TRANSPORTATION FUNDING: SALES AND USE TAX REVENUES

Legislative Constitutional Amendment

THE QUESTION

Should the California Constitution be amended to require gasoline and diesel fuel sales tax revenues be allocated for specified transportation purposes, including highways, streets and roads, and transit improvements?

PROVISIONS

This measure places in the State Constitution those provisions of current law that require that, from 2003-04 through 2007-08, gasoline sales tax revenues be used for specified state and local transportation purposes. The revenues would be allocated for transportation purposes specified under the Transportation Congestion Relief Program (TCRP).

In addition, the measure requires that starting in 2008-09, the gasoline sales tax revenues continue to be used for state and local transportation purposes. The revenues would be allocated as follows:

• 20 percent to public transportation.
• 40 percent to transportation improvement projects funded in the State Transportation Improvement Program, a five-year transportation capital investment program.
• 40 percent to local streets and roads improvements; with half of the amount (20 percent) allocated to counties and half to cities.

BACKGROUND

California spends over $15 billion annually to maintain, operate, and improve its highways, streets and roads, rail, and transit systems. About half of these revenues come from the local level in the form of local sales and property taxes and transit fares. The remainder comes from the state and federal levels, largely as motor fuel (gasoline) and diesel fuel taxes and truck weight fees.

Currently, the state levies two types of taxes on gasoline and diesel fuel:

• An excise tax of 18 cents on each gallon of gasoline and diesel fuel.
• A sales tax on the sales of gasoline and diesel fuel. The statewide rate is 5.75 percent through 2001. This rate will change to 6 percent on January 1, 2002.

Revenues from the state excise tax on gasoline and diesel fuel used on public roads total about $3 billion a year. These revenues are dedicated to transportation purposes.

Revenues from most of the state sales tax on diesel fuel--4.75 percent out of the statewide rate--are also used for transportation. However, most of the revenues from the state sales tax on gasoline have historically been used for various general purposes, including education, health, social services, corrections, and local government fiscal relief. Only a small portion of the state gasoline sales tax revenues have been used for transportation.

In 2000, the Transportation Congestion Relief Program (TCRP) was enacted in California. Under the program, gasoline sales tax revenues will be used from 2003-04 through 2007-08 for specified transportation purposes including highways, streets and roads, and transit improvements. Thereafter, these revenues will be available for various general state purposes.

FISCAL EFFECT

The measure places in the State Constitution those provisions of current law that require the use of state gasoline sales tax revenues for state and local transportation purposes from 2003-04 through 2007-08. Consequently, for that period, the measure would have no additional fiscal impact.

Beginning in 2008-09, the measure requires that state gasoline sales tax revenues continue to be used for transportation purposes in the future. The amount that would be used is projected to be about $1.4 billion in 2008-09, increasing annually thereafter, depending on increases in gasoline prices and consumption.

IMPACT OF YES OR NO VOTE

A YES vote means that provisions will be placed in the California Constitution requiring all revenues from the sales tax on gasoline and diesel fuels be used for transportation purposes only.

A NO votes means that the historic and current general uses of revenues from the sales tax on gasoline and diesel fuels will remain.

SUPPORTERS SAY

• Proposition 42 ensures that the gasoline sales tax we're already paying be spent to improve our highways, local streets and mass transit, without increasing or imposing new taxes.
• Proposition 42 creates jobs and boosts our economy with the creation of construction and engineering projects, generating nearly six times the amount in economic benefits.
• Proposition 42 requires an annual audit to ensure projects are delivered on time and on budget.

OPPONENTS SAY

Proposition 42 pits vital state programs against each other and puts transportation funding ahead of priorities for education, health, and safety concerns.

• Proposition 42 locks into the Constitution spending priorities through 2008.
• Since September 11^th of last year, government has greater demands on it to protect our public safety and health, and needs flexible funding sources to do so.

SUPPORT AND OPPOSITION

Official ballot arguments in support are signed by Commissioner Dwight Helmick, California Highway Patrol; Leo Soong, Chair of the Board, California State Automobile Association-AAA; Lieutenant Ed Gray, President, California Organization of Police and Sheriffs (COPS).

Official ballot arguments in opposition are signed by Wayne Johnson, President, California Teachers Association; Howard Owens, President, Congress of California Seniors Education and Resource Foundation; William D. Powers, President, Health Access of California.

For more information:

Supporters:

• Taxpayers for Traffic Relief/Yes on 42, A Coalition of Taxpayers, Construction, Business, Labor, Engineers and Commuters, (310) 996-2671, www.yesprop42.com
• California State Office of Emergency Services, (916) 262-1816
• California Taxpayers Association, Marian Bergeson, Former Member, California State Board of Education

Opponents:

• California Teachers Association, (650) 697-1400, www.cta.org
• Lenny Goldberg, Director, California Tax Reform Association, (916) 446-4300
• Viola Gonzales, Executive Director, Latino Issues Forum
• Jeff Sedivec President, California State Firefighters' Association

For more information, see Smart Voter Proposition 42.

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