The 2020-21 Budget: Resources and Environmental Protection

The 2020-21 Budget: Resources and Environmental Protection GABRIEL PETEK LEGISLATIVE ANALYST FEBRUARY 25, 2020 analysis full gutter 2020-21 BUDGET LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Contents Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Overview of Governor’s Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Crosscutting Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Climate Change Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Wildfire Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Department of Parks and Recreation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 New State Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Increasing Student Access to State Parks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Harbors and Watercraft Revolving Fund Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 California Department of Fish and Wildlife . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Funding Enhancements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Department of Water Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Sustainable Groundwater Management Act Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Tijuana River and New River Restoration Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Augmentations for Existing Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Department of Toxic Substances Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Board of Environmental Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Structural Shortfall of DTSC Special Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Department of Conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 California Geologic Energy Management (CalGEM) Division: Mission Transformation and Oversight 41 California Energy Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Appliance Efficiency Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Capital Outlay and Bond Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Proposition 68 Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Several New Natural Resources Capital Outlay Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Summary of Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 www.lao.ca.gov analysis full gutter 2020-21 BUDGET LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Executive Summary In this report, we assess several of the Governor’s budget proposals in the natural resources and environmental protection areas . Based on our review, we recommend various changes, as well as areas that would benefit from additional legislative oversight . In this summary, we describe our major findings and recommendations . We provide a complete listing of our recommendations at the end of this report . In addition, our office has published two separate reports that include assessments and recommendations related to natural resources and environmental protection programs . The 2020-21 Budget: Climate Change Proposals reviews four proposals by the Governor related to climate change mitigation and adaptation efforts: (1) the cap-and-trade expenditure plan ($965 million), (2) climate-related research and technical assistance ($25 million), (3) a Climate Catalyst Revolving Loan Fund ($250 million), and (4) a climate bond ($4 .8 billion) . The 2020-21 Budget: Wildfire-Related Proposals reviews 22 different proposals related to wildfire prevention, mitigation, and response, including for the California Department of Forestry and Fire Protection and the California Natural Resources Agency . This report includes a brief summary of the key recommendations from each of these reports . Budget Provides $11 Billion for Programs The Governor’s budget for 2020-21 proposes a total of $11 .4 billion in expenditures from various fund sources for programs administered by the California Natural Resources ($7 .1 billion) and Environmental Protection ($4 .3 billion) Agencies . The budget plan for these programs reflects a net reduction of $1 billion (8 percent) compared to the current-year budgeted level . While there is a net reduction in overall spending authority, the proposed budget is mostly consistent with what was approved for the current year and generally does not reflect significant programmatic reductions . Instead, the overall net spending reduction largely reflects the appropriation of one-time funding in the current year . For example, the current-year budget provides natural resources and environmental protection departments over $600 million more in one-time bond funds from Proposition 68 (2018) than is proposed for the budget year . Budget Includes Several Significant Fiscal and Policy Proposals New Oversight Board for Department of Toxic Substances Control (DTSC). The Governor’s budget plan includes $3 million from the General Fund for two years to establish a Board of Environmental Safety to oversee DTSC, as well as perform specified responsibilities . We recommend that the Legislature authorize the establishment of a new oversight board in order to improve transparency and promote greater accountability of DTSC . However, if it chooses to authorize a board, the Legislature will want to closely evaluate the different options for the board’s structure and responsibilities to ensure that they align with legislative priorities . For example, the Legislature may wish to consider how much authority the board should have to direct DTSC’s day-to-day operations . New Fee Structure for DTSC. The Governor’s budget includes two sets of changes to address structural deficits in the Toxic Substances Control Account (TSCA) and Hazardous Waste Control Account (HWCA)—two funds that support DTSC . First, the budget plan includes one-time www.lao.ca.gov 1 analysis full gutter 2020-21 BUDGET General Fund transfers totaling $13 million to address the structural deficits in the budget year . Second, the Governor proposes budget trailer legislation to restructure various charges that support the two funds on an ongoing basis . We recommend the Legislature wait to take action on the Governor’s proposal to transfer General Fund to TSCA and HWCA until the May Revision when updated information about the funds’ conditions will be available . We further recommend the Legislature decide whether to establish a Board of Environmental Safety before weighing the merits of the Governor’s proposals to restructure charges for TSCA and HWCA . The Legislature may wish to consider whether the Governor’s budget trailer legislation to adjust TSCA and HWCA would (1) create a charge structure that would cover the costs of both the departments’ existing mandated functions and potential program expansions, and (2) reflect the “polluter pays” principle . Purchase of a New State Park. The Governor’s budget includes $20 million from the General Fund on a one-time basis to acquire land to create a new state park . The proposal lacks numerous critical details, such as the properties the department is considering to create the new park, metrics that will be used to select a property, and potential future costs to build-out and maintain the park . Accordingly, we recommend that the Legislature require the administration to provide additional information on the proposal . Based on the information provided, the Legislature may wish to approve, modify, or reject the proposal based on how the proposal aligns with legislative budgetary and programmatic priorities . Funding Enhancements for California Department of Fish and Wildlife (CDFW). The Governor proposes $19 million ongoing from the General Fund—transferred from the Habitat Conservation Fund and Wildlife Conservation Board—and $20 million one time from the General Fund to help CDFW better meet its mission, primarily for activities to protect fish and wildlife . While we find that the proposed activities have merit, funding for the ongoing activities would be shifted from other state conservation programs . We recommend the Legislature adopt the one-time $20 million funding proposal because the resources will be used to make certain department operations and maintenance activities more efficient . We further recommend the Legislature weigh the relative trade-offs of the ongoing $19 million proposal with its other conservation and General Fund priorities . Lastly, we recommend deferring action on a third component of the Governor’s proposal—to extend funding scheduled to expire in 2021-22— until next year when a more in-depth analysis of CDFW’s budget will be available . 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET OVERVIEW OF GOVERNOR’S BUDGET In this section, we provide an overview of the various proposals for increased funding . We Governor’s 2020-21 budget plan for the state’s summarize the most significant proposed budget natural resources and environmental protection adjustments later in this section . departments, including a brief description of the Summary of Natural Resources main changes from the current year . Later in this report, we provide more detailed assessments of Budget Changes many of these specific proposals . Total of $7.1 Billion Proposed for Natural Resources Departments. As shown in Figure 2 Overall Plan Mostly Similar to (see next page), the Governor’s budget plan for Current Year entities within the California Natural Resources Total Spending of $11.4 Billion Proposed. Agency (CNRA) includes a total of $7 .1 billion . California’s Natural Resources and Environmental Almost half of this funding (including most of Protection Agencies oversee the activities of about the General Fund support) is for the California 40 state departments, boards, and conservancies Department of Forestry and Fire Protection (CalFire) whose missions are to protect and restore the and debt service on past natural resources-related state’s natural resources and to ensure public general obligation bonds . More than half of health and environmental quality . The Governor’s the total for natural resources departments is 2020-21 budget proposes total funding of proposed to be funded from the General Fund, $11 .4 billion from all sources—the General Fund, with the remainder mostly from special funds and as well as special, bond, and federal funds—for bond funds . Of the total proposed, $5 .4 billion these entities . As shown in Figure 1, this reflects (76 percent) is to administer state programs, and a net reduction of $1 billion (8 percent) compared most of the remainder is for local assistance— to the current-year budgeted level . (Later in this generally grants to local governments and section, we compare proposed spending to revised nonprofits to implement projects . estimates for the current year, which have been Key Changes for Natural Resources updated since the enactment of the budget .) Departments. Compared to updated estimates Net Reduction Mostly Reflects One-Time of current-year expenditures, proposed 2020-21 Funding in Current Year. While there is a net spending for natural resources departments is reduction in overall spending authority, the lower by $2 .3 billion (25 percent) . This reduction proposed budget is mostly consistent with what largely reflects the expiration of one-time funding was approved for the current year and generally provided in the 2019-20 Budget Act, as well does not reflect significant programmatic as technical budget adjustments made since reductions . Instead, the overall net spending enactment of the budget, rather than significant reduction largely reflects the appropriation of programmatic changes . one-time funding in the current year . For example, the current-year Figure 1 budget provides natural resources and environmental Proposed Spending Compared to 2019-20 Budgeted Level protection departments over (Dollars in Millions) $600 million more in one-time Change 2019-20 2020-21 bond funds from Proposition 68 Agency Budgeted Proposed Amount Percent (2018) than is proposed for the budget year . Partially offsetting Natural Resources $7,429 $7,095 -$334 -4% Environmental Protection 5,007 4,313 -694 -14 these reductions, the proposed Totals $12,436 $11,408 -$1,028 -8% 2020-21 budget also includes www.lao.ca.gov 3 analysis full gutter 2020-21 BUDGET • General Fund. On net, General Fund reduction of roughly $220 million from the spending for natural resources entities General Fund in both the current and budget is proposed to decrease by $28 million years for the Emergency Fund, which is used (1 percent) . This decrease reflects a number to support certain costs associated with of one-time, current-year appropriations, fighting wildfires .) including about $170 million provided for • Bond Funds. The Governor’s budget provides various local assistance projects administered $1 .8 billion less for bond funded activities by CNRA or the Department of Parks and and projects than estimated for the current Recreation . The budget also includes year . As noted above, some of this reflects significant General Fund increases, including a net reduction in funds provided from (1) an additional $221 million in debt service Proposition 68—over $400 million compared costs to repay previously approved, natural to the current-year budget—for natural resources-related general obligation bonds resources programs . In addition, much of this and (2) roughly $120 million for CalFire to apparent budget-year decrease is related to enhance wildfire staffing and other resources . how certain bonds are accounted for in the (The Governor’s budget also reflects a budget, making year-over-year comparisons Figure 2 Natural Resources Budget Summary (Dollars in Millions) Change From 2019-20 2018-19 2019-20 2020-21 Actual Estimated Proposed Amount Percent Total $7,286 $9,423 $7,095 -$2,327 -25% By Department Forestry and Fire Protection $2,220 $1,902 $2,019 $117 6% General obligation bond debt service 988 1,089 1,310 221 20 Parks and Recreation 1,172 1,041 1,029 -11 -1 Water Resources 746 2,317 973 -1,344 -58 Fish and Wildlife 538 560 573 13 2 Energy Commission 370 867 455 -412 -48 Conservation Corps 137 172 137 -35 -21 Conservation 138 146 136 -10 -7 Natural Resources Agency 353 484 130 -353 -73 State Lands Commission 103 85 61 -24 -28 Wildlife Conservation Board 196 195 48 -147 -75 Other resources programsa 324 565 223 -342 -61 By Funding Source General Fund $3,771 $3,933 $3,906 -$28 -1% Special funds 1,594 2,313 1,792 -521 -23 Bond funds 1,645 2,887 1,106 -1,781 -62 Federal funds 277 288 291 3 1 By Purpose State operations $5,261 $5,684 $5,423 -$261 -5% Local assistance 1,795 2,620 1,356 -1,264 -48 Capital outlay 231 1,119 316 -803 -72 a Includes state conservancies, Coastal Commission, and other departments. 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET difficult . Specifically, bonds that were Key Changes for Environmental Protection appropriated but not spent in prior years are Departments. Compared to updated estimates often carried over to the current year . The of current-year expenditures, proposed 2020-21 2019-20 amount will be adjusted in the future spending for environmental protection departments based on actual expenditures . is lower by $1 .2 billion (22 percent) . Similar to natural resources departments, this reduction Summary of Environmental Protection largely reflects the expiration of one-time funding provided in the 2019-20 Budget Act, as well as Budget Changes technical budget adjustments . Total of $4.3 Billion Proposed for • General Fund. The proposed budget reflects Environmental Protection Departments. As a significant net reduction in General Fund— shown in Figure 3, the Governor’s budget plan for $533 million (79 percent)—compared to the entities within the Environmental Protection Agency current year . However, this mostly reflects includes a total of $4 .3 billion . Most of this supports one-time costs for CalRecycle to conduct three departments—the California Department of debris cleanup activities following recent Resources Recycling and Recovery (CalRecycle), wildfires, as well as for funding provided in California Air Resources Board (CARB), and State the current year to accelerate cleanup of lead Water Resources Control Board (SWRCB) . Of contamination near the Exide battery recycling the total budgeted, $3 .8 billion (88 percent) is facility . proposed to be funded from special funds, and $2 .6 billion (59 percent) is for local assistance . • Special Funds. Special fund expenditures are estimated to decrease by $318 million Figure 3 Environmental Protection Budget Summary (Dollars in Millions) Change From 2019-20 2018-19 2019-20 2020-21 Actual Estimated Proposed Amount Percent Total $8,014 $5,552 $4,313 -$1,240 -22% By Department Resources Recycling and Recovery $3,584 $2,102 $1,589 -$512 -24% Air Resources Board 1,759 1,422 1,139 -284 -20 Water Resources Control Board 2,242 1,528 1,093 -435 -28 Toxic Substances Control 282 335 325 -10 -3 Pesticide Regulation 103 114 114 — — Other departmentsa 45 52 53 1 1 By Funding Source General Fund $2,176 $676 $143 -$533 -79% Special funds 4,284 4,101 3,783 -318 -8 Bond funds 1,191 406 18 -388 -96 Federal funds 364 370 369 — — By Purpose State operations $3,611 $2,216 $1,757 -$459 -21% Local assistance 4,403 3,336 2,556 -781 -23 Capital outlay — — — — — a Includes the Environmental Protection Agency, Office of Environmental Health Hazard Assessment, and general obligation bond debt service. www.lao.ca.gov 5 analysis full gutter 2020-21 BUDGET (8 percent) . The biggest Figure 4 change affecting this Significant Natural Resources and Environmental spending is the Governor’s Protection Budget Changes cap-and-trade expenditure plan, which decreases the (In Millions) allocation to CARB by almost 2020-21 Fund $200 compared to the Proposal Amount Source current-year budget . Forestry and Fire Protection • Bond Funds. The Governor’s Fire protection: relief staffing $93 Mostly GF budget provides $388 million Fire protection: mobile equipment replacement 19 GF (96 percent) less for Fire protection: direct mission support 17 Mostly GF Various air attack base infrastructure projects 14 GF bond-funded activities and Emergency Fund adjustment -219 GF projects than estimated for the current year . This largely Department of Water Resources Systemwide flood risk reduction projects $96 BF reflects a reduction of over Urban flood risk—American River project 46 GF $200 million provided from Sustainable groundwater management 40 GF Proposition 68 for SWRCB . Tijuana River project 35 GF Similar to what is described for New River Improvement Project 28 GF, BF natural resources bonds, much Natural Resources Agency of this apparent budget-year LiDAR data $80 GF decrease is related to how Conservation Corps certain bonds are accounted Residential Center—Ukiah $62 BF for in the budget . Energy Commission ARFVTF expenditures $51 SF Budget Includes Several Department of Parks and Recreation Significant Fiscal New state park $20 GF Proposals Outdoor environmental education grant 20 GF Museum storage facility 15 BF Figure 4 lists the most Department of Fish and Wildlife significant budget-year funding Funding enhancements $39 GF, SF changes proposed for natural resources and environmental State Water Resources Control Board Cannabis program $23 SF protection departments . Most of the funding increases are Department of Conservation proposed as one time or limited Oil and gas oversight $14 SF term . (The figure does not Department of Toxic Substances Control include year-over-year changes Base funding to maintain operations $13 GF in allocations of cap-and-trade GF = General Fund; BF = bond funds; LiDAR = light detection and ranging; ARFVTF = Alternative and Renewable Fuel and Vehicle Technology Fund; and SF = special funds. auction revenues to various programs .) 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET CROSSCUTTING ISSUES CLIMATE CHANGE PROPOSALS As part of that evaluation, the Legislature might want to consider the past and current Major Proposals Related to Climate Change levels of spending for each type of activity, as Mitigation and Adaption. The Governor’s budget well as the relative merits of relying on funding includes four major proposals related to climate to achieve these goals versus other strategies, mitigation and/or adaptation—(1) the cap-and-trade such as regulations . expenditure plan ($965 million), (2) expanded • How should funds be allocated in order to funding for climate-related research and technical most effectively achieve the Legislature’s assistance ($25 million), (3) establishment of climate goals? Programs that receive funding the Climate Catalyst Revolving Loan Fund should (1) have clearly defined goals and ($250 million), and (4) a climate bond ($4 .8 billion) . objectives, (2) be well coordinated across Our recent report, The 2020-21 Budget: Climate different government entities, (3) address clear Change Proposals, includes a description of market failures and complement regulatory each proposal, our assessment, and associated programs, and (4) have effective strategies recommendations . and resources for evaluating future outcomes . Key Issues to Consider. There are a variety Recommendations. We summarize our of important considerations that the Legislature recommendations on each of the proposals in will want to weigh as it constructs a climate Figure 5 . Overall, the Governor’s approach includes change package that best reflects its priorities and some positive steps intended to help reduce achieves its goals effectively . Notably, the Governor climate change risks, including additional focus proposes a significant increase in the amount of on adaptation activities . In many cases, however, General Fund resources allocated to climate-related the Legislature could consider modifications to the activities, including significant out-year General Fund commitments to pay off the proposed bond . We urge Figure 5 the Legislature to think broadly Summary of LAO Recommendations about its priorities and the role of Cap-and-Trade Expenditure Plan the General Fund, Greenhouse • Ensure multiyear discretionary expenditures do not exceed $800 million. Gas Reduction Fund (GGRF), • Direct administration to provide additional information on expected and other funds—as well as outcomes. nonfinancial tools, such as • Allocate funds according to legislative priorities. regulatory programs—in achieving • Consider other funding sources for high-priority programs. its climate goals . Some of the key Climate Research and Technical Assistance Funding considerations when developing an • Expand state’s climate adaptation activities with approach that reflects overall approach include: legislative priorities. • Delineate key climate policy goals and activities in statute. • Is the overall spending Climate Catalyst Loan Fund amount consistent with • Reject funding for Climate Catalyst Revolving Loan Fund. legislative priorities, • Consider a pilot project to gauge demand for loans. considering the potential need Climate Bond and the wide variety of other • Consider bond proposal as part of future General Fund priorities. potential uses of the funds? • Ensure focus of any bond package reflects legislative priorities. • How does the Legislature • Ensure project selection criteria is designed to maximize effectiveness. want to prioritize funding for • Adopt evaluation requirements sufficient to inform future climate response activities. adaptation versus mitigation? www.lao.ca.gov 7 analysis full gutter 2020-21 BUDGET proposals that might better reflect its priorities and and mitigation strategies, it will be difficult for the achieve its climate goals more effectively . In one Legislature to efficiently and effectively allocate case—the proposed Climate Catalyst Revolving additional funding related to wildfires . Accordingly, Loan Fund—we find that the administration has not we recommend that the Legislature require the provided adequate justification to merit adoption, development of a statewide strategic wildfire though the Legislature could consider creating plan . The purpose of the plan would be to inform a pilot program to gauge the type and number and guide state policymakers regarding the most of appropriate projects that might qualify for the effective strategies for responding to wildfires and program . mitigating wildfire risks . In particular, this would include guidance on the highest-priority and most WILDFIRE PROPOSALS cost-effective programs and activities that should receive funding, as well as an assessment of In recent years, California has experienced some how the state can achieve an optimal balance of of the deadliest and most destructive wildfires funding for prevention and mitigation activities with in the state’s history . While wildfires have always demands to increase fire response capacity . been a natural part of California’s ecosystems, Governor’s Wildfire-Related Budget recent increases in the severity of wildfires and the Proposals. The Governor’s budget provides a total adverse impacts on communities have increased of $492 million (mostly from the General Fund) for the focus on the state’s ability to effectively prevent, 22 proposals for wildfire-related augmentations mitigate, and respond to wildfire risks . In our across multiple natural resources and other recent report The 