The 2019-20 Budget: Office of Emergency Services

The 2019-20 Budget: Office of Emergency Services GABRIEL PETEK LEGISLATIVE ANALYST MARCH 13, 2019 Summary In this report, we assess the Governor’s 2019-20 budget proposals for the Governor’s Office of Emergency Services (OES). In summary, we recommend the following: • Budget Transparency. Require OES to (1) provide additional information about certain proposals that lack justification, and (2) submit detailed justification documents for future budget proposals. • California Interoperable Public Safety Radio System. Reject the proposal’s ongoing funding component of $2.7 million given uncertainty regarding the level of ongoing workload. We also recommend any ongoing funding provided in the future be paid for using a fee-for-service model rather than exclusively from the General Fund (as proposed). • Earthquake Early Warning. Withhold action pending release of an updated business plan that is anticipated in March 2019. Once the Legislature has this updated plan, we recommend that the Legislature consider the various funding options in the context of its priorities, as well as consider the burdens of any charges that are assessed. • Funding the 9-1-1 System. Weigh trade-offs of using the General Fund or increased charges to fund the upgrade and operation of the 9-1-1 system. We find reasonable arguments for using both fund sources. The Legislature will want to weigh the goals of keeping charges low against funding other General Fund priorities. • Federal Trust Fund Authority—Victims of Crimes Act (VOCA). Provide additional federal funds authority on a limited-term basis (rather than ongoing as proposed) and direct OES to report at budget hearings on its plans for the additional 2018 VOCA funds. To the extent that the OES’ priorities are not consistent with legislative priorities, the Legislature could direct the department to allocate funds differently. • Federal Trust Fund Authority—Hazard Mitigation Grant Program (HMGP). Consider whether the department’s criteria for allocating HMGP funds are consistent with legislative priorities. To the extent that the Legislature has different priorities than OES, it could direct OES to modify its criteria. • Deferred Maintenance. Adopt Supplemental Report Language requiring OES to identify (1) how its deferred maintenance backlog has changed between 2019 and 2022, (2) the reasons for any backlog increases that occur over that period, and (3) the specific steps it plans to take to improve its ongoing maintenance practices. • Fire Apparatus Maintenance Shop. Reduce the proposed $2.2 million by $157,000 to reflect that the department will no longer incur lease costs for the Fire Apparatus Maintenance Shop once the state purchases it. analysis full gutter 2019-20 BUDGET DEPARTMENT OVERVIEW OES coordinates planning, response, and radio system. In addition to its disaster-related recovery activities related to disasters and other responsibilities, OES administers various programs emergencies. During a disaster, OES is responsible that provide assistance to victims of crime. for coordinating the state’s activities under the The Governor’s budget proposes $1.5 billion California Emergency Services Act. OES also (almost three-quarters from federal funds) for administers state and federal funds that are support of OES in 2019-20. Of this total budget, provided to help communities respond to and $1.3 billion is for local assistance. This total budget recover from disasters. Additionally, OES provides is a net decrease of $10 million (0.6 percent) from oversight over emergency communication systems, current-year estimated expenditures. including the 9-1-1 system and the public safety BUDGET TRANSPARENCY Background facilitate stakeholders’ ability to track and engage in the budget process. Budget Development Process Includes Technical Adjustments Typically Lack BCP Documents to Justify Requests. Pursuant Documents. Purely technical adjustments to the to the State Constitution, each January the budget are often made without BCPs. This is Governor’s administration proposes a budget because these adjustments represent modifications bill to the Legislature to serve as a starting place to carry out changes previously approved by for budget negotiations. Along with the budget the Legislature or voters. Accordingly, they do bill, the administration prepares and publishes a not include new policy or funding choices for number of other documents to explain and justify the Legislature to consider. For example, they its budget requests. These include budget change could include activities such as allocating already proposal (BCP) documents, which provide detailed authorized changes in employee compensation descriptions of proposed budget modifications or reducing expenditure authority to reflect the for the coming fiscal year, as well as justification expiration of augmentations that the Legislature for why new activities should be funded or approved on a temporary basis in past years. existing activities discontinued. For example, if the administration is proposing that new state Governor’s Proposal employee positions be established or funded, Governor’s Budget Includes Various OES the BCP usually describes the existing level of Requests That Lack BCP Documents. As part of staffing, the new workload that is driving the need the 2019-20 budget package, OES made several for additional resources, the proposed position requests for funding without providing BCPs to classifications, and the estimated amount of staff support their justification including: time that would be spent on each task needed to complete the workload. These documents typically • Funding for 9-1-1 System ($60 Million). The also include an analysis of other alternatives that budget package includes increased funding the administration considered and a rationale from the General Fund to the State Emergency for why the proposed approach is preferable. Telephone Number Account (SETNA). This Legislative members and staff use these documents includes a $10 million loan from the General to help evaluate the merits of the administration’s Fund in 2018-19 (as already approved in proposals, and they are publicly available to Chapter 1 of 2019 [AB 72, Committee on 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET Budget]) and $50 million in General Fund in standalone BCPs with detailed descriptions support in 2019-20. The increased authority of program activities to be undertaken and would be used to address a shortfall in SETNA explanations for why the administration believes the and make improvements to the state’s 9-1-1 level of funding and positions requested are needed system. (We discuss this proposal in more and why the proposed fund source has been detail later in this report.) selected. The Legislature uses this information to • Prepositioning Mutual Aid Engines determine whether the Governor’s proposals are ($25 Million). The Governor proposes worthy of adoption, modification, or rejection. In increased ongoing General Fund support to addition, information provided in BCPs also can be preposition mutual aid fire engines in advance the basis for the Legislature to conduct oversight of possible fires or other disaster events. of department programs to ensure that currently funded activities are performing effectively before • Conducting Disaster-Related Public providing additional resources. Education ($20 Million). The budget package includes a one-time General Fund If the administration had provided individual augmentation in 2018-19 for local entities BCPs for these requests, the Legislature would to begin an education campaign on disaster be able to answer key questions, such as how preparedness and safety. (This funding was the proposed funding and staffing levels were included in Chapter 1.) determined and why the proposed fund source was selected. In some cases, at our request, the • Increasing Funding for California Disaster department was able to provide information to Assistance Act (CDAA) ($20 Million). The answer these questions adequately. However, in Governor proposes increased General Fund other cases, we still have outstanding questions. support on a one-time basis for CDAA, which For example, the requested ongoing funding for provides funding for the repair of public prepositioning mutual aid engines represents a infrastructure and other costs related to continuation of funding provided on a one-time disasters. basis by the Legislature in the last two budgets. • Building Earthquake Early Warning System According to information provided by OES, of ($16 Million). The Governor proposes the $25 million provided in the current year, only increased General Fund support on a $3 million had been expended as of January 2019. one-time basis to complete buildout of the While much of the current fiscal year