California Department of Transportation

Fiscal Year 2009-10 Budget

The fiscal year 2009-10 enacted governor’s budget for Caltrans totaled $12.1 billion in authorized expenditures. This is a $1.7 billion decrease from the 2008-09 enacted governor’s budget, primarily due to a tapering of Proposition 1B appropriations. The 2009-10 budget included a fully-funded Proposition 42 transfer and a Proposition 1A loan repayment of $83 million to the Traffic Congestion Relief Fund.

In January 2009, the Schwarzenegger administration projected a $40 billion shortfall through June 2010. Governor Arnold Schwarzenegger signed the 2009-10 Budget Act in February 2009, which addressed the shortfall and added $2 billion to the state’s reserves. However, about $6 billion of the 2009-10 Budget Act’s proposed solutions relied on the passage of Propositions 1A through 1E, which voters rejected in 2009. As a result, the 2009-10 Budget Act was amended and signed in October 2009.

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Putting More Federal Dollars to Work

Improving from a record low of $169 million of inactive federal obligations in fiscal year 2008-09 would be difficult, but Caltrans again decreased inactive obligations for federal aid highway projects from more than $160 million in August 2008, to an unprecedented low of $31 million in August 2010. In addition, the number of projects with remaining balances over $500,000 was reduced from 94 to just seven. To continue a plan of improvement, Caltrans has implemented a six-month inactive look-ahead program to continue reducing this balance in future years.

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Funds Management

In federal fiscal year 2009-10, Caltrans successfully:

  • Obligated all of the American Recovery and Reinvestment Act funds ($2.57 billion).
  • Obligated $3.5 billion from the Federal Highway Trust Fund.
  • Requested $200 million to obligate against additional available projects through the August redistribution process.

The Federal Highway Administration (FHWA) granted California a conditional use of a toll credit pool of $5.7 billion. Caltrans uses toll credits in lieu of state matching funds, which ease stress on the State Highway Account cash balances. As of July 2010, California obligated $96 million from the toll credit pool toward 173 state projects and $7 million toward 29 local projects.

Since 1989, the Statewide Preliminary Engineering System (SPES) program has expended $2.87 billion dollars in federal reimbursements. The last memorandum of understanding (MOU) between FHWA and Caltrans for the SPES was approved in 1989. Caltrans finalized a new Statewide Preliminary Engineering System MOU with FHWA in January 2010.

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Federal Aid Data System

In March 2010, the Federal Resources Office completed its task to replace the Rapid Access Management Information System mainframe version of the Federal Aid Data System (FADS) with Federal Aid Data System 2.0. Caltrans and Federal Highway Administration (FHWA) use the FADS 2.0 to process federal funding requests for state and local projects. The system provides real-time reporting capability, which ensures that all data entered can be accounted for by providing a complete audit trail of changes to project data. It also ensures data integrity and accuracy by providing online edits, table lookups, and drop down menus. This system of checks and balances results in the transfer of error-free federal obligation requests, thereby reducing the number of rejected federal obligation requests and improving the accuracy of project data. More than 100 federal funding requests totaling about $4 billion per year are transmitted from Caltrans to FHWA per week using FADS 2.0. The updated version is a statewide, centralized, Web-based application written in a programming language that meets information technology standards and is supported by Caltrans IT staff.

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Proposition 42 Transfer

Passed by the voters in 2002, Proposition 42 is a state sales tax on gasoline that provides funds for transportation purposes. In fiscal year 2009-10, Proposition 42 revenues totaled $1.44 billion, an 8 percent increase compared to 2008-09. This improvement is attributable to Assembly Bill X3 3, which raised the state portion of sales tax from 5 percent to 6 percent through June 2011. These funds were distributed to cities and counties for local street and road projects and the Public Transportation Account, and retained in the Transportation Investment Fund for the State Transportation Improvement Program. Distribution of the $1.44 billion in revenues is shown below:

  • $575 million to local streets and roads.
  • $287 million to the Public Transportation Account.
  • $575 million — retained in the Transportation Investment Fund.

