The 2023-24 Budget: Crafting Climate, Resources, and Environmental Budget Solutions

2023-24 BUDGET The 2023-24 Budget: Crafting Climate, Resources, and Environmental Budget Solutions GABRIEL PETEK | LEGISLATIVE ANALYST FEBRUARY 2023 www.lao.ca.gov 1 2023-24 BUDGET 2 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Table of Contents Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Discussion of Governor’s Overall Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Discussion of Specific Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Zero-Emission Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Water and Drought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Wildfire and Forest Resilience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Nature-Based Activities and Extreme Heat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Community Resilience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Sustainable Agriculture, Circular Economy, and Other Recent Augmentations . . . . . . . . . . . . . . . . . 54 Parks, Museums, and Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Coastal Resilience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Potential Additional or Alternative Climate, Resources, and Environmental Budget Solutions . . . . . . . . . 69 www.lao.ca.gov 3 2023-24 BUDGET 4 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Executive Summary In response to the multibillion-dollar budget problem the state is facing, the Governor’s budget proposal identifies significant solutions from recent augmentations made to climate, resources, and environmental programs. This report describes the Governor’s proposals and provides the Legislature with a framework and suggestions for how it might modify those proposals to better reflect its priorities and prepare to address a potentially larger budget problem. The report begins with a discussion of the Governor’s overall approach, then walks through each of the Governor’s proposed solutions within nine thematic areas, including describing and commenting on many of the specific proposals. Recent Budgets Included Significant General Fund Augmentations for Climate, Natural Resources, and Environmental Programs. Combined, the 2021-22 and 2022-23 budget packages included $27 billion—primarily from the General Fund—for a wide variety of activities related to mitigating and responding to climate change, as well as for protecting and restoring natural resources and the environment. These recent budgets also included agreements to provide additional General Fund support in the out-years to continue these activities—including $8.7 billion in 2023-24—for a five-year total of $40.2 billion. Governor Proposes $5.8 Billion in General Fund Solutions Across Five Years From These Programs. The Governor’s budget proposal would generate $5.5 billion in General Fund savings from climate, resources, and environmental programs in 2023-24—$3.8 billion from spending reductions, $875 million from reducing General Fund and backfilling with a different fund source (primarily the Greenhouse Gas Reduction Fund, or GGRF), and roughly $800 million from delaying spending to a future year. The proposal includes additional net savings of $300 million in the out-years ($1.1 billion from further reductions and fund shifts, largely offset by the resumption of the delayed expenditures). The proposed approach differs by thematic area. For example, the Governor proposes reducing close to half of all the recent and planned augmentations for coastal resilience activities, but—largely due to shifting some planned program expenditures from the General Fund to GGRF—would maintain about 90 percent of intended funding for zero-emission vehicle programs. While Important Needs Remain, Identifying Budget Solutions From These Programs Is Appropriate Given Magnitude of Recent Augmentations. As evidenced by the flooding, drought conditions, heat waves, and severe wildfires that Californians have experienced over the past year, a changing climate presents the state with significant challenges. As such, maintaining key activities supported by recent funding augmentations is important to making progress in addressing the causes and impacts of climate change. However, given the scale of the recent spending increases, even reduced amounts still will represent significant augmentations compared to historical levels for most of these programs, particularly since many of these activities have not typically received General Fund support. Additionally, because making reductions to newly initiated activities and one-time expenditures is usually less disruptive than cutting ongoing programs and associated staff, these types of programs represent a reasonable area to focus some of the solutions needed to address the budget problem. Indeed, the Governor and Legislature chose to spend most of the recent General Fund surpluses on one-time expenditures as a form of budget resilience, with the expressed goal of avoiding making ongoing commitments that would be hard to sustain should economic conditions change. www.lao.ca.gov 5 2023-24 BUDGET As such, making reductions to these programs can allow the Legislature to take advantage of the flexibility that was envisioned when crafting recent budgets. Moreover, given the magnitude of solutions needed to solve the anticipated budget problem, a significant focus on these one-time augmentations likely is necessary if the Legislature wants to avoid cutting ongoing programs in this or other policy areas. Through careful prioritization, the state can continue to make significant progress on its climate and environmental goals even at moderately reduced spending levels. Governor’s Overall Approach Is Reasonable, but Specific Choices Reflect Administration’s Priorities. Overall, we find the Governor’s proposed approach for crafting budget solutions within climate, resources, and environmental programs to be reasonable— however, it represents just one possible strategy. Because of the quantity and magnitude of recent programmatic expansions in these programs, the Legislature has numerous options for selecting a different and equally sensible package of choices that achieves roughly the same—or, as may be necessary, an even greater amount—of budget solutions as the Governor’s, but that includes the activities it believes are most important to sustain. Recommend Legislature Adopt Package of Budget Solutions Based on Legislative Prioritization Criteria. We recommend the Legislature develop its own package of budget solutions based on its priorities and guiding principles. Some criteria we suggest the Legislature consider include: (1) preserving activities that reflect key legislative priorities and goals, including targeting vulnerable communities that may not have the resources to undertake important activities on their own; (2) preserving funding that is needed urgently to meet pressing needs; (3) avoiding budget solutions that would cause major disruptions, such as reducing funding that has already been committed to specific projects and grantees; and (4) considering whether other resources—such as previous budget appropriations, special funds, or federal funds—might be available to help accomplish intended activities. As the Legislature modifies program funding levels, we recommend that it also consider whether it might want to refine or refocus some program features to ensure that remaining funding targets the most important populations, activities, and desired outcomes. Other overarching recommendations to the Legislature as it crafts its solutions package include: • Be selective when opting to delay—rather than maintain or reduce—funding. • Reject the Governor’s General Fund trigger restoration approach to maintain legislative flexibility. • Reject or modify the Governor’s proposed GGRF trigger approach to maintain legislative flexibility. • Use the spring budget process to identify additional potential budget solutions for climate, resources, and environmental programs. • Weigh the relative priority of new spending against existing commitments. • Request additional information from the administration on the availability of federal funding. • Conduct robust oversight of spending and outcomes and consider whether additional program evaluations might be worthwhile. While we do not discuss every individual program proposal or craft a comprehensive alternative package of solutions, throughout the thematic sections of this report we provide examples of alternative solutions the Legislature could consider and identify specific proposals that raise some concerns. 6 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET INTRODUCTION In response to the multibillion-dollar budget could proceed, including suggested criteria the problem the state is facing, the Governor’s Legislature could use to craft its own package budget proposes reducing net General Fund of solutions. spending by $5.8 billion across five years from We then walk through each of the Governor’s climate, resources, and environmental programs. proposed solutions by thematic area, including This includes $4.7 billion affecting the 2023-24 describing and commenting on many of the specific budget—$3.8 billion in net spending reductions proposals. While we do not discuss every individual and $875 million from shifting spending to different program proposal or craft a comprehensive fund sources. The Governor would generate an alternative package of solutions, we provide additional roughly $800 million in budget-year examples of alternative solutions the Legislature savings by delaying funding for certain programs could consider and identify specific proposals that to a future year. The Governor also includes a few raise some concerns. These thematic areas include: new spending proposals for climate, resources, and • Zero-Emission Vehicles (ZEVs). environmental programs. This report describes the • Energy. Governor’s proposals and provides the Legislature with a framework and suggestions for how it might • Water and Drought. modify those proposals to (1) better reflect its • Wildfire and Forest Resilience. priorities, and (2) prepare to address a potentially • Nature-Based Activities and Extreme Heat. larger budget problem. • Community Resilience. The report begins with a discussion of the • Sustainable Agriculture, Circular Economy, Governor’s overall approach, including background and Other Programs. on recent funding augmentations and the state’s • Parks, Museums, and Access. budget problem; a high-level overview of the • Coastal Resilience. Governor’s proposals for climate, resources, and environmental programs; our overarching We conclude the report with a summary of assessment of his proposed approach; and potential additional or alternative options the recommendations for how the Legislature Legislature could consider for each thematic area. DISCUSSION OF GOVERNOR’S OVERALL APPROACH Background to climate change, as well as for protecting and restoring natural resources and the environment. Recent Budgets Included Significant General This spending is spread across numerous Fund Augmentations for Climate, Natural departments and is primarily from the General Resources, and Environmental Programs. Fund, but does include $6.4 billion from special Recent budgets included noteworthy amounts funds, mostly the Greenhouse Gas Reduction of new spending, mostly grouped into thematic Fund (GGRF) and Proposition 98 (for zero-emission packages. Figure 1 on the next page, highlights school buses). These budget packages also most of this funding. (Some augmentations that included agreements to provide additional were provided outside of these thematic packages General Fund support in the out-years—including are not included in the figure.) As shown in the $8.8 billion in 2023-24—for a five-year total of figure, recent budgets provided $27.7 billion in $40.2 billion. In general, these augmentations were 2020-21 through 2022-23 for a wide variety of all for activities that were one-time or limited-term activities related to mitigating and responding www.lao.ca.gov 7 2023-24 BUDGET in nature, such as providing grants for local entities it is clear that—absent a major and unexpected to construct infrastructure or undertake habitat jump in state revenues—the state faces the task restoration projects. Some of the augmentations of “solving” the budget problem. The Governor provided funding for activities to be undertaken proposes to address the problem primarily by by state agencies, such as to secure additional reducing spending, and targets the climate, electricity resources intended to ensure summer resources, and environmental policy areas for electric reliability. In most cases, the augmentations the largest proportional share of these solutions. displayed in the figure represent unprecedented (We discuss the overall budget condition in our levels of General Fund for these types of programs, recent reports, The 2023-24 Budget: Overview of many of which historically have been supported the Governor’s Budget and The 2023-24 Budget: with special funds or bond funds. In some cases, Multiyear Assessment.) this has allowed the state to expand previous Budget Outlook Could Actually Be Even programs or initiate new activities, while in others Worse. While the Governor’s budget is balanced the state is providing General Fund support to under the administration’s estimates for 2023-24, continue existing activities that were previously the administration forecasts operating deficits of supported with other fund sources. $9 billion in 2024-25, $9 billion in 2025-26, and State Faces a Multibillion-Dollar Budget $4 billion in 2026-27. That is, if the Governor’s Problem. Due to a deteriorating revenue picture budget projections are accurate, the state would relative to expectations from June 2022, both our have to address deficits of these amounts in each of office and the administration have anticipated these future years. Moreover, our office’s estimates that the state faces a budget problem in 2023-24. suggest there is a good chance that revenues A budget problem—also called a deficit— will be lower than the administration’s projections occurs when funding for the upcoming budget for 2022-23 and 2023-24. Thus far, neither the is insufficient to cover the costs of currently administration nor our office is forecasting a authorized services. Estimates of the magnitude recession; rather, our weaker revenue estimates of this shortfall differ based on how “baseline” represent a slowdown from the extraordinary spending is defined—the administration estimates economic growth in recent years. However, we a $22 billion problem whereas our office estimates do see certain economic signs that suggest a that the Governor’s budget addresses an $18 billion heightened risk of a potential recession. Should problem. Regardless of these technical definitions, a recession occur, the state’s revenue shortfall Figure 1 Recent and Planned Augmentations to Climate, Resources, and Environmental Programs (In Millions) Thematic Area 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 Totals Zero-Emission Vehicles — $3,351 $3,168 $2,107 $858 $460 $9,944 Energy — 2,425 3,002 2,626 654 918 9,625 Water and Drought — 5,508 1,435 1,119 133 558 8,752 Wildfire and Forest Resilience 526 968 630 690 — — 2,814 Nature-Based Activities and Extreme 10 176 1,384 743 — — 2,314 Heat Community Resilience — 522 935 715 — — 2,172 Sustainable Agriculture, Circular — 944 795 33 — — 1,771 Economy, and Other Programs Parks, Museums, and Access — 915 420 88 96 27 1,548 Coastal Resilience — 19 606 652 19 — 1,295 Totals $536 $14,827 $12,376 $8,773 $1,760 $1,963 $40,236a a Includes $33.7 billion from the General Fund and $6.4 billion from other fund sources, including the Greenhouse Gas Reduction Fund and Proposition 98. 8 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET would be considerably larger than current forecasts Governor’s proposed approach differs by thematic from either the administration or our office. Given area. The figure also shows that for each area, the this downside risk, in our recent budget reports, Governor proposes maintaining the majority of we recommended that the Legislature: (1) plan intended funding—using General Fund or a different for a larger budget problem and (2) address that source—across the five years. larger problem by reducing more one-time and • Reductions. The Governor reduces funding temporary spending. for selected programs. In some of these cases, the proposal is to rescind funding that Governor’s Proposals was provided in the current or prior year that Uses Three Strategies to Generate departments have not yet expended. In others, $5.8 Billion in General Fund Solutions Across the Governor proposes not providing funding Five Years From Climate, Natural Resources, in 2023-24 that was pledged as part of a and Environmental Protection Programs. recent budget agreement. For some programs The Governor relies on three strategies to achieve the Governor partially reduces the intended General Fund savings from climate, resources, and funding levels, and for others the proposal environmental programs: reductions, fund shifts, completely eliminates the funding. Reductions and funding delays. This includes $5.5 billion in are the strategy through which the Governor General Fund savings in 2023-24—$3.8 billion from generates the most savings across the five spending reductions, $875 million from reducing years ($4.1 billion, or 62 percent), as displayed General Fund and backfilling with a different fund in Figure 2. This includes $3.8 billion scored source, and roughly $800 million from delaying towards solving the 2023-24 budget problem. spending to a future year. The proposal includes • Fund Shifts. The Governor achieves additional net savings of $300 million in the additional savings by reducing or eliminating out-years—$1.1 billion from further reductions and the intended General Fund for a program, fund shifts, largely offset by the resumption of the but then backfilling it with funding from other delayed expenditures. As shown in Figure 2, the Figure 2 Governor's Proposed Changes to Climate, Resources, and Environmental Programs 2020-21 Through 2025-26 (In Billions) Amount Retained Zero-Emission Vehicles Energy Water and Drought Wildfire and Forest Resilience Nature-Based Activities and Extreme Heat Solutions by Type Community Resilience Fund Shifts Sustainable Agriculture, Circular Economy, and Other Programs Parks, Museums, and Access Funding Delays Reductions Coastal Resilience 2 4 6 8 10 12 $14 www.lao.ca.gov 9 2023-24 BUDGET sources—primarily using GGRF. The Governor If the administration determines the state does not would dedicate nearly all of the proposed have sufficient resources, none of the restorations 2023-24 discretionary GGRF expenditures— would occur. The trigger restoration list totals as well as amounts in future years—to backfill $3.8 billion across the budget and includes some General Fund reductions. The Governor programs outside of the climate, resources, and mentions the possibility of pursuing a general environmental policy areas. obligation bond for replacing or supplementing Also Proposes Trigger Restoration some program funding, but has not submitted Approach for GGRF. The Governor proposes a a formal proposal to do so nor linked any separate trigger restoration approach for GGRF specific program changes to potential bond revenues that the state may receive above the funding. (A general obligation bond would administration’s current estimates. Specifically, have to be repaid from the General Fund and proposed budget control section language would would require voter approval.) Similarly, the require the administration to allocate additional Governor mentions the potential availability discretionary GGRF revenue to backfill more of the of federal funds to help offset General Fund proposed reductions to ZEV programs. Under this reductions, but does not propose any explicit proposal, the Director of the Department of Finance shifts from state funds to federal funds. The (DOF) would have the discretion to determine which proposal includes a total of $1.7 billion in fund ZEV programs to augment and at what levels. shifts, including $875 million scored towards Governor Also Proposes Some New solving the 2023-24 budget problem. Discretionary Climate and Natural Resources • Funding Delays. The Governor also proposes Spending. In addition to the above budget delaying intended funding for certain solutions, the Governor has a few significant new programs, with the intent to provide it in a General Fund spending proposals for climate and future year rather than in 2022-23 or 2023-24. natural resources programs. (These are in addition This would achieve General Fund savings to numerous baseline increases across many in the budget year, but shift the associated departments, such as for funding to implement costs to a future year. The proposal includes recently passed legislation, which we do not a total of about $800 million in funding consider “discretionary.”) The major proposed delays, all scored towards solving the augmentations include the following, most of which 2023-24 budget problem. we discuss in more depth in separate publications: Suggests Some Proposed Reductions • California Department of Forestry and Fire Could Be Restored if General Fund “Trigger” Protection (CalFire) new training center and Conditions Are Met. The Governor’s proposal conservation camp replacement ($37 million includes language that would allow $2.2 billion—just in 2023-24, with commitment for $495 million over half—of the proposed reductions highlighted in future years for capital outlay, as well in Figure 2 to be restored in the middle of 2023-24 as ongoing operations costs of between if the administration at that time estimates that $3 million and $12 million annually). the state has sufficient resources to fund these • Various flood management activities expenditures. Specifically, if in January 2024 ($139 million one time). the administration estimates that the state has • Drought contingency fund ($125 million sufficient General Fund resources to fund both one time). its other baseline costs and these expenditures, • ZEV charging infrastructure at state buildings funding for the associated programs would be ($35 million one time). restored halfway through the fiscal year. In order • Expanded Sustainable Groundwater for any of these restorations to occur, however, Management Act staffing the administration would have to determine that ($14 million annually). the state has sufficient resources to fund all of the identified programs subject to the trigger. 10 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET • Expansion of California Volunteers Climate ongoing programs and associated staff, these Action Corps ($4.7 million annually for three types of programs represent a reasonable area years, growing to $9.5 million annually starting for the Governor—and Legislature—to focus some in 2026-27). of the solutions needed to address the budget problem. Indeed, the Governor and Legislature Overarching Assessment chose to spend most of the recent surpluses Need for Climate, Resources, and on one-time expenditures as a form of budget Environmental Programs Remains… As resilience, with the expressed goal of avoiding evidenced by the flooding, drought conditions, heat making ongoing commitments that would be hard waves, and severe wildfires that Californians have to sustain should economic conditions change. experienced over the past year, a changing climate As such, making reductions to these programs presents the state with significant challenges. can allow the Legislature to take advantage of Escalating climate change impacts will continue the flexibility that was envisioned when crafting to threaten public health, safety, and well-being— recent budgets. Moreover, given the magnitude of including from life-threatening events, damage to solutions needed to solve the anticipated budget public and private property and infrastructure, and problem, a significant focus on these one-time impaired natural resources. The unprecedented augmentations likely is necessary if the Legislature funding augmentations that the Legislature wants to avoid cutting ongoing programs in these committed in recent budgets represent a significant or other policy areas. Although making reductions step in the state’s efforts to help mitigate these in these policy areas will result in fewer of the effects, along with pursuing other major state goals one-time activities that the Legislature intended for such as reducing greenhouse gas (GHG) emissions, the state to conduct, even reduced amounts still increasing energy reliability, and restoring and will represent significant augmentations compared protecting natural habitats. Maintaining key to historical levels for most of these programs. activities supported by this funding is important This is particularly true since many of these to making progress in addressing the causes and activities have not typically received General Fund impacts of climate change. support. Through careful prioritization, the state can continue to make significant progress on its …However, Given Magnitude of Recent climate and environmental goals even at moderately One-Time Augmentations, Identifying Budget reduced spending levels. Solutions From These Programs Is Appropriate. Across the budget, the Governor targets the Overall Approach Is Reasonable, but Specific climate, resources, and environmental policy Choices Reflect the Governor’s Priorities. Given areas for the largest share of budget solutions. the significant budget problem facing the state, we This is due in part to the fact that these policy find the Governor’s overall approach for solutions areas also received the largest proportional from climate, resources, and environmental share of one-time General Fund spending from programs to be reasonable. As we discuss in the recent budget surpluses. Specifically, these subsequent thematic sections of this report, in programs represented about $20 billion, or nearly many cases, we find the Governor’s rationale for one-quarter, of the state’s $87 billion in one-time many specific programmatic choices to be credible. expenditures from the General Fund surplus from For example, many of the proposed solutions focus 2018-19 through 2022-23. (This total excludes on programs for which funds have not yet been constitutionally required spending for schools and committed to specific projects, where other fund community colleges pursuant to Proposition 98.) sources are available to help compensate for the In addition, many of the programs supported loss in General Fund, or where reduced funding by these funds represent new activities that are would allow some of the activities to continue but just getting up and running. Because making at a lower level. However, the proposals represent reductions to newly initiated activities and one-time an expression of the Governor’s prioritization expenditures usually is less disruptive than cutting criteria, and the efforts that the administration www.lao.ca.gov 11 2023-24 BUDGET believes are most—or least—important to sustain. and less from coastal resilience programs); (3) a While the Governor selects many programs for different mix across budget policy areas (such as funding reductions, the proposals would leave even more solutions from higher education programs more programs untouched. Notably, many of the and less from climate programs); (4) a different mix programs that the Governor suggests reducing are of solution strategies (such as more reductions those for which the Legislature advocated during and fewer delays); and (5) less new spending than budget negotiations in 2021-22 and 2022-23, rather the Governor proposes. The Legislature could also than those which were first proposed through the look at making reductions to programs funded with Governor’s January and May budget proposals. special funds—such as 2022-23 appropriations For example, as shown in Figure 2, the Governor from GGRF that have not yet been expended by proposes cutting roughly $560 million (43 percent) departments and are deemed a lower priority— from the multiyear budget agreement for coastal to free up additional funding that could offset resilience activities, most of which was added to the the impact of General Fund reductions. As we final budget package by the Legislature. discuss below, the Legislature could apply its own Additionally, the Governor focuses about prioritization criteria to guide its choices in building one-third of proposed reductions on 2021-22 and its solutions. 