The State Lands Commission (SLC) is responsible for the management of lands that the state has received from the federal government. These lands total more than four million acres and include tide and submerged lands, swamp and overflow lands, the beds of navigable waterways and vacant state school lands.
The budget requests a total of $8.5 million for support of the commission in 1995-96, including amounts from the General Fund ($4.8 million), the Oil Spill Prevention and Administration Fund ($2.4 million), and reimbursements ($1.3 million). This is a decrease of $9.1 million, or 51 percent, from estimated current-year expenditures. This level of funding reflects the administration's proposal to eliminate the SLC, as discussed below.
At the time this analysis was prepared, it was not possible to determine if the Governor's reorganization proposal for various resources and environmental protection departments has merit because the details of the plan have not been provided to the Legislature. If it appears that the Governor's reorganization plan will not be submitted to the Legislature in time for full consideration before the Budget Act is adopted, we recommend that full-year funding for the SLC be reestablished in the existing budget items for the commission. The Budget Act should be amended if legislation to eliminate or restructure the SLC is subsequently enacted.
As we discuss in the Crosscutting Issues section of this chapter, the budget proposes to eliminate the SLC and transfer (1) its Mineral Resources Management and Land Management programs to a new Department of Energy and Conservation (DEC) and (2) its Marine Facilities Management program to the Office of Oil Spill Prevention and Response in the Department of Fish and Game (DFG). Reflecting this proposal, the budget proposes to fund the SLC only for the first half of 1995-96.
Given that it is not certain when the Governor's reorganization plan will ultimately be presented to the Legislature, we recommend that the Secretary for Resources and the Secretary for Environmental Protection report at budget hearings on the plan and its status. If it appears at that point that the plan will not be submitted to the Legislature in time for full consideration before the Budget Act is adopted, then we recommend that full-year funding for the SLC be reestablished in the existing budget items for the commission. If legislation is subsequently enacted to consolidate or restructure the SLC, the Budget Act should be amended accordingly at that time.
We recommend that the State Lands Commission together with the Office of Planning and Research report at budget hearings on their long-term plan for conducting title resolutions on military bases in California slated for closure.
Background. The budget proposes $300,000 in the budget year from the General Fund for the SLC to resolve issues of sovereign land titles on five federal military bases in California--Mare Island (Vallejo), Alameda Naval Air Station (Alameda), San Francisco Naval Shipyard, Hunter's Point (San Francisco), Treasure Island (San Francisco), and San Diego Naval Training Center (San Diego)--which are proposed for closure. These bases were selected for title resolution work, out of the approximately 26 total bases slated for closure, by the Office of Planning and Research (OPR), which has been designated by the Governor as the lead state agency with respect to military base closure and reuse.
To perform this work, the commission proposes to redirect existing SLC staff who are currently performing reimbursable work, such as processing permits for use of state lands. The commission is requesting a one-year General Fund augmentation to offset the anticipated loss in reimbursements that will result from shifting staff from their current assignments.
Work Appears to Be Consistent with Legislative Intent. According to the SLC, many of the military bases closing in California include lands once held by the state. In order that planning for reuse of these bases may proceed, questions of ownership of the land on these bases must first be resolved. This work appears to be consistent with legislative intent. In the California Defense Conversion Act of 1993 (Ch 445/93--SB 458, Hart), for example, the Legislature declared the importance of a coordinated state program of defense conversion, and a coordinated effort to ensure that the state benefited from federal programs and assisted local governments to plan conversion. In order to achieve these goals, issues regarding title to these lands must be resolved.
Long-Term Plan Not Clear. While the work appears to be consistent with legislative direction, OPR's long-term plan for completing work on title resolution at other military bases is not clear at this time. The budget proposal will enable the SLC to perform title resolution work in 1995-96 at five specified bases out of the total 26 slated for closure. According to commission staff, criteria used by OPR in selecting these particular bases included the date of closure of the base and the impact of base closure on the local community.
However, it is not clear at this time what criteria OPR will use to select other bases, whether the SLC will be involved in additional title resolution work after 1995-96, or what the projected total cost to the state will be of conducting such work. For example, the U.S. Department of Defense will issue a draft list in March 1995 of military bases to be closed in the next round of closures. It is not known at this time if any bases on that list will require similar title resolution work.
Recommendation. Resolving issues of ownership on lands affected by military base closures will be critical to allowing the timely reuse of those lands. So that the Legislature may be apprised of the progress of these efforts to resolve title questions, we recommend that the State Lands Commission together with the Office of Planning and Research, report at budget hearings on their projections of the total cost of resolving title issues on all military bases proposed for closure and their schedule for completing this work.
The Department of Fish and Game (DFG) administers programs and enforces laws pertaining to the fish and wildlife resources of the state. The Fish and Game Commission sets policies to guide the department in its activities, and regulates the sport taking of fish and game. The DFG currently manages about 160 ecological reserves, wildlife management areas, habitat conservation areas, and interior and coastal wetlands throughout the state.
The budget proposes total expenditures of $165.7 million from all sources for support of the DFG in 1995-96. This is an increase of $1.2 million, or 0.7 percent, from estimated current-year expenditures.
We withhold recommendation on $75.5 million from the Fish and Game Preservation Fund (Item 3600-001-200) because the department indicates that it will propose a significant amendment to the budget.
The Fish and Game Preservation Fund (FGPF) accounts for a significant portion--about 46 percent--of the DFG's proposed support level for 1995-96. This fund receives revenues primarily from the sale of hunting and sportfishing licenses, commercial fishing permit fees, landing taxes, and environmental review fees paid by development project applicants. The budget requests $75.5 million from the FGPF for support of the department in 1995-96.
Budget Request Will Be Significantly Amended. The department and the Department of Finance (DOF) indicate that they will propose to significantly amend the department's budget, for both 1994-95 and 1995-96, in the spring of 1995. Specifically, DOF advises that it will submit to the Legislature during the May Revision process a request to amend both the current-year budget--through a request to transfer funds between categories, programs or projects (a Section 6.50 request)--and the proposed 1995-96 budget, through a Finance Letter.
The DFG and DOF indicate that the expenditure reductions and redirections proposed in these current-year and budget-year amendments will total about $10 million. It is our understanding, however, that there will be no net increase in the department's 1995-96 budget
request. There are two reasons why DFG and DOF will propose to amend the budget.
Recommendation. The DOF and DFG will submit amendments to the department's 1994-95 and 1995-96 budgets, at the May Revision, which will depend in large part on the contents of the department's strategic plan and its revised estimates of potential budget-year costs. Pending receipt of this revised budget information, we withhold recommendation on $75.5 million in the FGPF (Item 3600-001-200). We further recommend that the department report at budget hearings on the status of its strategic plan, and its current projections of its 1995-96 expenditures.
We recommend that the request to make permanent the positions in the department's Natural Community Conservation Planning (NCCP) pilot program be denied, because (1) the program still is not sufficiently funded by reimbursements as required by current law and (2) the department has consistently failed to provide information requested by the Legislature that would enable an evaluation of the success of the pilot program to date and the merits of making it permanent.
