In January 2006, an ambitious rebuilding of California was launched with the Strategic Growth Plan (SGP), which was designed to restore and maintain our roads, schools, ports, and water supply.  By investing and leveraging billions of dollars in the state's infrastructure over the next 20 years, California can maintain its economic sustainability and high quality of life.  In November 2006, the voters approved the first installment of that 20-year vision to rebuild California.  Then, in 2007, the Legislature authorized $7.7 billion in lease-revenue bond authority for the California Department of Corrections and Rehabilitation to address prisons and jail overcrowding, and to improve the delivery of mental, dental, and medical services within the correctional system. 

Addressing Critical Gaps in California's Infrastructure

Additional investments over the next ten years in the state's infrastructure are still needed if California is to maintain and improve its highly valued quality of life and continue its economic growth.  Many programs are still in need of funding, partnerships with the private sector should be leveraged, and a more coordinated effort of state agencies to promote sustainability and collaboration is needed.  To address these critical gaps that remain in California's infrastructure, the Administration proposes the following:

• The creation of a Strategic Growth Council to coordinate the activities of state agencies to promote sustainability and to coordinate the investment of funds in state-owned and state-funded infrastructure so that those investments can have years of lasting benefits.
• The establishment of Performance Based Infrastructure (PBI) California to provide a center of excellence of specialized experts for the delivery of PBI. This expertise will be used in a manner that will allow projects to be delivered in an innovative yet efficient manner and to ensure those projects are built to achieve the greatest life cycle benefits.
• $48.1 billion of new general obligation bonds are proposed to augment the existing funds for the SGP through 2016. The SGP proposes that the new general obligation bonds be placed on the ballot in the 2008 and 2010 general elections and that all bonds be issued and spent over the next ten years in a manner that maintains a prudent debt ratio.
• Legislation to place a bond before the voters to:
  • Expand the state's water supply and management systems to meet the needs of population growth and manage the effects of climate change on California's hydrology and water delivery systems for decades.
  • Continue funding of the state's K-12 schools beyond the three years of financing provided by the current bonds to prepare for enrollment growth, reduce overcrowding, and repair dilapidated classrooms in compliance with the settlement agreement in Williams v. State of California.
  • Continue funding of the state's higher education systems beyond the two years of financing provided by the current bonds to prepare for future enrollment growth and maintain their world renowned research capabilities. The bond measure proposes to provide an additional $50 million per year above the compact level for University of California and California State University.
  • Expand and repair the infrastructure for California's court system to address significant caseload increases and reduce delays.
• Modifications to the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, currently scheduled for November 2008 ballot to ensure that appropriate financing is available to begin building the project.

Creation of the Strategic Growth Council

The Strategic Growth Council (Council) is proposed to coordinate the activities of state agencies to promote environmental sustainability, economic prosperity and quality of life for all residents of California.  The Council would perform the following tasks:

• Coordinate the activities of state agencies to best improve air and water quality, improve natural resource protection, increase the availability of affordable housing, improve transportation, meet the goals of AB 32, and encourage sustainable land use.
• Recommend policies to the state agencies and the Legislature that will encourage the development of sustainable communities consistent with the intent of Proposition 84. Manage and award grants and loans of funds provided in Proposition 84 to support planning and sustainable communities.
• Collect, manage, and provide data and information to local governments that will assist local governments in developing and planning sustainable communities

Providing Performance Based Infrastructure

Over the last few years a number of nations have been turning to the private sector to help deliver an increasing number of infrastructure projects.  By partnering with the private sector, governments can harness the advantages of technology knowledge, management efficiencies and entrepreneurial spirit with the social responsibility, environmental awareness and job generation concerns of the public sector to leverage and build infrastructure.  This partnering approach results in a shared responsibility for the delivery of infrastructure and also when appropriate and cost effective, the service of maintaining and managing those assets.  The results are lower initial costs, lower life cycle costs, faster delivery, better service or lower risk and importantly improved customer satisfaction.

