Major Issues

The California Environmental Protection Agency (Cal-EPA) is not meeting some of the major goals set out for it when it was established, including assessing and addressing the greatest risks to public health and the environment. We make recommendations to address these shortcomings (see page B-51).

Priorities Need to Be Set for Resources Bonds

The Legislature will be evaluating a number of resources bond proposals this session. We provide a framework to assist the Legislature in assessing needs and setting funding priorities when considering the bond proposals (see page B-26).

Governor's Resources Initiatives Require More Detail

The Tahoe Initiative fails to identify long-term funding sources to meet the state's $274 million share of the Environmental Improvement Plan (see page B-37).

The Department of Fish and Game should verify that grants to be distributed under the Watershed Initiative comply with the statute creating the Salmon and Steelhead Trout Restoration Account (see page B-40).

The Ocean and Coastal Initiative needs more detail on coastal access and mitigation "bank" components (see page B-43).

Reorganization of Department of Fish and Game

Needs More Definition

We recommend that the department provide the Legislature, prior to budget hearings, with more details about the elements of this reorganization and when the department expects it to be completed (see page B-63).

State Agencies Lag in Recycling

State agencies lag in recycling and may impede some local jurisdictions' ability to meet landfill diversion requirements. The Waste Board should be more proactive in identifying and assisting state agencies to maximize their recycling efforts (see page B-79).

Pesticides Department Not Responsive to Legislative Direction

The Department of Pesticide Regulation has not been responsive to the Legislature's direction to develop the performance measures necessary to hold it accountable for meeting statutory mandates.

We recommend that the Legislature withhold action on the department's budget until the department provides the required performance measures (see page B-86).

State Potentially Liable for $750 Million in Cleanup Costs

State costs continue to mount at the Stringfellow and Casmalia hazardous waste sites, due to lawsuits alleging negligent state regulation at these locations.

In the Stringfellow case, a federal court has found against the state. To date, the state has spent $50 million in cleanup and $6 million in litigation. Future costs could be as high as $500 million if the state loses on appeal.

As for Casmalia, the budget proposes $2 million for litigation costs in 1998-99. If the state loses a current lawsuit, potential future cleanup costs could reach $250 million (see page B-97).

Overview

Expenditures for resources and environmental protection programs from the General Fund and various special funds are proposed to total $2.4 billion in 1998-99, which is 3.4 percent of all state-funded expenditures proposed for 1998-99. This level is an increase of $73.2 million, or 3.2 percent, above estimated expenditures for the current year. The budget proposes that 63 percent ($1.4 billion) of state support for resources and environmental programs come from special funds, including the Motor Vehicle Account, Environmental License Plate Fund, funds generated by beverage container recycling fees, and an "insurance fund" for the cleanup of leaking underground storage tanks. The General Fund supports the remaining 37 percent of these expenditures.

Figure 1 (see next page) shows that state expenditures for resources and environmental protection programs increased by approximately $596 million since 1991-92, representing an average annual increase of approximately 4.3 percent. This increase primarily reflects the establishment of various programs to address environmental problems such as leaking underground tanks, hazardous waste sites, and solid waste generation. When adjusted for inflation, these expenditures increased at an average annual rate of 1.5 percent. General Fund expenditures increased at an average annual rate of about 2.3 percent over this period. When adjusted for inflation, annual General Fund expenditures decreased slightly during this period at an average annual rate of 0.4 percent.

Spending by Major Program

Figure 3 (see page 8) shows similar information for major environmental protection programs--those programs within the jurisdiction of the Secretary for Environmental Protection and the California Environmental Protection Agency (Cal-EPA).

Spending for Resources Programs. Figure 2 shows that the General Fund provides a relatively small proportion of total support of resources programs, except in the case of the California Department of Forestry and Fire Protection (CDFFP) and the Department of Parks and Recreation (DPR). For 1998-99, the budget proposes $324.2 million (69 percent) of CDFFP's support and capital outlay expenditures from the General Fund. For DPR, the General Fund will constitute about 29 percent of the department's expenditures in 1998-99.

Figure 2 also shows that the budget proposes a significant reduction in total expenditures by DPR in 1998-99--by about 16 percent below the

