California’s Budget Crisis Could Get Worse with Upcoming EV Mandate

By: Georgia | Published: Jun 25, 2024

California’s budget is on a rollercoaster thanks to its big bet on electric vehicles. 

As the state backs away from gas-powered vehicles, driven by Governor Gavin Newsom’s green policies, billions in gas tax revenue—once the backbone of infrastructure funding—are at risk.

Gas Tax Woes

Last year, the gas tax boosted California’s funds by $7.4 billion

Vehicles traveling on a California highway during sunset, showcasing vibrant orange hues in the sky and light traffic

Source: Xan Griffin/Unsplash

But as the tax jumps to 59.6 cents per gallon, fewer gas cars mean potentially less money. It’s a fiscal cliff that the state might not be able to avoid.


From Surplus to Shortfall

Just when you thought budgeting couldn’t get tougher, California finds itself in a $45 billion hole, a dramatic flip from a $100 billion surplus just two years ago. 

Governor Gavin Newsom speaking passionately at a podium with a backdrop that reads "California Democrats."

Source: Wikimedia Commons

The phase-out of gas cars is expected to cut another $6 billion from future budgets.

Road to Zero Emissions

California is determined to clean up its act with a bold move: no more new gas cars by 2035

Evening view of the San Francisco skyline with buildings illuminated by the sunset, viewed from a highway

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This rule comes from the Advanced Clean Cars II regulation, ensuring that from 2025, zero-emission vehicles will start taking over the roads.

The Cost of Missing Targets

Next year, automakers not hitting their EV sales marks will face steep fines—up to $20,000 per non-compliant vehicle. 

Close-up of a car's fuel gauge with the needle pointing towards full, set against a dashboard background

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It’s a hefty push to get everyone on board with the state’s sustainability goals.

A Word from the Transportation Secretary

Despite the financial jitters, Transportation Secretary Toks Omishakin remains optimistic.

A man in a blue suit and orange tie sitting in front of a Mexican flag, with a scenic mountain road poster in the background

Source: ToksOmishakin/X

“We are not at a place where we’re losing gas tax funding yet. Some people say that we are, but we’re not,” he explained in a Politico interview, stressing the need for strategic foresight.


EV Taxes: A Silver Lining?

With EVs gaining traction, California hopes to boost its budget with new EV registration taxes. 

A blue electric car charging at a brightly lit EV charging station during nighttime, with neon lights highlighting the station

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Still, the consensus is clear: these funds will hardly make a dent in replacing the vanishing gas tax revenue.


Miles for Money

To fill the looming fiscal gap, California is eyeing a road charge program. 

Aerial shot of a busy highway interchange with multiple lanes and light traffic surrounded by greenery and urban buildings

Source: Bart Jaillet/Unsplash

This pay-per-mile model could solve financial woes but stirs up privacy concerns—a delicate balance between funding roads and respecting driver privacy.


Tracking Troubles

The implementation of a road charge involves collecting mileage information from the state’s 27 million licensed drivers, as noted in a report by the California Legislative Analyst’s Office. 

Black and white photograph of an urban street showing a clear bicycle lane marked on the road amidst parked cars and vehicles.

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This has raised concerns among residents about privacy and the security of their data. 


One More Trial

This July, California will test the waters with its fourth—and possibly final—pilot of the road charge system. 

View from inside a car showing a driver's hand on the steering wheel, facing a vibrant sunset while driving in evening city traffic

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“It’s likely going to be our last pilot because this will be the fourth one,” Omishakin shared, hinting that this trial could lead to bigger decisions.


A Decisive Moment

The upcoming pilot program results will be crucial for lawmakers, helping them decide if the road charge is the way forward. 

Top-down view of an urban road densely lined with trees, showing cars in motion along the road surrounded by lush greenery

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Understanding the ins and outs of this new funding mechanism is key to its success or failure.


Balancing Act

At a pivotal point, California juggles its financial predicaments with its environmental ambitions. 

California Governor Gavin Newsom energetically speaking at a podium, dressed in a dark suit and white shirt at a public speaking event

Source: Wikimedia Commons

The decisions made now will shape the state’s future, striving to support both its economy and the planet.