Chapter 765, Statutes of 1991 (AB 2172, Kelley)--known as the Natural Community Conservation Planning (NCCP) Act--authorized the department to assist public and private agencies in preparing and implementing natural community conservation plans. These plans are intended to facilitate economic development, while also protecting wildlife and plant species and their habitat.
One underlying premise of the program is that landowners benefit from the program (and are therefore willing to participate in it) since it provides greater certainty about where and how their development projects may occur. This is because, although the measure does not exempt development projects from the requirements of the California Environmental Quality Act (CEQA), it is designed, in the long run, to shorten the CEQA process for individual projects. Chapter 765 requires that the department be reimbursed for the costs it incurs in participating in the development and implementation of natural community conservation plans.
Legislative Concerns Over Objectives and Funding of Pilot Program. The administration initiated the NCCP program in Southern California in 1991 as a pilot program, and indicated that the program would be expanded statewide if it proved successful. In the 1992 Budget Act, however, the Legislature, concerned about the scope of the pilot project, the lack of goals and objectives, and the lack of a reimbursement plan, reduced funding for the program from the requested level of $1.8 million to $362,000. The Legislature also required that the department report quarterly on the NCCP program's activities in order to measure its progress and evaluate staffing and funding for the program. Information to be provided include a schedule for collection of reimbursements, a schedule for the development of program guidelines and standards, specific program objectives for the following quarter, and progress in meeting these objectives.
Budget Proposal. For 1995-96, the budget requests that the 16 positions in the pilot program be converted from limited-term to permanent status. These positions would continue to perform the following functions: (1) resources inventory and preliminary planning, (2) mitigation negotiations and agreements, (3) interim monitoring and review, (4) scientific monitoring and threat assessment, and (5) statewide coordination and oversight. According to the department, making the positions permanent will maintain the department's credibility as a committed partner in the program. We have two concerns with this proposal.
Proposal Still Fails to Include Sufficient Cost Reimbursements. As indicated above, Chapter 765 requires that the DFG be fully compensated for its actual costs for participating in the preparation and implementation of natural community conservation plans. As we observed in our Analysis of the 1993-94 Budget Bill (p. B-50), it makes sense for project applicants to pay for the costs of developing plans, because in the long run, they benefit since those plans will shorten the environmental impact review (CEQA) process for individual projects, and facilitate development that is compatible with habitat protection. Indeed, program staff cite increased development in areas enrolled in the NCCP program as one indication that the program is achieving its objectives.
However, as Figure 10 indicates, reimbursements will account for only about 13 percent of the program's funding in 1995-96. This level is even lower than in 1993-94, when reimbursements covered about 18
Department Has Consistently Failed to Provide Requested Information. We also observed in our Analysis of the 1993-94 Budget Bill (p. B-50) that the DFG had not provided the Legislature with any of the quarterly reports on the NCCP program's goals, objectives, and progress requested in the Supplemental Report of the 1992 Budget Act, and that without this information, the Legislature did not have a basis for approving any increases in funding for the program.
Since 1993-94, the information provided on the program's status has continued to fall short of the Legislature's requirements. The department's single report on the program's progress in 1993 provided only a brief summary of the program's goals for 1994, no schedule for the development of reimbursement agreements, and no evaluation of the program's progress in meeting the objectives and timelines set forth in the previous report. Thus, the Legislature is being asked to make permanent a pilot program, without the information to assess the program's effectiveness.
Recommendation. Because DFG has not provided the Legislature with the required information to assess the effectiveness of the NCCP pilot program, and because the program is still insufficiently funded from reimbursements, we recommend that the request to make the limited-term positions permanent be denied. Rather, these positions should be continued on a limited- term basis until the Legislature can evaluate the success of the pilot program.
We recommend that both DFG and the State Lands Commission (SLC) report at budget hearings on (1) the merits of transferring the Marine Facilities program from the SLC to the DFG and (2) the extent to which this transfer achieves the Legislature's priority of preventing oil spills.
The proposed 1995-96 budget for DFG's Office of Oil Spill Prevention and Response (OSPR) totals $19.1 million, including $16.3 million from the Oil Spill Prevention and Administration Fund (OSPAF), $2.1 million from the Oil Spill Response Fund (OSPF), and $721,000 in reimbursements.
Budget Proposes to Transfer Marine Facilities Program to OSPR. As we discuss in the Crosscutting Issues section of this chapter, the budget proposes to transfer the Marine Facilities Management program in the SLC to OSPR. (This transfer is part of a broader reorganization of several Resources and Environmental Protection departments.) At the time this analysis was prepared, it was not possible to determine if this proposal has merit because the details of the plan have not been provided to the Legislature. For example, it was not clear how the transfer of staff between departments would be accomplished, or how the transferred program would be integrated into OSPR's current organizational structure.
The administration indicates that the proposed transfer of the Marine Facilities Management program will consolidate like functions, improve service, and reduce costs. We think that opportunities to consolidate state programs in order to improve efficiency and program effectiveness ought to be explored. In our Crosscutting Issues write-up, we discuss criteria that the Legislature may want to use in evaluating the proposed transfer, including efficiency, coordination, accountability, and comprehensiveness.
Legislature Distinguished Prevention From Response. Another criterion for evaluating such consolidations is whether the transfer meets legislative priorities. This criterion is especially relevant to the proposed transfer of the Marine Facilities program. This is because in enacting the Lempert-Keene-Seastrand Oil Spill Prevention and Response Act in 1990, the Legislature made an explicit distinction between the responsibility of preventing oil spills and the responsibility of responding to such spills, and placed emphasis on prevention in order to minimize the risk and consequences of oil spills.
The OSPR's responsibilities related to prevention under the act include developing harbor safety committees, and adopting regulations to prevent spills from vessels. Although the act did not specifically assign responsibility for preventing spills resulting from bunkering (the fueling of vessels) and lightering (the transfer of oil between vessels), OSPR has also taken the lead on developing regulations in these areas.
Recommendation. We think that integrating the oil spill prevention activities of the SLC and OSPR could potentially improve implementation of the state's oil spill prevention and response programs. Because the Legislature has emphasized oil spill prevention as a priority, we recommend that DFG and the SLC report at budget hearings on the merits of transferring the Marine Facilities program from the SLC to the DFG, and the extent to which this transfer achieves that objective. This information will help the Legislature evaluate whether the proposed transfer is consistent with legislative priorities.
The Department of Parks and Recreation (DPR) acquires, develops, preserves, interprets, and manages the natural, cultural and recreational resources in the state park system and in the State Vehicular Recreation Area and Trail System. In addition, the department administers state and federal grants to cities, counties, and special districts that help provide parks and open-space areas throughout the state.
The state park system consists of 268 units, including 38 units administered by local and regional park agencies. The system contains approximately 1.3 million acres of land with 285 miles of ocean and 811 miles of lake, reservoir, and river frontage. During 1995-96, about 65 million visitor-days are anticipated at state parks and beaches operated by the department, up from an anticipated 64 million in 1994-95.
