State Spending Plan
July 9, 2018

The 2018-19 Budget

California Spending Plan

(Preliminary Version)


Natural Resources and Environmental Protection

The budget package provides a total of $11.7 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 $3.5 billion (23 percent) compared to 2017-18 estimated expenditures. This reduction primarily is related to a $2.6 billion decrease in the amount of bond funds budgeted. (We note that estimated bond expenditures for 2017-18 are somewhat inflated because of how prior-year bond appropriations are reflected in budget documents, making year-over-year comparisons of bond spending difficult.) Figures 22 and 23 display total funding provided for major departments overseen by the natural resources and environmental protection agencies, respectively.

Figure 22

Natural Resources Budget Summary

(Dollars in Millions)

Expenditures

2016-17 Actual

2017-18 Estimated

2018-19 Budgeted

Change From 2017‑18

Amount

Percent

Totals

$5,039

$8,782

$7,193

-$1,588

-18%

By Department

Forestry and Fire Protection

$1,305

$2,179

$1,844

-$335

-15%

Parks and Recreation

480

806

1,304

497

62

General obligation bond debt service

1,025

951

1,026

76

8

Water Resources

548

2,003

716

-1,287

-64

Energy Commission

396

683

533

-150

-22

Fish and Wildlife

431

520

524

4

1

Natural Resources Agency

312

333

293

-40

-12

Wildlife Conservation Board

94

496

196

-300

-60

Conservation Corps

94

109

153

44

40

Conservation

124

171

131

-40

-23

State Lands Commission

32

45

99

54

119

Other resources programsa

199

485

374

-111

-23

By Fund Source

General Fund

$2,726

$3,527

$3,607

$80

2%

Special funds

1,271

2,145

1,773

-372

-17

Bond funds

885

2,740

1,521

-1,219

-44

Federal funds

157

369

293

-76

-21

By Purpose

State operations

$4,174

$5,661

$4,909

-$751

-13%

Local assistance

556

2,161

1,719

-442

-20

Capital outlay

309

960

566

-394

-41

aIncludes state conservancies, Coastal Commission, and other departments.

Figure 23

Environmental Protection Budget Summary

(Dollars in Millions)

Expenditures

2016-17 Actual

2017-18 Estimated

2018-19 Budgeted

Change From 2017‑18

Amount

Percent

Totals

$3,714

$6,436

$4,547

-$1,889

-29%

By Department

Resources Recycling and Recovery

$1,500

$1,743

$1,568

-$175

-10%

Air Resources Board

700

1,705

1,386

-319

-19

Water Resources Control Board

1,137

2,578

1,140

-1,437

-56

Toxic Substances Control

247

263

303

40

15

Pesticide Regulation

94

104

105

1

1

Other departmentsa

37

44

44

1

2

By Fund Source

General Fund

$96

$217

$133

-$84

-39%

Special funds

2,905

4,286

3,842

-443

-10

Bond funds

427

1,564

202

-1,362

-87

Federal funds

286

370

370

By Purpose

State operations

$1,247

$1,753

$1,638

-$115

-7%

Local assistance

2,467

4,530

2,910

-1,620

-36

Capital outlay

154

-154

aIncludes the Environmental Protection Agency, Office of Environmental Health Hazard Assessment, and general obligation bond debt service.

Cap-and-Trade Expenditures

State cap-and-trade auction revenue is deposited in the Greenhouse Gas Reduction Fund (GGRF). As shown in Figure 24, the spending plan allocates $3.1 billion from the GGRF for various programs. This plan includes: (1) $1.5 billion in continuous appropriations, (2) $166 million in other existing spending commitments, and (3) $1.4 billion in discretionary spending. The plan assumes at least $2.6 billion in auction revenue in 2018-19, more than $400 million carried over from the end of 2017-18, and $50 million in interest income accrued to the fund. We discuss the major parts of this expenditure plan in more detail below.

