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The 2016-17 Budget

California Spending Plan

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Resources and Environmental Protection

The budget package provides a total of $9 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 decrease of about $5.1 billion (36 percent) compared to 2015–16 estimated expenditures. Most of the reduction in spending is related to estimated bond expenditures, such as expenditures from the 2014 water bond (Proposition 1). Some of this decrease, however, is related to how bond funds are accounted for in the budget, making year–over–year comparisons difficult. In total, about half of the budget for resources and environmental protection departments is from special funds, while the General Fund supports another third of these budgets. The remainder is supported by bond and federal funds.

Crosscutting Issues

Cap–and–Trade

State cap–and–trade auction revenue is deposited in the Greenhouse Gas Reduction Fund (GGRF) and is used for projects intended to reduce greenhouse gas (GHG) emissions. Under existing statute, 60 percent of annual cap–and–trade auction 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 remaining auction revenue is available to be allocated through the annual budget act or other legislation. This is sometimes referred to as noncontinuously appropriated, or discretionary, spending.

Recent auctions have varied greatly in the amount of revenue generated, resulting in significant uncertainty about the amount of revenue that will be collected in 2016–17. This makes it unclear how much funding will be continuously appropriated in 2016–17, as well as how much 2016–17 revenue will be available for discretionary programs. As shown in Figure 27, the budget, as revised in August 2016 legislation, includes $922 million in discretionary GGRF spending for various programs. This funding will be available regardless of how much revenue is generated from auctions in 2016–17 because the GGRF began 2016–17 with a fund balance of nearly $1.4 billion. Some of the major programs receiving discretionary funds are described below.

Low Carbon Transportation ($363 Million). The budget provides $363 million to the Air Resources Board (ARB) for programs that provide incentives for low– or zero–emission vehicles and equipment, including:

• $150 million for heavy duty vehicles and off–road equipment.
• $133 million for the Clean Vehicle Rebate Project (CVRP), which provides rebates for new zero–emission vehicles, such as electric and fuel cell cars. Budget–related legislation also provides additional guidance on the structure of the CVRP, including specifying maximum income eligibility limits for electric vehicles ($150,000 for an individual tax filer and $300,000 for joint filers) and directing the ARB to increase the rebate amounts by $500 for low–income households.
• $80 million for the Enhance Fleet Modernization Program and the associated “Plus Up” Pilot, which provide incentives to retire older vehicles and replace them with cleaner ones. Rebates for replacement vehicles are available for new or used cars. Incentive amounts vary based on household income and type of replacement vehicle.

Transformative Climate Communities ($140 Million). The budget provides $140 million to the Strategic Growth Council for a new program created by Chapter 371 of 2016 (AB 2722, Burke) called the Transformative Climate Communities Program. The program funds the development and implementation of neighborhood–level community plans that include multiple GHG reduction projects.

Transit and Intercity Rail Capital ($135 Million). The budget provides $135 million to the California Transportation Agency for the Transit and Intercity Rail Capital Program. This amount is in addition to the 10 percent of 2016–17 revenue continuously appropriated to the program.

Green Infrastructure Projects ($80 Million). The budget provides $80 million to the Natural Resources Agency for green infrastructure projects that reduce GHG emissions and provide multiple benefits. For example, funds might be used for such things as expanding public parks, implementing stormwater collection projects, and developing urban trails. At least 75 percent of the funds must be allocated to projects located in, and provide benefits to, disadvantaged communities.

Climate Change Activities

Implementation of Recent Energy Efficiency and Renewable Energy Legislation. Chapter 547 of 2015 (SB 350, de León) expanded the state’s renewable portfolio standard from 33 percent by 2020 to 50 percent by 2030 and established a state goal of doubling the amount of energy efficiency savings by 2030. In addition, the legislation directs the California Energy Commission (CEC), the California Public Utilities Commission (CPUC), and the ARB to undertake various activities related to resource planning and transportation electrification. Chapter 590 of 2015 (AB 802, Williams) made various other changes to energy efficiency activities, including establishing a statewide energy efficiency benchmarking program.

