Gov. Jerry Brown and Democratic legislators are pitching a transportation-tax proposal they depict as the only means to fix California’s crumbling roads, freeways and bridges. One would be hard pressed to find any policy maker in California who doesn’t bemoan the state of the state’s infrastructure, but the question always revolves around how to pay for it, and Republicans complain there are other ways to fix the current mess.

The Democratic plan, which received its first committee approval on a party-line vote Monday, would raise $52.4 billion over 10 years through a variety of tax proposals. It would hike gasoline taxes by 12 cents a gallon and diesel taxes by 20 cents a gallon, plus it would increase the vehicle-license fee from $25 to $175 a year, depending on the value of the vehicle. The average fee boost would be $48 a year. Furthermore, the plan would impose a $100 a year fee on electric vehicles because their drivers don’t pay gas taxes.

“This is mostly about fixing what we already have,” the governor said at a Capitol press conference last week. “If for some reason people try to fight this, and God help us if they were successful, they won’t defeat this, they’ll just delay it and make the expenses go up.” But Republicans focused on the economic impact of the plan on middle-class Californians. They also complain that the state’s cap-and-trade system, designed to battle climate change, will soon drive fuel prices up even further.

“For many households, the total tax hike will easily surpass $300 each year,” said Sens. Pat Bates, R-Laguna Niguel, and Jim Nielsen, R-Tehama, in a statement on Monday. “When combined with the 20 cent diesel excise tax hike and the 4 percent increase on the sales tax on diesel, it is clear that this tax proposal will negatively impact the California economy.”

The crux of the GOP argument: California doesn’t spend its current gas-tax revenue effectively, and it should reform its spending habits before calling on Californians to pay more at the pump – and when they register their cars and trucks. In fact, Republican legislators have proposed a bill that would raise the money without raising taxes. Assembly Bill 496, by Assemblyman Vince Fong, R-Bakersfield, would re-prioritize billions of dollars in general-fund spending toward transportation projects without requiring any type of tax increase.

For instance, the bill would divert $3 billion in sales tax revenue that comes from the sale of vehicles toward infrastructure-maintenance projects, and would move funds collected from truck-weight fees toward transportation-bond payments. The measure has the support of the Howard Jarvis Taxpayers Association, which recently expressed “frustration” the governor and Legislature have proposed tax increases without first considering other solutions.

The group noted that polls show strong support for returning the $68 billion high-speed rail project to a vote, which would allow some of these funds to be used for bread-and-butter infrastructure projects. “AB496 answers a question that too few in the legislature even bother to ask: how should legislators prioritize a record $120 billion general fund budget? California has seen a $36 billion general fund increase over the last six years, with not one dime of this new revenue spent on transportation projects,” wrote the group’s legislative director, David Wolfe, in a March 27 letter of support to Assemblyman Fong.

The tax-hike proposal doesn’t need to go to the voters for approval, but does need a two-thirds majority vote in both houses of the Legislature because it involves a tax increase. Democrats have supermajorities in both houses, but the governor still needs to woo some moderate Democrats who might be on the fence about such a large increase.

Gov. Brown compared the matter to a leaky roof. There’s no doubt that problems will keep expanding if a homeowner neglects such a problem – and the state’s infrastructure backlog is estimated at $130 billion.

A group of business officials and labor unions applauded the effort: “We are fully committed to supporting the road repair plan and intend to get it and the companion constitutional protection through the Legislature by April 6,” said Michael Quigley, of the California Alliance for Jobs, in a statement. “We need new revenue coupled with accountability provisions to begin to make a dent in the multi-billion dollar backlog of needed repairs to state highways and local roads.”

But critics point to a 2014 analysis of the California Department of Transportation to bolster their view that the state misspends so much of its current transportation revenue. The nonpartisan Legislative Analyst’s Office “recommends that the Legislature reduce the budget and staffing levels of the program starting with the 2014-15 budget, improve its staffing projects and data quality, and provide the California Transportation Commission with specific oversight and project approval functions that have limited external oversight.”

The analyst pointed to overstaffing by about 3,500 full-time jobs at Caltrans, which amounts to an unnecessary cost of around $500 million a year. Critics also complain about the above-mentioned rail project and the state’s inordinately high administrative costs on transportation projects. These, they say, are examples of misspending. Why should the state’s taxpayers spend more money when there’s little effort to reform current spending?

Wolfe’s letter points to another Republican complaint: The state’s general-fund budget continues to grow each year and has soared to record levels. Yet new transportation projects are, essentially, held hostage to the budget process. Democratic leaders spend money on other priorities, then complain there’s not enough money to deal with the transportation backlog – unless, of course, they are able to raise gas, diesel and registration fees.

Indeed, the governor last year called a transportation special session to come up with new infrastructure revenues, but he has thus far been unable to secure the additional dollars. The tax-hike plan is more likely than ever given increased Democratic numbers in the Capitol. The debate is the same as usual – new taxes vs. reforming how the state spends its current dollars – but the outcome may be different this time around.

Steven Greenhut is Western region director for the R Street Institute. He is based in Sacramento. Write to him at sgreenhut@rstreet.org.

