The Department of Parks and Recreation (DPR) acquires, develops, preserves, interprets, and manages the natural, cultural and recreational resources in the state park system and the off-highway vehicle trail system. In addition, the department administers state and federal grants to cities, counties, and special districts that help provide parks and open-space areas throughout the state.
The state park system consists of 265 units, including 39 units administered by local and regional agencies. The system contains approximately 1.3 million acres, which include 3,000 miles of trails, 280 miles of coastline, 625 miles of lake and river frontage, and nearly 18,000 camp sites. Over 70 million visitors travel to state parks each year.
The budget proposes $242.5 million in total expenditures for the department in 1999-00. This is an overall decrease of $112.1 million (32 percent) below estimated current-year expenditures. The reduction includes about $35 million in departmental support, and about $38 million each in local assistance and capital outlay expenditures.(Please also see the "Capital Outlay" chapter of this Analysis.)
The decrease in support expenditures reflects mainly one-time funding of $30 million in 1998-99 for deferred maintenance. As we discuss in a later section of this item, the budget proposes no funds in 1999-00 to address the department's maintenance backlog. The decrease in local assistance mainly reflects one-time expenditures in 1998-99 totaling $31 million for local park development.
Of the total proposed expenditures in 1999-00, about $75.2 million (31 percent) will come from the General Fund, about $82 million will come from the State Parks and Recreation Fund (SPRF) and the remainder from various other state funds, federal funds and reimbursements.
The DPR oversees one of the largest and most diverse natural and cultural heritage holdings of any agency in the nation. As such, its maintenance needs are also large and diverse--ranging from Civil War era structures to museums, artifacts, and park benches. The 265 park units encompass approximately 1.3 million acres throughout the state. These units include state beaches, state parks, museums, day-use and overnight campgrounds. Figure 1 highlights some of the key holdings that the department is responsible for maintaining.
|Department of Parks and Recreation
Key Assets Maintained
|Miles of trails||3,000|
|Miles of roads||2,704|
|Road and trail bridges||748|
|Historic, archaeological, and archival artifacts||2,750,000|
|Source: Department of Parks and Recreation, December 1998.|
In the following sections, we discuss:
We make recommendations on how deferred maintenance ought to be reduced and provide the Legislature with options for funding DPR's ongoing and deferred maintenance.
While the department has estimated its annual ongoing maintenance needs to be $15 million, it has not substantiated this estimate. We recommend that the department provide to the Legislature at budget hearings substantiation for its total ongoing maintenance needs, by maintenance categories.
The DPR categorizes its ongoing maintenance into two broad categories:
An adequate funding level for ongoing maintenance should cover all anticipated and scheduled maintenance work in accordance with maintenance cycles that maximize the useful life of facilities and equipment. It should also provide for some contingency funding for unanticipated maintenance, such as repair work that typically results from storm damage. If, on a persistent basis, ongoing maintenance work is not accomplished or not fully funded, a maintenance backlog (or deferred maintenance) accumulates. If maintenance on buildings and infrastructure components (such as roads and trails) are continuously deferred, facilities will eventually require higher expenditures for emergency repairs, major rehabilitations or replacement, or the initial investment may be abandoned and lost.
Ongoing Maintenance Estimates Not Substantiated. The department currently estimates its ongoing maintenance needs to be about $15 million annually. However, the department has not been able to provide any details for its estimate. As a result, the Legislature is unable to (1) evaluate whether this estimate is reasonable or (2) set maintenance funding priorities.
Ongoing Maintenance Needs Should Be Substantiated. By addressing ongoing maintenance needs, the Legislature can ensure that the department does not continue to expand its maintenance backlog. We recommend that the department provide the Legislature, no later than April 15, 1999, a finalized estimate of annual ongoing maintenance needs that identifies funding necessary to cover all anticipated and scheduled maintenance work by category. This information should include how the funding level was determined. Additionally, the needs estimate should include contingency funding for unanticipated maintenance work. With this information, the Legislature will be better able to evaluate the funding needs of the department and determine an appropriate level of funding on an ongoing basis for the department's maintenance activities.
We find that the Department of Parks and Recreation's deferred maintenance has been on the rise since the early 1980s. The maintenance backlog has resulted due to persistent underfunding of increasing maintenance needs.
Our review finds that the department has a significant backlog of maintenance projects. Deferred maintenance includes both Category I and Category II projects that were not completed on their regularly scheduled maintenance cycle. In contrast to the information provided regarding ongoing maintenance needs, the department has spent more time trying to gauge the magnitude of its deferred maintenance needs. Based on information provided by the department, it appears that the backlog began to develop in the early 1980s.
