Proposition 2 | Text of Proposed Law | Proposition 2 | Argument in Favor |
Transportation: Funding.
Legislative Constitutional Amendment.
Analysis by the Legislative Analyst

California's highways, public streets and roads, and mass transportation systems are funded by a mix of federal, state, local, and private money.

State Transportation Funds. State funds for transportation programs are derived from three major sources--a "gas" tax (currently, 18 cents per gallon of motor vehicle fuels, primarily gasoline and diesel), sales tax on gasoline and diesel, and taxes and fees on motor vehicles and their use, including truck weight fees, vehicle registration fees, and driver's license fees.

Currently, revenues derived from the gas tax on motor vehicle fuel used in vehicles on public roads and revenues from fees and taxes on motor vehicles are restricted to specified transportation purposes by the California Constitution. The State Constitution, however, permits these revenues to be loaned temporarily to the state General Fund with the condition that the loaned amount must be repaid. The state General Fund supports nontransportation activities such as education, corrections, and health and social services programs.

Under current law, revenues from the sales tax on diesel fuel and part of the sales tax on gasoline must be deposited in the Public Transportation Account for use only for public transportation and transportation planning purposes. Currently, these funds may be loaned to the state General Fund. Loans must be repaid with interest.

During a fiscal year, state transportation funds are often loaned on a short-term basis (sometimes as short as one day) to the state General Fund for cash flow purposes. Additionally, during the recession of the early 1990s, transportation funds were loaned to the state General Fund on a longer-term basis (more than a fiscal year). The length of these loans was determined by the Legislature and Governor in statute.

Local Transportation Funds. Current law authorizes each county to establish a Local Transportation Fund (LTF) for public transportation purposes. Revenues to each county's LTF are derived from one-quarter cent of the sales tax collected in that county.


This measure amends the California Constitution to restrict the conditions under which state transportation funds, including gas tax revenues, revenues from fees and taxes on motor vehicles and their use, and funds in the Public Transportation Account, can be loaned to the state General Fund. Specifically, loans to the state General Fund in any fiscal year must be repaid within that fiscal year, except that repayment may be delayed up to 30 days after a state budget is enacted for the subsequent fiscal year. Loans extending over a fiscal year may be made only if the Governor declares a state of emergency which would result in a significant negative impact to the General Fund, or if there is a decrease in General Fund revenues from the previous year's level. Loans extending over a fiscal year must be repaid in full within three fiscal years.

The measure also clarifies that the Legislature may authorize certain state transportation funds to be loaned to local agencies for transportation purposes allowed by the State Constitution. The measure requires such loans to be repaid with interest no later than four years after the loans are made.

Additionally, the measure amends the State Constitution to designate the LTFs as trust funds and prohibits the funds from being abolished. The measure further prohibits LTF monies from being diverted from specified transportation purposes to other purposes.

Fiscal Effect

It is unlikely that this measure would result in any state or local fiscal impact. This is because the measure's restrictions generally would not result in additional borrowing costs or savings.

Proposition 2 | Text of Proposed Law | Proposition 2 | Argument in Favor |