The 2024-25 Budget: Crafting Climate, Resources, and Environmental Budget Solutions

2024-25 BUDGET The 2024-25 Budget: Crafting Climate, Resources, and Environmental Budget Solutions GABRIEL PETEK | LEGISLATIVE ANALYST FEBRUARY 2024 www.lao.ca.gov 1 2024-25 BUDGET 2 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET Table of Contents Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Discussion of Governor’s Overall Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Overview of Specific Proposed Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Zero-Emission Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Water and Drough .t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Wildfire and Forest Resilience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Nature-Based Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Community Resilience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Coastal Resilience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Sustainable Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Circular Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Extreme Heat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Other Recent Augmentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 www.lao.ca.gov 3 2024-25 BUDGET 4 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET Executive Summary Overview of This Report. 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 suggestions for how it might modify the spending plan 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, including background on recent funding augmentations and the state’s budget problem; a high-level overview of the Governor’s proposals; our overarching assessment of the proposed approach; and recommendations for how the Legislature could proceed . We then walk through the Governor’s proposed solutions in each of 11 thematic areas, including examples of alternative or additional budget solutions the Legislature could consider . Recent Budgets Included Significant General Fund Augmentations. Combined, the 2021-22 and 2022-23 budget agreements included notable amounts of new spending 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 . In most cases, these augmentations represented unprecedented levels of General Fund for these types of programs, many of which historically have been supported primarily with special funds or bond funds . These budget packages also included agreements to provide additional funding in future years for a six-year total of about $39 billion (2020-21 through 2025-26) . To help address the General Fund shortfall that began materializing last year, the 2023-24 spending plan made a number of revisions—including reductions, delays, and fund shifts—to the thematic packages agreed to in earlier budget deals . On net, the revised budget agreement intended to maintain $36 billion from a combination of funding sources (93 percent of the original total) from 2020-21 through 2026-27 for these activities . (In some budget documents the administration cites higher climate spending amounts because it includes several large programs in its totals that we exclude from ours, such as related to transportation and housing .) Governor Proposes $4.1 Billion in General Fund Solutions for 2024-25 Budget Problem. Similar to last year, the Governor relies on three strategies to achieve additional General Fund savings from climate, resources, and environmental programs across the budget window (2022-23 through 2024-25)—$2 billion from spending reductions, $1 .1 billion from delaying spending to a future year, and $1 billion from reducing General Fund and backfilling with a different fund source (primarily using the Greenhouse Gas Reduction Fund, [GGRF]) . The amount of multiyear savings proposed across the combined budget window and forecast period (2023-24 through 2027-28) is somewhat less— $3 .6 billion . This is the net result of some additional out-year reductions which are more than offset by the costs associated with the resumption of delayed expenditures . Given State Budget Shortfall, Overall Proposed Approach Has Several Merits. The magnitude of the General Fund problem means that the Legislature faces difficult choices in developing its budget this year . Within this context, we find a number of redeeming qualities in the Governor’s proposal . Specifically, it: (1) continues to fulfill most state objectives by sustaining the vast majority of planned multiyear funding and activities; (2) focuses reductions on recent one-time augmentations, which is less disruptive than reducing ongoing base programs; (3) does not reduce funding that has already been committed to specific projects or grantees; (4) utilizes GGRF to sustain numerous programs while also achieving General Fund savings; and (5) eliminates most unappropriated General Fund planned for the budget year and future . www.lao.ca.gov 5 2024-25 BUDGET Governor’s Proposal Reflects Administration’s Priorities, Maintains Significant Amount of Unspent Funds. The administration’s choices regarding which programs to preserve and which to reduce largely reflect the Governor’s priorities . Specifically, many of the proposed cuts are to programs for which the Legislature advocated during budget negotiations, rather than those that were initially proposed by the Governor . To the extent the Legislature’s priorities differ from the Governor’s, we recommend it select a different mix of programs for funding reductions . Moreover, our review of expenditure data suggests the Governor’s proposal maintains over $1 billion in uncommitted prior- and current-year appropriated funds . The Legislature could reduce some of this funding and achieve General Fund savings as additions or alternatives to the Governor’s proposals, in most cases without major disruptions to specific programs or projects . However, should it wish to capture these savings, we recommend the Legislature consider taking early action ahead of the June budget deadline as in many cases departments have plans to make additional grant awards this spring . Proposed Delays and Out-Year Commitments Complicate Future Budget Situation. While the Governor eliminates most of the unappropriated planned General Fund, some of this funding is only temporarily reduced—$1 .7 billion in General Fund expenditures are delayed to future years . While these delays provide short-term savings and might preserve intended activities over the longer term, they also exacerbate future budget problems by increasing out-year General Fund spending commitments . The proposal also would maintain over $900 million in General Fund spending that previous budget agreements planned for 2025-26 . Building a multiyear spending plan that incorporates this funding sets expectations for potential projects and grantees that may be hard to keep given projected out-year budget deficits . Moreover, the Governor’s proposal includes plans to dedicate a notable share of out-year discretionary GGRF revenues for specific purposes (primarily for spending related to zero-emission vehicles) rather than deferring those spending decisions to future budget negotiations . The Legislature might benefit from preserving additional flexibility around how it wants to use future GGRF resources . Overall, we recommend the Legislature minimize out-year commitments for both the General Fund and GGRF . Recommend Legislature Identify Alternative and Additional Budget Solutions Depending on Its Priorities and the Evolving General Fund Condition. We think that generating at least the same magnitude of General Fund solutions from climate, resources, and environmental programs as the Governor will be important in solving the budget problem . Maximizing spending reductions from one-time funds will allow the Legislature to minimize the use of other budget tools—like reserves— that likely will be needed to address deficits in future years . To the degree some of the Governor’s proposed program reductions represent important efforts for the Legislature, however, it could opt to sustain that funding and instead find a like amount of savings by making alternative reductions, such as to programs with uncommitted funds . Besides alternative reductions, we recommend the Legislature also begin identifying options for potential additional budget solutions from these programs . Further reductions to this one-time spending could prove helpful in a number of potential scenarios, such as if (1) the budget condition worsens (current LAO revenue projections suggest this is likely), (2) the Legislature wants to reject some of the Governor’s proposed General Fund budget solutions in other policy areas, (3) the Legislature wants to “make room” to fund some of its key priorities, and/or (4) the Legislature determines that some of the solutions included in the Governor’s proposal may not yield anticipated savings . While this process will be challenging, taking the time to consider potential options over the spring will better prepare the Legislature to make decisions in June when it will not have much time to gather information before the budget deadline . 6 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET INTRODUCTION In response to the multibillion-dollar budget and environmental programs; our overarching problem the state is facing, the Governor’s budget assessment of the proposed approach; and proposes reducing net General Fund spending by recommendations for how the Legislature $3 .6 billion across six years from climate, resources, could proceed . and environmental programs . The proposal saves We then walk through each of the Governor’s $4 .1 billion in General Fund affecting the 2024-25 proposed solutions by thematic area, including budget from a combination of spending reductions, examples of alternative or additional solutions shifting spending to different fund sources, and the Legislature could consider . These thematic delaying funding for certain programs to a future areas include: year, but over the multiyear period some of these • Zero-Emission Vehicles (ZEVs) . savings are offset by the resumption of the delayed • Water and Drought . spending . This report describes the Governor’s proposals and provides the Legislature with • Energy . suggestions for how it might modify the spending • Wildfire and Forest Resilience . plan to better reflect its priorities and prepare to • Nature-Based Activities . address a potentially larger budget problem . • Community Resilience . The report begins with a discussion of the • Coastal Resilience . Governor’s overall approach, including background • Sustainable Agriculture . on recent funding augmentations and the state’s • Circular Economy . budget problem; a high-level overview of the • Extreme Heat . Governor’s proposals for climate, resources, • Other Recent Augmentations . DISCUSSION OF GOVERNOR’S OVERALL APPROACH BACKGROUND we describe in the box on the next page, this amount does not include some additional non-environmental Recent Budgets Included Significant General funding that the administration sometimes includes in Fund Augmentations for Climate, Natural its “Climate Budget” totals .) The funding was spread Resources, and Environmental Protection. across numerous departments and was primarily Combined, the 2021-22 and 2022-23 budget from the General Fund, but did include about agreements included notable amounts of new $6 billion from other funds, mostly the Greenhouse spending for a wide variety of activities related to Gas Reduction Fund (GGRF) and Proposition 98 mitigating and responding to climate change, as well (dedicated school funding for kindergarten through as for protecting and restoring natural resources community college, used here for zero-emission and the environment . These budget packages also school buses) . In general, these augmentations included agreements to provide additional funding were all for activities that were one time or limited in future years for a six-year total of about $39 billion term in nature, such as providing grants for local (2020-21 through 2025-26) . Most of this funding entities to construct infrastructure or carry out habitat was grouped into thematic packages, such as for restoration projects . Some of the augmentations ZEVs, wildfire and forest resilience, and water and provided funding for activities to be undertaken drought-related activities . (Recent budgets also by state agencies, such as to secure additional provided some additional augmentations for natural electricity resources intended to ensure summer resources and environmental protection departments electric reliability . that we do not include in these totals . Additionally, as www.lao.ca.gov 7 2024-25 BUDGET Clarifying Different “Climate Budget” Spending Totals Budget documents released by the administration cite higher totals for spending on climate programs than we discuss in this report . Specifically, the administration states that intended multiyear spending for the administration’s “California Climate Commitment” originally totaled $54 billion (as compared to our $39 billion) . That document also cites higher numbers for the proposed 2024-25 budget solutions from climate-related programs ($6 .7 billion as compared to our $4 .1 billion) and the revised proposed multiyear total maintained ($48 billion compared to our $34 billion) . This discrepancy stems from the administration counting several additional programs in its totals that we exclude from ours . These include multiyear spending plans related to transportation infrastructure ($13 .8 billion, which includes $4 .2 billion in bond funding for the high-speed rail project), housing development ($975 million), and various research initiatives and infrastructure projects at the University of California and California State University systems ($722 million), as well as a number of programs in both the health and workforce policy areas . Presumably, the administration includes this wider array of programs in its climate spending totals because it finds that they have some nexus to addressing or responding to climate change causes and impacts . We have two primary rationales for omitting these programs from our content in this and previous reports related to spending on climate and environmental programs . First, while many of the programs included in the administration’s totals may have some nexus with climate change, in most cases that is not their primary focus . For example, while developing infill housing could help the state meet its climate goals by reducing driving and associated emissions, the primary goal of the Infill Infrastructure Grant, Adaptive Reuse, and State Excess Site Development programs (all of which are included in the Governor’s Climate Budget totals) is to expand the state’s housing inventory . Indeed, given how widespread climate change impacts are becoming, one might be able to draw some relation between addressing or responding to climate change and an increasingly wide array of state expenditures, meaning grouping and tracking them comprehensively would become progressively more unwieldy and impractical . Second, to help avoid confusion, we have aligned our summaries with the way the Legislature has approached discussing and adopting its decisions . That is, the thematic “packages” and the handful of other environmental program augmentations we present in this report match the content discussed and voted on in the budget subcommittees that are directly charged with considering fiscal and policy issues related to climate change, natural resources, and environmental protection . The programs we exclude from our totals were deliberated upon in other legislative budget subcommittees and were not considered together in an overarching “legislative climate budget .” This slight divergence in how the administration and our office summarize climate spending is not new—we each have been largely consistent in our approaches since 2022-23 . (We have adjusted our totals slightly in this report to incorporate some additional “non-package” augmentations which the Governor is now proposing to modify, as we describe in the text .) Moreover, these distinctions do not represent a true difference in spending estimates, but rather alternative choices in how to frame the discussion of state spending for climate programs . 