• Broad authorization is proposed for state and local governments in California to use performance based infrastructure (PBI) for the planning, design, development, finance, construction, reconstruction, rehabilitation, improvement, financing, operation or maintenance of their infrastructure needs.
• PBI California is proposed to be established to assist in the effort to achieve the best financing, procurement, risk allocation, delivery, operation and maintenance of private partnerships in a performance based approach.
• PBI California will provide expertise to manage and implement public-private partnerships and provide the ability for the leveraging of resources and to generate economies of scale. PBI California would contract with governmental entities (local and state) to provide advice on how to enter into, and receive favorable terms from public-private partnerships and act as a repository of knowledge, understanding, expertise, and practical experience in relation to these partnerships. Partnering with the private sector will only be undertaken on those projects that can demonstrate a benefit in terms of cost, delivery time or long-term operational costs.

Enhancing Flood Control and Expanding California's Water Management and Delivery System

Over the next ten years, California must expand its water management and delivery system, including surface storage, groundwater storage and conveyance facilities.  In this phase of the Strategic Growth Plan, the Administration proposes a total of $11.9 billion general obligation bonds that will provide benefits in water supplies for decades.  The proposal consists of the following parts:

• The Governor's Budget proposes $3.5 billion in funding for water storage which will be dedicated to the development of additional storage, which, when combined with the Regional Water Management investments of Proposition 84 and the flood system improvements of Proposition 1E, will help to offset the climate change impacts of reduced snow pack and higher flood flows. 
  • In addition to this increased water supply, the projects will provide other benefits, such as enhanced flood management capability, improved Delta water quality, and improved wildlife habitat. The costs of new water storage would be shared between state taxpayers and non-state water suppliers.  The state would provide up to 50 percent of total costs, funded by general obligation bonds.  The state's investment reflects the statewide benefits of flood control, ecosystem restoration, and water quality improvement.  The non-state costs would be funded by the water suppliers who would benefit from the new storage. 

• The Governor's Budget proposes $2.4 billion for delta sustainability. Leveraging anticipated federal and local funding sources, this funding will be dedicated to implementing a resource management plan for the Delta consistent with the Bay Delta Conservation Plan currently in development and the findings of the Delta Blue Ribbon Task Force. To assure the reliability of the state's major water supply systems, investments will be made in improving water conveyance, water quality, the Delta ecosystem, and Delta levees. These investments will reduce the seismic risk to water supplies derived from the Delta, protect drinking water quality and reduce conflict between water management and environmental protection.
• The Governor's Budget proposes funding of $1.1 billion for the water resources stewardship. This funding will support implementation of Klamath River restoration, provide for elements of Salton Sea restoration identified in the Salton Sea Restoration Act and related legislation enacted in 2003, contribute to restoration actions on the San Joaquin River, and supplement successful restoration projects on the Sacramento River and its tributaries as well as in the Delta.
• The Governor's Budget proposes $3.1 billion in funding for water conservation. This funding will augment $1 billion in funding provided by Proposition 84 and support the Integrated Regional Water Management (IRWM) program. IRWM is designed to encourage integrated regional strategies for management of water resources that will protect communities from drought, protect and improve water quality, and improve local water security by reducing dependence on imported water. The proposed funding will provide targeted water conservation grants to local communities that coordinate the planning of their shared water resources. These investments in water conservation will increase water use efficiency and protect water quality, and will reduce energy use, urban and agricultural runoff, and urban effluent.
• The Governor's Budget proposes $1.1 billion for water quality improvement. This funding will support efforts to reduce the contamination of groundwater used for drinking water supplies, assist local community wastewater treatment projects, provide grants for stormwater management projects, and help the Ocean Protection Council protect and improve water quality in areas of special biological significance.
• The Governor's Budget proposes $700 million for other critical water projects:
  • $250 million for grants and loans for water recycling projects to enhance regional water self-sufficiency. 
  • $150 million to restore hillsides and other areas devastated by fire and to prevent future watershed damage from wildfires. 
  • $300 million to remove fish barriers on key rivers and streams, including removal of obsolete dams.