remains to California Earthquake Early Warning (CEEW) expend these funds, this leaves questions about system. (We discuss this proposal in more what the annual funding need for this program detail later in this report.) should be. • Assisting Victims of Human Trafficking Regarding the proposed augmentation for CDAA, ($10 Million). The Governor proposes the department has not provided the requested additional ongoing General Fund support supporting information for how it determined that for the Human Trafficking Victim Assistance $20 million is the level of additional resources Program. needed to support the program. In recent years, for example, OES has provided the Legislature with LAO Assessment a list of incidents with expected reimbursements Lack of Typical Justification Inhibits in the coming fiscal year and the associated Legislature’s Ability to Evaluate Requests. costs. Regarding the $10 million proposed for The requests identified above are not technical human trafficking programs, the absence of a adjustments to the budget that are simply BCP leaves questions about how the department effectuating past legislative decisions. Instead, they determined what the ongoing level of funding present policy choices. As noted above, typically need is throughout the state, as well as how much these types of new proposals would be presented should be funded from the General Fund versus www.lao.ca.gov 3 analysis full gutter 2019-20 BUDGET other possible sources (such as federal funds, LAO Recommendations as discussed in more detail in our analysis below Require Administration Provide Sufficient regarding the Victims of Crime Act). (We offer Justification Prior to Approving Requests. comments on the other proposals that have not yet The Legislature should feel comfortable that been adopted by the Legislature—specifically, the the requests in the budget are justified before 9-1-1 and CEEW proposals—in more detail later in approving them. To that end, we recommend this report.) legislative staff and members request additional Lack of BCPs Also Increases Difficulty of information about any of the requests for which Holding Administration Accountable. The they believe additional detail and rationale is absence of public documentation for exactly needed. how the administration proposes to expend Direct OES to Make Future Funding Requests funding will also make it difficult in future years Through Budget Proposals. We recommend the for stakeholders and the Legislature to hold Legislature direct OES to submit BCPs for any departments accountable for meeting these future requests that include (1) new positions; expectations. Assuming the Legislature approves (2) funding for new activities; (3) changes in a BCP as proposed, a public record of intended proposed funding-levels for existing activities, if spending facilitates the Legislature’s ability to not purely technical in nature; and/or (4) extensions monitor whether such commitments ultimately of funding, activities, and/or positions that are completed. This is because a BCP provides the Legislature previously had authorized only something for the Legislature to compare against on a limited-term basis. The submission of actual expenditures to identify instances where BCPs in these cases—which is consistent with funds may have been spent for unauthorized long-standing budgeting practices—will better purposes. Absent this documentation, legislators, enable the Legislature to assess whether it would staff, and stakeholders may struggle in future years like to approve, modify, or reject the Governor’s to understand what expectations were set when the requests. Additionally, it will allow the Legislature budget was approved. to more effectively exercise its oversight role over how state funds are used and ensure that funds are spent effectively and for well-justified purposes. CALIFORNIA INTEROPERABLE PUBLIC SAFETY RADIO SYSTEM Background communications, which is particularly problematic during disaster events. Additionally, conventional OES Operates the Public Safety Radio radio systems operate on dedicated radio channels. System. OES is a primary provider of public safety Accordingly, when a user selects a channel to make communications used by public agencies in the a call, other users cannot use that channel until state, including state departments and various local the call is over. This can lead to congestion on the agencies. Public agencies in the state currently radio system and an inefficient use of the radio utilize a patchwork of over 30 conventional public spectrum. safety radio systems that operate on different radio Public Radio System Has Generally Been frequencies and infrastructure. As a result, when an Funded on Fee for Service Basis. It costs agency on one system needs to coordinate with an roughly $82 million annually for OES to operate agency on another system, they generally cannot the public radio system, including for personnel, communicate directly. Instead, they must relay equipment, and maintenance. OES’ costs for messages through a dispatcher. This can delay 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET operating and maintaining the public radio system client agencies that use the system. In particular, have historically been funded on a fee-for-service the system is anticipated to enable radio users from basis by state agencies—such as the Department multiple agencies to communicate directly with of Motor Vehicles and the Department of Fish and one another. Additionally, the system is expected Wildlife—and local client agencies. As a result, the to use radio channels more efficiently by allowing costs of OES’ services have been borne by a mix them be shared more readily. This is because rather of state General Fund, special funds, and other than assigning dedicated radio channels to users, reimbursements by client agencies. (In some cases, it assigns a pool of channels for use by multiple one-time capital costs that support the system users. When a call is made by a user, the system have been borne exclusively by the General Fund.) automatically selects an available channel from the pool of channels. This leaves the remaining Governor’s Proposal channels available for other users to communicate. As shown in Figure 1, the Governor’s Level of Ongoing Workload Uncertain. OES budget proposes a $10.8 million General Fund anticipates that it will take five years to build out augmentation in 2019-20 to develop the California the CRIS system. After this time, OES indicates Radio Interoperable System (CRIS), which is an that there will continue to be ongoing workload upgraded statewide public safety radio system. associated with activities such as maintaining the Under the proposal, the level of funding would system and expanding the system to new users. increase somewhat each year through 2023-24, The $2.7 million proposed in ongoing funding for a total of $59.5 million over the five-year beginning in 2024-25 would be the same level of period. This includes funding for activities such as funding as provided for personnel in previous years purchasing and installing new radio equipment and to implement the system. However, it is unclear upgrading the radio vaults that hold the equipment. if in fact it would be the same level of workload. Beginning in 2024-25, the proposal would provide Additionally, there is uncertainty regarding the $2.7 million annually from the General Fund to additional ongoing workload associated with CRIS fund personnel to maintain and manage CRIS after because the department indicates that it ultimately the initial implementation and to make the system expects that replacing the over 30 existing systems available to new users. The administration also with CRIS will result in efficiencies. According to proposes to add 8 permanent positions beginning OES, this is because it is more labor intensive in 2019-20, increasing to 13 positions in 2020-21. for the department to repair a variety of different equipment rather than a single standard. Notably, LAO Assessment OES reports that, at this time, it is not able to quantify the level of efficiencies that will be Upgrade to System Expected to Provide achieved and when, or if, these efficiencies will be Important Benefits to Various Agencies. CRIS reflected in reduced staffing requirements. is anticipated to provide significant benefits to the Figure 1 Summary of Administration’s California Interoperable Public Safety Radio System Proposal (In Millions) 2024-25 and Component 2019-20 2020-21 2021-22 2022-23 2023-24 Ongoing Personnel $1.7 $2.7 $2.7 $2.7 $2.7 $2.7 Equipment 9.0 8.9 9.5 9.7 9.7 — Totals $10.8 $11.6 $12.2 $12.4 $12.4 $2.7 www.lao.ca.gov 5 analysis full gutter 2019-20 BUDGET LAO Recommendation ongoing basis and (2) there is expected to be an unspecified level of efficiencies achieved as a Approve Only