New Infrastructure Legislation: Summary and Issues for Legislative Oversight

Along with the 2023-24 budget agreement, the Legislature adopted a package of bills aimed at expediting infrastructure projects. In this post, we provide a summary of the key components of the bills that comprise this infrastructure package, including provisions related to legislative oversight. We conclude by identifying key issues for the Legislature to consider as it oversees the implementation of this legislation.

Background

State Has Significant Infrastructure Needs. A number of factors are contributing to the state’s growing infrastructure needs. For example, many components of California’s infrastructure—such as much of its levee, highway, and electric systems—were built decades ago. Due to their age, they may require rehabilitation to enable them to continue to provide safe, reliable service. Additionally, many of these infrastructure components were not designed for the anticipated effects of climate change, such as rising temperatures, more extreme weather events, and sea-level rise. Additional investments—such as for water storage and recycling projects to improve the state’s resilience to more frequent and intense droughts, or relocating roads and railways away from eroding sea cliffs—may be needed to adapt this infrastructure to the realities of the state’s changing climate. Furthermore, to try to limit the magnitude of climate change, the Legislature has adopted ambitious goals to reduce greenhouse gases. Meeting these objectives will require significant new investments and development, such as the construction of various types of renewable energy-related infrastructure.

Various Funding Sources Seek to Address Needs. In recent years, the state has dedicated significant amounts of new funding to meeting its infrastructure needs. For example, in 2017, the Legislature enacted Chapter 5 (SB 1, Beall), which increased fuel taxes and vehicle fees to support transportation-related infrastructure. More recently, the Legislature has appropriated billions of dollars from the General Fund and the Greenhouse Gas Reduction Fund to support a wide range of infrastructure, including for water conveyance and storage, energy transmission, electric-vehicle charging, and transportation. Additionally, the federal government recently has significantly increased its support for infrastructure projects through the passage of the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA).

Concern That Delays Could Jeopardize State Efforts to Complete Projects. There is a widespread perception that it takes too long to complete infrastructure projects in California. When projects face delays, bringing them to fruition becomes more difficult. Moreover, delays can contribute to higher overall project costs because construction costs typically escalate over time. Accordingly, project delays can make using the available funding effectively more challenging for the state and other entities, thereby complicating meeting state climate and infrastructure goals.

Governor Proposed Infrastructure Budget Trailer Bill Package Aimed at Expediting Projects. In May 2023, the Governor proposed a package of budget trailer bills on infrastructure. The Governor indicated that the package was designed to address concerns that project delays could jeopardize state efforts to complete critical infrastructure projects—such as in the areas of transportation, clean energy, and water—and meet its climate-related goals. The Governor also argued that adoption of the package was important to securing federal funds through the IIJA and IRA because the federal government values timely project completion.

Legislature Adopted Amended Package of Bills Along With Budget. As part of the 2023-24 budget agreement, the Legislature adopted amended versions of the bills that the Governor proposed as part of his infrastructure package. Most components of the package were shifted to policy bills, but one proposal ultimately was included in a budget trailer bill. In most respects, the content of the final package is similar to what the Governor originally proposed. Among the most notable changes was the addition of more provisions to facilitate legislative oversight, as we discuss in further detail below. The Legislature also added a bill related to workforce development requirements for construction projects. Additionally, the Legislature specifically excluded certain projects—most notably the Delta conveyance project, which had been included in the Governor’s initial proposal—from using the expedited processes the legislation authorizes.

Key Components of Infrastructure Legislation Package

The final package includes six pieces of legislation—five policy bills and portions of one budget trailer bill—aimed at expediting various types of infrastructure projects. We discuss the key components of these pieces of legislation below.

