In 2010, Gov. Arnold Schwarzenegger signed the gas tax swap which created a complex new structure for calculating taxes on gasoline. The gas tax swap lowered the sales tax but raised the excise tax to create “revenue neutrality” while freeing up more money for the state’s general fund. BOE is required to annually review the excise tax and make necessary adjustments by March 1 every year.
According to BOE's calculation the 3.5 cent increase will generate $500 million statewide. The increase will take effect on July 1 and remain in place until June 30, 2014.