Financing the Future: Rebuilding California’s Infrastructure David E. Dowall University of California, Berkeley

Persistent Population Growth California’s Population , (thousands)

Capital Outlay Trails Off Real State Capital Outlays (per capita in 1996 dollars)

VMT and State Lane Mile Trends, , Indexed 1957=100

VMT and State Lane Mile Trends, , Indexed 1970=100

Water Storage Capacity (Acre feet) and Population Trends, , Indexed 1950=100

Water Storage Capacity (Acre feet) and Population Trends, , Indexed 1970=100

California’s biggest infrastructure challenges Failure to link strategic and capital planning No multi-sectoral vision for investment planning Lack of interest in demand management Declining real user fee-base for many services Unpredictable funding Imbalanced state-local funding shares Poor project execution Failure to maintain investments

Aligning tariffs with costs and benefits Conventional wisdom –Foster consumption of merit goods –Redistribute income Revisit the role of prices –Generate revenues to pay for services –Balance tariffs with consumption benefits

Real Resident Undergraduate Student Fees ( dollars) Indexed 1965=100 for UC and CSU and 1984=100 for CCC Real Resident Undergraduate Student Fees ( dollars) Indexed 1965=100 for UC and CSU and 1984=100 for CCC

California State Gasoline Tax in Real 1997 dollars Indexed 1950=100

Real Wholesale Water Prices from the State Water Project ($/AF), Indexed 1963=100

Tariffs Should Match Costs Use tiered pricing to reflect incremental costs Price road use for peak and off-peak travel Price educational services according to means Tariffs should cover life cycle maintenance

Tariff Setting Ideas Water supply increasing block rates to reflect the incremental cost of providing water Road Pricing should reflect full financial and social costs of travel Pricing of educational services should promote access but there should be more emphasis on means testing Life cycle costing and maintenance requirements should be used to determine tariffs Equity concerns are best addressed through income transfers, not infrastructure pricing

Financing Infrastructure Infrastructure programs need to be based on sound long-term financing plans Make funding more predictable Rebalance state-local financing responsibilities Make greater use of user and beneficiary fees

Higher Education FTE Enrollment and Real Capital Outlay, 1970 to 2000 Indexed 1970=100

What Should the State do?  Define California’s vision for the future use it to plan infrastructure investments  Introduce demand management  Review and adjust user fees and charges, develop ability to pay offsets  Make capital funding more predictable  Introduce accountability to project delivery  Introduce lifecycle costing and management