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Prepared by Precision Advocacy
Joint Transportation Hearing on Declining Gas Tax Revenues
The Assembly and Senate Transportation Committees held a joint hearing on declining gas tax revenues this week. Chaired by Assembly Member Lori Wilson (D-Suisun City) and Senator Dave Cortese (D-San Jose), the hearing featured 3 panels focused on the problem of declining gas tax revenues as drivers trend toward electric vehicles. The hearing was attended by Assemblymembers Chris Rogers (D-Santa Rosa), Tom Lackey (R-Palmdale), Rhodesia Ransom (D-Stockton), and Alexandra Macedo (R-Visalia); and Senators Catherine Blakespear (D-Encinitas), Laura Richardson (D-Inglewood), Kelley Seyarto (R-Murrieta), and Bob Archuleta (D-Norwalk).
The hearing featured three panels:
- Gas Tax Revenue in Context: Frank Jimenez (Senior Fiscal & Policy Analyst), Legislative Analyst’s Office (LAO)
- Loss of Gas Tax Revenue: Brian Taylor (Professor, Department of Urban Planning and Public Policy, UCLA), University of California Institute of Transportation Studies; Dr. Asha Weinstein Agrawal (Director of National Transportation Finance), Mineta Transportation Institute
- Impacts of Gas Tax Decline: Tanisha Taylor (Executive Director), California Transportation Commission; James Corless (Executive Director), Sacramento Area Council of Governments (SACOG); Margot Yapp (President and CEO), NCE, Project Manager for Local Streets and Roads Needs Assessment Report
Gas Tax Revenue in Context. Frank Jimenez from the Legislative Analyst’s Office (LAO), discussed broadly how revenues from gas taxes are directly impacted by California’s progress towards reaching its greenhouse gas (GHG) emission reduction goals because a decrease in the consumption of gasoline and diesel fuels reduces the state’s revenues from taxes.
Transportation funding in California comes from federal, state, and local sources. In 2022-23, the LAO estimates that transportation funding in California totaled $44 billion.
- Local Funds. Slightly less than half of the funding comes from local sources, such as local sales taxes and transit fares.
- State Funds: Approximately one-third of funding comes from state revenue sources, primarily state fuel taxes and vehicle fees. Most of these funds remain at the state level, with a smaller portion provided to local governments on both a formula and competitive basis.
- Federal Funds: Roughly one-fifth of funding comes from the federal government, primarily from federal excise taxes on gasoline and diesel. Federal funds are distributed on both a formula and competitive basis to the state and local governments.
In 2020, Governor Gavin Newsom issued Executive Order N-79-20, which required 100% of in-state sales of new passenger cars and trucks to be zero-emission by 2035. The regulation requires annual increases in the percentages of new passenger cars, trucks, and SUVs sold in California that are zero-emission vehicles (ZEVs), starting with 16% in 2023 and culminating in 100% in 2035. It also directed the California Energy Commission (CEC) to update the biennial statewide assessment of zero-emission vehicle infrastructure required to support the level of electric vehicle (EV) adoption.
In a handout provided to the committee, according to the Mineta Institute, state revenues from the gas tax are estimated to be $13.3 billion in 2024 and modeling projects revenue ranges decline significantly in the future. By 2040, Mineta estimates projected revenue ranges from $4.8 billion to $12.1 billion. Cumulative revenue through 2040 is estimated to be between $12.8 billion and $75.1 billion less than cumulative revenue would be if the state continued to raise the same amount annually as it did in 2024 ($226.7 billion). These values equate to a cumulative revenue loss ranging from 6% to 33%. Other states are expected to also see significant declines in these types of revenues.
At the same time, the California Transportation Commission (CTC) Annual Report to the legislature in 2024 identified that the needs of transportation infrastructure have increased due to the severe climate events. The responsibility of maintenance for these transportation systems falls to state, regional, and local entities that rely on revenues from local taxes in addition to the state and federal gas tax. The CTC’s 2025 Interim Needs Assessment identified a 10-year need of $736.2 billion and projected available revenues of $572 billion. The anticipated funding shortfall is $164 billion, with the financial impact from the adoption of ZEVs and increased fuel economy increasing that shortfall by $31.1 billion.
