The Impact of the COVID-19 Recovery on California’s Transportation Revenue through 2040

Drastic changes to travel behavior during the pandemic have decreased fuel tax revenue, but the extent and timing of financial recovery in the years to come remain uncertain. New Mineta Transportation Institute (MTI) research, The Impact of the COVID-19 Recovery on California Transportation Revenue: A Scenario Analysis through 2040, estimates the impact the COVID-19 pandemic would have on state-generated transportation revenue under six potential economic recovery scenarios, projecting future transportation revenue in California through 2040. 

The six scenarios vary by several variables, including the length of the economic downturn and differences in transportation trends such as vehicle miles traveled (VMT), light-duty fleet size, and the mix of internal-combustion engine (ICE) vs. zero-emission vehicles (ZEV). These projections only consider revenue collected by the state through California Senate Bill 1: The Road Repair Accountability Act (SB1).

The study’s revenue projections under these six scenarios found that:

• The projections demonstrate that annual California transportation revenue by 2040 could range from as little as $6.5 billion to as much as $10.9 billion.
• The projected cumulative revenue raised between 2020 and 2040 varies across the scenarios by more than $40 billion.
• In 2020, taxes on fuels will generate roughly three-quarters of state generated transportation revenue but will likely generate a much smaller percentage of overall revenue by 2040 (in four of the six scenarios, they generate less than a quarter of revenues).

“The findings highlight the need for California’s policy leader to prepare a long-term strategy for raising adequate transportation revenues that take into account the wide variation that will arise,” says Principal Investigator Dr. Asha W. Agrawal.

The researchers suggest that in order to achieve its policy goals of reducing carbon emissions from the transportation sector, state policymakers may wish to change the structure of taxes to replace the revenue lost from fuel taxes. For instance, the team suggests supplementing the existing tax structure with a new road-user charge of one cent per mile. Whatever scenario plays out, California and the world will ultimately adjust and, in time, recover.

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 nations’ 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 AUTHORS
Asha Weinstein Agrawal, PhD, is Director of the Mineta Transportation Institute’s National Transportation Finance Center; Hannah King is an MTI Research Assistant and doctoral student at UCLA; Martin Wachs, PhD, is an MTI Research Associate and Professor Emeritus of UCLA and UC Berkeley; and Jeremy Marks is a Public Administration Analyst at UCLA’s Institute of Transportation Studies.

Media Contact:

Irma Garcia,

MTI Communications and Operations Manager

O: 408-924-7560

E: Irma.garcia@sjsu.edu