Deferred Maintenance Due Mainly to Underfunding. The accumulation of deferred maintenance is primarily the result of maintenance needs being underfunded over time. Figure 2 shows the amount requested for maintenance by the department's park districts compared to the actual funds available from 1983 through 1997. The requested amounts do not represent all the maintenance needs of the department; rather, they represent the amounts needed for the most important projects determined by district superintendents. (These amounts were requests made internally to department headquarters.) As Figure 2 shows, actual funding from 1983 through 1997 fell far short of the amount requested by state park districts. It is important to note that the funding gap, while providing a measure of deferred maintenance, is not a completely accurate measure. This is because the requested needs are only for the highest priority projects and could include both regularly scheduled maintenance and deferred maintenance projects.
|Department of Parks and Recreation
Requested Versus Actual Funding for Maintenance
|1983 Through 1997
|Fiscal Year||Requested Amounta||Actual Funding b||Difference|
|a Internally requested by state park superintendents to department headquarters.|
|b Actual amount included in the department's approved budget.|
Limited Resources Squeeze Maintenance Funding. In times of fiscal stress, maintenance is often viewed as a discretionary activity which can be deferred while limited resources are used to meet more immediate program and service needs. For instance, between 1988-89 and 1998-99, the department's total support funding grew at an average annual rate of 2.5 percent. The DPR indicated that this increase, however, has not been sufficient to pay for increases in costs such as utilities, rent, and increasing staff costs. In order to pay for these increasing costs, funding for maintenance was reduced.
Additionally, due to the state's fiscal condition, the department's General Fund support dropped by 30 percent (or a cumulative total of $22 million) from 1990-91 through 1995-96, leaving it to rely more heavily on less stable, alternative fund sources such as park fees. To the extent these fee revenues did not materialize, the department frequently reduced expenditures on maintenance.
Deferred Maintenance Problem Worsens as Maintenance Needs Have Increased. The department's maintenance needs are continuously increasing. In part, this is because many of the park facilities and properties were acquired and developed in the 1930s, 1940s, and 1950s, and structures require increasing repairs and rehabilitation as they age. In addition to many structures being quite old, the park units themselves were designed for far fewer visitors and for different recreational purposes. For example, in 1950-51, there were 7.2 million visitors to state parks. Today, there are in excess of 70 million visitors each year. Additionally, today's parks accommodate recreational vehicles and many more group campers than the number for which they were designed. Visitation has increased to the point where many parks actually exceed the capacities they were developed to accommodate. This leads to deterioration and damage of many park properties and facilities, thereby necessitating more frequent repairs and modifications. This appears to be the biggest problem in day-use areas that tend to have heavy foot traffic and multiple points of entry, like beaches.
As ongoing maintenance needs increase, any persistent underfunding of ongoing maintenance results in increases in deferred maintenance. This is because facilities deteriorate more quickly and problems become more severe as routine maintenance and upkeep are not done.
The preliminary data provided by the department show significant deferred maintenance needs. Most of the work is concentrated in the state's coastal park districts.
In October 1998, the department prepared a preliminary list identifying 2,600 deferred maintenance projects, totaling about $180 million. Because the department's current-year budget includes $30 million to reduce its deferred maintenance, the remaining backlog in 1999-00 should be about $150 million based on this preliminary estimate.
The preliminary list represents a compilation of the projects as reported by state park district superintendents. Data on each project was limited to a project identification number, project title, and estimated cost to complete the project.
Deferred Maintenance Projects Concentrated in Coastal Districts. Of the preliminary estimate, $118 million, or 66 percent of the total, is for projects located in the state's 12 coastal districts (consisting of 105 parks). Figure 3 summarizes the deferred maintenance needs in these districts. Of the 12 districts, the Marin District has the largest number and costs of deferred maintenance projects, estimated at $50 million. The majority of this amount is for deferred maintenance at Angel Island (see box). The next coastal district with the highest backlog is the North Coast Redwoods District, with an $11.2 million backlog.
|Deferred Maintenance Needs in State Coastal Districts|
|(Dollars in Millions)|
|State Park District||Number of Projects||Estimated Cost Of Projects|
|North Coast Redwoods||215||11.2|
|Russian River - Mendocino||129||6.4|
|San Diego Coast||61||2.6|
|San Luis Obispo||51||2.9|
The 16 inland districts have about $62 million of deferred maintenance. However, none of the six off-highway vehicle (OHV) districts have any deferred maintenance--including the one coastal OHV district, Oceano Dunes. This is because OHV districts are funded from the Off-Highway Vehicle Account, which provides a stable source of funds mainly from gas tax revenues for district maintenance. Additionally, maintenance needs for OHV parks are generally lower than other state park facilities.
