The 2022-23 Budget: Supply Chain and Port Infrastructure Proposals

2022-23 BUDGET The 2022-23 Budget: Supply Chain and Port Infrastructure Proposals Summary Governor Proposes $1.4 Billion for Supply Chain and Port Infrastructure. The Governor proposes $1.4 billion General Fund over four years for a package of four proposals related to supply chain issues and port infrastructure. Specifically, the package consists of: (1) $1.2 billion for the California State Transportation Agency to fund port, freight, and goods movement infrastructure; (2) $110 million for the California Workforce Development Board to establish a goods movement workforce training campus; (3) $40 million for the Department of Motor Vehicles to increase capacity to issue commercial driver’s licenses (CDLs); and (4) $30 million for the Governor’s Office of Business and Economic Development (GO-Biz) to fund operational and process improvements at the ports. Port, Freight, and Goods Movement Infrastructure. We find that several aspects of the proposed goods movement infrastructure program are uncertain, including key details for how the funds would be allocated. In assessing the proposal, the Legislature will want to consider the role of the state, the proposal’s primary goals, the need for short- or long-term strategies, the merits and trade-offs of using a new or existing program, the geographic distribution of the proposed funding, and the ways state funding can complement federal funding. The Legislature also will want to consider reporting requirements to help facilitate future oversight of the funded activities. Goods Movement Workforce Campus. The extent to which a labor shortage exists at the ports is unclear. We find that the proposal is not fully funded and would represent a new role for the state in workforce training. The Legislature will want to consider several issues, such as the existing training capacity at ports, other potential causes of the workforce shortage, the state’s role in funding and programmatic decisions, and how the outstanding project costs and ongoing operational costs would be funded. CDL Capacity. While the proposed resources to increase capacity to issue CDLs seem reasonable to address concerns regarding increased wait times, the demand for CDLs in the coming months is unclear. Further, we find that the Motor Vehicle Account would be a more appropriate fund source and that ongoing reporting is warranted to determine whether additional funding is needed after the proposed funding ends. Operational and Process Improvements at Ports. GO-Biz is still developing the details of this proposal. We find that the Legislature will want to request the administration provide details on how the grants would be implemented and a clear justification for state involvement. Should the Legislature determine that the proposed funding is appropriate, it will want to consider which agency is most suited to administer the grants. GABRIEL PETEK | LEGISLATIVE ANALYST FEBRUARY 2022 www.lao.ca.gov 1 2022-23 BUDGET BACKGROUND Businesses Use Ports, Freight Rail, and prices primarily arise from a surge in the amount of Commercial Trucks to Move Goods. In order goods consumers want to buy met with businesses for businesses to produce and deliver goods struggling to produce and deliver those goods. and services to the consumer, goods must be One result of this dynamic is a dramatic increase transported from one place to another. Businesses in ocean freight costs, which businesses may often use ports, freight rail, and commercial trucks pass on to consumers through higher prices. to move goods across international and state lines. Port congestion appears to be a key driver of rising For example, about 40 percent of U.S. imports and freight costs. Port congestion also may reduce the 25 percent of U.S. exports pass through the Ports availability of some goods to retailers, which could of Los Angeles and Long Beach, which are both increase the prices of some consumer goods. situated on San Pedro Bay. Recent Federal and State Funding for Ports Recent Increase in Goods Volume Has and Freight Rail. In response to these issues Resulted in Port Congestion. In recent months, facing ports and the broader supply chain, both ports have experienced higher than normal levels of the state and federal government have recently congestion. This is in part due to greater consumer provided funding for ports and freight rail. demand for goods, which has resulted in a record For example, the 2021-22 Budget Act included volume of cargo at many ports. For example, (1) $160 million in General Fund for zero-emission in 2021, the San Pedro Bay ports processed drayage trucks and infrastructure incentives, 14.3 percent more cargo than in 2018. As a result, (2) $280 million in General Fund for infrastructure there is a growing backlog of ships waiting to projects at the Port of Oakland, and (3) $250 million offload and pick up goods at ports. in federal funds to help ports offset initial Port Congestion Likely Contributing to Rising