K-12 Education
While some schools are experiencing declining enrollments, many other high-growth areas lack the schools necessary to accommodate increased enrollment.  Some large declining enrollment districts have very overcrowded sites requiring new construction to adequately house students. As our system of approximately 9,600 school sites continues to age, the need for modernization assistance to keep classrooms modern continues during this period.  Finally, because our primary and secondary school system helps develop tomorrow's workforce, it is important to both ensure facilities for charter schools to stimulate innovation and for Career Technical Education to ensure all students have the opportunity to participate in the high skill technical jobs that will fuel the economy of the future.

The SGP proposes $11.6 billion of additional general obligation bonds to provide state bond funding for schools into 2012-13.   The $11.6 billion is proposed to be split between the 2008 and 2010 elections.  This total amount of funding, when combined with the $7.3 billion contained in Proposition 1D, approved by the voters in November of 2006, is estimated to provide for approximately 39,000  new classrooms to house approximately 1 million  students and almost 60,000  renovated classrooms providing state-of-the-art facilities for over 1.5  million students. 

Proposition 1D Funding

Proposition 1D, designed to meet modernization needs through 2010-11 and other school facility program needs through 2008-09, will provide approximately 10,300 new classrooms housing almost 260,000 students and approximately 46,700 renovated classrooms to serve 1.2 million students through the following components: 

• New Construction - $1.9 billion
• Modernization - $3.3 billion
• Charter Schools - $500 million
• Career Technical Education - $500 million
• Overcrowding relief in certain districts - $1 billion
• Incentives to meet high performance school design standards - $100 million
• Joint-use facilities - $29 million

Of the amounts for new construction and modernization above, up to $200 million is available for the Small High School Program and up to $200 million is available for seismic safety projects.

Charter School Facility Program Changes

Although charter schools have been provided access to almost $900 million in bond funds beginning with Proposition 47 in 2002 and continuing through Proposition 55 and Proposition 1D in 2006, there are significant barriers in the existing Charter School Facility Program that have prevented charters from being able to use these bond funds to construct new facilities or renovate existing buildings to serve charter school facilities needs.  The Administration will work to remove these barriers and provide a climate for innovation to accommodate the needs of charter schools.

Meeting Future Education Needs

The 2008 Education Bond Measure proposes $6.43 billion for K-12 education to be allocated as follows:

• $4.43 billion for new construction to assist high-growth school districts that are projected to have increases in enrollment through 2010-11.
• $1 billion for to provide dedicated funding for charter schools as a part of addressing the educational needs of K-12 students and housing enrollment growth.
• $1 billion for career technical education facilities to provide a dedicated fund source for matching grants to provide state-of-the-art technical education facilities to ensure our comprehensive high schools can provide the cutting-edge skills essential to the high-wage technical sectors of our state economy.

The 2010 Bond Measure proposes $5.17 Billion for K-12 education to be allocated as follows:

• $2.335 billion for new construction.
• $835 million for modernization of existing facilities.
• $1 billion for charter schools.
• $1 billion for career technical education.

While the proposed SGP provides state general obligation bond assistance for funding the needs into 2012-13, assuming specified state cost containment measures, it will be necessary for schools to plan for additional bond measures and alternative financing strategies for financially troubled districts to ensure every student is housed in an appropriate classroom. The Administration proposes to review the overall financing structure for schools, including consideration of public-private partnerships, to ensure sustainable long-term funding of school facilities.

