HomeMy WebLinkAboutCity of SLO Support for Transit Budget - 2026-27 Governor's Budget ProposalCity of San Luis Obispo, Office of the City Council, 990 Palm Street, San Luis Obispo, CA, 93401-3249, 805.781.7114,
slocity.org
March 18, 2026
The Honorable Gavin Newsom, Governor
State of California
1021 O Street, Suite 9000
Sacramento, CA 95814
The Honorable Monique Limón, President pro Tempore
California State Senate
1021 O Street, Suite 8518
Sacramento, CA 95814
The Honorable Robert Rivas, Speaker
California State Assembly
1021 O Street, Suite 8330
Sacramento, CA 95814
RE: Response to Governor’s Fiscal Year 2026-27 Proposed Budget
Governor Newsom, pro Tem Limón, Speaker Rivas:
On behalf of the City of San Luis Obispo, I write to you today to outline our major budget priorities in
2026. While we recognize California’s uncertain fiscal future, we are advocating this year for the
preservation of critical funding and the institution of policies to advance the state’s goals for transit
agencies across California.
The City of San Luis Obispo is centrally located along California's Central Coast, halfway between San
Francisco and Los Angeles. The City of San Luis Obispo is the County Seat for San Luis Obispo County
and as such, it is also the governmental, economic, medical and educational hub for the other cities
in the county. San Luis Obispo City has a population of roughly 47,063 (US Census, 2021) with an
estimated additional population of 22,279 students when California Polytechnic State University is in
session.
SLO Transit is the local fixed-route transit operation for the City of San Luis Obispo. SLO Transit
operates 11 vehicles at peak along eight fixed-routes, one tripper route, and one express route; within
the 23 square miles of the city limits and the adjacent University campus. SLO Transit operates
Monday through Friday, approximately from 6:00 a.m. to 11:00 p.m. and Saturday and Sunday from
8:00 a.m. to 8:00 p.m. In fiscal year 2025, SLO Transit proudly provided over 660,000 trips to locals
and visitors alike.
1. Fulfill SB 125 Commitment
As you know, in 2023 the state approved a $5.1 billion multi-year transit funding package to address
the dire financial needs of transit and rail agencies statewide in the aftermath of the COVID-19
pandemic (commonly referred to as the “SB 125 program”). To date $4.41 billion of the $5.1 billion
has been appropriated, with the remaining balance of $690 million for the Zero Emission Transit
Capital Program (ZETCP) scheduled for appropriation this year and next. Unfortunately, the
Governor’s proposed budget does not include this promised appropriation for the upcoming fiscal
year, totaling $230 million. The SB 125 program has been essential to the maintenance of transit
service and ridership recovery – in particular as it has offered funding certainty to transit agencies for
capital program development and project delivery.
The failure to provide the remaining balance of funding for the SB 125-ZETCP would result in service
cuts and layoffs, threatening a fragile ridership recovery and undermining the efforts of many regions
and transit agencies to secure long-term funding through self-help measures. We urge you to
appropriate the planned $230 million in GGRF for the ZETCP in this coming year’s budget.
2. Funding Certainty in Greenhouse Gas Reduction Fund (GGRF)
We are grateful that during Cap-and-Invest negotiations last year the state largely preserved critical
funding for the two transit programs funded by the Greenhouse Gas Reduction Fund: the competitive
Transit and Intercity Rail Capital Program (TIRCP) and the formula-based Low Carbon Transit
Operations Program (LCTOP). These are measurably the most effective continuously appropriated
programs in the GGRF at reducing greenhouse gas emissions per dollar spent.
Unfortunately, the proposed budget presents significant funding uncertainty for the TIRCP and LCTOP.
As the TIRCP and LCTOP are in “Tier 3” of the new GGRF Expenditure Plan, they are projected to
receive far less than what was originally committed. Recognizing the vital and successful role these
programs play in reducing GHGs, we urge the state to establish increased funding certainty for these
programs.
3. Streamline Implementation of $125 million in FY 2026-27 for Fare Free Program
As included in SB 840, a one-time investment of $125 million for transit passes has been proposed in
the Governor’s budget. While we applaud this investment, we ask the state to direct this one-time
money to an existing formula program like LCTOP, which will be far more efficient and effective
than standing up a new program. The City has partnered with the San Luis Obispo Council of
Governments (SLOCOG) and other transit operators in the region to pilot a Mobility Wallet program.
The Mobility Wallet is an electronic or card-based payment system that would be distributed to
eligible SLO County constituents as pre-loaded debit cards restricted for transit use. The primary goal
of the Mobility Wallet pilot program is to provide transportation security for those most in need and
to alleviate the high transportation cost burden for county residents. This program is funded through
the State of California’s Low Carbon Transit Operations Program (LCTOP).
4. Support ZEB Transition by Reinstituting the Partial Sales and Use Tax Exemption and
Identifying New Incentive Funding
In 2018, the California Air Resources Board (CARB) adopted the Innovative Clean Transit (ICT)
regulation, which requires California transit agencies to convert their bus fleets to 100% zero-
emission technology by no later than 2040.
As you can imagine, this transition is extraordinarily expensive. We are grateful for CARB’s Hybrid and
Zero-Emission Bus Voucher Incentive Project (HVIP) and the 2019 establishment of a partial sales and
use tax (SUT) exemption for zero-emission buses. Unfortunately, the balance of HVIP is expected to
be fully utilized by the end of this year and the partial SUT exemption expired at the end of 2025
when its extension bill, SB 752 (Richardson), was held in the Senate Appropriations Committee. This
exemption saved transit agencies between $48,000 and $83,000 per ZEB. Without additional support,
we will not meet the requirements of the ICT. We ask the Legislature to identify new funding to
support HVIP and reinstitute the partial sales and use tax exemption for zero-emission buses.
5. Extend COVID-19 Era Statutory Relief for Transit Agencies
Typically, transit agencies must comply with a variety of efficiency measures, like a requirement to
obtain a percentage of our operating budgets from passenger fare collections (often called “farebox
recovery”). At the height of the COVID-19 pandemic, the state recognized this was counterproductive
to underwater transit systems and halted the penalties until the end of the 2025-26 fiscal year. As we
continue to recover and rebuild from the pandemic, we are still dealing with inconsistent ridership
levels. If these penalties resume, they will further hamstring transit agencies as they work to restore
ridership levels. We urge the state to extend these relief measures through FY 2028-29.
We appreciate your continued partnership and support. Please contact Alex Fuchs, Mobility
Services Business Manager at afuchs@slocity.org should you have any questions.
Sincerely,
Erica A. Stewart
Mayor, City of San Luis Obispo
cc: Steven Cliff, Executive Officer, California Air Resources Board
Toks Omishakin, Secretary, California State Transportation Agency
Dina El-Tawansy, Director, California Department of Transportation
California Transit Association, michael@caltransit.org
Members of the San Luis Obispo City Council
Senator John Laird
Assemblymember Dawn Addis
Dave Mullinax, League of California Cities
League of California Cities, cityletters@cacities.org