Connect with CP&DR

facebook twitter

Follow us on Facebook and Twitter

Subscribe to our Free Weekly Enewsletter

Governor's Bypass of Transit, Highway Planning Scheme Crashes

Three years ago back when California had money Gov. Gray Davis came up with a clever idea to push more money into transportation projects in a way that would benefit his core political constituencies without raising taxes. Today, Davis's Transportation Congestion Relief Program appears to be self-destructing, along with the entire system of funding state transportation projects. The whole congestion relief episode contains an important lesson about how optimistic budgeting in good times can be counter-productive when bad times arrive. The transportation funding mess has been brought into focus by an extraordinary recent report from the state auditor, who found that both Davis's congestion relief fund and the State Highway Account the chief funding source for road projects created by a mixture of revenues are about to go negative. The California Transportation Commission has already reduced State Transportation Improvement Program (STIP) allocations by $3 billion this year in an attempt to plug the gap, meaning that both the governor's pet projects and most of the regular STIP projects are now stalled. The STIP numbers are sobering indeed. Out of a planned $1.6 billion required to fund and build hundreds of projects during the 2002-03 fiscal year, the California Transportation Commission only allocated about $800 million. Out of $2.1 billion required to fund projects during 2003-04, the commission has so far allocated not a cent. And those cutbacks, the state auditor reports, are not enough. Caltrans budgeters are currently predicting a cash surplus in the State Highway Account, but only by overestimating certain revenues, such as state fuel excise taxes and commercial weight fees. A more realistic estimate of these revenues, along with the continuing state budget crisis, which will prevent the state from moving any more money from the general fund into the special transportation accounts, will surely plunge the state's transportation construction program into the red, perhaps in this fiscal year. State transportation planning is a complicated world that revolves around the STIP, which is the prioritized list of construction and renovation projects approved by the California Transportation Commission. (Regional-level projects are included in regional TIPs.) When Davis's traffic program came along, bureaucratic wags called the program the G-TIP Gray's Transportation Improvement Program. And in many ways, it was a remarkable example of peculiar California budgeting, a pre-allocation of the general fund. In that sense it was similar to ballot-box budgeting efforts such as the Proposition 98 school funding initiative. But the earmarked transportation funding was mandated by the governor's own legislation. The Transportation Congestion Relief Program allocated about $1 billion a year in general fund money mostly from sales tax revenues on fuel to a list of about 140 specific transportation projects around the state. The top-priority projects were not the same ones that had emerged from the state's regular transportation programming priorities; mostly, the projects served urban areas that are important to Democrats, such as Santa Clara County, where a BART extension to San Jose is planned. Cunningly, the governor's initiative did not provide all the funding for any project; rather, it threw just enough into the pot (usually 25% to 30% of the cost) to move the projects up the list for other funding (see CP&DR Insight, July 2000). The whole thing was a manipulative, politically driven end-run around the executive branch's own transportation planning system. But in the tax-rich world of 2000, everybody went along with it. Why not? After all, this was money flowing into transportation that would otherwise have been spent on something else. There is a difference between ballot-box budgeting and a chief executive's pre-allocation, however. Once the voters have made a decision about how to allocate the state's general fund, legislators are unlikely and, in the case of constitutional amendments such as Proposition 98 unable to alter the system. But in desperate times, it turns out that even a constitutional amendment gives the governor and the Legislature great leeway to start messing around with things. And mess around with the Transportation Congestion Relief Program they have. Technically, the program created a separate fund known as the Transportation Congestion Relief Fund (TCRF) designed to receive transfers from the general fund for the governor's special list of transportation projects. The legislation in 2000 also created another fund known as the Transportation Investment Fund, or TIF, where sales tax revenues from gasoline would be parked rather than in the general fund. In 2002, voters approved Proposition 42, a constitutional amendment that cemented the gasoline sales tax as the TIF's funding source. The congestion relief projects were supposed to receive $5 billion from these two sources from 2000 through 2008. About $1.5 billion originally came from a general fund transfer to the TCRF, and the remainder was supposed to come from the TIF. (Any overage in TIF funds was supposed to be distributed to other projects according to a formula.) However, things have not worked out as planned not surprising, considering that state leaders have wrestled with a budget deficit of more than $30 billion for months. For one thing, the Legislature has now "borrowed" more than $1 billion from the congestion relief fund to prop up the general fund and seems to have no plans to pay the money back. For another, the governor and the legislature have not transferred the $1 billion in sales-tax-on-gas revenues from the general fund into the TIF for this fiscal year. It turns out that, under Proposition 42, they can suspend the payments in a budget crisis. This description could go on and on, but the bottom line is that because of the budget crisis the state simply is not implementing the congestion relief program that was adopted by the Legislature only three years ago and added to the state constitution last year. And more than the governor's pet list of 141 projects is at risk. The state's decision not to shift funds from the general fund into these two special transportation accounts has also placed the entire state highway construction program at risk. The state auditor's report made that point clear. One rule of thumb around Sacramento is that when everybody else runs out of money, there is still a lot sloshing around at Caltrans. It is the biggest state agency, and it has reliable sources of revenue that are least partly protected from the vagaries of general fund budgeting. Transportation projects always get taken care of. But the maneuvering of the last few years has made Caltrans and its projects more vulnerable than they used to be. Slicing off general fund money to transportation projects via constitutional amendment is fine, except that it was done in typical California fashion a method familiar to local governments that have lost property tax revenues to a special fund for schools. A separate account was created; statutory and constitutional provisions were put into place about how to transfer general fund money into the separate account; and an override system was included so that the governor and the Legislature could pull the plug on the whole thing if the budget went south. That is what has happened. In the crazy world of Sacramento budget deficits, even Caltrans can't count on anything.
Search this site

NEW E-EDITION JUST PUBLISHED: