The 2019‑20 Budget: California Spending Plan

Resources and Environmental Protection

• Cap-and-Trade Expenditures
• Water
• Wildfire Prevention and Response
• Department of Parks and Recreation (Parks)
• Department of Toxic Substances Control (DTSC)
• Department of Resources Recycling and Recovery (CalRecycle)
• Resources Capital Outlay and Bond Administration
• Other Natural Resources Augmentations

The budget package provides a total of $12.4 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 $3.5 billion (22 percent) compared to 2018‑19 estimated expenditures. This reduction is primarily due to a $2.4 billion decrease in the amount of bond funds budgeted. (We note that estimated bond expenditures for 2018‑19 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 1 and 2 display total funding provided for major departments overseen by the natural resources and environmental protection agencies, respectively.

Cap-and-Trade Expenditures

State cap-and-trade auction revenue is deposited in the Greenhouse Gas Reduction Fund (GGRF). As shown in Figure 3, the 2019‑20 budget allocates $2.9 billion from the GGRF for various programs. This plan includes: (1) $1.3 billion in continuous appropriations, (2) $221 million in other existing spending commitments, and (3) $1.4 billion in discretionary spending. The plan assumes about $2.4 billion in auction revenue in 2019‑20, $500 million carried over from the end of 2018‑19, and $100 million in interest income accrued to the fund. We discuss the major parts of this expenditure plan in more detail below.

Continuous Appropriations ($1.3 Billion). Under legislation passed in 2014, about 60 percent of annual 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).

Other Spending Commitments ($221 Million). The spending plan includes $221 million for other spending commitments, mostly made in prior years. Similar to 2018‑19, some of these allocations—specifically backfilling the State Responsibility Area (SRA) fee suspension ($76 million) and the expanded manufacturing sales tax exemption ($64 million)—are “taken off the top” before determining continuous appropriations.

Discretionary Spending ($1.4 Billion). The budget includes $1.4 billion for various other programs—also known as discretionary spending. Most of these programs received GGRF in prior years. However, the 2019‑20 budget allocates GGRF to the following programs for the first time:

• Safe and Affordable Drinking Water. The budget provides $100 million GGRF for activities to help water systems provide safe and affordable drinking water. In addition, budget-related legislation continuously appropriates 5 percent of annual GGRF revenue to the safe drinking water program starting in 2020‑21. We discuss funding for this program in more detail below.
• Workforce Development for a Low Carbon Economy. The budget includes $35 million in 2019‑20—and a similar amount over the following four years—for the California Workforce Development Board to support apprenticeship and training programs intended to transition the state’s workforce to a low carbon economy. The funding would largely be used to expand existing workforce training programs—the High Road Construction Carriers Program ($10 million) and the High Road Training Partnership Program ($20 million)—that fund pre-apprenticeship programs. The budget plan also includes $5 million in 2019‑20 (and smaller amounts annually thereafter) to administer the grant programs.
• Local Fire Prevention in Wildland-Urban Interface (WUI). The budget allocates a total of $10 million to California Department of Forestry and Fire Protection (CalFire) intended to promote fire prevention and response activities in the WUI. This includes (1) $6 million for local block grants to implement fire prevention and community preparedness activities, (2) $2.5 million to reimburse counties for maintenance of emergency evacuation routes, (3) $1 million to create a new fire outreach and extension program, (4) $250,000 to reimburse counties for providing training to local planners on land use planning issues in the WUI, and (5) $250,000 to develop best practices for local planning ordinances and enforcement activities related to fire prevention.
• Fluorinated Gases Emission Reduction Incentive Program. The budget provides $1 million to California Air Resources Board (CARB) to implement Chapter 375 of 2018 (SB 1013, Lara) which established a program to provide incentives to reduce emissions of fluorinated gases that are often found in refrigeration equipment.
• Study Transition to a Carbon Neutral Economy. The budget provides $1.5 million to California Environmental Protection Agency (CalEPA) for a study to identify strategies to significantly reduce emissions from light- and heavy-duty vehicles and to achieve carbon neutrality in the transportation sector. The budget also provides $1.5 million to CalEPA to contract with the University of California to identify strategies to decrease demand and supply of fossil fuels to achieve a carbon neutral economy by 2045. This study must also assess how such changes would impact disadvantaged and low-income communities and identify strategies to address those impacts.

