The 2023-24 Budget: Improving Legislative Oversight of CalFire’s Emergency Fire Protection Budget

2023-24 BUDGET The 2023-24 Budget: Improving Legislative Oversight of CalFire’s Emergency Fire Protection Budget GABRIEL PETEK | LEGISLATIVE ANALYST | MAY 2023 SUMMARY The California Department of Forestry and Fire Protection (CalFire) is responsible for wildfire protection in State Responsibility Areas, which are primarily privately owned wildlands that encompass about one-third of the state’s land area. In this brief, we assess the design of CalFire’s budget for emergency fire protection, known as the Emergency Fund (E-Fund), and provide associated recommendations. Broad Flexibility Provided to Administration Under Current Process Merited in Some Cases, but Not Others. We find that the current process provides the administration with broad flexibility to increase the amount budgeted for the E-Fund with limited opportunity for legislative review. A strong rationale for providing such extensive flexibility exists when fire protection activities are truly unexpected, urgent, and necessary to protect life and safety. However, in practice, the E-Fund supports both (1) these types of unanticipated, urgent activities and (2) various planned budget adjustments, such as funding seasonal staffing increases in advance of fire seasons that are anticipated to be more severe than usual. We find that these planned adjustments merit somewhat more legislative control given the discretionary choices they present. Recommend Modifying E-Fund to Enhance Legislative Oversight While Preserving Necessary Flexibility for Administration. In this brief, we recommend specific changes to the design of the E-Fund to enhance legislative control and oversight over planned adjustments to funding for emergency fire protection. Specifically, we recommend limiting the use of the existing E-Fund to unplanned costs associated with responding to large wildfires. We also recommend creating a new fund that is separate from the E-Fund to support planned adjustments to the budget to address wildfire seasons that are anticipated to be more severe than is typical. We recommend a structure for this new fund that would provide the Legislature with somewhat greater control and oversight over these types of planned expenditures than is currently the case while retaining significant flexibility for the administration to make necessary adjustments to the amount of funding provided for emergency fire protection. BACKGROUND Wildfire Protection Base components—a base amount and the E-Fund, which is an amount budgeted for emergency Budget and E-Fund fire protection. Most of CalFire’s Budget Supports Wildfire Base Budget Intended to Pay for Day-to-Day Protection. Most of CalFire’s budget—roughly Fire Protection Costs. CalFire’s base wildfire $3.3 billion out of a total budget of $3.8 billion in protection budget pays for the department’s 2022-23—funds wildfire protection and suppression everyday firefighting operations, including salaries, (also referred to as wildfire response or firefighting). facility maintenance, and other regularly scheduled The remaining funding supports other department costs. This amount is also intended to cover the responsibilities such as wildfire prevention and costs associated with the “initial attack” on a resource management activities aimed at improving wildfire—that is, the firefighting operations generally forest health. As discussed in further detail below, undertaken in the first 24 hours of an incident. CalFire’s wildfire protection budget has two www.lao.ca.gov 1 2023-24 BUDGET CalFire’s base budget for wildfire protection has five years out of the last ten years of net General increased significantly over time and is estimated to Fund expenditures. The remaining $375 million was be nearly $2.9 billion in 2022-23. the amount the state estimated it would receive in E-Fund Budget Intended to Pay for reimbursements, which represented the average Large-Incident Firefighting Costs. In addition to of total reimbursements the state received in the its base budget for wildfire protection, CalFire has prior five years. If the E-Fund appropriation is not an amount that is budgeted for the E-Fund. This fully utilized in a given year, the remainder reverts funding is intended to enable the department to to the General Fund. In 2022-23, for instance, the pay for the costs of responding to large wildfires. wildfire season was not as severe as anticipated, so As we discuss in more detail below, authorizing the Governor’s 2023-24 budget proposal reflected language in the annual budget act limits the use of a $374 million reduction to the current-year amount the E-Fund for (1) situations where CalFire’s initial ($211 million less General Fund and $163 million attack forces are unable to cope with a wildland fire less in anticipated reimbursements). emergency, (2) additional fire detection capability Department of Finance (DOF) Can Augment and prepositioning of resources during periods the E-Fund After Notifying Legislature. CalFire of high fire risk (such as red flag warnings), or can make expenditures out of the E-Fund at any (3) responding to requests for mutual aid by another time for eligible wildfire protection costs. The government entity. Legislature provides the administration authority Some E-Fund Expenditures are Eligible to increase the E-Fund if at some point during for Reimbursement From Other Sources. the fiscal year the department finds that the The E-Fund is primarily supported by the General budgeted amount will not be sufficient to cover its Fund but can receive reimbursements from other costs. Specifically, each year the budget includes sources of funding. These reimbursements are language allowing DOF to augment the E-Fund no mostly from the federal government but can come sooner than ten days after it provides a quarterly