TRANSITProtecting Transit Funds:
The 2009 State Budget Crisis
In January 2009, the administration of Governor Arnold Schwarzenegger proposed to address California's $42 billion budget deficit in part by borrowing from local transportation funds—including the Proposition A and Proposition C half-cent sales taxes that Los Angeles County voters had specifically approved for transit operations and capital projects. This page documents the threat, the legal arguments against it, and the advocacy response that ultimately protected most transit revenues from the raid.
The Threat: Borrowing Local Transit Funds
California's fiscal crisis of 2008–2009 was one of the most severe in the state's history, driven by the collapse of income tax revenues during the Great Recession. The Governor's proposed budget included a provision to "borrow" approximately $1.7 billion from local government funds—including transit funds—to be repaid with interest within three years.
For LACMTA, the proposed borrowing would have affected Proposition A (the 1980 half-cent sales tax for transit), Proposition C (the 1990 half-cent sales tax for transit and congestion relief), and local transportation funds allocated by the state for local streets and transit. The total impact on LACMTA operations was estimated at $130–180 million in the first year alone—enough to require significant service cuts on an agency already facing the effects of recession-driven ridership changes.
Why This Was Legally Problematic
The state's authority to borrow local transportation funds was constitutionally contested on several grounds:
- Voter-approved revenues: Proposition A and Proposition C were approved by Los Angeles County voters specifically for local transportation purposes. The argument that the state could redirect these funds—even temporarily—was challenged as a violation of the ballot measure language and the voters' intent.
- Proposition 1A (2004): California voters had approved Proposition 1A in 2004, which restricted the state's ability to borrow or redirect local government revenues, including transportation funds. Transit advocates argued that the proposed borrowing violated Prop 1A's protections.
- Federal grant conditions: Many of LACMTA's capital projects were funded with federal grants that required local matching funds—including Prop A and Prop C revenues. Diverting these local funds could have triggered federal clawback provisions or jeopardized ongoing capital programs.
The Legislative Landscape in Sacramento
The budget proposal required approval from the Legislature. Transit advocates, including LACMTA, the Southern California Transit Advocates (SCTA), and rider organizations, mounted a campaign to persuade legislators to reject or modify the transit fund borrowing.
The key committees involved were the Senate Transportation and Housing Committee and the Assembly Transportation Committee, alongside the budget subcommittees in both chambers. The League of California Cities and the California Transit Association testified against the transit fund provisions, arguing that local transportation revenues were not the appropriate tool for closing a state-level structural deficit.
| Fund | Revenue Source | Annual Amount at Risk | Purpose |
|---|---|---|---|
| Proposition A | ½¢ county sales tax (1980) | ~$550M | Transit operations and capital |
| Proposition C | ½¢ county sales tax (1990) | ~$440M | Transit and congestion relief |
| Local Transportation Fund | ¼¢ state sales tax portion | ~$180M | Transit operations; bike/ped |
| State Transit Assistance | State fuel excise tax portion | ~$75M | Transit operations |
The Outcome
After months of negotiation and advocacy, the final 2009-10 budget included a reduced scope for transit fund borrowing. The state ultimately borrowed a smaller amount from local transportation funds—significantly less than originally proposed—and included repayment provisions. The Proposition A and Proposition C funds were partially protected through the advocacy campaign, though some Local Transportation Fund revenues were temporarily diverted.
The episode demonstrated both the vulnerability of voter-approved local transit funds to state budget raids and the effectiveness of organized advocacy. It also reinforced the case for Proposition 22 (2010), a ballot measure that subsequently strengthened constitutional protections for local transportation funds against state borrowing. Proposition 22 passed in November 2010 with 61% of the statewide vote, substantially closing the legal window that had allowed the 2009 borrowing.
Lesson for Transit Advocacy
The 2009 budget crisis illustrated a principle that transit advocates repeat in every state budget cycle: local transportation funds raised by local voters for local transit purposes are not a rainy-day reserve for state fiscal emergencies. The half-cent Proposition A and Proposition C taxes were approved by Los Angeles County voters to build and operate a specific transit network. Using them to close a state deficit undermines both the voter mandate and the long-term planning reliability that transit capital investment requires.
Understanding how transit funds flow—from voter approval through allocation to projects— is essential background for this kind of advocacy. The Transportation 101 guide provides a comprehensive overview of Proposition A, Proposition C, Measure R, Measure M, and the federal funding programs that together finance the LA Metro system.