Water

Safe and Affordable Drinking Water (SADW) Program. The budget provides $100 million from the GGRF and $33.4 million in one-time General Fund support in 2019‑20 to begin implementation of a SADW Program, which is intended to assist households and communities—particularly disadvantaged communities—in paying the costs associated with obtaining access to safe and affordable drinking water. This includes ongoing financial support for operations and maintenance, water system consolidations, administrative and managerial services, and other assistance. Chapter 120 of 2019 (SB 200, Monning) establishes the statutory framework for SADW. Under this legislation, 5 percent of the monies in the GGRF, up to an annual cap of $130 million, will be continuously appropriated beginning in 2020‑21 to support SADW. Beginning in 2023‑24, the General Fund will backfill any shortfall between the funds provided by the GGRF and $130 million. This provision sunsets in 2030.

Funding for Emergency Water Needs and Clean Drinking Water. The budget includes a total of $32 million from the General Fund on a one-time basis for the following water-related activities: (1) $16 million for various water projects, including for clean drinking water; (2) $13 million for emergency water needs—such as wildfire recovery planning costs—and water and wastewater service providers serving disadvantaged communities; and (3) $2.5 million to continue installing and filling temporary water tanks for households that have lost their water supply due to dry wells.

Water Conservation. The budget provides $7.8 million from the General Fund in 2019‑20 for California Department of Water Resources (DWR) and California State Water Resources Control Board (SWRCB) to begin implementing recent water conservation legislation. Chapters 14 (SB 606, Hertzberg) and 15 (AB 1668, Friedman) of 2018 require that urban water agencies develop and meet new water use efficiency objectives based on their local conditions, and add new components to existing water management planning requirements. The legislation also included numerous responsibilities for DWR and SWRCB to help develop and implement these new local planning requirements. The budget allocates the total $7.8 million as follows:

• DWR ($5.1 Million). Funding is provided to (1) conduct 14 detailed studies and investigations; (2) provide parcel-level landscape area data to urban water suppliers; (3) develop standards, guidelines, and methodologies; (4) research and report to the Legislature on potential changes to indoor water efficiency standards; and (5) provide support to SWRCB in developing new regulations. The department plans to contract with other entities to undertake most of these activities, although a portion of the funding ($379,000) will support three existing positions to oversee and support this work. Around $2 million of the total is provided on an ongoing basis for DWR to conduct technical assistance and oversight activities.
• SWRCB ($2.7 Million). The budget provides $2 million on a one-time basis for SWRCB to study and report—consistent with the California Environmental Quality Act—on the potential environmental impacts of the water conservation regulations the board must adopt. The remaining $717,000 is provided on an ongoing basis for four new positions who will help the board meet its assigned responsibilities, including evaluating the recommendations contained in DWR’s reports and subsequently adopting new standards and regulations.

Wildfire Prevention and Response

Implementation of 2018 Legislative Package. The budget provides a total of $227 million and 167 positions for various departments to implement a package of wildfire-related legislation passed in 2018, which focuses on wildfire prevention and improving forest health. (This amount does not include funding for activities related to electric utilities and wildfires, which we discuss below.) Specifically, the budget provides the following:

• CalFire—$211 Million. The budget provides $211 million from the GGRF and 123 positions for CalFire to implement various bills in the 2018 legislative package. This amount includes $165 million for forest health and fire prevention grants and projects and $35 million for prescribed burn crews, as required by Chapter 626 of 2018 (SB 901, Dodd). The remaining $11 million is provided to initiate new programs and expand existing efforts to mitigate wildfires, such as streamlining permitting requirements for fuels reduction projects and providing technical assistance to land owners and communities to reduce wildfire risks.
• California Conservation Corps (CCC)—$4.5 Million. The budget provides $4.5 million from the General Fund and two positions to establish four forestry corps crews, as required by Chapter 2126 of 2018 (AB 2126, Eggman). The crews will develop and implement forest health projects and receive assistance from CCC in obtaining forestry degrees or certificates.
• SWRCB—$4.4 Million. The budget provides $4.4 million ($2.6 million from the General Fund and $1.8 million from the Waste Discharge Permit Fund) and 22 positions for SWRCB to implement various provisions of SB 901, primarily to develop and implement a streamlined statewide permit to address water quality degradation that could result from increased removal of vegetation along utility corridors.
• Department of Fish and Wildlife (DFW)—$3.5 Million. The budget provides $3.5 million ($2 million from the Timber Regulation and Forest Restoration Fund and $1.5 million from the General Fund) and 15 positions for DFW to handle an increase in environmental review and permitting workload related to SB 901.
• CARB—$3.4 Million. The budget provides $3.4 million from the GGRF and five positions for CARB to conduct prescribed burn smoke monitoring, forecasting, modeling, and reporting activities consistent with the requirements of Chapter 624 of 2018 (SB 1260, Jackson). This amount includes $2 million annually for three years for local assistance grants.

