Whether or not voters this November approve an initiative to repeal recent increases to California fuel taxes and vehicle registration fees, its proponents are already planning a sequel.
The campaign is preparing to introduce a ballot measure in September that would ensure fuel taxes, car sales taxes and truck weight fees are spent on transportation projects. Supporters hope to begin collecting signatures in November, shortly after the vote on Proposition 6, for the 2020 election.
The proposal expands on Republican arguments that the gas tax increase, passed last year by Gov. Jerry Brown and Democratic lawmakers, was unnecessary because the state already has plenty of money to pay for a backlog of road repairs and maintenance.
It has three main components:
▪ Create a “lockbox” so that gasoline and diesel taxes are spent only on road projects.
▪ Steer sales taxes from automobile purchases to regional transportation agencies.
▪ Enact cost-saving changes to infrastructure planning and construction.
Its architects estimate the plan will generate at least $14 billion per year, mainly for streets and highways, far more than what the tax and fee increases are projected to bring in over the next decade.
“I call it the Robin Hood initiative — stealing our money back,” said Carl DeMaio, chairman of the gas tax repeal campaign.
But a Sacramento Bee analysis determined that the prospective initiative would require major spending cuts to other programs across state and local budgets. Opponents say it is unrealistic.
“It’s silly. It’s unworkable. It’s unconstitutional,” said Michael Coleman, fiscal policy adviser for the League of California Cities, which is campaigning against Proposition 6. “It’s not a serious proposal.”
Voters in November will consider reversing a transportation spending plan that includes a 12-cents-per gallon increase on gasoline, a 20-cents-per-gallon hike on diesel and a new “transportation improvement fee” based on the value of a car. It is expected to bring in $54 billion over the next decade, mostly for repairing and rehabilitating local streets, state highways, bridges and culverts.
About 18 percent, or nearly $10 billion, is budgeted for public transit, commuter rail, bicycling and pedestrian projects, parks and agriculture, research or workforce training. DeMaio said that is a misuse of money generated by drivers.
His next initiative would mandate that all gasoline and diesel taxes be spent on contracts for road maintenance and improvement projects.
Another $1.1 billion in truck weight fees, which is used to pay debt from a 2006 voter-approved transportation bond, would also fall under this “lockbox.”
“The money there has just not been prioritized appropriately,” DeMaio said. “Anything less than 100 percent of gas tax for roads, we find unacceptable.”
Without the recent increases, fuel taxes are projected to generate about $5.7 billion in the 2018-19 fiscal year. Nearly three-quarters of that money is already spent on roads, including local streets and highway maintenance, according to a breakdown provided by the California Department of Finance.
Most of the rest, more than $1.3 billion, currently flows through the state Department of Transportation for mass transit, operating the highway system, planning projects, equipment and legal and administrative costs. But more than $260 million will be sent this year to other departments, such as parks or food and agriculture, because it comes from taxes on gas or diesel purchased for boats, tractors and ATVs, rather than cars and trucks.
DeMaio believes new spending on road repair and rehabilitation would be far higher than $2.4 billion annually with the “lockbox.” He said the government is hiding the cost of bureaucracy and employee salaries in its project budgets.
“They’re not actually held accountable for fixing the road or filling the pothole,” he said.
State officials defend those expenses as part of the process of building and maintaining California’s infrastructure.
“You can put all the money toward concrete and asphalt,” said H.D. Palmer, spokesman for the Department of Finance. “Who pours the concrete? Who lays the asphalt?”
The largest chunk of new funding for the plan comes from reallocating the sales taxes on automobiles to local transportation officials. According to a study by the Center for Automotive Research, California sales taxes for new cars, used cars, parts and services totaled $6.5 billion in 2013.
DeMaio said the money would be divided proportionally to regions across the state depending on where it is generated. It would be up to local agencies in those areas to decide whether to spend the money on roads, mass transit or other transportation projects.
“The intent is that local control would be maximized,” DeMaio said. “It really needs to be as close to the people as possible.”
Currently, slightly less than half of sales taxes on cars — like sales taxes on other products — go to support California’s overall budget, according to Coleman of the League of California Cities. That is about $3.1 billion, using the 2013 figures.
Another quarter is designated to counties and cities for public safety, health and social services under 2012’s Proposition 30 and 1994’s Proposition 172.
The rest comes mostly from local sales taxes on cars and is split nearly evenly between city general funds, which pay for services like police, fire departments, parks and libraries, and county transportation districts.
“You’re taking local, voter-approved, dedicated revenues and sending them away to transportation purposes,” Coleman said. “I’d rather pay 12 cents more per gallon on my gasoline, which is nothing, than have that taken away from my police.”
The initiative also aims to drive down the cost of state transportation projects by outsourcing more of them to the private sector.
DeMaio estimates a billion dollars in savings annually by requiring competitive bidding for all projects; banning project labor agreements, which set wages and benefits based on union rates; and possibly exempting major infrastructure projects from state environmental regulations. He says that would free up more money for more construction.
“We believe that these government agencies are paying far in excess of what is needed in the local labor market to recruit and retain quality employees,” he said. “What they’re doing now is gross overcompensation.”
Though not addressed explicitly in the proposal, DeMaio points to a 2014 report by the Legislative Analyst’s Office as evidence of waste in the Department of Transportation that could be trimmed by contracting out work. The report concluded that the department was overstaffed by 3,500 full-time equivalent support positions, such as project design and management, at a cost of more than $500 million.
Transportation officials have vigorously disputed those findings. And in May, the LAO released a new analysis that said its 2014 estimates were no longer accurate, because construction activity had not declined as much as projected and the gas tax increase created additional funding for construction. But, the report added, analysts continue to have concerns that the transportation department’s “budget development methodology is unreliable and contains incentives to request more staff than needed.”
In a statement, spokesman Matt Rocco said “staffing levels are based on how many projects the department has committed to delivering, and the staff needed to support the workload required for designing and overseeing those projects.”
“That staffing was the lowest it has been in in 20 years” when lawmakers approved the new taxes and fees in April 2017, he said. The Department of Transportation was budgeted for an increase of 872 full-time equivalent support positions, to 10,319, in the current fiscal year.
Redirecting sales taxes from automobiles would pull an estimated $870 million out of city budgets.
The state would have to use its general fund to pay for the transportation debt service — nearly $1.6 billion in the current fiscal year — that is currently covered by the truck weight fees. Along with the more than $3 billion hit to the general fund from losing car sales taxes, California might have to cut nearly $5 billion from other programs to balance its budget.
That figure could be even higher if policymakers wanted to make up for the Department of Transportation funding stripped away by the proposed “lockbox” on gas tax money. Those administrative functions, such as operating the California highway system and managing federal funding for transportation projects, cost hundreds of millions annually.
California’s general fund has grown to $138 billion. But so much of the budget is protected by previous initiatives and laws — at least 40 percent goes to K-12 schools and community colleges because of 1988’s Proposition 98, for example — that cutting other programs to pay for roads would be extremely complicated.
Of the discretionary spending that would be easiest to cut, most is for the University of California and California State University. It also includes the court system, the Legislature and various state agencies.