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.