Higher Education
Proposition 1D is in the second year of funding and nearing exhaustion, consequently, the SGP proposes funding beyond the two years of financing provided by the current bonds.  The SGP includes an additional $50 million per year for UC and CSU, on top of the compact funding of $345 million per year, to continue state support for the UC, CSU and CCC beyond 2008-09 through additional bond measures on the 2008 and 2010 ballots, totaling $12.3 billion.  These funds will be used to meet an increased student enrollment of approximately 130,000 at the UC and CSU campuses and to continue the current level of CCC support. Proposed new general obligation funding for higher education includes:

• $3.2 billion for the University of California. This funding will help the UC system accommodate an increased enrollment of approximately 50,000 students over the ten-year vision of the SGP. Facilities must be built or renovated to meet this high level of demand.
• $3.2 billion for the California State University. This funding will help the system accommodate an increased enrollment of approximately 80,000 students over the ten years.
• $6 billion for California Community Colleges. This funding will help the 72 districts who provide services at 110 colleges and 65 off-campus centers provide services to their approximately 2.5 million students.

Investment in Long-Overdue Transportation Improvements
The approval by voters of Proposition 1A and the $19.9 billion transportation bond measure of Proposition 1B in November 2006 provides a substantial down payment on meeting California's long-term transportation needs over the next ten years.  Proposition 1B authorizes the following programs:

• $4.5 billion for congestion relief (corridor mobility) to expand capacity and improve travel times in high-congestion travel corridors.
• $4.0 billion for public transit, intercity and commuter rail, and waterborne transit operations.
• $3.1 billion for goods movement to relieve traffic congestion along major trade corridors, improve freight rail facilities, and enhance the movement of goods from port to marketplace. This includes $1.0 billion for air quality improvements that will reduce emissions and greenhouse gases from activities related to port operations and freight movement. $100 million is for port security improvements. The SGP proposes that these goods movement funds be used to attract at least $10 billion of private investment and other funding.
• $2.0 billion for the State Transportation Improvement Program to augment funds for this existing program that provides capital funding allocated on a formula basis to every region of the state.
• $1.0 billion for State Route 99; funding will provide for improvements to this 400-mile highway through the heart of the Central Valley.
• $2.0 billion for local streets and roads for improvements to local transportation facilities to construct, repair and rehabilitate streets and roads.
• $1.0 billion for transit safety, security, and disaster response to improve protection against security and safety threats and to increase the capacity of transit operations to move people, goods, emergency personnel, and equipment during and after a disaster.
• $1.0 billion for a State-Local Partnership to match local agencies that raise new funds for transportation projects.
• $750 million for highway rehabilitation and operational improvements for highway safety, rehabilitation, and pavement preservation projects. This amount includes $250 million for traffic light synchronization projects and other technology-based improvements to enhance safety operations and the capacity of local streets and roads.
• $200 million for school bus retrofit and replacement to reduce air pollution and minimize children's exposure to diesel exhaust.
• $125 million for local bridge seismic projects to complete seismic retrofits or replacements of local bridges, ramps, and overpasses.
• $250 million for improvements to railroad crossings and the construction of bridges over rail lines.

The 2007 Budget Act and related trailer bills appropriated a total of $4.2 billion in Prop 1B funding and the 2008-09 Governor's Budget proposes a total to $4.7 billion in appropriations.  These new resources will be used in conjunction with existing transportation revenue from state and federal gas taxes, weight fees, tribal gaming funds and Proposition 42 funds totaling $9.96 billion in capitol spending in 2008-09.  In the next ten years, the transportation component of the SGP is projected to result in 550 new High Occupancy Vehicle lanes; 750 new highway lanes; 9,000 miles of rehabilitated lanes; 600 miles of new commuter lines; 310,000 more transit riders and a 150-percent increase in intercity rail riders.

Maintaining What We Build

While the bonds and the funds they can leverage will provide substantial congestion relief, state and local needs for maintenance, rehabilitation and operation cannot be adequately funded with currently available resources.  The CalTrans State Highway Operations and Protection Program (SHOPP) does not have sufficient resources to adequately and effectively operate and preserve the State Highway System.  Most of the funds made available under Proposition 1B and Proposition 42 cannot be used for these purposes.  As the SGP is implemented, the Administration will work with interested parties and the Legislature to develop more information about the scope of the problem and long-term solutions.