The budget includes a total of $13.1 million from various fund sources to implement SB 350 and AB 802. Specifically, the budget provides the following:

• $9.2 Million for CEC. The budget includes $7.6 million from the Air Pollution Control Fund (APCF) and $1.6 million from the Energy Resources Programs Account and 37.5 positions for CEC. These resources are for CEC to, among other things, (1) establish statewide energy efficiency savings targets and prepare assessments of savings on electricity demand on an hourly and seasonal basis, (2) administer an increased renewable portfolio standard for publicly owned utilities, (3) produce guidelines for integrated resources plans from publicly owned utilities, and (4) implement a statewide energy efficiency benchmarking program.
• $3.4 Million for CPUC. The budget includes $3.4 million from the Public Utilities Commission Utilities Reimbursement Account (PUCURA) and 23 positions for CPUC. These resources are for CPUC to, among other things, administer a modified renewable portfolio standard for investor–owned utilities and other load serving entities, establish an integrated resource planning process, and develop and oversee new energy efficiency programs.
• $485,000 for ARB. The budget includes $485,000 from the AB 32 Cost of Implementation Account and two positions for ARB to (1) help analyze electric vehicle charging infrastructure needs, (2) consult with CPUC and CEC on setting GHG targets for utilities as part of the new integrated resource planning process, and (3) conduct a study on barriers for low–income customers to access zero–emission transportation options.

Climate Change Research. The budget includes $23.5 million from the General Fund to support climate change research activities. Of this amount, $21 million is one time. A total of $18 million is allocated to the CEC for alternative transportation fuel and vehicle technology research, including $15 million for a competitive grant program and $3 million to provide a state match for federal alternative fuel research programs. The remaining $5.5 million is allocated to the Department of Water Resources (DWR). This includes $3 million for research related to certain climate and weather patterns that contribute to high–precipitation events in California (also known as atmospheric rivers) and $2.5 million ongoing to identify climate change risks and adaption responses for the water sector.

ARB Regulatory Activities Intended to Reduce GHGs and Air Pollution. The budget provides a total of $3.2 million (APCF) and 13 positions for ARB to conduct regulatory activities intended to reduce GHG emissions and air pollutants. Specifically, the budget provides funding for:

• Short–Lived Climate Pollutant (SLCP) Strategy ($1.4 Million). The budget includes five positions to develop and implement policies to reduce SLCPs, such as methane and fluorinated gases. These funds are only available after ARB approves the SLCP strategy required by Chapter 523 of 2014 (SB 605, Lara). ARB staff is expected to present a final SLCP strategy to the board in fall 2016.
• Clean Truck and Bus Standards ($1.2 Million). The budget includes four positions to develop more stringent GHG and criteria pollutant standards for trucks and buses, as well as improve compliance monitoring for existing standards.
• Advanced Clean Cars Program ($580,000). The budget includes four positions to develop regulations to increase the number of zero–emission vehicles and to reduce criteria pollutants and GHGs from light duty vehicles.

Drought

Continued Response to Drought Impacts. Despite somewhat higher levels of precipitation in the winter of 2016, many areas of the state continue to experience the effects of multiple years of drought conditions. The budget contains $255 million to respond to these impacts, which include dry residential wells in certain communities, dead and dying trees across the state’s forests, and deteriorated habitats for fish and wildlife. As shown in Figure 28, these funds are spread across eight state departments for a variety of activities, with the largest amount going to augment fire protection activities at the California Department of Forestry and Fire Protection (CalFire). Most of these activities reflect the continuation of initiatives funded in recent years. Of the drought–response funding shown in the figure, $223.7 million is from the General Fund and $31 million is from special funds.

Preparation for Potential Future Water Shortages. The budget also provides a total of $12.6 million in General Fund mostly for DWR to support several activities intended to prepare the state for droughts in future years. Specifically, the budget includes: (1) $3 million one time and $2.5 million ongoing to research the effects that changing climate and weather might have on the water sector (discussed in greater detail below); (2) $4.3 million one time—as well as $240,000 one time for the State Water Resources Control Board (SWRCB)—to collect data and develop policy recommendations for long–term urban water use and conservation requirements; (3) $1 million one time to provide local agencies with facilitation services when necessary for working through implementation issues related to the Sustainable Groundwater Management Act of 2014 (SGMA); (4) $1 million one time to collect statewide agricultural land use data that will inform local groundwater management plans pursuant to SGMA; and (5) $550,000 ongoing to establish a Critical Water Shortage Management Program that will develop state–level strategies for responding to future dry periods. Additionally, the administration must submit a report to the Legislature by January 2020 summarizing lessons learned from the state’s response to the current drought.