Expansion of CalFire WildFire Response Capacity. The budget provides $102 million from the General Fund and 228 positions to expand CalFire’s ability to respond to wildfires. These augmentations include:

• Additional Fire Engines—$40.3 Million. The budget includes $40.3 million to purchase 13 additional year-round fire engines and provides 131 positions to staff those engines.
• C-130 Air Tankers and Related Capital Outlay—$17.7 Million. The budget provides $17.7 million and six positions to implement the first year of a plan to accept seven used C-130 air tankers from the federal government to increase CalFire’s aviation resources. These first-year costs include CalFire staff, contract pilots, and the first year of a three-year exclusive use contract for a C-130 air tanker to use as a training platform and be available to assist in wildfire response. Costs and staffing to operate and maintain the C-130 air tankers are estimated to increase over the next five years until reaching an ongoing annual cost of $50 million and 50.5 positions. In addition, the funding provided in the budget includes $1.7 million for the first phase of three capital outlay projects to construct barracks to accommodate the new larger flight crews.
• Increased Wildfire Staffing—$15.1 Million. The budget includes funding for additional staff to support wildfire operations. This includes 34 bulldozer operators ($10.6 million) and 13 “situational awareness” positions that will use real-time information to improve the deployment of firefighting resources ($4.5 million).
• CCC Crews Dedicated to CalFire—$13.6 Million. The budget provides $13.6 million and 30 positions to support five additional CCC crews dedicated to CalFire for fire response and prevention activities.
• Employee Wellness—$6.6 Million. The budget provides $6.6 million and 14 positions to expand two employee wellness programs to provide support services to employees, such as medical evaluations and mental health support in the field during wildfire incidents.
• Fire Detection Cameras—$5.2 Million. The budget provides $5.2 million for CalFire to join an existing network of wildfire detection cameras and to expand the network by 100 cameras.
• Mobile Equipment Replacement—$3 Million. The budget provides $3 million to permanently augment CalFire’s budget for routine replacement of mobile equipment, such as bulldozers and fire engines.

Innovative Procurement. The budget provides $15 million for CalFire to pay stipends or award contracts for vendors to develop new fire response technology or equipment through a new procurement process. Under this “innovative procurement” process, CalFire issued a request for ideas to assist the state with responding to wildfires and will use the budgeted funding to support the development, pilot testing, and potential procurement of selected proposals. The budget includes provisional language allowing the amount for innovative procurement expenses to increase by up to $35 million, subject to legislative notification.

Electric Utility Safety, Oversight, and Financial Stability. The budget and budget-related legislation provide $80 million for various activities related to wildfires and electric investor-owned utilities (IOUs).

• California Public Utilities Commission (CPUC) and Public Advocate’s Office Staff for SB 901 Implementation ($9.1 Million). The budget provides $6.6 million (Public Utilities Commission Utilities Reimbursement Account [PUCURA]) and 34 positions to CPUC for workload related to SB 901, including reviewing IOUs’ wildfire mitigation plans. In addition, the budget provides $2.5 million (Public Utilities Commission Public Advocates Office Account) and 14 positions to the Public Advocate’s Office for safety-related and administrative workload, such as reviewing wildfire mitigation plans.
• CPUC Oversight of Utility Wildfire Safety ($41 Million). The budget includes $41 million (PUCURA) for CPUC activities primarily related to improving electric utility wildfire safety oversight. This amount includes (1) $25 million on a one-time basis to contract with third parties to inspect utility infrastructure for compliance with wildfire safety requirements; (2) $13 million on a one-time basis to contract with a third party to develop a plan for improving state regulation of utility wildfire safety; and (3) $3 million ongoing and 16 positions for other activities, such as overseeing utility de-energization activities and identifying opportunities to streamline CPUC regulatory processes.
• CPUC Response to Utility Bankruptcy ($28 Million). The budget provides $28 million (PUCURA) on a one-time basis to CPUC for activities related to addressing Pacific Gas and Electric’s (PG&E’s) bankruptcy. (In January 2019, PG&E filed for Chapter 11 federal bankruptcy.) CPUC will use these funds to hire outside legal counsel and financial advisors with expertise on corporate finance, restructuring, and the federal bankruptcy process. These outside experts will be used to help CPUC represent California’s interests during the ongoing PG&E bankruptcy proceeding.
• Implementation of Recent Wildfire Legislation ($2 Million). The budget provides $2 million (General Fund) to the Department of Finance (DOF) to help implement policy measures adopted in 2019 related to utilities and catastrophic wildfire, including Chapter 79 of 2019 (AB 1054, Holden). (The amended 2018‑19 budget provided $15 million to DOF to hire outside consultants to help the administration evaluate utility wildfire issues and develop a proposal to address those issues.) Among other things, AB 1054 establishes a wildfire fund that can be used to pay future claims from IOU-caused wildfires, creates a new utility wildfire safety certification process and oversight structure (discussed below), and changes the legal burden of proof CPUC uses to determine whether utility shareholders or ratepayers are liable for damages from IOU-caused wildfires.
• New Government Entities to Implement AB 1054. Budget-related legislation established new government entities to implement some of the provisions of AB 1054. The budget package establishes, beginning January 1, 2020, a Wildfire Safety Division within CPUC. Division responsibilities include developing and recommending performance metrics to achieve maximum feasible wildfire risk reduction activities, overseeing and enforcing IOU compliance with wildfire safety activities, and developing a field audit program for utility wildfire mitigation plans. Beginning July 2021, these responsibilities will be transferred to a newly established Office of Energy Infrastructure Safety, located within California Natural Resources Agency (CNRA). The budget also establishes a new California Catastrophic Response Council, which is responsible for appointing and overseeing a new Wildfire Fund Administrator. The Wildfire Fund Administrator will be responsible for settling and paying certain IOU wildfire claims.