Figure 2
Resources Budget Summary Selected Funding Sources
1996-97 Through 1998-99 (Dollars in Millions)
Department	Actual 1996-97	Estimated 1997-98	Proposed 1998-99	Change From 1997-98
				Amount	Percent
Conservation
General Fund	$14.8	$15.6	$15.8	$0.2	1.3%
Recycling funds	313.0	319.3	302.2	-17.1	-5.4
Other funds	54.4	64.7	60.5	-4.2	-6.5
Totals	$382.2	$399.6	$378.5	-$21.1	-5.3%
Forestry and Fire Protection
General Fund	$374.8	$298.0	$324.2	$26.2	8.8%
Forest Resources Fund	14.7	14.4	14.4	--	--
Other funds	126.9	138.4	130.9	-7.5	-5.4
Totals	$516.4	$450.8	$469.5	$18.7	4.1%
Fish and Game
General Fund	$3.1	$4.2	$4.1	-$0.1	-2.4%
Fish and Game Fund	75.6	87.4	79.1	-8.3	-9.5
Oil Spill Prevention Fund	15.5	16.5	20.5	4.0	24.2
Natural Resources Fund	--	1.5	13.4	11.9	793.3
Other funds	73.9	89.6	91.8	2.2	2.4
Totals	$168.1	$199.2	$208.9	$9.7	4.9%
Parks and Recreation
General Fund	$68.4	$71.1	$69.8	-$1.3	-1.8%
Parks and Recreation Fund	80.9	81.1	82.5	1.4	1.7
Off-Highway Vehicle Fund	32.4	46.5	37.6	-8.9	-19.1
Other funds	40.5	85.4	48.9	-36.5	-42.7
Totals	$222.2	$284.1	$238.8	-$45.3	-15.9%
Water Resources
General Fund	$39.5	$54.7	$57.1	$2.4	4.4%
State Water Project funds	747.1	631.8	693.6	61.8	9.8
Delta Flood Protection	8.7	3.0	5.1	2.1	70.0
Other funds	100.8	192.2	103.0	-89.2	-46.4
Totals	$896.1	$881.7	$858.8	-$22.9	-2.6%

Figure 3
Environmental Protection Budget Summary Selected Funding Sources
1996-97 Through 1998-99 (Dollars in Millions)
Department/Board	Actual 1996-97	Estimated 1997-98	Proposed 1998-99	Change From 1997-98
				Amount	Percent
Air Resources
Motor Vehicle Account	$74.4	$74.3	$78.4	$4.1	5.5%
Other funds	31.5	42.4	43.2	0.8	1.9
Totals	$105.9	$116.7	$121.6	$4.9	4.2%
Waste Management
Integrated Waste Account	$31.4	$30.8	$30.8	--	--
Used Oil Recycling Fund	18.5	24.2	24.3	$0.1	0.4%
Other funds	10.5	21.4	19.1	-2.3	-10.7
Totals	$60.4	$76.4	$74.2	-$2.2	-2.9%
Pesticide Regulation
General Fund	$10.8	$11.4	$11.4	--	--
Pesticide Regulation Fund	33.2	31.1	31.4	$0.3	0.9%
Other funds	6.0	5.6	5.3	-0.3	-5.4
Totals	$50.0	$48.1	$48.1	--	--
Water Resources Control
General Fund	$28.4	$35.7	$37.4	$1.8	5.0%
Underground Storage Tank	152.9	244.2	205.9	-38.3	-15.7
Waste Discharge Fund	14.1	12.1	15.7	3.6	29.8
Other funds	161.6	228.1	221.3	-6.8	-3.0
Totals	$357.0	$520.1	$480.3	-$39.8	-7.6%
Toxic Substances Control
General Fund	$17.0	$26.3	$31.1	$4.8	18.2%
Hazardous Waste Control	51.4	50.9	26.7	-24.2	-47.5
Toxic Substances Control	--	--	28.3	28.3	--a
Other funds	56.0	49.5	48.9	-0.6	-1.2
Totals	$124.4	$126.7	$135.0	$8.3	6.5%
aNot a meaningful figure.

current-year estimated level. The reduction reflects lower local assistance and capital outlay expenditures for park development funded from various special funds. This is in part due to the depletion of park bond funds. In addition, it is because the department anticipates a large amount of expenditures of past appropriations to occur in the current year. The budget also proposes reductions in expenditures for the Department of Conservation--primarily in the beverage container recycling program due to an estimated reduction in redemption payments, and for the Department of Water Resources (DWR)--mainly in expenditures funded from Proposition 204 bond funds.

The budget proposes moderate increases in the support and capital outlay expenditures for CDFFP and the Department of Fish and Game (DFG). For CDFFP, the proposed General Fund increase will support additional staff for initial fire suppression. As in the current year, the budget includes a base level of $20 million for emergency firefighting in 1998-99. To the extent actual emergency firefighting expenditures exceed that base amount, additional funds will be provided through subsequent deficiency appropriations.

For DFG, the budget proposes to provide about $10 million from the Natural Resources Infrastructure Fund (NRIF) for various environmental review, resource assessments, and conservation planning efforts. Previously, these activities were funded primarily from the Fish and Game Preservation Fund. Additionally, the budget proposes $8 million from the Salmon and Steelhead Trout Restoration Account for local watershed planning.

In addition to the major programs shown in Figure 2, the budget proposes expenditures by other resources programs totaling about $255 million, a decrease of $42 million (14 percent) below current-year estimated expenditures. These programs include various land conservancies, commissions, the Department of Boating and Waterways, and the California Conservation Corps. Specifically, the budget proposes reductions in expenditures primarily for the acquisition of wildlife properties by the Wildlife Conservation Board ($23.1 million or 45 percent below current-year estimated expenditures) and by the Department of Boating and Waterways ($11.6 million, or 16 percent) for loans and grants for boating facilities.

