LAO Analysis of the 1996-97 Budget Bill
Resources, Part I

Plans Needed for Conservation of Land Resources

The state faces significant challenges in conserving and managing its land resources. We recommend that the Legislature adopt supplemental report language directing the Resources Agency to (1) develop a long-term plan for the conservation and management of the state's land resources, and (2) undertake an assessment of the state's habitat and open space acquisition and development needs, assess the relative priority of those needs, and develop a long-term financing plan for meeting them.

Better Management of Statewide Land Resources Needed

California spends substantial amounts of funds to protect and manage its land resources. This includes providing opportunities for outdoor recreation, protecting wildlife habitat and natural areas, and conserving prime agricultural land. The state faces significant challenges in achieving these goals, however. For example, the Department of Parks and Recreation estimates that only about one-half of the state's citizens are satisfied with the public parks and outdoor recreation opportunities available to them, due to a shortage of convenient recreational areas, overcrowding, and deterioration of park facilities. Also, while California has more biodiversity than any other state--approximately 40,000 species in 380 different natural communities--it is estimated that nearly half of the state's natural communities are rare or endangered. Finally, the American Farmland Trust projects that low-density urban sprawl will consume more than one million acres of California's farmland by 2040.

In recent years, various public and private organizations have called for better conservation, management, and development of the state's land resources, to help the state achieve its land conservation and protection goals. (See reports from the Governor's Growth Management Council [January 1993], the Resources Agency and several private and nonprofit organizations [February 1995], and the Milton Marks Commission on California State Government Organization and Economy [the Little Hoover Commission, December 1995]).

A common recommendation in these reports is the need for better statewide planning. For example, the Governor's Growth Management Council called for the state to develop a state resources protection and conservation plan which would include an inventory of resource lands of statewide significance--including wetlands, prime agricultural lands, timberlands, parklands, and wildlife and conservation habitat--and set standards and policies for the conservation of those resources. The state has not yet developed such a plan.

Current Law Requires Long-Term Environmental Plan.Current law requires the Governor to prepare and update every four years a comprehensive state environmental goals and policy report regarding air, water, and land uses. No Governor has submitted this plan to the Legislature since 1978. The report is to contain the following elements:

The report is intended to advise the Legislature of action required to implement the report's goals and objectives; provide a framework of goals and objectives to aid in the preparation and evaluation of various state plans; and serve as a guide for state expenditures for environmental purposes, with proposed budget expenditures to be related to the achievement of the report's goals and objectives.

Spending substantial amounts of funds alone will not enable the state to achieve its goals relative to land resources conservation and protection. Given the state's projected population growth, we think that the kind of long-term, integrated plan called for under current law is essential in enabling the state to effectively achieve its goals of protecting and conserving its land resources in order to further their recreational opportunities, biodiversity, and economic, esthetic and ecological values.

Ocean Plan Is a Potential Model for Long-Term Land Resources Conservation Plan.One model for such a plan is the draft ocean resources management plan released by the Resources Agency in July 1995, pursuant to Ch 1215/89 (AB 2000, Farr) and Ch 1027/91 (AB 205, Farr). This legislation required the Resources Agency to develop a long-term, coordinated plan to restore and manage California's ocean ecosystems. The agency's report was the first comprehensive effort to assemble data, coordinate programs, and identify clear management policies regarding the protection and management of the state's ocean resources.

Land Resources Conservation Plan Would Define State Goals.Developing a comparable plan for California's landecosystems would not be simple and would require time, but it would help to identify the state's goals for land resources management and conservation. Such a plan would help to identify an appropriate balance between various uses of land--including urban development, logging and farming, and wildlife habitat and recreational purposes--and the respective roles of state, federal and local agencies in achieving that balance. Also, a long-term plan would help to integrate the diverse programs and policies which the state has developed to protect and manage its land resources, and determine the appropriate funding sources and levels to support their implementation. Finally, a long-term land resources conservation plan would enable a determination of the role of acquisition of land--such as open space and wildlife habitat--relative to other programs and policies, in achieving the state's long-term land resources conservation goals.

