LAO Analysis of the 1995-96 Budget Bill
Resources, Part III

California Integrated Waste
Management Board (3910)

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. Cities and counties develop solid waste management plans--which must be approved by the CIWMB--showing how 50 percent of solidæt-te will be diverted from landfills by 2000. The CIWMB administers various programs which promote waste reduction and recycling, with particular programs for waste tire and used oil recycling. The board also regulates landfills through a permitting, inspection, and enforcement program that is mainly enforced by local enforcement agencies that are certified by the board. In addition, the CIWMB oversees the cleanup of abandoned solid waste sites.

The budget proposes total expenditures of $74.5 million from various funds (primarily special funds) for support of the CIWMB. This is a reduction of $1.5 million, or 2 percent, from estimated 1995-96 expenditures. Major budget adjustments include (1) $2.6 million for loans to local governments and businesses to develop markets for recycled goods, and (2) $1.4 million for grants and contracts for research, public education, and other activities in the tire recycling program.

Tire Grant Program Has Been A Mixed Success

We recommend that $1.4 million proposed to increase grants and contracts in the tire recycling program be rejected due to the lack of justification for additional grant funds and the mixed success of previous grants. We further recommend that the Legislature adopt supplemental report language directing the California Integrated Waste Management Board, in its 1997-98 and future years' budget requests, to identify the nature and types of grants that have been most effective and therefore should be targeted for funding. (Reduce Item 3910-001-0226 by $1.4 million.)

Recycling Program's Purpose Is to Divert Waste Tires From Landfills and Stockpiles. Chapter 974, Statutes of 1989 (AB 1843, W. Brown) required the CIWMB to establish a tire recycling program that promotes and develops alternatives to landfill disposal and stockpiling of used tires. This program is funded by a disposal fee of 25 cents per tire levied when used tires are left for disposal at a seller of new or used tires. This fee generates about $3.5 million in revenues each year which are deposited into the Tire Recycling Management Fund.

Chapter 974 also authorized the CIWMB to award grants, contracts, or loans to public agencies and businesses for various purposes. These purposes include research aimed at developing technologies and applications that reduce the disposal of tires in landfills, collection programs, and public education programs. In addition, grants and loans can be awarded to any entity that is involved in activities that result in less landfill disposal or stockpiling of tires.

Budget Proposes More Grants and Contracts. The board estimates that expenditures for the tire recycling program will total $3.8 million in 1995-96. Of this amount, $2.2 million is for external grants and contracts. The budget requests $4.9 million for the program in 1996-97, including a $1.4 million increase in external grants and contracts.

The board, however, has provided few details to substantiate the need for additional grant funds. Instead, it appears that the board's request is in response to an increase in available revenues. The board also has not provided details setting out the priorities for the awards of the grants in 1996-97. Additionally, our review of the results of the grants which have been previously awarded finds that these grants have produced mixed results, and that there is a need to better target grant funds to activities which will produce effective results.

Grants Have Produced Mixed Results. Under the current program, the board awards grants for projects that will be completed within a two-year period. Since the grant program was instituted, only one grant cycle--pertaining to grants awarded in 1992-93--has been completed. The board has tabulated the results from these grants. Later this year, the CIWMB will be in a position to evaluate the grants awarded in 1993-94.

In the 1992-93 grant cycle, about $1.9 million was awarded to 45 public and private entities. Our review finds that between 50 percent and 60 percent of these grants resulted in an actual or potential diversion of tires from landfills and stockpiles. Particularly successful were grants to set up local tire amnesty days, as well as research and demonstration projects to determine the recyclability of waste tires for road construction and a few other specific purposes.

However, the remaining grants--as much as 50 percent of the total--did not appear to produce results leading to either an actual or potential diversion of waste tires from landfills and stockpiles. Among these grants was a $100,000 award to a marine society to build an artificial reef made of waste tires which was designed to attract fish. This grant was later terminated when various state officials raised environmental and public safety concerns and refused to grant the necessary permits. In addition, several grants were terminated early because the grantee was unable to carry out the proposed project, and various grants for "innovative research" did not result in a potential for waste diversion.

