Lawmakers warned gas‑tax revenue decline could shrink transportation funding statewide

A joint informational hearing of the Assembly and Senate transportation committees in Sacramento heard on multiple panels that California’s traditional fuel‑tax funding model is eroding and that the state must develop replacement revenue mechanisms to avoid large cuts to maintenance and projects.

The hearing, convened by Chair Wilson of the Assembly Transportation Committee and attended by Senate leaders including Senator Cortese, featured briefings from the Legislative Analyst’s Office and academic and agency experts who described how increasing vehicle fuel efficiency and the transition to zero‑emission vehicles are shrinking the state’s gas‑tax base.

The briefing from Frank Jimenez of the Legislative Analyst’s Office laid out how California’s transportation funding is structured and how much it currently relies on fuel taxes and vehicle fees. Jimenez told the committees that total transportation funding in 2022–23 was about $44 billion and that state revenues from fuel taxes and vehicle fees are expected to generate roughly $14.4 billion in 2024–25, with the gasoline excise tax alone estimated to produce about $7.9 billion.

Why it matters: a decline in user‑based fuel revenues would hit large programs that are not fully protected by fixed funding rules. Tanisha Taylor, executive director of the California Transportation Commission, told lawmakers the commission allocates nearly $8 billion a year through programs that include the State Transportation Improvement Program (STIP), the Senate Bill 1 Local Streets and Roads program and the State Highway Operation and Protection Program (SHOP). Taylor warned, “we will have fewer resources to address the types of projects I described earlier,” if projected declines materialize, and cited a commission draft needs assessment that estimates a roughly $217 billion shortfall over the next 10 years between needs and available revenues when accounting for the projected decline in gas‑tax receipts.

Scenario projections: academics and independent researchers presented multiple future scenarios. Brian Taylor, a professor at the UCLA Institute of Transportation Studies, summarized the historical role and strengths of the per‑gallon fuel tax while emphasizing its limits as vehicles become more fuel efficient and electrified. “The California motor fuel tax is quite old,” Taylor said, and noted the tax’s political advantages but also that it is insensitive to changes in fuel efficiency and construction inflation unless policymakers act to adjust it.

Asha Weinstein Agrawal of San José State University’s Mineta Transportation Institute presented a scenario analysis that modeled a range of futures through 2040. She said every scenario in the study produced declining real revenues and that under some aggressive electrification and travel‑reduction assumptions the state’s combined revenue from the five principal fuel and vehicle fees could fall far below current levels—one illustrative result showed gross annual revenue falling from about $13 billion to roughly $5 billion by 2040 in a high‑adoption scenario. She emphasized the study’s use of multiple “if‑then” trajectories to make the uncertainty transparent and to show how both vehicle electrification and changes in vehicle miles traveled (VMT) influence revenue.

What programs would be affected: speakers repeatedly identified local streets and roads, Caltrans’ highway maintenance (SHOP), and STIP as programs likely to see cutting in a lower‑revenue future. Tanisha Taylor and others described how the “waterfall” of statutory and constitutional protections leaves the largest, more flexible programs most exposed to revenue declines. The commission highlighted prior cycles when lower than expected gas tax receipts produced funding shortfalls that delayed or reduced regional projects.

Regional and local views: James Corless, executive director of the Sacramento Area Council of Governments, said fuel‑tax revenue accounted for roughly one‑third of the funding SACOG counted on in its 25‑year regional plan and estimated a $3 billion–$4 billion shortfall across the region’s plan if no replacement is found. Margo Yap of NCE detailed local‑system needs, saying California’s local network represents over 85% of the state’s transportation network (tens of thousands of centerline miles) and reporting a multi‑billion‑dollar 10‑year local backlog: she described $80+ billion in local pavement needs plus tens of billions more for essential components such as sidewalks, signals and active‑transportation facilities, producing a local shortfall in the order of tens of billions over 10 years.

Options and tradeoffs discussed: witnesses and committee members discussed several classes of responses without endorsing a single approach. Options included (a) raising existing fuel taxes and indexing them, (b) increasing vehicle registration or flat fees on zero‑emission vehicles (the state currently collects a road improvement fee on ZEVs), (c) implementing a road‑user charge or mileage‑based fee (pilots have been conducted and were discussed), (d) shifting some transportation funding to the general fund, and (e) prioritizing and restructuring spending. The Legislative Analyst’s Office emphasized that each option has tradeoffs—equity, administrability, behavioral effects on travel demand and political feasibility all matter.

Stakeholder concerns emphasized equity and local impacts. Multiple legislators and speakers urged protections for lower‑income and rural residents who drive long distances out of necessity. Assemblymember Lackey and others stressed affordability and asked how to avoid regressive outcomes; Sacramento region officials urged that regions be engaged in designing any user‑fee program to include low‑income protections and rural exceptions. Industry, labor and local government commenters at the hearing urged continued investments in goods‑movement infrastructure and noted that deferred maintenance and climate‑driven emergency repairs are already straining budgets.

Next steps and oversight: witnesses urged continued scenario modeling, regular updates of projections, additional pilots and hearings on road‑use charging mechanics and equity design, and early legislative attention so the state can move beyond problem identification to policy choices. The California Transportation Commission said it will continue to monitor revenue trends and work with the Legislature to develop policy responses. Several panelists and public commenters specifically recommended transparent expenditure plans and strong public communication about how new revenues would be used to maintain and repair local and state infrastructure.

The hearing produced no formal votes. Committee members and agency officials described the session as an initial, informational step to outline the fiscal problem and to begin a sustained legislative process to evaluate options for sustaining California’s transportation system.