Democrats pass plan to rescue some state aid to transit

March 4, 2010

Updated at 3:42 PM. March 4

Democratic lawmakers on Thursday passed a new version of a controversial gas tax swap that would change the way public transit is funded in California while freeing up hundreds of millions of dollars to pay for other state priorities, from education and health care to social services and state prisons.

Legislative leaders sent the package to the governor on a majority vote, contending that because the changes would not increase overall tax collections, they do not represent a tax hike and thus do not require the two-thirds super-majority needed to approve tax increases in the Legislature. Republicans disagreed, arguing that individual tax hikes embedded in the plan should still have required two-thirds support for passage.

The legislation would repeal the sales tax on gas while increasing the per-gallon gasoline excise tax and the tax on diesel fuel in ways that would be “revenue neutral.” In other words, the tax increases would raise the same amount as would be cut by the repeal of the sales tax.

Then why bother? The biggest reason is that the courts have ruled that the Legislature and Gov. Arnold Schwarzenegger violated state law by shifting hundreds of millions of dollars raised by the sales tax on gas from transit operations to other programs. Sacramento’s creative solution is to simply eliminate that tax, and with it the legal requirement that the money be spent on transit. They then replace the sales tax with a higher excise tax — this one charged per gallon of gasoline — a tax to which public transit has no legal entitlement. Like magic, the revenue raised can now be spent in ways that help reduce the state’s general fund deficit while reducing the need to cut health, education and other programs.

But while the Democrats are giving transit far less than local operators and the courts say they should have received, the plan does create a newly dedicated pot of money for transit that will start at about $350 million a year in 2011. And for this fiscal year and the year that begins July 1, transit would get an immediate $400 million boost. The governor, in contrast, has proposed zeroing transit operations out of the state budget permanently. He has not said whether he will sign this package.

Not all transit operators are happy with this plan. They’re upset that the swap will wipe out their court victory before it can ever be implemented. But considering that they could have been left with nothing, at least some of them will view the latest wrinkle as a victory in itself. They wouldn’t be getting as much money as they think they are entitled to, but they would be getting more than they have been receiving lately and a lot more than they would have under the governor’s original proposal.

“They’re making the best of a bad situation,” said Seamus Murphy, government affairs manager for the San Mateo County Transportation District. “They’ve worked hard to try to make sure we have some sort of baseline funding moving forward.”

–Daniel Weintraub

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One Response to Democrats pass plan to rescue some state aid to transit

  1. jskdn

    March 5, 2010 at 9:07 am

    What’s the likelihood of legal challenges to the “revenue neutrality” tactic as a way to avoid the 2/3’s requirement? Are there established precedents?

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