California lawmakers on April 6 approved a plan to boost transportation funding by $5 billion annually through a combination of motor fuel and vehicle registration increases. The bill, which narrowly passed along party lines, is projected to raise $52.4 billion over 10 years, which will be used to fund road and bridge maintenance and improvements, as well as transit and trail infrastructure.

The approval of Senate Bill 1 will:

  • Increase the state gas tax by 12 cents-per-gallon and the diesel tax by 20 cents-per-gallon, with an additional 4 percent increase in the diesel sales tax, beginning Nov. 1, 2017.
  • Eliminate the current Board of Equalization “Gas Tax Swap” formula for a variable-rate motor fuel tax based on annual changes to the Consumer Price Index beginning July 1, 2019.
  • Create a Transportation Improvement Fee based on the market value of the vehicle beginning Jan. 1, 2018.
  • Implement a Zero-Emission Vehicle Fee of $100 for electric vehicles beginning in 2020 for model year 2020 or later.
  • Require the California Department of Transportation (Caltrans) to generate up to $100 million in department efficiencies, overseen by the newly-created Transportation Inspector General.

Legislation to change taxes must be approved by a two-thirds majority in California. State Democrats recently secured two-thirds majority in both chambers of the legislature, but several voiced hesitation on giving their support. The hours leading up to passage involved vigorous negotiations, including allocating some of the new revenue for specific projects. Senate Bill 1 passed the California Senate shortly after 7pm PT with a vote of 27-11, with only one Republican voting in favor of the bill and one Democrat opposed to the plan. The California Assembly subsequently approved the bill 54-26 at 10:40 pm PT, with one Democrat voting against the bill and no Republicans supporting the bill.

In addition to Senate Bill 1, California lawmakers also approved Assembly Constitutional Amendment 5, a bill that will prohibit the legislature from borrowing revenue generated by all taxes and fees on motor vehicles for non-transportation purposes. A transportation fund “lockbox” was already in place to prevent revenue derived from gasoline and diesel excise taxes and vehicle registration fees from being utilized for non-transportation purposes. The bill will go before state voters in the November 2018 General Election for final approval.

Gov. Jerry Brown (D) strongly championed for this legislation since the plan was introduced on March 29. The governor appeared before both chambers in the legislature as well as the districts of state lawmakers who voiced hesitation about signing on to the bill. He is expected to sign Senate Bill 1 into law shortly.

Read a fiscal analysis for Senate Bill 1.

Read a fiscal analysis for Assembly Constitutional Amendment 5.