In summary, the state faces significant challenges in conserving and managing its land resources. Ideally, in meeting those challenges, the Legislature would have guidance from the report that the Governor's Office of Planning and Research is required to prepare under current law. However, the Legislature has called unsuccessfully for this report for almost two decades. Accordingly, we recommend that the Legislature direct the Resources Agency to develop a long-term plan, in accordance with current law, for the conservation and management of the state's land resources.

State Relies on Land Acquisition To Achieve Habitat and Open Space Conservation Goals

A central element in California's approach to conserving and managing its land resources has been the acquisition and restoration of wildlife habitat, natural areas, and open space, and the development of public access and recreational facilities on those lands. While much has been acquired to date, the departments and agencies charged with conserving the state's habitat and open space indicate that the demand for future acquisition and restoration remains substantial. The California Tahoe Conservancy, for example, projects future costs of $79 million to $99 million to acquire and enhance sensitive wildlife habitat and natural lands and develop public access in the Lake Tahoe basin. The Department of Fish and Game indicates that continued acquisition of critical wildlife habitat will be necessary to ensure the long-term preservation of the state's fish and wildlife species.

Furthermore, both the Legislature and the administration have indicated continued interest in using land acquisition and restoration to achieve the state's goals relative to habitat and open space conservation. For 1996-97, for example, the budget requests support funding for two new land conservancies created in statute--the San Joaquin River Conservancy and Coachella Valley Mountains Conservancy--which will acquire and conserve open space and habitat.

State's Acquisition Needs Should Be Assessed. There is no consensus, however, on how much funds should be provided to acquire open space and wildlife habitat and develop park facilities, the appropriate sources of funding, and the priorities for funding these activities versus other capital outlay needs. In part, this lack of consensus reflects the state's approach to funding capital outlay needs. In our Analysis of the 1995-96 Budget Bill, we recommended that the Legislature undertake a comprehensive review of the state's capital outlay needs, set priorities, and establish a financing plan to fund these priorities over a multiyear period.

To date, the state has not identified the amount of habitat and open space it wants to acquire and develop in order to meet its long-term habitat and open space protection goals. Also, there is no target timeline or schedule for meeting those goals. The lack of such an assessment of need reduces the Legislature's ability to determine the appropriate long-term financing plan for land acquisition and park development, and the priority among various land acquisition and development programs and projects. Without knowing how much and when funds are needed, the Legislature will not be able to determine whether existing funding sources, such as the Environmental License Plate Fund and the Habitat Conservation Fund, are adequate, or whether other new financing sources--such as bond funds, the main fund source used by the state to date--are needed.

We think that undertaking a comprehensive assessment of the state's habitat and open space acquisition needs, setting priorities, and establishing a financing plan to fund these priorities over a multiyear period are essential to ensure that future funds are targeted for the highest priority needs. We further think that the Resources Agency would be an appropriate body to undertake this assessment.


The state's programs and policies for land resources conservation--including the state's programs to acquire and develop open space and wildlife habitat--should be coordinated, based on clear priorities, and directed towards the achievement of long-term goals. We think it is essential that the Legislature take steps to ensure that these criteria are met. Accordingly, we recommend adoption of the following supplemental report language:

(a) By January 1, 1998, the Resources Agency shall develop and submit to the Legislature a long-term plan for the conservation of the state's land resources. The agency shall submit to the Legislature by March 1, 1997 a report on its progress in developing the plan. The plan shall do all of the following: (b) By March 1, 1997, the agency shall submit a report to the Legislature on the needs for acquisition and development of the state's wildlife habitat, natural areas, and open space. The report shall include (1) the state's long-term goals relative to the conservation of habitat, natural areas, and open space, (2) an assessment of the state's needs to acquire, restore, and develop habitat and open space in order to meet those goals, (3) the relative priority of those needs, and (4) a long-term financing plan for meeting them.

