State May Come Up Short on Road Funds : Transportation: Changes in the U.S. highway program would cost state federal funds and spending flexibility, officials say.

President Bush’s budget for fiscal 1992 will propose changes in the U.S. highway program that will leave California with far less money for state and local projects than state officials expected when the federal gasoline tax was increased last December.

The budget, which will be unveiled at the White House on Monday, would revamp the federal highway program and boost spending for roads and mass transit to nearly $90 billion over the next five years, according to federal officials.

The changes are part of a new plan that Bush has said will give states more flexibility in administering federal funds. He also will seek to cut red tape on $15 billion in grants to states--echoing the “new federalism” of former Presidents Ronald Reagan and Richard M. Nixon.

The added flexibility apparently was promised to state officials during the budget talks last autumn in return for their support of an Administration-backed proposal to increase the federal gasoline tax to 14 cents a gallon from 9 cents a gallon.

But officials said that Bush’s new program will not provide the states with nearly as much money or flexibility as they have been seeking in funding for state and local projects. Furthermore, they said, it would require the states to pay as much as 40% of some highway projects.

In Sacramento, Carl Williams, Caltrans assistant director for federal programs and fiscal planning, said it appears that the Bush Administration has caved in to political pressures by putting the bulk of the money into the federal highway system.

“They have decided to have a highway system of political convenience,” he said.

The new legislation, which is designed to shape transportation policy beyond the completion of the interstate highway system, proposes to increase spending from the federal Highway Trust Fund from $16 billion in the current fiscal year to about $20 billion by 1996.

The President’s proposal also is expected to provide $3.3 billion for mass transit in fiscal 1992 and a separate fund for rebuilding the nation’s aging bridges.

It would establish a 150,000-mile system of “highways of national significance”--including the interstate system--that would receive about 70% of the funds allocated for each state, officials said. About 30% of the funds would then be given to state officials to allocate to state and local projects.

Currently, most funds received by the states are earmarked for certain types of state and local projects by the federal government.

The 70-30 split in funds is certain to disappoint officials in California and many other states, who had been advocating a 50-50 split.

Williams said that he is unhappy not only because of the 70-30 split but also because the federal government has chosen to designate 150,000 miles of highway as part of the federal system. He predicted that Congress would raise it to 200,000 miles before enacting a bill.

With such a big federal highway system, Williams said, there probably will not be enough money left for the states to receive even 30% of the total for state and local projects. He said that the federal system should not be increased beyond 80,000 miles.

Historically, California has recovered only about 85% of its contributions to the federal Highway Trust Fund, which is funded through gasoline taxes. Williams said that situation is unlikely to change under the new highway program.

In addition, officials said, the President’s legislation will increase dramatically the ratio of matching funds that the states will be required to pay on all projects.

The federal interstate system was built with 90% federal funds and a 10% state contribution. But on average, the federal government funds an estimated 83% of all projects.

While the 90-10 ratio is expected to continue for some projects related to the interstate system, officials said, the federal government wants to reduce its share of some projects to as little as 60%.

California is by no means the only state that opposes Bush’s proposal. Large Western states with small populations are expected to object to the President’s legislation even more strenuously because of the increased state matching funds and a formula for allocating the money that appears to favor urban areas.

As a result, officials said, the proposed legislation is likely to be heavily revised in Congress before it is enacted.

Likewise, many members of Congress are certain to oppose Bush’s plan to select about $15 billion in programs to turn over to the states in a single consolidated grant.

Although Administration officials have not yet specified which programs will be selected for transfer to the states, most of them are likely to be grant-in-aid programs involving health, education and housing.

California Rep. Leon Panetta (D-Carmel Valley), the House Budget Committee chairman whose support for such a proposal would be crucial, dismissed it on Thursday as “warmed-over revenue-sharing”--a reference to a similar plan instituted in the early 1970s by the Nixon Administration.

Another Californian, Rep. Jerry Lewis (R-Redlands), said that congressional leaders who met with top White House officials last Tuesday to discuss the budget proposals were clearly skeptical that such a program could pass Congress.

Lewis said that many members fear the Administration intends to shift these responsibilities to the states and then cut off federal funding, leaving the states to pick up the financial burden.

Steve Bell, former Republican staff director of the Senate Budget Committee and now a managing director for Salomon Brothers, a New York investment banking house, predicted that the effort would be “very, very unsuccessful.”

And Gail Fosler, a veteran Senate Budget Committee staffer and now chief economist of the Conference Board, a business-forecasting group, said that the states do not want jurisdiction over these programs because they grow too fast.

“These are probably programs that are going to be $18 billion next year,” she said.