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Wrong funding road

LOS ANGELES transportation officials are moaning about Gov. Arnold Schwarzenegger’s plan to seize transit revenues they think rightfully belong to them. The ultimate victims of the governor’s budgetary shell game will be transit riders. Yet the real problem is with the state’s mechanism for transit funding. Given the ugly system he inherited, Schwarzenegger is doing the right thing.

At issue is an obscure transit fund called the “spillover.” Under a 1971 law, a complex formula determines when the price of gasoline has risen more than that of other goods over a given year. When this happens, the “excess” revenue generated by the 6% sales tax on gasoline is supposed to be dedicated expressly to public transportation.

That may sound marginal, but with gas prices soaring, the money quickly adds up. For the fiscal year beginning in July, the spillover is projected to reach $617 million. Rather than give it to transit agencies, Schwarzenegger wants to spend it on school buses, which are normally paid for out of the general fund. Further, he wants to take another half-billion dollars out of state transit funds to pay for such traditionally nontransit expenditures as bus service for the disabled and debt service on past transportation bonds.

These moves would hit L.A. especially hard. The Metropolitan Transportation Authority says it stands to lose out on $237 million at a time when it faces a $105-million shortfall. The MTA is already eyeing steep fare hikes and service cuts.

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Yet Schwarzenegger is right to argue that school buses and transportation bonds are transportation items. More to the point, the 1971 law that created the spillover was a bad idea -- the legislative analyst’s office has urged that it be repealed. When gas prices rise, consumers spend less on other goods, so overall sales tax revenues tend to decline. Spillovers favor transit while starving other needed state services.

The underlying problem is that the state funds the vast majority of its transportation needs -- roads, buses, rail -- with an 18-cents-a-gallon excise tax on gasoline. This user fee, which hasn’t been raised since 1995, is producing less revenue when adjusted for inflation. And last year, because of high prices, the state’s consumption of gasoline fell for the first time in 14 years.

The formula needs to be revisited. Transportation should be financed by the most direct user fees when possible, but if the money for roads is going to come from the gasoline excise tax, then that tax needs to be raised or indexed to inflation. Fully funded (and intelligently managed) transit agencies help reduce urban traffic, take stress off roads, cut down on greenhouse gas emissions and keep fares low for the transit-dependent. Unlike the spillover, an indexed tax would be a reliable source of money for an ongoing challenge, not a one-time shot to erase red ink.


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