8 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET General Fund Augmentations Represent with the General Fund contributing more than half of Significant Departure From Historical Funding the funding . In some cases, this short-term infusion Trends. In most cases, the recent augmentations of new funding has allowed the state to expand represent unprecedented levels of General Fund for previous programs or initiate new activities, while in these types of programs, many of which historically others the state is providing General Fund support have been supported with special funds or bond to continue existing activities that previously were funds . This anomalous General Fund spending was supported with other fund sources . enabled by the significant tax revenue surpluses Fiscal Downturn Led to Some Reductions the state received (and expected to receive) over and Modifications to Packages in 2023-24 the past couple of years . Figure 1 highlights these Budget Agreement. To help address the General trends . The figure shows total annual funding Fund shortfall that began materializing last year, (including both the recent one-time augmentations the 2023-24 spending plan made a number of as well as baseline funds) for the California revisions—including reductions and delays— Department of Food and Agriculture and the to the thematic packages agreed to in earlier departments within the California Natural Resources budget deals . Specifically, the budget included Agency and California Environmental Protection General Fund reductions to the climate funding Agency, along with just the climate-specific funding packages totaling $8 .7 billion across 2021-22 provided to some additional departments through through 2023-24, although it backfilled about the thematic packages . As shown, in the years prior $2 billion of that amount by shifting costs to other to 2021-22, spending on climate, natural resources, fund sources (particularly GGRF) . Because the and environmental programs averaged around spending plan achieved some of those General $10 billion annually, and General Fund typically made Fund savings by delaying funding to future years up roughly one-third of the totals . In contrast, from and also anticipated additional out-year GGRF 2021-22 through 2023-24, average annual funding backfills, the planned net programmatic reduction levels for these departments more than doubled, from these packages across the multiyear period was only $2 .8 billion . That is, Figure 1 the budget agreement intended to maintain $36 billion from a General Fund Spending on Climate, Resources, and combination of funding sources Environmental Programs Surged in Recent Yearsª (93 percent of the original total) (In Billions) from 2020-21 through 2026-27 for specified climate-related $30 and natural resources activities . Figure 2 (on the next page) displays 25 the multiyear funding totals for each package as revised by the 20 2023-24 budget agreement . The Bond Funds figure also includes $2 .3 billion for 15 certain other significant climate 10 and environmental spending not Special Funds adopted as part of the thematic 5 packages, including $1 billion General Fund to implement the Clean Energy 2013-14 2015-16 2017-18 2019-20 2022-23 2024-25 Reliability Investment Plan (CERIP), $500 million to clean up ª Includes departments in the California Natural Resources Agency and California Environmental Protection Agency, as well as the California Department of Food and Agriculture and the climate package amounts for the Governor's contaminated brownfield sites, Office of Planning and Research and the California Public Utilities Commission. All amounts reflect the Governor's January 2024 proposals. and $477 million for a Climate Innovation Program . www.lao.ca.gov 9 2024-25 BUDGET Figure 2 Revised Recent and Planned Augmentations to Climate, Resources, and Environmental Programs (In Millions)a Thematic Area 2021-22b 2022-23 2023-24 2024-25 2025-26 2026-27 Total Zero-Emission Vehicles $3,351 $2,168 $847 $1,407 $1,406 $906 $10,085 Drought and Water Resilience 5,244 1,145 587 584 554 17 8,131 Energy 2,245 2,193 1,333 539 621 51 6,982 Wildfire and Forest Resilience 1,478 620 669 — — — 2,767 Nature-Based Activities 106 1,016 286 1 — — 1,409 Community Resilience 202 745 340 50 — — 1,337 Coastal Resilience 19 431 653 10 — — 1,112 Sustainable Agriculture 670 328 53 — — — 1,052 Circular Economy 198 245 — — — — 443 Extreme Heat 80 128 197 — — — 404 Otherc 579 127 295 675 875 — 2,551 Totals $14,172 $9,146 $5,260 $3,266 $3,456 $974 $36,273 a Reflects 2023-24 budget agreement . Includes roughly $28 billion from the General Fund and $8 .3 billion from other fund sources, including the Greenhouse Gas Reduction Fund and Proposition 98 . b Also includes $520 million provided in 2020-21, mostly for wildfire and forest resilience activities . c Includes funding for various environmental-related programs not incorporated in thematic packages, including to implement the Clean Energy Reliability Investment Plan, brownfields cleanup, and the Climate Innovation Program . State Faces a Multiyear, Multibillion-Dollar categories for recent one-time investments, the Budget Problem. Due to a deteriorating revenue Governor targets these programs for a notable picture relative to expectations from June 2023, share of these spending solutions . Under the both our office and the administration anticipate administration’s projections, even after adopting that the state faces a significant multiyear budget the Governor’s proposals, the state still would problem . A budget problem—also called a deficit— face operating deficits of $37 billion in 2025-26, occurs when funding for the current or upcoming $30 billion in 2026-27, and $28 billion in 2027-28 . budget is insufficient to cover the costs of currently (We discuss the overall budget condition in our authorized services . Estimates of the magnitude January 2024 report, The 2024-25 Budget: of this shortfall differ based on how “baseline” Overview of the Governor’s Budget .) spending is defined—the administration estimates a $38 billion problem whereas in January our office GOVERNOR’S PROPOSALS estimated that the Governor’s budget addresses Uses Three Strategies to Generate a $58 billion problem—as well as somewhat $4.1 Billion in General Fund Solutions for different revenue projections . Regardless of these 2024-25 Budget Problem. Similar to last distinctions, it is clear that the state faces the year, the Governor relies on three strategies to task of “solving” a substantial budget problem . achieve additional General Fund savings from Moreover, both our office and the administration climate, resources, and environmental programs: estimate that, based on current revenue forecasts, reductions, funding delays, and fund shifts . the state will face significant operating deficits in This generates approximately $4 .1 billion in General subsequent fiscal years . The Governor proposes Fund savings across the budget window (2022-23 to address the 2024-25 budget problem through through 2024-25)—$2 billion from spending a combination of strategies, including relying on reductions, $1 .1 billion from delaying spending reserves and reducing recent one-time spending to a future year, and $1 billion from reducing commitments . Given that the climate, resources, General Fund and backfilling it with a different fund and environmental policy areas were the largest source . In some cases, the Governor proposes 10 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET a combination of strategies, such as delaying for discretionary expenditures in 2024-25, the spending to a future year and shifting the fund Governor proposes using more than three-quarters source . The amount of multiyear savings proposed to backfill proposed General Fund reductions, across the combined budget window and forecast including the $1 billion in fund shifts for climate and period (2023-24 through 2027-28) is somewhat environmental programs . This includes $557 million less—$3 .6 billion . This is the net result of some in current-year expenditures (primary within the ZEV additional out-year reductions which are more than package) for which the Governor is requesting that offset by the costs associated with the resumption the Legislature take early action to reduce General of delayed expenditures . Fund and backfill it with GGRF . (The administration has requested that administering departments • Reductions. The Governor reduces $2 billion pause their spending of authorized General Fund in General Fund support for selected for these programs to avoid eroding these potential programs across the budget window . In some current-year savings .) of these cases, the proposal is to rescind funding that was provided in the current or The Governor also proposes delaying prior year that departments have not yet $600 million in planned GGRF spending for ZEV expended . In others, the Governor proposes programs from 2024-25 to 2027-28 . While this not providing funding in 2024-25 that was does not directly result in General Fund savings, pledged as part of a recent budget agreement . it has the effect of freeing up additional GGRF For some programs, the Governor partially resources in 2024-25 which can then be redirected reduces the intended funding levels and for for alternative purposes (such as the proposed others the proposal completely eliminates the fund shifts, which do generate budget solutions) . funding . Besides the $2 billion in reductions The Governor also would sustain previous affecting the 2024-25 budget, the proposal plans to provide $600 million from GGRF for the reduces an additional $543 million from ZEV package in 2025-26 and 2026-27 . Please General Fund expenditures that recent budget see our companion publication, The 2024-25 agreements had planned for the out-years Budget: Cap-and-Trade Expenditure Plan, for (2025-26 through 2027-28) . a more detailed discussion of the Governor’s GGRF proposals . • Funding Delays. The Governor proposes delaying $1 .1 billion in intended General Fund ASSESSMENT for certain programs, with the intent to provide it in a future year rather than within the budget Vast Majority of Intended Multiyear Funding window as originally planned . This would Would be Maintained. Responding to the causes achieve near-term General Fund savings, but and impacts of climate change presents significant shift the associated costs to a future year . In challenges for California and has therefore been addition to the $1 .1 billion originally planned a clear priority of both the administration and the for the current or budget year, the Governor Legislature in recent years . Indeed, the resources also proposes delaying $635 million in General and environmental policy areas received the Fund expenditures that had been planned largest proportional share of discretionary for 2025-26 . one-time General Fund spending from recent budget surpluses . The Governor’s budget largely • Fund Shifts. The Governor achieves an sustains this commitment . As shown in Figure 3 additional $1 billion in savings affecting the on the next page, even with the Governor’s budget window by reducing or eliminating the proposed budget adjustments, the majority of intended General Fund for a program but then the spending and activities included in recent backfilling it with GGRF . budget agreements would continue . Specifically, Relies on GGRF to Maintain Funding for the proposal would sustain $33 .7 billion, or Certain Programs. Of the $2 .3 billion in GGRF 86 percent of the total original intended amounts . that the administration estimates is available www.lao.ca.gov 11 2024-25 BUDGET Figure 3 Governor's Proposal Would Retain Majority of Planned Multiyear Climate Funding (In Billions) Zero-Emission Vehicles Drought and Water Resilience Energy Wildfire and Forest Resilience Already Reduced Other Reduction Fund shift Proposed Community Resilience Delay Nature-Based Solutions Coastal Resilience Sustainable Agriculture Retained Extreme Heat Circular Economy 2 4 6 8 $10 Even these reduced amounts still would represent Given State Budget Shortfall, Overall significant augmentations compared to historical Proposed Approach Has Several Merits. levels for most of these programs . Moreover, as The magnitude of the General Fund problem shown earlier in Figure 1, even with the Governor’s means that the Legislature faces difficult choices in proposed reductions, funding levels for climate developing its budget this year . Within this context, and resources-related activities would remain at we find a number of redeeming qualities in the levels that are roughly comparable to those that Governor’s proposal . Specifically, it: were in place in 2019-20, before the unprecedented • Continues to Fulfill Most State Objectives. increases that have occurred over the last couple of As noted, even with the Governor’s proposed years . This can give the Legislature confidence that reductions, the vast majority of multiyear even at moderately reduced spending levels such funding and activities included in recent as those proposed by the Governor, the state can budget agreements would be sustained . continue to make significant progress on its climate • Focuses Reductions on Recent One-Time and environmental goals . However, as shown in the Augmentations. Pulling back one-time figure, the proportion of funding proposed to be expenditures is less disruptive than making maintained—and therefore the relative magnitude reductions to ongoing base programs . of the activities that could continue being • Does Not Reduce Funding That Has implemented—does vary by thematic package . Already Been Committed to Specific For example, the Governor proposes maintaining Projects or Grantees. Sustaining committed essentially all of the total intended funding for funding avoids creating challenges for local ZEV programs, but only about half for coastal grantees and project sponsors that may resilience activities . 12 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET already have entered into contracts, attained 2024-25, some of this funding is only temporarily other financing, or initiated construction . reduced . Specifically, as noted above, the Governor • Utilizes Other Available Funds to Sustain proposes delaying a total of $1 .7 billion in General Numerous Programs. The strategy of Fund expenditures to future years . (This consists using GGRF to backfill many General Fund of $1 .1 billion affecting the 2024-25 budget window reductions allows the state to both achieve and an additional $635 million from 2025-26 .) savings and maintain planned activities . While these delays provide short-term savings and might preserve intended activities over the • Eliminates Most Unappropriated General longer term, they also exacerbate future budget Fund Planned for Budget Year and Future. problems by increasing out-year General Fund Pulling back on plans to provide funding that spending commitments . Specifically, the delays had been scheduled for 2024-25 or future result in higher planned spending of $315 million in years is among the least disruptive reductions 2025-26, $665 million in 2026-27, and $750 million the state can make, in that administering in 2027-28 . As noted above with regard to the departments should not yet have proceeded in out-year planned funding the Governor proposes making grant solicitations or initiating projects . to maintain, building a multiyear spending plan that Reducing Remaining General Fund From incorporates this delayed funding sets expectations 2024-25 and Out-Years Could Be Less for potential projects and grantees that may be hard Disruptive Than Some Other Alternatives. While to keep given projected out-year budget deficits . the Governor’s proposal eliminates most of the We estimate that state revenues in the out-years General Fund that past budget agreements had would need to exceed the administration’s planned for but not yet provided, it leaves some in forecast by roughly $50 billion per year in order to place . Specifically, the proposal would maintain sustain the total amounts of spending proposed about $380 million of General Fund spending by the Governor’s budget across all policy planned for 2024-25 (including $200 million for areas . Moreover, state priorities may shift in the drinking and wastewater infrastructure projects coming years—based both on the revenue picture and about $160 million for several energy but also evolving circumstances such as potential programs) . Moreover, the Governor sustains plans floods or droughts, policy changes at the federal to provide about $930 million from the General level, or other unforeseen events—and avoiding Fund in 2025-26 (including $500 million for water overcommitting out-year funds would help preserve storage projects, over $300 million for energy legislative flexibility to respond . programs, and $100 million to implement portions Legislature Could Pursue Alternative of CERIP) . Because these funds have not yet Approach for Prioritizing GGRF in Current and been appropriated and departments do not have Budget Years. While the Governor’s approach of the legal authority to spend them, the Legislature using GGRF to backfill General Fund reductions should have some certainty that they have not yet and sustain certain activities has merit, the been awarded or committed for specific projects . Legislature could adopt this same strategy in a As such, avoiding appropriating this budget-year somewhat different way to align with its priorities . and out-year funding in the first place could be Specifically, it could achieve the same amount of less disruptive for departments and other entities savings as the Governor through directing GGRF than retracting existing funding . Moreover, avoiding funds to backfill a different mix of General Fund incorporating one-time expenditures into out-year reductions . For example, the Governor proposes spending plans would help address the projected directing a total of $1 .3 billion from GGRF to backfill future budget deficit and avoid setting spending all the proposed General Fund reductions to the expectations that may be hard to keep . ZEV package, but only $37 million to sustain a mere Proposed Delays Complicate Future Budget 8 percent of the proposed reductions to coastal Situation. While the Governor eliminates most resilience activities . Based on its highest priorities, of the unappropriated General Fund planned for the Legislature could choose a different allocation . www.lao.ca.gov 13 2024-25 BUDGET The Legislature has flexibility around how it is able program expansions . While nothing precludes it to direct GGRF revenues because the program from revisiting these spending intentions in a future was authorized in a way that is akin to a tax, year, leaving them in its multiyear spending plan for meaning the funds can legally be used for broad now could set unrealistic expectations and make purposes . Historically, the state has used GGRF redirecting the funds in the coming years more for a wide range of environmental programs challenging . In contrast, holding off on making (along with programs in other policy areas such as spending commitments until it has more information transportation and housing) . about the budget situation it faces in each given Extensive Reliance on Out-Year GGRF fiscal year would preserve more flexibility for the Makes Assumptions About Future State Legislature to target available discretionary GGRF Priorities and Revenues. While the state funds to its pressing and emerging priorities . dedicates a share of annual GGRF revenues Second, considerable uncertainty exists around to recurring ongoing activities (such as the how much GGRF revenue will be available in high-speed rail project, sustainable housing and future years . Historically, GGRF revenues have transit programs, and forest health activities), it experienced significant volatility . A precipitous drop generally has maintained about 35 percent for in GGRF revenues could jeopardize not only these discretionary spending decisions agreed upon planned out-year ZEV expenditures but also other by the Legislature and Governor as part of each longstanding state priorities for which the state has year’s budget negotiations . The 2023-24 budget historically relied upon this funding