Schwarzenegger's Budget Fix: Reduce Gas Tax & Cut Transit

The current California state budge deficit exceeding $20 billion may be one of the most difficult to fix. Gov. Schwarzenegger is resorting to strategies that include the usual painful cuts and what are termed 'revenue shifts', but no tax hikes.

"The state's current 6 percent sales tax on a gallon of gasoline would be dropped, and replaced by a 10.8-cent increase in per-gallon excise taxes. Administration officials estimate the overall impact would be a 6-cent-per-gallon reduction in gas prices.

The seemingly arcane switch would allow the state to legally cut the money it must currently pay to local governments for transportation programs, and to schools. That's because the sales tax revenues from gasoline are part of voter-approved formulas that determine how much the transportation and schools get from the state."

From Streetsblog:
"The budget scheme defies a state Supreme Court ruling that declared the governor's continued raids on public transit funds illegal.

"Instead of diverting money from the Public Transportation Account (PTA)," the CA Transit Association said in a press release, "the proposal would remove the funding stream that is supposed to flow into the PTA in the first place, effectively eliminating state funding for transit."