2022-23 appropriations, with about two-thirds from As Legislature Modifies Funding Levels, funding intended for 2023-24 and future years. It Could Also Consider Refocusing Programs. However, the proposals still leave a significant Alongside its decisions to reduce funding for portion of planned budget-year and future amounts certain programs, the Legislature may want to also unaffected. While this approach could make sense take the opportunity to refine the design of those in some cases—such as if circumstances have programs to help ensure that remaining funding delayed departments from spending prior- and is targeted towards achieving the most important current-year funds—in other instances avoiding desired outcomes. For instance, this could mean appropriating budget-year funding in the first place adopting budget bill language giving administering could be less disruptive for departments and other departments more guidance on how to prioritize entities than taking back existing funding. This is funds, such as by limiting funding eligibility to because expenditure plans likely are not as far underserved communities or to focus on those along for funding that the departments do not yet activities or projects that have been shown to be have the legal authority to spend. most effective. Similarly, the Legislature could Legislature Could Apply Its Own Criteria, specify whether it wants departments to implement Select Different Set of Solutions. The Governor’s funding reductions by decreasing the amount of proposed approach for crafting budget solutions each grant they award, or, alternatively, to keep within climate, resources, and environmental the grants at the same level and just award fewer programs represents one possible approach. of them. In some instances, the Legislature may Because of the quantity and magnitude of recent want to scale back funding originally intended to be programmatic expansions in these programs, spread across multiple years and instead fund an however, the Legislature has numerous options initial year on a pilot basis before making a larger for selecting a different and equally reasonable commitment. In such cases, adding data collection package of choices that achieves roughly the and reporting requirements could help the state same—or, as may be necessary, an even greater learn about the effectiveness of the pilot effort to amount—of budget solutions as the Governor’s but inform future funding decisions. that reflects legislative priorities. For example, this Data Indicate Significant Amount of could include (1) a different mix across programs Funding Has Not Yet Been Committed. As of within a thematic area (such as across Energy early February 2023, information provided by programs); (2) a different mix across climate, the administration indicates that approximately resources and environmental thematic areas (such $11.4 billion of the $27 billion provided in as more budget solutions from water spending 2021-22 and 2022-23 for climate, resources 12 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET and environmental programs has not yet been has structured the trigger proposal would require committed to or spent on specific projects. sufficient resources to restore the full $3.8 billion In many cases, this is because programs were budget-wide trigger restoration list. Given other recently established with the new funding and budget formulas—such as Proposition 98—this require time to hire staff, develop program means that revenues likely would have to exceed guidelines, and implement grant solicitations his projections by about $7 billion in order for and awards processes. While the Governor these restorations to occur. Since our revenue has already proposed some of the applicable outlook is less optimistic than the Governor’s, we programs for reductions or delays (totaling about find it unlikely the trigger will be met. Specifically, $1.4 billion), clearly that is not the case for all of we estimate there is about a one-in-three chance them. Departments are in the process of awarding that the state will be able to afford the Governor’s some of these funds in the coming months— budget as proposed for 2022-23 and 2023-24, and meaning they are not ideal for reducing—but an even lower chance that the state could afford others represent options that the Legislature the Governor’s budget plus the trigger restorations. could consider for identifying additional As such, we think the Legislature should consider solutions. As we discuss below, we think that the proposed trigger reductions as indistinct from one principle the Legislature should use to guide the non-trigger reduction proposals, and assume its decisions is to avoiding making reductions that they will be needed. Indeed, as we discuss to programs that are already relatively far along below, we think a strong possibility exists that the in their implementation processes, since that Legislature will need to identify an even greater can result in disruption for local grantees and magnitude of budget solutions. their projects—including, potentially, prohibiting Additionally, an automatic trigger is not needed them from completing projects they have already to make midyear funding augmentations—the begun carrying out. However, programs with large Legislature already has this ability through its balances of uncommitted funds may indicate authority to pass midyear spending bills. As such, cases where programs still are in the early stages we find that the Governor’s proposal is structured of implementation and thus reductions or delays in a way that reduces legislative authority and could be made without significant disruptions. flexibility. First, it grants the Director of DOF sole We highlight some specific examples in the responsibility for determining whether resources subsequent thematic sections of this report. are in “excess” of existing spending commitments, Governor’s General Fund Trigger Restoration which allows significant room for the Director to Approach Not Realistic, Minimizes Legislative make subjective decisions (such as how to define Authority. As noted, of the $3.8 billion in proposed those commitments). Second, the proposal does reductions to climate, resources and environmental not provide the Legislature with the opportunity programs in 2023-24, the Governor identifies to modify the identified spending priorities once $2.2 billion as being eligible for restoration should the revenue situation has become clearer. This is revenues exceed expectations by January 2024. because all of the programs in the proposed trigger We find this trigger proposal to be misleading in would either be “on” or “off,” even if legislative that it portrays the necessity for these reductions priorities change or if revenues might be sufficient as being less certain than we think it is, and creates to allow for some but not all of the restorations. a false sense of hope—particularly for potential GGRF Trigger Proposal Also Raises grant recipients and other stakeholders—that the Concerns. We have similar concerns about the reductions may not be implemented. As discussed Governor’s proposal to allow the Director of DOF earlier, not only do the administration’s revenue to allocate potential midyear increases in GGRF estimates assume insufficient funds to trigger such revenues. Historically, the Legislature has opted a restoration, but the administration also forecasts to delay action on any additional GGRF revenues a $9 billion budget deficit for 2024-25 that will need that materialize midyear and allocate them as to be addressed. Moreover, the way the Governor part of the subsequent year’s budget package. www.lao.ca.gov 13 2023-24 BUDGET This approach allows the Legislature the discretion Potential for Federal Funds Could Help to consider its highest priorities for that spending Ease—but Not Fully Backfill—Proposed General as part of a more comprehensive discussion, which Fund Reductions. While we see advantages to the also often includes consideration of the impact Governor’s suggested strategy of identifying federal of those activities recently supported by GGRF funds to help offset some proposed General Fund and a desired level of fund balance to maintain. reductions, this strategy also comes with trade-offs. When midyear adjustments have been necessary Specifically, while federal programs may fund due to GGRF revenues coming in lower than activities similar to those supported by the state’s expected, the administration has cut programs programs, typically they would not provide an proportionally (rather than making discretionary identical dollar-for-dollar match. Federal programs decisions to prioritize some over others). Allowing may have different eligibility criteria or allowable the administration to select which ZEV programs it activities than state programs. For example, some would fund with any potential new monies and at federal funding for coastal projects focuses more what levels—without any statutory direction from on nature-based activities to address sea-level rise the Legislature-shifts too much decision-making rather than on other resilience efforts that state authority away from the Legislature to funds support, such as land acquisitions or shoring the administration. up critical public infrastructure. Moreover, some Proposed Fund Shifts Would Have federal programs often require state departments Programmatic Impacts. The Governor’s proposals or local governments to apply and compete for to shift some program costs from the General Fund funding against entities from across the nation, to other sources have some merit, as this approach making it uncertain whether California-based can allow planned activities to continue while projects ultimately would benefit from the same also helping to solve the state’s budget shortfall. total amount of funding as a General Fund However, such fund shifts are not without impacts. allocation would have guaranteed. Some federal For example, the Governor’s proposal to use all programs also require a state or local funding of the discretionary GGRF revenue in 2023-24— contribution, which can result in higher barriers to roughly $860 million—as well as commit GGRF access than some state programs. Indeed, state or revenues from future years to help sustain planned local entities may have been planning to use some ZEV and “AB 617” community air protection of the recent state augmentations to meet such program expenditures would benefit those matching fund requirements in order to be eligible programs. However, this strategy would leave the for funding from federal programs. Additionally, state without those funds to use for other programs some federal programs are structured in ways that GGRF discretionary monies typically have that provide different forms of benefits than state supported. For example, in recent years, GGRF programs. For instance, Californians who do not file has been used for programs that reduce methane taxes—including some lower-income households— emissions, support climate change research, cannot benefit from the tax credits provided replace agricultural diesel engines, and limit through the federal ZEV incentive program, but are short-lived climate pollutants. The choice before the eligible for rebates from the state’s program. Legislature is whether backfilling the General Fund While these distributional differences are to sustain intended funding for the ZEV and AB 617 important considerations for the Legislature to programs is a higher priority than other programs keep in mind, the recent large increases from for which GGRF could be used. The Legislature federal spending bills do offer a unique and helpful could also use GGRF to backfill General Fund opportunity to at least partially mitigate some reductions for other climate programs instead of state spending reductions made necessary by those selected by the Governor. California’s budget situation. As such, taking federal fund availability into account when crafting budget solutions is worthwhile. Given the quantity of new and augmented programs in the Infrastructure 14 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Investment and Jobs Act (IIJA) and Inflation Outcomes and Success of Recent Reduction Act, the Legislature would benefit from Augmentations Largely Are Still Unknown. additional assistance from the administration to fully While the administration has collected some data understand the landscape and nuances of federal regarding the status of spending from recent funds that might be available. augmentations, information about the outcomes Governor Uses Portion of Budget Solutions from that spending largely is still unavailable. For to “Make Room” for Proposed New Spending. example, the Legislature has funded numerous As highlighted above, along with the proposed efforts to help protect and rescue fish and reductions, the Governor’s budget also includes a wildlife from drought impacts, but does not have few notable new General Fund spending proposals, information regarding which specific strategies including for flood management activities and have proven to be most successful for long-term CalFire capital outlay projects. Some of these species protection. Similarly, the 2022-23 budget activities may have merit and represent priorities for package provided close to $3 billion in the current the Legislature—particularly as flood vulnerabilities year for several different efforts to improve the have been highlighted by recent storms. However, state’s electrical grid reliability during summers in the context of a budget problem when and extreme events, but the degree to which revenues already are insufficient to fund existing these have increased the state’s preparedness commitments, every dollar of new spending comes still is not clear. Such data shortcomings are at the expense of a previously identified priority and somewhat understandable, given how early many requires finding a commensurate level of solution of these programs are in their implementation somewhere within the budget. Moreover, some of and expenditure of recently appropriated the proposals—most notably the CalFire projects— funds. However, the lack of such information have significant out-year costs, which would makes it difficult for the Legislature to evaluate contribute to projected future budget deficits and which programs are most effective at achieving require finding additional solutions in the coming their intended outcomes, and—perhaps most years. We therefore think the Legislature should importantly—which are meaningfully contributing weigh the importance and value of the proposed to the state’s overall climate resilience goals. new activities against the activities to which it Detailed program outcome data would be valuable has already committed, as this is essentially the in the near term to help inform the Legislature as to spending trade-off that will result as long as budget which lesser-performing programs could be better problems persist. candidates for making needed budget reductions. Moreover, such information also would be important Additional Solutions May Be Needed if for helping to guide longer-term decisions, such Budget Problem Worsens. As discussed earlier, as which programs should be prioritized for future recent economic data and our fiscal outlook funding investments. In addition to information suggest that the Governor’s revenue estimates on outcomes, the Legislature also could benefit have a high likelihood of being overly optimistic. from continued reporting from the administration Should that prove to be the case, the Legislature regarding program implementation, including will need to identify additional solutions in order how funds are being prioritized for allocation and to meet its constitutional requirement to pass a whether departments are encountering any barriers balanced budget. While it has several options for in effectively carrying out the Legislature’s goals. crafting such solutions—including from within other This type of data could facilitate the Legislature’s policy areas and using tools other than spending ability to be aware of and intervene if problems— reductions—given the magnitude of the recent such as significant delays—arise, or if departments one-time investments in climate, resources, and are not implementing programs as the Legislature environmental programs, the Legislature likely will had originally intended. want to consider making additional General Fund reductions in this area. www.lao.ca.gov 15 2023-24 BUDGET Overarching Recommendations programs. While this approach might preserve funding over the longer term, it also exacerbates Below, we discuss our overarching future budget problems. Given the out-year recommendations to the Legislature for crafting budget forecast, we recommend the Legislature climate, resources, and environmental budget set a relatively high bar for opting to delay—rather solutions, which we also summarize in Figure 3. than reduce—program funding. To the degree Adopt Package of Budget Solutions Based the Legislature wants to consider funding delays, on Legislative Prioritization Criteria. We we recommend limiting this strategy to programs recommend the Legislature develop its own that have a very compelling rationale for the package of budget solutions based on its priorities state to prioritize maintaining funding (such as and guiding principles. Figure 4 highlights some activities benefiting vulnerable populations), but of the criteria we suggest the Legislature use for which (1) funding will not be spent this year, to guide its decisions. We provide our analyses such as because of capacity issues precluding and suggestions on specific programs in the more immediate spending at the state or local subsequent sections of this report based on these level, and/or (2) more information is needed before principles. We find that many of the Governor’s specific decisions can be made about how to most proposals largely align with our suggested criteria, effectively target the funds. but so too would numerous alternative decisions Reject Governor’s General Fund Trigger the Legislature could make instead of or in addition Restoration Approach, Maintain Legislative to the Governor’s proposals. As the Legislature Flexibility. We recommend the Legislature reject modifies program funding levels, we recommend the Governor’s trigger restoration proposal for two that it also consider whether it wants to refine or reasons. First, given revenue forecasts and the “all refocus some program features to ensure that or nothing” structure of the proposal, we believe the remaining funding targets the most important likelihood of the state receiving sufficient funds to populations, activities, and desired outcomes. activate the trigger is low, so portraying the trigger Be Selective When Opting to Delay—Rather cuts as distinct from other proposed reductions Than Maintain or Reduce—Funding. As noted, is misleading. Second, the proposal minimizes the Governor proposed delaying about $800 million legislative authority and flexibility to respond to in funding for climate, resources, and environmental Figure 3 Summary of Overarching Recommendations for Crafting Climate, Resources, and Environmental Budget Solutions 9 Adopt Package of Budget Solutions Based on Legislative Prioritization Criteria 9 Be Selective When Opting to Delay—Rather Than Maintain or Reduce—Funding 9 Reject Governor’s General Fund Trigger Restoration Approach, Maintain Legislative Flexibility 9 Reject or Modify Governor’s Greenhouse Gas Reduction Fund Trigger Approach, Maintain Legislative Flexibility 9 Use Spring Budget Process to Identify Additional Potential Budget Solutions for Climate, Resources, and Environmental Programs 9 Weigh Relative Priority of New Spending Against Existing Commitments 9 Request Additional Information From the Administration on Availability of Federal Funding 9 Conduct Robust Oversight of Spending and Outcomes, Consider Whether Additional Program Evaluations Might Be Worthwhile 16 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET changing revenue conditions and evolving spending priorities might change over the coming year—along priorities. We therefore recommend the Legislature with the evolving fiscal situation—we recommend instead focus its efforts on adopting the level of the Legislature avoid locking in any decisions solutions needed to balance the 2023-24 budget. now and preserve its flexibility to revisit any future Then, as revenues become clearer over the coming budget actions. year, it can make midyear changes—including Reject or Modify Governor’s GGRF Trigger augmentations if possible, or additional reductions Approach, Maintain Legislative Flexibility. We if needed—through its existing authorities, such as similarly recommend that the Legislature reject by passing midyear spending bills. If the Legislature the Governor’s proposed approach of giving finds it is important to identify some signals to help the Director of DOF the discretion over how to guide potential future actions, it could include intent allocate potential increases in GGRF revenues. language in the budget package to identify which We recommend the Legislature either (1) follow program reductions it views as the highest priorities its historical approach of waiting to allocate any for potential midyear legislative restorations if that unforeseen increases in 2023-24 GGRF revenues as option becomes available. However, because part of the 2024-25 budget process; (2) appropriate such revenues by passing a midyear spending bill in early 2024; Figure 4 or (3) adopt language that directs Suggested Criteria for Crafting Climate, Resources, the administration specifically and Environmental Budget Solutions how it should allocate additional 9 GGRF revenues, such as to which Preserve Activities That Reflect Legislative Priorities and Goals particular programs—ZEV or • Is the activity an important component of meeting the Legislature’s priorities? otherwise—and at which levels. Any • Does the funding target vulnerable or underserved communities that may not have resources to undertake the activity on their own? of these approaches would better • Does the activity represent a core state responsibility? preserve the Legislature’s spending • Does compelling evidence exist that a program is effective at meeting its decision authority as compared to intended outcomes? • If a program is to be reduced, should remaining funding be targeted or the Governor’s proposal. prioritized differently? Use Spring Budget Process 9 to Identify Additional Potential Preserve Funding That Is Needed Urgently to Address Pressing Needs • Would the funding be expended and activity be conducted in the near term, or Budget Solutions for Climate, not for several years? Resources, and Environmental • Are administering departments or funded entities experiencing capacity Programs. Given the distinct constraints in allocating or expending funding? • What is the current demand for the funds? possibility of worsening fiscal • How likely is it that delaying or not conducting the activity could lead to negative conditions, we recommend the long-term outcomes? Legislature begin to prepare now 9 for the likely need to solve for a Avoid Solutions That Would Cause Major Disruptions • How far along is the activity in being implemented? deeper revenue shortfall when • Has the funding been appropriated? Has it been committed to specific projects it adopts its final budget this or grantees? summer. Specifically, in addition to • Would pulling back state funding affect the ability to access other funding, such as federal funds? weighing the Governor’s proposed solutions and substituting its own 9 Consider Other Available Resources alternatives, we recommend it • Are there other funding sources available to help accomplish the activities at identify additional reductions and some level, either from previous budget appropriations, special funds, federal funds, or a potential bond? fund shifts (and potentially some • Would raising new special fund revenues—such as through increasing user delays) for a greater total amount of fees—be an appropriate substitution for General Fund monies? solutions from climate, resources, • What implications might result from potential fund shifts, such as for programs that funding might otherwise have supported? and environmental programs than • Are similar activities already being conducted? those proposed by the Governor. www.lao.ca.gov 17 2023-24 BUDGET While this process will be challenging—and, likely, funding reductions, and to understand associated unpleasant—taking the time to consider, research, implications and trade-offs in cases where and select potential options over the spring will federal programs’ criteria differ from the state’s better prepare the Legislature to make decisions programs. The Legislature could request that the in May and June when it will not have much time to administration provide this information ahead of gather information or carefully consider program the May Revision. Relatedly, we recommend the trade-offs before the budget deadline. Legislature exercise caution about reducing state Weigh Relative Priority of New Spending funding that might be essential for drawing down Against Existing Commitments. In the context of additional federal funds, such as monies that might a budget shortfall, each additional dollar of General be needed for state matching fund requirements. Fund spending for new activities necessitates Conduct Robust Oversight of Spending and making additional spending reductions from Outcomes, and Consider Whether Additional previously agreed-upon commitments. As such, we Program Evaluations Might Be Worthwhile. recommend the Legislature keep these trade-offs We recommend the Legislature conduct both in mind as it considers the Governor’s new near-term and ongoing oversight of how the spending proposals. Essentially, we recommend administration is implementing—and local grantees the Legislature weigh whether the new proposals are utilizing—funding from the recent budget represent higher priorities than its previously augmentations. In particular, we recommend budgeted activities, since funding one comes at the Legislature track: (1) how the administration the expense of another. As it undertakes these is prioritizing funding, especially within newly calculations, we recommend the Legislature also designed programs; (2) the time lines for making consider potential out-year and/or ongoing costs funding allocations and completing projects; (3) the associated with the new spending proposals and levels of demand and over- or under-subscription how they may affect future budget problems and for specific programs; (4) any barriers to resulting trade-offs. implementation that departments or grantees Request Additional Information From encounter; and (5) the impacts and outcomes of Administration on Availability of Federal funded projects. The Legislature has a number of Funding. We recommend the Legislature ask different options for conducting such oversight, the administration to provide more detailed all of which could be helpful to employ given that information on funding that the state and local they would provide differing levels of detail. These entities could potentially access from IIJA and the include requesting that the administration report Inflation Reduction Act. Departments likely have at spring budget hearings, requesting reports been closely tracking the federal programs that through supplemental reporting language, and align with their missions, and therefore could help adopting statutory reporting requirements (such provide comprehensive summaries that might be as those typically included for general obligation more difficult and time-intensive for legislative staff bonds). Additionally, to the degree it might want to track down on their own. Moreover, because more intensive external program evaluations for federal agencies are still formulating some program certain high-priority programs to help assess specifics, additional details may become available their effectiveness, the Legislature could consider over the spring. Such information could help adopting language that directs the administration to instruct the Legislature’s decisions about where set aside a portion of provided funding to contract federal funds might help make up for potential state for researchers to conduct more in-depth studies. 18 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET DISCUSSION OF SPECIFIC PROPOSALS ZERO-EMISSION VEHICLES for ZEV programs, from GGRF. Certain vehicle fees commonly known as “AB 8” fees have provided Recent and Planned another consistent source of funding for ZEV and Funding Augmentations mobile source emission reduction programs. These fees provide about $170 million annually for 2021-22 and 2022-23 Budget Acts Included programs that support ZEVs and lower-emission $9.9 Billion in Planned Investments for ZEV vehicles. (As we discuss in a separate publication, Programs. The previous two budgets committed a portion of these fees are scheduled to sunset significant funding for programs intended to in 2023, and the Governor is proposing that the promote purchase and use of ZEVs. As shown in Legislature renew them to continue to support Figure 5 on the next page, this funding is spread existing programs.) across five years, including $6.5 billion already provided and $2.1 billion intended for 2023-24. Governor’s Proposal The majority of this funding is from the General Reduces General Fund Spending and Fund ($6.3 billion), but also includes $1.6 billion Partially Backfills With GGRF for Net Reduction from Proposition 98 General Fund (for school of $1.1 Billion. As shown in Figure 6 on page 21, buses), $1.3 billion from GGRF, $307 million from the administration proposes to reduce General federal funds, and $366 million from other special Fund spending on ZEV programs by a total of funds. Most of the funding is for continuing or $2.5 billion, including $1.5 billion in 2023-24. expanding existing programs, such as rebates for However, the Governor proposes using $1.4 billion purchasing vehicles and incentive payments for from discretionary GGRF revenues across three developing charging infrastructure. As shown in years to backfill some of these reductions. the figure, ZEV funding is primarily split between As shown in Figure 7 on page 21, this amount the California Air Resources Board (CARB) and includes $611 million in 2023-24. The Governor the California Energy Commission (CEC). CARB also proposes pledging $414 million in annual oversees vehicle incentive programs, while CEC discretionary GGRF revenues in 2024-25 and oversees ZEV charging infrastructure programs. 2025-26 to partially backfill proposed reductions in The majority of planned ZEV augmentations those years. Largely because of this proposed use ($5.5 billion) support heavy-duty vehicle programs. of GGRF, the majority of ZEV programs would be Package Represents Unusually Large unaffected by the Governor’s proposed reductions, State-Level Investment in ZEV Programs. The including Clean Cars 4 All (CC4A, which provides large investments reflect the state’s policy goals of rebates to lower-income individuals for purchasing reducing GHGs from transportation. Transportation ZEVs), and a program shared by CARB and CEC is the single largest source of GHGs—responsible to support ZEV and lower-emission drayage trucks for 40 percent of emissions—making the sector and infrastructure. For most of the programs a critical area for seeking reductions. In the fall of that would receive reductions, the Governor 2022, CARB adopted regulations to require all new would maintain at least 50 percent of funding. cars sold in California to be ZEV or hybrid-electric The one exception is the proposed elimination by 2035. While the state has historically of a new program shared by CARB and CEC administered a variety of programs intended to aimed at reducing mobile source emissions from promote ZEVs, the funding displayed in Figure 5 port equipment. Overall, the Governor proposes is significant compared to previous amounts, maintaining $8.9 billion, or 89 percent, of intended as is the use of General Fund. For example, in funding for ZEV programs across the five years. 2019-20, the state invested a total of $435 million www.lao.ca.gov 19 2023-24 BUDGET Figure 5 Recent and Planned Zero-Emission Vehicle (ZEV) Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund, Unless Otherwise Noted (In Millions) Program Department 2021-22 2022-23 2023-24 2024-25 2025-26 Totals Light-Duty Programs $1,210 $396 $495 $170 $80 $2,351 ZEV Fueling Infrastructure CEC $515 $15 $210 $90 $40 $870 Grants Clean Vehicle Rebate Project CARB 525a — — — — 525 Clean Cars 4 All and Other CARB 150b 381a 125 — — 656 Equity Projects Equitable At-Home Charging CEC 20 — 160 80 40 300 Heavy-Duty Programs $1,627 $2,635 $1,205 $488 $225 $6,180 School Buses and CARB $130 $1,260c $135 — — $1,525 Infrastructure CEC 20 390c 15 — — 425 Clean Trucks, Buses, and CARB 500a 600a — — — 1,100 Off-Road Equipment CEC 299 — 315 $31 $25 670 Transit Buses and CARB 70 70 200 110 70 520 Infrastructure CEC 30 30 90 50 30 230 Drayage Trucks and CARB 157 75 165 48 — 445 Infrastructure CEC 181 85 185 49 — 500 CARB — — 60 120 70 250 Ports CEC — — 40 80 30 150 ZEV Manufacturing Grants CEC 125 125 — — — 250 Near-Zero Heavy-Duty Trucks CARB 45 — — — — 45 Drayage Trucks and CARB 40 — — — — 40 Infrastructure Pilot Project CEC 25 — — — — 25 ZEV Consumer Awareness GO-BIZ 5 — — — — 5 Other $514 $137 $407 $200 $155 $1,413 Transportation package ZEV CalSTA $407b $77d $77d $77d $76 $714 Sustainable community plans — — 200 80 59 339 and strategies CARB/CalSTA CARB 53 — 35 12 — 100 Emerging Opportunities CEC 54 — 35 11 — 100 Charter boats compliance CARB — 60a 40 — — 100 Hydrogen Infrastructure CEC — — 20 20 20 60 Totals $3,351 $3,168 $2,107 $858 $460 $9,944 a Includes Greenhouse Gas Reduction Fund. b Includes $200 million Public Transportation Account and $80 million federal funds. c Proposition 98 General Fund. d Federal funds. CEC = California Energy Commission; CARB = California Air Resources Board; Go-BIZ = Governor’s Office of Business and Economic Development; and CalSTA = California State Transportation Agency. 