impacts from COVID-19. In addition, the federal Consumer Prices. Across all goods and services Infrastructure Investment and Jobs Act (IIJA) that purchased by U.S. consumers, prices have risen was enacted in November 2021 includes $17 billion by 7 percent over the past year, a considerably for port infrastructure and $5 billion for freight faster rate than recent history. Rising consumer rail nationwide. OVERVIEW OF GOVERNOR’S PROPOSALS Proposes $1.4 Billion for Supply Chain to fund a package of four proposals related to and Port Infrastructure. In total, the Governor supply chain issues and port infrastructure, as proposes $1.4 billion General Fund over four years shown in Figure 1. Figure 1 Overview of the Governor’s Supply Chain and Port Infrastructure Package (In Millions) Proposal Department 2022-23 2023-24 2024-25 2025-26 Total Port, freight, and goods movement infrastructure CalSTA $600 $600 — — $1,200 Supply chain workforce campus CWDB 30 40 $40 — 110 Commercial driver’s license capacity DMV 10 10 10 $10 40 Operational and process improvements at ports GO-Biz 30 — — — 30 Totals $670 $650 $50 $10 $1,380 CalSTA = California State Transportation Agency; CWDB = California Workforce Development Board; DMV = Department of Motor Vehicles; and GO-Biz = Governor’s Office of Business and Economic Development. 2 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Specifically, the proposed package consists of campus; (3) $40 million for the Department of (1) $1.2 billion for the California State Transportation Motor Vehicles (DMV) to increase capacity to issue Agency (CalSTA) to fund port, freight, and goods commercial driver’s licenses; and (4) $30 million for movement infrastructure; (2) $110 million for the the Governor’s Office of Business and Economic California Workforce Development Board (CWDB) Development (GO-Biz) to fund operational and to establish a goods movement workforce training process improvements at the ports. OVERARCHING ISSUES FOR CONSIDERATION In this section, we identify some overarching Available Fund Sources. For some of the issues for the Legislature to consider as it proposals, there is significant federal funding assesses the Governor’s supply chain and port potentially available for similar activities. For infrastructure package. example, as mentioned above, IIJA includes several Role of the State. Given the importance of ports, billions nationwide for port infrastructure and freight, and the goods movement system to the freight rail. The Legislature will want to consider economy, it is reasonable for the state government how the state can best leverage state funds to to prioritize providing some funding for issues maximize federal funding, as well as how the state related to supply chain and ports infrastructure. can target funding to fill any gaps in the federal However, there are several other entities involved funding that are legislative priorities. In addition, and invested in these issues, including the federal the Legislature will want to consider whether the government, local and regional entities, port General Fund, as proposed by the Governor, is the authorities, and private businesses, such as freight most appropriate fund source to support some of railroads, marine terminal operators, and freight the proposals. In some cases, state special funds, trucking companies. In assessing the Governor’s or local, regional, and private funds, may be more proposals, the Legislature will want to consider the appropriate sources of funding. state’s role in supporting these types of activities, Lack of Key Details. Many of the proposals and how the state could best complement, rather lack important details on cost justifications, than duplicate, efforts by other entities, such as the workload estimates, and implementation. This federal government. partly reflects that some of the proposals include Short-Term vs. Long-Term Strategies. new initiatives that the administration is still in The current supply chain disruptions are the result the process of developing. For example, several of both short-term issues, such as greater consumer proposals would establish new programs that might demand, as well as long-term issues, such as the require additional feedback from stakeholders to capacity and resilience of the goods movement determine key details, such as program guidelines system. As a result, the Governor proposes a and allocation criteria. Before the Legislature takes combination of short- and long-term strategies in this any action on these proposals, it will be important package. For example, in the short term, one-time to require the administration to provide additional funding for additional commercial drive tests through information to ensure the requested funding will be overtime, as proposed by the Governor, would implemented according to its priorities. address the pandemic-related increased demand for State Appropriations Limit (SAL) these licenses needed for commercial trucking in the Considerations. The California Constitution budget