Legislative Analyst's Office
Analysis of the 2001-02 Budget Bill
The Department of Parks and Recreation (DPR) acquires, develops, and manages the natural, cultural, and recreational resources in the state park system and the off-highway vehicle trail system. In addition, the department administers state and federal grants to local entities that help provide parks and open-space areas throughout the state.
The state park system consists of 265 units, including 39 units administered by local and regional agencies. The system contains approximately 1.3 million acres, which includes 3,000 miles of trails, 280 miles of coastline, 625 miles of lake and river frontage, and nearly 18,000 camp sites. Over 70 million visitors travel to state parks each year.
The budget proposes $645.1 million in total expenditures for the department in 2001-02. This is an overall decrease of $656 million (51 percent) below estimated current-year expenditures. The budget proposes about $276.7 million in departmental support, about $300 million in local assistance and $68.5 million in capital outlay expenditures. (Please also see the "Capital Outlay" chapter of this Analysis.)
The reduction of $656 million includes a decrease of (1) $101.5 million in support expenditures, (2) $352.3 million in local assistance, and (3) about $202.1 million in capital outlay expenditures. The $101.5 million net decrease in support expenditures reflects mainly the expenditure in the current year of the remaining funds ($119 million) from the one-time appropriation provided in 1999-00 for deferred maintenance. The decrease in local assistance and capital outlay reflects mainly a decrease of Proposition 12 bond fund expenditures and one-time General Fund expenditures for various local park projects and state park improvements.
Of the total proposed expenditures in 2001-02, about $149 million (23 percent) will come from the General Fund; about $57 million will come from the State Parks and Recreation Fund; $336.4 million from Proposition 12; and the remainder ($103 million) from various other state funds, federal funds, and reimbursements.
The department has not identified the level of funding required for an adequate ongoing maintenance program. Without this information, it is difficult for the Legislature to evaluate the appropriate funding level for ongoing maintenance. We recommend the Legislature adopt supplemental report language requiring the department to report on the funding level required for an adequate ongoing maintenance program.
The DPR oversees large and diverse natural and cultural heritage holdings. As a result, its maintenance needs are diverse and include buildings, grounds, trails, cultural resources, and natural resources. Funding ongoing maintenance activities at an adequate level is important to avoid a maintenance backlog, high repair costs, and the loss of resources.
Current Maintenance Program Inadequate. Since the 1980s, the department has accumulated a large backlog of deferred maintenance. This accumulation is primarily the result of inadequate funding for ongoing maintenance. To partially address this problem, funding for ongoing maintenance was increased for the current year to a total of about $41 million. For 2001-02, the budget proposes to supplement the current-year level with an increase of $11 million specifically dedicated to the maintenance of natural resources. The additional funding is for activities such as erosion control, prescribed fire, and exotic plant control. However, the department indicates that the current funding level is still not adequate, but it is unable to estimate at this time the level of funding needed for an adequate ongoing maintenance program because of an antiquated record-keeping system.
In order to better assess its maintenance needs, the department plans to purchase a computer software package currently in use by the National Park Service. The new system will require districts to identify and enter their maintenance needs into a database and send the data via the Internet to headquarters. This will help DPR to quickly compile information on all of the park districts. The system will also automatically estimate the costs of maintenance needs entered into the database. The department plans to have information on its current maintenance needs by October 2001. We note that it is important to collect this information on a consistent basis. Additionally, the department should establish criteria and standards to guide the prioritization of maintenance work to be included into the database.
Department Should Report on Maintenance Needs. Without information on DPR's ongoing maintenance needs, it is difficult for the Legislature and the administration to evaluate the appropriate level of funding for ongoing maintenance. As DPR expects to have this information by October, we recommend the adoption of the following supplemental report language directing DPR to provide the Legislature with that information.
On or before December 10, 2001, the department shall submit to the Chair of the Joint Legislative Budget Committee and the chairs of the fiscal committees of each house of the Legislature a report on its ongoing maintenance needs. The report shall include: (1) an update on implementation of the software package to help the department manage its ongoing maintenance activities; (2) a cost estimate of the ongoing maintenance needs, by category (buildings, grounds, miscellaneous structures, systems, trails, cultural resources, and natural resources); (3) an estimate of the required staffing or contracting needed for routine maintenance; (4) the current expenditure level of ongoing maintenance in each of the categories.
The Legislature has provided a total of $187 million for the department to reduce a substantial backlog of deferred maintenance. The department is in the process of determining the amount of the remaining backlog. We recommend the department provide at budget hearings an updated estimate on the amount of deferred maintenance yet to be addressed.
As we discussed in our 1999-00 Analysis, the department began to accumulate a backlog of deferred maintenance in the 1980s when the state's fiscal constraints led to the underfunding of the ongoing maintenance needs of the department. (Please see page B-74 in the 1999-00 Analysis for a more detailed discussion of the department's deferred maintenance.)
In 1998-99, the Legislature provided $30 million to begin to address the department's deferred maintenance needs. For 1999-00, the Legislature provided an additional $157 million for the same purpose. The department estimated that the funding would address about half of the identified deferred maintenance projects. The department developed a plan to expend these funds over three years through 2001-02. Our review shows the department is on schedule for expending the funds. In addition, for 2001-02, the budget proposes $10 million from the State Parks System Deferred Maintenance Account for DPR to continue to reduce its maintenance backlog.
Update Needed on Deferred Maintenance. While the department has been working to reduce the deferred maintenance backlog identified in 1998, it is also deferring other ongoing maintenance projects. This is because, as we discussed earlier, the department does not have an adequate ongoing maintenance program. Therefore, the original estimate of reducing the deferred maintenance by about half over three years may no longer be valid. In addition, DPR is in the process of recalculating its remaining deferred maintenance needs based upon its experience with the deferred maintenance work completed thus far. The department reports it will have an initial update on its deferred maintenance needs by April 2001. This information is important for the Legislature to review in considering whether it should allocate additional funding for the department's remaining deferred maintenance needs. Accordingly, we recommend that the department provide at budget hearings an update on its deferred maintenance needs.
We recommend that the Legislature withhold authorizing the department to solicit proposals for a new concession contract for Hearst Castle until the department provides information on the terms of the proposal.
Hearst San Simeon State Monument. The concession at the Hearst San Simeon State Monument (popularly known as Hearst Castle) is among the top five park concessions in terms of gross sales and rent revenues. In 1999, about $12 million in revenues were generated for the state, with over 800,000 visitors. The current concession expired in 1998, and is being continued on a month-to-month basis. The budget requests authority to solicit proposals for a new food, gift, and retail sales concession contract.
Our review of the request to solicit proposals found that the department has not finalized major provisions for the terms of the proposal. For example, the length of the contract, amount of capital investment, the rent, and provisions for sit down dining have not been established. The DPR is currently in the process of analyzing the costs and benefits to the state of three different concession options, as well as combinations of those options. The department expects to select a final option by spring 2001.
Recommendation. Without information on important elements of the proposal such as capital outlay investments, contract terms, rents, and services to be provided, the Legislature is not able to determine whether the proposal is in the state's best interest. The approval of the proposed concession at this time is premature. Accordingly, we recommend the Legislature withhold approval of the proposal until the department provides to the Legislature the terms of the concession that it deems most appropriate based on its current analysis.