from other agencies such as local governments report to the Legislature—via the Joint Legislative in some cases. For example, when the federal Budget Committee (JLBC) and the fiscal and government determines that a wildfire threatens policy committees of both houses—identifying to become destructive enough to receive a Major the funding increase. These augmentations come Disaster Declaration, it might approve a Fire from the General Fund. As we highlight in Figure 1, Management Assistant Grant (FMAG), which the budget bill language governing the E-Fund reimburses the state for 75 percent of eligible has undergone several changes over time— wildfire protection costs. (We describe the process including regarding eligible activities and required for requesting and securing an FMAG in our notifications—to balance the state’s various goals, January 2019 post, How California Governments such as providing the department with greater Respond to Disasters.) The state can also qualify flexibility to respond to evolving emergencies while to be reimbursed by the federal government for seeking to maintain legislative oversight. E-Fund costs when CalFire conducts wildfire Current Use of the E-Fund protection activities on federal lands. Notably, the E-Fund Used for Two Main Categories of federal reimbursement process can take a number Expenditures. In recent years, the administration of months or even years in some cases. has used the E-Fund for various types of Annual Budget Includes Amount for E-Fund, expenditures which fall into two main categories: Based on Past Averages. The amount the state budgets for the E-Fund each year is based on an • Unplanned Large Fire Costs. These costs average of the fund’s expenditures in recent prior are associated with responding to large years. For example, for 2022-23, the enacted wildfires, generally those that have gone budget included $843 million for the E-Fund. beyond the initial attack. These include This included $468 million from the General Fund, staff overtime and equipment for extended calculated based on the average of the highest attacks. Such costs also include covering 2 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Figure 1 History of the E-Fund Authority in the Budget Bill Prior to 2002-03. Budget bill language allowed the E-Fund to be used for emergency fire protection broadly. The language required CalFire to provide quarterly reports on expenditures from the fund. However, it did not provide the Department of Finance (DOF) with the authority to increase the E-Fund administratively. Instead, if the costs of emergency fire protection exceeded the amount budgeted in the E-Fund, then the administration would seek a supplemental appropriation. 2002-03 Through 2010-11. In 2002-03, language was added to the budget bill to provide DOF with the authority to increase the E-Fund administratively no sooner than 30 days after CalFire provided a quarterly notification to the Legislature. During this period, the language of the budget bill continued to allow the E-Fund to be used for emergency fire protection broadly. 2010-11 Through 2018-19. In 2010-11, in response to concerns about the E-Fund being used for planned expenses—such as increasing staffing on engines during peak wildfire season and a contract for an air tanker—the Legislature modified the budget bill language to limit the E-Fund’s use to “situations where CalFire’s initial attack forces are unable to cope with a wildland fire emergency, for additional fire detection capability and prepositioning of resources during periods of high fire risk, or to respond to valid requests for mutual aid by another government authority.” During this period, the language of the budget bill continued to provide DOF with the authority to increase the E-Fund administratively no sooner than 30 days after CalFire provided a quarterly notification to the Legislature. 2019-20 Through Present. Starting in 2019-20, the language of the budget bill was changed from requiring that augmentations to the E-Fund occur no sooner than 30 days after CalFire provided a quarterly notification to the Legislature to no sooner than ten days. E-Fund = Emergency Fund and CalFire = California Department of Forestry and Fire Protection. or backfilling the regular shifts of those and (2) hiring additional seasonal CalFire firefighters who respond to large wildfires firefighters, support staff, and National Guard (referred to as “move up and cover”), as well crewmembers during the peak season. as the costs of strategically staging fire crews CalFire Uses E-Fund Mostly for Unplanned in key locations on a temporary basis when Large Fire Costs. As shown in Figure 2 on the weather conditions suggest there is a high next page, an average of 86 percent of the recent likelihood of a destructive wildfire (referred to expenditures from the E-Fund have been related as “prepositioning”). to unplanned costs associated with fighting large • Planned Fire Season Adjustments. These fires, whereas planned adjustments in anticipation costs are associated with increasing or of more severe fire seasons represented just extending staffing levels or other resources 14 percent of recent average expenditures. (such as contracts for exclusive use of However, the relative share of expenditures for helicopters or other types of air support) planned costs varied from year to year, from a to reflect the expectation that the fire low of less than 5 percent in 2017-18 to a high season will be more severe than could of over 20 percent in 2020-21. Also notable was be accommodated by the base budget. the variance in the overall level of annual E-Fund Examples of these planned costs include expenditures, driven primarily by how many (1) hiring seasonal CalFire staff or contracting large fires the state experienced in a given year. for helicopter support earlier than would For example, E-Fund