Gov. Jerry Brown and Democratic legislative leaders continued their push Friday for quick approval of higher vehicle taxes and fees to pay for a 10-year, $52 billion plan to upgrade California’s roads and highways with the release of legislative language for two bills that appear to answer concerns that new revenue might be diverted to the general fund or used for the state’s embattled bullet train project.

Senate Constitutional Amendment 2 and Assembly Constitutional Amendment 12 both say the new revenue generated by Brown’s plan can be used only for transportation and not be borrowed or diverted for any other uses. The measures do not appear to have the weaknesses seen in two previous constitutional amendments meant to guarantee fuel taxes were used only for road improvements.

Proposition 42, passed in 2002, said sales taxes on fuel could not be used for anything but transportation purposes. But it allowed the money to be diverted on a two-thirds vote of both the Assembly and Senate.

After two diversions in subsequent years, voters in 2006 approved Proposition 1A, a constitutional amendment that said future diversions were OK in times of financial crisis, but would be treated as loans that had to be repaid.

In 2010, however, Gov. Arnold Schwarzenegger and the Legislature orchestrated a scheme to unencumber vehicle fuel sales tax funds that was based on a legal opinion that it was OK to adjust both sales taxes and excise taxes on vehicle fuel without overcoming the normal obstacles to tax hikes if the changes were revenue-neutral.

The scheme sharply cut fuel sales taxes and sharply increased fuel excise taxes, which were not subject to Proposition 1A protections. This allowed $1.8 billion in fuel excise taxes to be used to pay off previous transportation bonds instead of using general fund dollars.

SCA 2 and ACA 12 would forbid the use of new revenue for such bonds approved on or before Nov. 8, 2016. This provision would also prevent funds from being directed to the California High-Speed Rail Authority’s $64 billion project, original approved in 2008.

Zero-emission vehicles would face first fees

Here are the key details of Brown’s proposal, which targets an estimated $137 billion maintenance backlog on local and state roads and highways:

• It would raise gasoline excise taxes by 12 cents per gallon, a 43 percent increase, and index them to inflation.
• It would raise the diesel sales tax from 5.75 percent to 9.75 percent and increase the diesel excise tax from 16 cents to 36 cents per gallon.
• It would impose a first-ever road-use fee of $100 a year on owners of zero-emission vehicles who don’t buy gasoline and thus help pay for road and highway improvements.
• It would add a new annual fee on vehicles based on their value, with owners of vehicles worth less than $5,000 paying $25 ranging up to owners of vehicles worth $60,000 or more paying $175.

To become law, the two bills need two-thirds support from both the Assembly and Senate, meaning Brown, Assembly Speaker Anthony Rendon and Senate President Pro Tem Kevin de Leon either need some Republican votes or no Democratic defections. They hope to have finals votes taken by Friday, April 6.

Republicans rip plan — and some Democrats may as well

That looks to be a tall task. Assembly Republican Leader Chad Mayes of Yucca Valley appeared to speak for most or all GOP lawmakers when he ripped Brown’s plan, telling reporters, “The state government has mismanaged our transportation system now for decades and the only answer, the only response to that, is that the Democrats — the ruling party here in California — want to raise taxes.”

Meanwhile, in an era in which California Democrats’ hostility to fossil-fuel vehicles keeps building, the new fee on zero-emission vehicles and the divvying up of the $52 billion in new revenue is likely to rankle some. The package’s overwhelming focus is on road and highway improvements; $7 billion would go to mass transit and local public transit systems and $1 billion to new bicycle lands and pedestrian projects.

What happened in San Diego County in the Nov. 8 election could be telling. Measure A, an $18 billion program which would have used sales taxes to fund transportation improvements, was crafted by the San Diego Association of Governments with an eye toward winning over environmentalists. Transit and bicycling projects and improvements were to get $8.94 billion of funding, just under half.

But Measure A got 58 percent of the vote, less than the two-thirds needed, after being scorned by some liberals for spending too much on roads and by some conservatives for spending too much on transit.

That suggests some green California Democrats may not be happy with transit and bicycling only getting a 15 percent cut of Brown’s $52 billion package.

The prime means the state uses to pay for such capital investments is through the bond process. State bonds don’t directly raise taxes, but the bond payments come out of the general fund. So increases in bond spending nudge out other types of spending, and lead to pressure to increase taxes to make the payments. By contrast, local bonds directly impose new tax commitments on property owners.

While supporters of individual bond measures argue over the specific merits of each proposed measure, both sides often ignore this crucial question: How efficiently do current bonds achieve the goals promised in the measures? California voters approve an overwhelming majority of the bond initiatives placed before them on the ballot, but too often there’s little attention paid to how the authorized funds actually are spent.

The state’s independent watchdog agency, the Little Hoover Commission, last week released a report that reinforces that point. In the past decade, voters have approved $70 billion in state bonds and more than $138 billion in local school-facilities bonds – numbers that have increased after the state lowered the voter threshold for approval, it explained.

“Spreading the costs of major infrastructure projects across generations makes sense,” the commission’s chairman Pedro Nava added. “But as Californians have put more and more on the tab, a day of reckoning will arrive.” The commission cautions that these payments on the debt service will remain after the next recession hits and called for a re-evaluation of “whether current oversight mechanisms are enough to ensure both state and local bond proceeds are spent as efficiently as possible and as voters intended.”