Fund Conditions for
Resources Programs

The state uses a variety of special and bond funds to support the departments, conservancies, boards, and programs that regulate and manage the state's resources. In this section, we provide a status report on selected special funds and bond funds supporting these programs. For purposes of this review, we have divided the funds into three categories: (1) resources special funds, (2) park-related bonds, and (3) bonds for water programs. (We discuss the condition of various environmental protection funds in the writeups of the individual departments and boards.)

Special Funds and Park-Related Bonds

Based on our review of the status of selected special funds and bond funds, we conclude that, if the Legislature approves the Governor's spending proposals, there will be little money available in (1) special funds for legislative priorities for resources programs and (2) park-related bond funds to start new park projects.

Figure 6 summarizes the total resources available, the Governor's expenditure priorities, and the reserve balances available for selected special funds and park-related bond funds. Below we discuss the status of individual funds and provide some general comments.

Special Account for Capital Outlay.Funds in this account are derived from state lease revenues arising from oil and gas development in state tidelands. In the past, money from the Special Account for Capital Outlay (SAFCO) was used primarily for capital outlay purposes, but was available for other General Fund purposes as well. In 1996-97, however, as in 1995-96, no deposit will be made to the SAFCO, and no expenditures from the account are proposed. Tidelands revenues will instead be deposited in the General Fund.

Outer Continental Shelf Lands Act, Section 8(g) Revenue Fund.Revenues to this fund come from royalties and other payments for the oil and gas recovered from submerged federal lands that are adjacent to California. The amount is determined by an agreement with the federal government. These funds have typically been used for various resources programs. On July 1, 1995, the fund was statutorily abolished, and all its assets and liabilities were transferred to the General Fund. For 1996-97, departments and programs which relied on Section 8(g) funds are proposed to receive funding from the General Fund instead.

Figure 6
Selected Special Funds
Resources Programs a
1995-96 and 1996-97
(In Millions)
1995-96 1996-97
ExpendituresResources Expenditures Balances
Special Funds
Special Account for Capital Outlay b --c -- -- --
Outer Continental Shelf Lands Act,
Section 8(g) revenue fund
-- -- -- --
Environmental License Plate Fund $21.6 $23.0 $22.0 $1.0
Public Resources Account, Cigarette and Tobacco Products
Surtax Fund
19.0 20.3 18.9 1.4
Habitat Conservation Fund 49.7 31.3 30.0 1.3
$90.3 $74.6 $70.9 $3.7
a Based on Governor's Budget.
b Figures are for resource-related programs only.
c Not a meaningful figure.

Environmental License Plate Fund.The Environmental License Plate Fund (ELPF) derives its funding from the sale of personalized license plates by the Department of Motor Vehicles. Funds from the ELPF can be used for the following purposes:

The budget proposes expenditures totaling $22 million from the ELPF, an increase of $402,000 (1.9 percent) from estimated current-year spending.

Public Resources Account, Cigarette and Tobacco Products Surtax Fund.The Public Resources Account (PRA) receives 5 percent of the revenue from the Cigarette and Tobacco Products Surtax Fund (C&T Fund). The budget projects account resources to be about $20.3 million in 1996-97. Generally, PRA funds must be used in equal amounts for (1) park and recreation programs at the state or local level and (2) habitat programs and projects.

Of the projected resources, the budget proposes expenditures from the PRA for the various departments totaling $18.9 million. This is a decrease of $49,000 (0.3 percent) from estimated current-year funding. This small decrease reflects a projected decrease in revenues to the C&T Fund.

Habitat Conservation Fund. The Habitat Conservation Fund (HCF) was created by Proposition 117, the California Wildlife Protection Act of 1990. The proposition requires that the fund receive annual revenues of $30 million primarily for wildlife habitat acquisitions and improvements. To provide this funding level, Proposition 117 requires the transfer of (1) 10 percent of funds from the Unallocated Account, C&T Fund, and (2) additional funds from the General Fund, to total $30 million. Proposition 117 allows the Legislature to substitute for the General Fund the transfer of other appropriate funds.

