Senate Standing Committee on Transportation

Well, good afternoon. Welcome everyone. The Assembly Transportation Committee the Joint Committee is called to order. The hearing room is open for attendance and it can be watched from a live stream on the Assembly's website.

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We will not predict, permit conduct that disrupts, disturbs or otherwise impedes the orderly conduct of legislative proceedings. We will not accept disruptive behavior or behavior that incites or threatens violence. We encourage the public to provide written testimony by visiting the Committee's website.

Please note that any written testimony submitted to the Committee is considered public comment and may be read into the record or reprinted. Given the time constraints today, including even more, we need to set some rules for public comment. In today's hearing. Each speaker will have 30 seconds to provide comment. With that, we will begin our hearing.

As the Chair of Assembly Transportation Committee, I am focused on ensuring our multimodal transportation system is safe, effective and affordable. Transportation impacts every Californian, connecting people to opportunities, goods and essential services while underpinning the world's fifth largest economy.

State and local transportation funding currently relies heavily on revenues from fuel taxes and other fees on gas powered vehicles to pay for infrastructure improvements. However, as gas powered vehicles become more fuel efficient and we transition to zero emission vehicles, these revenues are declining. Fewer drivers are paying to maintain our roads and that's not sustainable.

It is a problem. And while the gas tax has been critical funding a critical funding source for transportation improvements, it is becoming less effective as user based revenue mechanism. We need to explore new solutions that ensure transportation funding is fair and sustainable. This isn't just a California problem.

Several other states are exploring and adopting solutions to address looming transportation funding shortfalls. It's about having a conversation about what's right for California. I'm proud to spearhead this conversation beginning with the hearing and my Bill AB 1421 with my Senate colleagues and counterparts.

When Senator Cartese makes it, we'll give him an opportunity at any point to provide comments as well. Here's what I do know. Inaction is not an option and there are no easy fixes. This is going to be a multi year inclusive conversations. I've said several times in public and made several commitments. We are not solving to a determined solution.

Everybody is at the table, all the stakeholders to help us figure out what is right for California because we need to get this right for California today we will have presentations from each of our speakers and I understand a few presenters need to catch flights, and I invite them to leave after their presentation.

Any Members of the Committee who are here, we'll make them available to answer any questions that they may have of our Committee Members. But I'd like to now invite all of our panelists up at the same time on your agenda. It noted that there were going to be three separate panels.

Now we're going to do all the panels to get through, ensure we have enough time for dialogue. And as a reminder to those who need flights, it's okay to excuse yourself as soon as you as you need to to be able to make that flight. We'll give a moment for everyone to be seated. We're going to have three discussions today. Gas tax revenue in context, loss of gas tax revenue, and then impacts of gas tax decline. We'll go in that order.

And as was noted to Members of the Committee, if we can hold our questions till the end, if you are someone who needs to take a flight, if you can say that at the beginning, that way, if there is a Member who wants to ask you this specific question, we can, we can get that in. And with that, we'll start with Frank Jimenez, Legislative Analyst Office.

There we go. Mics on. Thank you. Good afternoon, Madam Chair. Frank Jimenez with the Legislative Analyst Office. We've been asked today to provide an overview of transportation funding in California. And I'll be making my remarks from a handout which you all should have received. If not, it should be making its way around the room.

And for those that are watching the hearing online, this handout is available on our [email protected] if you'd like to follow along. So turning to page one of our handout, California's transportation system consists of highways, local streets and roads, transit and rail systems, airports, seaports, bicycle routes and pedestrian pathways.

However, most public funding for transportation supports three major segments which I'll discuss. The first is highways. The California Department of Transportation. Also Caltrans is responsible for maintaining the state highway system, and that includes about 52,000 lane miles of highways, 13,000 bridges and other transportation assets. Local streets and roads.

California contains around 378,000 lane miles of local streets and roads that are owned and operated by cities and counties. They also maintain roughly 12,000 locally owned bridges and other roadway infrastructure. And transit and rail. California contains over 200 transit agencies which deliver services to the public through buses, trains, ferries and paratransit vans.

Transit systems are generally owned and operated by local governments such as cities and counties and local transit authorities. And the state is also in the process of completing a high speed rail line.

And outside of the entities that I mentioned, there are also regional entities as well that do planning at a regional level and also undertake projects of regional significance. Turning to page two, you'll see a pie chart that breaks down transportation funding.

And as you can see, funding for transportation in California comes from many federal, state and local sources. In 22-23 we estimate that total funding for transportation was $44 billion, and we use 22-23 information given that that's the most recent data that we have available, but the percentages that you see will generally hold together across various years.

First is federal funds. Roughly one fifth of total funding for transportation comes from the Federal Government, primarily from fuel excise taxes on gasoline and diesel. Federal funds are provided to the state and to local governments on both a competitive and formula basis, and the state will also sub allocate a portion of its revenues to local governments.

State funding made up roughly one third of total funding in California, primarily from fuel taxes and vehicle fees, which I'll discuss more in greater detail in the later pages of the handout.

Most state funding remains at the state level, but a smaller portion is provided to cities and counties and local governments on both the formula and competitive basis. And then finally, the local portion made up a little less than half of total funding. And local funds come from local sales taxes, General funds, and transit fares as well.

Turning to page three of our handout, diving a little bit further into the state's revenue sources. So state funding for transportation primarily comes from six different fuel taxes and vehicle fees. These sources are expected to generate around $14.4 billion in 24-25. So that's our current year.

Getting into the Fuel Taxes so the state collects excise taxes on gasoline and diesel, and they're adjusted each July for inflation. The state also collects a 13% sales tax on diesel fuel, with 10.5% provided the transportation purposes. The remaining portion goes to other state and local purposes.

Vehicle Fees the state collects from three major vehicle fees that support its transportation system. This includes the Transportation Improvement Fee, Road Improvement Fee, and weight fees. The Transportation Improvement Fee is an annual fee that varies based on the value of the vehicle, and the Road Improvement Fee is an annual fee levied on certain zero emission vehicles.

And both those fees are adjusted each January for inflation. And then weight fees are fees levied on commercial vehicles that vary based on weight and they are not adjusted for inflation.

The state will also collect a couple other vehicle fees, such as annual vehicle registration fees or driver's license fees, which support the Department of Motor Vehicles and the California Highway Patrol. Turning to page four on page four you'll see a table and you'll see the various fuel taxes and vehicle fees.

And in the center column you'll see their current rates as of today. On the right column you'll see estimated revenues for 24-25. And just to point out, the gasoline excise tax makes up roughly $7.9 billion, so more than half of the state's total revenues from fuel taxes and vehicle fees.

That's then followed by the transportation improvement fee at 2.4 billion. And right below the transportation improvement fee is the road improvement fee, and that's that fee charge to zero emission vehicles.

It's about $100 million, but it's expected to grow over time as more of these vehicles enter the state's fleet and the other taxes and fees generally range from 1.1 billion to 1.6 billion. Turning to page five of the handout, Outside of fuel taxes and vehicle fees, the state also utilizes other sources of support transportation.

This includes a continuous appropriation from the Greenhouse Gas Reduction Fund to support various programs. In 2425, it's estimated that 1.5 billion from the continuous appropriation would be used to support transportation programs. The state also currently pays debt service on past transportation bonds and that's supported through the General Fund.

But first weight fees are used to offset that along with other miscellaneous revenues and the General Fund makes up the difference. So in 24-25 that's estimated to be about $390 million. And outside of special funds, the state doesn't normally provide General Fund augmentations for transportation, but recent budget surpluses provided significant one time augmentations for transportation programs.

This totaled about $12.3 billion across a multi year period, with most of this being from the General Fund and a smaller amount from special funds. However, in response to recent budget deficits, the state made some adjustments to these augmentations that included delays, reductions, Fund shifts and cash flow adjustments.

However, the 24-25 budget, our current year budget, maintained $11.5 billion of that original multi year augmentation, so around 93%. About 8.2 billion is from the General Fund, 2.3 billion is from the Greenhouse Gas Reduction Fund, and $915 million is from various transportation accounts.

And this supports a variety of activities such as transit and rail capital projects, transit operational relief, port and freight infrastructure, and active transportation projects. Turning to page six of our handout, getting into the program side. So what are these various revenue sources support? We've broken down programs into four main categories and I'll go over them very briefly.

So there's Caltrans highway maintenance and rehabilitation programs. So Caltrans administers the maintenance program, which does preventative maintenance. It also administers the State Highway Operation and Protection Program or SHOPP, which does capital projects that reconstruct the highway system, local streets and roads.

This is one specific program, but the state provides funding on a formula basis to cities and counties to support locals in their maintenance of local streets and road networks. Transit and rail the state has several formula programs that support transit and rail systems and they each provide and support different activities.

The state also has one major competitive program, the transit intercity rail capital program. And then the state also provides funding from GGRF and PASS voter approved bond for the high speed rail project. And finally the last category is multimodal programs. So the state has various formula and competitive programs that can support a wide variety of transportation infrastructure. So that's kind of a large bucket of programs, but they can support a variety of different types of infrastructure.

And a lot of the funding that the state does provide is done so based on statutory formulas with some Fund sources support specific programs, and sometimes statute will set aside particular amounts for programs or will be based on percentages. And on top of that, the state constitution protects transportation revenues to support specific transportation purposes.

So turning to page seven of our report, you'll see a flowchart that shows basically the last four pages of our handout. And at the top you'll see the revenue sources that the state collects from from the six fuel taxes and vehicle fees and also the cap and trade auction revenues that go towards supporting various transportation programs.

As you can see in the bottom level of boxes, a lot of the state's funding goes towards supporting its own infrastructure through Caltrans through its highway maintenance and rehabilitation programs. You also see a significant portion for local streets and roads, about $2 billion for transit and rail programs, and about $1.7 billion for multimodal programs.

And on the far left you'll see funding for the high speed rail project. And on the right you'll see the weight fees that are provided to pervading past transportation debt service. So this is a very simplified figure that just shows how funding kind of flows to large buckets of programs.

And happy to dive into questions on those further. And then going into our last page on page eight, this dives in a little bit to what everyone else on the dais will dive into as well.

But the state has very aggressive greenhouse gas reduction goals and achieving these goals will require significant changes in the transportation sector, such as increasing the adoption of zero emission vehicles. Our office recently did a report that looks at how these might impact revenues and programs over the long run.

And we find, you know, under aggressive scenarios where the state is trying to achieve its goals, revenues are declining in inflation adjusted dollars. But even in a scenario where the state's existing policies and trends continue, these revenues will continue to decline over the long run. And these will have various impacts to programs.

And we see the largest impacts being to Caltrans highway maintenance and rehabilitation programs and also for local streets and roads with smaller impacts to transit. But happy to pass it over to the rest of the speakers and take any questions as well after. Thank you.

Thank you. And as a reminder to those who've come in, we're going to take questions at the end after of the panelists have an opportunity to speak with the exception of those who have to leave early to make a flight. With that, we're going on to the next section, which is loss of gas tax revenue. And we have Brian Taylor and Asha Agrawal.

Thank you. I think I'm up next. I'm Brian Taylor. I'm a Professor of urban planning and public policy at the UCLA Institute of Transportation Studies. It's an honor to be here. I do have a flight. I will have to leave in about 25 minutes, but I'll, I'll stay as long as I can.

So what I'm going to try and do is put some of the fuel tax debate in some context. And so I want to start I don't know whether you have a handout or whether they're going to put this up on the screen, but I want to start by saying the California motor fuel tax is quite old.

So forward next slide. There we go. In the early 1920s, more than 40% of the state budget was going to direct appropriations for highways and interest payments on road bonds. This was unsustainable. It was actually the state was drowning in debt around, around the cost of maintaining this burgeoning road system.

And something was developed and it really was borrowed from the UK and in 1923, California adopted an earmarked user fee for transportation, the per gallon fuel tax. It turned out to be at the time a smashing fiscal and political success and it really stabilized things.

It was popular on a lot of grounds, partly on a sense of fairness that the more you drove, the more you paid, and it was not making people who didn't use the roads responsible for them. Next slide.

The 102-year-old tax still has many upsides, and before we put it to sleep, we have to think about some of those. It still generates a lot of revenue, as you just heard, and especially after the passage of Senate Bill 1 in 2017. California's levy is at the high end among states, but it is not the highest.

