The 2017-18 Budget

California Spending Plan

(Final Version)

Natural Resources and Environmental Protection


The budget package provides a total of $10 billion from various fund sources—the General Fund, bond funds, and various special funds—for programs administered by the California Natural Resources and Environmental Protection Agencies. This is a net decrease of about $2.9 billion (22 percent) compared to 2016‑17 estimated expenditures. This reduction in spending primarily is related to a $3.6 billion decrease in the amount of bond funds budgeted. (We note that estimated bond expenditures for 2016‑17 are somewhat inflated because of how prior‑year bond appropriations are reflected in budget documents, making year‑over‑year comparisons of bond spending difficult.)

Cross‑Cutting Issues

Cap‑and‑Trade Expenditures

Chapter 135 of 2017 (AB 398, E. Garcia) extended authority for the Air Resources Board (ARB) to implement the state’s cap‑and‑trade program from 2020 to 2030. State cap‑and‑trade auction revenue is deposited in the Greenhouse Gas Reduction Fund (GGRF). The spending plan, as revised in September 2017 legislation, allocates nearly $2.6 billion from the GGRF for various programs. We discuss the major parts of this expenditure plan in more detail below.

Continuous Appropriations ($1 Billion). The budget assumes the state collects nearly $1.8 billion in auction revenue 2017‑18. Under legislation passed in 2014, 60 percent of this revenue is continuously appropriated to high‑speed rail (25 percent), affordable housing and sustainable communities (20 percent), transit and intercity rail capital (10 percent), and low carbon transit operations (5 percent). The 2017‑18 budget makes one minor change to this calculation. It specifies that the $80 million from the GGRF used to backfill lost revenue from the suspension of the State Responsibility Area (SRA) fee in 2017‑18 (discussed below) be subtracted before the calculation of the continuous appropriations. After this adjustment, the budget assumes about $1 billion would be continuously appropriated to these programs in 2017‑18. However, this amount ultimately depends on future auction revenue, which is subject to uncertainty.

Discretionary Spending ($1.6 Billion). Revenue that is not continuously appropriated—sometimes referred to as discretionary spending—is available to be allocated through the annual budget act or other legislation. The budget includes nearly $1.6 billion in discretionary GGRF spending for various programs. This amount includes (1) over $700 million of discretionary revenue collected in 2017‑18 and (2) over $800 million that was collected, but unallocated, in prior years. As shown in Figure 19, most of the spending is for programs intended to reduce mobile source emissions—particularly from heavy duty vehicles—forestry‑related activities, or programs intended to reduce emissions from agricultural activities. Many of the programs receiving funding in 2017‑18 have been allocated GGRF in prior years. Some of new GGRF allocations include:

  • Local Air District Programs for Cleaner Engines and Equipment. The budget provides $250 million to local air districts as follows: 43 percent to the South Coast Air Quality Management District, 32 percent to the San Joaquin Valley Unified Air Pollution Control District, 20 percent to the Bay Area Air Quality Management District, and 5 percent to the other smaller air districts. The air districts must use the funds for programs to encourage clean trucks and equipment, such as the existing Carl Moyer Program.
  • State and Local Fire Prevention Activities. Consistent with AB 398, which suspended the SRA fee and stated the Legislature’s intent to use GGRF to backfill the lost revenue, the budget provides $80 million for SRA fire prevention activities. It also includes $25 million for grants to local fire departments for fire prevention and response activities.
  • Emission Reductions From Agricultural Equipment and Food Processors. The cap‑and‑trade expenditure plan includes $85 million for incentives to reduce emissions from agricultural equipment and $60 million for a new program to encourage emission reductions from food processors.

