Major Issues

Transportation

Overall Transportation Funding Outlook Improves Significantly; But Uncertainties Exist

For the first time in recent years, there will be funds for a significant number of new highway transportation projects over the next six years, between 1998-99 and 2003-04. Specifically, state and federal revenues for highway transportation are projected to exceed expenditures by $4.6 billion (see page A-16).

While the funding outlook shows significant improvement, uncertainties remain that may affect the funding picture, including the level of federal funds, the level of gas tax revenues and potentially higher expenditures for the budget year (see page A-17).

Mass Transportation Faces Shortfall

The Public Transportation Account (PTA), which funds intercity rail service, mass transportation programs and transit capital improvements, faces a projected deficit in 1998-99 and will require a transfer of State Highway Account funds to stay in balance. Even with the transfer, revenues will still be substantially short of outstanding obligations made through 1997-98 for transit capital improvement projects (see page A-20).

Current projections show no PTA funds available for new transit capital improvement projects over the next six years--1998-99 through 2003-04 (see page A-20).

Motor Vehicle Account Balance Masks Continuing Problems

The Motor Vehicle Account projects a moderate balance at the end of 1998-99. This balance is made possible by the deferral of a loan repayment, continued shifts of expenditures to other fund sources, deferral of capital improvements, and overly optimistic projections of revenues (see page A-23).

Little Increase in Highway Transportation; But More Staff Proposed for Capital Outlay Support

Caltrans proposes expenditures of $5.7 billion for the highway transportation program, less than 1 percent more than in the current year (see page A-29).

Caltrans' capital outlay support staffing level is budgeted to climb to 9,521.4 personnel-year equivalents, costing $870.3 million. We withhold recommendation on the proposal because the department will revise its staffing request when transportation projects for the 1998 State Transportation Improvement Program are identified (see page A-31).

Transfer of Intercity Rail: Slow Progress

The Capitol intercity rail service may be transferred to a regional joint powers authority depending on the status of ongoing negotiations. However, Caltrans will most likely continue to administer the San Diegan and the San Joaquin services (see page A-44).

Implementation of Proof of Insurance Requirement Costly

The Department of Motor Vehicles' proposal to implement the financial responsibility legislation is neither efficient nor effective. However, the electronic transfer of insurance data would enhance both program efficiency and effectiveness. (see page A-53).

Database Redesign Stuck in Neutral

Five years after a DMV database redesign project failed, the department is no further along in developing its information technology system (see page A-55).

Overview

Transportation

Total expenditures from state funds for transportation programs are proposed to be significantly higher in 1998-99 than estimated current-year expenditures. The increase is due mainly to proposed higher expenditures for highway improvements, including seismic retrofit of state-owned toll bridges.

For traffic enforcement, the budget proposes essentially no change in the expenditures of the California Highway Patrol and minor increases in the Department of Motor Vehicles. The expenditure increases are primarily to provide adequate staff to maintain program service levels and to provide for facilities repairs and capital improvements.

The budget proposes total state expenditures of about $ 5.6 billion for transportation programs in 1998-99. This is an increase of $ 516 million, or 10 percent, over estimated expenditures in the current year.

Figure 1 (see next page) shows that state-funded transportation expenditures increased by $1.5 billion since 1991-92, representing an average annual increase of 4.4 percent. When adjusted for inflation, these expenditures increased by an average of 1.6 percent annually. This increase is largely the result of the passage of the Transportation Blueprint legislation in 1990 which provided additional state funds for highway and mass transportation programs. In addition, in March 1996, voters passed Proposition 192, authorizing $2 billion in bonds for seismic retrofit of highways and bridges. In August 1997, the Legislature further enacted legislation to fully fund seismic retrofit of state-owned toll bridges.

Figure 1 also shows that transportation expenditures have increased slightly as a share of total state expenditures over the period. In 1998-99, proposed transportation expenditures will constitute about 8 percent of all state expenditures.

Of the 1998-99 state transportation expenditures, about $4.3 billion is proposed for programs administered by the state, and about $1 billion is for subventions to local governments for streets and roads. Another $295 million will be for debt-service payments on rail bonds issued under Propositions 108 and 116 of 1990, and on seismic retrofit bonds issued under Proposition 192 of 1996.

Spending by Major Program

Figure 2 shows spending for the major transportation programs in detail. Specifically, the budget proposes expenditures of $6.4 billion (from all fund sources including federal funds) for the Department of Transportation in 1998-99--an increase of $71.4 million (1.1 percent) above estimated current-year expenditures. The higher expenditure level reflects mainly an increase of about $79 million in federal funds for highway construction. The budget also projects a decrease in Proposition 192 expenditures for seismic retrofit of highways and bridges, offset by an increase in expenditures on seismic retrofit of state-owned toll bridges and reimbursed expenditures for other highway transportation activities.

Spending for the California Highway Patrol (CHP) is proposed at $872.5 million--about the same level as in the current year. For the Department of Motor Vehicles (DMV), the budget proposes expenditures of $596.5 million, about 3.9 percent more than in the current year. The increase will be funded with a combination of Motor Vehicle Account revenues and revenues from motor vehicle license fees.

Additionally, the budget proposes an increase in the State Transportation Assistance (STA) program in 1998-99 from $84.8 million to $100.3 million. This increase reflects higher projected revenues into the Public Transportation Account (PTA, formerly Transportation Planning and Development [TP&D] Account). The STA program provides funds to local transportation agencies to operate public mass transit systems. Annual funding of the program is determined based on a statutory formula, and the level varies depending on anticipated revenues into PTA.

Major Budget Changes

Figure 3 highlights the major changes proposed for 1998-99 in various transportation programs.

As the figure shows, the budget proposes an increase of $41.5 million for 400 personnel-years-equivalent of engineering and design staff support. Additionally, the budget includes an increase of $26.7 million to accommodate increased highway maintenance and traffic operations systems workload, to increase the amount of night maintenance work done in urban areas (Southern California and Bay Area) and to conduct traffic incident investigations. An additional $8.9 million is proposed in order to increase support for bridge painting.

The budget also proposes $12.4 million in additional support for the state's intercity rail service. The additional amount is requested to fund higher costs for existing services, expand service on the Capitol line (Sacramento to San Jose), and extend the San Joaquin rail service from Stockton to Sacramento.

For CHP, the budget proposes an increase of $4.9 million in order to continue to automate the patrol vehicle environment for traffic officers, primarily via the installation of mobile digital computers. The CHP is also proposing an increase in staffing for freeway service patrol and emergency call box services. These services are reimbursed by participating local agencies. For 1998-99, the budget reflects (1) a drop in protective services due to the completion of a one-time security enhancement project at state facilities, and (2) a reduction in CHP's facilities improvement expenditures.

For DMV, the budget requests $9.7 million for additional staff to address increased workload and about $5 million to improve the department's document authentication process and to add staff to verify immigration documents submitted by applicants for occupational licenses and commercial driver licenses. The budget also includes an increase of $1.1 million to convert all computer programs used by DMV to meet the "year 2000" requirements.

In addition, the budget requests increases of about $18 million for facilities improvement, repairs and renovation, and furniture. Some of these capital projects have been deferred from 1996-97 and the current year.

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