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Program Enhancements and Other Budget Adjustments
Transportation Funding Sources
PROPOSITION 1B BONDS
The Governor's Budget proposes to appropriate $8.2 billion to begin implementation of the transportation element of the Proposition 1B bonds as part of the Strategic Growth Plan.
- $2.8 billion is projected to be allocated, or committed, in 2007-08. The initial allocation and appropriation amounts are planned to be adjusted as programs are more fully developed and projects are approved for funding.
- $523 million is proposed to be allocated through urgency legislation to enable construction to start as early as feasible for high-priority projects that are ready-to-start.
Most Proposition 1B programs will be administered by either the California Transportation Commission or Caltrans, with the exception of the Trade Infrastructure Air Quality and School Bus Retrofit (Air Resources Board), Port Security (Office of Emergency Services), and Transit Security (Office of Emergency Services and Homeland Security) programs. The Budget will give the California Transportation Commission or Caltrans the flexibility to move funding forward from future allocations and allow shifts between programs if projects are ready to be awarded, with the concurrence of the Department of Finance and the Legislature.
Funds for these projects will be disbursed as construction and other project activities occur, as in the case of other transportation projects, so the impact on the state debt limit of the bonds issued to fund these programs will be manageable. 2006-07 expenditures will be proposed in urgency legislation. Trailer legislation is proposed to direct implementation of performance-based project selection and provide for accountability to the people. Figure BTH-03 displays the proposed appropriation for each program and their anticipated allocations by fiscal year.
Four Proposition 1B programs are not reflected in the table (Intercity Rail, Transit Security, Trade Infrastructure Air Quality, and Port Security) because the Administration is considering program implementation approaches and gathering information on funding needs.
PROPOSITION 42
Approved by voters in March 2002, Proposition 42 amended the State Constitution to transfer state sales taxes on gasoline from the General Fund to transportation purposes beginning in 2003-04. The initiative replaced the Traffic Congestion Relief Program (TCRP) that began in 2000-01. The proposition included a provision that allows the Governor and the Legislature to suspend the sales tax transfer in a fiscal year when the transfer would result in a significant negative fiscal impact on government functions funded by the General Fund. The Proposition 42 transfer was partially suspended in 2003-04 and fully suspended in 2004-05 due to the inability of the General Fund to support the full transfer. The transfer was fully funded in 2005-06 and 2006-07. In November 2006, the voters approved Proposition 1A, which further limits the conditions under which the Proposition 42 transfer can be suspended and requires all outstanding loans be repaid in annual increments by June 30, 2016.
Consistent with that direction, the Governor's Budget proposes to fully fund the Proposition 42 transfer and the Proposition 1A loan repayment for fiscal 2007-08. The transfer distributes $684 million to the TCRP, $699 million to the State Transportation Improvement Program (STIP), and $175 million to the Public Transportation Account. Pursuant to current law, cities and counties do not receive any local streets and roads maintenance funds from Proposition 42 in 2007-08. The state provided what would have been their share in 2001-02 and 2002-03, even though no General Fund transfer occurred in those years due to fiscal constraints.
PUBLIC TRANSPORTATION ACCOUNT
The Public Transportation Account receives funds from sales tax on diesel fuel, a portion of the sales tax increase provided by Proposition 111, Proposition 42, and the "spillover" sales tax on gasoline. Spillover revenues are available only when revenues from the gasoline sales tax at the 4.75-percent rate exceed revenues from all taxable sales at the 0.25-percent rate and this mechanism dates back to the establishment of sales tax on gasoline in 1972. In past years, spillover transfers occurred rarely; however, there has been spillover the last five fiscal years and, as a result of high gasoline prices, spillover revenues are estimated to be $617 million in 2007-08. Other sales tax revenues to be deposited in the Public Transportation Account in 2007-08 are estimated to be $398 million, an increase of $19 million over the current year.
In prior years the Legislature amended these statutes to reallocate the spillover revenues by statutory change to higher priority transportation uses. A similar reallocation is proposed in this budget to offset the following General Fund expenditures in the following transportation programs:
- Home-to-School Transportation ($627 million).
- Transportation General Obligation Bond debt service ($340 million).
- Developmental Services-Regional Center Transportation ($144 million).
- These cost shifts are possible in part due to the large increases in spillover sales tax on gasoline, diesel sales tax and Proposition 42 sales tax on gasoline. While General Fund revenues have grown by 8.4 percent since 2005-06, these revenue sources have grown over 294 percent in that time.
- The spillover increase results from a shift in consumer buying to gasoline from other taxable items due to an increase in gas prices. The higher gas prices do not appear to cause a commensurate, sustained increase in consumer earnings or spending. Thus most of the current spillover revenue comes at the expense of the sales tax revenue that goes to the General Fund.