Figure 19

2017‑18 Cap‑and‑Trade Discretionary Spending

(In Millions)

Program

Department/Agency

Amount

Mobile Source Emissions

$810

Freight and heavy duty vehicle incentives

Air Resources Board

$320

Local air district programs for clean engines

Air Resources Board

250

Clean Vehicle Rebate Project

Air Resources Board

140

Low‑income light duty vehicles and school buses

Air Resources Board

100

Forestry

$325

Forest health and fire prevention

CalFire

$200

SRA fee backfill

CalFire/Conservation Corps

80

Local fire prevention grants

Office of Emergency Services

25

Urban forestry

CalFire

20

Agriculture

$250

Methane reductions from dairies

Food and Agriculture

$99

Agricultural equipment

Air Resources Board

85

Incentives for food processors

Energy Commission

60

Agricultural renewable energy

Energy Commission

6

Other Programs

$187

Waste diversion

CalRecycle

$40

Urban greening

Natural Resources Agency

26

Natural lands climate adaptation

Wildlife Conservation Board

20

Low income weatherization and solar

Community Services and Development

18

AB 617a implementation

Air Resources Board

17

Wetland restoration

Department of Fish and Wildlife

15

Climate and energy research

Office of Planning and Research

11

Transformative Climate Communities

Office of Planning and Research

10

Coastal climate adaptation

Various agencies

6

Other administration

Various agencies

24

Total Expenditures

$1,572

aChapter 136 of 2017 (AB 617, C. Garcia).

SRA = state responsibility area; CalFire = Department of Forestry and Fire Protection; and CalRecycle = Department of Resources Recycling and Recovery.

Drought and Drinking Water Expenditures

Provides Total of $94 Million to Address Lingering Impacts From Multiyear Drought. While a series of winter storms significantly increased the amount of water available for both human and environmental uses—and led the Governor to declare an end to the drought emergency—they were not sufficient to eliminate all of the impacts from the state’s multiyear drought. For example, high rates of groundwater pumping and depletion during the drought left some communities—primarily in the Central Valley—without a safe drinking water supply. The budget therefore includes a total of $94 million to respond to lingering drought impacts and drinking water issues, as shown in Figure 20.

Figure 20

2017-18 Drought Response and Drinking Water Funding

(In Millions)

Activity

Department

Amounta

Fire Protection and Tree Mortality

Expand/enhance fire protection

CalFire

$41.7b

Provide grants for fire protection

CalFire

10.0c

Provide grants for counties to remove dead trees

CalFire

6.0d

Subtotal

($57.7)

Drinking Water

Establish permanent drinking water solutions

DWR

$9.0

Provide grants for drinking/wastewater solutions

SWRCB

8.0

Provide emergency drinking water

OES

6.5

Provide CalFresh subsidies for drinking water

DSS

5.0

Subtotal

($28.5)

At-Risk Fish Protection

Assist Delta smelt

DWR

$3.5e

Monitor at-risk fish

DFW

2.6f

Subtotal

($6.1)

Conservation and Water Rights

Conduct Save Our Water conservation campaign

DWR

$1.0

Manage and enforce water rights

SWRCB

0.6

Subtotal

($1.6)

Total

$93.9

a One-time General Fund unless otherwise noted.

b Includes $3 million from State Responsibility Area Fund.

c From State Responsibility Area Fund.

d Would cover some local funding requirements for the California Disaster Assistance Act program, and would be supplemented by some amount of additional funding through OES.

e Includes $900,000 from Harbors and Watercraft Fund.

f Ongoing General Fund.

CalFire = California Department of Forestry and Fire Protection; DWR = Department of Water Resources; SWRCB = State Water Resources Control Board; OES = Office of Emergency Services; DSS = Department of Social Services; and DFW = Department of Fish and Wildlife.

Nearly all of the funding in this drought package is provided from the General Fund on a one‑time basis. The only ongoing funding is $2.6 million for the Department of Fish and Wildlife to continue operating a network of fish and wildlife monitoring systems, in order to protect at‑risk species during future droughts.

As shown, the largest single expenditure ($42 million) is for the California Department of Forestry and Fire Protection (CalFire) to respond to continuing above‑average fire danger related in part to the estimated 102 million trees that have died during the drought. (As discussed below, CalFire received additional ongoing resources to combat wildfire and tree mortality that were not part of the drought package.) The budget also provides $10 million for CalFire to provide grants for fire prevention in State Responsibility Areas, and $6 million to help counties meet their local funding requirement associated with the California Disaster Assistance Act (CDAA) program—administered by the Office of Emergency Services (OES)—to remove dead and dying trees. (Please see the write‑up on OES in the “Other Major Provisions” section of this report for more information about the CDAA program.)

