5 Pages Research Paper

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California's Transportation Funding

Introduction

California’s transportation funding is multifaceted. By definition, transportation

funding refers to the outlays that the government pays for providing a safe and efficient

transportation system. The funds are used to create a system that ultimately assists people in

commuting between workplaces and residences. In California, transportation funding is

derived from the local, state, and federal governments. Various fees, such as fuel taxes and

vehicle weight charges are also used to fund transportation within the state. The revenue

collected from these sources is channelled towards vehicle regulation, transit operations, and

highway maintenance. State funds are channelled to various projects subject to certain

frameworks outlined in state law. This study explores how the state of California is using its

funding for transportation.

Discussion

Transportation funding in California comes from a wide range of federal, local, and state

sources. State funding for transportation is sourced from a number of state transportation fees

and taxes. They include fees levied on vehicle weight, diesel excise and sales taxes, as well

as, gasoline taxes (LAO Report). California’s transportation budget for 2019-2020 is $23.5

billion for all fund sources for the state’s transportation programs and departments. Major

sources of state funding are vehicle taxes and state fuel. Transit fares sales taxes combined

with country and city general funds contribute to the largest percentage of local funding. As

for federal funding, federal tax fuels are the main source of transportation revenue. Over the

past two years, state funding has increased by approximately three-quarters owing to the

recent enactment of Senate Bill 1 in 2017. The new legislation has increased several fees to

raise around $5.1 billion in transportation revenues yearly. Almost all of the new revenue has

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been channelled towards deferred maintenance on state highways and local roads and streets.

Also, the funding is meant to improve trade transit and corridors in California State

Funding for mass transportation, roads, and highways in 2018-19 comes from federal,

local, and state sources and is estimated at $35 billion (Comprehensive Annual Financial

Report). As previously mentioned, 34% is derived from state sources' vehicle fees and fuel

taxes. In the financial year 2018-2019, transportation funding for motor vehicle regulation is

estimated to total $10.68 billion. The largest percentage goes to Local Government and

stands at 37.2%. The funding mainly supports the operation of state agencies. 21.6% and

11.3%, and 24.9% are channelled to California Highway Patrol (CHP) and California

Department of Motor Vehicles (DMV), and State Highways (Caltrans), respectively.

States in the US impose gas taxes in several ways; for example, per-gallon excise

taxes paid at the pump. Excise taxes levied on wholesalers are then transferred to end-users

through increased prices. In return, the gasoline tax is used to build and maintain roads;

hence, the tax imposed on gasoline is called a user fee. The fee is a means of forcing drivers

to compensate for the wear and tear they impose on public roads. The more miles drivers

cover, the more gasoline is burnt, and the more tax revenue is generated. California also

collects revenue from taxes on diesel fuel. According to the LAO Report, diesel excise tax in

California currently goes for 67 cents per gallon. Six cents of this tax is used to fund the

maintenance and development of local roads and highways in California State. The rest of the

revenue is deposited is used to fund various programs that deal with road maintenance and

development.

Vehicles operating on major highways in California while carrying heavy loads are

required by legislation to pay registration fees. Weight fees inject about $1 billion annually to

the state (LAO Report). Previously, vehicle weight fees were used to settle a portion of the

debt service costs on transportation bonds. This has recently changed as the vehicle weight

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fees have been redirected to maintaining and repairing highways and streets. The need arose

following a series of periodic assessment analysis of local roads and streets carried out by the

California State Association of Counties and the League of California Cities. Their latest

findings indicated that the pavement condition of the local transportation network is wanting

and will be in a failed condition by 2022 if not addressed. The report also revealed that

California's local governments are short around $8 billion a year for the next decade to

maintain the local road system. Similarly, the California Transportation Commission’s

statewide transportation needs assessment indicates that every year, California is short several

billion dollars needed to rehabilitate and maintain the state highway system. Although the $1

billion additional revenue from vehicle fees is clearly far short of the needs, it can provide

some relief to the state’s transportation system without raising taxes.

As previously mentioned, local sources also contribute to transportation funding.