The budget proposes expenditures for the department totaling $194.2 million for support and local assistance in 1995-96. This is a decrease of $36.3 million, or 16 percent, from estimated current-year expenditures. Of the total expenditures, the budget requests $179.6 million for support of the department, which is a net decrease of $1.6 million, or 0.9 percent, from the estimated current-year level. In addition, the budget proposes $14.6 million (from special, federal, and bond funds) for local assistance grants. This is a decrease of $34.7 million, or 70 percent, below estimated current-year spending for local assistance. This decrease is due to the depletion of bond funds for these purposes.
As discussed in the Crosscutting Issues section of this chapter and below, the department is one of five departments selected by the administration for a pilot project in performance budgeting.
We recommend that the department report at budget hearings on the status of the analysis it is currently conducting on its support funding, and the level of services it can provide with that level of support. The department should also report on its expenditure priorities for 1995-96 in the event that revenues to the State Parks and Recreation Fund (SPRF) fall short of projections.
The DPR relies mainly on the State Parks and Recreation Fund (SPRF) and the General Fund for its support. The SPRF revenues are derived primarily from state beach and park service fees and concession revenues. Of the department's total proposed support expenditures ($179.6 million) for 1995-96, $48 million is from the General Fund, $61.9 million is from revenues to the SPRF, and $69.7 million is from other fund sources.
The budget proposes to transfer $19.4 million from the California Beverage Container Recycling Fund (CBCRF) to the SPRF for support of the department in 1995-96. This is similar to other transfers from various special funds in recent years to the SPRF in order to provide sufficient funds to support the department's activities. These transfers are needed because of the reduction in General Fund support and the inadequacy of park fees and concession revenues (the main sources of revenues to the SPRF) to support the department.
Department's General Fund Support Has Fallen. Between 1990-91 and 1995-96, General Fund support for the department fell from $70.9 million to $48 million, a decrease of about $22.9 million (or 32 percent). This decrease in General Fund support has left the department increasingly reliant on the SPRF and other funds for its support. As a consequence, in the past few years, the department has increased beach and park service fees in the hopes of increasing revenues to the SPRF. Despite that, our review shows that revenues from these fees have remained relatively flat over recent years. Figure 11 shows that annual beach and park service fee revenues peaked in 1991-92 at about $50 million, and declined slightly in 1992-93 and 1993-94.
Our analysis indicates that in 1995-96, as in previous years, SPRF revenues will not be sufficient to fill the gap left by reduced General Fund support. In 1995-96, total SPRF revenues are projected to provide about $61.9 million, or 34 percent, of the department's support. Our analysis indicates that actual revenues may fall short of even this level, however, because the methodology the department uses to project SPRF revenues has tended to overestimate revenues in recent years. Since 1991-92, for example, actual revenues have fallen short of the department's projections annually, by an average of $9 million, or 15 percent.
Department Has Relied Heavily on Special Fund Transfers. Figure 12 shows the department's support expenditures since 1993-94 and how they are funded. As the figure indicates, the gap between SPRF revenues and the department's expenditures has been made up largely by transfers from various special funds, such as the Motor Vehicle Fuel Account (gasoline tax that would have been deposited into the Harbors and Watercraft Revolving Fund), the Off-Highway Vehicle Fund (OHVF), and the Harbors and Watercraft Revolving Fund (HWRF). In 1993-94, for example, $19.7 million in OHVF money was used for department support, including $8.9 million which was transferred to the SPRF.
Drawing on Special Funds Becoming More Difficult. In 1995-96, there will be less flexibility in using some of the special funds which have been used previously for the department's support. For example, the amount of OHVF funds available to support the department are declining in the budget year. This is because recent legislation--Ch 1004/94 (AB 3717, Costa)--made the OHVF a trust fund, which will tend to restrict the use of these funds to purposes specified in statute. Additionally, the budget proposes to use most of the funds in the HWRF for loans and grants related to boating facilities and enforcement under the Department of Boating and Waterways (DBW). Using funds from the HWRF for support of the DPR would require the Legislature to reduce expenditures proposed for the DBW.
Use of Beverage Container Funds Not Consistent With Statute. In order to maintain current levels of service in 1995-96 without increasing General Fund support for DPR, the budget proposes to use $19.4 million from the CBCRF for support of the department. Our review indicates that this proposal is not consistent with the intent of the statute which created the CBCRF. Under that statute, CBCRF funds are to be used only for the beverage container recycling program.
Options for Increased Revenue Include Partnerships. As the economy revives, revenues from state beach and park service fees are likely to rise. The department is also pursuing opportunities to increase its revenues through other means, such as through public/private partnerships. For example, as one of the performance measures in its 1994-95 performance budgeting contract with the Legislature, the department committed to identifying five new concession or operating agreements each of which have the potential for at least $500,000 in gross receipts. Relative to the level of funding required to maintain the department's support budget, however, such new sources of funding will not be adequate to address the funding problem and reduce to any significant degree the need for DPR to rely on other funding sources.
Longer Term Options for Cutting Expenditures May Be Limited. In past years, the department has managed to sustain budget cuts without having to significantly reduce service levels (for example, closing parks) by deferring expenditures, such as operations and maintenance. The ability of the department to continue such deferrals is limited, and does not provide a long-term solution to the department's funding problems. Other potential cost-cutting measures include transferring some parks to local agencies or reducing park service levels, such as shortening hours of operation.
Recommendation. The department faces the long-term challenge of establishing stable sources of support funding, and a level of operations commensurate with that level of funding. The Governor's Budget indicates that the department is currently conducting a thorough review of its financial support structure, and the level and type of park system that this structure can maintain in the long-term. We recommend that the department report at budget hearings on the results of this review and the department's expenditure priorities for 1995-96 in the event that SPRF revenues are lower than projected.
The department is one of five departments selected by the administration for a pilot project in performance budgeting. We recommend that the department report at budget hearings on its proposed budget contract with the Legislature for 1995-96, and the current status of its performance budgeting efforts.
In 1992-93, the department was selected by the administration as one of four departments to undertake a pilot project to test performance budgeting. (Currently, there are five departments in the pilot, since two departments have been added since 1992-93, and one of the original pilot departments is no longer a participant.) In 1994-95, the department entered into a Memorandum of Understanding (MOU) with the Legislature, contained in the Supplemental Report of the 1994 Budget Act, in which the department committed to begin to implement performance budgeting in 1994-95 and to meet specified performance measures.
In our write-up on performance budgeting in the Crosscutting Issues section of this chapter, we review the status of the pilot project to date. We also discuss various issues that need to be resolved in order to make the pilot a successful one, including the need to develop meaningful performance measures.
In order that the Legislature can review the department's experience, we recommend that the department report at budget hearings on its proposed budget contract with the Legislature for 1995-96, and the current status of its performance budgeting efforts.