year. Conversely, funding port infrastructure limits how the state can spend revenues that could potentially expand capacity in the long term. exceed a specific threshold. Appropriations for The Legislature will want to consider whether this capital outlay are excluded from the limit. Some package funds the mix of short- and long-term of the proposed spending meets the definition strategies that it deems appropriate to address its of capital outlay under the SAL—specifically, the priorities in addressing needs in the supply chain funding for CalSTA and CWDB as it would primarily and statewide port infrastructure. support infrastructure projects. As a result, the www.lao.ca.gov 3 2022-23 BUDGET Legislature has limited flexibility to reallocate (In our recent report, The 2022-23 Budget: Initial some of the funding from this proposal to other Comments on the State Appropriations Limit purposes that would not be excluded. That is, the Proposal, we cover SAL issues in more detail.) Legislature would generally need to repurpose In the remaining sections, for each of the the associated funding for other SAL-related Governor’s four proposals, we describe the proposal, purposes, such as tax reductions or an alternative provide our assessment, and identify issues and excluded expenditure. recommendations for legislative consideration. PORT, FREIGHT, AND GOODS MOVEMENT INFRASTRUCTURE Governor’s Proposal time-intensive, and often require multiple phases of work to complete. Therefore, port improvement Provides $1.2 Billion for Goods Movement projects are intended to address long-term capacity Infrastructure. The Governor’s budget provides issues—expanding the ability of ports and related a total of $1.2 billion over two years ($600 million goods movement infrastructure to move a greater in 2022-23 and $600 million in 2023-24) for a new number of containers than currently. In addition, goods movement infrastructure program to be these port infrastructure projects could have other administered by CalSTA. Funds would be allocated benefits, such as reductions in greenhouse gas to specific projects through a competitive process. (GHG) emissions through the electrification of port Projects eligible for funding include port-specific vehicles and equipment. While these goals may be projects, intermodal railyard expansion and worthwhile, it is important to recognize that such electrification, goods movement railway corridor infrastructure projects will not address the more capacity projects, grade separations, and immediate issues with the current supply chain zero-emission goods movement demonstration disruptions, such as delays in goods movement, projects. According to CalSTA, projects that stalled ships near ports, and insufficient space for could potentially receive funding are included containers at ports. in the Emerging Projects Agreement between CalSTA and the U.S. Department of Transportation Proposal Lacks Key Details. This proposal (which consists of transportation projects aimed would create a new program intended to fund at strengthening supply chain resilience) and the projects that meet certain goals, such as reduce 2020 California Freight Mobility Plan’s project GHG emissions, promote transportation equity, and list (which includes freight projects that will be reduce freight-related injuries and deaths. However, construction-ready by 2025). Seventy percent the Governor’s proposal lacks detail on how of the proposed funding would be allocated projects will be assessed and prioritized for funding. to projects related to the Ports of Los Angeles According to CalSTA, this is because additional and Long Beach, with the remaining 30 percent stakeholder feedback is needed before determining allocated to supporting ports and goods movement funding guidelines. Such limited information on infrastructure in the rest of the state, including how the program will be implemented makes it inland ports. difficult for the Legislature to assess whether the program is aligned with its priorities, or if additional Assessment legislative direction is warranted. For example, Proposal Addresses Long-Term Capacity additional information on how this new program Issues. Many of the projects that this proposal differs from existing programs that fund similar would fund will take years to implement. This is port, freight, and goods movement infrastructure in part because infrastructure projects are costly, would be helpful for the Legislature to determine 4 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET whether a new program is needed. In addition, Funding Excluded From SAL. The Governor the proposal has few accountability measures excludes the proposed spending from the SAL, as and no reporting requirements, which in turn will the funds would primarily support infrastructure make future legislative oversight of the program’s projects. As a result, the Legislature has limited implementation and outcomes challenging. flexibility to reallocate funding from this proposal Unclear Whether Geographic Allocations