The budget proposes to transfer about $27.1 million from various funds into the HCF. In addition, the budget proposes expenditures of $2.9 million from the California Wildlife, Coastal and Park Land Conservation Fund of 1988 to count towards the HCF requirement. These funds are proposed to fund activities of the California Tahoe Conservancy, State Coastal Conservancy, Department of Parks and Recreation, and the Wildlife Conservation Board. Specifically, the budget proposes $21 million to be allocated to the Wildlife Conservation Board. In accordance with Proposition 117, the Santa Monica Mountains Conservancy will receive no funding from the HCF in 1996-97.

Our review indicates that there may be a shortfall in funding for the HCF in 1996-97. This is because the administration's proposal to fund the HCF in 1996-97 assumes that the formula for allocating revenues from the surtax on cigarette and tobacco products will be changed relative to the requirements of Proposition 99. This funding formula change requires a four-fifths vote of the Legislature (as we discuss in the Health and Social Services chapter of this Analysis).

If the Proposition 99 funding formula is not changed, the shortfall in funding provided to the HCF could be approximately $650,000 relative to the requirements of Proposition 117. The Legislature could transfer additional funds into the HCF from other special funds, such as the ELPF, thereby avoiding a transfer from the General Fund in the event that the Proposition 99 funding formula is not changed.

Park-Related Bonds. Figure 7 shows the amounts available in selected park bond funds and the expenditures proposed for 1996-97. Park development projects and land acquisitions have traditionally been funded by various bonds passed by the voters. The availability of bond funds has contributed to the Legislature's flexibility in funding its priorities in past years. This is because the Legislature has been able to free up funds in the ELPF and the PRA by using bond funds to the greatest extent possible to fund various projects.

Figure 7
Selected Park Bond Funds
Resources Programs a
1995-96 and 1996-97
(In Millions)
1995-96 1996-97
Bond Fund
State, Urban, and Coastal Park Fund (1976 bond) -- -- -- --
Parklands Fund of 1980 $0.8 $2.0 $1.9 $0.1
Parklands Fund of 1984 9.7 0.8 0.7 0.1
Fish and Wildlife Habitat
Enhancement Fund of 1984
0.3 2.8 -- 2.8
State Coastal Conservancy
Fund of 1984
0.2 2.9 1.5 1.4
California Wildlife, Coastal and Park Land Conservation Fund of 1988 b 65.1 20.3 13.6 6.7
Wildlife and Natural Areas Conservation Fund of 1988 1.7 -- -- --
$77.8 $28.8 $17.7 $11.1
a Based on Governor's Budget.
b Figure reflects all bond allocations including those not subject to Budget Bill appropriations.

The budget projects available park-related bond fund balances totaling $28.8 million at the beginning of 1996-97, as shown in Figure 7. The fund balances at the end of 1996-97 are estimated to total $11.1 million. Of this amount, $6.7 million is from the 1988 Park Bond. Much of these funds are earmarked for development of particular geographic areas and for certain categories of projects. Consequently, the amount of funding that is available for projects that do not fall into these categories actually will be less than $6.7 million.

Water Bonds

Based on our review of bond funding for water programs, we conclude that there are sufficient funds available in 1996-97 to continue local water supply and wastewater treatment programs. However, there is little money available for new water projects not yet in the "pipeline."

There are several bond fund programs that provide loans and grants to local water agencies to enhance water quality and water supply. These include (1) the safe drinking water program; (2) water supply programs, including programs for water conservation, groundwater recharge, and water reclamation; and (3) the wastewater treatment program.

Past Funding Has Been Significant.These bond funds have provided significant amounts of funding in recent years, as indicated in Figure 8.

Budget Proposal.As indicated in Figure 9, the budget reflects expenditures totaling $93 million in 1996-97 for water quality and water supply programs. These expenditures would be funded from Safe Drinking Water funds, Water Supply funds, and Wastewater Treatment funds.