Examples of the local sources are country and city general funds, county transit fares. Also,

revenues generated from sales tax are under the same category. California has implemented a

local option sales tax (LOSTs) to fund transportation infrastructure. As of 2018, 24 counties,

that houses 88 percent of California’s population, have adopted LOST practices (LAO

Report). These practices have been shown to produce considerable income for the expansion,

operation, as well as maintenance of transportation services and facilities. Sales tax revenues

used for transportation funding in California produces over $4 billion annually.

California LOST expenditure plans are multifaceted in certain aspects, reflecting

each of the state’s unique transportation needs. Many LOST measures allocate the largest

portion of funding on transit and road projects and transit projects. Part of the sales tax is

used to fund the Mid-Coast Trolley mega estimated at $2,112.11 million through 2048

(Federal Transit Administration). The Mid-Coast Trolley is an 11-mile extension to the

current San Diego Trolley system. Major destinations will be served by the medium-high

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system, including University Towne Centre, UC San Diego, and VA Medical Center. The

highest priority transportation project is needed in San Diego region to provide an efficient

and reliable transit service. As planned, the Mid-Coast Trolley project is expected to connect

corridor residents, students, employees, and businesses in San Diego locality, thereby

mitigating traffic congestion issues.

Passenger fares also contribute to transportation funding. A farebox recovery rate, for

example, is used by transit agencies to indicate the number of operating revenues (Levinson,

and deFiebre). Whenever passengers hop into a public transit, they deposit fares into the

farebox. In California, the percentage of total operating revenues that people pay for through

fares is known as the farebox recovery ratio. Farebox recovery is a criterion used to assess

the efficiency and effectiveness of public transport systems. The financial aims are to

increase revenue/minimize patronage loss; increase of pre-payment, improve revenue control,

minimize fare evasion and abuse, and lower collection expenses. The customers benefit by

having a wide range of fair options, increased convenience, and maximized social equity.

Therefore, the use of this framework enabled California to enhance investment returns by

optimizing the productivity and capacity of the current transport infrastructure in California.

Lastly, seaports and airports generate about $5 billion in revenues per year by

charging for the use of their facilities (LAO Report). Long wait times at border ports of entry,

for example, delay access to intermediary products. This causes significant issues in the

manufacturing chain, and create negative traffic congestion along with adverse air quality

effects. The funds generated from seaports and airports are therefore used to develop and

maintain a robust and multimodal goods movement network. By investing in infrastructure at

airports and seaports of entry, there is a resultant relieve in traffic congestion and wear and

tear on highways. An influx of economic activity thus provided through the State of

California.

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Conclusion

This study has shown how California is committed to addressing transportation needs and

critical infrastructure through funding. As illustrated, transportation systems must be

consistently and regularly maintained to preserve existing public infrastructure. However,

current revenues lag concerning the needs of the state highway, local road, and transit

systems. There is, therefore, a need for all Californians to adequately invest in the

transportation infrastructure. A potential solution is for the State to consider replacing the

high gas tax with a new user fee over long term. Moreover, a formula that depends largely on

historical gas prices and less on future estimates can benefit the ability of local governments

to plan transportation budgets.

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Works Cited

Comprehensive AnnualFinancial Repor. "Financial Reports, Taxes, And Economy".

Https://Sco.Ca.Gov/Files-ARD/CAFR/Cafr18web.Pdf, 2018, https://sco.ca.gov/.

Federal Transit Administration. "U.S. Department Of Transportation Announces $1 Billion

To Expand Trolley Service In San Diego". Federal Transit Administration, 2019,

https://www.transit.dot.gov/about/news/us-department-transportation-announces-1-

billion-expand-trolley-service-san-diego.

Governor’s Budget. Transportation Proposals. 2019,

https://lao.ca.gov/Publications/Report/3745.

LAO Report. California's Transportation System. 2018,

https://lao.ca.gov/Publications/Report/3860.

LAO Report. The 2019-20 Budget: California Spending Plan. 2019,

https://lao.ca.gov/Publications/Report/4098.

Levinson, David, and Conrad deFiebre. "Farebox Recovery: The Economics Of Public

Transit | Minnpost". Minnpost, 2015, https://www.minnpost.com/minnesota-blog-

cabin/2013/06/farebox-recovery-economics-public-transit/.

United States. Cong. Senate. SB-1 Transportation funding. Sacramento: GPO, 2017. Print.