The 2020-21 Spending Plan:

Resources and Environmental Protection

Overview

Budget Summary. The budget package provides a total of $10.9 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 net decrease of $4.4 billion (29 percent) compared to 2019‑20 estimated expenditures. This reduction is primarily due to a few factors. First, the approved budget includes a $1.7 billion decrease in the amount of bond funds. (We note that estimated bond expenditures for 2019‑20 are somewhat inflated because of how prior-year bond appropriations are reflected in budget documents, making year-over-year comparisons of bond spending difficult.) Second, the final 2020‑21 budget plan does not include a cap-and-trade discretionary expenditure plan. By comparison, the 2019‑20 budget included about $1 billion from cap-and-trade auction revenues to support programs administered by natural resources and environmental protection departments. Third, the year-over-year spending reduction reflects one-time funding provided in 2019‑20. This includes about $500 million from the General Fund for the California Department of Resources Recycling and Recovery to conduct debris cleanup activities following recent wildfires. Figures 1 and 2 display total funding provided for major departments overseen by the California Natural Resources and Environmental Protection Agencies, respectively.

Special Fund Loans to General Fund. As shown in Figure 3, the budget includes a total of $781 million in one-time loans to the General Fund from special funds administered by the California Natural Resources Agency (CNRA) and California Environmental Protection Agency departments. Each of these funds is expected to have sufficient reserves to support these loans without affecting departmental programs during 2020‑21. Budget language requires that these loans be repaid with interest, as well as that each loan be repaid if the originating fund needs the money.

Retractions of Governor’s Major January Budget Proposals. The Governor’s May Revision withdrew a number of budget proposals originally included in the January budget, and most of these withdrawals were reflected in the enacted budget. Figure 4 displays the more significant January proposals that were withdrawn by the administration and excluded from the enacted budget. The largest of these was a proposed $4.8 billion general obligation bond that, if approved by voters, would have provided funding for projects to address the impacts of climate change. Most of the other proposals withdrawn would have provided General Fund augmentations.

In addition to the withdrawals shown in Figure 4, the enacted budget did not include $250 million from the General Fund originally proposed in January to support a new Climate Catalyst Loan Fund. (The January proposal would have provided the fund with an additional $750 million in 2023‑24.) These funds were intended to support loans to public and private entities for climate-related projects that have difficulty getting private financing. While the enacted budget did not include funding for this purpose, the budget package did include budget trailer legislation to establish the fund.

Cross-Cutting Issues

Cap-and-Trade Expenditure Plan

State cap-and-trade auction revenue is deposited in the Greenhouse Gas Reduction Fund (GGRF). The Governor’s January budget proposed a $2.7 billion total GGRF expenditure plan, including roughly $1 billion in discretionary spending. This proposal was based on assumed annual revenue of about $2.5 billion.

The state collected relatively little revenue ($25 million) from the May 2020 quarterly cap-and-trade auction and, at the time the budget was passed, there was substantial uncertainty about the amount of auction revenue that will be collected in 2020‑21. As a result, the budget does not include a new GGRF discretionary spending plan. However, the budget and existing state law provide funding for the following ongoing activities:

• Continuous Appropriations. State law automatically allocates 65 percent of total annual auction revenue (minus some minor adjustments) as follows: (1) 25 percent for the state’s high-speed rail project, (2) 20 percent for affordable housing and sustainable communities grants (with at least half of this amount for affordable housing), (3) 10 percent for intercity rail capital projects, (4) 5 percent for low carbon transit operations, and (5) 5 percent for safe and affordable drinking water.

• Continuing State Administrative Activities. The budget provides up to $134 million for state personnel costs to continue administrative, oversight, and other activities related to programs that received funding in prior years. This amount includes $83 million to the California Department of Forestry and Fire Protection (CalFire) for fuels management projects, prescribed fire crews, and hazard mitigation plan review.

• Statutory Allocations to Backfill Certain Revenue Losses. Consistent with existing state law, the budget allocates (1) $79 million to backfill state revenue losses from expanding a manufacturing sales tax exemption and (2) $42 million to backfill revenue losses from suspending a fire prevention fee that was previously imposed on landowners in State Responsibility Areas (known as the SRA fee).

Finally, as discussed in more detail below, the budget authorizes a loan from the Underground Storage Tank Clean-Up (USTC) Fund for safe and affordable drinking water. This loan would be repaid by the GGRF in a future year.