The Santa Monica Mountains Conservancy (SMMC) purchases lands and provides grants to state and local agencies and nonprofit organizations to conserve open space and improve recreational opportunities in the Santa Monica Mountains Zone and the "Rim of the Valley Corridor" adjacent to the San Fernando Valley. It promotes these objectives by (1) acquiring and consolidating subdivided land, (2) acquiring land for eventual sale or transfer to other public agencies, (3) creating buffer zones surrounding federal and state park sites, (4) restoring natural resource areas, and (5) implementing programs to improve access from surrounding inner city areas.
The budget for 1995-96 requests a total of $578,000 for support of the conservancy, a decrease of $51,000 from the current-year level. This amount includes $100,000 from the General Fund, $438,000 from the Santa Monica Mountains Conservancy Fund (SMMCF), and $40,000 from reimbursements. Funds in the SMMCF primarily come from reimbursements from the Mountains Recreation and Conservation Authority (MRCA) and sales of conservancy property. The MRCA is a joint powers authority made up of the conservancy and two local recreation and park districts in the Santa Monica Mountains area. Conservancy staff indicate that by receiving General Fund support, the SMMC is entitled to receive free legal representation from the Attorney General, up to a specified allotment of hours, for which the conservancy would otherwise have to pay.
The budget proposes no capital outlay expenditures by the conservancy in 1995-96, down from estimated capital outlay expenditures in 1994-95 of $11 million. Under Proposition 117, the California Wildlife Protection Act of 1990, the conservancy received $10 million annually for capital outlay for five years beginning in 1990-91. The current year is the final year of this $10 million annual allocation.
We recommend that the request for $100,000 from the General Fund to support the conservancy be deleted because the request is inconsistent with legislative intent that beginning July 1, 1995, no General Fund money be appropriated for support of the conservancy. We further recommend that the conservancy report at budget hearings on its efforts over the last two years to reduce its reliance on General Fund support. (Eliminate Item 3810-001-001 for $100,000.)
Proposal to Use General Fund Is Inconsistent With Legislative Direction. Chapter 1304, Statutes of 1992 (AB 3248, T. Friedman) eliminated the July 1, 1995 "sunset" requirement in law for the SMMC, thereby permanently establishing the conservancy. However, Chapter 1304 also declared legislative intent that, beginning July 1, 1995, no money should be appropriated from the General Fund for the support of the conservancy. Instead, other funding sources should be utilized, including the SMMCF, other special funds, donations, and local funding sources. Additionally, Chapter 1304 specified that in order to ensure an orderly transfer of funding sources, the conservancy should reduce operations to compensate for the loss of General Fund support or seek additional non-General Fund sources of revenue.
Proposed Level of Support Funding Not Justified by Capital Outlay Workload. The budget proposes no capital outlay expenditures by the conservancy in 1995-96. This, as indicated above, is because beginning in 1995-96, the conservancy will no longer receive funds allocated by Proposition 117. In past years, developing and implementing capital outlay projects, such as acquiring and restoring open space, accounted for most of the conservancy's workload. Relatively little of the conservancy's support costs have been for ongoing property maintenance. However, the level of support funding proposed for 1995-96 has not been adjusted to reflect this decline in capital outlay workload. Instead, proposed support funding is only $51,000, or 8 percent, below estimated current-year expenditures. Given the significant decline in the conservancy's 1995-96 capital outlay expenditures relative to prior years, it is not clear that the proposed level of support funding is justified.
Recommendation. Given legislative direction and the decrease in workload projected for 1995-96, we do not believe that the request for $100,000 from the General Fund for conservancy support is justified. Accordingly, we recommend the elimination of $100,000 in General Fund support for the conservancy. We further recommend that the conservancy report at budget hearings on its efforts over the last two years to reduce its reliance on General Fund support.
The San Francisco Bay Conservation and Development Commission (BCDC) implements and updates the San Francisco Bay Plan and the Suisun Marsh Protection Plan. Under these plans, the BCDC regulates: (1) all filling and dredging activities in the San Francisco, San Pablo, and Suisun Bays including specified sloughs, creeks, and tributaries; (2) changes in the use of salt ponds and other "managed wetlands" adjacent to the bay; and (3) significant changes in land use within the 100-foot strip inland from the bay.
The budget requests a total of $1.2 million for support of the BCDC in 1995-96. This is a decrease of $1.3 million, or 52 percent, below current-year estimated expenditures. This level of funding reflects the administration's proposal to eliminate the BCDC beginning January 1, 1996, as discussed below.
We recommend that the Secretary for Resources report at budget hearings on the current status of the proposal to eliminate the BCDC starting January 1, 1996. If it appears at that point that the administration will either withdraw the proposal to eliminate the BCDC or will require more time to study the proposal, then we recommend that full-year funding for the BCDC be reestablished. If legislation to eliminate or restructure the BCDC is subsequently enacted, the Budget Act should be amended accordingly.
Budget Request. The budget proposes to eliminate the BCDC, starting January 1996, and transfer its functions to the California Coastal Commission and the San Francisco Regional Water Quality Control Board. The administration's goal, according to the budget, is to consolidate similar functions, reduce costs, and improve services to clients and customers. Reflecting this proposal, the budget proposes to fund the BCDC only for the first half of 1995-96.
Administration Rethinking Budget Proposal. The budget indicates that the BCDC will be eliminated through either a Governor's Reorganization Plan or other legislation. (Please see our Crosscutting Issues section in this chapter on the proposal to reorganize several Resources and Environmental Protection departments.) At the time this analysis was prepared, the administration had not submitted its reorganization plan to the Legislature.
However, the administration now indicates that it is rethinking the proposal to eliminate the commission. Specifically, the Resources Agency indicates that it will conduct a study of the proposal to eliminate the BCDC, including an examination of any overlap between the BCDC and the Coastal Commission. The agency anticipates that this study will be completed by the end of April 1995. Depending on the results of this study, the administration may either pursue, modify, or withdraw the proposal to eliminate the BCDC.
Recommendation. Given that it is not certain when the administration's study of the BCDC will be complete, we recommend that the Secretary for Resources report at budget hearings on the status of the study and the proposal to eliminate the BCDC. If it appears at that point that the administration will either withdraw the proposal to eliminate the BCDC or will require more time to study the proposal, then we recommend that full-year funding for the BCDC be reestablished. If legislation to eliminate or restructure the BCDC is subsequently enacted, the Budget Act should be amended accordingly.
The Department of Water Resources (DWR) protects and manages California's water resources. In this capacity, the department implements the State Water Resources Development System, including the State Water Project (SWP). The department also maintains public safety and prevents damage through flood control operations, supervision of dams, and safe drinking water projects. In addition, the DWR furnishes technical services to other agencies.
The budget proposes total expenditures of $971.7 million in 1995-96, a decrease of $133.4 million, or 12 percent, from estimated current-year expenditures. Total expenditures include $861.7 million in expenditures financed with SWP funds and $35.7 million in bond funds for safe drinking water loans and grants. Appropriations in the Budget Bill provide the remaining $74.3 million, of which $23.9 million is from the General Fund. The General Fund amount is $4.7 million, or 24 percent, more than estimated current-year General Fund expenditures.