to other purposes. The Legislature would generally Reflect Needs. According to CalSTA, 70 percent need to repurpose the associated funding for other of the funding is proposed to go towards projects SAL-related purposes, such as tax reductions or an related to the Ports of Los Angeles and Long Beach alternative excluded expenditure. because the majority of the goods movement Issues for Legislative Consideration occurs in this region. However, it is unclear whether The Legislature may want to modify the this split in funding is reflective of the infrastructure Governor’s proposal so that it best address its needs in ports, freight, and the goods movement priorities. Some factors that merit legislative system. For example, Los Angeles and Inland consideration include: Empire projects (which include projects outside of the Ports of Los Angeles and Long Beach) • Role of the State. This proposal would constituted roughly one-third of estimated costs represent a significant one-time increase for projects included in the 2020 California Freight in state funding for port, freight, and goods Mobility Plan, followed by the Bay Area (nearly movement infrastructure. As discussed above, one-third) and San Diego (about one-sixth). the Legislature will want to consider what the Project Costs Range Widely. Costs for port, state’s role in supporting and maintaining freight, and goods movement infrastructure vary these types of infrastructure should be, given significantly. For example, the 2020 California the number of other entities involved, including Freight Mobility Plan identified more than the federal government, port authorities, and 300 freight projects that could be implemented freight railroad companies. in the next several years, and these project costs • Primary Goals. In addition to increasing ranged from $350,000 to $6 billion, with the goods movement capacity, this proposal median cost at about $50 million. The wide range is intended to meet several other goals, of costs reflects how varied these projects can be, including reducing GHG emissions, especially in regards to scale. Therefore, without promoting transportation equity, and a clearer understanding of which types of projects reducing freight-related injuries and deaths. will be prioritized, it is difficult to assess how many The Legislature will want to consider whether projects can be implemented with the proposed these goals reflect its priorities and, given level of funding. the limited implementation details the Federal Funding Anticipated, but Allocations administration has provided, if any additional Unclear. As discussed above, IIJA includes legislative guidance is needed to ensure several billions of dollars for port and freight rail funding will be allocated to best meet infrastructure. However, the amount of funding these goals. California will be eligible for and ultimately receive • Short-Term vs. Long-Term Strategies. currently is unclear. Further federal guidelines on This proposal mainly addresses long-term allocation of funding is anticipated in the coming capacity issues at ports. To address months. Without a clear understanding of how shorter-term issues related to port congestion, much funding the state is eligible for, and for other types of activities might be more what types of projects, it is difficult to ascertain appropriate, such as the purchase of chassis how state funding can best complement federal to move more containers at ports or providing funds and how state funds could be leveraged to port-adjacent state lands for increased maximize federal funds. container storage. It will be important for the Legislature to consider whether state action is needed in the short or long term, and modify the Governor’s proposal accordingly. www.lao.ca.gov 5 2022-23 BUDGET • New vs. Existing Programs. Funding is • Complementing Federal Funding. currently proposed to be allocated through a new The Legislature might want to defer action on program under CalSTA. However, other existing this proposal until later in the spring to see programs—like the Trade Corridor Enhancement if additional information on the anticipated Program, which is administered by California federal funds is available. Then, any additional Transportation Commission and funds similar state funding could be better targeted to fill goods movement infrastructure projects—could any funding gaps, provide any necessary state be used to allocate the proposed funding. matching funds to maximize federal funds, and The Legislature will want to consider the merits ensure funding is distributed across projects of and trade-offs of providing funding through a different types at all ports statewide in a manner new or existing program. For example, providing consistent with the Legislature’s priorities. funding through an existing program might lead • Reporting. Given that funds will be allocated to faster implementation, even if some existing to a new program, the Legislature might guidelines will have to be modified. Alternatively, want to