The commission had produced a similar report in 2009, where it called for greater oversight and transparency specifically for natural-resources bonds. It noted that 23 departments in the state Natural Resources Agency administer 16,000 projects, so it’s a Herculean task to try to oversee and track the billions of dollars in spending.

Regarding statewide bond measures, it called for the creation of bond-oversight committees in both houses of the Legislature, independent audits funded from the bond proceeds, and a greatly improved web-based system for tracking expenditures and outcomes based on uniform reporting standards. It also called for the establishment by state officials of some fundamental bond criteria that could then be used to create a “report card” that grades each bond proposal.

After the last report, some efforts were taken to improve accountability, but the commission was not satisfied with the level of changes. The Schwarzenegger administration had proposed a detailed accountability plan, but it has not led to a consistent approach. There is no report card, as proposed. Furthermore, the new report takes aim at the state’s website, although it is encouraged by new legislation that would advance that goal. It points to overall progress, but of an inconsistent nature.

The commission offered two recommendations this year. The first should get heads nodding, although it is lacking in detail: “The governor and the Legislature should adopt a consistent system to improve transparency and oversight of all statewide bonds, particularly the 2008 high-speed rail and the 2016 school facility construction bonds, which currently lack such requirements, as well as all future statewide bond measures.”

The second is more specific and calls for adequate financial support for Senate Bill 1029, a new law which requires the Treasurer’s Office to track and report on all local and state debt spending until the debts are paid off or redeemed.

Although the report doesn’t discuss this, the high-speed rail example offers a reminder of how difficult it will be for the public to get a handle on how its bond proceeds are being spent. Voters approved Proposition 1A in 2008 by a nearly 57 percent to 43 percent margin. The initiative authorized the California High-Speed Rail Authority to issue $9.95 billion in general-obligation bonds to fund the start of a bullet-train project linking Los Angeles with the Bay Area. The project now is estimated to cost $68 billion.

The rail line’s backers included a number of specific promises to voters to help secure their support for such a large bond measure. For instance, supporters touted a 2-hour and 40-minute travel time from L.A. to San Francisco, but the latest plan – using shared lines with commuter trains in both major metropolitan areas – puts the time well over 3 hours. Other promises regarding cost, completion times and subsidies seem unlikely to come to fruition.

“Substantial legal questions loom in the trial court as to whether the high-speed rail project the … authority seeks to build is the project approved by voters in 2008,” explained a state appellate court in 2014, yet the court gave the project the go ahead. Other legal challenges remain, but even one of the rail system’s original proponents has come out against the current iteration of the plan by arguing that it doesn’t resemble the project approved by voters.

In other words, the problem with this major bond issuance isn’t necessarily oversight given that the details of the authority’s spending are fairly well known by now. The problem, critics say, is the courts allow the spending to continue even after it’s known that the tightly written promises within the bond measure aren’t always being followed.

Regarding local bonds, the commission in 2009 recommended the creation of local oversight committees. It modeled its suggestion on the largely unheeded testimony from the California League of Bond Oversight Committees. “Unfortunately, but understandably, many locally-elected government officials who must make multimillion- and multibillion-dollar decisions on bond issuances lack experience in municipal finance,” according to the report. This situation, it wrote, is like “playing with financial matches.”

The commission’s new report points to a 2012 scandal at the Sweetwater Union High School District in San Diego County. The new leadership has since created an oversight committee that the commission sees as a statewide model.

“Bond oversight committees in many communities act simply as cheerleaders for the district, often because members simply do not understand their roles or know what actions they can take,” the report explains. The key to their success, it added, “is adequately training members so that they understand their role and the tools they have at their disposal to ensure they are effective.” The key is independent oversight and “performance audits tailored to results.”

The report also calls for a variety of measures ranging from better online tracking of spending to the ability to impose sanctions on districts that fail to live up to constitutional and statutory spending restrictions, as detailed in Proposition 39. That’s the 2000 statewide ballot measure that reduced the supermajority vote requirement to 55 percent for the passage of local school bonds. It included a variety of spending safeguards in exchange for making it easier for districts to pass these spending measures.

It’s unclear whether the state will embrace the commission’s suggestions and how successful any of the specific recommendations might be. But there’s little question that state officials need to pay more attention not only to how much money the state has to repair and improve its infrastructure – but how those dollars are being spent.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

A report issued by the California Center for Jobs & the Economy, sponsored by the California Business Roundtable, using numbers from the census and the American Community Survey, indicates that despite efforts to change attitudes about transportation the old stereotype holds true – Californians love their cars.

“The substantial investments in public transit, bike lanes and other alternative modes have not produced major gains in commuter use,” the report stated.

“Combined, public transit, carpooling and ‘other’ modes dropped from 30.3 percent of total commuters in 1980 to 21.5 percent in 2013 and to 21.1 percent in 2014. In total numbers, use of these three modes increased only 430,000 workers by 2014, while use of single occupant vehicles increased by 5.5 million workers.”