Figure 24

2018-19 Cap-and-Trade Expenditure Plan

(In Millions)

Program

Department

Amount

Continuous Appropriationsa

$1,490

High-speed rail

High-Speed Rail Authority

$621

Affordable housing and sustainable communities

Strategic Growth Council

497

Transit and intercity rail capital

Transportation Agency

248

Transit operations

Caltrans

124

Other Existing Spending Commitments

$166

Manufacturing sales tax exemption backfill

N/A

$89

State administrative costs

Various

49

SRA fee backfill

CalFire/Conservation Corps

28

Discretionary Spending

$1,401

Mobile Source Emissions

Heavy duty vehicle and off-road equipment programs

Air Resources Board

$180

Clean Vehicle Rebate Project

Air Resources Board

175

Low-income light duty vehicles and school buses

Air Resources Board

100

Low-carbon fuel production

Energy Commission

13

Local Air Pollution Reduction

Local air district programs to reduce air pollution

Air Resources Board

245

Local air district administrative costs

Air Resources Board

20

Technical assistance to community groups

Air Resources Board

10

Agriculture

Agricultural diesel engine replacements

Air Resources Board

112

Methane reductions from dairies

Food and Agriculture

99

Incentives for food processors

Energy Commission

64

Healthy Soils

Food and Agriculture

5

Agricultural renewable energy

Energy Commission

4

Forestry

Forest health and fire prevention

CalFire

160

Prescribed fire and fuel reduction

CalFire

30

Local fire response

Office of Emergency Services

25

Regional forest restoration projects

Natural Resources Agency

20

Urban forestry

CalFire

5

Other programs

Transformative Climate Communities

Strategic Growth Council

40

Waste diversion

CalRecycle

25

Urban greening

Natural Resources Agency

20

Climate and energy research

Strategic Growth Council

18

Low-income weatherization

Community Services and Development

10

Energy Corps

Conservation Corps

6

Wetland restoration

Fish and Wildlife

5

Coastal adaptation

Various

5

Woodstove replacements

Air Resources Board

3

Technical assistance for disadvantaged communities

Strategic Growth Council

2

Total

$3,056

aContinuous appropriations based on revenue assumption of $2.6 billion in 2018-19.

CalTrans = California Department of Transportation; SRA = State Responsibility Area; CalFire = California Department of Forestry and Fire Protection; and CalRecyle = California Department of Resources Recycling and Recovery.

Continuous Appropriations ($1.5 Billion). Under legislation passed in 2014, about 60 percent of annual auction revenue (less certain other existing spending commitments) 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).

Other Existing Spending Commitments ($166 Million). The spending plan includes $166 million for spending commitments made in prior years. Similar to the current year, some of these allocations—specifically backfilling the State Responsibility Area (SRA) fee suspension ($28 million) and the expanded manufacturing sales tax exemption ($89 million)—are “taken off the top” before determining continuous appropriations.

Discretionary Spending ($1.4 Billion). Revenue that is not continuously appropriated—sometimes referred to as discretionary revenue—is available to be allocated through the annual budget act or other legislation. The budget includes $1.4 billion in discretionary GGRF spending for various programs. Most of the programs received GGRF in prior years as well. Some of the notable changes to the allocations in 2018-19 include:

  • Prescribed Fire and Regional Forestry. The spending plan provides $30 million for prescribed burning and fuel reduction in forests and $20 million for regional forest restoration projects. This funding is part of the administration’s proposal to implement the Forest Carbon Plan. Up to $7 million of this funding may be allocated to the California Air Resources Board (CARB) for monitoring air pollutant emissions related to prescribed burning. (In addition, the spending plan continues cap-and-trade funding for forest health and fire prevention activities, funded at $160 million in 2018-19.)