source—raising package broke with historical practice somewhat further questions about the wisdom of committing by including plans to dedicate a notable share of these additional funds so many years in advance . out-year discretionary GGRF revenues for specific Data Indicate Significant Amount of purposes rather than deferring that decision to Appropriated Funding Has Not Yet Been future legislative and administration negotiations . Committed by Administering Departments. Specifically, the agreement planned to dedicate Of the General Fund appropriated for the thematic $600 million from discretionary GGRF annually packages from 2021-22 through 2023-24, we for three years beginning in 2024-25 to backfill estimate that over $4 billion remains uncommitted . General Fund reductions within the ZEV package . (This typically means that it has not yet been As noted above, the Governor’s proposal maintains dedicated to specific projects or activities .) Of this these plans and adds an additional out-year GGRF total, we estimate that the Governor is proposing commitment of $600 million in 2027-28 resulting solutions—including reductions, delays, and fund from a proposed delay of some planned ZEV shifts—affecting under $3 billion . This leaves over package spending . This would commit a total of $1 billion in uncommitted prior- and current-year $1 .8 billion ($600 million per year) in future GGRF appropriated funding that has not been proposed revenues from 2025-26 through 2027-28 . While this for a General Fund solution . The Legislature could approach allows the state to maintain long-term reduce some of this funding and achieve General intended ZEV spending plans and save General Fund savings as additions or alternatives to the Fund, it does raise two key concerns . Governor’s proposals, in most cases without major First, the Legislature might benefit from disruptions to specific programs or projects . We preserving additional flexibility around how it wants discuss various specific examples of programs to dedicate future GGRF funds . Specifically, given that the Legislature could consider reducing in the the projected budget deficits in the coming years, subsequent thematic sections of this report . the Legislature could face some very difficult Governor Gives Precedence to choices around its expenditures—including a Administration’s Initiatives Over Legislative potential need to reduce General Fund support Priorities . The administration’s choices regarding for core ongoing programs . In such a case, the which programs to preserve and which to propose Legislature could find that it has higher priorities for for reductions largely reflect the Governor’s GGRF revenues than sustaining planned one-time priorities . Specifically, many of the proposed 14 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET cuts are to programs for which the Legislature uncommitted), and funding to protect salmon advocated during budget negotiations, rather than (affecting $30 million of the $35 million currently those that were initially proposed by the Governor . uncommitted) . After those grant awards are made, For example, the Governor proposes cutting grantees will reasonably expect that funding is $452 million from the multiyear budget agreement forthcoming and take steps such as entering into for coastal resilience activities—proportionally more contracts and initiating construction activities . than any other of the thematic packages—much At that point, the Legislature will lose the option of which was originally added by the Legislature . of reverting the associated funding and capturing The Governor also proposes cutting several other savings without causing significant disruptions . As programs that the Legislature augmented as such, for some programs, the Legislature may want priorities during previous budget negotiations, to consider taking early action to make funding such as watershed climate resilience projects reductions ahead of the June budget deadline ($126 million proposed reduction), addressing to ensure departments do not proceed with their per- and polyfluoroalkyl substances ($102 million current plans to commit unspent funds (and erode proposed reduction), the Outdoor Equity Grant potential savings) . As noted above, we think these Program ($25 million proposed reduction), and the amounts could total over $1 billion . Urban Waterfront Program ($12 .3 million proposed Entities in California Are Receiving reduction) . Notably, at the same time, the Governor Significant Federal Funds for Climate- and proposes to maintain uncommitted funding for a Environmental-Related Activities. Recent federal number of the administration’s priorities, such as legislation, including the Infrastructure Investment for water storage projects ($500 million proposed to and Jobs Act (IIJA) and Inflation Reduction Act retain), water resilience projects ($228 million), and (IRA), have provided large increases in funding coastal acquisitions ($49 million) . To the extent the for various climate- and environmental-related Legislature’s priorities differ from the Governor’s, activities . As shown in Figure 4 on the next page, it could select a different mix of programs for we estimate that, thus far, entities in California— funding reductions . including state agencies and departments, local We also note that the administration has governments, tribes, private companies, and considerable control over the pace at which nongovernmental organizations—have received programs are administered . For example, we commitments totaling roughly $9 .7 billion from IIJA understand that the administration has suspended and IRA to support a wide range of climate- and grant solicitations for certain programs due to environmental-related activities . Some of the funding uncertainty—thus likely contributing to program areas slated to receive the most funding higher uncommitted amounts available for potential include drought and water resilience (much of reduction—whereas others proceeded in their which is for drinking water-related projects), clean solicitations without interruption . energy, ZEVs, and wildfire and forest resilience . Administration Plans to Commit More Additionally, many federal agencies have not yet Funding to Specific Projects in Coming Months. allocated all of their IIJA and IRA funding, so entities Departments in charge of administering the funding in California will have the opportunity to compete provided through recent budgets indicate that some for—and potentially secure—additional funding in programs expect to commit additional funds soon the near future . by making further grant awards within the next few Notably, many of the federally funded activities months . For example, the administration indicates it are broadly similar to those supported by the state’s expects to make some grant awards in spring 2024 programs . However, typically they do not provide for water resilience projects ($228 million currently an identical dollar-for-dollar replacement for state uncommitted), transmission financing ($200 million funds, as they may have different eligibility criteria currently uncommitted), the Wildlife Conservation or allowable uses . For example, in some cases, Board’s various nature-based solutions programs federal programs also require a local funding (affecting $73 million of the $100 million currently contribution, which can result in higher barriers to www.lao.ca.gov 15 2024-25 BUDGET access than some state programs . Despite these is because activities funded by recent budgets program differences, the availability of billions of are being attempted for the first time . Even for dollars of federal funds to support climate- and most previously funded programs, however, environmental-related activities will ensure that such outcome data are not regularly collected or even with recent and proposed reductions to tracked . The lack of such information also impedes state funding, significant support still is available the Legislature’s longer-term decisions, such as for many of the same broad purposes planned for regarding which programs should be prioritized in recent state budgets . This consideration may for future funding investments . Moreover, future be particularly important if the Legislature finds it decisions would benefit from information about the needs to make additional reductions to General process of implementing the recent unprecedented Fund-supported programs . For example, it could level of funding, including the design of and demand identify program areas where state entities are for specific programs, as well as successes and receiving significant infusions of federal funds (such challenges for both administering departments and as drinking water and ZEVs) and evaluate whether project sponsors . it could make additional reductions to proposed state funds and still make notable progress toward RECOMMENDATIONS achieving its priorities . While we have identified some advantages to the Information on Program Effectiveness Is Governor’s overall approach, the administration’s Limited. Ideally, the Legislature’s decisions around proposals do not represent the only set of options which programs to sustain or reduce could be for addressing the budget problem . The Legislature informed by evidence regarding which activities could make changes to (1) reflect its priorities are most effective at limiting the magnitude and (such as by making alternative reductions or fund impacts of climate change . Unfortunately, such shifts), (2) avoid growing out-year budget deficits data are not widely available . In some cases, this (such as by limiting the use of funding delays), and (3) include a higher level of budget solutions (such as by Figure 4 making additional reductions to California Estimated to Receive Billions in Climate and unspent prior- or current-year Resources-Related Funds From IRA and IIJA funds) . Below, we discuss our overarching recommendations to the Legislature for crafting climate, Extreme Heat Mitigation Coastal Resilience resources, and environmental Nature-Based Activities Other Wildfire and budget solutions, which we also Forest Resilience Total: $9.7 Billion summarize in Figure 5 . Maximize General Fund Savings by Reducing Significant One-Time Spending Zero-Emission From Climate Packages. Vehicles We recommend the Legislature Drought, Flood, and Water Resilience adopt a budget that includes significant General Fund savings from climate, resources, and Clean Energy environmental programs—at least as much as the Governor . While this could entail making reductions to some programs the Legislature believes are IRA = Inflation Reduction Act and IIJA = Infrastructure Investment and Jobs Act. important, the vast majority of the 16 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET Figure 5 Summary of Overarching Recommendations for Crafting Climate, Resources, and Environmental Budget Solutions 9 Maximize General Fund Savings by Reducing Significant One-Time Spending From Climate Packages. 9 Identify Alternative and/or Additional Budget Solutions Depending on Legislative Priorities and the Evolving General Fund Condition. 9 Consider Taking Early Action to Halt Program Spending in the Current Year and Capture Associated Savings. 9 Use the Greenhouse Gas Reduction Fund to Help Sustain the Highest Legislative Priorities. 9 Minimize Out-Year Commitments for Both the General Fund and the Greenhouse Gas Reduction Fund. 9 Conduct Robust Oversight of Spending and Outcomes, and Consider Whether Additional Program Evaluations Might Be Worthwhile. unprecedented recent investments still would be helpful in a number of potential scenarios, such as sustained . Maximizing spending reductions from if (1) the budget condition worsens (current LAO one-time funds will allow the Legislature to minimize revenue projections suggest this is likely); (2) the the use of other budget tools—like reserves— Legislature wants to reject some of the Governor’s that likely will be needed to address deficits in proposed General Fund budget solutions in other future years . Moreover, the Legislature faces some policy areas (such as to human services programs); urgency in making these changes, as this strategy (3) the Legislature wants to “make room” to fund will not be as readily available as time passes— some of its key priorities, which could include once one-time funds are spent, they no longer are support to implement recently chaptered legislation available to pull back, leaving fewer (and often more (which the Governor’s budget does not fund); and/ disruptive) options for balancing the budget, such or (4) the Legislature determines that some of the as making cuts to ongoing programs . solutions included in the Governor’s proposal Identify Alternative and/or Additional may not yield the anticipated savings . While this Budget Solutions Depending on Legislative process will be challenging, taking the time to Priorities and the Evolving General Fund consider, research, and select potential options Condition. We think that generating at least the over the spring will better prepare the Legislature same magnitude of General Fund solutions from to make decisions in May and June when it will not climate, resources, and environmental programs have much time to gather information before the as the Governor will be important to solving the budget deadline . budget problem . However, we recommend the Consider Taking Early Action to Halt Legislature modify the Governor’s proposals to Program Spending in the Current Year and reflect its priorities . To the degree some of the Capture Associated Savings. To the degree the Governor’s proposed program reductions represent Legislature identifies uncommitted funding from important efforts for the Legislature, it could opt to prior- and current-year appropriations it feels are sustain that funding and instead find a like amount good candidates for making reductions, it may of savings by making alternative reductions, such want to act on them ahead of the June budget as to programs with uncommitted funds . Besides package . This will help ensure that departments finding alternative reductions, we recommend do not proceed in making grant awards (eroding the Legislature also begin identifying options for the potential savings) and that the funds can be potential additional budget solutions from climate, captured without causing undue disruptions . resources, and environmental programs . Further As noted above, we think the total amount of reductions to this one-time spending could prove additional prior- or current-year unspent funds www.lao.ca.gov 17 2024-25 BUDGET could total over $1 billion . The Governor already Given the out-year budget forecast, we recommend has proposed a package of early action budget that—for now—the Legislature consider both items to which the Legislature could add, but this reducing planned out-year funding that has not likely will require identifying and acting upon the yet been appropriated, and reducing rather than target programs within the next month or two . delaying expenditures and revisiting them in a future The Legislature also could consider directing the year when it has a better sense of its available administration to temporarily pause all spending of fiscal resources and highest spending priorities for uncommitted prior- and current-year funding from both the General Fund and GGRF . This would help these packages to preserve its options as it gets a avoid both worsening out-year budget deficits and better sense of the revenue picture and deliberates creating spending expectations the state may not its budget package this spring . However, we note be able to fulfill . that the administration’s compliance with such Conduct Robust Oversight of Spending direction may be difficult to enforce . and Outcomes, and Consider Whether Use GGRF to Help Sustain Highest Legislative Additional Program Evaluations Might Be Priorities. We recommend the Legislature adopt Worthwhile. We recommend the Legislature the Governor’s overall strategy of using GGRF to conduct both near-term and ongoing oversight help backfill General Fund reductions for certain of how the administration is implementing— programs . This approach allows the state to and local grantees are utilizing—funding from achieve necessary budget savings while continuing the recent budget augmentations . In particular, important activities . However, we recommend we recommend the Legislature track: (1) how the the Legislature adopt a GGRF spending package administration is prioritizing funding, especially that preserves funding for its highest-priority within newly designed programs; (2) the levels of activities, which may represent a different mix demand and over- or under-subscription for specific from that proposed by the Governor . For example, programs; (3) any barriers to implementation that instead of prioritizing GGRF to sustain all of the departments or grantees encounter; and (4) the original intended funding for ZEV activities, the impacts and outcomes of funded projects . The Legislature could redirect some of those funds to Legislature has a number of different options for sustain some additional funding for other program conducting such oversight, all of which could be areas proposed for deeper reductions, especially helpful to employ given that they would provide given the significant amount of federal funds differing levels of detail . These include requesting available for ZEVs . that the administration report at spring budget Minimize Out-Year Commitments for hearings, requesting reports through supplemental Both General Fund and GGRF. As noted, the reporting language, and adopting statutory Governor proposed delaying about $1 .7 billion in reporting requirements (such as those typically General Fund spending for climate, resources, included for general obligation bonds) . Additionally, and environmental programs to future years, to the degree it might want more intensive external sustains over $900 million in General Fund planned program evaluations for certain high-priority for 2025-26, and also commits $1 .8 billion in programs to help assess their effectiveness, the out-year GGRF for maintaining intended multiyear Legislature could consider adopting language that spending levels in the ZEV package . While this directs the administration to set aside a portion of approach might preserve funding over the longer provided funding to contract with researchers to term, it also exacerbates future budget problems . conduct more in-depth studies . 