After carefully examining Proposition 1B, the Transportation and Land Use Coalition (TALC) is taking an oppose position. While we applaud the work of several lawmakers to gain significant funding for public transportation within this proposition, this funding must be weighed against the bond’s likely damage to programs that rely on the state’s General Fund, its failure to implement a more sustainable funding mechanism for transportation, and the absence of any connection to policies that promote efficient land use and reduce long-term transportation demand.

Summary of Position
Governor Schwarzenegger’s Strategic Growth Plan, released in January of 2006, envisioned transportation bonds primarily focused on building highways and expanding freight facilities. A bipartisan effort ensued to knit together the Governor’s Plan with more well-rounded proposals from Senator Perata, Assembly Speaker Núñez, and others. In May 2006, the Legislature approved SB 1266 (Perata/Núñez) to place a $19.9 billion transportation infrastructure bond, Proposition 1B, on the November ballot.

The enormity of Proposition 1B – it is far larger than any bond ever considered in California – means the package is able to provide something for almost every transportation interest group except cyclists and pedestrians. The breakdown of the overall package is:

• A full 50%, or $10 billion, for highway expansion, highway and road maintenance, and trade expansion (goods movement).
• An additional 5%, or $1 billion, for mitigating air pollution from the increased goods movement.
• 25% of the package, or $5 billion, to public transit and transit security.
• 15%, or $3 billion, to programs that can flexibly fund both road and transit capital programs, with decisions primarily to be made by regional and county agencies.
• The remaining 5% would fund a variety of smaller programs such as port security, intelligent transportation systems, diesel school bus retrofits, and grade separations.

On the positive side, the bond would give public transportation a significant infusion of funding for capital needs. Additionally, legislative leaders resisted the temptation to earmark funds for pet projects (with the exception of State Route 99). Instead, the proposition dedicates funding to a number of existing programs, such as the State Transportation Improvement Program (STIP), and to new funding categories that would be controlled at the state level.

But, fundamentally, Proposition 1B is deeply flawed in three ways:

1. The funding mechanism for Prop 1B threatens important state programs. This $20 billion general obligation bond, plus the associated interest payments, would be repaid from the state’s General Fund over the next 30 years. Drawing from the General Fund for transportation improvements would reduce the funding available in future years for education, health care, social services, and public safety.

While there was a significant state budget surplus this year, the large deficits experienced in California between 2001 and 2005 are expected to return. In addition, the state also faces tens of billions of dollars in financial burdens from unfunded liabilities related to employee retirement. According to the state’s Legislative Analyst, these liabilities are “very important from the standpoint of the state’s overall fiscal health…in that they will require future taxpayer dollars to be diverted to fund state employee and teacher services already rendered.” Lawmakers are likely to face a truly dramatic structural deficit in a few years, and will be forced to compensate for the additional debt service on Proposition 1B by cutting or borrowing $1.3 billion dollars annually from other programs, or raising taxes.

One of the greatest ironies of the bond is that it increases the likelihood that public transit will get lower levels of operating funds in the future, when the new transit projects funded by the bond are completed. This is because the gas tax “spillover,” which generally is available in years that gas prices are high and is intended to provide much-needed operations money to public transit, has historically been shifted into the General Fund every year that there is a budget shortfall. $1.3 billion had been at least partially redirected since 2000 until this year’s budget surplus allowed it to be allocated entirely to transportation. As our structural deficit grows, and as transportation bonds and earmarks become a larger cause of that shortfall, it will be even more difficult to direct the gas tax spillover to public transit because it will be needed to repay the debt incurred by the bonds.

2. Prop 1B is not a long-term funding solution. This bond is being put on the ballot because the Legislature has failed to do what many other states have done: provide a Cost Of Living Adjustment (COLA) for transportation by indexing certain fees and taxes to inflation. The statewide excise tax on gasoline has been at 18 cents per gallons for the past 12 years, meaning the purchasing power of the largest source of transportation revenue has been steadily eroded by inflation. Indexing this tax to inflation (or real wages) would raise an additional $40 billion or more during the 30 year period of the proposed bond – enough to pay for the proposed expenditures and to initiate a high-speed rail system in California.

There are other existing transportation user fees that also have the potential to provide far more funding than they currently do; indeed, truck weight fees were indexed to inflation just last year. Well-designed transportation user fees, from shipping container fees to vehicle license fees, can simultaneously promote environmental quality, social equity, and economic growth – without taking funding from essential state services.

3. Prop 1B fails to tackle the root source of our transportation crisis. The tremendous strain on the state’s highways and local roads are largely the result of poorly planned development that depends on automobile access – development that places sprawling subdivisions far from office parks, schools, shopping districts, or healthcare and other services. Until we start to build walkable downtowns and neighborhoods, and link them together with effective public transit, people will have no choice but to sit in traffic-packed highways that resemble parking lots.

Expanding interchanges and adding more lanes to some highways will not provide a long-term cure; by the time that many highway expansions are completed, new sprawling developments will have made congestion worse than before.

Conclusion
The Transportation and Land Use Coalition recognizes the work of many excellent lawmakers who helped develop this package and used significant political capital to garner funding for public transportation. However, we must look at the skyrocketing traffic congestion in nearly all of our metropolitan regions and acknowledge that the status quo is failing us. Land use planning, pricing policies, and bicycle and pedestrian safety should be a part of any large transportation funding measure; but, they are absent from this proposal.

Furthermore, the painful reality of state budget cuts over the last five years cannot, and should not, be forgotten. When we think about what this great state needs for the next generation, it certainly includes excellent public transportation and well paved roads, but not at the expense of education, health, and social services. TALC and its member groups look forward to working with the legislature to develop and pass transportation funding measures that solve the transportation crisis and provide residents with quality transportation choices.

¹ The 2006-07 Budget: Perspectives and Issues. Report from the Legislative Analyst’s Office to the Joint Legislative Budget Committee. 2006.