California lawmakers reach transit bailout deal: Will Gov. Newsom go along?

Proposed budget deal restores $2 billion for transit capital improvements, makes half available for operations, and also makes $1.1 billion for electric buses available for transit operations.

California lawmakers reached a handshake deal late Sunday that would provide more than $3 billion for BART, AC Transit, Caltrain and other beleaguered transit agencies that say low ridership since the COVID-19 pandemic is sending them over a fiscal cliff and without state aid would lead to catastrophic service cuts.

The proposed deal between the state Assembly and Senate restores $2 billion in transportation infrastructure funding that was slated to be cut if revenues are as low as the governor’s budget office expects, and allows the money to be used for transit operations at local transportation authorities’ discretion.

The deal also would allow local transit agencies to prop up their operating budgets over the next three years by diverting $1.1 billion in cap-and-trade funds that are supposed to be set aside to reduce carbon dioxide emissions.

“The legislature’s budget agreement is a very positive first step toward securing the future of public transportation in California,” said Sen. Scott Wiener, a San Francisco Democrat who has led the legislative effort to help rescue ailing transit agencies.

“Though significant work remains to avoid our transit systems’ fiscal cliff, this budget agreement solves a significant portion of transit systems’ collective operating deficit.”

Whether Gov. Gavin Newsom will sign such a budget bill, however, remains to be seen. The proposed deal is expected to be passed by the Assembly and Senate on Thursday, the deadline to finalize the state budget for the 2023-24 fiscal year that begins in July.

“Our discussions with the legislature are continuing, and we hope they can result in an agreement,” said H.D. Palmer, a spokesman for the state Department of Finance which prepared the governor’s proposed budget. “And as those discussions are ongoing, we’ll defer comment for the moment on any particular area of the budget.”

Newsom has indicated he is willing to talk, but stressed that the state is grappling with its own budget woes and doesn’t have the funding to fulfill everyone’s wish list. The state — heavily reliant upon the personal income tax payments of wealthy Californians whose fortunes rise and fall with investment performance — has gone from an unprecedented $97.5 billion budget surplus a year ago to a projected $31.5 billion deficit.

Even so, Newsom’s office stressed last week, the governor’s proposed budget maintained $5.7 billion of $7.7 billion in planned additional funds for local transit capital infrastructure projects, and the proposed reduction would be reversed next year if revenues exceed expectations.

Wiener has led a coalition of 35 state lawmakers and 19 members of the state’s congressional delegation in urging Newsom to make operations funding available to help transit agencies, arguing they shouldn’t be blamed for ridership that plunged during the pandemic and has yet to recover.

Transit agencies have laid out a host of doomsday cuts they’d have to make if ridership and revenues don’t improve. BART earlier this month said without the state money, the transit agency will have to run trains only once an hour, cut service on weekends and after 9 p.m. on weeknights, reduce service to San Francisco International and Oakland International airports, close some stations and even shut down some lines.

BART’s board last week adopted a $5.1 billion two-year budget with a $93 million deficit in 2025 that also calls for raising fares 11% over two years. The agency had no immediate response to the budget deal Monday.

AC Transit has said numerous local lines would have to be reduced or fully discontinued. The San Francisco Municipal Transportation Agency said it would cut back to pandemic-era service levels with frequency reductions starting on bus lines 2, 6 and 21.

Sen. Dave Cortese of San Jose said the proposed deal restoring the $2 billion potential cut from the Transit and Intercity Rail Capitol Program helps the state tap into the federal Infrastructure Law funding for the long-planned BART extension to downtown San Jose.

“Both chambers of the California Legislature proposed a 2023-24 state budget that protects transit agencies from falling off the fiscal cliff and maintains the state’s commitment to fund the planned BART extension through Silicon Valley,” Cortese said. “This priority BART project will not only reduce traffic on Bay Area highways, but it will also create an essential option for working people and students.”

Jim Wunderman, president and CEO of the Bay Area Council, a business-sponsored Bay Area advocacy group, said Monday that “we’re very encouraged by the outlines of the plan reached in the Legislature to provide funding for public transit.”

“This plan offers a temporary lifeline that will delay draconian service cuts and provide valuable time to identify more cost-saving measures in operations and explore new sources of revenue,” Wunderman said.

Wiener’s office said making the cap-and-trade funds available for transit operations now makes sense because transit agencies have until 2040 to reach their zero-carbon goals. Wiener said that it is his “strong hope that public transportation agencies will be able to minimize their use of these transit capital funds for operations” because they stand to lose significant 10-to-one federal matching funds on infrastructure projects.

“It would be short-sighted to cannibalize significant transit capital funds and forfeit billions in federal matching funds,” Wiener said.

But he also noted that even having the proposed flexibility to use the state funds for transit operations would only solve a portion of the transit agencies’ near-term fiscal problems, and urged the state to make highway funds available to transit agencies as well.