MOORLACH UPDATE — Mismanagement — March 11, 2017

"Does anyone listen to you?" I heard this question a few times after sharing about the Senate Governance and Finance Committee meeting this past week (see MOORLACH UPDATE — SB 1 — March 9, 2017 march 9, 2017 john moorlach).

Well, I am very glad to announce that an editorial board did. The LA Daily News and the Redlands Daily Facts provide their editorial thoughts against raising the gas tax in the piece below. In fact, many of their closing arguments parallel those that I have made.

Having served many years ago as Chairman of a credit counseling nonprofit, I can tell you that people find themselves in financial distress due to one of three occurrences: misjudgment, misfortune, or mismanagement. Sometimes it could be a combination, but for the state of California, the main reason for its financial precariousness is mismanagement. And this editorial board calls it out.

State needs transportation reform and better priorities, not tax increases, to fix infrastructure

http://www.dailynews.com/general-news/20170310/state-needs-transportation-reform-and-better-priorities-not-tax-increases-to-fix-infrastructure

http://www.redlandsdailyfacts.com/general-news/20170310/state-needs-transportation-reform-and-better-priorities-not-tax-increases-to-fix-infrastructure

There is broad agreement that California has allowed its infrastructure to seriously deteriorate, but not much accord on how to pay for the necessary improvements.

According to the American Society of Civil Engineers’ 2017 Infrastructure Report Card, half of the state’s public roads are in poor condition, each motorist pays an average of $844 per year in costs from driving on roads in need of repair, 1,388 bridges (5.5 percent) are structurally deficient and there are 678 “high-hazard potential” dams.

The funding problem is pretty substantial. The administration has identified approximately $77.4 billion worth of deferred maintenance needs alone, the vast majority of which are for transportation ($57 billion) and water resources ($13.1 billion). And just last month Gov. Jerry Brown valued the state’s total unmet transportation and water infrastructure needs at $187 billion.

“We’ve ignored some of the fundamentals for too long,” state transportation secretary Brian Kelly recently told the Sacramento Bee.

Brown’s proposed fiscal year 2017-18 budget includes a plan to raise more than $4 billion in revenue for transportation by hiking vehicle registration fees by $65 a year, increasing gas excise taxes and dedicating an additional $500 million in cap-and-trade auction proceeds. Under the proposal, the gasoline tax rate would rise from 27.8 cents per gallon to 39.5 cents per gallon — a 42 percent increase — and the diesel fuel tax rate would soar from 16 cents per gallon to 27 cents per gallon — a 69 percent jump. Both increases would go into effect in FY 2018-19, and would be adjusted based on inflation thereafter.

State Sen. Jim Beall, D-San Jose, chairman of the Senate Transportation and Housing Committee, has offered his own alternative, Senate Bill 1, which would generate an additional $5.5 billion a year in revenue. It includes a smaller annual raise in vehicle registration fees ($38), a similar 12-cents-per-gallon gas tax hike (over three years), a 20-cents-per-gallon increase in the diesel excise tax, a 4 percent increase in the diesel sales tax and a new $100 annual fee on drivers of zero-emission vehicles, who are able to avoid gas taxes.

The gas tax is at least a fairly close approximation to a user fee, which is preferable because those who use the roads should bear the burden of maintaining them. But the state has not proven that it can responsibly spend the money it already has. The California Department of Transportation is rife with waste and inefficiency, as numerous reports from the State Auditor and the Legislative Analyst’s Office have revealed. The LAO reported in 2014 that Caltrans maintains approximately 3,500 redundant engineers and architects at a cost of more than $500 million a year. State Sen. John Moorlach, R-Costa Mesa, notes that Caltrans also does very little contracting, and estimates that if we outsourced 50 percent of our transportation engineers and architects, like most other states do, we could save another $200 million a year.

California has mismanaged its scarce resources through waste, devoted a greater and greater share of transportation funds to public transit, which accounts for only a small fraction of the total number of trips taken and has seen declining ridership, and poured billions of dollars into an unnecessary high-speed rail boondoggle that will not address the state’s transportation problems. Bailing out such mismanagement with tax increases will only enable more of the same dysfunctional behavior. Until the state gets serious about putting its own house in order and making transportation a real priority, policymakers should put the brakes on any tax increases.

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