Executive Summary

The Governor’s budget proposes $16.5 billion in expenditures (mostly from special funds) for transportation programs in 2009–10. This includes $13 billion for the Department of Transportation (Caltrans), $2 billion for the California Highway Patrol (CHP), $963 million for the Department of Motor Vehicles (DMV), and $125 million for the High–Speed Rail Authority.

Balancing the 2009–10 Budget

Eliminate Transit Assistance to Fund Home–to–School and Regional Center Transportation. The Governor proposes to use $541 million in Public Transportation Account (PTA) funds for home–to–school and regional center transportation in order to help address the General Fund shortfall. In order to provide sufficient funding to do so, the Governor proposes to reduce funding for State Transit Assistance (STA) by one–half ($153 million) in the current year and to statutorily eliminate the program in the budget year, thereby providing no funding beginning 2009–10. Given the state’s fiscal condition, we recommend the Legislature approve the suspension of program funding in 2009–10, as well as reducing the current–year funding by $153 million. (Below, we discuss the opportunity for improving the program if the Legislature chooses to continue STA.)

Redirect Tribal Gambling Revenues for the General Fund. The Governor proposes to redirect $202 million in tribal gambling revenues to the General Fund in the current and budget years, instead of providing these revenues for transportation. We have made the same recommendation to the Legislature in the past. Accordingly, we recommend that the Governor’s proposal be adopted.

Vehicle License Fee (VLF) Shift. The Governor proposes to redirect $451 million in vehicle license fee revenues from DMV to other public safety programs to provide relief to the General Fund—including $92 million in the current year, and $359 million in the budget year. To backfill DMV for the loss of those funds, the Governor proposes to increase vehicle registration fees by $12 from $56 to $68. We note that the opportunity for any current–year General Fund relief expires in early April.

Sweep Non–Article XIX Revenues in Motor Vehicle Account (MVA). As an additional budget solution, we recommend the Legislature transfer MVA revenues that are not subject to the restrictions of Article XIX of the State Constitution to the General Fund to help address the state’s budget problems. Specifically, we recommend transferring $70 million to the General Fund in both 2008–09 and 2009–10.

Other Issues

Unstable Funding Negatively Affects Transportation Programs. We explain how a number of major funding sources for transportation are unstable, and the ramifications of this situation for transportation programs. We offer several recommendations to the Legislature to help stabilize funding for these purposes. The specific actions the Legislature can take include more clearly setting funding priorities, providing more funding from ongoing sources by raising the per gallon tax on gasoline and diesel, and exploring new ways of funding transportation programs, such as charging a mileage–based fee to generate revenues for transportation.

Governor’s Economic Stimulus Proposal May Have Limited Benefits. The Governor proposes to stimulate the economy by advancing state and local transportation capital projects. We find that the Governor’s proposal may have limited benefits and recommend an alternative approach to accelerating projects through the issuance of revenue bonds backed by future state gasoline tax revenues.

Improving Implementation and Accountability of Proposition 1B. Programs funded with Proposition 1B bond funds are well under way, with about one–half of the $20 billion authorized by the bond measure already appropriated. We review the implementation and accountability of Proposition 1B and make various recommendations to improve these programs.

STA Elimination Should Be Considered on Policy Grounds. While concurring with the Governor’s proposal not to fund STA in the budget year, we believe the Legislature should consider a number of policy issues beyond the immediate budgetary solution before eliminating the program, as proposed by the Governor. If the Legislature chooses to continue funding STA in the future, we recommend improvements be made to the current program, including changes in the way monies are allocated to transit operators.

Caltrans Planning Staff Overbudgeted. Caltrans spends $50 million each year preparing initial planning documents for transportation capital projects. Our review finds the department has a shelf of completed documents and that the ongoing workload does not justify the level of resources being provided to produce more of them. We recommend that staffing for these activities be reduced and that the department better track its workload in this area.

More Cost–Effective Approach Needed to Meet Air Quality Rules. The budget proposes to spend $63 million in 2009–10 to replace and retrofit vehicles to meet state air quality rules. Our review finds that, in total, Caltrans’ compliance with state air quality requirements will cost substantially much more ($260 million over multiple years) than was estimated by the state Air Resources Board (ARB) when the regulations were developed. We recommend that the Legislature have ARB and Caltrans provide the necessary information at budget hearings to determine a more cost–effective approach to meeting air quality requirements.

High–Speed Rail Authority Needs More Oversight. Proposition 1A, passed by voters in November 2008, authorizes $9 billion for the High–Speed Rail Authority to develop and construct a high–speed train system in California. We evaluate the authority’s budget request and recommend additional accountability measures for the use of these bond funds.

CHP. The budget requests $35 million to add 240 new officers. We recommend the Legislature reject half of these positions (120 new officers) as they are not fully justified. In addition, our review found the request to be overbudgeted. We recommend a total reduction of $22 million.

DMV. We recommend that the Legislature reject an administration request for funding to implement Real ID because it is premature. The state is not required to begin issuing Real ID compliant cards in 2009–10, and the intentions of the new federal administration regarding this unfunded mandate are yet unknown. We provide an update on the numerous information technology (IT) projects currently under way at DMV, and identify some of the challenges the department has faced in implementing the IT projects.