20 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Figure 6 Governor’s Proposed Zero-Emission Vehicle (ZEV) Budget Solutions (In Millions) General Fund GGRF Reductions Backfill (2023-24 New Total 2024-25 Through Net Proposed Program Augmentations 2023-24 and 2025-26 2025-26) Reductions Amounts Programs Proposed for Solutions School Buses and Infrastructure (CARB) $1,525 -$135 — — -$135 $1,390 School Buses and Infrastructure (CEC) 425 -15 — — -15 410 ZEV Fueling Infrastructure Grants 870 -210 -$130 $130 -210 660 Clean Cars 4 All and Other Equity 656 -125 — 125 — 656 Projects Transit Buses and Infrastructure (CARB) 520 -176 -180 293 -63 457 Transit Buses and Infrastructure (CEC) 230 -66 -80 130 -16 214 Drayage Trucks and Infrastructure 445 -80 -48 128 — 445 (CARB) Drayage Trucks and Infrastructure (CEC) 500 -85 -49 134 — 500 Sustainable community plans and 339 -140 -44 25 -159 180 strategies Equitable At-Home Charging 300 -160 -120 280 — 300 Clean Trucks, Buses, and Off-Road 299 -98 -56 154 — 299 Equipment Ports (CARB) 250 -60 -190 — -250 — Ports (CEC) 150 -40 -110 — -150 — Charter boats compliance 100 -40 — 40 — 100 Emerging Opportunities (CARB) 100 -35 -12 — -47 53 Emerging Opportunities (CEC) 100 -35 -11 — -46 54 Subtotals ($6,809) (-$1,500) (-$1,030) ($1,439) (-$1,091) ($5,718) All Other ZEV Package Funding $3,135 — — — — $3,135 Totals $9,944 -$1,500 -$1,030 $1,439 -$1,091 $8,853 GGRF = Greenhouse Gas Reduction Fund; CARB = California Air Resources Board; and CEC = California Energy Commission. Figure 7 Governor’s Proposed Use of GGRF for ZEV Program Backfills (In Millions) Backfill General Fund With Fund Shift to GGRF GGRF Three- Program Department 2023-24 2024-25 2025-26 Year Totals CARB $38 $56 $199 $293 Transit Buses and Infrastructure CEC 25 40 65 130 Equitable At-Home Charging CEC 160 80 40 280 Clean Trucks, Buses, and Off-Road Equipment CEC 98 31 25 154 CARB 80 48 — 128 Drayage Trucks and Infrastructure CEC 85 49 — 134 ZEV Fueling Infrastructure Grants CEC — 90 40 130 Clean Cars 4 All and Other Equity Projects CARB 125 — — 125 Charter boats compliance CARB — 20 20 40 Sustainable community plans and strategies CARB/CalSTA — — 25 25 Totals $611 $414 $414 $1,439 GGRF = Greenhouse Gas Reduction Fund; ZEV = zero-emission vehicles; CARB = California Air Resources Board; CEC = California Energy Commission; and CalSTA = California State Transportation Agency. www.lao.ca.gov 21 2023-24 BUDGET Proposes Trigger Restoration Approach decisions about where to make funding reductions. for GGRF. The Governor proposes a trigger For example, if the Legislature’s highest-priority restoration approach for GGRF revenues that the goal is to reduce air pollution from mobile sources, state might receive above current estimates during then it may want to prioritize maintaining funding for the 2023-24 fiscal year. Specifically, proposed programs that incentivize medium- and heavy-duty budget control section language would require ZEVs, as these are more effective at achieving that the administration to allocate additional GGRF objective than programs that focus on passenger revenues to backfill additional proposed reductions vehicles or charging infrastructure. Alternatively, to ZEV programs. The language identifies specific if the most important goal is reducing GHGs, then activities for which these revenues could be used— maintaining funding for programs that promote fueling infrastructure grants, transit and school passenger ZEVs make sense. (Please see our buses, ports, community-based efforts, emerging 2022 report, The 2022-23 Budget: Zero-Emission opportunities, and charter boat compliance—but Vehicle Programs, for more information on the would allow the Director of DOF the discretion to effectiveness of ZEV programs by goal.) determine which of these ZEV programs to augment Governor’s Proposed Solutions Appear and at what levels. Generally Reasonable. We find merit in the Administration Plans to Seek Federal Funds Governor’s approach of focusing budget solutions to Offset Other Reductions. The administration on newer programs and in areas with potential indicates plans to use potential federal funding federal funding availability. For example, eliminating from IIJA and the Inflation Reduction Act to help funding for the ports program is less likely to further offset the proposed decrease in state funds. cause disruption as compared to some existing For example, the administration has identified programs, given that this program has not begun federal funding for activities that reduce GHG implementation. Furthermore, federal funds for emissions at ports ($3 billion total available), similar activities at ports are available to help support charging infrastructure ($2.5 billion offset a loss in state funds. We also see value in total available), and support ZEV buses and bus the Governor’s approach of retaining funding for infrastructure ($5.6 billion total available)—three programs that reduce emissions and air pollution areas proposed for General Fund reductions. in low-income/disadvantaged communities, Proposes $35 Million New Spending for including the drayage truck programs and CC4A. Charging Stations at State-Owned Locations. These communities are more likely to be located Outside of the ZEV package—and therefore not in heavy transit corridors with higher levels of air displayed in any of the figures—the Department pollution, so they represent a worthwhile area of of General Services (DGS) Office of Sustainability state focus and intervention. This is consistent is requesting $35 million from the General Fund with the Legislature’s historical prioritization of over three years to install ZEV infrastructure at programs that provide ZEV funding for low-income state-owned and leased facilities. and disadvantaged communities. Finally, a rationale exists for making reductions in ZEV charging Assessment infrastructure support, as the market for charging Consider Highest-Priority Goals When is maturing and the same level of state intervention Making Funding Decisions. The large number may no longer be needed to spur development. of ZEV-related programs reflects diversity in Additionally, new federal funding is becoming approaches to achieve various state goals, such as available for charging infrastructure. reducing air pollution, lowering GHG emissions, and Consider Refining Some Programs to Focus providing subsidies and infrastructure benefiting on Highest-Priority Needs. As it considers making low-income and disadvantaged communities. funding reductions, the Legislature may want Prioritizing among these complementary goals to also consider narrowing the scope of certain and assessing how effective each program is at ZEV programs. This could help to ensure that attaining them can help guide the Legislature’s remaining funding is specifically targeted towards 22 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET achieving the Legislature’s highest-priority goals. be deployed with or without additional state For example, this might include more narrowly investments due to increased availability of focusing benefits on lower-income Californians who federal funding and the growth of companies are not eligible for federal subsidies and efforts that install chargers in public locations. where state investments could be most effective at This is particularly true for passenger spurring growth in ZEV infrastructure. Two possible light-duty vehicles in locations with higher approaches include: concentrations of ZEVs, which tend to be higher-income areas. The Legislature may • Focusing CC4A Rebates on Consumers want to consider whether the state should Who Do Not Qualify for Federal Incentives. focus less on funding light-duty chargers and The Governor proposes to maintain the instead prioritize infrastructure investments full funding amount for the CC4A program in areas that do not have as much private ($656 million), which provides rebates for investment. This could include helping to low-income car buyers who purchase ZEVs. subsidize installment of chargers in multiunit Some individuals who purchase ZEVs are dwellings and in lower-income neighborhoods. also eligible for federal tax credits up to This also could include prioritizing funding $7,500. For example, a car buyer at or below for medium- and heavy-duty vehicles and 300 percent of the federal poverty level hydrogen vehicles rather than light-duty and living in a disadvantaged community electric chargers. While these types of could receive up to $12,000 from CC4A, chargers and fueling stations may also qualify up to $7,500 from the state’s Clean Vehicle for federal funds, they are more emergent Rebate Program, and up to $7,500 of federal technologies and may need additional support incentives. As the program is currently before reaching the same availability as structured, some consumers can qualify passenger electric vehicle chargers. for both CC4A and other state ZEV rebate programs in addition to the federal tax Legislature Will Need to Weigh Whether incentive. In contrast, some Californians ZEV Programs Represent Its Highest Priority are only eligible for CC4A because their for GGRF Discretionary Funds… The Governor incomes are too low to participate in the proposes to use the majority of discretionary federal program. (The federal program GGRF funds for ZEV programs. Together with provides incentives as a tax credit and very $250 million proposed for backfilling a reduction low-income households are not required to to the AB 617 air quality improvement program file taxes so therefore are not able to take (discussed in the “Community Resilience” advantage of this benefit.) Particularly if it were section of this report), this represents nearly to make reductions to the CC4A program, all of the administration’s projected 2023-24 the Legislature could consider further limiting discretionary GGRF expenditures. Typically, the the program’s income-eligibility threshold to Legislature and Governor negotiate annually to focus exclusively on consumers who do not allocate discretionary GGRF revenue for a variety qualify for federal incentives. This would allow of programs and priorities. As such, directing the Legislature to focus funding on those these revenues towards only two program areas who do not have other options for subsidizing is unusual. The Governor’s proposal presents their ZEV purchases and facilitate more the Legislature with the key decision of whether equitable outcomes. sustaining ZEV programs is its highest priority for • Focusing Light-Duty ZEV Charging Funding the 2023-24 discretionary GGRF revenue. However, on Chargers That Would Otherwise Not Be should the Legislature reject the Governor’s GGRF Developed. The state has invested heavily approach, this could mean deeper reductions in chargers and these investments have to ZEV or other programs compared to what the helped support a private market for public administration proposes if it wants to realize the charging stations. More chargers likely will same amount of General Fund savings. www.lao.ca.gov 23 2023-24 BUDGET …And Whether It Wants to Commit Out-Year cap-and-trade auction revenues. This makes GGRF Revenues Now. As shown in Figure 7, in it particularly important for the Legislature to addition to the $611 million of discretionary GGRF consider its priorities for these discretionary revenues in 2023-24, the Governor proposes funds—and to maintain decision-making over how using $414 million annually in future GGRF to spend potential midyear increases. Extra GGRF discretionary funds to backfill ZEV programs in revenues could be especially helpful this year, 2024-25 and 2025-26. This is somewhat unusual— given the potential for a worsening budget picture. in general, after allocating funding for statutorily The Legislature could consider using such funds to required expenditures, uses for remaining GGRF support other climate-related activities that might funds typically are determined by the Governor otherwise need to be reduced. and Legislature on an annual basis as part of Federal Funds May Help Offset Some the deliberations on the budget for the fiscal Reductions, but No Guarantee. The Governor year in which they would be spent. Committing has identified federal funding opportunities for future GGRF revenues now would reduce the ports ($3 billion total), school and transit buses discretionary funds available in future years that ($5.6 billion total), and ZEV charging ($2.5 billion could support other programs and preclude the total). The administration believes this funding Legislature’s ability to weigh whether it might could offset reductions in state funding for various have different spending priorities in 2024-25 ZEV programs. However, applicants for the and 2025-26. funding would most likely be individual entities GGRF Trigger Proposal Also Raises (such as transit agencies interested in purchasing Concerns. We have concerns about the electric buses, charging developers, or ports Governor’s proposal to allow DOF to allocate pursuing lower-emission technologies) rather than potential midyear increases in GGRF revenues. state departments. Such applicants would be Historically, the Legislature has opted to delay competing for funding against entities from around action on any additional discretionary GGRF the country. As such, while this funding could revenues that materialize midyear and allocate help offset reductions to similar state programs, them as part of the subsequent year’s budget California entities would not necessarily be the package. This standard approach allows the beneficiaries of the same amounts or allocations of Legislature the discretion to consider its highest federal funding. priorities for that spending as part of a more Funding to Prepare State Properties for ZEV comprehensive discussion. When midyear Transition Could Make Sense to Add to ZEV adjustments have been necessary due to GGRF Package. DGS is subject to the Advanced Clean revenues coming in lower than expected, the Fleets regulation planned for adoption this year by administration has cut programs proportionally CARB, which will require government vehicle fleets (rather than making discretionary decisions to be zero-emission by 2035. As noted above, the to prioritize some over others). Allowing the Governor proposes $35 million in new General administration to select which ZEV programs it Fund spending outside of the ZEV package to would fund with any potential new monies and at install charging stations at state-owned and what levels—without any statutory direction from leased facilities to help meet this requirement. the Legislature—shifts too much decision-making Given the General Fund condition and the fact authority away from the Legislature to that overseeing the state fleet is a core state the administration. responsibility, the Legislature may want to Potential for Higher GGRF Revenues consider whether it should prioritize funding for Highlights Importance of Identifying this activity within the ZEV package over paying Legislative Spending Priorities. We believe a for privately owned vehicles and charging stations. strong possibility exists that additional GGRF Making room for this activity within the existing revenues will be available to spend in 2023-24, ZEV package would necessitate making deeper as the administration historically underestimates reductions to the programs displayed in Figure 5 24 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET if the Legislature wants to avoid an additional ENERGY $35 million net General Fund cost. However, we think such action could be justified to enable the Recent and Planned state to comply with ZEV fleet requirements and Funding Augmentations given budget constraints. $9.6 Billion Planned for Energy Programs Across Five Years. As shown in Figure 8 on Recommendations the next page, the previous two budgets and Adopt Package of Solutions From ZEV corresponding budget trailer legislation provided Programs Reflecting Legislative Priorities. significant funding for a variety of energy programs We recommend the Legislature begin with the and activities. The 2021-22 budget provided Governor’s proposals, which we find reasonable, $175 million for a package of investments, but also consider additional or alternative including programs intended to promote building reductions across ZEV programs based on its goals electrification, planning and permitting renewable and highest priorities. As it considers additional energy projects, and activities intended to ensure reductions, we recommend the Legislature electric reliability. The 2022-23 budget planned consider whether it wants to further refine certain for an additional $7.9 billion through 2025-26 ZEV programs—such as support for ZEV charging (including $2.3 billion scored in 2021-22) as part infrastructure and CC4A—to have a narrower scope of another energy package. Both packages were and focus on the highest-priority populations, funded almost entirely by the General Fund. Funded locations, and emerging technologies. We also activities focus primarily on three categories— recommend the Legislature consider whether ZEV reliability, clean energy, and ratepayer relief, programs represent its highest-priority for GGRF with most investments going to reliability-related discretionary spending and whether it wants programs. The 2022-23 budget also created the to commit future-year GGRF revenues for ZEV California Climate Innovation program, which programs now. The Legislature may also want offers grants for technology innovation projects to determine whether it wants to accommodate that reduce emissions, and provided $525 million funding the costs for installing chargers at through 2025-26. state-owned and leased facilities within the existing Includes $1 Billion for a Clean Energy ZEV package rather than as a new additional Reliability Investment Plan. As shown in Figure 8, General Fund expenditure—though this could come the $9.6 billion total also includes funding to support at the expense of other intended ZEV expenditures. implementation of a Clean Energy Reliability Reject or Modify Governor’s GGRF Trigger Investment Plan (CERIP), pursuant to Chapter 239 Approach, Maintain Legislative Flexibility. of 2022 (SB 846, Dodd). This legislation requires We also recommend the Legislature either (1) follow CEC to develop and submit the CERIP to the its historical approach of waiting to allocate any Legislature by March 2023, and dedicates $1 billion unforeseen increases in 2023-24 GGRF revenues as from the General Fund from 2023-24 through part of the 2024-25 budget process; (2) appropriate 2025-26—subject to appropriation—to implement such revenues by passing a midyear spending bill the plan’s proposed activities and projects, in early 2024; or (3) adopt language that directs the including $100 million in 2023-24. administration specifically how it should allocate General Fund Commitments Represent additional GGRF revenues, such as to which Unusually Large State-Level Investment in programs—ZEV or otherwise—and at which levels. Energy Programs. The state historically has Any of these approaches would better preserve operated programs that encourage renewable the Legislature’s authority over making spending energy and conservation, but the magnitude of choices as compared to the Governor’s proposal. General Fund commitments for energy efforts displayed in Figure 8 is uncommonly large, and most of the activities represent new efforts for the state. www.lao.ca.gov 25 2023-24 BUDGET Figure 8 Recent and Planned Energy Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund, Unless Otherwise Noted (In Millions) Activity Department 2021-22 2022-23 2023-24 2024-25 2025-26 Totals 2021-22 Energy Package $175 — — — — $175 BUILD expansion CEC $75 — — — — $75 Permitting initiatives CEC/DFW 39 — — — — 39 SB 100 planning and participation CEC/CPUC 20 — — — — 20 Various offshore wind activities CEC 18 — — — — 18 Emergency planning and support CEC/CPUC 14 — — — — 14a Wildfire Operational Observer OES 9 — — — — 9 2022-23 Energy Package $2,250 $3,002 $2,626 $654 $918 $7,925 Reliability Strategic Reliability Reserve DWR $1,500 $700 $20 $75 $75 $2,370 Residential Solar and Storage CPUC — — 900 — — 900 Distributed Electricity Backup Assets CPUC 550 — 100 25 25 700 Demand Side Grid Support CEC 200 — 95 — — 295 Transmission financing IBank — 200 50 — — 250 DOE grid resilience match CEC — 5 — — — 5 Support for reliability DWR — 3 — — — 3 Clean Energy CEC — $112 $665 $53 $92 $922 Equitable Building Decarbonization CPUC — 50 95 — — 145 CARB — 20 20 — — 40 Long duration storage CEC — 140 240 — — 380 Oroville pump storage DWR — 100 140 — — 240 Carbon removal innovation CEC — 50 50 — — 100 Industrial decarbonization CEC — 100 — — — 100 Hydrogen grants CEC — 100 — — — 100 Food production CEC — 25 50 — — 75 Offshore wind infrastructure CEC — 45 — — — 45 Energy modeling CEC — 7 — — — 7 Distributed energy workload CPUC — 1 1 1 1 4b Hydrogen Hub GO-Biz — 5 — — — 5 Energy data infrastructure CEC — 5 — — — 5 AB 525 implementation Various — 4 — — — 4c Ratepayer Relief Arrearage Payment Program CSD — $1,200 — — — $1,200d Capacity building grants CPUC — 30 — — — 30 Other Funding — $100 $200 $500 $725 $1,525 Clean Energy Reliability Investment Plan Various — — $100 $400 $500 $1,000 Climate Innovation Program CEC — $100 100 100 225 525 Totals $2,425 $3,002 $2,626 $654 $918 $9,625 a Includes $2 million Public Utilities Commission Utilities Reimbursement Account. b Public Utilities Commission Utilities Reimbursement Account. c Includes $1.5 million Energy Resources Program Account and $2.6 million General Fund. d General Fund through the California Emergency Relief Fund. BUILD = Building Initiative for Low-Emissions Development; CEC = California Energy Commission; DFW = Department of Fish and Wildlife; CPUC = California Public Utilities Commission; OES = Governor’s Office of Emergency Services; DWR = Department of Water Resources; IBank = California Infrastructure and Economic Development Bank; CARB = California Air Resources Board; DOE = U.S. Department of Energy; GO-Biz = Governor’s Office of Business and Economic Development; and CSD = Department of Community Services and Development. 26 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Many energy programs, including programs that these reductions by making fewer grant awards and promote energy efficiency and rooftop solar, largely funding fewer projects. The majority of programs are run through utilities and typically are funded by approved in the past two budgets are unaffected. ratepayers. For example, since 2009, the California All of the Governor’s solutions propose to maintain Public Utilities Commission (CPUC) has collected at least 50 percent of the intended funding $1.7 billion from ratepayers to fund incentives for for individual programs. In total, the Governor households and businesses to undertake energy proposes to maintain $8.7 billion, or 91 percent, of and storage activities through the Self-Generation the intended energy funding of $9.6 billion. Incentive Program. Makes Reductions Across Eight Programs, Delays Funding Two Programs. The Governor’s Proposals administration proposes reducing funding for eight Proposes Roughly $900 Million in programs, with most representing relatively modest Reductions. Figure 9 displays the administration’s reductions or scaling down of planned amounts. proposed budget solutions within energy programs. The proposal also includes delaying funding for As shown, the Governor would reduce $510 million two programs. The most significant of these from 2022-23 appropriations and $820 million proposals include: from funding intended for 2023-24, for budget-year • The California Arrearage Payment Program. savings of $1.3 billion. These reductions, however, The Governor proposes a $400 million include a shift of $433 million in General Fund reduction to this program, which received spending from 2022-23 and 2023-24 to future $1.2 billion from the California Emergency years, which would delay program expenditures but Relief Fund via General Fund resources in not result in a net reduction. Therefore, on net, the 2022-23. The administration states that Governor’s proposal would result in $897 million updated data indicate that not all of this less spending across energy programs. For the funding will be needed to address overdue most part, the administration would implement Figure 9 Governor’s Proposed Energy Budget Solutions (In Millions) Proposed Changes New Total 2024-25 and Net Proposed Program Augmentations 2022-23 2023-24 Out-Years Reductions Amounts Programs Proposed for Solutions Arrearage Payment Program $1,200 -$400 — — -$400 $800 Residential Solar and Storage 900 — -$270 — -270 630 Equitable Building Decarbonization 922 -50 -320 $283a -87 835 (CEC) Equitable Building Decarbonization 40 — -20 — -20 20 (CARB) Climate Innovation Program 525 -50 -100 150a — 525 Long duration storage 380 — -50 — -50 330 Transmission financing 250 — -25 — -25 225 Carbon removal innovation 100 — -25 — -25 75 Industrial decarbonization 100 -10 — — -10 90 Food production 75 — -10 — -10 65 Subtotals ($4,492) (-$510) (-$820) ($433) ($897) ($3,595) All Other Energy Funding $5,133 — — — — $5,133 Totals $9,625 -$510 -$820 $433 -$897 $8,728 a Reflects proposed delays from prior years to 2024-25 through 2026-27. CEC = California Energy Commission and CARB = California Air Resources Board. www.lao.ca.gov 27 2023-24 BUDGET energy bills for eligible households, so the Largely Does Not Reduce Reliability proposed amount can be reverted back to the Programs. The suite of energy reliability programs General Fund without programmatic impact. included in the 2022-23 budget package—the • Residential Solar and Storage. This largest category of funded activities—are kept $900 million incentive payment program mostly intact in the Governor’s proposal. These was designed with two components: include significant programmatic investments, (1) $630 million for residential customers including $2.3 billion to the Department of Water in lower-income, tribal, and disadvantaged Resources (DWR) for investments in strategic communities to install solar systems with reliability assets, $700 million to CPUC for the or without energy storage systems, and Distributed Electricity Backup Assets Program, (2) $270 million for general customers who and $295 million to CEC for the Demand Side Grid install energy storage systems. The Governor Support Program. proposes to eliminate the second portion for a Proposes Spending for Clean Energy net reduction of $270 million and maintain the Activities. Consistent with the intent expressed in $630 million targeted for lower-income, tribal, SB 846, the administration has proposed activities and disadvantaged populations. in 2023-24 for the first $100 million intended to • Equitable Building Decarbonization. implement its clean energy plan. While CEC has not The Governor proposes three changes to yet adopted the final CERIP or submitted it to the this multifaceted program, which has the Legislature ahead of its March 2023 deadline, the overarching goal of reducing GHGs from Governor has indicated intent to fund the following buildings. The first two affect the portion of categories of activities in the budget year: this program administered by CEC, which • Clean Energy Resource Development supports low-energy building upgrades Implementation ($67 Million). This would for low-to-moderate income families in include $32 million to DWR to initiate a new under-resourced communities and incentives centralized energy resource procurement for low-carbon building technologies. function, in which the state would procure The Governor proposes to (1) delay large-scale clean resources for utilities and $283 million from 2023-24 and instead provide other load serving entities. Other proposed it spread over the subsequent three years, investments in this category are intended to and (2) reduce the program by $87 million in support transmission and reduce barriers in 2023-24. These changes would result in fewer permitting and interconnection. funded projects and delayed time lines for • Near-Term Reliability ($33 Million). The projects. Third, for the portion administered administration has not yet provided details for by CARB—which provides incentives for how specifically it would use these funds. low global warming-potential refrigerants in homes—the Governor proposes to reduce Assessment funding by $20 million in 2023-24. Reasonable Justification Exists for Governor’s • Climate Innovation Program. The Governor Proposed Approach to Energy Solutions. Overall, proposes delaying $50 million from 2022-23 we find the Governor’s proposed reductions to and $100 million from 2023-24 and instead be reasonable and appropriate. For example, if providing these funds in 2026-27. This the state believes most of the originally intended program is to provide financial incentives programs still have merit, making modest reductions to California-headquartered companies across many of them while retaining some funding developing and commercializing new to continue supporting a smaller pool of projects technologies that help reduce GHGs or makes sense as a strategy. Most programs are new improve climate resiliency. and without an existing track record of success, which we believe makes them better candidates for reduction compared to more established activities. 28 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Additionally, most of the Governor’s proposed Federal Funds Could Help Partially Offset reductions are from funding proposed for 2023-24, Some Reductions. In addition to the solar program which means the targeted programs have not mentioned above, the administration has identified begun significant implementation and can thereby other federal funding that will flow to California for avoid unnecessary disruption. energy efficiency and clean energy activities. These Strong Equity-Based Rationale for Prioritizing include funds for a home-efficiency upgrade rebate Continued Funding for Solar and Building program and an energy efficiency block grant. The Decarbonization Programs. We see merit in the administration has not yet provided details about Governor’s proposal to maintain Residential Solar what specific programs or efforts these funds and Storage funding for lower-income households may support. while reducing funding incentives for higher-earning Utility Arrearage Funding Not All Needed households. Because disadvantaged communities to Meet Existing Demand. Our analysis concurs are most likely to bear the brunt of climate impacts with the administration’s assessment that the state and have historically been excluded from similar could revert $400 million and still support all eligible investments, we believe providing this type of households that fell behind in their utility payments targeted support should continue to be a high during the pandemic. Specifically, based on the priority for the state. Moreover, higher-earning applications submitted by utility providers in fall households likely will be eligible to apply for 2022, $647 million will fully pay down all remaining incentives for residential solar and energy eligible arrears. The administration’s proposal to storage projects from newly augmented federal leave $800 million available would cover those costs programs. These include the expansion of the and associated administrative activities. Please see federal Tax Credit for Residential Clean Energy, our online post, The 2023-24 Budget: Department which was extended through 2034 in the Inflation of Community Services and Development, for our Reduction Act. The extension authorized a new full assessment of this proposal. 