California may lose $1.3 billion in gas tax revenue during the coronavirus shelter-in-place period, a side effect of the decline in driving, according to a scientist at UC Davis.
The numbers appear in a new report from the university’s Road Ecology Center, which shows that drivers consumed 85.8 million gallons of gas during the second week of April, a steep drop from the 349 million gallons pumped in the first week of March.
The dip in fuel consumption has tremendous benefits for the environment, said Fraser Shilling, co-director of the Road Ecology Center and author of the report. But on the flip side, it means less tax money flowing into state coffers. At the estimated tax rate of 61 cents a gallon, revenue may have plunged by $161 million a week, the report said.
“The economic impacts are harsh,” Shilling said. He calculated the losses by dividing the reduction in vehicle miles traveled by the number of miles per gallon of fuel in an average car. Shilling then applied the 61 cent tax rate, based on past reports from the American Petroleum Institute that combine state excise taxes and local sales taxes.
His figures are rough, and open for debate, though they illustrate a trend that most transportation experts acknowledge: less travel means fewer people buying gas, which has repercussions for the economy.
The slide comes at a time when state lawmakers expected a gas tax windfall, owing to Senate Bill 1, a 17.6 cent-per-gallon increased approved in 2017. Legislators anticipated the bill would generate $53 billion over 10 years, money they hoped would fill a gaping backlog in highway and bridge repairs while also beefing up public transportation.
Officials at the state Finance Department said that California collects 47.3 cents in excise taxes from every gallon of gas sold, and on top of that, cities reap a 2.25 percent local sales tax. Sales tax losses could be exacerbated by the collapse in California gas prices, which tumbled from $3.43 in March to $2.74 today for a gallon of regular gas, a price chart from the American Automobile Association shows.
Department spokesman H.D. Palmer expects to get an official estimate of how much gas tax revenue the state has lost by next week, when Gov. Gavin Newsom submits his May budget revision. It will examine the impact of COVID-19 on all aspects of the state’s economy.
At this point, the state hasn’t announced cuts for any specific transportation projects. However, the slump in sales taxes could hurt transit agencies, many of which are already seeking government bailouts.
Last week the Bay Area Metropolitan Transportation Commission released its own report, projecting that Bay Area’s non-federal transportation revenues — a mix of fuel taxes, sales taxes, bridge and road tolls, transit fares and parking fees — could plummet by 47 % — of $3.5 billion — through December. By next summer losses could grow to $4.6 billion, the report said, at which point they would likely settle at recession levels.
“This funding shortfall threatens the nearly 250,000 people employed in the surface transportation sector and threatens the Bay Area’s ability to operate and maintain our transportation network,” the report said. The shortfall could halt everything from routine bridge, road and transit maintenance to major capital projects.
Despite the projected losses, the stay-at-home orders have also yielded positive results, Shilling concluded. Traffic is light, roads and freeways are quieter, crashes are down and fewer animals are getting hit by cars. And most notably, greenhouse gas emissions are falling.
The 75 % decline in road travel and fuel use set California on track to cut greenhouse gas emissions by 40 % if the trend were to stick for a year, according to the report. That’s halfway toward the state’s ambitious target of a 80 % greenhouse gas reduction by 2050.
Fraser acknowledged, however, that all the gains from the stay-at-home rules could evaporate after scientists release a vaccine or treatment for the coronavirus. Some transportation experts predict, further, that once the economy reopens people will get back in their cars.