It is as much a user fee as a tax and is perceived as fair, as I mentioned that heavy users of the road system tend to pay more, while light users pay less. And this status of kind of a tax and a user fee makes it easier politically to mostly earmark the funds for transportation purposes.

So that connection is more logical because it's seen as something that users of the road system and pay. Next slide. Among the other upsides is it's very cheap and easy to collect. And in fact, compared to almost all of the other means we have to collect, it's among the best.

It's levied not at the pump, but actually on wholesalers. And so its administrative costs are Low and cheating and evasion are rare. So it has those virtues in terms of being relatively inexpensive to collect. And it supports environmental goals.

And this was not really thought about much when it was adopted 102 years ago, but it is to know. It is essentially a tax on burning fuel. It nudges travelers toward both vehicle fuel efficiency, getting more miles on the road for each gallon they burn, and toward greener propulsion systems. So it's very supportive of environmental goals.

At the same time, it's a money spinner. So it has those two kinds of roles. Next slide. It requires a heavy political lift just to stay even. And California has kind of addressed that. It's a cents per gallon levy. So it's sensitive neither to rising construction and maintenance costs nor to increasing fuel efficiency.

So as cars get more efficient, as costs go up, that levy loses its buying power. And so it has a political liability in that you need to keep raising the levy to stay even. That's not a political winner to have to do that to go through the political process of raising the levy just to stay even.

But if you don't, it gradually sunsets over time. It actually is the opposite of the income tax. It just will erode away. Raising that levy can be a political challenge. And an example is the federal fuel tax has not changed in 32 years, despite many efforts to try and do that.

So California has largely overcome this with indexing, but this can be politically unpopular when rates change frequently or by large amounts. The fuel. Next slide. The fuel tax revenue base is eroding over time as the share of electric and hydrogen fuel cell vehicles in the fleet increases.

And this is perhaps fine early on as a way to incentivize the purchase and use of zero emission vehicles, but it's increasingly problematic as the ZEV share grows. So it's working on that environmental side, but as a money generator it starts to weaken and, and I think that's where we're at right now. Next slide.

But for all of their virtues, and Zevs have many of them, they do impose costs on society on road systems as well. They're not just the fact that they don't produce emissions doesn't absolve them from all of that. So heavy vehicles, it's important to know heavy vehicles do disproportionate damage to the roads as weights go up.

It's not linear, it's a non linear relationship. So that very heavy vehicles do a very large share of the damage to roads and battery electric cars and trucks weigh more than their similar internal combustion engine counterparts.

So at both levels, and that's because of the batteries right now secondly, many EVs tend to accelerate very quickly, which may increase crash risks as well. The exhilarating feel of that acceleration can be associated with what we're seeing are safety issues. I'm not blaming electric vehicles, but they can be associated with that, with, with quick driving.

EVs contribute to traffic congestion just like all other cars and trucks. And all of these effects vary by miles driven, but a flat annual fee doesn't account for that. So that essentially the more you drive, the more benefit you get, but it doesn't generate more revenue. So that's a challenge as well.

So next slide to evaluate the fuel tax and what might come after requires agreeing somewhat on its purpose. And I want to put out three goals that we sort of have for fuel taxes that exist now. The first is to raise revenue. And that's kind of the first thing that people think of.

Well, we need a way to raise revenue for the transportation system. This is how we've done it, it's in place, it's worked well. What are we going to do next? So one thing you can think about this is raising revenue from a transportation source and then spending on a transportation purpose.

So it has that nexus between those two and that's really common in the US you can also raise revenue from a transportation source like the fuel tax and use it for other public purposes like they do in the UK and many other parts of the world.

So they actually put that into the General Fund and use it for all sorts of purposes. Then you can also think about raising revenues from General sources. An income tax, a sales tax, and then spending that on transportation.

And the countywide local option sales taxes we have here in California are an example of that of a General levy that goes to a transportation purpose. So there are reasons why collecting from a transportation source to a transportation expenditure have virtues that I've mentioned now and will more.

But these are three to keep clear on what, what you'd want to do with that kind of a fee. The second thing is that, and this is the next slide, Gold 2 is to link who pays with who benefits. Or another way is who pays and who imposes costs on the system.

So fuel taxes are consistent with this cost imposed benefit receives fairness principle. The idea is that you're benefiting from the road system. You're putting damage on the road system. You're putting air pollution in the air, you're slowing down other drivers. You should pay for that. And you drive more, you pay more.

Heavy vehicles tend to do more damage to roads. They tend to pollute more. They also tend to consume more fuel and they pay more in fuel taxes. So it's not perfect, but it has this idea that there's a link between who pays, who benefits. Okay. The third goal is to influence behavior.

And this has probably been the one that transportation nerds like me are really interested in. An elected official said makes us a little, a little sketchy here. We don't want to be thinking about that.

But what I want to put out here is that no matter how you collect funds for transportation, it's going to affect travel behavior in some way. And I'll try and explain why.

So fuel taxes, as I mentioned, modestly encourage drivers to burn less fuel, drive lighter cars, acquire Low and no emission vehicles, drive more sparingly in travel versus greener modes. It has all of these influences. And new forms of charging road use could influence behavior even more directly, thereby lowering transportation revenue needs.

And that's a really important connection I want to make is that if you collect it in a certain way, it can actually stimulate even less burden on the road system, which actually lowers your revenue needs.

However, if you shift to a revenue collection device that's unconnected to transportation so that it has no bearing on it, and the sales tax is an example of that, that actually can increase your revenue needs because now drivers don't have the incentive to drive less or use a cleaner vehicle, they might drive a heavier vehicle, one that pollutes more, creates other kinds of problems, does more damage to the roads.

So that's a really important connection on how that behavioral influence affects the needs on the system, which in turn affects the revenues that you need to collect. Next slide. So to evaluate the fuel techs and what come next requires agreeing somewhat on its purpose among those three things, raising revenues and so forth.

So the fuel tax right now, if we continue to have more and more zevs in the fleet, it's going to gradually evolve away from being a primary revenue source. And one that is probably more of a syntax and that is, is that it's just taxing burning fuel and not necessarily a main way that you're gaining revenue.

Now as a base of internal combustion engines declines over time and revenues increasingly come from other sources, that folks focus of tax is going to shift. Economists call this a Pigovian tax on negative externalities. And like taxes on cigarettes, the goal is to discourage smoking.

Or the ultimate goal would be to discourage burning fuel and eventually eliminate it, which would drive revenues to zero. So that's the irony is that if you were really successful with this tax as being something on environmental goals, you'd actually get revenues to zero and you'd have nothing there.

So there's a conflict between using this thing to raise revenue and using it to incentivize more environmental behavior. But again, this transition is slow in coming and is likely to take many years to develop. So. Next slide. So a closing thought is that transportation needs.

Is that me? I was talking too long or is that. Is this like the music at the Oscars now? I need to get. Get off. Okay, I promise. Closing thought. The transportation needs and raising revenues, charging fairly and influencing behavior are all linked together.

And even if you say I'm only interested in one part of this, not other, it's. There's no way out of that connection between those and they're at times at odds. Again, no matter how you collect the revenues. We can collect revenues for transportation from General taxes, like on income and sales that are unrelated to driving and parking.

And this shields drivers from the social cost of driving and parking, which encourages them to drive and park more, thereby increasing transportation system needs. We can collect revenues from transportation user fees like fuel taxes and tolls. This makes drivers more aware of the costs they're driving and parking and, and more judicious in their travel as a result, thereby reducing transportation system needs.

And as you move forward, I want you to think about, or I encourage you to think about that relationship and how you can think about your revenue needs, your transition systems management needs and your environmental goals simultaneously. Thank you so much. Last slide and. zero, okay. I just pitched my book there.

I hope you all engage in it and send it in your summer reading on how we came, how finance dictates, what kind of a system we have. Thank you very much.

Thank you. Dr. Taylor. Just to give an opportunity because I know you do have to go to see if there are any questions on this particular presentation. We will, like I said, ask questions at the end, but I just want to be sure before he leaves, was there any questions from any of the. I don't see. I'm going to give an opportunity. You do Assembly Member Lackey.

Yeah, my, my quick question has to do with the fact affordability apparently is not a consideration in most of this assessment that, that I heard because I have some pretty stark numbers on ZEV buyers versus non ZEV buyers and the class that they represent.

For example, ZEV owners have a mean income about 190 per year. 190,000. 81% of them are homeowners rather than renters. 81% of them are college grads. That's a stark contrast for those who drive gas vehicles. So I wondered if that was even considered in any of these assessments that you made.

Well, I did mention that a flat fee on a ZEV doesn't account for all of the sort of costs that it's imposing on the system. So I think your point is well taken. Thank you.

I'm so sorry. I have a 5:03, Amtrak I'm trying to catch.

So yeah, we're going to get to you. So I wanted give an opportunity. My counterpart in the Senate, Chair Cortese, is here. So I wanted to give an opportunity if you wanted to say any words before we kept, before we kept going.

First of all, in the interest of the 503 Amtrak, I'm being extremely brief and I just want to say Paul, apologize for coming in a few minutes late. I had a meeting after the session before I got here.

So just want to thank Chair Wilson for her steadfast commitment to this topic and for really having the idea and the initiative, you know, to reach out and put this informational hearing together. I think in every single form we've been in over the past year. Certainly going back in the last session, the Chair Wilson has been focused on this issue and I'm eager to hear what everyone has to say and I'll stop there and conclude with the thank you.

Thank you Senator. Now we will move on. Thank you so much.

Thank you very much. I'm Asha Weinstein Agrawal. I'm with the San Jose State's Mineta Transportation Institute and their National Transportation Finance center. And I think there's some slides if we can get those up.

So I very much appreciate the opportunity to be with you today to talk about an MTI funded project that was requested of us, I believe actually by legislative staff from the Senate and Assembly to really think more deeply about how California's transition to electric vehicles will influence the amount of revenue that the state collects directly through its own taxes and fees.

And the way we approached this and just checking again, is it possible to get the slides up? Just got up. Zero great. Next one. Go two more. Next one. We did a scenario analysis and I think this is really critical.

We were trying asked to project through 2040 and quite honestly there is nobody with any accuracy who can predict anything much out to 2040. And in recognition of that, what we did was we used a scenario approach. I like to think of these as if then statements.

So we look at a variety of different possible trajectories for how much we drive as a state, what kinds of vehicles we're driving, how many of them or not. And then for these different sort of sets of conditions we examine what would be the impact on revenue. Next slide.

So you've already heard quite a bit about what our taxes and fees are.

So we're talking here about the five taxes that the state collects from vehicle owners and users and spends the money on transportation system and where the distinction between an internal combustion engine and an electric vehicle has at least some impact on how much revenue is collected.

So There are the three fuel taxes we've heard about, and then two, there are other registration fees out there, but the two that are part of SB1, the Transportation Improvement fee, which all light duty vehicles pay, and the amount varies according to the value of your vehicle. And then the RIF, which is a flat annual fee on electric vehicle owners. Next slide.

So normally I know that professors are hated because we come and talk about our methods way too long, but in this case, I'm going to just talk about them a little bit because I think at a very conceptual level, it's important to understand what we've done and why we have these different scenarios.

So we set out scenarios to try and imagine what might happen in the future and to push the boundaries a little bit to be a little more extreme in both directions than what most of us probably think is likely.

So we picked out five key changes, or I'll call them variables that will impact how much revenue we collect through these different taxes. So first of all, there's how big the population is, because if we have more people, presumably there's more driving more vehicles.

And then we also looked at how many vehicles each person, each adult in the state has. We looked at how much travel or vehicle, Miles traveled we have for both light duty and heavy duty vehicles.

And then we of course, looked at what was sort of the key to this study, the different percentages of light duty and heavy duty vehicles that are electric and therefore no longer paying the fuel tax. So, next slide, please.

The details right now are not too important here, but what I just want to mention, so the rows are those variables I just talked about, like what percentage of our fleet is electric? And then the three columns, high, medium and low.

This is where we tried to imagine the future and how something like the number of miles a year we drive may change over time. And if you'll go to the next slide, this is showing you what those, I'll call them trajectories were specifically for the percentage of our vehicle fleet that is electric.