- It is anticipated that use of Public Transportation Account funds for Home to School Transportation will continue in future years, but future revenues are not likely to be sufficient to fund both of the other two programs and that at least the Debt Service Fund will be supported by General Fund in 2008-09. If insufficient money is available in future years to sustain Home to School Transportation or Regional Center Transportation funding from the Public Transportation Account, any needed funding would be provided from the General Fund.
- Regions and counties were able to propose $1.7 billion in transit projects for the State Transportation Improvement Program last spring, but have not yet nominated projects to use over $600 million of these funds, indicating that there is not a pressing and immediate need for capital funds, especially given the $3.6 billion in bonds that will be available for several years.
- The Budget proposes $600 million in transit bond allocations and $69 million from the Public Transportation Account for capital projects in 2007-08. This is sufficient to fund all transit projects that were anticipated to be funded under the State Transportation Improvement Program in 2007-08. Additional project authorization capacity from the total $1.3 billion 3-year bond appropriation can be advanced to 2007-08, if other projects are approved for funding during 2007-08. Additionally, the Caltrans budget reflects $548 million more in 2007-08 for transit projects funded from the Traffic Congestion Relief Fund.
- As compared to the $331 million spent on transit in 2005-06, the Governor's Budget proposes effective spending of $397 million on transit from the Public Transportation Account for 2007-08, including a decrease in transit operating grants from $201 million to $185 million. These figures reflect an adjustment of $102 million from 2006-07 to 2007-08 to reflect the fact that transit agencies are being paid more in 2006-07 than is provided for in statute, due to an unintended interpretation of Budget Act language.
- Future transit operating funds will increase by an estimated $136 million in 2008-09, due to an increased share of Proposition 42 funding that begins that year. Other PTA revenue sources are also likely to grow. While it is recognized that more operating money will be needed to operate the STIP and bond-funded projects, more funding will not be needed until the equipment is delivered and construction is completed in future years.
- Transit operators need consistent and predictable funding for operations. The spillover calculation is highly volatile and in many years, produces no funds for transit. Thus it is proposed to decouple the spillover calculation from the state transit operating grant funding formula.
- While substantially more funding was provided in the 2006-07 Budget, this was based in part on spillover revenue estimates, which appear now to have been too high, one-time loan repayments of $218 million, and the desire to accommodate a spike in capital spending programmed in the 2006 STIP.
The Budget also proposes to permanently cease transferring revenues not controlled by Article XIX of the Constitution from the State Highway Account to the Public Transportation Account. This amount, estimated to be $80 million in 2007-08, will instead be used to reduce the backlog in pavement maintenance that Caltrans faces in the State Highway Operations and the Protection Program and the Maintenance Program.
TRIBAL GAMING FUNDS
The 2006 Budget Act assumed repayment of a portion of outstanding transportation loans with $849 million in bond proceeds derived from Indian gaming revenues to specified transportation programs. The 2005-06 expenditure total reflects $151 million in tribal gaming revenues that had been received to repay the State Highway Account for previous loans to the General Fund. Several lawsuits have prevented the bonds from being sold, and the date that the tribal bond revenues were expected has subsequently changed numerous times. The Budget now assumes spending the tribal compact cash as it is received until the date that the bonds can be sold can be determined. Of these funds, $100 million is annually deposited with the state, and consistent with current law, $200 million from 2006-07 and 2007-08 will be deposited in the State Highway Account.
TRADITIONAL STATE TRANSPORTATION REVENUES
The Governor's Budget forecasts gasoline and diesel excise tax revenues to increase by approximately 1.7 percent in 2007-08, from $3.4 billion to $3.5 billion. Federal excise tax funds available to Caltrans in 2007-08 are estimated to increase by 16 percent to $4.1 billion. California imposes fees on commercial vehicles and heavy pickup trucks based on the vehicle's laden weight, i.e., the heavier the vehicle, the greater the fee. The Budget anticipates weight fee revenues will be $979 million in 2006-07 and $1.03 billion in 2007-08.
These funds are distributed to the State Highway Account for support of the Department of Transportation, the Maintenance Program, The State Highway Operation and Protection Program, the State Transportation Improvement Program and to cities and counties for transportation purposes.
CHAPTER HIGHLIGHTS for
Business, Transportation, and Housing Back to Top
PRINTABLE BUDGET DOCUMENTS Back to Top
Budget Summary - Business, Transportation, and Housing (pdf * - 103K)
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Provides this entire Business, Transportation, and Housing Chapter in pdf format.
ADDITIONAL INFORMATION Back to Top
Proposed Budget Detail - Business, Transportation, and Housing
Displays Proposed Budget Detail information for Business, Transportation, and Housing.
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