Limited-Term Funding to result of the new system. Should the Legislature Implement System. We raise no concerns with reject this proposed out-year funding, OES would the proposal to provide five years of funding to still be able to come back in future years to ask implement the system and, thus, recommend for additional funding on an ongoing basis— the Legislature approve this part of the request. if needed—when the department has more However, we recommend rejecting the ongoing certainty regarding ongoing workload. Also, to funding component of $2.7 million. We find that the extent ongoing workload is funded in the there is significant uncertainty regarding the future future, we recommend that it be paid for using a level of workload associated with operating and fee-for-service model rather than exclusively from maintaining the public radio system after CRIS the General Fund. This approach is consistent with is implemented. This is because (1) the level of the current funding structure for the public safety workload associated with developing the CRIS radio system and would fairly apportion costs to system could be different from the level of workload the various client agencies that benefit from it. associated with maintaining the system on an EARTHQUAKE EARLY WARNING Background of derailments, which would directly benefit transit providers and users. CEEW System Intended to Provide State CEEW System Would Build Off of Existing With Some Advance Notice of an Earthquake. System. The CEEW system would build on Chapter 803 of 2016 (SB 438, Hill) authorized the foundation of the state’s existing California the development of the CEEW system through Integrated Seismic Network (CISN), which is a a multiagency partnership including OES, statewide network of earthquake sensors that the University of California, the United States provide information on the time, location, and Geological Survey (USGS), and other stakeholders. magnitude of earthquakes in the state within When fully deployed, the CEEW system would use 30 to 90 seconds after earthquakes begin. The a network of over 1,000 sensor stations and other implementation of the CEEW system would require related infrastructure to provide warnings several upgrading some of the existing CISN sensors to seconds prior to the arrival of an earthquake. meet the needs of the new, more advanced system These advance warnings would enable individuals, planned, as well as the installation of additional businesses, and governments to take actions to sensors and related infrastructure, such as Global reduce harm and loss of life from earthquakes. Positioning System (GPS) and telemetry equipment. A 2016 Benefits Study commissioned by OES CEEW System Has Received Funding From and the Seismic Safety Commission determined Multiple Sources. In recent years, the CEEW that these advance earthquake warnings would system has received various sources of funding. benefit society broadly as well as various specific For example, the 2016-17 budget provided sectors. For example, society as a whole would $10 million in one-time General Fund support for benefit from individuals having sufficient warning sensor stations, public education and training, the in order to drop, cover, and take other protective development of a business plan (discussed later actions prior to the beginning of damaging shaking, in this analysis), and four positions to develop thus reducing injuries and deaths. Additionally, and manage the CEEW system. In 2017-18, OES light rail and other mass transit systems could utilized one-time savings from other programs automatically suspend train operations upon receipt supported by the federal Emergency Management of an earthquake warning to minimize the chance Performance Grant to continue funding the four 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET positions provided in 2016-17 for an additional that the funding would be used to complete year. The 2018-19 budget included $15.8 million the remaining one-time costs associated with from the General Fund (and $750,000 from the the CEEW system identified in the 2018 CEEW General Fund annually thereafter) to support the Business Plan, such as for GPS stations, telemetry, build-out of the remaining sensor stations and and outreach. At this time, the administration has continue funding the four positions on an ongoing not put forward a proposal for ongoing operations basis. We note that the CEEW system has also funding for this program. previously benefited from other federal grants, LAO Assessment such as through the Earthquake Hazards Program administered by USGS. Additional Information Might Be Provided by OES Required to Submit a Business Spring. The 2019 update to the CEEW Business Plan for Future CEEW System Funding. Plan is currently anticipated to be released in Chapter 803 required OES to submit a business March. This document should include information plan identifying estimated system costs, sources that will help inform the Legislature’s decisions on of funding, a project completion schedule, the CEEW system. For example, the plan is likely risks, and roles and responsibilities of program to include updated cost and funding information stakeholders by February 1, 2018, and to provide for the project. Additionally, it might include the Legislature with an update to the business plan more detailed information on advantages and annually thereafter. The updates are required to disadvantages of the potential funding sources include various information, such as a summary that could be used to inform the Legislature’s of the overall progress of the implementation of deliberations on its preferred ongoing approach to the system and an update on funding acquired support the system. and expended. In May 2018, OES submitted the Various Funding Sources Are Reasonable. required initial business plan for the CEEW system. We find that there are reasonable rationales for This plan identified the need for additional capital funding the costs associated with the CEEW and other one-time costs of about $16.4 million system from either the General Fund or charges to pay for GPS stations, backbone telemetry, on specific user groups. On the one hand, the and outreach. It also identified unfunded ongoing Legislature might view the CEEW system primarily operational costs of about $16.4 million annually. as providing a public benefit for all Californians. Additionally, as summarized in Figure 2 (see This is because there are broad benefits to society next page), it identified a variety of possible from having advance warnings of earthquakes funding sources and briefly identified some main that will enable people to take actions to prevent advantages and disadvantages of each source. damage to themselves and their property. Based on However, the 2018 CEEW Business Plan did this perspective, it would be reasonable to fund the not provide specific details on possible funding system from the General Fund. On the other hand, sources, such as the estimated level of charges the Legislature might decide that the CEEW system that would need to be assessed on individual users should be more self-sufficient and funded by those or the potential administrative costs to collect these that benefit most directly, such as phone users that charges. Furthermore, the plan did not recommend can receive text alerts of an impending earthquake a specific source of funding for future costs and mass transit providers that could use associated with the system. notifications to change their operations to reduce the likelihood of collisions. This perspective would Governor’s Proposal imply that relying on charges to user groups would The Governor’s budget proposes $16.3 million be more appropriate. Alternatively, the Legislature in one-time General Fund support in 2019-20 for could view CEEW as a project with both specific the CEEW system. At the time of this analysis, the beneficiaries that have a strong interest in building administration had not submitted a BCP for this and maintaining the system, as well a serving a proposal. However, the administration indicates broader public interest. Under this scenario, it could www.lao.ca.gov 7 analysis full gutter 2019-20 BUDGET choose to fund CEEW from a mix of General Fund costly it is to administer and comply with (relative and charges. For example, the Legislature could to the amount of money collected). A second choose to fund one-time costs from the General consideration is who bears the cost of the charge, Fund (as it has done in recent years) and ongoing including how the burden is distributed across costs from charges paid by entities that benefit different groups of payers, such as low-income from the system. consumers. Funding Sources Present Trade-Offs. There Funding the CEEW system from the General are various considerations associated with