The Budget Agreement spares some transit funding sources from the Governor’s proposed cuts, but some questions about essential ongoing funds won’t be answered until later in the legislative session. Association members stepped up to fight for funds.
By Arianna Smith
Managing Editor
Transit California
Eager transit agencies now have answers to questions about state funding in 2025-26 . . . mostly.
On Tuesday, June 24, the Legislature announced that they had reached agreement with Governor Newsom on a final budget for the Fiscal Year 2025-26.
This final budget agreement builds on the legislative budget agreement, reflected in Senate Bill 101, which was passed by the Legislature on Friday, June 13 on a largely party-line vote, and is fully represented in that bill, as amended by two “Budget Bill Juniors” and twenty Budget Trailer Bills.
The good news for transit agencies is that this final budget agreement, which was passed by the Legislature and signed by Governor Newsom on June 27, rejects the billions of dollars in cuts to critical transit funding programs that the Governor proposed in his May Revise.
Executive Director Pimentel said of the budget agreement and the subsequent trailer bills, "The California Transit Association expresses our thanks and appreciation to Governor Newsom and legislative leaders for reaching agreement on a Fiscal Year 2025-26 state budget that advances critical state funding for California's transit agencies. In an incredibly difficult budget year, the state budget preserves all transit operations and capital funding, approved by the state in the Budget Acts of 2022 and 2023, and provides targeted operations support to create a funding bridge to regional self-help. With this budget, state leaders have affirmed the critical role public transit plays in providing Californians with mobility options, enhancing our quality of life, and combatting climate change."
Positive transit developments in the budget agreement
The final budget agreement rejects Governor Newsom's proposed cuts to Senate Bill 125's formula Transit and Intercity Rail Capital Program (TIRCP), which provides grants from the Greenhouse Gas Reduction Fund (GGRF) for capital improvements to modernize intercity, commuter, and urban rail systems, as well as bus and ferry transit systems; and the proposed cuts to SB 125’s formula for the Zero-Emission Transit Capital Program (ZETCP), which funds zero-emissions vehicles and infrastructure, as well as operating expenditures that avoid service reductions and increase ridership. The final budget agreement also rejects proposed cuts to the final TIRCP Cycle (Cycle 6). Taken together, the rejection of these proposed cuts results in the restoration of $1.078 billion in GGRF for these programs.
The final budget agreement also acknowledges the need to address fiscal emergencies amongst Bay Area transit agencies (AC Transit, BART, Caltrain, and SF Muni); the budget deal provides a two-year, $750 million emergency loan to these agencies "as they work through fiscal challenges until local revenues stabilize." The loan will only be made available if the agencies can demonstrate an ability to repay them, and specific terms of the loans still need to be finalized.
In additional good news, the final budget agreement also provides $132.2 million from the Air Pollution Control Fund, which is funded by penalties and fees collected on vehicular and nonvehicular air pollution control sources, for the Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project, which provides point-of-sale discounts for clean vehicles, from a recent legal settlement with Hino Motors.
However, the final budget agreement left some key transit funding questions unanswered. The budget currently defers decisions about extending the Cap-and-Trade program, which Governor Newsom proposes to rename to the Cap-and-Invest program, until later this Summer . The budget also takes no additional action on GGRF expenditures, including for continuous TIRCP and the Low Carbon Transit Operations Program (LCTOP), which provides operating and capital funds to reduce greenhouse gas emissions and improve mobility, especially for disadvantaged communities. In fact, the budget agreement is silent on Cap-and-Trade reauthorization and the vast majority of its corresponding GGRF expenditures.
Of further note, the GGRF appropriations described above are not yet reflected in bill language; they will be made later this session as part of this larger Cap-and-Trade Expenditure Plan.
Lastly, transit agencies and other public service providers must be aware that the final budget agreement includes $1.25 billion from the GGRF to fund CAL FIRE in Fiscal Year (FY) 2025-26, with an additional $500 million each for the subsequent two FYs, should the state general fund have a deficit. This could create pressures on one-time FY 2025-26 discretionary Cap-and-Trade expenditures.
