Road, transit money pinched, as state revises STIP estimates for budget year

The amount of money available for transportation projects already on the drawing boards is shrinking by about $113 million through the middle of next year, and may decline by some $300 million annually starting in 2008-09, according to state budget watchers and the staff of the California Transportation Commission.

The figures refer to money intended for the projects in the biennial State Transportation Improvement Plan, or STIP, which is the state’s main transportation planning document for expansions and improvements, and describes the funds allocated for approved projects over five years.

The numbers are not necessarily absolute, nor are they final: Money could be diverted from other accounts with lawmakers’ approval, and voters earlier approved nearly $20 billion in transportation-related funding that could be tapped.

But the bottom line is that some transportation money appears to be tightening as a new, difficult state budget approaches. A major deadline looms in January, when the governor unveils his latest spending plan, and transportation officials, as well as others throughout government, are awaiting the new budget numbers with some trepidation. The Transportation Commission should “reevaluate its allocation plan after the January 10 release of the governor’s 2008-09 budget,” the commission staff noted.

“This reduction is the result of the diversion of resources from the Public Transportation Account by the 2007-08 budget,” the staff wrote, adding that  “$113 million in STIP projects programmed for 2007-08 cannot be allocated in this fiscal year.” The amount represents about 6.2 percent of the STIP funding.

Money continues to flow to transportation projects through the state’s complex and intricate finance arrangement, although the announcement of two major allocations was delayed until September after the long-delayed state budget finally was approved this summer.

In September, state transportation officials, using a combination of STIP and voter-approved bond money, allocated nearly $1.3 billion for some 150 transportation projects, including a $90 million “managed lanes” project on I-15 in San Diego, $55 million to repair I-5 near Old Sacramento and $315 million in Los Angeles for the Exposition Light Rail project, which is schedule to reach Santa Monica once completed.

Construction already is under way on the first phase of the light rail project, which will travel from downtown Los Angeles to Culver City. The cost is estimated at $640 million, of which more than $550 million will come from state funding. Caltrans says state government has already allocated about $250 million, bringing the total amount in the coffers to about $300 million — enough to take construction halfway of the 8.6 miles of track in Phase One. Phase One is scheduled to open in 2010 and Phase Two, which is currently undergoing an environmental impact assessment, in 2015.

Other projects included $20 million to repair Highway 101 between Highway 1 and Highway 246 near Buellton in Santa Barbara County, $17 million to widen the Westside Parkway in Bakersfield to relieve traffic congestion, and $77 million to construct a six-lane freeway from Britannia Boulevard to Siempre Viva Interchange on Interstate 905 in San Diego.

But a perennial budget problem is that money in the STIP pool gets raided as the Schwarzenegger administration—and earlier administrations, as well—struggle to balance the books. In the world of transportation finance, where 10-digit price tags are not uncommon, the loss of a few million dollars, or even a few hundred million dollars, may not seem like the end of the world. But the loss of the money can translate into dozens of local projects that won’t get built across the state, or will, at the least, be delayed.
The loss also is cumulative.

The $300 million STIP reduction, for example, actually translates into an estimated $1.5 billion over the life of the five-year STIP, a significant amount of money – even in any five-year period when transportation funding from all sources totals about $45 billion in California, not including the nearly $20 billion approved last year by voters.

In 2006, the STIP funding pool was nearly full – just over 96 percent, by commission’s estimate. But subsequent diversions have left the STIP “severely under-funded,” including $1.3 billion in transportation  money that was removed in the current budget year, 2007-08, and put into the General Fund. In coming years, the amount of money headed into the STIP is likely to be reduced, too: Based on the Finance Department’s May revision, the cut may reach $300 million a year, a number that jibes with the Transportation Commission’s numbers. In addition, the Legislature and governor approved legislation that reduced the funding in the Public Transportation Account by about $85 million annually.

“The impact of these diversions … is that the STIP is now under funded,” the commission staff said.

Part of the problem is that a budget trailer bill approved this year by the Legislature and signed into law by the governor reduced the level of so-called “spillover diversion” money for transportation. The spillover refers to a portion of fuel and sales taxes set aside for the STIP. Earlier, the STIP received 50 percent of the spillover. Beginning next year, that amount has been cut to 17 percent.

The Legislature’s nonpartisan fiscal adviser, the Legislative Analyst, said those reductions may complicate and delay transportation projects, which depend on many sources of funds.

“When we do these projects, when the state and the CTC program these projects, none of them are fully funded by just state money, so we have to package other funds in order to fully fund a project,” said Dana Curry, a transportation specialist with the Legislative Analyst’s Office. “They use federal money, state money, local funds, local sales tax money.”

The siphoning off of transportation money is not unusual, and funds generated by fuel taxes, although intended for transportation-related purposes, have been shunted into the General Fund for years to fill budget holes. Proposition 42, approved by voters five years ago, sought to protect transportation funding, but it has had mixed results. With the current budget year, however, 40 percent of the Proposition 42 funding is specifically supposed to go to STIP projects. Budget watchers are skeptical.
 “The STIP projects are long-term projects, and they need to have the stability of knowing where the money is going to come from,” Curry said. “Then all of a sudden, the money’s not there. That’s when you have problems.”