18 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET OVERVIEW OF SPECIFIC PROPOSED ADJUSTMENTS ZERO-EMISSION VEHICLES for ZEV activities by $38 million relative to the 2023-24 budget package . The proposal also Recent Budget Agreements Included includes delays and fund shifts . Specifically: $10 Billion Over Several Years for ZEV Programs. The 2021-22 and 2022-23 budgets • Modest Reductions to Four Programs included plans to provide a combined $10 billion ($38 Million). The budget makes reductions over several years to different departments for to the following programs: California Energy a collection of activities intended to promote Commission (CEC) ZEV manufacturing grants statewide adoption of ZEVs . Of this initial funding ($7 million), CEC emerging opportunities plan, the majority of support was from the General ($7 million), and the California Air Resources Fund ($6 .3 billion), but also included $1 .6 billion Board (CARB) and CEC drayage trucks and from Proposition 98 General Fund, $1 .3 billion infrastructure pilot projects ($14 million and from GGRF, and about $700 million combined from $9 million, respectively) . federal and other special state funds . As shown • Funding Delays ($600 Million). The Governor in Figure 6 on the next page, funded activities proposes delaying a total of $600 million included programs for both light- and heavy-duty in planned expenditures from GGRF for vehicles, such as vehicle purchase incentives seven programs from 2024-25 to 2027-28 . and projects to expand the state’s vehicle (This delay has the net effect of freeing up charging network . $600 million in GGRF funds in the budget The 2023-24 budget agreement made some year, which the Governor then uses to changes to this original package in light of the backfill General Fund reductions for other evolving General Fund condition . Specifically, it programs . The proposal also would commit reduced multiyear funding for several programs a like amount of GGRF in 2027-28 for the by a total of $845 million . This included reducing delayed expenditures .) The affected programs $550 million for transit buses and infrastructure, are: CEC ZEV fueling infrastructure grants $150 million for school buses and infrastructure, ($120 million); CEC clean trucks, buses, and and $85 million for ports . However, the current-year off-road equipment ($137 million); Clean Cars agreement also added money for a new flexible 4 All ($45 million); CEC and CARB drayage ZEV transit capital program that provides formula trucks and infrastructure ($50 million and funding to transit agencies which they can use $48 million, respectively); CARB sustainable to support zero-emission buses and related community plans and strategies ($100 million); infrastructure and/or to cover their operating CEC Equitable At-Home Charging expenses . This program is funded with GGRF and ($80 million); and CARB charter boats intended to provide $910 million over four years, compliance ($20 million) . The administration thereby more than offsetting the reductions in terms notes that prior-year funding is available for of total multiyear planned ZEV spending . To achieve most of these programs to meet applicant General Fund savings, the 2023-24 budget package demand in the interim . also included a number of fund shifts to use GGRF • Current-Year Shift to GGRF ($475 Million, revenues in place of some planned General Fund Early Action). The budget proposes (including for out-year expenditures) and delayed shifting $475 million of current-year ZEV certain intended spending to 2026-27 . expenditures from General Fund to GGRF Governor’s Proposal: Reduces $38 Million, for the following programs: ZEV fueling Delays $600 Million, and Shifts $475 Million infrastructure grants ($219 million); drayage to GGRF. As shown in Figure 6, the Governor’s trucks and infrastructure ($157 million); transit budget proposes to reduce net multiyear spending buses and infrastructure ($29 million); and www.lao.ca.gov 19 2024-25 BUDGET Figure 6 Governor’s Proposed Changes to ZEV Package General Fund Unless Otherwise Noted (In Millions) Original Revised Proposed Multiyear Multiyear Proposed Multiyear Program Department Totala Totalb Reductions Total School buses and infrastructure CARB $1,525c $1,390c — $1,390c CEC 425c 410c — 410c Clean trucks, buses, off-road equipment CARB 1,100 1,100 — 1,100 CEC 670d 670d —f,g 670d ZEV fueling infrastructure grants CEC 870 870d —f,g 870d Transportation package ZEV CalSTA 790e 790e — 790e Clean Cars 4 All CARB 656d 656 —f 656d Clean Vehicle Rebate Project CARB 525 525 — 525 Drayage trucks and infrastructure CEC 500 500d —f 500d CARB 445 445d —f,g 445d Sustainable community plans and strategies CARB/CalSTA 339 339d —f 339d Equitable At-Home Charging CEC 300 300d —f 300d ZEV manufacturing grants CEC 250 250 -$7 243 Ports CARB 250 185 — 185 CEC 150 130 — 130 Transit buses and infrastructure CARB 520 140 — 140d CEC 230 60 —g 60 Emerging opportunities CARB 100 100 — 100 CEC 100 100 -7 93 Charter boats compliance CARB 100d 100 —f 100 Near-zero heavy duty trucks CARB 45 45 — 45 Drayage trucks and infrastructure pilot CARB 40 40 -14 26 CEC 25 25 -9 16 ZEV consumer awareness GO-BIZ 5 5 — 5 Hydrogen infrastructure CEC 60 — — — Flexible ZEV transit capital program CalSTA — 910d,h — 910d Total $10,020 $10,085h -$38 $10,047 a Based on 2021-22 and 2022-23 budget agreements . b Based on 2023-24 budget agreement . c Includes Proposition 98 General Fund . d Includes Greenhouse Gas Reduction Fund (GGRF) . e Includes federal funds . f Delays to 2027-28 . g Fund shift to GGRF . h The 2023-24 budget agreement made $845 million in program reductions and added $910 million across four years for a new flexible ZEV transit program . Note: Totals may not add due to rounding ZEV = zero-emission vehicle; CARB = California Air Resources Board; CEC = California Energy Commission; CalSTA = California State Transportation Agency; and GO-Biz = Governor’s Office of Infrastructure and Economic Development clean trucks, buses, and off-road equipment LAO Comments: Legislature Could Consider ($71 million) . This proposed change is enabled Alternative and/or Additional Reductions. While by higher-than-projected cap-and-trade there is significant unspent funding planned for the auction revenues materializing in the current budget year and out-years in the ZEV package, year . The Governor is requesting that the most of this funding is from GGRF . Consequently, Legislature take early action to effectuate this making reductions would not automatically fund shift so that programs can proceed with generate General Fund savings . However, the making grant awards this spring . Legislature could achieve further budget solution if it were to reduce GGRF spending on ZEV activities, make additional General Fund reductions 20 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET elsewhere, then redirect the freed-up GGRF to likely would have to take early action in order backfill those other priorities . Based on available to capture the savings as CARB is in the data on remaining funds, the Legislature could process of preparing to award the funds . consider reducing the following: • Emerging Opportunities ($47 Million). • School Bus and Infrastructure (About CARB is using this funding for ZEV technology $1 Billion in Proposition 98 General Fund). demonstration projects . Of the $53 million The 2022-23 budget package established a General Fund originally allocated, $47 million new program to fund zero-emission school remains in the program’s balance and could buses and related infrastructure administered be reverted for General Fund savings . by CARB and CEC . The Legislature previously • CEC ZEV Program Funding (Unknown, approved $500 million of Proposition 98 Potentially Several Hundreds of Millions General Fund to fund the first round of of Dollars). Updated information on CEC’s grants and adopted intent language to ZEV package expenditures was not available allocate additional funding in the future . at the time of this writing . Based on historical The Governor’s budget provides an additional CEC ZEV spending time lines, we suspect that $500 million of Proposition 98 General Fund several hundreds of millions dollars of unspent for a second round of grants in 2024-25 . funding could be available . We will provide The administration has indicated it is in the more information to the Legislature after we process of, but has not yet allocated, the receive these data from the administration . original grant funding . With this in mind, we recommend the Legislature: (1) consider WATER AND DROUGHT reverting the prior funding (about $500 million) Recent Budget Agreements Included to achieve General Fund savings, and $8.8 Billion Over Several Years for Water and (2) reject the new $500 million proposed in the Drought-Related Activities. As shown in Figure 7 budget year . For more information about the on the next page, the 2022-23 budget appropriated school bus spending, please see our report, and intended to provide a combined $8 .8 billion The 2024-25 Budget: Proposition 98 K-12 ($8 .3 billion from the General Fund and about Education Analysis . $450 million from other funds) over several years • Buses and Off-Road Equipment (At to various departments for emergency drought Least $249 Million). CARB has used its response and water resilience activities . Nearly half appropriations for this category of activities to of the funding ($4 billion) was to support activities fund its Hybrid and Zero-Emission Truck and related to drinking water quality and availability, Bus Voucher Incentive Program . Expenditure water recycling and groundwater cleanup, water data suggest $249 million of the GGRF supply, and flood management . About $1 .4 billion previously appropriated for this program is was intended for immediate drought response unspent and could be reverted and redirected activities, such as for the State Water Resources to achieve General Fund savings elsewhere . Control Board (SWRCB) to respond to drinking CEC also received funding in this category but water emergencies . The remaining funding the administration had not provided data on ($3 .3 billion) was to support habitat restoration, CEC’s expenditures as of this writing . water quality, and conservation activities . The • Charter Boats Compliance ($60 Million). 2023-24 budget agreement reduced total multiyear CARB closed its grant solicitations for this funding by $632 million General Fund (7 percent) . program in December 2023 and currently Major reductions included $278 million for water is reviewing applications . Approximately recycling, $119 million for Salton Sea restoration $40 million of General Fund plus $20 million of activities, and $60 million for local assistance GGRF remains in the balance . The Legislature grants related to implementation of the Sustainable could consider reverting this $60 million but Groundwater Management Act . www.lao.ca.gov 21 2024-25 BUDGET Figure 7 Governor’s Proposed Changes to Water and Drought Resilience Package General Fund Unless Otherwise Noteda (In Millions) Original Revised Proposed Proposed Program Department Multiyear Totalb Multiyear Totalc Reductions Multiyear Total Drinking Water, Water Supply, Flood $4,025 $3,732 -$224 $3,508 Drinking water, wastewater projects SWRCB $1,700 $1,700 — $1,700 Water recycling, groundwater cleanup SWRCB 800 522 -$174d 348 Water conveyance, water storage DWR 700 700 — 700 Flood management and planning DWR 644 644 — 644e Dam safety DWR 100 100 -50 50 Aqueduct solar panel pilot study DWR 35 20 — 20 Watershed climate studies DWR 25 25 — 25 Water storage tanks DWR 21 21 — 21 Immediate Drought Response $1,439 $1,409 -$27 $1,382 Community drought relief DWR $800 $800 — $800 Data, research, communications Various 202 202 — 202 Water rights activities SWRCB 113 113 — 113e Drought contingency control section Various 96 96 — 96 Forecasting water supply/runoff DWR 101 101 -$27 74f Drinking water emergencies SWRCB 62 62 — 62 Drought salinity barrier DWR 27 3 — 3 Drought food assistance DSS 23 23 — 23 Conservation technical assistance DWR 10 10 — 10e Water refilling stations at schools SWRCB 5 — — — Habitat/Nature-Based Solutions $1,208 $1,208 -$438 $770 Wildlife and habitat projects CDFW, DWR $459 $459 — $459 Watershed climate resilience WCB 334 334 -$312 22 Watershed climate resilience DWR 161 161 -126 35 Aquatic/large-scale habitat projects Various 149 149 — 149 Spending from various bonds WCB, DWR 105 105 — 105 Water Quality and Ecosystem Restoration $1,191 $1,027 -$102 $925 Water resilience projects CNRA $445 $445 — $445e Streamflow enhancement program WCB 250 250 — 250 Salton Sea DWR 220 101 — 101 PFAs support SWRCB 200 155 -$102 53 Urban streams and border rivers Various 70 70 — 70 Clear Lake CNRA 6 6 — 6 Conservation/Agriculture $916 $771 -$19 $752 SGMA implementation DWR $356 $296 — $296 Water conservation programs DWR 180 180 — 180 SWEEP CDFA 160 120 —g 120 Multibenefit land repurposing DOC 110 90 — 90 Agricultural conservation DWR, CDFA 70 45 — 45 Relief for small farmers CDFA 25 25 -$13 12 On-farm technical assistance CDFA 15 15 -6 9 Totals $8,779 $8,148 -$810 $7,337 a In total, about $450 million is from a variety of non-General Fund sources, including bond funds, federal funds, special funds, and reimbursements . b Based on 2021-22 and 2022-23 budget agreements . c Based on 2023-24 budget agreement . d Governor proposes delaying $100 million from 2022-23 to 2025-26 . e Includes funding from sources other than General Fund . f Original appropriation was $16 .75 million ongoing . Governor proposes reducing annual amount to $10 million beginning in 2024-25 . g Governor proposes delaying $21 million until 2024-25 and shifting the fund source from General Fund to Greenhouse Gas Reduction Fund . SWRCB = State Water Resources Control Board; DWR = Department of Water Resources; DSS = Department of Social Services; CDFW = California Department of Fish and Wildlife; WCB = Wildlife Conservation Board; 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 . 22 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET Governor’s Proposal: Reduces $810 Million, Fund (SRF) programs and providing grants for Delays $100 Million, and Delays and Shifts water recycling and clean water projects in $21 Million. Also shown in Figure 7, the Governor’s disadvantaged communities . In addition, the budget proposes to reduce multiyear General Fund federal IIJA is providing more federal funding spending for water and drought resilience, relative than normal for SRF programs between 2022 to the 2023-24 budget agreement, by $810 million . and 2026 ($1 .16 billion for the Drinking Water (The $7 .3 billion the Governor proposes to retain SRF and $790 million for the Clean Water represents 84 percent of the original 2022-23 SRF), which can be used for water recycling package .) The proposal would revert $100 million and groundwater cleanup projects . appropriated in earlier years for water recycling • Per- and Polyfluoroalkyl Substances (PFAs) projects administered by SWRCB and delay Support. The proposal would reduce funding providing it until 2025-26 . Similarly, for the California for addressing PFAs by $102 million (retaining Department of Food and Agriculture’s (CDFA’s) $53 million, or 27 percent, of the original total, State Water Efficiency and Enhancement Program, after accounting for additional reductions the proposal would revert $21 million General Fund made in 2023-24) . PFAs are long-lasting appropriated in earlier years and instead provide chemicals which are hard to break down and the same amount of funding from GGRF in 2024-25 . have been used in a variety of consumer and Proposed reductions include: industrial products . Reduced funding would • Watershed Climate Resilience. The budget result in fewer and/or smaller state-funded proposes to reduce funding by $438 million grants . However, SWRCB will receive ($126 million to the Department of Water approximately $460 million in federal funds Resources [DWR] and $312 million to the through its SRF programs from 2022 through Wildlife Conservation Board [WCB]), retaining 2026 to address “emerging contaminants,” just 11 percent ($56 million) of the original which include PFAs . amount . DWR indicates that the proposed • Dam Safety. The budget would halve reduction would affect the number of funding—from $100 million to $50 million— long-term projects it can fund but not its for dam safety pilot projects administered near-term program plan, which includes six through a competitive grant program by DWR . pilot studies and a subsequent set of grants . The reduction would result in DWR funding While the reduction will lead to WCB awarding fewer projects . fewer grants, it has other funding sources • Agricultural Programs. The budget would available for these types of projects, including reduce funding for drought relief for small $43 million from Proposition 68 (2018) and farmers by $13 million and for on-farm annual support of $21 million from the Habitat technical assistance by $6 million . (Relative Conservation Fund . to the original package, the budget would • Water Recycling and Groundwater retain $21 million, or 53 percent, for these Cleanup: The proposal would reduce funding two programs .) CDFA indicates that demand for groundwater cleanup by $55 million for drought relief grants was lower than and for water recycling by $119 million (the anticipated (it awarded about $12 million of 2023-24 budget already reduced funding the available $25 million), perhaps in part due by $278 million) . (As noted above, the to a similar program being offered through budget also would delay $100 million until the Governor’s Office of Business and 2025-26 for water recycling .) Relative to the Economic Development (GO-Biz) . The on-farm original package, the budget would retain technical assistance program was similarly $348 million, or 43 percent for these two undersubscribed, although CDFA indicates programs . SWRCB indicates it would prioritize this could reflect the