The budget proposes $2.8 million from the Harbors and Watercraft Revolving Fund (HWRF) for local subventions for Delta flood protection and control. We recommend that the department report at budget hearings on why this is an appropriate use of HWRF funds, and why the department is not funding Delta flood protection fully out of the California Water Fund (CWF), as it has in previous years.
Harbors and Watercraft Funds Will Be Used for Delta Flood Protection. Current law--Ch 28/88 (SB 34, Boatwright)--declares the Legislature's intent to transfer $12 million annually from the CWF to the Delta Flood Protection Fund (DFPF) for Delta flood protection uses. For 1995-96, the budget proposes $7.3 million from the CWF for local subventions for Delta flood protection and control. (This amount will first be transferred into the DFPF.)
The proposed expenditures represents a decrease of $3.3 million (or 31 percent) from the current- year level of $10.6 million. To partially off-set that reduction, the budget also proposes $2.8 million from the HWRF for local subventions for Delta flood protection. Thus, the total funding for Delta flood protection local assistance will be $10.1 million, or about $519,000 (4.9 percent) less than total funding in 1994-95.
Use of Harbors and Watercraft Funds Inconsistent With Statute. The department indicates that HWRF funds will be used to repair and rebuild levies in the Delta, which will protect navigable waterways, watercraft harbored in the Delta, and public facilities such as marinas and harbors. Thus, according to the department, the proposal to use HWRF for Delta flood protection is justified.
However, our analysis indicates that under current law, the department may not be eligible to use HWRF funds. This is because current law specifies that HWRF funds are available upon appropriation to the Department of Boating and Waterways--for boating facilities development, boating safety, and boating regulation programs--and to the Department of Parks and Recreation, for the operation and maintenance of units of the state park system that have boating-related activities. The DWR is not one of the departments specified by statute as eligible to use HWRF money. Accordingly, we recommend that DWR report at budget hearings on its proposed use of HWRF funds for local flood control subventions, and the appropriateness of that fund source given statutory direction on the use of these funds
The California Integrated Waste Management Board (CIWMB), in conjunction with local agencies, is responsible for promoting waste management practices aimed at reducing the amount of waste that is disposed in landfills. These practices include source reduction, recycling, and composting. Major recycling programs include used oil and tire recycling and the development of markets for recycled goods. The CIWMB approves local solid waste management plans which must show how 25 percent of solid waste will be diverted from landfills by 1995--a goal that the board projects will be met. By 2000, the local plans must meet a 50 percent waste diversion goal. The CIWMB also protects public health and safety through regulation of existing and new solid waste land disposal sites.
The budget requests total expenditures of $245.7 million from various funds for support of the CIWMB in 1995-96. This amount is $170.1 million, or 225 percent, more than estimated current-year expenditures. The increase results primarily from (1) the transfer of the Beverage Container Recycling and Litter Reduction program ($172.2 million) from the Department of Conservation to the CIWMB on January 1, 1996, as part of the Governor's proposal to reorganize various resources programs, and (2) an increase of $1.9 million from the Recycling Market Development Revolving Loan Account to expand the Recycling Market Development Zone Loan program to develop markets for businesses using recycled materials.
At the time this analysis was prepared, it was not possible to determine if the Governor's reorganization proposal for five resources and environmental protection departments--including the CIWMB--has merit because the details of the plan have not been provided to the Legislature. If it appears that the Governor's reorganization plan will not be submitted to the Legislature in time for full consideration before the Budget Act is adopted, we recommend that full-year funding for the
CIWMB, with its current structure and recycling program, be reestablished in the existing budget items for the CIWMB and that the Budget Act be amended if legislation to restructure the CIWMB is subsequently enacted.
As we discuss in the Crosscutting Issues section of this chapter, the budget proposes to, as of January 1, 1996, (1) reorganize the CIWMB's board from a six-member, full-time board into a five- member, mainly part-time board (the consequences of which are discussed immediately below), and (2) transfer the Beverage Container Recycling program from the Department of Conservation to the CIWMB. The budget of the CIWMB reflects (1) savings from the reduced board size and (2) the transfer of costs and funding to the CIWMB for the Beverage Container Recycling program for the second half of 1995-96.
Given that it is not certain when the reorganization plan will ultimately be presented to the Legislature, we recommend that the Secretary for Environmental Protection report at budget hearings on the plan and its status. If it appears at that point that the plan will not be submitted to the Legislature in time for consideration before the Budget Act is adopted, then we recommend that full- year funding for the CIWMB, with its current structure and recycling program, be reestablished. If legislation is subsequently enacted to restructure the board and the recycling program, the Budget Act should be amended accordingly at that time.
The Governor's proposal to reorganize the CIWMB's board from its current structure with six full-time members into a five-member, mainly part-time, board will have a number of consequences, including significant savings.
Currently, the CIWMB's board consists of six full-time members, with 18 personal staff (advisors, committee analysts, and secretaries). In 1994-95, board member salaries, support staff costs, and related operating expenses totaled $2.1 million. The 18 personal staff are in addition to the staff who carry out the day-to-day analysis, review, and enforcement activities of the CIWMB.
The Governor's reorganization plan proposes, as of January 1, 1996, to change the board into a five-member board (of which four members are part-time). It also reduces the personal staff of the board from 18 to 4 personnel.
Consequences of a Smaller Board. Based on our review, we conclude that this proposal will have the following effects:
Some have argued that the CIWMB may be less effective and efficient as a part-time board. We believe in this particular instance, a part-time board can operate just as effectively as a full-time board, as in the case of the Air Resources Board. Staff of the CIWMB would continue to assist board members in reviewing and approving local solid waste plans; reviewing permit approvals by local agencies; holding hearings for permit appeals and permit violations; and acting as an enforcement agency in a few local jurisdictions.
Revenues to the Integrated Waste Management Account (IWMA) are projected to continue to decline over the next several years and are not likely to be sufficient to maintain current program levels by 1996-97. We recommend that the CIWMB report, at budget hearings, on the various revenue generating and expenditure reduction options to avert an IWMA funding shortfall.
The Supplemental Report of the 1994 Budget Act directed the CIWMB to report on five- year revenue projections for the Integrated Waste Management Account (IWMA). At the time this analysis was prepared, a final report has not been submitted. Only a draft report was available for review.
The IWMA is the primary source of funding for the CIWMB's permitting and enforcement functions and its waste reduction and resource recovery program. The account derives its revenues primarily from integrated waste management fees (a surcharge on "tipping fees") levied on operators of solid waste landfills.
A History of Declining, Unstable Revenues. The IWMA has a history of being a declining, unstable revenue source. In part, this situation reflects the direct relationship between the amount of tipping fees collected and the state of the economy. Accordingly, as the economy declined, so did the revenue from the state surcharge on tipping fees. In addition, as the CIWMB successfully fulfills its mandate to divert waste from landfills, revenues associated with tipping fees will continue to decline over time.
