TRANSPORTATION TAXES:
Legislature Approves Largest Transportation Tax in State History

After a week of intense negotiations, lawmakers reached an agreement late April 6 for a $52.4 billion transportation tax increase – the largest transportation tax in state history – that will fund a broad array of transportation infrastructure projects promoted by Governor Jerry Brown.

Legislative approval of the governor’s plan came only after more than $1 billion in “sweeteners” were agreed upon to secure votes needed for the massive tax plan to win two-thirds approval in both houses. The side deals are expected to be included in separate legislation, which raised concerns from some observers who noted that vote-trading is not legal.

Passage of the tax was an early birthday present for Governor Jerry Brown, who turns 79 today. He personally lobbied for passage of the package (SB 1, Beall, and ACA 5, Frazier), appearing before legislative committees and holding several press conferences to promote the legislation.

SB 1 increases the excise and sale tax on diesel and gasoline, various vehicle-related fees and taxes, and funds streets and highways, mass transit, walking and bike paths, state parks, and higher education research. ACA 5 places a measure on the 2018 ballot to prevent future lawmakers from redirecting SB 1’s appropriations.

SB 1 made it through both houses of the Legislature late Thursday night without a vote to spare. The legislative sessions began later in the day than usual so that the bill would be in print for at least 72 hours before the vote, as required by Proposition 54.

“This is a big lift in terms of taxes,” Governor Brown said during his testimony to legislative committees. “We’ve been told that taxes can be bad and we don’t want to have an excessive tax burden. And this is significant – but look at all the people supporting it! … The key point here – the roads are broken and they’re getting worse, and they’re not going to get better unless you get a significant injection of money.”

Economists expect that the tax increase will increase the cost of goods and services to the California consumer, as the tax increases will increase costs to businesses for fuel they use in their vehicle fleets, and these costs trigger higher prices.

SB 1 received wide support from the business community and labor unions. Supporters included the California Chamber of Commerce, California Trucking Association and Silicon Valley Leadership Group.
Opponents included the Howard Jarvis Taxpayers Association (HJTA), the California Farm Bureau and the National Federation of Independent Business.

The governor said that given his long tenure in state politics, he was one of the few people with the political capital and willpower to get SB 1 passed. “All the guys running for governor all want to be president, so they’re not going to want to raise taxes,” said the governor, who ran for president in 1976 and 1980. Commenting on his future, he said, “You got a guy here who's going nowhere – I have no future, I only have a past.”

Leading up to the vote on SB 1, the California Republican Party and the HJTA launched a media blitz urging voters to call Democratic and Republican lawmakers to oppose SB 1. Others opposing SB 1 included GOP activist and blogger Jon Fleischman, who called Republican lawmakers “prostitutes” for voting for the bill in exchange for district funding, and Americans for Tax Reform President Grover Norquist. The opponents argued that California already collects enough taxes to fund transportation programs, and simply needs to prioritize spending better and improve efficiency within the Department of Transportation (Caltrans).

Supporters of the plan also engaged in a public relations campaign, airing advertisements in the districts of moderate lawmakers, urging them to support the legislation.  

Throughout the week, a number of lawmakers were uncertain how they would vote.

Senators Steve Glazer, Anthony Cannella and Richard Roth were viewed as the swing votes in the upper house. Senator Cannella told reporters at one point that SB 1 was being jammed through the process, and that he could not vote on the bill this week, but might after the Legislature’s spring recess. He and Senator Roth eventually voted for the bill after two other bills – SB 132 and SB 496 – were amended to fund projects in their districts.

Assembly Members Adam Gray, Rudy Salas, Sharon Quirk-Silva, Sabrina Cervantes, Al Muratsuchi and Catherine Baker also were identified as possible swing votes (in the 2016 election, Ms. Quirk-Silva, Ms. Cervantes and Mr. Muratsuchi all won seats that previously were held by Republican lawmakers). All voted for SB 1.

The floor debates were highly partisan and regional. Lawmakers raised concerns – at times with an inflection of anger in their voices – that urban Democrats were seeking to pay for roads on the backs of rural and suburban motorists who drive longer distances to work.

Senator Ted Gaines said there is “confusion from the Legislature about the war on poverty.” He said the bill would “serve up poverty to millions of families throughout the state,” and argued that lawmakers were making the state less affordable with higher taxes and burdensome regulatory programs.

Shortly before the Senate vote, the governor caucused with Democratic lawmakers, urging holdouts to support the bill.

The Senate debate raised questions regarding whether funds would be misspent or appropriated to the high-speed rail project. Senator Jim Beall reassured his colleagues that none of the funds from SB 1 would be earmarked to California’s high-speed rail project.

Senator Beall said that SB 1 was the culmination of two years of heavy lifting. He described the $52.4 billion tax increase as a “user fee,” and said SB 1 will provide needed funding for projects. Citing a deferred maintenance project involving guardrails on bridges, he said people are dying due to California’s deferred maintenance.

SB 1 passed the Senate on a vote of 27-11, with Senator Cannella casting the lone Republican vote in favor, and Senator Glazer casting the lone Democratic vote in opposition.

The Assembly vote was much less certain – halfway through the evening, Assemblywoman Quirk-Silva was sent to the emergency room after falling ill. She returned in time to vote, but her absence delayed the debate.

Assemblywoman Baker, who many expected to provide a key vote for SB 1’s passage, opposed the bill. The San Ramon Republican said: “Taxes and revenues are how we pay for the projects of this state. But, before we take a single dollar from Californians, we have a duty to make sure we are spending the people’s money the best we possibly can.”

She said instead of doing the “hard work,” the Legislature and Governor Brown took the “easy path” and avoided making any real reforms to Caltrans. She cited past reports and audits that criticized the agency for unnecessary and redundant staffing and an inability to form public-private partnerships.

Nothing in the bill, Ms. Baker said, would make Caltrans more efficient. “We need to work harder for real reforms,” she said. “That’s our job.”

Supporters argued that a new inspector general is being created to make sure the new tax revenue is spent wisely.
When the Assembly opened the roll to vote on SB 1, the bill received 51 votes – three short of passage.

After approximately 10 minutes of lobbying by other lawmakers, three Democrats added their votes: Assembly Members Jim Cooper, the leader of the moderate Democratic caucus; Tim Grayson, who promised voters in the last election that he would not vote for higher taxes; and Al Murasutchi, a Democrat who represents a previously Republican district. The bill passed by a vote of 54-26.

Assemblyman Rudy Salas, a Democrat from Bakersfield, voted against the bill. Once the vote was final, he tweeted: “The families I represent drive too far to jobs that pay too little.”

After the vote, CalChamber President Allan Zaremberg released a written statement praising the legislation, stating: “Fixing our roads and improving transportation in the state is critical to California’s economy and our job climate. SB 1 creates a user paid program that provides the long-term funding source necessary for capital improvements. The new revenue provided for in SB 1 will ensure that we do not continue down the path of further deterioration of our roads and bridges. Repairing roads now will be far cheaper than replacing them later.”

 

 

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