consider requiring CalSTA to report a new program might be needed if the intended by January 1, 2025 on (1) the number, types, goals and types of projects prioritized differ location, and expected completion date of significantly with the existing program. projects funded; (2) an updated list of identified • Geographic Equity. As discussed earlier, much needs in port, freight, and goods movement of the funding is dedicated to projects at the infrastructure with estimated project costs, Ports of Los Angeles and Long Beach because entities involved, and region; as well as (3) the the majority of goods movement occurs in amount of federal funding the state has received this region. However, the Legislature also may and for which projects. Additional information want to consider needs of port infrastructure on funding outcomes and ongoing need in statewide, to ensure the needs of smaller, goods movement infrastructure would help the inland ports are met with the available funding. Legislature determine whether any additional The Legislature can consider requesting CalSTA state funding for these activities is needed in to provide additional rationale behind the the future. proposed funding split—particularly, how it aligns with the infrastructure needs across regions. GOODS MOVEMENT WORKFORCE TRAINING CAMPUS Governor’s Proposal Campus to Replicate Port Environment, Include Training on New Technology. Under this proposal, Provides $110 Million to Build New Training the new campus would replicate port working Campus in Southern California. The Governor’s environments to provide a safer location for training budget provides $110 million General Fund over new hires who may be unfamiliar with the port’s three years for CWDB to build a new training campus complex working environment. The administration at the Port of Los Angeles. The proposed funding notes that the campus would train new workers, would cover about two-thirds of total project costs as consistent with the longstanding role of CWDB, but estimated currently. Other entities would provide the also would re-train existing workers on how to use remainder of the funding. The Port of Los Angeles has emerging port technology (especially related to the already identified a 15-acre location to be used for adoption of low- or zero-emission cargo handling the training campus. According to the administration, equipment). Further, the training campus would be the training facility would build on existing training available to host training for other related industries, programs at the Port of Los Angeles. The existing such as freight movement. program is a CWDB-funded partnership consisting of employers, the International Longshore and Warehouse Union, and the Los Angeles Port Authority. 6 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Stated Aim of Campus Is to Address irrespective of whether a training campus is Workforce Shortage. The administration’s stated available, if the demand for similarly skilled workers aim of the campus is to attract new workers and increases in other nearby sectors. train existing workers in order to avoid future Details About Funding Sources Remain workforce shortages at the ports. Outstanding. The Governor proposes to provide $110 million toward the $150 million in total project Assessment costs but the proposal does not identify the New Campus Not Likely to Address funding source for the remaining project costs. Short-Term Challenges… Planning and The proposal also does not specify whether the construction of the new campus likely would take state and CWDB would commit to funding training several years. The new campus therefore is not costs at the campus and, if so, at what cost and a solution to the current supply chain disruptions over what time frame. at the ports that have impacted businesses Building Campus Would Mark New Role and consumers. for State in Workforce Training. The training …But Could Prove Helpful Over Long-Term. campus would build on an existing CWDB-funded In theory, the new campus could help port training partnership at the ports. Under its workers adopt new practices and technologies longstanding workforce training model, the more rapidly in the future. The campus also might CWDB convenes training parties and funds a help encourage more workers to enter the port portion of the total training costs. Training costs workforce. These developments could prove might include worker pay during training, costs helpful in the future because an adequate number for curriculum development, and instructor pay. of workers who have the needed skills is a key CWDB does not customarily fund the construction element of smooth operations at the ports. of physical infrastructure—in this case, the campus Unclear if Workforce Shortage Exists or if itself. The proposal therefore marks a new, Training Is Key Bottleneck. As noted earlier, the untested role for CWDB that may not align with administration’s stated aim of the campus is to legislative priorities. address a future workforce and skills