More cars on the road means those roads take a beating, which has led Gov. Jerry Brown to call a special session to deal with funding to fix the roads. While Brown wants tax increases to fix the roads, Republicans in the Legislature are seeking to make sure that money collected for transportation purposes is spent on the roads and not siphoned off for other purposes.

Yesterday, Assemblyman Mathew Harper, R-Huntington Beach, introduced a bill that would give the voters a say in whether gas taxes are increased for the roads. Harking back to the governor’s pledge, made when he began his third term, to seek a vote of the people before taxes are raised, Harper said in a release, “I am proposing we do exactly the same thing here. Letting the people decide what they think about new taxes before we force new taxes upon them is not a revolutionary idea.”

It’s an interesting gambit, moving the tax decision away from the legislators but perhaps breathing life into the gas tax choice given that Republicans seem determined not to give a gas tax measure the necessary votes it needs to pass. When Gov. Brown wanted to put a tax on the ballot for voters to decide soon after he took office in 2011, Republicans would not go along. Are Republicans willing to let voters decide this time? However, a gas tax increase never scores well in polling.

While the issue of funding roads dominates the transportation discussion, the Center’s report argued that the increase in auto travel is tied to another major policy issue in California — the cost of housing.

“The continued growth of single occupant vehicles is fully consistent with the all-too familiar need in California to broaden the geographic search region in order to find housing commensurate with workers’ incomes,” the study stated. “In California, the growing body of land use, energy, CEQA and other regulations affecting housing cost and supply has put both the cost of housing ownership and rents within traditional employment centers out of the reach of many households.”

The solution offered in the report: “Regulatory reform to make housing in the urban centers more affordable for a broader swath of California’s workers.”

While officials try to figure a way to deal with increased volume on the roads, new technology may add to the burden.

Driverless cars might increase the ride-alone phenomenon. If some of the public transit users enjoy the ability to relax or read as they commute, driverless cars would give the same opportunity with the convenience of door-to-door service.

But the governor’s proposed $170.7 billion budget ($122.6 billion general fund) for the 2016-17 fiscal year would lead to repeating that mistake when the next recession hits.

Revenues will plunge $55 billion over three years if an average recession hits next year according to the budget summary. That would result in a $29 billion budget deficit in 2020 based on Brown’s current spending proposal, which includes $4 billion in one-time expenditures. If the Legislature instead spends that $4 billion on new or ongoing programs, the deficit would balloon to $43 billion – larger than occurred during the Great Recession.

Recession Expected

California is in the seventh year of economic expansion. That makes it two years overdue for a recession, which has occurred every five years on average, according to Keely Bosler, chief deputy director of the California Department of Finance.

“While there is significant uncertainty in forecasts, there is one thing that is quite certain: and that is history,” Bosler told the Senate Budget and Fiscal Review Committee Jan. 19. “It’s this boom-and-bust cycle that this budget really aims to avoid going forward.” But she acknowledged that “the budget in the state of California does remain precariously balanced over the long term.”

Her cautionary words were echoed by committee Vice Chairman Sen. Jim Nielsen, R-Tehama.

“We must keep in mind that though times are a little bit better, some parts of our economy have not improved,” he said. “And therefore we must exercise constraint and not get overly ambitious. And that will be what governs our progress in the budget. Let’s not get overly ambitious, and let’s not let government get out of control.”

Examine the Department of Finance 2016 Budget Slides here

But Democratic legislators are eager to spend some of the budget surplus on ongoing social programs, particularly for the developmentally disabled, instead of socking it away in the state’s rainy day fund – despite the likelihood that doing so could once again bust the budget.

“It shouldn’t surprise any of us that a recession is at hand. The question is when, not if,” said committee Chairman Sen. Mark Leno, D-San Francisco. “At the same time, an additional $2 billion set aside in the rainy day fund above and beyond what voters told us they’d like to see in it – that I think will be at least part of the playing field of our debate.

“What is appropriate for continuing payment of debt and for reserves, at the same time recognizing that so many Californians who have been hurt at the time of the recession have not seen much recovery or reinvestment in the programs for which they rely for their quality of life?” Sen. Leno asked.

Rainy Day Fund

Proposition 2, passed in 2014, requires that $2.6 billion in this year’s budget be placed in the rainy day fund. Brown has proposed adding an extra $2 billion to the fund. That would bring the total to $8 billion (with previous funding), equating to two-thirds of the constitutional target of 10 percent of general fund revenues, according to Bosler.

But legislative analyst Mac Taylor warned the committee that, while it’s good to beef up state reserves, the Legislature would be unnecessarily tying its hands by going along with Brown’s extra $2 billion in the rainy day fund, which is known formally as the Budget Stabilization Account.

“We would caution you not to put extra money into the BSA,” Taylor said. “Once you put it in the BSA, it’s governed by the rules in the BSA. You can only take out half the monies, if you have a downturn, in the BSA. You might imagine a situation when you might want to take out more in the first year.”

Also up for grabs by the Legislature for whatever purpose it chooses is $1.1 billion from a tax on managed care organizations, an expenditure that Brown left unspecified, according to Taylor. In addition, he told the lawmakers that they could decide to siphon off some or all of the $2.5 billion Brown has proposed to spend on infrastructure, including $1.5 billion for state facilities.