So the chart on the left is for light duty vehicles, and, you know, our high one shows us by 2040, getting to, you know, essentially 99% of vehicles are electric. Remember, I'm not trying to say I think any of this is electric likely. We're just trying to throw out different if then statements.

And then on the low end, well, what if we just kind of trickle along gradually you know, a few more EVs, maybe slightly faster adoption than we've had. That's our low. And the medium is in between. For heavy duty vehicles, we're a bit more conservative.

So, you know, again, our low is kind of a little bit more of the same and our high would get us up to 80% or so electric. This is just a thought experiment so that we can see what will happen next slide.

So again, for this next one, the details are not important, but these are the eight different possible futures or scenarios that we came up with. And the first three all assume sort of Low VMT growth, but they vary how fast electric vehicles get absorbed into our fleet. So those are the first three scenarios.

The bottom three scenarios 6, 7, and 8, all assume high VMT and then again, different levels of adoption of electric vehicles. And then the middle ones are kind of in the middle. So let's go to the next slide. So this is the big reveal. This is the revenue that we project across these eight different scenarios.

And there are a few things we can notice quickly. First of all, all the lines go down. So we have 2040 out there on the end. And the amount of revenue lost ranges from about, I think, at the very lowest and 9% of our revenue. And this is in real dollars, so inflation injustice.

But at the most dramatic, we could go from 13 billion a year to 5 billion a year in revenue. And this is adding up across all those, those different, you know, the fuel taxes and the vehicle fees. So all the lines go down.

And in most cases it's enough of a downward slope that I think we would all be rather worried if this was what comes about. Now, the next key thing I want to point out here is there are three yellowish lines at the top and then three blue lines towards the bottom.

So scenarios 12 and 3 all assumed Low levels of penetration of electric vehicle, sorry, of vmt. But we varied how fast electric vehicles get brought into our fleet. And so you'll see even if we have that, there's quite a substantial difference between line one at the very bottom and line three.

And so that's one thing to look at. And this again is showing us how just changing VMT can influence how much revenue we raise. So, and this is the key takeaway point really from this is, yes, how fast we adopt electric vehicles will have a very direct and dramatic impact on the revenue we collect.

But there are other factors that can also dramatically tank the amount of revenue that we would collect. And, and if whatever forces in society were to come about that Led people to drive a lot less. So fewer VMT per year, we would raise a lot less money each year. Next slide.

So here this is going to just is decomposing how much revenue we project from each of those five different taxes. The three on fuel and then on the far right, the two vehicle registration fees.

So the first big picture thing to notice is the gas tax on the far left raises right now vastly more revenue than any of the other four. And that in this case, in all the scenarios, revenue raised goes down dramatically.

And by 2040, actually, we will probably almost inevitably be raising more money from the vehicle registration fees, which are the two on the right, than we are from the gas tax. Diesel, we just don't raise as much that way from diesel taxes. So it's sort of a less key part of the picture.

But then those are those far right TIF and RIF, in particular, the RIF, that's the annual flat fee on electric vehicles, could rise to become a very large fraction of the revenue that the state is raising.

And I'll now wrap up if we could have the next slide with just a few closing thoughts about what all this might mean for policy. First of all, it is, I just want to stress, and I'm sure you all know this anyway, but it's good to remind ourselves that nobody can predict future revenue with any accuracy.

Very far out. So, you know, we need to sort of take in mind that these are educated guesses. Secondly, we are going however, my strong educated guess is that we are going to lose revenue soon, even within the next sort of visibly within the next few years, regardless of which of these scenarios come about.

And by 2040, we will have almost certainly lost a lot of revenue on an annual basis. Third point is that as I mentioned, yes, a fast transition to EVs would dramatically reduce the revenue this set of taxes is raising.

But other factors in particular, if you had fewer vehicles in the fleet or people just driving less, that would also have a profound impact on our revenue. And then finally, and we don't need to go back to the previous slide, but I made that point that the vehicle fees may become a larger share of the revenue that we raise.

And so that is something that Senate Bill 1 I think has done that we can probably all appreciate that it sort of cushions the loss of revenue if fuel tax revenues decline. And next slide, I had one more second conclusion slide, which is just some policy suggestions.

First of all, I think we should explore a wide variety of taxes and fees to augment or replace state fuel taxes.

And related to that, you know, the SB1 approach with this package of taxes and fees, we're not putting all our eggs in one basket, so to speak, is likely something that we will want to replicating as we find replacements for fuel tax revenue. And third point here, we do want to start soon.

This is not a 20 year off into the future problem where we can sort of twiddle our thumbs for 10 years and then get busy. We probably need to be working on it much more soon than that next slide.

And then just some suggestions regarding thinking of these sorts of projections over time is that it would be very useful to keep projecting multiple scenarios as we try and understand the future and to update them regularly. You know, conditions change and that will lead us to have different projections. And that I think it's really valuable.

We made a clear point to try and be very transparent and explained here about what are all the inputs. You know, we're looking at things like changing number of vehicles each family owns.

That by making those transparent, it helps us all, you know, to look at the work that was done and get a sense of like, well, maybe I don't think that, you know, these maybe I don't think that the population is going to rise or fall or whatever rate.

And so then it's pretty easy to play around with, well, what if a different set of future conditions comes about and to then understand how that would impact the revenues. So I am so sorry not to stay longer, but I'm hoping to make my 503 train, which is the last one, back to where my car is parked.

And so I thank you all very much for the invitation to be here and happy to address questions by email or otherwise later.

Okay, so no time for one question. If it's really short, we'll see if it's short. If you started and it's not short, you can answer it via email. Dr. Agrawal, thank you. And Assembly Member Ward.

Thank you. I wonder if you or anybody else on the panel would be able to tell me, I seem to recall anecdotally from a conversation now two years ago that there might have been a pilot study underway.

And I think the DMV might have been sort of taking the lead on that to evaluate odometer readings sort of submitted and whether or not that could be an acceptable way to be able to offset an odometer reading for some, you know, per mile fee or category of fees in lieu of the excise tax. Do you, are you familiar with that?

Wonderful question? Yes. There are many people here who can tell you, but California has actually had a whole series of pilots that are exploring exactly what you're discussing and I'm sure there are others here can provide more detail. .

If anybody can elaborate. Kind of curious about the status of some of those and if that's information that can help us maybe start to think about a design for looking forward in the near future. So can we take that.

I was just going to say we are going to get to that as a part of our series. So I'm going to have us go on. But if you want to answer, know briefly knowing that there's going to be another hearing that's going to go take a deeper dive into that,

I can answer in two sentences. Yes, that's something that the California Transportation Commission through our is working with the California State Transportation Agency on. There's an SB 339, which is a Bill from Senator Wiener which authorized the the kind of look at a road user charge program as well as kind of the the mechanics of that.

Okay, thank you.

Awesome. So now we're going to move on the third section, which is the impacts of gas tax decline. We have three different speakers here. I'll name them in order. Tanisha Taylor, James Corless and Margaret Yapp. Margo Yapp,

thank you. Thank you. Chair Wilson, Chair Cortese and Members. My name is Tanisha Taylor and I am the Executive Director of the California Transportation Commission. I appreciate the opportunity to be here today as well as the Committee's interest in a topic that is increasingly becoming an urgent issue of concern for our agency.

The Commission is responsible for allocating a significant portion of state transportation funding to projects throughout California. We partner closely with Caltrans and local and regional transportation agencies in carrying out this responsibility, as well as with the California State Transportation Agency.

Working together with our state and local partners, we've collectively achieved some tremendous successes since the passage of Senate Bill 1 in 2017. Thanks to that increase in funding, the California State Auditor recently removed the state's transportation infrastructure from its high risk list after 16 years.

In recognition of the progress California has made in rebuilding and upgrading the state transportation system. However, Senate Bill 1 was clear that it was not intended to meet all of California's state and local transportation needs.

Moreover, as has been discussed by the previous panels, today the Commission is projecting declining gas tax revenues that Fund transportation improvements throughout the state. I've been asked today to talk about how these revenue declines will impact the transportation funding programs run by the Commission.

The Commission administers several programs based on statutory requirements and funding levels established by the Legislature, resulting in nearly $8 billion per year being allocated to projects through these various programs. Some of these programs receive fixed levels of funding each year and are relatively insulated from changes in gas tax revenue.

You can think of this as a waterfall of sorts where the first $200 million a year is directed to one program, the next $100 million to another program, and so on, with the remaining funds split between some of our largest programs.

Where we anticipate seeing the impact of declining revenues is specifically in the large programs towards the bottom of the waterfall, namely the State Transportation Improvement Program, the Local Streets and Roads Program, and the State Highway Operation and Protection Program. These three programs serve three different but critically important statutory purposes.

The first program I mentioned, the State Transportation Improvement Program, or stipul, is the smallest of the three IT funds priority projects identified by each individual region of the state as well as interregional priority projects identified by Caltrans. Each stip covers five years of projects which totaled about 2.9 billion for the most recent program adopted in 2024.

Funding for the program is divided up among each county in the state on a formula basis, with local agencies identifying their projects according to statutory requirements and the Commission's guidelines. The next largest program is the Senate Bill 1 local streets and roads Program, which receives half of the remaining revenues at the bottom of the waterfall.

This program passes $1.2 billion a year to cities and counties on a formula basis for those local jurisdictions to spend on road maintenance improvements they choose, such as pavement resurfacing on city streets as well as adding new bikeways and sidewalks.

The other half of the remaining revenues at the bottom of the waterfall go to the State Highway Operation and Protection Program or the shop. This is the state's Fix it First maintenance program for the state highway system and California's largest transportation funding program. A new SHOP is adopted every two years and covers four years of projects.

Last year's shop included $21.2 billion for specific repairs on the state highway system, as well as reserves for things like emergency and restoration. Projects are developed using an asset management framework to meet the specific 10 year condition targets for assets like pavement and bridges included in Senate Bill 1.

The shop is intended to improve safety and maintain the existing state highway system and cannot be used to add new traffic lanes. Since the voters upheld Senate Bill 1, Caltrans has been able to make significant progress towards the 10 year performance measures established in 2017, largely through investments made by the Commission in the shop.

But even though we are generally on track to meet our targets on schedule. We haven't met all of them yet and need sustainable funding sources to continue our progress. Across these three programs.

The state is able to Fund a broad array of local, regional and state transportation priorities that keep people moving safely, support climate action, improve equitable outcomes, create good paying jobs, and keep California's economy running.

Because these programs do not receive fixed levels of funding each year, any decline in fuel tax revenues means less funding for each of these three programs. We are already seeing this phenomenon play out in real time.

The Commission and Caltrans are in the middle of a month long process to develop an estimate of funding available for the SIP and SHOPP that is adopted ahead of each programming cycle. This estimate tells us how much funding we will have to award to new projects. Excuse me, when we adopt a new step and SHOPP each year.

As has been the case in the last few program cycles, declining tax revenues are already impacting our Fund estimates. Beginning with SB 1 and continuing with the Federal Infrastructure Investment and Jobs act, the Legislature has been able to pour more money into these programs over the past eight years.

However, we're nearing the point where our revenue mechanisms will provide less money cycle over cycle instead of more to these programs. So what does this mean for our funding programs? In short, we will have fewer resources to address the types of projects I described earlier.

Fewer projects to maintain and repair the state highway system, fewer improvements to enhance regional connectivity, and fewer resources for local governments to spend to keep local roads in a State of good repair.

This doesn't mean our transportation system will fail and become unsafe overnight, but it does mean we will be making less progress in improving our system and will be spending more to preserve what we currently have.

We faced a similar situation prior to Senate Bill 1, when lower than expected gas tax revenues meant the state could not meet its funding commitments for about a quarter of the regional projects included in the stipend. And as a reminder, those are products across every County of the state.

If the projections we've discussed today hold, we're on track to find ourselves in a similar situation in the not so distant future. This means our transportation system may once again be placed on the state auditors high risk list due to disrepair, reversing the progress we have made and undermining the commitments made to the voters in SB1.

We will lose the momentum we have built to address our fix it first needs, let alone address new needs as they emerge.

Those needs are considerable and they are growing as part of the Commission's draft 2025 state and local Transportation System Needs Assessment the Commission is projecting 10 year needs of nearly $758 billion and available revenues of approximately $541 billion.