shortage. Issues for Legislative Consideration The proposal does not include additional information about the future skills and workforce The administration has provided limited shortage. Key information might include: (1) the information about the new training campus. As the types of ports jobs that have historically been Legislature assesses the Governor’s proposal, the difficult to fill; (2) the training background and following issues merit consideration: experience needed for these jobs; (3) the types • Existing Training Capacity. Before moving of ports jobs that likely will be needed in the forward with this proposal, the Legislature will future; and (4) the gap, if any, between the current want to confirm that existing training capacity workforce and the projected needs for future port at the Southern California ports is insufficient operations. This key information would assist the to meet future workforce training demand. Legislature in assessing the extent to which a labor • Workforce Labor Supply. According to shortage exists at the ports. Further, although the administration, the campus would help insufficient training opportunities can lead to address a workforce and skills shortage. workforce shortages, many other dynamics also It will be important for the Legislature to affect workforce supply and therefore could instead consider how the campus would alleviate be causing the purported shortage. For example, these shortages and help prevent goods in addition to training opportunities, working movement delays in the future. Furthermore, conditions, scheduling, and work pay/benefits also the Legislature might want to inquire about affect workers’ decisions about whether to work at how port worker unions and the port authority the ports. Additionally, some of the conditions may manage labor supply and support new hiring be out of the ports’ immediate control. For example, and training. the ports could struggle with a workforce shortage, www.lao.ca.gov 7 2022-23 BUDGET • Identifying and Addressing Other • Understanding Need for State Funding. Potential Causes of Workforce Shortage. Throughout the state, ports and other facilities The administration has indicated that operate training sites. To better understand expanded training access is needed to ensure the need for state funding, the Legislature will a stable and skilled workforce at the ports. want to request the administration provide Many other factors also could contribute to additional information on how these sites have workforce insufficiencies. The Legislature been funded and built in the past, as well could direct the administration to identify other as why the proposed campus needs state potential bottlenecks to a stable and skilled funding, while other training sites have not workforce. With this information available, required state funding. the state could consider taking steps to also • Outstanding Project Costs and Ongoing address these areas of concern. Operational Costs. The Legislature will want • State’s Role in Recruiting New Workers. to confirm that full project funding has been Under normal circumstances, the state has committed before appropriating state funds a limited role in determining who enrolls to build the campus. After the campus has in training programs. (We would note that been built, training programs that take place CWDB’s flagship training program—High there will need ongoing funding. Before acting Roads Training Partnership—does prioritize on this proposal, the Legislature will want to underserved workers.) Given the state’s larger request the administration provide additional financial role here, it will be important for the information on whether the state plans to Legislature to ensure that parties recruit in a provide funding for operational costs in the way that is consistent with state priorities. future, and if so, at what ongoing level. CAPACITY TO ISSUE COMMERCIAL DRIVER’S LICENSES Governor’s Proposal to be consolidated lack sufficient dedicated space for commercial drive tests.) The two centers would Provides $6 Million for Extended Field Office also create additional capacity for 300 additional Hours. The Governor’s budget includes $6 million commercial drive tests per month. If the requested from the General Fund in 2022-23 for DMV to fund funding is approved, DMV expects the two new overtime for 200 Licensing Registration Examiners, centers to open by spring 2023. as well as the necessary office and support staff, so that field offices with wait times of 30 days or Assessment more for commercial drive tests can offer additional Wait Times for Commercial Drive Tests Have testing slots on Saturdays. According to the Increased Due to Couple of Factors. In recent department, expanding the number of commercial years, DMV has reported an increase in wait times drive tests available as proposed will increase test for individuals applying for their commercial driver’s capacity by 3,800 tests per month. license (CDL). For example, in 2021, applicants had Provides $34 