State Budget Impacts

State Budget Impacts

By: Dave Ackerman, AGC Legislative Advocate

2012-07-05

The final 2012-13 state budget agreement includes deep spending reductions combined with temporary taxes that will go before voters in November. The following are a few items from the budget that impact the construction industry:

Court Construction

The State budget shifted about $350 million from Court construction projects into court operations, delaying for another year a significant number of courthouse construction and renovation projects statewide. AGC strongly lobbied to maintain as many of the court projects as possible. In the end, funding was provided for the new San Diego County Courthouse, Santa Clara County Family Center Court Facility and the San Joaquin County Courthouse because they were far enough along in the process to justify funding. Acquisition for land for the Sacramento County Courthouse was also approved because the option to purchase the property was due to expire if acquisition was denied.

Highway Users Tax Account (HUTA) Take in State Budget—Permanent Loss of Local and State Transportation Funds

Virtually all transportation infrastructure funding was protected from cuts during the current budget debate, with one exception.

In the May Budget Revision, the Governor proposed to take a portion of the new HUTA pursuant to the Transportation Tax Swap done in 2010. The HUTA “take” would result in a loss of $312 million in new HUTA revenues shifted to General Fund relief through 2012-13 and $128 million annually on a permanent basis beginning in 2013-14.

The State is able to sweep this share of new HUTA due to an unintended consequence resulting from the Swap. Specifically, existing law directs a specified percentage of old HUTA revenues attributable to off-highway vehicles (OHV) to special funds including the Off-Highway Vehicle Trust Fund, the Harbors and Watercraft Revolving Fund, and the Department of Agriculture Account. This provision of law applies to the base 18-cent HUTA, but was not intended to apply to the new HUTA which replaces Prop 42 revenues. However, the State Controller’s Office has been applying this statute and taking a share of new HUTA since the enactment of the swap in FY 2010-11. This money was intended to flow through the new HUTA formula: 12 percent to the SHOPP, 44 percent to the STIP and 44 percent to cities and counties for local streets and roads.

The California State Association of Counties, League of California Cities and AGC opposed the idea of redirecting these funds on a permanent basis and we were successful in getting a three-year sunset (and permanent fix to direct these funds to transportation purposes starting in 2015-16) included in the transportation budget trailer bill (AB 1465) which the Legislature passed on June 15th.

Following passage of AB 1465, the Administration insisted on returning to a permanent take of the new HUTA funds so they could add this revenue stream into their long term budget calculations and revenue estimates.

Bending to pressure from the Department of Finance, despite strong opposition from the Counties and AGC, the Senate Budget Committee passed a new bill, AB 1466, which returned to a permanent taking of the new gas tax monies. The Governor has signed this bill into law

The specific fiscal impact to counties as a result of this action is the loss of $40 million in 2010-11 and 2011-12 and $28 million in 2012-13 and every year thereafter. Further, cities will suffer an identical loss and Caltrans SHOPP program will experience a loss as well.

Cool Pavement

The budget includes reporting language for Caltrans to update the Legislature on existing sustainable pavement efforts.

High Speed Rail

High Speed rail is not yet funded as part of the State Budget signed into law this week. The Budget Bill striped out HSRA operating funding, setting up a serious discussion with the Governor over funding options. The Legislature has pledged to conclude work on this issue before recessing for their summer break on July 6.

Earlier this year, the Governor asked for an appropriation of $5.8 billion to begin the construction of the Initial Operating Section (Merced/Bakersfield) of the High Speed Rail system. Of this , $3.2 billion is Federal Funds and $2.6 billion is Proposition 1A funding. Governor also asked for a $1.1 billion appropriation for High Speed Rail construction proposed in the High Speed Rail Authority Business Plan. These funds would provide $600 million for the electrification of the Caltrain corridor and $500 million for projects in the Los Angeles basin to improve existing rail corridors as part of the blended approach to constructing the system.

There is a high risk of losing federal funds if approval of all of the above does not occur by early July.

Now that the state budget is out of the way, legislative leaders are promising action on high-speed rail and pension reform, the two most contentious issues of the current legislative session.