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California Public Transit Funding

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California Public Transit Funding

A Santa Monica Big Blue Bus operates Route R7 on Santa Monica Boulevard by the Third Street Promenade in downtown Santa Monica, California.

Christopher MacKechnie

A Quick Overview of California Public Transit Funding

Although funding is down from the peak years, the state of California remains a strong supporter of public transit at both the state and regional levels. In fact, California provides the second highest amount for transit of any state - in FY 2008 the state spent $2,299,578,879 which was eclipsed only by New York's $3,015,441,656. This total does not include federal or local money spent on transit in the state.

State Transit Funding Support

California transportation spending is derived from two main sources: gasoline and diesel fuel excise taxes, and sales tax on gasoline and diesel fuel. Although California, like most states, spends the vast majority of its transportation revenue on highways - more than 80% - it does set aside a significant amount for public transit as well through several methods. One of the earliest and most important was 1971's Transportation Development Act (TDA). The TDA dedicates 0.25% of the state sales tax to public transit and is administered by a Local Transportation Fund created in each county. The TDA also extended a 5% state sales tax to gasoline and used revenues gathered in this way to make up for losses to the general fund caused by the diversion of some of the state sales tax to public transit. Any additional money generated by the state sales tax on gasoline over and beyond the amount required to compensate for the 0.25% is known as "spillover" money and is supposed to go to public transit, but in recent years has been redirected to the general fund to compensate for California's dire budget problems. Although several ballot initiatives have been passed by voters in an attempt to prohibit this practice, it still continues. Spillover money is available in any given year if 5% * the amount spent on California gasoline > 0.25% * the amount spent on all sales taxable goods in the state of California.

It is important to note that in order to receive money from the Local Transportation Fund a transit system must meet certain farebox recovery ratios that are 20% in urbanized areas and 10% in non-urbanized areas. Transit operators that serve both urbanized and non-urbanized areas have to meet a standard between 10 and 20% that is determined by the percentage of their service area that is classified under each category.

Spillover money is deposited into the Public Transportation Account (PTA) and is awarded to different jurisdictions in California under a complex formula. In addition to the spillover money, revenue generated by the state sales tax on diesel fuel and, since Proposition 42 in 2002, some of the money generated by the state sales tax on gasoline that was previously used to compensate for the money the TDA took is also deposited into the Public Transportation Account. Finally, a small amount of money is available from the State Highway Account to support transit through the State Transportation Improvement Program.

In addition to the above taxes, California voters passed a massive $19.9 billion transportation bond in 2006. This bond includes money devoted to a variety of programs including $4 billion for "Public Transportation Modernization, Improvement, and Service Enhancement."

Local Transit Funding Support

The most common mechanism for local transit funding is a county wide sales tax of up to 1%. Twenty-one counties in California currently levy sales taxes for transit. Most of these taxes are for a duration of around thirty years, but four "transit districts", including BART in the San Francisco Bay area, currently levy permanent 0.5% sales taxes.

It is important to note that these taxes require a super majority for approval; in other words, more than 66.7% of voters in twenty-one counties have approved additional taxes for public transit at one point or another. Despite the worsening economy and the public's antipathy towards taxation of any kind, this support continues. In 2008 voters in Santa Clara County, home of San Jose, approved an additional sales tax in order to ensure that the planned BART extension south from the East Bay will go ahead as planned. Voters in Los Angeles County also approved Measure R, a 30 year 0.5% sales tax that will go towards a variety of programs including both public transit and road projects. While Measure R spreads project completion throughout its 30 year life, Los Angeles Mayor Antonio Villargosa has been aggressively lobbying for his "30-10 plan" in which the federal government would front all of the money the measure is expected to generate up front to be paid back over time as the money is actually generated. The fate of the "30-10 plan" is pending the outcome of Congressional work on a new federal transportation bill.

The Future of California Transit Funding

Although new Governor Jerry Brown has promised to keep transit spending at a stable level, if Californians fail to extend temporary tax hikes for another five years in June then public transit spending may be cut further. In addition, if Republicans succeed in reducing federal transportation funding then state transit agencies will suffer, especially agencies like Los Angeles Metro looking for federal money to construct new rapid transit lines. Furthermore, at this time it is unclear whether the state will continue to be able to raid public transit spillover funds to use for non-transit purposes.

While sales tax revenues will undoubtedly rise when the economy recovers, certain transit agencies may not have the long to wait. For example, Caltrain is scheduled, in the absence of emergency rescue funding, to eliminate multiple stations and all non-peak hour trains. This severe cutback is especially unfortunate given the recent effort by many cities along its San Francisco Peninsula route to approve Transit Oriented Development projects near Caltrain stations.

Like most government agencies, California's transit systems are struggling to deal with high employee pension and health care costs. Successfully resolving those issues would go a long way to helping them weather any future declines in transit funding.

For further information about California transit funding please click here .

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