Proposition 1

As shown in Figure 29, the 2016–17 budget appropriates about $1 billion from Proposition 1, the $7.5 billion water bond voters approved in 2014. Almost half of this total, $465 million, is from the section of the bond dedicated to addressing statewide obligations and agreements. As shown in the figure, this funding is allocated for four specific water–related commitments into which the state has entered. The other $562 million is appropriated for various other categories of projects specified in the bond, primarily for departments to continue running competitive grant programs initiated with prior–year Proposition 1 appropriations. As shown in the figure, this includes $320 million for SWRCB to fund water–recycling projects. (Combined with the $292 million provided in prior years, this fully allocates the funding specified in Proposition 1 for water recycling.) Budget legislation also requires the California Natural Resources Agency (CNRA) to submit a report each January from 2017 through 2021 that summarizes Proposition 1 expenditures and funded projects, as well as associated outcomes, challenges, and accomplishments.

Marine Mammal Protection

The budget package, as revised in August 2016, contains trailer bill legislation that implements various requirements related to orcas being held in captivity in the state, including prohibitions on (1) captive breeding programs, (2) the import and export of new orcas and related genetic materials into or out of the state, and (3) holding any new orcas in captivity. (The legislation does permit an orca currently being held in captivity in the state to continue to be held and used for educational presentations until its death.) Additionally, the budget provides a total of $2.1 million for the UC Davis Wildlife Health Center to allocate grants to rescue seals and sea lion pups stranded on California beaches, and to help whales off the coast of California that become entangled in fishing gear and marine debris.

Natural Gas Regulation—Aliso Canyon

On October 23, 2015, Southern California Gas Company discovered a leak in one well within its Aliso Canyon storage field located in the northern San Fernando Valley near the community of Porter Ranch. The company pumps natural gas underground at this field where it is stored until it is pumped up later and delivered to its customers. Homes in the areas surrounding the Aliso Canyon gas leak were evacuated, and at the request of residents and local officials, on January 6, 2016 Governor Brown declared the situation an emergency. On February 18, 2016, the Aliso Canyon gas leak was sealed. In response to the Aliso Canyon gas leak, the Legislature took several actions intended to improve oversight of the natural gas industry and prevent future leaks. Specifically, the Legislature approved a total of $15 million and 46 positions as follows:

• Department of Conservation (DOC). The budget provides DOC with a total of $7.2 million from the Oil, Gas, and Geothermal Administrative Fund (OGGAF). This includes $4.2 million ($681,000 in one–time funds to purchase equipment) and 20 positions for increased regulation of natural gas storage facilities. The total also includes $3 million ($2.5 million in 2017–18) to contract for services to conduct and complete additional independent scientific studies in accordance with recommendations from the California Council on Science and Technology.
• CPUC. The budget provides $3.6 million (PUCURA) and 17 positions to perform tasks related to the natural gas leak at Aliso Canyon—such as investigating its causes, implementing measures to prevent future leaks, and increasing inspection levels. This amount also includes $2.1 million and seven positions to implement Chapter 14 of 2016 (SB 380, Pavley), which requires CPUC to open a proceeding to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon storage facility while maintaining energy reliability in the region.
• ARB. The budget provides $2.3 million ($1.4 million in one–time funds to purchase equipment) from OGGAF and four positions to support neighborhood air quality monitoring near oil and gas facilities.
• CEC. The budget provides $1.7 million ($1 million in one–time contract funds) from the Public Interest Research, Development, and Demonstration Fund and three positions to improve the commission’s technical ability to monitor, model, and analyze the interaction of California’s electricity and natural gas systems for grid reliability.
• Office of Environmental Health Hazard Assessment (OEHHA). The budget provides $350,000 from OGGAF and two positions for OEHHA to support the ARB in its neighborhood air quality monitoring near oil and gas facilities.

The Legislature also passed budget legislation in August that authorizes OGGAF monies to now be used to support ARB and OEHHA. Budget legislation also requires CEC to report by September 15, 2017 on a plan for tracking natural gas and requires ARB to develop a model to estimate leaked and vented emissions of methane from natural gas infrastructure.

