Traveling in California:
Issues for Legislative Consideration

Additional, Ongoing Funding Source Needed for Transportation

What Is the Current Unfunded Need?

• The current level of state, local, and federal funds for transportation falls substantially short of what is needed to ensure mobility and facilitate goods movement over the next decade. According to the Inventory of Ten-Year Funding Needs for California's Transportation Systems, prepared by the CTC pursuant to Senate Resolution 8 (Burton, 1999), California's total ten-year funding shortfall for transportation exceeds $100 billion.
California's Ten-Year Unfunded Transportation Needsa
(In Billions)
State highway
  • Expansion
 $25
  • Maintenance, safety, and operation
 8
Bridge rehabilitation and replacement 6
Local road
  • Expansion
 13
  • Rehabilitation
 11
Intercity rail 4
Bus and commuter/urban rail 32
Bicycle and pedestrian 1
Otherb 16
Total $117
a Key findings from Senate Resolution 8 (Burton).
b Includes storm drainage retrofit, airport and seaport improvement, and grade separation projects.


• Additional funds are needed, both to (1) expand the system to accommodate population growth and the subsequent increase in demand for travel and (2) operate and maintain the local streets, highways, and transit systems that exist today.

What Should the Legislature Do?

• We recommend the Legislature provide an additional, reliable, ongoing fund source for transportation. This funding stream should be at least sufficient to meet the state's annual transportation maintenance needs in order to avoid escalating repair costs in the future arising from deferred maintenance. Additional funds are also needed to build, operate and maintain new capacity—whether in the form of highway improvements or new transit service. We estimate additional, ongoing funding needs of approximately $1 billion annually.

• The following pages discuss the two main approaches to meeting the state's transportation needs—those that enhance transportation "supply" and those that better manage transportation "demand." Given limited resources, both approaches are necessary to meet the state's mobility needs.

How Do We Most Effectively Expand Transportation Supply?

• Additional Investment Needed. Reducing congestion and providing for the mobility of people and goods over the next several decades will require substantial investment in new infrastructure.

• Allocate New Funds Based on State Priorities. While there is already a process established both at the state and regional levels for prioritizing expenditures using existing revenues, the Legislature will need to determine the state's goals and priorities relative to any new state transportation revenues. For instance, to the extent that funds are intended for capital outlay, they could simply be incorporated into the existing STIP process. Alternatively, the Legislature may want to designate new funds for other purposes, such as local streets and roads or transit operations. We recommend that the adoption of a new fund source be accompanied by a fund allocation process that clearly links expenditures to specified needs and priorities.

• Assess Needs Periodically. We further recommend the enactment of legislation that would require a statewide transportation needs assessment, similar to SR 8, every five years. The legislation should require that the report be prepared by the CTC, in coordination with Caltrans and RTPAs, and that it use a uniform methodology to assess needs in each region.

Are There Ways to Better Manage Demand for Mobility?

• Imbalance Between Demand and Supply. Given limited resources, as well as environmental constraints, the state cannot meet demand for mobility solely expanding the highway system. Highway congestion is largely caused by the imbalance between the demand for freeway capacity, and the supply of that capacity. Yet expansion of the highway system will rarely alleviate congestion permanently. This is because as investments are made to increase supply (the size of the road system), demand (measured in vehicle miles traveled) increases.

• More Efficient Use of Existing System. The Legislature should consider policies that encourage more efficient use of the existing highway and transit infrastructure. Policies that would better manage demand for mobility include:

• Road Pricing. Incorporating the social cost of driving (such as pollution and congestion), into the user cost of driving can influence driving behavior. Such policies include toll roads with adjustable toll rates depending on traffic conditions—known as congestion pricing. Additionally, financial incentives, such as policies that allow employees to exchange their parking space for a transit pass, can also reduce demand for driving.

• Increased Investment in Transit and Other Alternatives to Driving. Another way to meet mobility demands without substantial road infrastructure investment is to make other modes of travel more convenient and reliable. Improving transit operations, carpool facilities and bicycle and pedestrian facilities, as well as promoting telecommuting, can attract people to these modes of travel and alternatives.

• Land-Use Planning. Land-use policies that reduce the distances between housing, employment, and retail centers can reduce growth in driving.

What Is the State's Role in Mass Transportation?

State Role in Funding

• Primary Funding Source Over Subscribed. Currently, the state's primary source for funding mass transportation activities, the PTA, is projected to experience a shortfall within the next four years (please see our January 2000 report Public Transportation Account: Options to Address Projected Shortfall). As a result, the state's ability to provide additional funds for new transit capital acquisition, operating and maintenance assistance, and expansion of service is constrained. Providing additional revenues to the account will help meet the demands placed on this over-subscribed mass transportation fund source.