2020-21 Budget: Governor’s departments . The total includes $179 million Wildfire-Related Proposals we assess: (1) the for CalFire, $119 million jointly for CalFire and state’s overall approach to addressing wildfire the Governor’s Office of Emergency Services, risks and (2) the Governor’s wildfire-related budget $80 million for CNRA, and $210,000 for the Forest proposals that involve multiple departments . Management Task Force . In this section, we summarize the findings and Based on our review, we classify the budget recommendations from our recent report as they proposals in three categories . Specifically, we find relate to natural resources departments . (1) that even in the absence of a strategic plan, State Should Develop Strategic Wildfire some proposals appear reasonable; (2) several Plan to Address Risks. In assessing the state’s proposals are promising but lack important overall approach to addressing wildfire risks, we implementation details; and (3) some proposals find that several factors contribute to increasing raise more significant concerns because they risks, including increased development in fire-prone might not align with some of the key elements areas, unhealthy forestlands, climate change, and we think should be included in a strategic wildfire the role of utility infrastructure management . In the plan, they lack basic workload justification, or coming decades, the state will likely continue to both . Figure 6 (see pages 10 and 11) summarizes face demands for additional funding and resources the wildfire-proposals for natural resources to respond to wildfire risks . Yet, without a broad departments and our recommendations for each and comprehensive evaluation of wildfire risks proposal . DEPARTMENT OF PARKS AND RECREATION The state park system, administered by the historical sites, and ecological reserves . The size Department of Parks and Recreation (Parks), of each park also varies, ranging from less than contains 280 parks and serves about 75 million one acre to 600,000 acres . In addition, parks offer visitors each year . State parks vary widely by type a wide range of amenities—including campsites, and features, including state beaches, museums, golf courses, ski runs, visitor information centers, 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET tours, trails, fishing and boating opportunities, acquisition (over 45,000 acres) since the state restaurants, and stores . Parks also vary in the types acquired Anza Borrego State Park in the 1940’s . of infrastructure they maintain, including buildings, Governor’s Proposal roads, power generation facilities, and water and wastewater systems . The Governor’s budget provides $20 million from For 2020-21, the Governor’s budget proposes the General Fund (one time) to acquire property $1 billion in total expenditures—including to create a new state park . According to the $213 million from the General Fund—for the department, the intent of the proposal is to expand department . More than half of the department’s public access to state parks by adding more proposed budget supports state park operations, acreage of park land . (The budget also includes a with most of the remainder for local assistance separate proposal of $4 .6 million from three bond grant programs . The proposed budget is funds for smaller park land acquisitions intended to $11 million (1 percent) lower than the estimated expand existing state parks .) current-year spending level for Parks . This At the time of this analysis, the specific decrease largely reflects the net effect of certain property, or properties, that the department is one-time funding provided in the current year— considering purchasing have not been identified . particularly for the development of the Native The department, however, has developed a list of American Heritage Center and grants for various potential large-acreage properties it is considering . local park projects—offset by various funding In addition, the administration hopes other increases proposed in the 2020-21 budget . landowners will come forward to express interest in selling their property to the department, which NEW STATE PARK would increase the number of potential sites for a new park . The Governor’s budget includes $20 million (one time) to acquire land to create a new state Assessment park. The proposal lacks numerous critical The concept of creating a new state park details, such as the properties the department is consistent with the department’s mission of is considering to create the new park, metrics providing outdoor recreation and protecting that will be used to select a property, and natural resources . However, the specific proposal potential future costs to build-out and maintain put forward by the department lacks sufficient the park. We recommend that the Legislature details, which make it difficult for the Legislature to require Parks to provide additional information assess its merits . We identify several key pieces of on the proposal. Depending on the information information that are lacking from the proposal . provided, the Legislature may wish to approve, Department Will Not Disclose Properties modify, or reject the proposal. Under Consideration. While the department Background indicates it has a list of properties it is considering to create a new state park, it indicates that it Parks regularly acquires land to augment existing will not share the list with the Legislature . Not state parks . Less frequently in recent years, the knowing the potential sites for a new park makes department establishes a new state park . The it difficult for the Legislature to weigh the merits department has acquired properties for four new of the proposal . One key problem is that the state parks in the past 19 years—including Los Legislature will not be able to determine the Angeles State Historic Park (2001), Fort Ord Dunes extent to which the sites under consideration will State Park (2009), the California Indian Heritage effectively increase access to parks, such as by Center State Park (2011), and Onyx Ranch State ensuring that sites under consideration are located Vehicular Recreation Area (2014) . According to in areas (1) with relatively few existing parks or the department, it has not made a large land (2) near large population centers that would ensure access to a greater number of people . Another www.lao.ca.gov 9 analysis full gutter 2020-21 BUDGET issue is that without knowing the properties Some properties under consideration might already under consideration, it is unclear whether the have usable infrastructure, while others may $20 million being requested is an appropriate level require significant funding to construct or repair of funding for acquiring a new state park . Some basic amenities such as trails, restrooms, roads, properties under consideration might cost less than parking, or a visitor center . Similarly, Parks has not $20 million to purchase, while others may cost estimated the ongoing operational costs to support considerably more . In addition, it is unclear what the new park with staff, routine maintenance, and type of park the department will acquire, such as interpretive programs . a forest, beach, or desert, as well as what other Further, the department has not identified the key features the park will have, such as preserving source of funding for these future costs . State important ecological or historical sites or providing parks typically are supported by a combination of for recreational opportunities . General Fund and special funds—particularly the Proposal Lacks Key Information Needed to State Parks and Recreation Fund (SPRF), which Assess Future Costs. Without knowing the details gets most of its revenues from various park user of a specific property, the department indicates fees . While a new park, especially if it has a high it is unable to estimate the costs to build-out the volume of visitors, could generate significant fee new park with various infrastructure improvements . revenue to offset future operating costs, it is likely Figure 6 Summary of Natural Resources Wildfire Proposals and Recommendations Proposal Description Recommendations Department of Forestry and Fire Protection (CalFire) Relief staffing $93.4 million mostly General Fund in 2020-21 (increasing to • Make funding for training staff limited term. $142.6 million ongoing) to support 294 positions in 2020-21 • Provide additional seasonal staffing rather (increasing to 555 positions ongoing) for (1) additional firefighting than permanent staff. staff, (2) increased training academy staff, and (3) 14 fire engines • Reject funding for training fire engines. for training purposes. Various capital outlay $39.4 million General Fund for new capital outlay projects • Approve. projects ($11.9 million) and to continue previously approved projects ($27.5 million). New projects include replacing two helitack bases, a conservation camp, and an auto shop. Mobile equipment $19 million General Fund for two years to replace CalFire vehicles • Approve. replacement and mobile equipment. Direct mission support— $16.6 million ongoing ($10.8 million General Fund and $5.8 million • Require additional workload justification; administrative staffing reimbursements) to support 103 administrative positions. reject if sufficient information not provided. • If justification is provided, align proposal with positions that are justified. Wildland firefighting $5 million one-time General Fund to fund firefighting research • Approve. research grant related to protective equipment and safety. Hired equipment staffing $2.9 million General Fund in 2020-21 ($2.4 million ongoing) • Require additional workload justification; to support ten positions to operate a program to contract for reject if sufficient information not provided. firefighting equipment from private vendors. • If justification is provided, align proposal with positions that are justified. Mobile equipment $1.7 million General Fund in 2020-21 ($1.5 million ongoing) to • Require additional workload justification; staffing support nine positions related to processing and procurement of reject if sufficient information not provided. vehicles and mobile equipment. • If justification is provided, approve staffing on limited-term basis. (Continued) 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET the new park would require some ongoing General list of the properties under consideration . Based Fund support . (The SPRF currently is being fully on the stated intent for the budget proposal, we utilized to support existing parks and likely does might expect one key metric to be an assessment not have a significant enough operating balance of the extent to which each property would benefit to support a new park on an ongoing basis .) an area that currently has relatively low access to Parks indicates that it is exploring options for state parks and other outdoor recreation . However, partnerships with private and nonprofit groups to departmental staff has indicated that Parks has not offset at least a portion of build-out and operational conducted an analysis of park access to identify costs . However, different locations are likely to such “park-poor” areas . Without an assessment vary substantially in the opportunities for private or of the biggest gaps in parks access, it is unclear nonprofit funding . how the department will select a location for the Department Has Not Identified Selection new park that best meets the goal of providing Criteria. While Parks has indicated it is considering additional park access . In addition, clearly defining multiple properties, the department has not selection criteria would help to ensure that the identified the metrics it will use to evaluate these department fully considers other important factors properties and select a preferred site for the new in its decision-making process, such as future state park . The process Parks plans to use to select capital and operating costs, as well as the degree a property is important, particularly given that it to which each location conserves land that has does not intend to provide the Legislature with a unique ecological features, historical significance, or is otherwise of statewide interest . Proposal Description Recommendations Building standards and $689,000 Building Standards Administration Special Revolving • Approve. defensible space Fund to support two positions for the Office of the State Fire education—SB 190 Marshall to implement provisions of SB 190 related to defensible space inspections and fire safety building standards training. CalFire and Office of Emergency Services Joint Proposals Home hardening pilot $110.1 million—including (1) $100 million one time ($75 million • Approve majority of proposal related program—AB 38 federal funds and $25 million General Fund); (2) $8.3 million in to grant program with additional 2020-21 GGRF (decreasing to $6.1 million ongoing); and implementation guidance. (3) $1.8 million General Fund (decreasing to $1.6 million annually • Provide funding for training and mobile for next four years)—to implement AB 38. Provides 33 positions. equipment staff for CalFire only on a Includes establishing a $100 million home hardening grant limited-term basis. program, conducting defensible space inspections related to real • Reject funding for additional fire engine. estate transactions, training defensible space inspectors, hiring mobile equipment positions, and purchasing a new fire engine. Wildfire Forecast and $9 million General Fund and PUCURA (decreasing to $6.3 million • Approve. Threat Intelligence ongoing) to establish a weather forecasting intelligence and Integration Center— integration center required by SB 209. SB 209 Other Entities Light detection and $80 million one-time General Fund to contract for the collection of • Withhold action and require CNRA to ranging data (LiDAR) LiDAR data of the entire state. provide a detailed implementation plan. (CNRA) • If no plan is provided, reject the proposal. • Consider funding a pilot project. Administration and $210,000 ongoing Environmental License Plate Fund to support • Approve and establish a statutory research support two positions to conduct various workload required by executive framework for the task force. (Forest Management order. Task Force) SB 190 = Chapter 404 of 2019 (SB 190, Dodd); AB 38 = Chapter 391 of 2019 (AB 38, Wood); GGRF = Greenhouse Gas Reduction Fund; SB 209 = Chapter 405 of 2019 (SB 209, Dodd); PUCURA = Public Utilities Commission Utilities Reimbursement Account; and CNRA = California Natural Resources Agency. www.lao.ca.gov 11 analysis full gutter 2020-21 BUDGET Recommendations property, an estimate of future capital outlay and operational costs, and identification of the funding Require Parks to Provide Additional Details. sources that will be used to fund these future costs . We recommend the Legislature require the department to provide it with the list of potential INCREASING STUDENT ACCESS properties under consideration during the course of spring budget hearings . For each potential property, TO STATE PARKS we also recommend that Parks be required to The Governor’s budget includes two include estimates of the potential infrastructure proposals to increase student access to build-out costs, ongoing operational costs, and state parks. In general, the proposals appear revenues (from fees or partnerships) . In addition, consistent with recent legislative priorities. we recommend that the Legislature require Parks However, the proposals lack details to fully to report on the metrics and process it will use to assess their merits. We recommend the select a site for a new state park . Legislature require Parks to report additional Determine Action on Proposal Based on information before taking action on the Additional Information Provided. If the Legislature proposals, as well as consider several oversight receives sufficient information and determines that questions regarding the broader goals and a new state park is consistent with its short-term outcomes of student park access programs. and ongoing budgetary priorities, it may want to approve the proposal . The Legislature also could Background choose to modify the proposal based on the Increasing Student Access to Parks Has Been additional information provided by Parks, such as a Legislative Priority. Improving student access to by providing a different level of funding to align with state parks has been a priority for the Legislature the range of potential acquisition costs associated in recent years . To support this priority, the with the size and type of park the Legislature would Legislature has increased funding for park access like to see developed . programs with various funding augmentations If the Legislature does not receive sufficient from Proposition 68, Proposition 64 (2016), and information on the proposal, it may wish to reject SPRF . In addition, last year the Legislature passed the proposal and direct the department to report Chapter 675 of 2019 (AB 209, Limón) to create next year with a more fully developed plan to the Outdoor Environmental Education Grant acquire a new park . While information on the Program to provide grants to increase access to location and type of the new park will be important outdoor environmental education experiences for for the Legislature to weigh the benefits of the underserved and at-risk youth . proposal, we think that information on the future Parks Has Several Access Programs. Parks costs and funding sources to support a new park has several programs that increase access to are particularly critical . state parks . Two programs that focus specifically Consider Adopting Reporting Language. To on K-12 students are the Parks Online Resources the extent that the Legislature provides funding for Teachers and Students (PORTS) program and for a new park in 2020-21 before a specific site the Summer Learning Program (SLP) . The PORTS is identified, we recommend that the Legislature program provides virtual field lessons for students approve budget bill language requiring that the using videoconferencing technology to allow a department notify the Joint Legislative Budget classroom of students to interact with a park Committee (JLBC) regarding key details of the interpreter located at a state park . The department acquisition prior to Parks having the authority to estimates that 74,000 students were served by spend any of the $20 million . This notice to the the PORTS program in 2018-19 . The SLP program JLBC should identify the property the department coordinates with various nonprofit organizations to selected, other properties that were under host K-12 students at state parks for day trips and consideration, the process used to select the overnight camping trips during the summer . Parks 12 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET estimates that 4,900 students visited state parks program guidelines until after funding has been under the SLP program in 2018-19 . appropriated .) In addition, because the department’s student Governor’s Proposals access programs have generally started as limited The Governor’s budget includes two budget efforts—such as pilot efforts or ones facilitated proposals that would provide augmentations for with nonprofit partners—the department has programs designed to increase student access to not established broad program goals for the state parks . programs or evaluated the most critical gaps in student park access . For example, the department • K-12 Access Program Expansion has not created a long-term goal of the total ($2.9 Million). The budget provides number of California students that will be served $2 .9 million from the Environmental License by the various programs or an assessment of Plate Fund and 19 positions to expand the the resources necessary to achieve that goal . In PORTS and SLP programs . A portion of addition, the department has not evaluated how it the requested positions will replace existing will prioritize student access for over-subscribed limited-term or seasonal positions with programs . permanent positions . • New Outdoor Environmental Education Recommendations Grant Program ($20 Million). The Governor’s Obtain Details of PORTS and SLP Proposal budget includes $20 million (one time) from Before Taking Action. We recommend that the General Fund to establish the Outdoor the Legislature require the department to report Environmental Education Grant Program information on the level of resources currently created by AB 209 . dedicated to the PORTS and SLP programs, the allocation of proposed new positions between Assessment these two programs, and information on how outcome metrics tie to the level of resources The proposals to expand student access budgeted . Regarding the Outdoor Environmental to state parks appear consistent with recent Education Grant Program, the Legislature may want legislative priorities, including the adoption of to ask the department about what process it will go AB 209 . However, the proposals lack basic through to develop program guidelines if funding is details necessary to fully assess their merits . For approved . example, the proposal to augment staffing for the PORTS and SLP programs does not identify Consider Broader Oversight Questions. Given (1) how many of the requested positions will replace multiple recent funding increases provided for park existing limited-term or seasonal positions and access programs, we recommend the Legislature how many will augment the programs, (2) how use these budget proposals as an opportunity the new positions would be allocated between to consider broader questions about the goals, the programs, or (3) accurate estimated outcome administration, marketing, and implementation measures . Without this information, it is not of the department’s student access efforts . Key possible to assess what outcomes, such as number oversight questions include: of students served by the program, are likely to • Goals. Does the department have long-term be achieved . In addition, the department indicates goals for the number of students that it that it has not yet determined how it would hopes will participate in the PORTS and allocate grant funds for the Outdoor Environmental SLP programs, as well as any other efforts Education Grant Program because it has not yet to increase student access? What are the had the opportunity to meet with stakeholders Legislature’s goals for ensuring K-12 students and develop program guidelines . (Assembly have access to state parks and outdoor Bill 209 directs the department to wait to develop learning experiences? www.lao.ca.gov 13 analysis full gutter 2020-21 BUDGET • Funding. What is it likely to cost to achieve come from increased revenues, decreased program goals? What are available sources of expenditures, and fuel tax revenues; and (4) how funding—including potentially nontraditional to prevent operational shortfalls for the fund on funding sources for parks—to increase an ongoing basis. student park access and outdoor learning Background experiences? • Prioritization. Given limited funding, what Expenditures for Boating-Related are the most cost-effective ways of providing Activities. The HWRF is used to support various student access? Should programs focus on boating-related activities, including management specific grade levels? How should classes and of invasive aquatic plants and other species and students be prioritized when programs are local assistance grants for boating facilities and over-subscribed? How should the department safety programs . The administration estimates that balance the trade-offs of virtual park a total of $79 million will be spent from the fund in experiences with in-person park visits? For the current year, primarily by three departments— example, virtual field trips allow more students Parks, Department of Fish and Wildlife, and the to participate at lower costs, while in-person California Department of Food and Agriculture . field trips provide a more complete experience As shown in Figure 7, $61 .7 million is to support and hands-on learning . various Parks operations, local assistance • Communication With Schools. What are programs, and capital projects . the most effective ways of marketing the Most Revenue Generated From Vessel various programs and sharing information Registration Fees and Fuel Taxes. The HWRF with schools, students, and nonprofit receives a significant portion of its revenue from partners? What is the process for receiving vessel registration and renewal fees, as well as a feedback from teachers and schools to ensure transfer from Motor Vehicle Fuel Account (MVFA) . programs target appropriate grade-level • Vessel Registration and Renewal Fees. content and align with curriculum? Are there Vessel registration in the state is conducted opportunities for these communication efforts on a biennial basis . The state charges an to be streamlined or improved? initial registration fee of $65 for most vessels ($37 in even years, the second year of the two HARBORS AND WATERCRAFT REVOLVING FUND INSOLVENCY Figure 7 Parks Expenditures From the HWRF The Harbors and Watercraft Revolving Fund (HWRF), which is used to support various (In Millions) boating-related activities, will become insolvent 2019-20 in 2020-21 absent any intervention. The Program Estimated Governor’s budget includes a “placeholder” Aquatic invasive plant removal $12.5 solution of $26.5 million to keep the fund Public safety grants 11.5 solvent, but the specific details of the solution Launch facility grants 11.0 are unclear, as well as whether it would prevent Loan program for boating facilities 5.5 insolvency beyond the budget year if ongoing. Quagga and zebra removal grants 3.8 Abandoned watercraft abatement 2.8 We recommend the Legislature consider the Capital outlay projects 2.7 following key issues: (1) the structure of the Oceanography research 1.5 vessel registration fee going forward; (2) the Beach erosion control 1.0 current demand of boating programs and Other 9.4 the effects of reduced expenditures from the Total $61.7 fund; (3) the extent to which solutions should HWRF = Harbors and Watercraft Revolving Fund. 14 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET year cycle) . A majority of the fee is deposited related to how fuel tax revenues associated into the HWRF, while a small portion is with vessels is distributed among the HWRF, deposited into the Air Quality Improvement SPRF, and the General Fund . The outcome of Fund and the Alternative and Renewable Fuel the change, however, is a significant decrease and Vehicle Technology Fund . The state also in the amount of MVFA funds transferred to the charges a registration renewal fee that is due HWRF . For instance, the MVFA transfer fell from every two years on odd numbered years . The $23 million in 2018-19 to $8 million in 2019-20 . fee is $36 for most vessels . The full amount of The 2019-20 budget also included a one-time the renewal fee is deposited into the HWRF . solution of $22 million—from a combination of As a result of the renewal fee being collected a reversion of unencumbered local assistance on a biennial basis, fee revenue fluctuates appropriations and a transfer from the Public Beach predictably each year . The HWRF generally Restoration Fund—to offset the reduced transfer . receives about $4 million in even years and The fund is still estimated to have an operational $27 million in odd years . Both the initial shortfall of $40 million at the end of the current registration and renewal fees include a base year, which will result in estimated reserves of fee and a supplemental fee for activities to $38 .8 million . Figure 8 shows historical revenues prevent the spread of the quagga mussel, an and expenditures from the HWRF . invasive species . Governor’s Budget • Transfer From MVFA. The HWRF also receives an annual transfer from the MVFA . Absent any corrective actions, the administration The transfer reflects the estimated amount of estimates that the HWRF will experience an state fuel taxes paid by vessel owners . The operational shortfall of $64 million in the budget amount transferred is based on the number of year . This would cause the fund to fully deplete registered boats in the state and has ranged its remaining reserves and become insolvent . In from $18 million to $29 million annually in recognition of this problem, the Governor’s budget recent years . Operational Shortfall and Figure 8 Insolvency. Over the last HWRF Revenue and Expenditure History several years, the HWRF has (In Millions) periodically faced operational shortfalls—meaning planned $140 expenditures have exceeded Year-End Balance combined revenues and transfers . 