Legislative Analyst's Office Analysis of the 2002-03 Budget Bill

Overview

Total state-funded expenditures for transportation programs are proposed to be substantially higher, by 9.4 percent, in 2002-03 than estimated current-year expenditures. The increase is due primarily to significantly higher expenditures projected for state highways and local transportation projects (as scheduled in the State Transportation Improvement Program and the Traffic Congestion Relief Program) and for seismic retrofit of state-owned toll bridges.

For traffic enforcement, the budget proposes increases primarily in the expenditure level of the California Highway Patrol in order to enhance the state's security activities.

Expenditure Proposal and Trends

The budget proposes total state expenditures of about $8 billion for all transportation programs and departments under the Business, Transportation and Housing Agency in 2002-03. This is an increase of $692 million, or 9.4 percent, over estimated expenditures in the current year.

Figure 1 shows that state-funded transportation expenditures increased by about $3.7 billion since 1995-96, representing an average annual increase of 9.1 percent. When adjusted for inflation, these expenditures increased by an average of 6.3 percent annually. The increase is mainly the result of the significant increase in expenditures under the Traffic Congestion Relief Program (TCRP) enacted in 2000-01 and projected higher state-funded expenditures for highway transportation improvements contained in the State Transportation Improvement Program (STIP). The TCRP provided $1.6 billion from the General Fund in 2000-01 for a number of specific projects to be constructed over a number of years. In addition, in March 1996, the voters passed Proposition 192 which authorized $2 billion in bonds for seismic retrofit of highways and bridges. In August 1997 and subsequently in September 2001, the Legislature further enacted legislation to fund seismic retrofit of state-owned toll bridges.

Figure 1 also shows that transportation expenditures as a share of state expenditures have remained relatively stable since 1995-96. In 2002-03, proposed transportation expenditures will constitute about 8.2 percent of all state expenditures.

Of the 2002-03 state transportation expenditures, about $6.6 billion is proposed for programs administered by the state, and $1.1 billion is for subventions to local governments for streets and roads. Another $339 million will be for debt-service payments on rail bonds issued under Propositions 108 and 116 of 1990, and 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 about $9 billion (from all fund sources including federal and bond funds) for the Department of Transportation (Caltrans) in 2002-03--an increase of $1.2 billion (15 percent) above estimated current-year expenditures. The higher expenditure level reflects projected increases of about $1.3 billion in state and federal funds for highway construction and local road improvements, offset by a drop of about $121 million in reimbursed expenditures.

Spending for the California Highway Patrol (CHP) is proposed at $1.2 billion--$112.8 million, or 10 percent, higher than the current-year level. Most of the expenditures, about 91 percent, would come from the Motor Vehicle Account. The budget, however, anticipates that about $90 million of these expenditures would subsequently be reimbursed by federal funds available for homeland security enhancements.

For the Department of Motor Vehicles (DMV), the budget proposes expenditures of $666.7 million, $20.5 million (3 percent) less than in the current year. These expenditures would be mainly from the Motor Vehicle Account and vehicle license fees.

Additionally, the budget proposes to fund the State Transportation Assistance program in 2002-03 at $115.3 million, which is $55.7 million (or 33 percent) less than the current-year level. The proposed amount is determined based on a statutory formula, and it depends on anticipated revenues into the Public Transportation Account. The budget-year drop in funding level occurs because in the current year the program has been provided, on a one-time basis, $53.3 million more than the amount called for by the statutory formula.

In addition, the budget proposes a loan of $672 million from transportation funds to the General Fund for nontransportation purposes.

Major Budget Changes

Figure 3 highlights the major changes proposed for 2002-03 in various transportation programs.

As the figure shows, the budget proposes to increase highway construction by Caltrans by $1.3 billion. The bulk of the increase is related to the delivery of the STIP, projects in the TCRP, and seismic retrofit of state-owned toll bridges. The budget also proposes an additional $171 million in federal funds for various designated local transportation projects. In total, the budget proposes $3.7 billion in transportation capital outlay expenditures and $2.2 billion for local transportation improvements.

The budget does not propose any increase in highway engineering and design support. However, the funding level may be changed in May when Caltrans is better able to estimate total design and engineering workload to deliver the STIP.

In addition, the budget proposes $77 million to integrate the various information technology systems in the department. It also proposes $23 million for Caltrans to implement a stormwater runoff management plan and to comply with the federal Clean Water Act. 

For CHP, the budget proposes $89.6 million to increase the number of officers, pay for staff overtime, acquire aircraft and various equipment in order to provide a higher level of security and protection for state facilities and employees. These expenditures will come from the Motor Vehicle Account (MVA). The administration expects the expenditures to subsequently be reimbursed by federal funds.

For both CHP and DMV, the budget proposes funding increases to pay for higher employee retirement costs as well as workers' compensation costs.

In order to accommodate the various proposed increases in MVA expenditures, the budget also proposes reductions totaling $29.8 million in order to avoid a funding shortfall. These reductions include: (1) a reduction of $10.8 million for various MVA-funded operating expenses and equipment purchases, (2) a drop of $10.5 million in Air Resources Board support and subvention to local air quality management districts, and (3) a reduction of $8.5 million for CHP equipment and vehicle replacement and operating expenses.