State Budget Update

FY 2009-10 State Budget Diverts Over $1 Billion in Public Transit Funds

On July 28, 2009, Governor Schwarzenegger signed the revised FY 2009-10 state budget.  In a last-minute change adopted by the Assembly, the final budget excluded the diversion of local gas tax funds from cities and counties — sparing Bay Area cities and counties a $184 million loss — but it still contains deep cuts to public transportation funding, with about $1.2 billion in public transit funds redirected to the General Fund.  The budget fully funds Proposition 42, funded by the sales tax on gasoline and estimated to generate a total of $1.4 billion statewide in FY 2009-10. However, the $1.2 billion in diverted public transit funds includes public transit’s share of Proposition 42 (20 percent of the total or $288 million) which the budget redirects to transportation-related costs in the General Fund.

Public Transit Diversion Remains Key Part of Budget “Solution”

While the elimination of state funding for transit operations was made in the February version of the FY 2009-10 budget and therefore is not a surprise to transit operators, the repercussions of these cuts are being felt across the region as local operators raise fares, cut service and lay off workers. The latest revenue projections from the Department of Finance indicate that over $800 million in State Transit Assistance (STA) funds will be diverted statewide, including $291 million for the Bay Area. Click here for a detailed breakdown of the loss of STA funds by Bay Area transit operator. When combined with $444 million in other public transit funds that would have gone towards transit capital projects in the State Transportation Improvement Program or intercity rail improvements, the total loss of transit funding statewide is $1.2 billion. These diversions were made despite a Court of Appeal ruling last June finding that the state’s diversion of public transit funds in FY 2007-08 was illegal.  The state is currently appealing this ruling to the State Supreme Court.

Property Tax Diverted from Three Bay Area Transit Agencies

In addition to the local street and road and STA diversions, several Bay Area transit operators are also affected by the borrowing of local property taxes, including AC Transit and BART, which will lose $7.5 million and $2.5 million. If there is a silver lining to this diversion, it is that these funds will be repaid within three years with interest.

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