California is the richest state in the richest country in the world and we lead the world in entrepreneurship and innovation.
But when it comes to infrastructure, we are neither rich, entrepreneurial nor innovative. States and countries with a fraction of our wealth provide their citizens with far superior infrastructure services. People elsewhere travel on more convenient and comfortable transportation systems, study in better school facilities, live behind more secure levees, drink from more secure water systems, and more. California’s environment, quality of life, workers, students and innovators all suffer as a result of our infrastructure deficit.
California’s failure has been well documented. According to the Keston Institute at the University of Southern California, our state faces "precarious earthen levees … steady disintegration of schools, hospitals, and prisons … limits to our water supplies, and waste treatment and water reclamation systems that fall far short of their potential …and increasing congestion and air pollution symptomatic of outdated transportation systems based on technologies and plans developed more than two generations ago."
And a recent study by the Bay Area Economic Institute reported that California devotes only 1 percent of Gross State Product to infrastructure. The historical norm, and the level believed to be necessary to maintain our standard of living, is closer to 2.5 percent.
What accounts for this serious shortfall in infrastructure investment? There are three principal factors:
First, until the Schwarzenegger Administration, the state had not seriously invested in infrastructure since the Pat Brown era. As a result, we have been living off the investments of the past without making the re-investments necessary to preserve living standards for future generations.
Second, the federal government, the single largest source of infrastructure financing, has reduced its contribution by half over the past two decades when measured as a percentage of Gross Domestic Product.
And third, the state has not allowed private sector participation. There are over $1 trillion in infrastructure funds that provide capital, services and innovation to governments around the world, but because of limitations imposed by California, these funds are largely unavailable to help meet our needs.
To renew California’s infrastructure, the Governor believes we need the robust participation of all three of these components, plus ongoing investment by local governments.
That is why in 2006 he asked the voters to emulate the Pat Brown era and approve more than $40 billion of bonds to improve transportation, housing and other infrastructure. They did so, and those funds are quickly being put to work. More recently he has asked the Legislature to approve another $48 billion of infrastructure bonds for the ballot.
And, in January of this year, the Governor joined New York Mayor Michael Bloomberg and Pennsylvania Governor Ed Rendell in forming the Building America’s Future Coalition, whose aim is to boost federal financing and to pressure the presidential candidates to close America’s infrastructure gap. Already 15 more governors have joined and more are expected in the coming months.
Also in January, the Governor used his State of the State address to call for more private participation in infrastructure services by proposing the adoption of his Performance-Based Infrastructure (PBI) plan. This powerful technique was pioneered by Great Britain and has also been used by Canada, Australia, Spain, France and other states and countries to deliver nearly 1000 infrastructure projects. PBI combines the dynamism and innovation of the private sector, the financing of public pension funds and other investors, and the regulatory concerns of the public sector in order to deliver and maintain infrastructure projects faster, better and cheaper.
Unfortunately, because of government employee union opposition to competition, California remains significantly off-limits to PBI. As a result, California is missing out on billions of dollars of high quality infrastructure services being provided to others around the world.
The good news is that local governments appear to be increasingly willing to step up for infrastructure expenditures but obviously they cannot carry all these costs themselves. That’s why we need all of these sources: federal, state, local and private.
It’s time for California to lead the world in infrastructure. Our citizens and environment deserve no less.