costs for both unplanned typically be the case (for example, in March and planned activities were much higher than rather than in June) and keeping seasonal usual in 2020-21—$1.2 billion compared to the staff or contracted resources on longer than recent annual average of $734 million—due to would typically be the case (for example, the historically severe wildfires that the state until December rather than until October), experienced that year. www.lao.ca.gov 3 2023-24 BUDGET Figure 2 Main Categories of E-Fund Expenditures (In Millions) Five-Year Annual Category 2017-18 2018-19 2019-20 2020-21 2021-22 Average Unplanned Large Fire Costs $910 $812 $365 $955 $740 $630 Extended Attack and Incidents $826 $734 $292 $728 $663 $540 Move Up and Cover 42 44 39 139 42 51 Prepositioninga 42 35 34 88 36 39 Planned Fire Season Adjustments $37 $78 $83 $266 $156 $103 Early Staffing or Extended Peak Staffing $6 $29 $64 $51 $63 $35 Fire Protection Augmentationb 32 49 19 215 93 68 Totals $947 $890 $448 $1,222 $896 $734 Percent Unplanned 96% 91% 81% 78% 83% 86% Percent Planned 4% 9% 19% 22% 17% 14% a Includes temporary staging of resources—such as fire engines and crews—for a short period in advance of a high-risk event (such as when there is a red flag warning). b Includes activities such as hiring additional seasonal CalFire firefighters, National Guard crewmembers, and support staff during the peak wildfire season beyond those funded through CalFire’s base budget. E-Fund = Emergency Fund and CalFire = California Department of Forestry and Fire Protection. ASSESSMENT In this section, we assess the design of the Adopted Budget Amount Should Reflect Best budget for the E-Fund. We begin with a discussion Estimate of Expenditures. The budget, as passed of the key characteristics that the state’s budgeting by the Legislature and signed by the Governor, approach for emergency fire protection should should represent a realistic estimate or “best guess” display. We next discuss some aspects of the of the expected costs of wildfire protection in the state’s current budgeting approach that we assess relevant fiscal year, both from the General Fund and to be consistent with the key characteristics we funded through reimbursements. If the budgeted identify and therefore find to be justified, as well as amounts for the base budget for wildfire protection others that we find merit modification. or the E-Fund systematically underestimate or overestimate costs, they would not provide a Effective Budgeting Approach for transparent reflection of the costs of operating state Emergency Fire Protection Should government. Moreover, miscalculating the amounts Reflect Three Key Characteristics needed for firefighting could result in the Legislature dedicating too much or too little of the remaining The state’s approach to budgeting for wildfire state funds for its other priorities than it otherwise protection should enable CalFire to adequately would choose to allocate. respond as fires occur but also allow for sufficient legislative oversight. We believe an effective Important to Have Mechanisms for Adjusting budgeting approach for emergency fire protection Wildfire Budget Given Uncertainties. The state encompasses three characteristics: (1) the initial faces inherent unpredictability regarding the budget should reflect the best estimates of number, scale, and timing of the wildfires that will anticipated costs, (2) the budget should allow occur in any given year. This uncertainty makes it for midyear adjustments, and (3) the adjustment difficult for the state to accurately estimate—and process should preserve reasonable mechanisms budget in advance for—the level of expenditures for legislative oversight and authority. that will be required for effective wildfire protection 4 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET during the year. Thus, even if over time the state’s Existing Process for Modifying E-Fund budgeting approach does not systematically Provides Administration Broad Flexibility. underestimate or overestimate average wildfire The current process for making midyear wildfire protection costs, the budget almost certainly protection funding augmentations gives the will require midyear adjustments in some years. administration broad, nearly unlimited authority Recognizing this, a strong rationale exists for the to use General Fund to increase the E-Fund’s budget to have mechanisms to adjust the amount expenditures with narrow opportunities for of funding provided for wildfire protection activities legislative review. Specifically, the administration outside of the annual budget adoption process to is only required to notify the Legislature prior to ensure that the state has the resources it needs to making augmentations to the E-Fund—not prior adequately respond to wildfires. to committing to expenditures. Since the E-Fund Mechanism Should Weigh Flexibility Against typically is budgeted in the hundreds of millions of Preserving Legislative Authority. The California dollars, in practice, this allows the administration Constitution entrusts the Legislature with the power the ability to commit to very significant new of appropriation, including through the annual state expenditures without up-front notification to or budget act and other legislation. This role provides approval from the Legislature. an important check and balance in the state’s Existing Process Only Provides Ten Days for system of separation of powers, as well as helps to Notifications. Furthermore, the administration ensure that state funds are being spent efficiently only provides such E-Fund notifications to the and effectively and in accordance with the priorities Legislature ten days—a period that includes of the public (as expressed through and overseen weekends and holidays—in advance of DOF by their elected representatives). Accordingly, the augmenting