the Fund would minimize administrative costs and different approaches to funding the CEEW system. avoid concerns about burdening specific groups. One consideration when evaluating any new charge However, this option would mean that funding the should be whether the state and payers of the CEEW system would come at the expense of other charge can implement it efficiently, including how General Fund priorities. In contrast, depending on Figure 2 Potential Funding Sources and Trade-Offs Identified in OES’ 2018 CEEW Business Plan Funding Source Pros Cons Electric utility and/or natural gas Provides a dedicated, stable revenue Potential minor additional users charge source. Can be added to existing administration costs. Potential bills with little administration cost. opposition from utilities. Charge on transportation providers, Provides a dedicated, stable Potential minor additional such as rail operators revenue source. Can be charged administration costs if other users to transportation providers (and (for example, electricity customers) likely passed on to riders of are charged. Potential opposition regional transit systems) with little from transportation providers. administration cost. Cell phone connection charge Clear nexus between payers and Potential opposition from cell phone beneficiaries. Can be added to carriers. existing bills with little administration cost. Provides a dedicated, stable revenue source. Income tax surcharge Provides a dedicated, stable revenue Limited nexus between payers and source. Administration costs would beneficiaries. be relatively low if charge added to existing tax returns. Charge on CEEW technology and Establishes a nexus between benefits Revenues could fluctuate based on service providers and (certain) beneficiaries of the number and type of technology and system. Avoids the need to increase service providers. taxes/charges paid directly by individual Californians. Foundation and federal grants Avoids the need to increase taxes/ Does not provide a stable, dedicated charges imposed on Californians. revenue source. Charge on industries—such as Avoids the need to increase taxes/ Requires multiple, new, and costly hospitals—that benefit from CEEW charges imposed on Californians. revenue collection mechanisms. State General Fund Establishes a nexus with users and Requires annual appropriations beneficiaries to the extent entire and so may not provide a stable, state benefits from CEEW. No new dedicated revenue source. revenue collection costs. OES = Governor’s Office of Emergency Services and CEEW = California Earthquake Early Warning. 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET the specific charges that are assessed, funding be available. Specifically, the updated business the CEEW system from charges could potentially plan might include updated information on the result in significant administrative costs relative cost of the CEEW system and potential funding to the amount of money collected. This could sources, such as more detailed information on the be particularly true if multiple charges were level of administrative costs that would be involved assessed—such as on the utility and transportation in assessing each of the possible charges. Such sectors—rather than just one charge because each information would be valuable in informing the charge would entail separate administrative costs. Legislature’s decision-making. Withholding action Additionally, some specific charges could affect until the spring will also give the administration certain groups of relatively lower incomes—such as an opportunity to craft a BCP for legislative transit users—more heavily than others. consideration that could include additional information, such as an evaluation of possible LAO Recommendation alternative funding sources. Once the Legislature Withhold Action Pending Release of Business has any additional information that is available in Plan. We do not raise concerns with the state the spring, we recommend that the Legislature continuing to devote General Fund to complete consider the various funding options in the context the one-time costs associated with the CEEW of its priorities, weighing factors such as other system as proposed by the Governor. However, we demands on the General Fund, administrative recommend that the Legislature withhold action costs, and the burdens of any charges that are until the spring when additional information should assessed. FUNDING THE 9-1-1 SYSTEM Background increased reliance on texts and reduced reliance on phone calls—the number of intrastate calls has 9-1-1 System Is Outdated. OES has been declining. Accordingly, SETNA revenues have responsibility for developing and maintaining the been declining, dropping about 40 percent in the state’s 9-1-1 system. The existing 9-1-1 system last ten years to about $60 million annually. These is based on technology that was developed and lower revenue levels are not sufficient to meet the deployed in the 1980s and has various limitations. current funding needs for maintaining and operating For example, during disaster events, the system the existing 9-1-1 system. Accordingly, SETNA’s can get overwhelmed, making it difficult for callers reserve has been declining in recent years and is to reach dispatchers. Additionally, the system has now depleted. limited ability to handle data—such as photos 2018-19 Budget Funded Upgrade to and text messages—or provide accurate location 9-1-1 System. As part of the 2018-19 budget, information to first responders. the Legislature approved a plan that includes 9-1-1 System Funded Through Charges on providing $11.5 million from SETNA in the current Intrastate Calls. The existing 9-1-1 system is year to upgrade the 9-1-1 system. As shown in funded through a special fund known as SETNA, Figure 3 (see next page), this level of funding which is funded by a surcharge of up to three will increase each year through 2021-22, for a quarters of one percent (.0075) on intrastate calls total of $132 million over the five-year period. (calls that originate and terminate within the state) Beginning in 2022-23, annual funding will be almost made on landlines and cell phones. According to $40 million. The funding provided would be used OES, on average, a consumer is currently charged to upgrade the existing 9-1-1 system to what is about $0.14 each month for 9-1-1 services. Due to known as Next Generation 9-1-1. This upgrade is the shifts in communication patterns—such as the expected to provide important benefits. First, the www.lao.ca.gov 9 analysis full gutter 2019-20 BUDGET Figure 3 Next Generation 9-1-1 Augmentations Approved in 2018-19 Budget (Dollars in Millions From the State Emergency Telephone Number Account) 2022-23 and Category 2018-19 2019-20 2020-21 2021-22 Ongoing State Operations $1.1 $1.1 $1.1 $1.1 $1.1 Local Assistance 10.4 $20.4 23.0 34.1 38.6 Totals $11.5 $21.5 $24.0 $35.1 $39.7 system is anticipated to be more reliable during the current SETNA structural deficit. OES indicates disasters. This is because when a 9-1-1 call center that it is continuing to determine whether the becomes overwhelmed in a disaster event, the Next funding should be repaid to the General Fund in the Generation 9-1-1 system allows for the automated future. (In February 2019, the Legislature passed transfer of calls to another call center, which will Chapter 1 which provided an additional $10 million ensure that the calls are answered. Second, the loan from the General Fund to SETNA and required system is also anticipated to provide additional the loan to be repaid no later than June 30, 2023.) functionality. For example, it is anticipated to allow In addition, the administration indicates it plans users to send data, such as text messages and to release budget trailer legislation to modify the pictures through the 9-1-1 call system. Additionally, structure of the charge that supports SETNA. At it is expected to provide better information on the the time of this analysis, the specific language had location of callers, thus making it easier for public not been released by the administration. However, safety officials to reach those in need of assistance. the administration indicates that the language will Upgrade Was to Be Funded by Revised Rate likely be similar to the language proposed as part Structure, but Was Not Approved. As part of of the 2018-19 budget, which would replace the the proposed 2018-19 budget, the administration charge on intrastate calls with a charge on devices proposed budget trailer legislation that would have that can access the 9-1-1 system. changed the structure of charges that support Issues for Legislative Consideration the 9-1-1 system in order to raise the additional funds necessary to (1) address SETNA’s insolvency Identification of Additional Funding and (2) support the transition to Next