President Obama’s promised economic stimulus package could not come at a better time for the cash-strapped state of California, though a bailout of a massive projected budget deficit appears unlikely.
With a Feb. 1 deadline that state controller John Chiang says would pretty much dry up the state’s cash flow, the budget deficit—estimated at $42 billion through June 2010—will mean more important infrastructure construction projects are likely to be halted or even cancelled.
Gov. Arnold Schwarzenegger (R) and legislature leaders from both parties have been locked in a stalemate that has forced the state to delay payment for some contract work as well as state income tax refunds and many health and welfare programs. Delaying $3.7 billion in obligations could keep the state afloat through February, says Chiang.
“The $42-billion deficit is a rock upon our chest, and we cannot breathe until we get it off,” the governor said during his Jan. 15 state-of-the-state address.
The state constitution mandates a balanced budget. Only four budgets in the past 20 years have been on time; approval requires a two-thirds vote, and Republicans, who have a minority in the assembly and senate, have effectively blocked new taxes, which even Schwarzenegger now supports.
In December, the state had to suspend funding on more than 2,000 infrastructure projects that were already under way. On Jan. 16, the state’s top financial body, the California Pooled Money Investment Board, agreed to free up $650 million to pay for contract work already done, including $102.9 million for work on California Dept. of Transportation highway and infrastructure projects.
On Jan. 14, the California Transportation Commission, which allocates funds for the construction of highway, passenger-rail and transit improvements, declined to allocate $293.5 million for 27 transportation projects, including $253 million from Proposition 1B, the 2006 voter-approved transportation bonds.
The Proposition 1B allocations would have gone to seven projects across the state, including the $190 million to construct a fourth bore of the Caldecott Tunnel in Alameda and Contra Costa counties in the San Francisco Bay Area.
“Proposition 1B-funded projects support thousands of jobs and create improvements to California’s infrastructure that will last for decades,” says Will Kempton, Caltrans director. “Without a budget solution, funding for these projects has come to a standstill. This places needed jobs at risk and could further jeopardize the state’s fragile economy.”
On the Caldecott Tunnel project, a 12-week bidding process was expected to begin in the first quarter, says Bob McCleary, executive director for the Contra Costa Transportation Authority, a partner with Caltrans on the project.
“We can still get it going with just a few weeks’ delay if the budget was finalized or we get funded with the stimulus,” McCleary says.
CTC is charged with approving the allocation of bond funds, but environmental groups challenged the Caldecott Tunnel’s environmental impact statement in court. If they prevail, the tunnel could be delayed while the EIS is amended, adds McCleary.
He says Pasadena-based Parsons Corp. has already completed preliminary design for the new bore, which will be 3,389 ft long and help relieve congestion in the tunnel’s other three bores on crowded State Route 24.
The majority of the current Proposition 1B projects are below $3 million. Halting funding would hit small local contractors and engineers especially hard.
How and where the proposed stimulus funds from Washington are allocated now is the main question. David Anderson, Caltrans spokesman in Sacramento, says the department’s federal liaison has not yet heard any specifics.
“California, unlike many other states, has not submitted any projects on a to-do list,” he says. “We’re just waiting for specific information on how the stimulus will be distributed.”
At the U.S. governors’ annual meeting in Philadelphia last month, Schwarzenegger met with the new administration and identified $28 billion in infrastructure projects ready to break ground in California within 120 days. Several weeks later, in a follow-up letter, he revised that total to $44 billion in projects that are ready to start construction or place orders.
The projects in communities across California include $11.8 billion in energy and energy-efficiency projects, $11 billion for investment in road, transit and rail construction, $8.5 billion for water and sewer projects, $1.1 billion for school construction and $5 billion for airport, park, public safety and other public infrastructure.
The governor says these projects would generate nearly 800,000 jobs over the life of the projects.