This creates an anticipated shortfall of about $217 billion over a 10 year the next 10 years, which takes into account the projected gas tax revenue decline that you've heard about already. That's about $20 billion a year. As a reminder, SB1 was was estimated to provide just over 5 billion a year over 10 years.

These needs cover the state highway system, local streets and roads, transit at intercity rail, complete streets and active transportation, as well as climate adaptation and necessary necessary improvements to support the deployment of zero emission freight infrastructure. And while our revenues are declining when accounted for inflation, these system wide needs are continuing to grow.

For example, we've all seen the images of the Low sand corridor shut down by high tides on the Pacific or the Pacific coast highway washed out by mudslides and the burn scars around Pacific Palisades in Malibu.

In addition to making our infrastructure more resilient to the effects of climate change, we need to have resources ready to repair our transportation system in unexpected situations.

In the past, between 500 and 600 $1.0 million has been set aside each year in the shop to Fund emergency damage repairs to the state highway system, such as responding to storm damage or rockfall. In recent years, the Commission has increased the level of shop funding set aside to Fund emergency damage repairs to $1 billion per year.

Due to severe impacts from atmospheric rivers, flooding and wildfires. In the new normal of year round fire season and stronger, more frequent storms, our transportation system will be put under strain that our funding programs and our revenue mechanisms were not designed for. This is a challenge that has no single solution.

The Commission will continue to monitor how declining revenue will impact the state's transportation programs and will be ready to assist the Legislature in developing policy solutions to address this issue. Thank you for the opportunity to speak on this topic and I'm happy to answer questions when it's appropriate. I don't have a time commitment, so thank you.

All right, we'll move on to our next speaker.

Yeah. Good afternoon. I'm James Corliss. I'm Executive Director of the Sacramento Area Council of governments or SACOG. We represent the six counties of the Greater Sacramento region and the 22 incorporated cities within. Really appreciate the opportunity to provide you with the region's perspective on the vital importance of state future fuel tax revenues.

This afternoon I want to focus my remarks on three key areas. One is the important role that regional planning Agencies such as ours play in directing fuel tax revenues through our long range plans. Secondly is the critical nature of the kinds of projects that are currently funded with those fuel tax revenues.

And last but not least, why we're extremely concerned with the future sustainability of those fuel tax revenues. So first, role of regional agencies. I'm one of many regional planning agencies across California that you entrust for us to play an important role developing a long range transportation plan.

Under both state and federal law, we are required to develop a long range plan that looks out at least two decades.

It spells out how we're going to meet state goals such as reducing greenhouse gas emissions from vehicles through investing in our transportation network and helping our local governments plan and shape housing and jobs in a way that's coordinated, smart, and reduces the reliance on driving.

In our current regional long range plan that we've been developing for the last few years, and our board's scheduled to adopt later this year, the state fuel based tax revenues make up roughly 1/3 of all the transportation funding that we're counting on in our plan in the next 25 years. In annualized funding.

That's about 500 million a year. All right, thank you. Or 12 billion over the life of the 25 year plan. It's really important to note that in this six county region, the greater Sacramento county region, we do not simply have the ability to rely on other funding sources.

We have one County of our six that has a local transportation option sales tax. That's not for lack of trying. We cannot get to the 2/3 vote threshold even though we sorely want to. So those state gas tax revenues and state fuel tax revenues are critical.

So the second point is really the importance of these fuel tax revenues in our region, how we use them. Tanisha did a great job about explaining a lot of the ways that a lot of these programs work and flow through the ctc.

And down here in our region, there's a number of ways that fuel tax revenues are apportioned and allocated. One is directly to our cities and counties. I'm sure you're going to hear from our next speaker.

Tanisha mentioned the STIP shares that go county by county, that we have a vital role to coordinate that for road and transit projects. We have critical funding for public transportation coming to our region for both capital and operations.

And finally, we compete at the state level for the state's Active Transportation program and Senate Bill 1, competitive programs like Solutions for Congested Corridors and TCEP or the Trade Corridor Enhancement Program that are vital. All of these amount to critical investments to support the implementation of our long range plan and invest in critical infrastructure.

A few examples that have been recently funded. In 2023 there were some severe storms in El Dorado County. We need to do emergency repairs on Highway 50. We used our STEP funding to be able to stabilize canyon slopes and to prevent future landslides. Highway 50. Recently in Davis, the Cesar Chavez Elementary School complete streets project was finished.

It includes separated bike lanes, drop off, pick off frontage improvements and transit stop improvements. And finally, here in Sacramento County, Sacramento Regional Transit has been implementing Low floor conversions at light rail stations and purchasing new Low floor light rail vehicles to improve Ada access and boarding accessibility.

Built right here in South Sacramento at the Siemens plant to really update the region's 43 miles of light rail network at a cost of 13 million. Just three examples of how those fuel tax revenues are funding projects that are critical in our region among literally hundreds and thousands of others.

And so finally, in terms of the future of fuel tax revenues, you've heard from prior speakers, we're concerned about obviously the future of the fuel tax revenue. And it is the future is now. And the way we see it, we're staring both down a steep slope of declining revenues, but as well as an absolute cliff. So first, the steep slope.

Part of the reason that we're here today is because what's actually partly a good news story, the good news story is that as a state we're actually burning less gasoline, less fuel for transportation, in large part because of the move towards more fuel efficient and zero emission vehicles and in part because our regional plans are doing their part to make sure people don't have to drive as much or as far for every trip.

Now, without a state fix in our region for the six counties we forecast, we'd be facing a massive shortfall in the investments in our regional plan. If we do nothing, we're looking at a loss in our region alone of between 3 and 4 billion over the lifetime of our plan.

In the near term, that means cuts to public transportation, accelerated deterioration of roadways that are already slipping toward failed conditions, major delays in transportation infrastructure investments that connect people to jobs and opportunity. I also mentioned that many of us are also worried about a fiscal cliff, specifically around Senate Bill 1.

And the cliff is the fact that if we as regions don't achieve our very well intended and that we take very seriously greenhouse gas reduction targets under SB375 in our long range plan will literally get cut off from SB1 funding. We won't get any more.

It's as if our school was failing and we got no more education funds. We would love to work with you and your colleagues to help fix that problem so that we can have access to transportation funds to reach those goals and not get cut off.

So just in closing, I really want to thank you for this opportunity today to testify in front of you, my agency, all of our peer regional agencies across the state want to work with you to find solutions to the challenge of long term sustainable transportation revenues at the state level. Thank you very much.

Thank you. We'll move on to our final panel speaker and as noted at the beginning, once this is done, we'll open it up for questions from the the Members of the Committee will be starting with Senator Blake Speier at that time.

Thank you. I'm Margot Yapp with NCE. I work with the cities and the counties on producing a needs assessment every couple of years. Also just recently helped Tanisha on the SB 1121 draft report. So I have some slides and I promise I'm not going to show too many graphs and charts and we didn't.

Get those printed before for you all, but they'll be posted and we'll make sure every Member of the Committee gets those emailed directly.

So I thought I'd spend the first couple of minutes just talking about the local road system. Next slide, please. First, I think is that people, I think sometimes forget how big the 539 cities and counties, how big their road network is. It's over 85% of California's transportation network. That's pretty big. That's 144,000 center line miles.

I think Frank, you mentioned something like almost 400,000 lane miles. That's about. That equates. So what we're trying to talk about is what are those impacts? Next slide, please. And of these 144,000 miles, it's not in great condition. Right now we use a scale called the pavement Condition Index.

It's a scale from 0 to 100 and if you can imagine 100 as being the best roads in the world and then zero being the worst. And I've got a couple of pictures there to kind of show you those examples. Where we are statewide is we're at 65, that's as of 2022.

We're currently in the process of updating that. Give you a new number by 2025. But 65, the first question people ask me is that good or bad? And I usually respond, and some of you may have heard me say this in similar presentations, I'll Give an analogy.

My daughter, if she were to come home from school and say that I got a 65 on a math test and me as a parent, I have two, really options, right? I can say that's not bad. You know, I was never really good at math, even though I am an engineer, and I might say that's acceptable.

The other way I could think about is, you know what? If you want to get to UC, you might want to work a little bit harder. So this is a policy decision for all of us, for all of you to decide, is 65 acceptable or not?

And the point of my presentation really is to share with you the implications of the different funding levels that we're going to be facing. So. Next slide.

So when we added up all 144,000 miles of roads and we looked at what the conditions are, and we look at the cost of repairing them and maintaining them, we came up, over the next 10 years, it's going to be about $80 billion, plus or minus. That's not a good number. Next slide.

We also looked at other things. It's not just roads. There are signals. There's crosswalks, there's sidewalks, there's storm drains. There are all these safety improvements. There's pedestrian facilities, bicycles facilities. All of these things we need to add up. And you can say we call them the essential components. They're about $27.8 billion in needs. Next slide.

The active transportation is really important. It fulfills, I think, some of the state's goals in greenhouse gas emissions, where every city and county is in the process of encouraging more facilities for either bicyclists. You've seen it all over Sacramento. You've seen it in all your home cities and jurisdictions.

There's a lot of bicyclists out there, as well as pedestrian facilities. That is over $11 billion that needs to be for maintenance. And this, by the way, none of this is new facilities. It's just maintaining the existing facilities that we do have. Next slide. Bridges are the other big component.

I think some people don't always know that cities and counties own about half the bridges in California, that's over 12,000 bridges. And of these, more than half are more than 50 years old.

When I tell you that the design life for many of these Bridges was about 50 years old then, what I'm saying is that many of these bridges are coming to the end of the service life. So that's a concern. Not that they're going to fall or damage, but some of them have weight limitations on them.

Some of them don't meet current standards because they were built 50 years ago and they're narrow. So there are issues with these that require costs. Of that, half of them are also in poor or fair condition. And that is worrisome because if a bridge fails, it has significant impact on local communities.

They may have to travel 2030 miles just to get to the highway, especially if, you know, rural town or county. So those are concerns for those bridges. Next slide. The needs are about $7 billion. Let me mention that in addition to all these needs, we've had several challenging things happened in the last few years.

Construction costs have gone up about 30, over 30% just in the last four or five years. Part of it is due to Covid, part of it is due to inflation. But all these things combined have added to more expensive repairs that were not accounted for when SB 1 passed in 2017. Next slide.

So let's take a look at the financial portions. I've kind of just given you foundations. Next slide. And there's a table here. Oops. Go ahead and hit them. The numbers are not showing up. Whoops. Back up.

Okay. I'm not sure why the numbers are not showing, but what I wanted to share with you was that there's total needs of about $120 billion. The funding is about 57 billion. So we have a shortfall of $70 billion in over the next 10 years.

When we look at that real red box, what that little red box says was about 54 plus, plus or minus billion. What essentially we are anticipating now is that the decline in the gas tax that all the previous speakers have said, it erases all the gains that SB1 has.

That was about 1.2, $1.5 billion a year for cities and counties. We're not going to see that. And we're going to go back to where we were 567 years ago, before SB1 was passed. So what does that really mean? Next slide, please. So the first thing is roads are going to get worse.

We're predicting that probably about a third of the road system that's 50,000 miles, plus or minus. It's probably going to be in poor to failed condition. And I've got a picture of what that looks like. 4,000 bridges, half of them, excuse me, 4,000 bridges are probably going to need replacement and the funding will not be there.

And then all the other portions that we talked about, the safety components, the signals, complete streets, pedestrian, bicycle facilities, none of those are going to be able to be maintained. So these are very significant impacts that we're forecasting with the decline of the gas tax. And I think I have just a couple of slides left.

This next slide is a picture of what a road in poor condition looks like. I took this picture just last month after the last storms that we had. Winter can do horrible things to roads. Atmospheric storms really have a big impact. This is in a neighborhood where those homes that you see are $2 million homes.

And look at the roads. This is not a situation where it only affects poor neighborhoods. It's affecting neighborhoods all up and down the social economics class in California. Every agency, city, county that we have has some bad roads right now. Next slide. So we haven't even begun to quantify the impacts of climate change.

This is a big, big issue for us. I have three some examples. One is the wildfires. These are the wildfires from 2022 over in El Dorado and Placer County. The impacts we estimated was about $60 million just on the roads alone. And it's not the fires. The fires don't damage the roads.

