Proposition 91 - Transportation Funding Restrictions

What it does

Proposition 91 is an attempt to eliminate the ability of the Governor and the state Legislature to use the proceeds of the state gasoline sales tax and the fuel excise tax for non-transportation uses, even during extreme fiscal emergencies. This is the third measure in recent years to further restrict the use of transportation funds. In 2002, voters approved Proposition 42, which initially dedicated the gas sales tax to transportation. But the proposition contained a provision that allowed the Legislature and the governor to divert funds to non-transportation expenses during fiscal emergencies. Last fall’s Proposition 1A further strengthened the dedication of gas taxes to transportation but allows the use of these transportation funds for non-transportation uses twice in a 10-year period so long as the “loan” to the General Fund is repaid with interest.

Prop. 91 would make two significant changes that would further limit the state’s ability to use transportation funds for non-transportation purposes. First, it would eliminate the state’s ability to transfer money from the “Transportation Investment Fund” portion of the sales tax on gasoline to non-transportation uses, even in a fiscal emergency (as is allowed under existing law). Second, it would also eliminate the authority to loan monies from the fuel excise tax to the state’s General Fund for multiple years. It would allow some of these funds to be transferred on a short-term basis when the state has cash-flow problems. However, those monies would have to be repaid within 30 days of the adoption of the following year’s budget.

In a change that may affect transit funding, Prop. 91 reverses the restrictions on loans to the state’s General Fund from the “Public Transportation Account” (which is funded also by the sales tax on gasoline). The scope of this change remains unclear.

Why it is on the ballot

Prop. 91 is an initiative constitutional amendment and statute that was placed on the ballot through the submission of signatures. Oddly, its official proponents are encouraging voters to vote “no” in February, because the proponents consider that Proposition 1A (approved by voters in November 2006) already has accomplished the objectives they intended.

In January of 2006, the California Alliance for Jobs, a lobbying group of construction companies, engineering companies and labor unions began a petition drive on an initiative that attempted to further limit the use of transportation funds for non-transportation uses. The group referred to its initiative as a “legislative fix of Prop. 42.” The concern with Prop. 42 was that the funds allocated to transportation in Prop. 42 were too frequently “raided” by the state Legislature for non-transportation uses. The Alliance sought to use the threat of its very strict measure as a bargaining tool to encourage the Legislature to place a more moderate but effective measure onto the November 2006 ballot. The belief was that if the Legislature endorsed the measure, there would be less political opposition.

During the first half of 2006, the Alliance was simultaneously gathering signatures and attempting to work with the state Legislature on a compromise measure. However, it was not until April and May of 2006 that the Legislature appeared poised to put a compromise onto the ballot. This was near the deadline for submission of signatures to qualify measures for the ballot, so the Alliance submitted more than 600,000 signatures (and claims to have withheld an additional 400,000). Then, on May 5, the Legislature submitted a compromise measure for the November ballot — Prop. 1A — alongside four infrastructure bonds — Propositions 1B, 1C, 1D and 1E — totaling more than $40 billion.

Although the state Legislature had achieved what the Alliance sought, the signatures had already been submitted and were counted. Because the number the Alliance had submitted was so close to the minimum required, just 7,000 more than the minimum, the verification process took a long time and the state did not officially qualify the measure in time for the November 2006 ballot. Although 77 percent of the voters in November 2006 approved Prop. 1A, there was no way to remove the already-approved strict initiative — which became Prop. 91 — from the next state ballot.

The Alliance now claims that it wants to continue its commitment to the governor and the state Legislature to support the Prop 1A compromise, and thus the Alliance is not campaigning for Prop. 91. In fact, the Alliance is listed as the official proponents but it has taken out a paid argument encouraging voters to oppose Prop. 91. There are no proponents actively supporting Proposition 91

Pros

Arguments for this measure:

• The current law is not strict enough to protect transportation funding. Proposition 1A still allows politicians to divert the transportation funds to non-transportation programs during times of fiscal crisis, thereby exacerbating the condition of streets, highways and mass transit.
• Allowing the state to use transportation funds for other uses drives up the cost of transportation projects, as one-year delays can increase the price of a capital project by 10 percent or more.
• Prop. 91 would make funding for highways, streets and roads, which are the main recipients of the gas tax, more stable on a year-to-year basis.
• Prop. 91 does allow the gas-tax money to be loaned to the state for short-term cash-flow challenges, but does not allow the state to divert it for several years while transportation projects languish.
• The voters already have approved two prior versions of laws that require gas-tax revenues to be used to improve transportation and mass transit, and voters have a reasonable expectation that this will happen. Diverting transportation funds to general government uses can create voter distrust that will make it more difficult to gain voter approval of future transportation-funding measures. Prop. 91 furthers the voters’ will by further closing the “fiscal emergency” loopholes.

Cons

Arguments against this measure:

• This measure was meant as a political lever in 2006 to force the state Legislature to restrict the raiding of transportation funds. It was always intended as a threat more than as a serious policy consideration of the best way to support transportation funding.
• The measure we currently have — Prop. 1A, which was the result of the political pressure exercised by the threat of the more restrictive Prop, 91 — works fine. Prop. 1A’s set-aside for transportation spending provides sufficient protection for transportation projects, but Prop. 91 goes too far by eliminating any discretion when there are changes in fiscal circumstances. It is irresponsible to further tie the hands of the governor and the Legislature to redirect spending in a crisis.
• During a future fiscal crisis, there is likely to be increased pressure on social services, education and other programs to bear the cost of resolving the fiscal emergency. These services typically go to the most vulnerable populations in the state. The cost to the state of eliminating such programs and attempting to restart them a year or more later is significant. Delaying most transportation projects by a year causes less economic, fiscal and social harm. Further, the existing Prop. 1A limits the extent to which transportation projects can be bumped during a fiscal crisis.
• Given the billions of dollars in approved spending on transportation projects, there will be sufficient work for everyone in the existing transportation and construction sectors. Therefore, there would be minimal economic harm from any potential delays.
• Prop. 91 does not provide the same level of protection for transit funds as it does for funds that are primarily used for roads and highways. For San Francisco, the potential loss of transit funds is a major concern.
• State program priorities change. It is wrong to lock spending priorities — transportation and mass transit — into the state constitution.

SPUR’s analysis

Despite the fact that Prop. 91 may be effective in preventing the use of most transportation funds for non-transportation uses, it may cause unintended consequences. In particular, it is written in such a way as to prevent the use of the Transportation Investment Fund by the state, but may allow Public Transportation Account funds to be loaned to the General Fund without a restriction on when they must be repaid. The Public Transportation Account funds are used entirely by public-transit agencies. Therefore, Prop. 91 could have the effect of making public-transit funding less certain.

In addition, Prop. 91 was designed in an attempt to get the Legislature to act for the November 2006 ballot — which it did. Even the initial proponents have not argued that Prop. 91 is the best form of legislation they could hope for. In short, Prop. 91 is a measure that was written to solve a problem that already has been solved through the political process. Unfortunately, Prop. 91 is now on the February ballot and we are forced to review it on its merits. As such, we have strong reservations and urge a “no” vote. Not only does Prop. 91 impose too many restrictions and limit flexibility, it could disproportionately harm public-transit funding by only allowing those funds to be loaned only to the General Fund. In 2006 we supported Prop. 1A, the supposed fix to the practice of raiding transportation funds. We stand by our prior endorsement.

SPUR recommends a “No” vote on Prop. 91.