Higher Taxes Alone Won't Fix California's Infrastructure
Last year, Governor Jerry Brown called a special legislative session to address California's transportation infrastructure funding deficiencies. It's obvious to see why this issue needs attention. The American Society of Civil Engineers gives California's transportation infrastructure a dismal C- grade, saying it "is suffering from a lack of sufficient investment for the operations and maintenance of existing facilities and dedicated funding sources for new improvements to the system." They estimate that California needs to inject a one-time investment of $37 billion and an additional $10 billion per year for ongoing maintenance. And that would just raise California's grade to a B.
In response to Governor Brown's special session, Sacramento Democrats proposed an ambitious plan that would raise existing taxes and fees and create new ones bringing in an additional $7.3 billion per year. Sacramento Republicans, on the other hand, proposed a plan to modernize how California's government uses current transportation funding to better utilize current revenue streams.
So which approach would better address the problem? Assessing California's transportation policy highlights a few distressing elements: 1) the state currently doesn't prioritize transportation, 2) the state diverts money dedicated to transportation to other policy areas, and 3) the money that does go toward transportation is used very inefficiently.
As a result, it's clear that simply raising new money won't address the underlying, systemic reasons for California's crumbling transportation infrastructure.
Budgeting Priorities: Budgets are the best reflection of our lawmakers' priorities. Examining how expenditures across policy areas change over time, especially relative to overall spending, gives important cues to what our government considers important investment. Based on inflation-adjusted expenditure data, it's immediately clear that Sacramento doesn't prioritize transportation. Between fiscal years 2005-2006 and 2015-2016, real transportation expenditures increased 26%. This sounds impressive until you find out that total real expenditures increased by 29% over the same time period. But the news gets worse. Real transportation spending growth is 6 points below overall spending since the pre-recession peak and 19 points under overall spending since Brown's first budget since returning to the Governorship.
Current Transportation Revenue: Sacramento Democrats obviously believe that California doesn't collect enough revenue to prioritize transportation spending in the budgets they pass. This ignores two realities, however. For one, while it's true gas tax revenue has been falling because of greater fuel efficiency, Sacramento isn't required to only fund transportation policy with only transportation-dedicated revenue. They can use general fund revenue; they just choose not to use general fund revenues for transportation. Secondly, Sacramento doesn't even use all the current transportation-dedicated revenue for transportation. Sacramento has raided accounts meant to cover transportation maintenance to the tune of $9.2 billion, of which only $2 billion is legally required to be pay back - however there is ambiguity whether when paid back even this money will go toward transportation. Moreover, these raids will continue to grow by about $1 billion per year.
Transportation Bureaucracy: Lastly, it is apparent that the agency charged with implementing California's transportation policy, largely the Department of Transportation or Caltrans, fails to efficiently or effectively use the money that is prioritized for transportation. The best way to highlight this ineffective use of transportation dollars is to compare the state's disbursements per mile for various transportation-related activities - capital and bridge disbursements, maintenance, and administration - to the national average. Needless to say, California's isn't getting much bang for its transportation buck. In terms of capital and bridge disbursements, California spends per mile double the national average. For maintenance disbursements, California is 147% of the national average (and remember: the state has among the worst quality roads). And the Golden State's administrative disbursements per mile are 372% of the national average.
Even if Sacramento Democrats pass their plan to increase existing taxes and fees and create new ones, there's no evidence that 1) future budgets will prioritize transportation, 2) the new funds will actually even go toward transportation, and 3) California's transportation bureaucracy will effectively and efficiently use the money. California does need to rethink how it generates transportation revenue. The gas tax is a relic of the past and something more akin to user fees or a mileage tax model is more appropriate. But transportation tax reform is moot unless the state prioritizes transportation spending in its budget, actually uses all revenue it currently has at its disposal before determining whether more is necessary, and then ensures that the agencies disbursing the money use it effectively and efficiently. California's transportation infrastructure woes are a governance problem, first and foremost.