120 Operational shortfalls have typically occurred in even years 100 when the registration renewal fee Expenditures 80 is not due . However, prior-year reserves have been able to 60 support the fund during these Revenues periods . and Transfers 40 The operational shortfalls were exacerbated because 20 of a technical correction that was made as part of 2014-15 2015-16 2016-17a 2017-18 2018-19 2019-20b the 2019-20 budget . The a Revenues include a General Fund loan repayment of $46 million. change was intended to better b Reflects $22 million in one-time budget solutions. reflect past legislative intent HWRF = Harbors and Watercraft Revolving Fund. www.lao.ca.gov 15 analysis full gutter 2020-21 BUDGET includes a placeholder solution of $26 .5 million a $1 increase in the renewal fee, for instance, to keep the HWRF from becoming insolvent . The would generate about $750,000 in odd budget assumes half of this amount would come years . We also note that the base registration from increased revenue and half from expenditure renewal fee was last updated in 2005 . As reductions . However, at the time of publication, time has progressed, the fee has lost its the administration had not identified what specific relative purchasing power due to inflation . This actions it would propose and, instead, states that it may provide a rationale for the Legislature intends to have a more complete proposal later this to increase the fee to reflect its current spring . year value, which would result in about a $7 increase in the fee . The Legislature could Assessment also consider indexing the registration and Unclear Whether Placeholder Solution Would renewal fees to inflation, which would align Prevent Insolvency Beyond Budget Year. While them with similar registration fees placed on the Governor’s budget includes a $26 .5 million motor vehicles . placeholder solution, the lack of specificity provided • Reduce Expenditures From HWRF. The makes it difficult to evaluate whether the solution Legislature could also reduce expenditures by would prevent the HWRF from becoming insolvent decreasing the amount allocated to specific in subsequent years . While the current level of programs supported by the fund . As noted funding assumed in the placeholder solution would earlier, overall expenditures from HWRF allow for the fund to remain solvent in the budget have increased significantly in recent years year, it would also force the fund to deplete its from $48 million in 2014-15 to $79 million in remaining reserves to $1 .3 million . Assuming the 2019-20 . A reduction in expenditures also $26 .5 million solution is ongoing, we estimate that may be warranted given the decrease in fuel there would continue to be an operational shortfall tax revenue transferred from the MVFA to the in 2021-22 of about $28 million . This would HWRF going forward, though the Legislature ultimately place the HWRF in a similar situation to would want to consider the impact to what it is currently experiencing . Accordingly, it is in programs of any reduction in expenditures . the interest of the Legislature to approve a solution • Shift More MVFA Funds to HWRF. As that would keep the fund solvent in future years . mentioned earlier, some of the fuel tax Options for Addressing the Operational revenue related to vessels is transferred to the Shortfall. While the Governor does not yet have a General Fund and the SPRF . This is a result specific proposal, there are a wide range of options of vessel fuel tax revenue not being limited for the Legislature to consider . Accordingly, it will for only transportation purposes under the be important for the Legislature to establish its California Constitution—in contrast to fuel priorities for the HWRF and determine how best to tax revenue collected from motor vehicles . address the projected insolvency in 2020-21 . While The Legislature could eliminate or reduce the the Governor’s placeholder solution could help the amount transferred into these funds in order fund remain solvent in the budget year, it is unclear to support the HWRF . For instance, the MVFA whether it would address the operational shortfalls is expected to transfer $35 million of fuel tax beyond 2020-21 . Accordingly, the Legislature will revenue related to vessels to the General Fund want to consider long-term solutions in addressing in the budget year . To the extent that a portion the structural imbalance . In order to assist the of these funds was shifted from the General Legislature in developing its plan, we identify a Fund to HWRF, this would reduce funding framework of options for its consideration: available for the Legislature’s General Fund priorities . • Increase Revenues. The Legislature could generate additional revenues by increasing vessel registration or renewal fees . Roughly, 16 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Recommendation programs—such as facilities, safety, and invasive aquatic plant and species removal? Consider Key Issues in Budget Deliberations. How would a reduction in expenditures from The Governor’s budget plan currently lacks a the HWRF affect state goals for each of these detailed proposal . However, even in the absence of programs? a proposal, we recommend the Legislature consider • How to Balance Different Options. How key issues when weighing different options for does the administration intend to reach the addressing the insolvency in 2020-21 and the $26 .5 million adjustment for the HWRF? longer-term operational shortfall in the HWRF . This To what extent should budget-year or could include directing the administration to report longer-term solutions come from increased additional information on the following topics at revenues, decreased expenditures, and fuel budget hearings: tax revenues? • Structure of the Registration Fee. How do • Future Health of HWRF. How does California’s vessel registration fees compare to the administration intend on preventing other states? Would it make sense to have a operational shortfalls on an ongoing basis for range of registration and renewal fees that are the HWRF? How will the proposed solution based on the size of a vessel? What are the ensure that the fund is supported during trade-offs between a flat fee versus a tiered even years when the renewal fee is not being fee? collected? What level of ongoing solutions • Effects on Reducing Expenditures . What would be needed to ensure that the fund is the current demand for boating-related builds reserves going forward? CALIFORNIA DEPARTMENT OF FISH AND WILDLIFE The California Department of Fish and Wildlife general obligation bond funds (8 percent), and the (CDFW) is responsible for promoting and regulating rest from other special funds . the hunting of game species, promoting and regulating recreational and commercial fishing, and FUNDING ENHANCEMENTS protecting California’s fish and wildlife for the public trust . The department manages over 1 million The Governor proposes $19 million ongoing acres of public land throughout the state including and $20 million one time in 2020-21 to help ecological reserves, wildlife management areas, CDFW better meet its mission, primarily for and hatcheries . activities to protect fish and wildlife. While we find that the proposed activities have merit, The 2020-21 Governor’s Budget proposes total funding for the ongoing activities would be expenditures of $573 million for CDFW from various shifted from other state conservation programs. sources, an increase of $13 million (2 percent) We recommend the Legislature adopt the compared to current-year expenditures . This one-time funding proposal and weigh the increase reflects the net total of the proposed relative trade-offs of the ongoing proposal augmentations described in the next section and with its other conservation and General Fund the removal of several one-time, current-year priorities. We recommend deferring action on a appropriations . Of the total proposed expenditures, third component of the Governor’s proposal—to $172 million comes from the General Fund extend funding scheduled to expire in 2021-22— (30 percent), $115 million from the Fish and Game until next year when a more in-depth analysis of Preservation Fund (FGPF, 20 percent), $86 million CDFW’s budget will be available. from federal funds (15 percent), $46 million from www.lao.ca.gov 17 analysis full gutter 2020-21 BUDGET Background Legislature Directed CDFW to Undertake a Detailed Review of Its Activities and Budget. CDFW Has Experienced a Roughly $20 Million Along with funding increases, the 2018-19 budget Ongoing Budget Shortfall. As noted, the FGPF is package included a requirement that CDFW among the department’s largest funding sources, conduct a service-based budget (SBB) review by providing roughly one-fifth of overall CDFW January 2021 . This review is intended to provide resources . The fund receives revenues from a more clarity regarding the following: variety of fees, including recreational hunting and fishing license and permit fees . Expenditures from • The core activities that CDFW undertakes . the FGPF support many of the department’s core • The existing gap between the department’s activities, including various wildlife conservation “mission” level of service (defined as the efforts, law enforcement, management of both service standards and essential activities department-owned lands as well as inland and required for the department to meet its coastal fisheries, and oversight over the state’s mission and statutory requirements) and its commercial fishing industries . In recent years, current service levels . expenditures from the FGPF have exceeded its • Instances where CDFW may be conducting revenues by roughly $20 million annually . This gap activities outside its mission and statutory developed in large part because the state has requirements . created new costs for the fund without adding an • Detailed estimates for the costs and staffing equivalent amount of new revenues . These costs that would be necessary to meet mission have resulted from significant employee salary service levels . increases negotiated through the state collective • An analysis of the department’s existing bargaining process, assigning new activities to revenue structure and the activities supported CDFW without providing new funding, and shifting by those fund sources, including instances activities from other funding sources to the FGPF . where different funding sources or revenue 2018-19 Budget Provided Funding for structures might be allowable or more Three Years to Address Shortfall and Expand appropriate . Programs. In 2018-19, the Legislature augmented CDFW’s budget by roughly $30 million, with about The budget package also required that the $23 million of this amount expiring in 2021-22 . The SBB review include development of a new budget total augmentation consists of: tracking system to inform ongoing and future fiscal decision-making processes . • $20 million in additional General Fund for the The Legislature has provided $4 million in department to address its funding shortfall one-time General Fund to support these activities . and maintain its existing service levels—roughly Figure 9 $7 million ongoing and about $13 million for three years . Recent CDFW Service Expansions • $10 million annually for three (Dollars in Millions) years—one-half from the Activity Funding Positions General Fund and one-half Law enforcement/wildlife trafficking prevention $3.7 6 from the Tire Recycling Marine fisheries management 2.7 11 Management Fund—along Salmon monitoring and conservation support 1.3 4 with 30 new positions for Hatchery production support 1.0 1 CDFW to expand its activities . Status reviews of endangered species 0.6 2 Figure 9 summarizes how Administrative support 0.4 3 the department has used that Collaborative conservation activities 0.3 3 funding augmentation . Totals $10.0 30 CDFW = California Department of Fish and Wildlife 18 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET CDFW is still in the middle of the SBB process . it has determined would be necessary to fulfill its Specifically, it has accomplished two of the tasks mission and meet all of its statutory responsibilities . described—defining current and mission service Figure 10 displays these results, showing the levels and their relative gap in terms of staffing difference between the number of staff hours levels—but has not yet determined what it would currently being dedicated in each of CDFW’s cost to fully achieve its mission or analyzed its eight areas of service compared to the number of revenue sources and comparative distribution of hours the department has determined would be funding . needed to meet its mission . As shown, in most SBB Review Determined Existing Service areas, CDFW has determined that current service Levels Fall Short of Meeting Mission. While levels are less than one-third of mission levels . CDFW has not yet completed the SBB review, The largest shortfall—both proportionally and in its initial analysis has identified significant gaps terms of total staff hours—is in species and habitat between its existing levels of service and those conservation, the service area the department Figure 10 Review Found CDFW Is Falling Short of Meeting Its Mission Hours Per Year 3,000 Service Levels Mission 2,500 Current 2,000 1,500 1,000 500 Species and Habitat Permitting and Law Public Use and Lands and Administrative Operational Education and Conservation Environmental Enforcement Enjoyment Facilities Support Support Outreach Protection Service Areas CDFW = California Department of Fish and Wildlife. www.lao.ca.gov 19 analysis full gutter 2020-21 BUDGET has determined requires the most comparative (WCB) . Revenues into the HCF consist of about workload . Specifically, CDFW staff currently spend $11 million annually from statewide tobacco taxes about 690,000 hours per year on activities in that and roughly $19 million from the General Fund service area, compared to the 2 .8 million hours the and are continuously appropriated to the specified department estimates would be needed to meet its departments . The HCF—along with requirements mission . The second largest gap is in the permitting for its annual revenues and specified categories and environmental protection service area—falling of uses—was originally established in 1990 by a short of meeting mission service levels by about voter-approved initiative, Proposition 117 . The 1 .6 million hours annually . requirements are scheduled to expire at the end of CDFW Reviewing Both Staffing and Other 2019-20 . As part of the 2019-20 budget package, Options to Address Shortfalls. Notably, while however, the Legislature adopted budget trailer the initial SBB review focused on identifying legislation extending the requirement that the shortfalls in service levels defined solely by staffing state ensure a total of $30 million be continuously hours, CDFW indicates that the next phase of appropriated into the HCF to continue the its analysis will identify strategies for narrowing existing categories of uses by WCB and the other those gaps through various approaches—not just departments until 2030 . by seeking to add staffing resources and labor Governor’s Proposals hours . For example, the department plans to investigate whether it could (1) adjust mission level The Governor proposes three separate expectations by making legislative, regulatory, or augmentations from the General Fund for CDFW . policy changes; (2) increase efficiencies within the Figure 11 summarizes the two proposals for department to lessen the number of staff hours 2020-21 . The third proposal would not take effect needed to meet mission service levels, such as by until 2021-22 . Next, we describe each of the three streamlining processes or acquiring new technology proposals . or equipment; and (3) collaborate with partner $18.9 Million Ongoing Redirected From agencies to help complete some tasks . WCB’s HCF Programs to Expand Species Legislature Recently Reauthorized Funding Conservation Activities at CDFW. The Governor for Wildlife Conservation Programs. The Habitat proposes $18 .9 million in new ongoing funding to Conservation Fund (HCF) provides $30 million be used primarily to augment CDFW’s habitat and annually for wildlife conservation efforts . These conservation activities . This includes increasing monies have been used primarily for grants to compliance with the California Endangered purchase land to preserve as undeveloped wildlife Species Act (CESA) and a pilot approach to habitat, as well as to fund habitat restoration expediting regulatory permitting processes for projects . Statute prescribes particular categories restoration projects (as described in more detail of uses at certain departments for these funds . in the box on page 22) . While the proposed For example, $10 million per year must be spent $18 .9 million augmentation would provide new to protect deer and mountain lion populations, resources for CDFW, these funds would not with a particular emphasis on native oak forests . represent new General Fund spending for the Additionally, at least $3 million annually must be state . Rather, the Governor proposes to shift these spent to acquire and restore stream and riparian funds from their existing uses within the HCF . habitat, and another $3 million to acquire and (To implement this shift the Governor proposes restore wetlands . budget trailer legislation to undo the recent Of the total $30 million provided annually, statutory reauthorization of funding for the HCF .) statute requires the following allocations: As described earlier, WCB and other departments (1) $4 .5 million to Parks, (2) $4 million to the State currently use these funds—together with funding Coastal Conservancy, (3) $500,000 to the Tahoe from voter-approved bonds—primarily to acquire Conservancy, and (4) the remainder (which totals and preserve land for conservation . Because $21 million) to the Wildlife Conservation Board of existing statute specifying the amounts that 20 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET must be provided to Parks, the State Coastal $23.4 Million Ongoing General Fund Conservancy, and the Tahoe Conservancy, the Beginning in 2021-22 to Backfill Shortfall and funding shift would come from WCB’s portion of the Maintain Service Expansions. The Governor HCF—leaving WCB with only about $2 million of its proposes that the Legislature act now to authorize existing $21 million in HCF funds . The Governor’s funding for 2021-22 that would allow the proposal does not include backfilling these funds department to sustain existing service levels— for WCB . including the recent expansions described in $20 Million One Time From General Fund Figure 9—when the three years of funding provided to Upgrade Equipment and Operations. The by the Legislature in 2018-19 is scheduled to Governor proposes one-time funding to be used expire . primarily to purchase equipment and undertake Assessment projects that would improve efficiency throughout the department’s operations . This includes Ongoing Funding Addresses Some Service replacing one outdated aircraft and purchasing Gaps, but Legislature Could Prioritize Other 43 fish stocking vehicles, 18 hatchery egg-sorting Activities. As described previously, CDFW machines, and 18 units of heavy equipment for has identified a significant deficit in existing maintaining state wetlands . The funding would also service levels, with the largest gaps in the areas support 15 projects at state wetlands to improve of (1) species and habitat conservation and both energy and water-use efficiency . This includes (2) permitting and environmental protection . Most of upgrading pumps and canals and installing solar the Governor’s proposals for new ongoing funding arrays to power water conveyance . are targeted in these categories, suggesting they Figure 11 Summary of Governor’s 2020-21 CDFW Funding Proposals (Dollars in Millions) Activity Description Funding Positions New Ongoing Proposals Protect endangered species Conduct work to implement and enforce compliance with CESA, including $10.8 31 reviewing petitions to list new species as threatened or endangered, processing and monitoring CESA-related regulatory permits, and developing and implementing plans to help CESA-listed species recover. Increase awareness about Conduct climate-risk assessments on CDFW lands. Develop and disseminate 1.9 7 biodiversity and climate change education and outreach materials about state’s biodiversity and climate change risks. Improve permitting process for Direct additional staff resources to consult with restoration project proponents 3.4 15 restoration projects and process environmental permits to expedite time lines and enable permitting for larger scale projects. Administration and facilities Provide administrative support and office space proportional to new staff and 2.8 5 activities included in overall proposal. Totals $18.9 58 New One-Time Proposals New aircraft Purchase new aircraft to aerially monitor wildlife. $6.0 — Fish hatchery equipment Purchase equipment to upgrade hatchery operations, including egg sorters 6.5 — and fish stocking vehicles. Equipment and water conveyance Undertake projects to improve water conveyance, including upgrading canals, 7.5 — projects at state wetlands levees, and water pumps, and installing solar-panels. Purchase new heavy equipment for maintenance including tractors, graders, and excavators. Total $20.0 CDFW = California Department of Fish and Wildlife and CESA = California Endangered Species Act. www.lao.ca.gov 21 analysis full gutter 2020-21 BUDGET would help the department be better positioned While the proposed activities focus on areas to carry out its mission . As such, we find that the in which the