Sudden State Funding Freeze Leaves Transit Agencies Hanging

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After long negotiations during last year’s budget process, the legislature and the Governor found a way to provide some extra funding to keep transit agencies from collapsing. The money was due to be released on April 30, but then the California Finance Department issued a sixty-day freeze on all unallocated funding as of that day.

The timing is “uncomfortable,” according to Michael Pimentel, Executive Director of the California Transit Association (CTA). “The transit agencies themselves are in the midst of developing their budgets, and they assumed they could count on these allocations,” he said. Now they will likely have to quickly come up with alternative plans, and adopt reduced budgets.

While not just transit funding is affected by the freeze, it’s particularly difficult for transit agencies because some of the one-time funding in last year’s budget was, for the first time, allowed to be used for operations, if a transit agency could show they needed to do so. Agencies had spent last fall working on documenting that need, and were already counting on the funding.

Another concern for transit agencies is that not having this funding will make it harder to get federal grants, for which local matching funds need to be pledged. A sixty-day delay could slow down progress on those grants. Delays could mean facing approvals in the hands of a less transit-friendly Congress.

In other words, the prospect of losing out on federal funding is very real.

“The current spending freeze on funds that were supposed to be appropriated for California’s transit agencies no later than April 30 could have a catastrophic ripple effect,” Pimentel noted in a written statement that accompanied a letter from the CTA to the Newsom Administration.

“This funding was part of a critical lifeline to keep public transit moving in our state. Agencies have made fiscal plans based on a prescribed timeline for when these funds would flow in order to keep their services running, operations funded, and major sustainable transportation and rail capital projects on track. Without the release of this funding, communities across the state will see delays in service restoration and the construction of major transit projects. Our state also risks jeopardizing billions of dollars in one-time federal funding, impacting our state’s climate goals.”

For public transit agencies, the freeze affects $2.4 billion that was approved in last year’s state budget, plus billions more in state investments approved in the previous year.

Transit agencies and the CTA were caught off guard by the action, and have been busy working to convince the administration to rethink the freeze. Advocates are urging transit supporters to contact their legislators and the governor’s office to highlight the importance of getting these dollars out, the sooner the better.

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