Deferred Maintenance Projects Fall in Two Main Categories. Based on the limited description on individual projects provided by DPR, we grouped the projects into two main categories: public use and basic infrastructure. Projects that do not fit into either category are lumped into an "other projects" category.
Because a key component of DPR's mission is to provide recreational opportunities to the public, we attempted to identify all projects that would directly impact park visitation or the experience visitors have while in the state park system. Where we could easily identify projects related to restroom facilities, campgrounds, visitor centers, trails, or exhibits, we grouped them as public use-related projects. Projects identified by DPR which involve repairs to the infrastructure, such as roofs or foundations, windows or floors, or water and sewer systems are grouped into a separate "basic infrastructure" category.
Marin District's Deferred Maintenance
Angel Island State Park has approximately $40 million in deferred maintenance. With over 2 million visitors annually, this park is the ninth most visited park in the system.
The backlog at this park is attributed to:
Difficult Access. It is an island with no easy access for labor or heavy equipment to do routine maintenance.
Numerous Historic Structures. Angel Island has some of the oldest structures in the United States, some dating back to the Civil War. Historic structures are costly to maintain and repair because they require the use of historic materials and must meet historic standards.
One Quarter of the Backlog Directly Impacts Public Use. About 24 percent ($43 million) of the projects on the department's list fall under this category. The biggest portion of that--$15 million--is for trails or access, including pedestrian, bike, horse, and skating trails, as well as sidewalks and ramps which increase access to public facilities.
The second largest portion of the public-use category is for restroom repairs. Restroom repairs include replacing fixtures, repairing tiles, showers or toilets, or replacing or renovating restrooms, comfort stations, combination buildings, and chemical or pit toilets. These projects represent about $12 million in costs.
Repairs to campgrounds, campfire centers, fire pits, RV hook ups, and day-use areas totaled about $9 million.
Bulk of the Maintenance Backlog Is Projects on Basic Infrastructure. Based on the preliminary list, 61 percent, or about $110 million, of all projects are for basic infrastructure maintenance. Specifically, about $40 million is for general repairs and rehabilitations. This includes repairs to historic structures built by the Civilian Conservation Corps such as benches, culverts, and retaining walls. It also includes repairs to kiosks or district headquarters which may need new paint or siding.
Stabilization or foundation work projects total $16 million. Additionally, deferred roof maintenance or replacements are estimated to cost $16 million and a similar amount is estimated to be needed for deferred water, sewer, and drainage projects.
We find that the preliminary data submitted by the department on its deferred maintenance has limitations in that it is incomplete and inconsistent. In order for the Legislature to better evaluate funding priorities for deferred maintenance, we recommend that the department provide a more complete and consistent inventory of its deferred maintenance projects for all districts at budget hearings.
The department's preliminary list is a good first effort to identify its total deferred maintenance needs. However, the list of projects is still being evaluated by the department for completeness and accuracy. While each district was asked to identify all of its maintenance needs, our review shows that the preliminary list did not (1) include projects related to road maintenance, (2) detail information on artifact conservation needs, and (3) provide complete information on natural resources maintenance needs. Furthermore, not all districts used a consistent set of terminology in reporting their maintenance backlog. For instance, districts did not use project descriptions consistently to identify health and safety projects or projects mandated by law. Thus, it is not possible to compare and group projects to any detailed level that would enable the department and the Legislature to determine project priorities.
Criteria Used in Identifying Deferred Maintenance Projects Not Known. The preliminary data provided by the department also failed to identify what criteria were used in developing the deferred maintenance list. It is not clear whether the list is simply a compilation of all maintenance projects that have missed a scheduled maintenance date or if projects on the list were also inspected to determine that maintenance was in fact needed. Missing a scheduled maintenance date alone may not constitute deferred maintenance given that the maintenance schedule only provides a rough guideline for when maintenance will be needed. For example, while it may be optimal to repaint building exteriors every six years, for buildings in very mild climates, or in areas experiencing unusually mild weather, optimal maintenance could be every eight years.
Better Information Will Be Forthcoming in March. The department anticipates that these data problems will be resolved by mid-March. According to DPR, two maintenance program managers are currently evaluating the projects within each state park district in order to ensure that all data are consistently reported throughout the department and that the missing information on roads, artifacts, and natural and cultural resources projects are added.
As deferred maintenance for roads, artwork, and natural and cultural resources are identified, total funding needs will increase. On the other hand, the current evaluation process could result in some projects being dropped from the list or project costs being revised.
In order to provide the Legislature with better information regarding DPR's deferred maintenance, we recommend that the department provide to the Legislature, at budget hearings, a complete and updated list of deferred maintenance projects. The projects should be categorized by whether they relate to health and safety, natural and cultural resources, artifacts and historic needs, legal mandates, and roads. Additionally, the department should specify what criteria were applied to determine which projects were truly deferred maintenance. This information will enable the Legislature to better evaluate funding priorities for deferred maintenance.