Safe Drinking Water.The budget projects total expenditures of $37.3 million in 1996-97, leaving a balance of $29.3 million at the end of 1996-97. The Department of Water Resources (DWR) advises, however, that it has pending grant applications in the pipeline against most of this balance.

Water Supply.The budget reflects $38.1 million in expenditures for water supply programs. The balance available for these programs in 1996-97 is projected to be $38.5 million. According to staff at the DWR and the State Water Resources Control Board, most of this balance is for pending applications for projects.

Figure 9
Selected Water Bond Funds a
(In Millions)
Resources Expenditures Balances
Safe drinking water
1986 California Safe Drinking Water Fund $35.2 $16.9 $18.3
1988 California Safe Drinking Water Fund 31.4 20.4 11.0
($66.6) ($37.3) ($29.3)
Water supply
1986 Water Conservation and Water Quality Fund $38.6 $23.0 $15.6
1988 Clean Water and Water Reclamation Fund 13.6 9.7 3.9
1988 Water Conservation Fund 24.4 5.4 19.0
($76.6) ($38.1) ($38.5)
Wastewater treatment
1984 State Clean Water Fund $40.6 $17.6 $23.0
$183.8 $93.0 $90.8
a Based on Governor's Budget.

Wastewater Treatment.The budget proposes expenditures of $17.6 million from the 1984 State Clean Water Fund to fund wastewater treatment projects in 1996-97. This will leave a fund balance of $23 million at the end of 1996-97. The budget indicates that a majority of the balance is for projects considered to be in the pipeline.

Summary.Based on the projected expenditures of water bond funds, there will be sufficient amounts to continue funding water programs in 1996-97 at the levels proposed in the budget. However, it appears that most of the remaining fund balances are not available for new projects in 1997-98 given pending applications for projects already in the pipeline.

New Bonds for Water Supply and Wastewater Treatment, but Not Local Flood Control

The administration proposes new bonds totaling $540 million, to be placed on the November 1996 ballot, for Bay-Delta restoration and facilities, and wastewater treatment and reclamation. However, no funding is proposed to address the state's unmet share of costs for local flood control, which now totals about $140 million.

Despite past expenditures of water bonds, there remain significant funding demands in the areas of water quality and water supply. For example, the administration estimates projected demand totaling over $10 billion through the year 2000 for local safe drinking water and wastewater programs. There also are significant funding demands in the area of local flood control. As we discuss below, the administration is proposing to meet someof these needs (through proposed new bond funding), but not others.

Proposed New Water Bonds.The administration proposes two new water bonds to be placed on the November 1996 ballot. However, the budget proposes no expenditures in the budget year from these proposed bonds. At the time this analysis was prepared, no additional detail was available on the projects or programs to be funded from these bonds, or the schedule by which bonds would be issued.

No Funding Proposed for Local Flood Control.The costs of local flood control projects are funded by the federal government (72 percent), state government (20 percent), and local government (8 percent). Thus, local agencies in California rely heavily on federal and state funding for their flood control projects. Due to the state's budget condition in recent years, however, the state has been unable to pay fully its share of costs for local flood control projects. (In 1994-95, the administration proposed to fund these costs from a bond which did not ultimately reach the ballot.) According to the DWR, the unpaid amount on the state's share of costs is currently about $140.8 million.

The lack of state funding has affected the development of local flood control projects. For example, the DWR indicates that due to the lack of state funding, construction has stopped on some local projects, including enlargement of Prado Dam on the Santa Ana Mainstem near the border of Orange, Riverside, and San Bernardino Counties, and work on Upper Llagas Creek in Santa Clara County. The budget proposes no funding in 1996-97 for the state's share of local flood control costs.

