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2011

Other Budget Issues

Further Detail

The Governor's January budget requests a one-time increase of $63 million in funding from the State Highway Account for the Department of Transportation (Caltrans) to fund the replacement of vehicles and equipment that are subject to various Air Resources Board (ARB) regulations. This request is part of a multi-year plan to retrofit and replace vehicles and equipment in Caltrans fleet in order to comply with ARB rules.

However, at the same time, the administration is currently reviewing the state’s fleet as required by a recently issued executive order to determine if there are vehicles that not needed or are being underutilized. Through this process, the administration expects to identify some vehicles in Caltrans’ fleet that can be sold and do not need replacement. Our discussions with the administration indicate that some of the vehicles slated for replacement with the $63 million requested may not be needed. Our understanding is that retiring a vehicle, rather than replacing it, is an acceptable way of complying with ARB’s regulations. Thus, the full $63 million requested for replacement vehicles to comply with ARB regulations will not likely be needed. According to the administration,  the executive order fleet review will not be completed until the summer or fall of 2011. Therefore, the amount that is needed for replacement vehicles at Caltrans will not likely be known until after the Legislature has finalized the department’s budget for 2011-12.

Because the amount needed for vehicle replacements is unknown at this time, we recommend that the Legislature approve the budget request, but include budget bill language requiring the Department of Finance to adjust the appropriation amount after the completion of the fleet review to be consistent with its findings about which vehicles will be retired or replaced. In addition, we think that the Legislature should specify how the savings from the executive order can be spent. In this case, we recommend that any savings be made available for pavement maintenance projects. We have found in past analyses that the state has a growing backlog of maintenance and repair needs on its highways. Directing the amount of the $63 million in funding for vehicle replacement that is not needed for compliance with ARB’s regulations to pavement maintenance will allow for more accurate budgeting of Caltrans’ needs as well as the use of funds to perform critical highway repair work. Accordingly, we recommend that the Legislature adopt the following budget bill language:

Item 2660-001-0042 Provision X

Of the funds appropriated in this item, up to $63 million is available for the replacement of vehicles necessary for compliance with regulations imposed by the California Air Resources Board. These funds shall be available only upon the completion of the fleet evaluation being conducted under Executive Order B-2-11. After completion of the fleet evaluation, the Director of the Department of Finance shall reduce the amount of funds appropriated for the purchase of vehicles in this item to account for vehicles that are planned for retirement and do not need to be replaced. The Director of the Department of Finance shall also increase the appropriation for the department’s pavement maintenance activities, by an amount equivalent to the savings identified from vehicle replacements. The Director of the Department of Finance shall notify the Joint Legislative Budget Committee of the portion of the $63 million in this item that is available for vehicle replacement and the portion that is available for pavement maintenance after adjustments have been made.