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CA Transit Operators Hopeful State Diesel Tax Will Create Stable Funding

Governor Arnold Schwarzenegger proposed eliminating the sales tax on
gasoline in his new budget, transit operators and advocates saw the
announcement as a move to subvert a California Supreme Court ruling that required the state to stop raiding transit funds.

than comply with the court's ruling, they argued, the Governor was
eliminating the voter-established rules that required the state to fund
transit operations with the sales tax on gasoline. Nevermind that
several of those ballot initiatives passed by more than two-thirds
margins and put explicit restrictions on how taxpayer money could or
couldn't be used for transportation projects.

Now many of those transit operators are supporting two bills (ABX8 6 and ABX8 9)
that would do as the Governor proposed by eliminating the sales tax on
gasoline, but would retain the sales tax on diesel. Rather than cry
foul, lobbyists for those operators worked with legislators to develop
the bills.

California Transit Association (CTA)
Communications Director Jeff Wagner said with the legislature and the
Governor thwarting the law and the will of the voters for years by
raiding the the State Transit Assistance fund (STA), which is fed in
part by the sales tax on gasoline (as well as the sales tax on diesel
and other sources), and with Supreme Court rulings in the CTA's favor
doing little to change the situation, his organization was taking steps
to secure some kind of steady state funding for operators.

fundamental position is in opposition to the elimination of the sales
tax [on gasoline], but that has long seemed a foregone conclusion,"
said Wagner. "Given that lay of the land, we've worked with the
legislature to get some level of funding for public transit. What this
package does give us is the ability for transit to get funding that it
isn't currently getting."

to Wagner, if the Governor signs the bills, which could happen
imminently, the state would put over $300 million each year
(potentially rising to over $400 million) into transit operations, more
than the average amount operators were receiving before the raids began
several years ago. The money would come from the sales tax on diesel,
which is expected to increase in future budget cycles. What's more, a
one-time allocation of $400 million would be released to operators this
year, which would mean tens of millions of dollars for each of the
largest Bay Area agencies.

"It makes great progress for establishing stable and
reliable funding for public transit that has been missing in recent
budget years as a result of the raids of the funds in question," said

As we've reported, local operators are thrilled
to get an immediate infusion of money, which will go a long way toward
plugging budget deficits. In San Francisco, Mayor Gavin Newsom hailed
the "good news from Sacramento" and MTA Chief Nat Ford said "the
funding would clearly help us provide more reliable transit service to
our customers."

Some advocates are concerned, however, that
the short-term gain will do nothing to secure long-term transit
funding, given the state's propensity to raid transit funds.
TransForm's Carli Paine raised a number of concerns about the new
legislation; foremost among them is what would guarantee that the
legislature and the Governor won't be back at the public transportation
trough next year when the next budget crisis arises.

concerned that we're losing the few legal protections that offered hope
that we would actually start seeing some of that money," said Paine.
"All we have left is the Governor's and legislators' word that some
money will go to transit, but they haven't been good on their word."

the new legislation removes the central funding stream from several
voter initiatives, legislators didn't believe the move was contrary to
the voters' will. According to Alicia Trost, State Senate Pro Tem
Darrell Steinberg's press secretary, the new bills are "in the spirit
of long-term funding" for transit operations. When asked what would
guarantee that lawmakers wouldn't raid the transit trust funds next
year, Trost said she would look into the answer, but didn't call back
by press time.

Paine was also troubled that an early provision in
the bill to give local jurisdictions the authority to raise fees for
transit had been removed. "In the current proposal, that ability for
regions to help themselves has been stripped away," said Paine, who
noted that Bay Area voters have repeatedly voted to tax themselves to
provide more money for transit.

To that end, Wagner said the CTA would continue to participate in the Local Taxpayer, Public Safety, and Transportation Protection Act of 2010,
a ballot initiative that would prevent the state from taking locally
approved tax measures for the general fund. According to proponents of
the initiative, since 1992, lawmakers have taken $11.2 billion in locally approved tax measures for the general fund, $5 billion of that coming in the last ten years from transit funds.

are still continuing our involvement with the 'Protect Local'
initiative," said Wagner. "We feel the initiative has further
protections to transit funds."

A Brief History of Transit Funding Initiatives

(Source: CTA)

Proposition 116, June 1990

Rail Transportation. Bond Act

Yes: 53.3%, No: 46.7%

Authorizes general obligation bond issue of $1,990,000.000 to provide
funds principally for passenger and commuter rail systems, with limited
funds available for public mass transit guideways, paratransit
vehicles, bicycle and ferry facilities, and railroad technology museum.

IMPORTANT TO NOTE: The measure designated the Public
Transportation Account as a trust fund, and specified that "the funds
in the account shall be available, when appropriated by the
Legislature, only for transportation planning and mass transportation

Proposition 2, November 1998

Transportation: Funding

Yes: 75.4 %, No: 24.6%

Requires loans of transportation related revenues to the General Fund
be repaid the same fiscal year, or within three fiscal years if the
Governor declares an emergency significantly impacting the General Fund
or General Fund revenues are less than the previous fiscal year's
adjusted revenues. Allows loans of certain transportation related
revenues to local entities conditioned upon repayment, with interest,
within four years. Designates local transportation funds as trust funds
and prohibits abolition of all such funds created by law. Restricts
allocations from local transportation funds to designated purposes
relating to local transportation.

IMPORTANT TO NOTE: This measure was a Constitutional
Amendment placed on the ballot by the Legislature. The provisions of
this measure couldn't be spelled out any more clearly, and yet every
single one of them has been repeatedly violated.

Proposition 42, March 2002

Congestion Improvement Act. Allocation of Existing Motor Vehicle Fuel
Sales and Use Tax Revenues for Transportation Purposes Only
Yes: 69.1%; No: 30.9%

SUMMARY: Requires,
effective 7/1/03, existing revenues from state sales and use taxes on
sale of motor vehicle fuel be used for transportation purposes as
provided by law until 6/30/08. Requires, effective 7/1/08, existing
revenues resulting from state sales and use taxes on sale of motor
vehicle fuel be used for public transportation; city and county street
and road repairs and improvements; and state highway improvements.

IMPORTANT TO NOTE: Another Legislative
Constitutional Amendment, 20 percent of the funds from which are
supposed to flow to transit through the Public Transportation Account.

Proposition 1A, November 2006

Transportation Funding Protection

Yes: 77%; No 23%

Protects transportation funding for traffic congestion relief projects,
safety improvements, and local streets and roads. Prohibits the state
sales tax on motor vehicle fuels from being used for any purpose other
than transportation improvements. Authorizes loans of these funds only
in the case of severe state fiscal hardship. Requires loans of revenues
from states sales tax on motor vehicle fuels to be fully repaid within
the three years. Restricts loans to no more than twice in any 10-year

IMPORTANT TO NOTE: Yet another Constitutional
Amendment placed on the ballot by the Legislature, Prop 1A specifically
restricted access to Prop 42 funds for transfer to the General Fund,
and specified that no such "loans" could take place unless all prior
"loans" had been repaid in full.

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