California budget fight could shut down transit projects

Contractors in California could stop working on dozens of construction projects this week due to a lack of transportation funding. Officials from the California Department of Transportation recently notified contractors working on $6.7 billion worth of state projects that, barring settlement of the fight over the state budget, they would not be paid for work performed after July 20.

A shutdown could cost California more than $25 million per month while reducing the state’s federal assistance. Federal highway officials notified the state July 15 that it would not receive federal reimbursement for penalties or fees paid as a result of the impasse. The shutdown would also hurt contractors, who must make the tough decision to either shut down and temporarily lay off workers or continue to work. If they continue to work, contractors would have to borrow money, with interest. A state-wide shutdown could also lead to widespread layoffs in the transportation construction industry.

According to Jeff Morales, director of the California DOT, it is not the first time state lawmakers have been slow in reaching an agreement on the budget. But in the past the state had been able to continue work with money from reserve funds.

This year, however, the funds were unusually low because the state had borrowed money set aside for congestion relief. The fund now holds about $200 million. The state owes its contractors almost $300 each month.