Revenue Declines Over Next Six Years Projected to Be Significant. The budget projects IWMA fee revenues of $47.7 million in 1995-96, an increase of $1.6 million (3.5 percent) over estimated current-year revenues. However, as shown in Figure 13, IWMA fee revenues are projected by the CIWMB to decline significantly from 1996-97 through 2000-01. The figure shows the CIWMB's projections for IWMA revenues for 1996-97 through 2000-01, using (1) the current fee level of $1.34 per ton of waste disposed at a landfill and (2) the maximum fee allowable under current law of $1.40 per ton. The figure shows "high," "medium," and "low" revenue scenarios. The revenue scenarios are based on assumptions about the timing of economic recovery, the degree to which the waste diversion goals are met, and the level of out-of-state export of waste (such waste is not subject to the tipping fee surcharge).
At the current fee level, total revenues could decline by $5.1 million (high scenario) to $11.6 million (low scenario) between 1995-96 and 1996-97. Figure 13 also shows that between 1995-96 and 2000-01, revenues are projected to decline by $11.5 million (24 percent) under the high revenue scenario with a $1.40 per ton tipping fee surcharge and by $23.1 million (48 percent) under the low revenue scenario with the current $1.34 per ton surcharge. The percentage reductions in the real purchasing power of the account would be even greater, when adjusted for inflation.
Options Need to Be Considered. The budget proposes $49.6 million of expenditures and transfers from the IWMA in 1995-96 for support of the CIWMB ($39.4 million) and other state and local agencies ($10.2 million) for activities related to the CIWMB's work. Our review shows that even under the most optimistic scenario, with the tipping fee surcharge set at $1.40 per ton, revenues projected for 1996-97 ($44.5 million) will not be sufficient to support a program level that is the same as in the current year or proposed for the budget year. To the extent revenues are lower, a potentially significant funding shortfall could occur.
In the draft report, the CIWMB evaluated a number of fee options which would supplement the tipping fee revenues, including (1) an increase in the tipping fee surcharge; (2) a fee--such as an "advanced disposal fee"--tied to the amount of packages or products produced or sold; (3) a fee tied to revenues, sales or profits of waste-generating producers and retailers; and (4) a fee system related to solid waste facility permitting. The CIWMB found an increase in the tipping fee surcharge and a new permit fee system to be the easiest to implement and the least disruptive. The other funding options-- such as the advanced disposal fee--could potentially raise substantial revenues, but would be more complex to administer, in part because the base of fee payers would be much larger.
In order that the Legislature may consider the alternatives examined in the report, we recommend that the CIWMB discuss, at budget hearings, the various revenue generating options and expenditure reduction options for averting a funding shortfall.
The State Water Resources Control Board (SWRCB) regulates water quality in the state and administers water rights.
The board carries out its water quality control responsibilities by (1) establishing wastewater discharge policies, (2) implementing programs to ensure that the waters of the state are not contaminated by surface impoundments, underground tanks, or aboveground tanks, and (3) administering state and federal loans and grants to local governments for the construction of wastewater treatment facilities. Nine regional water quality control boards establish water discharge requirements and carry out water pollution control programs in accordance with state board policies. These regional boards are funded by the state board and are under the state board's oversight.
The board's water rights responsibilities involve issuing and reviewing permits and licenses to applicants who wish to take water from the state's streams, rivers, and lakes.
The budget proposes total expenditures of $283 million from various funds for support of the SWRCB in 1995-96. This is a reduction of $4.8 million, or 1.7 percent, from estimated current-year expenditures. The decrease results primarily from (1) a reduction of $12.3 million in local assistance for water reclamation activities and for the construction of publicly owned wastewater treatment and storm drainage facilities, mainly due to a depletion of bond funds, and (2) an increase of $10 million to expand the Underground Storage Tank Cleanup Fund program.
The board's plan to reduce backlogs in the renewal and update of permits issued to dischargers of waste appears reasonable. The board also is developing a plan to reduce backlogs in the processing of water rights and licenses. We recommend that the board report, at budget hearings, on the status of this plan.
Due to concern over the extent of backlogs in both the board's water quality and water rights program, the Legislature, in the Supplemental Report of the 1994 Budget Act, required the board to report on a three-year plan to reduce backlogs in these programs by at least 80 percent.
Core Water Quality Regulatory Program. The budget proposes $27.6 million (or 9.8 percent of the SWRCB's total expenditures) for support of the board's core water quality regulatory program. This amount is the same as estimated current-year expenditures. The board's core water quality program is comprised of three programs, all involving the issuance of permits by the regional boards:
Backlogs in Renewal and Update of Water Quality Permits. As we discussed in the Analysis of the 1994-95 Budget Bill (page B-61), significant backlogs have developed over the last several years in permit renewal and update. These backlogs reflect the fact that the board has had to process an increasing number of permit applications and incorporate various federal and state law changes into the permits, while funding and staffing has remained relatively stable.
Figure 14 shows the extent of the backlog in the core water quality program in 1993-94, and as anticipated for the current and budget years. As this figure shows, the board anticipates that backlogs will be reduced in the current year. The board anticipates this current-year reduction as a result of both the implementation of the administrative initiatives in its four-year plan to reduce backlogs (discussed below) and its recent decision to change the time schedule for updating waste discharge requirements. Formerly, the board had updated WDRs every three, five, or ten years, based on the relative threat to water quality of a particular discharge of waste. For 1994-95 and future years, the board has revised this update schedule--an administrative goal that is not required by statute--to every 5, 10, or 15 years. The significant decrease in backlogs in the update of WDRs between 1993-94 and 1994-95 reflects this scheduling change which thereby redefines a "backlog." The board has stated that a WDR will be reviewed and updated if the threat to water quality so dictates, regardless of the schedule for updates.
Plan for Reducing Water Quality Core Program Backlogs. The board has a four-year plan (1994-95 through 1997-98) to eliminate backlogs in the renewal of NPDES permits and to reduce backlogs in the update of WDRs (Chapter 15 and Non-Chapter 15) by at least 80 percent, by the end of 1997-98. The plan proposes to reduce the backlogs through workload adjustments and various administrative initiatives to simplify and expedite the permitting process. While the plan does not rely on increased funding, it does assume that staffing will be maintained at current levels. The major components of the plan are as follows:
Our review shows that the board's plan for reducing backlogs in its core water quality regulatory program is reasonable. In particular, we think that wider use of general permits has merit, particularly in cases where routine discharges involve only minimal environmental threat. The use of general permits will reduce the regional boards' workload by decreasing the need to process several separate permit applications and the subsequent renewals or updates.
Water Rights Program. The budget proposes $8.1 million, including $7.3 million from the General Fund, for support of the board's water rights program. This amount is the same as estimated current-year expenditures. The board's water rights program processes applications, and conducts hearings and environmental reviews, for parties requesting a permit to divert and use the state's surface waters. Once a permit ("water right") is issued and the applicant completes the project and begins using the water, the board issues a license as a confirmation of the water right. Due to limited funding, the board generally does not perform compliance inspections--an activity not required by law. Currently, there are over 12,600 water rights permits and licenses in the state.
