Governor releases record $227 billion state budget for 2021-22

From the January 11, 2021 issue of CalAPA Asphalt Insider

Gov. Gavin Newsom on Friday unveiled his proposed state budget for the 2021-22 fiscal year that begins on July 1, a record $227 billion spending plan that reflects the state’s revenues have largely avoided the most-feared impacts of the COVID-19 pandemic. Spending on construction remains robust, and the importance of jobs linked to transportation were pushed to the forefront.

“Our budget reflects and understands the realities of this pandemic,” the governor said during a detailed presentation where he spent a considerable amount of time reviewing the events of the past year, when the global pandemic swept across the state and the nation, triggering public health restrictions on business activity and the most job losses since the Great Depression of the 1930s.

State tax revenues did not drop as much as had been feared, however, and the governor proposed a number of initiatives to assist with COVID-19-related impacts. Among those allocations is a $14 billion investment to provide relief for individuals and small businesses, funding for vaccine distribution and school reopening.

Transportation spending remained robust, reflecting the continuing impact of SB1 gas-tax revenue. Although fuel consumption dropped early in the pandemic, it has drifted higher and is approaching pre-pandemic levels. The closely-watched budget of the California Department of Transportation reached record levels.

“As the Administration continues to prioritize economic recovery and investments in California’s transportation infrastructure, Caltrans has used its share of the additional SB1 revenues to accelerate projects and support creation of new jobs in the transportation sector,” the governor’s budget summary states. “The Budget maintains sufficient planning and engineering staffing levels to continue developing and designing previously programmed projects.” Programming is government-speak for the schedule of projects in the pipeline.

Overall, the Caltrans budget for 2021-22 is projected to be $14.5 billion, compared to $13.4 billion in the current year and $11.7 billion in 2019-20. The total number of Caltrans employees is projected to be 20,668, which is nearly even from this fiscal year and last.

The job-creation aspect of work on California’s transportation system, which was heavily promoted during the run-up to the passage of SB1, the $50 billion Road Repair & Accountability Act of 2017, was given more prominence in this year’s budget than at any time in memory. Even the title of the transportation section of the budget was renamed to become “Department of Transportation Investments and Job Creation.”

“Job creation is foundational to the state’s recovery from the significant impacts of the COVID-19 Pandemic,” the opening of the transportation section of the budget states. “The Department of Transportation (Caltrans) currently estimates that approximately 11,000 jobs are created for every billion dollars spent on highway infrastructure. The California Transportation Commission allocated $22 billion for more than 1,200 projects in 2020, which will create thousands of jobs and spur economic recovery.”

SB1, the budget notes, provided “stable, ongoing, long-term funding for both state and local transportation infrastructure priorities. In the years since, Caltrans has moved forward with a number of projects that continue to create jobs.” Elsewhere in the budget it states, “For the four-year period from 2020-21 through 2023-24, $17.4 billion is programmed for new and ongoing state highway repair and rehabilitation projects in the State Highway Operations and Protection Program (SHOPP). SB1 has increased available SHOPP funding capacity by nearly $2 billion annually since 2018-19.” The bulk of pavement rehabilitation work, of great interest to the asphalt pavement industry, comes out of the SHOPP program. During the same time frame, about $2.4 billion will be available for new construction.

Jobs are also prominently featured elsewhere in the budget, including the consolidation of various labor-related departments and functions into a new entity, the “Department of Better Jobs and Higher Wages.” The budget proposes $8.5 million to expand construction apprenticeship and multi-craft pre-apprenticeship programs, a pipeline to the construction trades, which could result in approximately 650 jobs.

The state is also bullish on the positive impact of federal dollars on state finances. “The recently enacted federal COVID-19 relief bill provides $10 billion for highway projects, of which California is likely to receive approximately $900 million,” the budget states. “When combined with the more than $500 million California received in the redistribution of federal funding that went unused in other states, California is on track to move forward with all planned projects.” Although not mentioned in the state budget, the incoming Biden-Harris administration has placed transportation infrastructure investments near the top of its list of priorities, which also could bode well for transportation funding.

The budget is also largely silent on a controversy that erupted in 2019 when the governor said he wanted to “leverage” $5 billion in transportation funds for climate-change purposes. The budget makes reference to ongoing work by the California State Transportation Agency and stakeholders on a “Climate Action Plan for Transportation Infrastructure,” which is due by July.

An initial analysis of the budget by Transportation California, a CalAPA partner, found “no new or concerning proposals within the Transportation Budget.”

The Legislature will hold hearings and make substantial changes to the proposed budget over the next several months. The state Constitution says the spending blueprint must be approved and signed into law before the new fiscal year begins July 1. The governor’s budget page can be found HERE. The transportation budget is HERE.