California’s gas tax increased by 2.2 cents on July 1. Here is what cities need to know

By Damon Conklin, legislative advocate (transportation)

California drivers will pay more at the pump starting July 1, as part of an annual tax adjustment that directly supports local streets and roads. The 2.2 cents per gallon increase applies only to the state excise tax established under SB 1 (Beall, 2017) and is separate from federal fuel taxes and state and local sales taxes. The total state excise tax is now 63.4 cents per gallon.

While rising fuel prices understandably generate public concern, suspending or repealing SB 1 revenues would have immediate consequences for cities. Reduced funding would delay street maintenance projects, increase deferred maintenance, accelerate roadway deterioration, and ultimately result in higher long-term costs for taxpayers.

The annual Consumer Price Index adjustment is designed to preserve the purchasing power of transportation revenues as construction costs rise. At the time, SB 1 helped provide cities with a stable, formula-based funding source to repair streets, rehabilitate aging pavement, improve safety, and maintain critical local transportation infrastructure.

However, the gap between SB 1 revenues and the cost to repair and maintain local infrastructure has grown. California's transportation funding system is facing a growing fiscal challenge due to improved fuel economy and increased zero-emission vehicle usage.

A 2025 report from the American Society of Civil Engineers found that local governments do not have enough money to keep up with necessary repairs and upgrades. Similarly, the California Transportation Commission estimates the state faces a more than $215 billion transportation funding shortfall over the next decade.

It is critical that policymakers preserve existing transportation revenues while evaluating sustainable long-term funding solutions. Cal Cities looks forward to working with stakeholders to develop an equitable transportation funding framework that is capable of supporting California’s transportation system for generations to come.