limited capacity of providing low-cost financing for water technical assistance providers, rather than the recycling projects through its State Revolving needs of farmers . www.lao.ca.gov 23 2024-25 BUDGET • Forecasting Activities. The budget would • Revert Unspent Funding Provided in Earlier reduce an ongoing appropriation for DWR— Budgets. Of the $6 .5 billion General Fund from $17 million to $10 million annually—that already appropriated for water and drought supports water supply/runoff forecasting . resilience packages across 2021-22, 2022-23, Specifically, the reduction would result in and 2023-24, the Governor proposes reducing conducting fewer aerial snow surveys and about $524 million of uncommitted funds conducting them (and associated modeling) in (as discussed above) . Based on our review fewer watersheds . of other uncommitted funds, the Legislature could consider additional reductions of close LAO Comments: Legislature Could Consider to $775 million . For example, SWRCB has Alternative and/or Additional Reductions. about $300 million in uncommitted funds In light of the state budget condition, the for drinking water/wastewater programs . Legislature has several options for additional and/or SWRCB expects to commit a good portion alternative reductions from the water and drought of this funding between April and June, with resilience package . an estimated $65 million remaining by the • Water Storage Projects ($500 Million end of the 2023-24 fiscal year . Consequently, in 2025-26). The administration’s original depending on how much of this funding proposal for this funding noted that it the Legislature wished to pull back, it may would build on the $2 .7 billion provided have to act quickly to capture the potential by Proposition 1 (2014) for water storage savings that currently are available . While projects, yet specific details on how the funds these programs remain important, particularly would be used have not been provided . Given among disadvantaged communities, this funding has not yet been appropriated, SWRCB could partially offset reductions with eliminating it likely would be less disruptive federal SRF funding and its annual GGRF compared to certain other options before appropriation . Additionally, the California the Legislature . Natural Resources Agency (CNRA) has • Drinking Water Project Grants approximately $228 million in uncommitted ($200 Million). While these programs funds for water resilience grants . The are important, the state currently has an administration indicates it will select awardees unprecedented amount of federal funding in the March/April time frame, meaning the available for these purposes through the Legislature would have a short window to act federal SRFs . In addition, state statute and reduce these funds to solve the budget requires an annual GGRF appropriation of problem . Other examples include $50 million $130 million (through 2030) to SWRCB for for dam safety (given the Governor already the same types of drinking water projects . As proposes a reduction of the other $50 million, such, the state could continue to pursue its an additional reduction would eliminate the goals and focus on the drinking water needs pilot program) and $104 million for WCB’s of disadvantaged communities even with a streamflow enhancement program . reduction in General Fund support . • Water Recycling (Reduce Rather Than ENERGY Delay $100 Million). Although eliminating this Recent Budget Agreements Included funding—rather than delaying it, as proposed $7.9 Billion Over Several Years for Energy by the Governor—would reduce the number Programs. The 2021-22 and 2022-23 budgets of projects SWRCB could support with state included plans to provide a combined $7 .9 billion funding (which is more flexible than federal ($6 .9 billion from the General Fund and about funding), other funding sources are available $1 billion from other funds) over several years to for these projects . Specifically, SWRCB can different departments for an energy package . use federal funds provided through the SRF for water recycling projects . 24 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET As shown in Figure 8, funded activities focused and Development, $270 million from the Residential primarily on three categories—reliability, Solar and Storage Program at the California Public clean energy, and ratepayer relief . (In addition Utilities Commission (CPUC), $105 million from the to programs shown in the figure, the recent Distributed Energy Backup Assets (DEBA) program agreements included $1 billion for CERIP at CEC ($100 million of which was redirected to implementation and a Climate Innovation program, the Investments in Strategic Reliability Assets both of which are discussed in the “Other Recent program at DWR for no net budget savings), and Augmentations” section of this report .) On net, the $50 million from the program providing incentives 2023-24 budget agreement reduced total multiyear for long-duration storage . In addition, the 2023-24 funding by $944 million . Major reductions included adjustments to the energy package included $549 million from the California Arrearage Payment numerous funding delays as well as shifts totaling Program at the Department of Community Services about $1 billion from the General Fund to GGRF . Figure 8 Governor’s Proposed Changes to Energy Package General Fund Unless Otherwise Noted (In Millions) Original Revised Proposed Multiyear Multiyear Proposed Multiyear Program Department Totala Totalb Reductions Total Investments in Strategic Reliability Assets DWR $2,370 $2,470f —d $2,470 California Arrearage Payment Program CSD 1,200 651 — 651 Equitable Building Decarbonization CEC 922 922c -$283e 639 Residential Solar and Storage CPUC 900 630c —d 630 Distributed Electricity Backup Assets CEC 700 595f —d 595 Long duration storage CEC 380 330c —e 330 Demand Side Grid Support CEC 295 295 — 295 Transmission Financing IBank 250 225 — 225 Oroville pump storage DWR 240 240 —d 240 Equitable Building Decarbonization—TECH Initiative CPUC 145 145c — 145 Carbon removal innovation CEC 100 75 -40 35 Industrial decarbonization CEC 100 90c -22 68 Hydrogen grants CEC 100 100 -35 65 Food Production Investment Program CEC 75 65c -19 46 Offshore wind infrastructure CEC 45 45 — 45 Equitable Building Decarbonization—Refrigerants CARB 40 40 — 40 Capacity building grants CPUC 30 30 -20 10 Energy modeling CEC 7 7 — 7 DOE grid resilience match CEC 5 5 — 5 Distributed energy workload CPUC 5g 5g — 5g Hydrogen Hub GO-Biz 5 5 — 5 Energy data infrastructure and analysis CEC 5 5 — 5 AB 525 implementation Various 4h 4h — 4h Support for reliability DWR 3 3 — 3 Totals $7,926 $6,982 -$419 $6,563 a Based on 2021-22 and 2022-23 budget agreements . b Based on 2023-24 budget agreement . c Includes Greenhouse Gas Reduction Fund (GGRF) . d Proposed funding delays . e Proposed fund shift to GGRF . f Reflects $100 million transferred from Distributed Electricity Backup Assets to DWR Strategic Reliability Assets . g Public Utilities Commission Utilities Reimbursement Account . h Includes $1 .5 million Energy Resources Program Account and $2 .6 million General Fund . DWR = Department of Water Resources; CSD = Department of Community Services and Development; CEC = California Energy Commission, CPUC = California Public Utilities Commission; IBank = California Infrastructure and Economic Development Bank; CARB = California Air Resources Board; DOE = Department of Energy; and GO-Biz = California Governor’s Office of Business and Economic Development www.lao.ca.gov 25 2024-25 BUDGET Governor’s Proposal: Reduces $419 Million, • Industrial Decarbonization. The budget Delays $505 Million, and Shifts $144 Million would reduce funding for this new CEC to GGRF. Also shown in Figure 8, the Governor’s program that provides incentives for budget proposes to reduce net multiyear spending technologies that reduce emissions at for energy activities by $419 million relative to industrial operations by $22 million, retaining the 2023-24 budget package . (This would retain $68 million from its original planned allocation 83 percent of the original intended amount .) of $100 million . The proposal would reduce The proposal also includes funding delays for the number of state-funded projects, but four programs totaling $505 million . Finally, the the program plans to leverage $90 million in Governor shifts $144 million for two programs from federal Department of Energy (DOE) funds, the General Fund to GGRF (Equitable Building which would help offset the reduction . Decarbonization and incentives for long-duration • Hydrogen Grants. The proposed reduction storage) . Major proposed program changes include: of $35 million would retain $65 million of • Funding Delays for Four Programs. the original amount for CEC to provide The proposal delays funding for (1) Residential these grants . The administration noted this Solar and Storage (instead of $75 million in program is a good candidate for reductions 2024-25 and $125 million in 2025-26, it would due to more than $1 billion newly coming to provide $100 million in both 2026-27 and California from DOE to support hydrogen 2027-28), (2) a pump storage project at the energy development through the Alliance for Oroville Dam complex (instead of $90 million Renewable Clean Hydrogen Energy Systems in 2024-25 and $110 million in 2025-26, it (ARCHES) initiative . would provide $100 million in both 2026-27 • Food Production Investment Program. and 2027-28), (3) Investments in Strategic This proposed reduction of $19 million would Reliability Assets (delays $55 million from be in addition to $10 million reduced from the 2024-25 to 2025-26), and (4) DEBA (reverts program in 2023-24 . Relative to the original $50 million from 2023-24 and instead provides package, the budget would retain $46 million, $25 million in both 2025-26 and 2026-27) . or 62 percent, for this program . CEC expects • Equitable Building Decarbonization. it would support 10 to 14 fewer projects as a The budget proposes reducing overall funding result of the proposed reduction . for this CEC program by $283 million, retaining • Capacity Building Grants. The original $639 million, or 69 percent, of the original package provided $30 million across 2021-22 allocation . This program is intended to support and 2022-23 to provide capacity grants to energy upgrades for low- and middle-income tribes and community-based organizations households and still is being developed by to participate in CPUC decision-making CEC . The reduction would result in fewer processes . CPUC has not yet spent this direct install incentives . (The Governor also funding and the Governor proposes to proposes to shift $87 million for this program reduce it by $20 million . To accommodate from General Fund to GGRF in 2024-25, which this reduction, CPUC would decrease its would have no programmatic effect .) grant funding allocations by approximately • Carbon Removal Innovation Program. 70 percent and forgo a planned technical This proposal would reduce this program assistance contract . by $40 million, adding to the $25 million LAO Comments: Legislature Could Consider reduction that was adopted in 2023-24 . Alternative and/or Additional Reductions. In light There is no further funding proposed for this of the state budget condition, the Legislature has program beyond the $35 million retained several options for generating General Fund savings in 2022-23 (representing 35 percent of the through making additional and/or alternative original allocation) . reductions from the energy package . Based on the best available data on remaining funds, the 26 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET Legislature could consider reducing the following • DEBA ($543 Million). As of this writing, data programs (all amounts from the General Fund from the administration indicate this program unless otherwise noted) . (which is intended to provide incentive funding to promote more efficient backup • Hydrogen Grants (Additional $65 Million). energy resources) has $543 million from The Legislature could consider a further previously appropriated funds remaining in reduction or elimination of the program’s its balance . CEC indicates that it expects to funding—beyond the $35 million proposed by release additional solicitations this spring . the Governor—due to the significant federal Given the large size of this allocation and funding (more than $1 billion) newly available that CEC has only spent a total of $2 million for hydrogen development in California (on administrative costs) thus far, it seems a through ARCHES . None of this funding has yet reasonable candidate for capturing additional been committed . savings . Depending on the level of savings • Industrial Decarbonization (Additional needed, the Legislature could prioritize $60 Million). The Legislature could consider equity by making reductions to the portion a further reduction or elimination of the of program funding not explicitly directed to program’s funding beyond the $22 million disadvantaged communities (roughly half of proposed by the Governor . As noted above, the funding) . Given CEC’s plans to proceed federal funds are also available to support the with new grant solicitations this spring, the goals of this program . This program has not Legislature may have to consider early action yet begun dispersing funding . if it wants to make reductions . • Food Production (Additional $35 Million). The Legislature could consider further WILDFIRE AND reductions beyond the $19 million the Governor proposes for this program, which FOREST RESILIENCE has only committed a small portion of its Recent Budget Agreements Included funding . However, if the Legislature wants to $2.8 Billion for Wildfire Resilience-Related make additional reductions, it may have to Activities. Recent budget packages included a take early action, as the administration plans total of $2 .8 billion over a four-year period—2020-21 to collect proposals later this spring . The through 2023-24—to support wildfire and funds the Governor proposes retaining for the forest resilience . Roughly 40 percent of the program are from GGRF, not General Fund, funding over the four years—$1 .1 billion—was but the Legislature could instead eliminate for programs designed to promote healthy General Fund for a different program and forests and landscapes, generally by removing redirect this GGRF to offset those reductions hazardous fuels . Just over one-quarter of the in order to achieve additional savings . funding—$766 million—was to support the • Transmission Financing ($225 Million). installation and maintenance of wildfire fuel breaks . Previous budgets appropriated $225 million The remaining funds—totaling $909 million— to the California Infrastructure and Economic was for projects to increase regional capacity Development Bank to boost new electricity for conducting forest health projects, as well as transmission in the state . The administration to encourage forest-sector economic stimulus, has not yet dispersed these funds, though science-based forest management, and it plans to do so later this spring . The community hardening . Of the $2 .8 billion total, Legislature could consider making reductions $2 billion was from the General Fund and the or eliminating this funding, but it may have to remaining $755 million was from GGRF . take early action . Additionally, federal energy The 2023-24 budget agreement reduced net funds the state is receiving to support grid funding for various wildfire and forest-resilience reliability may be able to help offset reductions activities by $47 million and shifted $14 million to this program . from the General Fund to Proposition 98 . www.lao.ca.gov 27 2024-25 BUDGET The largest reduction—$25 million—was for efforts $5 .7 million from the Sacramento-San Joaquin to steward state lands, intended to help CNRA Delta Conservancy, $2 .3 million from the departments bring buildings in high-fire-risk State Coastal Conservancy, and $1 .3 million zones into compliance with new defensible space from the San Gabriel and Lower Los Angeles regulations that are under development pursuant Rivers and Mountains Conservancy) . to Chapter 259 of 2020 (AB 3074, Friedman) . While these reductions would lessen the As shown in Figure 9, after these reductions, the number of projects that conservancies can budget retained a multiyear total of $2 .8 billion for undertake, it still would leave significant wildfire and forest resilience activities (98 percent of funding—$350 million—for conservancy-led the original planned amount) . wildfire resilience efforts . Governor’s Proposal: Reduces $101 Million • Biomass to Hydrogen/Biofuels Pilot. and Shifts $163 Million. The Governor’s 2024-25 This funding was for a pilot administered budget proposes some additional General Fund by the Department of Conservation (DOC) reductions to the wildfire and forest resilience aimed at creating hydrogen and/or liquid funding that was included in recent budget fuel from forest biomass . The budget agreements . Cumulatively, the reductions would proposes to reduce funding by $44 million lower General Fund spending by $101 million across (retaining $6 .5 million) . The retained funding the following seven programs, while retaining a has already been used for a first round of total of $2 .7 billion for wildfire and forest resilience planning grants for project developers and (95 percent of the original funding provided) . In DOC’s administrative activities . The proposed general, the proposed reductions will result in fewer reduction will mean that DOC will not move projects being undertaken by each program . The forward with an originally planned second affected programs consist of: round of grant funding, which had been expected to support the implementation of • Forest Legacy Program. This program funds pilot projects . conservation grants and easements with private landowners to protect forest land from • Monitoring and Research. This funding conversion to non-forest uses and to support was to support various efforts—including good management practices . The budget by CalFire as well as universities and other proposes to reduce funding by $4 million, researchers—to improve knowledge of forest retaining $45 million . conditions and the effectiveness of different practices to reduce the risk of wildfire spread • Prescribed Fire and Hand Crews. or damage . The budget proposes to reduce This funding supports the California funding by $6 million, retaining $32 million . Department of Forestry and Fire Protection (CalFire) fuels reduction crews, as well as a • Interagency Forest Data Hub. This funding CalFire contract with the California National was to create an Interagency Forest Data Hub . Guard to perform vegetation management The budget proposes to reduce funding by work . The costs of the National Guard $3 million, retaining $7 million . crews ultimately were paid by the federal • Home Hardening. This funding was government, resulting in savings . The budget provided to implement the wildfire mitigation proposes to reduce funding by $5 million, assistance pilot program authorized by retaining $129 million . Chapter 391 of 2019 (AB 38, Wood), providing • Conservancy Projects. This funding was grants to homeowners in certain vulnerable provided for multiple state conservancies to communities for retrofits aimed at improving support projects aimed at improving resilience resilience to wildfires . The budget proposes to wildfires . The budget proposes to reduce to reduce funding by $12 million, retaining funding by $28 million ($9 .4 million from the $38 million . The proposed reduction would San Diego River Conservancy, $9 million from mean fewer homes and communities would be the Coachella Valley Mountains Conservancy, included in the pilot . 