In California, new law to net more funding for transit agencies

by Angela Cotey, Associate editor

On March 22, California Gov. Arnold Schwarzenegger signed legislation that will revise the state's transportation funding mechanisms and provide public transit agencies with hundreds of millions of dollars in funding. But transit providers won't get as much as they were slated to receive under previous provisions.

The two-part legislation calls for California to issue a one-time allocation of $400 million to the State Transit Assistance (STA) program to provide operating relief to state transit agencies through fiscal-year 2010-11. Then, beginning in FY2011-12, the STA will be funded at a baseline amount of about $350 million annually.

Yet, the deal isn't quite as sweet as it sounds for transit agencies, says Jeff Wagner, spokesman for the California Transit Association. In 1990 and again in 2006, California voters approved measures that would provide state transit funding through a gasoline sales tax, which was expected to generate about $1 billion annually in transit-dedicated funding. However, during the past decade, the state legislature repeatedly has diverted a large chunk of that money to help plug gaps in the state general fund.

During a mid-year budget adjustment during FY2008-09, the legislature cut off STA funding to transit agencies. The FY2009-10 budget eliminated the STA completely, leaving agencies scrambling to fill holes in their operating budgets.

So, the transit association filed a lawsuit against the state seeking to recover more than $1.9 billion that was diverted from the STA. In June 2009, the state Appeals Court ruled in the association's favor, stating that the funding diversions violated state law. State officials appealed the ruling, but the Supreme Court upheld the appellate court ruling in September 2009.

Now, the legislature has crafted a package that eliminates the gas sales tax, but retains the diesel fuel tax and increases the fuel excise tax by an amount equal to the previous gasoline tax. The "gas tax swap," as it's called, would generate the same amount of money as the gas tax, but doesn't have the same spending restrictions as the previous tax, so some of the money can be used to relieve the general fund deficit, says Wagner.

"What transit gets out of this deal is considerably less than what it should have been getting, but transit agencies were never actually getting it," he says. "The average STA allocation over the last 10 years has been $189 million."

Cautiously Optimistic

That's why some transit agencies are couching their enthusiasm.

"The feeling here is that it's better than nothing," says Rick Jager, spokesman for the Los Angeles County Metropolitan Transportation Authority (LACMTA), which expects to receive about $120 million in immediate funding and $80 million annually through the new funding mechanism. "The problem is, the funds are not protected, so they could be raided in future budget negotiations, and we have some concerns with that."

The agency still is reeling from last year's state funding elimination, facing a $181 million deficit in FY2011. All departments have been asked to cut their budgets by 20 percent. LACMTA also plans to cut about 260 positions, says Jager, adding that the new influx of funding will "help a little, but not a lot."

Not a Perfect Solution

Ditto for Caltrain, which will receive $5 million through the one-time payment, which is expected to be available in late June or early July. The agency hasn't yet determined what it'll use the money for, but it won't be enough to restore some commuter-rail service cut earlier this year, says spokesman Christine Dunn.

At Bay Area Rapid Transit (BART), officials will use a one-time allocation of $26 million, as well as $23 million annually beginning in FY2012, to replace some of the reserves it's depleted the past several years to address budget shortfalls, wrote spokesman Linton Johnson in an email.

"This is welcome news, although the funding source is less predictable than the one it replaces," he added.

Santa Clara Valley Transportation Authority (VTA) officials also are cautiously optimistic about the new funding mechanism. The agency is set to receive $15.5 million for FY2010-11, which will enable it to hold off on additional fare increases and service cuts, and about $13.5 million in STA funds after FY2012.

"This confirms we have some level of state funding for future budget cycles, so overall it's good news," says VTA spokesman Brandi Childress. "But there are long-term solutions that need to be worked out."