Most of Waste Diversion Not Attributable to Grants. According to the CIWMB, the rate of diversion of waste tires from landfills and stockpiles has increased significantly from 34 percent in 1990 to 62 percent in 1994. For 1994, this represents a diversion of about 18 million of the 29 million waste tires that were generated that year. However, only a small proportion of this diversion (less than 5 percent) appears to be directly attributable to the board's tire grant program. Rather, a majority of the diversion relates to known well-established uses of waste tires, such as a fuel in cement kilns.

Expansion in Grant Program Not Warranted. While the proposed increase in grants and contracts for the tire recycling program is consistent with statute, we do not think the requested increase is justified in light of the lack of clear reasons for additional grants and given the ineffectiveness of a significant proportion of past grants. Therefore, we recommend the requested increase be rejected. We further recommend that the Legislature adopt the following supplemental report language to ensure that the CIWMB targets its grants towards activities that are most likely to result in, or create the potential for, a significant diversion of waste tires from landfills and stockpiles:

In order that the Legislature may assess, and ensure, the effectiveness of the grants, loans, and contracts in the California Integrated Waste Management Board's tire recycling program, the board shall, as part of its 1997-98 and future years' budget request, provide the following information:

It is the Legislature's intent that the board target its grants, loans, and contracts in the tire recycling program towards the identified types of activities that have proven to be particularly effective.

Department of Pesticide Regulation (3930)

The Department of Pesticide Regulation (DPR) administers programs to protect the public health and the environment from unsafe exposures to pesticides. The department (1) evaluates the public health and environmental impact of pesticide use, (2) regulates, monitors, and controls the sale and use of pesticides in the state, and (3) develops and promotes the use of reduced-risk practices for pest management. The department is funded primarily by a tax on the sale of pesticides in the state, and by the General Fund.

The budget proposes expenditures of $47.2 million for the DPR in 1996-97, a decrease of $1 million, or 2 percent, from estimated current-year expenditures. Of the total amount, about $36 million will be expenditures for departmental support, and $11.1 million for local assistance. Major budget proposals include a reduction of $798,000 and 16 positions in various programs reflecting efficiencies. (Please see our write-up on this proposal in the Crosscutting Issues section of this chapter.)

Major Funding Shortfall Will Occur After 1997-98

We recommend the department report, prior to budget hearings, on its program and funding priorities given the scheduled reduction in the mill tax rate in 1997.

Mill Tax Rate Will Drop in 1997. The primary source of funding for the DPR is a tax levied on the sale of registered pesticides in the state (the mill tax). The mill tax is currently levied at a rate of 22 mills (2.2 cents) per dollar of sales. Under current law, about 6.6 mills are distributed to the counties for enforcement activities. The remainder, about 15.4 mills, are available for state operations of the department.

Except for a small amount which is deposited in the Food and Agriculture Fund, all of the mill tax revenues are deposited in the Department of Pesticide Regulation Fund. In 1996-97, revenues from the mill tax are projected to be $30 million, with about $21.3 million available for the department.

Current law provides that, as of July 1, 1997, the 22 mill rate will revert to 9 mill--the rate which existed prior to 1992. Of the 9 mills, about 5.6 mills will be distributed to counties, leaving 3.4 mills for state support.

Lower Mill Tax Rate Will Result in Substantial Revenue Loss for Department. While the counties will receive slightly less revenue from the mill tax when the tax rate drops in 1997, the department will receive substantially less revenue. Assuming no change in the sale of pesticides, we project that annual mill tax revenues available for the department will decline from $21.3 million to $4.7 million when the tax rate changes in 1997. This represents a decrease of about 78 percent in tax revenues.

Major Shortfall in DPR Fund After 1997-98. Figure 23 shows projected revenues and expenditures in the DPR Fund for 1997-98, assuming that the mill tax reverts to the 9 mill rate on July 1, 1997. The figure also assumes that expenditures, and revenues from sources other than the mill tax (mainly registration and license fees), will remain the same as in 1996-97. The figure shows that in 1997-98 expenditures will exceed revenues by $14.2 million. Because the DPR Fund is projected to have an accumulated reserve of $13.8 million by the end of 1996-97, maintaining the 1996-97 level of expenditures in 1997-98 would create a funding shortfall of $400,000. However, in 1998-99, the shortfall would increase significantly to $14.6 million.

