Governor Newsom’s January 10 proposed Fiscal Year 2023-24 budget forecasts General Fund revenues $29.5 billion lower than at the 2022 Budget Act projections, leaving an estimated budget gap of $22.5 billion in the 2023-24 fiscal year. Consequently, the Governor has proposed $2 billion of reductions to the $8 billion of transit capital funding committed by the 2021 and 2022 Budget Acts. At the same time, with federal and state emergency pandemic funds running out and ridership levels still lagging below pre-pandemic levels, transit agencies dependent on farebox revenue face a transit operations funding crisis that will force them to start cutting service or staff in the coming year. The state budget remains silent on this critical issue.
As we reported in our January 10 Funding Update, the Governor’s January 10 proposed budget would make the following specific reductions from the 2021 and 2022 Budget Acts.
Funding for the Transit and Intercity Rail Capital Program (TIRCP) would be reduced from an additional $2 billion in both fiscal years 2023-24 and 2024-25 to $1 billion in each fiscal year. Governor Newsom supports returning to the originally proposed $2 billion if the state's fiscal outlook has improved by January 2024.
Funding for the Zero-Emission Vehicle Funding Package would be reduced from $10 billion over five years to $8.9 billion. A $2.5 billion General Fund reduction across ZEV programs would be partially offset by roughly $1.4 billion in shifts to Cap-and-Trade funds to a net-$1.1 billion reduction. This would be distributed across the following programs:
- Equitable Zero-Emission Vehicles and Infrastructure: A reduction of $745 million General Fund, partially offset by a shift of $535 million to the Greenhouse Gas Reduction Fund. Despite this reduction, $2.1 billion (91 percent) remains.
- Heavy-Duty Zero-Emission Vehicles and Supporting Infrastructure: A reduction of $1.5 billion General Fund, partially offset by a shift of $839 million to the Greenhouse Gas Reduction Fund. Despite this reduction, approximately $5.3 billion (89 percent) remains.
- Zero-Emission Mobility: A reduction of $184 million General Fund, partially offset by a shift of $25 million to the Greenhouse Gas Reduction Fund. Despite this reduction, approximately $180 million (53 percent) remains.
- Emerging Opportunities and Federal Programs: A reduction of $133 million General Fund, partially offset by a shift of $40 million to the Greenhouse Gas Reduction Fund. Despite this reduction, approximately $1.3 billion (93 percent) remains.
Funding for the Active Transportation Program would be reduced by $500 million General Fund, with $300 million restored from State Highway Account funds, for a net reduction of $200 million. Despite the reduction, approximately $850 million (81 percent) of the original $1.05 billion of additional funds remains.
Funding for Grade Separations, initially allocated as $350 million in 2023-24, will be delayed and made available for dispersal in 2025-26.
Finally, the proposed budget reflects revenue reductions for the State Transit Assistance (STA) program of about $102 million; for intercity and commuter rail of about $40 million; for the Low Carbon Transit Operations Program (LCTOP) of about $25 million; and for the TIRCP of about $37 million.
In the face of these proposed cuts and recognizing to address the transit operations funding needs of California transit agencies, long-time public transit advocate State Senator Scott Wiener (D-San Francisco) is standing up for public transit. He told Transit California: “Public transit is an essential service that provides access to opportunity for millions of Californians as we go about our daily lives. We rely on public transit for so many essential aspects of life — work, school, healthcare, shopping, fun, and so forth. Even those who rely on a car to get around benefit from public transit, as it eases congestion, reduces pollution, and helps us meet our climate goals.”
Wiener continued: “We routinely underfund public transit operations at the state level compared to other states on a proportional basis, with transit agencies relying on a patchwork of fare revenues and local sources to sustain operations. I understand that the Governor’s proposed budget sought to address many key priorities in the face of a projected budget deficit, but now that emergency federal relief funds are running out and many transit agencies are facing potentially devastating budget cuts, it’s critically important for members of the Legislature to fight for these systems. The impacts to Californians will be serious if we do not,” warned the Senator.
In a letter to the Governor and Legislature in December 2022, submitted before the release of the Governor's budget, the California Transit Association urged maintaining the $4 billion committed to public transportation specifically across fiscal years 2023-2024 and 2024-2025. Furthermore, it called for action on the fiscal cliff: “We are requesting the Administration and the Legislature work with the Association to address operating funding challenges, while exploring ways to improve operations and bring riders back to California’s transit systems. Additionally, we are requesting that the Administration and the Legislature extend the statutory relief provided to California’s transit agencies through Fiscal Year 2024-25.” In a follow-up letter issued to the Legislature on January 25, in response to the Governor’s Budget, the Association provided greater specificity to our budget request.
In a February 2 opinion piece published in Capitol Weekly, the Association’s Executive Director Michael Pimentel noted that a recent survey of California transit agencies conducted by the Association found that more than 80 percent of respondents have already fully expended or will fully expend federal relief in FY 2023-24. Pimentel highlighted the efforts transit agencies are making to restore their ridership. “Even with these strategies, many agencies cannot expect a full recovery to pre-pandemic ridership levels in the short-term and others will continue to struggle because the landscape of in-office versus remote work has shifted the transit commuter paradigm,” said the Executive Director. “Nevertheless, these services need to be maintained for those who depend on them and to assist the state in meeting its long-term environmental, land-use, and equity objectives.”
The Association opinion piece urged the Governor and the Legislature to do the following:
- Restore the cuts to transit capital proposed in the state budget;
- Provide funding for transit operations to address near-term funding shortfalls and to assist agencies in regrowing their ridership; and,
- Extend state statutory relief for transit agencies through FY 2024-25.
Senator Wiener said: “We’re continuing to build a coalition of Legislators, advocacy groups, and other allies to push for transit operations funding, secure the restoration of transit capital funding, provide continued statutory relief to California’s transit agencies, and work with transit agencies to identify improvements they can make to increase ridership. We’ll continue engaging with legislative leadership, the transit sector, the business community, and advocates to achieve a positive result here.”
The Association’s Transit Operations Funding Subcommittee, chaired by San Diego MTS CEO and Association Vice Chair Sharon Cooney, is steering the industry’s efforts to secure the inclusion of transit operations funding in the state budget and, through Association staff, are working closely with Senator Wiener to coordinate our statewide strategy. It continues to meet weekly to advance a two-track process, focused on addressing our industry's short- and long-term operations funding needs. These efforts include consistent engagement with the Legislature, the press, and soon, the public. A recent example of these external efforts is the participation by Executive Director Michael Pimentel in a Joint Informational Hearing of the Assembly and Senate Transportation Committees, focused on the “Short-Term Crisis and Long-Term Transformation: How to Bring Back and Build Transit Ridership in California.” Our readers can watch Pimentel’s testimony and the testimony of several Association members on the Senate’s website here. As our budget request continues to take shape, they will be guided by under recently adopted principles, that acknowledge that any short-term transit operations funding the Association secures must be available to address budget shortfalls that would lead to service cuts and/or layoffs as well as to address ridership retention and growth strategies. Any long-term transit operations funding the Association secures must be flexible and available to address a broad range of service needs.