  • Local Air Districts. The spending plan includes $20 million for two years to pay for local air district costs of implementing Chapter 136 of 2017 (AB 617, C. Garcia). Local air district costs include purchasing and maintaining air monitoring equipment and developing community air protection plans. The budget also includes $30 million over two years from the Air Pollution Control Fund for these activities, providing a total of $50 million for these purposes.

  • Low-Carbon Fuel Production. The spending plan provides $12.5 million to the California Energy Commission (CEC) for grants to low-carbon fuel production facilities. This allocation backfills a portion of the $23 million that was provided for this purpose in 2017-18 from the Alternative and Renewable Fuel Vehicle Technology Fund (ARFVTF). The budget plan redirects these ARFVTF dollars to pay for an expansion of zero-emission vehicles (ZEV) fueling infrastructure in 2018-19. (We discuss this change in the ZEV section below.)

Multiyear Commitments for Certain Programs. Most of the new spending is one time, but some programs would receive multiyear funding. These multiyear programs are: (1) $200 million annually over eight years to continue light-duty ZEV rebates, including $175 million for the Clean Vehicle Rebate Project and $25 million for incentives for light-duty vehicles for low-income consumers; (2) $30 million ongoing for prescribed fire and fuel reduction; (3) the two-year $20 million allocation for AB 617 implementation; and (4) $6 million ongoing to the California Conservation Corps for energy efficiency activities in the Energy Corps program.

Strategy to Ensure Fund Solvency. The budget prohibits most departments and agencies from spending more than 75 percent of their GGRF allocations before the final quarterly auction of the fiscal year (scheduled for May 2019). Once the final auction is complete and the total amount of 2018-19 revenue is determined, the Department of Finance (DOF) will determine how much of the revenue is available to fund the discretionary programs specified in the expenditure plan. DOF must then notify the Joint Legislative Budget Committee of its determination within 30 days. This strategy is meant to ensure fund solvency if actual revenue is lower than $2.6 billion. Certain programs—most notably $200 million to CARB for light-duty ZEV rebates—are not be subject to the 75 percent restriction.

Proposition 68 Resources Bond

California voters approved Proposition 68 in June 2018. This measure authorizes the state to sell a total of $4.1 billion in general obligation bonds for resources-related purposes, including parks, habitat restoration, and water projects. The 2018-19 Budget Act appropriates over one-quarter of the bond. Specifically, this includes $1.3 billion for 20 departments. Figure 25 shows expenditures for each department and program proposed for Proposition 68 funding in 2018-19.

Figure 25

2018-19 Funding From Proposition 68 Resources Bond

(In Millions)

Department

Primary Uses

Amount

Parks and Recreation

Local and state parks

$482.6

Water Resources Control Board

Groundwater cleanup and management, safe drinking water

177.3

Water Resources

Flood protection, groundwater recharge

160.8

Natural Resources Agency

Salton Sea, river and parkway recreation, green infrastructure

126.2

Wildlife Conservation Board

Habitat conservation

71.9

Coastal Conservancy

San Francisco Bay restoration, coastal forests

53.7

Sierra Nevada Conservancy

Watershed Improvement Program, habitat restoration

36.3

Santa Monica Mountains Conservancy

Habitat restoration, LA River restoration

34.0

Food and Agriculture

Water efficiency, healthy soils

31.0

Fish and Wildlife

River and wetland restoration

23.6

Ocean Protection Council

Marine wildlife, assisting coastal communities

20.3

Forestry and Fire Protection

Urban forestry

14.6

Conservation Corps

Parkway restoration, grants to local corps

9.8

San Gabriel Mountains and LA River Conservancy

LA River restoration

8.7

Tahoe Conservancy

Upper Truckee River and Marsh restoration

3.2

Conservation

Agricultural conservation

2.2

Baldwin Hills Conservancy

Habitat restoration

1.2

Sacramento-San Joaquin Delta Conservancy

Economic development

1.1

Coachella Valley Mountains Conservancy

Habitat restoration

0.2

San Diego River Conservancy

San Diego River restoration

0.1

Various

Statewide bond administration

1.4

Total

$1,260.0

LA = Los Angeles.