Infrastructure Spending

“When it comes to one-time spending, the governor has focused on infrastructure,” said Taylor. “We think that’s a very positive thing. But keep in mind you have other one-time things that you can spend on. We have very high-cost pension and health retiree liabilities that are accruing costs at 7½ percent a year. So you may want to make additional payments to help fund those and pay those liabilities off. There’s no right choice.”

If the lawmakers do decide to spend the money on infrastructure, they should exercise more control on how it’s spent, instead of leaving it to the administration, Taylor said.

“You don’t want to lose control,” he said. “I think you’ve already lost way too much authority for capital outlay projects. You have given it to both university systems and the administration. Stop doing that. I think you should be exerting a lot more control over capital outlay projects.”

But Leno was more concerned about providing enough “human infrastructure” to help the state’s neediest residents.

Social Services Budgeting

“What I’m hearing is regarding developmentally disabled services that housing units are being lost, facilities are being closed,” Leno said. “Employees at the community-based organizations that supply services are leaving because the employees can find much better jobs than the $13-$14 per hour that some are being paid after 20, 25 years of service. What happens to that infrastructure?”

Taylor responded that there’s been a large growth in spending on the developmentally disabled due to the large increases in caseload. “But you can have just about every program and area of the budget come and tell you that they need a lot more,” he said.

Spending on regional centers for the developmentally disabled has grown by 24 percent in recent years, according to Bosler. “This is well beyond caseload and inflation,” she said. Contributing to the higher costs is California’s aging population, which requires more services and support, along with the rise in autism.

But Leno wasn’t satisfied, saying that the cuts made to social services during the Great Recession have yet to be fully restored.

“Do we want to suggest that even in these boom times that this is our new normal?” he asked. “Or do we have a goal of getting back to where we were at least in adjusted dollars to the 2008 level at some point? If not now, then the question is when. It certainly won’t happen during the next downturn, and quite likely we will have to make additional cuts. We continue to create a new normal level funding which is ever, ever lower.”

Power Over the Budget

Nielsen called the budgeting process itself into question, asserting that it gives too much power over spending to the governor.

“We’ve abdicated our authority over the budget,” he said. “I believe that we are almost making the Legislature irrelevant. Maybe we go through the exercise and pound our chest and try to think we’re important. And this has been a steady erosion over a long period of time.”

Taylor responded that budgetary authority is hard to get back after being given away. He cited the state’s ballot measures as contributing to the problem.

“Almost every initiative that has increased a tax in the last 20 years has dedicated the funds for particular purposes,” he said. “From a budgeting perspective, that’s just a terrible development. No matter how well meaning or how well purposed they may have been in the first year that that measure was passed, that’s not what budgeting is about. It’s about changing priorities, as you know, and being able to make decisions.”

Legislative budget committees plan to hold numerous hearings in the coming months to gain more insight into and provide input on the budget before the governor’s planned budget revision with updated revenue and expenditure figures in May.

(AP Photo/Rich Pedroncelli)

Having failed to deliver during a special legislative session Gov. Jerry Brown called last year, Sacramento Democrats and Republicans squared off on Medi-Cal and infrastructure spending this week.

A large health care hole has developed in the current state budget, driven by the increased Medi-Cal enrollment under the rules set by the Affordable Care Act. But no consensus has formed around how to fix it. “The administration, lawmakers and health plans continue to be deadlocked on Brown’s proposal to expand a tax on health plans to help generate about $1 billion for Medi-Cal,” the Sacramento Bee noted. “Republican critics say the new tax would saddle millions of health plan customers with higher costs. But administration officials have warned that the lack of a replacement tax would force offsetting health care cuts in the governor’s budget,” while some Democrats have joined Republicans in questioning the wisdom of a refashioned tax, the Bee added.

The current tax supplying Medi-Cal with funding will expire in June. “The governor’s chief adviser, Nancy McFadden, has cautioned against relying on the extra tax money coming in,” the Associated press reported. “Even as more people enroll, the program faces a shortage of doctors since reimbursement payments were slashed by 10 percent during the recession.”

Meanwhile, on infrastructure, the governor’s office has also faced an uphill climb. “Brown proposed a mix of taxes, fees and cap-and-trade money that he said would generate about $3.6 billion annually,” as the Bee noted. “But Republicans have vowed to reject any plan that includes a tax increase, and negotiations remain on idle.” Because tax increases require a two-thirds vote of support in the Legislature, Republicans have been able to flex their muscle. But some hopes have centered around a proposal by State Sen. Jim Beall, D-San Jose. His plan “would raise an additional $4.5 billion a year for highway maintenance projects and $1.5 billion for mass transit improvements, such as BART extension lines to Livermore and Richmond,” without allocating any spending to the state’s high-speed rail endeavor, according to the San Jose Mercury News.

Persistent divides

In addition to the two dominant issues they must confront, legislators have placed education, the environment, guns and water in their crosshairs, according to the AP. “But lawmakers will again be confronted with the Democratic governor’s ‘less is more’ spending approach when he releases his budget proposal, due by Jan. 10,” the wire observed. “Democratic leaders are already beating the drums for more spending, pointing to legislative analyst Mac Taylor’s estimate that the state will have $3.6 billion more this year than assumed,” wrote Dan Walters at the Mercury News. “The Assembly’s incoming speaker, Anthony Rendon, wants a heavy state commitment to expand prekindergarten education, a longtime goal of children’s advocates, who contend that it will improve academic achievement.”

