Spillover

What is the Spillover?

The Spillover is a source of revenue for the State Public Transportation Account (PTA). 25% of all PTA funds go to transit capital improvements and 75% go to the State Transit Assistance (STA) program, which provides flexible fundis to transit operators for transit operations. The STA is the sole source of ongoing state transit funding, and represents the only way the state addresses its critical transit operating needs. Spillover funds are generated when gasoline and diesel fuel prices grow at a faster rate than the rest of the economy. It is precisely these times that Spillover dollars are most needed for transit services and capital projects.

How big is the Spillover?

The amount of Spillover changes from year to year, depending on increases in fuel prices. The state projects that there is $1.667 billion in 2008-2009 State Spillover funds. The adopted State Budget redirected all of these funds away from public transportation.

Where did the Spillover come from?

The Spillover formula dates back to 1971 when sales tax was first extended to motor vehicle fuel (previously, California's state sales tax had covered all goods except motor vehicle fuel). Spillover funding is generated when collections from the sales tax on gasoline increase at a faster rate than all other taxable items.

Each year, the state compares the estimate of revenue generated by a state sales tax rate of 5% on all goods except gasoline with the revenue generated by a sales tax rate of 4.75% on all goods including gasoline. If the amount estimated at 4.75% is greater than the amount estimated at 5%, then the difference is supposed to "Spill over" to the Public Transportation Account. This mechanism is defined in California's Revenue & Taxation Code section 7102(a)(1).

Doesn't the advent of Proposition 42 eliminate the need for transferring the Spillover revenue to transit?

No. The spillover revenue has historically been authorized by the legislature to promote statewide public transit policies and programs, and it is intended to function separate from Proposition 42's funding stream (the state sales tax on gasoline).

Proposition 42 funds a number of different transportation programs, and transit is only one such mode. Proposition 1A, which voters passed in November 2006, protects only Proposition 42 funds; Spillover funds are still vulnerable to being redirected away from transit.