(1)Article XIX of the California Constitution restricts the expenditure of revenues from taxes imposed by the state on fuels used in motor vehicles upon public streets and highways to street and highway and certain mass transit purposes, and restricts the expenditure of revenues from fees and taxes imposed by the state upon vehicles or their use or operation to state administration and enforcement of laws regulating the use, operation, or registration of vehicles used upon the public streets and highways, as well as to street and highway and certain mass transit purposes. These restrictions do not apply to revenues from taxes or fees imposed under the Sales and Use Tax Law or the Vehicle License Fee Law.

Article XIX prohibits the Legislature from borrowing revenues from taxes imposed by the state on fuels used in motor vehicles, and from using those revenues other than as specifically permitted by Article XIX. Article XIX provides that up to 25% of fuel tax revenues allocated to the state may be pledged or used for the payment of principal and interest on voter-approved transportation bonds issued for street and highway purposes on and after November 2, 2010, upon voter approval and appropriation by the Legislature. Article XIX provides that up to 25% of fuel tax revenues allocated to cities and counties may be pledged or used for the payment of principal and interest on voter-approved transportation bonds issued for street and highway purposes. However, in counties where voters have approved the use of fuel tax revenues for certain mass transit purposes, Article XIX provides that the Legislature may authorize any fuel tax revenues allocated to mass transit purposes to be pledged or used for payment of principal and interest on voter-approved bonds issued for those mass transit purposes.

This measure would prohibit the Legislature from borrowing revenues from fees and taxes imposed by the state on vehicles or their use or operation, and from using those revenues other than as specifically permitted by Article XIX. The measure would also provide that none of those revenues may be pledged or used for the payment of principal and interest on bonds or other indebtedness. The measure would delete the provision that provides for use of any fuel tax revenues allocated to mass transit purposes to be pledged or used for payment of principal and interest on voter-approved bonds issued for those mass transit purposes, and would instead subject those expenditures to the existing 25% limitation applicable to the use of fuel tax revenues for street and highway bond purposes.

(2)Article XI of the California Constitution requires, of requires the revenues derived under the Vehicle License Fee Law, the revenues Law from a rate that does not exceed 0.65% of the market value of a vehicle to be allocated to cities and counties, and does not restrict expenditure of those revenues for a particular purpose.

This measure would require revenues derived from that portion of the vehicle license fee rate that exceeds 0.65% of the market value of a vehicle to be used solely for street and highway purposes. The measure purposes and would prohibit the Legislature from borrowing those revenues, and from using those revenues other than as specifically permitted. This revenues. The measure would also provide that none of prohibit those revenues may be from being pledged or used for the payment of principal and interest on bonds or other indebtedness.

(3)This measure would make other conforming changes.

(1)Article XIX of the California Constitution restricts the expenditure of revenues from taxes imposed by the state on fuels used in motor vehicles upon public streets and highways to street and highway and certain mass transit purposes, and restricts the expenditure of revenues from fees and taxes imposed by the state upon vehicles or their use or operation to state administration and enforcement of laws regulating the use, operation, or registration of vehicles used upon the public streets and highways, as well as to street and highway and certain mass transit purposes. These restrictions do not apply to revenues from taxes or fees imposed under the Sales and Use Tax Law or the Vehicle License Fee Law.

Article XIX prohibits the Legislature from borrowing revenues from taxes imposed by the state on fuels used in motor vehicles, and from using those revenues other than as specifically permitted by Article XIX. Article XIX provides that up to 25% of fuel tax revenues allocated to the state may be pledged or used for the payment of principal and interest on voter-approved transportation bonds issued for street and highway purposes on and after November 2, 2010, upon voter approval and appropriation by the Legislature. Article XIX provides that up to 25% of fuel tax revenues allocated to cities and counties may be pledged or used for the payment of principal and interest on voter-approved transportation bonds issued for street and highway purposes. However, in counties where voters have approved the use of fuel tax revenues for certain mass transit purposes, Article XIX provides that the Legislature may authorize any fuel tax revenues allocated to mass transit purposes to be pledged or used for payment of principal and interest on voter-approved bonds issued for those mass transit purposes.

This measure would prohibit the Legislature from borrowing revenues from fees and taxes imposed by the state on vehicles or their use or operation, and from using those revenues other than as specifically permitted by Article XIX. The measure would also provide that none of those revenues may be pledged or used for the payment of principal and interest on bonds or other indebtedness. The measure would delete the provision that provides for use of any fuel tax revenues allocated to mass transit purposes to be pledged or used for payment of principal and interest on voter-approved bonds issued for those mass transit purposes, and would instead subject those expenditures to the existing 25% limitation applicable to use of fuel tax revenues for street and highway bond purposes.

