SACRAMENTO, Calif. — State leaders are grappling with how to restructure road funding as California transitions to an electric vehicle future — and they are running out of time to find solutions.
State officials, lawmakers, industry representatives and labor leaders joined POLITICO California Policy Editor Debra Kahn Tuesday for a live event to discuss how California’s EV mandate will impact declining gas and diesel tax revenues where state and local authorities rely on to invest in public transport and road maintenance. The nonpartisan Legislative Analyst’s Office estimates a 64 percent (or $5 billion) drop in gas tax funding by 2034.
Here are the key takeaways from the wide-ranging discussion in Sacramento:
The problem is more urgent than you might think: California motorists’ demand for gasoline has been slowly declining, declining about 1 percent annually in recent years. However, that pace will increase as more people switch to electric vehicles, ahead of a 2035 ban on the sale of new gasoline cars. Lawmakers warned Tuesday that the state must find a solution quickly or risk falling behind.
Chairman of the Transport Committee Lori Wilson said electric cars are spreading fast enough in a Bay Area jurisdiction to cut gas tax revenues by 18 percent. She said her staff has mapped out how long it would take to transition California to a road tax system, under which residents would pay different amounts based on their driving habits and income levels. If the state were to begin that transition now, it would take about six years for road use fees to be fully implemented.
“While there is an appearance of lead time, there isn’t because things are moving slowly and it takes time to get there,” the Solano County Democrat said.
Sen. Dave Cortese, chairman of his chamber’s transportation committee, said the Legislature has a lot on its plate, from modernizing the power grid to keeping a struggling education system afloat. That means lawmakers won’t get a chance to focus solely on the gas tax conundrum.
“We still have a little time, but I will determine that we don’t have that much time,” said the San Jose-area Democrat.
California Transportation Secretary Toks Omishakin offered a different view. He emphasized that while gas consumption is declining, gas tax increases have kept revenues stable. He thinks this gives the state wiggle room to continue working on pilot programs to test out road use fees instead of fuel taxes. A new pilot will start in August to test charging mechanisms.
“We don’t want to be caught flat-footed on this issue.”
Transit is in the crosshairs: California’s public transportation system is already struggling amid pandemic-related ridership declines, and that problem will worsen as the state’s main source of transportation funding — taxes on diesel sales — dries up.
Michael Pimentel, executive director of the California Transit Association, which represents transit agencies across the state, argued that the only way the state can achieve its climate goals is by encouraging car-oriented residents to use more public transportation, while simultaneously adopting electric vehicles embrace. . Improving the frequency and reliability of transit systems will require more funding, but California could lose 20 percent of its diesel revenues — $1.3 billion — according to LAO estimates.
Pimentel estimates that the number of transit passengers must increase by 6 to 8 percent to achieve climate goals. That’s at least 100 million additional bus, train and ferry trips annually, based on the 1.3 billion transit trips recorded in 2019 – before the pandemic hit ridership.
“That’s a huge undertaking, and we can’t do that if we cut and erode the sales tax on diesel,” he said.
Lawmakers are working on it in different ways: Each member of the panel said they are actively thinking about the EV transition, but their strategies look different.
Cortese said his main focus is figuring out how California will produce enough clean energy to reliably power its electric grid and provide the transmission capabilities needed to run the millions of chargers needed to power a vast ecosystem of support electric vehicles. We are still a long way from that reality, he said, as evidenced by the state having to keep its last nuclear power plant open.
“There’s a reason we expanded Diablo Canyon,” Cortese said. “That was not something that any California legislature ever wanted to do.”
Wilson said she wants to build more housing, which she called the underlying problem of California’s efforts to reduce emissions. The Assemblymember raised the idea earlier this year of introducing a bill to promote more transit-oriented housing, though that proposal never emerged.
Omishakin was more confident that the state is on the right track to successfully navigate the transition. California already accounts for 35 percent of the nation’s electric vehicles and 40 percent of its charging stations, he said.
“We are doing extremely well, the rest of the world is really following our steps and our leadership,” Omishakin said.
AVs are hot: The debate over how California should regulate autonomous vehicles is high on the agenda, as illustrated by a spirited exchange between Cortese and Wilson.
Lawmakers have tried to rein in the technology after high-profile accidents, including stops at busy intersections, menacing emergency vehicles and the towing of a woman. The DMV and the California Public Utilities Commission have the sole authority to regulate AV technology.
Cortese decided Monday not to move forward with a bill that would have given city and county officials more power over AV regulations after Wilson’s committee proposed eliminating the local control element. That clearly irked the senator, who argued that local law enforcement agencies have long had a say in how cars use their roads.
“I don’t know how you can get away with that just because there’s no human driver behind the car,” Cortese said.
Wilson hit back, saying that while the bill was too broad and that while local governments control things like speed limits, they don’t have the power to say who can drive on the streets.
“There is language in the bill that is broad enough that you can limit the number of vehicles that can be in a community,” she said. “So if you have that control, you could essentially ban AVs in your community.”
Autonomous vehicles are also on the minds of union organizers, who are grappling with how new technology affects employment. Emily Cohen, executive vice president of United Contractors, said she has seen the rapid growth of self-driving cars in San Francisco and even saw a few AVs driving through former President Donald Trump’s motorcade last week. She called AVs an “X-factor” that policymakers must understand if they want to address the funding problem.
“How will that change not only driving behavior, but also exercise behavior?” she asked. “Will this put more cars on the road or fewer cars on the road? How will that change people’s quality of life?”
