California voters two years ago emphatically endorsed a plan to speed highway and transportation projects when they supported at the ballot box a package of gas taxes and vehicles fees.
But the cororonavirus outbreak looks likely to jeopardize those plans.
Traffic volume on state highways has plunged dramatically in California since Gov. Gavin Newsom issued a stay-at-home order last month. As a result, Californians are buying much less gas and paying less tax. Suddenly the state’s ambitious program to improve those roads faces an uncertain future.
The anticipated plunge in tax revenue is roiling transportation projects around the country. Congress and the White House are being pushed hard by the state transportation officials’ Washington-based group to provide states with $49.95 billion in federal aid.
Lawmakers are starting to discuss a new economic aid package — a goal with an endgame still weeks away — but transportation officials are hoping that the funds they’re requesting will be included.
The nation’s plight is being echoed in California, where Newsom’s administration is revising his state budget proposal to account for suddenly plummeting tax revenue.
“This could cause some problems. There could be some delays if regions across the state don’t take advantage of quieter streets and lighter public transit schedules to work on improvement projects,” said Sen. Jim Beall, D-San Jose, who leads the Senate’s transportation committee.
One glimmer of hope is that the state’s transportation revenue program is structured with some stabilizers to prevent a freefall, Beall said.
Gasoline tax increases are tied to the rate of inflation, and motorists pay a transportation improvement fee of $27 to $188 fee per vehicle, depending on its market value.
It’s the probable fuel tax trend that’s a concern.
How far will tax revenue fall?
Traffic volume on state highways has dropped 20 percent to 55 percent since March 21, two days after Newsom issued his shelter in place order, through April 11, compared to the 22-day period just before the order, according to a new University of California, Davis Road Ecology Study.
Newsom’s order, as well as other local directives, “had a profound effect on daily travel in California,” the study said.
Combined with other fees state motorists pay, including a 47.3 cents a gallon gasoline tax and an 18.4 cents a gallon federal gasoline tax, California had the highest motor fuel taxes in the country, as of January 1, according to the American Petroleum Institute.
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In 2017-18, state gasoline tax revenue was $6.4 billion. In 2019-20 and 2020-21, it was estimated to be $7.2 billion and $7.5 billion, respectively. The tax is one of several sources of revenue for the transportation program.
The California State Transportation Agency expects updated figures next month, and is not commenting on what the data could show.
Preliminary projections show that nationwide, state transportation revenues are likely to drop 30 percent over the next 18 months, according to the American Association of State Highway and Transportation Officials.
That would mean a nationwide shortfall of $16.7 billion for the rest of the current fiscal year and another $33.3 billion in fiscal 2021.
In California, motor fuel taxes help pay for the plan enacted in Senate Bill 1 in 2017, a program to raise $5.4 billion annually on the state’s highway, bridge and transit systems, as well as on local streets and roads and multi-modal congestion relief corridors. In 2018, voters affirmed the plan when they rejected an initiative that would have repealed tax and fee increases that pay for the transportation work.
A drop in SB1 gas tax revenue could impact projects in San Luis Obispo County, such as effort to improve Highway 46 East. Plans to complete the last stretch of widening on the Antelope Grade heading toward Bakersfield and eventually build an interchange at the dangerous Cholame “Y” nearby are both dependent on SB1 money.
The irony of the slowdown is that it helps create unusually favorable circumstances for road improvement and repair. Less traffic means less disruption, and workers need the work.
And, noted Beall, “delaying projects makes everything cost more.”
Because of the lighter traffic, lane closure hours have been expanded in Sacramento County, giving contractors more time to work, said Matt Robinson, Sacramento County public information officer.
And, he said, because schools are using remote learning, it helps projects adjacent to schools, where contractors are not allowed to work until school is out for the summer. In one instance, the Thomas Edison Safe Route to School project, the contractor is allowed to move forward with construction, instead of waiting until June.
Should states get help for highways?
But for projects to continue to proceed, California needs help, and its biggest hope could be Washington, D.C., where
congressional lawmakers and President Donald Trump are considering help for the nation’s infrastructure.
Help for infrastructure hasn’t been a hot topic. A key reason is that “there’s a lag in seeing the revenue collected at the state level, and you’re just now starting to see that decrease in revenue show up,” said Jim Tymon, executive director of the American Association of State and Highway Transportation Officials.
His group is pushing the $49.95 billion aid plan. The White House and congressional leaders are expected to begin discussing a new economic aid package soon, though there is reluctance from Senate Majority Leader Mitch McConnell and it’s unclear when such a plan would be adopted.
“We all have governors regardless of party who would love to have free money. And that’s why I said yesterday we’re going to push the pause button here, because I think this whole business of additional assistance for state and local governments need to be thoroughly evaluated,” the Kentucky Republican told radio host Hugh Hewitt Wednesday.
“Leader McConnell is right,” added Rep. Kevin Brady, R-Texas, in a Fox News interview.
“We really need to not turn to how many more trillions of dollars can we spend, but how can we while applying max pressure on the virus and helping these businesses and states begin to reopen – because I think that is key to getting people back to work,” said Brady, top Republican on the tax-writing House Ways & Means Committee.