(2)Article XI of the California Constitution requires, of the revenues derived under the Vehicle License Fee Law, the revenues from a rate that does not exceed 0.65% of the market value of a vehicle to be allocated to cities and counties, and does not restrict expenditure of those revenues for a particular purpose.

This measure would require revenues derived from that portion of the vehicle license fee rate that exceeds 0.65% of the market value of a vehicle to be used for street and highway purposes. The measure would prohibit the Legislature from borrowing those revenues, and from using those revenues other than as specifically permitted. This measure would also provide that none of those revenues may be pledged or used for the payment of principal and interest on bonds or other indebtedness.

(3)This measure would make other conforming changes.

WHEREAS, Transportation infrastructure is vital to a growing and robust California economy; and

WHEREAS, In order to continue growing and remain a national economic leader, California must prioritize transportation funding; and

WHEREAS, California has 175,499 miles of public roads; and

WHEREAS, California roadways have $59 billion in accumulated deferred maintenance, and 87 percent of county roads have an average pavement rating of at risk or poor; and

WHEREAS, The average California driver pays $832 annually for the increased cost of vehicle maintenance, tire wear, and increased gas costs because California streets and roads are in such disrepair; and

WHEREAS, In 2002, the voters passed Proposition 42, with 69 percent of the vote, which purported to guarantee transportation taxes and fees would only be used for transportation purposes; and

WHEREAS, During the fiscal crisis beginning in 2009, taxes and fees being paid by Californias drivers were diverted to the state General Fund and not used to repair or maintain California streets and roads; and

WHEREAS, The state fiscal crisis has abated but the diversion of transportation taxes and fees continues; and

WHEREAS, Unmet needs caused by the diversion of certain transportation taxes and fees have created an environment of crumbling infrastructure and increased costs to repair the states street and highway system; and

WHEREAS, To keep the Proposition 42 promise to the voters that transportation taxes and fees shall only be used for transportation purposes and not diverted to the General Fund to pay the cost of general obligation bonds, and to ensure that any future transportation fees or taxes are used only for transportation purposes, the voters should be given an opportunity to close the Proposition 42 loophole; now, therefore, be it

Resolved by the Senate, the Assembly concurring, That the Legislature of the State of California at its 201516 Regular Session commencing on the first day of December 2014, two-thirds of the membership of each house concurring, hereby proposes to the people of the State of California that the Constitution of the State be amended as follows:

The Legislature shall not borrow revenues subject to Section 2, 3, or 11, or 12 and shall not use these revenues for purposes, or in ways, other than those specifically permitted by this article.

Revenues subject to Section 2 may not be expended for the purposes specified in subdivision (b) of Section 2, except for research and planning, until that use is approved by a majority of the votes cast on the proposition authorizing that use of those revenues in an election held throughout the county or counties, or a specified area of a county or counties, within which the revenues are to be expended.

(a)Up to 25 percent of the revenues subject to Section 2 that are allocated to the State may be pledged or used by the State for the payment of principal and interest on voter-approved bonds issued by the State on or after November 2, 2010, for the purposes specified in Section 2, upon approval by the voters of this use of the revenues and appropriation of the revenues by the Legislature.

(b)Up to 25 percent of the revenues subject to Section 2 that are allocated to any city or county may be pledged or used by that city or county for the payment of principal and interest on voter-approved bonds issued by that city or county for the purposes specified in Section 2, upon approval by the voters of this use of the revenues.

(c)Revenues subject to Section 2, 3, or 11 11, or 12 shall not be pledged or used for the payment of principal and interest on bonds or other indebtedness, except as specifically provided in this section.

This article shall not affect or apply to taxes imposed pursuant to the Sales and Use Tax Law, or the Vehicle License Fee Law, and all amendments and additions now or hereafter made to those statutes, except as provided in Section 11.

From the revenues derived from taxes imposed pursuant to the Vehicle License Fee Law, and all amendments and additions now or hereafter made to that statute, other than fees on trailer coaches and mobilehomes, over and above the costs of collection and any refunds authorized by law, those revenues derived from that portion of the vehicle license fee rate that exceeds 0.65 percent of the market value of the vehicle shall be used solely for the purposes specified in subdivision (a) of Section 2.

Revenues from taxes imposed by the State on motor vehicle fuels for use in propelling water-borne vessels, over and above the costs of collection and any refunds authorized by law, shall be deposited into the Harbors and Watercraft Revolving Fund (Section 85 of the Harbors and Navigation Code) or its successor, and shall be used solely for the following purposes:

WHEREAS, Transportation infrastructure is vital to a growing and robust California economy; and

WHEREAS, In order to continue growing and remain a national economic leader, California must prioritize transportation funding; and

WHEREAS, California has 175,499 miles of public roads; and

WHEREAS, California roadways have $59 billion in accumulated deferred maintenance, and 87 percent of county roads have an average pavement rating of at risk or poor; and