30 percent credit on new standalone residential Legislature Could Consider Additional or battery storage. Alternative Reductions to Energy Programs. Similarly, while we believe the Legislature should Making additional reductions beyond those avoid adopting significant funding delays because proposed by the Governor to new energy programs of how they would impact potential future budget that are early in implementation or planning phases problems, we find merit in the Governor’s proposal could provide additional General Fund savings. to delay—but not reduce—funding for the Equitable This could include reducing more funding than the Building Decarbonization Program. Because Governor for certain programs that the Legislature the program is just beginning implementation, it may view as lesser priorities compared to other could sustain delays without major programmatic activities. Additionally, the Legislature could reduce impacts. This program targets upgrades to programs the Governor does not identify for any buildings, which are a substantial source of GHG funding changes. Three specific programs we emissions, and specifically focuses on supporting think the Legislature could consider for additional efficiency and energy improvements for low-income solutions include: households that would not otherwise be able to • Oroville Pump Storage Project. The recent undertake these upgrades. The Legislature could budget package included $240 million from consider reductions and/or further delays in future the General Fund—$100 million in 2022-23 years should the program struggle to meet its and $140 million in 2023-24—for a project to goals or if costs could be shifted to federal funds modify the Oroville Dam complex so it can awarded to California for energy efficiency projects. use its existing pump-back operations to However, we think this program’s focus on equity provide long-duration energy storage. The makes it worthwhile to continue prioritizing for project is still in the initial planning phases, so state investments. the majority of the funding will not be needed for several years. Moreover, given the early www.lao.ca.gov 29 2023-24 BUDGET stage of the project, its specific costs still are the reliability programs merit continued or unknown, and therefore whether it ultimately additional funding, the Legislature could ask will be cost-effective and worthwhile for the the administration: How duplicative is the state to pursue also is still uncertain. The funding? When exactly will it be needed, and Legislature could revert the bulk of these is it all needed this year? What role should funds (leaving a small amount for continued the state play in funding reliability resources planning) and have the administration come as compared to local utilities? What are the back to request additional funds once cost potential impacts on electricity rates, which estimates and more conclusive information have been steadily increasing? Depending on the cost effectiveness of the project are on the answers to these questions, the more certain. Legislature might determine that some of • Climate Innovation Program. The this funding could be reduced without major Governor proposes to delay $150 million near-term impacts. from this program to 2026-27 but maintain the full $525 million. This new program Recommendations has a very broad scope and how exactly Modify Governor’s Proposals to Reflect the administration will use the funds still is Legislative Priorities. We find the Governor’s unclear, making it difficult for the Legislature proposed reductions to be reasonable and believe to weigh how to prioritize its importance or they merit legislative consideration. We recommend effectiveness compared to other programs. the Legislature prioritize maintaining funding Moreover, the program has not yet begun for programs that focus on equity, such as implementation. These factors make it a good providing residential solar incentives and grants to candidate for reduction. decarbonize homes in lower-income communities. • Energy Reliability Programs. As highlighted To the degree the Legislature wants to identify in Figure 8, the 2022-23 Energy Package alternative or additional programs for reductions, planned for significant funding across five we recommend it consider providing less funding years for programs that primarily focus on for: (1) the Oroville pump storage project (which ensuring electric reliability. These programs is still in the planning phases); (2) the Climate include the Strategic Reliability Reserve, Innovation Program (which has an unclear focus Distributed Electricity Backup Assets, and and has not yet begun implementation); and Demand Side Grid Support. The funding (3) potentially to three primary reliability programs— is intended to support actions to expand the Strategic Reliability Reserve, Distributed energy supply and storage in California Electricity Backup Assets, and Demand Side in coordination with CEC, CPUC, and the Grid Support—based on what it learns about the California Independent System Operator. outcomes from these programs thus far. While improving energy reliability is a clear state priority, the benefits from this WATER AND DROUGHT investment thus far are not entirely clear. Recent and Planned As of early February 2023, about $440 million had been committed for DWR’s Strategic Funding Augmentations Reliability Reserve, which is much less than Recent Budgets Committed $8.8 Billion the $2.3 billion intended for these efforts in for Drought and Water Resilience Activities. 2021-22 and 2022-23. Given the additional As shown in Figure 10, recent budgets have $100 million for CERIP activities the Governor committed a combined $8.8 billion ($8.3 billion also proposes to provide in 2023-24, it is from the General Fund and $440 million from other unclear whether all of the reliability funding funds) over five years to various departments for the state has already provided is still emergency drought response and water resilience urgently needed. In determining whether activities. Of the total, $6.9 billion was appropriated 30 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Figure 10 Recent and Planned Drought Response and Water Resilience Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund, Unless Otherwise Noted a (In Millions) Program Department 2021-22 2022-23 2023-24 2024-25 2025-26 Totals Drinking Water, Water Supply, Flood $2,498 $529 $473 $25 $500 $4,025 Drinking water, wastewater projects SWRCB $1,700 — — — — $1,700 Water recycling, groundwater cleanup SWRCB 300 $190 $310 — — 800 Flood and dam safety DWR 313 237 163 $25 — 738b Water conveyance, water storage DWR 100 100 — — $500 700 Aqueduct solar panel pilot study DWR 35 — — — — 35 Watershed climate studies DWR 25 — — — — 25 Water storage tanks DWR 21 — — — — 21 Flood planning DWR 4 2 — — — 6 Immediate Drought Response $1,250 $84 $26 $26 $26 $1,411 Community drought relief DWR $800 — — — — $800 Data, forecasting, communications Various 144 — $17 $17 $17 194 Drought contingency control section Various 96 — — — — 96 Save Our Water campaign DWR $75 — — — 75 Drinking water emergencies SWRCB 62 — — — — 62 Water rights activities SWRCB, CDFW 88 4 9 9 9 119b Drought salinity barrier DWR 27 — — — — 27 Drought food assistance CDSS 23 — — — — 23 Conservation technical assistance DWR 10 — — — — 10b Water refilling stations at schools SWRCB — 5 — — — 5 Habitat/Nature-Based Activities $643 $292 $160 $82 $32 $1,208 Fish and wildlife protection/study Various $300 $47 — — — $347 Watershed climate resilience WCB 16 158 $96 $50 $14 334 Watershed climate resilience DWR 10 67 48 25 11 161 Aquatic/large-scale habitat projects Various 122 7 7 7 7 149 MWD resilience projects DWR 50 — — — — 50 River restoration activities DWR 15 14 9 — — 37b Spending from various bonds WCB, DWR 105 — — — — 105 State land and bird habitat projects CDFW, DWR 25 — — — — 25 Water Quality and Ecosystem Restoration $391 $420 $380 — — $1,191 Water resilience projects CNRA $165b $100 $180 — — $445 Streamflow enhancement program WCB 100 150 — — — 250 Salton Sea DWR 40 100 80 — — 220 PFAs support SWRCB 30 50 120 — — 200 Urban streams and border rivers Various 50 20 — — — 70 Clear Lake CNRA 6 — — — — 6 Conservation/Agriculture $726 $110 $80 — — $916 SGMA implementation DWR $236 $60 $60 — — $356 SWEEP CDFA 110 50 — — — 160 Multi-benefit land repurposing DOC 90 — 20 — — 110 Water conservation programs DWR 180 — — — — 180 Agricultural conservation DWR, CDFA 110 — — — — 110 Totals $5,508 $1,435 $1,119 $133 $558 $8,752 a In total, $440 million is from a variety of non-General Fund sources, including bond funds, federal funds, special funds, and reimbursements. b Includes funding from sources other than General Fund. SWRCB = State Water Resources Control Board; DWR = Department of Water Resources; CDFW = California Department of Fish and Wildlife; CDSS = California Department of Social Services; WCB = Wildlife Conservation Board; MWD = Metropolitian Water District; CNRA = California Natural Resources Agency; PFAs = per- and polyfluoroalkyl substances; SGMA = Sustainable Groundwater Management Act; SWEEP = State Water Efficiency and Enhancement Program; CDFA = California Department of Food and Agriculture; and DOC = Department of Conservation. www.lao.ca.gov 31 2023-24 BUDGET in 2021-22 and 2022-23, while $1.8 billion is historically has filled important gaps, such as by intended for 2023-24 through 2025-26. Nearly half supporting infrastructure improvements in areas of the funding targets activities related to drinking that lacked local and/or long-term funding streams. water, water recycling and groundwater cleanup, The General Fund traditionally has supported water supply, and flood management. About emergency drought response, but in recent years $1.4 billion supports immediate drought response also has funded more expanded types of drought activities, such as for the State Water Resources response activities, such as projects to upgrade Control Board (SWRCB) and California Department community water systems. of Fish and Wildlife (CDFW) to oversee and enforce Governor’s Proposals regulatory restrictions on water diversions and fishing in certain streams. The remaining funding Proposes Some Modest Changes, but supports habitat restoration, water quality, and Retains Vast Majority of Water-Related Funding. conservation activities. Figure 11 displays the Governor’s proposed changes to water and drought spending. As shown, State Investments for These Types of the proposal reduces spending by $194 million Activities Historically Supported Primarily and delays spending by $300 million until 2024-25, Through Bonds. The vast majority of total yielding combined General Fund budget solutions spending on water systems—including drinking of $494 million in 2023-24. This approach retains water and wastewater systems, water delivery, $8.6 billion of $8.8 billion planned for water-related and flood management—comes from local activities over the five years. The proposal retains water utilities, which are funded by local water nearly all of the funding appropriated or planned for charges and taxes. According to data compiled immediate drought response and instead focuses by the Public Policy Institute of California, from most of the funding reductions in other categories. 2016 through 2018, local sources contributed (In addition, the Governor’s budget proposes 84 percent of total spending on water in California, $139 million in new one-time General Fund with much smaller shares coming from the state spending for flood management projects, which we (13 percent)—primarily via bond funds—and federal discuss in more detail in a separate publication.) (3 percent) governments. State bond funding Figure 11 Governor’s Proposed Drought Response and Water Resilience Budget Solutions (In Millions) Proposed Changes New Total 2021-22 and Net Proposed Program Augmentations 2022-23 2023-24 2024-25 Reductions Amounts Programs Proposed for Solutions Water recycling, groundwater cleanup $800 — -$40 — -$40 $760 Watershed climate resilience (WCB) 334 -$158 -64 $198a -24 310 Watershed climate resilience (DWR) 161 -42 -30 72a — 161 PFAs support 200 — -100 30a -70 130 SWEEP 160 -40 — — -40 120 Aqueduct solar panel pilot study 35 -15 — — -15 20 Water refilling stations at schools 5 -5 — — -5 — Subtotals ($1,695) (-$260) (-$234) ($300) (-$194) ($1,501) All Other Drought Response and $7,057 — — — — $7,057 Water Resilience Funding Totals $8,752 -$260 -$234 $300 -$194 $8,558 a Reflects funding delayed from a prior year. WCB = Wildlife Conservation Board; DWR = Department of Water Resources; PFAs = per- and polyfluoroalkyl substances; and SWEEP = State Water Efficiency and Enhancement Program. 32 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET • Water Recycling. The proposal reduces • Aqueduct Solar Panel Pilot Study. The $40 million General Fund from planned proposal reduces spending by $15 million 2023-24 funding for water recycling programs in 2021-22 for DWR to support pilot studies administered by SWRCB. Recent budgets on installing solar panels over aqueducts to committed a total of $800 million for both generate energy and reduce evaporation. The water recycling ($725 million) and groundwater proposal retains $20 million for this purpose. cleanup ($75 million). The proposal retains • Water Refilling Stations at Schools. The $685 million for water recycling and the proposal eliminates all $5 million in 2022-23 original $75 million for groundwater cleanup. funding for SWRCB to support water refilling • Watershed Climate Resilience. Recent stations at schools. budgets committed $495 million over five years to DWR and the Wildlife Conservation Assessment Board (WCB) to support increased climate Some Drought and Water Resilience resilience at a watershed level. WCB plans Activities Remain Important. While we generally to use funding to provide grants through find identifying budget solutions among the many existing programs. DWR has formed a recent one-time augmentations appropriate, we Watershed Resilience Work Group and plans think retaining funding for the most critical activities to complete climate risk and preparedness should remain a priority. For example, maintaining assessments; develop a watershed resilience funding to address drinking water emergencies planning framework, toolkit, and performance and to support SWRCB’s modernization and metrics; and support four to six pilot studies. enforcement of water rights are key to the state’s The proposal reduces 2022-23 funding and ability to effectively manage drought conditions. planned 2023-24 funding by $24 million and Recent storms also demonstrated the importance delays an additional $270 million until 2024-25. of flood and dam management. We therefore find On net, the proposal retains $471 million for the Governor’s proposed approach to leave funding watershed climate resilience activities. for these efforts untouched to be prudent. • Per- and Polyfluoroalkyl Substances Proposed Reductions Appear Reasonable. (PFAs) Support. Recent budgets committed Overall, the individual reductions the Governor $200 million over three years for various proposes appear reasonable—they do not take activities to address PFAs. These are funding away from the most urgent needs and, in long-lasting chemicals that are hard to break some cases, federal funding is available for similar down and have been used in a variety of purposes. In addition, based on our assessment, consumer and industrial products to create, these reductions will not lead to major disruptions in for example, nonstick surfaces and water- and the programs. Specifically: stain-resistant fabrics. The proposed budget • Water Recycling—Significant State and reduces planned 2023-24 spending Federal Funding Still Available for This by $70 million and delays an additional Purpose. SWRCB indicates that even $30 million until 2024-25. On net, the proposal with the Governor’s proposed $40 million retains $130 million for PFAs support. reduction for water recycling, it expects the • State Water Efficiency and Enhancement remaining $685 million would be sufficient Program (SWEEP). The proposal reduces to provide the maximum grant amount to all funding for the SWEEP program by $40 million eligible projects based on current demand. in 2022-23, retaining $120 million over 2021-22 In addition, SWRCB receives federal funding and 2022-23. This program, administered through the Clean Water State Revolving by the California Department of Food and Fund (CWSRF), which can be used for water Agriculture (CDFA), provides farmers with recycling projects. (The CWSRF provides financial assistance to make improvements low-cost financing and forgivable loans for to their irrigation systems that would result in water projects.) On top of the regular annual using less water and/or energy. www.lao.ca.gov 33 2023-24 BUDGET amount of federal CWSRF funds the state funding has been modest and that it has other receives (roughly $54 million), IIJA is providing services and funding available depending on CWSRF with a significant increase (roughly schools’ needs. In addition, schools could $850 million over five years from 2022 choose to use their general purpose funding through 2026). and federal COVID-19-related funding for • SWEEP—Reduction Would Maintain water refilling stations. Program at Historical Levels. Recent Legislature Could Consider Converting budgets provided the SWEEP program with Governor’s Proposed Delays to Reductions $110 million General Fund in 2021-22 and Instead. In light of the state’s budget condition, $50 million General Fund in 2022-23. Even the Legislature could consider reducing rather than with the proposed $40 million reduction, it delaying funding—as the Governor proposes—for would still receive $10 million General Fund in watershed climate resilience and PFAs support. 2022-23, which is more in line with historical The Legislature could then revisit whether to average annual allocations. (From 2013-14 provide more funding for these programs in through 2019-20, SWEEP received an average 2024-25 or a future year. of $18 million annually from GGRF or bond • Watershed Climate Resilience. Reducing funds; it did not receive funding in 2019-20 this funding would result in an overall decline or 2020-21.) Because this is a grant program, from $495 million to $201 million for watershed reducing funding likely would mean fewer climate resilience. For WCB, this would grants to farmers. mean providing fewer and/or smaller grants. • Aqueduct Solar Panel Pilot Study—State For DWR, this could mean conducting fewer Could Wait for Study Results Before or no pilot studies over the five-year window Expanding. DWR awarded 2021-22 funding and perhaps scaling back some of its planning ($20 million General Fund) to Turlock Irrigation and assessment activities. Should it decide District in February 2022 to install and study to make these reductions, the Legislature solar panels over several sections of its also could consider redirecting more of the irrigation canals. The district anticipates remaining funds from WCB to DWR. The starting construction in early 2023 and activities DWR is undertaking—climate risk completing it in 2024. The Governor’s assessments; development of frameworks, proposal to reduce the $15 million for similar toolkits, and performance metrics; and demonstration projects would give the state pilot studies—could be used to inform more time to see whether the Turlock project has effective and strategic spending on projects the desired results before it decides whether in the future. to fund additional pilots or expand solar • PFAs Support. Reducing this funding would panels over canals more broadly in the future. result in an overall decline from $200 million • Water Refilling Stations at Schools— to $100 million for PFAs support. Another Funding Reduction Would Not Cause Major funding source is available, however. The IIJA Disruptions. While the proposed $5 million is providing California with supplemental funds reduction would decrease funding explicitly of about $330 million over five years through for new water refilling stations at schools, the Drinking Water State Revolving Fund SWRCB’s broader Drinking Water for Schools (DWSRF) specifically to address “emerging Program, which also supports water refilling contaminants,” including PFAs. stations, would continue. This program was established in 2016 and has provided two Legislature Could Consider Additional rounds of grant funding to schools totaling Reductions. As the Legislature weighs additional $16.3 million to increase access to and/or budget solutions in response to a potentially improve the quality of their drinking water. worsening revenue picture, some programs it could SWRCB indicates that demand for this consider reducing—or reducing further—include: 34 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET • Water Resilience Projects (California support these types of projects. As such, Natural Resources Agency, CNRA). the state could continue to pursue its goals Recent budgets have provided a total of and focus on the needs of disadvantaged $445 million to CNRA over three years, communities even with a reduction in General including $180 million General Fund planned Fund support. for 2023-24, for water resilience projects • Multi-Benefit Land Repurposing in the Delta. This program is new and was (Department of Conservation, DOC). created with the funding provided in 2021-22. Recent budgets provided DOC with It allows the administration to select projects $90 million in 2021-22 and planned $20 million to implement voluntary agreements with water in 2023-24 for a new grant program to users. The purpose is to improve conditions support repurposing agricultural land for other for native fish species and maximize water beneficial uses. Such uses might include for human purposes, without necessitating dry farming, wildlife habitat, or groundwater stricter regulatory flow requirements. CNRA capture. The program is not needed to was given significant discretion over how to respond to immediate and urgent drought use these funds with few statutory parameters impacts and it is too early in its implementation or reporting requirements. The Legislature to know how effective it is at addressing could reduce or eliminate the 2023-24 amount longer-term land transition goals. As such, and instead request reporting and evaluation the Legislature could consider reducing or of the use of funds to date before providing eliminating the $20 million in 2023-24 and additional funds. collecting information about program design, • Drinking Water (SWRCB). Recent budgets demand, and outcomes before making any provided $1.7 billion General Fund to SWRCB future funding decisions. for drinking water projects. This includes • Additional Water Recycling Reductions providing financial assistance to small (SWRCB). Given the influx of federal IIJA and/or disadvantaged communities that dollars to the state’s CWSRF (which can be had projects underway to repair, upgrade, used for a variety of purposes, including or consolidate drinking water or wastewater water recycling projects), the Legislature systems. SWRCB thus far has committed could consider reducing the amount planned about $265 million of the $1.7 billion and for 2023-24 ($310 million) by more than the indicates it should reserve $400 million proposed $40 million. While this could mean to meet state matching requirements for that SWRCB might be unable to fully meet federal DWSRF funds. However, this leaves current demand for the program using state up to about $1 billion that could be reduced. funds, federal funds could help make up for While the activities funded by this program some of that gap. are important—for example, they help State Could Use Coordinated Approach in increase equitable access to safe, clean, and Seeking Reductions Within Habitat Programs affordable drinking water within vulnerable That Support Similar and Complementary communities—an unprecedented amount of Efforts. Recent state budgets have included federal funding currently is available for these and planned for numerous augmentations to purposes. This includes more than $2.5 billion support ecosystem health, habitat restoration, from IIJA over five years, on top of historical and fish and wildlife protection and resilience. grant levels, for DWSRF programs (including Such programs were funded in both the water and the aforementioned $330 million to address drought packages displayed in Figure 10, as well emerging contaminants). In addition, state as the nature-based activities package discussed statute requires an annual GGRF appropriation in more detail later in this report. Many of these (through 2030) to SWRCB of $130 million to programs have similar types of objectives, even if provide more flexible funding and grants to their specific areas of focus may differ somewhat. www.lao.ca.gov 35 2023-24 BUDGET The Legislature could look across these various DOC’s multi-benefit land repurposing, CNRA’s programs and consider them together when water resilience activities, DWR’s aqueduct pilot, deciding where to make needed reductions. and DWR’s watershed climate resilience planning While decreasing funding levels for some of these and assessments. Particularly if it were to reduce programs likely would mean completing fewer total funding for these programs, the various evaluations projects, taking a holistic approach about where and information would enable the Legislature to to cut and where to preserve funding could allow make more effective funding decisions in the future. the state to maintain complementary efforts and continue to pursue its overall habitat and ecosystem WILDFIRE AND goals in a more coordinated way. For example, FOREST RESILIENCE programs could be categorized thematically by their overarching goal, such as protecting native Recent and Planned fish/salmon populations. The state could then Funding Augmentations maintain funding for one or two of the programs Recent Budgets Committed $2.8 Billion that would most effectively achieve that goal, while for Wildfire and Forest Resilience Packages. potentially reducing funding for others. Figure 12 The state has made significant commitments describes the various programs included in in recent years to support wildfire resilience. recent funding packages that support similar and Most of this funding has been allocated as part complementary habitat restoration and wildlife of three budget packages: (1) an early action protection efforts. package adopted in April 2021 that amended Recommendations the 2020-21 Budget Act, (2) a 2021-22 Budget Act package, and (3) a 2022-23 Budget Act Modify Governor’s Proposals to Reflect package. As shown in Figure 13 on page 38, Legislative Priorities. Overall, we find the together, these augmentations total $2.8 billion Governor’s proposed reductions for water over four years—$526 million in 2020-21, and drought programs to be reasonable and $968 million in 2021-22, $630 million in 2022-23, therefore recommend the Legislature give them and $690 million planned for 2023-24. Of the careful consideration. The proposals do not take $2.8 billion total, $2 billion is from the General Fund funding away from the most urgent needs (such and the remaining $755 million is from GGRF. as responding to drinking water emergencies Funding Supports Various Programs or supporting water rights enforcement) and, and Activities. The wildfire and forest in some cases, federal funding is available for resilience packages commit funding to more similar purposes. Should the Legislature wish to than two dozen programs managed by various seek alternative or additional reductions, some state agencies, with CalFire receiving the of the particular modifications we recommend it largest share (about 60 percent). As shown consider include: (1) reducing rather than delaying in Figure 13, roughly 40 percent of the funding funding for watershed and PFAs support programs; over the four years—$1.1 billion—is to support (2) reducing or further reducing programs receiving programs designed to promote healthy forests federal IIJA funding, such as drinking water and landscapes, generally by removing and water recycling; (3) reducing or eliminating hazardous fuels. Just over one-quarter of 2023-24 funding for new programs such as DOC’s the funding—$766 million—is to support the multi-benefit land repurposing program and installation and maintenance of wildfire fuel breaks. CNRA’s water resilience activities; and (4) taking The remaining funds—totaling $909 million— a coordinated approach to reducing funding for are for projects to increase regional capacity wildlife habitat programs with similar activities for conducting forest health projects, as well as and goals. to encourage forest-sector economic stimulus, Consider Requiring Reporting and science-based forest management, and Assessment for New Programs. The Legislature community hardening. could require the administration to provide reporting and assessment of newer programs, such as 36 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Figure 12 Habitat Restoration and Wildlife Protection Programs Funded in Recent Budgets General Fund, Unless Otherwise Noted (In Millions) Funding Provided and Planned (2021-22 Through Program Department Description 2023-24) Water resilience projects (DRWR CNRA New program supporting projects to implement voluntary $445a package) agreements with water users in the Sacramento-San Joaquin Delta, improve conditions for native fish, and maximize water for human purposes without using flow regulations. Protect fish and wildlife from WCB Fish and wildlife protection projects, including land 353 changing climate conditions acquisition and restoration, invasive plants and species (NBA package) control, and wildlife corridors development. Streamflow enhancement WCB Grant program for projects to benefit fish and wildlife by 250 program (DRWR package) changing the amount, timing, or quality of stream flows, including by purchasing water or water rights. Various WCB programs (NBA WCB Support for planning, acquisition, and restoration 245 package) projects on natural and working lands. Habitat restoration (NBA package) DWR Multi-benefit habitat projects supporting efforts to reach 200 voluntary agreements on species protections and water flows in the Delta. Aquatic habitat and drought DWR Programs and projects, such as habitat restoration 122 resilience (DRWR package) projects, promoting recovery of native fish in the Sacramento-San Joaquin watershed. Resilience projects for fish and WCB Projects to construct, repair, modify, or remove 105 wildlife (DRWR package)b infrastructure to improve fish and wildlife passage. Salmon protection (DRWR CDFW Projects to protect, restore, and enhance riparian and 100 package)b aquatic salmon habitat, including restoring river channels and reconnecting flood plains. Fish and wildlife protection (DRWR CDFW Support to rehabilitate and shelter fish and wildlife at risk 75 package)b from drought conditions. Climate change impacts on CDFW Projects to benefit fish and wildlife by protecting instream 50 wildlife (NBA package) flows, purchasing water, and building conservation projects. Fisheries and wildlife support CDFW Support for fish and wildlife at-risk during drought, 33 (DRWR package)b including fish hatchery improvements and terrestrial and fish species monitoring and rescue. Climate induced hatchery CDFW Support for an assessment of existing fish hatcheries to 17 upgrades (DRWR package)b inform future planning and development efforts. Salmon study, tribal co- DWR, CDFW Support to study the reintroduction of salmon on the 7 management (DRWR package)b North Fork Feather River and for CDFW to work with tribal nations on fish passage above large dams. a Includes $125 from Proposition 68 (2018) bond funds. b Included as part of the “Fish and wildlife protection/study” item in Figure 10. DRWR package = funded in one of the Drought Response and Water Resilience packages; CNRA = California Natural Resources Agency; NBA package = funded in the Nature-Based Activities package; WCB = Wildlife Conservation Board; DWR = Department of Water Resources; and CDFW = California Department of Fish and Wildlife. www.lao.ca.gov 37 2023-24 BUDGET Figure 13 Recent and Planned Wildfire and Forest Resilience Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund, Unless Otherwise Noted (In Millions) Program Department 2020-21 2021-22 2022-23 2023-24 Totals Resilient Forests and Landscapes $204 $383 $272 $280 $1,139 Forest Health Programa CalFire $155 $160 $120 $120 $555 Stewardship of state-owned land Various 30 145 65 65 305 Post-fire reforestation CalFire — — 50 50 100 Forest Improvement Programa CalFire 10 40 11 14 75 Forest Legacy Programa CalFire 6 10 14 19 49 Tribal engagement CalFire 1 19 10 10 40 Reforestration nursery CalFire 2 9 2 2 15 Wildfire Fuel Breaks $148 $236 $190 $192 $766 Fire prevention grantsa CalFire $123 $120 $115 $117 $475 Prescribed fire and hand crewsa CalFire 15 49 35 35 134 CalFire unit fire prevention projects CalFire 10 40 20 20 90 Forestry Corps and residential centersa CCC — 27 20 20 67 Regional Capacity $119 $199 $55 $155 $528 Conservancy projects Various $69 $139 $35 $135 $378 Conservancies Regional Forest Capacity Program DOC 50 60 20 20 150 Forest Sector Economic Stimulus $25 $51 $72 $22 $170 Workforce training grants CalFire $6 $18 $15 $15 $54 Biomass to hydrogen/biofuels pilot DOC — — 50 — 50 Climate Catalyst Fund Program IBank 16 33 — — 49 Transportation grants for woody material CalFire — — 5 5 10 Market development OPR 3 — 2 2 7 Science-Based Management and Other $3 $79 $19 $19 $120 Monitoring and research CalFire $3 $20 $7 $8 $38 Remote sensing CNRA — 25 3 2 30 Prescribed fire liability pilot CalFire — 20 — — 20 Permit efficiencies CARB, SWRCB — 4 4 4 12 State demonstration forests CalFire — — 5 5 10 Interagency Forest Data Hub CalFire — 10 — — 10 Community Hardening $27 $20 $22 $22 $91 Home hardening OES, CalFire $25 — $13 $12 $50 Defensible space inspectors CalFire 2 $13 5 5 25 Land use planning and public education CalFire, UC ANR — 7 4 5 16 Totals $526 $968 $630 $690 $2,814 a Includes Greenhouse Gas Reduction Fund. CalFire = California Department of Forestry and Fire Protection; CCC = California Conservation Corps; DOC = Department of Conservation; IBank = California Infrastructure and Economic Development Bank; OPR = Governor’s Office of Planning and Research; CNRA = California Natural Resources Agency; CARB = California Air Resources Board; SWRCB = State Water Resources Control Board; OES = Governor’s Office of Emergency Services; and UC ANR = University of California Agriculture and Natural Resources. 