Figure 23
Department of Pesticide Regulation Fund
Revenues and Expenditures
1995-96 Through 1997-98
(In Millions)

1996-97a 1997-98
Revenues $33.3 $33.4 $16.8
Expenditures 31.7 31.0 31.0
Difference $1.6 $2.4 -$14.2
Carryover reserve $9.8 $11.4 $13.8
$11.4 $13.8 -$0.4
a Based on 1996-97 Governor's Budget.

In order that the Legislature may assess the department's program priorities at various funding levels, including at a mill tax rate of 9 mills, we recommend that the department report, prior to budget hearings, on (1) the department's expenditure priorities at a mill tax rate of 9 mills, (2) the department's expenditure priorities for activities that would go unfunded at a mill tax rate of 9 mills, and (3) the department's proposals for funding options, such as different mill tax rates and new funding sources, including how the department would reduce expenditures if funding is less than the current level.

State Water Resources Control Board (3940)

The State Water Resources Control Board (SWRCB) regulates water quality in the state and administers water rights.

The board carries out its water quality 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 waste 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 expenditures of $291 million from various funds for support of the SWRCB in 1996-97. This amount is about the same as estimated current-year expenditures. Major budget proposals include (1) an increase of $10 million to process more claims in the Underground Storage Tank Cleanup Fund (USTCF) program, (2) a reduction of $3.8 million in the Water Quality Management (WQM) program due to a lack of funding, and (3) an increase of $2 million for oversight of cleanup of leaking underground storage tanks.

Future Direction of Underground Tank Program Uncertain

The future direction of the underground tank program is uncertain given a current review of cleanup standards for this program. We recommend that the board report at budget hearings on the status of its review, as well as on the costs and benefits of a possible shift in policy that would lower the level of cleanup required of leaking tanks.

Tank Program Is Board's Largest Program. The budget requests about $170 million for support for the Underground Storage Tank Program in 1996-97, representing close to 60 percent of total expenditures for the board. Of this amount, $154 million is from the USTCF for support of the Underground Storage Tank Program. The USTCF is funded by a per gallon storage fee on petroleum tank owners. The program has three major components: (1) permitting of underground tanks (containing hazardous substances, such as petroleum), (2) cleanup of leaking tanks under local oversight, and (3) payment of claims for cleaning up leaking tanks.

Since 1983, close to 30,000 out of up to 200,000 tanks in the state have been found to be leaking. Of these leaking tanks, about 8,500 tanks have been cleaned up and over 20,000 tanks still require cleanup action. Regional water boards and, where authorized, local oversight agencies, order and approve cleanup plans and supervise tank cleanups.

Demand for reimbursements from the USTCF to help pay for cleanup costs far exceeds available funds. The board estimates that from 1992-93 to the end of the current year, it will have authorized 3,285 payments totaling $386 million, having actually paid $228 million in progress payments as cleanup work is completed. However, there will still be 5,968 requests, representing more than $1 billion of claims, that remain unprocessed.

Board Is Reviewing Cleanup Standards. Chapter 1191, Statutes of 1994 (SB 1764, Thompson) required the SWRCB to convene an advisory committee to review and make recommendations by September 1, 1995 regarding the operations and policies of the petroleum underground tank cleanup program. (At the time this Analysiswas prepared, the advisory committee had not made its recommendations to the board.) By March 1, 1997, the board is required to adopt standards for the cleanup of leaking petroleum tanks, taking into account the committee's recommendations. Until these standards are adopted, federal and state laws regarding hazardous substances govern the level of cleanup required.

Among the information reviewed by the advisory committee is a year-long study by the Lawrence Livermore National Laboratory (LLNL). According to the board, the study found that the environmental impact from leaking underground petroleum tanks is not as severe as once thought, given natural processes that remove toxic substances from the leaks. Although the board has not yet adopted cleanup standards as required by Chapter 1191, it directed the regional boards and local oversight agencies in December 1995 to consider the LLNL study's recommendations when making cleanup decisions. The board recommended that cleanup of leaking tanks be replaced with monitoring in certain low-risk cases.