department’s current level of service proposed use of the new $18 .9 million seems is significantly behind mission levels, these are well-targeted for addressing existing deficiencies not the only areas for which that is the case . The in CDFW’s services . For example, as shown in Governor’s proposal prioritizes addressing some Figure 11, the proposal includes $10 .8 million important deficiencies, but the Legislature could for activities that would help the department also adopt a package of funding augmentations that increase statewide compliance with CESA . The prioritizes improving services in different areas of the SBB review found that CDFW staff time currently is department . As shown in Figure 10, the SBB review only sufficient to address 23 percent of its mission identified gaps in all of DFW’s service areas, some service levels related to issuing and enforcing of which are not addressed by the proposed new CESA permits, and 38 percent of mission-level expenditures . For example, the SBB review found workload to manage and monitor endangered that within the operational support service area, the species . This means that the department is not largest gap in service levels was within its genetics able to consistently research and monitor the research lab programs, which provide scientific status of species that have been designated as information to help guide the department’s activities endangered or are most at risk of being threatened to preserve fish, wildlife, and plants . The Governor’s with extinction . Similarly, the proposed $3 .4 million proposal does not provide funding to address this to expedite restoration projects could help address deficiency . Similarly, the proposal does not provide the roughly 450,000 hours per year SBB-identified funding to address the largest service level gap gap between current and mission service levels in identified under the law enforcement service area— the department’s programs to restore and enhance workload related to protecting the environment from wildlife habitats . This deficit means that existing legal and illegal cannabis growing facilities . CDFW staff often do not have time to consult with Permitting Pilot Could Yield Helpful stakeholders who seek to undertake restoration Information, but Lacks Explicit and Measurable projects to ensure their proposals are effectively Goals. We find that the proposal to provide designed, focus on state wildlife priorities, and $3 .4 million and 15 new positions to expedite meet regulatory requirements . permitting for restoration projects addresses an important problem and could help the state better Proposal Includes Pilot Initiative to Expedite Restoration Projects As noted in Figure 11, included within the Governor’s proposal is $3 .4 million and 15 new positions to improve the permitting process for habitat restoration projects . This is part of a larger initiative being championed by the Secretary for Natural Resources to “Cut the Green Tape” and make getting regulatory approvals for undertaking restoration projects easier, quicker, and less costly . This effort is in response to feedback from proponents of restoration projects that the prolonged process for attaining necessary permits is onerous, duplicative, and inhibits them from implementing large scale projects . The California Department of Fish and Wildlife’s particular proposal would pilot a new approach in one selected region of the state to help expedite time lines for granting environmental permits . Specifically, the requested funding would support a “strike team” of staff working on grant administration and permitting to provide early consultation with project proponents, hold permitting workshops, and seek to incorporate the use of existing “programmatic” permitting options that could facilitate larger scale restoration projects . To start, this pilot effort would be focused on the North Coast region of the state (Humboldt, Mendocino, Del Norte, Sonoma, and Marin Counties) . 22 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET achieve its species and habitat conservation goals . fleet of fish stocking vehicles would save between is However, the proposal lacks detail about how $250,000 and $400,000 in annual maintenance and objectives and outcomes from this new approach labor costs . will be measured and communicated . This inhibits The proposals to improve operations at state the Legislature, state, and stakeholders from wetlands—by improving water conveyance and evaluating the success of this novel approach and purchasing new heavy equipment—likewise are how it might be modified or replicated for other likely to reduce the staff time and costs needed to regions or departments . conduct ongoing operations and maintenance on Shifting HCF Would Leave WCB’s Existing those lands . Specifically, the department estimates Programs Without Funding. Shifting $18 .9 million the new equipment will save between $150,000 from the HCF to CDFW would leave WCB with less and $300,00 annually in fuel costs, repairs, and funding to dedicate for its current land acquisition labor charges . The proposed projects should and restoration programs . The Governor’s also improve the quality of those wildlife habitats proposal essentially prioritizes increasing ongoing and decrease carbon emissions . Similarly, CDFW programs at CDFW over sustaining WCB’s existing estimates its proposal to spend $6 million to HCF-funded programs on an ongoing basis . Part replace an existing aircraft that is over 30 years of the administration’s rationale for this change old would improve performance and could save is that WCB has bond funds available right now . between $250,000 and $300,000 annually in Specifically, WCB has roughly $400 million in maintenance, repair, and fuel costs . remaining funds from voter-approved general Proposal to Address Funding Shortfall Is obligation bonds and special funds that can Premature. While the Governor’s proposal to support these programs . Those funds, however, provide $23 .4 million General Fund in 2021-22 are one time and not ongoing . (Absent any change, addresses an issue the Legislature will need to the HCF would be available annually until its confront next year, we find that committing these current 2030 statutory expiration .) In addition, resources now is premature . We believe a strong CDFW would prioritize conservation and restoration case exists for maintaining CDFW’s present funding projects that differ somewhat from historical HCF levels and recent augmentations—especially given areas of priority . Moreover, the Legislature recently the service deficiencies that the first phase of the expressed its prioritization of continued General SBB review has identified currently exist even with Fund for existing WCB programs by reauthorizing those resources . However, the Legislature would the HCF statutes through 2030 . benefit from seeing the full results of the SBB One-Time Funding Proposals Seem Likely review before determining how to fund those—and to Improve Efficiencies. As noted earlier, one all—department activities on an ongoing basis . component of CDFW’s SBB analysis is seeking In particular, CDFW’s forthcoming analysis of to identify ways the department can better carry its existing funding and distribution of revenues out its mission with strategies that extend beyond (during the next phase of its SBB review) will just requesting increased ongoing funding for be informative in weighing the most appropriate new staff . We find that the Governor’s proposal sources of new funding . The review might support to spend $20 million to upgrade equipment aligns the ongoing provision of General Fund, but it might with this goal . That is, the proposed activities also support increasing other revenues, such as likely will decrease the amount of staff hours and user fees . A desire for this more complete analysis costs needed to accomplish state objectives for and perspective was the rationale behind the CDFW hatcheries and wetlands . For example, Legislature making CDFW’s 2018-19 augmentations the department proposes to spend $1 .5 million limited term . Because those funds do not expire to purchase 18 new egg sorting machines for its until 2021-22, adopting this component of the hatcheries, and estimates that each machine will cut Governor’s proposal now is not necessary, and in half the time that staff currently spend manually the Legislature can delay action for another year sorting eggs using tweezers several times a year . without causing disruptions to CDFW activities . Additionally, CDFW estimates replacing the aging www.lao.ca.gov 23 analysis full gutter 2020-21 BUDGET Recommendations to provide new funding for the department only for the activities which it deems to be Weigh Trade-Offs of Different Options for the highest priorities . This approach would Augmenting CDFW’s Conservation Activities. address some of CDFW’s existing service As noted above, we find the proposed activities to deficiencies and at a lower overall cost increase CDFW’s species conservation and habitat compared to the Governor’s proposal . This restoration activities have merit . Because the shift approach, however, would leave more of from the HCF would create some impacts on the the existing service deficiencies in place . WCB programs currently receiving those funds, Additionally, such an approach still would however, the Legislature might want to consider require the Legislature to transfer some alternative responses to funding this proposal . Yet funding away from existing HCF-funded other options also have associated trade-offs . We programs or expend some new General Fund . recommend the Legislature consider the relative • Defer Decision Until 2021-22 When merits of both the existing WCB HCF-funded Results of SBB Review Are Complete. The activities and the proposed CDFW activities in Legislature could also reject the Governor’s the context of its other General Fund priorities . proposal without prejudice and revisit it next Moreover, should the Legislature opt to provide year once the SBB review is complete . This new ongoing funding for CDFW, we recommend approach would provide the Legislature with it specify it be used for activities that reflect the the benefit of additional information about Legislature’s priorities, which could differ somewhat the department’s existing revenue structure from those in the Governor’s proposal . and whether funds could appropriately be We believe the Legislature has four key options shifted or generated from sources other for responding to the Governor’s proposal: than the General Fund . However, delaying • Adopt Governor’s Proposal to Shift Funds augmentations for another year would mean Away From Existing WCB Programs. The continuing CDFW’s current deficiencies in advantages of adopting the Governor’s the species and habitat conservation and proposed approach are (1) it would have a permitting and environmental protection neutral effect on the state budget and not service areas, and forego for another year result in new net General Fund commitments the opportunity to pilot the proposed new and (2) many similar WCB programs could restoration permitting approach . continue to be supported with bond funds If Legislature Approves Pilot Strategy in the near future . The disadvantages are for Restoration Projects, Add Reporting that programs currently funded by the Requirements. If the Legislature opts to fund the HCF could be negatively affected by losing proposal to provide funding and staff to test a these dedicated ongoing revenues and new approach for expediting restoration project the requirement to spend funds in certain permitting, we recommend it adopt supplemental categories . reporting language for CDFW to submit two reports . • Reject Fund Shift, Fund Proposed Activities Given this would be a new pilot approach intended With New General Fund. The Legislature to inform future statewide efforts, we believe the could maintain existing General Fund within goals and information gleaned from this effort must the HCF for WCB and instead provide an be explicit, transparent, and widely disseminated . additional $18 .9 million from the General Fund Specifically, at the outset of the initiative, CDFW for CDFW’s proposed activities . This would should submit a report communicating the avoid impacting existing programs but would measureable objectives it hopes to accomplish increase ongoing General Fund commitments through this new approach, including quantifiable for CDFW . metrics that will indicate success . Such metrics • Fund a More Modest Package of could include how many acres of land might be Augmentations. The Legislature could opt restored and how much more quickly permits will 24 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET be granted compared to current time lines . We some ongoing costs and staffing requirements, we recommend this first report be due in the fall of recommend the Legislature approve the proposed 2020 . Additionally, after the pilot approach has $20 million in one-time General Fund to replace been implemented for a few years, the department outdated equipment and modernize operations . should report on its successes (as measured by the Defer Decision on $23.4 Million Ongoing established metrics), any challenges and lessons General Fund Until Next Year. Because CDFW learned, and potential recommendations for how has sufficient funding to maintain existing service the approach could be improved and replicated levels in the budget year, we recommend rejecting in other regions of the state . We recommend this the Governor’s proposal to commit additional second report be due no later than December General Fund for 2021-22 before it is needed . 2023 . Instead, we recommend the Legislature use Approve Proposal to Provide $20 Million forthcoming information from the department’s One Time to Improve Efficiencies. Because it SBB analysis to determine the appropriate funding would make certain department operations and sources and amounts for CDFW as part of the maintenance activities more efficient by reducing 2021-22 budget development process . DEPARTMENT OF WATER RESOURCES The Department of Water Resources (DWR) SUSTAINABLE GROUNDWATER protects and manages California’s water resources . MANAGEMENT ACT In this capacity, DWR plans for future water IMPLEMENTATION development and offers financial and technical assistance to local water agencies for water The Governor proposes providing projects . In addition, the department maintains the increased General Fund to facilitate continued State Water Project, which is the nation’s largest implementation of the Sustainable Groundwater state-built water conveyance system . Finally, Management Act—$30 million one time for local DWR performs public safety functions such as assistance grants and $9.6 million ongoing for constructing, inspecting, and maintaining levees DWR to conduct additional technical assistance and dams . and oversight activities. We recommend The Governor’s 2020-21 budget proposes a approving both proposals but also adopting total of $973 million from various funds for support language to ensure the local assistance funds of the department . This is a net decrease of are used for projects that provide public $1 .3 billion (or 58 percent) compared to projected benefits and focus on efforts needed to current-year expenditures . This year-to-year effectively implement groundwater sustainability decrease is primarily due to the way bond funds are plans. accounted for in the annual budget . Specifically, DWR had $1 .8 billion in 2019-20 spending authority Background from bond funds appropriated over the past several State Passed Major Legislation to Regulate years, compared to $628 million proposed for Groundwater in 2014. In 2014, the Legislature appropriation in 2020-21 . (These totals exclude passed and the Governor signed three new the roughly $1 .7 billion in annual payments from laws—Chapters 346 (SB 1168, Pavley), water contractors for DWR’s work on the State 347 (AB 1739, Dickinson), and 348 (SB 1319, Water Project, as those funds are not appropriated Pavley)—collectively known as the Sustainable through the annual budget act .) Groundwater Management Act (SGMA) . With the goal of achieving long-term groundwater resource sustainability, the legislation represents the first www.lao.ca.gov 25 analysis full gutter 2020-21 BUDGET comprehensive statewide requirement to monitor including defining and prioritizing groundwater and operate groundwater basins to avoid depletion basins, collecting and disseminating data and best (known as “overdraft”) . The act’s requirements practices, and providing technical and financial apply to 94 of the state’s 515 groundwater basins assistance to GSAs . While some amount of its that DWR has found to be “high and medium data collection and technical assistance efforts priority” based on various factors, including will continue on an ongoing basis, starting in overlying population and irrigated acreage, 2020, DWR has also begun to assume significant number of wells, and reliance on groundwater . workload associated with reviewing initial GSPs to While comprising less than one-fifth of the ensure they comply with the law . The department groundwater basins in California, the 94 high- and must also provide GSAs with assistance as they medium-priority basins account for 98 percent implement the actions described in their plans, as of California’s annual groundwater pumping . Of well as conduct annual reviews to ensure basins the identified basins, DWR has identified 21 as are making steady progress towards sustainability being “critically overdrafted,” which it defines goals . as a condition where a “continuation of present Along with DWR, SWRCB also has certain water management practices would probably responsibilities in implementing SGMA, specifically result in significant adverse overdraft-related by enforcing the law and intervening when local environmental, social, or economic impacts .” The entities fail to follow the law’s requirements . If any remaining 421 basins ranked as being lower in basins ultimately fail to comply with SGMA, the priority—generally smaller and more remote—are state is charged with taking over their management . encouraged but not required to adhere to SGMA . Because the act is still in its initial years of Local Agencies Are Developing and Beginning implementation, SWRCB has not yet been called to Implement Management Plans. SGMA assigns upon to play a large role . primary responsibility for ongoing groundwater State Has Provided Significant Funding management to local entities . Local groundwater to Support SGMA-Related Activities in sustainability agencies (GSAs)—formed by a Recent Years. To support DWR’s SGMA-related single or combination of local public agencies responsibilities, the state has provided roughly with existing water or land management duties— $160 million total for the department’s state-level are responsible for developing and implementing activities since 2014-15, primarily from the General long-term groundwater sustainability plans (GSPs) . Fund . While some of this funding has been used These plans will define the specific guidelines and to contract for technical reports and third-party practices that will govern the use of individual facilitation services to assist GSAs, much of it groundwater basins, including potentially limiting has been used for DWR staff . The department extractions from these basins . For most of the has gradually been increasing the number of staff regions of the state subject to SGMA, GSAs must working on SGMA, up to a total of 119 funded adopt and begin to implement GSPs by January positions in 2019-20 . (The state is also spending 2022 . For the 21 basins identified as being in $750,000 per year for five staff at SWRCB for conditions of critical overdraft, however, GSPs were SGMA-related workload .) due on January 31, 2020, and, thus, those GSAs In addition to state-level funding, the Legislature must now begin implementing strategies to manage has appropriated funds from voter-approved their basins sustainably . The law requires that general obligation bonds for grants to local critically overdrafted basins achieve sustainability agencies to begin complying with SGMA . These goals by 2040, and that all other basins do so by local assistance funds include about $140 million 2042 . from Proposition 1 (2014) (appropriated between DWR Tasked With Important Role in 2015-16 and 2017-18) and $46 million from Supporting SGMA Implementation. SGMA Proposition 68 (appropriated in 2018-19) to develop tasked DWR with several responsibilities in GSPs . Additionally, the Legislature authorized the initial phases of the act’s implementation, $88 million from Proposition 68 in 2019-20 for 26 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET grants to GSAs to begin implementing their GSPs a critical first step towards better groundwater and employ practices that bring their groundwater management, and successful implementation of the usage into balance . For example, implementation act’s requirements should continue to be a state grants might fund projects that increase the rate priority . The coming years represent an important of groundwater replenishment, such as by building period for establishing how SGMA will guide local new infrastructure to direct floodwaters onto the operations and practices in future years . DWR land and enable that water to percolate into the plays a key role in supporting local efforts, and groundwater basin . the proposed increase in positions and funding for state-level activities would better enable the Governor’s Proposals department to carry out its responsibilities . Local Proposes 37 New Positions, $9.6 Million agencies are undertaking the work of gathering and to Expand DWR’s Role in Supporting SGMA analyzing data about their areas’ groundwater use, Implementation. The Governor proposes defining sustainability targets for their basins, and $9 .6 million in ongoing General Fund in 2020-21 to developing and beginning to implement enforceable support 37 new positions and increase DWR’s plans and practices for how the basins can be SGMA-related activities . These staff would managed to achieve those sustainability goals . primarily be engaged in compliance reviews of The comprehensiveness and effectiveness of these GSPs and providing technical assistance to GSAs processes and plans will determine the overall as they implement their sustainability plans . This success of the act . DWR can support these efforts augmentation would grow to $11 .2 million in by providing oversight and support to ensure GSAs 2021-22 and to $16 .3 million annually beginning stay on track to meet deadlines and work toward in 2022-23 to also cover ongoing data collection their sustainability objectives . contracts, such as for monitoring changes in Critically Overdrafted Basins Would Benefit groundwater levels, land use patterns, and ground From Additional Support for Successful elevation (known as subsidence) . Transition… As noted previously, the 21 critically Proposes $30 Million for Local Agencies overdrafted basins face earlier SGMA deadlines to Transition to Next Phase of SGMA than the remaining 73 basins that are subject to Implementation. The Governor’s proposal the act’s requirements . These areas of the state also includes $30 million in one-time General face the double challenge of experiencing the Fund support to provide grants to the critically most severe imbalance between groundwater overdrafted groundwater basins that must start usage and available groundwater resources, as implementing their GSPs in 2020 . While DWR well as the most expedited time lines to begin has designated 21 basins as being in critically addressing that imbalance . As such, we believe overdrafted status, two currently have or are in the Governor’s proposal to provide $30 million in the process of having their groundwater usage additional financial assistance to these basins could adjudicated by the courts; as such, only 19 basins help facilitate their success in these initial phases of will be regulated by SGMA’s requirements and be SGMA implementation . eligible for this funding . DWR states that its current …However, Governor’s Proposal Lacks plan for these funds would be to provide roughly Safeguards to Ensure Appropriate and Effective $1 .5 million to each of the GSAs to undertake Use of Funding. While the intention to assist studies or projects that would help limit the critically overdrafted basins in beginning to economic disruption in their regions from complying implement SGMA is reasonable, the Governor’s with SGMA . proposal lacks details about how exactly the funds would and should be used . For example, Assessment the proposal does not include language specifying that the use of these funds should be limited to Successful Implementation of SGMA Is studies or projects that are necessary to enable the Fundamental to State’s Management of GSAs to proceed with implementing their GSPs . Water Resources The passage of SGMA was www.lao.ca.gov 27 analysis full gutter 2020-21 BUDGET The Governor’s proposal also lacks adequate benefits (such as for studies of strategies to assist safeguards to