38 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Packages Represented a Significant Increase General Fund support for: (1) the Climate Catalyst in State Funding for Wildfire Resilience. The Fund Program ($41 million), (2) stewardship of state historically has provided some baseline state-owned lands ($25 million), (3) workforce funding from the General Fund for wildfire training grants ($15 million), (4) defensible space prevention and resilience activities, typically in the inspections ($5 million), and (5) monitoring and tens of millions of dollars annually. However, the research ($5 million). Notably, the Governor state has greatly increased its funding for such proposes to replace $14 million of the General Fund activities in recent years. First, starting in 2017-18, for workforce training grants with Proposition 98 the state allocated roughly $200 million annually General Fund (for a net reduction of $1 million). from GGRF to support forest health and wildfire As part of this fund shift, the Governor proposes prevention. (As part of the 2021-22 budget, the to modify the eligibility for the program to limit it to Legislature made this a continuous appropriation community colleges, which are eligible to receive lasting from 2022-23 through 2028-29.) Second, the Proposition 98 funding. addition of one-time General Fund commitments Proposes to Retain Vast Majority of the in the packages discussed above represent Funding From Recent Packages. Despite the unprecedented state funding to support wildfire reductions discussed above, the Governor’s resilience efforts. Notably, even with these recent budget proposes to maintain almost all—roughly commitments, wildfire resilience still only accounts 97 percent—of the funding that has been for a relatively small share of CalFire’s overall committed in recent wildfire and forest resilience budget (under 15 percent in 2022-23 and 2023-24), packages. The administration indicates that it with the remainder of the department’s budget is prioritizing retaining funding for wildfire and almost entirely supporting wildfire response. forest resilience in recognition of the urgency of reducing the risk of catastrophic wildfires. Governor’s Proposals (Separately from these packages, the Governor’s Proposes a Few Programs for Reductions budget also proposes funding for some new and One Fund Shift. The Governor proposes a discretionary wildfire-related proposals, including few reductions in the area of wildfire resilience, for the construction of a new CalFire training center which would have a net impact of providing and the replacement of a conservation camp. $77 million less for five programs. As shown in We discuss these proposals in further detail in a Figure 14, the Governor proposes to reduce separate publication.) Figure 14 Governor’s Proposed Wildfire and Forest Resilience Budget Solutions 2020-21 Through 2023-24 (In Millions) Total General Fund Backfill With New Proposed Program Department Augmentations Reductions Fund Shift Amounts Programs Proposed for Solutions Stewardship of state-owned land Various $305 -$25 — $280 Workforce training grants CalFire 54 -15 $14a 53 Climate Catalyst Fund Program IBank 49 -41 — 8 Monitoring and research CalFire 38 -5 — 33 Defensible space inspectors CalFire 25 -5 — 20 Subtotals ($471) (-$91) ($14) ($394) All Other Wildfire and Forest Resilience Funding $2,343 — — $2,343 Totals $2,814 -$91 $14 $2,737 a Governor proposes to shift funding to Proposition 98. CalFire = California Department of Forestry and Fire Protection and IBank = California Infrastructure and Economic Development Bank. www.lao.ca.gov 39 2023-24 BUDGET Assessment • Reducing Funding for Stewardship of State Land Justifiable Given Delays in Relevant Wildfire Resilience Continues to Represent Regulations. We also find justification for an Urgent and Critical Issue. We find that the Governor’s proposal to partially reduce prioritizing maintaining support for programs funding for stewardship of state-owned land. aimed at improving the state’s resilience to CNRA departments—such as the Department wildfires has merit. California has experienced a of Parks and Recreation (Parks), CDFW, and pattern of increasingly severe wildfires in recent CalFire—had planned to use the $25 million decades, driven by climate change and poor in funding now proposed for reduction to help forest management. These wildfires have had bring their buildings in high fire-risk zones major consequences for local communities and into compliance with new defensible space the broader state, including loss of life, property, regulations required by Chapter 259 of 2020 and habitats. Furthermore, the scale of the effort (AB 3074, Friedman). However, the relevant that will be required to make the state resilient to regulations have not yet been promulgated, wildfires is so large—involving treating millions so CNRA indicates the funding is not yet of acres and protecting millions of homes in high necessary. Additionally, Parks and CDFW fire-risk areas over the coming years—that it will have received other allocations of funding take significant, sustained funding to accomplish. for stewardship of state-owned land that the Accordingly, we think it makes sense to be selective Governor is not proposing to reduce, which about reductions to wildfire and forest resilience they could use to support these compliance funding to continue the state’s efforts in this area. efforts. We note, however, that maintaining Most Proposed Solutions Appear required defensible space around state Reasonable. While all of the Governor’s proposed facilities is a core state responsibility and has wildfire and forest resilience-related solutions important safety implications. Accordingly, come with trade-offs, on balance, we find most should the Legislature adopt this proposed to be reasonable in light of the state’s anticipated reduction, it may want to consider providing budget challenges. funding in a future year should departments • Climate Catalyst Program Is New and determine it is needed to ensure safety Untested. The intent of the new Climate and compliance. Catalyst Fund Program is to provide • Shift of Workforce Training to low-interest rate loans to private-sector Proposition 98 Worth Considering Given projects—such as building materials General Fund Condition. On balance, we manufacturing and energy generation—that also find that shifting funds for workforce use materials remaining from fuel reduction training to Proposition 98 merits consideration projects, with the ultimate goal of creating as a budget solution. Community colleges a sustainable wood products market. While have received a portion of the past grant funding was initially allocated in 2020-21, funding from this CalFire program ($2.3 million the program has taken time to launch and of $18 million appropriated in 2021-22 from no awards have been made thus far. Given the General Fund outside of Proposition 98). this, reducing funding for this program likely Additionally, community colleges already would be less disruptive than for some other play an important role in helping develop programs that already are well underway. the forestry workforce. Currently, eight Additionally, as this is a new activity, the community colleges offer two-year degree program’s effectiveness in achieving its stated and/or certificate programs in forestry, and goals is unclear. Reducing the funding for this 55 colleges offer them in fire technology or program should still allow it to support one wildland fire technology. Together, these or two pilot projects. The Legislature could colleges have granted about 100 forestry consider adding funding in a future year if associate degrees and certificates, as well as evidence suggests the program is successful about 2,500 fire and wildland fire technology at achieving its goals. 40 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET associate degrees and certificates annually Legislature Could Consider Making in recent years. Given the existing role Reductions to Some Other Programs. The community colleges play in this area and Legislature could consider making some other their past history of receiving grant funds targeted reductions, in place of or alongside those under this program, providing them with proposed by the Governor. Two programs we think workforce training grant funds would take could be potential candidates for reduction include: advantage of their expertise and experience. • Transportation of Woody Biomass. The We note that despite this, limiting grants to budget provided $5 million in 2022-23 and community colleges could exclude some committed $5 million more for 2023-24 to potentially worthwhile recipients from the develop a new program aimed at reducing the program. Also, shifting these costs to costs of transporting woody biomass, with the Proposition 98 would mean fewer resources goal of reducing combustible material left in available for other eligible activities using the state’s forests. We think it is worthwhile to that fund source. However, we think these consider making reductions to this program trade-offs are reasonable given available for a few reasons. First, it is new and thus Proposition 98 resources, workforce how effective it will be at improving the state’s development goals, and the General Fund resilience to wildfires is uncertain. Second, (non-Proposition 98) condition. some of the state’s existing programs already Proposed Reduction to Defensible Space support the transportation of woody biomass. Inspector Funding Raises Potential Concerns. For example, CalFire’s Wildfire Prevention While most of the Governor’s proposed solutions grant program has provided about $70 million appear reasonable, we have identified one that annually over the past two grant cycles in part raises some potential concerns. Specifically, the for this same activity. The extent to which this Governor proposes to reduce funding for CalFire new program is needed is therefore not clear. defensible space inspectors by $5 million. These We think retaining the $5 million appropriated inspectors are tasked with assessing homeowner in 2022-23 for this program would be compliance with the state’s defensible space reasonable, since CalFire has already released requirements in certain areas of the state. As we the grant solicitation. However, the Legislature noted in our September 2021 report, Reducing could eliminate the $5 million commitment for the Destructiveness of Wildfires: Promoting 2023-24. In so doing, the Legislature could Defensible Space in California, CalFire has treat the initial $5 million as a pilot and then consistently failed to meet its goal of conducting decide whether to expand the program at defensible space inspections on each eligible parcel a later date based on whether it is able to at least once every three years. Inspections play a demonstrate cost-effectiveness at improving valuable foundational role in the state’s defensible wildfire resilience. space program and can help the state track and • Home Hardening. The Legislature could also evaluate its efforts to promote compliance with consider reducing a new pilot program to these safety requirements. Additionally, inspectors provide financial assistance to homeowners can help to educate homeowners about activities in a few communities to conduct home they can conduct to make their homes safer from hardening activities. The Legislature initiated wildfires. Accordingly, we have recommended this pilot program through the passage increased ongoing resources for CalFire defensible of Chapter 391 of 2019 (AB 38, Wood). inspections. The Governor’s proposed reduction This legislation also required a report runs counter to this recommendation, and we are to be completed by 2024 assessing the concerned it could impede the effectiveness of the cost-effectiveness of defensible space state’s efforts to encourage properties to maintain and home hardening compared to other defensible space. activities to help facilitate the Legislature’s evaluation of the effectiveness of the pilot. www.lao.ca.gov 41 2023-24 BUDGET The initial $25 million for this program was Recommendations provided in 2020-21. However, the process Modify Governor’s Wildfire Proposal of developing the program has been lengthy Consistent With Legislative Priorities. We and no awards have been made to date. recommend the Legislature develop its own Currently, the administration indicates that package of budget solutions based on its priorities it anticipates providing funding for the first and the guiding principles we identify in this report. round of pilot communities this spring. As it does so, we suggest the Legislature be The Legislature could consider decreasing judicious about targeting any reductions in the area the funding for this program—such as of wildfire and forest resilience, given its overall by reducing or eliminating the combined urgency and importance. Based on our review, $25 million in 2022-23 and 2023-24 for a we think it is reasonable for the Legislature to future round of pilot communities—given that consider adopting most of the Governor’s proposed it is in the early stages of implementation reductions since they align with many of the and no outcome data is yet available. principles we identify in this report. We do, however, It could then decide whether to expand it recommend the Legislature consider rejecting the based on whether the program is able to Governor’s proposed reduction of $5 million for demonstrate cost-effectiveness at improving defensible space inspectors given the foundational wildfire resilience. value they play in educating homeowners and Potential for Some Federal Funds to Support promoting data collection and compliance with state Wildfire Resilience, but Details Lacking. The defensible space laws. We also recommend the IIJA and the Inflation Reduction Act included Legislature consider adopting additional solutions, substantial funding to support forestry and wildfire either in place of or in addition to those proposed resilience. The details of much of this funding, by the Governor. The home hardening grant and including how much California will receive, still are transportation of woody biomass are two examples emerging. However, in some cases, it appears of programs we think are potential candidates for the legislation supports activities similar to those reductions. By reducing but not eliminating their the state committed to funding. For example, the funding, the Legislature could gain information on Inflation Reduction Act includes a total of over their effectiveness before determining whether to $3 billion for several programs aimed at conserving expand them. The potential availability of federal private forestlands and managing vegetation on funds to support similar purposes could mitigate federal, state, and private lands, among other the impacts of potential reductions. Since the activities. Additionally, IIJA provides the U.S. Forest details about these funds are still emerging and Service with close to $3 billion to support various departments are often well-positioned to secure activities that reduce the risk of wildland fire and timely information, we recommend that the restore ecosystems on federal forestlands, as well Legislature request updates from the administration as an additional $1 billion for a new competitive in the spring on the funding that departments are grant program to assist at-risk communities in tracking and how it aligns with state commitments planning for and mitigating wildfire risk. It will be for similar purposes. important for the Legislature to understand more NATURE-BASED ACTIVITIES about how these federal programs align with state investments, which may become clearer by the AND EXTREME HEAT spring. To the extent federal funding mirrors the same types of activities, it could help to partially Recent and Planned mitigate state reductions. Funding Augmentations Recent Budgets Committed $1.6 Billion for Nature-Based Activities. As shown in Figure 15, recent budgets have committed a total of $1.6 billion on a one-time basis over three years—$106 million 42 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET in 2021-22, $1 billion in 2022-23, and $421 million managing land for conservation and habitat intended for 2023-24—from the General Fund for restoration-related purposes. Just over one-quarter various departments to implement a variety of of the funding—$403 million—is to support wildlife nature-based activities. While most of this funding protection programs. Just under one-quarter of was included as part of a 2022-23 budget package the funding—$383 million—is for regionally focused on nature-based activities, some was part focused programs, such as those targeting of a 2021-22 package focused on climate resilience. specific areas of the state. The remaining funding— Nature-Based Activities Funding Supports totaling $284 million—is for youth and tribal a Variety of Programs. About one-third of the programs, wetland-focused programs, and other funding over the three years—$495 million—is types of activities. Many of the funded programs to support programs focused on acquiring and are intended to help the state achieve various goals Figure 15 Recent and Planned Nature-Based Activities Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund (In Millions) Program Department 2021-22 2022-23 2023-24 Totals Land Acquisition and Management Programs — $325 $170 $495 Various WCB programs WCB — $150 $95 $245 Habitat restoration DWR — 125 75 200 Opportunity coastal acquisition SCC — 50 — 50 Wildlife Protection Programs $46 $257 $100 $403 Protect wildlife from changing conditions WCB $31 $222 $100 $353 Climate change impacts on wildlife CDFW 15 35 — 50 Regionally Focused Programs $60 $214 $109 $383 Conservancy funding Various $60 $70 $100 $230 Wildlife corridors (including Liberty Canyon) CDFW, SMMC — 52 — 52 San Joaquin Valley flood plain restoration WCB — 40 — 40 Natural Community Conservation Program CDFW Planning and Land Acquisition — 36 — 36 Climate Smart Land Management Program DOC — 14 6 20 Resource conservation strategies WCB — 2 3 5 Youth and Tribal Programs — $109 $42 $152 Local and tribal NBS corps programs CCC — $38 $11 $49 Tribal program CNRA — 70 30 100 Tribal staffing CNRA — 1 1 3a Wetland Focused Programs — $111 — $111 Wetlands Restoration Program CDFW — $54 — $54 NBS Wetlands Restoration Program DC — 36 — 36 San Francisco Bay wetlands support SCC — 11 — 11 Redondo Beach wetlands restoration CNRA — 10 — 10 Other Programs — $20 — $21 Cal CIS CNRA — $18 — $18 Partnerships and improvements CNRA — 2 — 2 California nature support CNRA — 0.3 $0.3 0.5 Totals $106 $1,036 $421 $1,565 a NBS package also provided $1 million in 2024-25. WCB = Wildlife Conservation Board; DWR = Department of Water Resources; SCC = State Coastal Conservancy; CDFW = California Department of Fish and Wildlife; SMMC = Santa Monica Mountains Conservancy; DOC = Department of Conservation; NBS = nature-based solutions; CCC = California Conservation Corps; CNRA = California Natural Resources Agency; DC = Delta Conservancy; and Cal CIS = California Climate Information System. www.lao.ca.gov 43 2023-24 BUDGET and plans established by the administration over in 2022-23, and $322 million in 2023-24—for the past few years, such as the goal to conserve various departments to address the risks posed 30 percent of the state’s land and coastal waters by by extreme heat. These activities are displayed in 2030 (“30x30”) as established by the Governor’s Figure 16. Almost all of this funding comes from Executive Order N-82-20 and the Natural and the General Fund, but a small portion—$15 million Working Lands Climate Smart Strategies. for the Farmworker Low-Income Weatherization Nature-Based Activities Represent Area Program—comes from GGRF. Notably, while most of of Expanded Focus. This funding represents a this funding was part of a 2022-23 budget package significant increase in General Fund support for focused on addressing extreme heat, some was also nature-based programs. Some of the specific included as part of a 2021-22 package focused on programs shown in Figure 15 support activities that climate resilience. the state has historically undertaken—often using Extreme Heat Funding Supports Variety of general obligation bond funds or GGRF—such as Programs. About 60 percent of the funding over the habitat and wetland restoration. However, some four years—$460 million—is to support programs programs are new, such as the Local and Tribal to expand green spaces in urban areas, schools, Nature-Based Solutions (NBS) Corps programs and and childcare centers. Just under one-quarter the Climate Smart Land Management Program. of the funding—$175 million—is for a program Recent Budgets Committed $749 Million for intended to help communities prepare for the Extreme Heat. Recent budgets have committed impacts of extreme heat. The remaining funding— a total of $749 million over four years—$10 million totaling $115 million—is for programs to support in 2020-21, $70 million in 2021-22, $348 million weatherizing housing occupied by individuals with Figure 16 Recent and Planned Extreme Heat-Related Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund, Unless Otherwise Noted (In Millions) 2020-21 and Program Department 2021-22 2022-23 2023-24 Totals Greening Programs $80 $237 $143 $460 Urban Greening Program CNRA $50 $100 $100 $250 Urban Forestry Program CalFire 30 20 10 60 Green Schoolyards Program CalFire — 117a 33 150 Community Resilience — $50 $125 $175 Extreme Heat and Community Resilience Program OPR — $50 $125 $175 Weatherization Programs — $40 $25 $65 Low-Income Weatherization Program CSD — $25 $25 $50 Farmworker Low-Income Weatherization Program CSD — 15b — 15 Education and Outreach Programs — $20 $28 $48 Protections for vulnerable populations CDPH, DIR, CDSS — $14 $14 $28 Community-based public awareness campaign OPR — 6 14 20 Agricultural Programs — $1 $1 $2 Animal Mortality Management Program CDFA — $1 $1 $1 Origin Inspection Program CDFA — 0.3 0.3 0.5 Totals $80 $348 $322 $749 a Includes $100 million for the Urban Forestry Program for schools and childcare facilities provided through a budget control section. b Funded from the Greenhouse Gas Reduction Fund. CNRA = California Natural Resources Agency; CalFire = California Department of Forestry and Fire Protection; OPR = Governor’s Office of Planning and Research; CSD = Department of Community Services and Development; CDPH = California Department of Public Health; DIR = Department of Industrial Relations; CDSS = California Department of Social Services; and CDFA = California Department of Food and Agriculture. 