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. The budget package appropriates $841 million from Proposition 68 for various activities across multiple departments and programs, as highlighted in Figure 5. (Because the bond has over 75 discrete categories for how funds must be used, the figure provides a consolidated summary.) As shown, the largest category of Proposition 68 appropriations in 2020‑21 are for grants to support local parks ($452 million). Including the amount provided in 2020‑21, over three-quarters of the funding authorized in Proposition 68 has been appropriated, although some of these funds likely will take multiple years to expend.

Resources Capital Outlay

Rescind Funding for Previously Approved Projects. The budget rescinds funding provided from the General Fund in prior budget acts for three CalFire capital outlay projects. This includes (1) $17.8 million for the Ventura Training Center, (2) $1.5 million for the Prado Helitack Base, and (3) $1 million for the Potrero Forest Fire Station. In addition, the budget retains $10.7 million previously provided for the Ishi Conservation Camp kitchen replacement project, but changes the funding source to use lease revenue bonds rather than the General Fund.

New Funding for Several Projects. The budget provides $39.8 million—mostly from special funds—for new natural resources capital outlay projects. This funding generally supports the acquisition and planning phases for these projects with most of the funding from previously approved bonds. Total costs for these projects currently is estimated to be $111 million. Figure 6 summarizes these projects.

In addition to the projects listed in Figure 6, the budget also includes $265 million to fund other natural resources capital outlay projects initiated in prior years. This total includes $184 million—from bond funds and the General Fund—to fund portions of nine capital outlay flood management projects (discussed in the Department of Water Resources [DWR] section of this post) and $81 million to fund design and construction costs of other natural resources projects approved in previous budgets.

Natural Resources

Department of Forestry and Fire Protection

The budget provides $1.8 billion from various funds to support CalFire, including $1.5 billion from the General Fund. This total is a net decrease of about $140 million, or 7 percent, from the estimated 2019‑20 level. This decrease primarily reflects the reduction of cap-and-trade funds as part of the deferral of the decisions on the cap-and-trade expenditure plan. The total funding includes some General Fund augmentations, including related to relief staffing and the innovation procurement sprint, as described below.

Relief Staffing. The budget includes $85.6 million ongoing (primarily from the General Fund) to support additional firefighting positions and fire response surge capacity. (In adopting the 2020‑21 budget, the Legislature rejected without prejudice additional out-year augmentations proposed by Governor.) Specifically, the augmentation provides (1) $34.2 million to support 172 permanent firefighting positions; (2) $44 million for 378 seasonal firefighters and other surge capacity; (3) $7.5 million for the six CalFire contract counties, pursuant to the state’s existing budgeting methodology for contract counties, which is tied to CalFire’s budget for fire response resources; and (4) $1.8 million for facilities and equipment, such as purchasing vehicles. These increases are partially offset by a reduction of $1.9 million to reflect a lower level of unplanned overtime within the department’s fire protection program as a result of the higher ongoing staffing levels.

Innovation Procurement Sprint. The budget includes ongoing funding to support a contract for predictive fire software that was procured through the innovative procurement sprint process authorized in the 2019‑20 Budget Act. (This process was intended to allow CalFire to solicit and test new technologies that could help prevent or respond to wildfires.) This funding includes $4.4 million from the General Fund in 2020‑21 to support 24 staff to implement the use of the new software. The budget provides an additional $3.3 million ongoing beginning in 2023‑24 to support the contract with the vendor to license the use of the predictive fire software. (The first three years of funding for the contract are being funded from the appropriation provided in the 2019‑20 Budget Act.)

Department of Parks and Recreation (Parks)

The budget includes a total of $1.3 billion from various funds to support Parks, including $195 million from the General Fund. This total is a net increase of $439 million, or 51 percent, from the estimated 2019‑20 level. This increase primarily is due to one-time bond funds from Proposition 68 for capital outlay and grant projects. In addition, the budget includes General Fund augmentations for an outdoor education grant program (discussed below) and funding ($5 million) to acquire a new state park.

Outdoor Education Grant Program (AB 209). The budget provides $20 million from the General Fund on a one-time basis to start a new grant program authorized under Chapter 675 of 2019 (AB 209, Limón). Assembly Bill 209 requires Parks to establish the Outdoor Equity Grants Program to assist underserved youth to have outdoor educational experiences. The $20 million will support grants to local public entities and nonprofit organizations.