ensure these state funds would vulnerable communities that may lose drinking be used for broad public benefits rather than to water from dry wells) rather than private benefits address potential economic impacts on private (such as to compensate individual farmers who will individuals . Moreover, the broad nature of how the have to reduce their dependence on groundwater administration has described the purpose of these pumping) . Moreover, we recommend these funds funds—to help GSAs address potential negative be focused on local efforts needed to implement economic impacts in the region that could result GSPs (such as to collect additional data necessary from SGMA—raises concerns about how they could to follow the plans) rather than projects intended be used . For example, local stakeholders might to address regional economic impacts that are seek to use them not just to further implementation outside DWR’s scope of responsibility for assisting of the law, but to address a wide range of with SGMA implementation (such as responding to associated local impacts—including changes in the potential changes in the local labor market) . local labor markets, shifting land use decisions, and regional economic development . Such ancillary TIJUANA RIVER AND NEW RIVER issues are beyond the scope of DWR’s expertise RESTORATION PROJECTS and also exceed the responsibilities that SGMA tasks to the state . The state must be careful to The Governor proposes providing funding avoid setting expectations that it will assume for projects to address pollution flowing financial responsibility for addressing what could be into Southern California in binational rivers significant regional economic impacts associated across the border from Mexico—$35 million with SGMA implementation . for the Tijuana River in San Diego County and $28 million for the New River in Imperial County. Recommendations Both the proposals would address serious Approve $9.6 Million Increase for DWR’s public health and environmental concerns. Implementation Activities. We recommend the For the Tijuana River projects, however, Legislature approve the Governor’s proposal to the administration has not yet identified a provide DWR with additional staff and funding source for funding ongoing operations and to implement SGMA . Enhancing DWR’s efforts maintenance activities in future years. We to support GSAs will increase the chances that recommend approving the New River proposal, local agencies will achieve statewide groundwater but requiring that the administration provide sustainability goals . Moreover, helping to an ongoing funding plan for the Legislature to ensure greater local compliance with the act’s consider prior to approving the Tijuana River requirements will lessen the odds that the state has proposal. to assume what likely would be significant costs to Background take over management of noncompliant basins . Approve $30 Million for Implementation Cross-Border Pollution Flows Into Southern Grants but Add Language Directing Use of California in Rivers From Mexico. Areas in Funds. To help support critically overdrafted basins Southern California have experienced pollution in their efforts to begin bringing their groundwater flowing in binational rivers across the border from use into balance, we recommend approving the Mexico . One prime example is the Tijuana River, Governor’s proposal to provide $30 million in which flows from the Mexican city of Tijuana across one-time General Fund . However, we recommend the border into the Tijuana River National Estuarine the Legislature include provisional language in Research Reserve in San Diego County and then the budget bill that places parameters around out into the Pacific Ocean past the city of Imperial how these funds can—and cannot—be used . Beach . A second example is the New River, For example, we recommend requiring that the which flows from the Mexican city of Mexicali into funds be used on projects that focus on public the city of Calexico in Imperial County, and then 28 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET into the Salton Sea . Both rivers are dangerously New River Severely Contaminated by Various contaminated, creating public health concerns and Pollutants. The New River is also heavily polluted, negative environmental impacts in their respective primarily from discharges of waste from domestic, regions . agricultural, and industrial sources in both Mexico Raw Sewage and Waste Flow Into Tijuana and the Imperial Valley . The river contains trash, River Valley. For many years, contaminated storm pathogens, and multiple contaminants at levels that and wastewater from the city of Tijuana and its violate numerous state water quality standards . surrounding areas have flowed into California Such conditions pose a threat to public health through the Tijuana River and nearby canyons and result in foul odors that inhibit economic and tributaries . Contaminants found in the river development in the region . These issues are include raw sewage, used tires, residential and most prevalent in the city of Calexico, but also industrial waste, building materials, sediment, contribute to the water quality problems that and some hazardous waste . Polluted flows are the state has been trying to address where the most severe during heavy storm events . These river ends at the Salton Sea . Because of this, toxic conditions have led to illnesses and other Proposition 68 included $10 million specifically to negative public health effects in the region, which address New River water quality issues . contains several economically disadvantaged Mexico and U.S. Governments Making communities . Additionally, the sewage and debris Some Efforts to Address Issues. Both the flowing into the Tijuana River National Estuarine U .S . and Mexican governments have dedicated Research Reserve compromise state and federal some resources towards addressing the pollution wildlife habitat restoration and species conservation in these rivers . For example, the California efforts . After the flows pass through the estuary, Environmental Protection Agency (CalEPA) states they empty into the Pacific Ocean, where the waste that since 1997, the U .S . government has provided discharges have led to frequent beach closures about $330 million for these issues, including that affect public access and local recreation-based (1) $280 million for the Tijuana River, mostly to economies . The California Attorney General help build a wastewater treatment plant near the (together with the San Diego Regional Water border (the Mexican government also contributed Quality Control Board and some cities in San Diego to the construction and operation of that plant) County) has filed a lawsuit alleging water quality and (2) $50 million for wastewater and sanitation violations against the International Boundary and projects in Mexicali . CalEPA also reports that in Water Commission, a binational federal agency that both Tijuana and Mexicali, Mexico is working on addresses boundary and water issues and operates upgrading infrastructure to collect and convey a water treatment plant at the Tijuana border . sewage on its side of the border . These efforts and The state has dedicated some resources expenditures, however, have not yet been sufficient towards addressing these persistent issues with to rectify the significant pollution problems present the Tijuana River . For example, over the past 15 in both rivers . years, state Parks spent a combined total of nearly The recent trade agreement between the U .S ., $9 million to remove sediment and trash from Mexico, and Canada dedicated up to $300 million the Goat Canyon Sediment Basin facility that is for wastewater treatment along the U .S .-Mexico located within the National Research Reserve . Also, border . However, how and where these funds will Chapter 542 of 2017 (SB 507, Hueso) provided be spent—including how much will be dedicated $500,000 to San Diego County to identify and to issues in California as compared to other border study potential projects to address pollution in the states—has not yet been determined . valley . (The final report from that study is due in Governor’s Proposals spring 2020 .) Additionally, the 2019-20 Budget Act provided $15 million from Proposition 68 to the The Governor has two one-time funding State Coastal Conservancy to undertake projects in proposals to help address these border river the valley . pollution issues . www.lao.ca.gov 29 analysis full gutter 2020-21 BUDGET $35 Million to Address Pollution Issues in Assessment the Tijuana River Valley. The Governor proposes Waiting for Mexican or U.S. Governments $35 million in one-time General Fund support to to Respond Would Prolong Negative Impacts. construct a series of projects in various tributaries Many of the negative impacts that the Tijuana of the Tijuana River on the U .S . side of the valley, River and New River regions are experiencing are as well as to operate and maintain them for two caused by pollution that occurs on the other side years . The projects have the primary goals of of the international border . This suggests that capturing trash and sediment and preventing Mexico—or our federal government—should take flooding . San Diego County would serve as the the lead on actions and expenditures to address lead agency for implementing and managing these them . However, given the magnitude of the effects projects . The proposal includes: California is experiencing on public health, natural • $17 million to build sediment detention basins, resources, local economies, and recreation, it is automated trash screens, and infrastructure to reasonable for the state to take action to respond . control flows in Smuggler’s Gulch . While the state should not take full responsibility • $4 million to build infrastructure to control flows for addressing all of the pollution in these rivers, and manage existing trash collection structures we find that making some contributions to try to and sediment basins in Goat Canyon . mitigate the damaging impacts Californians are experiencing is appropriate . • $1 million to construct a flood control channel and to undertake a feasibility study in Yogurt Funding for Ongoing Maintenance and Canyon . Operations of Tijuana River Projects Not Yet Identified. While the city of Calexico has • $6 .5 million annually for two years to operate committed to funding the ongoing costs to maintain and maintain the new projects . and operate the proposed New River Improvement $28 Million for Improving Water Quality in Project in the future, no similar commitment has the New River . The Governor proposes a total of yet been arranged with a local entity for the Tijuana $28 million—$18 million from the General Fund and River projects . The Governor’s proposal would fund $10 million from Proposition 68—for the New River the estimated annual costs of $6 .5 million for the Improvement Project, which would address solid first two years, but does not include a plan for how waste and water quality issues that are affecting those costs would be covered thereafter . the city of Calexico and the Salton Sea . Specifically, Recommendations the proposed funding would help build a bypass structure to divert much of the polluted river water Require Administration Submit Funding Plan to the city’s existing wastewater treatment plant, for Ongoing Costs. We recommend the Legislature as well as a system to pump the water back into require that the administration present a plan for the riverbed after it has been treated . The proposal how operations and maintenance for the Tijuana would also construct a new trash screen just River projects will be funded in future years . The downstream from the Mexican border to keep Governor’s proposal includes funding for the debris from flowing further down the river . The first two years of these ongoing costs, but does city of Calexico would serve as the lead agency not identify a source for supporting the activities for managing and implementing the projects and thereafter . A full understanding of the potential has committed $50,000 annually to operate and funding options—and an evaluation of the likelihood maintain them on an ongoing basis . The specific of the state ultimately assuming these costs on an components of the proposal include: ongoing basis—is essential for the Legislature to adequately evaluate the trade-offs associated with • $15 million to build a bypass encasement . this proposal . • $7 .3 million to build a trash screen and diversion structure . • $5 .4 million to build a pump back system . 30 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Withhold Approval of Funding for Tijuana recommend the Legislature fund the Governor’s River Projects Until State Has Plan for Funding requests at a level that is $550,000 less than Ongoing Costs. We recommend the Legislature proposed in the budget year. withhold action on approving the proposed Background $35 million for the Tijuana River projects until it has more certainty about how ongoing costs to Newly Established Positions Typically Cost operate and maintain the projects will be funded More in Initial Year. When departments request in future years . We believe the proposed projects that the Legislature approve the addition of new have merit and address important needs in the positions, they typically request supplementary region . Because of this, we believe the state resources in the first year for one-time expenses should ensure they will continue to function such as computers, cubicle build-out, and as intended beyond the two years for which potentially for new specialized equipment or maintenance funding is proposed . Approving vehicles . The overall amount requested for funding to construct the projects without a plan positions is usually less in subsequent years, for which entities will assume the significant costs reflecting a decreased funding need after these of operating and maintaining them on an ongoing one-time purchases have been completed . basis runs the risk of them falling into neglect and failing to function effectively in the future . This could Governor’s Proposals place future pressure on the state to fund ongoing Requests $550,000 More in 2020-21 costs to protect its substantial investment . If the Compared to Subsequent Years, but for Existing administration believes there is a significant chance Positions. The Governor has three proposals to that the state will need to assume the $6 .5 million continue a total of about 30 existing positions at in annual costs to maintain these projects, the DWR and to either change their funding source Legislature should incorporate that cost into its or extend funding that was initially provided on decision of whether or not to construct these a limited-term basis . Even though these are not projects now . If the administration is able to submit newly established positions, the proposals include the aforementioned plan within the coming months, additional funding for 2020-21 compared to this would still allow the Legislature to consider subsequent years . Across the three proposals, the approving funding for the Tijuana River projects as total additional funding requested for these existing part of the 2020-21 budget . positions in the budget year is $550,000 . (In total, Approve Funding for New River Project. the three proposals request $6 .7 million .) The Because the proposed projects would address specific proposals are as follows: serious public health issues in the city of Calexico and the administration has a plan for how the • Central Valley Flood Protection Board: investments would be maintained in future years by Continuation of Existing Staffing. Extends local stakeholders, we recommend approving the limited-term General Fund for 19 existing Governor’s proposal to provide $28 million for the positions to continue core activities New River Improvement Project . at the Central Valley Flood Protection Board—$322,000 higher costs in 2020-21 . AUGMENTATIONS FOR • Flood Planning Resourcing. Switches funding from bond funds to the General Fund EXISTING STAFF for 8 .5 existing positions working on flood The Governor has three proposals to continue planning—$194,000 higher costs in 2020-21 . funding for a total of about 30 existing positions • Stream Gaging Plan Implementation. at DWR, but also requests $550,000 in additional Switches funding from special funds to funding for these positions in 2020-21 compared the General Fund for 3 existing positions to subsequent years. Because we find no to develop a plan for implementing stream justification for this higher level of funding, we gages—$34,000 higher costs in 2020-21 . www.lao.ca.gov 31 analysis full gutter 2020-21 BUDGET Assessment to different funds and programs . A change in internal accounting, however, does not explain why No Justification for Additional Costs for a different amount of resources would be needed Existing Positions. We find no justification for across the years or justify the state providing the providing DWR with $550,000 more for the department with additional funding in one year for 30 positions in 2020-21 . These existing staff will conducting the same activities as in future years . not be assuming new responsibilities or needing new equipment, and the department should Recommendation be able to sustain them with the same level of Reduce Funding for 30 Existing Positions by resources in the budget year as in future years . $550,000. We recommend the Legislature provide The administration states that the difference in $550,000 less funding than requested by the requested funding is due to a change in its internal Governor in 2020-21 for 30 existing positions . accounting methodology for charging “overhead” DEPARTMENT OF TOXIC SUBSTANCES CONTROL The Department of Toxic Substances Control hazardous material release response plans (DTSC) is charged with protecting the people of and inventories, and hazardous waste California and the environment from the harmful generator and onsite treatment activities . effects of toxic substances . DTSC administers the • Safer Consumer Products (SCP). This following major programs: program is intended to reduce human and environmental exposure to toxic chemicals • Site Mitigation and Restoration. DTSC by working with the industry to develop implements the state’s laws regarding the safer consumer products . The SCP collects identification, assessment, and cleanup of information on the presence of toxic sites contaminated by toxic substances, chemicals in products in order to identify including sites that are part of the federal priority products for possible regulation . It Superfund program, as well as state-only sites also provides support and guidance to priority (those where the state is the lead agency) . product manufacturers for the analysis of safer The program currently oversees investigations alternatives, and issues regulatory responses and cleanup of releases of hazardous to proposed alternatives . substance at approximately 1,300 sites . • Exide Technologies Facility Contamination The department also monitors long-term Cleanup. DTSC oversees lead contamination operations and maintenance activities at more removal and remedial actions in the than 230 sites where cleanup is complete . communities surrounding the Exide • Hazardous Waste Management. The Technologies lead-acid battery recycling department regulates the generation, facility in the City of Vernon . storage, transportation, and disposal of hazardous waste through permitting, The Governor’s 2020-21 budget proposes a total compliance monitoring, and enforcement of $325 million for support of DTSC . The proposed of noncompliance . DTSC oversees more amount reflects a decrease of $10 million, or than 95,000 hazardous waste generators 3 percent, compared to projected current-year throughout the state and permits 71 treatment expenditures . Most of the department’s budget and storage facilities . Additionally, DTSC is from special funds, particularly the Toxic supports and oversees 81 local entities, Substances Control Account (TSCA) and known as Certified Unified Program Agencies Hazardous Waste Control Account (HWCA) . (CUPAs), that implement the six elements The proposed budget would support a total of of the CUPA program—such as regulating 947 positions for the department . 32 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET BOARD OF would be supported by 12 staff including ones with expertise on hazardous substances and ENVIRONMENTAL SAFETY environmental science, as well as administrative We recommend that the Legislature support staff . Board members would be appointed establish a Board of Environmental Safety in by the Governor, and four would be required to order to improve transparency and promote possess expertise in one of the following areas: greater accountability of DTSC. However, the public health, environmental science, environmental Legislature could consider a different structure law, or cumulative impact assessment and and responsibilities for the board as compared management . One board member would be to that proposed by the Governor if such selected from the public . Board members would changes would better align with legislative not be subject to confirmation by the Senate . priorities. For example, the Legislature may wish Beginning January 1, 2021, the board would to consider board membership and confirmation be required to conduct no fewer than six public requirements, as well as how much authority the meetings per year . board should have to direct DTSC’s day-to-day Key Responsibilities of the Board. The operations. Governor’s proposed budget trailer legislation specifies the board’s responsibilities, including the Background following functions: Legislature Established Independent Review • Establish Charges for HWCA and TSCA. Panel (IRP) to Review DTSC. Chapter 24 of The board would establish by regulation a 2015 (SB 83, Committee on Budget and Fiscal schedule of charges for (1) hazardous waste Review) established within DTSC a three-member facilities, generators, and handlers subject IRP to assess the department’s performance in to HWCA charges and (2) entities subject to various areas of operations and administration, as TSCA charges . (We discuss HWCA and TSCA well as to make recommendations to improve its funding in greater detail later in this analysis .) programs . The IRP held 28 public meetings and • Hear and Decide Permit Appeals. The board submitted 11 reports to the Legislature between would hear and decide appeals of hazardous January 1, 2016 and January 8, 2018 . The IRP waste facility permit decisions . issued its final report on January 8, 2018, in which it identified five priority areas on which to focus in • Provide Opportunities for Public Hearings. order to improve DTSC’s programs: (1) continuity The board would be required to hold in executive leadership, (2) human resources, public hearings on individual permitted or (3) stable fiscal resources and addressing remediation sites . structural deficits, (4) increased transparency and • Provide Direction to DTSC. The board accountability, and (5) reviewing governing statutes would be required to evaluate alternatives that may need revision or repeal . One of the IRP’s and develop recommendations to the director recommendations was to establish an oversight of DTSC for a plan for hazardous waste board or consider other structural changes at DTSC management in the state . The board would to improve accountability and transparency . also review and approve the director’s annual priorities—including clear performance Governor’s Proposal metrics—for each of DTSC’s programs . Establish Board of Environmental Safety. • Develop a Multiyear Schedule for The Governor’s budget proposes $3 million from Discussion of Long-Term Goals. The board the General Fund for two years and budget trailer would schedule discussions of long-term legislation to establish a Board of Environmental goals for topics, including improvements to Safety (board) within DTSC . The five-member board (1) the efficiency of DTSC’s hazardous waste would be composed of a full-time chairperson facility permitting process, (2) DTSC’s ability and four part-time paid members . The board to meet its duties and responsibilities, (3) the www.lao.ca.gov 33 analysis full gutter 2020-21 BUDGET site mitigation program and how the cleanup Assessment of contaminated properties is prioritized, and Board Could Be Established Through (4) DTSC’s implementation of its enforcement Legislation. Both the policy committee process activities . and the budget process could be used to establish • Provide Ombudsman Services to the Public a board . We note that a bill currently making its and Regulated Community. The legislation way through the legislative process would establish establishes an office of the ombudsman a board generally similar to the one proposed within the board to (1) receive complaints by the Governor . Specifically, AB 995 (C . Garcia) and suggestions from the public, (2) evaluate would create the Board of Environmental Safety complaints, (3) report findings and make in CalEPA . Under the proposed legislation, recommendations to the director and the each member of the five-member