What happens is the firefighters have to go through on these rural county roads or could be City roads that were not meant to withstand those traffic. The biggest impact is from debris removal. Suddenly you have huge trucks coming in and out to remove the burnt either structures or trees. And that damages pavements.

And then the last thing is you saw what happened in Santa Monica after the fires. As soon as the rains come, you have mudslides, it washes out roads. Those roads needs to be repaired.

In Santa Cruz County two years ago, when we had those series of atmospheric storms, in one month in January alone, they encountered over something like $70 million in storm damage. All the SB 1 funds got sucked into repairing that damage. So I think those are huge impacts that we also need to quantify.

The second picture is impacts of periodic flooding. You saw that also happened with Tulare county when the rains came a couple years ago. This is actually in Sonoma county where they actually built roads with the expectation that they will be flooded periodically during the winter. That does damage them and they need to be repaired almost every year.

And then the last picture is even in agencies where you might not think it's subject to periodic flooding. That's San Diego last January when we had those storms hit and huge damage again. So climate change is happening. We're seeing those impacts. It's affecting the transportation system. We're only just beginning to quantify what those impacts are.

And that's added to the $120 billion that I just, you know, told you about in the first few slides. Next slide. So I think that I just want to kind of set the case for the local, the 539 cities and counties. Happy to answer any questions that you might have.

Thank you. This panel is very informative and a great way to end. As we head towards questions, I have three people in the queue. And so if you just get my attention, I'll be scanning as, as we go through those first three people, starting with Senator Blakespear, then moving to Assemblymember Ransom and then Senator Richardson.

Yes, thank you. Well, thank you, Chair Wilson, and thank you, Chair Cortese, for convening this. And I'm grateful to the panelists who came today to speak with us. My name is Catherine Blakespear and I'm the state Senator representing parts of northern San Diego County and Orange County.

And I previously served as the mayor of my City of Encinitas and was the chair of SANDAG, our COG in San Diego. And I am now the chair of a Subcommitee on LOSSAN rail corridor resiliency. So.

So the rail corridor that runs 350 miles from San Diego to San Luis Obispo, a lot of it along the coast and was referenced in the remarks earlier. I appreciate your reference to that. I think there I had a couple of comments and then I wanted to end with a question.

So one of them is that the money that we are using on roads, we also have a lot of revenue that goes to transit and needs to go to transit. And there are things that go back and forth between the two pots.

So if there's a highway lane, that becomes a bus only lane, that becomes a transit lane. And we also have a substantial amount of the greenhouse gas reduction Fund, GGRF, continuous appropriations. 40% of that is going to rail and transit in the state.

And there's a lot of money and we need to make sure that it is going to the things that are the highest priority for the state and for the Legislature. And we recognize that revenues have been declining for a long time.

So I think when I served in the local role, which was three years, five years, seven years ago, I was hoping that at the state level we would be moving forward with some proposal that would be funding transportation in an ongoing, sustainable way that wasn't reliant on the gas tax and wasn't reliant on the General Fund for the state.

And we haven't seen that emerge. You know, I think we're in our third study of, of a per mileage fee or some assessment of a different way. There's congestion pricing, you know. And so I think it's important to recognize that we need to move from problem identification to solutions.

And so I wanted to ask this panel if there are things that you see as most likely. And I say that in the context of recognizing very much a concern about affordability from the state Legislature this year and in General and particularly from voters, and a reluctance to approve gas taxes.

You know, gas taxes can be, are very, can become very unpopular and very much a lightning rod. And we've seen that when we in other contexts. And so I just wanted to see if there's, you know, a political litmus test that you're doing on what might be possible.

And then also one last before I turn it over to you to answer that, I wanted to just also make the point that for the Sacramento, the effort to get a sales tax measure passed, if you had a local organization that was willing to put it on the ballot, you wouldn't have to get to the 2/3, you could get to 50 +1 and you might be more likely to get a passage.

So I hope you're Considering that as an option in the future. And then I guess one last thing, sorry, I just remembered I wanted to say this, is that transportation, like a lot of areas, is currently having to bear the, the brunt and burden of a crisis in unsheltered homelessness.

So the amount of time and energy spent on transit lines, on transit stations, but in the Caltrans right of way and making sure clean California is part of this initiative, but making sure that people are moved out from places that are unsafe and unsanitary and they're connected with services and we're managing mental health problems and all of the attendant realities of the unsheltered homelessness crisis.

I think it's also taking up the budget which could be spent on paving roads and these other critical things and being able to name that and put a value to it and identify it is a really important piece towards solving it and toward identifying just the huge problem it is for us at every level in the State of California.

So with that, I'd like to know what you think is the possible future solutions that you think are most viable.

Okay, I'll start. Those were great questions. So I think, I mean I.

Can you move the microphone closer to your mouth?

Yes, yes. Or I'll just move closer to it. Professor Brian Taylor, who had to leave I think said it really well when he talked about user fees. Right. So we've had a history in transportation of the more what you consume, what you use. Right. There's a feedback mechanism there.

The problem is that it was based 100 years ago off a thing that we're no longer doing as much. Right. Which is buying gasoline. So I think perhaps everybody's aware the road uses charge.

I mean so something to the equivalent of the more you use the system, the more you pay and the longer we wait to do that, the harder it's going to be in terms of simply having a revenue neutral and a one for one switch over. We hear you.

Because in this region, affordability and the cost of travel, this is a, the greater Sacramento region. We're a very price sensitive region. Right. We don't have a lot, there's not a lot of high income earners who are looking to pay a lot on a user fee or a toll or anything else.

We actually don't have any toll facilities, but we're about to about to build our first. And so I think we have to look at some kind of means based programs to look at low income travelers and the, you know, the folks that are going to really.

It's going to hurt the most in terms of those, those, those user fees. I think we have to get kind of serious about that. What I would offer up in terms of the regions right.

In all your different regions around California, whether they're single county, regional transportation planning agencies, a lot of them, or Multi County, like, like ours and many others, is let us, let us in to be part of this solution.

Let us innovate with you so that we can actually help shape some of these programs that will make it work. Look at those discounts and the means base that we can make it work and right size them for sort of the demographics and the populations we're trying to serve.

The only thing I'll add to what Director Corless has stated is that the most important thing for us on a statewide basis is to stop the bleed and to make sure that we have those revenues when we need to be able to achieve the state's goals and to look at all those things to Director Corless point about how we balance our goals across all of these things.

Right. We have to think about how we invest each of our dollars to achieve more goals. And that's the importance of collaborating not just with the Legislature, but across our regional and local partners as well.

Frank Jimenez with the Legislative Analyst Office, we did a report two years ago looking at this issue and there are many options in front of the Legislature, whether that's looking at its current fuel taxes and fees and increasing them, shifting transportation costs to the General Fund, reducing transportation spending on certain programs and prioritizing programs that are of high priority for the Legislature or implementing new charges such as a road charge.

And I think having these oversight hearings is important because it helps identify what the issue is. As everyone on this panel has pointed out that revenues are projected to decline over the long run. So we see this impact coming and understanding what are the Legislature's priorities and how best to Fund our transportation system.

If a road charge is something the Legislature is interested in doing these hearings now, it's when would something like that be available for the state? I know that's part of future hearings, but it is something for the state to think about over the long run.

If it's not ready to be implemented next year, it's what are the alternatives we can do in terms of a short term plan and a long term plan. So I think that's where these hearings have importance in identifying, you know, what's available for us today, what's out in the future and thinking about, you know, what's.

What can we implement now to sh up revenues and then if there's something that can be transitioned to in the out years, thinking about what that plan is.

All right, thank you. We're going to go to Assembly Member Ransom, followed by Senator Richardson, Assembly Member Rogers, Chair Cortese, Senator Seyarto and Senator Archuleta.

Thank you, Chair Wilson. Well, first I want to thank Senator Blakes fear for her comments because they were very similar to my questions. And I'll just kind of start with my comments, which is in regards to the gas tax. I think we all know that this is really unsustainable.

And so, and we're just seeing, you know, just regular everyday people having an outcry because so many different things are impacted by the gas tax and it's, it's impacting additional costs throughout our state.

And so I guess what I would first like to know is what does your data say in regards to the, the fact that the gas continues to rise and that is causing people not to want to use gas? How is that actually impacting the decline in revenue?

Are people just voting with their feet, so to speak, and saying, you know what, I'm going to find another way as opposed to, you know, dealing with the, you know, the gas, the, the amount that they have to pay for gas? That's a question that I have.

And then I feel that this gas issue is very similar to what we're seeing in a lot of local governments where we're constantly paying for deferred maintenance, like the things that we're. The money we're getting today is paying for old problems. Right.

And so what we're seeing is really innovative strategies where we're coming up with like lighting districts or parks districts where people are paying for their own usage and impact on different areas. And, and so I'd like to know what.

I know you've talked about some tools and some different ideas, but where else in the US where are we seeing this done better than what we're doing? And are we looking at any of those solutions and options? Because I did hear your presentation. I definitely appreciate your time and your expertise.

But I'm looking to find what are some viable solutions that we can actually start to look at that will be sustainable as opposed to us continuing to have a transportation ponzi, so to speak, where we're just kind of, you know, using this person's money to pay for that person's problem.

Maybe I'll take a help at that. I think fundamentally we're at the point in this, in this state where we need to change the funding mechanism. I think you've heard that from all the panelists. We need to change it. And I don't think California has to do it alone.

There are lots of other states who are in the same situation. And also looking at other mechanisms. For instance, the road funding mechanism. Oregon's done pilots as well. We've looked at some of the other states, like Connecticut. They've also projected declining gas tax revenues. And let's not just say that the solution is just in this room.

I think there's others. If we were to look outside of the United States, gas prices are probably almost double what they are because there is. But that's not sustainable, I think, in the United States.

So I think we need, when you go to a user charge, everyone I think is in agreement that that's equitable, you pay for what you drive. But there has to be some exceptions, probably in rural areas where the commute is, you know, 30 miles before you get to the nearest town.

Well, how do you consider those, those type of users? I think there are exceptions and that can be done. I think we're a creative state. I think we can figure it out. But we do need to figure it out and we don't have much time.

And are people declining gas because of the cost? Like, how is that? Is there a correlation in your data?

I don't have that kind of information, but it's a very good question. But I don't know. My guess is probably yes.

And maybe I'll add and maybe as an anecdote. So we don't have the data right now for what is happening in real time because we usually are lagging on data. But what we do have is past trends. We've seen gas prices go as high as $6 in the State of California.

We did see people choose to take alternative modes. They chose to take transit, they chose to walk. And that did have an impact on gas tax collected in terms of how much gas tank is collected.

It's a product of how many gallons of fuel are sold because the price of gas doesn't affect the rate of the gas tax collected. And so that's, that's one of those things that is going to continue to be analyzed and understood as we're kind of looking at how we, we meet all of the goals of the state.

Yeah. Just to add to your last question on what other states have done. Everyone in the US all states. This is an issue that they'll all have to grapple with a lot of transportation funding at the state and at the federal level is dependent on, you know, fuel taxes that are charged per gallon.

So it's an issue that all states are looking into. Maybe in California these impacts are a little bit more front loaded just because we have aggressive climate goals. But we do have solutions in terms of fixing this issue over the long run.

It's just determining, you know, the legislative priorities and identifying the solution that works best for our state in our context and what we looking for in terms of, you know, collecting revenues from people who do drive and use our road system.

Okay, now we'll move on to Senator Richardson, followed by Assembly Member Rogers.

Thank you, Madam Chair, and both chairs for conducting this very important hearing today. I have a few questions. My first one is, is there data pre 2020of the number of vehicles vs number of vehicles being driven vs current 2024? And is there data to identify the difference between EVs vs gas?

Because all the data seem to talk about the fuel, but not the actual vehicles themselves.

Maybe. If I can restate your question just to make sure I understand. So you're looking to understand whether there's vehicle on the number of vehicles or how much gas is being consumed. Can you maybe clarify your question for us?

Sure. I was actually looking at the number of vehicles I've read, and I don't know if it's accurate. You're the more experts on this issue. But I've actually read that the a purchase or lease of EVs has actually gone down. It has not gone up over the last couple years.

So do we have any data to show how many gas vehicles were in operation versus how many EVs over the last three to five years?

I don't have that data, but I'm happy to follow up with you and work with Department of Motor Vehicles and the California Air Resources Board to get that data for you.