• Projected Statewide Needs Exceed Current Funding Capacity. It may not be enough to simply eliminate the funding shortfall in the PTA. Specifically, doing so will provide funds to expand intercity rail service, but will not provide sufficient additional funds to meet other statewide mass transportation needs. For example, over the next ten years, SR 8 identified substantial unfunded operating and capital needs for bus and rail (including commuter and urban rail). These unfunded operational needs are projected to be between $0.7 billion and $3.7 billion over the next ten years. Unfunded capital investments are more substantial, and are estimated to be between $3 billion and almost $11 billion. Additional funds provided to mass transportation, therefore, should not solely be aimed at addressing the projected PTA shortfall, but should recognize the substantial statewide transit needs over the next decade.

State Role in Interregional Versus Regional Transportation

• What Is the State's Role in Interregional Versus Intraregional Transportation? Under current law, the state programs 25 percent of STIP funds on interregional transportation projects, while the RTPAs program 75 percent of STIP resources for regional transportation projects. What defines a regional or interregional project, however, is not precise. As urban areas around the state continue to develop and grow, what constitutes "interregional" and "regional" transportation will become even more blurred. This is particularly true with mass transportation projects. Should the state continue to focus primarily on interregional travel and concentrate its funds on the intercity rail program, or should the state assist with intraregional mass transportation projects? The state may want to assist with the funding of regional projects where improvements to the regional transportation system:

• Alleviate highway and street congestion.

• Improve air quality.

• Improve connectivity between all modes of transportation, including automobile and transit travel.

State Role in Infrastructure Investment and Planning

• Comprehensive Plan Lacking for Rail System. There is currently no statewide, comprehensive rail needs analysis that incorporates all forms of rail transportation, including commuter, urban, and intercity rail. Without an assessment that incorporates the funding needs and expansion plans for all three forms of rail transportation, the Legislature will not be able to effectively determine where passenger rail capital investments are most needed nor evaluate the overall effectiveness of the state's passenger rail network.

• Recommendation for Comprehensive Rail Plan. We recommend the Legislature enact legislation directing Caltrans to initiate a comprehensive, statewide assessment of all existing and proposed passenger rail systems, including intercity, commuter, and urban rail. The assessment should be conducted in cooperation with transit operators and regional transportation planning agencies, and should emphasize how the intercity rail system integrates with other modes of passenger rail transportation, particularly if there are connections between commuter/urban and intercity rail. The study should also identify the capital and operational investments that are planned over the next ten years, including details on commuter or urban rail's rehabilitation programs, new improvement projects, and new or extended services. (Please see our Analysis of the 2000-01 Budget Bill, pages A-72 through A-75.)

Improvements Needed to Expedite Project Delivery

Transportation Projects Take Many Years to Complete

• It is not uncommon for Caltrans to take over ten years to design, conduct environmental review, and advertise a project for construction as shown in the figure below. Part of this is due to the complexity of design and environmental review. However, our review suggests that there are opportunities for expediting project delivery.

• Californians pay for slow project delivery in various ways, including inconvenience resulting from congestion, as well as higher project costs due to the extra time spent on projects and inflationary pressure on construction material, right-of-way acquisition, and labor costs.

Legislature Should Pursue Environmental
Streamlining Opportunities

• Most project delay occurs during the environmental phase, particularly on large projects. Efforts to expedite project delivery should focus on streamlining the environmental review process.

• We have identified opportunities for streamlining the environmental review process in ways that do not compromise the level of review. Environmental streamlining is critical to ensuring that the benefits of additional funding are realized in a timely manner. (Please see our Analysis of the 2000-01 Budget Bill, page A-53.)

Flexible Financing Can Speed Up Project Delivery

• Federal funds carry many strings with them which tend to make delivery of federally funded projects slower than projects funded solely with state or local funds.

• We recommend that Caltrans and local agencies work with the CTC to develop funding strategies that minimize the administrative complexity of using federal funding in a large number of projects, while ensuring that the state's share of federal funds is fully utilized each year. Such strategies could include pooling federal funds from different counties to be used on several large projects rather than on many small ones.

• In order to make this feasible, alternative flexible fund sources, such as the General Fund or local sales taxes, must be available to substitute for federal funds.

Can Caltrans Hire Enough Staff to Perform the Work?

• Another concern is whether Caltrans can hire enough staff to perform the design work on future highway projects—particularly if funding is substantially increased.

• Caltrans has difficulty hiring staff due to a decline in civil engineering graduates in recent years and competition with local governments and the private sector who often pay higher salaries.

• Additionally, the State Constitution prohibits Caltrans from contracting out design work to the private sector except under certain conditions. The State Supreme Court ruled that in order to contract out, Caltrans must be able to factually demonstrate that private contracting would meet one of the following:

• Be more cost effective.

• Be necessary to ensure timely project delivery.

• Be used to provide specialized work for which state expertise was unavailable.

• A statewide ballot measure, to be considered by voters in November 2000, would allow the state to contract out engineering and design currently performed by Caltrans.

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