28 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET Figure 9 Governor’s Proposed Changes to Wildfire and Forest Resilience Package General Fund Unless Otherwise Noted (In Millions) Original Revised Proposed Multiyear Multiyear Proposed Multiyear Program Department Totala Totalb Reductions Totalf Resilient Forests and Landscapes $1,139 $1,114 $4 $1,110 Forest Health Program CalFire $555c $555c — $555c Stewardship of state-owned land Various 305 280 —e 280c Post-fire reforestation CalFire 100 100 — 100 Forest Improvement Program CalFire 75c 75c — 75c Forest Legacy Program CalFire 49c 49c $4 45c Tribal engagement CalFire 40 40 — 40 Reforestation nursery CalFire 15 15 — 15 Wildfire Fuel Breaks $766 $766 $5 $761 Fire prevention grants CalFire $475c $475c —e $475c Prescribed fire and hand crews CalFire 134c 134c $5 129c CalFire unit fire prevention projects CalFire 90 90 —e 90c Forestry Corps and residential centers CCC 67c 67c — 67c Regional Capacity $528 $528 $28 $500 Conservancy projects Various Conservancies $378 $378 $28 $350 Regional Forest Capacity Program DOC 150 150 —e 150c Forest Sector Economic Stimulus $170 $153 $44 $110 Workforce training grants CalFire $54 $53d — $53 Biomass to hydrogen/biofuels pilot DOC 50 50 $44 7 Climate Catalyst Fund Program IBank 49 33 — 33 Transportation grants for woody material CalFire 10 10 — 10 Market development OPR 7 7 — 7 Science-Based Management and Other $120 $120 $9 $111 Monitoring and research CalFire $38 $38 $6 $32 Remote sensing CNRA 30 30 — 30 Prescribed fire liability pilot CalFire 20 20 — 20 Permit efficiencies CARB, SWRCB 12 12 — 12 State demonstration forests CalFire 10 10 — 10 Interagency Forest Data Hub CalFire 10 10 3 7 Community Hardening $91 $86 $12 $74 Home hardening OES, CalFire $50 $50 $12 $38 Defensible space inspectors CalFire 25 20 — 20 Land use planning and public education CalFire, UC ANR 16 16 — 16 Totals $2,814 $2,767 $101 $2,666 a Based on early action amendments to 2020-21 budget, as well as 2021-22 and 2022-23 budget agreements . b Based on 2023-24 budget agreement . c Includes Greenhouse Gas Reduction Fund (GGRF) . d Reflects a reduction of $15 million dollars of General Fund, partially offset by $14 million in Proposition 98 General Fund . e Includes a proposed fund shift to GGRF . f In addition to the amounts displayed, the Governor would continue to maintain the statutory continuous appropriation of $200 million annually GGRF from 2024-25 through 2028-29 to support wildfire and forest resilience . 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 . www.lao.ca.gov 29 2024-25 BUDGET In addition to the reductions discussed above, uncommitted balance of roughly $22 million the budget shifts $163 million across four programs ($20 million of which is General Fund to GGRF, including (1) stewardship of state-owned and $2 million of which is GGRF) . Of this lands ($34 .5 million), (2) fire prevention grants total, CalFire plans to award an $8 million ($82 million, proposed for early action), (3) Regional block grant by April 2024 to allow partner Forest and Fire Capacity Program ($20 million), organizations to offer similar assistance and (4) unit fire prevention projects ($26 million) . outside of the Forest Improvement Program . Notably, the Governor does not propose to make CalFire expects to award the remaining any changes to the $200 million continuous funding through its typical rolling solicitation appropriation from GGRF for forest health and process, which provides awards of a couple wildfire prevention that was authorized as part of million dollars every two months . The of the 2021-22 budget but is not fully reflected Legislature could consider reducing funding in the budget packages . Accordingly, in addition for this program, with the amount available for to the amounts in Figure 9, under the Governor’s generating savings dependent on when the plan, an additional annual $200 million from GGRF Legislature acts . would be provided for these purposes in 2024-25 • Prescribed Fire and Hand Crews through 2028-29 . ($31 Million GGRF). In addition to the LAO Comments: Legislature Still Has a $5 million in uncommitted General Fund Few Potential Alternative and/or Additional that the Governor proposes reducing, the Reductions It Could Make to Unspent program currently has roughly $31 million of Current- and Prior-Year Funds. The Legislature uncommitted GGRF from prior appropriations . has a few other options that it could consider in The Legislature could consider also reducing addition to or in place of the Governor’s proposed these funds and redirecting them to offset solutions . For example, the Legislature could other General Fund costs . If it were to reduce replace some or all of the proposed fund shifts with funds for this program, CalFire would have reductions, which would make additional GGRF less funding for fuel reduction work and available for other critical legislative priorities . research grants . We note that if the Legislature Additionally, the Legislature could consider is interested in reducing the portion of this (1) making reductions to programs that have funding that CalFire uses for research grants significant uncommitted balances but are not ($4 .5 million), taking early action would be included in the Governor’s proposed solutions important to reduce disruptions given the and/or (2) increasing the size of the reductions department plans to make those awards to certain programs beyond what the Governor in May 2024 . proposes to capture the full uncommitted balance . • Home Hardening Program ($13 Million). Some potential options for these types of additional This program has faced various solutions include: implementation challenges and as such has roughly $25 million of General Fund that • Tribal Engagement ($22 Million). has not yet been committed . Accordingly, This program supports tribes in the planning in addition to the Governor’s proposed and implementation of projects that advance $12 million reduction, the Legislature could wildfire resilience, forest health, and cultural consider capturing an additional $13 million use of fire . It has an uncommitted balance in General Fund savings . A reduction to the of $22 million General Fund, almost all of funding for the program would result in fewer which is currently anticipated to be awarded homes and communities being included sometime in summer 2024 . in the pilot . • Forest Improvement Program ($22 Million). This program provides financial assistance to private, nonindustrial forestland owners under cost-share agreements . This program has an 30 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET NATURE-BASED ACTIVITIES habitat restoration-related purposes . Just over one-quarter of the funding—$403 million— Recent Budget Agreements Included was to support wildlife protection programs . The $1.6 Billion for Nature-Based Activities. Recent remaining funding—totaling $667 million—was for budget agreements included $1 .6 billion on a regionally focused programs, youth and tribal one-time basis over three years—from 2021-22 programs, wetland-focused projects, and other through 2023-24—from the General Fund for types of activities . Many of the funded programs are various departments to implement a variety of related to helping the state achieve various goals nature-based activities . As shown in Figure 10, and plans established by the administration over the about one-third of the total funding—$495 million— past few years, such as the objective of conserving was to support programs focused on acquiring 30 percent of the state’s lands and coastal waters and managing land for conservation and Figure 10 Governor’s Proposed Changes to Nature-Based Activities Package General Fund (In Millions) Original Revised Proposed Multiyear Multiyear Proposed Multiyear Program Department Totala Totalb Reduction Total Land Acquisition and Management Programs $495 $495 — $495 Various WCB programs WCB $245 $245 — $245 Habitat restoration DWR 200 200 — 200 Opportunity coastal acquisition SCC 50 50 — 50 Wildlife Protection Programs $403 $368 — $368 Protect wildlife from changing conditions WCB $353 $318 — $318 Climate change impacts on wildlife CDFW 50 50 — 50 Regionally Focused Programs $383 $273 -$5 $268 Conservancy funding Various $230 $130 — $130 Wildlife corridors (including Liberty Canyon) CDFW and SMMC 52 52 — 52 San Joaquin Valley flood plain restoration WCB 40 40 — 40 Natural Community Conservation Program Planning CDFW 36 30 — 30 and Land Acquisition Climate Smart Land Management Program DOC 20 16 — 16 Resource conservation strategies WCB 5 5 -$5 – Youth and Tribal Programs $152 $152 — $152 Local and tribal NBS corps programs CCC $49 $49 — $49 Tribal program CNRA 100 100 — 100 Tribal staffing CNRA 3 3 — 3 Wetland Focused Programs $111 $101 -$10 $91 Wetlands Restoration Program CDFW $54 $54 — $54 NBS Wetlands Restoration Program DC 36 36 — 36 San Francisco Bay wetlands support SCC 11 1 — 1 Redondo Beach wetlands restoration CNRA 10 10 -$10 – Other Programs $21 $21 — $21 CalCIS CNRA $18 $18 — $18 Partnerships and improvements CNRA 2 2 — 2 California nature support CNRA 1 1 — 1 Totals $1,565 $1,409 -$15 $1,394 a Based on 2021-22 and 2022-23 budget agreements . b Based on 2023-24 budget agreement . 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 CalCIS = California Climate Information System . www.lao.ca.gov 31 2024-25 BUDGET by 2030 (“30x30”) as established by the Governor’s After accounting for these reductions, the Executive Order N-82-20 and the Natural and budget proposes to retain a total of $1 .4 billion for Working Lands Climate Smart Strategies . nature-based activities (89 percent of the original The 2023-24 budget agreement made General planned amount) . Fund reductions to planned nature-based activities LAO Comments: Legislature Could Consider totaling $155 million across five programs . The largest Alternative and/or Additional Reductions From reduction—$100 million—was to funds provided to Unspent Current- and Prior-Year Funds. Based various conservancies across the state . Some other on our review of expenditure data, we estimate notable changes included reducing: $35 million for that about $400 million remains uncommitted a WCB program to mitigate the impacts of climate from various prior- and current-year nature-based change on wildlife, $10 million for the State Coastal activity-related program appropriations that Conservancy’s (SCC’s) San Francisco Bay wetlands the Governor does not propose reducing . support, and $6 million for the California Department Given the significant amount of uncommitted of Fish and Wildlife’s (CDFW’s) Natural Community funding in this area, to the extent the Legislature Conservation Program Planning and Land Acquisition needs to identify alternative and/or additional program . After accounting for these reductions, the solutions, it has multiple options to consider . budget retained $1 .4 billion for nature-based activities Some examples include: (90 percent of the original planned amount) . • Various WCB Programs ($102 Million). Governor’s Proposal: Reduces $15 Million. These WCB programs support planning, As shown in Figure 10, the Governor’s 2024-25 acquisition, and restoration projects on budget proposes to achieve $15 million in General natural and working lands. Currently, about Fund savings by eliminating funding for the following $102 million of the $245 million originally two nature-based activity-related programs: provided for these programs remains • Wetlands Restoration at Redondo Beach. uncommitted and could be considered for The original package provided $10 million reduction . Such a reduction would mean fewer for CNRA to provide funding to the City of projects are completed . However, a significant Redondo Beach to purchase a former power amount of funding still would be retained, both plant site on which the city would like to develop in these programs as well as in other programs a regional park and restore historic wetlands . that support activities with similar objectives, CNRA indicates that the city intended to use the such as CDFW’s program to mitigate climate funds to bid on the property at auction after the change impacts on wildlife and WCB’s other resolution of legal matters that are still pending . programs . We note that WCB indicates that If the funding is eliminated as proposed, the it plans to make additional awards for these city may not have sufficient funds to acquire the programs in the coming months . Thus, if the property, however, the timing of when the city Legislature would like to reduce funding for might need the funds still is uncertain . these programs, taking early action would maximize the amount of savings available . • Regional Conservation Strategies. The original package provided $5 million for a • WCB’s Program to Protect Wildlife From WCB program created by Chapter 455 of Changing Conditions ($100 Million). WCB 2016 (AB 2087, Levine) that supports the originally received $353 million to protect development of voluntary, nonregulatory wildlife from changing conditions . Of this regional planning processes . This program also amount, $218 million has been committed to previously received $5 million in Proposition 68 projects and the 2023-24 budget package funding in 2018 . WCB expects the impact of reduced $35 million . However, nearly the proposed General Fund elimination would $100 million remains uncommitted and thus be minimal because it still has remaining could be considered as a potential solution . Proposition 68 funding for this same purpose . As with WCB’s other programs discussed above, additional reductions would result 32 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET in fewer projects, but the board still would • Wildlife Corridors ($20 Million). Of the maintain significant funding for similar activities $42 million originally provided to CDFW from other sources . WCB indicates that it plans for wildlife corridors, roughly $20 million to make additional awards totaling roughly remains uncommitted and therefore could be $30 million in the coming months, making considered for a budget solution . CDFW notes this program another potential candidate for that it is reviewing proposals on a continuous early action . basis, so the amount available for reduction • CNRA’s Tribal Nature-Based Solutions would be dependent on when the Legislature Program ($97 Million). This is a new takes action . program aimed at helping facilitate access, • Climate Smart Land Management co-management, and ancestral land return . Program ($7.5 Million). This is a new While providing funding to support tribes program administered by DOC that aims to has merit in light of historical injustices, only increase the capacity of state partners to about $3 million of the $100 million provided support natural working lands and 30x30 in 2022-23 or 2023-24 has been committed . goals . Roughly $7 .5 million of the $16 million Thus, the remaining $97 million could originally provided for this program remains potentially be considered for reduction given uncommitted and DOC does not anticipate the severity of the state’s budget problem . making awards until June or July 2024 . We note, however, that the administration Given the condition of the General Fund, the indicates that it expects to make awards as Legislature could make further reductions and soon as April 2024, so should the Legislature use the first round of funding as a more limited want to consider reducing the funding, it pilot . It could then evaluate the outcomes would be advisable to take early action . (We of that funding before deciding whether it is note that the budget also proposes to convert worthy of future support . a temporary staff position that supports this program to permanent status . Should the COMMUNITY RESILIENCE program be eliminated, that position would no Recent Budget Agreements Provided longer be needed, resulting in a small amount $2.2 Billion for Community Resilience. As shown of ongoing savings .) in Figure 11 on the next page, recent budgets • SCC’s Coastal Acquisitions included $2 .2 billion for programs focused on ($49 Million). This funding has been set aside helping communities address the causes and for SCC to undertake acquisitions that help impacts of climate change . Funding was provided protect natural resources and provide for across 2021-22 through 2024-25 . The funds public access . Currently, roughly $49 million support both previously existing and newly of the $50 million that was originally provided established programs . For example, the largest for this purpose remains uncommitted . SCC share of the funding is for a program established reports that it anticipates it ultimately would in 2017—through Chapter 136 (AB 617, C . Garcia)— use the funding