Deferring maintenance on a continuous basis impedes the Department of Parks and Recreation's ability to carry out its mission, negatively impacts the level and type of services parks can offer, and leads to a devaluation of assets.
The mission of DPR is to preserve the state's biological diversity, protect its natural and cultural resources, and create opportunities for high-quality outdoor recreation for the health and education of the people of California. A large backlog of maintenance projects negatively impacts the level and type of service the department can provide and thus reduces the department's ability to carry out its mission. Furthermore, continuous deferral of maintenance reduces the useful life of facilities and devalues the state's assets.
Level and Type of Service Suffers as a Result of Backlog. Service to the public is negatively affected by a lack of adequate maintenance of park facilities. For instance:
Health and Safety Concerns Affect Park Visitors and Staff. The lack of adequate maintenance can pose a health and safety threat, real or perceived, to park visitors and staff. In addition, unsafe facilities may have to be closed to public access.
Unkempt Facilities Could Impact Visitation Rates. Many of the restrooms, visitors centers, and exhibits are in varying states of deterioration. Deteriorated facilities could deter park visitation.
Public Access to Facilities Is Restricted Due to Lack of Repair. The department's preliminary data show that nearly 25 percent of the pedestrian, horse, bicycle, and wheel chair accessible trails are in need of repair. Most of these trails are in coastal areas and require high maintenance because of unstable soils and natural erosion that occurs on the coast. The trails in the Russian River-Mendocino District, for example, need an estimated $1.3 million for deferred maintenance work. The lack of timely repairs limits the public's access to these beaches and park facilities.
Some Facilities Are Not Energy or Cost-Efficient Due to Deferred Maintenance. Many of the deferred projects involve the replacement of doors and windows, weatherproofing, or replacing whole plumbing or electrical systems. These types of repairs could improve facilities' energy efficiency, thereby reducing expenses such as utilities costs. This could free up funds to meet other needs.
Deferred Maintenance Could Result in Devaluation of Assets and Higher Costs. As we noted earlier, deferring maintenance results in substantially more costly repair and rehabilitation in the long run. In addition, deferring maintenance reduces the useful life of a facility, in some instances resulting in irreparable damage, thereby reducing the value of state assets. For example:
Loss of Historical and Cultural Resources. The department is charged with the protection of the state's most valued historical and cultural resources. To the extent that proper maintenance and conservation is not done, these resources--some of them irreplaceable--will deteriorate and could eventually be lost to the state. For instance, among the state's collection at Hearst Castle, two 17th century ecclesiastical banners have been permanently taken off display in order to prevent further deterioration. According to staff, this could have been prevented had conservation efforts been done earlier.
We recommend that the Legislature adopt supplemental report language requiring the Department of Parks and Recreation to develop a deferred maintenance reduction plan by December 31, 1999.
Department Should Develop Plan to Eliminate Deferred Maintenance. We believe that the Legislature should take steps to eliminate the backlog of deferred maintenance over several years. In order that the Legislature can determine how much money should be provided annually, and over what period of time, the department should provide the Legislature with a multiyear plan to eliminate the backlog. This plan should set priorities for DPR's list of projects using such criteria as the health and safety implications of projects and urgency of the projects. The plan should identify the work that has to be done annually, assuming adequate funding for ongoing maintenance, that would result in eliminating the backlog over several years. Additionally, the plan should incorporate the department's ongoing maintenance needs estimate to ensure that the current level of deferred maintenance does not continue to grow.
Based on this plan, the Legislature can determine how to fund deferred maintenance to eliminate the backlog. Once funding is provided, the Legislature can hold the department accountable for the amount of work to be accomplished.
Accordingly, we recommend that the Legislature adopt the following supplemental report language:
The department shall submit a deferred maintenance reduction plan to the Legislature no later than December 31, 1999. The plan shall set priorities for the department's deferred maintenance projects and identify the amount of work it needs to accomplish, assuming adequate funding for ongoing maintenance, in order to eliminate the backlog.
The Legislature has several options to fund park maintenance and deferred maintenance. The Legislature should determine which park facilities and assets serve a statewide purpose and therefore the state should retain and which should be sold or turned over to local governments.
The Legislature has a number of options it can consider to fund both the maintenance and deferred maintenance needs of the department.
In addition to increasing funds to accommodate maintenance needs, the Legislature should also review the state's holding of park facilities and collections to ensure that they serve statewide purposes and interests and therefore should be under state ownership. The department's holdings of properties and collections have been accumulated over the years, some acquired deliberately by the state, while others were donated. We believe that facilities that serve mainly local interests should be returned to local ownership, while facilities that serve no particular public interest or purpose should be considered for sale. This would reduce total maintenance needs and allow the Legislature to direct limited resources to facilities and collections with statewide significance.
