Riders vs. raiders

Sacramento Regional Transit general manager Mike Wiley got some good news last week. At least, it’s what passes as good news in his business these days.

For the last three years, state lawmakers have been siphoning money away from public-transportation districts in order to help fill in California’s deepening budget hole. That’s money agencies like RT desperately need to keep the buses and trains running, and the budget cuts have been a shock to people who rely on public transit.

But last week, the state’s 3rd District Court of Appeal ruled that the diversion of funds was illegal and that the state has to pay transportation agencies back the money.

“It’s the most encouraging news we’ve heard about state funding in a long time,” Wiley said. If the ruling stands, “Not only would the state be responsible for paying back what they illegally raided, they would be responsible for paying us on an ongoing basis.”

That’s good news for RT, but terrible news for lawmakers and the governor, who may now have to come up with another $3 billion on top of the current $26 billion budget deficit.

The contested funds come from the sales taxes on gasoline and diesel fuel collected in the state that together make up the Public Transportation Account. A big chunk of the PTA is from the gas sales tax “spillover” fund, which fills up when gas prices rise faster than inflation.

For the past several years, gas prices have soared and the spillover account has been flush. “When the price of gas is going up faster than everything else, that’s exactly when you need more and better public transit,” said Joshua Shaw, executive director of the California Transit Association, a lobbying group for the many transit agencies around the state.

The account made a tempting target for lawmakers looking for loose money, and they employed some fairly creative budget maneuvers to get at it. For example, lawmakers began taking money out for school buses, which historically have been paid out of the state’s general fund. In the last budget cycle, the state simply zeroed out all of its funding for local transit districts until 2013. Because of the diversion, Sacramento RT is losing about $26 million in funding every year. In fact, Wiley says RT is out about $64 million so far because of the state’s “illegal raid” on transit funding over the past three budgets.

The CTA filed a lawsuit against the state back in 2007, arguing that the funds have been repeatedly protected by voters—including ballot measures Proposition 116, passed in 1990, and Proposition 42, passed in 2002. Those measures divvy up the sales taxes on gasoline and put limits on how the money can be moved around.

In 2008, a Sacramento Superior Court judge upheld the state diversion of funds. But the CTA filed an appeal, and last week the appeals court reversed the decision, ruling that the state was on the hook for roughly $3 billion, the amount it borrowed from the transportation account.

“[The state has] probably known for years that this is illegal,” Shaw said. “But the people who ride the bus are not politically powerful. So it was easy money to take.”

The lack of state funding drove RT to raise fares and cut service twice in the past two years. Earlier this year, RT had to cut $8 million from its operating budget, leading to the elimination of two-dozen bus lines.

While the court’s decision is encouraging, it may be a long time before money begins flowing back into RT’s coffers. “In theory, on July 31, they ought to put the money back,” said Shaw.

But in fact, state director of the Department of Finance Mike Genest has promised to appeal the decision to the state Supreme Court, and will ask for a stay pending that appeal. One of the state’s main arguments is that “mass transit” can also mean school buses or transportation programs for the disabled, an argument the 3rd District court rejected. “We continue to believe that the use of these transportation funds for those purposes is legal,” said H.D. Palmer, spokesman for the Department of Finance.

If the ruling does stand, no one knows where the money will come from. Shaw acknowledged that the state’s budget deficit is extraordinary. “But if the state had not entered into these budget tricks, robbing Peter to pay Paul, we wouldn’t be in this situation.”