Funding to Improve Access to Safe Drinking Water Can Be Used to Address More Systemic Issues. As shown in the figure, $28.5 million is for four departments to implement both temporary and permanent solutions to drinking water problems such as dry or contaminated residential wells. While many of these problems have been caused or exacerbated by the recent drought, the funding may also be used in communities facing more systematic issues with their drinking or wastewater systems. For example, the package includes $5 million for a new pilot program at the Department of Social Services to provide supplemental CalFresh food benefits for families living in communities with contaminated drinking water to purchase bottled water.

Sustainable Groundwater Management Act (SGMA) Implementation

Enacted in 2014, SGMA represents the first comprehensive statewide requirement to monitor and operate groundwater basins, with the goal of achieving long‑term groundwater resource sustainability. The budget includes $17.3 million to continue implementing SGMA in 2017‑18, of which $15.8 million is ongoing. The funding is allocated across the two state departments charged with overseeing SGMA—the Department of Water Resources (DWR) and State Water Resources Control Board (SWRCB).

DWR—Support Local Agencies in Planning and Implementation ($15 Million). The budget provides an ongoing $15 million General Fund augmentation for DWR to both continue and expand its SGMA implementation activities. In 2017‑18 and 2018‑19, DWR will use the funding to assist in the formation of local Groundwater Sustainability Agencies (GSAs), review alternative management plans submitted by qualifying GSAs, and collect and disseminate the data GSAs need to develop their local groundwater management plans. In future years, the funds will be used for ongoing activities such as providing technical assistance to GSAs, reviewing and evaluating local plans, monitoring groundwater levels, and continued data collection and dissemination. The department will accomplish the proposed activities within its existing position authority.

SWRCB—Intervene in Areas That Fail to Comply With SGMA ($2.3 Million). The budget includes five new positions and $2.3 million ($750,000 ongoing and $1.5 million on a one‑time basis) for SWRCB to assume management responsibilities of groundwater basins that failed to meet the statutory deadline to form GSAs by June 30, 2017. The ongoing funding and new staff will be used to establish a new SGMA Reporting Unit within SWRCB that will (1) identify groundwater users and usage rates within these “unmanaged” basins, (2) issue and collect fees, and (3) conduct enforcement efforts for noncompliance.

In 2017‑18, these activities will be funded by a loan from the Underground Storage Tank Clean‑Up Fund to the Water Rights Fund. The budget assumes revenue from fees paid by groundwater extractors in unmanaged basins will be used to repay the loan to the Water Rights Fund in 2019 and provide ongoing support for program activities beginning in 2018‑19. (These fees are required under SGMA.)

Timber Regulation and Forest Restoration Program

The budget provides $15.2 million for various activities supported from the Timber Regulation and Forest Restoration Fund (TRFRF) in 2017‑18.

Forest Restoration and Accountability ($9 Million). The budget provides $9 million and 15 positions in 2017‑18 (declining to $1.2 million and seven positions in 2019‑20 and thereafter) to support activities in three departments:

  • Forest Restoration Grants ($7 Million). The budget includes $5 million for CalFire to support the California Forestry Improvement Program (CFIP), which extends for one additional year the same level of resources that CFIP has received for the past two years. The budget also extends existing SWRCB grants for another two years at their current funding level of $2 million annually.
  • State Operations ($2 Million). The budget includes about $1 million ($472,000 ongoing) for the California Natural Resources Agency (CNRA) and CalFire to support development of an online timber harvest permitting system, $549,000 to convert four limited‑term positions at SWRCB to permanent status, $300,000 annually for CNRA to continue existing pilot projects for an additional two years, and $149,000 for one additional support position at CNRA to assist in the development of ecological metrics and monitoring protocols.

Restore Nursery Operations ($4.9 Million). The budget includes $4.9 million ($2.1 million ongoing) for CalFire to resume state nursery operations at the L.A. Moran Reforestation Center, which has been used in the past to support the reforestation of public and private forest lands, especially those that have been damaged by fire, flood, drought, insects, and disease. The center is expected to provide 300,000 seedlings annually.