Additional proposed trailer bill language, as well as additional legislative actions, are expected in the months ahead on GGRF, Cap-and-Trade, and more.
Association members activated to succeed
While we celebrate the good news in the final budget agreement, we must reflect on the reality that the protection of this critical transit funding was not guaranteed.
Throughout the months of May and June, the Association organized a steady drumbeat of public and private appeals to legislators, staff, stakeholders, and local communities to preserve existing transit funding and seek additional resources.
In May, Association members arrived in Sacramento for the Spring Legislative Conference and Advocacy Day with an urgent “no cuts” message. At the conference itself, legislative leaders Senator Scott Wiener (Chair of the Senate Budget Committee), Senator Catherine Blakespear (Chair of the Senate Environmental Quality Committee), and Assemblymember Lori Wilson (Chair of the Assembly Transportation Committee) served on the panel, “Improving California’s Climate Strategy through Cap-and-Trade Reauthorization,” where they answered questions and listened to concerns from Association members. Following the conference, numerous Association members descended on the State Capitol to plead their case to legislators, staff, and the Governor’s Administration.
Following the Association’s solicitation to members to provide real-world consequences of cuts, the Association was overwhelmed by the response of members eager to explain how the proposed budget cuts would affect their operations. The Association highlighted dozens of member responses across its social media platforms (Linkedin, X, Bluesky, Instagram, and Facebook) through eye-catching images and quotes to relevant policy-oriented audiences.
Sharon Cooney, Chair of the Association’s Executive Committee and Chief Executive Officer of the San Diego Metropolitan Transit System, penned an op-ed in the Times of San Diego that called on elected officials to build on the successes of post-pandemic ridership recovery instead of pulling back funding. “Now is not the time for the state to back-track on transit funding,” she wrote. “In fact, it should be doubling down on its investments in transit. Clean air, healthy communities and a thriving economy depend on it.”
Finally, just days before the announcement of the Legislature’s budget agreement, the Sacramento Bee published an op-ed by the Association’s Executive Director Michael Pimentel plainly stating the need for Governor Newsom to include robust, ongoing transit funding commitments in his proposal to restructure Cap-and-Trade Program, which he is renaming Cap-and-Invest. The current restructuring plan provides no guidance – or funding promises – to transit agencies, which have long depended on the program. “By essentially hitting reset on all past and current funding commitments, the governor’s plan places these projects — and dozens more like them, as well as one-time emergency funding for transit operations — in jeopardy. If we are serious about combating climate change, improving air quality and addressing the affordability crisis faced by everyday Californians, we must increase our investments in clean, efficient, affordable public transit.”
As negotiations on additional budget trailer bills continue throughout summer, Association members should continue to watch for action alerts and requests from the Association to highlight agencies’ success stories and ongoing challenges.
What happens next?
Still, many funding questions remain unanswered.
“The uncertainty of the present moment affects almost every aspect of the state budget,” wrote Jason Sisney, Budget Advisor to Assembly Speaker Robert Rivas, on his #CABudget blog. Amongst the factors that could affect the content of the trailer bills that will be passed later this session, he listed ongoing changes to federal priorities on tariffs and possible funding cuts to state activities, delayed tax revenues from Los Angeles County due to wildfire recovery, the possibility of a coming economic recession, future annual deficits projected by the Department of Finance and the Legislative Analyst’s Office, and rising costs in key state-funded programs.
The Association and our members must remain vigilant in tracking additional budget bills and communicating the benefits of continued investment in public transit.
In the weeks ahead, as discussions turn to Cap-and-Trade, the Association and our members will need to continue to engage Governor Newsom and the Legislature to ensure that, as the GGRF Expenditure Plan is developed, expenditures in the continuous TIRCP and the Low Carbon Transit Operations Program (LCTOP) are maintained or increased.