National Legislation

The Highway Trust Fund

The Highway Trust Fund was established in 1956 to finance the United States Interstate Highway System. The fund receives money from a federal fuel tax of 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel fuel. It currently has three accounts: the Highway Account which funds road construction; a smaller Mass Transit Account; and also a Leaking Underground Storage Tank Trust Fund.

In 1993, the federal gas tax was raised from 14 cents per gallon to 18.4 cents per gallon; since that time, it has remained unchanged. In 1993, the tax was 18% of the cost of a gallon of gas; today it is 5%. With rising fuel efficiency of our vehicle fleet, reduced driving since the recession of 2008, and congressional refusal to raise the federal gas tax or index it to inflation, the Highway Trust Fund is on the brink of insolvency. From 2008 to 2010, Congress authorized the transfer of $35 billion from the General Fund of the U.S. Treasury to the Highway Trust Fund because the tax was not taking in enough money. The U.S. Department of Transportation estimates that the Highway Account will become insolvent by summer 2014, and the Mass Transit Account will reach insolvency by the end of 2014.

Regardless of the level of the tax, questions surround the gas tax’s viability as a long-term revenue source. Although the tax is intended to support infrastructure maintenance and development, it often lacks that direct link to road use and wear and tear. For example, a 2010 Ford Escape hybrid SUV (29 mpg) puts much more stress on the road than the lighter 2010 Ford Mustang (19 mpg), but because the Ford Escape is more fuel efficient, its owner pays less in taxes to travel the same distance. According to the National Surface Transportation Infrastructure Financing Commission, “Reliance on motor fuel taxes generally provides a weak proxy for capturing the costs of environmental damage and other negative impacts such as contribution to congestion and system wear and tear.”

A vehicle miles traveled (VMT) fee charges motorists on how many miles they have traveled and has been proposed as a replacement or supplement to the fuel tax. A VMT fee currently exists as part of a limited program for 5,000 volunteers in Oregon and for trucks in Illinois. Internationally, Germany, Austria, Slovakia, the Czech Republic, Poland, Hungary, and Switzerland have implemented various forms of VMT fees for trucks, while France, Belgium and Russia have truck-based systems under development. New Zealand has a system applying to all heavy vehicles and diesel-powered cars.

A VMT fee can be a flat fee (e.g., a fixed number of cents per mile) or a variable fee based on factors such as time of travel, congestion, type of road, weight of the vehicle, vehicle emissions, and ability for the owner to pay. The implementation of VMT fees is envisioned through the use of an on-board GPS device that captures the distance driven. Opponents of VMT fees view these systems as an invasion of privacy, but those in favor argue that on-board units can be programmed to gather just enough data to collect and transfer the miles per region or zone as opposed to the exact location.

Corporate Average Fuel Economy Standards

In 1975, Congress established Corporate Average Fuel Economy (CAFE) standards to improve vehicle fuel efficiency. CAFE is the average fuel economy (mpg) of a manufacturer’s fleet of passenger cars and light trucks (pick-up trucks, minivans, and SUVs) sold in the United States. CAFE standards initially helped raise fuel efficiency, but then remained virtually unchanged for nearly three decades.

The Obama administration has made two major updates to CAFE standards. The first phase raises average fuel economy to 38.2 mpg for passenger cars and 28.9 for light trucks by 2016. The second phase, announced in 2012, raises fuel economy to 55.3 mpg for passenger cars and 39.3 mpg for light trucks by 2025. The program also includes manufacturer incentives for electric, plug-in, natural gas, and fuel cell vehicles, along with a special incentive for technologies that help increase fuel economy for large pickups.

California Legislation

SB 1077

In California, in addition to the federal gas tax, drivers pay 37.7 cents per gallon for the state gas tax. Our state has the second-highest amount of taxes per gallon of gasoline, topped only by New York.

In February 2014 State Senator Mark DeSaulnier, D-Concord, introduced SB 1077, which would require the California Department of Transportation to develop, by January 2016, a VMT pilot program. This bill tasks the Transportation Agency with examining issues relating to a VMT fee, such as how to calculate mileage, how to collect data and protect drivers’ privacy, and how to assess the costs of a VMT fee program if implemented throughout the state. The pilot program would use volunteers, and would end with a final report by June 2017.