Monitoring Exemptions and Emergency Notice Provisions ($1.4 Million). The budget includes $1.4 million ($1.2 ongoing) from TRFRF for CalFire to implement and subsequently monitor the effects of the following recent legislation: (1) Chapter 583 of 2016 (AB 1958, Wood), which exempts the removal of non‑oak trees for the purpose of restoring or conserving oak woodlands from being subject to a Timber Harvest Plan (THP); (2) Chapter 563 of 2016 (AB 2029, Dahle), which requires the department to evaluate the Forest Fire Prevention Pilot that provides a THP exemption for specific tree removal activities that could reduce fire risk; and (3) Chapter 476 of 2016 (SB 122, Jackson), which requires CalFire to prepare a record of proceedings—an official record of all project application materials, reports, and related documents—concurrently with a THP or other type of harvest permit at the request of the applicant (with costs reimbursed by the applicant).

Natural Resources

As shown in Figure 21, the budget includes $5.7 billion (including $2.9 billion from the General Fund) for the support of various resources programs in 2017‑18. This is a decrease of $1.8 billion, or 23 percent, from the revised 2016‑17 spending level. Most of this reduction in year‑over‑year spending is attributable to lower bond spending in 2017‑18, particularly for DWR (described in more detail below). The budget also reflects a reduction of $221 million from the General Fund for resources programs, which primarily reflects reduced spending to address the effects of the state’s multiyear drought because of the additional precipitation brought by winter storms in 2016‑17.

Figure 21

Natural Resources Budget Summary

(Dollars in Millions)

2015‑16 Actual

2016‑17 Estimated

2017‑18 Budgeted

Change From 2016‑17

Amount

Percent

Expenditures

Department of Forestry and Fire Protection

$1,306

$1,513

$1,636

$122

8%

General obligation bond debt service

970

1,027

1,011

‑15

‑1

Department of Parks and Recreation

466

613

719

106

17

Department of Water Resources

916

2,009

572

‑1,437

‑72

Energy Resources Conservation

436

664

556

‑108

‑16

Department of Fish and Wildlife

408

496

468

‑28

‑6

Wildlife Conservation Board

116

502

145

‑358

‑71

California Conservation Corps

95

96

120

24

25

Department of Conservation

87

152

118

‑33

‑22

Coastal Conservancy

44

142

73

‑69

‑48

Other resources programs

157

256

298

42

16

Totals

$5,002

$7,470

$5,716

‑$1,754

‑23%

Funding

General Fund

$2,600

$3,078

$2,857

‑$221

‑7%

Special funds

1,280

1,643

1,774

131

8

Bond funds

983

2,443

795

‑1,648

‑67

Federal funds

139

307

291

‑16

‑5

The Legislature also approved Chapter 852 of 2017 (SB 5, de León), which places a $4 billion general obligation bond on the June 2018 ballot. If approved by voters, the bond would provide additional funding—to be repaid from the General Fund in future years—for a variety of natural resources‑related projects, including to expand or improve state and local parks, protect watersheds and coastal habitats, improve flood protection, provide clean drinking water, and protect against the effects of climate change.

Department of Fish and Wildlife (DFW)

The budget includes $468 million from various sources for DFW. This is a decrease of $28 million (6 percent) compared to 2016‑17, reflecting the removal of several one‑time expenditures.

Fish and Game Preservation Fund (FGPF). As shown in Figure 22, the budget includes $18.7 million from various sources to address an ongoing shortfall in the nondedicated account of the FGPF. This additional revenue will allow the department to sustain current activities supported by this account through the budget year, including enforcing the state’s laws and regulations, protecting fish and wildlife resources, managing department‑owned lands, and regulating recreational hunting and fishing and commercial fishing activities. Of the total amount provided, only $1.6 million—the $900,000 increase to commercial landing fees and $750,000 of the $8.7 million in lifetime license revenues—represents ongoing funding. The budget package also includes statutory changes associated with these two new sources of revenue: (1) a schedule detailing the new commercial landing fees for each species and (2) elimination of the Lifetime License Trust Account and transfer of the existing account balance and future revenues from lifetime license purchases directly into the FGPF nondedicated account and other relevant accounts.

Figure 22

2017-18 Solution to FGPF Shortfall

(In Millions)

Source

Amount

Transfer from Lifetime License Trust Account

$8.7

General Fund

5.1

Environmental License Plate Fund

4.0

Increase in commercial landing fees

0.9

Total

$18.7

FGPF = Fish and Game Preservation Fund.

