THE FACTS

BRIEF HISTORY OF LOST PROPOSITION 42 TRANSPORTATION FUNDS

In 2002, California voters approved Proposition 42 by almost a 70% margin, redirecting the state's portion of sales tax on gasoline from the General Fund to transportation programs. Approximately $1.1 billion in Proposition 42 funds annually were supposed to start flowing in FY 2003-04. Out of the $2.4 billion expected from Proposition 42 for FY 2003-04 and FY 2004-05, only $295 million has flowed to transportation projects. The Governor has made it clear that due to the FY 2005-06 deficit, channeling Proposition 42 funds from transportation to the General Fund is once again a distinct possibility.

In addition to the $2.1 billion, another $3.4 billion has been diverted from transportation to the General Fund in the same time period as shown in the table below:



DIRE STRAITS FOR CURRENT TRANSPORTATION FUNDING FLOW

The combination of eliminated Proposition 42 funds and slower than expected federal transportation funds coming to California has resulted in such a severe cash flow crunch that no new project allocations have been approved since December 2002. Only priority emergency and rehabilitation programs have been funded. With barely enough cash to sustain $500 million in projects through December 2004, the California Transportation Commission expects to continue its moratorium on new project allocations from the State Transportation Improvement Program and the Traffic Congestion Relief Program. Additionally, the Commission will not be able to issue any new GARVEE bonds, which have proved to be an innovative way to advance funding.

Transportation funding has been cut to the quick. Now, even the quick may have to be cut. Without an infusion, the Commission may be forced to stop state highway rehabilitation project allocations. With more than 50% of California roads already in fair or poor condition, more deferrals of Proposition 42 funds for General Fund purposes continue to put Californians--especially emergency personnel--in harm's way as they attempt to navigate through a congested and deteriorating road system.



PROMISED RELIEF IN PRECARIOUS POSITION

Even though some funds earmarked for transportation could flow as a result of the Governor's negotiated gaming compact, federal ethanol funds returning to California and the passage of a federal transportation reauthorization bill expected next year, all of these sources are now expected to provide less funding than anticipated during enactment of the FY 04-05 budget. Specifically, the $1.2 billion from tribal gaming bonds is now estimated to generate only $850 million. The ethanol fix, which will return $300 million to California annually through 2010 won't begin to flow for two more years. Finally, the much anticipated increase in federal transportation funding remains on hold pending approval of a new federal transportation program to replace the Transportation Equity Act for the 21st Century (TEA 21), which expired more than a year ago. As a consequence, the transportation funding hole continues to deepen.



RECOMMENDATIONS

California's budget crisis will not be resolved without some sacrifice in programs across the state and/or an increase in revenue. However, transportation has already made deep sacrifices for the past two years when Proposition 42 suspensions, transfers and loans to the General Fund programs have provided a safety valve for other state priorities. Further cuts in transportation programs will harm California's economic growth and resultant increase in general fund revenues. As the Governor develops his FY 05-06 Budget scheduled for release in early January, we urge the Administration and Legislature to resist further suspensions or loans of Proposition 42 funds or any other transportation money to the General Fund for a third consecutive year. Immediate transportation infrastructure investments are necessary to ensure we not only reclaim our moniker as the Golden State, but that we elevate that nickname to the Golden Dream by the Sea as offered by Governor Schwarzenegger.