2007/08 State Budget and How it Affects Transportation

Background
Since 2002, California’s transportation coffers have been subjected to continuous raids – totaling nearly $6 billion - in the State’s attempts to balance their budget.  This has rendered the State unable to follow through on scheduled expenditures for critical transportation projects. 

A positive note was reached in November 2006, when voters passed Propositions 1A and 1B.  Proposition 1A closed loopholes that allowed the legislature to raid Proposition 42, which directed the sales tax on gasoline to transportation purposes.   Proposition 1B provided $19.9 billion in bonds for transportation projects, including a $2 billion infusion of funds into the State Transportation Improvement Program (STIP).

Unfortunately, the deficits that have plagued the State budget have not abated. Through the approaches listed below, the 2007 State Budget diverts a total of approximately $1.3 billion from transportation.

Using Transportation Funds for General Fund Obligations
One way the Legislature is raiding transportation funds that would have gone to the STIP is to use them for general fund obligations that have some sort of transportation connection.  Specifically, transportation funds are proposed to be used to pay debt on general obligation bonds issued for transportation in the past, as well as paying for some school-related transportation costs.

“Spillover” Funds and the STIP
The “spillover” fund dates back to the passage of the Transportation Development Act (TDA) in 1971, and is based on the concept that when gasoline prices spike, more funding for transit alternatives is needed to offset the impact of those gas prices to lower income persons.   The “spillover” calculation is based on a complex formula that places a portion of the higher gas tax proceeds towards the Public Transportation Account (PTA).  About half of the PTA goes to transit providers via the State Transit Assistance funds.  The other half of the PTA is included in the STIP.

Meanwhile, the availability of funds in the STIP is based on a complex set of assumptions, with a cornerstone being that the funding designated for the STIP in state law will materialize.  This includes PTA dollars.

What Does it Mean to Placer?
These raids hurt Placer in two ways.  First, we have a reduced amount of STA funds to operate our transit systems (an estimated $2 million reduction).  But more subtly, it may affect our ability to construct the Lincoln Bypass.

The STIP includes both transit and road projects, and programming of projects is aligned with the estimated availability of funding on a year by year basis.   Even with the influx of funds available from the infrastructure bonds, the corresponding diversion of spillover and other funds means that there may just be barely enough cash to cover the projects that are already promised for allocation in FY 2007/08, regardless of whether they are road or transit.

The Lincoln Bypass is programmed for STIP allocation in FY 2008/09, but we have been working diligently on a design-sequencing approach that will allow us to start work in FY 2007/08.   We had been working on the assumption that the influx of funds from the infrastructure bonds would make an early allocation possible.  Now, with barely enough money for the projects already promised money this year, it will present a major challenge for us to get the more than $150 million in cash needed to construct the Lincoln Bypass in FY 2007/08.

What’s equally alarming is that, if this trend towards raiding transportation funds resumes, there may not be funds available for allocation to the Lincoln Bypass promised for 2008/09.  The delay, and resulting cost, could be devastating.

Regardless of the current outlook, our game plan remains unchanged.  The PCTPA-Caltrans-local jurisdiction team is committed to finding a way to go to construction on the Lincoln Bypass in FY 2007/08.