Change in Cleanup Standards Could Significantly Change Program. At the time this Analysiswas prepared, it was not known how the board will respond to the LLNL study and other materials presented to the advisory committee. Depending on the standards adopted, there could be a potentially major impact on both the level of expenditures for state oversight of cleanup activities and claims for cleanup activities. To the extent that, on average, a lower level of cleanup would be required than in the past, expenditures for oversight and cleanup claims would go down over time.

In order that the Legislature may be advised of the costs and benefits of this possible shift in board policy, we recommend that the board report, at budget hearings, on (1) the advisory committee's recommendations, (2) the board's response to these recommendations, and the basis for determining whether changes in the cleanup process are warranted, and (3) the costs and benefits of changing the cleanup standards. This information should include the potential impact of the board's policy on (1) state and local oversight and other administrative costs, (2) the level of environmental protection, (3) the level of fees paid by tank owners, (4) cleanup expenditures of tank owners, and (5) level of claims to the USTCF.

Lack of Funding for Water Quality Management Program

The budget proposes a $3.8 million reduction in the Water Quality Management program due to lack of funding. We recommend that the board report at budget hearings on its expenditure priorities at the reduced funding level and the impact of this reduction on the board's other programs, including permitting.

The WQM program assesses the state's water quality. This is done 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 prior to 1994-95 had been various bond funds. Other support came from the General Fund and federal funds.

Major Reductions in the WQM Program. In the current year, program expenditures are estimated to total $8.7 million, about 45 percent less than 1992-93 expenditures. The 1996-97 budget reflects a further major reduction in program support--to $4.9 million. Of this amount, $3.7 million is from the General Fund, and $1.2 million is from the Waste Discharge Permit Fund (WDPF).

The Supplemental Report of the 1995 Budget Act requires the board to submit a report on options to fund the WQM program in 1996-97 and future years. In its January 1996 report, the board advised the Legislature that it was still developing a long-term funding solution for the WQM program.

Impact of Reductions. According to the board, it is not certain what particular activities in the WQM program will be reduced in 1996-97. However, the board indicates that it will likely delay its review and updates of statewide and basin water quality control plans that are required under both federal and state clean water laws. However, if the plans are not updated to include statewide standards for permit issuance, limits on waste discharge would have to be developed on a case-by-case basis. This could result in a more time-consuming permit process. In addition, the lack of compliance with federal clean water laws could result in the United States Environmental Protection Agency setting water quality standards in the state, which, according to the board, could be more stringent and costly for businesses in the state.

In order that the Legislature may be advised of the board's priorities for expenditures for the WQM program at the lower funding level proposed for 1996-97, and the impact of the reduced funding on the board's other programs, including the issues noted above, we recommend that the board report on these matters at budget hearings.

Long-Term Funding Concerns Facing Board

With over 60 different fund sources, the board's funding has been unstable and lacks the flexibility needed to address changing priorities. We recommend that the board report at budget hearings on its draft proposal to provide a stable funding mechanism for the Water Quality Management program and other board programs.

The funding problems in the WQM program discussed above reflect broader long-term funding issues facing the board. In recent years, funding for the SWRCB's operations has shifted from the General Fund to a mixture of fees, special funds, and federal funds. In 1986, 53 percent of its budget was from the General Fund; today less than 10 percent of its budget is funded by the General Fund. In addition, bond funds that supported many of the board's activities--such as the WQM program--in the 1970s and 1980s are either close to or completely depleted. Today, over 60 different fund sources support the SWRCB, with special funds being the primary support.

Problems With Current Funding Mechanism. Several problems have been identified with the current funding mechanisms. First, the current-funding mix with many separate special funds is less stable and predictable and provides less flexibility in decision-making. This is because (1) fee revenues for special funds tend to vary from year to year and (2) special and federal funds generally prescribe the specific purposes for which they must be used. Therefore, the current funding mix restricts the board's flexibility to redirect resources to a high priority program such as the WQM program.