the fund. This provides very limited specific mechanisms provided in the budget for time for the Legislature to review the request and adjusting wildfire protection resources generally raise any potential concerns. (In contrast, most should preserve legislative control and oversight notifications to the JLBC are provided 30 days in as much as possible without unduly impeding advance of the administration taking an action in response activities. order to provide the committee with adequate time for review.) Some Aspects of the Current Process Existing Process Can Be Used to Bypass Reasonable but Others Raise Some Traditional Budget Process. Under the existing Concerns authority, the administration can effectively use Existing Approach to Setting Budgeted the E-Fund as an alternative budget process to Amount Is Generally Reasonable. The approve funding for additional resources. We administration’s current approach of using note that in some cases, the timing would have some type of average of past expenditures and allowed the administration to request resources reimbursements when proposing the annual through the traditional budget process but it budget for the E-Fund makes sense. Furthermore, elected to use the E-Fund process instead. (We given that the state has been experiencing a trend describe a recent example of this in the text box towards a greater number of large and destructive on the next page.) The use of the E-Fund in cases wildfires, the administration’s approach of averaging where the traditional budget process could have the five highest years over the past ten years been used is problematic because the traditional (rather than the average of all the recent years) process is generally more transparent and gives the is reasonable. In practice, over the past decade, we Legislature more time for review and control than it find that the administration’s approach has resulted has with the JLBC notification process. in eight years in which the budget underestimated Unclear if Using E-Fund for Planned Costs expenditures (resulting in a need for midyear Is Consistent With Legislative Intent. CalFire augmentations to the E-Fund), but also two years in contends that it can make changes to early, which it overestimated expenditures. extended peak, and seasonal staffing and other www.lao.ca.gov 5 2023-24 BUDGET planned fire protection activities based on existing described earlier, the Legislature narrowed the budget bill language authorizing the use of the language of the budget bill in 2010-11 to limit the E-Fund to preposition resources. Prepositioning use of the E-Fund to “situations where CalFire’s is typically thought of as the temporary staging of initial attack forces are unable to cope with a resources—such as fire engines and crews—for a wildland fire emergency, for additional fire detection short period in advance of a high-risk event (such capability and prepositioning of resources during as when there is a red flag warning). Notably, as periods of high fire risk, or to respond to valid displayed in Figure 2, CalFire does categorize requests for mutual aid by another government some of its E-Fund expenditures as prepositioning. authority” after our office raised concerns However, the department also uses this authority about the E-Fund being used to support various to support activities that it does not categorize as planned expenditures. such and that go well beyond the typical definition Existing Flexibility Is Reasonable for of prepositioning, including significant expansions Unplanned Costs Related to Large Wildfires. and/or extended use of resources like support When certain fire protection activities are truly staff, contracted helicopters, seasonal CalFire unexpected, urgent, and necessary to protect firefighters, and National Guard crewmembers for a life and safety, a strong rationale exists for the period of multiple months. Whether these types of Legislature to provide the administration with expenditures are consistent with the Legislature’s significant flexibility to ensure that expenditures intent of the budget bill language governing the can be made without delay. We find typical acceptable uses of the E-Fund is unclear. As we E-Fund expenditures to address unplanned Administration Has Used Emergency Fund to Hire Additional Planned Firefighting Staff In July 2020, the Governor announced a plan to spend $73 million to hire 858 additional firefighters and support six California Conservation Corps crews through October 2020. The Governor funded these additional staff in part through the Emergency Fund (E-Fund), arguing it was an authorized use for “prepositioning resources during periods of high fire risk.” That this decision to augment staff occurred just a couple of weeks after the budget was passed and the new fiscal year began raised questions about why the additional resources could not have been proposed to the Legislature through the traditional budget process. Moreover, the administration did not—and was not required to—provide the Legislature with advance notification of its intent to use the E-Fund for this purpose because the costs of these resources could be supported by the E-Fund amount that was included in the budget. (The 2020-21 Budget Act provided $373 million from the General Fund for the E-Fund.) Moreover, in September 2020, the administration notified the Legislature that it anticipated needing an augmentation from the General Fund to support additional E-Fund costs. However, this was well after the additional firefighters and crews had been put in place. Essentially, the administration spent the funds to hire new staff, then requested a General Fund augmentation to partially backfill these costs so that it would have sufficient E-Fund on hand to address unplanned large fire response costs. Accordingly, the notification did not provide the Legislature with a meaningful opportunity to review the discretionary decisions regarding staffing and other resources for the 2020-21 fire season to ensure that they were consistent with its priorities. This is a significant departure from the oversight role the Legislature typically plays in considering whether to approve the costs associated with new firefighting positions through the traditional budget process. 