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Where Does All the Money Go Instead?

Saturday September 26th, 2015   •   Posted by Craig Eyermann at 6:36am PDT   •  

cahsr2 Jay Obernolte of the Los Angeles Times asked a question that nearly every California resident who has traveled in a car almost anywhere in the state at almost anytime in recent decades might also have asked: “Why are California’s roads so bad?

Given that Californians pay about 40% more in taxes and fees than the national average, it is only reasonable to expect that the quality of roads we get in return should be significantly better than in other parts of the country.

Unfortunately, anyone who has driven in our state recently knows that this is simply not the case. According to the Reason Foundation’s 21st Annual Highway Report, California is home to one of the worst highway systems in the nation. The report ranks our state second to last in both the condition of urban interstates and in maintenance.

So where does all the extra money that California collects in fuel taxes and vehicle fees go? Obernolte finds that a large percentage of the money that the state collects is being diverted for other purposes.

For instance, 100% of the sales tax on diesel fuel is currently diverted to public transit projects. If we spent this money on our road infrastructure instead, we’d have an additional $620 million each year for repairs. Cap-and-trade revenue, currently allocated with the intention of reducing greenhouse gases, is a more appropriate source of funding for mass transit.

A similar situation exists with the nearly $1 billion that is collected annually from the vehicle weight fee program. During the recession, the Legislature approved AB 105, which directed revenue from truck weight fees to support the general fund. Now that our economy has improved, budget gimmicks like this are no longer needed.

That assumes, of course, that California’s state government doesn’t actually still need to divert those funds to boost its solvency, as the state’s ability to borrow money to fund the topmost priorities of its politicians — greenhouse gas reduction schemes and mass transit projects — are quite costly. So much so that creditors would demand the state be able to make its debt payments before loaning it any money to support them.

That is something that should be fresh on the state’s politicians’ minds, as it just finally paid off the debt it took on during a previous fiscal crisis. KQED’s John Myers reflects on the lessons that should have been learned as the state just finished paying a million dollars a day, every day, just in interest, for 11 years.

Well, certainly, the state got through the worst times. But again, in that million dollars a day, every day, for 11 years, that’s a lot of interest. I don’t think that the voters really understood that. Schwarzenegger did not sell that part of the plan when he was out campaigning for the deficit bond that it was going to cost all of this in interest. I think there are definitely lessons learned.

The politics of California were so polarized back then. And of course, we have seen that now on a national level. There are, you know, some lessons about what happens that the political system can’t resolve at some point. And I think, too, there’s probably a lesson for voters that borrowing money in state bonds is not free money and that it does come at a cost. All of those interest payments could have gone for something else in California.

That money — just as an example — could have paid for the state’s share of the University of California system for like 15 or 16 months. I mean, it is a lot of money. And these were choices that the voters were making. I think that might be the real lesson learned.

A better lesson to learn is that we cannot afford our politicians to be so careless with public finances that the people’s real needs go unfulfilled.

Featured Image:
California Governor's Office of Business and Economic Development

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September 2015