AgdaPkt 2010-02-01 clsd and regular

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'Transportation' Continued from Page 1... 8A Page 2 The Proposal. The Governor proposes to eliminate the 5 percent (temporarily 6 percent through FY 2010-11) sales tax on gas1 (which funds Proposition 42 allocations), but provide an alternative revenue source by increasing the excise tax on gas (Highway Users Tax Account or HUTA). HUT A would increase from 18 cents per gallon to 28.8 cents in FY 2010-11, and then gradually increase to 33.9 cents per gallon over a 10 year period2. Currently, the effective combined Prop. 42 and HUT A taxes total 34.4 cents per gallon. The alternative HUT A revenues will be allocated first to pay state transportation debt services, then as follows: 1. 50 percent to the State Transportation Improvement Program (STIP) 2. 50 percent split evenly between cities and counties using current HUT A formulas The Governor expects this proposal to be considered in an extraordinary session before March 1, which would give the legislation time to go into effect beginning July 1. The proposal would not change the dollar amounts for STIP or local streets and roads in FY 2010-11 from what could be expected under current law. In FY 2010-11, the 28.8 cent excise tax would generate about $1.933 billion and be allocated as follows: . $675 million to fund debt service on Prop. 1 B and seismic retrofit bonds currently paid by the state general fund. . $629 million to local streets and roads In the same allocation as the current Prop. 42 local streets and roads allocations. . $629 million to the STIP as the current Prop. 42 allocation. The proposal only affects the 5 percent (temporarily 6 percent) state sales and use tax rate and would leave Prop. 172, county realignment, locally adopted add-on rates and the local Bradley Bums rates in place on sales of gasoline. Severe Imoact on Transit. This funding swap for an alternative revenue source has the greatest immediate impact on transit operations. Overall, transit will receive about $1.6 billion less in FY 2010-11 than it would have if the status quo were maintained. Currently, the sales tax on gasoline provides funding for the Public Transit Account (PT A) through the Transportation Investment Fund and the spillover, which would provide $1.2 billion in FY 2010-11. However, the alternative source of revenues to replace the state sales tax on gasoline may not be used for transit under Article XIX. Therefore, revenues to the PTA would be eliminated. In addition to losing the revenues provided by the sales tax on gas, the Governor proposes eliminating the state sales tax on diesel fuel and using Proposition 1113 revenues for state transit purposes. The Governor also proposes transferring funds in the PT A to pay the debt service on state transportation bonds. Moreover, there is a stark policy disconnect between proposed cuts to transit funding and the recent focus on climate change and reducing carbon emissions. It is unrealistic to expect reduced vehicle usage without viable transit alternatives. A Bad Deal for Transportation: Excise Tax is a Declinina Source of Revenue. The prime driving force behind this proposal is the state's desire to free up short term revenue to balance its budget, not to responsibly allocate transportation revenues to meet state and local transportation needs. The deteriorated conditions of state and local transportation networks are well documented. While comparing current funding to the Governor's proposal has its challenges, there are a few facts regarding Prop. 42 and the HUT A excise tax that should be taken into consideration. As vehicles become more efficient and less gas is consumed. excise tax revenues are likely to flatten or decrease. Conversely, Prop. 42 revenues have been increasing, and are estimated to have an annual growth potential of up to 5 percent. Besides the direct hit to transit, this proposal could likely result in an overall decrease In local streets and roads funding in the future. Underminina Existina Voter Protections for Local Fundina. The voters adopted Prop. 42 in order to earmark the sales tax on gasoline for capital improvement projects, publiC transit, and 2