California Environmental Quality Act (CEQA) Judicial Streamlining and Record of Proceedings. Chapter 60 of 2023 (SB 149, Caballero) includes various changes related to the judicial review of certain projects under CEQA. First, the legislation creates a process under which eligible projects can apply to the Governor to receive expedited judicial review of CEQA challenges. Under this accelerated process, court challenges—including all appeals—are required to be completed within 270 days, if feasible. (In some cases, court challenges can take several years to be resolved under the typical process.) Qualifying projects include: (1) certain semiconductor and microelectronic projects, (2) up to 20 transportation projects that meet certain criteria, (3) certain water-related projects (excluding the Delta conveyance project), and (4) certain energy infrastructure projects. To be eligible for the expedited process, projects also must meet certain other requirements, such as avoiding or minimizing impacts to disadvantaged communities and emissions of greenhouse gases. Chapter 60 appropriates $1 million from the General Fund on a one-time basis in 2023-24 to the Judicial Council for training in order to implement these changes. Second, the legislation extends the sunset for an existing, similar process that has been in place for roughly a dozen years, under which the Governor may certify certain other types of projects for streamlined review such as mixed-use development projects and stadiums. Third, the legislation includes language aimed at streamlining the preparation of the administrative record in CEQA cases by (1) expanding the lead agency’s authority to prepare the record of proceedings for the court and (2) excluding logistical communications, such as meeting invitations, from the administrative record that must be prepared as part of CEQA legal challenges.

Infrastructure Contracting. Chapter 58 of 2023 (SB 146, Gonzalez) expands the Department of Water Resources’ (DWR’s) and the Department of Transportation’s (Caltrans’) authority to use alternative procurement methods. Specifically, it authorizes DWR and Caltrans to use the progressive design-build procurement process for the construction of up to eight large public works projects per department. Under the progressive design-build procurement process, a single entity typically designs and constructs a project, and the construction price is determined through negotiation. (The Delta conveyance project and desalination projects are exempted from this authority.) The legislation also authorizes Caltrans to use job order contracting for certain maintenance and other activities. Additionally, this legislation extends and expands the California State Transportation Agency’s (CalSTA’s) existing authority to assume the responsibilities of the federal government for the purposes of compliance with the National Environmental Protection Act (NEPA)—making the authority available through the end of 2033 (rather than January 1, 2025) and allowing it to cover certain local and regional transportation projects in addition to state projects.

Fully Protected Species. Chapter 59 of 2023 (SB 147, Ashby) allows the California Department of Fish and Wildlife (CDFW) to authorize—for certain types of projects—the incidental take of a species that is designated under law as fully protected. (Incidental take occurs when a protected animal is unintentionally harmed or killed as a result of a project.) Qualifying types of projects include: State Water Project projects, regional or local water agency infrastructure, certain transportation-related projects like wildlife crossings, and wind and solar photovoltaic projects. (The Delta conveyance project and desalination projects are excluded from this authority.) Additionally, certain conservation, impact minimization, and mitigation conditions must be met for CDFW to approve an incidental take. Furthermore, the legislation removes three species that are either no longer threatened or are presumed extinct from the fully protected designation—the American peregrine falcon, brown pelican, and thicktail chub. Chapter 59 also requires CDFW to develop a plan by July 1, 2024 to assess the population status of each of the remaining fully protected species.

Green Bank Financing. Chapter 53 of 2023 (SB 124, Committee on Budget and Fiscal Review) authorizes the Infrastructure and Economic Development Bank (I-Bank) to spend future federal funding that the state might receive through the Climate Catalyst Revolving Loan Fund program. Under the legislation, the funding must meet certain other requirements, including that its use be consistent with the state’s Scoping Plan for Achieving Carbon Neutrality and state law and not require the expenditure of additional state funds. (Chapter 53 is a budget trailer bill and also includes other provisions not related to the infrastructure package.)

Caltrans Environmental Mitigation. Chapter 57 of 2023 (SB 145, Newman) includes provisions related to mitigating the environmental impacts of various types of transportation projects, including a high-speed rail project that has been proposed by a private firm, Brightline West, to be constructed between Southern California and Las Vegas, Nevada. Specifically, the legislation requires Caltrans to ensure that wildlife crossings are built at three priority locations along Interstate 15 if intercity passenger rail is constructed in the right-of-way, and allows Caltrans to contract with Brightline West to build the crossings. The legislation further allows Caltrans to use federal and state funds to support the construction of the wildlife crossings. Additionally, Chapter 57 specifies that transportation funding is presumed to provide adequate funding for the long-term maintenance of a habitat connectivity or wildlife corridor structure on the state highway system. Finally, the legislation provides Caltrans with various new authorities related to purchasing and/or transferring property and credits for environmental mitigation purposes, as well as creating environmental mitigation-related endowments.

