Highlands Consulting has long served State transportation clients and has been closely following the effect of the COVID-19 pandemic on this area. In September, the Legislative Analyst’s Office (LAO) released a new transportation policy post on the “Impact of COVID-19 on State Transportation Revenues.” It highlights the direct impacts the pandemic has had on transportation, and, in turn, on transportation revenues. With people staying at home and driving less, California has seen a reduction in vehicle miles traveled (VMT), fuel consumption, and fuel prices – which should come as no surprise.
Encouraging people to drive less and walk and bike more aligns with the State’s transportation policy objectives, including those outlined in the Governor’s recent climate change Executive Order. It orders the California Transportation Agency to reduce vehicle miles traveled, to encourage people to shift away from cars, and to reduce congestion to decrease greenhouse gas emissions and support public health. COVID-19 has — quite unexpectedly! — helped accelerate some of these changes.
However, these changes in our driving behavior have also reduced important revenue streams that fund transportation projects throughout the state. State funding relies on gas taxes that are used specifically for transportation improvement (such as maintenance for highways, local streets, and roads). With falling demand, gas prices and taxes have fallen. As the LAO explains, this has all contributed to an estimated decrease of $619 million in 2019-20 state transportation revenue.
California thus finds itself at a crossroads. For over 12 years, Highlands Consulting has supported the State’s planning efforts towards promoting alternate modes of transportation, as well as identifying new revenue streams that are not bound to gas tax models. The COVID-19 pandemic has further emphasized the importance how we can help the State achieve its mission for mobility and safety for its transportation system.