board would board, and (4) provide assistance to the public fill a different specialized position (representing when appropriate . environmental law, environmental science, public Under the statutory framework proposed by the health, regulatory permitting, and cumulative impact administration, the director of DTSC, or a designee, assessment and management) . There would be would be required to present and respond to the a full-time salaried chairperson of the board with board on any issue or item brought before the board the remaining four members receiving per diem, by the public, ombudsman, or a board member . but no salary . Members would be appointed to Furthermore, the board would be required to serve four-year terms—two of the initial appointees prepare an annual review of DTSC’s performance, would serve two-year terms in order to stagger including, but not limited to, the director, and appointments . The bill specifies the duties of provide the review to the Secretary of CalEPA . the board, which includes (1) reviewing specified policies, processes, and programs within the According to the administration, the proposed hazardous waste control laws; (2) proposing board structure is intended to respond to the statutory, regulatory, and policy changes; and specific needs for DTSC and has been informed (3) hearing and deciding appeals of hazardous through many years of stakeholder discussions . waste facility permit decisions . The board would be The administration considered other examples of required to hold no less than six public meetings similar boards in other departments . For example, per year . In addition to creating a board, the bill the administration considered: would require the Secretary for CalEPA to convene • Board of Fire Protection Within CalFire. a task force to review the fee structure for HWCA Responsible for developing the general and TSCA . The Secretary would be required to forest policy of the state and determining provide recommendations to the Legislature, by department guidance policies . January 10, 2021, on how these funds could be • State Mining and Geology Board Within the modified to ensure they provide adequate funding Department of Conservation. Responsible to support DTSC’s programs . for providing oversight and direction to the Concept of Establishing a Board Has Merit. Office of Mine Reclamation and the California A board that holds regular public meetings Geological Survey . could improve transparency and allow the • Fish and Game Commission Within CDFW. public and stakeholders a regular venue to raise Responsible for formulating general policies issues and discuss their concerns . The board for the conduct of the department . structure could also help to promote greater accountability by requiring the DTSC director to (For information about existing boards that are regularly report on the department’s progress overseen by CalEPA, see the box on page 35 .) towards meeting outcome goals . While we think the Governor’s concept of establishing a board has merit, the Legislature will want to closely evaluate the specifics of the choices made by the 34 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET administration . Specifically, as we describe in our performance review appear to be directed towards recent report, The 2020-21 Budget: Assessing improving the department’s performance . the Governor’s Reorganization Proposals, and Board Would Not Immediately Result in summarize in the box on page 36, the Legislature Improved Efficiency. The proposed board would will want to keep in mind several key considerations not result in DTSC using fewer resources or when evaluating the specifics of the proposal . improving the quality of services provided within In this section, we discuss how most of these existing resources in the near term . Under the considerations apply to the proposed creation of proposed structure, the board would have limited the Board of Environmental Safety . ability to require the department to make changes, Board Could Make DTSC’s Programs More such as those intended to result in improved Effective. Some elements of the Governor’s efficiency . However, to the extent that the board proposal could make DTSC’s programs more uses its oversight functions to steer the department effective and result in the public receiving towards changes that improve its effectiveness— improved services . In particular, the proposals to as described previously—this could result in more require that the board (1) review and approve the efficient operations in the long term, if done within director’s annual priorities for each program and existing resources . (2) provide the Secretary of CalEPA with an annual CalEPA Boards Two Boards Operate Under California Environmental Protection Agency (CalEPA). CalEPA oversees and coordinates the activities of two boards, three departments, and one office . The two boards that CalEPA currently oversees are: • California Air Resources Board (CARB). CARB is charged with protecting the public from the harmful effects of air pollution and developing programs and actions to fight climate change . CARB consists of 16 members . Twelve are appointed by the Governor and confirmed by the Senate, including five who represent local air districts, four experts in fields related to air quality, two public members, and the Chair, who serves as the only full-time, salaried member . Two members represent environmental justice communities (one appointed by the Senate and one by the Assembly), and two nonvoting members appointed for legislative oversight, (one from the Senate and one from the Assembly) . Voting members serve six-year terms . CARB holds monthly meetings . CARB has 35 authorized positions to support its activities including a Small Business Ombudsperson . • State Water Resources Control Board (SWRCB). SWRCB is charged with preserving, enhancing, and restoring the quality of California’s water resources and drinking water for the protection of the environment, public health, and all beneficial uses, as well as ensuring proper water resource allocation and efficient use . Each of the five full-time salaried board members fills a different specialized position (representing the public, engineering expertise, water quality expertise, legal expertise, and water supply) . Members are appointed to four-year terms and confirmed by the Senate . The board allocates water rights, adjudicates water right disputes, develops statewide water protection plans, establishes statewide water quality standards, and guides the nine Regional Water Quality Control Boards located in the major watersheds of the state . The SWRCB’s broad authority over water allocation and water quality protection generally enables it to provide comprehensive protection to California’s waters . SWRCB generally meets twice each month . SWRCB has 18 authorized positions to support its activities . www.lao.ca.gov 35 analysis full gutter 2020-21 BUDGET New Structure Would Improve Accountability. the department’s accountability by creating The addition of the board would result in a an additional forum for the public to voice its government structure where the Legislature and concerns . In addition, providing a public hearing the public could more easily identify the persons forum to appeal departmental permit decisions responsible for managing DTSC’s programs and could result in a more transparent appeals process . hold them accountable . Annual goal setting, Establishment of the Board Is Based Upon a long-term goal setting, and an annual performance Policy Rationale. According to the administration, review of DTSC by the board would establish a the proposal to establish the board is designed public process for identifying performance issues, to address several problems that have occurred determining who is responsible for them, and in recent years . First, the board is intended to measuring the department’s progress towards provide strategic guidance for DTSC, which the addressing them . The creation of an ombudsman IRP found to be lacking . Second, as discussed who would receive complaints from the public, previously, the board structure is intended to render assistance, and make recommendations enhance public transparency and accountability to the board and the director would increase on DTSC processes, which has eroded the trust of Issues to Consider When Reviewing Reorganization Proposals In our recent publication, The 2020-21 Budget: Assessing the Governor’s Reorganization Proposals, we recommend that the Legislature consider the following key questions when evaluating proposals to reorganize state departments: • Would the Reorganization Make Programs More Effective? A reorganization should result in programs becoming more effective and the public receiving improved government services . • Would the Reorganization Improve Efficiency? A reorganization should result in programs using fewer resources or improving the quality of services provided within existing resources . • Would the New Structure Improve Accountability? A reorganization should result in a government structure where the Legislature and the public can easily identify the person or entity responsible for managing a program . • Is the Reorganization Based Upon a Policy Rationale? A reorganization should be consistent with an underlying policy rationale to address a problem that has been clearly identified . • Does the Reorganization Reflect Legislative Priorities? A reorganization should be consistent with the priorities that the Legislature has set for a program or government function . • Do the Benefits Outweigh the Costs? The benefits of a reorganization should outweigh the costs to implement the reorganization, which can sometimes be significant . • Is the Reorganization Well Planned? A reorganization should be well planned given that it can result in significant complexities—such as the need to reclassify positions and responsibilities . • How Should the Reorganization Be Implemented? Government reorganizations can be implemented in a few different ways, though typically they have been pursued either through the formal executive branch reorganization process laid out in statute or budget trailer legislation . 36 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET some stakeholders . Third, the proposed fee-setting For example, the Legislature should consider authority is intended to help ensure that fees are whether the Governor’s proposal to appoint set at levels that will maintain fiscal solvency in all five board members without making them TSCA and HWCA in the future . subject to Senate confirmation is likely to Establishment of the Board Is Intended to Be result in a board that reflects the Legislature’s Consistent With Legislative Priorities. Ultimately, priorities . Alternatively, for example, the the Legislature will have to determine the extent to Senate and Assembly could each appoint one which this specific proposal is consistent with its member, and the Governor could have three priorities for DTSC . However, through the creation appointees who would be subject to Senate of the IRP, the Legislature signaled its intent to confirmation . (Requiring Senate confirmation identify options for DTSC to improve its overall would be consistent with AB 995, as well as operations including permitting, enforcement, for SWRCB and CARB members .) public outreach, and fiscal management, and • Board Member Qualifications and the IRP recommended the creation of a board to Compensation. The Legislature may wish provide oversight of DTSC’s activities . to consider whether it would prefer to have Benefits Could Potentially Outweigh the one board member selected from the general Costs in the Long Term. The Governor’s budget public (as proposed by the Governor) or contains $3 million from the General Fund for the to require professional qualifications for all implementation of the board and for the cost of appointees . Assembly Bill 995, for example, holding public meetings that are accessible to the would require the fifth board member to have communities where they are held . It is difficult to expertise in the area of regulatory permitting . determine whether the benefits of establishing Also, the Legislature may wish to consider a board—including possible improvements to how the board members are compensated effectiveness, efficiency, and accountability—would and how compensation levels might affect the outweigh the monetary costs . However, in the short state’s ability to recruit qualified candidates . term, establishment of a board would result in a Under the Governor’s plan, the chair of the relatively small increase in costs . board would be a full-time salaried position and the remaining four board members would Proposal to Establish Board Is Supported be part-time salaried positions . Under AB 995, by Adequate Planning. The proposal to establish for example, the chair would be a full-time a board appears to be consistent with several salaried position, and the other four members years of work by the administration, stakeholders, would not receive salaries but would receive and the IRP . In our view, the administration has per diem compensation . presented a reasonable plan that can serve to facilitate discussions between the Legislature and • Board’s Authority Over the Department. the administration for the establishment of a board . Under the Governor’s proposal, the board would have a complementary role to DTSC Other Issues for Legislative Consideration. and would perform specific functions, In addition to considering whether the creation while the department would maintain of the board meets general criteria for successful day-to-day management responsibility . The reorganizations, the Legislature faces other, more administration’s proposed structure was specific implementation decisions regarding the created to respond to its assessment of board . Accordingly, we raise some issues for the the specific needs of DTSC as identified Legislature to consider as it deliberates over this through stakeholder discussions and internal proposal . discussions . However, other boards under • Board Member Confirmation. The CalEPA’s jurisdiction, such as SWRCB and Legislature may wish to consider the degree CARB, have greater authority to direct to which specific details related to board day-to-day operations than is proposed membership would reflect legislative priorities . for the Board of Environmental Safety . The www.lao.ca.gov 37 analysis full gutter 2020-21 BUDGET Legislature may wish to consider how much Legislature wait to take action on the Governor’s authority to invest in the board to allow it to proposal to transfer General Fund to TSCA and require changes to DTSC’s operations . HWCA until the May Revision when updated information about the funds’ conditions will be Recommendation available. The Legislature may wish to consider whether the Governor’s budget trailer legislation We recommend the Legislature establish a to adjust TSCA and HWCA would (1) create a board in order to improve DTSC’s transparency and charge structure that would cover the costs accountability, and thereby help restore confidence of both the department’s existing mandated in the department within the regulated community functions and potential program expansions, and the public . We note that SWRCB and CARB and (2) reflect the polluter pays principle. already exist under CalEPA and have demonstrated that a board-based structure can be a successful Background model for environmental regulatory agencies . In DTSC administers HWCA and TSCA, which our view, the long-term benefits of establishing a combined typically represent about half of DTSC’s board to oversee DTSC’s activities could eventually total budget . Figure 12 displays the amount and outweigh the short-term costs and result in the percent of total funding that TSCA and HWCA public receiving improved services . comprise in each of DTSC’s four major programs . However, if the Legislature authorizes a new As shown, the bulk of TSCA funding goes to the oversight board, we would recommend that it Site Mitigation and Restoration program, the SCP consider a range of issues to ensure that the program, and the Exide Technologies Cleanup structure and responsibilities of the board are program, while the bulk of HWCA funding goes to consistent with legislative priorities . This could the Hazardous Waste Management program . include consideration of the board membership and TSCA Receives Revenues From Various confirmation requirements, as well as the level of Sources. Major sources of revenue for TSCA authority the board would have over DTSC . include various charges, fines, and penalties . TSCA typically receives about 80 percent of its STRUCTURAL SHORTFALL OF revenue from an environmental charge levied DTSC SPECIAL FUNDS on organizations that use, generate, store, or conduct activities related to hazardous materials . We recommend the Legislature decide The amount of the charge is scaled based on the whether to establish a Board of Environmental number of employees the organization has . For Safety before weighing the merits of the example, organizations with between 50 employees Governor’s proposals to restructure charges for and 75 employees pay $352 annually . HWCA and TSCA. We further recommend the Figure 12 TSCA and HWCA Support for Major DTSC Programs (Dollars in Millions) 2018-19 TSCA HWCA Program Amount Percent Amount Percent Site Mitigation and Restoration $40.8 29.8% — — Hazardous Waste Management 0.6 0.7 $61.9 74.4% Safer Consumer Products 13.2 88.0 — — Exide Technologies Facility Contamination Cleanup 60.5 96.1 0.9 1.5 TSCA = Toxic Substances Control Act; HWCA = Hazardous Waste Control Account; and DTSC = Department of Toxic Substances Control. 38 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Organizations with 1,000 or more employees pay certified financial statements and financial $16,681 annually . In addition, over the past few information for use by the State Controller’s Office years, TSCA has received General Fund loans to and DOF . DTSC has indicated these delays were expedite the cleanup of contamination from the partly due to the implementation issues with its Exide Technologies Facility . These loans to TSCA transition to the Financial Information System for have been large enough in recent years to account California (commonly referred to as FI$Cal) . for roughly half of TSCA’s revenues . According to the administration, the structural HWCA Receives Revenues Mainly From imbalance is due, in part, to additional operational Charges. Major sources of revenues for HWCA costs to implement expanded responsibilities include charges on hazardous waste generators, the department has been given since 2000 . For waste disposal entities, and other facilities that example, Chapter 559 of 2008 (SB 509, Simitian) handle hazardous waste . For example, the fee established the SCP program, which is currently on generators generally is based on the amount funded at about $16 million, most of which is of hazardous materials produced, subject to a funded from TSCA . Other budget augmentations cap . Some charges on generators and facilities in recent years—several of which were intended to are subject to an annual Consumer Price improve program performance in certain operational Index adjustment . Other charges, such as a areas—have increased costs to TSCA and HWCA . U .S . Environmental Protection Agency (U .S . EPA) HWCA Backfill From General Fund Approved identification verification charge and a manifest in 2019-20. To address the structural deficit charge, are not adjusted for inflation . identified by the department, the 2019-20 budget Office of State Audits and Evaluations plan included a total of $46 million from the General (OSAE) Conducted a Performance Audit. In Fund to keep HWCA fiscally solvent for two years, response to concerns about DTSC’s accounting including $27 .5 million in 2019-20 and $18 .5 million practices, OSAE, within the Department of in 2020-21 . In the absence of the backfill, the Finance (DOF), conducted a performance audit of HWCA balance was projected to become insolvent DTSC’s accounting practices that was released in in 2019-20 . December 2019 . The audit found (1) an ineffective Governor’s Proposal system of quality control, (2) improper application of accrual policies and procedures, (3) inadequate General Fund Transfers to TSCA and HWCA in review of accounting transactions, (4) incorrect 2020-21. The Governor’s budget plan proposes to revenue account classifications, and (5) an transfer $12 million from the General Fund to TSCA . outdated cost allocation plan . DTSC is currently Absent the $12 million transfer, DTSC would fall an working to address these audit findings . estimated $10 million short of being able to fund TSCA and HWCA Face Structural Imbalances. the projected costs for the programs it supports . In recent years, the growth in expenditures Under the Governor’s proposal, TSCA would start from TSCA and HWCA has outpaced growth the 2020-21 fiscal year with an estimated beginning in revenues, transfers, and other adjustments, balance of $753,000 and end the year with an creating structural imbalances in both funds . estimated reserve of $2 million . The Governor According to the most recent estimates available, proposes an additional $1 million transfer from in 2018-19, HWCA expenditures were $5 .7 million the General Fund to HWCA, increasing the total greater than revenues, and TSCA expenditures transfer for the budget year to $19 .5 million . Under were $13 .1 million greater than revenues (excluding the Governor’s proposal, HWCA would begin the expenditures and the General Fund transfer for 2020-21 fiscal year with an estimated balance of Exide cleanup) . We note that the magnitude of $5 .5 million and end the year with an estimated the structural imbalances has been unclear until reserve of $1 .3 million . recently because DTSC’s accounting unit has One-Year Change and Increase in Charges for experienced significant delays in closing DTSC’s 2021-22. The proposed budget trailer legislation monthly financial records and providing accurate makes two sets of changes for the charges that www.lao.ca.gov 39 analysis full gutter 2020-21 BUDGET generate revenues for TSCA and HWCA . First, for While the board would have authority to set these HWCA, it replaces the existing generator, U .S . EPA charges annually, the administration’s proposed identification verification, manifest, and disposal language sets a maximum level for each charge charges with a new generation and handling that would be adjusted annually beginning in charge, which would be based on a price-per-ton 2022 to reflect increases or decreases in costs as model and effective in 2021-22 . This change, in measured by the Consumer Price Index . combination with proposed elimination of some Issues for Legislative Consideration charge exemptions, is projected to increase revenues into HWCA . Figure 13 displays the Long-Term Solution Should Reflect “Polluter projected revenues for HWCA in 2020-21 and Pays” Principle. The Legislature will want to 2021-22 under the Governor’s proposal . Second, consider options for modifying the current revenue the proposed language increases the level of structure for HWCA and TSCA to ensure that they charges that would have to be paid under TSCA’s generate sufficient future revenues to support existing environmental charge . These specific mandated departmental functions . Importantly, changes would remain in effect until the charges changes to the charges imposed under HWCA and adopted by the board for 2022-23 went into effect . TSCA should reflect the polluter pays principle: New Board Would Set TSCA and HWCA those who produce or otherwise contribute to Charges for 2022-23 and Out Years. The pollution should bear the costs of managing administration proposes budget trailer legislation it to prevent damage to public health and the to provide the proposed Board of Environmental environment . The administration states that this Safety with ongoing authority to set charges for principle is part of its rationale for how it structured TSCA and HWCA beginning with the 2022-23 fiscal this proposal . Generally, we find that the proposal is year based on the charge structures established consistent with the polluter pays principle . in 2021-22 . The board would establish a schedule Are Statutory Maximum Charges Set at a of charges annually based on its calculations of Level That Would Allow for Program Growth? charges necessary to align TSCA’s and HWCA’s The Legislature may wish to consider whether revenues with the amounts appropriated by the the caps on charges proposed in the Governor’s Legislature for support of DTSC’s programs . proposed budget trailer legislation would be sufficient to cover the costs of Figure 13 both the department’s existing HWCA Revenue Projections Under Governor’s Proposal mandated functions and potential program expansions (such as (In Millions) when the SCP program was 2020-21 2021-22 created) . The administration has Projected Projected not provided an estimate of the Existing Charges Revenue Proposed Charges Revenue potential revenue that could be Generator $28.6 Generation