44 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET lower incomes, conduct education and outreach alternative sources such as general obligation bonds on extreme heat for certain vulnerable populations, or GGRF. Some of the funding displayed in Figure 16 and mitigate the impacts of extreme heat in pest and is to augment existing programs and activities to add livestock management. a focus on extreme heat. For example, funding is Extreme Heat Represents New Area of State included for the Department of Industrial Relations Focus. Historically, the state has not provided to expand its existing outreach, education, and significant funding explicitly to mitigate the strategic enforcement efforts to improve worker impacts of extreme heat. The package includes protections from heat-related illnesses. Finally, some existing, expanded, and new activities. Some of of the augmentations are supporting the creation of the recently funded programs—such as the Urban new programs. For example, the Extreme Heat and Greening Program, Urban Forestry Program, and Community Resilience Program is a new program Low-Income Weatherization Program—represent at the Governor’s Office of Planning and Research existing activities that have received support from (OPR) aimed at helping communities prepare for the the state in the past, however, these programs impacts of extreme heat. have not historically focused narrowly on the goal Governor’s Proposals of addressing extreme heat. Rather, they have had other core goals—such as enhancing landscapes or Proposes Several Programs for improving energy efficiency—but they can also help Reductions. The Governor proposes some notable reductions in the areas of nature-based with heat mitigation. Previous funding typically was not provided from the General Fund, but rather from activities and extreme heat, as shown in Figure 17. Figure 17 Governor’s Proposed Nature-Based Activities and Extreme Heat-Related Reductions (In Millions) Proposed Reductions 2020-21 New Total Through Proposed Program Department Augmentations 2022-23 2023-24 Total Amounts Nature-Based Activities Programs Proposed for Solutions Conservancy funding Various $230 — -$100 -$100 $130 San Joaquin Valley flood plain restoration WCB 40 -$40 — -40 — Protect wildlife from changing conditions WCB 353 — -35 -35 318 Local and tribal NBS corps programs CCC 49 -13 -11 -24 26 San Francisco Bay wetlands support SCC 11 -10 — -10 1 Natural Community Conservation Program CDFW 36 -6 — -6 30 Planning and Land Acquisition Climate Smart Land Management Program DOC 20 -4 — -4 16 Subtotals ($739) (-$73) (-$146) (-$219) ($520) All Other Nature-Based Activities Funding 826 — — — 826 Nature-Based Activities Totals $1,565 -$73 -$146 -$219 $1,346 Extreme Heat Programs Proposed for Solutions Urban Greening Program CNRA $250 — -$100 -$100 $150 Extreme Heat and Community Resilience OPR 175 -$25 -50 -75 100 Program Urban Forestry Program CalFire 60 -20 -10 -30 30 Subtotals ($485) (-$45) (-$160) (-$205) ($280) All Other Extreme Heat Funding 264 — — — 264 Extreme Heat Totals $749 -$45 -$160 -$205 $544 WCB = Wildlife Conservation Board; NBS = Nature-Based Solutions; CCC = California Conservation Corps; SCC = State Coastal Conservancy; CDFW = California Department of Fish and Wildlife; DOC = Department of Conservation; CNRA = California Natural Resources Agency; OPR = Governor’s Office of Planning and Research; and CalFire = California Department of Forestry and Fire Protection. www.lao.ca.gov 45 2023-24 BUDGET Specifically, for nature-based activities, the Reductions to Conservancies Make Sense largest reduction proposed—$100 million—is for Given Other Recent Funding. Because of their funds slated for various conservancies across access to significant other funding, we think the state. Some other notable reductions include: the Governor’s proposal to reduce $100 million (1) eliminating $40 million for WCB for San Joaquin for nature-based activities by various state Valley floodplain restoration, (2) reducing $35 million conservancies merits legislative consideration. from funding for a WCB program to mitigate climate In addition to the $130 million that conservancies change impacts on wildlife, and (3) reducing would retain for nature-based activities from this $24 million from funding to establish a new program package, they also received substantial funding as to support nature-based activities undertaken by part of the wildfire and forest resilience package the state’s 14 local conservation corps. ($378 million) which the Governor does not propose For extreme heat, the Governor proposes reducing. Thus, even with the proposed reductions, reductions to three programs. The largest is conservancies still would receive significant $100 million from the Urban Greening Program, a funding to support key priority activities in their longstanding program that funds plans and projects regions. This represents a substantial increase in aimed at developing additional green spaces (such conservancy funding compared to historical levels, as by adding trees or drought-tolerant plants). as well as a shift toward greater use of General Significant reductions are also proposed for the new Fund support than has been the case in the past. Extreme Heat and Community Resilience Program (Conservancies have traditionally relied heavily on ($75 million out of $175 million) and $30 million from general obligation bond funding.) the Urban Forestry Program, which is a longstanding Given Significant Funding Proposed Across program managed by CalFire that focuses on Multiple Programs, Could Consider Additional supporting tree planting in local communities. Reductions to WCB Habitat Restoration Proposes to Retain Most of the Funding That Program. We also think it is reasonable for the Was Previously Committed. While the Governor Legislature to adopt the Governor’s proposed reduces a larger share of funding for nature-based reductions to WCB’s efforts to protect wildlife from activities and extreme heat as compared to most changing conditions. Notably, the Governor only of the other thematic areas, the proposal still would proposes to reduce this program by $35 million, maintain most of it. Specifically, the Governor leaving over $300 million for these activities. proposes to maintain 86 percent of the funding Additionally, as we discuss in further detail in the for nature-based activities. This includes retaining earlier “Water and Drought” section of this report 94 percent of the funding already appropriated (in and below, these activities are similar to several 2021-22 and 2022-23) and 65 percent of funding others that are proposed for funding in both the planned for 2023-24. The Governor also proposes to nature-based activities and water and drought maintain 73 percent of the funding for extreme heat. packages, and thus the Legislature may even want This includes retaining 89 percent of the funding to consider adopting additional reductions to these already appropriated (in 2020-21 through 2022-23) programs beyond those proposed by the Governor. and half of the funding planned for 2023-24. Reduction of Funding for Local Corps Reasonable Given Access to Other Funding. Assessment The recent budget package established two new None of the Governor’s proposed solutions are activities for the California Conservation Corps: without trade-offs. However, on balance, we think (1) $36 million to support nature-based work the Governor’s proposals generally are reasonable at the 14 existing local conservation corps and in light of the state’s anticipated budget challenges. (2) $13 million to establish a new Tribal NBS Corps Below, we discuss several of these proposals, as and provide related administrative support. The well as other potential reductions we think could Governor proposes reducing the first by $24 million warrant consideration. (retaining $12 million) and leaving the second unaffected. Reducing the dedicated funding for local 46 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET conservation corps may result in them completing Urban Forestry from $60 million to $30 million, there fewer nature-based projects than they might would still be a significant amount—$180 million— otherwise. However, local corps still have access available for these programs. Additionally, these to their typical funding sources, such as grants two programs are similar to the Green Schoolyards (including from other state programs) and payments program, which the Governor proposes to fully for their work, that can allow them to continue to maintain at $150 million. Accordingly, under the complete activities, including some similar types Governor’s proposed approach, the state still of projects. Accordingly, we think the Governor’s would maintain $330 million for greening-related proposed reduction merits legislative consideration. programs. Notably, as we discuss in greater detail Scaling Back Climate Smart Land below, these types of programs are also candidates Management and Extreme Heat and Community for some other potential funding sources, such as Resilience Programs Could Provide Time to federal funds, which could help mitigate some of the Evaluate Results of Initial Funding. We also find impacts should their state funding be reduced. merit in the Governor’s proposal to reduce funding Legislature Could Consider Making for DOC’s Climate Smart Land Management Reductions to Some Other Programs. To the Program by $4 million (from $20 million to extent the Legislature needs to identify additional $16 million) and OPR’s Extreme Heat and solutions, either because the budget condition Community Resilience Program by $75 million (from worsens in the coming months or because it $175 million to $100 million) and think the Legislature would like alternatives to some of the Governor’s could consider making even deeper reductions to proposals, it has various options to consider. these programs. These are both new initiatives first In particular, the Legislature could make more funded in the current year. As new programs, the significant reductions than the Governor proposes Legislature does not yet have information on their to funding for programs or projects in 2023-24 or effectiveness or demand for funding. The Legislature subsequent years. For both nature-based activities could consider reducing more funding than the and extreme heat activities, the Governor only Governor proposes and treating the remaining proposes to reduce half or less of the funding amount as a more limited pilot effort. It could intended for 2023-24. Since this funding has not yet then evaluate the outcomes of that funding before been appropriated, it has not yet been committed to deciding whether it is worthy of future support. specific projects, and as such, making reductions For example, for Climate Smart Land Management, would generally be less disruptive. Some examples the Governor proposes to reduce $4 million from of specific programs that we think are reasonable the amount provided in 2022-23, but the Legislature for the Legislature to consider reducing, in addition could also opt to not provide the $6 million intended to those discussed above, include: for 2023-24, for a total reduction of $10 million. • WCB’s Various Programs, DWR’s Habitat Similarly, for the Extreme Heat and Community Restoration, and CDFW’s Program to Resilience Program, the Governor proposes to Mitigate Climate Change Impacts on reduce $25 million from the amount provided in Wildlife. As discussed above and in the 2022-23 and $50 million from the amount intended “Water and Drought” section of this report, for 2023-24, but the Legislature could choose to these programs support activities with eliminate the remaining $75 million intended for similar objectives, even if their specific areas 2023-24, for a total reduction of $150 million. of focus differ somewhat. The Legislature Proposed Urban Greening and Forestry could reduce funding levels for some of Reductions Still Would Leave Substantial these programs, including the amounts that Funding for Similar Purposes. We also find a would be appropriated in 2023-24. While compelling rationale for the Governor’s proposal this would mean fewer projects completed, to reduce funding for Urban Greening and Urban other complementary efforts still would Forestry. While funding would decline for Urban be underway. Greening from $250 million to $150 million and for www.lao.ca.gov 47 2023-24 BUDGET • State Coastal Conservancy’s (SCC’s) above program, this office has base funding Coastal Acquisitions. SCC has not yet for general communications about important identified specific properties for which it would state issues. The Legislature could retain use this funding. This uncertainty makes it the $6 million that was provided for the difficult to conclude that this funding meets public awareness campaign in 2022-23, but an urgent need and that its planned usage eliminate the $14 million planned for 2023-24. should be a high priority for the state’s limited This would enable the Legislature to treat resources. Given the lack of clarity around the 2022-23 funding as a pilot and evaluate the demand for, timing of, and specific use of its effectiveness—and relationship to other this funding, we find it to be a good candidate OPR activities—prior to determining whether for reducing. additional funding is merited. • CNRA’s Tribal NBS Program. This is a new Potential for Other Funding Sources to program aimed at helping facilitate access, Replace or Help Offset Loss of General Fund. co-management, and ancestral land return. As the Legislature considers its preferred mix of None of the $70 million provided in 2022-23 solutions, it will be important to consider other has yet been allocated and the $30 million sources of potential funding that may be available to intended for 2023-24 has not yet been support similar activities. Some additional sources appropriated. While providing funding to could include: support tribes has merit in light of historical • Federal Funds. Recent federal infrastructure injustices, the specific activities that will be bills have included funding to support some supported with this funding still are unclear similar activities. Specifically, the Inflation because CNRA still is in the process of Reduction Act provided $1.5 billion for the consulting with tribes to develop the program. United States Forest Service’s Urban and The Legislature could provide a lesser amount Community Forestry Program and $3 billion of funding to get the program started. It could to the U.S. Environmental Protection then consider restoring some of the funding Agency to mitigate extreme heat and other at a later date should the final structure climate-related risks. Additionally, IIJA provided and details of the program be consistent $3.5 billion for a weatherization assistance with legislative priorities. Alternatively, if program. The details around this funding, the Legislature considers this effort a high including how much California will receive, still near-term priority, it could consider retaining or are emerging. However, to the extent federal delaying—rather than reducing—the funding, funding aligns with the same types of activities and providing additional statutory direction on as state funding, state reductions could be the use of the funds. partially mitigated by similar federally funded • OPR’s Community-Based Public Awareness activities. Additional details on available Campaign. This is a new program to conduct federal funding should be available in the a public awareness campaign about the coming months. risks of extreme heat, focused on vulnerable • Proposition 98 General Fund. CalFire’s communities. While a greater state focus program to green schoolyards could potentially on mitigating the effects of extreme heat is be funded through Proposition 98. A key warranted given the health risks it poses, trade-off associated with using school funds particularly to vulnerable groups, this particular to support this program is that less would program is new and thus its effectiveness be available to support other Proposition 98 is uncertain. Moreover, starting in 2022-23, priorities. However, shifting funding for this OPR also received a separate $65 million program to Proposition 98 would reduce ongoing annual General Fund augmentation pressure on non-Proposition 98 General Fund to establish and operate an Office of resources, so it is worthy of consideration. Community Partnerships and Strategic Communications. In addition to running the 48 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET • GGRF. Some activities—such as wetlands As the Legislature makes its choices regarding restoration, urban greening, and low-income which programs to target for solutions, we weatherization—have been funded by GGRF recommend that it consider other potential sources in the past. A key trade-off associated with of available funding, such as Proposition 98, GGRF, using GGRF for these activities is that it and federal funds. While many of these sources of would mean less of those funds available to funds come with trade-offs, they could enable the support other programs. (As noted elsewhere Legislature to maintain funding for more high-priority in this report, the administration is already programs while also reducing pressure on the proposing to use GGRF to offset some other General Fund. General Fund augmentations, mostly for ZEV-related programs.) COMMUNITY RESILIENCE • Potential Future Bond. As noted previously, Recent and Planned some of the types of activities and programs funded in the nature-based activities Funding Augmentations and extreme heat areas are consistent Recent Budgets Included Significant New with those that have been funded in past Funding for Community-Based Climate Activities. general obligation bonds. Accordingly, if the As shown in Figure 18 on the next page, recent Legislature decides to pursue asking voters to budgets have included $2.2 billion for programs approve a resources-related bond in the future, primarily focused on helping communities address it could consider including some or all of these the causes and impacts of climate change. This total activities if they are high legislative priorities. consists of $1.5 billion appropriated through the last two budgets and $715 million intended for 2023-24. Recommendations About two-thirds of the funding across the three Modify Governor’s Proposals Consistent years is from the General Fund ($1.4 billion), with With Legislative Priorities, Identify Additional the remainder ($760 million) from GGRF. As shown, Potential Solutions. We recommend the the largest share of funding ($930 million) is for the Legislature develop its own package of budget AB 617 program, which funds efforts to reduce solutions based on its priorities. Based on our pollution and improve air quality in highly impacted review, we think it is reasonable for the Legislature communities. This is an existing program established to consider adopting the Governor’s proposed in 2017—through Chapter 136 (AB 617, C. Garcia)— reductions for nature-based activities and extreme that has historically been supported using GGRF. heat since they align with many of the principles we The same is true for the Transformative Climate identify in this report. Communities (TCC) program, which began in 2018 and funds community-led development We also recommend the Legislature consider and infrastructure projects. The three years of adopting additional solutions, either in place of augmentations displayed in the figure represent the or in addition to those proposed by the Governor. first time the TCC program is funded with General As it does so, we recommend the Legislature focus Fund instead of GGRF. mostly on reducing planned funding for 2023-24 in order to minimize potential disruptions. Some In contrast to AB 617 and TCC, most of the other specific areas that we think merit consideration for programs displayed in the figure represent new potential reduction include: WCB, DWR, and CDFW activities that the state is initiating for the first time with programs with similar objectives; SCC’s coastal this funding. This includes the Community Resilience acquisitions; and OPR’s community-based public Centers Program (which will support new construction awareness campaign. The Legislature could also and upgrades of neighborhood-level resilience consider reducing or delaying funding for CNRA’s centers to provide shelter and resources during Tribal NBS Program until more details have been climate and other emergencies) and the Regional developed regarding how funds will be used. Climate Resilience Program (which will provide grants for local entities to plan and implement regional projects that respond to their greatest climate risks). www.lao.ca.gov 49 2023-24 BUDGET Figure 18 Recent and Planned Community Resilience Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund, Unless Otherwise Noted (In Millions) Program Department 2021-22 2022-23 2023-24 Totals AB 617 program CARB $320a $310b $300 $930 Transformative Climate Communities Program SGC 115 165 140 420 Community Resilience Centers SGC — 110 160 270 Regional Climate Resilience Program OPR 25 125 100 250 Methane monitoring satellites CARB — 105a — 105 Community air monitoring CARB — 30a — 30 Climate Adaptation and Resilience Planning Grants OPR 10 10 5 25 Environmental Justice Initiative CalEPA 10 10 5 25 Fifth Climate Assessment Various 22 — — 22 Regional Climate Collaboratives SGC 10 10 — 20 School ventilation upgrades (CalSHAPE) CEC — 20a — 20 CA Volunteers: Climate Action Corps OPR 5 5 5 15 Fluorinated Gas Reduction Incentive Program CARB — 15 — 15 High-GWP Refrigerants CARB — 10a — 10 Vulnerable Communities Platform and CalAdapt Mapping OPR 5 — — 5 Wood stove replacements CARB — 5a — 5 Regional planning for lithium extraction CEC — 5 — 5 Totals $522 $935 $715 $ 2,172 a Funded from the Greenhouse Gas Reduction Fund (GGRF). b Includes $270 million from GGRF. AB 617 = Chapter 136 of 2017 (AB 617, C. Garcia); CARB = California Air Resources Board; SGC = Strategic Growth Council; OPR = Governor’s Office of Planning and Research; CalEPA = California Environmental Protection Agency; CalSHAPE = California Schools Healthy Air, Plumbing, and Efficiency Program; CEC = California Energy Commission; and GWP = Global Warming Potential. Governor’s Proposals • AB 617 Program Reduction and Fund Shift. The Governor proposes to eliminate Proposes Funding Changes for Four the full $300 million in planned General Fund Programs, $280 Million Total Net Reduction. spending for this program in 2023-24, but Figure 19 displays the Governor’s proposed then uses $250 million from GGRF to mostly changes for community-based climate programs. make up for this loss, resulting in a $50 million The Governor selects the four largest programs net reduction. The administration states it is for achieving General Fund savings and leaves the uncertain exactly how it would implement this remaining 13 programs unaffected. The proposals reduction (such as whether it would result in would reduce General Fund support for three of fewer grantees or decreased grant amounts the programs by a combined $530 million (although for the same number of grantees). proposes to shift $250 million from GGRF to mostly backfill one program) and delay a share of funding • TCC Reduction. The Governor proposes for one program by one year without a net change reducing $65 million from the 2022-23 in overall resources. When accounting for the appropriation and $40 million from planned proposed GGRF fund shift, the Governor’s budget 2023-24 funding for a net reduction of would result in a total net programmatic reduction $105 million. This would leave the program of $280 million, leaving a three-year total of with $100 million annually in both the current $1.9 billion (87 percent) to support the community and budget years. The administration resilience programs displayed in Figure 18. estimates this reduction would result in a total The specific proposals are as follows: of between five and ten fewer communities receiving TCC funds, as well as reduced 50 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET implementation grant amounts for continuing Proposes Doubling Funds for California grantees. The administration notes that Volunteers Climate Action Corps. In addition applicants could apply instead to a similar new to his proposed reductions for the four large federal program. programs, the Governor also proposes two • Community Resilience Centers Delay. changes for the California Volunteers Climate Action The Governor delays $85 million of the Corps program. This program, which provides $160 million in planned spending for this stipends for local community members to organize program from 2023-24 to 2024-25. This would volunteer climate change-fighting efforts, was achieve General Fund savings in the budget approved on a pilot basis with $4.7 million General year but shift those costs to the next year. Fund per year from 2021-22 through 2025-26. The program still would retain $75 million to The Governor proposes (1) doubling funding for this spend in 2023-24 and would not experience program, resulting in additional $4.7 million annual a net funding reduction across the two fiscal General Fund costs from 2023-24 through 2025-26, years. The administration estimates the and (2) making the program permanent rather than proposed delay would not have programmatic limited term, ultimately resulting in an ongoing impacts, but rather would allow potential $9.3 million annual General Fund cost. grantees more time to develop competitive Assessment proposals before applying for funds. Governor’s Focus on Larger Programs • Regional Climate Resilience Program Is Appropriate. We find that the Governor’s Reduction. The Governor proposes approach of focusing budget solutions on large reducing $25 million from the 2022-23 community resilience programs and leaving the appropriation and $100 million from planned smaller programs unaffected has merit. With 2023-24 funding, for a total net reduction one exception—methane monitoring satellites, of $125 million. This would retain half which we discuss next—all of the unaffected of the three-year planned total amount. programs displayed in Figure 18 received less The administration estimates this reduction than $30 million total. Additionally, nearly all of this would result in approximately 60 fewer funding was provided in the current or prior years projects funded. and administering agencies likely already are in Figure 19 Governor’s Proposed Community Resilience Budget Solutions 2021-22 Through 2023-24 (In Millions) General Backfill New Total Fund With Fund Proposed Program Department Augmentations Reductions Shift Amounts Programs Proposed for Solutions AB 617 program CARB $930 -$300 $250a $880 Transformative Climate Communities Program SGC 420 -105 — 315 Community Resilience Centers SGC 270 —b — 270 Regional Climate Resilience Program OPR 250 -125 — 125 Subtotals ($1,870) (-$530) ($250) ($1,590) All Other Community Resilience Programs $302 — — $302 Totals $2,172 -$530 $250 $1,892 a Would shift fund source to the Greenhouse Gas Reduction Fund. b Governor proposes delaying $85 million in General Fund spending from 2023-24 to 2024-25. AB 617 = Chapter 136 of 2017 (AB 617, C. Garcia); CARB = Air Resources Board; SGC = Strategic Growth Council; and OPR = Governor’s Office of Planning and Research. www.lao.ca.gov 51 2023-24 BUDGET the process of expending the funds. Therefore, Governor’s TCC Proposal Justified, Given rescinding the funding at this point could be Availability of Federal Funds. While the Governor’s disruptive. Even if some share might still be proposal to reduce the TCC program by $105 million available, given the comparatively smaller amounts would result in fewer communities receiving state of funding associated with these programs, the grants, we believe it is justified for two reasons. potential amount of budget solutions they could First, even with the proposed reductions, significant yield likely are not worth the potential disruption. funding would remain for the program—$100 million As such, maintaining the modest funding for these each in 2022-23 and 2023-24. This would allow the smaller programs and allowing departments to program to continue at roughly the same level as carry out their intended activities makes sense. in 2021-22. The Strategic Growth Council (SGC) Methane Monitoring Satellite Program indicates it would use this funding to award three new Would Be a Good Candidate for Reductions. large implementation grants (at $28 million each), The fact that the Governor proposes no reductions three new mid-size project development grants for the methane monitoring satellite program is (at $5 million each), and three new smaller planning a notable inconsistency in approach. Like the grants (at $300,000 each) each year. Second, the other four programs proposed for modification, U.S. Environmental Protection Agency recently this initiative has a relatively large associated established the Environmental and Climate Justice cost—$105 million—and therefore has the potential Block Grants Program, which is modeled directly to meaningfully contribute to needed budget after California’s TCC program. This $3 billion federal solutions. (Although this program was funded with program will provide three-year implementation grants GGRF, the Legislature could reduce the amount and on a competitive basis to applying states, tribes, free up those monies to swap with General Fund municipalities, and community-based organizations. from a different program, thereby yielding General California communities have no guarantees about Fund budget solutions.) This program was funded how much they will receive from this program or for the first time in 2022-23 to (1) help pay for the whether it will directly backfill the locations and costs to launch eight satellites, (2) cover the costs amounts that state funds would have supported. of collecting the methane data for the lifetime of However, the federal program presents an opportunity the satellites (5 to 15 years), and (3) support seven to potentially support the goal of expanding the TCC positions at CARB for three years. We believe program even if the state reduces its funding. SGC several arguments exist for reducing funding for indicates it will use existing staff to provide technical this program. First, CARB indicates that only a assistance and support communities interested in small amount of the funds (less than $1 million) has applying for the federal program. been spent thus far. The board does not expect Uncertainty About New Climate Resilience to release a request for proposals until late spring Center Program Makes It a Good Candidate for or early summer 2023, so no funding would be Reduction. Instead of the Governor’s proposal to awarded in the current year. Second, methane leaks delay $85 million for climate resilience centers from from oil and gas facilities and landfills—the two 2023-24 to 2024-25, the Legislature may want to main methane sources intended to be monitored consider reducing funding for this program. This is by this program—make up a relatively small share a brand-new program initiated in the current year, of overall statewide GHG emissions (less than and as such, no data are yet available regarding 5 percent in most years), so the state could instead program demand or effectiveness. SGC still is in prioritize maintaining funding for other programs the process of designing the program and does that might have a greater impact on reducing not plan to make initial awards from its 2022-23 statewide GHG goals. Third, the state already allocation until Fall 2023. Moreover, SGC indicates has various efforts in place to monitor methane, that most communities do not yet have scoped-out, including regular in-person inspections. Finally, designed, and permitted centers ready to receive CARB is expecting to obtain methane data from two funding, so its initial funding awards will only be for satellites being launched by the private sector in planning activities. Given how early this program is 2023, so some similar data already will be available. in its implementation, spending the allocated funds 52 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET for actual projects likely will take several years, and Expanding Climate Action Corps Program the state cannot yet be sure how many centers it While Reducing Existing Commitments Not will fund, where they will be located, how frequently Justified. Given this program only began in they will be used, or how effective they will be 2021-22, sufficient data are not yet available on at protecting communities from climate change the effectiveness of the current pilot program to impacts. This uncertainty around funding demand justify the Governor’s proposal to double its existing and implementation timing, combined with the need funding or make it ongoing, particularly at the for budget solutions, suggest this program is a good expense of other existing commitments. Given the candidate for reductions. The Legislature could budget problem, providing $4.7 million in additional convert the Governor’s proposed $85 million funding General Fund for this program would necessitate delay into a reduction, as well as consider reducing an equal amount of reductions from other existing an even larger share of the $160 million intended to spending commitments. Moreover, $3 million in be provided in 2023-24. If it makes reductions to the federal Americorps funds is available and currently 2023-24 intended amounts, the Legislature could supplementing state funds for this program, so this leave the $115 million from the 2022-23 appropriation activity could continue—albeit at a lower level—even in place (as the Governor does) and treat this as a without any General Fund support. We discuss this more modest pilot effort, collecting information about proposal and our assessment in more detail in a program demand and implementation to help target separate publication. and inform potential future investments. Recommendations Proposal to Cut Regional Climate Resilience Program in Half Raises Some Concerns. While the Modify Governor’s Proposals to Reflect Regional Climate Resilience Program is new and early Legislative Priorities. Overall, we find most of the proposed budget solutions the Governor proposes in its implementation, we think the Legislature may for community resilience programs to be reasonable want to exercise caution in considering the Governor’s proposed reductions. This is the community resilience and worthy of consideration. Based on our initial assessment, some particular modifications the program for which the Governor proposes the largest Legislature could consider include: (1) reducing reduction, both in dollars ($125 million) and proportion funding for methane monitoring satellites, (2) reducing (50 percent). However, the Legislature established rather than delaying $85 million for the Climate this program to fill an important gap in statewide Resilience Center Program, and (3) maintaining climate preparedness efforts. While numerous some additional funding for the Regional Climate other programs provide grants for individual cities Resilience Program. or nongovernmental entities to conduct distinct projects, this program is somewhat unique in its Reject Proposal to Expand Climate Action intent to support regionally based project planning Corps Program. Because no evidence is available and implementation efforts. Many of the impacts of to suggest this program is particularly effective at climate change cross jurisdictional boundaries and reducing the causes and impacts of climate change, necessitate coordinated, collaborative efforts that are and because it would necessitate a like amount of hard to organize and fund. (We discuss this challenge reductions from existing programs, we recommend as it relates to sea-level rise in our December the Legislature reject the Governor’s proposal to 2019 report, Preparing for Rising Seas: How the allocate an additional $4.7 million General Fund to State Can Help Support Local Coastal Adaptation double funding for this program. We also recommend Efforts.) Although large amounts of funding for this the Legislature reject the proposal to make the program still remain unspent and thus could be program ongoing, given the lack of data on its reduced without near-term disruptions, the absence effectiveness and the state budget condition and of support for regional-based climate change outlook. The Legislature could request additional readiness activities could contribute to greater information on program outcomes to inform future long-term disruptions from climate change impacts. budget decisions about whether to extend this program beyond its current 2025-26 sunset date. www.lao.ca.gov 53 2023-24 BUDGET SUSTAINABLE AGRICULTURE, the General Fund. The remaining amounts are from GGRF ($225 million) and the Air Pollution Control CIRCULAR ECONOMY, AND OTHER Fund ($43 million). While most of this funding was RECENT AUGMENTATIONS included as part of a 2021-22 budget package focused on sustainable agriculture, some of the Recent and Planned funding shown was originally included in an extreme Funding Augmentations heat package or as standalone proposals. Recent Budgets Committed $1.2 Billion for Sustainable Agriculture Funding Supports a Sustainable Agriculture Activities, Mostly From Variety of Programs. The committed $1.2 billion General Fund. As shown in Figure 20, recent is designated for more than two dozen programs budgets have committed a total of $1.2 billion on a administered by various departments. Almost half limited-term basis over three years—$684 million of the funds are for two programs administered by in 2021-22, $487 billion in 2022-23, and $13 million CARB: (1) the Funding Agricultural Replacement intended for 2023-24—to support sustainable Measures for Emission Reductions (FARMER) agriculture activities. About 80 percent of Program, which supports agricultural equipment the $1.2 billion total—$915 million—is from Figure 20 Recent and Planned Sustainable Agriculture Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund, Unless Otherwise Noted (In Millions) Program Department 2021-22 2022-23 2023-24 Totals Agricultural diesel engine replacement (FARMER) CARB $213a,b $150 — $363 San Joaquin Valley agricultural burning alternatives CARB 180 — — 180 Healthy Soils Program CDFA 75a 85 $10 170 Livestock methane reduction and AAMP CDFA 32 68a — 100 Farm to School Incubator Program CDFA 30 60 — 90 Conservation Agriculture Planning Grants CDFA 17 22 — 39 Pollinator Habitat Program CDFA 15 15 — 30 Fresno-Merced Future of Food CDFA 30 — — 30 Climate Catalyst Fund Program—agriculture IBank — 25 — 25 California Nutrition Incentive Program CDFA 10 10 — 20 Healthy Refrigeration Grant Program CDFA 10 10 — 20 Farm to Community Food Hubs Program CDFA 15 — — 15 Urban Agriculture Program CDFA 12 — — 12 Underserved farmer technical assistance CDFA 5 5 — 10 Methane reduction: cattle feed CDFA — 10a — 10 Research in GHG reduction CDFA 5 5 — 10 Invasive Species Council CDFA 5 5 — 10 Farmer training and manager apprenticeships CDFA 5 5 — 10 Safer, sustainable pest management CDFA 10 8 — 18 Sustainable Cannabis Pilot Program CDFA 9 — — 9 Various other programsc CDFA, DPR 6 4 3 12 Totals $684 $487 $13 $1,183 a Includes funding from the Greenhouse Gas Reduction Fund. b Includes funding from Air Pollution Control Fund. c Includes the following programs: (1) impact assessment and alignment of reporting, (2) integrated pest management technical assistance (previously in the extreme heat package), (3) canine blood bank, and (4) Senior Farmers Market Nutrition Program. FARMER = Funding Agricultural Replacement Measures for Emission Reductions; CARB = California Air Resources Board, CDFA = Department of Food and Agriculture; AAMP = Alternative Manure Management Program; IBank = California Infrastructure and Economic Development Bank; GHG = greenhouse gas; and DRP = Department of Pesticide Regulation. 