December 27, 2013
Pursuant to Elections Code Section 9005,
we have reviewed the proposed constitutional initiative related to
funding for transportation programs (A.G. File No. 13‑0046).
Background
Transportation Funding.
California spends an estimated $27 billion a year from a combination of
state, federal, and local funds to maintain, operate, and improve its
highways, streets and roads, passenger rail, and transit systems. About
one-half of the funding comes from various local sources, such as sales
and property taxes and transit fares. About one-quarter of the funding
comes from the federal government and the remaining one-quarter comes
from the state. The portion of transportation funding provided by the
state comes from several sources.
·
Fuel Excise Taxes.
Currently, the state charges excise taxes of 39.5 cents per gallon on
gasoline and 10 cents per gallon on diesel fuel used in vehicles
operating on public roads. These taxes generate about $6 billion
annually for state and local transportation programs.
·
Vehicle Weight Fees. The
state charges weight fees on vehicles that carry a heavy load, such as
commercial trucks. These fees generate about $1 billion annually, which
repay bonds that finance state and local transportation projects.
·
Diesel Sales Tax. The
state currently charges a sales tax on diesel fuel of 6.94 percent,
which generates about $610 million annually for state and local transit.
·
Miscellaneous Transportation Revenues.
The state collects about $65 million
annually from miscellaneous sources, such as rental income from
properties owned by the California Department of Transportation. These
funds are deposited in the state General Fund.
Local Government Finance.
The vehicle license fee (VLF), also
called the motor vehicle in-lieu tax, is a tax on the ownership of a
registered vehicle in place of taxing vehicles as personal property. The
VLF is paid annually upon vehicle registration in addition to other
fees, such as the vehicle registration fee, air quality fees, and
commercial vehicle weight fees, all of which fund specific state
programs. In 1998, the Legislature began a series of reductions in the
VLF. The fee was reduced from a level of 2 percent down to a rate of
0.65 percent. Revenues from the VLF fund a variety of county and city
services.
Proposal
New Tax on Vehicles. This
measure amends the State Constitution to create a new tax on vehicles.
Specifically, the measure creates an annual property tax on all vehicles
registered in the state, at the rate of 1 percent of a vehicle’s value
upon full implementation beginning on January 1, 2018. Under the
measure, the tax would be phased in over four years in annual increments
of 0.25 percent beginning on January 1, 2015. The Department of Motor
Vehicles (DMV) would collect the tax when vehicles are registered each
year.
The measure
specifies that commercial vehicles would be exempt from the new tax
until July 1, 2016. If the state increases the excise tax on diesel fuel
by at least three cents per gallon before July 1, 2016, then commercial
vehicles would continue to remain exempt from the new vehicle tax
established in the measure. If, however, the state does not increase the
diesel excise tax before July 1, 2016, then the new tax would be charged
on commercial vehicles beginning July 1, 2016.
Additional Revenues for Transportation Programs.
The measure requires that revenues from
the vehicle tax be deposited in a new special fund—the California Road
Repairs Fund. Monies in the California Road Repairs Fund would be
continuously appropriated without further legislative action for the
maintenance and repair of various transportation systems.
·
40
percent for state highway repairs, with half of the funds for projects
at any location in the state and half of the funds allocated to counties
for qualified projects.
·
25
percent for county roads.
·
25
percent for city streets.
·
10
percent for public transit.
In addition, the
measure redirects the state’s existing miscellaneous transportation
revenues from the state General Fund to the California Road Repairs
Fund. These funds would be continuously appropriated specifically for
repairs and preventive maintenance on the state’s highways.
The measure specifies that revenues in
the California Road Repairs Fund shall be used only to supplement
existing levels of funding for state and local highways, streets and
roads, and public transit and that none of the funds shall be used to
supplant existing fund sources generally available for such purposes.
The measure also requires the state and local governments to report on
how the additional funding provided is spent.
Fiscal Effects
Increased State Revenues.
This measure would result in increased
state revenues from the new tax on vehicles. As noted earlier, these
revenues would be deposited in the California Road Repairs Fund to
support state and local transportation programs. We estimate that state
revenues would increase by about $400 million in the first year of
implementation in 2015 and increase to between $3 billion and $4 billion
annually upon full implementation beginning in 2018.
Redirection of Existing Revenues.
This measure would redirect about $65 million annually in miscellaneous
revenues from the state General Fund to the California Road Repairs
Fund, with the funds used to increase funding for state and local
transportation programs. This would have the effect of reducing General
Fund resources available for non-transportation programs by a
corresponding amount.
Increased Administrative Costs.
This measure would result in increased
administrative costs to the state and local governments. For example,
the DMV would incur one-time costs to charge and collect the new vehicle
tax. Under the provisions of this measure, these costs would be
supported by a portion of the revenues generated from the new tax on
vehicles. In addition, the new reporting requirements contained in the
measure would result in a minor increase in administrative costs for
state and local governments, which would be supported by the funding
provided in this measure.
Other Fiscal Effects. For
many taxpayers, this vehicle tax would be deductible from their state
income taxes and would therefore reduce the amount of revenue the state
collects from income taxes. In many years, this reduction in General
Fund revenues would reduce required state funding for schools and
community colleges. The net reduction in General Fund resources
typically would be in the tens of millions of dollars annually.
Summary of Fiscal Effects.
We estimate that this measure would have
the following fiscal effects:
·
Increased
state revenues from a new tax on vehicles of $3 billion to $4 billion
annually for state and local transportation programs.
Return to Initiatives
Return to Legislative Analyst's Office Home Page