In recent years, transportation funding has been both constrained and uncertain due to various factors including the use of transportation funds to help the General Fund. The 2006-07 Governor’s Budget proposes to reverse this trend. Specifically, it proposes to fully fund Proposition 42 and partially repay a previous loan of transportation funds to the General Fund. In addition, as part of his Strategic Growth Plan, the Governor proposes to provide $12 billion in general obligation bond funding and $14 billion in revenue bond funding for state transportation over the next ten years. Furthermore, he proposes to permanently firewall Proposition 42 funds after 2006-07 by prohibiting suspension of the transfer from the General Fund. We highlight a number of policy issues that the Legislature should consider as it reviews the Governor's proposals.