November 7, 2006 Ballot Prop. 1A

Overview

Proposition 1A, Transportation Funding Protection, is a proposed constitutional amendment that would limit the Legislature's ability to suspend the transfer of motor vehicle fuel sales tax funds to the Transportation Investment Fund (TIF), which supports state and local transportation programs. This transfer was approved by voters as Proposition 42 of 2002. The Legislature currently has the authority to suspend the transfer during a budget crisis. Proposition 1A would allow the state to borrow the funds up to twice in a 10-year period, and would require repayment with interest within three years. Proposition 1A would also allow the Legislature, with the approval of the governor but not the voters, to issue bonds backed by vehicle fuel sales tax revenues

Background

California levies a statewide sales tax of 6 percent on gasoline and diesel fuel. Prior to 2002, sales taxes paid on motor fuels were deposited in the state's general fund. Allocation of these funds was part of the annual state budget process, and there was no requirement that they be used for transportation purposes.

Proposition 42 (2002) amended the State Constitution to dedicate motor vehicle fuel sales tax funds to transportation programs. Instead of being directed to the general fund, these revenues are transferred to the Transportation Investment Fund (TIF) to provide for improvements to highways, streets and roads, and transit systems. Proposition 42, however, allows the Legislature to suspend the transfer by a two-thirds vote subject to a gubernatorial declaration that the transfer would have a negative impact on the state's finances. The transfer has been suspended twice — partially in 2003-04 and in full in 2004-05. In 2006-07, Proposition 42 is projected to shift $1.4 billion from the state's general fund to the TIF.

Proposition 1A was placed on the ballot with the passage of SCA 7, introduced by State Senator Tom Torlakson (D-Antioch). The measure would amend the State Constitution to limit the Legislature's authority to suspend Proposition 42 transfers of motor vehicle fuel sales tax funds to transportation programs. Currently the Legislature can choose, but is not required, to treat as loans any amounts that are redirected to the General Fund as a result of a suspension. Proposition 1A would require that suspended allocations be treated as loans, to be repaid in full, including interest, within three years of suspension. The measure would allow suspensions to occur only twice in ten consecutive fiscal years. All prior suspensions must be repaid before a subsequent suspension could occur. Transfers that were suspended during 2003-04 and 2004-05 must be repaid to the Transportation Investment Fund according to a specific schedule. Proposition 1A would also allow the Legislature to authorize the sale of bonds backed by Proposition 42 revenues.

Arguments For and Against

Proponents argue that Proposition 1A is consistent with Proposition 42, and closes a loophole which allows funds intended for transportation programs to be diverted to other uses, limiting the ability of desperate legislators to raid funds meant for transportation and highway purposes to pay for non-transportation spending. They hold that the ability to issue bonds backed by Proposition 42 funds will help finance critical transportation investments. As a September 27 editorial in the Palm Springs Desert-Sun puts it, "Should the state economy falter and budget revenues fall, Proposition 1A gives lawmakers the flexibility to divert the gas tax to other needs. But it also requires that this money is fully repaid within three years. It also restricts lawmakers' raiding of these funds to no more than twice in any 10-year period. This revenue stability would allow communities to continue moving forward on transportation projects."

Official Voter Information

Opponents argue that Proposition 1A would hinder the Legislature from responding to future budget crises, resulting in cuts elsewhere in the budget, increased taxes, or borrowing from other unprotected funds. They note that funds for highway and transportation improvements are already provided in other existing laws or proposed laws without tying the hands of the ability of the legislature to use the money for other purposes (including state emergencies), that Proposition 1A would close off. They note that Proposition 42 allowed for suspension in order to give the Legislature some flexibility in fiscal crises. They also argue that bonds backed by Proposition 42 revenues will reduce the total amount of funding available over time, since bonds must be repaid with interest.

Voter Information Guide
Includes title and summary, arguments for and against, and text of the initiative.

Transportation Funding Protection 
Analysis by California Legislative Analyst, 2006.

Individual Campaign Committees

Total Contributions and Expenditures (select "Nov. 2006 election" and "Prop. 1A" in dropdown boxes)

Key Websites and Links

Rebuilding California: Prop 1A 
[Website archived in UCLA Online Campaign Literature Collection]

Yes on 1A and 1B 
[Website archived in UCLA Online Campaign Literature Collection]

Public Opinion

PPIC Statewide Survey: Californians and the Future, Public Policy Institute, October 2006.

PPIC Statewide Survey: Californians and the Future, Public Policy Institute, September 2006.

Voter support for five statewide bond proposals holding up so far. Field Poll, Release 2212, Sep. 29, 2006.

PPIC Statewide Survey: Californians and the Future, Public Policy Institute, August 2006.

Voters are supporting four of the five bond proposals on the November ballot, although not by overwhelming margins. Field Poll, Release 2206, July 28, 2006.

Continuing negative job appraisals of the Governor and the legislature, despite initial support for infrastructure bonds. Field Poll, Release 2201, June 5, 2006.

Reports and Studies

How Is Transportation Funded in California? [September 2006, California Budget Project]

Proposition 1A of 2006: What Would Be the Impact of “Locking In” the Proposition 42 Transfer? [August 2006, California Budget Project]