PROPOSITION 42 TRANSPORTATION FUNDING: SALES AND USE TAX REVENUES

Legislative Constitutional Amendment

THE QUESTION

Should the California Constitution be amended to require gasoline and diesel fuel sales tax revenues be allocated for specified transportation purposes, including highways, streets and roads, and transit improvements?

THE SITUATION

Over $15 billion is spent annually in California to maintain, operate and improve its highways, roads, rail and transit systems. Nearly half of those revenues come from the local level in the form of local sales and property taxes and transit fares. The remainder of the funds comes from the state and federal levels, largely in the form of gasoline and diesel fuel taxes.

The state currently levies two types of taxes on gasoline and diesel fuel:

• An 18 cent excise tax on each gallon of gasoline and diesel fuel; and
• A sales tax on the sale of gasoline and diesel fuel, the rate of which is currently 5.75 percent and will change to 6 percent on January 1, 2002.

About 83 percent of the diesel fuel sales taxes are currently used for transportation purposes. However, most of revenues from gasoline sales taxes have historically been used for various general purposes, including education, health, social services, corrections, and local government fiscal relief.

THE PROPOSAL

This measure places in the State Constitution the provisions of current law from the Transportation Congestion Relief Program (TCRP) of 2000 that require gasoline sales tax revenues be used for specified state and local transportation purposes. Proposition 42 would:

• Allocate gasoline and diesel fuel sales tax revenues for transportation purposes as specified under the TCRP for the fiscal years 2003-04 through 2007-08;

• Require that beginning with fiscal year 2008-09, revenues from gasoline and diesel fuel sales taxes be allocated 20% to public transportation, 40% to transportation improvement projects as specified in the State Transportation Improvement Program, and 40% to local streets and road improvements, with half of the latter amount being allocated to counties and half to cities.

• Require a 2/3 majority vote of the legislature to modify this distribution of revenues.

FISCAL EFFECT

According to the Legislative Analyst, for fiscal years 2003-04 through 2007-08, Proposition 42 would have no fiscal impact, since it merely reflects those provisions of current law found in the Transportation Congestion Relief Program of 2000.

Beginning in fiscal year 2008-09, however, the amount of state revenues that would otherwise be available for general purposes, estimated to be approximately $1.4 billion for 2008-09 and increasing annually thereafter, would now be allocated specifically for transportation purposes only.

SUPPORTERS SAY

• Prop 42 ensures that the gasoline sales we’re already paying be spent to improve our highways, local streets and mass transit, without increasing or imposing new taxes.
• Prop 42 creates jobs and boosts our economy with the creation of construction and engineering projects, generating nearly six times the amount in economic benefits.
• Prop 42 requires an annual audit to ensure projects are delivered on time and on budget.

OPPONENTS SAY

• Prop 42 pits vital state programs against each other and puts transportation funding ahead of priorities for education, health and safety concerns.
• Prop 42 locks into the Constitution in 2002, spending priorities through 2008
• Since September 11th of last year, government has greater demands to protect our public safety and health, and needs flexible funding sources to do so.

For more information:

Supporters: Taxpayers for Traffic Relief/Yes on 42, A Coalition of Taxpayers, Construction, Business, Labor, Engineers and Commuters, (310) 996-2671, www.yesprop42.com

Opponents: California Teachers Association, (650) 697-1400, www.cta.org
Lenny Goldberg, Director, California Tax Reform Association, (916) 446-4300

See also Smart Voter Proposition 42 and "In Depth".

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