But analysts expected Gov. Brown’s new budget proposal to pour cold water on the kinds of ambitions his party rank and file have pushed for again. Brown “will release his budget proposal for the coming year Thursday, amid a strong state economy and fiscal experts’ predictions that tax revenue will continue to surpass estimates from last June,” the Bee reported. “If Brown’s past budget proposals are any clue, the Democratic governor will warn that it all could quickly go south. The fourth-term governor’s spending plan is unlikely to include big new policy proposals.

Federal funds

TULARE, CA (Photo by Justin Sullivan/Getty Images)

California’s struggling infrastructure faced the daunting prospect of too little water underground and too much falling from the sky.

“Four years of drought and heavy reliance on pumping of groundwater have made the land sink faster than ever up and down the Central Valley, requiring repairs to infrastructure that experts say are costing billions of dollars,” the Associated Press reported, citing punishing conditions affecting everything from canals to well casings to “stretches of a riverbed undergoing historic restoration.”

The problem has been ongoing for months. “The sinking is buckling the walls of irrigation canals, damaging pipes, creating giant sink holes and cracking homes,” CBS News noted in August. “California’s farmers are pumping groundwater as fast as they can in order to keep their crops alive during a drought that has left them high and very dry. But when this much water is pumped out of the aquifer below ground, the clay between the pockets of water collapses and the ground starts to deflate like a leaky air mattress.”

Despite an unusually heavy El Niño, years of historically meager snowy seasons led farmers and others to turn to groundwater in lieu of high-altitude runoff. “Years of low snow packs in the Sierra Nevada mountains have forced California to pump water from underground reserves to meet residential and agricultural demand,” The Hill noted, adding that drought conditions push groundwater consumption up from 40 percent of total statewide usage to roughly two thirds during a drought.

California’s continuing dry spell, however, has pushed the imbalance even further, inflicting harm on the state’s sprawling but already derelict waterways. “Overpumping during the current drought has led to damaged water infrastructure around the state,” according to The Hill. “Replacing a bridge in one California irrigation district could cost $2.5 million, and building a new canal elsewhere recently cost $4.5 million.”

Too much too soon

But the collapse, and its attendant costs, have taken on an added urgency as the state faces a powerful new rainy season. In fact, El Niño rains were expected to push those costs even higher, as mudslides and flooding hit weakened structures. “Heavy rains often bring mudflows. But experts warn that the deluges expected this winter with El Niño are likely to be exacerbated by the dry conditions in countless hillside and canyon communities,” the Los Angeles Times reported. “Even a little rain can set off a fast-moving debris flow, sweeping up anything in its way — loose boulders, tree limbs, cars, even homes.”

Officials faced tough tradeoffs between focusing on infrastructure repair and pivoting to emergency construction that would ameliorate the effects of El Niño. “From Ventura County to San Diego County, officials are racing to clean out debris basins, install protective barriers and develop evacuation plans for communities most at risk from an El Niño forecast to be one of the strongest ever recorded,” noted the Times.

Paying for less

Although experts have not calculated the final tab for the state’s subsidence, as the lowering of the ground level is called, estimates run as high as the billions over the long term. “Putting a grand total on damage from subsidence in California is tricky because irrigation districts don’t often single out repairs required by subsidence from general upkeep,” according to the AP. Department of Water Resources spokesman Ted Thomas told the wire service that the sinking of the California Aqueduct alone, which has reached over a foot, cost the state “tens of millions of dollars” over the past 40 years, with officials bracing for a similar expenditure going forward.

In the long run, however, new groundwater legislation has ensured that California farmland will simply be retired. “Groundwater pumping has kept hundreds of farms operating the past four years but continuous groundwater pumping won’t be allowed under the new California Sustainable Groundwater Management Act, which is set to take effect in 2020,” according to Ag Professional. “It will limit how much groundwater can be extracted over the long haul.”

There is consensus that California’s roads and highways must be fixed. There is no consensus how the fix should be paid for.

A Special Session legislative meeting Friday was called a first step in finding agreement to the funding problem. The Democrats see tax increases as part of the mix; Republicans want to prioritize the use of existing dollars for the roads. The tricky part of compromise is the push for any taxes in the context of so many other tax increases that could be presented to voters in 2016.

Governor Jerry Brown has proposed a yearly funding package for the roads of $3.6 billion. The package includes a 6-cent gasoline tax increase, an 11-cent diesel tax increase — both tied to inflation — a $65 car fee and cap-and-trade funds. His proposal is little more than half what legislative Democrats and a coalition of business, labor and construction groups have called for.

Republican proposals also include cap-and-trade money. In this case, the money would be used directly for the roads. The governor’s plan would funnel cap-and- trade dollars to bus lanes and rail. The Republicans also would trim CalTrans staff, direct weight fees and other transportation monies exclusively for the roads and employ other methods without raising taxes.