Spending for Environmental Protection Programs. As Figure 3 shows, the budget proposes reductions in the expenditures of the State Water Resources Control Board (SWRCB) and the California Integrated Waste Management Board (CIWMB) in 1998-99. For SWRCB, the reductions will be mainly in claim payments for underground tank cleanup paid from the Underground Storage Tank Cleanup Fund. For CIWMB, the reductions are primarily in the tire recycling program.

The budget proposes to increase support for the Department of Toxic Substances Control (DTSC) in 1998-99 by $8.3 million, or 6.5 percent over the current-year estimated level. The budget also reflects the implementation of Chapter 870, Statutes of 1997 (SB 660, Sher) which changed the department's fee structure. For 1998-99, site mitigation and pollution prevention activities will be funded from the newly created Toxic Substances Control Account while permitting and regulation of hazardous waste facilities will continue to be funded from the Hazardous Waste Control Account.

For the Air Resources Board, the budget proposes increases of $4.9 million (4.2 percent) over the current-year estimated level. Most of the increase will be from the Motor Vehicle Account.

Major Budget Changes

As Figure 4 shows, the budget proposes to increase funding for watershed planning and land acquisition under the Natural Community Conservation Planning program in DFG. The budget also proposes significant increases in funding for fish restoration and assessment and protection of subtidal and marine environments.

For DPR, the budget proposes a significant reduction in funding for state park capital outlay as well as for local assistance for park development. For DWR, the budget proposes increased expenditures for the State Water Project, but reductions in local flood protection, Bay-Delta water quality control projects, as well as reductions related to the conclusion of the Mono Lake project.

Figure 5 shows that the budget proposes various increases to clean up pollution. Specifically, the budget proposes an increase of $2 million for direct site cleanup at hazardous waste sites (DTSC) and $1.5 million for SWRCB to address water quality problems at an inactive mine. Figure 5 also shows a $41 million proposed reduction in SWRCB expenditures to reimburse tank owners for the cost of cleaning up underground storage tanks. This reduction is misleading because it is due to a one-time increase in 1997-98 expenditures of $48 million in accumulated prior-year appropriations. This reduction masks a $7 million increase in SWRCB's

Figure 4
Resources Programs Proposed Major Changes for 1998-99
	Forestry and Fire Protection	Requested:	$469.5 million
		Increase:	$18.7 million	(+4.1%)
	+$6.8 million to improve staffing of fire engines and airbases
	+$4.4 million to refurbish airtankers
	Fish and Game	Requested:	$208.9 million
		Increase:	$9.7 million	(+4.9%)
	+$11.7 million to continue salmon restoration
	+$8 million to assist local watershed planning
	+$4.6 million for Natural Community Conservation Planning
	+$3.6 million to protect subtidal and marine environments
	+$2.4 million for striped bass restoration
	+$1.2 million to increase support of field biologists
	Parks and Recreation	Requested:	$238.8 million
		Decrease:	$45.3 million	(-15.9%)
	-$30 million in state park capital outlay
	-$20 million for local assistance of park development
	Water Resources	Requested:	$858.8 million
		Decrease:	$22.9 million	(-2.6%)
	+$62 million in State Water Project design, construction, operations, and maintenance
	-$29.9 million in local assistance for flood protection and control
	-$24.4 million for water development, ground water storage and recycling, and Bay-Delta water quality control projects
	-$9 million due to conclusion of Mono Lake program
	-$9 million for projects for fish and wildlife habitat

Figure 5
Environmental Protection Programs Proposed Major Changes for 1998-99
	Air Resources Board	Requested:	$121.6 million
		Increase:	$4.9 million	(+4.2%)
	+$3.6 million to develop implementation plan for fine particulate matter
	+$2.5 million for Rice Straw Demonstration Project
	Integrated Waste Management Board	Requested:	$74.2 million
		Decrease:	$2.2 million	(-2.9%)
	+$1.5 million for pollution prevention and education program for the Lake Tahoe Basin
	Water Resources Control Board	Requested:	$480.3 million
		Decrease:	$39.8 million	(-7.6%)
	+$1.5 million for plan to restore water quality affected by Leviathan Mine
	+$1.3 million for coastal nonpoint source pollution and coastal water monitoring
	+$0.9 million for watershed management
	-$41 million to tank owners for tank cleanup
	Toxic Substances Control	Requested:	$135 million
		Increase:	$8.3 million	(+6.5%)
	+$3.5 million to repay a loan made to the General Fund
	+$2 million for direct hazardous waste site cleanup
	+$1.4 million for litigation costs at the Casmalia Hazardous Waste Management Facility
	+$1 million for the Hazardous Waste Management Tracking System

base funding to reimburse tank owners for the cost of cleaning up underground storage tanks. The budget also proposes an increase of $1.3 million for monitoring and pollution control of coastal waters.

For ARB, the budget proposes $6.1 million to address air quality issues associated with fine particulate matter (emitted mainly from fuel burning engines, fireplaces, woodstoves, and agricultural burning) and rice straw burning.

In addition to the major changes shown in Figure 5, the budget also proposes to increase funding for Cal-EPA's permit assistance centers by $2.2 million from the General Fund, more than three times the funding level estimated for the current year.