There is no rush in California

With transportation projects in jeopardy, state sits on budget problem

Article August 14, 2003
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The hills are finally hollow in California. Every ounce of
gold appears to have been picked clean.

The state now faces a $38 billion deficit, and as of press
time has gone almost a month without an operating budget. The financial
paralysis has cut the knees out from under the California Transportation
Department (Caltrans). With the budget impasse, state payments to contractors
working on about 600 highway projects officially ended in late July.

"Business is not that bad in California; it's just the
state is in shambles," Jim Waltze, president of Griffith Co., Santa Fe
Springs, Calif., told ROADS & BRIDGES. "The problem is the
out-of-control spending. One day we read in the papers that highway contractors
may have to lay off 200,000 workers, and there is no mention of 200,000 public
employees or anybody else being laid off."

According to Waltze, contractors were given the following
two options: suspend work with no penalty from Caltrans or continue with a
deferred payment. Any California state payment 30 days past due will automatically
draw interest at 10% per year. But if a contractor chooses to go with a
deferred payment all operating costs come out of the company vault. Waltze
believed most of the small contractors would have no choice but to stop work.
However, the larger firms, like Griffith Co., analyzed the possible scenarios
on a case-by-case basis.

"Most contractors are pretty strapped for cash,"
said Waltze. "They could use their own money or borrow it. With borrowing
the real problem is they don't know how long this budget impasse is going to
last. They don't know how long they'll need to borrow."

Several counties have tossed their own money into road
projects. The San Bernardino Associated Governments (SANBAG) offered to lend
Caltrans $30 million interest free. SANBAG has about $40 million in Measure I
cash, which comes from a half-cent sales tax increase dedicated to
transportation projects.

Despite the aid the state's transportation agency has
suffered consequences. The Los Angeles Times reported that a statewide
construction work stoppage would initially cost Caltrans as much as $100
million, plus up to an additional $30 million once work resumes.

Funding currently under budget consideration includes a
partial suspension of Proposition 42, which requires revenue collected on the
sales tax from gasoline purchases to be deposited in the state's Transportation
Investment Fund. Of the $1.09 billion expected to be collected in FY 2004, $289
million was proposed to go into the fund dedicated to certain transportation projects.
The remainder would be sent to the state's general fund to help with the
deficit. A competing budget measure in the state assembly would place a little
more than $289 million in the transportation fund. In earmarking that fund,
$100 million would be dedicated to the State Highway Account and $189 million
would be directed to traffic congestion relief.

"We've always had a Republican governor and a
Democratic legislature, so there were some checks and balances there. Now we
have a Democratic governor with a very liberal Democratic legislature. Somehow,
the highway industry has been singled out to carry the burden of the
deficit."

Gov. Gray Davis could not escape the finger pointing.
Several lawmakers were calling for his dismissal.

About the author: 
Bill Wilson is editor of Roads & Bridges.
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