Not only have the Republicans expressed opposition to tax increases but there is no certainty that all Democratic legislators would support a tax increase.

The informal group of moderate Democrats who banned together to stop the provision to cut petroleum use in half over 15 years in climate change bill SB350 objected that their constituents would pay a higher cost for commuting. And cap-and-trade now covers gasoline refining and has raised the cost of gasoline about 10-cents a gallon. Additional taxes on gasoline would adversely affect many of their constituents, the moderate Democrats believe.

The governor wants the funding package to move through the Legislature quickly for strategic reasons.

For one thing, the plunging cost of gasoline may undermine the argument that the gas tax increase will hurt low-income drivers. Even a tax increase on gas would leave the cost of a gallon of gasoline well below recent price levels.

If debate lingers until next year, it becomes an issue for candidates running for office in an election year. Remember, a car fee increase was a major reason for a governor’s recall just a decade ago.

If a package of gasoline taxes and car fees should end up on the ballot it would likely get a cold stare from the voters. Likely there will be a number of tax increases on the November ballot. An extension of Proposition 30, a cigarette tax, perhaps a property tax, maybe others could be on that ballot. A roads funding package will not look so good in the context of all these tax increase proposals.

The roads and highways are the veins and arteries that pump life into our economic system. They must be cared for to prevent the economic system from getting a form of man-made sclerosis. The governor and legislators during the Special Session are walking a tightrope to balance the need to improve the roads and highways with voters being turned-off by a slew of tax proposals.

Adding to the controversy of potential tax increases designed to fund infrastructure and health care entitlements, some lawmakers seized the opportunity to reintroduce pet projects, at least one of which lacks much prospect of getting past Gov. Jerry Brown.

“Lawmakers, he said, should bring him new plans for financing public health care and road repairs, problems that have festered for years,” as the Los Angeles Times observed. “But he could get much more than he bargained for as lawmakers from both parties seize an opportunity to push a raft of tangential and even unrelated measures. Some would not provide a single dollar toward the governor’s objectives of filling potholes and boosting money for health care programs.”

Raising taxes

Brown had hoped to finish off the legislative season in about four weeks’ time. But in addition to the specter of old, reintroduced bills, he has struggled with Republican opposition to the core of his plans. Having lost their supermajorities, Democrats must borrow strength from Republicans; hikes in taxes and fees require a vote from two thirds of the legislature — Assembly and state Senate alike.

Democrats have lined up behind new infrastructure spending, drawn from higher gas taxes and automotive fees, and new Medi-Cal spending, fueled by costlier tobacco taxes and health insurance. But Republicans, at least some of whom must throw their weight behind the schemes, have balked. Senate Minority Leader Bob Huff complained that Democrats just negotiated a budget that left those items by the wayside.

“They’re coming back and saying, we spent that money, $10 billion unanticipated revenue, and here, Republicans — we need your votes now to tax more,“ Huff said, according to Capital Public Radio. “And they knew we wouldn’t want to do that.”

Assembly Minority Leader Kristin Olsen, CPR added, warned that Republicans already identified some $6 billion in existing funds for infrastructure, and threw cold water on the prospect that Sacramento would agree on a Medi-Cal package this year.

On the other hand, at least some Republicans “have indicated they’re open to hiking the gas tax for the first time in more than 20 years — but only if the money is restricted to transportation improvements,” the San Jose Mercury News indicated. And Huff claimed, Republicans weren’t “willing to talk about that until we nail down the transportation funds that are currently being done,” according to the Sacramento Bee.

While Brown faced the test of imposing tax increases without voter approval, Republicans confronted a more intense variety of the same problem with their constituents. Hoover Institution fellow Bill Whalen, a former aide to Gov. Pete Wilson, told the Mercury News that “Republicans who fear the end of their careers will need talking points that clearly articulate why the tax benefits their districts. Voting for taxes isn’t exactly a ticket to longevity in these districts. They have a lot at stake.”

Old ghosts

Adding to the tension, a barrage of largely unwanted legislation has been reintroduced, threatening to stymie Brown’s sessions and objectives even more than negotiations likely will. Among the second-chance bills, the Times reported, “backers reintroduced a stalled proposal to let doctors help terminally ill patients end their own lives by prescribing lethal doses of drugs. Other lawmakers are trying to raise the smoking age from 18 to 21 and rein in the use of electronic cigarettes,” while still others want more mass transit, a bridge-specific lane opening, and a ban on research-driven fetal tissue sales.

Brown has already proven unable to help himself from criticizing some of the moves. Through spokeswoman Deborah Hoffman, Brown admonished the Legislature’s right-to-die advocates, insisting “the session is not the appropriate venue to consider the issue. A better approach would be to reconsider previous legislation next year that is now stalled,” Hoffman said, according to the Associated Press.

Daniel Parks / flickrMore than a month after Gov. Jerry Brown called for lawmakers to hold a “special session” on transportation funding, California still doesn’t have a plan for how to close its annual $5.7 billion shortfall for road, bridge and highway repairs.

More than a month after Gov. Jerry Brown called for lawmakers to hold a “special session” on transportation funding, California still doesn’t have a plan for how to close its annual $5.7 billion shortfall for road, bridge and highway repairs.

