California’s Gas Tax Going Up Again—Amid Coronavirus, Some Say Now Is Not the Time
Monday, June 15, 2020
California’s gas tax is set to increase July 1, but some lawmakers are calling for a freeze on the higher levy, citing the financial burden of the coronavirus-spawned recession on millions of the state’s residents.
The automatic increase pegged to inflation — the third increase in the last four years — comes as a long-simmering dispute over the gas tax law enacted three years ago has again flared up at the state Capitol.
The tax is set to increase by 3.2 cents, to 50.5 cents per gallon, and state officials estimate it will bring in an additional $440 million to state coffers in the coming fiscal year. The hike is triggered by the increase in the consumer price index and is built into SB 1, the legislation that boosted the tax by 12 cents per gallon in 2017 and 5.6 cents last year.
In all, the fuel taxes are expected to raise $7 billion during the new fiscal year to pay for road and bridge repairs. But a group of Republican lawmakers says this is the wrong time to raise taxes on Californians, more than 6 million of whom have lost jobs during the COVID-19 pandemic.
Assemblyman Vince Fong (R-Bakersfield), vice chairman of the Assembly Transportation Committee, said the increase “further rubs Sacramento salt into the wounds of California residents who are struggling with uncertainty and real financial pain” during the coronavirus crisis.
Assembly Republican Leader Marie Waldron of Escondido said it was “inconceivable” that the state would raise costs on Californians at this time.
“Unemployment continues to rise and all the ways California was unaffordable prior to the pandemic still exist — suspending the gas tax increase is the least that could be done,” Waldron said.
Delaying or canceling the gas tax increase would require a vote of the Legislature, and Democrats who control the state Senate and Assembly say they have no plans to take that action. Newsom has not proposed halting the increase, a spokesman for the governor said.
State Sen. Holly Mitchell (D-Los Angeles), chairwoman of the Senate Budget Committee, said local governments hurting financially because of the pandemic are depending on the tax revenue to repair pothole-riddled roads.
“As we talk about stimulating our local economy and how long it takes infrastructure projects, I don’t think now is the time to take our foot off the pedal,” Mitchell said.
She said the tax increase’s effect on consumer pocketbooks is blunted by the fact that gas prices in California are down from what they were a year ago. The average price of a gallon of gas Friday was $2.98, compared with the $3.86 average a year earlier, according to the American Automobile Assn.
Assemblyman Phil Ting (D-San Francisco), chairman of the Assembly Budget Committee, agreed that the Legislature should allow the increase to take effect.
“The annual [consumer price index] adjustment allows us to continue the progress we’re making to fix our crumbling roads and bridges,” Ting said.
Newsom’s statewide order in mid-March for Californians to stay home during the pandemic reduced driving significantly in the state. An analysis by the California Department of Transportation in April shows that traffic volume on state roads was down some 35% as compared to the same time last year.
Though having fewer people on the roads during the stay-at-home order has allowed road construction projects to accelerate, it has also negatively affected the amount of money available.
State estimates of gas and diesel tax revenue have declined by almost 7% this year and are projected to drop by 7.6% in the fiscal year starting July 1. The decline will mean a loss of about $1.2 billion in revenue over the two years, though the governor’s budget estimates the state will receive $7 billion in fuel taxes for the new fiscal year.
For those who drive electric cars and don’t pay a gas tax, a new $100 road improvement fee kicks in July 1, but only for zero-emission vehicles with a model year of 2020 or later.
Though orders that closed businesses are easing across the state, the prospect that a slow recovery could continue to reduce fuel tax revenue has officials watching closely.
“In light of revenue projections, Caltrans is monitoring any potential impacts to maintenance and construction projects moving forward,” Caltrans spokesman Matt Rocco said. “However, at this time, all ongoing projects are expected to continue without delay or stoppage.”
Because California has the second-highest gas prices in the country, after Hawaii, the issue of fuel taxes has long been contentious. In 2018, voters recalled from office then-state Sen. Josh Newman (D-Fullerton) for voting in favor of the gas tax increase.
Voters that year rejected an initiative that would have repealed the gas tax hike and instead approved a separate ballot measure, Proposition 69, that required that revenue to be spent on transportation projects.
The debate flared up again last month when a Senate budget subcommittee rebuffed a proposal by Newsom to divert $130 million in interest from the State Highway Account, which is funded by the gas tax, and instead use the funds to balance the general fund budget.
Mark Monroe, an assistant budget manager for Newsom’s Department of Finance, said during a May 24 legislative hearing that the transfers “are important components of the broader balancing of the state budget.”
But after the independent Legislative Analyst’s Office suggested lawmakers confer with their attorney for an opinion on whether such a transfer was legal, both Democratic and Republican legislators said such action would run afoul of what was promised to voters in Proposition 69.
“I think this is a broken promise,” Sen. Mike McGuire (D-Healdsburg) said of the proposal. “I believe this money could be better spent in the way intended, fixing the roads of California.”
McGuire noted the reduction in vehicle use during the pandemic was already costing the state $600 million in gas tax funds for repairs.
“We have decreasing revenues because of the situation we are in, and we are going to need every penny to go to the roads,” said Sen. Brian Dahle (R-Bieber), who opposes transferring the $130 million to the general fund. “I don’t think this is the time.”
Category: Government Affairs, COVID-19, Economic News