Second, the current permit fee structure allows the SWRCB and the regional boards to recover from fees only 30 percent to 40 percent of their administrative costs in connection with individual permittees. Current law sets a maximum annual cap of $10,000 on fees for holders of waste discharge permits (deposited in the WDPF). Actual fees assessed range from $200 to $10,000, with the level of assessment based on the relative threat to water quality. (Only 5 percent of fee payers pay the $10,000 fee; the majority pay a fee of $2,000 to $4,000.) Some fee payers have resisted fee increases, in part because of recessionary times, but also because of their perception that other parties contributing to water pollution are not paying their "fair share" of fees. In particular, "nonpoint source" polluters, such as farmers, generally have not been subject to permitting and fee regulation.

Board Is Addressing Funding Concerns. As discussed in the Analysis of the 1995-96 Budget Bill(see pages B-77 through B-80), the board has taken a number of actions to make its regulatory programs operate more efficiently. For example, the board has increased the use of "general" permits which can be adopted for use by several dischargers, where there is similarity in the nature of the discharge or compliance requirements. While the board has made progress in achieving administrative efficiencies, the associated savings do not eliminate the need for the board to develop a long-term, stable funding mechanism for its programs.

The board has advised the Legislature that it is currently developing a draft funding proposal in time for discussion at budget hearings. We recommend that the board report at budget hearings on its proposal to provide a long-term, stable funding mechanism for the WQM and other board programs.

Department of Toxic Substances Control (3960)

The Department of Toxic Substances Control (DTSC) regulates hazardous waste management, cleans up or oversees the cleanup of contaminated hazardous waste sites, and promotes the reduction of hazardous waste generation. The department is primarily funded by fees on persons that generate, transport, store, treat, or dispose of hazardous wastes.

The budget requests $151.3 million from various funds for support of the DTSC in 1996-97. This is an increase of $32.4 million, or 27 percent, above estimated current-year expenditures. Almost all of this increase is for $30.3 million from the General Fund for cleanup activities at the Stringfellow Federal Superfund Site (Stringfellow) and the Casmalia Resources Hazardous Waste Management Facility (Casmalia). In addition, the budget requests a $1.6 million General Fund increase to clean up illegal drug labs closed by the Department of Justice.

Other major budget proposals mainly relate to a projected $5.4 million decrease in revenues in the Hazardous Waste Control Account (HWCA), the department's primary source of support. Specifically, the budget proposes to reduce $1.6 million of the HWCA support for various programs throughout the department and replace $1.7 million of the current HWCA funding for the Department of Health Services with General Fund support.

The budget also proposes a $2.2 million reduction in the Railroad Accident Prevention and Immediate Deployment (RAPID) program, due to the expiration of the fee authority for this program. (We discuss this issue further in the Crosscutting Issues section of this chapter.)

State Liable as Responsible Party For Major Cleanup Costs

A recent court decision found the state liable for all of the cleanup costs at the Stringfellow Federal Superfund Site. These costs could reach hundreds of millions of dollars over many years. The state is also liable for part of the cleanup of the Casmalia Hazardous Waste Management Facility.

The budget requests $30.3 million from the General Fund for cleanup costs in 1996-97 at two hazardous waste sites, Stringfellow and Casmalia. Under federal law, the state is considered to be a "responsible party" that contributed to the contamination at these sites, making the state liable for potentially all of the past and future cleanup costs at these sites.

Stringfellow Represents Multiyear Liability for State. Stringfellow operated as a hazardous waste disposal facility in Riverside County from the 1950s to 1972, having received state permits for the facility's location. However, the physical environment around the site was such that a substantial amount of contamination migrated from the site to neighboring communities. Around 1983, Stringfellow was placed on the federal Superfund list, a list of high-risk contaminated sites to be cleaned up by, or under the oversight of, the United States Environmental Protection Agency (US-EPA) with state participation. Since that time, the state has spent about $25 million at Stringfellow for investigations and cleanup activities. The US-EPA and other responsible parties have spent about $155 million.