Department of Water Resources

The budget includes $995 million from various sources for DWR. This represents a decrease of $1.3 billion (57 percent) compared to the amount provided in 2019‑20. This year-to-year decrease is primarily due to a year-to-year decrease in bond spending authority. (These totals exclude the roughly $1.7 billion in annual payments from water contractors for DWR’s work on the State Water Project [SWP], as those funds are not appropriated through the annual budget act.)

Flood Management Planning and Projects. As shown in Figure 7, the budget provides $334 million in funding for DWR to undertake various flood management projects and activities, primarily from Proposition 68. (Of this funding, about $40 million represents Proposition 68 funds that were appropriated for different flood-related activities in a prior year and are being reverted and reappropriated for a new purpose in this budget.) Many of these projects will also be supported by federal and local funding. The largest category of state funding for flood management in the budget consists of $138 million ($103 million from Proposition 68 and $35 million from Proposition 1 [2014]) to undertake eight projects along the State Plan of Flood Control system in the Central Valley.

Salton Sea and New River Projects. The budget provides funding and staff to support several new initiatives to support water quality and habitat improvements at and around the Salton Sea in Imperial and Riverside Counties. This includes $28 million—$18 million from the General Fund and $10 million from Proposition 68—for the New River Improvement Project, which would address solid waste and water quality issues that are affecting the city of Calexico and the Salton Sea. Specifically, the funding will help build a bypass structure to divert polluted river water to the city’s wastewater treatment plant, as well as a system to pump the water back into the riverbed after it has been treated. The funding will also support construction of a new trash screen just downstream from the Mexican border to keep debris from flowing further down the river through Calexico and to the Salton Sea. The City of Calexico will serve as the lead agency for managing and implementing these projects as well as operating and maintaining them on an ongoing basis.

Additionally, the budget provides $19.3 million from Proposition 68 for the state to work with local partners to construct a demonstration habitat improvement project at the northern part of the Salton Sea. This pilot project could eventually be connected to a larger North Lake initiative that is being contemplated for development.

Finally, the budget authorizes ten new positions to support implementation of the state’s Salton Sea Management Program, which would be funded with existing bond funding authority, primarily from Proposition 68. The new positions would work collaboratively but be housed within three different departments: six at DWR, two at CNRA, and two at the California Department of Fish and Wildlife (CDFW).

Sustainable Groundwater Management Act (SGMA) Implementation. The budget includes $9.6 million in ongoing General Fund to support 37 new positions and increase DWR’s SGMA-related activities. These staff would conduct compliance reviews of local groundwater sustainability plans and provide technical assistance to groundwater sustainability agencies as they implement their sustainability plans. The Governor’s proposed budget in January also included $30 million in General Fund for local SGMA implementation grants. However, the May Revision withdrew this proposal in response to the economic downturn.

Ratepayer-Funded Staffing Increases for Various Initiatives. The budget authorizes 38 new positions for DWR that would be supported by ratepayer funds rather than through a budget appropriation. This total includes 25 positions to be paid for by water users of the SWP—23 positions to comply with energy transmission requirements imposed by national regulators, and 2 positions to address regulatory requirements and projects associated with SWP operations in the Sacramento-San Joaquin Delta. In addition, 13 positions will help implement the new Charge Fund program established by Chapter 79 of 2019 (AB 1054, Holden). This legislation tasked DWR with issuing bonds and administering a new fund to pay for eligible wildfire damages that are caused by investor owned utilities. The new positions will be paid for by monthly surcharges on ratepayers’ electricity bills.

Department of Fish and Wildlife

The 2020‑21 Budget Act includes $553 million from various sources for CDFW. This represents a $37 million (6 percent) decrease compared to 2019‑20 funding levels, primarily due to a year-to-year decrease in bond funding authority. Despite significant proposals to increase CDFW’s funding in the January Governor’s budget and decrease the department’s funding in the May Revision, the final budget package ultimately included only a few modest budget changes. The Legislature rejected the Governor’s proposal to shift $18.9 million in Habitat Conservation Fund monies from the Wildlife Conservation Board to CDFW. The Legislature also rejected the Governor’s May Revision “trigger” proposal to reduce CDFW’s budget by $34 million if the federal government did not provide sufficient stimulus funds to the state. Additionally, as described in the Cannabis Regulation section of the Other Provisions post in our Spending Plan series, CDFW will also continue to receive $12.7 million from various funds for ongoing cannabis-related regulatory and enforcement activities.