Backlogs Throughout Water Rights Program. As discussed in the Analysis of the 1994-95 Budget Bill (page B-65), significant backlogs have developed over the last several years in all areas of the board's water rights program. Backlogs have resulted from the increasingly complex environmental reviews of water diversions and increasing complaints, while funding has remained relatively stable. Figure 15 shows the extent of the backlog in the water rights program in 1993-94, and as anticipated for the current and budget years.
The Board's Plan for Reducing Water Rights Backlogs. In its report, the board noted several recent developments that will help to reduce backlogs. These developments include the on-going enhancement of the Division of Water Rights' information management system, and the implementation of legislation which enables small diverters of water to use an expedited application process for water rights.
While Figure 15 does reflect a drop in the backlog in most areas of the program, there will still be a sizeable backlog by the end of 1995-96. In fact, the backlog in the requests for the project changes area will actually increase. At the time this analysis was prepared, the board was in the process of developing a final workplan for reduction of backlogs in the water rights program. This workplan will be complete by May 1995. We recommend that the board report, at budget hearings, on the status of its workplan, and discuss what additional measures it can take to further reduce the backlog and, in particular, the backlog in requests for project changes.
The budget request for $5 million from the Waste Discharge Permit Fund (WDPF) to support the Water Quality Management (WQM) program is reasonable. We recommend the adoption of supplemental report language requiring the board to report by November 1, 1995 on options for alternative funding sources and program reductions that might be made in order to support the WQM program in 1996-97 and future years.
The board's Water Quality Management (WQM) program assesses the state's water quality in order to update the water quality standards and plans which form the basis of the board's permitting program. The primary funding source for the program has been various bond funds. In the current year, expenditures for the program are estimated at $3.2 million, about 60 percent less than the prior two years. These bond funds will be depleted by the end of the current year.
The budget for 1995-96 requests $5 million from the WDPF to replace the bond funds which have supported the WQM program. Our review finds that this request is reasonable, and that the proposed use of WDPF funds is within statutory authority. Furthermore, the request would reduce the likelihood of the board's overall mission being compromised. For example, it will reduce the likelihood of permit backlogs which would result if permit writers, not able to rely on statewide standards, have to determine discharge limits on a case-by-case basis.
Our review, however, also shows that the budget year request will be funded from the existing reserve of the WDPF. This, together with other proposed expenditures, will essentially exhaust resources in the fund, leaving a balance of less than $1 million in the fund by the end of 1995-96. Based on the past revenue stream to the WDPF, there will not be sufficient resources in 1996-97 to maintain the WQM program and all other functions at the 1995-96 level.
The board is currently developing long-term funding options as part of its strategic planning efforts. We think that as part of this effort, the board ought to consider the merit of revising the current waste discharge permit fee structure. For instance, the current fee--capped by statute--does not recover a majority of the board's administrative costs of permitting dischargers. In addition, the board should consider reductions that might be made in various program areas supported by the WDPF in order to support the WQM program. The board's review of these options will provide better information for the Legislature to determine how best to fund the board's activities in 1996-97 and future years. Accordingly, we recommend that the Legislature adopt the following supplemental report language:
The State Water Resources Control Board shall submit, by November 1, 1995, a report to the Legislature recommending specific options to address the funding requirements for the board's Water Quality Management (WQM) program in 1996-97 and future years. In its report, the board shall consider, among other options, (1) the merit of revising the waste discharge permit fee structure, including changes to the current cap on the waste discharge fee set in statute, and changes to make the fee more reflective of the board's administrative costs associated with individual dischargers, and (2) reductions that might be made in various program areas that are supported by the Water Discharge Permit Fund in order to provide funding for the WQM program.
The board's program which reimburses owners of leaking underground storage tanks for cleanup costs has significant backlogs in the administration of claims, particularly in the issuance of letters of commitment. We recommend that the board report, at budget hearings, on how the budget's proposal to increase staffing for this program by 19.5 personnel-years in 1995-96 addresses this backlog problem.
The Underground Storage Tank Cleanup Fund (USTCF) is administered by the board to reimburse owners of leaking underground storage tanks for cleanup costs. The USTCF is funded by a per gallon storage fee levied on tank owners. The board estimates that there are about 20,000 leaking tanks (20 percent of all tanks) in the state requiring cleanup. By the end of the current year, the board anticipates having received about 10,200 claims, and it anticipates receiving about 1,300 new claims annually in future years. The program's sunset date is 2005, unless extended by statute.
Currently, to process a claim for reimbursement from the USTCF, the board does the following:
Figure 16 shows the board's workload and ending "backlog" in its claims process for 1993-94 through 1995-96. As the figure shows, significant backlogs exist in all areas of the claims process. The largest backlog exists in the issuance of letters of commitment for claims that have been reviewed and put on the "priority list." By the end of 1994-95, the board anticipates having issued letters of commitment to only 2,648 out of the 7,661 claims that will have been put on the priority list.
The budget proposes expenditures of $143.6 million from the USTCF for the underground tank cleanup fund program in 1995-96. This is an increase of $10 million (and 19.5 personnel-years) over estimated current-year expenditures. Of this $10 million, $8.8 million is for claim reimbursements, with the balance for the administration of the fund.
The board anticipates that the number of claims will increase as a result of Ch 1191/94 (SB 1764, Thompson). This increase is due to a number of factors, including lowering or eliminating the deductible for certain claimants, thereby enabling claims of lower amounts (previously not claimed) to be made.
We believe that the amount requested for the USTCF program is reasonable. However, to the extent Chapter 1191 increases workload by increasing the number of claims, there will be an impact on current backlogs. In its budget proposal, the board has not specifically addressed how the backlogs in the various stages of the claims process--the issuance of letters of commitment in particular--might be reduced given the higher level of staffing that is requested. Therefore, we recommend that the board report, at budget hearings, on how it proposes to use the requested staff to address the backlogs in the claims process.
The Department of Toxic Substances Control (DTSC) (1) regulates hazardous waste management, (2) cleans up sites that have been contaminated by hazardous substances and oversees the cleanup of sites by others, and (3) promotes methods to treat and safely dispose of hazardous wastes and reduce the amount of hazardous wastes that are generated in the state. The department is primarily funded by fees on persons and entities that generate, store, treat, or dispose of hazardous wastes.
The budget proposes total expenditures of $119.1 million from various funds for support of the DTSC in 1995-96. This is a decrease of $4.6 million, or 3.7 percent, from estimated current-year expenditures. The net decrease results primarily from (1) a reduction of $7.3 million (and 128 positions, 39 positions which are currently vacant) in support of various programs due to a stated decline in revenues in the Hazardous Waste Control Account (HWCA), (2) the elimination of HWCA support ($3.9 million) for the Department of Health Services and the Office of Emergency Services (the budget proposes to partially offset this loss by providing $3 million from the General Fund directly to these two departments), (3) an increase of $7.1 million HWCA funds to support the cleanup of clandestine drug labs and to implement a new pilot program for the expedited cleanup of hazardous waste sites, and (4) an increase of $2.3 million to coordinate the cleanup of closing military bases.
As we discuss in the Crosscutting Issues section of this chapter, the DTSC is one of five departments selected by the administration for a pilot project in performance budgeting.