6 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET costs associated with responding to large wildfires wildfire season that is anticipated to be severe) generally meet these criteria. Thus, sufficient are less urgent than responding to specific, active justification exists for the administration to retain wildfires. The department generally knows of these the current high level of flexibility to support these needs in advance and often can plan for them activities that the existing E-Fund policies provide. such as by requesting funding augmentations Existing Flexibility Not Warranted for through the traditional budget process. Second, Planned Fire Season Adjustments. As described decisions about seasonal staffing levels involve previously, the E-Fund not only supports unplanned discretionary budget choices about how to allocate costs associated with responding to large wildfires, response-related resources (such as how many but it also is being used to support planned costs CalFire seasonal firefighters to hire versus relying on such as seasonal staffing augmentations. While National Guard crewmembers), and making these it makes sense for the budget process to provide types of choices is a core part of the Legislature’s the administration with some flexibility to modify constitutional role related to appropriating funds. resource levels depending on what is expected for Accordingly, a robust legislative review and the upcoming wildfire season, we identify two key oversight process is more important for these reasons why these types of planned adjustments types of expenditure decisions as compared to should be subject to more legislative control. unanticipated and unavoidable costs resulting from First, planned fire season adjustments (such as responding to large wildfires. pre-hiring additional firefighters in advance of a RECOMMENDATIONS We have two recommended actions for the $150 million, reduction in the amount proposed Legislature to address the inadequacies we have for the E-Fund in the Governor’s 2023-24 budget identified in the existing process for budgeting (including both General Fund and reimbursements). the E-Fund. Create New Fund to Support Planned Limit Use of E-Fund to Unplanned Costs Seasonal Costs. In general, we recommend the Associated With Responding to Large Wildfires. Legislature require that CalFire use the traditional We recommend modifying the budget bill language budget process for requesting augmentations governing the E-Fund to explicitly limit its use only for planned costs about which it is aware to unplanned costs associated with responding during the time period that the Legislature is to large wildfires—such as for overtime paid to still in session and engaged in the appropriation firefighters who respond to fires that go beyond process. Such requests could be considered the initial attack. These costs are unanticipated for funding through the annual budget act as and sufficiently urgent to merit the broad well as subsequent trailer legislation and budget flexibility the existing E-Fund process provides appropriation bills. Additionally, we recommend the administration. Our recommended approach the Legislature create a new fund—from a separate would explicitly prohibit the use of the E-Fund for budget allocation—to support planned fire season activities such as pre-hiring, extended hiring, and adjustments that are needed after the passage of augmentations of seasonal resources that are the budget and could not reasonably have been generally known in advance. Corresponding to this foreseen during the budget process, potentially change, we recommend the administration reduce including costs associated with pre-hiring seasonal the amount it budgets for the E-Fund to reflect this staff or extending peak staffing and contract more modest scope by basing it on the average levels. The creation of this new fund would allow of previous years of just unplanned expenditures expenditures for these activities to be made outside rather than on all E-Fund expenditures. We estimate of the typical budget process when necessary this would result in a roughly 14 percent, or but also provide additional legislative oversight www.lao.ca.gov 7 2023-24 BUDGET compared to the current process. We recommend fund be provided sooner than 30 days after the Legislature structure this new fund as follows: JLBC receives notification (unless the JLBC waives the 30-day review period in writing). • Budget Fund at Nominal Amount. We We recommend requiring that this notification recommend setting the base budget for specify the activities proposed to be funded this new fund at a nominal amount, such as (such as the number, classifications, and $1,000. In practice, this would require the durations of proposed new hires) as well as administration to request an augmentation the associated costs. Furthermore, to help prior to making any significant expenditures maximize legislative oversight, we recommend from the fund. adding language specifying that this fund • Create a 30-Day Advance Notification may not be used in cases where costs could Process for Augmenting the New Fund. reasonably be foreseen during the prior, We recommend that the budget bill language current, or upcoming budget process. accompanying the allocation for this new fund specify that no augmentation to the LAO PUBLICATIONS This report was prepared by Helen Kerstein, and 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. 8 LEGISLATIVE ANALYST’S OFFICE