The Governor's budget does not provide any funding for the Department of Parks and Recreation's deferred maintenance. We recommend that the Legislature, in determining the state's funding priorities, consider providing some amount of funding to continue to reduce deferred maintenance in 1999-00.
For 1998-99, the Legislature provided $30 million for DPR deferred maintenance reduction. With this level of funding, the current estimated backlog would be eliminated in about five years.
No Funding Proposed for Budget Year. The budget proposes no money for deferred maintenance in 1999-00. Chapter 326, Statutes of 1998 (AB 2784, Strom-Martin) created the State Parks System Deferred Maintenance Account within the Resources Trust Fund and designated $10 million annually from state tidelands oil revenues to the account. Money in the account would be subject to legislative appropriation for DPR deferred maintenance purposes. Because of the drop in oil prices, this account would not receive any revenues in 1999-00 (please see Fund Condition for Resources Programs discussion in the "Crosscutting Issues" section of this chapter.) Therefore, there would be no funds for DPR deferred maintenance from this account for 1999-00.
Nonetheless, given the magnitude of the department's estimate of the backlog, we believe it is important that the reduction of deferred maintenance continue, to the extent possible. Consequently, we recommend that the Legislature, in determining the state's priorities in funding various programs, consider providing some level of funding for DPR's deferred maintenance in 1999-00.
The Supplemental Report of the 1998 Budget Act required DPR to submit a report to the Legislature on (1) its plans for using enterprise activities to finance DPR responsibilities, (2) DPR's role in providing services that compete with private operators of hotels, convention centers and recreation facilities, (3) measures to evaluate the performance of concession contracts and (4) procedures for soliciting customer reaction to concessionaire's performance. The department submitted the report in November 1998.
The supplemental report also required the Legislative Analyst's Office to review DPR's report, and propose a long-term funding plan for the department. Our review and recommendations are in the following sections.
Enterprise activities, primarily concessions, provide substantial revenues to supplement Department of Parks and Recreation's (DPR's) support. The DPR is pursuing enterprise activities in a manner consistent with statutory guidelines and restrictions.
Statute Sets Limit on DPR Enterprise Activities. Current law requires improvements undertaken within state parks to be for the purpose of promoting public enjoyment and education while preserving the natural, scenic, cultural and ecological value of the facilities. Improvements which are attractions in themselves, or which are otherwise available to the public within a reasonable distance outside state parks, are prohibited in park facilities. In addition, current law prohibits concessions to be entered into solely for revenue generating purposes.
Concessions Represent Largest "Enterprise Activity" in DPR and Provide Substantial Revenues. The department relies on concessions to finance a portion of its activities. Concessions pay rents to the state, typically based on some percentage of the concession's gross sales revenues. Rent revenues are deposited into SPRF. Restaurants and retail businesses account for about 60 percent of SPRF revenues from concessions.
In 1996-97, 226 concession contracts were in place to serve visitors in state park units. Concessions range in size and activity from pay showers at Leo Carrillo State Beach (which generated $3,900 in 1996-97 to the state), to the food and souvenir concession at Hearst San Simeon State Historical Monument (which generated $1.4 million in 1996-97). Concessions generated in excess of $59 million in gross sales and paid more than $7.2 million in rent in 1996-97. This amount accounted for about 11 percent of all SPRF revenues in that year.
The DPR Has Five-Year Plan for Concessions. The department uses a five-year concession plan which it updates annually in order to guide its enterprise activities. Having one comprehensive plan allows DPR to identify and assess concession opportunities statewide. The plan also lets the department monitor and compare concession contracts to ensure that they are competitive and provide maximum returns to the state.
Revenue Allocation Program Established to Encourage Enterprise Activities. Since 1995, DPR has established a Revenue Allocation Program to (1) provide state park district superintendents with the flexibility to try new, revenue generating activities and (2) hold superintendents accountable in how they raise and spend moneys in the district.
Under the program, districts must continue to follow state and departmental guidelines for purchasing and contracting. However, superintendents may make operational decisions regarding revenue generation and how funds are spent. Specifically, each superintendent is provided a target amount of revenues to be raised. As an incentive, the district can keep a portion of the revenues raised in excess of the target. Districts may also receive a credit for any cost-savings achieved.
Types of new programs and activities initiated as a result of the Revenue Allocation Program include the following:
Other Enterprise Activities Under Evaluation. The department is currently evaluating other opportunities including:
DPR Avoids Direct Competition with Private Sector. Our review of DPR's report indicates that the department is pursuing enterprise activities in a way consistent with statutory guidelines and restrictions. In evaluating new enterprise opportunities, the department appears to focus first on the benefits the opportunities would provide the public. The concession opportunities considered also do not appear to compete with commercial services offered in close proximity to park units.
