By Pacific Coast Business Times Staff Friday, March 6th, 2009

Expect a lot more potholes now that the state legislature has plugged California’s $42 billion budget gap.

Infrastructure officials and state workers are breathing a tentative sigh of relief after the budget compromise. But road maintenance stands to take a huge hit, projects remain uncertain, and state workers still aren’t sure whether their jobs are safe.

State workers so far have avoided the massive layoffs Gov. Arnold Schwarzenegger threatened during the budget fight, but their departments still face deep cuts.

And though infrastructure officials have high hopes for federal stimulus money, they know the funds could be a one-time offer, while California’s structural budget problems are perennial.

“Right now it doesn’t look like we’re going to take any permanent cuts, which is a very good thing,” said Scott McGolpin, public works director for Santa Barbara County. “But it makes it extremely hard, at the local government level, to continue providing outstanding customer service when the state uses local government to balance their books.”

Ventura County

Ventura County expects to take a $1 million permanent hit to its transportation budget, said Jeff Pratt, the county’s public works director. He said the immediate result will probably be fewer maintenance crews out doing work. The county’s budget for capital projects, on the other hand, has a contingency reserve to protect it for now.

“We’ve already got a low pavement rating, and it’s not going to be any better,” Pratt said.

But the biggest dollar impact to Ventura County’s $328 million public works budget will come from a three-month deferral on the return of gas tax revenue, which all California counties face. The state will hold gas tax collected by the counties from January, March and February and won’t give it back until the end of May.

In Ventura County, that’s $1 million a month that won’t come back. Pratt said the county has contingency funds in place to handle the temporary shortfall.

In December, the county shut down a host of projects because state money froze, including more than $9 million worth of watershed improvements and $2 million in trails projects. The state has told the county that it will once again be reimbursed for work it does, but the county has to front the money. Pratt said it plans to.

“[State money] is unfrozen, but it’s unclear when we’re going to get it,” Pratt said. “On lot of these grants, we would have had to front the money anyway.”

Santa Barbara County

Santa Barbara County stands to take a temporary hit of $1.5 million from the three-month gas tax deferral said McGolpin, the county’s public works director. “Now we have to figure out how we’re going to carry that $1.5 million because the state gas tax is how we pay for the work that our road crews do,” he said.

The state pulled a similar move in last year’s budget, but counties were able to draw on the state’s Pooled Money Investment Account, or PMIA – which was shut down in 2008 because of frozen credit markets.

That move threatened to stop work on Highway 101 from Milpas to Hot Springs in Santa Barbara, an eagerly awaited project to alleviate one of the county’s worst traffic jams. That project went on, but other projects won’t be as lucky.

“We’re not going to get our local road funding until the PMIA opens up again,” McGolpin said. “We’re being told the PMIA will start flowing again when the credit markets open up. It’s more of a national issue than a state budget issue.”

McGolpin said some of the lost gas tax money that stemmed from Prop. 1B can be replaced with funds from Prop. 42. “[Prop. 42 money] can only be used for surface treatment and storm damage repairs, whereas Prop. 1B was completely flexible and could be used for road crews,” he said.

But McGolpin is hopeful about federal stimulus money, of which he is ready to put $2.5 million to work by the end of April. He’s also hopeful he can find money for a $47 million levy in Santa Maria for which U.S. Rep. Lois Capps, D-Santa Barbara, already brought home $7 million.

“We have a $230 million unfunded backlog in transportation,” McGolpin said. “The majority of those projects are shovel ready.”

SLO County

San Luis Obispo County gets about $600,000 a month in gas tax that will be deferred, said Dave Flynn, the county’s deputy director of public works.

“For us, that was a big dent in our routine maintenance budget,” Flynn said. “Because of that, we ended up holding off on doing any overlay work. If there wasn’t this hiccup in the budget, we typically would have done a $3 million spring overlay project on our roadways.”

If gas tax money comes through in May, the county might be able to do its overlay work in the fall. And though the public works budget – which includes major efforts such as the Nacimiento water project, the Vineyard interchange and the Los Osos wastewater project – hasn’t taken a huge hit, that’s largely because of county support.

“We’ll have to see whether the board wants to continue with supporting infrastructure,” Flynn said. “It’s kind of an interesting time – sometimes you don’t know when you need to move forward and when you need to pull back.”

State jobs

When the budget fight got down to the wire, Gov. Arnold Schwarzenegger sent out 10,000 “surplus notices” to state workers saying their jobs might be cut.

But now that there’s a budget, “the reality is that those surplus notices will either be withdrawn or not acted upon,” said Lynelle Jolley, communications director for California’s personnel administration department.

“Departments can take a look at what their payroll costs will be for the coming year and adjust accordingly,” Jolley said. “Departments are still poring over the budget to determine how they’re affected.”

Jolley said department budget cuts are expected in the first two weeks of March.

At Atascadero State Hospital, which employees about 2,400, there’s been no word of layoffs, though the facility has complied with the governor’s orders to furlough workers.

“We have the flexibility to direct the furlough to meet all our staffing requirements,” said Craig Dacus, the hospital’s public information officer. The workers have until 2010 to take the time off, he said.

Andy Pitoniak, a spokesman for the California Men’s Colony in San Luis Obispo, which employees about 1,800, said the facility hasn’t heard news about layoffs.

But $400 million has to come out of the state’s corrections budget, he said.

“I think it’s still too early to tell how it’s going to affect us as an institution,” Pitoniak said. “The administration at this point is looking for ways to cut that $400 million.”

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