for a complex, significant that supports efforts to reduce pollution and acquisition opportunity which currently is in the improve air quality in highly impacted communities . appraisal phase . The same is true for the Transformative Climate • Wetlands Restoration Program ($13 Million). Communities Program, which began in 2018 The original package provided $54 million for and funds community-led development and this CDFW program, which funds wetland and infrastructure projects . The remaining programs meadow restorations, and also supports a displayed in Figure 11 were initiated with funding recently created Beaver Restoration Program . provided in the recent budget packages . Of the $54 million, roughly $34 million remains The 2023-24 budget revised the funding for uncommitted . CDFW anticipates awarding several of these programs to save $765 million roughly $21 million early this spring, leaving General Fund through a combination of reductions $13 million the Legislature could reduce . www.lao.ca.gov 33 2024-25 BUDGET and fund shifts . Specifically, the 2023-24 budget programs in the community resilience package . package included $515 million in reductions These include $75 million from the regional climate (24 percent), delayed $50 million from 2023-24 to resilience program, $9 .8 million from regional 2024-25, and shifted $250 million for the AB 617 climate collaboratives, and $5 million from the program from the General Fund to GGRF . After Climate Adaptation and Resilience Planning Grants accounting for the reductions, the budget retained Program . In a separate but related action (not $1 .7 billion for community resilience activities reflected in the figure), the Governor proposes across the multiyear period (76 percent of the providing $250 million from GGRF for an additional original planned amount)—about $1 billion from year of support for the AB 617 program in 2024-25 . GGRF and $607 million from the General Fund . LAO Comments: Proposal Captures Most As a separate but related action (not reflected in Remaining General Fund but Legislature Could the figure), the budget doubled funding for the Consider Other Possible Solutions. Based on California Climate Action Corps program (from our review of expenditure data, some additional $4 .7 million to $9 .3 million per year beginning in funding in the community resilience package 2023-24) and made the funding ongoing rather than remains uncommitted and could be considered for ending in 2025-26 as originally planned . reductions . These include: Governor’s Proposal: Reduces $90 Million • Climate Adaptation and Resilience General Fund. As shown in the figure, the Planning Grants ($10 Million). Only Governor proposes new General Fund reductions $10 million of the $25 million provided for totaling about $90 million across a few Figure 11 Governor’s Proposed Changes to Community Resilience Package General Fund Unless Otherwise Noted (In Millions) Original Revised Proposed Multiyear Multiyear Proposed Multiyear Program Department Totala Totalb Reductions Total AB 617 CARB $930c $930c — $930c Transformative Climate Communities Program SGC 420 215 — 215 Community Resilience Centers SGC 270 110 — 110 Regional Climate Resilience Program OPR 250 100 -$75 25 Methane monitoring satellites CARB 105c 105c — 105c Community air monitoring CARB 30c 30c — 30c Climate Adaptation and Resilience Planning Grants OPR 25 25 -5 20 Environmental Justice Initiative CalEPA 25 25 — 25 Fifth Climate Assessment Various 22 22 — 22 Regional Climate Collaboratives SGC 20 20 -10 10 School ventilation upgrades (CalSHAPE) CEC 20c 20c — 20c Fluorinated Gas Reduction Incentive Program CARB 15 15 — 15 California Climate Action Corps OPR 15 15d — 15d High-GWP refrigerants CARB 10c 10c — 10c Vulnerable Communities Platform and CalAdapt Mapping OPR 5 5 — 5 Wood stove replacements CARB 5c 5c — 5c Regional planning for lithium extraction CEC 5 5 — 5 Totals $2,172 $1,657 -$90 $1,567 a Based on 2021-22 and 2022-23 budget agreements . b Based on 2023-24 budget agreement . c Includes Greenhouse Gas Reduction Fund . d 2023-24 budget agreement doubled the funding for this program and made it ongoing, which is not reflected here . 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 . 34 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET this program has been committed to date . in fewer individuals participating in these While the Governor proposes reducing activities, scaling back a recently initiated associated funding by $5 million, an additional program likely would be less disruptive $10 million would remain uncommitted . than making reductions to longstanding The administration currently is finalizing its ongoing programs—which could become guidelines for the next round of grants and necessary if the fiscal situation worsens and expects to close applications and begin the Legislature is unable to identify sufficient making awards in late spring or early summer . budget solutions elsewhere . Additionally, • Environmental Justice Initiatives federal funding supports a similar program . (Between $5 Million and $15 Million). The administration indicates that it is finalizing COASTAL RESILIENCE awards for the first round of these grants and Recent Budget Agreements Included expects to still have between have between $1.3 Billion for Coastal Resilience Activities. $5 million and $15 million General Fund As shown in Figure 12, recent budgets included available for future grant cycles that would be $1 .3 billion across four years (2021-22 through initiated in the second half of 2024 or later . 2024-25) for a variety of activities to increase The Legislature could consider reducing the coastal resilience and adapt to the effects of funding for these programs to achieve General sea-level rise . The package included funding for Fund savings rather than moving forward with SCC for projects to protect the coast (including the next rounds of the grants . coastal watersheds) from the effects of climate • Climate Action Corps Program (Up to change ($500 million), adapt to the effects of $9.3 Million Ongoing Annually). The 2023-24 sea-level rise using nature-based approaches budget package doubled annual funding ($420 million), and adapt infrastructure to the levels for this program and made it ongoing . effects of sea-level rise ($144 million) . The package The Legislature could consider lowering or also included funding for the Ocean Protection eliminating the ongoing commitment . While Council (OPC) to support projects to protect and taking such action ultimately would result restore marine wildlife and ocean and coastal Figure 12 Governor’s Proposed Changes to Coastal Resilience Package General Fund Unless Otherwise Noted (In Millions) Original Revised Proposed Multiyear Multiyear Proposed Multiyear Program Department Totala Totalb Redutions Total Protecting the coast from climate change SCC $500 $326 -$171 $155 Adapting to sea-level rise SCC 420c 420c -159 261c Adapting infrastructure to sea-level rise SCC 144d 135d -62 72d Protecting the ocean from climate change OPC 117e 117e -35 82e Implementing SB 1 OPC 102d 102d -25f 77g Adapting to sea-level rise in state parks Parks 12 12 — 12 Totals $1,295 $1,112 -$452 $660 a Based on 2021-22 and 2022-23 budget agreements . b Based on 2023-24 budget agreement . c Includes $80 million from the Greenhouse Gas Reduction Fund (GGRF) . d Includes $38 million from GGRF . e Includes $17 million from Proposition 68 (2018) bond funds . f Governor proposes delaying $27 million from 2023-24 to 2024-45 and shifting the fund source for $37 million in 2024-25 from General Fund to GGRF . g Includes $74 million from GGRF . SCC = State Coastal Conservancy; OPC = Ocean Protection Council; SB 1 = Chapter 236 of 2021 (Senate Bill 1, Atkins); and Parks = Departments of Parks and Recreation . www.lao.ca.gov 35 2024-25 BUDGET ecosystems ($117 million) and to implement materialize . The funds ultimately were restored in Chapter 236 of 2021 (SB 1, Atkins), which aims the final budget agreement because the Legislature to support local governments in sea-level rise viewed these activities as significant priorities . planning ($102 million) . The enacted 2023-24 However, given that the funds have not yet been budget reduced this overall funding by $183 million, awarded for specific projects, approving these primarily in SCC’s coastal protection program . proposed reductions likely would be less disruptive Governor’s Proposal: Reduces $452 Million than other alternatives the Legislature may have and Shifts $37 Million. The Governor’s budget to consider . In addition, based on our review of proposes to reduce General Fund support for SCC expenditure data, OPC has about $20 million in by $392 million across its three programs and uncommitted funds that the Legislature also could for OPC by $60 million across its two programs . consider reducing . In addition, for OPC’s implementation of SB 1, the proposed budget would delay $27 million from SUSTAINABLE AGRICULTURE 2023-24 to 2024-25 and shift the fund source Recent Budget Agreements Included for both that amount and the original $10 million $1.2 Billion for Sustainable Agriculture. planned in 2024-25 from the General Fund to GGRF . As shown in Figure 13, past budgets committed a Relative to the original package, the proposed total of $1 .2 billion ($916 million from the General changes would result in 51 percent of funding Fund and $268 million from various special retained, or $660 million of the original $1 .3 billion . funds) for a package of programs related to Reduced funding would limit the number of projects promoting sustainable agriculture . This funding SCC can fund and could affect its ability to draw was provided from 2021-22 through 2023-24 . down future federal funding that requires a state Almost half of the funding was provided to CARB match . SCC indicates it would focus on managing to support (1) agricultural equipment upgrades and previously authorized projects and advancing replacements that reduce greenhouse gas and air recently selected priority projects by completing pollutant emissions ($363 million) and (2) financial environmental reviews and permits and potentially incentives to implement alternative practices to securing additional federal funds . SCC recently agricultural burning in the San Joaquin Valley applied for $150 million in federal funds and would ($180 million) . The remaining funds—$641 million— be able to use its existing and retained funds for were for a wide range of programs, mostly the required state match, but with the proposed administered by CDFA . For example, $170 million reductions likely would not have sufficient matching was provided for the Healthy Soils Program, funds to apply for future rounds of federal grants . which allocates grants to implement practices that LAO Comments: Proposal Eliminates Nearly improve soil health, sequester carbon, and reduce All Unspent Coastal Funding. The Governor’s greenhouse gas emissions . proposal would reduce a significant share The 2023-24 budget made several changes to (49 percent) of funding from the coastal resilience the package . This included scoring $144 million in package—proportionally more than any other of the General Fund savings across various programs . thematic packages . One rationale for this approach Major reductions included $25 million from the is that a significant amount of SCC’s funding has Climate Catalyst Fund, $22 million from the not been spent, making it easier to pull back to Conservation Agriculture Planning Grants Program, help solve the state’s significant budget deficit and $15 million from the Pollinator Habitat Program . without halting particular projects or reneging on The budget package also reduced $65 million specific spending commitments . We note that a key in General Fund from the Healthy Soils Program reason this magnitude of funding still is available is but partially backfilled it with $50 million from because the Governor had proposed reducing it in GGRF, resulting in a net reduction of $15 million . the 2023-24 budget, not because there is a lack of Overall, these actions resulted in a net reduction of activities to pursue . During budget negotiations— $94 million in total funding—maintaining $1 .1 billion, which lasted through June 2023—SCC could or 92 percent, of the previously approved not make plans to spend funds that might not funding levels . 36 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET Figure 13 Governor’s Proposed Changes to Sustainable Agriculture Package General Fund Unless Otherwise Noted (In Millions) Original Revised Proposed Multiyear Multiyear Proposed Multiyear Program Department Totala Totalb Reductions Total Agricultural diesel engine replacement and upgrades CARB $363c,d $363c,d — $363c,d San Joaquin Valley agricultural burning alternatives CARB 180 180 — 180 Healthy Soils Program CDFA 170c 155c —e 155c Livestock methane reduction CDFA 100c 100c — 100c Farm to School Incubator Grant Program CDFA 90 90 — 90 Conservation Agriculture Planning Grants Program CDFA 39 18 — 18 Fresno-Merced Future of Food Innovation Initiative CDFA 30 30 — 30 Pollinator Habitat Program CDFA 30 16 — 16 Climate Catalyst Fund Go-Biz 25 — — — California Nutrition Incentive Program CDFA 20 20 — 20 Healthy Refrigeration Grant Program CDFA 20 20 -$9 12 Transition to safer, sustainable pest management CDFA 18 18 — 18 Farm to Community Food Hubs Program CDFA 15 15 -14 1 Urban Agriculture Program CDFA 12 12 — 12 Technical assistance for underserved farmers CDFA 10 10 — 10 Farmer training and farm manager apprenticeships CDFA 10 10 — 10 Methane reduction through cattle feed CDFA 10c 10c — 10c Research in GHG reductions CDFA 10 5 — 5 Invasive Species Council CDFA 10 5 — 5 Sustainable California Grown Cannabis Pilot Program CDFA 9 1 — 1 Assessment of regulatory requirements for agriculture CDFA 6 6 — 6 Integrated pest management technical assistance CDFA/DPR 5 5 — 5 Canine blood bank CDFA 1 1 — 1 Senior Farmers Market Nutrition Program CDFA 1 1 — 1 Totals $1,184 $1,090 -$23 $1,067 a Based on 2021-22 and 2022-23 budget agreements . b Based on 2023-24 budget agreement . c Includes funding from the GGRF . d Includes funding from the Air Pollution Control Fund . e Governor proposes reducing General Fund by $24 million in 2022-23 and backfilling with an equal amount from GGRF in 2024-25 . Note: Totals may not add due to rounding . CARB = California Air Resources Board; CDFA = California Department of Food and Agriculture; Go-Biz = Governor’s Office of Business and Economic Development; GHG = greenhouse gas; DPR = Department of Pesticide Regulation; GGRF = Greenhouse Gas Reduction Fund . Governor’s Proposal: Reduces $23 Million 2022-23 agreement, the Governor’s budget would and Shifts $24 Million. As shown in Figure 13, retain $1 .1 billion, or 90 percent, of the originally the Governor proposes net reductions in General approved funding levels for sustainable agriculture Fund support for two programs totaling $23 million . activities . The two proposed reductions consist of: Additionally, the proposal would revert $24 million • Farm to Community Food Hubs Program in General Fund provided to livestock methane ($14 Million). The proposal would eliminate reduction programs in 2022-23 and backfill the most funding provided for this program, reduction with an equal amount from GGRF apart from $1 million the department has in 2024-25, resulting in no net programmatic already spent on administrative activities . The funding impact . This will allow the state to both remaining funds have not yet been committed . capture budget savings and still meet a matching • Healthy Refrigeration Grant Program requirement for federal funding ($77 million) that ($9 Million). The Governor reduces funding CDFA recently received . Compared to the original that has not yet been committed but www.lao.ca.gov 37 2024-25 BUDGET retains $12 million which CDFA has already to make grant awards from this funding later awarded . While the proposal would scale this spring .) Given that the program is still back the program, it still would allow the relatively new (it began in 2020-21) and has state to gather information on whether the uncommitted funds, the Legislature could program is effective in achieving its primary reduce this funding and allow the program goal of improving access to healthy foods in to continue operating at a scaled-down level underserved communities . with fewer grants than originally intended . The Legislature may need to take early action LAO Comments: Proposal Captures Most— to prevent the department from proceeding but Not All—Available General Fund Savings with its grant application and award process From Uncommitted Prior-Year Funds. Based and eroding these potential savings . on our review of program expenditure data, apart from the Governor’s proposals, most remaining sustainable agriculture funds have already been CIRCULAR ECONOMY fully awarded to projects or are expected to make Recent Budget Agreements Included final awards in the coming months . However, $468 Million for Circular Economy Activities. we have identified one additional option the As shown in Figure 14, past budgets provided Legislature could consider for seeking additional or a total of $468 million ($138 million from the alternative savings: General Fund and $330 million from various special funds) for a package of programs related • Farm to School Incubator Grant Program to promoting recycling and waste reduction . ($50 million). This program provides funding Funding was provided from 2021-22 through to schools to purchase locally grown foods, 2022-23 . Circular economy funding went to nine coordinate educational opportunities, and programs, all of which are administered by the further collaboration and coordination California Department of Resources Recycling between schools and producers . Of the and Recovery (CalRecycle) . Roughly half of $90 million the program was provided from the funding ($240 million) was to support local the General Fund, CDFA has not yet solicited jurisdictions in implementing the organic waste grant applications or made awards for requirements established by Chapter 395 of 2016 roughly $50 million . (The department plans Figure 14 Governor’s Proposed Changes to Circular Economy Package General Fund Unless Otherwise Noted (In Millions) Original Revised Proposed Proposed Program Multiyear Totala Multiyear Totalb Reduction Multiyear Total SB 1383 implementation grants $240c $240c — $240c Organic waste infrastructure 105c 105c — 105c RMDZ Loan Program 50 46 — 46 Co-digestion capacity 30c 30c — 30c Recycling feasibility grants 15 — — — Quality incentive payments 10d 10d — 10d Compost Permitting Pilot Program 8 8 -$7 1 Edible food recovery 5 5 — 5 Community composting opportunities 5 — — — Totals $468 $444 -$7 $437 a Based on 2021-22 and 2022-23 budget agreements . b Based on 2023-24 budget agreement . c Includes funding from the Greenhouse Gas Reduction Fund . d Includes funding from the Beverage Container Recycling Fund . SB 1383 = Chapter 395 of 2016 (SB 1383, Lara) and RMDZ = Recycling Market Development Zone . 