Thank you. Perfect. And then my second question is similar to the gas tax, is there a fee for other fuels such as electrical charging and hydrogen? So I don't know if it's so much with the increase of EV vehicles that we have less vehicles driving or is it just the different types of vehicles? So is there a fee or a tax for electrical charging or hydrogen that could go in this state Fund to assist with roads and highways?

Frank Jimenez with the Legislative Analyst Office. The state doesn't have an equivalent tax on electric vehicle charging or hydrogen that funds its transportation system. That is definitely an option that the Legislature has in looking to increase revenues.

There are some trade offs, at least on the electrical vehicle charging side, it's just because currently and in the future so much charging is predicted to be at home.

And that's a very difficult place for the state to collect revenues because that would require the state to, you know, add infrastructure that can read the amount of charging that someone does at home specifically for their vehicle.

The public space is a little bit easier to implement that type of collection, but it's projected to be a small amount of total charging in the state. And then on the hydrogen side as well. Hydrogen fuel cell vehicles make up a very, very small portion of the total ZEVs in the state.

So there are options to create revenues from it, but it's would be difficult to either get or at the same time a very small portion relative to the dollar amounts that we generate from the gas tax.

So the answer to the question is no, we don't charge a fee for the other technologies. However, there might be challenges. Okay, and then my last question is on page three of your report, Mr. Jimenez, you state that there's a vehicle fee for commercial battery operated vehicles, but not for passengers.

Was that, was I correct in reading that again that there's nothing for the average driver of capturing any of the fees, just commercial?

There are weight fees that are charged to commercial vehicles and those are to capture vehicles that drive in the state that carry heavy loads. So that's for a specific class of vehicles. On the zero emission vehicle conversation, there is the road improvement fee, which is an annual fee charged to zero emission vehicles that the state collects.

It's around $118 currently. So that's that portion of the state's fees and taxes that try to capture some of the lost revenues that zero emission vehicles don't pay related to the gas tax.

Could you provide more information about that to the Committee?

Yes, of course.

Thank you. No further questions.

Thank you, Senator. Now moving on to Assemblymember Rogers, followed by Chair Cortese.

Thank you so much, Chair. Ms. Yapp, just a quick question. So I served two years as the chair for the Sonoma County Transportation Authority and Regional Climate Protection Authority. And typically when we talked about road needs, we talked about the degradation curve for each of our roads as well.

Your analysis of the needs for California, how did you account for things becoming more expensive the more that we allowed them to erode?

Sorry. As roads deteriorate, it costs more. So that's one factor. And the other, of course, is inflation. If we're going to project it over next, let's say a road that may only require an overlay. Right now, if you don't do anything.

You defer maintenance five years from now may require reconstruction and reconstruction may cost three times as much. So that's. We factor that into the analysis.

So when you said that over the 10 year period, the amount of money that we brought in from SB1 would be wiped out by additional needs, does that take into account that degradation or is that on top of that, that we're actually talking about further eroding, even further than what we had from SB1?

It's on top.

On top of that. Thank you. And I just wanted to make a comment. I really want to appreciate and punctuate the point that you made around fire damage and the debris removal impact to roads.

I served on the City Council in Santa Rosa and after the Tubbs fire, Coffee park and Fountain Grove both had their roads completely diminished just from the heavy vehicles that did the debris removal.

And FEMA actually looked at it and said that we couldn't prove that it was as a result of the debris removal mission and that it was separate from the declared disaster, which was fire, so they wouldn't actually pay anything towards those roads being.

The CHP had an account for new road that we were able to access to get some of that funding. But it's certainly something for LA Members to take note of that FEMA is unlikely to pay for the debris removal missions. Damage to roads.

Right. Very familiar story.

Thank you. We'll be moving on to Chair Cortese, followed by Senator Seyarto.

Thank you. Chair Wilson. I actually have three questions and let me just start with congestion pricing and maybe Mr. Corless can respond to this because I think you alluded to the issue of, you know, user fees.

Anything that's going to try to derive revenue from the use of the roads themselves is something that we would need to move in on pretty quickly.

Part of what I've seen about that in regional government, for example, is that that space is quickly being occupied and therefore the revenues in terms of sources and uses is being dictated by those who are collecting it, whether it's a regional, an MPO or whether it's in my county, the vta, how urgent is it for the state if it wants to create a uniform program for road user charges like that to get in there quickly and start legislating on it.

Chair Cortese, I mean, as you've heard from all the panel, and I think you understand, right, the revenue is declining. Right. And the speed, the speed of that decline, I think is. Is a good question, but it is definitely declining. So if you, if you just go to A revenue neutral user fee and make that switch.

The longer you wait, the less revenue you will have.

That's what you were alluding to. What I'm, what I'm alluding to is the fact that the longer you wait, the more somebody else is taking that revenue and the harder it is to go in and take that away from them.

Yeah, I don't know if you see that as a problem or if, if anyone on the panel sees it as.

An issue to be taken, but yeah, no, I take your point.

On the subdivision roads. That slide was pretty compelling. I have a similar condition of a road that I live on right here in Sacramento. I won't get into specifics, but it's definitely already to the reconstruction stage. I know that just from my local government experience, you'd have to go down 4 inches now instead of just pavement maintenance.

I don't know how many roads are like that in this area.

I know the City of San Jose, which I served and also, you know, continue to represent in this position as well as on my position on the County Board of Supervisors at 1.0 was about $1.0 billion upside down on that kind of pavement maintenance, local pavement maintenance, ostensibly because the funds were fungible to the General Fund, in effect to call back and use for other things, especially starting about 15 years ago, you know, with the so called Great Recession, do we need to legislate, if I get this is about let's go find a source of revenue, but do we also need to legislate guardrail, so to speak, so that locals can't come in and repurpose those funds and end up right back in, you know, in this massive deferred maintenance kind of a situation.

Just your opinion, if you, if you care to share it.

My opinion's yes. I remember around 2010, 2012 when we had the recession and the state had a large deficit and they were going to borrow some of the gas tax funds and then pay the locals back later.

And we went through a lot of effort to try and protect those funds, but, but I think that situation could happen again. Other priorities in the state could perhaps create a situation where again, transportation falls to the bottom of the list.

Yeah, I think the local government, again, you can call it whatever you want. A shift, I guess is the nicest word I can come up with.

It would be pretty devastating if we went to the work and spent the political capital to, to come up with a source of revenue that begins to attack this overall number, this overall deficit, only to have locals start shifting that, you know, somebody mentioned homelessness. I think Senator Blakespear mentioned, you know, all the different competing factors.

So I would just put a vote out there for whatever we're going to do. We need to make sure that those funds are not fungible, if you will, between local government uses particularly, I think the state, obviously we can control a lot more easily just by conditioning money in the first place.

And then lastly, I feel like asking this to the lao, and it's totally unfair to ask any of you in a sense, because it's sort of a political question. But the history of the Legislature is littered with political casualties, those who have stood up for a gas tax that, you know, weren't here a year later.

It's been the third rail. There's no question about it over the years. It's not to say that the public doesn't shift. I know that a majority of the states, including red states, have actually been able to increase their gas tax while, you know, it seems to be such a pariah here in California. Are you aware, any of you aware that of where public opinion starts to fall in terms of selecting, you know, what is going to be palatable here?

It seems to me that the road user charges, having served when they weren't in existence in the Bay Area and then having, you know, chaired the Metropolitan Transportation Commission and then having seen what I see now somehow survived any kind of, to, you know, political criticism of, of any significance.

You know, I hate to say that maybe someone's going to start campaigning against me on that issue, but, but most, but, but many of these other sources of revenue, again, are, especially the gas tax or a, or a fuel tax of any kind seems to, you know, just be a political third rail in California.

Any suggestions on that? I'm not asking for campaign advice. I'm asking for what do we know about the tolerance of, of our own consumers. Maybe that's the way to ask it. And the LAO has seen any history on that. Please pipe in.

I'm an engineer, so, and I'm not a politician, so I can't say that much. But I will say one thing. When SB1 was passed, I was anticipating that there will be an outcry from the press when those, you know, gas tax, gas prices went up, think approximately maybe 50 cents a gallon at that time.

I didn't see a single headline in the newspapers about it.

I think when people understand, and I'm, as a voter, if I understand that that money is going to go towards fixing the road outside my street, I'm a lot more supportive of that than if it was to go to the General Fund, where I may not know where it is.

I think if funds, whether it's a sales tax. I live in Oakland, by the way, and I've passed parcel taxes. I voted for parcel taxes that impact me personally because I know it was going to go towards the transportation network. I think most of my colleagues and my neighbors are also supportive of it.

So that's what I can add to the conversation.

Well, and I appreciate that you're an accountant and being a former business person, in fact a current business person, but a politician first and foremost, I can assure you that there have been what I would call political casualties as recently as the last election cycle based on the lack of tolerance for what people perceive to be an increase of the cost of fuel that they want to blame the Legislature for.

So I tend to veer away from that particular source. And I understand what you're saying. I think those of us who are on the inside and understand the, the actual fairness of those fuel taxes, you know, are. Have a different mindset. Have a different mindset.

I support them like you do, but it's not what I see in my district.

In our development of our long range transportation plan. We've done some focus groups, I'm sure many people have in the last year. And the word that you just said, fairness, I do think is evidenced by some of the questions on from the dias.

I think the public is beginning to understand that there's a lack of fairness right in who pays in. And as our vehicles become more efficient, EVs sales are going up, that is going to grow. So I would only want to go out and do that research.

But I will tell you, in the focus groups in this region, people have already begun to take note that there is a lack of fairness on who pays and who benefits.

That's good to know. Thank you. Thank you, Madam Chair.

Thank you, Senator Seyarto, followed by Senator Archuleta, followed by Assemblymember Lackey.

Thank you very much. There's a lot to digest here. I'm not an engineer and hardly will lay claim to being a great politician, but what I am is a consumer like the rest of the world out there and most of my constituents who have gone through this cycle of raising gas prices and things like that.

I also moved out to the Riverside area before we had our housing boom because that's where I could afford a house. And so when we start talking about fairness issues, essentially when you're talking about user fees and mileage fees, you're talking about people that had to move out but still have to commute back into work centers.

And if they're going to pay the most because they did the sacrifice and had to go move out to where their house is not going to be worth $2 million in a couple of years, where's the economic fairness there if they're going to pay the most for having to be forced to move out where there's no job centers?

So when we're looking at this transportation issue, one of the things that comes to mind is this question. Is there a difference in what it costs to build a road in California versus what it costs to build a road in, say, Arizona or Nevada?

Depends on which part of the state you're in. If you were in Los Angeles, I would say yes. If you were in Imperial County, maybe not that much of a difference. It's just we're a large state. There's a lot of different.

Right.

So talking to the people that actually do the build that road, traffic that build roads because of our regulations, because of our costs on all of the things that we heap into the equation, including labor costs, legal issues, all of that, our roads cost about three times as much to build the same amount of road as they do, and we use inferior materials.

And so when you talk about where people are frustrated and why they don't want to pay those user fees, or they question why they're paying a higher tax for gas and things like that, this is where they get confused and this is where they come off the rails.

It's when they're going up the 215 freeway and by the time they get from Moreno Valley down to Murrieta, they need to go to the dentist because the road is so bad and there's no hope for them on the horizon that their roads are going to get any better.

And so there's a lot of money that is being collected already, but they're not seeing the benefit for that. And if they're not seeing the benefit, they're not going to want to pay more taxes for it.

So somehow we've got to figure out all of these different pots of transportation monies and what they go to and figure out how much people have to pay. Because people are willing to pay for stuff, but they're not willing to pay for stuff that is inferior.

They're not willing to pay four times as much for something that somebody else across the state border gets for. You know, like it's four times less. They start to question that. So a lot of Our issues are self inflicted wounds. One figure you threw out there was $130 billion. What's that figure?

The total needs of this whole system for the next 10 years for the local roads.

So it's $13 billion a year. Would that get us all the roads we need?

It would put them in really good condition.

It would put them in really good condition. So, you know, somewhere we have to figure out how we get that. You know, we have 39 million people in California and shrinking or growing, whichever one, whichever news you want to watch. But there's a number there that is fair for everybody.