Loss of Gas Tax Revenue. Brian Taylor from UCLA discussed some of the benefits and challenges of the current gas tax. It's cheap and easy to collect, administrative costs are low and cheating and evasion are rare. However, it is politically difficult to increase the tax to maintain revenue levels.
Tanisha Taylor from the CTC emphasized that dwindling transportation funds from the gas tax are increasingly an emergency situation. She specifically discussed the LOSSAN rail corridor and how damaging it can be when key transportation paths are shut down.
Impacts of Gas Tax Decline. James Corless, Executive Director of the Sacramento Area Council of Governments, characterized gas tax revenues as a steep slow decline followed by an absolute cliff. He said this is in part a good news story because we are burning less fuel and doing better with regional planning. Many are worried about a fiscal cliff, as jurisdictions out of compliance with SB 375 (Chapter 728, Statutes of 2008) - the Sustainable Communities Strategy, will be cut off from SB 1 (Chapter 5, Statutes of 2017) transportation funds. He hopes that future legislation will change this policy.
Margot Yapp, Project Manager for the Local Streets and Roads Needs Assessment Report, highlighted some of the major findings of the latest assessment. More than 85% of California’s roads are owned and operated by cities and counties. In addition to streets and roads, local bridges are an integral part of local street and road infrastructure. They make up approximately 48% of all the bridges in California. Bridge’s average age in California is over 50 years, 10 years older than the national average, and more than half are in fair or poor condition and are approaching their expected life span. Bridge safety, strengthening, and widening improvements necessary to keep pace with California’s modern mobility needs will require $7.2 billion. To simply maintain their current condition will require $800 million annually, but only $290 million is available. There is an estimated shortfall of $4.3 billion to maintain the safety and integrity of bridge infrastructure. Meanwhile, construction costs have increased by 32% since the start of the COVID-19 pandemic.
Ms. Yapp emphasized that the gas tax decline is estimated at $12.4 billion, essentially erasing any gains from SB 1. According to her testimony, less than half of roads will be in good condition, almost 40% of roads will be in poor condition, and safety, storm drains, and active transportation (bike lanes) will be impacted because of the reduced funding.
Legislative Response. Senator Blakespear inquired about potential solutions from the perspective of affordability and political feasibility. She also commented on the impact of the unsheltered homelessness crisis on the transportation network. In response, Mr. Corless talked about the potential for user fees and a means-based approach. Ms. Yapp brought up the issue of equity and the longer distances that rural residents must drive.
Senator Richardson asked about the viability of an electrical charging tax. Panelists responded that the state does not have a tax on vehicle charging or hydrogen fuel for cars. Most people charge their cars at home, making this difficult to separate from home electricity charges. There is a road improvement fee charged annually on ZEVs to provide some parity with the gas tax.
Several legislators talked about the issue of deferred maintenance and higher costs associated with continually deferred repairs. Senator Seyarto brought up the issues of regional equity for project funding, saying that roads in Riverside are particularly bad.
Ms. Yapp raised the policy consideration of maintaining so many miles of local roads that are rarely used, particularly in rural areas. She asked what is politically palatable? What is equitable? Mr. Jimenez discussed raising the ZEV fee but cautioned that it moves the state away from the policy goal of fairness and tying usage of the roads to the fees that consumers pay.
Chair Wilson expressed her support to continue the policy of fees tied to usage rather than a flat tax, and Co-Chairs Cortese and Wilson emphasized that the conversation is just the beginning and prioritization of projects as well as the state transportation network in the face of declining revenues will be necessary.
Proposition 36 Implementation Hearing
On February 25, the Senate held a joint informational hearing of the Senate Public Safety Committee and Senate Budget Subcommittee on Corrections, Public Safety, Judiciary, Labor, and Transportation to discuss implementation of Proposition 36. Panels presented an array of issues, including an overview of the proposition, enforcement and prosecution, the Proposition 36 process, and treatment.