Generation Necessary. For many years, SETNA has had a 9-1-1. Specifically, instead of imposing a charge on structural deficit. At this point, the fund’s reserves intrastate calls, this revised structure would have have been depleted. Therefore, a revised funding imposed a flat fee of between $0.20 and $0.80 per approach would be necessary even absent the month on all lines (such as landlines and cell phone additional costs associated with implementing Next numbers) that can access the 9-1-1 system. OES Generation 9-1-1. In addition, the implementation could adjust the charge within this range annually of Next Generation 9-1-1 comes with additional in order to recover its costs for the 9-1-1 system. one-time and ongoing costs that add urgency to As of spring 2018, OES estimated that the new the need to address SETNA’s funding issue. flat fee would be set at approximately $0.32 per Various Options for Fund Sources Are month per line to cover estimated expenditures Reasonable, but Present Trade-Offs. The users for the 9-1-1 program of about $130 million in of devices that connect to the 9-1-1 system receive 2018-19. The above budget trailer legislation was benefits from it by being able to access the service not adopted by the Legislature. during an emergency. Therefore, it is reasonable to assess a charge on these users as historically has Governor’s Proposal been the case. The specific structure of the charge The Governor’s budget includes one-time proposed last year (and anticipated to be proposed General Fund support of $50 million to address again this year) appears to be a reasonable method 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET for allocating costs across parties that receive Loans Shift Costs to Future. Requiring SETNA these benefits. to repay the General Fund transfers—as is required While it is reasonable to assess charges on for the $10 million provided in 2018-19 and is device owners, the revised structure is anticipated being considered for the $50 million proposed to result in additional costs for these users. in 2019-20—comes with advantages and Specifically, based on last year’s proposal, OES disadvantages. On the one hand, a loan ensures estimated that the average customer would that the General Fund would be repaid, thus pay about $0.32 per month rather than about ensuring that General Fund dollars will ultimately $0.14 per month under the existing structure. If be available for other priorities. On the other hand, the Legislature does not want 9-1-1 charges to requiring repayment does not ultimately reduce the increase by that amount, it could fund all or part of burden of additional costs for device users. Instead, the system from the General Fund. This would be it would reallocate the costs to users in future a reasonable approach since the system provides years. In fact, if the General Fund loan is required to broader benefits to society, including ensuring be repaid within just four years (such as required for that a more robust emergency response system is Chapter 1), users would be required to cover these available to everyone, including those who do not costs pretty quickly. Accordingly, if the Legislature have phones connected to the system. However, in chooses to provide additional General Fund loans considering the potential use of General Fund for to help fund the system, it could consider allowing this program, the Legislature will want to weigh this them to be repaid over a longer period of time use against its other General Fund priorities. in order to allow users a longer period of time to absorb these additional costs. FEDERAL TRUST FUND AUTHORITY INCREASE: VICTIMS OF CRIME ACT Background OES makes decisions on which programs to establish and fund with the assistance of VOCA Provides Funding for Victim Programs. its Steering Committee, which identifies gaps In 1984, Congress created a fund financed by in existing services informed by input from federal criminal fines and penalties, which is stakeholders. In allocating funds, OES has to known as VOCA. Annually, federal VOCA funds consider the federal requirements that govern the are distributed to states—largely on a population use of VOCA funds. However, these requirements basis. OES is the state agency that receives these generally are broad and give states a significant funds on behalf of California. The department degree of flexibility to determine the number and has significant flexibility in determining how to type of victim programs administered. For example, allocate funding to the various victim programs the federal government requires that funds be it administers. This is because the annual state spent on direct services to victims and that the budget does not specify spending amounts for state must spend a minimum of 10 percent of the each victim-related program. Instead, the annual funds on each of the following categories: child budget includes an amount of federal funds abuse, sexual assault, domestic violence, and authority for all the victim-related federal funds, underserved victim populations. Additionally, the including VOCA, thus providing OES discretion to federal government generally prohibits states from allocate funds to specific victim-related programs. supplanting existing funding with VOCA funds. Along with the discretion to determine funding The federal government does not require that the levels for programs, OES has the authority to state fund specific programs or a certain number establish new programs. of programs. In recent years, the state has funded www.lao.ca.gov 11 analysis full gutter 2019-20 BUDGET a few dozen programs with VOCA funds, such as However, OES has indicated that it anticipates the victim/witness assistance, rape crisis, domestic FFY 2019 VOCA award to be over $250 million. violence assistance, transitional housing, and child Legislature Modified Budgeting Approach abuse treatment. The federal government requires to Increase Oversight. In December 2015, the that VOCA funding be spent within a five-year time administration provided a notification to the Joint period. In practice, the state typically allocates Legislative Budget Committee (JLBC) indicating funds to grantees over a three-year period. that the state anticipated receiving $233 million in State’s Allocation of VOCA Has Increased VOCA funds, which would be a very large increase Substantially in Recent Years. Starting in 2000, from prior funding levels. The letter indicated that Congress placed a cap on the amount of VOCA OES intended to allocate these additional funds to funds available to be distributed to states. In federal eight existing programs and eight new programs. fiscal year (FFY) 2015 (from October 1, 2014 to This notification was provided by the administration September 30, 2015), the federal government for informational purposes, and OES indicated that raised the cap from $745 million to $2.4 billion. it did not intend to wait for legislative concurrence This resulted in a large increase in VOCA with its spending plan because the department funding available to California and other states. already had sufficient expenditure authority for Specifically, as shown in Figure 4, the amount of federal funds in the 2015-16 Budget Act. At the California’s VOCA funding more than quadrupled time, OES’ budget included a large federal funds from $52 million in FFY 2014 to $233 million in appropriation in order to ensure sufficient authority FFY 2015. In FFY 2018, the federal government to expend potential federal funds, including for increased the cap to $4.4 billion. Accordingly, the disaster-related purposes, which can sometimes be state received another large increase in VOCA very large and unanticipated at the beginning of the funding, to a total of nearly $400 million. We note fiscal year. that the amount of VOCA funding in future years is In response to concerns about the lack of uncertain because it depends on federal actions. opportunity to review and provide input on the proposed VOCA allocations, the JLBC requested that the administration work with the Legislature to separate OES’ Figure 4 federal expenditure authority Federal Victims of Crime Act Funding for California for victim programs from the (In Millions) authority for other purposes (such as disaster assistance) in future $450 budget acts. This change to 400 OES’ budget was made starting 350 in 2016-17, and OES was given a base level of federal funds 300 authority for victim funding of 250 about $260 million, including about $232 million to accept 200 VOCA funds and the remaining 150 authority to accept funds from 100 other smaller federal grant programs such as those related to 50 the Violence Against Women Act. However, consistent with most 2012 2013 2014 2015 2016 2017 2018 other areas of the budget, if OES receives additional federal funds for victim programs beyond