The 2017-18 Budget

Office of Emergency Services (OES)

OES coordinates emergency planning, response, and recovery activities related to disasters. OES maintains the State Emergency Plan—which outlines the organizational structure for emergency response to natural and man-made disasters—and assists local governments and other state agencies in developing their own emergency preparedness and response plans. Additionally, during an emergency, OES is responsible for coordinating the state’s activities under the California Emergency Services Act. The department also acts as the state’s conduit for state and federal assistance related to recovery from disasters and hazard mitigation. In this capacity, OES helps local governments to assess their disaster-related damages and prepare their state and federal grant and loan applications. Additionally, OES administers various programs that provide assistance to victims of crime.

The Governor’s budget proposes $1.4 billion (more than two-thirds from federal funds) for support of OES in 2017‑18. Of this total budget, $1.2 billion is for local assistance. This total budget is a net decrease of $125 million (8 percent) from current-year estimated expenditures mostly related to the completion of the Proposition 1B bond program.

In this analysis, we discuss our findings and recommendations regarding two issues for OES included in the Governor’s 2017‑18 budget: (1) drought and the California Disaster Assistance Act (CDAA) and (2) Public Assistance Program.

Drought and CDAA

LAO Bottom Line. The Governor’s budget proposes an additional $56.7 million from the General Fund in 2017‑18 to support local assistance and state operations activities, primarily related to the drought. We recommend (1) delaying decisions on funding amounts until May when drought conditions are more certain, (2) segregating funding for drought purposes to ensure that it achieves its intended outcomes, and (3) directing OES to make any future request for funding through budget proposals—rather than as adjustments to the department’s base funding amount—to ensure that the Legislature has the information it needs to make its budgetary decisions.

Background

OES Coordinates Disaster Response and Administers Disaster Assistance. OES is responsible for assuring the state’s readiness to respond to, and recover from, natural and man-made emergencies. During an emergency, the office functions as the Governor’s immediate staff to coordinate the state’s response. OES also provides financial assistance through CDAA to local jurisdictions whose resources have been overextended. This assistance includes partial reimbursement of certain local government costs associated with responding to emergencies, as well as partial funding for the repair or replacement of public property damaged or destroyed by disasters.

Recent Activities and Funding Related to Drought Response. In response to an extended drought in California that began in 2011, the Governor proclaimed a State of Emergency in January 2014. At that time, OES activated the State Operations Center and regional operations centers to monitor the drought, coordinate a state-level response to the drought, and provide technical assistance to local government agencies. For example, in communities affected severely by the drought, OES helped coordinate the provision of emergency water supplies for drinking and sanitation. Since the drought has not been declared an emergency by the federal government, the state cannot use federal funds to support drought-related activities. Accordingly, drought-related local assistance must be funded exclusively by CDAA (rather than mostly by the federal government), and OES staff must be supported by state funds when engaging in drought-related activities.

The Legislature has provided OES with funding from the General Fund to support OES’ drought-related activities in recent years. As shown in Figure 1, this includes funding (1) to provide emergency drinking water, (2) for removal of dead and dying trees, and (3) to support the State Operations Center and coordinate assistance to local agencies. The 2016‑17 budget includes a total of $56.7 million for these purposes (though the tree mortality-related funds could also be used for other types of disasters). The funding for emergency drinking water and tree removal have been provided through the CDAA program.

Governor’s Proposal

The Governor’s budget includes adjustments totaling $56.7 million from the General Fund in 2017‑18 for drought and other disaster purposes as follows:

• Drought-Related CDAA Claims ($52.2 Million). This would continue current-year funding levels related to emergency drinking water ($22.2 million) and tree mortality ($30 million).

• Non-Drought-Related CDAA Adjustment ($1 Million). The budget reflects a $1 million augmentation to fund disaster assistance through CDAA that is not linked to the drought.