In January 1995, a federal court found the state to be liable for all past and future cleanup and site operation costs at Stringfellow. This means that the state is liable for the $155 million of past costs and for future costs which, according to the department, could be in the hundreds of millions of dollars.

The budget requests $12 million from the General Fund to perform various activities at Stringfellow in 1996-97, including the operation of a pretreatment plant, site maintenance, monitoring, and stabilization work to prevent against future migration of contamination to nearby communities. Expenditures in 1997-98 and 1998-99 are also projected to be $12 million per year. According to the department, these expenditures will lower the long-run maintenance costs at the site and prevent future damage claims from residents of neighboring communities and litigation with the US-EPA and other responsible parties.

While the state is appealing the court decision, it is unlikely that a decision will be rendered before 1998-99. According to the Attorney General's Office, it is unlikely that the state would be absolved of all liability at Stringfellow. At best, the liability would be reduced. Under such circumstances, the state may be able to recover some of its expenditures. Regardless of the finding on the liability issue, the state remains responsible under federal law for oversight activities at Stringfellow, but these costs could be recovered from the responsible parties.

Budget Request Will Settle Casmalia Liability. Casmalia operated as a hazardous waste treatment, storage, and disposal facility in Santa Barbara County until 1989. The US-EPA has taken the lead to cleanup this site, and has identified parties, including a number of state agencies, that contributed to the contamination by sending large amounts of waste to Casmalia. The US-EPA is negotiating with these parties to settle their liability for cleanup costs based on the amount of waste each party contributed.

The budget requests $18.3 million from the General Fund in order to settle the state's liability for costs at Casmalia. (In addition, the budget requests $2.5 million from the State Highway Account for the Department of Transportation's "share" of the overall state liability.) The amount is based on the state having contributed 5 percent of the waste at Casmalia. If the US-EPA accepts this "cash out" settlement, the state would be absolved of any further liability. However, the department may still be responsible for certain regulatory oversight activities at the site, at an unknown cost.

According to the department, if the state does not enter into a settlement with the US-EPA, the state would become subject to several lawsuits from other responsible parties (over 20,000 hazardous waste generators contributed to the waste at Casmalia) and the US-EPA. In addition, the US-EPA could transfer the regulatory lead for Casmalia back to the state, at a substantial future cost to the state.

Are There Other Stringfellows? The department indicates that it is not aware of any contaminated sites other than Stringfellow or Casmalia that could result in the state being found liable as a "responsible party" for cleanup costs.

Budget Focuses Direct Site Cleanup on Pilot Program

We recommend that the request for an additional $4.1 million for "orphan share" cleanup costs for a pilot cleanup program be denied because there is no known estimate of the state's liability for these costs. We recommend approval of the requested reappropriation of $4.1 million from the current year for orphan share cleanup costs. We further recommend that the department report at budget hearings on the relative effectiveness of the pilot site cleanup program and the level of participation in the pilot program. (Reduce Item 3960-001-0456 by $4,098,000.)

Background. The department is responsible for overseeing the cleanup of contaminated hazardous waste sites which are carried out and paid for by "responsible parties." In addition, it carries out and pays for some of the cleanup of "orphan share" sites where responsible parties are unable or unwilling to provide a timely cleanup, or cannot be found. (These sites are in addition to those cases, discussed above, where the state itself is a responsible party and is therefore liable for cleanup costs.)

The state is currently involved in direct cleanup of about 27 orphan share sites in what is known as the "State Superfund" Program. The selection of these sites is based on the level of threat to environmental protection if cleanup did not proceed in a timely manner. In addition, there are 14 "backlog" sites where no cleanup activity has taken place due to a lack of funding. The department projects total state costs to clean up and maintain all of these sites to be more than $200 million, of which about $20 million has been spent to date. In recent years, funding for direct site cleanup has come from bond funds (which are almost depleted) and from transfers of revenues from the HWCA to the Site Remediation Account. In 1996-97, the budget requests $1.6 million to pay for cleanup of the orphan share sites in the State Superfund Program.