Construction Workforce Development. Chapter 61 of 2023 (SB 150, Durazo) requires Caltrans to work with the California Workforce Development Board to establish a new high road construction careers program, which is to be funded with a minimum of $50 million from IIJA. Beginning January 1, 2026, the legislation requires state agencies that enter into construction contracts which are valued at more than $35 million and have project labor agreements to include community benefit provisions—such as partnerships with high road construction careers programs and local hire provisions—in those agreements. Finally, the legislation requires that by March 30, 2024, CalSTA, the Labor and Workforce Development Agency, and the Government Operations Agency must develop recommendations for what terms should be included in construction contracts in order to provide benefits to marginalized and disadvantaged communities.

Package Includes Some Oversight-Related Provisions

The package includes a number of notable provisions that facilitate legislative oversight, as summarized in Figure 1. Many of these provisions were added by the Legislature during negotiations with the administration. These provisions generally fit into the three categories discussed below.

Various Notification and Review Processes. The package requires the administration to provide the Legislature—through the Joint Legislative Budget Committee (JLBC)—with notifications and opportunities for review. For example, Chapter 60 requires that the Governor provide determinations to the JLBC about whether projects qualify for expedited judicial review. The JLBC can then either concur or not concur with the Governor’s determinations. Additionally, Chapter 53 requires the I-Bank to provide the JLBC with notifications within ten days of receipt of nonstate funds into the Climate Catalyst Revolving Loan Fund. Such provisions provide mechanisms for the Legislature to monitor and oversee how the authorities it has provided to the administration are being used and be able to raise concerns in near real time, if warranted.

Various Reporting Requirements. The package also includes requirements for several annual and one-time reports to provide the Legislature with key information to help inform its oversight efforts. For example, Chapter 58 requires annual reports with information on active and expired job order contracts, as well as a one-time report on Caltrans’ and DWR’s use of progressive design-build authority. These reports are intended to provide the Legislature with information on how these new delivery methods are being used and what they are accomplishing, such as estimates of time and/or cost savings. Also, Chapter 59 requires annual reports containing certain information on fully protected species. These reports are intended to enable the Legislature to better understand when CDFW is authorizing the incidental take of species and any associated repercussions.

Many Components of Package Sunset in 2033. Several components of the package—including related to streamlined judicial review, CDFW’s authority to authorize take of fully protected species, CalSTA’s NEPA delegation authority, Caltrans’ job order contracting authority, and Caltrans’ expanded environmental mitigation authority—are only authorized for roughly the next decade. These sunsets create a natural check-in point for Legislature, at which time it can evaluate the outcomes that have resulted from each of the components and decide whether it wants to modify or extend them.

Continued Legislative Oversight Is Important to Ensure State Goals Are Met

Over the coming months and years, the Legislature can use its oversight role to closely monitor the implementation of the infrastructure package. In so doing, it can help ensure that the package is meeting legislative intentions for expediting projects, as well as maintaining environmental protections and other goals. If merited, the Legislature could adjust the authorities it has granted over the coming years—such as to clarify legislative objectives, address implementation problems, or expand its efforts to streamline projects. The Legislature also will be faced with decisions about whether to extend certain provisions when they sunset in roughly ten years.

Legislative Oversight Could Take Various Formats. The Legislature can exercise its oversight role through a variety of approaches. These can include reviewing the required reports and notifications discussed above and taking subsequent actions if they raise questions or identify areas of concern. The Legislature also could conduct oversight hearings that allow it to hear directly from not only implementing agencies, but also other experts and stakeholders. Such hearings could serve as an important opportunity for the Legislature to gather key information, monitor progress towards meeting legislative goals, identify lessons learned, and determine whether additional legislative intervention might be merited.

Legislative Oversight Could Happen at Various Times. The Legislature has flexibility with regard to when it conducts its oversight activities. For example, it could consider structuring activities around when key reports are due and significant decisions—such as whether to extend sunsets—are slated to be made. The Legislature could choose to conduct oversight at other times as well, based on legislative capacity and stakeholder feedback.

Key Questions to Guide Future Oversight. To help the Legislature in its oversight role, we recommend it focus its efforts—whatever forms and timing they may take—on addressing the following questions:

• How Is the Administration Selecting Which Projects Receive Expedited Treatment? The package of legislation provides the administration with discretion in various areas, such as which specific transportation projects will receive judicial streamlining and which transportation and water-related projects will be able to use alternative delivery methods like progressive design-build. Some key questions for the Legislature to monitor include: What process is the administration using for selecting projects? Is the administration basing its decisions on clearly defined criteria? If so, what are those criteria? Are the administration’s processes and criteria reflective of legislative priorities?

