On Tuesday, the State Board of Equalization (BOE) adopted a $0.06 reduction in the gas excise tax – a move that was closely watched by transportation planners and public works directors around the State.
Under a complex transportation funding formula known as the “Fuel Tax Swap,” the Board of Equalization (BOE) is required by law to adjust a portion of the State’s gasoline tax in accordance with the retail price. Because of dramatic decreases in the price of gasoline over the past several months, BOE staff suggested the Board lower the excise tax rate by $0.075 cents for Fiscal Year 2015-16, beginning July 1, 2015 – a move that was projected to decrease collection of tax proceeds dedicated to transportation projects by $1.1 billion in revenues. As part of the complex formula, counties receive a portion of these taxes, thus any reduction in the rate translates into less money available for local transportation projects.
In response to future projections that the cost of fuel may soon increase (as it has in recent weeks), and concerns voiced from various transportation stakeholder groups, the BOE adopted a reduction that was more modest. It should be noted that the action taken by the BOE this week does not impact the levies placed on diesel fuel.
In related news, Senator Jim Beall (D-San Jose), Chair of the Senate Transportation and Housing Committee, introduced Senate Bill 321 earlier this week to revise the formula used by the BOE to adjust the excise tax rate, which would result in more transportation funding revenues.