Million to Lease Two to wait, on average, 36 days for a commercial drive Commercial Drive Test Centers. The Governor’s test, compared to 22 days in 2019. However, the budget provides $3.5 million from the General Fund number of CDL applications actually decreased to in 2022-23 (and $10 million annually from 2023-24 4,932 in 2020-21 from 5,064 in 2018-19. As such, through 2025-26) for DMV to lease dedicated the recent increase in wait times likely is more commercial drive test centers in the Bay Area and attributable to reasons other than an increase in the northern Los Angeles County. These two centers demand for CDLs. Based on our communications would each consolidate three existing testing with the administration, there appears to be two locations. (Currently, the testing locations proposed primary reasons for the increased wait times: 8 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET • Pandemic-Related Test Cancellations. to 8,800 tests monthly for a year. In the long term, DMV closed or limited field office activities the department could stabilize testing availability several times throughout 2020 and 2021 due and expand testing capacity by having dedicated to the pandemic. For example, DMV canceled space for commercial drive tests, instead of all drive tests statewide on December 14, 2020 having to rely on frequently unavailable public or due to the surge in COVID-19 cases and shared spaces. did not resume tests until February 1, 2021. …But Wait Times Could Vary Depending on This required previously scheduled tests to Changes in Demand for CDLs. In addition to the be rescheduled and delayed, increasing wait factors described above, wait times for commercial times for both applicants with previously drive tests could be impacted by changes in the scheduled tests as well as applicants seeking number of CDL applications. For example, while new appointments. the number of CDL applications are currently • Disruptions in Availability of Testing stable, it is possible that the demand for CDLs Locations. DMV has reported several could increase in the coming months, due to a disruptions with their commercial drive test rising need for truck drivers to move goods. In this locations, which has led to canceling or case, wait times could increase if the number of rescheduling appointments. Of the 23 DMV CDL applications increases at a pace not readily locations that administer commercial drive accommodated by the existing CDL testing tests, four are dedicated commercial drive capacity. Alternatively, the demand for CDLs could test centers, which are located in Fontana, decrease due to other factors. For example, at the Fresno, Gardena, and West Sacramento. time of this analysis, DMV recently implemented While these four centers have sufficient space a new federal regulation which requires CDL to accommodate large vehicles required applicants to provide proof of driver training. for commercial drive tests, the other test This additional requirement could discourage locations frequently do not, and often have some potential CDL applicants from applying, to utilize public streets and alleys as well as and therefore, possibly decrease the number of shared parking lots to conduct the tests. CDL applications. Continued assessment of the For example, the test location in Lancaster demand for commercial drive tests is needed to uses a subleased parking lot at a municipal determine whether additional testing capacity is stadium to conduct their test. However, DMV warranted beyond the time frame of this proposal. frequently is forced to cancel or reschedule Motor Vehicle Account (MVA) Is More test appointments when the stadium needs Appropriate to Support Proposed Activities. the space for events. Such disruptions have The state currently collects an $83 fee from CDL also contributed to increased wait times for applications, which is deposited into the MVA. commercial drive tests. Given that the proposed activities would directly support the department’s work in processing CDLs, Proposal Seems Reasonable to Address they should be funded through the MVA, rather than Current Issues Leading to Increased Wait the General Fund as proposed by the Governor. Times for Commercial Drive Tests… We find Currently, the MVA is expected to be in relatively that the proposal is a reasonable approach to stable condition for the next couple of years to addressing the two primary factors that have led to support the proposed costs. increased wait times. In the near term, expanding testing capacity through the use of overtime would Recommendations allow the department to process the backlog of Shift Fund Source to MVA. The costs applications delayed due to pandemic-related test associated with this proposal are directly related to cancellations and disruptions at test locations. processing commercial drive tests, which the state For example, funding overtime would expand the collects a fee to support. Therefore, we recommend available testing slots immediately, increasing the proposal be funded through the