News & Press

Governor Signs Balanced Budget

This week Governor Brown signed the main budget bill to take effect on Monday, a $96.3 billion state General fund spending plan that will shift more education money to poor and English-learning students and expand Medi-Cal coverage to more than 1 million low-income Californians under the federal healthcare program.

The size of the general fund and a reserve account of $1.1 billion in the 2013-14 state Budget reflects the continuing recovering of California's economy and $6 billion in voter-approved taxes from last year. The total budget, including special funds and bond funds for programs such as transportation adds up to over $200 billion.

There were several issues in the budget that could impact construction:

Enterprise Zone elimination

The legislature just yesterday approved the Governor’s proposal to overhaul enterprise zones in California. Enterprise Zones have provided tax breaks to employers in 40 locally-designated areas for years The proposed change will scale back employer hiring credits. The legislation would provide hiring credits only to employers paying at least 150 percent of the minimum wage. With an exception of qualified small businesses, it would exclude temporary worker agencies, retailers, restaurants and bars.

“Wall of Debt”

The Budget dedicates billions to repay this budgetary borrowing. Moving forward, continuing to pay down the Wall of Debt will be an important factor to increasing the state’s fiscal capacity. In 2011, the level of outstanding budgetary borrowing totaled $35 billion. The budget bill projects that the debt will be reduced to less than $27 billion this year, with repayment to transportation programs of remaining obligations estimated to be $30 million by the end of 2017.

Transportation Budget Items

Transportation Agency

On July 1, the former Business, Transportation Agency (BTH) will be eliminated and the new Transportation Agency will become the cabinet level conduit for transportation agencies. The new Agency will include only the Department of Transportation, the Department of Motor Vehicles, the California Highway Patrol, the Board of Pilot Commissioners, the Office of Traffic Safety, the High Speed Rail Authority, and the California Transportation Commission.

In line with this reorganization, the Governor appointed Acting BTH Secretary Brian Kelly as the first state Transportation Secretary this week.

Transportation Budget Impacts

The Budget includes total funding of $20 billion ($83.4 million in General Fund and $19.9 billion in Other Funds) for all programs overseen by the Transportation Agency. 

  • Transportation Debt Service - An ongoing diversion of $67 million in special fund transportation revenue is continued for debt service. The State Highway Account generates a portion of this revenue from rental income and the sale of surplus property.
     
  • Capital Outlay Program - The budget act includes a reduction of $36.3 million and 184 Caltrans positions for engineering, design and construction oversight activities. Overall Caltrans’ workload is anticipated to decrease significantly as a result of the expiration of Proposition 1B and other temporary sources of funding such as the federal American Recovery and Reinvestment Act funds. The proposed level of staffing will establish a 90/10 percent split of state staff to architectural and engineering consultant contracts.
     
  • Cap and Trade Program - The Budget includes a General Fund loan of up to $500 million from the fund balance in the Greenhouse Gas Reduction Fund. The Fund has received an estimated $260 million in proceeds from the auction or sale of allowances. The loan will provide additional time to develop programs to further the purposes of AB 32. 
SB 75 - Judiciary, Pending approval (Budget “trailer” bill to enact statute that cannot be done in the budget)

SB 75 contains statutory provisions related to courts necessary to enact the budget package, including a requirement that the Judicial Council to perform an evaluation of the Long Beach Design-Build Courthouse Project. The two budget committees had included specific language to impose “best practices” guidance to all P3 projects, which could have resulted in adding additional approvals for highway and transit projects. Opposition to the inclusion of the “best practices’ language resulted in this trailer bill language being limited only to reporting for the Long Beach Courthouse.