Analysis of the 2004-05 Budget Bill Legislative Analyst's Office February 2004

California Infrastructure Plan

Existing law requires the Governor to annually submit to the Legislature a five-year infrastructure plan in January of each year in conjunction with submission of the Governor's budget. The second infrastructure plan was submitted in April 2003—after publication of our Analysis of the 2003-04 Budget Bill. The administration has indicated that the 2004 infrastructure plan will be deferred one year, allowing it "the opportunity to comprehensively review final budgetary decisions and propose a meaningful plan to reflect those decisions."

The information contained in the infrastructure plan is important to the Legislature in making budget-year funding decisions. The plan provides the context for how particular projects fit into a larger scheme for addressing a department's capital needs. For this reason, we are providing in this Analysis information from 2003 California's Five Year Infrastructure Plan for several departments. We recognize that the 2003 infrastructure plan was prepared by an earlier administration; however, we believe the information in the 2003 infrastructure plan—particularly with regard to needs identified by departments—is similar to that which would have been contained in a 2004 plan. This is because identified facility needs do not change significantly from year-to-year and are therefore relatively independent of policy positions of different administrations. 

In the remainder of this piece, we review the 2003 plan from a statewide perspective. In many of the individual departmental write-ups which follow, we identify the funding for projects the departments indicate are "needed." Some of these projects, however, may not warrant funding—in the judgment of either the administration or the Legislature—because they may be inconsistent with its priorities or lack sufficient justification. We also identify significant projects which the Legislature may be asked to fund in the near future.

Background on State Infrastructure

Infrastructure funding is an increasingly important issue. The state has hundreds of billions of dollars invested in infrastructure such as highways, parks, water resources, college buildings, prisons, and state offices. In addition to funding capital development to support various departmental missions, the state has also historically provided funds for local infrastructure in the areas of K-12 school construction, community college construction, local streets and roads, local parks, wastewater treatment, flood control, and jails.

During the 20^th century, the state built roads, water projects, schools, prisons, and other facilities to accommodate population growth—without much need to maintain and renovate an aging infrastructure stock. This has changed. Much of the state's infrastructure now must be renovated, adapted, and improved to meet current and future needs. However, the need to build new infrastructure to accommodate population growth will continue unabated. This dual challenge—to develop new infrastructure while extending the life of existing facilities—requires that the state address capital investment in a comprehensive way.

The 2003 California Infrastructure Plan

Most infrastructure planning information is developed by state agencies. In the past, however, this information was not consolidated into a statewide plan. As a result, the Legislature did not have a coordinated picture of the state's capital investment needs. Chapter 606, Statutes of 1999 (AB 1473, Hertzberg), requires a comprehensive long-term plan for California's infrastructure development programs. Specifically, the act directed the Governor, beginning in January 2002, to annually submit a five-year infrastructure plan for state agencies, K-12 schools, and higher education institutions, and a proposal for its funding. The information contained in the 2003 plan follows the format and content from the first plan. The individual departments generated five-year capital development plans based on their needs. The Department of Finance (DOF) reviews the infrastructure plans proposed by departments and makes recommendations to the Governor's office concerning the justification for proposed projects. Those considered justified are approved in concept for funding.

The 2003 Plan Overview

State departments identified $66.5 billion of capital outlay projects to the DOF to consider for funding in the five-year period 2003-04 through 2007-08. Of these, $55.2 billion (about 81 percent) were included in the 2003 plan (see Figure 1). The $11.5 billion of projects that were not included in the plan were deleted for various reasons: they were not justified, they were deferred for consideration to later years, or they were deleted for policy reasons. In some cases, projects were deferred for consideration in later years on the basis that funding for these projects was considered unlikely to be available in the five-year period covered by the plan.

Figure 1 shows how the $55 billion of identified expenditures was distributed among major program areas of the state budget. As the figure indicates, proposed spending is concentrated in the areas of transportation and K-12 education. These two areas account for about 70 percent of total spending. Proposed funding of these expenditures relies heavily on bonds (primarily for education), and on federal and special funds (almost exclusively for transportation).

Project Categories

In the infrastructure plan the administration has categorized projects as to their general nature. For existing facilities and infrastructure, these categories are:

• Critical Infrastructure Deficiencies. Condition of existing facilities impairs program delivery or results in an unsafe environment. (Such projects would correct conditions that significantly limit the efficiency and effectiveness of program delivery or are hazardous to employees and the public.)
• Facility/Infrastructure Modernization. Facility is structurally sound but modernization will result in an upgrade that will enable or enhance program delivery.
• Workload Space Deficiencies. Additional space required to serve existing programs because of increased workload.
• Enrollment/Caseload/Population (E/C/P). Changes to E/C/P estimates resulting in a reduction or increase in the amount of space needed or a change in the use of existing space.
• Environmental Restoration. Land restoration or modification for environmental purposes.
• Program Delivery Changes. Modifications to existing facilities required by authorized changes to existing programs or newly required programs.

For new infrastructure, the categories are:

• Workload Space Deficiencies. Additional space required to serve existing programs because of increased workload (not E/C/P based).
• Environmental Acquisitions and Restoration. Land acquisitions and restoration of newly acquired land for the improvement or protection of wildlife habitat. 
• Public Access and Recreation. Acquisitions or projects which facilitate, or allow public access to state resources and land such as coastal and park acquisitions, as well as development of access to beaches for recreation or open space preservation.
• Enrollment/Caseload/Population (E/C/P). Caseload driven facility requirements which result in a reduction or increase in the amount of space required for program delivery.
• Program Delivery Changes. Modifications to existing facilities required by authorized changes to existing programs or newly required programs.

We have found this categorization by the administration to be helpful in understanding its priorities.