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LEAGUE OF WOMEN VOTERS OF CALIFORNIA EDUCATION FUND Nonpartisan In Depth Analysis of Proposition 2 TRANSPORTATION: FUNDING.

Legislative Constitutional Amendment

THE QUESTION

Should the state Constitution impose conditions on the repayment of loans of transportation revenues to the General Fund and local entities?

PROVISIONS

• Loans to the state General Fund must be repaid in full during the same fiscal year in which the loan is made, except that repayment may be delayed up to 30 days after a state budget is enacted for the subsequent fiscal year.

• Loans can be extended up to three fiscal years only if the Governor proclaims a state of fiscal emergency that would have a significant negative impact on the General Fund, or if General Fund revenues decrease from one year to the next.

• The Legislature can authorize the loan of state transportation funds to city and county transportation agencies for up to four years, to be repaid with interest, for purposes authorized by the Constitution.

  In addition, Proposition 2 declares that local transportation funds (LTFs) are trust funds and may not be abolished. The measure prohibits any county and the Legislature from authorizing the expenditure of LTF money for any purposes other than those relating to local transportation.

BACKGROUND

Since the Great Depression, the State Constitution has required Californians to pay state and local taxes and fees on their motor vehicles and the fuel they consume. At the state level the revenues generated by these fees and taxes, known as "user fees," have been earmarked for transportation-related purposes. Revenues from a sales tax on fuel must be used on highway or mass transit construction. Revenues from motor vehicles, including truck weight fees, vehicle registration fees,* and driver's license fees, can be used for highway or mass transit purposes. They can also be used for the administration and enforcement of state traffic laws (the California Department of the Highway Patrol) and laws relating to environmental effects of traffic, such as the Air Resources Board.

The Constitution also authorizes each county board of supervisors to impose a uniform local sales and use tax rate of up to 1 1/4 percent. A portion of these revenues can be deposited in the county's local transportation fund to be used primarily for transit purposes.

For 60 years, these revenues were used for the purposes specified in the Constitution. However, during the early 1990's, the state faced a severe recession and General Fund deficit. The Legislature and Governor began to divert transportation funds as loans to balance the General Fund. The Constitution permits the General Fund to borrow these transportation funds "temporarily" and requires that they be repaid. However, the Constitution does not define "temporarily," nor does it specify when the loans must be repaid. So these loans have, in most cases, become permanent diversions of transportation funds for General Fund purposes. In addition, in 1995-96, the Legislature authorized the diversion of $800 million in local transportation funds to mitigate Orange County's bankruptcy and a general funding shortfall in Los Angeles. Thus a total of almost $1.2 billion in state and local transportation resources have been diverted for other purposes since 1991-92.

Proposition 2 limits the repayment period for loans or transfers from transportation funds to the same fiscal year in which the loan or transfer is made. This effectively eliminates the use of a loan or transfer as a budget-balancing tool since that requires that repayment be made in a future fiscal year. The measure does provide a safety valve: a 3-year loan of state transportation funds may be made to the General Fund if the Governor proclaims a "state fiscal emergency," or if General Fund revenues are significantly less than the previous fiscal year. The Governor has never proclaimed a "state fiscal emergency."

FISCAL EFFECT

According to the Legislative Analyst, this measure would not result in additional borrowing costs or savings, so it probably would have little or no fiscal impact on state or local governments.

A YES vote on Proposition 2 means that restrictions would be placed on loans of state transportation funds to the General Fund to ensure their repayment. Local transportation funds derived from the one-quarter cent county sales tax are designated trust funds and must be used for specified transportation purposes.

A NO vote means that state transportation funds can continue to be used for General Fund purposes without additional restrictions. State statutes could allow local transportation funds to be diverted for other purposes.

SUPPORTERS SAY

• This is the voters' opportunity to stop the bureaucrats from siphoning transportation funds into other government programs. For example, funding for road and bridge improvements has lagged 30 percent behind goals specified in the State Transportation Blueprint approved by voters in 1990.

• The present constitutional requirements for repaying loans to transportation funds are too general, vague or nonexistent.

• This measure will give the state government flexibility to use the funds in case of a severe cash flow shortage, but will protect transportation funding from long-term reallocations for other purposes.

OPPONENTS SAY

• State transportation accounts contain large amounts of revenue, a portion of which can be tapped to help balance the General Fund budget without critically jeopardizing overall transportation programs.

• Diverting these funds prevents additional cuts to education, welfare programs, Medi-Cal, prisons, or other General Fund-supported programs, or increases in tax or fees.

• Proposition 2 forgives the return of nearly $1.2 billion in transportation related funds that have been loaned to the General Fund.

• This measure's restrictions would hamper the Legislature's ability to respond to future financial needs or emergencies.

SUPPORTERS AND OPPONENTS

Official ballot arguments in favor are signed by Assembly Member Kevin Murray, Assembly Transportation Committee Chair; Allan Zaremberg, president, California Chamber of Commerce; and Donald R. Doser, AFL-CIO Operating Engineers Business Manager.

No ballot arguments were filed in opposition.

For more information:
Supporters: Transportation California (916) 600-4260

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Last updated: September 13, 1998
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