Analysis of the 2007-08 Budget Bill: Transportation

Appropriating Proposition 1B Funds

Proposition 1B authorizes about $20 billion in general obligation bond funds for transportation. The measure allocates specific amounts of bond funding for particular transportation uses, and requires that the funding be subject to legislative appropriation. The 2007-08 budget requests total appropriations of $7.7 billion in Proposition 1B funds for various transportation programs.

Provide Bond Funding Annually to Enhance Legislative Oversight

The budget requests three-year appropriations of Proposition 1B bond funds, totaling $7.7 billion for various transportation programs. However, of that amount, only $2.8 billion is estimated to be used in 2007-08.

We identify no programmatic or fiscal reason to provide three-year appropriations of Proposition 1B funds. In order to maintain oversight of expenditures, the Legislature should appropriate these funds annually, based on estimated allocations for that year. Accordingly, we recommend that only $2.8 billion be appropriated in 2007-08. We further recommend that the administration identify for the Legislature by May 1, a list of potential projects that would be ready for bond fund financing to substantiate the requested amount. (Reduce Item 2640-104-6059 by $700,000,000, Item 2660-104-6053 by $2,000, Item 2660-104-6055 by $450,500,000, Item 2660-104-6056 by $2,000, Item 2660-104-6058 by $100,000,000, Item 2660-104-6060 by $331,500,000, Item 2660-104-6062 by $29,750,000, Item 2660-104-6063 by $2,000, Item 2660-104-6064 by $106,251,000, Item 2660-304-6053 by $142,798,000, Item 2660-304-6055 by $1,351,500,000, Item 2660-304-6056 by $509,998,000, Item 2660-304-6058 by $595,300,000, Item 2660-304-6063 by $118,998,000, Item 2660-304-6064 by $8,499,000, and Item 9350-104-6065 by $450,000,000.)

Governor’s Proposal. The budget proposes to appropriate $7.7 billion through various Proposition 1B programs to the Department of Transportation (Caltrans), transit agencies, cities and counties, and the Air Resources Board. For the amounts appropriated to Caltrans ($5.2 billion), transit agencies ($1.3 billion), and cities and counties ($1.1 billion), these funds are to be available for allocation to projects over three years. As shown in Figure 1, the budget estimates that no more than $2.8 billion of these funds would be used for projects in 2007-08.

Match Annual Appropriation With Anticipated Fund Allocation. In our January report, Implementation of the Transportation Bond (also in the “Crosscutting Issues” section of this chapter), we recommended that the Legislature appropriate Proposition 1B bond funds annually through the budget. By appropriating funds on an annual basis, the Legislature has the opportunity to annually check on program progress and performance, and withhold appropriations, as necessary, if programs are not performing. Providing the administration with a three-year appropriation would significantly reduce this kind of legislative oversight. Accordingly, we recommend that at most, only $2.8 billion be appropriated, instead of $7.7 billion.

Recommend Administration Provide Project Information. At the time this analysis was prepared, it was not known which projects would be eligible and ready to use bond funds in 2007-08. Thus, there is no assurance that there will be $2.8 billion of projects ready for Proposition 1B fund allocations in 2007-08. In order to inform the Legislature of the types and number of projects that would likely be funded, we recommend that the administration identify by May 1, a list of potential projects that would be ready for funding in each Proposition 1B program requesting an appropriation in 2007-08. Based on that information, the Legislature can further adjust the appropriation amount of Proposition 1B bond funds for each program.

Authority to Transfer Bond Funds Circumvents Accountability

We recommend the deletion of budget bill language that allows the administration to transfer appropriated bond funds among Proposition 1B programs. This is because allowing the transfer of bond funds among various uses circumvents accountability in the use of the funds, and runs counter to the bond measure’s intent to allocate specific amounts for particular transportation purposes.

Governor’s Proposal. The Governor’s budget includes budget bill language that would allow the administration to redirect bond fund appropriations among Proposition 1B programs. Specifically, this language would allow up to 90 percent of bond funds appropriated in most Proposition 1B programs to be transferred to other bond-funded programs, subject to approval by the Department of Finance and 30-day notification of the Joint Legislative Budget Committee and the budget committees of the Legislature.

Proposed Language Circumvents Appropriation Authority and Accountability. The administration maintains that the language is needed so that the California Transportation Commission would have the flexibility to shift funding among programs to meet the demands of projects requesting bond funding. However, if the administration is able to provide the Legislature with a list of projects to be funded by each Proposition 1B program, as we recommend above, this level of flexibility would not be required.

Additionally, we have serious concern with the proposed language. Proposition 1B clearly allocates specific amounts of bond funds to particular purposes. Proposition 1B also specifies that these amounts are subject to appropriation by the Legislature. The “power of the purse”-appropriation authority-is one of the Legislature’s most powerful tools to ensure accountability. By allowing the administration to transfer the funds from one purpose to another, as the Governor proposes, the Legislature’s appropriation authority, as well as program accountability, would be circumvented. As shown in Figure 2, the administration could shift funding among almost all Proposition 1B programs rendering legislative appropriations in the budget bill meaningless.

Furthermore, the proposed language is so unconstrained that conceivably bond funds could be transferred among various uses in such a way that, in the aggregate, the bond measure’s intent of providing specific amounts for particular purposes would not be met. Accordingly, we recommend that the language be deleted.

Appropriations Requested in Current Year Would Not Be Used

The Governor proposes current-year expenditures of $523 million in specified Proposition 1B funds by Caltrans. Because all Proposition 1B funds are subject to legislative appropriation, these expenditures would require separate urgency legislation. Discussions with Caltrans indicate that these funds are unlikely to be expended in 2006-07. We recommend that the administration provide a list of projects that would be funded to substantiate the request.

Governor’s Proposal. The Governor’s budget proposes current-year expenditures of $523 million in specified Proposition 1B funds by Caltrans. As shown in Figure 3, these expenditures would mainly be for projects in the State Transportation Improvement Program, the State Highway Operations and Protection Program, and the newly created Corridor Mobility program.

Funds Unlikely to Be Spent in 2006-07. Discussions with Caltrans indicate that it is highly unlikely that the requested funds would be spent in the current year. This is because it often takes four months to advertise and award a project to a construction bidder. Thus, unless funding is made available by early March, most of the current-year appropriation would not be encumbered before the end of the fiscal year. The department indicates, however, that the current-year appropriation would expedite projects which are ready for construction, as an appropriation is necessary before project advertising can begin.

We do not object to current-year appropriations aimed at expediting project delivery. However, we recommend that the Legislature not appropriate the requested current-year funds until the administration substantiates its request by providing a list of the projects that would be funded.

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