Courtesy of Transportation California
Governor Newsom released his May Revision to his 2020-21 State Budget proposal Thursday, May 14 which lays out his plan for dealing with the $54.3 billion budget deficit created by the ongoing public health crisis. While the January 2020-21 State Budget was predicated on a nearly $6 billion budget surplus and over $16 billion in the Rainy-Day Fund, the COVID-19 pandemic induced recession has significantly reduced California’s three main sources of revenue – sales tax, personal income, and corporate. The Governor’s May Revision proposes to close the gap between revenues and expenditures by drawing down on reserves, canceling new budget initiatives proposed as part of the January Budget, reduced spending in the current year, and borrowing from special funds and temporary revenue increases. The programmatic cuts can be lessened should additional support from the federal government materialize.
Like other revenue sources, the gasoline excise and other transportation taxes have taken a hit during the COVID-19 Stay-at-Home Order. The May Revise reports that gas tax receipts will be reduced by $1.8 billion in total over the next five years (budget year through 2024-25).
The Department of Finance reports the following more specific revenue and program impacts, over the January Budget:
Gasoline excise taxes are projected to generate $1.108 billion less during the remainder of the current year’s budget and the 2020-21 budget. However, it could have been worse – estimated decreases in fuel consumption will be partially offset by inflationary increases in the gasoline and diesel fuel excise tax rates.
Transportation Improvement Fee (TIF) imposed by SB 1 is projected to increase over January estimates by $275 million.
In terms of programmatic impacts, the State Highway Operations and Protection Program (SHOPP) will see a reduction of $556 million, cities and counties will lose $282 million in local streets and roads revenues, and the State Transportation Improvement Program (STIP) which funds state highway improvements, intercity rail, and regional highway and transit improvements will see a reduction of $91 million over the current and 2020-21 fiscal years.
The release of the May Revision starts the horserace toward the eventual adoption of a state budget by the constitutional deadline of June 15. Look for a truncated schedule of hearings starting next week in the Legislature to accommodate the new social distancing requirements, but an abundance of behind-the-scenes work between Administration staff, legislative leadership and budget staff, and the third house (i.e., lobbyists).
The House of Representatives passed the HEROES Act last week – a total $3 trillion stimulus proposal – that would commit $15 billion to state DOTs as a backstop to lost state generated transportation funds. California gets approximately 9% of federal surface transportation funding so we assume the State would receive $1.4 billion in transportation funding from the HEROES Act. Given the longer-term funding losses projected through 2024-25, and the fact that the state budget doesn’t take into consideration significant losses from local sales tax measures, toll revenues, etc., the industry must continue to advocate for a much more robust investment into transportation and infrastructure from Congress and the Trump Administration so as to avoid project delays, cuts, associated job losses, and lost economic activity.
For the Governor’s full budget summary click here.