Resources

As shown in Figure 30, the budget includes $5 billion (including $2.8 billion from the General Fund) for the support of various resources programs in 2016–17. This is a decrease of $3.7 billion, or 42 percent, from the revised 2015–16 spending level. Most of this reduction in year–over–year spending is attributable to lower bond spending in 2016–17, particularly for DWR.

In addition to this amount, the budget includes $187 million from the General Fund for deferred maintenance projects at several resources departments. This includes $100 million for flood protection projects administered by DWR and $60 million for projects at state parks. More information on deferred maintenance funding provided in the budget is included in the “Other Major Provisions” section of this report.

California Conservation Corps (CCC)

The budget includes a total of about $112 million ($64 million General Fund) for CCC, a net increase of about $16 million (16 percent) above estimated 2015–16 expenditures. This change primarily reflects a one–time $20 million augmentation from the General Fund to renovate the Auburn residential center, partially offset by various baseline and technical adjustments.

Construction of New Residential Centers. The budget includes $400,000 from the General Fund for the acquisition phase of new residential centers in Napa ($200,000), Pomona ($100,000), and Ukiah ($100,000). (The administration projects it will spend a total of $84 million to complete these three projects, including costs for the acquisition phase, preliminary plans, working drawings, and construction.) This funding begins the implementation of a major expansion of residential centers as described in the administration’s Five–Year Infrastructure Plan. Specifically, the plan proposes a combined total of $171 million over the next five years from the General Fund and lease revenue bond funds to (1) complete the construction of six new residential centers by the end of 2020–21 and (2) begin the acquisition and preliminary planning phases for two additional residential centers that would begin construction after 2020–21. Some of the proposed residential centers would replace current nonresidential centers, while others would add capacity in new locations.

Butte Fire Center (Magalia). The budget includes $2.7 million General Fund and 12.5 positions to operate a new CCC residential center in Magalia. This center was converted from an existing CalFire facility that was closed in 2004 due to budget cuts.

Department of Forestry and Fire Protection

The budget includes $1.4 billion (mostly General Fund) to support CalFire, a net decrease of about $8 million, or 1 percent, from the estimated 2015–16 level.

Helicopters. The budget provides $12 million from the General Fund for the department to purchase one helicopter in 2016–17. This will be the first new helicopter purchased as part of a plan for CalFire to replace its entire helicopter fleet in coming years, which is likely to cost at least a couple hundred million dollars. The budget includes provisional language requiring CalFire to notify the Joint Legislative Budget Committee (JLBC) prior to the award of a procurement contract on (1) the helicopter model being acquired, (2) the cost per helicopter, (3) costs by fiscal year, and (4) the delivery schedule. The budget also allows DOF, after notification to the JLBC, to augment the amount budgeted for the first helicopter based on the actual costs associated with procurement, fees, and related support costs. The provisional language also allows DOF, after legislative notification, to augment CalFire’s budget for capital outlay costs associated with studies, acquisition, and preliminary plans for helicopter facility modifications.

Professional Standards Program. The budget provides $4 million (mostly from the General Fund) and 14 positions to establish a professional standards program in headquarters. This will include a unit to provide additional oversight for internal investigations and adverse actions, as well as expand manager and supervisor training. The positions will conduct administrative and background investigations, provide more training to managers and supervisors, and develop guidelines to promote consistent application of penalties. The budget specifies that the program place an emphasis on the training and education of all employees and supervisors, include no more than three sworn peace officers, and include a working group of department and labor representatives to develop the training and education components. The department is also required to report to the Legislature on the implementation and effectiveness of the program.

Department of Parks and Recreation (DPR)

The budget includes $569 million from various fund sources to support DPR, a net increase of about $19 million, or 3 percent, from the estimated 2015–16 level. This is primarily due to increased capital outlay spending.

Baseline Funding and Off Highway Vehicle (OHV) Trust Fund Shift. The budget includes a one–time augmentation of $17 million in State Parks and Recreation Fund (SPRF) authority to maintain spending at current–year levels. (Similar one–time increases were included in the past two budgets as well.) The budget also includes a one–time transfer of $31 million in fuel tax revenues to SPRF to support this augmentation, as well as to address a SPRF structural shortfall. This money would otherwise have been deposited in the OHV Trust Fund to support the state’s eight State Vehicular Recreation Areas and other programs for OHV users. The department anticipates providing an ongoing budgetary solution as part of the 2017–18 budget.

