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Fully Funded Prop 42 Puts CA Projects Back on Track

Sat December 10, 2005 - West Edition
Jennifer Rupp



Funding for transportation projects in California has moved slower than its rush-hour traffic for the past decade.

When Proposition 42 was passed under former Gov. Gray Davis, the voters thought they were seeing a light at the end of the tunnel. Instead, they saw traffic congestion worsen as transportation projects were put on hold due to a lack of funding.

Prop 42 was passed in March 2002, permanently dedicating the state sales tax on gasoline to a newly created account known as the Transportation Investment Fund (TIF). An estimated $1.3 billion a year would be used on projects in the state’s Traffic Congestion Relief Plan, city street repairs, county street repairs, mass transit and new highways.

The proposition, however, contained a loophole that allowed the legislature to divert the money back into the state’s general fund in a budget “emergency” as long as they had a two-thirds vote. Because of this clause, transportation did not see a dime of the gas tax money for more than two years.

In May 2005, Gov. Arnold Schwarzenegger announced that his revised 2005-06 budget would include $1.3 billion in restored transportation funds for Prop 42. On July 5, the budget was approved by the legislature. More transportation aid was promised by the federal government as well.

“The federal legislation will increase California’s share of federal transportation funding,” said Schwarzenegger in a July statement regarding the federal transportation bill. President George W. Bush did indeed sign the New Federal Transportation Reauthorization Bill on Aug. 10 promising $28.2 billion in federal transportation funds over the next six years.

“Most states increased their transportation funding by about 25 percent,” said California Department of Transportation (Caltrans) Spokesperson David Anderson. “California increased its share by 31 percent, receiving $6.7 billion more than the previous six-year period.”

“Transportation funding has clearly been a priority [for Gov. Schwarzenegger],” said H.D. Palmer, Department of Finance Deputy Director of External Affairs. “The money is currently available for use.”

On July 15, the California Transportation Commission (CTC) earmarked $1.26 billion in new transportation funding to start construction on 337 projects throughout the state.

“California is back in business,” said Caltrans Director Will Kempton. “We want contractors to come back to the state — there’s work to be done.” A total of $4.1 billion will be put toward transportation improvements in the 2005-06 fiscal year. This amount consists of Prop 42 funds, expected Native American gaming revenues, and regular revenues Caltrans receives from state and federal gas taxes and truck weight fees. New construction projects are currently under way in Santa Rosa, Fresno, Orange County and Los Angeles.

The Associated General Contractors of California (CA AGC) has been heavily involved in the restoration of Prop 42 funds. The CA AGC Legislative Update in July stated: “Intense ’grassroots’ lobbying and coordinated support through Transportation California paved the way for the governor to reverse his decision and fully fund Proposition 42 for the next fiscal year. A lobbying partnership between the construction unions and the construction industry secured final legislative approval.”

“Construction volume dropped off considerably and [contractor] unemployment rates rose when the Prop 42 funds were diverted away from transportation,” said Tom Holsman, acting director of industrial relations of CA AGC. “The money has been flowing since July, so we’re seeing an increase in work for non-residential contractors.”

The Woodland Daily Democrat stated that “traffic congestion already costs California drivers an estimated $5 billion a year in lost time, lost productivity, extra fuel, car repairs and other expenses.” Even with the newly available funds, California residents may not be out of the woods just yet. While the $1.3 billion was restored to the TIF just months ago, the same loophole still exists.

“Legislature may still borrow money from the TIF for an economic crisis with a two-thirds vote,” said Palmer.

The governor credits California’s improving economy for the ability to restore the transportation funds. “Our economic recovery plan is working and as a result we have more revenues coming to the state,” said Schwarzenegger in May 2005.

The plan’s revenue generation technique is highly dependent upon several variables, including the price of gas and alternate fuel sources, which may lower gas consumption and thus lower the gas tax revenues. The stability of continuous funding is also dependent on the legislature ensuring that they will practice fiscal responsibility and vote not to transfer the funds away from the TIF. CEG