the 12 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET level budgeted, it must request additional authority victim programs that are of significant interest to to receive these funds during the fiscal year after the Legislature. Also, notably, because the budget providing legislative notification. Additionally, JLBC already includes a process to allow the department requested that OES include the Legislature in to request the authority to receive additional the Steering Committee process that informs the unanticipated federal funds upon legislative allocation of VOCA funds. This was implemented, notification, we find that there is no need to budget and the Assembly and Senate now each appoint a excess federal funds authority in order to allow the representative to the Steering Committee. department to receive these unanticipated funds. Unclear Which Programs OES Plans to Governor’s Proposal Fund With VOCA Augmentation. As previously The Governor’s budget proposes $50 million mentioned, the state has broad flexibility to use annually in additional federal funds authority to VOCA funds for a variety of programs that provide allow the state to receive the anticipated increase direct services to victims. At the time of this in VOCA funds. OES indicates that it arrived at the analysis, OES had not yet identified the gaps in estimate of $50 million in additional federal funds services it intended to meet with the additional authority by assuming that the additional funds funds provided by the FFY 2018 VOCA allocation, received from the 2018 VOCA award will be spent or which specific programs it intended to fund, but over the next four years. The department also was expecting to do so in the coming months. indicates that it assumed that the award amount In recent years, the Legislature increasingly for VOCA would continue to be higher than the has made funding programs that serve victims historical average. of crime a General Fund priority. For example, in the 2018-19 Budget Act, the Legislature provided LAO Assessment General Fund augmentations for (1) services Excess Federal Funds Authority in the Future to victims of domestic violence and sexual Reduces Legislative Oversight. OES assumes assault ($10 million), (2) Family Justice Centers that the additional federal funds authority will be ($10 million), and (3) services to victims of human needed over a four year period, but requests an trafficking ($10 million). ongoing increase in federal funds authority based LAO Recommendations an assumption that the state’s VOCA awards will continue to be higher than the historical average in Provide Additional Authority on Limited-Term the future. However, the level of VOCA awards the Basis. We recommend that the Legislature provide federal government will provide the state in future the requested additional federal funds authority on years is uncertain. To the extent that future awards a four-year basis, consistent with OES’ anticipated return to a level significantly below the 2018 award timeline for expending these funds. This approach amount of $400 million—for example, the 2017 would reduce the chance that OES will have more award amount of $219 million—this approach could federal funds authority budgeted than it needs in result in the department having more federal funds future years. In so doing, it will increase legislative authority on an ongoing basis than the department oversight by requiring the department to request needs. It is problematic to provide more federal additional federal funds authority if it receives funds authority in the department’s budget than is additional federal VOCA augmentations. anticipated to be necessary based on the amount Direct OES to Report on Its Plan for of federal funds the administration anticipates Allocating Funds. We recommend that the receiving and using in a given year. This is because Legislature direct OES to report at budget if the department has more federal funds authority hearings on the gaps it—along with its Steering than it needs, it will be able to allocate these funds Committee—has identified in victim programs. We to create or expand programs without legislative further recommend that the Legislature ask OES notification, as occurred with the 2015 VOCA about how it plans to allocate the 2018 VOCA allocation. This reduces oversight over funding for funds, including which new programs it plans to www.lao.ca.gov 13 analysis full gutter 2019-20 BUDGET create and which existing programs it plans to the department to allocate funds differently. For augment. example, if human trafficking continues to be an Consider Plan in Context of Legislative area of funding priority for the Legislature, it could Priorities, and Direct OES Accordingly. We direct the department to direct an increased share recommend that the Legislature consider whether of VOCA funding towards services for victims of OES’ plans for utilizing the additional 2018 human trafficking. (As mentioned previously, there VOCA funds are consistent with its priorities are some federal limitations that would have to for victim programs. To the extent that the be considered, including that funds must be used department’s priorities are not consistent with for direct services to victims and cannot supplant legislative priorities, the Legislature could direct existing funds.) FEDERAL TRUST FUND AUTHORITY INCREASE: HAZARD MITIGATION GRANT PROGRAM Background administers a two-step process. First, it sends out a notice inviting eligible sub-applicants— Program Provides Funding to Mitigate Future such as state agencies, local governments, and Disaster Risks. The HMGP is a federal grant nonprofits—to submit a preliminary application program that is designed to help communities known as a Notice of Interest (NOI) for any implement hazard mitigation measures that proposed projects. OES reviews and approves reduce the risk of loss of life and property from NOIs for eligibility. Second, sub-applicants with future disasters. States are eligible to receive this approved NOIs may submit full applications to the funding following a large disaster that receives department. OES reviews these full applications for a Presidential Major Disaster Declaration. The feasibility and accuracy, evaluates them based on amount of the grant is up to 20 percent of the priorities established by the department, and then total federal disaster assistance provided in the recommends projects to the Federal Emergency relevant disaster. Upon receipt of funds, states Management Agency (FEMA) for funding. OES must have the primary responsibility for prioritizing, submit all eligible project applications to FEMA selecting, and administering state and local hazard within 12 months from the date of declaration of mitigation projects. Eligible mitigation measures the disaster. (The department may seek up to two include activities such as strengthening buildings to 90-day time extensions.) withstand future earthquakes, elevating buildings OES has flexibility on which projects to at risk for flooding, creating defensible space by recommend that FEMA fund, but generally clearing brush and trees from around structures recommends that FEMA fund the highest scoring in areas prone to wildfires, and completing fuel applications based on the criteria the department reduction projects within two miles of structures. has established. Funds are obligated by FEMA We note that funded activities do not have to be upon approval of each individual project, and tied to the location or type of disaster that triggered generally provided on a reimbursement basis. The the funding. However, projects do have to meet federal government typically requires a 25 percent various other federal requirements for funding. For nonfederal cost share. example, most of the funding must go to projects State Expected to Receive Over $1 Billion in that can show they have benefits that exceed their HMGP Funds for 2017 and 2018 Disasters. Due costs according to a methodology established by to the scale of the disasters—especially wildfires— the federal government. experienced in 2017 and 2018, the state received a OES’ Process for Allocating HMGP Funds. number of Presidential Major Disaster Declarations When the state receives HMGP funds, OES 14 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET and is anticipated to receive several billions of in many cases, it prioritizes projects related to the dollars in federal assistance for disaster response specific type of hazard that triggered the disaster and recovery activities. Based on the formula for declaration. For example, for the major 2018 fires, determining HMGP funding, the state is anticipating the department has indicated it is providing first receiving over $1 billion in HMGP, $500 million for priority to fund mitigation activities in declared 2017 disasters (including about $400 million for counties (Ventura, Los Angeles, and Butte). (Please late 2017 wildfires) and about $530 million for 2018 see the box on page 16 for additional information disasters. regarding the department’s priorities for anticipated OES Has a Base Level of Federal Funds HMGP funding resulting from the late 2017 wildfires Authority. OES has a base level of federal and mudslides and the November 2018 wildfires.) funds authority for emergency-related activities Funding Decisions Are in Progress. OES and of $670 million annually. OES typically receives FEMA are in the process of selecting projects for funding from HMGP as well as a variety of other funding with the HMGP funds associated with the federal grant programs—such as the Homeland 2017 and 2018 disasters. As shown in Figure 5, Security Grant Program—under this authority. OES has already made recommendations to FEMA Federal funds for disaster-related purposes are for over $100 million in funding related to 2017 exempt from the process that typically requires disasters. However, the deadlines for submitting legislative notification prior to the acceptance of proposed projects to FEMA for the bulk of the unanticipated federal funds. HMGP funding are in the coming months. Grant Funds Are Not Heavily Oversubscribed. Governor’s Proposal Given the number of potential hazard mitigation The Governor proposes $60 million annually in projects throughout the state that could benefit additional federal funds authority on an ongoing from HMGP funding—and the large amount basis to allow the state to receive the anticipated of federal funding available—we would expect HMGP funds. OES indicates that they arrived at many project proposals to be submitted to OES. the estimate of $60 million by assuming that the However, OES reports that it generally expects additional HMGP funds will be received over a to be able to fund all but the lowest priority seven-year period. This increase—along with the projects. Based on our discussion with OES, it department’s base budget for federal funds—is anticipated to Figure 5 allow the department to receive the anticipated HMGP and other Anticipated HMGP Funding Amounts and federal disaster-related funds. Deadlines for Recommendations to FEMA LAO Assessment 2017 Disaster Declarations Amount Deadline January 2017 storms $22.1 Already submitted OES Has Established Certain Late January 2017 storms 10.1 Already submitted Priorities for HMGP Funds. OES February 2017 storms 78.4 Already submitted has identified certain priorities October 2017 California wildfires 333.2 4/2/2019 for the HMGP funds associated December 2017 wildfires and debris flows 56.7 4/2/2019 with each of the recent disasters Subtotal ($500.5) that have received Presidential 2018 Disaster Declarations Amounta Deadline Major Disaster declarations. The Summer 2018 California wildfires and high winds $31.8 8/3/2019 priorities vary by HMGP disaster Camp and other November 2018 fires 500.0 11/11/2019 allocation. However, OES reports Subtotal ($531.8) that its usual practice is to Total $1,032.3 prioritize funding for projects in a Amounts for the 2018 disaster declarations are estimates. the counties that experienced the FEMA = Federal Emergency Management Agency and HMGP = Hazard Mitigation Grant Program. relevant disaster declaration. Also, www.lao.ca.gov 15 analysis full gutter 2019-20 BUDGET Priorities for Recent Hazard Mitigation Grant Program (HMGP) Funding Late 2017 Wildfires and Mudslides. The Office of Emergency Services (OES) has established the priorities for the nearly $400 million in HMGP funding anticipated to be received as a result of the Presidential Major Disaster Declarations the state received for the October and December 2017 fires and mudslides that affected multiple counties. Specifically, OES has decided to prioritize funding for projects of the following types: 1. Projects in declared counties (and other counties with significant wildfires) that mitigate the types of damages associated with wildfires and mudslides, including: » Soil stabilization. » Erosion control. » Replanting and reforestation. » Flood diversion and storage. » Drainage improvements. 2. Previously submitted but not funded projects in declared counties for certain past disasters. 3. Projects in declared counties related to the specific type of disaster that occurred (for example, fire projects in fire-declared counties). 4. Disaster-specific hazard projects in non-declared counties and all sea level rise and tribal projects. 5. Any hazard projects in declared counties. 6. Any hazard projects in non-declared counties. 7. New hazard mitigation plans and plan updates. 8. Planning-related activities. 9. Projects in declared counties that do not meet cost-effectiveness requirements. 10. Projects in non-declared counties that do not meet cost-effectiveness requirements. November 2018 Wildfires. OES has established the following priorities for the roughly $500 million in HMGP funding anticipated to be received as a result of the Presidential Major Disaster Declarations the state received for the November 2018 fires that affected Butte, Los Angeles, and Ventura Counties. 1. Eligible hazard mitigation activities in declared counties (Butte, Los Angeles, and Ventura Counties), specifically: » Post-fire erosion control projects. » Projects that use the Federal Emergency Management Agency’s pre-calculated benefits methodology. » Building code projects to support post-disaster code enforcement. » Mitigation projects addressing flood, fire, and earthquake hazards. 2. Partnerships with state agencies for large projects to mitigate flood, fire, and/or earthquake hazards. 3. Previously submitted but not funded projects. 4. Mitigation projects in non-declared counties. 16 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET is not clear why some potential sub-applicants could consider prioritizing projects undertaken may not be applying. For example, it could be by state departments or projects that could because some state agencies or local jurisdictions reduce state costs for disaster response, such are unaware of this funding opportunity, the as fire-risk reduction projects that are within process is administratively burdensome, the match the State Responsibility Area. To the extent that requirements are too costly, or because of other the Legislature has different priorities than the reasons. department, it could direct OES to utilize different criteria when evaluating potential projects. LAO Recommendations Require Department to Report at Budget Consider Department’s Plan in Context Hearings. We recommend requiring OES—as well of Legislative Priorities, and Direct OES as local stakeholders—to report at budget hearings Accordingly. We recommend that the Legislature on what factors may be contributing to eligible consider whether the department’s criteria for sub-applicants not applying for HMGP funds. allocating HMGP funds are consistent with its For example, OES could report on the types of priorities. For example, the Legislature could outreach activities the department is conducting. consider whether to prioritize some or all of the Based on this information, the Legislature could funding for the most cost beneficial projects, consider whether it would be appropriate to regardless of whether they are in declared expand outreach efforts or otherwise encourage disaster areas. Alternatively, the Legislature eligible entities—such as state agencies and local governments—to apply. DEFERRED MAINTENANCE Background backlog has varied in recent years.) Since then, the Legislature has provided a total of $7 million OES’ Headquarters Facility. OES’ headquarters for deferred maintenance projects at the building. facility is located in the Sacramento area. The (An additional $1 million was also provided for 118,000 square foot building was constructed in deferred maintenance projects at another OES 2002, which makes it among the newest state facility.) In January 2019, OES identified a backlog office buildings. A 2015 assessment of state office of deferred maintenance projects of $3 million at its buildings in the Sacramento area determined that headquarters facility. the building is in good condition and identified a total of $6.5 million in capital needs for the Governor’s Proposal building through 2025. Based on its condition, The Governor’s 2019-20 budget proposes the assessment placed the OES headquarters $2 million in one-time General Fund support facility among the top third of buildings that were for deferred maintenance projects at the OES evaluated. headquarters facility. The department indicates Previous Budgets Provided Significant that it will use this funding for various projects, Funding for OES’ Deferred Maintenance Needs. such as wall repairs and replacing the access Facilities require routine maintenance and