The department's 1995-96 revenue projections for the Hazardous Waste Control Account (HWCA) appear to be more realistic than in prior years. The budget proposes HWCA program reductions to correct for overly optimistic revenue projections in prior years. Given the modest reserve projected for the account, any overestimation of revenues could result in a HWCA funding shortfall in 1995-96.
Hazardous Waste Control Account Has Been an Uncertain Revenue Source. The HWCA is primarily supported by fees, assessed against (1) hazardous waste storage, treatment, and disposal operations; (2) facilities that generate hazardous waste; and
(3) individuals and entities who dispose of hazardous waste. In addition, the HWCA is funded by cost recoveries in the site mitigation program, as well as by revenues from fines and penalties.
Revenue projections for the HWCA have been uncertain in prior years because of the difficulty in predicting the impact on fees as a result of (1) legislative changes, (2) the state of the economy, and (3) programs promoting pollution prevention (which operate to reduce the amount of hazardous waste generated, treated, stored, and disposed, thereby reducing the activities subject to fees). Because of this, the department has often had to revise its revenue estimates downward and reduce program expenditures.
1994-95 Budget Included Major Program Reductions. The 1994-95 Governor's Budget, as introduced, included departmentwide reductions in various programs totaling $15.8 million in order to keep the HWCA in balance. Subsequent to that, the department revised its HWCA revenue projections downward in May 1994 and proposed to further reduce expenditures by $4 million in 1994-95. As a result, the 1994-95 budget reflects total expenditure reductions of $19.8 million.
1995-96 Program Reductions Not Result of Revenue Declines. For 1995-96, the budget proposes further reductions in various programs. Our review shows that the reductions are proposed for two reasons: (1) to correct for a program level that has been expanded in recent years based on overly optimistic revenue projections and (2) to free up funds for new programs. This conclusion is contrary to the budget's portrayal that programs are proposed to be reduced as a result of an actual decline in revenues. In fact, our analysis shows that while there was a significant decline of about $7.6 million in actual overall HWCA revenues between 1992-93 and 1993-94, revenues in 1994-95 and 1995-96 are anticipated to vary little from the 1993-94 levels.
Are 1995-96 Revenue Projections Any Better? In 1994, the department completed a review of its revenue forecasting procedures. As a result, it made a number of changes in its methodology and data collection in order to improve the accuracy of its revenue projections. Our review indicates that the department is more conservative in projecting fee revenues that are inherently uncertain or for which little data is available, and the 1995-96 revenue projections reflect this. The department notes that the following sources of HWCA revenues are particularly subject to uncertainty in 1995-96:
HWCA Funding Shortfall Possible. In prior years, the reserve in the HWCA had helped to bridge the gap between expenditures and revenues, enabling the department to sustain program levels that exceeded revenues. This option will not be available in the budget year, as the budget projects a relatively modest HWCA reserve ($1.6 million) equal to about 2.5 percent of budgeted expenditures. If the department's revenue projections for 1995-96 prove again to be too optimistic, a funding shortfall in the account may result.
In order to fund two new statutory programs, the budget proposes to reduce departmental expenditures in other areas. We recommend that the department report at budget hearings on (1) the relative effectiveness of the programs affected by the proposal and (2) how "orphan share" sites will be chosen for the site cleanup pilot program.
Program Reductions. The budget proposes to reduce HWCA expenditures by a total of $11.4 million in 1995-96. There are two main components of this proposed reduction. First, the budget proposes to reduce DTSC support by $7.3 million and 128 positions (39 positions which are currently vacant) as follows:
Second, the budget proposes to eliminate HWCA support of the Department of Health Services ($2.3 million) and the Office of Emergency Services ($1.6 million) for their work related to disease control and radiation health, and accidental hazardous material releases. Instead, the budget requests General Fund appropriations of $1.6 million and $1.4 million, respectively, to support these departments' activities.
New Programs. These reductions are made, in part, to fund the following new programs at a total cost of $7.1 million.
Costs for the pilot program are to be recovered from the responsible parties liable for the cleanup, but Chapter 435 also allows (but does not require) up to ten sites in the program to include an "orphan share." "Orphan share" sites are those with responsible parties who are unable or unwilling to help pay for the cleanup or who cannot be identified or found. To the extent that orphan share sites are chosen, the department will pay for the orphan share's cleanup costs, but only to the extent funds are made available to the Expedited Site Remediation Trust Fund, created by Chapter 435.
The budget proposes that $4.1 million be redirected from fines and penalties in the HWCA to the trust fund in 1995-96 to pay for cleanup costs of orphan share sites chosen for the pilot program. These expenditures are in addition to the proposed expenditures of $925,000 for the pilot program which will be reimbursed by responsible parties.
Chapter 55 provides that the new cleanup responsibilities assigned to the department apply only to the extent sufficient funding is made available for this purpose. The legislation creates the Illegal Drug Lab Cleanup Account (General Fund) as of
January 1, 1996, but does not provide an appropriation to the account.
The budget proposes $3 million from the HWCA for illegal drug lab cleanups in 1995-96. Based on our review of the current workload of the Department of Justice and local law enforcement agencies for cleanup activities, we believe that the proposed amount is reasonable.
Department Should Report on Program Priorities. We believe that funding these two new programs has merit and is consistent with legislative intent. For instance, funding for the department to assume financial responsibility for "orphan shares" in the expedited site cleanup pilot program is necessary to effectively test the program's new approaches to site cleanups.
However, because of the condition of the HWCA, funding these new program areas necessitates reductions in other programs. We think that the Legislature should assess the redirection of resources proposed by the department in terms of the relative effectiveness of the programs affected and the extent to which these programs meet legislative priorities and goals. Therefore, we recommend that the department report, at budget hearings, on the relative effectiveness of the programs affected by its redirection proposal in meeting legislative goals and priorities, and the department's funding priorities for these programs.
In addition, because no details were available regarding the expedited site cleanup pilot program's expenditures for "orphan shares," we recommend that the department report, at budget hearings, on the circumstances under which it will accept sites for the pilot program thereby requiring it to assume financial responsibility for "orphan shares."
The department has not submitted information required by the Legislature regarding three- year revenue projections and expenditure priorities. We recommend that this information be presented to the Legislature at budget hearings.
During hearings on the 1994-95 budget, the Legislature expressed its concern that funding shortfalls in the HWCA were likely in future years if current expenditures were maintained. As a result, the Legislature adopted language in the Supplemental Report of the 1994 Budget Act requiring the department to submit to the Legislature, by January 1, 1995, a report on projections of revenue generated to the HWCA (and related accounts) for 1995-96 through 1997-98 using a number of revenue scenarios. In addition, the department was required to set priorities for these three fiscal years, considering the overall impact on environmental protection.
At the time this analysis was prepared, the department had not submitted the required report to the Legislature. Consequently, this affects the ability of the Legislature to fully evaluate the department's plan to reduce and redirect HWCA program expenditures in the budget year. Therefore, we recommend that the department present this information to the Legislature at budget hearings.