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Public Transportation Account

The Public Transportation Account (PTA) funds the operating costs of intercity passenger rail services, transportation planning, and transit capital projects. In June 2009, the Third Appellate Court of California ruled that funds in the Public Transportation Account may only be used for “transportation planning” and “mass transportation” purposes. In September 2009, the California Supreme Court upheld this ruling. As a result, redirections of current and prior fiscal year spillover revenues of approximately $960 million were deemed invalid. In March 2010, Governor Arnold Schwarzenegger signed Assembly Bill X8 6 and Assembly Bill X8 9 into law, which reinstated mandated transfers from the PTA to State Transit Assistance. The following fiscal year, 2009-10, PTA transfers were revised as a result of the enactment of ABX8 6 and ABX8 9:

  • $400 million to State Transit Assistance (this is also intended to cover FY 2010-11).
  • $142 million of debt service payments.
  • $79 million of non-Article XIX revenues were reverted to the State Highway Account.

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Proposition 1B: The 2006 Transportation Bond

Fiscal year 2009-10 represented the third year of allocations from the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006 (Proposition 1B). The 2009-10 Budget Act appropriated $3.7 billion in Proposition 1B funds for capital outlay, local assistance, and state operations, including $2.8 billion for programs administered by Caltrans.

photo of highway 99 in atwater californiaThe state’s fiscal climate continued to affect the ability of the state treasurer to sell general obligation bonds to fund bond-supported programs. The condition of the General Fund also affected Caltrans’ ability to access cash to meet bond-funded project commitments. As such, the department continued to put bond-funded projects on hold. In fall 2009 and spring 2010, the state treasurer succeeded in selling bonds to provide cash for the state’s general obligation bond programs. In all, the treasurer was able to sell more than $12 billion in bonds, though only about $1.9 billion was provided for transportation. This allowed projects that were already under construction to continue, and it provided cash for several new projects that had been deemed ready to proceed to construction.

In fiscal year 2009-10, $1.08 billion was allocated as follows:

  • $630 million — capital outlay.
  • $332 million — local assistance.
  • $117 million — state operations.

It is important to note, however, that these bond sales provide funding only for the cash flow of the projects and not the full project costs. Future bond sales are needed to fund these projects to completion. The state is expected to return to the bond market now that the 2010-11 state budget is enacted. The success of those sales will determine how many additional transportation bond projects will be funded.

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State Transportation Improvement Program and State Highway Operation and Protection Program Funding

Despite a less than ideal bond market, which caused the delay of some allocations for State Transportation Improvement Program (STIP) projects, approximately $742 million in STIP allocations were made in fiscal year 2009-10 from a cadre of funds, including the Federal Trust Fund, the Transportation Investment Fund, and Proposition 1B. Caltrans delivered additional projects, but those projects could not receive an allocation because of the shortage of bond availability.

photo of highway workers repaving a highway

California continues to experience a transportation-funding shortfall. Funding from excise tax on fuels is declining due to reductions in fuel consumption and is eroding from inflation, because the last increase of state excise tax on fuel occurred in 1994. The 2009 Ten-Year State Highway Operation and Protection Program (SHOPP) Plan identified an annual investment need of $6.3 billion for the repair and maintenance of pavement and bridges, the construction of safety and mobility improvements, and the replacement of facilities. Due to a funding shortfall in fiscal year 2009-10, $1.5 billion of available SHOPP funding was allocated to the highest priority components, which are safety and emergency along with bridge and pavement maintenance. In 2009-10, Caltrans realized about $400 million in SHOPP contract award savings due to California’s struggling economy and a favorable bidding climate. These savings are expected to continue in the future but slowly erode as the state’s economy recovers.

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Looking Ahead: The Fuel Tax Swap

photo of a woman filling her car with gasIn March 2010, Governor Arnold Schwarzenegger initiated a "Fuel Tax Swap" by signing Assembly Bill X8 6 and Assembly Bill X8 9 into law. The fuel tax swap eliminated the state sales tax on gasoline effective July 1, 2010, and replaced it with a 17.3 cents-per-gallon increase to excise tax on gasoline for a new total of 35.3 cents per gallon.

The net effect of the fuel tax swap will increase the contributions toward debt service on general obligation bonds, such as Proposition 1B. It will also reduce the revenues deposited in the Public Transportation Account (the state portion of sales tax on gasoline was eliminated), and fund new State Transportation Improvement Program projects from a portion of the 17.3 cents-per-gallon increase to excise tax on gasoline that is deposited in the State Highway Account.

The fuel tax swap also eliminated Proposition 42 revenues, the sole funding source for the Transportation Investment Fund. Caltrans will continue to use the Transportation Investment Fund to pay for obligations until the fund is fully liquidated. Caltrans estimates that this will occur in October 2012. New obligations and allocations for the State Transportation Improvement Program will be made from the State Highway Account.

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