Because even if somebody doesn't have a car and doesn't travel on the roads, you know what they call 911 and somebody has to drive on the roads to get them. They go to the store or, or they have somebody go to the store for them and there's a cost for that.

They have to have roads, they have sidewalks to walk on. So all of that, the fairness issue is something that the more you heap on the people that are spending their four hours a day in the car and they don't really want to, because really they don't. They don't want to spend four hours a day in the car. And if we're going to heap all the cost on them, there's two things that happen.

They'll either move out and then you have to worry about their tax input, which a lot of our young people are doing, by the way, and, or they're just not going to, you know, be able to afford other things in their lives. And we don't want to put them in that situation.

The EV situation, you know, the EV programs have been fairly new and now we're starting to see the bumps in the road, how to replace an ev, what you do with the old battery and how much it costs to do that, and the fact that they're heavier and so they do as much damage to the roads or more than gasoline vehicles, a lot of people are not going to be enticed, as one of the slides there earlier showed, to jump out of their vehicle and jump into something that is approved by whoever the planners are, the world for them to be transported in.

They're not willing to give that up and they're not going to. So somewhere we have to figure out, where do we get $13 billion, we make 44 billion of it to fix our roads and take care of all those transportation needs over the next 10 years, you said. And there is a way of doing that.

Probably you guys get Somebody gets to figure that out. But it can't be through fees that are unfair to large portions of the population who are forced to go out and live where they live and drive, how long they drive.

And when they're doing that, they sure would like to drive something that they want to drive, not what they're being told to drive. So, you know, those are some of the things that I see as probably some of the obstacles in what we're talking about, transportation wise.

Would really like to get a grip on making a little bit more simple for people so they understand, hey, I'm giving this much, and this is what we're getting out of it.

And then they actually see it happening, because right now we have some transportation projects been sitting in the hopper for nine years just trying to get through a regulatory system, and it's an important, important project, and yet it can't get through. And in the meanwhile, it's gone from being a $20 million project to a $49 million project.

That's what people are sick and tired of. So if anybody was wondering why people don't want to do it and why it's such a politically unpopular thing to do is go support more of what has been happening to them and not seeing the results, that's it. So, anyway, thank you so much for your expertise today. I really do appreciate trying to clarify this for us all.

But it's a lot of stuff that I think some of us know and maybe some direction for us to start thinking about if we really want to solve this problem or if we just want to figure out how to shuffle the deck to try and get more money without knowing where that money's going. Thank you.

Thank you, Senator. And that is why we're doing these types of hearings, to get us all on the same page so that we can get to the solution part. Moving on to Senator Archuleta, then Assembly Member Lackey and Assembly Member Macheto.

I'm gonna try and make my question pretty brief because I know we're trying to get out of here, but I thank you all for being here. Your expertise is amazing. And Madam Chair and.

And co Chair, thank you for putting us together, because the question I think the General public is looking for is, or the answers is, how can we lower fuel tax? You know, that's the thing. How do we lower the taxes or the cost of fuel at the pump?

And of course, puzzle is, how do we maintain our roads by making that adjustment? And lastly, my question also is, how do we equalize the. The people who drive the regular automobiles versus those that drive the EVs. The parity.

Because whether it's at the DMV when they're buying the car, or as you mentioned, at home or charging it in the infrastructure, we've got to find a parity between both. So your answers, please.

I think that's a very important question that we're going to have to continue to wrestle with. Right. Because the, the reality is, is that too many of your comments today, we can set a system that is very high and probably not politically palatable. Right.

We can set a system that is middle of the road, maybe a little more political palatable. We can set a system that is political, politically palatable. But maybe the thing that is the most comfortable, maybe it doesn't, and I don't have the numbers in front of you, but maybe it doesn't meet our safety needs.

And so it's this delicate balance of what is a safe transportation system that moves people in the ways that they need to be moved in order to get to their jobs on time and can put groceries in their cars and be affordable in that balance with how we pay for it all. And that's, that's the real challenge. I don't have a great answer to that question right now. Right.

That's the question that we're going to have to wrestle with over time is what is that threshold that ensures that we have a sustainable funding source, but also ensures that as we're maintaining bridges, our bridges are in good repair, our roads are in good repair because we also don't want potholes that are taking axles off of cars or those different things.

And so as we continue this kind of discussion moving forward, I think your question is a very valid one and a very one that we'll have to keep at the top of our minds.

I would just say, I think, you know, it's a lot of what we talked about this afternoon, right. Was, and I guess in our minds is a, is a user pays principle. In other words, the more you use the road, you pay for it. Right. And we've gotten further and further away from that user pay principle.

I'd also really recommend, and perhaps you can do this again through your, through your counties or your local transportation agencies is really just some good research about where, who's driving what kinds of vehicles. We did some here in this region and we actually found that people who were seemingly making the longer trips. Right.

So if you pay by the mile, you might pay more. We're actually in less fuel efficient vehicles and paying a lot right now in the gas tax because while everybody feels the pain of the cost of gas at the pump, very few people could actually tell you what they spend on the gas tax on a daily basis. Right. That's a hard one to calculate.

So there is, I think, some really interesting data to show, again, I think the longer we wait, this fairness curve is going to become less and less fair by the people who drive the most fuel efficient vehicles will pay the less, and the people who drive the most miles and less fuel efficient will pay them more.

And I don't think that's the system you want to get yourself further down the road on.

Madam, I'd like to hear you're such an expert. I appreciate your input.

Well, I'll give an example. I started the conversation by saying this is really a policy question of the math grade, right? What's acceptable and what's acceptable to our residents. And we have a really big spectrum of opinions.

When I was working out in the Central Valley on one of the more rural counties, and I went to the Board of Supervisors and I told them, you need X dollars. And they said, what? What are you talking about? I said, well, there's a solution.

I said, you could take up 400 miles off your network, strip it out, don't own them, don't maintain them. You know who they serve? They serve the agricultural community where the farmers drive, but there's nobody living out there. They're just miles and miles of roads that go into farms and maybe a couple of vehicles a day.

As a public agency, do we want to own and maintain those roads? And they said, that's a very good point. The 400 miles of roads that we don't need to own and maintain, that would cut our costs down. That is a solution you can look and see.

And I think here is public works, cities and counties, particularly as an agency grows and Riverside County is one of the fastest growing, we automatically assume that when a developer builds a subdivision that the city must own it and maintain it without any idea or any consideration of where the source of revenue is.

And we've done that automatically for years. I think that's a good question to bring up. Should we do that as a public agency? The other I think, though, is that, you know, both Tanisha and Dave are right. What is palatable, I think will be different in the regions.

But I think at the end of the day, we have to say what is acceptable. Maybe we're not going to get a Cadillac for our road system. Maybe we'll be okay with the Chevy. Let's figure out what the cost of the Chevy is and then figure out, okay, how can we make it equitable?

It's never going to be perfect. And I, I heard loud and clear the opposition that there will be, that the public will have, and we're all Probably a little bit tax fatigued, you know, especially with the last few years of inflation. But I know these are economic cycles that come and go.

When SB1 was passed, nobody thought it could be done, but it got done because we put a lot of effort into communicating to the public. And I don't know if you remember seeing all these signs everywhere on the freeways, on the local agencies, your tax dollars at work.

This is where SB1 money, I think a lot of it is communication. People are willing to pay for roads if they can actually see the money come back to roads. But we have to make the case that it will come back to roads. It will affect the road outside my front door.

Sir, would you chime in?

Yeah. I think everyone's brought up very important policy questions that the Legislature will have to grapple with. I think just at a high level, an average internal combustion engine vehicle will pay around $300 in gasoline excise tax in a year. The road improvement fee, which is paid by zero emission vehicles each year, it's $118.

So there's that delta there that over time, as more vehicles shift to zero emission vehicles, that's a delta that's not being made up, you can increase the zero emission vehicle fee to make it, you know, equal in terms of aggregate what people are spending each year.

But by increasing the road improvement fee, you're getting away from the state's traditional system of collecting transportation revenues based on usage. So if I'm driving a zero emission vehicle and I'm now paying $300 a year, if two people are driving different amounts, they're still paying that higher zero emission vehicle fee. So you get into questions on fairness.

There's, you know, If I'm driving 300 miles a day versus 1,000 miles, you know, a day, or, you know, the day probably doesn't work out there in a month, but still it reaches that question on, you know, fairness.

And I think what kind of gets lost in this conversation as well, we talk about, you know, this transition to zero emission vehicles, but there's also a decline in revenues due to increasing fuel efficiency in just conventional vehicles. So those that do consume gasoline.

So it's getting hit on both ends that transition to zero emission vehicles and also just graduating greater fuel efficiency amongst internal combustion engine vehicles.

Thank you. I appreciate your input.

Assembly Member Lackey, followed by Assembly Member Macedo.

Well, thank you. I think I don't have any questions. I just have a plea and a pleading primarily to my colleagues. And I think what's not. Well, Mr. Jimenez, kind of touched on it. It's about ability to pay.

There's no question that someone is going to have to absorb the cost of what we have to accomplish in order to have safe, better roadways. But what we're considering way too heavily from my perspective, is a regressive tax consideration, or as I learned a great new term, Pigovian tax. Right.

It's actually a sin tax, apparently, because what we're asking to strongly consider is a gas tax plus a road usage charge to the people that can least afford it. I represent a primarily, mostly a rural community. Those people drive out of necessity, not out of convenience. They have to drive a distance.

My colleague, Senator, kind of explained the circumstances on affordability. We claim that that's a strong consideration for this legislative body. This is a chance to prove it. These people need to be understood that they have limits. The average over half the state drives a car less than five worth $5,000.

Folks, that ain't the people that drive an S. These zero emission vehicles far different. So why in the world aren't we making them carry the majority of this burden? There's a way we can do it. There's multiple ways. All you have to do is look at other states and some of the considerations that they're addressing.

These zero emission vehicles, they're the ones that need to carry a big part of this burden. And right now they're carrying even less, as was indicated by Mr. Jimenez. That is an inequitable system. Why in the world is it okay? In my opinion, it's not okay.

And the other consideration of creating a greater burden to the people that can least afford it, why in the world are we considering that it's an affront against fairness. And I hope that we will collectively discuss the realities of what people can afford and what they can't afford, and those who can need to bear the brunt.

And we're not doing that. So I hope we as a body will actually consider that in a. In a more realistic way, because the public deserves that. Thank you.

Thank you, Senator Lackey, for your comments and because you made them to your colleagues versus the panel. I'll follow up and just be absolutely clear that our discussion today is not about the solutions to this problem. So there is not a consideration of any form of programs to address the declining revenues.

What we're talking about today is to have every Member of the Committee in both houses on the same page about what exactly is the problem, so that we now can collectively consider.

And when I say collectively, not just the Members of the Legislature, but all of our stakeholders collectively can consider what is the solution for California, as you noted, the sin tax or the Pigovian tax, you know. Mr. I believe Taylor was it, Mr. Taylor, Dr. Taylor, excuse me, brought that up, that that's what we're moving to now under our current system. And so we have to find a way to address that.

And so that it is something that is based on usage, which it currently is, especially for those who live in rural areas, or as Senator Syrto eloquently put that more and more people are having to move farther and farther away from job centers and other things just to have affordable housing.

And that's why this Committee has taken it on as a priority, or on the Assembly side at least, is how can we address this issue of housing affordability where it intersects with transportation. So that will be a major focus of mine as chair. And so I appreciate those comments. They're duly noted.

And as we get through the series of hearings that we'll have to get everybody on the same page and then focus on the solution. I'm sure that will come up multiple times, and I look forward to your comments multiple times on that. With that, we'll turn it over to my colleague.

Thank you so much, Madam Chair. So Assemblyman Lackey kind of took a lot of what I was going to talk about from rural areas, but I do have a quick question. When we were talking about the infrastructure that's reaching its end of life, have we done any legal analysis of the liability that we are open to if for some reason these structures fail or create harm to the public?

So as we assess the needs of the transportation system, we always prioritize safety first. And so that's the first thing we Fund with all of our Fund sources.

If there is a if there is a road, if there is a bridge, if there is a transit system that is unsafe, we will Fund that to make sure that it is safe. Because safety for the traveling public is most paramount.

We spend billions of dollars just ensuring the things that you are talking about are funded and that we don't have bridges flow. We also we've talked about emergency repairs as well.

