State Transit Program at Financial Crossroads : Transportation: Officials may have to delay projects or raise taxes to pay for them. Recession, defeat of a bond issue and earthquake-related costs are blamed for the shortfall.

Three years after voters increased the gasoline tax to pay for improvements to roadways and public transit, California’s transportation program is facing a new financial crisis that will force officials to either delay numerous highway and rail projects or raise taxes.

Financial experts in the California Department of Transportation have quietly warned state leaders of the predicament. They blame the recession, the defeat of a $1-billion rail bond issue and unexpected expenses for earthquake retrofitting of toll bridges for producing a $3-billion shortfall in transportation funds.

“It doesn’t leave us much choice,” said Assemblyman Richard Katz (D-Sylmar). “Option A is to delay or cut projects; Option B is to increase revenues.”

The shortage of funds in a program that had been considered the most financially stable in state government is triggering heated debate among California’s transportation leaders.

Some want to redesign the entire program to fit the new financial constraints--a politically unpopular move that would require numerous projects to be downsized, delayed or eliminated. Officials say projects planned for construction before 1995 would probably be spared from such cutbacks.

Other policy-makers want to go forward as planned with the understanding that by 1995, state leaders would have to come up with new taxes or a bond issue to finish paying for the projects. A similar strategy was followed in 1988, when the state also faced a shortage of transportation funds.

“Unfortunately, I don’t know if there is any solution that is good from a pure political standpoint,” said Robert Shelton, a California Transportation Commission member from Corona del Mar. “The bigger picture is that California is in trouble on many fronts in terms of its ability to fund important priorities.”

At the center of the debate over transportation financing is a planning document known as the State Transportation Improvement Program, which provides a detailed blueprint of all the road and rail projects to be undertaken by Caltrans over a seven-year period. Traditionally, projects included were virtually assured of being completed; those that did not make it were likely to remain on the drawing boards forever.

Consequently, Katz said, there has always been political pressure to approve as many projects as possible.

Once projects are proposed by local transportation agencies, the power to determine which ones become part of the state improvement program rests with the nine-member transportation commission appointed by the governor. The commission revises the plan every two years so new projects can be added to replace those completed or already in progress.

The current plan was approved in 1992 when the commission, confident that a new 9-cents-a-gallon gas tax increase would provide ample funds for a greatly expanded program, called for $12 billion in projects.

For several reasons, there will not be as much funding as projected. The biggest blow came when voters defeated a rail bond measure in 1992. The proposal was the second in a series of three $1-billion rail bond efforts. The first issue was approved in 1990 and the third will not go on the ballot until 1994.

Since the the bond mesasure’s defeat, the gasoline tax, the prime source of state funds for transportation, has produced $600 million less than anticipated because motorists have cut down on their driving.

Also unexpected was a $700-million price tag for seismic retrofitting of the state’s toll bridges. Since the 1989 Loma Prieta earthquake, the Legislature has demanded that retrofitting of bridges be given top priority.

Federal funds have amounted to $300 million less than expected this year and new federal requirements have added $200 million to highway building costs. Meanwhile, the Legislature this year borrowed $300 million from highway accounts to help balance the state budget.

In addition, projects such as a Disney resort expansion in Orange County, for which Gov. Pete Wilson has pledged $60 million in assistance, could conceivably come from Caltrans special funds. However, Wilson has said the state has found enough money from savings on freeway projects so the state’s participation in the Disney project will not add to the Caltrans shortage.

Although the commission has responsibility for conforming the planned transportation improvements to available revenues, the latest financial crisis is likely to be resolved by the governor and the Legislature.

Katz, chairman of the Assembly Transportation Committee, sees little likelihood that a tax increase could win approval and believes the improvement program should be scaled back. He accuses the transportation commission of creating the crisis by planning projects in 1992 that assumed voters would approve $3 billion in rail bonds.

“What I find frustrating is that first they created the circumstances that caused the shortfall and now they’re out there saying, ‘Oh, my God, we have this deficit and projects aren’t going to be done if we don’t have more money,’ ” said Katz.

As one of the architects of the gas tax increase approved by the voters in 1990, Katz said he believes he would be breaking faith with the electorate if he were to ask for another tax increase.

Quentin L. Kopp (I-San Francisco), chairman of the Senate Transportation Committee, agrees that a tax increase would be unpopular, but he believes it is ultimately the best way to restore money for roads and trains.

He favors moving forward with the current transportation blueprint. He said the program would not begin to run out of money until 1995, at which point lawmakers would have the responsibility of coming up with new sources of revenue.

“I’m of the school that does not believe projects should be eliminated,” he said.

Commission Vice Chairman Dean Dunphy of San Diego said another approach would be for the panel not to adopt an improvement program in 1994. Revenues could catch up because no new projects would be added to the planning process and the current projects would be stretched over an additional two years.