High Speed Rail

The High-Speed Rail Authority is charged with planning the development and implementation of an intercity high-speed rail service.  The Budget proposes to continue the current level of funding of $1.2 million for basic staff support.

Supporting the State's Court System
The state's court system is supported by a substantial infrastructure inventory, including 451 trial court facilities, 11 appellate court facilities and 3 Supreme Court facilities.  A significant number of these facilities do not meet current guidelines for efficient and safe court environments and, overall, the facilities are overcrowded with no capacity to handle growth in judicial workload.  The Administrative Office of the Courts estimates that $9.9 billion is needed to bring all the courts up to secure and safe standards and accommodate growth. 

It is proposed that $2 billion of new general obligation bonds be provided to address these infrastructure issues. While this amount will not fund all facility needs identified by the AOC, it will provide immediate funding to handle the most critical infrastructure issues over the next ten years.  In addition, this funding will enable the courts to leverage private funding through public-private partnerships. These partnerships might include (but not be limited to) arrangements such as:

• Exchanging outdated and inefficient court facilities located on valuable urban property for new court facilities on less prominently-located property.
• Co-locating revenue-generating commercial space (e.g., law offices) in newly constructed court buildings.
• Partnering with the private sector in design-build-operate agreements in which the private sector constructs and operates a court building in exchange for lease payments.

Promoting Affordable Housing
California has had high housing prices for many years and lags the nation in affordability.  Restrictions on land available for development and additional costs imposed by government are the primary reasons for these high prices.  This has led to a chronic undersupply of housing affordable to most Californians.  State bond funding, tax credits and redevelopment funds are used to help create additional housing, primarily for low-income Californians. Proposition 1C, provides $2.85 billion for housing-related programs:

• $1.4 billion for affordable housing loans and grants; over their life these programs are projected to assist in the creation of over 31,000 new housing units and 2,350 shelter spaces:
  • $345 million for multifamily housing
  • $50 million for emergency housing
  • $195 million for supportive housing
  • $135 million for farm worker housing
  • $300 million for CalHome
  • $200 million for down payment assistance
  • $125 million for the Building Equity and Growth in Neighborhoods (BEGIN) program Over their life these programs are projected to assist in the creation of over 31,000 new housing units and 2,350 shelter spaces.
• $1.45 billion for new housing incentive programs to incentivize construction of housing; expected to result in 87,000 additional housing units. This funding will support new programs to provide incentives to permit housing development and to stimulate innovation in housing creation. These programs will require further legislative and administrative program development. The Administration is proposing that these funds be granted on a competitive basis, with priority given to localities that increase housing production over recent trends, produce more affordable housing, and do so with less negative impacts by situating housing near transit and within existing urbanized areas. Several of these programs provide funding for parks and other community infrastructure needed for new housing.

Proposition 46 Funding

The Budget includes the remaining $36 million of Proposition 46 funding.  This bond has assisted in the creation or permitting of over 100,000 housing units. 

Promoting Public Safety
The historic passage of AB 900 in 2007 provided the California Department of Corrections and Rehabilitation (CDCR) $7.7 billion to help address California's prison overcrowding crisis. Given that much of AB 900 funding is tied to performance and construction goals that CDCR will be working to meet over the next several years prior to accessing the second phase of funding, the Budget proposes that $2.5 billion that is currently appropriated for the second phases for infill, re-entry and medical facilities be redirected to provide the federal receiver with funds to construct medical beds.

Enhancing Other Public Services
State government provides many services to California's citizenry.  Delivery of these services depends upon a variety of capital facilities such as general office space, forest fire stations, homes for veterans, crime labs, beds for mental health patients, agricultural inspection stations and special schools for the deaf, to name only a few.  This broad array of facilities must provide adequate functionality and capacity to enable the delivery of services to the public.  A $300 million general obligation bond is proposed to be placed on the November 2008 ballot so that the seismic renovation of 29 various state facilities can be completed.