Senator Jesse Arreguín, chair of the Senate Public Safety Committee, began the hearing by stating that voters sent a clear message with the passage of Proposition 36, passed by 68% of voters in November that the public wants action to address retail theft, the drug addiction crisis, and get people connected to treatment. A primary impetus of the hearing was to begin discussions on the projected state and budget implications of the measure to assist with its implementation, and as part of this year’s budget process, ensure fair cost sharing between the state and local governments.
Senator Roger Niello (R-Fair Oaks), who is not a member of either committee, but was granted a pass for the day, noted that he wrote a letter to Governor Gavin Newsom in December, requesting that the Governor’s January budget proposal fully fund Proposition 36. The letter was signed by several members of the delegation, including Senators Steven Choi and Kelly Seyarto, as well as Assemblymember Tri Ta.
Overview of Proposition 36. Rick Owen, Senior Staff Counsel from the Committee on Revision of the Penal Code provided an overview of Proposition 36 grouped into three general categories:
- Creation of a new treatment mandated felony offense for repeat drug possession.
- This offense can be charged when a person is arrested for drug possession and has two or more prior convictions for drug offenses.
- When a person is charged with a treatment mandated drug offense, they must be given the opportunity to participate in a treatment program approved by the court to get their case dismissed.
- The law does not specify the length or conditions of the treatment.
- If the person agrees to treatment and completes it successfully, the drug possession charges will be dismissed, however, if treatment is terminated due to unsatisfactory performance or the commission of a new crime, the court must proceed with sentencing.
- Proposition 36 does not directly address what should occur if treatment is unavailable at that time.
- Increased penalties and expanded sentencing enhancements for drug sale offenses, particularly those related to fentanyl.
- The law also required courts to advise people convicted of certain drug offenses that they could be charged with murder if someone dies because of taking the drugs that they sold.
- Increased punishment for certain thefts, including expanding California's petty theft with a prior offense. Prosecutors were given more power to charge felonies for low value thefts that were previously treated as misdemeanors.
Proposition 36 Costs. The Legislative Analyst’s Office (LAO) is estimating that Proposition 36 will increase state criminal justice costs by between tens of millions of dollars and the low hundreds of millions of dollars annually, based on the increased state prison population and state court workload. In addition, the LAO estimates that local criminal justice costs will increase by tens of millions of dollars with the expansion of the jail and community supervision population and local court related workload.
Proposition 36 reversed portions of Proposition 47, a 2014 voter-approved initiative that reduced felonies to misdemeanors specified drug and property crimes. Each year, the state savings generated by the implementation of Proposition 47 are awarded to public agencies to provide mental health services, substance use disorder treatment, and/or diversion programs for those in the criminal justice system. The LAO estimates that Proposition 47 savings will be reduced by somewhere in the low tens of millions of dollars annually.
After the LAO’s presentation, Senator Scott Wiener (D-San Francisco), chair of the Senate Budget & Fiscal Review Committee, emphasized that proponents of Proposition 36 were insistent that the measure was about treatment and not about incarceration, and therefore it makes sense to examine what supports the legislature can provide to counties to provide effective behavioral health treatment. He additionally noted his strong objection to the state providing operational support for local law enforcement agencies.
Enforcement and Prosecution. Allison Haley, Napa County's district attorney, stated that Proposition 36 allows district attorneys flexibility to meet the needs of their own communities, and provided an example of prosecutor discretion, noting that she has implemented washout periods, so the county isn’t charging cases unless the priors were committed within roughly the last 10 years. She believes that counties want Proposition 36 to be surgically and thoughtfully implemented with an eye toward hardened repeat offenders. Residents of Napa expect that each case is reviewed individually, and that treatment programs are designed for individuals, versus a one-size fits all approach. Some counties are taking a phased approach to implementation to keep caseloads manageable for either the district attorney's office or the public defender's office. In other counties where drug trafficking is rampant, the community is demanding as much accountability as possible.
