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AB-2698 Infrastructure financing.(2001-2002)

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AB2698:v98#DOCUMENT

Amended  IN  Assembly  April 15, 2002

CALIFORNIA LEGISLATURE— 2001–2002 REGULAR SESSION

Assembly Bill
No. 2698

Introduced  by  Assembly Member Cox

February 22, 2002

An act to repeal and add Article 5.5 (commencing with Section 16407) of Chapter 2 of Part 1.5 of Division 4 of Title 2 of the Government Code, relating to state infrastructure financing, and declaring the urgency thereof, to take effect immediately making an appropriation therefor.


LEGISLATIVE COUNSEL'S DIGEST


AB 2698, as amended, Cox. Infrastructure financing.
Existing law requires the Governor to submit annually a proposed 5-year infrastructure plan to the Legislature.
This bill would delete obsolete provisions relating to the former Capital Outlay and Savings Fund and create the California Twenty-First Century Infrastructure Investment Fund (Infrastructure Investment Fund) in the State Treasury. The bill would transfer a specified percentage percentages of revenues from the General Fund to the Infrastructure Fund commencing in the 2003–04 first fiscal year, beginning with the 2004–05 fiscal year for year, in which General Fund expenditures exceed the level of General Fund expenditures in the 2001–02 fiscal year. 75% of those funds would be continuously appropriated to the Controller for allocation to cities and counties for local infrastructure expenses, and the remaining 25% would be subject to appropriation by the Legislature. The bill would provide that primary responsibility for preparing an annual plan to expend these funds shall be in the Department of Finance unless the Governor directs another state agency to carry out this responsibility. The bill would also provide that the Infrastructure Investment Fund and its related provisions shall not become operative until the Legislature enacts a statute to allocate the revenues in the fund.
The bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: YES   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares the following:
(a) An investment in California’s infrastructure is an investment in California’s future. The quality of life in California depends on the quality of our children’s education and on the condition of the state’s transportation network, water system, and parks.
(b) California’s education, transportation, and resource infrastructure is critically underfunded. The State Department of Education estimates a thirty-six billion dollar ($36,000,000,000) need to build classrooms for our school children. While the population of the state has increased by 50 percent, and the number of vehicles on the road has doubled, the state highway system is the same size today as it was 25 years ago. The California Transportation Commission has documented one hundred eighteen billion dollars ($118,000,000,000) in unmet transportation needs.
(c) Over the course of the next 10 years, California faces an eighty-two billion dollar ($82,000,000,000) to ninety billion dollar ($90,000,000,000) shortfall in its infrastructure investment, as estimated by the Department of Finance and the California Business Round Table.
(d) California has often used bonds to pay for infrastructure investments. However, bonds alone can not dent the magnitude of California’s infrastructure investment deficit. According to the Department of Finance’s 1999 Capital Outlay and Infrastructure Report, if California issued thirty-two billion dollars ($32,000,000,000) in new bonds, 6 percent of the state’s future annual budgets would be committed to repay the debt.
(e) In addition, bonds are the most costly and most dangerous way to pay for improvements. For every two dollars ($2) California raises to improve our infrastructure, an additional one dollar ($1) must be spent to pay the bankers and investors who finance the bonds. The total cost to repay thirty-two billion dollars ($32,000,000,000) in bonds would exceed fifty billion dollars ($50,000,000,000). If California’s economic growth again slows down, bonds must still be repaid, squeezing out investments in education, child care, and other important programs.
(f) According to the Legislative Analyst’s 1998 report, Overhauling the State’s Infrastructure Planning and Financing Process, the state needs to take two main steps to provide a more stable funding source for our infrastructure needs: dedicate a given level of General Fund resources for infrastructure, and reserve a greater proportion of the spending for pay-as-you-go financing.
(g) In the 1960s, when California created the nation’s finest education and transportation systems, the state routinely committed 7 to 10 times more of the General Fund to capital outlays than we do today.
(h) Establishing a California Twenty-First Century Infrastructure Investment Fund and slowly increasing the amount of the General Fund committed to capital outlays is the only realistic prospect California has to reverse 25 years of neglect of our infrastructure. Such a program could conservatively be expected to raise over seventy-five billion dollars ($75,000,000,000) in the next 20 years.
(i) The California Twenty-First Century Infrastructure Investment Fund will also protect against the risks of bonded indebtedness. By limiting the annual growth of the Infrastructure Investment Fund to no more than 25 percent of annual General Fund growth, education, child care, and other necessary services will be protected during periods of economic recession.