Environmental License Plate Fund

The Environmental License Plate Fund (ELPF) supports various resources and environmental protection programs. The fund is primarily supported from the sale and renewal of personalized motor vehicle license plates, as well as a portion of fees on the sale and renewal of certain specialty license plates. The Department of Motor Vehicles recently began offering “legacy license plates,” which has increased revenues in recent years. The fund is estimated to receive $55 million in revenues in 2018-19. As displayed in Figure 26, the budget includes several new ELPF expenditures. Most of this funding is provided on a one-time or limited-term basis.

Figure 26

Major New ELPF Expenditures in the 2018-19 Budget

(In Millions)

Department

Purpose

Amount

CNRA

Ocean Resiliency Program to address threats of climate change on coastal and marine ecosystems

$15.0

TRPA/SWRCB

Backfill General Fund monies redirected to DFW

6.6

CalFire

Fireworks stewardship program for seized illegal fireworks

3.6

SLC

Boca Chica Lowlands Restoration Project

2.0

Delta Stewardship Council

Delta Science Program

2.0

General Services

Backfill Energy Resources Programs Account funding

1.9

Conservation

Watershed coordinator grants

1.8

Coastal Conservancy

Backfill bond funds for ongoing operations

1.0

CNRA

Establish project monitoring unit

0.7

ELPF = Environmental License Plate Fund; CNRA = California Natural Resources Agency; TRPA = Tahoe Regional Planning Agency; SWRCB = State Water Resources Control Board; DFW = Department of Fish and Wildlife; CalFire = California Department of Forestry and Fire Protection; SLC = State Lands Commission; and DWR = Department of Water Resources.

Department of Fish and Wildlife (DFW)

The budget includes $524 million from various sources for DFW. This is roughly equivalent to the amount provided in 2017-18.

Funding Augmentations. The budget provides $39.1 million ($34.1 million General Fund and $5 million Tire Recycling Management Fund) in augmentations for DFW. Of this amount, $29.6 million is authorized for three years and $9.5 million is provided on a one-time basis. The new funding is provided for the following purposes:

  • Address Operating Shortfall—$19.6 million for three years to address an operating shortfall in the Fish and Game Preservation Fund and allow DFW to continue its existing activities.

  • Expand Activities—$10 million for three years (including $5 million from the Tire Recycling Management Fund) to expand DFW’s current service levels.

  • Expand California Waterfowl Habitat Program—$5 million one time to expand this program—which provides grants to landowners for improving waterfowl habitat conditions on their private lands—to working agricultural rice fields.

  • Launch California Biodiversity Initiative—$2.5 million one time for a new effort to improve understanding of and preserve the state’s biodiversity.

  • Conduct Budget Review and Develop Tracking System—$2 million one time for DFW to contract with an independent entity to conduct a service-based budget review and develop a new budget tracking system by January 2021. DFW can also use a portion of these funds to support associated staff work. The budget package includes budget trailer legislation (1) specifying the scope and interim deadlines for these activities and (2) authorizing DFW to accept private funds to help support the review and system.

California Energy Commission

The budget provides $533 million for CEC in 2018-19, a net decrease of $150 million (22 percent) compared to estimated prior-year expenditures. The net decrease largely reflects a technical issue related to unspent 2016-17 funds that were carried over into 2017-18. This decrease is partially offset by an increase in spending for ZEV fueling infrastructure, discussed below.

