Straight Talk on the CA State Gas Tax Crisis

State politicians have had their day in Sacramento debating all kinds of revenue-generating alternatives to fund transportation infrastructure. But will they address the root sources of the problem?

I-15 Corridor Funding: A previous proposal called for an I-15 carpool lane between Murrieta and Lake Elsinore, but lack of funding has cut it off even though Southwest Riverside County medical jobs and housing continue to grow. Why?

Transit Talking Points by: Nicholas Ventrone, Community Engagement Director

The statewide transportation infrastructure account appears to be in a fiscal crisis and many proposals and thesis I'm hearing continue to be that taxes and fees need to be raised.

Sunday's Press Enterprise featured a front page article reporting the situation and Sacramento politicians have raised all kinds of cash-generating solutions including a road usage per-mileage tax or a flat $52/year motor vehicle registration tax that would be payable during vehicle or insurance renewal. Simply throwing more and more money into the problem has been the solution that I've been hearing. However, I have not heard of any unified solution that would get to the root sources of the problems.

I am pretty much infuriated of how the ongoing highway fuel tax funding crisis is being addressed and how our public servants are addressing this issue.

The truth is that there are very important pieces of information that are continuously being omitted in the reportage that We the People need to know. These hard facts that are generally not being reported will just about negate the thesis we're all hearing of needing to hand more and more money over to the state taxman to pay for transportation infrastructure, which is certainly not essential.

First, let's take a look at the current revenue stream of the kitty.

According to the California Legislative Analyst's Office, annual statewide transportation revenues have more than doubled over the past 15 years--from $3.5 billion in 1999-00 to about $7.2 billion in 2013-14. This revenue comes from three main sources: (1) excise taxes on gasoline, (2) vehicle weight fees, and (3) sales and excise taxes on diesel fuel. That money is supposed to be going toward the development and maintenance of capital surface transportation infrastructure which also covers mass transit.

Factor in all 50 states and the state governments combined are collecting on average about $40-43 billion per year according to the U.S. Census Bureau.

At the federal level, 2013 fuel taxes were just under $30 billion according to Federal Highway Administration stats reported by a Strong Towns blog post. That's more than double than the receipts in 1994 even though the 18.4 per-gallon rate for unleaded gasoline remained untouched since then; back then, the feds collected about $13.9 billion.

This tax collected by the state and feds is supposed to be returned to its taxpaying jurisdictions and purposed to develop and maintain the highways and bridges with a portion allocated toward mass transit capital improvements.

That's exactly what happened not too long ago.

Previously, fuel and local sales taxes paid for the infrastructure.

The 90's and early 2000's was a major boom period for transportation infrastructure. The economy was robust with the birth of the Internet.

Los Angeles Metro began its massive Metro Rail master plan and built the I-110 Harbor Transitway, the I-105 freeway and connecting carpool lanes. That was also the period when Metrolink was first born, Orange County built out its own freeway expansion and carpool lane master plan, and the same HOV lanes were beginning to sprout in the Inland Empire.

Then came the recession. Revenues took a hit. Today, fuel tax receipts have fully recovered despite the fact that cars are becoming more fuel efficient, which brings me to my next point.

More Fuel Efficient Cars continue to Grow

I must keep the debate fair and mention the fact that the vehicles we use to get around--whether it be a private automobile, a carpool, riding the bus, or taking the train are becoming more and more fuel efficient year after year. That's a good thing as that means we can grow multi-modal transportation options while simultaneously support making the Earth's air cleaner. As cleaner cars, buses and locomotives are developed, we can grow our infrastructure and keep smog levels down. Plus, that means more of our hard-earned money going into the bank instead of the tank.

Therefore, the future of fuel tax revenue at both the state and federal level is threatened and a funding master plan must be made. However, current tax receipts are still okay and flush with cash.

Traffic: I-15 peak hour traffic north of Escondido.
Do we really have to wait until 2050 for the I-15 Express Lanes and BRT?
Surface Transportation & Bridge Infrastructure Falling Behind

Despite all of this money flowing into Washington and Sacramento, reports show that the state has an infrastructure backlog of $59 billion. However, that number may be bloated and I'll explain why in a moment.

As a transit advocate, I can conclude that our roads, rails and bridges that vehicles, buses and trains rely on have lagged behind as the Inland Empire continues to grow. Commuters now clog the built carpool lanes. The Riverside Transit Agency remained on a bare-bones budget up until recently.