Commitment for Ongoing Funding. In 2018‑19, the Legislature augmented CDFW’s budget by roughly $30 million, of which about $23 million was scheduled expire in 2021‑22. That limited-term funding included $5 million annually from the Tire Recycling Management Fund, with the remainder from the General Fund. The intent is to provide $23 million from the General Fund on an ongoing basis beginning in 2021‑22—rather than allowing funding to expire—to allow the department to sustain existing service levels in future years.

New Activities. The budget includes some funding for a few new initiatives at CDFW. First, the budget includes $4 million one time from the General Fund for a new “Cutting the Green Tape” initiative intended to facilitate habitat restoration projects by identifying more efficient project permitting processes. Second, the budget provides $2.2 million one time from the General Fund to improve management of CDFW-owned public lands, including by assessing their risk from climate change. Third, the budget includes about $3 million from the General Fund in 2020‑21 (decreasing to $2.7 million in 2021‑22 and $768,000 ongoing) and authority for four new positions to implement three pieces of legislation enacted in 2019: (1) Chapter 361 (SB 19, Dodd) related to stream gages, (2) Chapter 354 (AB 834, Quirk) related to harmful algal blooms, and (3) Chapter 766 (AB 1254, Kamlager-Dove) related to bobcat management. The Governor’s January budget had included funding proposals to implement several additional recently enacted statutes. However, the May Revision withdrew those proposals with the administration indicating that CDFW will instead meet new statutory requirements using existing resources.

California Energy Commission (CEC)

The budget provides $494 million from various special funds to support the CEC, a decrease of $373 million (43 percent) from the estimated 2019‑20 level. The net year-over-year decrease largely reflects (1) a technical issue related to unspent 2018‑19 funds that were carried over into 2019‑20 and (2) one-time funding provided in 2019‑20 that is not provided in 2020‑21. This decrease is partially offset by a one-time increase in funding for electric vehicle (EV) charging infrastructure and an increase in spending for the Building Initiative for Low-Emissions Development (BUILD) program, discussed below.

EV Charging Infrastructure ($51 million). The budget provides a $51 million (Alternative Renewable Fuel and Vehicle Technology Fund) one-time increase for EV charging infrastructure. This amount is in addition to the $111 million baseline allocation for CEC’s Clean Transportation Program, a portion of which goes to EV charging infrastructure

BUILD Program ($40 million). Pursuant to Chapter 378 of 2018 (SB 1477, Stern), the budget includes $40 million (Building Initiative for Low-Emissions Development Program Fund) to provide incentives for near-zero greenhouse gas emission technologies in new low-income residential housing. Eligible technologies include such things as electric heat pumps and induction cooking appliances. Total allocations to the BUILD program are $80 million over a three-year period. Funding comes from the sale of cap-and-trade allowances that are provided to natural gas utilities.

Department of Conservation (DOC)

The budget includes $129 million ($4 million from the General Fund) for DOC in 2020‑21. This is a decrease of $17 million, or 11 percent, below 2019‑20 expenditure levels.

California Geologic Energy Management Division (CalGEM) Expansion. The budget plan provides $7.2 million from the Oil Gas Geothermal Administrative Fund in 2020‑21 ($4.8 million ongoing) and authority for 25 positions to strengthen oversight and enforcement of oil and gas operators. Of this total, 16 positions are to implement recent legislation—Chapter 774 of 2019, (SB 551, Jackson), Chapter 771 of 2019 (AB 1057, Limón), and Chapter 773 of 2019 (SB 463, Stern). In particular, the budget funds ten positions for Chapter 774, which requires operators to submit reports to CalGEM on costs to plug and abandon wells and attendant facilities and requires CalGEM to conduct inspections of certain idle wells and deserted production facilities. In addition to implementing new legislation, the budget funding provided for CalGEM will support (1) public outreach and improved data transparency, (2) regulatory compliance and oversight, and (3) enforcement activities.

Environmental Protection

State Water Resources Control Board (SWRCB)

The budget act includes $1.1 billion for SWRCB, which is $421 million (28 percent) less than provided in 2019‑20, largely due to a year-to-year reduction in bond spending authority. The budget includes the continuation of $22.6 million from various funds for ongoing cannabis-related regulatory and enforcement activities, as described in the Cannabis Regulation section of the Other Provisions post in our Spending Plan series.