Pilot Program to Expedite Site Cleanup. Chapter 435, Statutes of 1994 (SB 923, Calderon) established a pilot program to expedite the voluntary cleanup of up to 30 hazardous waste sites. The pilot allows for expedited cleanup by providing for arbitrators to decide a number of issues, including the extent of cleanup required and the degree of liability for the cleanup by the various responsible parties.

Costs for the pilot program are to be recovered from the responsible parties liable for the cleanup. Chapter 435 also allows up to ten sites in the program to include an orphan share. The department will pay for the orphan share's cleanup costs only to the extent funds are made available.

No Orphan Share Expenditures in Pilot Program in 1995-96. For the current year, up to $4.1 million in fine and penalty revenues in the HWCA is provided to pay the state's liability for cleanup costs at orphan share sites chosen for the pilot program. This amount was freed up by reductions in other programs in the department.

As of January 1996, four sites--only one of which potentially has an orphan share--have been designated to participate in the pilot program. The department now expects a total of six sites to join the pilot program in the current year, with six to eight being added in 1996-97. Only some of these sites are likely to have an orphan share. The department also expects that it will not expend any money for orphan share cleanup costs before 1996-97.

Budget Requests $8.2 Million for Pilot Program in 1996-97. The budget requests $8.2 million for orphan share cleanup costs related to the pilot program for expediting site cleanup in 1996-97. This amount includes $4.1 million to be reappropriated from the current year and an additional $4.1 million in 1996-97 fine and penalty revenues in the HWCA. This amount represents the bulk of the total request for direct cleanup of sites where the state is not a responsible party.

Budget Request Not Justified Based on Known State Liability. We believe that funding the pilot program has merit and is consistent with legislative intent. However, the department has not provided information which justifies the need for $8.2 million for the pilot program in 1996-97. Specifically, the department does not know the amount of the state's liability for orphan share cleanup costs at the pilot sites. This amount will not be known until the number of sites in the program that have orphan shares is determined, sites are investigated, and liability among responsible parties at these sites is allocated. The department cannot estimate when that process will be complete. Thus, there is no assurance that there will be any allocation of liability to the state for orphan share cleanup costs in either the current or budget year.

Lacking this justification, we recommend that funding for the pilot program not be augmented in 1996-97. Accordingly, we recommend the request for $4.1 million from the Expedited Site Remediation Trust Fund for the pilot program be denied. To provide continued funding for the program, we concur with the request to reappropriate $4.1 million from the current year.

We also recommend that the department report at budget hearings on the effectiveness of expenditures in the pilot program, relative to other direct site cleanup expenditures in the State Superfund Program. This will enable the Legislature to assess the extent to which redirection of resources to the pilot program is consistent with legislative goals and priorities. We further recommend that the department provide, at budget hearings, any further details it may have regarding interest and participation in the pilot program and the state's potential liability for orphan share cleanup costs at sites in the program.

Legislatively Required Reports Not Submitted

The department has not submitted information required by the Legislature regarding (1) three-year revenue projections and expenditure priorities and (2) the hazardous waste manifest system.

Reports on Revenue Projections and Expenditure Priorities Not Submitted. Because of concern regarding the future condition of the HWCA, the Legislature adopted supplemental report language in both 1994-95 and 1995-96 requiring the department to submit to the Legislature, by January 1, 1995, and January 1, 1996, respectively, reports on three-year projections of revenues to the HWCA (and related accounts) using a number of revenue scenarios. In addition, the department was required to set priorities for three fiscal years, considering the overall impact on environmental protection.

At the time this Analysiswas prepared, the department had not submitted either required report to the Legislature. Consequently, this affects the ability of the Legislature to evaluate the department's plan to reduce the HWCA program expenditures in the budget year.

Report on Hazardous Waste Manifest System Not Submitted. The Legislature also directed the department to submit, by January 1, 1996, a report on the department's hazardous waste manifest system, including information on the department's efforts to upgrade the system in order to provide a complete and accurate tracking of hazardous waste generated in the state. At the time this Analysiswas prepared, the department had not submitted the required report to the Legislature.