Department of Parks and Recreation (Parks)

The budget provides $978 million from various fund sources to support Parks—a net decrease of $203 million, or 17 percent, from the estimated 2018‑19 level. The lower level of planned spending reflects the expiration of one-time bond funds in 2018‑19. The total includes two specific augmentations discussed below.

Special Fund Backfills. The budget provides $35.7 million in 2019‑20 and $9.7 million annually thereafter from the General Fund to backfill the State Parks and Recreation Fund to account for a lower estimate of fuel tax revenues authorized by Chapter 5 of 2017 (SB 1, Beall). The backfill will ensure Parks receives as much total funding as originally estimated.

The budget also includes $22.4 million in one-time actions to backfill for lower estimated revenues from fuel taxes to the Harbors and Watercraft Revolving Fund (HWRF). Specifically, the budget reverts $16.4 million in previously authorized but unencumbered funds and transfers $6 million from the Public Beach Restoration Fund. The administration plans to propose an ongoing funding solution for the HWRF as part of the 2020‑21 budget process.

Local Parks Project Grants. In addition to existing programs that support parks, the budget provides $58 million from the General Fund for one-time grants for various specific local park and community recreation projects located throughout the state.

Department of Toxic Substances Control (DTSC)

The budget includes $352 million ($62 million from the General Fund) for DTSC in 2019‑20. This is an increase of $18 million, or 5 percent, above 2018‑19 expenditures.

Exide Cleanup. The budget provides a one-time $74.5 million General Fund loan to the Toxic Substances Control Account to continue the cleanup of residential properties contaminated by airborne lead from the Exide lead-acid battery recycling facility. This funding augments the $176.6 million General Fund loan provided for this purpose in previous legislation. The 2019‑20 funding includes two components: (1) $24.5 million ($9.5 million for 2019‑20 and $15 million for 2020‑21) for increased costs to complete the cleanup of up to 2,500 parcels that have been prioritized under DTSC’s cleanup plan and (2) $50 million to cleanup an additional 700 parcels not previously included in the cleanup plan.

Hazardous Waste Control Account (HWCA) Backfill. In recent years, HWCA has faced a structural deficit. The budget plan includes $27.5 million from the General Fund to backfill this deficit in 2019‑20, as well as an $18.5 million General Fund backfill to the account in 2020‑21. This funding will allow DTSC to continue to regulate hazardous waste generators, transporters, and treatment facilities as required by state law. Historically these regulatory activities have been funded by fees on the hazardous waste industry. However, the existing fee structure no longer generates sufficient funds to pay the full costs of DTSC’s regulatory program. In the absence of the backfill, the HWCA balance was projected to become insolvent in 2019‑20.

Department of Resources Recycling and Recovery (CalRecycle)

The budget provides $1.6 billion from various special funds to support CalRecycle, a decrease of $266 million (14 percent) from the estimated 2018‑19 level. The decrease primarily is due to one-time expenditures in 2018‑19 related to wildfire debris removal.