Cal-EPA Cost-Cutting Proposals
Include Efficiencies and Policy Choices

The budget proposes reductions of about $8.2 million and 73 positions in programs throughout the California Environmental Protection Agency to reduce the costs of regulations for business. Our review finds that the reductions reflect mainly program efficiencies and policy decisions to reduce program levels, rather than a reduction in regulations.

We recommend that the Air Resources Board and the Office of Environmental Health Hazard Assessment (OEHHA) report at budget hearings on the impact of the reduction in the Air Toxics "Hot Spots" Program in terms of costs and benefits for business and the level of environmental protection. We further recommend that the Department of Toxic Substances Control and the OEHHA report on (1) the impact of the reduction in the Railroad Accident Prevention and Immediate Deployment (RAPID) Program on the ability of the state and local agencies to respond to hazardous spills and (2) their priorities for spending the remaining RAPID fee revenues.

Budget Offers Cost-Cutting Proposals

In response to a directive from the Secretary for Environmental Protection, boards and departments within the California Environmental Protection Agency (Cal-EPA) reviewed their activities for opportunities to reduce program costs "in response to concerns regarding excessive and duplicative environmental regulations." The budget proposes reductions of about $8.2 million and 73 positions in various programs as part of this cost-cutting initiative. Figure 10 summarizes these reductions by department, and highlights some of the program activities which will be affected.

Our review finds that most of the proposed reductions do not reduce excessive or duplicative regulations. Rather, the reductions are based mainly on (1) program efficiencies, (2) workload reductions, or (3) policy decisions to reduce program levels due to various reasons, including a lack of funding. Our specific findings follow.

Some Reductions Reflect Efficiencies and Workload Reductions

Our review finds that many of the reductions are properly characterized as program efficiencies. In some cases, the workload of the proposed reduced staff has been, or can be, absorbed by other staff. For example, enabling professional staff to finalize their own correspondence eliminates the need for a word processing technician in the Department of Pesticide Regulation (DPR).

Figure 10
Cal-EPA Departments and Boards
Proposed Reductions in 1996-97
Reductions Major Programs Affected Work
Air Resources Board
$2.6 million
(23.7 py)
  • Air Toxics "Hot Spots" Program
  • Risk assessment guidelines in "Hot Spots" Program.
  • Technical assistance to Caltrans on transportation/air quality matters.
Department of Toxic Substances Control
$2.2 million
(6.5 py)
  • Railroad Accident Prevention and Immediate Deployment (RAPID)
  • Program Technical assistance to state and local emergency response agencies.
Office of Environmental Health Hazard Assessment
$1.6 million
(4 py)
  • Air Toxics "Hot Spots" Program
  • RAPID Program
  • Risk assessment guidelines in "Hot Spots" program.
  • Annual update of Railroad Hazardous Commodities List.
California Integrated Waste Management Board
(22.5 py)
  • Administration
  • Permitting
  • Enforcement
  • Local Assistance
  • Planning and other assistance to local governments.
  • Evaluations of local enforcement agencies.
Department of Pesticide Regulation
$0.8 million
(16 py)
  • Pesticide Registration
  • Review of data on efficacy of pesticides and certain environmental impact data.

A second group of reductions represents workload elimination as programs are completed or as the responsibility for carrying out activities has been assumed by other jurisdictions or parties. Reductions in such cases also will not have a negative impact on programs or services. For example, the completion of the development of an emissions inventory database allows the Air Resources Board (ARB) to reduce resources in support of this activity. As another example, two positions in the DPR that review data on the efficacy of pesticides are being eliminated on the basis that ineffective pesticides are sorted out by the marketplace where extensive product testing is done. According to the DPR, no other state requires efficacy data as part of its pesticide registration process.

Some Reductions Reflect Policy Decisions

Our review finds that a third group of reductions will result in the elimination or delay in the carrying out of program responsibilities. These reductions primarily reflect policy choices, rather than program efficiencies. Two examples are the Air Toxics "Hot Spots" Program and the RAPID Program.