AB 32 (the Global Warming Solutions Act), 2006

Background: The Kyoto Protocol, which set legally binding greenhouse gas reduction targets, was signed by most developed countries in 1997 with the exception of the United States. In 2005, Governor Schwarzenegger gave executive order S-3-05, which set reduction targets for California, but did not specify how reduction targets would be met. AB32 includes specific measures and a review process for meeting the reduction targets.

Effects: The bill requires the Air Resources Board (ARB) to prepare a scoping plan that measures current greenhouse gas emissions and estimates how reductions will be achieved within the specified timeframe (next target is to reduce GHGs to 1990 levels by 2020). Another key feature of the bill is the creation of a cap-and-trade program that restricts how much electric power plants and large industries may pollute. Firms that exceed limits must purchase pollution allowances at Air Resources Board auctions, which to date has generated $1.3 billion in revenue for the state.

Next steps: The goal of the legislation is to reduce greenhouse gas emissions to 1990 levels by 2020 and then to continue reductions to 80 percent of 1990 levels by 2050.

SB 375 (The Sustainable Communities and Climate Protection Act), 2008

Background: Since the transportation sector is the largest source of greenhouse gas emissions in California (38%) it’s imperative to reduce vehicle emissions by designing communities that are better served by public transit.

Effects: The California Air Resources Board adopted transportation-related reduction targets for the eighteen Metropolitan Planning Organizations (MPOs) in 2011. In the Bay Area, our planning organization is the Association of Bay Area Governments (ABAG) and the Metropolitan Transportation Commission (MTC). Each of the MPOs must create a Sustainable Communities Strategy (SCS) that coordinates housing, transportation, and land use planning with the aim of achieving the Air Resources Board’s reduction targets. The guiding principle is that denser, transit-oriented development in previously developed areas (“infill development”) can accommodate more people and lower GHG emissions from vehicles.

Next steps: The Sustainable Communities Strategy for the Bay Area can be found in Plan Bay Area, which was adopted in July 2013. Implementation of the Plan is ongoing.

SB 1339 (Commute Benefit Policies), 2012

The goal of SB 1339, the Bay Area Commuter Benefits Program, is to reduce air pollution and GHG emissions from motor vehicle travel by moving commuters from solo-occupancy vehicle travel to alternatives like transit, vanpool, carpool or bike. The program will go into effect on September 30th, 2014 and operate on a pilot basis in the Bay Area through the end of 2016. If successful, the model might be used in other metropolitan regions of the state.

Under SB 1339, Bay Area employers with 50 or more full-time employees within the Bay Area must offer their employees one (or more) of the following commuter benefit options:

  • Option 1: Pre-tax benefit. Employees can exclude transit or vanpool costs from their taxable income, up to the maximum amount allowed under federal law ($130/month). Employees who take advantage of this option could save up to $600 per year. This benefit also reduces employers’ payroll (FICA) taxes, saving them on average $140 a year per employee.
  • Option 2: Employer-provided transit/vanpool subsidy. The employer provides a subsidy to cover employee’s transit or vanpool costs up to a maximum of $75/month (employer can provide more if they would like).
  • Option 3: Employer-provided transit. The employer provides a free or low cost bus, shuttle, or vanpool. This option can be very costly to employers, but employer-transit can be a valuable way to attract and retain workers.
  • Option 4: The employer provides an alternate benefit from a list of options. This option is best for employers located in areas not served by transit. This option provides more flexibility to offer alternative commute options like walking, telecommuting, or switching to electric vehicles.

Recent legislation

AB 8, September 2013: This $2 billion bill includes several measures that will promote the transition to clean technology vehicles. Among them is the ten-year extension of the Clean Vehicle Rebate Project (CVRP), which provides rebates of up to $2,500 for new eligible zero-emissions or plug-in hybrid vehicles on top of the federal tax credit, which is worth up to $7,500. The bill also sets aside funding for the construction of at least 100 public hydrogen fueling stations.

SB 99, September 2013: This bill boosts state funding for walking and biking infrastructure by 35%. The various pedestrian, bicycle, trails, and Safe Routes to Schools programs will be unified into a comprehensive Active Transportation Program. The bill provides $24 million for Safe Routes to School projects in a statewide competition, and additional funding will be distributed through regional metropolitan planning organizations. The bill requires that 25% of the Active Transportation Program funding benefit disadvantaged communities.

AB 417, October 2013: This bill exempts bicycle transportation plans in urban areas from the California Environmental Quality Assessment (CEQA). An unintended consequence of CEQA was that it discouraged cities from pursuing environmentally-friendly and traffic-relieving bicycle transportation programs.