and handling $61.1 generated under the new charge Disposal 6.2 structures, which includes potential EPA ID verification 5.4 increases in some charges, as Manifest 2.2 well as elimination of others . This Subtotals ($42.4) ($61.1) makes it difficult for the Legislature Facility $5.6 Facility $11.2 to assess the degree to which the Other 0.1 Subtotalsa ($5.7) ($11.2) proposed structure would provide Total Revenueb $48.0 $72.3 a long-term fix to the structural a Fee-for-service revenues are not included—fee-for-service charges are calculated based on the Department of Toxic deficits facing TSCA and HWCA . Substances Control’s (DTSC’s) actual costs which are not assignable to DTSC’s nonpermitting activities related to The Legislature may wish to have facility permits or to its overall regulatory program costs. b May not total due to rounding. the department report on whether HCWA = Hazardous Waste Control Account and EPA ID = Environmental Protection Agency Identification. the proposed charge maximums 40 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET would allow enough flexibility to expand existing before they could be implemented . We recommend departmental functions or create new ones in the the Legislature consider the scope of the board’s future without the need to make additional statutory authority and define its responsibilities consistent changes to them . with legislative priorities before the Legislature takes up the issue of whether such a board should Recommendations be given the authority to annually adjust HWCA and Decide Whether to Establish a Board Before TSCA charges . Weighing HWCA and TSCA Proposals. We Withhold Action on General Fund Transfers recommend the Legislature decide whether to Pending May Revision. We recommend the establish a board within DTSC before weighing the Legislature wait to take action on the Governor’s merits of the Governor’s proposals to restructure proposal to transfer General Fund to TSCA and charges for HWCA and TSCA . Under the HWCA . Given the level of uncertainty that has Governor’s proposed budget trailer legislation, full plagued these two funds over the past several implementation of the proposal to allow a board to years, we believe it makes sense to wait until set charges for various entities under HWCA and the May Revision when more information about TSCA is contingent upon first establishing such prior- and current-year revenues and expenditures a board . If the Legislature rejects the Governor’s will be available before taking action on this item . proposal to establish a board, the proposed We will provide an updated analysis of TSCA and budget trailer legislation regarding HWCA and HWCA fund conditions at the time of the May TSCA charges would require significant revision Revision . DEPARTMENT OF CONSERVATION The Department of Conservation (DOC) is CALIFORNIA GEOLOGIC ENERGY charged with the development and management MANAGEMENT (CALGEM) DIVISION: of the state’s land, energy, and mineral resources . MISSION TRANSFORMATION AND The department manages programs in the areas of (1) geology, seismology, and mineral resources; OVERSIGHT (2) oil, natural gas, and geothermal resources; The administration proposes $13.9 million and (3) agricultural and open-space land . The and 53 positions in 2020-21, growing to Governor’s budget proposes $136 million for $24.3 million and 128 positions in 2022-23. DOC in 2020-21, a decrease of about $10 million, We recommend the Legislature approve most or 7 percent, from estimated expenditures in of the resources proposed, but recommend the current year . The year-over-year decrease is withholding action on the public transparency mainly explained by a reduction in one-time bond component of the proposal ($600,000 and appropriations from the current year, partially three positions in 2020-21) until the department offset by a budget proposal to increase oil and gas provides additional information to justify the regulatory activities (described in more detail in the request. Absent additional justification, we next section) . would recommend the Legislature reject it. We also recommend the Legislature consider approving only the funding and positions requested in 2020-21, but not for the out-years, thereby providing the Legislature an opportunity to request an update on the division’s performance as part of its deliberations on the 2021-22 budget. www.lao.ca.gov 41 analysis full gutter 2020-21 BUDGET Background observe “critical” may-witness operations that are performed near a building intended for CalGEM Regulates Oil and Natural Gas human occupancy such as a home or school . Production. Chapter 771 Statutes of 2019 There were 27,468 shall-witness operations (AB 1057, Limón) changed the name of the Division 2018 . of Oil, Gas, and Geothermal Resources (DOGGR) to • Evaluates Aquifer Exemptions. An aquifer the CalGEM Division . The division regulates onshore exemption is one of a series of requirements and offshore oil, natural gas, and geothermal wells . to allow an operator to inject oil and natural The division is charged with ensuring the safe gas production fluids into the ground if the development of oil, natural gas, and geothermal aquifer is not a current or future source of resources in the state through sound engineering drinking water . The approval of an aquifer practices that protect the environment, prevent exemption consists of six sequential review pollution, and ensure public safety . The division and approval steps by multiple agencies— consists of headquarters in Sacramento, and four including CalGEM, SWRCB, and U .S . EPA— geographic districts (northern, southern, inland, and and takes at least one year to complete . The coastal) . It coordinates with other state and federal division is currently involved in 19 aquifer agencies on regulatory issues that fall outside of its exemption package reviews that are at various jurisdiction . For example, it collaborates with the stages in the approval process . U .S . EPA, SWRCB, and the nine Regional Water • Regulates Underground Injection Control Quality Control Boards (RWQCBs) to implement (UIC). The UIC program regulates the and carry out water pollution and control programs . permitting, drilling, inspecting, testing, In order to fulfill its mandate to regulate oil and and sealing of about 55,000 UIC wells in natural gas operators, the division performs various California that fall into two categories: (1) wells regulatory activities . that inject water or steam for enhanced • Reviews and Approves or Denies Permits. oil recovery and (2) wells that return briny Oil and natural gas operators must obtain water—typically unusable for drinking or permits from the division in order to perform irrigation—from oil and natural gas production a variety of common activities including back underground . According to the division, (1) drilling new wells, (2) reworking or there are over 850 UIC projects statewide that deepening existing wells, and (3) plugging require review . These projects are generally and abandoning wells . The division typically defined by a geological zone or area and evaluates 7,000 to 10,000 permit applications can be as small as a few wells or as large as per year . thousands of wells that inject fluids . • Witnesses Field Operations. State law • Performs Construction Site Well Reviews. and regulations require division staff to The division developed the construction site witness about 30 different oil and natural well review program to assist local permitting gas production operations and the testing agencies in identifying and reviewing the of certain equipment (referred to as “shall location and condition of oil or natural gas witness” operations) . For example, the wells located near or beneath proposed plugging and abandonment of a well construction sites . According to the division, encompasses numerous steps that are this function is important in urban areas, required to be witnessed by field inspectors . such as Los Angeles, where oil fields are State law and regulations also allow the typically older—sometimes more than division to witness certain oil and natural 100 years old—and urbanization is rapidly gas production operations and testing of occurring . In 2018-19, the division processed equipment (referred to as “may-witness” 370 construction site reviews which take from operations) . Generally, the division places a days to months to complete depending on higher priority on sending field inspectors to the size and complexity of the review and the 42 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET availability of data on the wells at or near the production, such as hydraulic fracturing (also construction site . known as fracking) . The division regulates • Regulates Pipelines and Facilities. After well stimulation treatments in cooperation oil and natural gas is pumped from the with SWRCB, which reviews all proposed ground, it goes through a production facility projects to determine their potential effect that prepares it for sale to refineries or gas on groundwater . The division performs an utilities . The division’s pipelines and facilities extensive engineering review and well integrity unit oversees these facilities and regulates evaluation for well stimulation projects . all oil and natural gas production equipment Division Has Expanded Over the Past Decade. between the wellhead, where oil and natural Over the past decade, the state has enacted gas leaves the ground, and the sales meter, legislation to strengthen the division’s regulatory where ownership or custody changes hands . authority and oversight over oil and natural • Issues Notices of Violation (NOV) and gas production and provided the division with Enforcement Orders. The division’s significant new resources . As shown in Figure 14 enforcement program was established in (see next page), between 2012-13 and 2019-20, 2018-19 to centralize and standardize the the Legislature approved proposals to (1) increase division’s statewide enforcement efforts . field inspections, (2) enhance the UIC program, Field inspectors issue NOVs to operators (3) perform construction site reviews, (4) improve who are out of compliance with state laws gas pipeline safety through periodic testing, or regulations . NOVs can be followed by (5) establish a centralized statewide enforcement enforcement orders to comply (Orders) if a program, (6) develop a new idle well management noncompliant operator refuses to voluntarily program, (7) implement a program to regulate take action to remedy a violation . Under the well stimulation, and (8) provide funds to plug enforcement program, staff review NOVs abandoned wells . and draft Orders in coordination with the Well Statewide Tracking and Reporting department’s legal staff . (WellSTAR). In addition to the regulatory resources • Regulates Idle Wells. The division regulates shown in Figure 14, the Legislature funded idle wells which are generally defined as wells WellSTAR beginning in 2015-16 . WellSTAR is an that have not produced for two years or more electronic database—now nearing completion—that and have not yet been properly plugged and allows oil and gas operators to submit required abandoned . Idle wells can leak oil or natural information online and allows the public to access gas, which can pose risks to life, health, information about well stimulation permits, well property, and natural resources if they are not maintenance data, and other data . WellSTAR adequately monitored and tested regularly . was implemented largely in response to U .S . EPA The division manages different plans for the requirements, as well as various changes in state elimination and testing of idle wells, which law that required increased collection and reporting require division staff to monitor to ensure all of information on well stimulation treatments and work is being completed by operators in a disposal of water produced during oil and natural timely manner, and staff witness well testing to gas drilling operations . ensure it is done to the appropriate standards . Recent Legislation Expands the Division’s New idle well regulations, that went into effect Regulatory Role. The Legislature recently passed April 1, 2019, are expected to increase the four pieces of legislation that increased the number of idle wells tested per month from division’s regulatory authority and required the about 200 in 2020 to over 700 in 2023 . division to perform studies . Some of the major • Regulates Well Stimulation. Well stimulation provisions from each piece legislation are as treatment refers to processes performed follows: on oil and natural gas wells to increase www.lao.ca.gov 43 analysis full gutter 2020-21 BUDGET • Chapter 771 of 2019 (AB 1057, Limón.) to life, health, property, and natural resources . Chapter 771 authorizes the division to require Chapter 771 also mandates operators provide increased financial assurances from an additional documentation—such as proof of operator based upon the division’s evaluation sale and lease agreements—when ownership of the risk that the operator will desert its of wells or facilities changes . wells and the potential threats the wells pose Figure 14 Key CalGEM Enacted Budget Proposals Since 2012-13 (Dollars in Millions) First Year Ongoing Program and Proposal Description Positions Amount Positions Amount Oil and Gas Operations DOGGR Compliance and Support Staff Augmentation (2012-13)—Funding 18 $2.5 18 $2.3 and positions to enhance DOGGR’s onshore and offshore regulatory programs by improving its (1) construction site review, (2) environmental compliance program, and (3) Underground Injection Control (UIC) program. Chapter 313 of 2013 (SB 4, Pavley) Implementation (2014-15)—Funding 65 13.0 60 9.3 and positions to implement a program to regulate well stimulation, including hydraulic fracturing, as mandated by SB 4. SB 4 Contracting Costs (2014-15)—Funding to complete an independent — 5.7 — — scientific study on well stimulation treatments as required under SB 4. UIC Program (2015-16)—Funding and positions to enhance the UIC program 23 3.5 23 3.3 and to increase the division’s support staff. Underground Gas Storage Regulation (2016-17)—Funding and positions 20 4.2 20 3.3 for increased regulatory activities for underground gas storage facilities. Chapter 601 of 2015 (AB 1420, Salas) Implementation (2016-17)—Funding 10 1.4 10 1.2 and positions to improve gas pipeline safety through periodic testing. Oil and Gas Studies (2016-17)—Funding (two year) to contract for — 3.0 — — independent scientific studies to assess well stimulation practices. Chapter 272 of 2016 (AB 2729, Williams) Implementation, Idle Well 8 1.5 15 2.5 Testing (2017-18)—Funding and positions to develop a new Idle Well Management Program. Enforcement Program (2018-19)—Funding and positions to develop a new 6 1.2 6 1.2 Centralized Statewide Enforcement Program. Regulatory Field Inspection (2018-19)—Funding and positions to increase 21 4.3 21 3.7 inspections and enforcement and mitigate the risk of urban encroachment on oil and gas fields. Deserted and Orphan Wells Orphan Well Elimination (2012-13)—Funding (three year) to plug orphan oil — $1.0 — — and gas production wells that pose a threat to the environment and public safety. Orphan Well Remediation (2016-17)—Funding to plug orphan oil and gas — 1.0 — $1.0 production wells that pose a threat to the environment and public safety. Chapter 652 of 2017 (SB 724, Lara) Implementation (2018-19)—Funding to — 1.6 — 0.6 carry out additional deserted well and production facility work. a The California Geologic Energy Management (CalGEM) Division was formerly known as the Division of Oil, Gas, and Geothermal Resources (DOGGR), until it was renamed by Chapter 771 of 2019 (AB 1057, Limón). 44 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET • Chapter 772 of 2019 (AB 1328, Holden). Chapter 774 requires the division to conduct Chapter 772 requires the division—in inspections of certain idle wells and deserted consultation with CARB—to measure production facilities and to report certain emissions from up to 500 idle and abandoned information stemming from these inspections oil and natural gas wells in California, in order to the Legislature . to provide information on hazardous wells and better understand how fugitive emissions may Governor’s Proposal pose a risk to workers and nearby residents . The administration proposes $13 .9 million from Chapter 772 also requires contracted the Oil, Gas, and Geothermal Administrative Fund independent experts to undertake a study in 2020-21 (growing to $24 .3 million in 2022-23 that includes an estimate of the hydrocarbon and ongoing) primarily to support the expansion emissions from the state’s idle and abandoned of CalGEM activities . Under the proposal, wells . the department would receive an additional • Chapter 773 of 2019 (SB 463, Stern). 53 positions in 2020-21 (growing to 128 positions Chapter 773 generally requires (1) an operator over three years) for these activities . Of the total to apply for a permit to perform a well positions proposed, the division would increase stimulation treatment in order to maintain by 120 authorized positions over three years to a wells that are used for underground storage total of 427 authorized positions, or by 39 percent . of natural gas; (2) an operator of a natural (We note that the Governor’s proposal would also gas storage well to provide the division establish eight positions—six administrative and with a complete chemical inventory of the two legal—outside of the division .) Figure 15 materials that could be emitted from the well summarizes the seven components of the in the event of a leak; and (3) the division to Governor’s proposal . review and, if necessary, revise its natural gas Increase Field Presence. The Governor storage well policy and regulations . proposes $4 .8 million and 22 new positions in • Chapter 774 of 2019 (AB 551, Jackson). 2020-21 (growing to $14 .1 million and 70 new Chapter 774 requires each operator of an positions in 2022-23 and ongoing) to expand oil or natural gas well to submit a report the division’s field presence . The positions would to the division, beginning July 1, 2022, perform the following regulatory functions: that estimates the operator’s total costs (1) witness field operations, (2) review UIC projects to plug and abandon all of its wells and and applications, (3) review and manage the aquifer to decommission all attendant production exemption approval packages, (4) process permit facilities, including site remediation . Figure 15 Governor’s Proposed California Geologic Energy Management Division Expansion Oil, Gas, and Geothermal Administrative Fund (Dollars in Millions) 2020-21 2021-22 2022-23 and Ongoing Description of Expansion Components Funding Positions Funding Positions Funding Positions Increase field presence $4.8 22.0 $9.9 48.0 $14.1 70.0 Implement legislation 6.4 16.0 4.9 27.0 4.9 27.0 Regulatory enhancement (enforcement) 0.8 5.0 1.3 8.0 1.6 10.0 Collect data on pipelines and facilities 0.6 3.0 1.4 7.0 1.7 10.0 Improve public transparency 0.6 3.0 0.9 5.0 0.9 5.0 Meet new requirements for idle wells 0.3 2.0 0.6 3.0 0.6 3.0 Address increased well stimulation workload 0.4 2.0 0.5 3.0 0.5 3.0 Totals $13.9 53.0 $19.5 101.0 $24.3 128.0 www.lao.ca.gov 45 analysis full gutter 2020-21 BUDGET applications, and (5) perform construction site data on abandonment costs; and (5) prioritize well reviews . Some of the requested positions could abandonment projects . perform more than one of these five regulatory Improve Public Transparency. The budget functions . For example, 23 of the positions includes $600,000 and three new positions in (Associate Oil and Gas Engineers) could perform 2020-21 (growing to $900,000 and five positions field inspections, as well as process permit in 2022-23) to improve public transparency by applications and work on UIC reviews . About 27 of (1) conducting more data analysis and improved the proposed positions (Engineering Geologists) public reporting, (2) performing ongoing analysis would spend the bulk of their time in the field, while of newly available data from WellSTAR, and most of the remaining 20 positions would perform (3) adding a second public outreach coordinator for support staff functions or serve in supervisory roles . the division in order to increase its ability to work Implement Recent Legislation. The budget with local government agencies and community includes $6 .4 million and 16 new positions in organizations . 2020-21 ($4 .9 million and 27 positions in 2022-23 Meet New Requirements for Idle Wells. and ongoing) to implement recent legislation, The Governor proposes $300,000 and two new including (1) $1 .3 million and 7 positions to positions in 2020-21 (growing to $600,000 and implement Chapter 771, (2) $1 million (one time) three positions in 2022-23) to meet requirements to implement Chapter 772, (3) $400,000 and imposed by new idle well regulations . The staff 2 positions to implement Chapter 773, and would (1) centralize the idle wells program and (4) $3 .2 million and 18 positions to implement standardize forms and processes used by division Chapter 774 . staff and operators, and (2) increase tracking of Regulatory Enhancement (Enforcement). operator compliance . The administration proposes $800,000 and five Address Increased Well Stimulation new positions in 2020-21 (growing to $1 .6 million Workload. The administration proposes $400,000 and ten positions in 2022-23 and ongoing) to and two new positions (growing to $500,000 identify and implement enforcement actions . and three positions in 2022-23) to address the Enforcement staff would perform several functions increasing number of well stimulation applications . including collecting and organizing evidence, The additional staff would analyze data collected gathering and evaluating well ownership and lease under the well stimulation program and review and information, and identifying responsible parties to track well maintenance performed by operators . support the issuance of Orders . Legal staff would support enforcement staff by organizing evidence, Assessment building enforcement cases, and prosecuting and Six Components of the Governor’s Proposal adjudicating Orders . Are Reasonable… We find that most components Collect Data on Pipelines and Facilities. of the administration’s expansion proposal are The Governor proposes $600,000 and three new reasonable based upon three-year workload positions in 2020-21 (growing to $1 .7 million and forecasts and the need to provide additional ten positions in 2022-23) to collect and analyze resources to implement recent legislation . For information that operators are required to provide, example, the main driver of additional field such as maps and data on oil and gas pipelines presence workload is associated with shall-witness and tank facilities and pipeline management and critical may-witness operations . Data show plans . The staff would utilize this data to identify, that shall witness operations increased 59 percent map, and categorize wells and facilities to guide from 2017 to 2018 . In addition, the division waived regulatory activities . According to the division, this oversight of roughly one-third of all shall-witness would allow it to better (1) plan for inspections; oil and natural gas operations from 2016 through (2) identify hazards; (3) collect, manage, and 2018, indicating a clear ongoing need for the analyze facility condition information; (4) retain division to have a greater presence in the field . 