Fiscal Impact: Additional gas and diesel tax revenue of $210 million

The Governor's budget maintains the level of funding for services included in the Public Transportation Account. It does not reduce services paid for by this account.

Record-high gas prices have contributed to additional funds projected for the state budget. The Governor's budget reflects this change, showing a projected increase to Public Transportation Fund spillover revenue of $601 million. From the Governor's January budget to the May Revisions, estimates were increased by $210 million in spillover funds available from gasoline taxes.

Current law requires the transfer of some gasoline and diesel fuel sales tax revenues from the General Fund to the Public Transportation Account (PTA); a portion of this transfer is known as spillover.

The state's nonpartisan Legislative Analyst's Office has in the past advised dong away with this spillover mechanism because gas prices and the resulting taxes are volatile and unpredictable, endangering funding to transportation.

The Department of Finance has made efforts to ease that volatility, and continues doing so with this budget.

The $200 million will go toward maintaining a healthy and needed budget reserve to cushion the state against unforeseen costs, such as disasters and court orders.

Because Of Rising Gas Prices, The $617 Million Projected In The Governor's January Budget Has Risen By $210 Million. The Governor's January budget estimated $617 million in spillover funds for 2007-08 and proposed that $340 million be used to repay transportation debt, with the remainder transferred to the PTA as spillover. The May Revision forecasts that 2007-08 spillover transfers will be $827 million due to higher gas prices in 2007. (Governor's Budget 2007-08, May Revision, 05/14/07)

• In The Current Budget Year, $325 Million In Spillover Funds Were Put Toward Transportation Costs. In 2006-07, $200 million of spillover revenues that would otherwise be transferred to the PTA was used to repay transportation debt and $125 million was transferred to the Bay Area Toll Account. The Governor's Budget estimated that $224 million would be transferred to the PTA as spillover in 2006-07; this amount has been increased to $226 million. (Governor's Budget 2007-08, May Revision, 05/14/07)

The Nonpartisan Legislative Analyst's Office, "In The Administration's Defense," Has Called The Spillover Funds "Volatile" And Recommended Eliminating The Mechanism. "In the administration's defense, the nonpartisan Legislative Analyst's Office noted that the spillover funding was volatile, falling to zero in some years, as well as regularly subject to diversion for budget-balancing purposes by the Legislature. The office recommended that the legislature eliminate the spillover mechanism, but make sure that the same gasoline sales tax revenue is reserved for transit spending." (Eric K. Nelson, "Transit Advocates Blast Governor's Cuts In Funding," The Oakland Tribune, 03/30/07)

The Governor's Budget Begins Implementing Billions In Transportation Funding From Proposition 1B, Which The Governor Helped Put On The Ballot And Pass. The Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006 authorizes $19.925 billion over the next 10 years to fund existing and new statewide transportation-related infrastructure programs and projects. The Governor's Budget proposed $7.685 billion for allocation to various programs and projects over three years and language to provide flexibility to ensure that those projects that are ready to commence be funded as soon as possible. The May Revision continues this proposal and updates the proposed appropriations in the Budget Bill to $11.5 billion over three years. (Governor's Budget 2007-08, May Revision, 05/14/07)

The Governor's Budget Does Not Impact Public Transportation Services Included In The Public Transportation Account. Transportation - The May Revision includes a reduction of $15.2 million in Public Transportation Account funds as a technical adjustment that will not impact services. This adjustment is necessary to account for reduced transportation costs and for the non-medical transportation funding that is included in the Intermediate Care Facility/Developmental Disabled Bundled Rate Proposal in the Governor's Budget. (Governor's Budget 2007-08, May Revision, 05/14/07)