54 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET upgrades and replacements that reduce GHG Program; (5) the Farm to Community Food Hubs and air pollutant emissions ($363 million) and Program; and (6) the Climate Catalyst Fund, which (2) financial incentives for farmers to implement provides low-interest loans to projects that advance alternative practices to agricultural burning in the the state’s climate mitigation and adaptation goals in San Joaquin Valley ($180 million). The remaining the agricultural sector. (We also discuss this program funds—$640 million—support a wide range in the “Wildfire and Forest Resilience” section of this of programs, mostly administered by CDFA. report because separate funding focusing on the For example, $170 million is committed to CDFA’s wood products sector was included in that package.) Healthy Soils Program, which provides grants Some other programs shown in Figure 20 have to increase statewide implementation of various received funding from the state in the past, but practices that improve soil health, sequester carbon, typically from sources other than the General Fund. and reduce GHG emissions. For example, CARB’s FARMER Program has been Sustainable Agriculture Activities Historically supported by GGRF and the Air Pollution Control Not Significant Recipients of General Fund. Fund (which receives revenue from fees and The state has traditionally not provided significant penalties paid by various emitters of air pollution), General Fund support for most of these activities. and the Healthy Soils program has historically been Some of the programs shown in Figure 20 are new supported by GGRF. As noted in the figure, these and their creation was made possible by the robust two programs received support from those special condition of the General Fund. Examples of new funds in 2021-22, but in subsequent years funding programs include (1) the Fresno-Merced Future shifted to the General Fund. of Food Innovation Initiative; (2) the Conservation Recent Budgets Committed $468 Million Agriculture Planning Grants Program; (3) the for Circular Economy Activities. As shown in Pollinator Habitat Program; (4) the Urban Agriculture the top portion of Figure 21, recent budgets have Figure 21 Recent and Planned Circular Economy and Other Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund, Unless Otherwise Noted (In Millions) Program Department 2021-22 2022-23 2023-24 Totals Circular Economy $205 $263 — $468 SB 1383 implementation grants CalRecycle $60a $180a — $240 Organic waste infrastructure CalRecycle 90a 15 — 105 RMDZ Loan Program CalRecycle 25 25 — 50 Co-Digestion capacity CalRecycle 10 10 — 20 Recycling feasibility grants CalRecycle 2 13 — 15 Quality incentive payments CalRecycle 10b — — 10 Methane reduction from waste CalRecycle — 10a — 10 Compost permitting pilot and edible food recovery CalRecycle 3 10 — 13 Composting opportunities CalRecycle 5 — — 5 Otherc $55 $45 $20 $120 Sustainable Agricultural Lands Conservationd DOC — $25 — $25 Complete fine-scale vegetation mapping CDFW $5 20 $20 45 Deferred maintenance CalFire 50 — — 50 a Includes funding from the Greenhouse Gas Reduction Fund (GGRF). b Includes funding from Beverage Container Recycling Fund. c Includes other resources and environmental protection programs proposed by the Governor as solutions, but not categorized in packages by the administration. d In addition to the funding shown above, this program receives an annual appropriation of GGRF administered by the Strategic Growth Council. CalRecycle = California Department of Resources Recycling and Recovery; RMDZ = Recycling Market Development Zone; DOC = Department of Conservation; CDFW = California Department of Fish and Wildlife; and CalFire = California Department of Forestry and Fire Protection. www.lao.ca.gov 55 2023-24 BUDGET committed a total of $468 million on a limited-term food waste co-digestion projects at wastewater basis over two years—$205 million in 2021-22 and treatment plants. Notably, local jurisdictions $263 million in 2022-23—to support various recycling administer various programs aimed at promoting and waste reduction programs. Of the $468 million recycling and waste reduction, typically supported total, just over 40 percent—$138 million—is from by user fees. the General Fund. The remaining amounts are from Recent Budgets Provided One-Time GGRF ($320 million) and the Beverage Container Funding for Various Other Activities Outside Recycling Fund (BCRF, $10 million). While most of of Packages. While most of the major one-time this funding was part of a 2021-22 budget package augmentations in the resources, environment, and focused on the circular economy, some funding climate area were presented as part of packages, was initially included in the nature-based activities some were adopted as separate actions and largely packages or as standalone proposals. are not proposed for reductions (and, therefore, Circular Economy Funding Supports Several are not discussed in this report). However, we Different Programs. Circular economy funding display three of these non-package augmentations is committed to roughly a dozen programs, in the bottom of Figure 21 because the Governor all of which are administered by the California proposes to reduce them: the Sustainable Department of Resources Recycling and Recovery Agricultural Lands Conservation program through (CalRecycle). Roughly half of the funds ($240 million) DOC ($25 million), vegetation mapping undertaken are for a program that provides grants to local by CDFW ($45 million), and deferred maintenance at jurisdictions to help them in implementing and CalFire facilities ($50 million). complying with the organic waste requirements Governor’s Proposals established by Chapter 395 of 2016 (SB 1383, Lara). Significant funding is also allocated to Proposes Various Reductions Affecting support (1) the expansion of organics recycling Multiple Programs. The Governor proposes infrastructure, such as composting and digestion some notable reductions in the areas of facilities ($105 million), and (2) the Recycling sustainable agriculture, circular economy, Market Development Zone (RMDZ) Loan Program, and other activities, as shown in Figure 22. which provides loans to recycling businesses Specifically, for sustainable agriculture activities, that prevent, reduce, or recycle recovered waste the largest reduction proposed—$25 million—is materials ($50 million). the elimination of the Climate Catalyst Program’s funding for agriculture-related loans. Some other Circular Economy Activities Historically Not notable reductions include: (1) $22 million from the Significant Recipients of General Fund. Typically, Conservation Agriculture Planning Grants Program, the state has supported most of CalRecycle’s (2) $15 million from the Healthy Soils Program, budget from special funds, such as BCRF, which (3) $15 million from the Pollinator Habitat Program, is supported by deposit fees consumers pay when and (4) $15 million from the Farm to Community purchasing beverages in recyclable containers. Food Hubs Program. The state has not historically provided significant General Fund support for the department to In the circular economy area, the Governor undertake the types of activities included in the proposes reducing three programs. The largest is circular economy package. the elimination of $15 million for recycling feasibility grants, which is a new program that provides grants In some cases, the package includes funding for to entities that are in the research, development, new programs, such as those that support recycling feasibility assessment, and pilot phases of new feasibility grants, edible food recovery grants, recycling technologies and projects. Reductions and composting opportunities. In other cases, it are also proposed for a program that provides supports expansions of existing programs, often grants to community groups operating small-scale with a greater reliance on the General Fund than composting programs in green spaces within in the past. For example, the package provides disadvantaged and low-income communities General Fund support for the expansion of the ($5 million) and the RMDZ Loan Program ($5 million). existing GGRF-funded grant program to include 56 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Figure 22 Governor’s Proposed Sustainable Agriculture, Circular Economy, and Other Budget Reductions 2021-22 Through 2023-24 (In Millions) Total Proposed New Proposed Program Department Augmentations Reductions Amounts Sustainable Agriculture Programs Proposed for Solutions Healthy Soils Program CDFA $170a -$15 $155 Conservation Agriculture Planning Grants CDFA 39 -22 18 Pollinator Habitat Program CDFA 30 -15 16 Climate Catalyst Fund Program—agriculture IBank 25 -25 — Healthy Refrigeration Grant Program CDFA 20 -9 11 Farm to Community Food Hubs Program CDFA 15 -15 0 Urban Agriculture Program CDFA 12 -6 6 Research in GHG reduction CDFA 10 -5 5 Invasive Species Council CDFA 10 -5 5 Farmer training and manager apprenticeships CDFA 10 -5 5 Sustainable Cannabis Pilot Program CDFA 9 8.5 0.5 Subtotals ($350) (-$128) ($222) All Other Sustainable Agriculture Funding Various $833 — 833 Sustainable Agriculture Totals $1,183 -$128 $1,055 Circular Economy Programs Proposed for Solutions RMDZ Loan Program CalRecycle $50 -$4.5 $45.5 Recycling feasibility grants CalRecycle 15 -15 — Composting opportunities CalRecycle 5 -5 — Subtotals ($70) (-$24) ($46) All Other Circular Economy Funding CalRecycle $398 — $398 Circular Economy Totals $468 -$24 $444 Other Non-Package Programs Proposed for Solutions Sustainable Agricultural Lands Conservation DOC $25 -$25 — Complete fine-scale vegetation mapping CDFW 45 -20 $25 Deferred maintenance CalFire 50 -13 37 Other Totals $120 -$58 $62 a Includes $25 million from the Greenhouse Gas Reduction Fund. CDFA = California Department of Food and Agriculture; IBank = California Infrastructure and Economic Development Bank; GHG = greenhouse gas; RMDZ = Recycling Market Development Zone; CalRecycle = California Department of Resources Recycling and Recovery; DOC = Department of Conservation; CDFW = California Department of Fish and Wildlife; and CalFire = California Department of Forestry and Fire Protection. The Governor also proposes cuts to three The Governor also proposes to maintain 95 percent programs funded outside of budget packages: of the funding for circular economy activities. (1) eliminating the $25 million for DOC’s Sustainable Most of the funding in these areas was provided Agricultural Lands Conservation program, in 2021-22 and 2022-23, so there has been more (2) reducing CDFW’s vegetation mapping time for the funding to be committed to projects program by $20 million (retaining $25 million), and as compared to some of the other packages. (3) reducing CalFire’s deferred maintenance funding Also, as described above, a notable portion of the by $13 million (retaining $37 million). funding for these activities was from non-General Retains Most of the Funding That Was Fund sources, and thus was not the focus of the Previously Approved for Sustainable Agriculture Governor’s reductions. and Circular Economy Activities. The Governor proposes to maintain close to 90 percent of the funding for sustainable agriculture activities. www.lao.ca.gov 57 2023-24 BUDGET Assessment Planning Grants Program, (2) the Pollinator Habitat Program, and (3) the Urban Agriculture Program. We Proposed Solutions Generally Appear think it is reasonable for the Legislature to consider Reasonable. All of the Governor’s proposed reducing these programs given that they have solutions come with trade-offs. However, after funding that has not yet been committed and are weighing these trade-offs, we think the Governor’s relatively new with uncertain benefits. In most cases, proposals generally are reasonable in light of the the Governor proposes to retain some funding for state’s anticipated budget challenges. In particular, these programs, which could be used to gather while many of these programs aim to achieve information on their effectiveness. The Legislature worthy environmental goals, they generally could then use this data to decide whether to focus on less pressing climate change-induced provide additional funding for in the future. challenges than some of the other thematic areas discussed in this report (such as wildfire, sea-level In the case of two other new activities—the Farm rise, and drought). Accordingly, we think targeting to Community Food Hubs Program and recycling uncommitted funding from these programs is a feasibility programs—the Governor proposes to worthwhile approach to pursuing budget solutions. eliminate rather than reduce the associated funding. (We think it would be overly disruptive to take Given the programs are new and untested, their away funding that has already been committed elimination will not result in significant disruptions, to specific projects.) Below, we discuss several and as such we find this proposed approach specific proposals for which we think the Governor worthy of consideration. If these programs are proposes reasonable reductions, and we also high priorities for the Legislature, however, it could identify other potential reductions that we think also consider reducing rather than eliminating warrant legislative consideration. their funding. Climate Catalyst Program Is New and Other Proposed Reductions Also Untested. We find justification for the Governor’s Reasonable. We also find merit in the Governor’s proposal to eliminate the $25 million provided other proposed reductions: in 2022-23 for offering agricultural-related loans • Sustainable Agricultural Lands through the Climate Catalyst Fund Program. As we Conservation. This program funds discussed in the “Wildfire and Forest Resilience” conservation easements on and plans for portion of this report, funding was initially allocated agricultural lands to preserve them from in 2020-21 to establish a version of this program being converted to more GHG-intensive focused on creating a sustainable wood products residential uses. Eliminating the full $25 million market. However, the program has taken time to in General Fund support for this program, launch and no awards have been made thus far for as the Governor proposes, however, would either wood products or sustainable agriculture not leave it without any funding. This is activities. We note that the Governor proposes because the program receives annual to maintain some funding for the wildfire portion funding allocations from GGRF as part of of the program, which could be used to test its the continuously appropriated Affordable effectiveness as a strategy for spurring market Housing and Sustainable Communities development. Depending on the results of that program through SGC. While the annual effort, the Legislature could consider whether funding amounts vary depending on the level to reauthorize funding for an agriculture-related of cap-and-trade auction revenues, they expansion in future years. typically total tens of millions of dollars. The Given Uncertain Benefits, Various Other program awarded $74 million in grants using Newly Established Programs Also Good GGRF in December 2022 and has allocated Candidates for Reductions. Like the Climate nearly $300 million since it began. This Catalyst Fund, several other programs the Governor funding could allow it to continue existing proposes reducing are new or recently established activities even without the intended General programs, including (1) the Conservation Agriculture Fund augmentation. 58 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET • Vegetation Mapping. Reducing the for this relatively new program—$30 million in $20 million intended for this effort in 2023-24 2021-22 and $60 million 2022-23. Given that would prevent CDFW from being able to the program is still in its early implementation complete fine-scale statewide mapping stages (it began in 2020-21), the Legislature of vegetation and habitats. However, the could reduce funding and allow it to continue $25 million provided in 2021-22 and 2022-23 operating at a scaled-down level (offering will allow the department to complete fewer grants). The state could then gather about two-thirds of this mapping effort and information about how effectively the program provide the state with a good deal of helpful met its intended goals before considering information to support its conservation additional augmentations. (An existing decisions. The state could fund the final stage program evaluation report is due to the of this project in a future year. Legislature by January 2024.) The program • CalFire Deferred Maintenance. The has awarded all of its 2021-22 funding to Governor proposes to reduce by $13 million grantees, but has not yet made awards from the $50 million provided in 2021-22 for CalFire the 2022-23 amount, and has $60 million in to undertake deferred maintenance projects. unspent funds as of February 2023. This would still leave the department with • Healthy Soils Program. While the Governor sufficient funding—$37 million—to address a proposes a $15 million reduction for this significant portion of the roughly $160 million program, we find that additional reductions backlog that has accumulated over many could be warranted. As we discuss in our years. While addressing deferred maintenance 2021 report, Assessing California’s Climate is an important activity, the Governor’s Policies—Agriculture, the program provides proposed reduction is worthy of consideration only modest GHG benefits at a relatively given the funds that would remain and the high cost per ton when compared to other condition of the General Fund. programs we reviewed. While a deeper • RMDZ Loan Program. Reducing this reduction for the program would result in program by $4.5 million represents a relatively fewer overall projects, the program received a modest decrease. Leaving the program with significant augmentation from the $75 million $45.5 million, as the Governor proposes, provided in 2021-22. Data indicate that roughly would enable it to continue providing nearly as $8 million in funding from that augmentation many loans to recycling businesses. remains unspent as of this writing and the program has not yet awarded any of its Legislature Could Consider Reducing $85 million in funding from 2022-23. Farm to School Incubator Grant Program, Further Reductions for Healthy Soils. Should Legislature Could Consider Reducing the Legislature want to consider alternative or GGRF for SB 1383 Implementation Grants additional budget solutions than those proposed and Organic Waste Infrastructure Program by the Governor, we believe two additional to Offset General Fund Support for Other agriculture-related programs merit consideration. Activities. While the Governor does not propose funding changes for these two circular economy • Farm to School Incubator Grant Program. programs, we think they are reasonable candidates The Governor does not propose changes for reducing should the Legislature seek additional for this program—which provides funding or alternative budget solutions. Decreasing this to schools to purchase locally grown foods, funding likely would result in smaller grants to local coordinate educational opportunities, and governments to support their compliance with further collaboration and coordination SB 1383 and organic waste management efforts. between schools and producers—but we think While these grants help offset costs faced by local the Legislature could consider reducing its jurisdictions (costs which are typically passed on funding. Recent budgets provided $90 million to users through fees), local waste management www.lao.ca.gov 59 2023-24 BUDGET does not represent a core state responsibility PARKS, MUSEUMS, AND ACCESS and SB 1383 requirements will be implemented regardless of whether the grants are provided. Recent and Planned Notably, of the combined $345 million appropriated Funding Augmentations in 2021-22 and 2022-23 for these two related Recent Budgets Provided Various One-Time programs, as of this writing roughly $240 million Augmentations. Over the past few years, the (about 70 percent) remained uncommitted and state has committed significant one-time funding thus potentially is available for reduction. We note to support parks, museums, and improving public that almost all of the uncommitted funding is from access to parks and open space. As shown in GGRF rather than the General Fund. However, to Figure 23, these augmentations provide a combined the extent that the Legislature were to reduce these total of about $1.5 billion over a five-year period, GGRF expenditures, it would free up those funds almost all from the General Fund. Of this amount, to redirect and use in place of General Fund for $1.3 billion has already been appropriated (in either other programs the Legislature wants to preserve, 2021-22 or 2022-23), $88 million is planned for thereby achieving state budget solutions. appropriation in 2023-24, and $124 million is planned for appropriation in a future year. (In addition to the Recommendations items displayed in the figure, the state also provided Modify Governor’s Proposals Consistent numerous augmentations in recent years to specific With Legislative Priorities, Identify Additional legislative-priority park, museum, and access Potential Solutions. We recommend the projects through budget control sections.) Legislature develop its own package of budget Most of These Augmentations Were Not solutions based on its priorities and the guiding Included in Packages. The 2021-22 budget principles we identify in this report. Based on our grouped several of these augmentations into an review, we recommend the Legislature consider “Outdoors for All” package. However, unlike many adopting the Governor’s proposed reductions for of the other thematic areas discussed in this sustainable agriculture, circular economy, and other report, most of the recent augmentations for parks, non-package proposals since they align with many museums, and access were not adopted by the of the principles we identify in this report. Legislature as part of defined packages, but rather We also recommend the Legislature consider as stand-alone proposals. adopting additional solutions, either in place of Funding Supported Various Programs and or in addition to those proposed by the Governor. Activities. As shown in Figure 23, recent and Options for legislative consideration include: planned augmentations support a variety of types (1) reducing funding for the Farm to School of programs and projects, most of which are Incubator Grant Program, (2) deeper reductions administered by Parks or CNRA. Close to 40 percent to the Healthy Soils Program, (3) reducing of the funds—$569 million—is for competitive grant CalRecycle’s SB 1383 implementation grants, and programs to create new or improve upon existing (4) reducing organic waste infrastructure grants. parks and other open spaces. About 30 percent While these latter two programs are funded with of the funds—$464 million—is to support specific GGRF, such reductions would free up those local, state, federal or nonprofit projects. The funds to offset General Fund spending on other remaining funds—totaling $515 million—are for legislative priorities. programs focused on increasing access to parks (such as through providing transportation or free admission to parks), improving interpretation and art programming in parks, and supporting various other programs. This represents an unusually large amount of General Fund support for these types of activities, many of which have traditionally been funded largely from general obligation bonds. 60 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Figure 23 Major Recent and Planned Parks, Access, and Museum One-Time Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund, Unless Otherwise Noted (In Millions) 2021-22 and 2024-25 and Program Department 2022-23 2023-24 2025-26 Totals Competitive Grants for New or Improved Parks Space $419 $56 $94 $569 Statewide Parks Programa Parks $230 $56 $94 $380 Urban Rivers and Waterways Program Parks 154 — — 154 Recreational Trails and Greenways Program CNRA 35 — — 35 Specific Projects $459 $5 — $464 Wildfire repair projects at specific state parks Parks $124 — — $124 Indian Heritage Center Parks 95 — — 95 India Basin projecta Parks 50 — — 50 Jewish summer camps CNRA 40 — — 40 Alameda-Tesla expansion area Parks 31 — — 31 Sacramento Railyards Parks 30 — — 30 Allensworth State Park and Entrepreneurship Center Parks, CNRA 30 — — 30 John Muir Trail projects CNRA 23 — — 23 Designated museums CNRA 16 — — 16 Public Beach Restoration Fund transfer Parks 15 — — 15 San Francisco Greenhouse Project CNRA 6 — — 6 Redondo Beach Park CNRA — $5 — 5 Access-Related Programs $132 $27 $30 $189 Outdoor Equity Grants Programa Parks $65 $25 $25 $115 Library Pass and other pilot programsa Parks 23 — — 23 K-12 accessa,b Parks 21 2 5 28 Explore the Coast Programa SCC 14 — — 14 Whale Tail Programa Coastal 10 — — 10 Commission Interpretation and Art-Related Programs $50 — — $50 Cultural Art Installation Program Parks $25 — — $25 African American history and engagement Parks 15 — — 15 Tribal acknowledgment and interpretation Parks 10 — — 10 Other Programs $276 — — $276 Deferred maintenance Parks $169 — — $169 Museum Grant Program CNRA 50 — — 50 Future capital outlay Parks 50 — — 50 Property acquisitions Parks 6 — — 6 Totals $1,335 $88 $124 $1,548 a Included in 2021-22 Outdoors for All package. b Includes $3.2 million in 2020-21 and $2.4 million ongoing from the Environmental License Plate Fee Fund. Parks = Department of Parks and Recreation; CNRA = California Natural Resources Agency; and SCC = State Coastal Conservancy. www.lao.ca.gov 61 2023-24 BUDGET Governor’s Proposals that serve underserved communities or were severely affected by COVID-19. Proposes Several Program Reductions. The Governor proposes some notable reductions to a In addition, the Governor proposes to revert few programs, as shown in Figure 24. The largest $110 million of General Fund that was previously set proposed reductions are to the Statewide Parks aside in a designated fund for specific park-related Program, which is a long-standing competitive activities but is not urgently needed. Of this grant program focused on creating new local parks funding, $95 million was set aside to support the and improving existing parks in disadvantaged completion of a new Indian Heritage Center. This communities. Specifically, the Governor proposes project is currently in the initial planning phases to (1) eliminate $75 million appropriated for the and the administration indicates that it intends to program in 2022-23 and (2) reduce the funding request additional funding—potentially from lease planned for the program in 2023-24 through revenue bonds—when it reaches the construction 2025-26 from a total of $150 million to $75 million. phase. The remaining $15 million that the Governor proposes to revert was part of a 2022-23 The Governor also proposes to eliminate appropriation to support the identification and $35 million appropriated in 2022-23 for the completion of future Parks capital outlay projects, Recreational Trails and Greenways Program, which which are not anticipated to be undertaken at this is an existing program that provides competitive time. (The Governor presents these reversions as grants to support nonmotorized infrastructure fund shifts rather than reductions.) in parks and other outdoor recreational areas. Additionally, the Governor proposes to reduce Proposes to Retain Most of the Funding $31 million from the $185 million appropriated in That Was Previously Approved. Even with 2021-22 to help Parks address its over $1.2 billion the reductions discussed above, the Governor backlog of deferred maintenance projects. (Parks proposes to maintain roughly three-quarters of the funding for deferred maintenance was reduced intended General Fund for parks, museums, and by $16 million in 2022-23, leaving a net increase access-related programs and projects—$1.2 billion of $169 million over those two years.) Finally, of $1.5 billion. Notably, the Governor proposes the proposal would reduce $29 million from to not only maintain most of the funding that has the $50 million appropriated in 2021-22 for the already been appropriated for these activities Museum Grant Program, which is a competitive (79 percent) but also most of the funding intended grant program that prioritizes funding for museums for the budget year and future years (65 percent). Figure 24 Governor’s Proposed Parks, Museum, and Access Budget Reductions 2021-22 Through 2025-26 (In Millions) Total Proposed New Proposed Program Department Augmentations Reductions Amounts Programs Proposed for Solutions Statewide Parks Program Parks $380 -$150 $230 Indian Heritage Center Parks 95 -95a — Recreational Trails and Greenways Program CNRA 35 -35 — Deferred maintenance Parks 169 -31 138 Museum Grant Program CNRA 50 -29 21 Future capital outlay Parks 50 -15a 35 Explore the Coast Program SCC 14 -3 11 Subtotals ($793) (-$358) ($435) All Other Parks, Museum, and Access Funding $755 — $755 Totals $1,548 -$358 $1,190 a The Governor proposes to revert funding that was deposited in a specific fund for these activities back to the General Fund. The Governor categorizes these as fund shifts rather than reductions. Parks = Department of Parks and Recreation; CNRA = California Natural Resources Agency; and SCC = State Coastal Conservancy. 