ZEV Fueling Infrastructure. The budget includes $134.5 million ARFVTF for ZEV fueling infrastructure, including $114.5 million for electric vehicle charging stations and $20 million for hydrogen fueling stations. These funds will be administered through the existing Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP). The $114.5 million for electric vehicle charging stations is $99 million more than the 2017-18 funding level. This increase reflects (1) a $58 million one-time allocation from the ARFVTF fund balance and (2) redirecting $41 million from other ARFVTP activities, such as grants for low-carbon fuel production facilities. (As discussed earlier in the cap-and-trade section of this report, $12.5 million GGRF is being used to backfill a portion of funding for low-carbon fuel production.) The administration intends to allocate all ARFVTP funding (about $95 million annually) to ZEV fueling infrastructure over the next several years.

Department of Water Resources

The budget includes $716 million for DWR, which represents a $1.3 billion decrease compared to the prior year. (These totals do not include the roughly $1.7 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 2017-18 spending authority from bond funds appropriated over the past several years, compared to the roughly $350 million appropriated in the 2018-19 Budget Act.

Flood Management. The budget provides $195 million from the General Fund for flood management projects—primarily levee improvements—in the Central Valley. This funding falls into two categories:

  • First, the budget includes $170 million one time for six specific urban levee improvement projects—identified in the budget act—that have already been authorized by the U.S. Army Corps of Engineers and funded by Congress. These monies would meet federal requirements for the state’s share of funding those projects and be used in combination with local and federal funds.

  • Second, the budget provides $25 million on an ongoing basis to perform regular maintenance and repairs on the levees for which the state holds special responsibility and liability. DWR will perform some of these activities and allocate some funding to local agencies that have contracted with DWR to maintain the state’s levees. Additionally, from this ongoing amount, the budget sets aside $1.3 million in 2018-19 to study the feasibility of levying an assessment to support flood management activities within the Sacramento-San Joaquin Drainage District.

In addition to these funds, the budget includes $96.5 million for various flood management activities from Proposition 68 (as mentioned earlier) and $100 million from the General Fund to address deferred maintenance and repairs on levees in the Central Valley (described in the “Other Provisions” section of this report).

CalFire

The budget includes $1.8 billion from various fund sources to support the California Department of Forestry and Fire Protection (CalFire), a net decrease of $335 million, or 15 percent, from the estimated 2017-18 level. This decrease is primarily due additional one-time fire-fighting costs provided in 2017-18, particularly for the large fires that occurred in Sonoma and Napa Counties in October 2017 and in Ventura County in December 2017.

Helicopter Fleet Replacement. The budget includes $101 million from the General Fund in 2018-19 for the procurement of four new helicopters as part of CalFire’s helicopter fleet replacement plan. Funding for procurement of the first helicopter was provided in the 2017-18 budget. Under the plan, all 12 of CalFire’s helicopters would be replaced by 2020-21. The one-time cost of fleet replacement, including ancillary costs and capital outlay, is currently estimated at $315 million. The administration estimates ongoing support costs will grow to about $14 million annually for increased staffing and maintenance needs.

Fire Protection. The budget provides an increase of about $50 million from the General Fund to support CalFire’s firefighting capabilities. This includes $11 million for increased staffing and vehicle maintenance, $9.4 million for additional dispatchers at Emergency Command Centers, $7.3 million for additional California Conservation Corps (CCC) fire crews, and $4 million to lengthen the season that McClellan Reload Air Base is staffed. (The budget also provides funding for a new firefighter training program for parolees at the Ventura Training Center, which is discussed in the “Judiciary and Criminal Justice” section of this report.)

California Conservation Corps

The budget includes a total of about $153 million ($90 million General Fund) for CCC, a net increase of about $44 million, or 40 percent, above estimated 2017-18 expenditures. This year-over-year change primarily reflects an increase of almost $36 million in General Fund spending for capital outlay projects. These projects mainly consist of $24 million for the planning and construction costs of a kitchen, multipurpose room, and dorm replacement at the Auburn residential center, as well as funding for the acquisition and planning phase to build new residential centers (as discussed below).

