New Public Works Fiscal Plan Urged

State Legislative Analyst Elizabeth Hill called on lawmakers and Gov.-elect Gray Davis on Monday to earmark nearly $16 billion over the next 10 years for improvements to California’s aging and ailing public works system.

Hill added her voice to a rising chorus of business executives, labor officials, educators and others demanding a remedy to the deteriorating conditions of highways, college campuses, schools, water treatment plants and parks.

In a report, Hill, the Legislature’s nonpartisan budget advisor, said demands by California’s burgeoning population on an increasingly stressed infrastructure will intensify and require billions of dollars in new public works. In 40 years, the state will have nearly twice as many people as it had in 1990, according to a study released last week by the California Department of Finance.

She noted that for years rehabilitation and construction of new public works projects have been burdened by unstable sources of financing, ad hoc planning and lack of clear priorities.

“We felt it is timely for both the new Legislature and new administration to focus attention on this particular issue,” Hill told a news conference.

She urged Davis and lawmakers to overhaul infrastructure planning and financing immediately, but said the Legislature should develop a long-term plan on its own if Davis “does not indicate a willingness to take a new approach by spring 1999.”

Hill’s proposal drew support from the independent California Business Roundtable, which is composed of top corporate executives and is prompting its own similar plan. “It’s very well done,” said president William Hauck of the analyst’s report.

A Davis spokesman said the governor-elect had not yet seen the report.

Hill did not estimate how many billion dollars worth of infrastructure projects are facing “unmet needs,” but the Business Roundtable last summer set the price tag statewide at $33 billion.

As a major component of reform, Hill said, California should set aside 6% of its general fund budget each year exclusively for public works--in much the same way as other permanent government programs are financed.

The earmarked funds would be used to pay interest on construction bonds as well as for “pay as you go” construction of other projects.

Hill estimated that if no new bonds are approved, her proposal would produce about $800 million in the next fiscal year, a sum that would grow to nearly $16 billion over the next decade.

Currently, with some exceptions, there is no dedicated stream of general fund money to pay for state public works projects. The state primarily pays for such construction by selling bonds.

The interest on the bonds is paid by the general fund. The payments usually reduce the general fund by about 5% a year, and leave a relatively small sum to be spent on new projects, Hill said.

Under Hill’s proposal, the state would not only designate more money directly for public works projects, but also would have revenue to pay off bonds and begin new construction projects.

Hill said dependable financing over the long term would recognize that California faces a “significant challenge of meeting its infrastructure needs” and would “address the challenge with an ongoing program.”

Hill said she believed there is a legislative consensus in support of the 6% level.

Although Hill and the Business Roundtable agreed that the state should designate a specific amount of money for construction, the business group has proposed a different funding source.

Last summer, the executives issued their own proposal for reorganizing infrastructure planning and financing. It included earmarking one-quarter cent of the current state sales tax to pay for construction.

Over 10 years, $11.8 billion in sales taxes would be dedicated to public works projects, the business organization estimated. The diversion would reduce the general fund by only 1.6% over the same period, the group said.

The round table’s Hauck on Monday praised Hill’s report, especially the recommendation that general tax revenues be committed to financing long-term infrastructure improvements.

“We need a capital facilities plan and financing mechanism that goes beyond general obligation bonds,” Hauck said. “We cannot close the gap that exists on the basis of bonds. It wouldn’t be prudent to do so.”