Department of Water Resources (DWR)

The 2017‑18 budget includes $572 million for DWR, which represents a $1.4 billion decrease compared to the prior year. (These totals do not include the roughly $1.8 billion in annual payments from water contractors for DWR’s work on the State Water Project, as those funds are not appropriated through the annual budget act.) This year‑to‑year decrease is primarily due to the way bond funds are accounted for in the annual budget. Specifically, DWR had $1.7 billion in 2016‑17 spending authority from bond funds appropriated over the past several years, compared to the roughly $400 million actually appropriated in the 2017‑18 Budget Act.

Flood Management. The budget appropriates $111 million from Proposition 1 (2014) to DWR for flood management projects. As shown in Figure 23, these funds are spread across seven different expenditure categories, with roughly half of the total to be spent within the Sacramento‑San Joaquin Delta region. This amount represents just over one‑quarter of the total funding ($395 million) set aside within Proposition 1 for flood management projects, leaving the remainder available for appropriations in future years.

Figure 23

Proposition 1 Funding for Flood Management Projects

(In Millions)

Program Category

Amount

Statewide

Central Valley tributary projects

$40.0

Coastal watershed projects

9.0

Central Valley systemwide projects

7.0

Subtotal

($56.0)

Delta

Systemwide projects

$20.0

Delta Levee Subventions Program

20.0

Delta Special Projects Program

10.0

Emergency response projects

5.0

Subtotal

($55.0)

Total

$111.0

In addition to the Proposition 1 funding, the budget approves $2.2 million from the General Fund annually for three years and nine new positions for the Central Valley Flood Protection Board to inspect and permit state‑regulated levees. Budget trailer legislation also authorizes the board to set and charge fees to cover the cost of its regulatory activities.

Dam Safety. Spurred by damage to the Oroville Dam spillway that occurred in February 2017, the budget package includes provisions to improve the safety of dams across the state.

  • Budget trailer legislation requiring owners of state‑regulated dams to develop more extensive emergency response plans and inundation maps, including for emergency scenarios other than a total dam failure. The new statute also provides DWR with additional authority to enforce compliance with these requirements, including to impose fines.
  • $6.5 million and 12 positions for DWR to conduct more extensive dam and spillway inspections and review the aforementioned emergency response plans and inundation maps. In 2017‑18 these activities would be supported by a General Fund loan to the Dam Safety Fund, to be repaid and sustained on an ongoing basis through increased fees paid by dam owners. (The budget also provides $1.9 million from the General Fund and four positions for the Office of Emergency Services to review emergency response plans and inundation maps, and to coordinate emergency response drills.)

San Joaquin River Fish Projects. The budget provides $21 million from Proposition 13 (2000) for DWR to spend over five years for projects to improve fish populations in the San Joaquin River watershed. Such projects could include restoring river beds, banks, or floodways or removing barriers within the river or its tributaries, with the goal of facilitating fish migration and improving spawning habitats. The budget also includes provisional language requiring DWR to report to the Legislature on how these funds are being utilized by March 1, 2018.

These funds could be used for projects that implement voluntary settlement agreements between the state and water users (such as irrigation districts and water agencies). Such agreements are related to implementing the Bay‑Delta Water Quality Control Plan and are intended to both improve ecological flow and habitat for fish and create water supply and regulatory certainty for water users. The budget package also includes two other appropriations that could be used to support such voluntary settlement agreements: (1) $40 million from Proposition 1 for DWR to undertake multibenefit flood management projects within Central Valley tributaries (as described earlier), and (2) $1.1 million ongoing General Fund for DFW to help negotiate and implement projects resulting from such agreements.

Los Angeles River Conservancies

The budget package includes $98 million from Proposition 1 (2014) for two conservancies to undertake projects to restore the Los Angeles River. This fully appropriates the funding specified in the 2014 water bond for this purpose. Specifically, the budget includes $49 million each for the Santa Monica Mountains Conservancy and the San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy, which focus on the upper and lower segments of the river, respectively. Additionally, budget bill language requires that each conservancy use $6.5 million of its allotment on planning and implementation of projects jointly agreed upon by both conservancies.