The Department of Parks and Recreation's annual review of concession contracts serves to protect the interests of the state and the public.
The DPR evaluates all concessionaires annually in the following categories: accounting, bonds/insurance, construction, use of premises, quality assurance (which includes prices and customer service), safety, facility maintenance, and interpretive program (where applicable). The DPR takes past performance evaluation of a concessionaire into consideration when it awards new contracts. Depending on the evaluation, the department may take corrective action, including contract termination, if necessary.
The annual review of concession contracts enables the department to verify that the concession is operating consistent with the terms of the contract and is providing the expected services to the public. As such, the review process protects the state's and the public's interest while ensuring that revenues due to the state are collected.
We recommend that the department develop standardized customer survey forms to assess concession performance. We further recommend that the department adopt a consistent method of distributing and collecting customer surveys.
Customer satisfaction is a critical factor in measuring DPR's performance. However, our review shows that customer satisfaction with concessions is not being effectively measured. Specifically, there is no standard survey of concession customers. Generally, concessions may develop their own survey forms to get customer feedback. Our review of a sample of customer survey forms shows that surveys differ in the questions posed as well as the rating options. This makes it difficult for the department to utilize survey results to compare performance among concessions.
In addition, our review shows that there is no consistent way of distributing and collecting survey forms. As a result, customers' responses are gathered haphazardly. A more consistent way of distributing and collecting survey forms in all concessions would likely increase the number of responses and provide concessionaires and the department better information to gauge customer satisfaction.
Accordingly, we recommend that the department develop standardized customer surveys and adopt a more consistent way of distributing and collecting survey forms.
We recommend that the current funding mix of General Fund and user fees, supplemented with revenues from enterprise activities such as concessions, be continued. However, enterprise activities should not be pursued at the cost of stewardship responsibilities.
Currently, the ongoing operations of the department are funded with a combination of General Fund and special user fees, supplemented with revenues from concessions. We think this funding mix should continue. To the extent that state park facilities provide public benefits to the entire population of the state, General Fund support is warranted. Where benefits accrue to specific users, such as campground users, user fees are appropriate.
Enterprise activities, including concessions, also provide a revenue source for the department's support. However, we think that such activities should be consistent with current statutory guidelines and restrictions. In recent years, due to the state fiscal condition, General Fund support of the department has decreased. (Please see Analysis of the 1996-97 Budget Bill, page B-67.) As a result, the department has increasingly relied on SPRF revenues for ongoing support and therefore has sought to increase its enterprise activities in an attempt to generate additional revenues. However, despite these efforts, concession revenues only account for about 3 percent of the department's total expenditures.
Given current statutory requirements, it appears difficult for DPR to substantially increase revenues from enterprise activities. Whether DPR's authority to engage in enterprise activities should be broadened is a policy decision for the Legislature. In our view, any loosening of statutory guidelines and restrictions to facilitate increased use of concessions must be weighed against the potential of (1) compromising the department's stewardship role, and (2) increasing competition with the private sector. In our write-up on DPR's deferred maintenance, we indicate that, as a funding option, the Legislature may want to consider a state policy for public-private partnerships, whereby private funding and sponsorships may be encouraged.
As we also noted in that write-up, we believe that the Legislature should review the department's holdings of facilities and other assets to make sure that the state owns only those assets that serve statewide purposes and interests. Doing so would enable the Legislature to more effectively utilize limited state funds.
Bond Funds Are Appropriate for Capital Improvement. Park development and major rehabilitation projects, as well as land acquisitions have traditionally been supported by bond funds authorized by voters. Because these projects provide long-term benefits over many years, financing them through bonds is appropriate. However, bonds are not an appropriate fund source for ongoing maintenance of facilities because maintenance efforts generally do not extend the useful life of facilities sufficiently to justify the incurring of long-term debt obligations.
As we pointed out in the "Crosscutting Issues" section of this chapter, there are virtually no park bond funds available for additional park development.
The budget projects zero balance for the State Parks and Recreation Fund by the end of 1999-00. We recommend the department report at budget hearings on what actions it plans to take in the event that (1) projected park revenues do not materialize or (2) expenditures are higher, such as in the case of increased employee compensation for department staff.
The budget projects SPRF resources of $81.9 million in 1999-00, and proposes to use the full amount for DPR support. About two-thirds ($54.3 million) of the resources are projected to come from park user fees and concession revenues.
Our review, however, shows that the department has typically overestimated these revenues. (Please see Analysis of the 1996-97 Budget Bill, page B-68). For instance, actual revenues in 1997-98 were $5.9 million lower than projected. For the current year, the most recent estimate of revenues is $52 million, or $2.2 million less than when the current year budget was enacted.
