How Much Will California’s Transportation Revenue Decrease Due to the COVID-19 Pandemic?

MTI researchers highlight the need for policymakers to prepare for future shortfall
May 12, 2020
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San José, CA

California could lose up to $20 billion in transportation revenue over the next 10 years following the COVID-19 pandemic, according to new research released today by the Mineta Transportation Institute (MTI).

In a new report The Impact of COVID-19 on California Transportation Revenue, MTI researcher Asha Weinstein Agrawal and UCLA researchers Hannah King and Martin Wachs projected how much revenue will be generated over the next decade by the state taxes on fuel purchases and fees on vehicle ownership. COVID-19 has already reduced those revenues substantially because Californians are driving less and therefore buying less fuel.

Projected total revenue varied across different economic recovery scenarios tested. “Under a worst-case scenario, a slow economic recovery could cause California to receive 17% less revenue through 2030 than the state would have received without COVID-19,” explains Agrawal, the director of MTI’s National Transportation Finance Center. “The projected revenue for the slow-recovery scenario is $98 billion, compared to a projected $118 had COVID-19 not occurred.”

The study finds that state policy choices could counteract projected revenues shortfalls. King explains that “one hypothetical recovery scenario we tested could generate $121 billion, a 3% revenue gain compared to revenue had COVID-19 not struck.” This scenario assumed a swift and complete economic recovery coupled with policies to encourage Californians to purchase electric vehicles.

“California policymakers are hastily planning for a future with less-than-anticipated revenue,” said Wachs, a Professor Emeritus of Urban Planning at UCLA and researcher at its Institute of Transportation Studies. “The scenarios in this study are not predictions of what will happen, but with so much uncertainty about the future they help policymakers ask important ‘what if’ questions.”

The study looked just at transportation revenue collected by the state, a package of taxes and fees established by Senate Bill 1 in 2017. These are gasoline and diesel fuel taxes, an annual fee on vehicles with the rate based on vehicle value, and an annual fee for zero-emission vehicles (ZEVs).

In addition to these state-generated revenues, transportation funds in California are also raised locally through transit fares, tolls, sales taxes, and property taxes. California also receives federal funding that will be important to a transportation program recovery.

Agrawal explains how shortfalls in state transportation revenue would influence drivers.“Revenue shortfalls will likely result in both reduced maintenance and delayed capital investments. Drivers will have to wait longer for planned improvements like replacing outdated bridges and rehabilitating freeways.”

The researchers constructed five recovery scenarios based on transportation-specific variables that are most likely to be affected by COVID-19, including fuel consumption, the number of registered petroleum-powered and electric vehicles, and the price of cars. They projected potential revenue exploring possible government policies to stimulate the market, like tax credits to incentivize new vehicle purchases. The five recovery scenarios that were compared with a baseline of what was expected before the COVID-19 emergency, are 1) slow, 2) moderate, 3) moderate with a stagnated vehicle market, 4) moderate with an electric-vehicle stimulus, and 5) fast with an electric-vehicle stimulus. 

This study was funded by the Mineta Transportation Institute at the request of the California Transportation Commission. The researchers will present their findings during a 30-minute webinar on Thursday, May 14 at 10a.m. (PDT).

ABOUT THE MINETA TRANSPORTATION INSTITUTE

At the Mineta Transportation Institute (MTI) at San Jose State University (SJSU) our mission is to increase mobility for all by improving the safety, efficiency, accessibility, and convenience of our nation's’ transportation system. Through research, education, workforce development and technology transfer, we help create a connected world. MTI was founded in 1991 and is funded through the US Departments of Transportation and Homeland Security, the California Department of Transportation, and public and private grants. MTI is affiliated with SJSU’s Lucas College and Graduate School of Business.

ABOUT THE UCLA INSTITUTE OF TRANSPORTATION STUDIES

The UCLA Institute of Transportation Studies (UCLA ITS) is a research center focused on cutting-edge research, the highest-quality education, and meaningful and influential civic engagement on the many pressing transportation issues facing our cities, state, nation and the world today. Housed within the UCLA Luskin School of Public Affairs, UCLA ITS aims to prepare and support the next generation of transportation practitioners to be thoughtful decision-makers at the highest levels of policy, planning and academia.

 ABOUT THE AUTHORS

Dr. Asha Weinstein Agrawal is a Professor at San Jose State University, Hannah King is doctoral candidate at UCLA, and Dr. Martin Wachs is Professor Emeritus at UCLA.

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Contact:

Irma Garcia, MTI Communications & Workforce Development Coordinator

408.924.7560

irma.garcia@sjsu.edu