Tuesday, February 23, 2016

2016-17 California Budget: Transportation Proposals

Transportation Proposals: Executive Summary

Overview. The Governor’s budget provides a total of $17 billion from various fund sources for all departments and programs under the California State Transportation Agency in 2016–17. This is an increase of $664 million, or 4 percent, over the estimated current–year expenditures. The budget includes $10.5 billion for the California Department of Transportation, $2.4 billion for the California Highway Patrol (CHP), $1.8 billion for the California High–Speed Rail Authority, $1.1 billion for the Department of Motor Vehicles (DMV), and $459 million for transit assistance. In this report, we assess the Governor’s budget proposals in the transportation area. Below, we summarize our major findings and recommendations.

Highway and Road Maintenance and Repair Needs. In order to assist the Legislature in its deliberations regarding increased funding for state highway and road repairs, we assess the costs to maintain and rehabilitate core aspects of the state highway system—pavement, bridges, and culverts—as well as local roads. We find that the state has ongoing highway repair needs of about $3.6 billion annually as well as an existing backlog of needed repairs totaling roughly $12 billion. This need is significantly higher than can be addressed through the existing funding of about $1.6 billion for these purposes.
In this report, we recommend a roadmap to assist the Legislature in ensuring that the highest priority needs are addressed first and that any additional funding provided is aligned with those needs. Specifically, we recommend the Legislature (1) make the Highway Maintenance Program the highest priority for additional funding to address the $1.1 billion in ongoing unmet needs as well as a $3 billion existing maintenance backlog, (2) make the State Highway Operation and Protection Program the next priority for additional funds, (3) determine the level of funding for local roads based on legislative priorities weighed against state highway needs, (4) align permanent funding sources with ongoing needs and temporary funding sources with one–time needs (such as addressing backlogs), and (5) adopt accountability measures to ensure that any additional funds are spent effectively.

Motor Vehicle Account (MVA) Fund Condition. The MVA, which receives most of its revenues from vehicle registration and driver license fees, primarily supports CHP and DMV. Due to expenditures outpacing revenues, the MVA has faced an operational shortfall in recent years and will continue to experience a shortfall in 2016–17, absent corrective actions. In order to address this shortfall and to support proposed new expenditures, the Governor proposes to raise the vehicle registration fee by $10 and index the fee to inflation. Under the Governor’s plan, we find that the MVA will be barely balanced over the next few years and likely face an operational shortfall in the tens of millions by 2019–20. The Legislature will need to take steps to address the ongoing shortfall in the MVA and prevent insolvency. While the Governor’s approach is one way of addressing the problems in the near term, there are alternatives to the Governor’s approach. The Legislature could adopt a mix of strategies that involve limiting spending from the MVA, increasing MVA revenues, or eliminating an existing transfer from the MVA to the General Fund. The Legislature will also want to consider the Governor’s proposals to increase MVA expenditures in the context of a larger strategy for resolving the operational shortfall in the MVA.

DMV Self–Service Terminals. The Governor’s budget proposes $8 million from the MVA on an ongoing basis to fund existing and increased costs related to expanding the use of self–service terminals—kiosks that allow DMV customers to process their vehicle registration renewal without the assistance of DMV staff and immediately receive a registration card and sticker. While the expansion of self–service terminals has merit, the Governor’s specific proposal raises concerns. We find that the administration’s plan to expand the use of self–service terminals lacks sufficient detail and that providing additional funding as proposed by the Governor is not justified. Accordingly, we recommend that the Legislature reject the Governor’s proposal and require DMV to develop a comprehensive plan for the use of self–service terminals.

Full report courtesy of LAO

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