38 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET (SB 1383, Lara) . Significant funding also was EXTREME HEAT provided to support (1) the expansion of organics Recent Budget Agreements Included New recycling infrastructure, such as composting Focus on Extreme Heat. The past few years facilities ($105 million) and (2) the Recycling Market represent the first time the state provided significant Development Zone (RMDZ) Loan Program, which funding explicitly to mitigate the impacts of extreme provides loans to recycling businesses that prevent, heat—originally planned for a total of $649 million reduce, or recycle recovered waste materials from 2020-21 through 2023-24 ($634 million ($50 million) . General Fund and $15 million GGRF) . Figure 15 (on The 2023-24 budget made three changes the next page) highlights these funding allocations . to the package that resulted in a net reduction In some cases, the recent budget agreements of $24 million in total funding—maintaining created new programs such as the Extreme $444 million or 95 percent of the previously Heat and Community Resilience program within approved funding levels . These reductions—all the Governor’s Office of Planning and Research of which were intended to be supported by the (OPR), which is a program aimed at boosting General Fund—included $15 million from recycling community-level preparation . The funding also feasibility grants, $5 million from community supported some programs that existed previously composting opportunities, and $4 million from the but were not explicitly focused on mitigating RMDZ Loan Program . extreme heat, such as the Urban Greening, Governor’s Proposal: Reduces $7 Million. Urban Forestry, and Low-Income Weatherization As shown in Figure 14, the Governor proposes to programs . In addition, funding was included for reduce General Fund for the Compost Permitting the Department of Industrial Relations to expand Pilot Program by $7 million . This program has yet to its existing outreach, education, and strategic announce when funding will be made available for enforcement efforts to improve worker protections grants . Ultimately, the proposed reduction would from heat-related illnesses . mean the program would not be able to provide The 2023-24 budget package saved $303 million local grants to support the siting and permitting General Fund through a combination of making of composting facilities . However, the remaining $245 million in reductions and shifting $58 million amount—about $1 million—will support a research in expenditures from the General Fund to GGRF . contract that will identify statewide best practices The reductions included $175 million from the for permitting these types of facilities, which could Urban Greening program, $40 million from the make potential future program activities even more Extreme Heat and Community Resilience program, effective . CalRecycle indicates that it awarded and $30 million from the Urban Forestry program . that contract in December 2023 . Assuming this The fund shifts from General Fund to GGRF reduction, the Governor’s proposal would retain included $33 million for the Green Schoolyards $437 million, or 93 percent of the initially approved program and $25 million for the Extreme Heat and funding levels for sustainable agriculture activities . Community Resilience program . LAO Comments: Proposal Targets Available Governor’s Proposal: Reduces and Shifts Remaining Uncommitted Funds. The Governor’s Funding. The Governor proposes to save about proposal largely captures the remaining $150 million General Fund through a combination uncommitted funds from the circular economy of $109 million in fund shifts and $40 million in package . Based on available information, nearly reductions . The proposed solutions include: all of the programs within this package have fully • Extreme Heat and Community Resilience. awarded funds to projects or are expected to make The proposal reduces the program by final awards in the coming months . The Governor’s $40 million and shifts the remaining $70 million proposal incorporates the one notable exception, from General Fund to GGRF . the Compost Permitting Pilot Program . • Urban Greening. The proposal shifts $24 million from General Fund to GGRF . www.lao.ca.gov 39 2024-25 BUDGET Figure 15 Governor’s Proposed Changes to Extreme Heat Package General Fund Unless Otherwise Noted (In Millions) Original Revised Proposed Multiyear Multiyear Proposed Multiyear Program Department Totala Totalb Reduction Total Urban Greening Program CNRA $250 $75 —c $75d Extreme Heat and Community Resilience Program OPR 175 135 -$40c 95d Urban Forestry Program CalFire 60 30 — 30 Green Schoolyards Program CalFire 50 50e — 50e Low Income Weatherization Program CSD 50 50d — 50d Protections for vulnerable populations CDPH, DIR, CDSS 28 28 —f 28 Community-based public awareness campaign OPR 20 20 — 20 Farmworker Low-Income Weatherization Program CSD 15d 15d — 15d Animal Mortality Management Program CDFA 1 1 — 1 Origin Inspection Program CDFA 1 1 — 1 Totals $649 $404 -$40 $364 a Based on 2021-22 and 2022-23 budget agreements . b Based on 2023-24 budget agreement . c Proposes to shift funding from General Fund to the Greenhouse Gas Reduction Fund (GGRF) . d Includes funding from GGRF . e An additional $100 million for Green Schoolyards was provided through a budget control section, which is not reflected in the table . f Proposes to shift funding from General Fund to the Labor and Workforce Development Fund . CNRA = California Natural Resources Agency; OPR = Governor’s Office of Planning and Research; CalFire = California Department of Forestry and Fire Protection; 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 . • Protections for Vulnerable Populations. • Extreme Heat and Community Resilience The proposal shifts $16 million from Program ($95 Million). None of the funding General Fund to the Labor and Workforce for this program has yet been committed . Development Fund . OPR plans to award $20 million during a first round of grant funding sometime this summer . LAO Comments: Legislature Could Capture Given the budget condition, in addition Additional Savings by Reducing Rather Than to the Governor’s proposed $40 million Shifting Funds. Through a combination of reduction and in lieu of the proposal to reductions and fund shifts, the Governor’s proposal shift $70 million to GGRF in 2024-25, the eliminates nearly all of the uncommitted General Legislature could consider eliminating all Fund that was included as part of the extreme heat funding for the program . Doing so would save package . However, the Legislature could modify an additional $25 million General Fund and a couple of proposed solutions to further help the also free up $70 million in GGRF that could General Fund condition . be used to backfill additional General Fund • Urban Greening Program ($24 Million). reductions elsewhere . Due to the proposed fund shift, the administration has paused evaluation of grant requests for this program . Because the funding has not yet been committed, the Legislature could consider reducing the funding rather than shifting it to GGRF . Doing so would free up GGRF that the Legislature could then use to backfill additional General Fund reductions elsewhere . 40 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET OTHER RECENT AUGMENTATIONS from $525 million to $477 million . That is the only revision that has been made thus far to originally Recent Budget Agreements Also Included planned funding for the programs reflected in One-Time Funding for Activities That Were Not the figure .) Captured in the Thematic Packages. Outside of the thematic packages highlighted in this Governor’s Proposal: Reduces $578 Million report, recent budgets also provided or planned and Delays $1.1 Billion to Later Years. To to provide one-time funding for a variety of climate achieve General Fund savings, the Governor’s and resources-related activities . Figure 16 shows budget proposes an overall spending reduction several of these non-package augmentations totaling $578 million across the various activities totaling $2 .7 billion, all from the General Fund . shown in the figure, thereby retaining $2 billion, (The figure does not include a comprehensive or 77 percent, of the revised 2023-24 amounts . list of all funding provided in recent budgets for The proposal also includes several significant environmental programs outside of the thematic funding delays, totaling $1 .1 billion . This figure packages, but rather just those the Governor is displays proposed reductions and resulting now proposing to modify as described below .) multiyear funding levels . Some key changes include: The largest of these augmentations include • CERIP—Delay. Chapter 239 of 2022 (SB 846, $1 billion planned over three years to implement Dodd) included a plan to provide a total of CERIP, $500 million over three years to clean up $1 billion to implement CERIP—$100 million brownfield sites, and $477 million mostly over in 2023-24, $400 million in 2024-25, and two years for a new Climate Innovation Program $400 million in 2025-26 . The budget proposes intended to support California companies in to delay $800 million of this planned funding . advancing climate technologies . (The 2023-24 Specifically, it would maintain $100 million budget package reduced originally planned each in 2023-24 and 2025-26, and provide funding for the Climate Innovation Program $300 million in 2026-27 and $500 million Figure 16 Governor’s Proposed Changes to Other Recent Augmentations General Fund (In Millions) Revised Proposed Proposed Program Department Multiyear Totala Reductions Multiyear Total Clean Energy Reliability Investment Plan (SB 846) CEC $1,000 —b $1,000 Brownfield cleanups DTSC 500 —c 500 Climate Innovation Program CEC 477d -$475 2 Diablo Canyon Land Conservation and Economic Various 160 —e 160 Development (SB 846) Urban Waterfront Program Parks 154 -12 142 Outdoor Equity Program Parks 115 -25 90 California Electric Homes Program CEC 75 -6 69 California Nutrition Incentive Program CDFA 35 -33 2 Enteric methane incentives CDFA 25 -23 2 Pesticide Notification Network DPR 10 -3 7 Totals $2,551 -$578 $1,974 a Based on 2023-24 budget agreement . b Governor proposes delaying $400 million from 2024-25 and $400 million from 2025-26 . The proposal would instead provide $300 million in 2026-27 and $500 million in 2027-28 . c Governor proposes delaying $175 million from previously appropriated funds—$85 million until 2025-26 and $90 million until 2026-27 . d The 2023-24 budget reduced the original amount from $525 million to $477 million . e Governor proposes delaying $150 million from 2024-25 until: 2025-26 ($50 million), 2026-27 ($50 million), and 2027-28 ($50 million) . SB 846 = Chapter 239 of 2022 (Senate Bill 846, Dodd); CEC = California Energy Commission; DTSC = Department of Toxic Substances Control; Parks = Department of Parks and Recreation; CDFA = California Department of Food and Agriculture; and DPR = Department of Pesticide Regulation . www.lao.ca.gov 41 2024-25 BUDGET in 2027-28 . The overall funding level would LAO Comments: Legislature Could Consider stay the same but stretch over a longer Alternative and/or Additional Reductions. To the period of time . extent the Legislature needs to find alternative • Brownfield Cleanups—Delay. and/or additional solutions to those chosen by the The Department of Toxic Substances Control administration, it has some options among the (DTSC) received $300 million in 2021-22, non-package augmentations . First, the Legislature $100 million in 2022-23, and $100 million could consider reducing rather than delaying some in 2023-24 for cleanup activities . The or all of the funding the Governor proposes shifting budget proposes to revert $175 million from to a future year . Second, the Legislature could look prior appropriations and delay providing at uncommitted balances in other non-package it until 2025-26 ($85 million) and 2026-27 augmentations that the Governor has not targeted ($90 million) . The overall funding level would for solutions . Below we provide examples within stay the same but stretch over a longer period both categories . of time . • Could Reduce, Rather Than Delay, Funding • Climate Innovation Program—Reduction. for Several Programs. The Legislature could The 2023-24 budget provided $2 million in reduce a portion or all of the funding proposed 2022-23 and planned to provide $475 million for delay in: over 2024-25 and 2025-26 for the Climate » CEC’s CERIP implementation: $800 million . Innovation Program . The Governor’s budget » DTSC’s brownfield cleanups program: proposes to reduce all $475 million in future $175 million . spending, retaining just $2 million . » Diablo Canyon Land Conservation • Diablo Canyon Land Conservation and and Economic Development Plan Economic Development Plan—Delay. implementation: $150 million . Chapter 239 required CNRA to lead planning efforts for how to manage the conservation • Could Revert Uncommitted Funding From of Diablo Canyon lands and local economic Non-Package Augmentations: Based on development as the nearby nuclear power our review of expenditure data, the following plant is decommissioned . Chapter 239 amounts of funding provided in recent included intent language to provide $10 million budgets remain uncommitted at the time of in 2022-23 and $150 million in 2024-25 to this writing: support the plan . The budget proposes to keep the same overall funding level, but » California Department of Parks and delay the $150 million in 2024-25 and instead Recreation’s (Parks’) Outdoor Equity provide $50 million in 2025-26, $50 million in Program: $50 million from previous 2026-27, and $50 million in 2027-28 . appropriations remains uncommitted (in addition to the $25 million the Governor • California Nutrition Incentive Program— proposes reducing from planned 2024-25 Reduction. The budget proposes to revert funding) . Awards are anticipated to be $33 million of CDFA’s $35 million appropriation made in May 2024 . in 2023-24 for the California Nutrition Incentive Program . While the reduction would not » Parks’ Natural Resources and Park affect any of CDFA’s existing federal funding Preservation Fund: $26 million remains awards, it would affect CDFA’s ability to uncommitted of the original $50 million draw down future federal funds through transfer from the General Fund, after the Gus Schumacher Nutrition Incentive $20 million was scored as budget Program, as the department was planning solution last year . to use these funds to meet its state fund » OPC’s Intertidal DNA Barcode Library: matching requirements . $9 million remains uncommitted of the $10 million that was provided in 2023-24 . 42 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET » CNRA’s Museum Grant Program: funding at a later date when there is more $30 million remains uncommitted of the certainty about what is needed) . $50 million that was provided in 2021-22 . » GO-Biz—CERIP: $11 million that was » DWR—CERIP: $32 million that was provided provided in 2023-24 remains uncommitted in 2023-24 for central procurement remains and GO-Biz has not yet solicited proposals . uncommitted (the Legislature could provide CONCLUSION The unprecedented levels of funding the state constituencies were anticipating receiving funds provided in recent years represent a significant for local projects . However, the Legislature can commitment to addressing the causes and modify the Governor’s proposals to craft a budget impacts of climate change, as well as pursuing package that both achieves required General Fund numerous other state environmental goals . These solutions and sustains its highest-priority activities . augmentations were enabled by the large General Moreover, the level of funding that already has been Fund surpluses the state received—and expected expended—and therefore cannot be reduced—still to receive—over the past few years . Given the will be exceptional by historical standards . These change in the state’s overall fiscal condition, commitments, combined with the significant reducing this spending correspondingly is both amount of new federal funding flowing into the state reasonable and necessary—particularly for for similar activities, should provide the Legislature expenditures that were planned when the state and public with some comfort that the state can had a different General Fund outlook but that have continue to make notable progress in pursuing not yet been implemented . Scaling back these its climate and environmental goals despite the spending intentions will require the Legislature to modifications necessitated by the budget downturn . make difficult choices, particularly since certain www.lao.ca.gov 43 2024-25 BUDGET ENVIRONMENT AND TRANSPORTATION UNIT Rachel Ehlers Overarching Comments Rachel.Ehlers@lao.ca.gov (916) 319-8330 Sarah Cornett Zero-Emission Vehicles Sarah.Cornett@lao.ca.gov Energy (916) 319-8329 Sonja Petek Water and Drought Sonja.Petek@lao.ca.gov Coastal Resilience (916) 319-8340 Helen Kerstein Wildfire and Forest Resilience Helen.Kerstein@lao.ca.gov Nature-Based Activities (916) 319-8364 Luke Koushmaro Community Resilience Luke.Koushmaro@lao.ca.gov Extreme Heat (916) 319-8355 Frank Jimenez Sustainable Agriculture Frank.Jimenez@lao.ca.gov Circular Economy (916) 319-8324 LAO PUBLICATIONS This report was reviewed by Rachel Ehlers. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 44 LEGISLATIVE ANALYST’S OFFICE