Air Toxics "Hot Spots" Program.Under this program, facilities that emit toxic chemicals (such as oil refineries and dry cleaners) provide information to the ARB and local air districts about their air emissions. Based on this information, facilities may be required to prepare risk assessments, notify the public of the risks, and take measures to reduce significant risks. The OEHHA is required to develop risk assessment guidelines that are used by facilities and review the risk assessments prepared by the facilities. The ARB is required to maintain an emission inventory and develop risk reduction guidelines. The program's costs are recovered by a fee on facilities.

The budget proposes expenditures of $2.6 million for this program for 1996-97, a decrease of 43 percent. This reduction--characterized in the budget as resulting from "program efficiencies"--would eliminate 16 positions in the ARB and reduce the ARB's contract with the OEHHA by $1.1 million.

Our review finds that part of the reduction results from certain statutorily required activities being completed (such as the development of specific procedures for public notification). However, the reduction proposal will also result in some previously planned activities--particularly those by the OEHHA--not being carried out or being delayed. For instance, the risk assessment guidelines to be prepared by the OEHHA will be less comprehensive and will be adopted on a less timely basis than planned.

Net Benefit to Business Unclear.The budget proposal does not change the requirement that risk assessment guidelines be developed for use by business. However, the adoption of less comprehensive and timely risk assessment guidelines may create both costs and benefits for businesses that are required to prepare risk assessments and implement measures to reduce risks. For example, reduced program activity at the state level should result in lower fees being levied on businesses to recover program costs. On the other hand, less comprehensive guidelines may make the risk assessment process more time-consuming for business due to less guidance being provided. It is unclear whether the reduction would be a net benefit to business, and whether there would be an impact on the level of environmental protection and public health and safety.

In order that the Legislature may be advised of the costs and benefits of the reduction on business and whether there would be an impact on the level of environmental protection and public health and safety, we recommend that the ARB and the OEHHA report at budget hearings on these matters.

The RAPID Program.Chapter 766, Statutes of 1991 (SB 48, Thompson) established the RAPID Program to coordinate technical support from a number of state agencies, including the Department of Toxic Substances Control (DTSC)--the lead agency--and the OEHHA to prevent and respond to hazardous spills from surface transportation accidents. The program has been funded by a fee paid by railroads and trucking companies transporting hazardous materials. While the statutory authority for this fee expired December 31, 1995, the requirements to coordinate technical support and respond to hazardous spills continue.

In 1995-96, program expenditures are estimated to total $3.2 million, including $2.7 million for support of the DTSC (including interagency agreements with the Office of Emergency Services, the Board of Equalization, and the State Fire Marshal's Office), and $462,000 for the OEHHA. Of this amount, a majority of the expenditures are for training and equipment grants and planning assistance for local agencies (such as fire departments) that provide emergency response to hazardous spills. The balance is for the DTSC to provide oversight and technical assistance at hazardous spills and for OEHHA to prepare and annually update lists of hazardous commodities in railroad transport.

Fee Expires, Administration Takes Credit for "Savings."The budget proposes expenditures of $533,000 (from the remainder of collected fees) for the program in 1996-97, a decrease of 83 percent, due to expiration of the fee. This proposal--characterized in the budget as a change that "reduces fees and the cost of government"--will eliminate all positions (6.5 in the DTSC and 2 in the OEHHA) that have been funded by the RAPID fee and eliminate the OEHHA's annual update of the hazardous commodities list. In addition, the reduction will result in fewer funds for the state to oversee and provide technical assistance to local governments at hazardous spills, limiting the state's role to major spills, and eliminating training and equipment grants for local agencies.

The reduction in equipment, training, and other technical assistance to local agencies to help them prepare for and respond to hazardous spills could affect the ability of these agencies to provide an appropriate emergency response to hazardous spills. In order that the Legislature may be advised of the impact of this reduction, we recommend that the DTSC and the OEHHA report, at budget hearings, on the impact of this reduction on the level of emergency response that will be provided in the state. The departments should also report on their priorities in spending the remaining fee revenues of $533,000 so that the Legislature can assess whether these expenditures are consistent with its priorities.