Office of Environmental
Health Hazard Assessment (3980)

The Office of Environmental Health Hazard Assessment (OEHHA) identifies and quantifies the health risks of chemicals in the environment. The OEHHA provides these assessments, with its recommendations for pollutant standards and health and safety regulations, to the boards and departments in the California Environmental Protection Agency and to other state and local agencies. The OEHHA develops policies and guidelines for conducting risk assessments, and provides scientific and medical support to, and public health oversight of, the environmental regulatory agencies.

The budget requests $11.8 million for support of the OEHHA in 1996-97. This is a decrease of $1.6 million, or 12 percent, from estimated current-year expenditures. Major budget proposals include a $1.1 million reduction in the Air Toxics "Hot Spots" Program (please see the Crosscutting Issues section of this chapter for a discussion of this issue) and a $717,000 increase due to additional workload in the environmental assessor registration program.

Major Expansion in Environmental Assessor Program

We recommend that seven positions requested for the implementation of the environmental assessor registration program--as modified by Ch 820/95 (AB 1876, Richter)--be two-year limited-term positions because the workload of the program is uncertain. We further recommend that the Department of Toxic Substances Control report, at budget hearings, on the impact of Chapter 820 on its workload in 1996-97 and future years.

The Environmental Quality Assessment Act of 1986 established a voluntary registration program in the OEHHA for environmental assessors. Environmental assessors are independent parties who review a business' operations to ensure compliance with environmental laws relating to hazardous substances management, and make recommendations for cost-effective process improvements. The state provides an annual list of registered assessors to businesses seeking this technical assistance. The OEHHA reviews applications for registration and renews these registrations every five years. The OEHHA's costs are recovered from application and registration fees which are capped in statute.

Since 1987, over 5,100 assessors have been registered, with annual growth in recent years of about 500 assessors.

Statute Adds New Category of Assessor. Chapter 820 changes the environmental assessor program. Among other changes, Chapter 820 creates a new category of "class II" environmental assessors who will be authorized to act as private site managers at the cleanup of lower-risk contaminated hazardous waste sites.

Chapter 820 requires the OEHHA to establish registration criteria for the class II assessors, and to work with the Department of Toxic Substances Control (DTSC) to develop performance standards for them. As with class I assessors (the new name for the former registered environmental assessor), the OEHHA will process applications for class II registration and renew registrations every five years. Costs for the program will continue to be recovered from application and registration fees that are capped in statute.

Budget Proposes Major Expansion in Assessor Program. In the current year, the environmental assessor program has four positions and estimated expenditures of $386,000 (prior to implementing requirements of Chapter 820). The budget requests an increase of $717,000 and ten positions for this program in 1996-97. Of these ten positions, seven positions are requested due to increased workload to implement Chapter 820, and three positions are requested to reduce increasing backlogs in the initial registration and renewal process. Our review finds that the request for three positions for reduction of workload backlogs is justified.

However, the actual amount of additional workload in 1996-97 and future years as a result of Chapter 820 is highly uncertain at this time given a lack of experience with demand for both private site management and class II assessor registrations. Based on limited experience of a similar program in Massachusetts, the OEHHA projects that there may be as many as 1,400 applications for class II registration in the modified program's first full year. However, no information is available to project ongoing demand for class II registration.

Given the uncertainty about ongoing workload, we recommend that the seven additional positions requested to implement Chapter 820 be made two-year limited term. After two years of experience with the program, the Legislature will be in a better position to assess the appropriate staffing levels for this program.

What Is the Impact on the DTSC's Workload? Chapter 820 will affect the workload of the DTSC. For instance, workload should be reduced to the extent private site managers registered as class II assessors, rather than the DTSC, oversee cleanup activities at lower-risk hazardous waste sites. On the other hand, the department will have additional workload related to audits of sites cleaned up with a private site manager. Additionally, to the extent Chapter 820 encourages more voluntary cleanups because of the authorized use of private site managers, the DTSC would have an increase in cleanup activities to approve. The budget proposes no adjustments in support for the DTSC as a result of Chapter 820. In order that the Legislature is advised of the impact of Chapter 820 on the department's workload, we recommend that the DTSC report at budget hearings on this matter, including the timing of, and amount of, any expected adjustments to its budget.

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