California governor proposes fuel tax freeze

California Gov. Gavin Newsom this week unveiled a budget plan that includes freezing the state’s fuel tax rates. The freeze is part of his plan to take advantage of a $45 billion state surplus.

At a Monday news conference detailing his proposed budget, the governor included information on a suspension of the expected inflation-related increases this summer to the state’s fuel excise rates.

The state excise rate on gas is 51.1 cents and the excise rate on diesel in 38.9 cents. Additional state taxes and fees bring the total per-gallon rates for gas and diesel to 56.6 cents and 65.9 cents, respectively.

An annual inflation adjustment is set to take effect on July 1. Newsom’s plan is to delay the adjustment for a minimum of one year. The budget proposal could extend the tax freeze for the next two years, “should economic conditions warrant it.”

The governor’s office said a pause is expected to decrease fuel tax revenues by $523 million in 2022-2023 based on an estimated 5.6 % inflation rate.

“We’re going to backfill it in terms of the tax itself to transportation projects so that there’s no direct impact to investments,” Newsom said at the news conference.

U.S. Rep. Josh Harder, D-Calif., welcomed the governor’s fuel tax recommendation.

“Pausing the increase in the gas tax is a great first step toward getting prices under control, but we have to go further,” Harder said in a news release.

SB1

A 2017 transportation funding law authorizes regular fuel rate increases to keep up with inflation.

Since then, the excise tax on gas has increased by 23.3 cents to 51.1 cents. The diesel rate is up 22.9 cents to 38.9 cents.

The 10-year, $52 billion transportation funding deal – SB1 – is touted to benefit local roads, trade corridors and public transit.

LIVE NOW: Governor @GavinNewsom presents the California Blueprint – his plan to take on California’s greatest existential threats while building on California’s historic progress. #CAblueprint https://t.co/OO1sfikTrZ

— Office of the Governor of California (@CAgovernor) January 10, 2022

Transportation budget

The budget proposes investing $9.1 billion in the transportation system with a focus on increasing mobility options through rail, transit and active transportation projects.

High-speed rail projects would receive $4.2 billion. Another $2 billion would be applied to transit and rail projects. Local projects would collect $1.25 billion.

Port investment

Over the next two years, $2.3 billion in surplus would be applied for ports infrastructure and goods movement.

The governor’s budget summary explains that “while the state has already taken several actions to mitigate supply chain disruptions, additional investments are necessary to support supply chain resiliency and transform the way California moves goods and people in a way that reduces greenhouse gas emissions and considers environmental impacts to communities.”

Specifically, $1.2 billion from the state’s general fund would be allotted for port-related high-priority projects to improve goods movement on rail and roadways at port terminals, including railyard expansions, new bridges, and zero-emission modernization projects.

Another $40 million would be earmarked to aid the pursuit of licensing more truck drivers.

Newsom said the state would work to cut red tape at the Department of Motor Vehicles and to prioritize licensing of commercial drivers.

The legislature can take up the governor’s budget proposal during the regular session that began a week ago. LL

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