Funding and New Positions for Drinking Water Program. The budget package authorizes $130 million for the Safe and Affordable Drinking Water (SADW) Fund. Chapter 120 of 2019 (SB 200, Monning) requires that 5 percent of annual GGRF revenues be continuously appropriated into the SADW Fund, up to an annual total of $130 million. Given the uncertainty around GGRF revenues, however, the Legislature authorized a one-time loan from a different special fund for this program in 2020‑21. Specifically, budget trailer legislation allows the Director of Finance to transfer up to $130 million from the USTC Fund as a loan to the SADW Fund in 2020‑21 to help make up the difference should 5 percent of GGRF revenues fall short of that amount. (The USTC Fund—which has maintained a large balance in recent years—is administered by SWRCB and is used to clean up soil and groundwater contaminated by petroleum leaks from underground storage tanks.) The loan will need to be repaid to the USTC Fund by future GGRF revenues.

The budget also includes authority for 48 new positions to implement the SADW Fund and associated program. These positions will supplement the 23 positions established in 2019‑20. All of the positions will be supported by a portion of the $130 million from the SADW Fund.

Water Quality Budget Trailer Legislation. In accordance with federal law, SWRCB grants Section 401 water quality certifications for projects that result in discharges to waterways. Newly enacted budget trailer legislation authorizes SWRCB to issue these certifications before completion of an environmental review, which is required under the California Environmental Quality Act. Under recently revised expedited federal review time lines, the board could be in a position of being forced to waive its authority to issue a Section 401 certification for a particular project if the environmental review was not completed in time. The new legislation allows the board to issue the certification more quickly if it determines that awaiting completion of the review poses a substantial risk of waiver of the state’s certification authority. Additionally, the language reserves the authority for SWRCB—to the extent authorized by federal law—to reopen and revise the certificate as appropriate based on the information provided once the environmental review is completed.

Air Resources Board

The budget provides $564 million, primarily from various special funds, to support the California Air Resources Board (CARB), a decrease of $1.2 billion (69 percent) from the estimated 2019‑20 level. The decrease primarily is because the 2020‑21 budget does not include a GGRF discretionary expenditure plan. In contrast, the administration’s revised estimates for 2019‑20 are for CARB to spend $1.3 billion from the GGRF (including carryover from prior-year appropriations) for various programs it administers, including local air pollution reduction activities and low carbon transportation.

Local Air District AB 617 Implementation. The spending plan includes $50 million one time (Air Pollution Control Fund [APCF]) to continue support for local air district costs of implementing Chapter 136 of 2017 (AB 617, C. Garcia). Local air district costs include maintaining air monitoring equipment and developing and implementing community air protection plans. In 2019‑20, these efforts were supported by APCF and GGRF.

Cap-and-Trade Auction Information Technology Platform. The budget allocates $5.3 million (Cost of Implementation Account) to pay Western Climate Initiative, Inc. (WCI, Inc.) for a new information technology system used to administer cap-and-trade auctions. WCI, Inc. is a nonprofit entity that administers various aspects of the state’s cap-and-trade program, including the joint allowance auctions with Quebec. California’s share of the $25 million total estimated cost of the system is $21.1 million.

Wildfire Smoke Clean Air Shelters. The budget provides $5.5 million to implement the Wildfire Smoke Clean Air Shelters for Vulnerable Populations Incentive Pilot Program, pursuant to Chapter 393 of 2019 (AB 835, Wicks). This includes $5 million one-time funding for grants to retrofit ventilation systems to create a network of clean air centers to mitigate the adverse public health impacts due to wildfires and other smoke events.

Department of Toxic Substances Control (DTSC)

The budget includes $314 million for DTSC in 2020‑21. This is a decrease of $21 million (6 percent) below 2019‑20 expenditure levels. The department is primarily supported by special funds.

We note that the final budget plan did not include the Governor’s January budget proposals to (1) establish a Board of Environmental Safety to oversee the department and (2) change the fee structures to increase funding for the Hazardous Waste Control Account (HWCA) and the Toxic Substances Control Account (TSCA). While it deferred taking action on these proposals through the budget process, the Legislature subsequently passed separate legislation—AB 995 (Garcia)—which would have implemented similar changes. However, the legislation was vetoed by the Governor.

Special Fund Backfills to Maintain Operations. A loan from the USTC Fund will provide $50.6 million in funds for the following: (1) $19.5 million to backfill a structural deficit in the HWCA, (2) $11.8 million for the Stringfellow Superfund site, (3) $9.5 million for baseline expenditures normally paid for from the General Fund, (4) $7.7 million to backfill a structural shortfall in the TSCA, and (5) $2.1 million for the second phase of the Argonaut Dam remediation project.