Transportation Funding Changes could be Coming

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

In his last Tuesday Sacramento Bee column, Dan Walters considered what could lead to major changes in highway and transportation funding as the Brown Administration considers its options.

Pointing to a Tax Foundation report, Walters wrote, “California has the nation’s third-highest fuel tax, more than 50 cents a gallon, but is among the lowest states in having motorists and other transportation users pay for their services through fees and taxes.

In fact, the organization calculated, California’s users pay for less than a third of building and maintaining streets, roads, highways and transit services.

The rest of the transportation burden is being borne by diversions of other revenue, such as those local sales taxes paid by everyone who buys retail goods, the state’s general fund that’s been tapped to service transportation bonds, city and county property taxes, federal grants and so forth.”

Funding transportation by means other than by the users of the transportation is being considered as a solution for transportation funding by other states.

Effective and efficient transportation funding is key to a revived California economy. This is not a new issue. In 1988, I worked with Proposition 13 co-author, Paul Gann, on a ballot measure (Proposition 72) to boost funding that would have required sales taxes on gasoline to be used for transportation purposes (as well as establish a budget reserve.) The measure lost.

Because cars are getting better mileage and as hybrid and electric cars start to move into the market, the old methods of funding roads on a pay-as-you-go tax on a gallon of gasoline is not keeping up with the demand. An array of states, including Pennsylvania, Massachusetts, Wisconsin, Maryland, Michigan, Oregon, Washington, Missouri, Kentucky, Virginia and Wyoming are all considering new funding strategies.

In Virginia, Governor Bob McConnell is proposing abandoning the old pay-as-you-go highway tax system by eliminating the state’s 17.5 cent per gallon gas tax and replacing it with an 8/10 of one percent increase in the state sales tax from 5 percent to 5.8 percent and dedicating the increase to the roads. Opponents fight abandoning the pay-as-you-go principle. Supporters argue that the roads benefit all because it serves the backbone of the economy.

It would be hard to conceive of California following a similar plan by upping its already top-of-the-heap sales tax.

Other state proposals under consideration deal with miles-based user fees and more toll roads. Transportation expert, Ken Orski, an occasional contributor to Fox and Hounds Daily, writes an overview on some of the state and federal proposals that may be coming in transportation funding on his Innovation Briefs blog.

Proposals to change transportation funding are likely coming and the proposals may involve new, creative funding methods. As Orski writes, “when it comes to raising money, bold and unconventional approaches will sometimes trump established principles.”

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