May 2026 Government Affairs Update:

Transportation Funding, Energy Policy & Workforce Trends

Transcript

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Welcome to the Southern California Contractors Association's May Government Affairs Update.

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I'm Lori. And I'm Scott. This month we're covering transportation funding, workforce and economic trends, energy policy developments, and several key industry updates that could directly impact contractors across California.

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Let's start with transportation funding. Transportation California, which SCCA has been a member of for decades, has released its second newsletter in its funding series.

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And the focus continues to be what they describe as an emerging transportation funding crisis. This latest bulletin takes a closer look at voter polling and focus group feedback, essentially trying to gauge how the public is thinking about transportation investments right now.

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Which matters because funding solutions ultimately depend on public support, whether that's involving new revenue measures or long-term infrastructure investment plans designed for the future.

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At the federal level, there's also movement in how transportation infrastructure is evaluated. The U.S. Transportation Secretary recently encouraged state governments and the Federal Highway Administration to work together to reduce congestion and pursue what he called high-performance, high-efficiency strategies for mobility.

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That guidance included a reminder that the country maintains about 4 million miles of public roads, supporting roughly 92% of commute trips and moving about 72% of freight.

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That's an important detail because a shrinking labor force can make unemployment rates look stronger than they actually are. In this case, California's unemployment rate ticked down slightly, but fewer people participating in the workforce changes how that number should be interpreted.

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And when you zoom out, the broader economic picture shows mixed signals. California remains a massive economy, but workforce participation and long-term growth patterns continue to raise concerns about long-term stability.

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The Public Policy Institute of California also notes that construction job growth has been soft, with the sector declining since 2022 and growth concentrating in lower-cost inland regions of the state.

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Another key trend this month is vehicle sales and fuel mix in California.

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Right. In the first quarter of 2026, new vehicle sales were about 61% gasoline powered and 13.7% electric, which reflects a year-over-year decline in EV share.

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That slowdown is largely being linked to the reduction in federal EV incentive programs, including tax credits and HOV lane access benefits at the federal level.

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And while that may sound like just a market shift, it has real implications for infrastructure funding. Higher fuel efficiency and EV adoption reduce gas tax revenues, which is a major funding source for infrastructure work.

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Energy policy continues to be closely tied to transportation and infrastructure funding.

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One example is a proposed sustainable aviation fuel tax credit tied to a Northern California refinery conversion project. The proposal has drawn criticism over concerns that it could divert hundreds of millions of dollars away from transportation infrastructure funding.

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The Legislative Analysis Office has also raised concerns, and SCCA has stated opposition to the proposal.

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At the same time, there's ongoing debate about broader energy and fuel policy direction in California, especially as affordability and supply stability continue to be major public concerns.

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On the regulatory side, the Contractors State License Board released its latest quarterly newsletter.

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The focus remains on consumer protection, including complaint trends and guidance related to recovery efforts for homeowners impacted by recent wildfire events.

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While the CSLB's mission is consumer focused, the updates are always closely watched by the construction industry because they often signal enforcement priorities going forward.

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Workforce development continues to be a major theme this month as well.

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Right, and Governor Newsome recently announced $18 million in apprenticeship training grants through the Department of Industrial Relations, which is quite the development.

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Those funds are distributed through the Division of Apprenticeship Standards and ultimately support training programs across the state's construction workforce pipeline.

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The governor also declared National Apprenticeship Week and highlighted that more than 245,000 Californians have completed apprenticeship programs since 2019.

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It's a reminder that apprenticeship remains one of the primary workforce development tools in the construction industry.

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Looking at labor trends more broadly, the Bureau of Labor Statistics shows a continuing gap between public sector and private sector union membership.

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Public sector union membership is around 32.9%, compared to about 5.9% in the private sector.

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And over the past year, public sector union participation has continued to grow slightly.

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There's also an interesting housing trend worth noting.

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Interesting indeed. California has added significantly more housing units than population growth in recent years, which would normally suggest a loosening market.

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But instead, vacancy rates have actually tightened from about 1.2% down to 0.8% over the same period.

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Exactly. And researchers suggest smaller household sizes and shifting living patterns may be contributing to that outcome.

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On another note, one of the more significant developments this month comes from an April 2026 audit of Caltrans' disadvantaged business program.

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The audit identified several concerns, including late subcontractor payments, discrepancies between bid participation and actual payments made, and issues with federal reporting accuracy.

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What's interesting is that one of the most notable findings showed that 37% of reviewed subcontractor payments were made late.

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Right, Scott. Yet another found a significant gap between reported DBE participation at bid time and actual payments made during project delivery.

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These are longstanding issues SCCA has raised with Caltrans and policymakers, and they continue to be part of ongoing discussions around project delivery and compliance.

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Speaking of project delivery, there's also been a notable shift in work zone enforcement. Caltrans and the California Highway Patrol have stepped up enforcement activity through the COZEP and MayZEP programs.

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Historically, CHP presence served mainly as a deterrent, but officers are now taking a more active enforcement role.

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Right, and according to Caltrans, that shift is producing results, with citations reportedly increasing by around 500%.

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Another major infrastructure project continuing to move forward is the Delta Conveyance Project.

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The project is designed to improve long-term water reliability by rerouting water delivery infrastructure around the Sacramento San Joaquin Delta.

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Given California's ongoing water supply challenges, it remains one of the most significant infrastructure projects currently in development.

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Before we wrap up, there are a few additional updates worth noting this month. One comes from the Bureau of Labor Statistics, which reported a decline in workplace fatalities nationwide, including within the construction industry.

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That's certainly positive news. While there's always more work to do when it comes to job site safety, any reduction in fatalities is a step in the right direction. Looking at California more broadly, the California Board of Equalization recently reported that assessed taxable property values across the state now total approximately $9.1 trillion.

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That's right. According to the Public Policy Institute of California, the income gap continues to grow with top earners now bringing in roughly 11 times more income than the average lower income family.

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And that growing affordability challenge continues to shape policy decisions across California, from energy pricing and transportation funding to housing and economic development.

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In fact, concerns over gas prices and energy affordability remain front and center for many policymakers, especially as California continues its transition towards cleaner energy sources while also trying to maintain reliable transportation funding.

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Taken together, these updates highlight just how interconnected California's policy challenges have become. Workforce trends, affordability, transportation funding, energy policy, and infrastructure investment are all influencing one another. And for contractors, those issues aren't just policy discussions happening in Sacramento. They can directly affect project funding, workforce availability, operating costs, and long-term planning.

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Which is why SCCA will continue monitoring these developments and advocating for policies that support a strong and sustainable construction industry.

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Well, that concludes our update for today. If you have any specific questions, don't hesitate to reach out to the SCCA team for more information.

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Thanks again for joining us. We'll see you again next time.

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This broadcast was produced with the help of AI and is intended for general informational purposes based on materials from the Southern California Contractors Association. Labor and regulatory matters can change, so be sure to stay up to date on anything that may affect your business.