Protect Public Transportation Funding: 2008-09 State Budget

UPDATE: Budget Decimates Public Transportation Funding...Again!

After a record impasse, California's 2008-09 State Budget was passed 85 days late -- on September 23. Unfortunately, the $17 billion deficit was addressed in large part through cuts to key programs, including redirecting $1.7 billion in dedicated public transportation funds to the General Fund.

The problem is, as gas prices continue to rise, even more Californians are turning to mass transit. Transit ridership is rising across the state, and some systems are experiencing overcrowding. Yet, because of these and previous funding raids we're simultaneously seeing fare hikes and service cuts. Download a fact sheet that outlines the context of the budget cuts.

This year's raid on public transit funding comes after a nearly $1.3 billion cut in last year's state budget.

What is the Spillover?

Across the state, public transit operators have a hard time funding day-to-day operations, including fuel costs. As gas prices rise, transit operations cost more to provide. This increases the risk of service cuts and fare hikes. Funding cuts threaten important access to health care, jobs, and education. Most state transit funds and all of the money from the transportation infrastructure bonds can only be used for capital expenses. There is one hope, funds known as the "gas tax spillover," which are intended by law to fund public transit when gas prices are higher.

The Spillover is a source of revenue for the State Public Transportation Account (PTA), where 25% of the funds go to transit capital improvements and 75% go to discretionary regional transit funding that can be used for transit operations. The PTA is the sole source of ongoing state transit funding, and represents the only way the state addresses its critical transit operating needs.

In general, the Spillover isn't triggered every year, but only when gasoline and diesel fuel prices grow at a faster rate than the rest of the economy. It is precisely these times that Spillover dollars are most needed for transit services and capital projects.

Why do we need to save public transit funding and protect the Spillover?

People seek more transit options when the price of operating their cars increases and transit agencies need to pay the higher costs of their own fuel budgets. Suspension of Spillover dollars has become a habit in California, contributing to our deteriorating public transportation systems that cannot meet the needs of the communities that depend on them. We can't have reliable public transit without reliable funding for public transit operators. Furthermore, 41% of the state's greenhouse gas emissions come from transportation, mostly from private cars and trucks, so if Californians are serious about curbing climate change, funding public transit operations is an imperative.

Since FY2000-01, suspension of Spillover dollars and other shifts, loans, and transfers of transit funding have denied more than $4.6 billion in revenue to the PTA. The 2008-09 State Budget alone cost the PTA account $1.667 billion.
 

These revenues rightfully belong to public transportation, and are much needed for transit operations given the number of service cuts and fare increases across the state. This funding is needed to protect commuters, working families, communities of color, and youth and seniors from further reductions in service.

How big is the Spillover?

The amount of Spillover changes from year to year, depending on increases in fuel prices. The state projects that there is $1.667 billion in 2008-2009 State Spillover funds. The adopted State Budget redirected all of these funds away from public transportation.

Where did the Spillover come from?

The Spillover formula dates back to 1971 when the gasoline sales tax was first established. It occurs when collections from the sales tax on gasoline increase at a faster rate than all other taxable items. The transfer is based on a theoretical calculation required by law to be made every year, which compares the revenue estimated to be generated by a state sales tax rate of 5% on all goods except gasoline to the revenue generated by a sales tax rate of 4.75% on all goods plus gasoline. If the amount estimated at 4.75% is greater than the amount estimated at 5%, then the difference (the Spillover) is supposed to be transferred to the Public Transportation Account. This mechanism is defined in Revenue & Taxation Code section 7102(a)(1).

Doesn't the advent of Proposition 42 eliminate the need for transferring the Spillover revenue to transit?

No. The spillover revenue has historically been authorized by the legislature to promote statewide public transit policies and programs, and it is intended to function separate from Proposition 42's funding stream (the state sales tax on gasoline).

Proposition 42 funds a number of different transportation programs, and transit is only one such mode. Proposition 1A, which voters passed in November 2006, protects only Proposition 42 funds; Spillover funds are still vulnerable to being redirected away from transit.