Department of Parks and Recreation (DPR)

The budget includes $719 million from various fund sources to support DPR, a net increase of about $106 million, or 17 percent, from the estimated 2016‑17 level. This is primarily due to (1) $52 million in increased revenue to the State Parks and Recreation Fund (SPRF) under Chapter 5 of 2017 (SB 1, Beall), which directed any additional revenue from increased motor vehicle fuel tax revenue attributable to off‑highway recreational vehicles to SPRF; (2) one‑time Proposition 40 (2002) funding of $26 million for local assistance grants through the Youth Soccer and Recreation Development Program and Outdoor Environmental Education Facilities Program; and (3) an increase of $14.5 million from the General Fund for hazardous mine remediation at three parks under cleanup and abatement orders.

Improving State and Local Parks. The budget provides an additional $52 million from SPRF and $1 million each from the Off‑Highway Vehicle Trust Fund and the Abandoned Watercraft Abatement Fund to improve state and local parks. Specifically, this funding will be used for: (1) a local assistance program to Jurupa Area Recreation and Park District ($18 million), (2) repairs at state parks caused by recent storm damage ($16.4 million), (3) capital outlay projects that improve state park units ($15.1 million), (4) off‑highway recreation and the reduction of boating hazards ($2 million), (5) a pilot project intended to improve access and transportation to state parks ($1.5 million), and (6) the establishment of a recruitment and training program ($1 million).

Baseline Funding to Maintain Operations. The budget includes two, one‑time funding sources totaling $16.6 million in order to maintain park operations at 2016‑17 levels. Of that amount, $12.6 million is from the SPRF fund balance. The remaining $4 million in funding is provided from Environmental License Plate Fund.

Department of Forestry and Fire Protection (CalFire)

The budget includes $1.6 billion from various fund sources to support CalFire, a net increase of about $122 million, or 8 percent, from the estimated 2016‑17 level. This is primarily due to increased Greenhouse Gas Reduction Fund (GGRF) funding for forest health and fire prevention, partially offset by decreased emergency drought spending and estimated Emergency Fund expenditures. The 2016‑17 budget also included several one‑time expenditures for CalFire, such as the procurement of a new helicopter and equipment replacements.

Extended Fire Season. The budget provides an increase of $42.4 million and 18.5 ongoing positions as well as 276 ongoing seasonal firefighters in order to expand the fire season for CalFire staffing earlier into the spring and later into the fall, as well as provide increased coverage for winter fire suppression and fuel reduction activities.

Hiring and Training Staff. The budget provides $14.2 million and 55 positions to address increased hiring and training demands. The 2015‑16 Budget Act included a similar level of funding on a two‑year, limited‑term basis in order to determine ongoing workload and appropriate corresponding staff demands.

California Energy Commission (CEC)

The budget provides $556 million for CEC in 2017‑18, a net decrease of $108 million (16 percent) compared to estimated prior‑year expenditures. This year‑over‑year decrease largely reflects a difference between when funds are allocated and when they are spent. A significant amount of estimated spending in the prior year was from funds that were allocated, but unspent, in earlier years.

Energy Resources Program Account (ERPA) Shortfall. The budget includes several adjustments—totaling $15.4 million—intended to address a structural shortfall in ERPA, which is the main fund that supports CEC operations. These adjustments are:

  • Shift Funding Source for Certain Activities ($5.5 Million). The budget shifts $4.8 million and 35 positions related to alternative fuel and vehicle activities from ERPA to the Renewable Fuel and Vehicle Technology Fund. The budget also shifts $622,000 and 3 positions related to energy efficiency compliance from ERPA to the Appliance Efficiency Enforcement Subaccount.
  • Align Expenditure Authority With Actual Spending ($9.9 Million). The budget reduces contracting authority for power plant siting activities by $4.9 million and includes a $5 million general reduction in expenditure authority to more closely align expenditure authority with actual expenditures in recent years.

Even with these adjustments, annual ERPA expenditure authority is still about $8 million more than annual revenue. The fund is projected to have a balance of about $11 million at the end of 2017‑18.

