The 2023-24 California Spending Plan

Transportation

Overview

The budget package provides a total of $33.2 billion for transportation-related programs in 2023-24, including for the California Department of Transportation (Caltrans), California State Transportation Agency (CalSTA), local streets and roads (shared revenues), California Highway Patrol (CHP), Department of Motor Vehicles (DMV), and High-Speed Rail Authority. As shown in Figure 1, this is quite comparable to 2022-23 estimated funding levels (representing an increase of $369 million, or only 1 percent). This relatively flat year-to-year funding trend reflects two offsetting factors. First, the 2022-23 budget package included significant one-time General Fund as part of a Transportation Infrastructure package (described in more detail below) that mostly did not carry over into 2023-24. However, that year-to-year decrease in General Fund was offset by combined increases in federal funds (reflecting additional funding from the Infrastructure Investment and Jobs Act [IIJA]) and special funds (as Caltrans plans to undertake more projects funded with the State Highway Account [SHA] in 2023-24 compared to the prior year).

Revisions to Transportation Infrastructure and Supply Chain Packages

Modifies Some Funding Provisions, but Sustains Same Overall Amounts as Prior-Year Agreements. The 2022-23 budget package planned for significant multiyear General Fund augmentations for transportation programs. In total, these augmentations intended to provide $10.9 billion over a five-year period. This included $9.5 billion through the Transportation Infrastructure Package and $1.4 billion through the Supply Chain Package. The 2023-24 budget package sustains the same overall amounts for the various programs in each of the packages, which is displayed in Figure 2. While total multiyear funding levels remain the same as in the prior-year agreements, the budget makes the following modifications:

• Population-Based Transit and Intercity Rail Capital Program (TIRCP). While the budget package provides the same amount as originally planned for in previous agreements—$4 billion—it expands the allowable uses for this funding to include operational expenditures, as we discuss in more detail below.

• Active Transportation Program. The budget shifts a portion of the funding—$300 million—for the Active Transportation Program from the General Fund to SHA.

• Local Climate Adaptation Programs. The budget shifts the full amount of funding—$200 million—for local climate adaptation programs from the General Fund to SHA.

• Grade Separation Projects Within TIRCP. The spending plan delays the full amount of funding—$350 million—intended for grade separation projects through TIRCP from 2022-23 to 2025-26.

• Port and Freight Infrastructure Program. The budget delays a portion of the $600 million that had originally been scheduled for the program in 2023-24 by instead planning to provide $200 million annually from 2023-24 to 2025-26. The budget also shifts a portion of the 2023-24 funding—$150 million—from the General Fund to SHA.

Support for Local Transit

Transit ridership had been gradually declining since 2014 but dropped dramatically when the COVID-19 pandemic began in 2020. The decrease in ridership has reduced fare revenues for the agencies that operate locally based transit services. Largely as a result of these revenue decreases, along with increased cost pressures, many transit agencies are facing fiscal shortfalls. The magnitude of these operational funding shortfalls varies across local jurisdictions. However, transit agencies estimated that without the additional resources provided by this budget package, the annual statewide operational funding shortfalls could have totaled around $300 million in 2023-24 and grown to about $1.9 billion by 2025-26. To help address these issues, the budget package provides new funding, flexibilities, and oversight, along with establishing a taskforce to recommend longer-term transit improvements and reforms.

Provides New Funding and Flexibility for Transit Operations and Capital Programs… To give transit agencies additional tools to address potential operating shortfalls, the budget package provides flexibility over the use of funding within two programs. First, as shown earlier in Figure 2 and consistent with prior multiyear funding agreements, the budget includes $2 billion General Fund in both 2023-24 and 2024-25 for the population-based TIRCP. The budget also expands the allowable uses for this funding, permitting it to be used for capital improvements and/or transit operations. Under previous budget agreements, funding under this program had been limited to capital expenditures. In addition, the spending plan includes intent to provide $1.1 billion across 2023-24 through 2026-27 from the Greenhouse Gas Reduction Fund (GGRF) and Public Transportation Account to support a new Zero-Emission Transit Capital Program. This includes $410 million in 2023-24 ($220 million from GGRF and $190 million from the Public Transportation Account). This new program provides formula funding which agencies have the flexibility to use to support zero-emission buses and related infrastructure and/or to cover their operating expenses.

…And Adds New Accountability and Reporting Requirements. The budget package includes various accountability and reporting requirements related to this transit funding. At the state level, CalSTA is required to develop and administer an accountability program for funding distribution. The budget package also includes new requirements for regional transportation agencies. In order to receive funding in 2023-24, an agency must either (1) submit a short-term financial plan for CalSTA approval by December 31, 2023 or (2) declare that it does not have an operational need between 2023-24 through 2026-27 and will not use the funding to support operations. In order to receive funding in 2024-25, agencies must submit short-term financial plans to CalSTA by December 31, 2025. In addition, agencies must submit long-term financial plans to CalSTA by June 26, 2026. CalSTA must approve an agency’s long-term plan in order for it to be eligible to receive TIRCP funding in 2026-27 or subsequent years.

Extends Temporary Penalty Exemptions and Statutory Flexibility. The budget package extends various flexibilities and penalty exemptions that were previously set to expire at the end of 2022-23. Specifically, the budget extends the following through 2025-26: (1) exemptions to penalties if agencies do not meet existing efficiency requirements under the Transportation Development Act; (2) flexibility to use State of Good Repair Program funding to support operations; and (3) hold harmless provisions that allow for revenue-based allocations to be based on pre-pandemic data for various programs including the State Transit Assistance, State of Good Repair, and Low Carbon Transit Operations Program.

