California will receive $3.2 billion annually of federal money for transit upgrades for the next four years, thanks to the passage of the Federal Bill "SAFETEA-LU." However, overall construction in the state (excluding residential construction) for 2006 will be lackluster. It is probable that overall spending will be some 2.5 percent less than 2005. Construction Industry Research Board (CIRB) data shows 2005's overall heavy construction ending at a paltry .05 percent above the previous year. CIRB had predicted a modest 2-percent overall increase for 2005.

The State still has its budget woes. During a recent special election set up by Gov. Schwarzenegger, Prop. 76 was defeated handily. That measure was to make sure the legislature lived within its means — a balanced budget — and it had a clause that would have permanently protected gas tax revenues, to be spent only on highway/infrastructure projects. It would have mandated a state constitutional amendment limiting state spending to the prior year's level along with three prior years' average revenue growth. Excess revenues would be placed in budget reserves, school funding requirements would be changed, and best of all, taxes that had been collected strictly for highways and roads would be spent only on those projects. AGC of California, SCCA and others endorsed the ballot measure.

Three years ago, voters had passed Proposition 42, "guaranteeing" the same thing. But it was written loosely enough that some $3 billion has been siphoned off to the General Fund, thereby "guaranteeing" only that California's freeways, roads, bridges will deteriorate longer. Now, thanks to Prop. 76's defeat, the $1.3-billion gas sales tax revenues currently drawing interest in the General Fund may be at risk for the 2006–2007 budget.

Diane C. Eidam, executive director of the California Transportation Commission, admitted at a WTS seminar recently, "We're in a transportation crisis in California." Because of the situation, AGC of California, Transportation California and other organizations are lobbying the governor and members of the legislature to fully fund Proposition 42 in 2006–2007, being sure not to divert to the General Fund any of the gas tax money already in state coffers. This is a fight that is not going to go away any time soon.

Transportation California Executive Director Mike Lawson has said if Proposition 42 is not fully funded, projects that have been on the books since 2002 are in jeopardy of being delayed or cancelled, and no funding will be available to add new capacity projects if the revenue from the sales tax on gasoline is diverted from transportation accounts in the state's 2006–07 budget.

Addressing a group of state legislators in October, he added, "First, you will delay much-needed projects all across the state, the needs of which do not diminish but actually increase over time along with the costs to complete them. Second, Caltrans will be forced to downsize its commitment to contract consultants and its own staff, which will have a huge destabilizing effect, not only to state funded projects, but to local and developer-funded projects as well."

Still, looking at the figures brings up the "Is the glass half full or half empty?" analogy. California construction (not even factoring in residential construction) remains a $28-billion-plus economy this year. There are still some very impressive and extraordinary projects currently under construction.

PinnacleOne, a leading construction-consulting firm, has compiled the following outlook on the U.S. construction industry for 2006 that could possibly impact California and Hawaii construction:

• Full Impact of Hurricanes to Hit Industry by Mid-Year. In the early part of 2006, there will be minimum escalation to construction costs while the cleanup in Louisiana, Mississippi, Texas, and Florida is taking place. However, by mid-year, once re-construction starts, look for costs to rise rapidly as the demand for materials and labor will dramatically escalate. Increases could be as much as 10 percent to 15 percent across the country and it may take as long as 18 to 24 months before supply and demand for these resources level off.

In fact, economists in Hawaii are predicting just that. The Pacific Business News expects that tourism will remain good in Hawaii but that construction will more than likely be affected by Hurricane Katrina — projects being delayed by shortages of steel, lumber and glass. Shopping malls, high-rise condominium towers and military housing have been delayed by contractors and developers. But construction overall, according to University of Hawaii's Economic Research Organization, may end at 8 percent above last year, with a modest construction growth of 3 percent in 2006.