Environmental Protection

As shown in Figure 24, the budget includes $4.6 billion (mostly special funds) for the support of various environmental protection programs in 2017‑18. This is a net decrease of $1.2 billion, or 20 percent, from the revised 2016‑17 spending level. Most of this reduction in year‑over‑year spending is attributable to lower bond spending in 2017‑18 by the State Water Resources Control Board. (As noted earlier, much of this reduction reflects how prior‑year bond appropriations are reflected in budget documents, making year‑over‑year comparisons of bond spending difficult.) In addition, the budget includes an increase of $746 million in special fund resources for environmental programs. Most of this change is related to increased spending from the GGRF particularly for the Air Resources Board (ARB).

Figure 24

Environmental Protection Budget Summary

(Dollars in Millions)

2015-16
Actual

2016-17
Estimated

2017-18
Budgeted

Change From 2016-17

Amount

Percent

Expenditures

Air Resources Board

$698

$845

$1,629

$784

93%

Resources Recycling and Recovery

1,687

1,588

1,601

13

1

State Water Resources Control Board

910

2,945

949

-1,996

-68

Department of Toxic Substances Control

220

249

280

31

12

Department of Pesticide Regulation

91

96

100

4

5

Environmental Health Hazard Assessment

18

21

22

1

5

General obligation bond debt

3

3

3

-4

Totals

$3,627

$5,746

$4,583

-$1,163

-20%

Funding

General Fund

$225

$90

$95

$5

5%

Special funds

2,669

3,335

4,079

744

22

Bond funds

396

1,936

25

-1,911

-99

Federal funds

337

384

384

Air Resources Board

The budget provides $1.6 billion for ARB in 2017‑18, a net increase of $784 million (93 percent) compared to estimated prior‑year expenditures. This year‑over‑year increase is largely because of higher programmatic expenditures from the GGRF, which receives revenues generated by the state’s cap‑and‑trade auctions. The budget includes over $900 million from cap‑and‑trade expenditures for ARB.

Implementation of Volkswagen (VW) Settlement. In 2016 and 2017, ARB reached various legal settlements with VW related to the discovery of “defeat devices” in VW diesel vehicles, which were designed to control nitrogen oxide (NOx) emissions during vehicle smog certification but then to illegally turn off those emissions controls during on‑road driving. The budget provides the following resources to implement the settlement:

  • 2‑Liter Vehicle Settlement ($2.3 Million). The budget includes $2.3 million (Air Pollution Control Fund [APCF] and Reimbursements) and 14 positions to implement the 2‑liter vehicle settlement, including (1) testing and monitoring VW vehicle modifications, (2) reviewing and approving VW’s plans for investing $800 million in zero‑emission vehicle infrastructure over ten years, and (3) allocating roughly $400 million over three years to programs that reduce NOx emissions. Budget‑related legislation also directs ARB, to the maximum extent allowable under the settlement, to ensure that at least 35 percent of funds benefit low‑income and disadvantaged communities disproportionately affected by air pollution.
  • 3‑Liter Vehicle Settlement ($25 Million). The budget also includes $25 million (APCF) from the 3‑liter settlement to be used for the Enhance Fleet Modernization Plus‑Up Program, which provides incentives to low‑income households in certain areas of the state to retire old vehicles and replace them with zero‑emission vehicles.
  • Civil Penalties ($154 Million). The budget provides $154 million (APCF) from the civil penalties settlement to pay for a portion of a new mobile source testing facility in Southern California.

Southern California Consolidation Project. The budget includes $413 million, including $154 million from the APCF and $259 million from lease revenue bonds, to design and construct a new mobile source emissions testing laboratory in Riverside. The estimated project includes over $100 million in vehicle testing equipment. Construction is scheduled to begin February 2018 and the project is expected to be complete in February 2022.

Zero‑ and Near‑Zero Emission Warehouse Program ($50 Million). The budget includes $50 million (Trade Corridor Enhancement Account) for a competitive funding program to encourage zero‑ and near‑zero emission technologies at warehouses. Funding will require a one‑to‑one match. This program was part of the transportation funding package discussed in the transportation section of this report.

Agricultural Emission Reduction Program ($50 Million). The budget allocates $50 million—including $35 million from the Alternative and Renewable Fuels and Vehicle Technology Fund and $15 million from the Air Quality Improvement Fund—to provide incentives for cleaner agricultural equipment, such as harvesting equipment, heavy duty trucks, and agricultural water pump engines. (As discussed above, part of the cap‑and‑trade expenditure plan includes an additional $85 million for these activities.)