repair control and video surveillance systems. This to keep them in acceptable condition and to funding is part of a larger statewide proposal to preserve and extend their useful lives. When such provide over $600 million on a one-time basis for maintenance is delayed or does not occur, we deferred maintenance projects across a variety of refer to this as deferred maintenance. In 2015-16, departments. (See The 2019-20 Budget: Deferred OES identified a deferred maintenance backlog Maintenance for our assessment of the Governor’s of $4 million at its headquarters facility. (As we overall deferred maintenance proposal.) discuss in more detail later, the department’s www.lao.ca.gov 17 analysis full gutter 2019-20 BUDGET LAO Assessment backlogs because it might point to different legislative responses. To the extent that changes Unclear Why Backlog Has Changed Over in the department’s backlog represent actual Time. If the department has an effective ongoing differences in accumulated needs since last year, maintenance program, we would expect that it might suggest that OES’ routine maintenance the size of its deferred maintenance backlog activities are insufficient to keep up with what would decrease over time as additional funding needs to be done on a regular basis to prevent is provided to address it. However, as shown in the accumulation of new deferred maintenance Figure 6, OES’ identified deferred maintenance and that it should improve its maintenance backlog at its headquarters facility has changed program. When asked about its plan for ensuring substantially from year to year, without a clear that additional deferred maintenance does not connection to the amount of deferred maintenance accumulate, OES reported that it has executed funding that has been provided. In particular, it ongoing facility maintenance contracts to ensure is unclear why the reported backlog grew from that additional deferred maintenance will not be $4 million to $7 million between 2015-16 and required in the future, but it is unclear if this will 2018-19, despite the state providing a total of be sufficient. However, to the extent that the $4 million to OES to address its backlog in 2015-16 changes in the department’s reported deferred and 2016-17. maintenance projects are a result of changes in It is unclear whether these changes in OES’ its reporting methodology, the information on its reported backlog shown in Figure 6 represent reported backlog might not be sufficiently reliable actual changes in deferred maintenance needs to inform decision making about how to most across years or are a result of differences in how appropriately address the department’s deferred deferred maintenance is catalogued or reported maintenance challenges. Instead, it might point to by the department. It is important to understand the importance of gathering improved information what is leading to these changes to identified on the department’s backlog. LAO Recommendation Figure 6 Require OES to Detail Plans Changes in the OES Identified Deferred Maintenance Backlog at Headquarters Building for Better Maintaining Facilities. Given that deferred maintenance (In Millions) projects have continued to $8 emerge for the department despite multiple allocations of 7 Identified Unfunded Need deferred maintenance funding in 6 recent years, it will be important Funding Provided for the Legislature to continue 5 to monitor the success of 4 OES’ practices in preventing the accumulation of deferred 3 maintenance. Accordingly, 2 consistent with recommendations we have made on the 1 administration’s overall proposal for deferred maintenance funding 2015-16 2016-17 2017-18 2018-19 2019-20a in 2019-20, we recommend additional reporting to ensure a Proposed funding in Governor's budget. that progress is made at reducing OES = Governor’s Office of Emergency Services. deferred maintenance backlogs. 18 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET Specifically, we recommend that the Legislature of the following language would be consistent with adopt supplemental report language (SRL) requiring this recommendation: that, no later than January 1, 2023, OES identify Item 0690-xxx-xxxx. No later than January 1, how its deferred maintenance backlog has changed 2023, the Office of Emergency Services since 2019. We further recommend that the SRL shall submit to the fiscal committees of the require, to the extent that its backlog has grown in Legislature and the Legislative Analyst’s Office the intervening years, the department to identify the a report identifying the total size of its deferred maintenance backlog as of the 2018-19 fiscal reasons for the increase and the specific steps it year and September 2022. To the extent that plans to take to improve its maintenance practices the total size of the deferred maintenance on an ongoing basis. This is because, if OES backlog has increased over that period, the continues to experience increases in its backlog, department’s report shall also identify the this might suggest that its routine maintenance reasons for the increase in the size of the activities are insufficient to keep up with its annual backlog and the specific steps the department needs and that the department should improve plans to take to improve its maintenance its maintenance program to prevent the further practices on an ongoing basis. accumulation of deferred maintenance. Adoption FIRE APPARATUS MAINTENANCE SHOP AND GENERAL PURPOSE WAREHOUSE Background Governor’s Proposal OES Facility Used for Maintaining Fire The Governor’s 2019-20 budget provides Engines. OES runs a program that provides $2.2 million from the General Fund to enable fire engines (known as apparatus) and related OES to exercise the lease purchase option to equipment to local governments for use in the acquire the Fire Apparatus Maintenance Shop in mutual aid system. In order to support this Sacramento. This includes $2 million to purchase program, OES operates a facility to maintain fire the property and $200,000 for site evaluations, apparatus and store fire and rescue supplies real estate due diligence, and property appraisals. and equipment needed for major disaster The department currently rents this facility at an response operations. Prior to 2016, OES used a annual cost of roughly $290,000, which it expects Sacramento Metropolitan Fire District facility as the would have declined to roughly $207,000 annually maintenance shop and leased separate warehouse in future years if the lease purchase option was not space. However, Sacramento Metropolitan Fire exercised. According to OES, maintenance costs District asked OES to vacate its facility by 2016. for the new facility are anticipated to be roughly Accordingly, as part of the 2016-17 budget, OES $50,000 per year. received a General Fund augmentation to cover LAO Assessment the additional lease costs associated with allowing it to relocate and consolidate its maintenance Proposal to Purchase Property Is Reasonable. facility and warehouse into a joint facility near OES’ We find that it is reasonable for the state to headquarters. OES entered into a lease for this new purchase the Fire Apparatus Maintenance Shop. facility—the Fire Apparatus Maintenance Shop— This is because we find that the total savings over which contained a provision allowing the state to less than 20 years from no longer needing to lease purchase the facility for $2 million. This facility was the space is greater than the cost of purchasing built in 1996 and the department reports that it is in and operating the building. Given the age and good condition. condition of the building, we expect that it will likely www.lao.ca.gov 19 analysis full gutter 2019-20 BUDGET provide services for sufficient years to justify the LAO Recommendation state’s investment. Modify Proposal to Reflect Technical Proposal Does Not Reflect Cost Savings Adjustment. We recommend that the Legislature Associated With Reduced Rent. By providing reduce the proposed $2.2 million by $157,000 to funds for the state to purchase the Fire Apparatus reflect that the department will no longer incur Maintenance Shop, this proposal will enable the lease costs associated with the Fire Apparatus department to stop making the rent payments Maintenance Shop once the state purchases it, and that it has been making. This should result in cost thus should have some savings reflected in their savings to the department of about $157,000 per budget. year, after taking into account the maintenance costs that will be required under state ownership. However, the budget proposal does not include a reduction in the department’s budget to reflect these reduced lease costs. LAO PUBLICATIONS This report was prepared by Helen Kerstein and reviewed by Brian Brown. 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, CA 95814. 20 LEGISLATIVE ANALYST’S OFFICE