To the extent that park revenues do not materialize at the level projected for 1999-00, the department will have to cut back expenditures. Additionally, any increase in expenditures, including increases in employee compensation for DPR staff and other unforseen expenditures such as storm damage repairs, would have to be covered by either the General Fund or by further reductions in other SPRF-supported expenditures. In order that the Legislature is informed of the potential impact on DPR programs, we recommend that the department report at budget hearings on actions it plans to take if (1) projected park revenues do not materialize and/or (2) planned expenditures are higher than projected.
The Department of Water Resources (DWR) protects and manages California's water resources. In this capacity, the department implements the State Water Resources Development System, including the State Water Project (SWP). The department also maintains public safety and prevents damage through flood control operations, supervision of dams, and safe drinking water projects.
Currently, the department houses, and participates along with 14 other state and federal agencies in, the CALFED Bay-Delta Program. This program is developing a long-term solution to water supply, water quality, flood control, and fish and wildlife problems in the San Francisco Bay/Sacramento-San Joaquin Delta Estuary (the "Bay-Delta").
The budget proposes total expenditures of $893.5 million in 1999-00, a decrease of $98.7 million, or 10 percent, from estimated current-year expenditures. This decrease reflects (1) a reduction of about $59 million for flood control subventions and (2) elimination of a one-time expenditure in the current year of $35 million for groundwater supply development to help the state live within its allocation of Colorado River water. Other major budget proposals for 1999-00 include an increase of $6 million from the General Fund and 44 positions for support of the CALFED Bay-Delta Program. Additionally, as discussed below, the budget proposes to revert to the General Fund $44 million appropriated by Chapter 326, Statutes of 1998 (AB 2784, Strom-Martin) for payment in the budget year of the state's share of costs for local flood control projects.
Of the proposed total expenditures, $726 million is for planning, construction, and operation of the SWP, financed with SWP Funds (revenues from water contractors). The budget also includes about $80 million in bond funds--for loans and grants to local agencies for safe drinking water, water conservation, and water supply management and development--and about $63 million from the General Fund--mainly for water planning and flood control/management.
The budget proposes no funding to pay local claims for the state share of costs of locally sponsored, federally authorized flood control projects. As a consequence, the state's unpaid amounts owed to local governments will increase to about $189 million by the end of 1999-00. We recommend the enactment of legislation setting out the criteria for funding future local flood control projects and determining the state share of costs for such projects.
State Shares in Costs of Local Flood Control Projects. Under current law, the costs of locally sponsored, federally authorized flood control projects are shared among federal, state, and local governments. State and local governments are responsible for 70 and 30 percent, respectively, of the nonfederal share of project costs. (The nonfederal share varies between 25 and 50 percent of a project's total costs.)
In order for a locally sponsored flood control project to be eligible for state funds, the project must be authorized by the Legislature (for "large projects" where the federal share exceeds $5 million) or the department (for "small projects"). Congress must also authorize large projects in order for federal funding to be provided. Beginning in 1999, Chapter 326, Statutes of 1998 (AB 2784, Strom-Martin) requires, as a condition of state funding, large projects to be authorized by the Legislature prior to getting Congressional authorization for federal funding.
State Unable to Pay Its Full Share of Costs. Due to the state's budget condition in the 1990s, the state has been unable to pay its full share of costs for these flood control projects. According to the department, the lack of funds for the state share has caused construction to stop or be delayed on a number of projects.
Funding to reduce the amounts owed to local governments has come from two sources in recent years. First, Proposition 204 approved by the voters in 1996 provided $60 million in bond funds for this purpose. (These funds were depleted at the end of 1997-98.) In addition, the 1998-99 Budget Act provided $40 million from the General Fund. Even with this recent infusion of funding, the department estimates the unpaid amount of the state's share of costs owed to local governments at the end of 1998-99 to be about $132 million. If no funding were to be provided in 1999-00 for local flood subventions, the department projects the arrearage would increase to about $189 million by the end of 1999-00.
Budget Proposes to Revert Statutory Appropriation for 1999-00. Chapter 326 appropriated $44 million from the General Fund for each of 1999-00 and the subsequent two fiscal years. However, the budget proposes to revert the $44 million appropriated for 1999-00 to the General Fund, pending the enactment of legislation to authorize the reversion. With the reversion, the arrearages will be about $189 million at the end of 1999-00.
Unpaid Obligations Should Be Addressed. The amounts currently owed to local governments are obligations of the state that should be addressed. To the extent that additional General Fund resources--over the currently projected amount--become available in the budget year, we think that consideration should be given to reducing these arrearages.
