future years to provide what the sales tax would have provided. It is a “thinly disguised effort to avoid the Proposition 13 requirement that tax increases be approved by a two-thirds legislative majority.”
thanks for the clarification!