• Which Projects Receive the Benefits of Expedited Processes? In practice, it will be important to understand which types of projects benefit from these expedited processes. This is because a lack of clarity still exists around not only which projects will qualify for expedited processes, but also which will choose to use them. Some key questions include: How many and which types of projects benefit from the new processes? How large or small are these projects? To what extent are these projects consistent with legislative priorities?

• Do Changes Result in Expedited Project Completion Rates? The infrastructure package is intended to expedite projects, so it will be important for the Legislature to understand how effective the changes are at meeting that goal. Some key questions include: Are projects completed more quickly than they otherwise would have? If so, which projects and what is the magnitude of their acceleration? If not, why not?

• What Environmental Effects—Both Positive and Negative—Result From the Affected Projects? The package is intended to help the state meet its climate and other environmental goals. While projects that benefit from these processes may have environmental benefits, they also could create other environmental harms in some cases. Some key questions include: What types of environmental benefits result from the projects, such as related to reductions in greenhouse gas emissions? How large are these benefits? Do these projects create any offsetting environmental harms, such as related to local air quality or effects on sensitive habitats or species? If so, what are they and how large are those impacts? How should the Legislature weigh the environmental costs and benefits, since they may be difficult to directly compare? Would the Legislature benefit from the input of external experts—such as academic researchers—as it weighs these trade-offs?

• What Fiscal Effects Result From Implementing the Process Changes? As mentioned previously, the package provides $1 million to the Judicial Council for implementation-related training. Some key questions include: Do any additional costs—to the courts or other entities—result from implementing these changes? For example, have the courts experienced ongoing costs from hearing CEQA-related cases on an expedited basis? Have changes resulting from the legislation led to any offsetting savings, such as related to completing projects more quickly and thus experiencing less cost escalation?

• How Are Local Communities and Environmental Justice Concerns Affected? The costs and benefits of the projects that use the expedited processes may not be evenly distributed throughout the state. Accordingly, it will be important to understand their geographic impacts. Some key questions include: Where are the projects that benefit from streamlined processes located? What are the effects on nearby vulnerable communities? How does the expedited CEQA judicial review process affect environmental justice groups’ ability to engage robustly, and thus ensure that all perspectives—including those of historically underrepresented and disproportionately impacted communities—are adequately represented in decisions?

• To What Extent Do the Changes Help the State Secure Federal Funding? The administration has argued that enactment of this package of legislation will make the state more competitive for being awarded federal funding. The Legislature will want to explore to what extent this proves to be the case. Some key questions include: What evidence is available to demonstrate the effect of these changes on the state’s receipt of federal funding? For example, is there evidence that these policy changes affect how the state’s projects score under competitive IRA and IIJA programs? If so, by how much? Is there information on how much additional funding is secured by the state as a result of these changes?

• What Other Consequences Emerge From Changes? The infrastructure package may have other implications—both positive and negative—beyond the environmental, fiscal, and environmental justice-related effects discussed above. Accordingly, the Legislature will want to explore whether any such impacts emerge. Some key questions include: What are the effects of these statutory changes, if any, on transparency and public input? What are the effects of these changes on the pursuit of other legislative priorities, such as around ensuring safe, affordable, and reliable water and energy, or the creation of long-term, well-paying jobs?

• Do Other Barriers to Completing Important Infrastructure Projects Remain That Could Merit Additional Legislative Intervention? Some stakeholders have raised concerns that other barriers to completing infrastructure projects exist that are not addressed by this package. Accordingly, the Legislature likely will want to take steps to understand to what extent significant barriers persist and whether any of them merit additional legislative action. Some key questions include: Are projects—both the categories of projects targeted by this package as well as other key types of infrastructure such as affordable housing projects—still encountering barriers after the implementation of the infrastructure package? Could any of these barriers be resolved through additional state legislation? What would be the trade-offs associated with such legislation?

Conclusion

In passing the infrastructure package, the Legislature made a number of key statutory changes intended to expedite various types of infrastructure projects and help the state achieve its climate-related goals. Given the various potential implications of these changes—such as on project delivery and the environment—the Legislature will want to closely oversee their implementation. As it conducts these oversight activities, we recommend the Legislature focus on answering the key questions we identify in this post, which are aimed at helping assess whether the enacted changes are meeting their intended goals.