By Wes May ECA Executive Director Email: [email protected]
California Governor Jerry Brown announced his new budget for Fiscal 2017-18 early this year and there was good news and bad news for the construction industry.
The good news is a plan to raise $43 billion in new money for “transportation” in the state over the next ten years. We put the word “transportation” in quotes because the meaning of the word in state budget terms has changed dramatically. It used to mean money spent on roads and bridges, today it is defined as funding for many other items: “active” (walking and bicycle riding) transportation, sustainable transportation grants, corridor mobility improvements, transit and intercity rail capital programs, trade corridor improvements, environmental sustainability and IT improvements.
Here’s where the new money is to come from under the Governor’s plan on an ‘”annualized” basis:
- Road Improvement Charge—$2.1 billion from a new $65 fee on all vehicles, including hybrids and electrics.
- Stabilize Gasoline Excise Tax—$1.1 billion by setting the gasoline excise tax at the 2013-14 rate and eliminating the current annual adjustments. The broader gasoline tax would then be adjusted annually for inflation to maintain purchasing power.
- Diesel Excise Tax — $425 million from an 11-cent increase in the diesel excise tax. This tax would also be adjusted annually for inflation to maintain purchasing power.
- Cap and Trade—$500 million in additional Cap and Trade proceeds.
- Caltrans Efficienciesn — $100 million in cost-saving reforms.
All the new taxes (charges, fees, etc.) will require a two thirds vote in the Legislature. The Democrats own a two thirds majority in both the Assembly and the State Senate, so it shouldn’t be a problem, right?
Well, maybe. The first item on the list, the “road improvement charge” looks exactly like a vehicle licensing fee and the last time the state raised that tax it led to the recall of then Governor Gray Davis in 2003.
The second item represents a do-over on the “gas tax swap” of 2010 and locks in a higher base rate for the gas tax than has resulted from the original bill. The actual excise tax in fiscal 2013-14 was 39.5 cents per gallon, a substantial hike over the current rate of 27.8 cents. The increase in diesel is a near doubling of the current diesel tax of 13 cents per gallon.
The other proposals may fall into the arena of wishful thinking. The plan to double funding from Cap and Trade proceeds depends on those auctions continuing for ten years and actually meeting their targets—neither of which is a sure thing today.