• State Operations Related to Drought ($3.5 Million). The budget provides $3.5 million in 2017‑18 for drought-related coordination activities. This reflects a decrease in funding of $1 million from the current-year level of funding.

Budgeting Approach. The Governor does not provide a proposal to justify the above augmentations. Instead, the additional funds included in the Governor’s budget are included as a modification to the department’s base funding amount (known as a “miscellaneous baseline adjustment”). Additionally, under the Governor’s approach, the $52.2 million in CDAA funds for drought-related activities could be used for any eligible CDAA disaster purpose, not just drought-related assistance.

LAO Assessment

OES Has Underspent Drought Funding in Recent Years. Prior-year spending data shows that OES has underspent its budget allocations for emergency drinking water and state operations. Specifically, in 2015‑16, OES spent $14.8 million on emergency drinking water, which was $7.4 million less than its allocation of $22.2 million. As of December 31, 2016, it was on-track to spend about $14.8 million in 2016‑17. Similarly, in 2015‑16, OES spent $2.8 million on state operations related to the drought, and it was on pace to spend less than $2 million in 2016‑17.

We note that the state has been relatively slow in expending CDAA funds on tree mortality—less than $150,000 through December 31, 2016—but the department indicates this is largely because of requirements that local governments identify matching funds before state funds can be awarded. We expect that tree removal projects might accelerate in the coming year as local governments secure their matching funds. Moreover, the total need for tree removal is substantial.

Funding Required for Drought Will Depend on Future Hydrologic Conditions. As we discuss in our recent report, The 2017‑18 Budget: Resources and Environmental Protection, the level of funding needed to respond to the drought will depend in part on future hydrologic conditions. A series of winter storms between October 2016 and February 2017 have brought significant precipitation to California and will help address the drought conditions that have faced the state. However, because the state’s rainy season is still only halfway completed, it is premature to determine what specific drought conditions will remain and what state-level responses will be required in 2017‑18. For example, it is too early to know how much CDAA assistance will be needed to provide emergency drinking water to local communities or how much OES staff support will be needed to coordinate drought response efforts.

Funding Could Be Used For Non-Drought Purposes. While OES indicates that the vast majority of the CDAA augmentation is justified based on drought (tree mortality and emergency drinking water) needs, funding could be used for any eligible disaster purpose, not just drought. This is problematic because the administration has not provided evidence that the proposed $52.2 million is needed for other CDAA purposes besides drought. Furthermore, the administration could shift funds away from drought-related purposes in a way that might not reflect legislative priorities.

We note that the 2016‑17 budget allowed this type of administrative flexibility for the $30 million provided to address tree mortality. It appears that some of this funding has been used for other types of CDAA disasters, since the department reports that, as of December 31, 2016, its expenditures on other CDAA disasters already exceeded the $39.1 million in base funding provided for those other disasters.

Approach Lacks Transparency. In our view, the administration’s budgeting approach—which does not provide a proposal to justify its requested budget augmentations—is problematic. The approach fails to provide the Legislature with the workload and cost information necessary to assess whether the proposal is fully justified, should be modified, or warrants rejection. Miscellaneous baseline adjustments are typically reserved for technical changes—such as allocating already authorized changes in employee compensation—not substantive decisions on funding levels for specific programs. We further note that this budgeting approach deviates from the department’s recent practice of providing full proposals for its drought-related requests, as well as the approach taken by every other state department requesting drought-related funding for 2017‑18. It is unclear why OES should be treated differently from other departments and allowed to make changes to proposed funding levels without submitting budget proposals.

LAO Recommendation

Delay Decisions Until May When Statewide Conditions Are More Certain. Given that ongoing weather patterns are still affecting statewide hydrology, we recommend delaying any action on the Governor’s drought response proposals until after the May Revision. At that point, the state’s rainy season should largely be over, and the state will have better information on the drought. Furthermore, by May, OES should have additional information on current-year expenditures, which would provide further clarity on the amount of funding that likely will be needed in 2017‑18. We note that OES has already indicated it expects to reexamine its proposed funding amount based on evolving conditions, and might propose budget changes in May.