Unified Hazardous Materials Program

We recommend that the Secretary for Environmental Protection and the Department of Toxic Substances Control report at budget hearings on the status of a local-level unified hazardous materials program intended to consolidate six regulatory programs and reduce fragmentation in program delivery. We further recommend that three positions requested for the State Fire Marshal to implement the unified program be made limited term.

Consolidated Program Should Reduce Savings

Chapter 418, Statutes of 1993 (SB 1082, Calderon) included a number of provisions to reform the environmental regulatory and permitting processes in the state. Among these is the requirement that the Secretary for the California Environmental Protection Agency (Cal-EPA) develop and implement, by January 1, 1996, a program to consolidate various activities related to hazardous materials. The program is to be administered at the local level and is to consolidate the following programs:

Unified Program's Purpose Is to Reduce Fragmentation. Prior to Chapter 418, the above programs were administered typically by a wide variety of local agencies--such as cities, counties, and fire departments--within any given geographic area. The state was responsible for overseeing local implementation as well as for carrying out programs in areas where there was no local implementation. State agencies involved include the Department of Toxic Substances Control (DTSC), the State Water Resources Control Board (SWRCB), the Office of Emergency Services (OES), and the State Fire Marshal (SFM). Regulated parties were subject to many separate permit requirements and fees, at both the state and local level.

As a result of Chapter 418, the hazardous materials programs are to be consolidated and administered by a local agency--known as a Certified Unified Program Agency (CUPA), that is certified by the Cal-EPA. State agencies--with the DTSC as the lead agency--will oversee the unified program's, implementation by the CUPAs, and will recover their costs from a surcharge that is added to the unified fee that regulated parties will pay to the CUPAs.

Unified Program Should Result in Lower Government Costs and Lower Fees.By reducing fragmentation in the delivery of hazardous materials programs, the unified program should result in both lower costs for state and local governments and lower fees. As the CUPAs become certified, the state's overall workload ought to be lower as a result of (1) the shift to the CUPAs of some program responsibilities formerly performed by the state, and (2) less fragmentation in program delivery at the local level which should make the state's oversight role easier and less costly. Lower state costs and more efficient local operations should result in lower overall fees paid by parties regulated under the unified program.

While state agencies may experience more workload in the initial implementation of the unified program, overall workload should gradually decline as the CUPAs are certified beginning in 1995-96 and continuing into 1996-97. Accordingly, some state savings should be expected in 1996-97, with greater savings in 1997-98 when the unified program should be fully operational.

Unclear When Savings Will Materialize

The budget does not reflect any net savings from the unified program in 1996-97. Twenty-six permanent positions have been added over the last couple of years to the participating departments to develop and implement the unified program. Because the program will be fully implemented during the budget year, we would expect that some of these positions would be proposed for elimination.

Cost savings for state and local governments and lower overall fees for regulated parties would indicate that the unified program is achieving its objectives. However, it is unclear at this point when such savings will begin to occur and what impact the program will have on overall levels of fees paid by regulated parties. In order that the Legislature may be advised of these matters, we recommend that the Cal-EPA and the DTSC report at budget hearings on (1) the status of the implementation of the unified program, (2) the amount of program savings and benefits that can be anticipated, and when they would likely occur, and (3) the safeguards established in the development of the unified program to ensure that the program, when implemented, will in fact result in less fragmentation of program delivery.

Requested Fire Marshal Positions Should Be Limited Term.For 1996-97, the budget requests three positions for the SFM (now part of the California Department of Forestry and Fire Protection). The requested positions will establish an advisory committee that must report to the Legislature, by January 1998, on the potential inclusion of Fire Code permits in the unified program, help the Cal-EPA develop the unified program, review applications for the CUPA certification, and ensure the proper transfer of programs to the CUPAs. We recommend that these positions be made two-year limited term on the basis that the ongoing workload does not justify making these positions permanent.

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