Brendan Woods, Alameda County’s public defender, focused on the notable difference in treatment mandated felony cases, comparing several counties with Orange County. According to Woods, in Orange County, 757 treatment mandated felony cases have been filed, and 95% of those charged do not have permanent housing. He stated that only 11 clients have opted into treatment because resources aren’t available, and clients have to wait in custody for several weeks without knowing how long treatment will last. In Alameda County there has been 1 treatment mandated felony case, Contra Costa County has 2, Sacramento County has 3, and neither San Francisco nor Marin County have any cases.
Stanislaus County’s public defender, Jennifer Jennison, expressed frustration that for individuals awaiting felony mandated treatment, there is no plan in place, no strategy for referrals, no assessments have been made, and not a single treatment plan has been developed for individuals. Instead, she contended that they are sitting in jail, unable to afford bail, in need of treatment, and waiting for the promise of Proposition 36 to be fulfilled. Stanislaus County has a population of 550,000, with a total of 120 treatment beds, only 12 of which were available on the day of the hearing. No housing options have been identified upon completion of treatment or for those who will receive outpatient services. The county’s drug court is at capacity due to limited resources.
Proposition 36 Process. Sergio Tapia, Presiding Judge of the Superior Court of Los Angeles County, testified that treatment mandated felonies require significantly more judicial oversight than previous drug-related offenses, including regular status hearings and progress reports, which extend case timelines.
In Los Angeles County, specialized drug courts known as community collaborative courts address substance use disorders alongside other related issues. If all parties agree, individuals receive intensive supervision, treatment, and rehabilitation services as an alternative to incarceration. The court works closely with the county's behavioral health agency to coordinate treatment services within the community. Collaborative courts’ service providers assess defendants’ progress and offer recommendations to judges. Judges must oversee participants throughout the program, and this level of oversight demands more frequent court appearances and judicial involvement. Additionally, access to treatment, resources, and services remains a significant challenge statewide. Some counties have received hundreds of case filings while others have received none. This discrepancy often depends on how district attorneys choose to charge eligible offenses.
Steve Jackson, Chief Probation Officer of San Joaquin County, stated that to effectively implement Proposition 36 California must have the tools and resources in place at every point of the system, including after arrest and after incarceration. The California Probation Officers Association has requested budget funding to support probation’s role at the pre-trial sentencing and the supervision process. He stated that if programs and staffing are not scaled appropriately to address the impacts, the opportunity to provide meaningful intervention will be missed.
Treatment. Phoebe Bell, the behavioral health director for Nevada County provided the county behavioral health perspective on the implementation of Proposition 36, reiterating the comments of others that Proposition 36 creates, in perpetuity, a new pathway to treatment services via the treatment mandated felony, but does not provide a related funding source to support that new pathway.
Medi-Cal coverage for inpatient or residential substance use treatment is a relatively new benefit in California and was established under a pilot program approved in 2016 in 2017. Today, 40 out of 58 counties have opted in to the program. Substance use treatment capacity has also been challenged by the reality that commercial insurers do not make residential substance use treatment readily available to their beneficiaries, even though it should be a covered benefit.
The overall austerity approach towards funding substance use treatment has led to an inadequate patchwork of providers serving Californians. Providers sometimes struggle to keep the doors open on one end of the spectrum, given both the underfunded public system and the difficulty people have in accessing their commercial benefits. The core funding model for the public behavioral health system is based on the ability to draw down federal Medi-Cal funding using state or local matching funding.
Several policies are being implemented that invest in behavioral health infrastructure, such as the Behavioral Health Continuum Infrastructure Program grants and the BH-Connect workforce initiative. The missing link in Proposition 36 is the ongoing sustainable funding source for the expanded treatment services. A robust treatment system, fully supported across the array of payer sources, is critical to address the complex needs of people struggling with substance use disorders.
Robb Layne, Executive Director of the California Association of Alcohol and Drug Program Executives, testified to the lack of treatment beds in Los Angeles County, stating that out of 357 residential facilities, only 23 have opened beds to treat substance use disorders. Layne provided a laundry list of suggestions to improve the efficacy of Proposition 36:
- Infrastructure is desperately needed to address a severe workforce shortage, lack of sufficient transitional housing for someone leaving a treatment program, and the re-establishment of specialized treatment courts that facilitate communication between judges, providers, and county agencies.
