The raid on the gas tax funds, which would take away more than $2 billion from local governments over a two-year period, is among the recommendations included in the Joint Budget Conference Committee’s proposed budget that seeks to erase the state’s $25 billion deficit.
The Committee recommends taking the local share of the Highway User Tax Account (HUTA), suspending payment of Prop. 42 transportation funds, and using the revenues to repay debt service on bonds and balance the state’s General Fund. The Committee is chaired by Assemblymember Noreen Evans (D-Santa Rosa). Calls to Evans staff seeking comment were not returned.
A coalition of counties, cities, unions and transportation industry businesses are lobbying hard against the gas tax takeaway, which they say would drastically reduce road maintenance and services, pose a threat to public safety and contribute to the loss of thousands of jobs and revenues. Jim Earp, executive director the California Alliance for Jobs, said the gas tax diversion won’t solve the state’s budget woes.
“The bottom line is the taking of transportation funds, after the voters have repeatedly voted to support improving our transportation infrastructure, is another ploy to patch a hole. It is not going to solve any budget problems,” said Earp, whose organization represents 1,700 heavy construction companies and 50,000 union workers throughout the state. “And in the meantime, it is going to put many people in the transportation industry out of work.”
A legal opinion released this week by the League of California Cities concludes that ballot measures in 1974 and 1998 restrict the state’s ability to use gas taxes for debt service and for the general fund and make the raid on gas taxes unconstitutional.
“It is pretty obvious that it is illegal to steal local gas tax funds when the voters have twice restricted such funds,” said Judith Mitchell, president of the League of California Cities, an attorney and the mayor of Rolling Hills Estates. “After the voters’ strong rejection of the May 19 ballot measures, I hope state leaders will avoid budget gimmicks like this that are blatantly unconstitutional and raise serious questions about the credibility of the state budget.”
The loss of the local gas tax funds will force some cities to cut all or part of their street maintenance programs, which including repairing pot holes, street sweeping, snow plowing, resurfacing streets, new road projects and traffic lights.
Chris McKenzie, executive director of the League of California Cities, said “What we’re going to see is a drastic reduction in the day-to-day street maintenance: pot holing, surfacing, street sweeping, resealing. Street sweeping is done to prevent pollutants from washing into nearby creeks and streams and the ocean … in many cases cities are sweeping those streets under director order from the Regional Water Quality Control Boards. Other cities are telling us they are going to have to cut down on street light systems. Limit repairs of traffic signals, which are extremely important… or convert them to flashing red. There is a whole range of street repairs and maintenance that will not be accomplished.”
But the effects will be felt well beyond the budgets of cities and counties. “People will see the effects of this ripple out almost immediately,” said Paul McIntosh, executive director of the California State Association of Counties (CSAC). “They will feel it in their pocketbooks. When a city or county is using these tax funds to purchase goods and services, that money is recycled in the local economy. The state wants to rip that off and use it for debt service, which takes that money and sends it to somebody outside the state.”
A survey by CSAC estimates that nearly 4,000 jobs will be lost in Public Works departments statewide if the gas taxes are diverted, with the effects being felt not only in the public sector but also in private sector companies that rely on public projects for their livelihood.
The Coalition Against Fiscally Reckless Diversion of Gas Tax Funds, a group of cities, counties and private sector organizations and businesses, estimates that every $1 billion invested in infrastructure improvements generates $5 billion in economic activity and 18,000 jobs. Coalition officials also point out that contractors are now bidding jobs at 20 to 40 percent below engineers’ estimates due to the dire state of the economy, which provides the state with a better value on infrastructure investment.
Compounding the problem is the fact that HUTA provides the local match for many federal grants, which will mean the potential loss of millions of dollars in federal funds, according to the Sacramento Area Council of Governments.
McIntosh said CSAC is proposing a temporary 5-cent gas tax increase as a way of stopping at least part of the gas tax takeaway. Others support the tax increase, but don’t believe it will find acceptance among Republicans who have vowed to vote against any new taxes.
For some cities and counties, the HUTA funds make up their entire road and operations budget. Others rely on local funding, such as sales tax measures, for a larger portion of their budgets.
If what some are calling a “raid” on local gas taxes is approved, administrators and department heads will be forced to make drastic cuts in their operations. The city of Sacramento would lose $7.8 million of its $42 million streets and roads budget and the results would be drastic, said Jerry Way, director of the city’s Department of Transportation. “It is a raid, because there is no intention right now that it is going to be repaid,” he said. “It’s going to change the entire way we do business
It’s going to be very had hitting.”
Way said the city uses gas tax revenues to fund traffic signals, traffic engineering, road and street maintenance and traffic signs and markings.
“That is a huge issue,” he said. “This would affect our ability to replace traffic lights and stop signs … it’s enough to create anarchy on the streets.”
Could reduced service levels pose a threat to public safety issue? “Absolutely,” said Way.
Funding from gas taxes pays for pedestrian safety programs and crosswalks, and allows the city to comply with ADA (Americans with Disabilities Act) requirements.
“This would be significantly hard-hitting, just on the face of it,” said Way.
In the foothills east of Sacramento, Placer County anticipates taking an even harder hit from the gas tax raid. Public Works Director Ken Grehm said the combined gas tax diversions planned by the state would cut his streets and road budget by roughly 43 percent, it could eventually force the reduction of half of the 100 workers in those departments.
And while that won’t happen right away, the prospect is difficult to imagine, said Grehm. “Exactly how bad cutting back by half is, that is going to take a while to determine. It’s almost unfathomable,” he said. “We have some alternative funding that would bridge the time when we would have to contract down to half of what we are now.”
One of the first impacts in Placer County would be felt in snow plowing. “We would still do it, but it would have to be slashed back tremendously … snow would accumulate a lot longer.”
The effects of a $2 billion gas tax takeway will be felt not just on roads and street maintenance, but in other areas of cities’ and counties’ budgets as General Funds are tapped to make up the shortfalls in HUTA funds. “Some cities are telling us they are going to take money from the general fund to help their other operations,” said the League of California Cities’ McKenzie. “On the average, 60-80 percent of General Funds are used for public safety, so they may have to reduce police and fire services.”
A vote this Wednesday, June 24 on the Budget Conference Committee’s budget was delayed, but Senate Pro Tem Leader Darrel Steinberg vowed to work “every day” to be get a budget passed before July 1, when the state will be forced to start issuing IOUs.
Barry Dugan can be reached at