46 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET As another example, only about 170 of the 850 Recommendations UIC projects (or 20 percent) were in progress as Approve Most of the Funding and Positions of July 2019—indicating that a significant number Proposed for 2020-21. We recommend the of projects will be forthcoming for the division to Legislature approve $13 .3 million and 50 positions review and monitor . (out of the Governor’s total request of $13 .9 million …But One Component Lacks Detail. The and 53 positions) for 2020-21 . We find that these Governor’s proposal provides little information resources are justified on workload basis and are on how the public transparency component consistent with recent statutory requirements . would increase public awareness with regard to We recommend the Legislature withhold the division’s regulation of oil and natural gas action on the public transparency component of production and storage operators . Specifically, the proposal—$600,000 and three positions in the proposal does not clearly identify the gaps in 2020-21—until the department provides additional current public reporting that would be addressed information to justify the request . Absent additional or describe the specific actions the five proposed justification for this component, we would staff would take to fill those gaps . Furthermore, recommend the Legislature reject the proposed the proposal neither explains how increasing the resources related to public transparency . number of staff analyzing the data provided by Ensure Continued Oversight Such as by Not WellSTAR would improve regulatory planning and Approving Proposed Out-Year Expansions. permitting activities, nor how this, in turn, would The division’s workload can vary over time improve public transparency . based upon a number of factors, which adds Division’s Workload Could Vary Due to a uncertainty to the ongoing level of resources Number of Factors. The division’s annual workload the department will require to implement its is somewhat uncertain and can change over time programs . Furthermore, the division has been for a number of reasons . For example, the amount the subject of continuous legislative oversight in of oil and natural gas produced in California recent years due to concerns with department varies depending on market factors . For example, operations, including noncompliance issues in the crude oil production in California decreased by UIC program as identified by U .S . EPA, as well 20 percent between 2014 and 2018 . Significant as other issues . Given the workload uncertainty production slowdowns in California’s oil and natural and historical concerns with the department’s gas industry result in decreases in some of the operations, the Legislature might wish to engage division’s workload, such as field inspections . in ongoing oversight of the division through the Other factors that can affect the division’s annual budget process . This could be accomplished workload include (1) where field inspections are by only approving the funding and positions occurring and the associated travel time, (2) varying proposed for 2020-21 (on an ongoing basis), but complexity of project reviews—such as for UIC not the proposed expansion in the out-years . The and construction site reviews, and (3) inherent administration would be required to come back uncertainty regarding workload associated with next year to submit its proposal for 2021-22, new initiatives . thereby providing legislative budget committees the opportunity to request an update on the division’s performance in key areas of operations, such as implementing recently enacted legislation, witnessing field operations, reviewing and approving or denying permits, and issuing Orders . www.lao.ca.gov 47 analysis full gutter 2020-21 BUDGET CALIFORNIA ENERGY COMMISSION The Energy Resources Conservation and technologically feasible and cost-effective, which Development Commission (commonly referred means that the total lifetime savings from reduced to as the California Energy Commission, or CEC) energy is less than the higher up-front costs . is responsible for forecasting energy supply and Currently, CEC’s development and implementation demand, developing and implementing energy of energy efficiency standards is primarily funded conservation measures, conducting energy-related by (1) ERPA, which is supported by a statewide research and development programs, and siting surcharge on electricity consumption, and (2) COIA, major power plants . which is supported by a fee on large greenhouse The Governor proposes to allocate $455 million gas (GHG) emitters . for CEC in 2020-21, a net decrease of $412 million Chapter 697 directs CEC to adopt and (48 percent) compared to estimated expenditures periodically update standards that promote the in the current year . This net decrease is primarily use of flexible demand technologies to assist the result of (1) a technical issue related to unspent with grid reliability and integration of intermittent prior-year funds being carried over into the current renewables . This means developing regulations year and (2) about $100 million in one-time GGRF for appliances that have the capability to shift or being spent in 2019-20, but no new allocations reduce electricity use during certain days or times in the 2020-21 budget . This decrease is partially based on electricity prices or other issues related offset by a proposed $51 million increase in to balancing electricity supply and demand . In one-time spending for zero-emission vehicle fueling addition, Chapter 697 requires CEC to collaborate infrastructure . with CNRA and DWR to assess opportunities for upgrades to the State Water Project to enhance APPLIANCE EFFICIENCY flexible demand capabilities . STANDARDS Governor’s Proposal The Governor’s budget proposes $750,000 The budget includes $750,000 (PUCURA) to (Public Utilities Commission Utilities implement Chapter 697 . The funding would support Reimbursement Account [PUCURA]) and four four new permanent positions to adopt appliance positions to adopt and periodically update standards, plus one two-year, limited-term position energy efficiency standards that promote the to assess upgrades to the State Water Project . use of flexible demand technologies pursuant Revenue for PUCURA comes from California Public to Chapter 697 of 2019 (SB 49, Skinner). We Utilities Commission (CPUC) fees assessed on recommend the Legislature use a different, regulated investor-owned utilities (IOUs) . more appropriate fund source for these Assessment activities. We recommend using the Energy Resources Program Account (ERPA) if the Unclear Whether PUCURA Is Appropriate structural deficit is addressed this year. If Fund Source. PUCURA is not currently used to not, we recommend using the AB 32 Cost of fund implementation of CEC energy efficiency Implementation Account (COIA). standards . The purpose of the fund is to support CPUC activities, including regulation Background of IOUs . However, the activities required by State law requires CEC to reduce statewide Chapter 697 relate to statewide appliance consumption of energy by adopting efficiency standards and changes to the State Water Project . standards for appliances sold in California . The Under the proposal, IOU ratepayers would be standards, adopted by regulation, must be paying for CEC activities that are meant to benefit 48 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET energy users across the state, including those activities related to achieving the state’s GHG outside of IOU territories (such as publicly owned goals, including CEC energy efficiency regulations utilities) . As a result, it is unclear whether PUCURA and implementation of the Renewables Portfolio is an appropriate fund source for these activities . Standard . Activities related to Chapter 697 appear Alternate Fund Sources More Appropriate. to be an appropriate use of these funds because Alternate fund sources are likely more appropriate they help integrate zero carbon intermittent for these activities . In our view, ERPA is the most renewable resources, which can help reduce GHGs . appropriate funding source because (1) the fund Recommendation is supported by a statewide charge on electricity consumption—not just IOU customers and Shift Costs to Alternative Fund Source. If (2) historically, this is the main source of funds the administration proposes—and the Legislature used for CEC energy efficiency regulatory activities . adopts—changes that address the ongoing ERPA However, it is worth noting that there is a structural structural deficit, we recommend the Legislature deficit in ERPA, and the fund is projected to be use ERPA to fund Chapter 697 implementation . In insolvent in 2025-26 . If the Chapter 697 activities our view, ERPA is the most appropriate fund source are funded with ERPA, the projected date of because it is tied directly to statewide energy insolvency would be in 2024-25 . Supplemental consumption and, historically, is the primary fund Report Language adopted as part of the 2019-20 used for state energy efficiency activities . However, Budget Act directs CEC to develop a plan by if the ERPA structural deficit is not addressed in April 1, 2020, to fully address the structural deficit . this year’s budget, we recommend the Legislature Another option would be to shift funding to consider shifting the fund source to COIA in the COIA . This fund is used to pay for administrative short-term until the structural deficit is addressed . CAPITAL OUTLAY AND BOND ADMINISTRATION PROPOSITION 68 IMPLEMENTATION designed to control how funds are administered and overseen by state agencies . For example, most The Governor proposes appropriating funds must be used for local assistance—typically $514 million from Proposition 68, primarily allocated through a competitive grant process for local parks and flood protection projects. to local governments, nonprofit agencies, and We recommend the Legislature approve the other organizations to implement projects . The proposals, as we find them to be reasonable bond also includes several provisions designed and consistent with bond language and the to assist “disadvantaged communities” (with multiyear allocation plan the administration median incomes less than 80 percent of the previously presented to the Legislature. statewide average) and “severely disadvantaged communities” (with median incomes less than Background 60 percent of the statewide average) . For example, Proposition 68 Provides $4.1 Billion in it requires that for each use specified in the bond, General Obligation Bonds. In June 2018, voters at least 15 percent of the funds be spent to benefit passed Proposition 68, authorizing the state to sell severely disadvantaged communities . a total of $4 .1 billion in general obligation bonds About 60 Percent of Proposition 68 for natural resources-related purposes, including Funds Has Already Been Appropriated. habitat restoration, parks, and water projects . Proposition 68 provides funding for multiple (The Legislature placed this bond on the ballot types of activities . Bond funds are distributed through Chapter 852 of 2018 [SB 5, de León] .) The across 20 state departments, including 10 state bond measure includes a number of requirements conservancies . Combined, the 2018-19 and www.lao.ca.gov 49 analysis full gutter 2020-21 BUDGET 2019-20 budgets appropriated $2 .4 billion Governor’s Proposals (60 percent) from Proposition 68, leaving Appropriates Over $500 Million From $1 .7 billion available for future appropriation . The Proposition 68. Figure 16 displays the Governor’s Legislature has already appropriated the majority of various Proposition 68 proposals for 2020-21 . funding for most of the bond’s categories . As shown, these proposals total $514 million Figure 16 Proposition 68 Overview (In Millions) Implementing Bond Prior 2020-21 Program Department Allocation Appropriations Proposed Natural Resources Conservation and Resiliency $1,497 $873.0 $74.0 Restoration and conservation projects Conservancies $345 $185.8 $26.4 Restoration and conservation projects WCB 265 197.3 0.8 Voluntary agreements CNRA 200 70.0 — Salton Sea management CNRA 200 141.2 10.0 Habitat restoration and protection CDFW 95 32.8 3.2 Los Angeles River watershed RMC/SMMC 75 31.8 14.8 Various specified projects CNRA 71 69.3 — Deferred maintenance CDFW 50 10.0 5.0 Restoration and conservation projects CCC 40 21.8 12.0 Healthy coastal and marine ecosystems OPC 35 10.3 0.1 Watershed improvement SNC 25 23.6 -0.2a Forest management and urban forestry CalFire 25 23.5 0.6 Projects that assist coastal communities OPC 21 10.3 0.1 Working lands and riparian corridors DOC 20 17.4 1.0 Multibenefit green infrastructure CNRA 20 18.7 0.1 Healthy soils CDFA 10 9.5 0.1 Parks and Recreation $1,323 $606.2 $291.5 Improve and expand local parks Parks $1,035 $517.7 $255.0 Improve and expand state parks Parks 170 35.0 24.6 Lower cost coastal accommodations SCC/Parks 60 5.4 5.5 Trails, greenways, and river parkways CNRA 40 37.5 0.1 Deferred maintenance at fairgrounds CDFA 18 10.6 6.3 Water $1,280 $950.8 $146.5 Flood protection and repair DWR $460 $251.6 $122.9 Sustainable groundwater management DWR 240 173.6 20.2 Safe drinking water SWRCB 220 205.8 1.8 Sustainable groundwater management SWRCB 160 133.3 0.7 Multibenefit stormwater CNRA 100 93.1 0.5 Water recycling SWRCB 80 74.3 0.3 Water efficiency and enhancement CDFA 20 19.0 0.1 Totalsb $4,100 $2,433.0 $514.0 a Governor proposes to revert $182,000 from the current-year appropriation. b Includes funding for bond administration. WCB = Wildlife Conservation Board; CNRA = California Natural Resources Agency; CDFW = California Department of Fish and Wildlife; RMC = Rivers and Mountains Conservancy; SMMC = Santa Monica Mountains Conservancy; CCC = California Conservation Corps; OPC = Ocean Protection Council; SNC = Sierra Nevada Conservancy; CalFire = California Department of Forestry and Fire Protection; DOC = Department of Conservation; CDFA = Department of Food and Agriculture; Parks = Department of Parks and Recreation; SCC = State Coastal Conservancy; DWR = Department of Water Resources; and SWRCB = State Water Resources Control Board. 50 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET across multiple departments and programs, which priorities, and by continuing implementation represents just under one-third of the total bond of most bond categories, the administration is funding still available for appropriation . Of the taking steps to address those identified issues . proposed funding, about $125 million (25 percent) For the three large or new 2020-21 proposals, is to continue existing program activities, such as to the administration has identified projects that are allocate another round of grant funding or support ready to be implemented and utilize the funds . state staff who are administering the programs . Moreover, the appropriations are consistent with Almost three-fourths of the Governor’s proposed the multiyear “rollout” plan for Proposition 68 that Proposition 68 spending plan is for two program the administration submitted to the Legislature in categories—local park grants and flood protection . the 2019-20 budget process . The spending plan includes only one first-time While a few bond categories have significant appropriation for a program—restoration of the proportions of funding left to appropriate— New River . We describe each of these three including voluntary agreements, CDFW habitat proposals: restoration and deferred maintenance, coastal ecosystems, state parks, and lower cost coastal • Grants to Improve and Expand Local Parks accommodations—the rationale for continuing ($255 Million). State Parks would allocate to delay the release of these funds has merit . the majority of these funds ($203 million) Specifically, these programs either have funding through competitive grants to create and remaining from earlier bonds, or departments expand safe neighborhood parks in park-poor are still in the process of undertaking additional neighborhoods . Funds would also be planning to prepare for effective implementation dedicated to creating or improving regional before expending funds . parks ($28 million) and enhancing recreation and tourism in rural communities ($23 million) . Recommendation • Multibenefit Flood Protection Projects Approve Governor’s Proposals. Because ($123 Million). DWR would use these funds they are consistent with both bond language and for a number of new and continuing flood the multiyear allocation plan the administration management projects that both achieve public previously presented to the Legislature, we safety improvements and enhance habitats for recommend the Legislature approve the Governor’s fish and wildlife . Most of these projects would 2020-21 Proposition 68 funding proposals . be undertaken in the Central Valley, including to expand floodwater capacity and habitat in SEVERAL NEW NATURAL the Yolo Bypass . RESOURCES CAPITAL OUTLAY • Salton Sea/New River Improvement Project ($10 Million). As described earlier in the PROJECTS “Department of Water Resources” section, The Governor’s budget includes $57 million these funds would be used to help address to begin 12 new major capital outlay projects for pollution in the New River, which flows into departments within CNRA, as well as several minor the Salton Sea . Bond language reserved these capital outlay projects . As shown in Figure 17 (see funds specifically to address New River water next page), these proposals include eight projects quality issues . to acquire, expand, or improve state parks; four projects to replace or relocate CalFire facilities; and Assessment various minor projects for CalFire and the Tahoe Proposals Consistent With Bond Language Conservancy . The total costs for completion of the and Multiyear Plan. We find the Governor’s proposed projects is estimated to be $254 million proposals to be reasonable and consistent ($157 million General Fund and $97 million from with legislative and voter intent . The Legislature various bond funds) . and voters structured the bond around specific www.lao.ca.gov 51 analysis full gutter 2020-21 BUDGET In addition, the proposed 2020-21 budget experiencing delays and reverts $3 .6 million includes $298 million ($134 million General Fund previously provided for the California Conservation and $164 million from various other funds) for Corps Tahoe Base Center equipment warehouse the next phases of previously approved natural relocation project that is unable to move forward at resources capital outlay projects . The budget this time . also reappropriates funding for several projects Figure 17 Summary of New Natural Resources Capital Outlay (In Millions) Project 2020-21 Phase 2020-21 Funding Total Project Cost Parks New state park acquisitiona A $20.0 $20.0 Museum storage facility acquisition A 15.0 15.0 System acquisition A 4.6 4.6 Candlestick Point SRA initial build-out P 2.7 50.0 Old Sacramento SHP riverfront improvements P 0.6 5.0 Colonel Allensworth SHP visitor center P 0.6 8.6 Lake Perris SRA: replace lifeguard headquarters P 0.4 9.2 Humboldt Redwoods State Park: replace restroom P 0.2 3.8 Subtotals ($44.1) ($116.2) CalFire Minor projects Various $4.6 $4.6 Intermountain Conservation Camp replacement P 3.8 73.3 Lake-Napa auto shop and warehouse replacement A,P 2.1 22.4 Kneeland Helitack Base relocation A 0.9 18.3 Howard Forest Helitack Base replacement A 0.6 18.0 Subtotals ($11.9) ($136.6) Other Tahoe Conservancy minor projects Various $0.9 $0.9 Subtotals ($0.9) ($0.9 ) Totals $56.8 $253.6 a The proposed project is only the acquisition of land for a new state park. Costs to build-out park infrastructure are not included. A = acquisition; P = preliminary plans; SRA = State Recreation Area; and SHP = State Historic Park. 52 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET SUMMARY OF RECOMMENDATIONS Issue Governor’s Proposal LAO Recommendations Climate Change Various proposals (1) $965 million discretionary cap-and-trade Refer to recent report, The 2020‑21 expenditure plan, (2) $250 million General Budget: Climate Change Proposals. Fund for new Climate Catalyst Revolving Load Fund, and (3) $4.75 billion general obligation bond for November 2020 ballot. Wildfire Prevention and Response Various proposals $378 million for 12 proposals for CalFire, Refer to The 2020‑21 Budget: CNRA, and the Forest Management Task Governor’s Wildfire‑Related Proposals. Force related to wildfire mitigation and (The summary in this report includes response activities.a a table that briefly describes each proposal and our recommendations.) Department of Parks and Recreation New state park $20 million one-time General Fund to acquire Require department to provide additional land for an unspecified new state park. details on potential properties and future costs. Determine action based on information provided and consistent with legislative priorities. Consider adopting reporting language if funds are approved. Increasing student access $22.9 million including (1) $ 20 million Direct department to present additional to state parks one-time General Fund and (2) $2.9 million details related to the $2.9 million ongoing ELPF to expand student access to ongoing funding. Consider oversight state parks. questions regarding broader goals and outcomes of programs. Harbors and Watercraft $26.5 million as a “placeholder” solution to Consider key issues when weighing Revolving Fund keep the fund solvent in 2020-21. options for addressing insolvency. insolvency Direct the administration to report additional information at budget hearings. California Department of Fish and Wildlife (CDFW) Funding enhancements $19 million ongoing shifted from Wildlife Weigh the relative trade-offs of the Conservation Board and $20 million one $19 million ongoing proposal with time in 2020-21 to help CDFW better other conservation and General meet its mission, both from General Fund. Fund priorities. Adopt the one-time $23 million ongoing General Fund beginning $20 million proposal. Defer action on in 2021-22 to backfill funding shortfall and $23 million proposal until next year maintain service expansions. when a more in-depth analysis of the CDFW’s budget will be available. (Continued) www.lao.ca.gov 53 analysis full gutter 2020-21 BUDGET Issue Governor’s Proposal LAO Recommendations Department of Water Resources (DWR) Sustainable Groundwater $30 million one time for local assistance Approve both proposals but adopt Management Act grants and $9.6 million ongoing for DWR to language to ensure the local implementation conduct additional technical assistance and assistance funds are used for projects oversight activities, both from the General that provide public benefits and Fund. focus on efforts needed to effectively implement groundwater sustainability plans. Tijuana River and New $35 million General Fund for the Tijuana River Approve New River proposal but require River restoration projects and $28 million—$18 million General Fund administration provide a plan for and $10 million from Proposition 68 bond addressing ongoing costs at Tijuana funds—for the New River to address cross- River prior to approving that proposal. border pollution issues. Augmentations for existing $6.7 million General Fund for 30 existing Provide $550,000 less than requested in staff positions across three proposals to either 2020-21 for 30 existing positions. change their funding source or extend funding that was initially approved on a limited-term basis. Department of Toxic Substances Control (DTSC) Board of Environmental $3 million (two years) and 15 positions Authorize creation of a new oversight Safety to establish a 5-member Board of board, but consider the specifics of the Environmental Safety that would hold regular proposal to determine the degree to public hearings and perform specified which it reflects legislative priorities, functions. including how much authority the board should have to direct DTSC. Structural shortfall of $12 million General Fund transfer to the Wait until May Revision to take action on DTSC special funds Toxic Substances Control Account (TSCA), proposed General Fund transfers to $1 million General Fund transfer to the get updates on TSCA and HWCA fund Hazardous Waste Control Account (HWCA), conditions. Decide whether to establish and budget trailer legislation to restructure a board before weighing the merits of charges for TSCA and HWCA. the Governor’s proposal to restructure charges. Consider whether the new charges would cover future costs and reflect polluter pays principle. Department of Conservation California Geologic Energy $13.9 million and 53 permanent positions Approve most of the 2020-21 request, Management Division: in 2020-21 growing to $24.3 million and but withhold action on $600,000 mission transformation 128 permanent positions in 2022-23 to and three positions intended to and oversight (1) strengthen enforcement of existing laws improve public transparency until and regulations that govern oil and natural additional justification is provided. gas operators and (2) implement recent Recommend the Legislature consider legislation. approving only the 2020-21 request on an ongoing basis to ensure future legislative oversight. (Continued) 54 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Issue Governor’s Proposal LAO Recommendations California Energy Commission Appliance efficiency $750,000 (Public Utilities Commission Utilities Use a different, more appropriate standards Reimbursement Account) and four positions fund source for these activities. to adopt and periodically update energy We recommend using the Energy efficiency standards that promote the use Resources Program Account if the of flexible demand technologies pursuant to structural deficit is addressed this year. Chapter 697 of 2019 (SB 49, Skinner). If not, we recommend using the AB 32 Cost of Implementation Account. Bond Administration Proposition 68 $514 million from Proposition 68 across Approve proposals. implementation multiple departments for various projects and programs. a Two of these proposals are joint proposals with funding for CalFire and the Governor’s Office of Emergency Services. CalFire = California Department of Forestry and Fire Protection; CNRA = California Natural Resources Agency; and ELPF = Environmental License Plate Fund. www.lao.ca.gov 55 analysis full gutter 2020-21 BUDGET NATURAL RESOURCES AND ENVIRONMENT UNIT Ross Brown Climate Change 916-319-8345 Ross.Brown@lao.ca.gov Energy Commission Rachel Ehlers Fish and Wildlife 916-319-8330 Rachel.Ehlers@lao.ca.gov Water Resources Shawn Martin Toxic Substances 916-319-8362 Shawn.Martin@lao.ca.gov Conservation Jessica Peters Forestry and Fire Protection 916-319-8363 Jessica.Peters@lao.ca.gov Parks LAO PUBLICATIONS This report was reviewed by Brian Brown and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 56 LEGISLATIVE ANALYST’S OFFICE