The effects of the delayed budget are being felt as the California Transportation Commission meets over the next couple of days. Funding for transportation projects worth over $2.1 billion that are contingent on the approval of the state budget may either be deferred or delayed. These include projects funded by Proposition 1B, the transportation bond approved by state voters in 2006.
Should the Budget Impasse continue through the end of August 2010, transportation fund cash balances may be depleted, resulting in potential suspension of ongoing construction projects. Delayed and suspended construction projects and nonpayment to vendors prevents the economic stimulation and job creation that result from the Caltrans’ normal activities. During the FY 2008-09 budget impasse, payment for over 96,000 invoices was delayed, resulting in more than $215,000 in penalties. In addition, state tax revenue is impacted by delaying income to construction contractors and their employees. Furthermore, suspension of ongoing construction projects results in penalty payments to construction contractors, resulting in significantly increased project costs.
Caltrans currently has $9.5 billion worth of projects in construction. There are another $1.5 billion worth of projects being delayed, including $977 million the Commission plans to allocate during the August 11-12 meeting that have been allocated with FY 2010-11 funds contingent upon the passage of the budget.
Caltrans also will delay $937 million worth of contracts that were allocated with prior-year funds but where the contracts have not yet been awarded. While these contracts are funded from existing budget authority, the forecasted depletion of cash in the transportation funds at the end of August make award of these contracts imprudent. Between projects contingent upon budget passage and those held due to projected fund depletion, Caltrans has projects on hold totaling over $2.4 billion.
In addition, $647 million of bond-funded projects are being delayed until the Treasurer’s Office can complete a bond sale. This number includes $216 million in previously delivered projects and an additional $431 million expected to be deferred at the August Commission meeting. Without a budget and with the uncertainty of available cash for contracts after September, Caltrans will not be awarding new contracts. This impasse will cause a delay in new construction starts and delay the creation or saving of jobs.