SEC. 2.

 Article 5.5 (commencing with Section 16407) of Chapter 2 of Part 1.5 of Division 4 of Title 2 of the Government Code is repealed.

SEC. 3.

 Article 5.5 (commencing with Section 16407) is added to Chapter 2 of Part 1.5 of Division 4 of Title 2 of the Government Code, to read:
Article  5.5. Infrastructure Investment Fund

16407.
 (a) The California Twenty-First Century Infrastructure Investment Fund is hereby created in the State Treasury for the purpose of funding capital outlay expenses that are related to corrections, education, parks, transportation, and water or other natural resources related projects. Primary responsibility for preparing an annual plan to expend these funds shall be in the Department of Finance, unless the Governor directs another state agency to carry out this responsibility.
(b) For purposes of this article, “Infrastructure Investment Fund” means the California Twenty-First Century Infrastructure Investment Fund.

16408.
 (a) Revenues shall be transferred from the General Fund to the Infrastructure Investment Fund, on an annual basis, commencing in the first fiscal year that begins on or after July 1, 2004, in which General Fund expenditures exceed the level of General Fund expenditures in the 2001–02 fiscal year, according to the following schedule:

Fiscal Year

Percentage of
General Fund

2003–04

1.0%

2004–05

1.5%

2005–06

2.0%

2006–07

2.5%

2007–08

3.0%

2008–09

3.5%

2009–10

4.0%

2010–11

4.5%

2011–12

5.0%

Each subsequent fiscal year

5.0%

Fiscal Year
Percentage of
General Fund Revenues
Transferred to
Infrastructure Investment Fund
1 ........................
 1.0%
2 ........................
 1.5%
3 ........................
 2.0%
4 ........................
 2.5%
5 ........................
 3.0%
6 ........................
 3.5%
7 ........................
 4.0%
8 ........................
 4.5%
9 ........................
 5.0%
Each subsequent fiscal year ........................
 5.0%
(b) Notwithstanding the percentages specified in subdivision (a), if General Fund revenues increase by less than 3 percent from the prior year, the increase in the amount of General Fund revenues that are transferred to the Infrastructure Investment Fund compared to the transfer in the prior year shall not exceed an amount equivalent to 25 percent of the increase in General Fund revenues relative to the prior year.
(c) If the General Fund has 0.0 percent or negative growth compared to the prior year, then the percentage of the General Fund revenues transferred to the Infrastructure Investment Fund shall remain at the level specified for the prior year.
(d) This section shall not be construed to affect the state’s minimum funding obligation pursuant to Section 8 of Article XVI of the California Constitution.

16409.This article shall not become operative until the Legislature enacts a statute to allocate the revenues in the Infrastructure Investment Fund. The statute shall do all of the following:

(a)Require that 75 percent of these moneys be annually distributed to cities and counties, on a continuously appropriated basis, for local infrastructure expenses.

(b)Create an oversight panel to ensure that locally allocated funds are spent for eligible infrastructure projects.

(c)Require that the remaining 25 percent of the revenues in the Infrastructure Investment Fund be subject to annual appropriation by the Legislature.

SEC. 4.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:

In order to ensure that adequate funding is available to make vitally necessary improvements in state infrastructure facilities, it is necessary that this act take effect immediately.

16409.
 (a) Notwithstanding Section 13340 of the Government Code, 75 percent of the revenues in the Infrastructure Investment Fund are hereby continuously appropriated to the Controller and shall be annually distributed by the Controller to cities and counties, on the basis of population, for local infrastructure expenses.
(b) The remaining 25 percent of the revenues in the Infrastructure Investment Fund shall be subject to annual appropriation by the Legislature.
(c) An oversight panel is hereby created to ensure that funds allocated pursuant to this section are spent for eligible infrastructure projects. The panel shall consist of ____.