DALLAS – A 2.2 cent reduction in California's gasoline tax approved by a state panel last week is expected to cut revenues dedicated to roads and mass transit by $328 million per year.
The California Board of Equalization voted 3-2 to lower the state tax to 27.8 cents per gallon on July 1, down from the current 30 cent rate adopted last year by the board.
The cut in the tax rate, the third reduction by the board in the past three years, is required under 2010 state laws so that motorists pay the same total amount of gasoline tax over a three-year period as they did before the deficit-cutting measures were enacted under former Gov. Arnold Schwarzenegger.
The new lower rate will go into effect July 1, the beginning of the state's fiscal year.
Board member Fiona Ma, who voted for the lower tax, said the rate-setting formula that includes an estimated price of gasoline over the next 12 months is too complicated.
"I am deeply concerned about having to make these kinds of Magic 8 Ball predictions on something so unpredictable as the price of gasoline," she said.
California motorists paid the fourth-highest gasoline tax in the nation as of Jan. 1, the American Petroleum Institute said. The total levy of 40.62 cents per gallon included the 30 cent per gallon excise tax and 10.62 cents per gallon of other state fees, including a 2.2% sales tax dedicated to local governments.
The two fuel tax swap measures signed by Schwarzenegger in March 2010 were designed so that the overall state taxes paid by consumers at the pump would be the same as under the existing state tax of 18 cents per gallon and 8.25% state sales tax, with no net revenue gain. The sales tax was reduced to 2.25 cents and the equalization board is required to set the gasoline tax rate for the next fiscal year by March 1.
The board lowered the state gasoline tax in fiscal 2015 to 36 cents per gallon from 39.5 cents in fiscal 2014 and last year cut it to 30 cents for fiscal 2016, which ends June 30.
The 36 cent tax rate generated $5.37 billion in fiscal 2015 from the sale of 14.9 billion gallons of gasoline. The 39.5 cent rate in fiscal 2014 brought in $5.76 billion.
Revenues in fiscal 2010 from the 18 cent tax totaled $2.67 billion.
Malcom Dougherty, director of the California Department of Transportation, said the three years of cuts in the gasoline tax will reduce state transportation funding by $738 million over the next five years, with project delays likely.
"Although Caltrans will continue to prioritize safety projects, today's action emphasizes the need for the comprehensive transportation funding package that [Gov. Jerry Brown] continues to call for," he said.
Board member Diane Harkey said the state taxes on motor fuels are still too high.
"While I'm happy to help lower the price at the pump, to have a true impact for constituents we need to work on eliminating the extra fees from the cost of cap and trade being extended to the oil refineries in the state and the low carbon fuel standards that have driven up California's gas costs, making it some of the most expensive fuel in the nation," she said.
California motorists paid an average of $2.32 for a gallon of unleaded gasoline last week, exceeded only by Hawaii's $2.57, the AAA said. The national average was $1.71 per gallon.