Local Air District AB 617 Implementation ($27 Million). The budget provides $27 million (APCF) to support local air districts’ implementation of Chapter 136 of 2017 (AB 617, C. Garcia), which, among other things, requires additional air pollution planning, monitoring, and emission reduction activities in certain communities. These resources are primarily intended to fund local air district operations and monitoring equipment. It does not include incentive funding for programs to encourage emission reduction activities. However, the cap‑and‑trade expenditure plan includes $250 million for local air district emission reduction activities, which could be used to achieve the emission reductions envisioned in AB 617. The cap‑and‑trade expenditure package also includes an additional $17 million for ARB administrative activities ($12 million) and technical assistance grants for local communities ($5 million) related to AB 617 implementation.

Department of Toxic Substances Control (DTSC)

The budget includes $280 million from various funds to support DTSC, which is a net increase of $31 million, or 12 percent, from the revised 2016‑17 level. This net increase primarily reflects an augmentation of $43 million in spending from the Toxic Substances Control Account (TSCA) for the Exide Technologies Facility Contamination Cleanup Program, partially offset by a $12 million General Fund reduction to reflect one‑time funding provided in 2016‑17 to retrofit the Argonaut Mine dam in Jackson.

Exide Cleanup Implementation. Exide Technologies operated a lead‑acid battery recycling plant in the city of Vernon that ceased operations in 2014 when DTSC notified Exide that its application for a new permit would be denied. Testing indicates that releases of lead dust from the facility contaminated areas up to 1.7 miles from the facility and impacted thousands of properties including private residences, parks, and schools.

Chapter 9 of 2016 (SB 93, de León) allows the loan of up to $177 million from the General Fund to the TSCA to use for activities related to the lead contamination in the communities surrounding the Exide facility. (To the extent that DTSC recovers costs for investigation and cleanup from the parties responsible for the contamination, these funds will be used to repay the loan from the General Fund.) These funds are available for transfer from the General Fund to TSCA until June 30, 2018. The Department of Finance projects that $24 million will be transferred in 2016‑17 and $67 million will be transferred in 2017‑18. The budget also provides a $1.4 million loan annually for three years from the Lead‑Acid Battery Cleanup Fund (LABCF) for a third‑party quality assurance contractor—as specified in the final closure plan agreement—to oversee the Exide closure implementation.

National Priorities List and State Orphan Sites. The budget includes $14.6 million to support (1) the state’s share of cost for federal National Priorities List (NPL) sites and (2) the cleanup of state‑only orphan sites. This total is an increase of $5 million from 2016‑17 and includes $10.9 million from the Site Remediation Account and a one‑time appropriation of $3.7 million from penalty assessment revenues in the APCF ($2.7 million), the Department of Pesticide Regulation Fund ($500,000), and the Waste Discharge Permit Fund ($500,000). This funding level complies with Chapter 704 of 2016 (AB 2891, Committee on Environmental Safety and Toxic Materials) which (1) expressed the Legislature’s intent that funding for hazardous waste cleanups be in an amount that is sufficient to pay for estimated costs at both federal NPL sites and at high‑priority state‑only orphan sites. In addition, DTSC submitted to the Legislature a report on DTSC’s estimated hazardous waste cleanup costs, as required by Chapter 704.

Lead‑Acid Battery Recycling Act Implementation. The budget includes $610,000 from the LABCF to begin the investigation, evaluation, and cleanup of contamination from lead‑acid battery recycling facilities. Chapter 666 of 2016 (AB 2153, Garcia), known as the Lead‑Acid Battery Recycling Act of 2016, generally requires lead‑acid battery purchasers and manufacturers to pay a $1 per battery fee. Fee revenues are deposited in the LABCF and may be used for certain purposes such as (1) investigation, site evaluation, cleanup, remedial action, removal, monitoring, or other response actions at any area of the state that is reasonably suspected to have been contaminated by the operation of a lead‑acid battery recycling facility and (2) to repay a $177 million General Fund loan to provide funding for Exide‑related activities.