MVA instead of DMV’s testing capacity from 5,000 tests monthly the General Fund. www.lao.ca.gov 9 2022-23 BUDGET Require Ongoing Reporting. As discussed received each month, and the number of above, whether the increased wait times for CDL applicants served by region per month for commercial drive tests will be an ongoing or the four years of proposed funding. Additional one-time issue is unclear. We recommend information on the demand for CDLs would allow the Legislature require DMV to report by the Legislature to determine whether ongoing January 1, 2026 monthly wait times for commercial funding for the commercial drive test centers is drive tests, the number of CDL applications needed beyond 2025-26. OPERATIONAL AND PROCESS IMPROVEMENTS AT THE PORTS Governor’s Proposal supply chain inefficiencies. Unfortunately, prior international efforts to harmonize data standards Provides $30 Million for Port Operational among the various stakeholders have been and Process Improvements. The Governor’s unsuccessful. Should common data standards budget includes $30 million one-time General be widely adopted, these changes could not only Fund in 2022-23 for grants to make operational alleviate port congestion in California, but also and process improvements at the state’s ports to improve freight operations globally. help alleviate supply chain problems. The grants would be administered by GO-Biz. GO-Biz is still …But State Role Is Unclear. As we noted in developing this proposal, but it has suggested our overarching comments, it is reasonable for that the grant funding could be used to improve the state to have an interest in promoting goods data interconnectivity between the ports to enable movement given the importance of trade to the efficient cargo movement. state’s economy. However, the adoption of shipping data standards is a concern with an international Assessment scope. Federal agencies may therefore be better Administration Is Still Developing Proposal. situated than the state to play a coordinating The Federal Maritime Commission currently or incentivizing role. Moreover, the primary is identifying data interconnectivity problems beneficiaries of adopting common data standards at the ports and how the adoption of common would primarily be private, for-profit companies. data standards could address port congestion. Once the administration has finalized and provided The Federal Maritime Commission anticipates to the Legislature the details of this grant proposal, that it will present its findings in spring 2022. the Legislature should consider whether the request The administration has noted that GO-Biz is is an appropriate use of state General Fund. meeting with the ports, federal government, and Issues for Legislative Consideration other stakeholders and that it likely will submit a spring proposal reflecting the outcomes of As the Legislature assesses the Governor’s those discussions. proposal for operational and process improvements at the state’s ports, some key issues that merit Improved Data Interconnectivity Might legislative consideration include: Address Supply Chain Problems… Ports, ocean carriers, marine terminal operators, trucking • Proposal Lacks Key Details. Without more companies, and railroads lack common data information about how the funding would standards that would allow for efficient sharing be allocated and used, it is difficult for the of cargo records and other relevant information Legislature to fully evaluate the merits of the about port and cargo handling operations. The proposal and determine whether the proposal lack of data standards has for many years caused aligns with its priorities. 10 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET • Need for State Funding Unclear. • Other State Agencies May Be Better Suited Improving data interconnectivity and to Administer This Program. Should the alleviating port congestion has clear benefits Legislature determine that state funding for for the state. However, the efficient movement operational and process improvements at of goods in the global supply chain is truly a the ports is appropriate, it will want to then matter of international concern. The primary consider which agency is most suited to beneficiaries of more efficient goods administer the new program. GO-Biz has a movement are private, for-profit corporations. cross-cutting coordination role for the state’s In considering the updated proposal in the key economic issues but has limited expertise spring, the Legislature will want to evaluate in technical goods movement issues. CalSTA whether the administration has provided a or the Office of Freight Planning in the clear justification for state involvement. California Department of Transportation might be better suited to effectively administer the grant program. www.lao.ca.gov 11 2022-23 BUDGET LAO PUBLICATIONS This report was prepared by Eunice Roh, Chas Alamo, and Brian Weatherford, and reviewed by Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 12 LEGISLATIVE ANALYST’S OFFICE