Expansion and Replacement of Residential Center Facilities. The budget includes $9 million from the General Fund for the acquisition and planning phases of new residential centers in Auberry ($4.3 million), Los Pinos ($1.4 million), and Greenwood ($3.2 million), as well as the study phase in Yountville ($200,000). This funding begins the implementation of a major expansion of residential centers over the next five years. The first two of these facilities will provide services in new locations. The center at Greenwood will replace an existing residential center that is no longer serviceable, and the new center at Yountville will replace an existing nonresidential center in Napa. The projects are estimated to cost a combined total of $163 million (General Fund and lease revenue bonds) to complete.

Department of Parks and Recreation (DPR)

The budget includes $1.3 billion from various fund sources to support DPR, a net increase of $497 million, or 62 percent, from the estimated 2017-18 level. This is primarily due to $483 in one-time Proposition 68 funding (discussed above).

Parks Funding Augmentation. The budget assumes that $79 million of fuel tax revenue will be transferred to the State Parks and Recreation Fund (SPRF) in 2018-19 as a result of Chapter 5 of 2017 (SB 1, Beall). This is an increase of $25 million from the amount transferred in 2017-18, which primarily reflects the full implementation of the fuel tax increases established in SB 1. Of the transferred amount, the budget provides (1) $26.6 million to address a historical budget shortfall in SPRF and $7.7 million to build up the fund’s year-end reserve; (2) $3 million to continue support that was initiated in 2017‑18 for recruitment and training, off-highway vehicle grants, and abandoned watercraft abatement grants; and (3) $41.9 million ongoing and 361 positions to expand service levels throughout the state park system. The department utilized its newly implemented accounting system—known as Service-Based Budgeting or SBB—to inform its proposed allocation of additional resources and positions across the state parks. The largest funding increases are for facilities and maintenance, natural resource management, and local engagement.

California Indian Heritage Center. The budget authorizes $200 million—$100 million from the General Fund and up to $100 million in donations—for the planning and construction of a California Indian Heritage Center in West Sacramento. The center is intended to replace the State Indian Museum at Sutter’s Fort State Historic Park in Sacramento. The new center would be managed by the department in collaboration with tribal representatives. The final project is expected to include up to 120,000 square feet of building space, outdoor plazas and venues, and educational trails to the Sacramento River. It is expected to be completed by the end of 2022.

State Lands Commission (SLC)

The budget provides $99 million for SLC, which is more than double the current-year level of $45 million. The significant funding increase is to plug offshore oil and gas wells, as described below.

Abandoned Oil and Gas Wells. The budget provides $58 million in 2018-19 for SLC to plug and secure two offshore oil and gas sites near Santa Barbara. Specifically, the budget provides $38 million for Platform Holly and $20 million for Rincon Island as proposed by the administration. Under the administration’s plan, $20 million would be provided for each site in 2019-20, and an additional $10.5 million for Rincon Island in 2020-21. SLC assumed control and responsibility for the facilities at these sites after the lessees declared fiscal insolvency and relinquished the leases they had held with the state. These wells and facilities are on state lands and will continue to pose risks to the environment and public health until they are fully plugged and secured. The ultimate cost to the state is likely to be less than the $109 million that the Legislature approved, however, as the state is in active negotiations for a prior lessee to pay some of the costs. Any funds that the state ultimately receives will reimburse the General Fund for these upfront appropriations. The Legislature also approved supplemental reporting language requiring SLC to submit a status update regarding funding, work, costs, and the terms of other offshore leases by January 10, 2019.

Other Augmentations. The budget provides a number of other augmentations for SLC, including (1) $3 million one-time General Fund for the state’s share of environmental remediation activities at the Selby Slag site, (2) up to $2 million ongoing from tideland oil and gas revenues to identify and remove coastal hazards and legacy wells pursuant to Chapter 645 of 2017 (SB 44, Jackson), (3) $2 million ELPF for two years for restoration activities at the Bolsa Chica wetlands, and (4) $2 million one-time General Fund to begin developing a digital system for managing SLC’s historical records.