Dive Brief:

• Although the COVID-19 pandemic response and stay-at-home orders in California have resulted in a significant decrease in state revenues and increases in unanticipated emergency spending, it appears that the impact on the state's transportation agencies will be minimal.
• In an announcement Thursday, Gov. Gavin Newsom estimated the state's budget deficit to be $54 billion over the next two fiscal years, a 22.3% decline in revenue since his $222 billion January budget proposal. Transportation funding from fuel taxes is anticipated to drop by $1.8 billion through the 2024-25 fiscal year.​
• While the governor outlined a number of transit-related mechanisms to balance the budget including delaying new programs, shifting resources and program cuts, he instructed Caltrans, the state's department of transportation, to accelerate projects to achieve cost savings, support the creation of new jobs and improve roads as a way to restart California’s economy. 

Dive Insight:

Since the coronavirus outbreak hit the U.S., construction leaders across the country have worried that infrastructure projects like road and bridge construction could suffer as state DOT revenue declines and that federal funding could be waylaid as Congress turns its attention to COVID-19 mitigation measures for business and unemployed Americans.

In what is good news for contractors that work on large public projects, the California budget proposal maintains current transit planning and engineering staffing levels so as to continue developing and designing previously programmed projects. This is being done in anticipation of federal support for when stimulus funding becomes available, according to the Associated General Contractors of California.

The impacts to ongoing transportation programs include:

• The State Highway Operations and Protection Program (SHOPP) will see a reduction of $556 million.
• The State Transportation Improvement Program (STIP) will see a reduction of $91 million over the current and 2020-21 fiscal years.
• Cities and counties will lose $282 million in local streets and roads funds.

The plan, which relies on tapping cash reserves and an infusion of federal money, also calls for scaled-back public services, a temporary limit on corporate tax credits and cuts to state workers’ pay. 

In a press conference yesterday, Newsom urged Congress to pass the $3 trillion federal aid package proposed by House Democrats this week.

“This pandemic is bigger than any one state,” he said. “The magnitude of what we’ve been asked to do is very, very significant, and that’s why the federal government is so important.”

Now that the May revise has been published, the state legislature will begin budget committee meetings and negotiations to finalize a budget. The legislature must vote on a balanced budget by June 15; the governor must enact the budget by July 1 per the state constitution.