May Revise

Blog

May. 19, 2022

Governor Newsom Maintains Major Proposed Investments in Transportation

By Jacob Herson
Managing Editor
Transit California

On May 13, 2022, Governor Newsom released the May Revise, his update of the Fiscal Year 2022-2023 budget based on the latest economic forecasts, which reflect a $49.2 billion discretionary surplus. In the May Revise, the Governor has maintained significant proposed investments in rail, transit, zero-emission vehicles and charging infrastructure, active transportation (walking and biking), greenhouse gas (GHG) emissions reduction, and climate adaptation that were contained in his January budget and March relief package. Notably, the May Revise drops a previous element of the Governor’s proposed relief package that would have paused the inflationary adjustment to gas and diesel excise tax rates. In another change, it significantly increases the level of proposed investment in active transportation projects from $750 million to $1.25 billion.

Speaking to Transit California about the May Revise, Association Executive Director Michael Pimentel observes, “through the May Revise, Governor Newsom has doubled down on his support for public transit and rail agencies with the goal of building a transformational transportation network that delivers on our state’s mobility, environmental, and equity objectives.” He notes that “the Association has continued to support the Governor’s push to direct a sizable portion of the state budget surplus, and we are excited to see similar efforts in the State Legislature. In the weeks ahead, it will be critical that all Association members contact their legislators to emphasize the importance of reaching agreement on a transportation funding package to be included in the state budget.

One-Time Transportation Investments

The May Revise maintains the following one-time investments in transportation infrastructure included in the Governor's proposed January budget:

Priority Transit and Rail Projects – $2 billion, to be administered through the Transit and Intercity Rail Capital Program, for transit and rail projects statewide that improve rail and transit connectivity between state and regional/local services.
Southern California Mobility Projects – $1.25 billion to be administered through the Transit and Intercity Rail Capital Program, to deliver critical projects in Southern California, defined as the counties of Imperial, Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura.
Heavy-Duty Zero-Emission Vehicles and Supporting Infrastructure – $935 million to deploy 1,000 zero-emission short-haul (drayage) trucks and 1,700 zero-emission transit buses and $1.1 billion for zero-emission trucks, buses, and off-road equipment and fueling infrastructure.
High Priority Grade Separations and Grade Crossing Improvements – $500 million to support critical safety improvements throughout the state.
High-Speed Rail – $4.2 billion to complete high-speed rail construction in the Central Valley, advance work to launch service between Merced and Bakersfield, advance planning and project design for the entire project, and leverage federal funds.
Active Transportation – $1.25 billion to the General Fund to advance projects that increase the proportion of trips accomplished by walking and biking, increase the safety and mobility of non-motorized users, and advance efforts by regional agencies to achieve GHG goals. The level of proposed investment in active transportation is revised up from the $750 million proposed in the Governor's January budget.
Climate Adaptation – $400 million for state and local climate adaptation projects that support climate resiliency and reduce risks from climate impacts.
Emerging Opportunities – $200 million to invest in demonstration and pilot projects in high carbon-emitting sectors, such as maritime, aviation, rail, and other off-road applications, as well as support for vehicle grid integration at scale.

Of the funds identified for Priority Transit and Rail Projects and Southern California Mobility Projects: not less than $1.5 billion would be administered as a set-aside for an "Existing TIRCP Projects Leveraging Federal & Local Funds Reserve" and would be available for multi-year grants to support the delivery of capital projects from the TIRCP and that can demonstrate that a supplemental state grant would leverage or maintain an identified source of significant local or federal investment; and, up to $250 million would be administered as a set-aside for a "Major Projects Project Development Reserve" and would be available for multi-year grants to support the delivery of capital projects and programs of projects that have entered or have applied to enter federal project development processes for at least a portion of the project or program of projects, and that expect to receive federal funding in the future.

Additional details on these proposals can be found here: Spring Finance Letter: EPA - ZEV Acceleration; Spring Finance Letter: CalSTA - Transit and Rail Funding Package.

Governor’s Relief Package

Additionally, the May Revise restates the Governor's relief package proposed in March to cushion the financial blow that many Californians have experienced because of the rise in gas prices and other inflation-induced price hikes. The package includes investments for the following transportation-related relief items:

$11.5 billion in direct tax refunds to Californians – This relief would be provided in the form of $400-per-vehicle direct payments to registered vehicle owners, capped at two vehicles. This approach will ensure relief is provided to seniors who receive Social Security Disability income and low-income non-tax filers. Previously, this proposal was scored at $9 billion.
$750 million in incentive grants to transit and rail agencies to provide free transit for Californians for 3 months – This relief would provide incentive grants to transit and rail agencies to provide free transit for Californians for three months, which was part of the early broad-based relief package. The state will provide an amount to agencies based on their 2019 fare revenues. In return, transit and rail agencies are required to provide free transit for at least three months.
$439 million to pause a part of the sales tax rate on diesel for one year – Currently, California's sales tax on diesel fuel is 13 percent. Of that amount, 10.5 percentage points is directed to various transportation programs, including the State Transit Assistance Programs, with the remainder (approximately 2.5 percentage points) going to the State General Fund. As proposed, this relief would only pause the 2.5 percentage points directed to the State General Fund, which would hold harmless investments in transportation programs. Previously, this proposal was scored at $600 million.

The May Revise drops a previous element that would have paused the inflationary adjustment to gas and diesel excise tax rates.

Implementation of Federal IIJA

The Federal Infrastructure Investment and Jobs Act (IIJA) provides a sizable amount of funding for transportation infrastructure nationwide. The May Revise outlines that 295 positions and $50 million will be provided to Caltrans for management and implementation of the IIJA funding, and 626 positions and $144 million will be set aside to assist in providing the technical support that will accompany the increased workload within the Department. The following programs will be eligible to receive the budgeted IIJA funding:

Existing surface transportation, safety, and highway performance apportioned programs;
A new bridge replacement, rehabilitation, preservation, protection, and construction program;
A new program that will support the expansion of an electric vehicle (EV) charging network;
A new program to advance transportation infrastructure solutions that reduce greenhouse gas emissions;
A new program to help states improve resiliency of transportation infrastructure;
Improving public transportation options across the state, with increased formula funding for transit.

Additional Investments

The May Revise also reflects that the State Transit Assistance (STA) program will see revenues of approximately $1.1 billion in FY 2022-23. Intercity and Commuter Rail would receive an estimated $368 million in FY 2022-23.

Beyond these direct investments in public transit and rail, the May Revise maintains the proposed $2 billion in General Fund support over two years to continue the state's efforts to address homelessness by investing in behavioral health housing and encampment cleanup grants. The May Revise also maintains $100 million to continue the Clean California Local Grant Program into 2023-24, which provides grants to cities, counties, transit agencies, tribal governments and other government agencies to beautify their communities and remove trash and debris.

Finally, the May Revise also maintains Governor Newsom’s proposed $300 million in one-time General Fund ($75 million in 2022-23 and $225 million in 2023-24) for the Affordable Housing and Sustainable Communities program to support land use, housing, transportation, and land preservation projects for infill and compact development that reduce greenhouse gas emissions. This is in addition to $407 million that flows to the program through the Greenhouse Gas Emission Reduction Fund.

Governor Newsom will be entering into negotiations with the Senate and Assembly to finalize a budget by June 15.