WHEREAS, The average California driver pays $832 annually for the increased cost of vehicle maintenance, tire wear, and increased gas costs because California streets and roads are in such disrepair; and

WHEREAS, In 2002, the voters passed Proposition 42, with 69 percent of the vote, which purported to guarantee transportation taxes and fees would only be used for transportation purposes; and

WHEREAS, During the fiscal crisis beginning in 2009, taxes and fees being paid by Californias drivers were diverted to the state General Fund and not used to repair or maintain California streets and roads; and

WHEREAS, The state fiscal crisis has abated but the diversion of transportation taxes and fees continues; and

WHEREAS, Unmet needs caused by the diversion of certain transportation taxes and fees have created an environment of crumbling infrastructure and increased costs to repair the states street and highway system; and

WHEREAS, To keep the Proposition 42 promise to the voters that transportation taxes and fees shall only be used for transportation purposes and not diverted to the General Fund to pay the cost of general obligation bonds, and to ensure that any future transportation fees or taxes are used only for transportation purposes, the voters should be given an opportunity to close the Proposition 42 loophole; now, therefore, be it

Resolved by the Senate, the Assembly concurring, That the Legislature of the State of California at its 201516 Regular Session commencing on the first day of December 2014, two-thirds of the membership of each house concurring, hereby proposes to the people of the State of California that the Constitution of the State be amended as follows:

The Legislature shall not borrow revenue from the Highway Users Tax Account, or its successor, revenues subject to Section 2, 3, or 11, and shall not use these revenues for purposes, or in ways, other than those specifically permitted by this article.

Revenues allocated pursuant subject to Section 4 2 may not be expended for the purposes specified in subdivision (b) of Section 2, except for research and planning, until such that use is approved by a majority of the votes cast on the proposition authorizing such that use of such those revenues in an election held throughout the county or counties, or a specified area of a county or counties, within which the revenues are to be expended. The Legislature may authorize the revenues approved for allocation or expenditure under this section to be pledged or used for the payment of principal and interest on voter-approved bonds issued for the purposes specified in subdivision (b) of Section 2.

(a)Up to 25 percent of the revenues subject to Section 2 that are allocated to the State pursuant to Section 4 for the purposes specified in subdivision (a) of Section 2 of this article may be pledged or used by the State, upon approval by the voters and appropriation by the Legislature, for the payment of principal and interest on voter-approved bonds issued by the State on or after November 2, 2010, for such the purposes issued by the State on and after November 2, 2010. specified in Section 2, upon approval by the voters of this use of the revenues and appropriation of the revenues by the Legislature.

(b)Up to 25 percent of the revenues subject to Section 2 that are allocated to any city or county pursuant to Section 4 for the purposes specified in subdivision (a) of Section 2 of this article may be pledged or used only by any that city or county for the payment of principal and interest on voter-approved bonds issued by that city or county for such the purposes specified in Section 2, upon approval by the voters of this use of the revenues.

This article shall not affect or apply to fees or taxes imposed pursuant to the Sales and Use Tax Law Law, or the Vehicle License Fee Law, and all amendments and additions now or hereafter made to such those statutes, except as provided in Section 11.

From the revenues derived from taxes imposed pursuant to the Vehicle License Fee Law, and all amendments and additions now or hereafter made to that statute, other than fees on trailer coaches and mobilehomes, over and above the costs of collection and any refunds authorized by law, those revenues derived from that portion of the vehicle license fee rate that exceeds 0.65 percent of the market value of the vehicle shall be used solely for the purposes specified in subdivision (a) of Section 2.

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2015 - 2016 Regular

Bill No: SCA 7 Hearing Date: 1/12/2016

SUBJECT: Motor vehicle fees and taxes: restriction on expenditures

DIGEST: This constitutional amendment (SCA) proposes to amend the California Constitution to:

1. Prohibit the Legislature from borrowing revenues from fees and taxes imposed on vehicles or their use or operation, and from using those revenues other than as specifically permitted in the Constitution, with limited exceptions.
2. Prohibit revenues derived from motor vehicle taxes, motor vehicle fees and taxes, and vehicle license fees (VLFs) from paying the principal and interest on bonds or other indebtedness, except as explicitly provided.
3. Require that revenues derived from the portion of the VLF that exceeds the current rate of 0.65% be used solely for street and highway purposes.

ANALYSIS:

Existing law:

The California Constitution:

1. Restricts the use of fuel excise tax revenues (from vehicles used on public streets and highways) and vehicle registration fee revenues to transportation purposes.
2. Restricts the Legislature from borrowing revenues from the Highway Users Tax Account.
3. Restricts fuel excise tax revenues to development and construction of roads and highways, unless a majority of voters in an election throughout a county or counties approves the use of the revenues for fixed-guideway mass transit.
4. Allows the Legislature to pledge fuel excise tax revenues for payment of bonds to fund voter-approved fixed-guideway mass transit projects.
5. Allows the Legislature to use up to 25% of the state’s share of fuel excise tax revenues for payment of state-issued, voter-approved bonds for transportation purposes issued after November 2010.
6. Allows a city or county to use up to 25% of its share of fuel excise tax revenues for payment of locally issued, voter-approved bonds for transportation purposes.
7. Specifies that the restrictions on fuel excise tax and vehicle registration fee revenues do not apply to revenues derived from sales taxes or VLFs.