62 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Assessment Reducing Deferred Maintenance Funding Would Mean Fewer Projects, but Likely No While all of the Governor’s proposed solutions Major Near-Term Impacts. We also think it is come with trade-offs, on balance, we find them to reasonable for the Legislature to consider reducing be reasonable given the difficult choices that the the amount of deferred maintenance funding for Legislature is likely to face in the coming year. Parks, as proposed by the Governor. Taking care Given Potential for Other Funding Availability, of state assets—such as through addressing Proposed Reductions to Statewide Parks and backlogs of deferred maintenance—is a core state Greenways Programs Appear Reasonable. The responsibility and important to ensuring those largest reductions the Governor proposes are for facilities and locations can serve Californians for the Statewide Parks Program and the Recreational decades to come. However, Parks has received Trails and Greenways Program. These are both large augmentations to help it address its backlog programs that serve valuable goals, including of deferred maintenance in recent years, in part improving and enhancing parks and open spaces due to the healthy condition of the General Fund. with a focus on underserved communities. Moreover, many of Parks’ projects are not of high Nonetheless, funding for these types of activities urgency to protect health and safety. For example, is generally needed with less urgency than funding these projects include completing assessments of for many other areas within the climate, resources, artifacts, replacing interpretive signs, and repairing and environment policy areas because they do pavement. Given the change in the General Fund not address the most immediate climate risks— condition, pulling back some of these funds which often disproportionately affect these same seems justifiable. communities. Additionally, the federal government Supporting Museums Is Worthwhile, but Not has recently provided increasing support for similar Urgent State Responsibility. The Governor’s types of programs. Specifically, since 2018, the proposal to reduce the Museum Grant Program amount of federal funding available to California also has some merit. Since the program received from the Land and Water Conservation Fund $50 million in 2021-22, it has provided one round of (LWCF) program—which provides matching funds funding totaling $21 million to support 64 projects. for state and local parks projects—has roughly The Governor’s proposal to eliminate the rest of tripled. The state now anticipates receiving over the funding for this program would mean that $20 million in formula-based funds annually from remaining dollars would no longer be available to LWCF, as well as access to competitive grant support a second round of grants, and thus fewer funds. Notably, LWCF is not a direct replacement museums would benefit from the program than for state dollars, since it requires a 50 percent would otherwise be the case. While this program match and comes with various compliance and serves a worthwhile goal of assisting museums, other requirements. However, it can provide a this need is less urgent than many other programs, complementary source of support to help cover such as those addressing the immediate impacts of the costs of local and state parks projects, and climate change. Additionally, supporting museums can help mitigate some of the impacts of modest is generally not a core state responsibility, as they reductions to state funding for these types typically rely primarily on fee revenues and private of projects. Moreover, these programs have funding for their operations. historically been funded with bond funds. Thus, if the Legislature were to consider proposing a bond, Most Funding Not Yet Needed for Indian these types of programs could be included if they Heritage Center Project. The Governor’s proposal were high legislative priorities. For these reasons, to shift funding for the Indian Heritage Center also we think the Governor’s proposed reductions merit seems reasonable. Reverting the money that was legislative consideration. designated for this project back to the General Fund would help solve the 2023-24 budget problem. Notably, these funds are not needed immediately, since the project is still in the early planning phase. www.lao.ca.gov 63 2023-24 BUDGET When the project is ready for construction— 2019 (AB 209, Limón) and first funded with expected to be 2027—depending on the budget $20 million from the General Fund on a condition, the Legislature could decide what fund one-time basis in 2020-21. The goals of this source to provide for its support (such as General program are worthwhile—to help enable Fund or lease revenue bonds). As such, adopting underserved youth to have more outdoor the Governor’s proposal essentially would shift the educational experiences. However, because timing of the costs associated with this project, but the program is new, data are not yet available would eventually result in at least the same overall to enable the Legislature to evaluate its costs for the General Fund. effectiveness. The Legislature could wait to Legislature Could Consider Making see the outcomes of the $85 million already Reductions to Some Other Programs. To appropriated before determining whether to the extent that the Legislature needs to identify provide additional funding. additional solutions either because the budget • Statewide Parks Program. While the condition worsens in the coming months or Governor proposes some reductions to the because it would like to reject some of the Statewide Parks Program, the proposal would Governor’s proposed solutions, it has various retain $25 million annually from 2023-24 options that we think are reasonable candidates through 2025-26. The Legislature could to consider. In particular, the Legislature could consider further reductions to this program consider making more significant reductions to should it need to identify additional General funding for programs or projects in 2023-24 or Fund solutions, although taking such action out-years than the Governor proposes. Since would come with trade-offs. Specifically, this funding has not yet been appropriated, it has reductions would result in fewer projects to not been committed to specific projects, and as rehabilitate and construct local projects which such, making reductions would generally be less are valuable to local communities, particularly disruptive. Some programs the Legislature could the economically disadvantaged communities consider reducing include: on which this program focuses. However, these projects typically do not represent • Cultural Art Installation Program. The urgent health and safety issues. Moreover, Legislature could consider reducing funding funding from federal programs or a potential appropriated in 2022-23 to create this new bond could potentially support similar types of program. This program is intended to support activities, as discussed above. grants to artists to develop permanent and temporary art installations in state and local • Redondo Beach Park. The Governor parks. These activities have the potential does not propose a reduction to this local to enhance park users’ experiences but do project planned for funding in 2023-24. not meet an urgent need or address a core The Legislature could consider whether state responsibility. We note that a portion of providing $5 million for this specific project the funding for this program—$5.7 million of continues to be a high legislative priority since $25 million—has been encumbered. However, it has not yet been appropriated and given the first funds are not anticipated to be recent deteriorations in the condition of the provided to projects until July 2023, so a large General Fund. share of this funding likely could be reduced Recommendations with only modest disruptions. • Outdoor Equity Grant Program. The Modify Governor’s Proposals Related to Governor proposes to maintain all of the Parks, Museums, and Access Consistent planned funding for this program, including With Legislative Priories. We recommend the the $25 million annually planned for 2023-24 Legislature develop its own package of budget and 2024-25. This is a relatively new program, solutions based on its priorities and the guiding established pursuant to Chapter 675 of principles we identify in this report. Based on 64 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET our review, we think it is reasonable for the Parks—to support coastal resilience activities. Of Legislature to consider adopting the Governor’s the total, $624 million was appropriated in 2021-22 proposed solutions—such as for the Statewide and 2022-23, while $652 million is planned for Parks Program, Recreational Trails and Greenways 2023-24 and $19 million for 2024-25. Recent Program, Parks deferred maintenance projects, and budget and trailer bill language specified some of the Museum Grant Program—since they align with the specific purposes and allowable uses for the many of the principles we identify in this report. We recent augmentations. also recommend the Legislature consider adopting • Protecting the Coast From Climate additional solutions, either in place of or in addition Change. Nearly 40 percent—$500 million— to those proposed by the Governor. Some other of the total funding for coastal resilience areas that we think merit potential consideration is for SCC to support an array of possible for reduction include: (1) the Cultural Art Installation projects geared toward protecting the coast Program and (2) reductions to programs slated for and coastal watersheds from the effects additional funding in 2023-24 or out-years, such of climate change. This could include as the Outdoor Equity Grants Program, Statewide sea-level rise adaptation projects. Trailer bill Parks Program, and Redondo Beach Park. language includes numerous allowable uses, such as improving the resilience of COASTAL RESILIENCE critical infrastructure, restoring upland habitat, removing dams, developing coastal Recent and Planned trails, or providing low-interest loans to Funding Augmentations local governments to acquire properties Recent Budgets Committed $1.3 Billion Over at risk from sea-level rise to prepare for Four Years for Coastal Resilience Activities. impending impacts. As shown in Figure 25, recent budgets have • Adapting to Sea-Level Rise Through committed $1.3 billion ($1.1 billion from the General Nature-Based Activities. Roughly Fund, $155 million from GGRF, and $17 million from one-third—$420 million—of the total funding Proposition 68 bond funds) to three departments— is for SCC to support nature-based activities SCC, the Ocean Protection Council (OPC), and to protect communities and natural resources Figure 25 Recent and Planned Coastal Resilience Augmentations Highlighted Rows Indicate Programs Governor Proposes for Budget Solutions General Fund, Unless Otherwise Noted (In Millions) Program Department 2021-22 2022-23 2023-24 2024-25 Totals Protecting the coast from climate change SCC — $350 $150 — $500 Adapting to sea-level rise: nature-based activities SCC — 120a 300 — 420 Adapting infrastructure to sea-level rise SCC — 38b 97 $9 144 Protecting the ocean from climate change OPC $7c 61d 50 — 117 Implementing SB 1 OPC — 38b 55 10 102 Adapting to sea-level rise in state parks Parks 12 — — — 12 Totals $19 $606 $652 $19 $1,295 a Includes $80 million from the Greenhouse Gas Reduction Fund (GGRF). b GGRF. c Proposition 68 (2018) bond funds. d Includes $11 million from Proposition 68 bond funds. SCC = State Coastal Conservancy; OPC = Ocean Protection Council; SB 1 = Chapter 236 of 2021 (Senate Bill 1, Atkins); and Parks = Department of Parks and Recreation. www.lao.ca.gov 65 2023-24 BUDGET from sea-level rise. Budget bill language • Adapting to Sea-Level Rise in State directs SCC to make $30 million available for Parks. Parks received $12 million in 2021-22 the San Francisco Bay Area Conservancy. to implement its sea-level rise adaptation “Nature-based” in this context could mean, for strategy, including conducting planning and example, restoring or building up wetlands or demonstration projects. sand dunes to serve as wave buffers. SCC and OPC historically have not received large • Adapting Infrastructure to Sea-Level Rise. General Fund augmentations. Instead, bond funds, Another $144 million is for SCC to support GGRF, other special funds, and federal funds have sea-level rise adaptation projects through its supported their activities and grant programs. Climate Ready Program. Budget and trailer bill language direct SCC to prioritize projects Governor’s Proposals that adapt public infrastructure along the Proposes Significant Reductions Totaling coast, including urban waterfronts, ports, $561 Million. Figure 26 shows the Governor’s and ecosystems. proposed $561 million in reductions for coastal • Protecting the Ocean From Climate resilience, which represent 43 percent of the Change. Nearly 10 percent—$117 million—of funding that had been committed for this purpose. the total funding is for OPC to support ocean The Governor makes the smallest proportional protection projects, including projects to reductions to SCC’s nature-based sea-level rise protect and restore marine wildlife and ocean adaptation activities (12 percent, or $50 million) and and coastal ecosystems. OPC’s ocean protection activities (13 percent, or • Implementing SB 1. Another $102 million $15 million). Other programs would be reduced by is for OPC to implement Chapter 236 of more than 60 percent of their committed funding: 2021 (SB 1, Atkins). This legislation requires • Protecting the Coast From Climate Change. OPC to establish a collaborative that would The Governor’s budget reduces funding by provide information and support to local, $325 million (65 percent) over 2022-23 and regional, and state agencies in identifying, 2023-24, maintaining $175 million of the assessing, planning for, and mitigating the original intended amount. effects of sea-level rise. As intended by SB 1, • Adapting Infrastructure to Sea-Level Rise. this funding also provides financial support to The proposed budget reduces funding by local and regional governments for updating $106 million (74 percent) over 2023-24 and their local land use plans to account for 2024-25, maintaining $38 million of the original sea-level rise. intended amount. Figure 26 Governor’s Proposed Coastal Resilience Budget Reductions 2022-23 Through 2024-25 (In Millions) Total General Fund New Proposed Program Department Augmentations Reductions Amounts Programs Proposed for Solutions Protecting the coast from climate change SCC $500 -$325 $175 Adapting to sea-level rise: nature-based activities SCC 420 -50 370 Adapting infrastructure to sea-level rise SCC 144 -106 38 Protecting the ocean from climate change OPC 117 -15 102 Implementing SB 1 OPC 102 -65 38 Subtotals ($1,283) (-$561) ($722) All Other Coastal Resilience Funding $12 — 12 Totals $1,295 -$561 $734 SCC = State Coastal Conservancy; OPC = Ocean Protection Council; and SB 1 = Chapter 236 of 2021 (Senate Bill 1, Atkins). 66 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET • Implementing SB 1. The Governor’s budget Some Coastal Resilience Activities Are More reduces funding by $65 million (63 percent) Urgent Than Others. The recent and planned over 2023-24 and 2024-25, maintaining state funding augmentations for coastal resilience $38 million of the original intended amount. include a variety of allowable uses. While these are all intended to help achieve state goals, some Assessment are more directly targeted towards responding to Addressing Pending Impacts of Sea-Level the threat of sea-level rise and therefore focus on Rise Represents Important State Activity. While more urgent needs. For example, planning now the most severe impacts of sea-level rise could be for the inevitable impacts of sea-level rise is an several years off, they are certain. This differs from essential step in increasing preparedness along some other climate challenges such as wildfire, for the coast before tides are anticipated to get higher. which the magnitude and location are unknown and In contrast, other activities, such as developing dependent on ignitions, weather, and interventions coastal trails, may also meet important state to remove fuels. Given the degree of global warming goals—such as increasing public access—but that already is assured, climate scientists are represent a less time-sensitive undertaking. In light confident that sea-level rise will result in increased of the state’s worsening budget condition, the flooding along the coast, erosion of beaches and distinction between urgent and less urgent activities cliffs, and raised coastal groundwater levels in the is a key factor for the Legislature to use in guiding coming decades. Damage to public infrastructure its funding decisions. poses a serious threat, as these assets are key Proposed Reductions Do Not Allow SCC components of state and local systems of public Sufficient Flexibility to Target Most Effective health, transportation, and commerce. (Our 2019 Projects. Recent budgets structured SCC funding report, Preparing for Rising Seas: How the State to support sea-level rise adaptation projects within Can Help Support Local Coastal Adaptation Efforts, all three of its allocations. The administration’s provides more information about these threats and proposal retains most of the funding for one of lays out options for how the state can support local these allocations—nature-based sea-level rise communities in their responses.) adaptation activities—while reducing the large Governor’s Significant Reductions Could majority of funding for the other two—protecting Affect Statewide Preparation Activities. Recent the coast and adapting coastal infrastructure General Fund augmentations to plan for and to sea-level rise. We are concerned that this address sea-level rise were particularly notable approach will limit SCC’s ability to fund the projects because General Fund spending in this area that may be most effective at and necessary historically has been low. We note that the Governor for preparing for the impacts of sea-level rise. proposes reducing a disproportionately large While nature-based projects are an important amount of coastal resilience funding (43 percent) part of the state’s coastal resilience strategy, in relative to other climate resilience packages (most certain cases, a compelling reason may exist others would maintain at least 85 percent of to pursue other types of near-term activities as funding). Given the threats posed by rising seas, well, such as land acquisition, managed retreat, the reductions to coastal resilience funding that the or shoring up critical public infrastructure. The Governor proposes could impede the state’s ability Governor’s proposed reductions could limit SCC to prepare for pending impacts. The Legislature from adequately supporting these types of projects might wish to consider maintaining a higher even when they might be needed more urgently proportion of this funding, or consider delaying than a nature-based activity. The Legislature could funding rather than reducing it, to try to continue consider a more flexible approach, for example, by some the progress it had hoped to make. Given the combining the three SCC programs, funding the current state budget problem, however, if it were combined program at whatever level the state can to do so, it likely would have to consider alternative afford based on other legislative priorities, then budget solutions in other areas of the budget. directing SCC to use the funding to support the www.lao.ca.gov 67 2023-24 BUDGET most critical sea-level rise-preparation projects, (NOAA) and the U.S. Army Corps of Engineers whether those use nature-based approaches or (USACE). SCC indicates NOAA’s current grants other methods to protect the coast, infrastructure, support nature-based sea-level rise adaptation and vulnerable populations. projects—the same types of projects for which the Legislature May Want to Consider Less Governor already proposes maintaining funding. Drastic Reductions to OPC-Supported However, NOAA’s current grants are competitive, Sea-Level Rise Adaptation Planning. The meaning California will vie for funding (totaling Governor’s proposal to significantly reduce SB 1 about $700 million over five years) against other implementation funding could affect the state’s states. Moreover, USACE supports longer-term ability to effectively prepare for the impacts of projects and requires state matching funds. In sum, sea-level rise. Assessing local risks, understanding while federal funds could help further the state’s a community’s particular vulnerabilities, and coastal resilience goals, they will not be available adjusting land use plans accordingly are all immediately nor will they necessarily support important activities that the Legislature might wish the types of projects included in the Governor’s to support now, ahead of significant changes in sea proposed reductions. levels. These planning efforts could enable local Recommendations communities to more effectively direct potential project implementation funding in the future. Modify Governor’s Proposals to Reflect Waiting to fund such activities could result in lost Legislative Priorities. The Governor’s proposal significantly reduces coastal resilience funding opportunities to prepare before it is too late to avoid overall (from an already low base), including for significant impacts. As such, as the Legislature planning, which is an important first step for local weighs potential modifications to the Governor’s communities and the state to prepare for sea-level proposals, it could seek to identify the level of rise and to make more effective future spending planning progress it feels is important to make decisions. Overall, this approach highlights in the next few years and maintain an associated the challenging trade-offs currently facing the amount of funding. Legislature. While we recommend the Legislature Retaining Parks Funding Makes Sense. plan for a larger budget problem by identifying We find merit in the Governor’s proposal to more spending reductions than the Governor, it avoid reducing Parks’ funding for sea-level rise might wish to consider maintaining a higher level planning and demonstration projects. Particularly of support for sea-level rise adaptation—though because state parks comprise more than this would mean it likely would have to consider one-quarter of California’s coastline and are a additional budget solutions in other areas. Based state responsibility, prioritizing funding to prepare on our initial assessment, we recommend the these public lands for forthcoming impacts seems Legislature consider: (1) modifying the focus of sensible. In addition, planning and demonstration SCC program funding to allow it to direct spending projects can help inform effective uses of future to the most urgent sea-level rise adaptation implementation spending. activities, including nature-based and other Federal Funding a Possibility, but Would strategies, and (2) funding OPC’s SB 1 planning Not Directly Backfill State Funds. Some federal efforts at a level that will allow it to meet the funding for coastal projects is available through the Legislature’s near-term goals. National Oceanic and Atmospheric Administration 68 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET POTENTIAL ADDITIONAL OR ALTERNATIVE CLIMATE, RESOURCES, AND ENVIRONMENTAL BUDGET SOLUTIONS Figure 27 highlights some of the specific budget solutions we have identified within this report that the Legislature could consider as alternatives or additions to the Governor’s proposals. Figure 27 Potential Additional or Alternative Climate, Resources, and Environmental Budget Solutions Overall Recommendation: Modify the Governor’s proposals consistent with legislative priorities and identify additional potential solutions. Zero-Emission Vehicles (ZEVs) Consider: (1) whether to further refine certain ZEV programs, such as support for charging infrastructure and the Clean Cars 4 All Program, to have a narrower scope and focus on the highest priority populations, locations, and emerging technologies; (2) whether ZEV programs represent the Legislature’s highest priority for Greenhouse Gas Reduction Fund (GGRF) discretionary spending; (3) whether to commit future-year GGRF revenues for ZEV programs now; and (4) whether to “make room” for funding costs for installing chargers at state-owned and leased facilities within the existing ZEV package. Reject or modify the Governor’s GGRF trigger approach to maintain legislative flexibility. Energy Consider reducing funding for: (1) the Oroville pump storage project, (2) the Climate Innovation Program, and (3) potentially for three primary reliability programs based on what the Legislature learns about the outcomes from these programs thus far. Water and Drought Consider: (1) reducing rather than delaying funding for watershed resilience and per- and polyfluoroalkyl substances programs; (2) reducing or further reducing programs receiving federal funding, such as drinking water and water recycling programs; (3) reducing or eliminating 2023-24 funding for new programs such as the multi-benefit land repurposing program and voluntary agreement-related water resilience activities; and (4) taking a coordinated approach to reducing funding for habitat restoration programs with similar activities and goals. Wildfire and Forest Resilience Consider: (1) rejecting the Governor’s proposed reduction of funding for defensible space inspectors, (2) reducing funding for the home hardening grant program, and (3) reducing funding for the transportation of woody biomass program. Nature-Based Activities and Extreme Heat Consider: (1) reducing funding for coastal acquisitions, (2) reducing or delaying funding for the Tribal Nature-Based Solutions Program until more spending details are clear, and (3) reducing funding for the Governor’s Office of Planning and Research’s community-based public awareness campaign. Community Resilience Consider: (1) reducing funding for methane monitoring satellites, (2) reducing rather than delaying funding for the Climate Resilience Center Program, and (3) maintaining some additional funding for the Regional Climate Resilience Program. Reject the proposal to expand the California Volunteers Climate Action Corps program. Sustainable Agriculture, Circular Economy, and Other Programs Consider: (1) deeper reductions to the Healthy Soils Program, (2) reducing funding for the Farm to School Incubator Grant Program, (3) reducing SB 1383 Program implementation grants, and (4) reducing organic waste infrastructure grants. Parks, Museums, and Access Consider reducing funding for: (1) the Cultural Art Installation Program and (2) programs slated for additional funding in 2023-24 or out-years, such as the Outdoor Equity Grants Program, Statewide Parks Program, and Redondo Beach Park. Coastal Resilience Consider: (1) maintaining a higher level of support for coastal resilience by identifying alternative budget solutions in other areas of the budget; (2) modifying the focus of the State Coastal Conservancy’s programs to allow it to direct spending to the most urgent sea-level rise adaptation activities, including nature-based as well as other strategies; and (3) funding sea-level rise planning efforts at a level that will allow for meeting the Legislature’s near-term goals. www.lao.ca.gov 69 2023-24 BUDGET 70 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET www.lao.ca.gov 71 2023-24 BUDGET CONTACT LIST Sarah Cornett Zero-Emission Vehicles (916) 319-8329 Energy Sarah.Cornett@lao.ca.gov Rachel Ehlers Community Resilience (916) 319-8330 Rachel.Ehlers@lao.ca.gov Frank Jimenez Sustainable Agriculture (916) 319-8324 Circular Economy Frank.Jimenez@lao.ca.gov Helen Kerstein Wildfire and Forest Resilience (916) 319-8364 Nature-Based Activities Helen.Kerstein@lao.ca.gov Extreme Heat Parks, Museums, and Access Sonja Petek Water and Drought (916) 319-8340 Coastal Resilience Sonja.Petek@lao.ca.gov LAO PUBLICATIONS This report was reviewed by Rachel Ehlers 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, California 95814. 72 LEGISLATIVE ANALYST’S OFFICE