What does Proposition 42 do?

Proposition 42 would permanently dedicate revenues from the state’s share of the sales tax on gasoline to transportation projects. This sales tax on gasoline is already collected at the pump and generates roughly $1.3 billion a year. This is not a new tax or new revenues -- up until 2000 revenues from the sales tax on gas were captured by the state’s general fund. The dedication of the state’s share of the sales tax revenues from gasoline would thus reduce the amount of revenues flowing into the state’s general fund by roughly $1.3 billion a year.

How did it get on the state ballot?

Proposition 42 was placed on the ballot by the legislature. It is a constitutional amendment (ACA4 of 2001) carried by Assemblymember John Dutra (D-Fremont).

Where would the money come from?

Whenever you buy a gallon of gas, you pay for (a) the base cost of the gallon of gas, (b) an 18 cent state gas tax, (c) an 18.3 cent federal gas tax, and (d) the sales tax levied on a+b+c (while overall sales tax rates range from 7.25% to 8.5% depending on where you live, the state's share of the sales tax on gasoline is equivalent to 6%). The price per gallon advertised at the pump already includes all these costs.

How much money would it generate?

Current estimates are around a $1.3 billion a year, that will likely climb to roughly $1.5 billion a year by 2008. Of course, there are many variables on the size of future revenues, including changes in total miles driven (likely to increase), fuel efficiency of vehicles (likely to increase thus decrease the revenues generated), the cost of a gallon of gas (likely to increase) and the amount of the state’s share of the sales tax. It is equivalent – in terms of revenues generated for transportation – to a 9 to 10 cent gas tax increase statewide. The additional 1.3 billion dollars would be added to total transportation expenditures by all levels of government in California of around $16 billion a year.

Where would the money be spent?

Up until 2008, the state’s share of the sales tax on gasoline will largely be spent on 141 transportation projects contained in the state’s so-called Traffic Congestion Relief Plan (TCRP). After 2008, the money will be divided as follows: (a) 20% for city street repairs; (b) 20% for county road repairs; (c) 20% for mass transit and intercity rail; and (d) 40% for new highway and transit capital investments (through a five-year state funding program known as the ‘STIP’). In dollar figures, the STIP would get a boost of approximately $560 million a year, and each of the other programs would receive a $280 million increase. The legislature could change the formula by which the money is allocated, or redirect the sales tax on gas revenues back into the general fund in a budget "emergency," but only with a two-thirds vote.

Who supports and who opposes Proposition 42?

Support is strongest from road construction interests, local governments, rail advocates and public transit agencies. For more information visit http://www.yesprop42.com. Leading the campaign in support of the Proposition is the California Alliance for Jobs, the League of California Cities, the California State Association of Counties (CSAC), the AAA, and the California Transit Association. Opposition is strongest from the California Teachers Association, the SEIU, several other unions and other beneficiaries of programs funded from the state’s general fund. Additional policy-oriented organizations like the Latino Issues Forum and the California Budget Project are also opposed.

What is STPP’s position?

STPP doesn’t have a formal position on Proposition 42. If Proposition 42 passes it will direct substantial revenues towards mass transit and road repair needs, two areas that have been greatly underfunded in California over the last several decades. It will provide valuable operating funds for mass transit systems throughout the state -- something that transit agencies desperately need in order to provide additional bus and train frequencies and night and weekend service. It is also a somewhat direct connection to the usage of the transportation system, ie the more you use the transportation system the more you pay.

Unfortunately, Proposition 42 doesn’t change the rules with which the money is spent, something that’s critical if California is to ever get a handle on its transportation crisis. STPP coordinated a joint letter to the legislature in 2001 signed by over 60 organizations asking for a more innovative approach to transportation funding in Proposition 42 (then ACA4). Those principles – such as conditioning transportation funds on the development of infill housing and more compact land uses that can reduce regional traffic congestion -- were not incorporated into the bill or the ensuing proposition. (For the full text of that letter, visit http://www.transact.org/Ca/legletter0201.htm).

What would happen if Proposition 42 doesn’t pass?

If Proposition 42 doesn’t pass on March 5th (passage requires a simple majority of the state’s voters), the tax will still be collected but the state’s share of the sales tax on gasoline would revert back to the general fund after 2008. In the meantime, revenues from the sales tax on gas would still be dedicated to the 141 projects in the state’s Traffic Congestion Relief Program (TCRP) as a result of separate legislation (AB2928 of 2000).

For more information regarding Proposition 42 or any other state transportation policies or programs contact STPP at 415-956-7835, 415-956-7795 or visit our California web site at http://www.transact.org/ca/.