State Budget Update

Proposed FY 2008-09 State Budget

Governor's Transportation Budget Mostly Avoids Large Reductions

January 11, 2008
Yesterday morning, the Governor released his proposed FY 2008-09 state budget proposal. Following current law, and not without some pain, the proposed budget provides generally good news for transportation. While the budget fully funds Proposition 42 and provides repayment of outstanding Proposition 42 loans — for a grand total of $1.5 billion — it also proposes shifting $455 million in “spillover” funding from the Public Transportation Account (PTA) to offset bond and other repayment expenses that are traditionally covered by the General Fund.

The above action on the “spillover” funding is consistent with language contained in last year’s budget trailer bills. The ramification of this fund shift is to reduce funding available for intercity rail and transit capital improvements in the State Transportation Improvement Program (STIP) and it reduces funding available for the State Transit Assistance (STA) program — the only statewide monies available for transit operating expenses. STA Funding More than Doubles from Current Year Following current law that reflects both a change in how Proposition 42 funds are allocated and guidance from last year’s budget, STA funding will increase by $427 million over last year’s $316 level to $743 million (a 135 percent increase). Specific Bay Area numbers are included in the table in Attachment A. Proposition 42 Fully Funded Table 1 on the following page indicates the funding level for the various Proposition 42 programs. FY 2007-08 was the last year of allocations to the Traffic Congestion Relief Program (TCRP) and the last year that cities and counties had to forego funding for local streets and roads. The end of the TCRP will mean much greater funding levels for transit, local streets and roads and the STIP.

STA Funding More than Doubles from Current Year

Following current law that reflects both a change in how Proposition 42 funds are allocated and guidance from last year’s budget, STA funding will increase by $427 million over last year’s $316 level to $743 million (a 135 percent increase). Specific Bay Area numbers are included in the table in Attachment A (PDF).

Proposition 42 Fully Funded

Table 1 below indicates the funding level for the various Proposition 42 programs. FY 2007-08 was the last year of allocations to the Traffic Congestion Relief Program (TCRP) and the last year that cities and counties had to forego funding for local streets and roads. The end of the TCRP will mean much greater funding levels for transit, local streets and roads and the STIP.

Table 1
Proposition 42 & Loan Repayments: Statewide Amounts
($ millions)

Program	Proposition 42	Proposition 42 Loan Repayment	Total
Traffic Congestion Relief Program (TCRP)	0	82.5	82.5
Local Streets and Roads*	594	N/A	594
State Transportation Improvement Program (STIP)*	594	N/A	594
Public Transportation Account	297	.5	297.5
Total Proposition 42 Revenues	1,485	83 *	1,568

*General Fund loans repaid from Spillover funds

Funding Provided for Bond Programs

With regard to Proposition 1B implementation the news is generally good. A total of $4.7 billion is budgeted, as shown in the table below:

Table 2

Proposition 1B Bond Program ($ millions)	2007-08 Actual	2008-09 Proposal
Corridor Mobility Improvement Account	608	1,547
Public Transportation Modernization	600	350
State Transportation Improvement Account	727	1,186
Trade Corridors	0	500
State Local Partnership	0	200
State Highway Operation and Protection Program	403	216
Rail Grade Separations/Local Seismic	123	86
State Highway 99	14	108
Intercity Rail	188	73
Local Streets and Roads	950	0
School Bus Retrofit	193	.4
Air Quality	250	250
Transit Security	101	101
Port Security	41	85
Total	$4,198	$4,702.4

In addition to Proposition 1B, the budget proposes to appropriate $717 million for Proposition 1C, the housing bond. This includes $200 million proposed for the regional Planning and Infill Incentive Program and $95 million for the new Transit-Oriented Development Incentive Program administered by the Department of Housing and Community Development.

Proposed Funding Delay for Local Streets and Roads

One bit of bad news was the proposal to postpone until September 2008 the monthly transfer of gas tax receipts used to repair local streets and roads. This action would allow the state to meet its cash flow needs at the expense of local government.

High-Speed Rail

The budget proposes to provide $1.2 million to the California High Speed Rail Authority for its operations expenses, same as last year. However, last year the California High Speed Rail Authority received $15.5 million for capital improvements and this year’s budget reduced that to zero.

Next Steps

Typically, budget subcommittee hearings covering transportation begin in late March to early April, followed by the Governor’s May Revise. Given the overall negative tone of the state budget and the significant cuts proposed therein, it is likely that transportation funding will be considered to help address budget shortfalls at some point during the upcoming year.

Thus, we will need to remain vigilant in protecting transportation funding in the extremely difficult budget environment facing Sacramento this session.

Main Legislative Update page