- Immediate capacity funding to expand treatment availability.
- Accelerated workforce development to expedite counselor certification programs and create retention bonuses for providers serving court ordered clients.
- Administrative support to counties specifically for Proposition 36 implementation.
- Direction for the Department of Health Care Services to develop a streamlined documentation requirement that satisfies both the legal and medical requirements.
- An improved data system for statewide tracking of beds to monitor availability outcomes and allowing real time capacity management.
- Methods to measure success, including tracking meaningful recovery, sustained engagement and treatment, housing stability, employment, and family unification.
Saun Hough, vocational services administrator with SHIELDS for Families, provided additional information about his program, as well as similar programs, which are funded by Proposition 47 savings. He stated that they have demonstrated the effectiveness of investing in behavioral health services providing intensive outpatient, outpatient and residential substance use disorder treatment, family support, employment services and mental health, connecting individuals to mental health, housing substance use services significantly reducing recidivism rates and improving economic stability. His view, and evaluations from the Board of State and Community Corrections, reflect success with the provision of comprehensive case management to individuals, connecting clients to housing, mental health care and substance use treatment, significantly reducing recidivism rates, improving employment outcomes and increasing stability for program participants. Participants in these programs had a recidivism rate of just 15.3% compared to much higher rates among those traditionally incarcerated, additionally, homelessness among participants dropped by 60% while unemployment rates decreased by 50% for those who identified employment as a goal.
Hough warned that programs that rely on the prop 47 funding to operate are facing significant challenges because of a potential 74% reduction in funding. The resulting closure of programs will leave gaps in services and have devastating consequences, including increased recidivism.
Proposition 36 implementation highlights California's significant need and shortage of behavioral health care. The increased demand and lack of resources will continue to be a high priority for the administration and legislature throughout this year’s budget discussions.
Upcoming Hearings
Agendas are typically posted on the committee websites in the Assembly and Senate a few days prior to the hearings. To view hearings after they take place, you may access them in the Assembly or Senate media archives where they are generally available within a few hours of committee adjournment.
Tuesday, March 11, 2025, 9 a.m.
Assembly Water, Parks, and Wildlife
Location: State Capitol, Room 444
Informational Hearing: Is California Ready for Flood?
Tuesday, March 11, 2025, 9:30 a.m.
Senate Human Services
Location: 1021 O Street, Room 2200
Informational Hearing: Hunger In California
Tuesday, March 11, 2025, 1:30 p.m.
Assembly Budget Subcommittee No. 7 on Accountability and Oversight
Location: State Capitol, Room 447
Homelessness Funding and Accountability
Tuesday, March 11, 2025, 1:30 p.m.
Senate Transportation
Location: 1021 O Street, Room 1200
Informational Hearing: Transportation in California: An Overview of Departments and Programs
Wednesday, March 12, 2025, 9 a.m.
Assembly Joint Hearing Assembly Labor and Employment and Senate Labor, Public Employment, and Retirement
Location: 1021 O Street, Room 1100
Informational Hearing: L.A. Wildfires: Ensuring an Equitable Recovery for Workers
Wednesday, March 12, 2025, 9:30 a.m.
Assembly Budget Subcommittee No. 4 on Climate Crisis, Resources, Energy, and Transportation
Location: State Capitol, Room 447
Energy, Zero Emission Vehicles, And Air Resources Board Budget Informational Hearing
Item No. Description
3355 Office of Energy Infrastructure Safety Office
3360 Energy Resources Conservation and Development Commission
8660 California Public Utilities Commission
3900 California Air Resources Board
3860 Department of Water Resources
3480 Department of Conservation
0509 Governor's Office of Business and Economic Development
Wednesday, March 12, 2025, 1:30 p.m.
Assembly Budget Subcommittee No. 2 on Human Services
Location: State Capitol, Room 444
Item No. Description
0530 California Health and Human Services Agency
5180 Department of Social Services
- Proposal for a Multi-agency Office on Foster Care
5180 Department of Social Services
- Foster Care and Child Welfare Services
- Community Care Licensing
- Program Updates and Priority Issues of Interest
- Governor's Budget Proposals
5175 Department of Child Support Services
- Program Updates and Priority Issues of Interest
- Governor's Budget Proposals
Wednesday, March 12, 2025, 1:30 p.m.
Senate Insurance
Location: 1021 O Street, Room 2100
Informational Hearing: Understanding California's Insurance Market: Key Factors and Future Outlook in the Aftermath of Recent Wildfires
Wednesday, March 12, 2025, 1:30 p.m.
Assembly Local Government
Location: State Capitol, Room 447
Informational Hearing: Introduction to the General Plan
Thursday, March 13, 2025, 9:30 a.m. or upon adjournment of Session
Senate Budget and Fiscal Review Subcommittee No. 2 on Resources, Environmental Protection, and Energy
Location: 1021 O Street, Room 2200
Item Description
3355 Office of Energy Infrastructure Safety Office
3900 California Air Resources Board
3360 Energy Resources Conservation and Development Commission
8660 California Public Utilities Commission
Thursday, March 13, 2025, 9:30 a.m. or upon adjournment of Session
Senate Budget and Fiscal Review Subcommittee No. 1 on Education
Location: 1021 O Street, Room 2100
Item Description
6100 Department of Education
- Childhood Sexual Assault Claims
- Teacher Recruitment Incentive Grant
- National Board Certification Incentive Grant
- Literacy Specialists and Mathematics Coaches
- Student Support and Discretionary Block Grant
6980 California Student Aid Commission
Golden State Teachers Grant Program
6440 University of California
6610 California State University
6870 California Community Colleges
6980 California Student Aid Commission
6600 UC College of the Law, San Francisco
6120 California State Library
Thursday, March 13, 2025, 9:30 a.m. or upon adjournment of Session
Senate Budget and Fiscal Review Subcommittee No. 3 on Health and Human Services
Location: 1021 O Street, Room 1200
Item Description
4265 Department of Public Health
- Center for Infectious Diseases
- Emergency Preparedness Office
- Laboratory Field Services
- Center for Health Statistics and Informatics
- Center for Healthy Communities
- Center for Family Health
- Center for Health Care Quality
Thursday, March 13, 2025, 9:30 a.m. or upon adjournment of Session
Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government
Location: State Capitol, Room 113
Item Description
Homelessness Funding and Program Oversight
0515 Business, Consumer Services, and Housing Agency
2240 Department of Housing and Community Development
Thursday, March 13, 2025, 9:30 a.m. or upon adjournment of Session
Senate Budget and Fiscal Review Subcommittee No. 5 on Corrections, Public Safety, Judiciary, Labor, and Transportation
Location: State Capitol, Room 112
Item Description
0552 Office of the Inspector General
5225 Department of Corrections and Rehabilitation
5227 Board of State and Community Corrections
8830 California Law Revision Commission
Governor’s Press Releases
Below is a list of the governor’s press releases beginning February 26.
March 4: Governor Newsom: “Tariffs are taxes on American families”
March 4: California seizes $534 million in illegal cannabis in 2024
March 3: Governor Newsom orders return to office
March 1: With growing fire risk, Governor Newsom proclaims state of emergency to fast-track critical wildfire prevention projects statewide
February 28: Governor Newsom releases 2024 judicial appointment data
February 28: What they are saying: Governor Newsom’s latest economic investments will help bolster LA firestorm recovery
February 28: Governor Newsom announces executive staff transitions with appointments of Nani Coloretti, Ann Patterson
February 27: Governor Newsom announces appointments 2.27.25
- Aaron Maguire, of Roseville, has been appointed Executive Officer of the Board of State and Community Corrections
- Abby Edwards, of Sacramento, has been appointed Senior Deputy Director of State Planning and Policy at the Governor’s Office of Land Use and Climate Innovation
- Gareth Elliott, of Sacramento, has been reappointed to the University of California Board of Regents
- Darnell C. Grisby, of Oakland, has been reappointed to the California Transportation Commission
February 27: Governor Newsom partners with 21 Brazilian state governors to protect the environment, cut harmful pollution
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