Brown said in his Inaugural Address in January that fixing the shortfall was a top priority in 2015. He referenced a $59 billion backlog in deferred maintenance, but that sum could balloon, transportation experts say, if bridge and road repair projects are neglected and require infrastructure replacement.

“All the data out there shows our roads are deteriorating, both at the state and local levels, at an alarming pace,” said Jim Earp, executive director of the California Alliance For Jobs. “If we don’t address it, the costs will skyrocket.”

Road reconstruction costs are tenfold higher than proper maintenance, added Earp, whose organization represents construction companies and unions.

While this debate is centered at the Capitol, its implications will be felt across the Golden State where motorists stand to pay a hefty price as roads get worse.

Driving on roads in need of repair costs California drivers $18.4 billion a year in extra vehicle repairs and operating costs, according to TRIP, a national nonprofit transportation research group based in Washington, D.C.

That amounts to an average of $762 per California motorist, and is hundreds of dollars more per year than motorists in Nevada, New York and Texas pay.

A report released by TRIP last week showed 15 metro areas in California rank among the nation’s worst for road pavement conditions. Those rough roads mean big bucks for drivers in San Francisco and Los Angeles, where the associated vehicle maintenance costs top $1,000 annually, according to the report.

Tax increases

This year, Democratic lawmakers have submitted a range of ideas to plug the funding gap, and ultimately start fixing more roads.

They include a $10 billion plan by Assembly Speaker Toni Atkins, D-San Diego, to charge all drivers a $52 annual road user fee.

Her five-year plan would also accelerate loan repayments from the state’s general fund that are owed to transportation accounts. Additionally, it would free up $1 billion per year by returning truck weight fees to transportation funds instead of using them to repay debt owed by state government.

Also in the mix is San Jose Democratic Sen. Jim Beall’s SB16, which would raise the gas tax by 10 cents per gallon, bump up the vehicle registration fee by $35 annually while also charging a new $100 annual fee for zero-emission vehicles.

The 10-cent increase would leave California with the highest gas tax in the nation.

Republicans, meanwhile, say they have no appetite for tax hikes and want to use existing funds to pay for the state’s crumbling road infrastructure.

Sen. Jeff Stone, R-Riverside, lashed out at California officials for their years of diverting money from transportation repairs after an Interstate 10 bridge collapsed earlier this month during a severe storm east of Coachella.

Built in 1967, the bridge was listed as “functionally obsolete” on the 2014 National Bridge Inventory, meaning it was no longer considered adequate for the high volume of traffic it handled. The listing did not mean the bridge was inherently unsafe, but instead was built to outdated capacity standards.

“It was one of hundreds of bridges across our state in need of replacement or repair,” Stone said in a press release. “Maintenance and repairs of California’s bridges and highways have been neglected far too long. Millions of taxpayer dollars, approved by voters to build and maintain our bridges and highways, have been siphoned away to programs that have nothing to do with infrastructure, transportation or highway safety.”

Out the door without a plan

Lawmakers held two special sessions in early July, then left the Capitol for a month-long recess a week later without a firm plan for moving forward.

Some, including Earp, said progress was made.

“I think there’s some good karma going on,” Earp said. “There’s a much greater chance that something will get done than we’ve had in quite a while. There’s a lot of traction on it.”

Still, getting a two-thirds vote in the Legislature for any new taxes will be a “heavy lift,” Earp noted.

Republicans in the Assembly are frustrated that Democrats waited until this summer to make transportation funding a priority rather than dealing with it in the spring budget process given the state’s higher revenue totals.

Some are less-than-optimistic that a deal will be reached, unless key pieces of their plans are incorporated, a GOP spokeswoman said.

“We’re stuck in proverbial political traffic,” Amanda Fulkerson, spokeswoman for the Assembly Republican Caucus, said.
Republicans in the Assembly proposed the following to raise $6.6 billion for road repairs:

• Dedicate 40 percent of the funds in California’s cap-and-trade program, generating $1 billion annually
• Use existing funds from vehicle weight fees, for $1 billion annually
• Invest half the governor’s strategic growth fund into shovel-ready road projects, for $200 million annually
• Eliminate redundancies at Caltrans, saving $500 million annually
• Eliminate 25 percent of the state’s long-term unfilled employee positions, saving $685 million annually
• Make a $1 billion commitment in the state general fund for transportation

The road ahead

The next round of special session meetings won’t start until lawmakers return to the Capitol Aug. 17, at the earliest.

From the initial sessions, it appears lawmakers want “a portfolio approach” taking the best pieces from existing plans rather than looking for just one solution, said Jay Day, chief of staff for Assemblyman Jim Frazier, D-Oakley. Frazier is chair of the assembly’s special session panel tasked with addressing the problem.

Day added that ultimately lawmakers need to fashion a bill that’s to the liking of Gov. Jerry Brown, who has said he doesn’t favor another transportation bond.

They won’t have much time. The deadline for the Legislature to pass bills is Sept. 11.

“Everything’s on the table,” Day said of funding options. “We’re in dire need. We have a nearly $6 billion shortfall every year.”

Contact reporter Chris Nichols at chris@calwatchdog.com or on Twitter @ChrisTheJourno