Yes, there are now very desirable projects on the books right now which include the giant 91 Project in Corona which promises to make the Corona Crawl a thing of the past for 3+ FasTrak-registered HOV's, transit, and toll-paying non-carpools. RTA's 10-Year Transit Network Plan also promises better frequency, span, and late night services. And major transit improvements are in play in San Bernardino. But those projects should have been funded and fulfilled long ago during the Inland Empire's rapid housing growth last decade.

Excise Tax Changes Proposed:

Last but not least, the California Board of Equalization has proposed lowering the state fuel excise tax during its February meeting. I'll address that in another post.

The hard facts of this Transit Talking Points is done. Here are three issues that need to be resolved regardless of how the transportation accounts are funded in the future...

Funding: State and federal policies need to allow RTA and RCTC to efficiently build out its bus transit station master plans with seamless connections to planned carpool or HOT tolled express lanes without the bloated regulatory costs.
Issue #1 - Where's the money the government gets from the current gas taxes?

Other than the 2008-09 recession period, state and federal gas tax receipts have been growing through the roof since last decade. That money which Inland Empire residents paid into was supposed to be returned to our local transportation agencies and go toward the development and maintenance on such capital infrastructure.

The questions I submit are this:
  • Where's all of this money the governments get from the fuel taxes?
  • Shouldn't the $7.2 billion per year plus California's lion's share of the federal kitty be enough to maintain the roads, rails, and bridges in the state?

Sadly, $7.2 billion plus the federal share are not even close to cutting into the backlog of overdue projects. California is reportedly backlogged $59 billion. The federal highway trust fund is running out of cash.

The governments have reported that we need even more money just to maintain existing infrastructure.

But why is this backlog even occurring in the first place? Take a look at the next two issues.

Issue #2 - State Transportation Funding Displacement/Fuel Swap

Despite tax increases and repeat opposition from the public via the ballot, the state government continues to tap into the transportation account and divert funds to other interests.

Back in 2010, then-Governor Arnold Schwarzenegger proposed, pushed for, and signed into law a "fuel swap" of statewide gas taxes, creating complication of the fuel tax code. It basically reduced fuel sales taxes and raised the fuel excise tax, but the move also gave the state government a legal excuse to not spend the gas tax money on the infrastructure and allowed it to re-purpose it elsewhere. That was to get around the multiple ballot measures and lawsuits to stop this kind of displacement.

So basically, the billions per year that was supposed to be going to our statewide projects was tapped into and been diverted to...who knows what? That contributed toward the state's backlog of unpaid projects.

Why does this continue?

Fair Wage Policies: Suppose the left worker is an assistant project manager training the right worker who is a skilled crew member. The manager is paid about $55,000 per year salary plus insurance and retirement benefits given his vast responsibilities. The employee is paid a $12/hour starting wage plus basic health insurance. If the employee's team delivers an efficient working project on time, the crew member would be awarded a nice bonus plus a raise on his next project and potential promotion.
Issue #3 - Infrastructure Contract Labor costs well above Private Sector Market Rates

Also, at both the state and federal level, current law and policies have forced government-financed projects to cost way more than they otherwise would if done by the private sector, especially since the recent recession.

I've already previously pointed to examples regarding a local park & ride project and passenger rail service. Contract operators who bid on projects are forced to pay wages which are way beyond market supply and demands. That drives up costs paid for by you and I. Current law and federal labor enforcement panders to public labor unions which has given these interests a power grab on infrastructure costs.

To be fair, labor unions played an important role in U.S. history and I don't oppose enforcing a minimum wage of about $9-$10 per hour given inflation and the current spending power of the dollar. Plus workplaces must be safe, and workers must be paid fairly for the work done and have the right to address labor problems collectively. Entry-level workers should be paid the lower starting wage. Workers who perform well, gain and use job experience to deliver productive work on time and add value to their contractor should be awarded with the higher wages and more paid benefits. That's the fair solution and that is what the U.S. Department of Labor should be enforcing, not keeping infrastructure costs constantly bloated.

That's a potential reason why the state's $59 billion infrastructure backlog may be inflated.

We need to debate some fair, out-of-the box solutions to this problem .

Because these factors have led to an excessive backlog of overdue projects that is certainly going to require extensive work, we must address this problem in an intelligent, out-of-the-box way to solve this crisis without unfairly asking the taxpaying public to fork over more money to the state taxman.

First, all three cash management issues I've mentioned must be addressed and put into law before I will back a wholesale tax hike to the public. As far as replacing the actual funding source as more fuel-efficient and all-electric cars become the norm, I will address this once again in a future Let's Debate post.

Bottom line is we live in a free country and We the People must regain control of this grave situation, and must not allow this problem to control us.