This SCA:

1. Restricts the Legislature from borrowing revenues from any of the following taxes:
2. Fuel excise taxes (from both on and off public roads and highways)
3. Vehicle fees and taxes (such as vehicle registration fees and weight fees)
4. VLFs above the existing rate of 0.65% of the market value of the vehicle
5. Eliminates the authority of the Legislature or local governments to pledge fuel excise tax revenues for payment of bonds to fund road construction and repair as well as voter-approved fixed-guideway mass transit projects.
6. Restricts the use of revenues from any fuel excise tax, vehicle fee or tax, or VLF above the existing rate for the payment of bond indebtedness, except as provided in existing law.
7. Dedicates any revenues from increases in the VLF above the existing rate to transportation purposes.

COMMENTS:

1. Purpose. According to the author, since 2010, the Legislature has diverted over $5 billion from the State Highway Account to the General Fund to pay debt service on General Obligation Bonds. Additionally, since 2012, $100 million per year in gas taxes has been deposited into the General Fund rather than being used for transportation purposes. This SCA asks the voters to protect transportation taxes by requiring that they be used only for transportation purposes and preventing those revenues from paying for transportation bonds.
2. Background of transportation maintenance backlog. California faces an enormous road and highway maintenance backlog. The Governor, in his 2015 inaugural address, noted that the state faces a $59 billion shortfall over the next 10 years to adequately maintain the existing state highway system. Local governments have estimated the funding shortfall for maintaining existing local streets, highways and bridges is $78 billion over the same time period. Efforts to develop solutions have been ongoing, including the establishment of the current First Extraordinary session.
3. Current restrictions. Most transportation revenues, including gasoline and diesel excise taxes and vehicle registration fees, are constitutionally protected from being borrowed or used for purposes other than transportation. This protection does not apply to VLFs and fuel excise taxes for usage outside of public roads.
4. General Fund impact: weight fees. Weight fees are assessed on commercial vehicles based on weight. Those revenues are protected by the Constitution and are currently used to pay the principal and interest on transportation bonds, resulting in a savings to the General Fund of $1 billion annually. The author disagrees with that practice, believing that those transportation bonds should be paid out of the General Fund, with the weight fees funding other new and ongoing transportation projects. This SCA prohibits the practice of paying for the transportation bonds with weight fee revenue, resulting in the loss of the General Fund savings.
5. Additional restrictions: vehicle license fee. This SCA proposes a comprehensive set of protections against borrowing taxes and fees raised from fuel excise taxes, vehicle fees and taxes, and VLFs above the existing rate of 0.65%. It also proposes to dedicate any revenues from increases in the VLF above the existing rate, and any fuel excise taxes on fuel not used on public roads and highways, to transportation purposes. The VLF is a property tax and therefore not subject to the same constitutional restrictions as taxes on motor vehicle fuels or the use of motor vehicles. Most VLF revenues are used for local government purposes. The proposals being discussed in the First Extraordinary Session do not include a VLF increase.
   
6. Non-public road uses: author’s amendment. Motor vehicle fuel is sometimes used by vehicles that do not use public roads, such as boats, airplanes, and off-road vehicles. Taxes from the use of these fuels are used to support the infrastructure and purposes those vehicles are put to, such as harbors, airports and off-highway vehicle parks. The author will propose amendments to clarify that the SCA does not change the current use of these funds.
7. Double-referral. If approved, this bill has also been referred to the Senate Elections and Constitutional Amendments Committee.

Related Legislation:

SCAX1 1 (Huff) —This SCA is nearly identical to SCA 7 and was approved unanimously by the Senate Transportation and Infrastructure Development Committee, though with caveats by a number of Senators. This SCA is pending in the Appropriations Committee.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

POSITIONS: (Communicated to the committee before noon on Wednesday,

January 6, 2016.)

SUPPORT:

Alameda Corridor — East Construction Authority

California Association of Harbor Masters and Port Captains

California Yacht Brokers Association

County of Riverside

Howard Jarvis Taxpayers Association

Kern County Board of Supervisors

Madera County Board of Supervisors

Marina Recreation Association

National Marine Manufacturers Association

Orange County Taxpayers Association

San Bernardino County

San Joaquin Valley Regional Transportation Agencies

Transportation Agency for Monterey County

Worldwide Boaters Safety Group

OPPOSITION:

None received

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