And so as those emergency repairs come out, one of the things that we have done at the Commission, which is very important to us, is we have actually delegated the authority to Caltrans to fix the roads first, make sure they are safe, and then come back and tell us how much they've spent to ensure that those products are moving quickly and that our process that meets every Six weeks is not the barrier to getting out there and getting things cleaned up and safe as fast as we can.

So based on that dollar amount, what is the absolutely crucial. We have to have minimum amount to make sure that we are not opening ourselves up to a public safety liability. Do you know that number off the top of your head?

I do not know that number off the top of the head. It fluctuates depending on the day and depending on what's going on in California.

Ah, same up here all the time. The point that I'd like to make is I would be curious if one of those counties that you talked about that are predominantly rural and agricultural are the county that I represent. Because that is truly the backbone of what we do.

And although I appreciate you trying to make things more efficient and seeing places that we can make cuts, I'd like to make sure that we understand that even if it's only a couple people using those roads, those are farm workers that live in areas that that's where the community's at, or they are the truckers or the services for the Ag crops, that maybe there's not houses out there, but there is farm.

Farm ground out there. So that we're taking into account the resources that we are using to get that product and that crop onto our dinner tables at night as well. To your point, that is something that terrifies me.

I drive a Chevy pickup truck, and I can't tell you how often I have to take my Chevy pickup truck that I drive out on those roads into the shop because of problems with maintenance. And I am blessed that I'm able to afford that.

The farm worker that is taking that to get to the Doctor, taking their kids to school, to the grocery store, and just to get to work, they don't have that luxury. They also don't have the luxury of purchasing an electric vehicle. And even if they do, we don't have the charging capabilities or the power to power something like that.

And I feel like in rural areas, because we do talk about only they're only used a couple times a day, take into account what they're being used for before our rural roads and our Central Valley roads, our agricultural roads, are dismissed because they are vitally important and time is of the essence for what we're doing.

We have crops that once we take them out of the ground, they are a perishable product that needs to get to their final destination. So these are all things that I understand, maybe it's nuanced where I live and represent are different, but it is important.

And when we're talking to the mayors of towns and I say, you know, if you had a magic wand and you could fix something in your town, what would it be? And their common answer is roads.

Every single time, whether it's in their city or connecting into their cities, it's damaging the Central Valley and once again, the people that can't afford those things. So I go back to that equitable that I know we're going to talk about. I just want to make sure that we're talking about the entirety of California, not just those urban areas that have high traffic volumes.

And maybe I can speak to that a little bit, is that I hear you and I see you. It is so important to make sure that we are serving all of California, not just the urban areas of California. I can guarantee you as a woman who started her career in San Joaquin county, the Valley is near and dear to my heart.

And they're, they're always one of those agencies and one of those, one of those regions that I make sure when we talk about things at the Commission like geographic equity and making sure that we're touching every vote to many of your points about the voters understanding that SB1, the gas tax, is working for them and being able to see the improvements that are happening in each of the regions, in each of the counties, in each of the cities of the state.

And so those are the things that we consider quite, quite frequently at the Commission to make sure that our goods can make it to market. Because what good is it to the economy if our goods are not making it to market?

What good is it to the Central Valley if the goods are not making it to the market and people are not able to get to their jobs or places that they need to be?

Thank you, Madam Chair.

Thank you. I'll ask a couple questions before we close. Just really quickly, Margot, you noted you articulated really well. And this is actually for. But Margot, you articulated really well the local need. And so I wonder, do we have that level of detail for the state and where would we find it?

Yes, at the state level, Caltrans does the state highway system management plan, which they look at the state highway system and project what are the conditions today and what are our performance targets that the state hopes to meet related to state highway system infrastructure over the next 10 years?

They project that the needs are about $11.2 billion per year and the pipeline of projects and funding they expect is 7.1 billion. So that creates a delta of 4.1 billion. And that's according to their most recent draft state highway system management plan.

So we do have that data at the state level in terms of, you know, comparable amounts of, you know, what are the current needs and what's that delta over time.

Thank you. And then Margot, you mentioned the 2025 PCI will be ready soon. Is there a time period that, you know, that'll be available Okay, so 26, January 26. Okay.

And then if we can end on this, who from your point of view or perspective will be the most impacted by the declining gas tax revenues?

I think the simple answer is all of us. At the end of the day, all of us will be impacted by declining transportation revenues. And it's not just to the roadways, it's to our economy as well.

If we can't get goods to market to what we've already talked about, if we can't get people to work, if we can't get kids to school, we're all impacted in varying different ways.

I think Director Taylor said it, said it really well. I would just add, and Margo said this also extremely well. You know, we have so many roads. We have a lot of rural areas in our six county Greater Sacramento region that are fallen.

The PCI is going and once it goes past that sort of falls over the cliff, it's 234 times more expensive to fix it. So it's everybody, but it's particularly the people that depend on a lot of those facilities. As you were saying.

Thank you. If there's none other. We have our last bit. I was just thinking that. Thank you, Chair. Is public comment. We're going to ask that you limit it. You've been here all day and thank you so much for being patient.

But because of the lateness hour, we're going to ask you to limit it to just 30 seconds if you could.

Is this on? Yeah. Okay. Good afternoon, Madam Chair, Mr. Chair, Members of the Committee, Kiana Valentine with Transportation California. Just wanted to share with you all this afternoon that the statewide construction industry just recently commissioned a report to look at tools available to the State of California for solving our looming transportation funding crisis.

The report will be out later this month. It evaluates how those tools perform against. A series of good taxation policy criteria. With the goal of trying to help. You all have an evidence based conversation. Going forward about what to do. Thank you so much. Thank you.

Thank you, Madam Chair. Keith Dunn here on behalf of the Self Help Counties Coalition, the District Council of Ironworkers, as well as the Building and Construction Trades Council of California. A few points I want to make really quickly is even in our most conservative states, locals have supported sales tax to support their local road system.

And they do that because there's expenditure plans which shows what they're getting and it's a direct relationship with the voter and communication comes out. We show what they're doing. We also have a saying is drive until you qualify. And that has more to do with our labor, whether it's agriculture or who I represent in the construction field.

More and more we have individuals who are leaving further out having to drive into work. Oftentimes my Members drive with tools. They have to have roads. They have to have that Chevy pickup or Dodge, which I drive.

And I'll have to have you wrap up.

Yeah. And with that I would just say we have a lot to discuss. It's a collective effort, local, state and feds. The locals are doing their part. 25 counties. There's more that could do more. But we look forward to partnering with you to find a solution. Thank you.

Chair Cortese and Wilson. Chris Shimoda with the California Trucking Association. Thank you for having today's hearing. As a long term Member of the. Road User Charge Technical Advisory Committee, CTA. Recognizes the need to identify a long. Term sustainable replacement for the gas tax. As the Committee continues to explore these.

Alternatives, we urge the Committee to continue supporting investments in our critical goods movement. Infrastructure policies that maximize our existing infrastructure dollars. And please do include truckers. We are a major fee payer into. The system in the discussion. Thank you very much.

Thank you.

Good afternoon. Sofia Rafikova, the Coalition for Clean Air. We share the concerns about the declining gas tax and would support the state looking at alternative revenue mechanisms such as. A road user charge to replace their. Lost gas tax revenue.

And we submitted a letter to your committees earlier today outlining some principles of what a road user charge could look like, including recommendations that the state should implement a variable rate model where road users pay different amounts depending on their income. As a flat rate would make transportation costs even more unaffordable for Low income households.

And also that a proposed fee structure should also consider vehicle size and efficiency by charging upper income drivers with larger high emission vehicles at a higher rate. And should also continue to incentivize transition. To zero emission vehicles. Thank you.

Good afternoon. My name is Ruhama Toretta. I am here on behalf of the Norcal Carpenters Union. Our projected gas tax revenue shortfall diminishes opportunities for our Members, reduces transportation options for Californians and and undermines our ability to access a safe and reliable transportation network.

When we invest less in our roads, all drivers suffer, whether you drive a gas powered car or an electric vehicle. As we look towards solutions to address declining gas revenue, we urge policymakers to prioritize an equitable approach that ensures that all drivers pay their fair share. Thank you.

Good evening chairs and Members. Jeanne Wardwaller with fearless advocacy representing Transform and also 21 Members of the Climate Plan Network that signed on to the letter that Sophia mentioned and I want to echo her colleague her comments. I also shared with all of the staff on the Committee so you all have access to that.

We really appreciate the conversation talking about this early and the importance of replacing the gas tax. We think this is a rare opportunity to reevaluate how we invest in our transportation system to achieve environmental equity and affordability goals.

We recommend that you prioritize investments aligned with CalSTA's CAP, the Climate Action Plan with revenues particularly looking at a road charge, focus on fix it first maintenance as you've talked about a lot today, as well as alternatives to driving like walking, biking and transit. We also recommend that you set. Okay.

Set an investment target for disadvantaged communities so that this will provide meaningful benefits to them. Thank you.

Chairs and Members. Jason Bryant on behalf of Western United Dairies representing the Dairy Farmer Families of California producing dairy products from the north coast through the Central Valley through the Inland Empire. California infrastructure in rural communities is critical to being competitive as dairy farmers.

And we just appreciate this Committee's ability to identify this problem, get ahead of it and bring us forward as well as this great panel to consider what solutions are out there. We look forward to being a part of that solution. So thank you for having us gearing. Thank you. Thank you.

Thank you. Chairs of both committees and Members. Matt Cremins. I will be very brief. I'm with the California Nevada Conference of Operating Engineers. Really just wanted to say thank you. This is an extremely important issue that we appreciate you highlighting. We look forward to being part of the solution. Thank.

Good evening chairs. Carlos Gutierrez with KSC representing the food and agricultural supply chains, our farmers, our food distributors and of course our, our grocers depend on a very efficient and safe transportation network.

We ask that as we continue, as you all continue to address these issues, that we are invited to have a seat at that table to offer our expertise and techno expertise as movers of goods. So again, thank you for this panel and of course, thank you.

Good evening chairs and Committee Members. Eric Turner, on behalf of the California Construction and Industrial Materials Association, also known as CALCIMA. I just want to say thank you for holding this hearing, align our comments with Transportation California. Again, really appreciate the attention to this critical issue. We look forward to working with you on solutions as we move forward. Thank you.

Damon Conklin with the League of California Cities as well as the California Association of, California, State Association of Counties, representing those local municipalities that manage the 144,000 centerline miles and contribute to the PCI survey, which we look forward to reporting back to this Committee on the findings and highlights.

Again, thank you very much for surfacing this issue and appreciate the dialogue and conversations around a sustainable revenue source for local streets and road maintenance.

Thank you.

Good afternoon everyone. My name is Jed Davis. I'm with Native American Legislative alliance and for the sake of 30 seconds I should probably just read this. We have been tracking this issue for many years and recognize the state's declining fuel tax forecast.

Many California tribes also face the same forecast and we would ask legislators to consider the devastating effect this issue may have on tribes in California. The proposed road use charge would eliminate the state gas tax and instead charge all drivers a fee based on track miles.

While this may seem equitable, it poses a significant risk to tribal revenue. State taxes typically exempt tribes, allowing them to charge their own tax similar to the state tax. If the state were to eliminate the gas tax and replace it with a mileage based fee, this could inadvertently eliminate potential tribal tax revenue generated from fuel sales.

Therefore, tribes would favor to continue maintaining the existing taxation mechanism and apply it to electricity, hydrogen or other future motor vehicle fuels. Tax rates can then be adjusted relative to road impacts and emission incentives and the burden can be appropriated as necessary.

Thank you so much. I'd just like to thank our panelists as well as all those who gave public comments and for the Members who engaged in this really much needed discussion. And this is just the beginning. I look to my co chair, Senator Cortese to see if he had any closing remarks.

Again, thank you for your leadership in, as I said earlier, being steadfast about the need to do this. I thought it was a great turnout today of the membership and the composition of the committees and lots of great dialogue as many of the speakers just said.

And I think it's really sent up a flare for the entire Legislature. I think word will travel fast from here that this is something that we need to prioritize sooner rather than later. And again, thank you for your leadership and pulling this together. Madam Chair

Thank you for yours. And with that this informational hearing of the joint between the Assembly and Senate is now adjourned.