Analysis of the 2008-09 Budget Bill: Infrastructure

Overview

The State’s 2008–09 Infrastructure Program

The 2008–09 Budget Bill proposes $11.3 billion in state infrastructure funding. This is new funding for continuing phases of existing projects started in previous years, the starting of new projects, and acquisitions of property. (This total does not include billions of dollars of spending [1] from past capital outlay appropriations that is expected to occur in the budget year or [2] which has appropriation authority from sources other than the budget bill, such as K–12 school funding and AB 900 [Solorio] prison construction funding.) Of the $11.3 billion, more than one–half—$6.2 billion—is funded from general obligation bonds. The principal source of general obligation bond funding is the $42.7 billion bond package approved by the state’s voters in November of 2006. Additional projects would be funded by bonds that the administration proposes to be placed on the November 2008 ballot, as discussed below. The second largest source of funding is federal funds, representing almost one–third of the total. Federal funds are provided primarily for transportation purposes. The remaining funding is proposed from the General Fund, lease–revenue bonds, and special funds. Figure 1 shows the distribution of funding sources, by program area, for infrastructure spending proposed in the budget bill.

Governor’s New Bond Proposals

The Governor proposes $48.1 billion in additional general obligation bond funding by 2010 to support a variety of infrastructure projects (see Figure 2). Of this amount, $38.3 billion would be placed on the November 2008 ballot, with the remaining $9.8 billion placed on the November 2010 ballot. Of the total, $23.9 billion would be for education purposes, such as the construction and modernization of K–12 and higher education facilities. The remaining bond funds would be allocated mostly to water development and flood projects ($11.9 billion), high–speed rail ($10 billion), and court facilities ($2 billion). We discuss the Governor’s proposal in more detail in the “Crosscutting Issues” section of this chapter.

Funding by Program

Figure 1 shows the funding amounts proposed in the budget bill for each program area. An overview of the proposed funding is described below. (Analyses of proposed capital outlay projects are discussed in individual departmental write–ups in each chapter of this publication.)

Transportation. Transportation funding—totaling $8.5 billion—dominates the state’s infrastructure funding. The funding goes for a variety of state and local transportation capital projects. Of the total, about one–half comes from the passage of Proposition 1B, the state’s $19.9 billion transportation bond approved in 2006. Federal funds and special funds (including primarily gas tax revenues) provide the bulk of the remaining funding.

Higher Education. Funding totaling $1.6 billion is divided among the three segments.

• University of California—$388 million.
• California State University—$358 million.
• California Community Colleges—$894 million.

Over $1 billion of this amount would be dependent on the passage of a new 2008 general obligation bond proposed by the Governor. Another $457 million would come from Proposition 1D passed in 2006, with the remainder from earlier general obligation bonds.

Resources. Proposed funding in resources totals $490 million, primarily for the following purposes:

• Department of Water Resources—$139 million mainly for flood control.
• Department of Forestry and Fire Protection—$93 million to replace and relocate various fire stations and facilities.
• Various conservancies and Wildlife Conservation Board—$231 million for land acquisition and restoration.

Corrections and Judiciary. The budget bill proposes capital outlay funding of $236 million for the California Department of Corrections and Rehabilitation. Of this amount, $100 million is from the General Fund to begin and continue 16 facilities projects. The budget also proposes $136 million in lease–revenue bonds to build a new Death Row complex at San Quentin. For the courts, the budget depends on $62 million from a new general obligation bond to begin four court replacement projects.

Awaiting Infrastructure Plan Update

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 the 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. Thus, the plan represents the administration’s funding priorities for infrastructure improvements across all departments and programs.

Plan Not Submitted on Time. The administration did not submit a 2008 infrastructure plan as required in January. Instead, the administration reports that it plans to submit it on March 1, 2008. The 2008 plan is expected to include the prison capital outlay program approved by the Legislature in the spring of 2007 (AB 900) and the Governor’s proposals to place an additional $48 billion in bonds before the voters in 2008 and 2010.

Debt Service on Infrastructure Bonds

For those infrastructure projects that are funded through bonds, the state must make annual debt–service payments to retire the bonds. Most of these payments are to cover infrastructure projects that were completed in prior years. We estimate that the total infrastructure debt–service payments from the General Fund (including transportation “spillover” funds required by law to be allocated for this purpose) will be $5.2 billion in 2008–09. In the following piece, we discuss the payments in more detail and how they would be affected by the Governor’s proposed bond package.