While it is premature to determine final funding amounts related to drought until later this spring, we anticipate the amount of necessary funding will be less than currently proposed. This is because improved hydrologic conditions around the state will negate the need for some amount of state agency response compared to recent years. Based on improved hydrology and prior-year spending data, we find that OES might only require $14 million to provide emergency drinking water in the budget year, and it might be reasonable to reduce state operations funding for OES’ drought response to about $1.7 million. Finally, while OES’ expenditures on tree mortality have lagged so far, we expect that they may accelerate in the budget year and that the vast number of dead and dying trees in the state’s forests many need to be removed to reduce fire risk and improve public safety. We, therefore, anticipate that substantial funding for tree removal still will be needed in 2017‑18.

Segregate Funding for Drought Purposes. We recommend that if the Legislature chooses to provide additional CDAA funding for emergency drinking water and tree mortality, it restrict the use of those funds to those purposes. Separating these funds from other CDAA funds will ensure that resources are directed to the purpose intended by the Legislature.

Direct OES to Make Future Funding Requests Through Budget Proposals. We recommend that the Legislature direct OES to submit any future requests for funding adjustments to CDAA or other drought-related activities through the submission of budget proposals rather than miscellaneous baseline adjustments. This approach—which is consistent with typical budgeting practice—will ensure that the Legislature has the information it needs to make its budgetary decisions.

Public Assistance

LAO Bottom Line. The Governor’s budget proposes a $3.5 million increase from the General Fund and a reduction of $3.5 million in federal trust fund authority on an ongoing basis for OES’ Public Assistance Program. We recommend modifying the proposal to provide a smaller increase—$2 million—from the General Fund (and a commensurate reduction in federal trust fund authority) to support the program, consistent with its historical expenditure levels.

Background

The Public Assistance Program is responsible for administering federal and state local assistance funding related to disaster recovery, including the state’s CDAA local assistance funding. The Public Assistance Program has a base budget of about $10.6 million annually, split equally between state and federal funds. The 2016‑17 Budget Act included an additional $3.5 million from the General Fund for the program on a one-time basis. The budget also included provisional language making the availability of these additional funds contingent on OES providing the Joint Legislative Budget Committee with a notification regarding state and federal expenditures compared to funding authority for this program.

Governor’s Proposal

The Governor’s budget proposes $3.5 million from the General Fund and a reduction of $3.5 million in federal trust fund authority on an ongoing basis to support the Public Assistance Program. This would result in the same level of total ongoing expenditure authority for the program as in prior years. However, rather than funding authority being evenly split between the General Fund and federal funds, the program would be more reliant on the General Fund ($8.8 million) than federal funds ($1.8 million) on an ongoing basis.

LAO Assessment

OES has not provided adequate data to substantiate its request for $3.5 million in additional General Fund to address its Public Assistance Program. As shown in Figure 2, OES has overspent its General Fund allocation for the Public Assistance Program in each of the past three years. Most recently, in 2015‑16, OES’s General Fund expenditures for the program were $6.9 million, which was $1.6 million higher than its authority. (The department has covered these costs by redirecting resources from other programs.) If the recent trend continued, we would expect that the department would need only about $2 million—rather than the $3.5 million requested—in additional General Fund support in 2017‑18 compared to its budget authority.

LAO Recommendation

Reduce Request to $2 Million Augmentation. We recommend that the Legislature reduce the Governor’s proposed General Fund augmentation from $3.5 million to $2 million in 2017‑18 and ongoing to support its Public Assistance Program, with a commensurate reduction in federal trust fund authority. Based on historical data, this should allow OES to address its Public Assistance Program workload. To the extent that General Fund expenditures on the Public Assistance Program continue to grow, the department can return to the Legislature in a future year to request additional funding.