Support for Recycling Centers. The 2019‑20 funding for CalRecycle includes a one-time augmentation of $5 million from the Penalty Account of the Beverage Container Recycling Fund (BCRF) to provide supplemental payments to low-volume recycling centers. Chapter 793 of 2019 (AB 54, Ting) allows DOF to augment this amount by $5 million if certain conditions are met. (We note that AB 54 also appropriates an additional $5 million from the BCRF for recycling center pilot projects to expand recycling opportunities.)

Resources Capital Outlay and Bond Administration

Proposition 68. Proposition 68 was passed by voters in June 2018, authorizing the state to sell a total of $4.1 billion in general obligation bonds for natural resources-related purposes such as parks, habitat restoration, and water projects. As shown in Figure 4, the budget appropriates $1.2 billion from Proposition 68 for various activities across multiple departments and programs. (Because the bond has over 75 discrete categories for how funds must be used, the figure provides a consolidated summary.) The budget also establishes 15.5 new positions to implement Proposition 68-funded programs and activities (adding to the 80.5 positions established as part of the 2018‑19 budget).

Various Resources Facility Projects. The budget provides $235.7 million to begin 12 new capital outlay projects for departments within CNRA. As shown in Figure 5, these proposals include one large project at the Salton Sea; nine projects to expand, replace, or relocate CalFire facilities; and two improvement projects in state parks. The total costs for completion of the proposed projects is estimated to be $548 million. The largest project shown, a dust suppression and habitat restoration project at the Salton Sea, is funded with a new $111 million appropriation from Proposition 68 and a total of $95 million in reappropriated prior-year funds from other bonds. All of the funding for the rest of the projects shown in the figure will come from the General Fund, with the exception of the Colusa-Sacramento River State Recreation Area boat launching improvement project that will be funded from the HWRF. In addition to the projects listed in Figure 5, the budget also includes roughly $420 million to fund other capital outlay projects, which includes about $120 million—primarily from Proposition 68 bond funds—to fund portions of eight capital outlay flood management projects and about $300 million to fund design and construction costs of other natural resources projects approved in previous budgets.

Deferred Maintenance. The budget includes a total of $39.6 million—$21.6 million from Proposition 68 and $18 million from the General Fund—for several natural resources departments to implement deferred maintenance projects at their facilities. This includes $24.6 million for Parks, $10 million for DFW, and $3 million for CalFire. A complete list of deferred maintenance funding included in the 2019‑20 Budget Act is included in our “Statewide Infrastructure” spending plan post.

CalFire Funding for Contract Counties. The budget reinstates capital outlay funding for contract counties—the six counties that contract with CalFire to meet wildfire responsibilities in the SRAs within those counties. The funding will be provided on an ongoing basis using a historic formula for determining annual funding levels. In 2019‑20, the funding formula results in $3.3 million from the General Fund for the six contract counties. These funds are not tied to specific projects but instead are intended to cover a portion of the counties’ ongoing capital outlay needs related to providing fire response service in the SRA.

Other Natural Resources Augmentations

The 2019‑20 budget also includes augmentations for the following natural resources purposes:

• Various Local Assistance Project Grants. The budget provides $113 million from the General Fund in one-time grants through CNRA to various local entities and nonprofit organizations for specified local assistance projects. The grants will support various types of projects, such as improvements to open spaces, parks, and museums.
• Extension of Habitat Conservation Fund (HCF). The resources budget trailer bill, Chapter 31of 2019 (SB 85, Committee on Budget and Fiscal Review), extends until 2030 provisions of the Fish and Game Code that require $30 million annually to be transferred to the HCF from tobacco tax revenues, the General Fund, or other sources. This requirement—first enacted by Proposition 117 in 1990—had been scheduled to sunset in 2020. Existing law requires that funds be used by the Wildlife Conservation Board to acquire, enhance, or restore certain specified types of lands for wildlife or open space.
• Fish Screen Project. The budget includes $17 million one time from the General Fund for DFW to install fish screens on an interlake tunnel in order to prevent non-native white bass from migrating from Lake Nacimiento to Lake San Antonio in San Luis Obispo County.
• Nutria Eradication. The budget provides $2 million (including $1.6 million ongoing) from the General Fund and ten new positions for DFW to eradicate nutria—a highly invasive, non-native, semi-aquatic rodent. Additionally, the budget includes $9.4 million in reimbursement authority over three years for DFW to spend a Proposition 1 (2014) grant it received from the Delta Conservancy to supplement this work.
• Atmospheric Rivers Research. The budget includes $9.3 million one time from the General Fund for DWR to conduct research intended to improve observations, forecasts, and decisions around atmospheric river precipitation events.