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. 13‑0045).
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.
Off-Road Gasoline Excise Taxes. The state charges excise taxes on
gasoline purchased for off-road uses, such as for off-road vehicles,
agricultural equipment, boats, and planes. These taxes generate about
$275 million annually. The state General Fund receives about half of
these revenues, with the remaining half funding off-highway vehicle
recreation, agriculture, general aviation, and boating programs.
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.
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
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. The measure also
redirects about half of the revenues from existing off-road vehicle fuel
taxes from the state General Fund to this new special 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
- 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
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.
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 $200 million annually in off-road fuel
taxes and 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.
- Reduced state General Fund resources of about $200 million annually for
non-transportation programs, with a corresponding increase in funding
available for transportation programs.
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