Establishes Taskforce to Recommend Transit Improvements and Reforms. The budget package requires CalSTA to convene a stakeholder group to develop policy recommendations to grow transit ridership and improve the transit experience for riders. In addition, the language directs the taskforce to provide an analysis of various other topics such as reforming the Transportation Development Act. The taskforce must submit a report on its findings and recommendations to the Legislature by October 31, 2025.

Caltrans

The budget provides $18.1 billion from various fund sources to support Caltrans in 2023-24, which represents an increase of $3.3 billion (22 percent) when compared to the revised 2022-23 expenditure level. The year-to-year change largely reflects anticipated increases in the number of projects the department plans to undertake and commensurate higher levels of spending supported by both the federal IIJA as well as SHA.

Continues Support for Homeless Encampment Coordinators on a Limited-Term Basis. The budget includes three activities related to homeless encampments on and near state highways. First, it provides $4.5 million annually from the General Fund from 2023-24 through 2025-26 for Caltrans to continue and expand its encampment coordinator team to 30 positions. (This team was initiated when the department received $2.7 million from the General Fund in both 2021-22 and 2022-23 for 20 positions.) Encampment coordinators are tasked with managing encampment cleanups on the state highway system by working with Caltrans’ maintenance staff, local governments, law enforcement, and service providers. Second, budget trailer legislation requires the department to submit a report to the Legislature by January 1, 2026 that summarizes outcomes of the encampment coordinator team. Third, the budget includes $1.3 million from the General Fund in both 2023-24 and 2024-25 for the department to establish a homelessness solutions team. This team will be in charge of coordinating long-term planning efforts involving homelessness and housing across all of the department’s programs.

Increases Department’s Capital Outlay Support. The spending plan includes a net increase of $39.1 million from various fund sources and 143 new full-time equivalent staff for the Capital Outlay Support Program. This brings budgeted totals for the program to $2.4 billion and 11,787 full-time equivalent staff. This program provides the staff support necessary to deliver transportation infrastructure projects, such as engineering and design, environmental analysis, right-of-way acquisition support, and construction administration and oversight. The growth is largely related to (1) an increase in the number of local projects on the state highway system that Caltrans supports and (2) workload associated with expanding the state’s Broadband Middle Mile Network Program.

Extends Indirect Cost Recovery Rate Limit for “Self-Help” Counties. Caltrans frequently undertakes work on behalf of local governments that develop projects on the state highway system. The department charges these local governments for all costs that are directly attributable to these projects. The department also charges an amount for its associated indirect costs—those that are not directly tied to a specific project, but are necessary to conduct department activities. These include program-related indirect costs (such as program overhead) and administrative indirect costs (such as human resources and accounting). The budget includes budget trailer legislation that permanently extends provisions—which had expired on January 1, 2023—that limit the administrative indirect cost recovery rate that Caltrans can charge to self-help counties to no more than 10 percent of the department’s direct costs. (Self-help counties are those that have passed local sales tax measures dedicated to transportation improvements.)

California Highway Patrol

The budget provides $3 billion for CHP in 2023-24, which represents a reduction of $106 million (3 percent) relative to 2022-23. While total spending is similar to the previous year, the budget includes a notable shift in funding approach for several planned capital outlay projects.

Shifts Funding Approach for Planned Capital Outlay Projects. In order to help address the state budget shortfall, the spending plan adopts the approach of using lease revenue bonds—rather than up-front General Fund, as the administration had originally planned—to fund the design-build phases of ten field office replacement projects. As shown in Figure 3, the budget plans on a total of $542 million in lease revenue bonds for these projects across three years. The administration has not yet identified what fund source it plans to use to pay the future debt service on these bonds.

In addition, the budget includes a total of $11.3 million in one-time General Fund for the performance criteria phase of five different office replacement projects (roughly $2 million each): Antelope Valley, Barstow, Los Banos, Porterville, and Redding.

Funds Statewide Body-Worn Camera Implementation. The budget package approves appropriations from the Motor Vehicle Account of $9.8 million in 2023-24, $9.9 million in 2024-25, and $4.9 million in 2025-26 and annually thereafter to implement body-worn cameras statewide. Most of the funding is for costs to procure and maintain the equipment and information systems. The funding also would support 11 positions to carry out various related workload for CHP including maintenance, training, oversight, and responding to public record requests.

Department of Motor Vehicles

The budget provides $1.5 billion for DMV, a reduction of about $200 million (12 percent) relative to the revised spending estimates for 2022-23. This year-to-year decrease is largely due to the expiration of one-time funding that was provided in the prior year. Key changes in the 2023-24 budget include fund shifts for various capital outlay projects and new funding to support the implementation of the Motor Voter Program.

Shifts Funding Approach for Planned Capital Outlay Projects. Similar to the CHP projects discussed above, the budget package uses lease revenue bonds—rather than up-front General Fund, as the administration had originally planned—to fund various phases of field office projects. Specifically, as shown in Figure 3, the budget package plans to rely on $81 million from lease revenue bonds, including $42 million for the design-build phase of San Francisco field office replacement, $22 million for the for the construction phase of the Inglewood field office replacement, and $17 million for the construction phase of the Delano field office replacement. (While not yet approved through the budget, the administration also plans to request $62 million from lease revenue bonds in 2025-26 for the design-build phase of the El Centro field office replacement.) The administration has not yet identified what fund source it plans to use to pay the future debt service on these bonds. The budget also includes $2.5 million in one-time General Fund for the performance criteria phase of the El Centro field office replacement.

Supports Next Stage of Motor Voter Program Implementation. The budget provides $4.5 million General Fund in 2023-24 on a one-time basis for contracted resources and temporary staffing to continue planning and implementing activities related to Chapter 314 of 2021 (AB 796, Berman). Chapter 314 made various changes to the Motor Voter Program such as improvements to voter registration processes.