Pilot Projects. The budget provides $1 million for two new pilot programs within DPR in response to recommendations made by the Parks Forward Commission. First, the budget provides $690,000 over two years from the State Parks Protection Fund (SPPF) to support the community liaison pilot project, which is intended to identify new ways to engage underserved and underrepresented communities at two state parks. The effectiveness of the project will be evaluated by UC researchers with funding provided by the State Parks Foundation. Second, the budget provides $348,000 over two years from SPPF to support a history interpretation pilot, which is intended to improve historical interpretation programs at two state parks through partnerships with UC Riverside and UC Santa Barbara. The UC teams are responsible for evaluating the effectiveness of the projects.

Environmental License Plate Fund (ELPF)

The CNRA administers the ELPF, which faced a projected shortfall of about $9 million in 2016–17. As shown in Figure 31, the budget package includes various changes to address this shortfall. Most savings are due to shifting activities previously funded by the ELPF to the General Fund ($6.5 million) or to special funds administered by DPR ($3 million). For the Department of Fish and Wildlife, the budget package removes $1.5 million in ELPF that had funded work related to incidental take permits under the California Endangered Species Act and institutes a new fee on permit applicants to support this work. The budget package also assumes increased revenue of $1.5 million from a 5 percent increase in the environmental license plate fee. These changes are expected to increase revenues and decrease ELPF expenditures by about $12 million annually.

Environmental Protection

As shown in Figure 32, the budget includes $4 billion (mostly special funds) for the support of various environmental protection programs in 2016–17. This is a decrease of $1.4 billion, or 27 percent, from the revised 2015–16 spending level. Most of this reduction in year–over–year spending is attributable to lower bond spending in 2016–17, particularly for SWRCB.

Department of Toxic Substances Control (DTSC)

The budget includes $267 million from various funds to support DTSC, which is a net increase of $46 million, or 21 percent, from the revised 2015–16 level. This net change primarily reflects augmentations for the Exide Technologies cleanup and Argonaut mine retrofit, partially offset by various baseline and technical budget reductions.

Exide Technologies Cleanup. Exide Technologies operated a lead–acid battery recycling facility 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.

During 2015–16, the Legislature approved increases in spending for Exide Technologies cleanup. In August 2015, the Legislature approved $7 million of emergency funding from the Toxic Substances Control Account (TSCA) to (1) test approximately 1,000 properties in the community surrounding Exide, (2) develop a comprehensive cleanup plan, and (3) begin cleanup of the highest priority sites. In addition, Chapter 9 of 2016 (SB 93, de León) allows the loan of up to $177 million from the General Fund to 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 DOF projects that $4.8 million will be transferred in 2015–16 and $42 million will be transferred in 2016–17.

Argonaut Mine Dam Retrofit. The budget includes $14.3 million from the General Fund on a one–time basis to retrofit the Argonaut Mine Dam in Jackson. The U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers finalized a study to assess the dam’s stability and concluded that the dam was structurally unstable and had a significant chance of complete failure with sustained rainfall.

Enhanced Permitting Capacity. The budget includes $3.6 million from the Hazardous Waste Control Account (HWCA) to support the conversion of eight limited–term positions to permanent status and to provide 15 additional permanent positions to enable DTSC to eliminate the existing backlog of permit applications and complete most future decisions on hazardous waste permits within two years.

Replacement of Laboratory Equipment. The budget includes a one–time increase of $2 million from HWCA to procure laboratory and investigatory equipment used to enforce hazardous waste laws.

State Water Resources Control Board

The budget includes $1.2 billion to support SWRCB, a net decrease of $1.6 billion, or 56 percent, from the revised 2015–16 level. This year–over–year change primarily reflects reductions in bond funds of $1.5 billion—mainly from Proposition 1 (2014 water bond). The budget also includes funding for regulation of medical marijuana and for drought activities, which are discussed in other sections of this report.

Drinking Water for Schools. The budget for the board includes $10 million from the General Fund for water bottle filling stations and point of use filtration systems to provide clean drinking water in schools.

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