Analysis of the 2005-06 Budget Bill Legislative Analyst's Office February 2005

California Infrastructure Plan Not Submitted

We recommend the Legislature defer action on all capital outlay appropriations in the budget for new (not continuing) projects until the required infrastructure plan is submitted and reviewed.

Chapter 606, Statutes of 1999 (AB 1473, Hertzberg), requires the Governor to annually submit to the Legislature a five-year infrastructure plan in January in conjunction with submission of the Governor's budget. The plan is required to identify new and renovated infrastructure requested by state agencies (including higher education), and aggregate funding for transportation and K-12 education. Additionally, the plan is required to provide a cost estimate and a specific funding source for the infrastructure projects identified. If the plan proposes the issuance of new state debt, it must evaluate the impact of the issuance on the state's overall debt position. Thus, the plan represents the administration's funding priorities for infrastructure improvements across all departments and programs.

No Current Infrastructure Plan. The Department of Finance indicates that no plan was submitted in 2004 because of other priorities resulting from the mid-term change of administration. The administration, however, again did not submit an infrastructure plan with the 2005-06 Governor's Budget. This means the most recent plan is the one submitted in 2003, by the prior administration. Therefore, the Legislature has no information about the current administration's priorities regarding infrastructure investment.

Without current information about the types and amounts of capital outlay spending the administration plans for the next five years, and how these expenditures will be funded, the Legislature does not have information it needs to evaluate the administration's capital outlay proposals included in the budget and determine how they address the state's long-term infrastructure needs.

Defer Funding New Capital Outlay Projects Pending Infrastructure Plan. The Governor's budget proposes almost $1.3 billion in funding for capital outlay improvements (not including transportation and the State Water Project). About $900 million of the amount would fund continuing projects for which work including preliminary plans and/or working drawings is underway. Because these projects have been approved by the Legislature in previous years, we recommend that funding be provided in 2005-06 so that they can continue. Withholding funding for their completion at this time would be disruptive and result in additional costs.

We recommend, however, the Legislature defer action on all capital outlay proposals in the budget for new projects (proposed to cost a total of about $400 million) until the 2005 infrastructure plan has been submitted and reviewed by the Legislature. Doing so allows the Legislature to ensure that the administration's priorities related to these projects are the same as the Legislature's.