Legislature Should Examine the Appropriate State Role in Funding Future Local Flood Control Projects. We think that the state should play a role in the funding of future local flood control projects. However, we think the Legislature should examine what the appropriate role ought to be. Specifically, the Legislature should determine (1) what types of future local projects ought to be funded and (2) what the appropriate cost sharing ratio ought to be.
This examination is warranted because currently, it is not clear whether legislative or departmental authorization of local flood control projects is based on clear criteria for project prioritization. Once a local flood control project is authorized either by statute or by DWR (in the case of small projects), the state is essentially committed to funding a fixed share of the project's cost. This creates a state fiscal obligation. However, without clear criteria for project prioritization, there is no guarantee that state funding is directed to projects that address the most crucial public safety needs on a statewide basis.
To the extent the state fails to meet its obligations to local governments, these governments will experience additional fiscal strain. This is because local governments often "front" the state's share of costs pending state reimbursements rather than shut down project construction or delay project repairs. To do this, local governments often redirect resources from other programs or borrow funds.
In order to ensure state funds are targeted to projects that are consistent with legislative priorities, we recommend that the Legislature enact legislation setting out the criteria for determining the eligibility of future local flood control projects to receive state funding. These criteria would also provide a basis to decide which projects to authorize in light of limited available state resources. For example, the Legislature could set criteria based on the extent to which a project reduces the risk to public safety, or the amount of other benefits a project would generate in addition to flood control, such as water quality/supply improvements and habitat conservation.
The Legislature could also limit eligibility for state support in cases where future local land use decisions would result in substantial flood risks that require control measures. Such eligibility criteria could be used to encourage land use decision-makers to give greater consideration to the potential costs and benefits of their decisions.
In addition to setting eligibility criteria, the Legislature should also reevaluate the proportion of the nonfederal share of local projects' costs to which the state is willing to commit. While at least some of the costs of local flood control projects are appropriately a local responsibility, these projects do provide--to varying degrees--benefits of a regional or statewide nature. Such benefits may include enhanced water supplies and habitat conservation. The Legislature might consider setting different rates (percentage amount) for the state share of costs for different categories of projects based on the relative statewide benefits derived from the projects and the extent of the affected population.
We believe that by enacting legislation that sets out funding eligibility criteria and determines the degree to which the state contributes to local flood control projects, the Legislature will better ensure that state funding is directed to meet statewide priorities.
The Legislature's oversight of the CALFED Bay-Delta Program is made difficult by the lack of information in the Governor's budget display and by not scheduling the program in the budget bill. We recommend that the department provide the Legislature, prior to budget hearings, with expenditure and staffing information on the program. We also recommend that the Legislature adopt supplemental report language directing that this information be provided in future years. Finally, we recommend that the Legislature schedule the CALFED Bay-Delta Program in the budget bill.
The CALFED Bay-Delta Program. Since 1995, the CALFED Bay-Delta Program has been developing a long-term comprehensive plan to improve water management and preserve the ecological health of the Bay-Delta. The program (which is housed in the department) coordinates activities of 15 state and federal agencies and receives state support through the department's budget. The program's administrative costs--estimated to total about $48 million from 1995 through the end of 1998-99--are split about evenly between the state and the federal government. (Federal funds support about $23 million of the $48 million. These funds do not pass through the state budget.) For 1999-00, the budget proposes $6 million from the General Fund, and an increase of 44 positions, for the program.
Under the state's current contract with the federal government, the program continues through the end of 2000. However, it is likely that the program will continue in some form for a decade or two in order to provide oversight of the long-term implementation of the Bay-Delta "solution" being developed by the program.
Legislature's Oversight Has Been Difficult. We find that it has been difficult for the Legislature to oversee the CALFED Bay-Delta Program. In part, this is because the CALFED Bay-Delta Program expenditures are not separately identified or displayed in the Governor's budget. Thus, it is difficult for the Legislature to identify program expenditures, staffing, and activities to hold the department accountable. The Legislature's oversight of the program has also been complicated by the substantial shift from year to year in fund sources that support the program. Additionally, legislative oversight has been complicated by the program's staffing arrangements. The program's staffing has come mainly from employees loaned to the department from other state agencies or hired under the department's blanket authority for temporary help. As a result of these arrangements, the Legislature has had limited ability to review and approve specific positions for CALFED.
Detailed expenditure and staffing information would help the Legislature evaluate the appropriate support for the program as well as the appropriate fund sources for that support.
Recommend CALFED Program Budget Be Presented to Legislature. In order for the Legislature to better evaluate the budget's proposal for the CALFED Bay-Delta Program, we recommend that the department, prior to budget hearings, provide the fiscal subcommittees responsible for reviewing the department's budget the following information:
In order to ensure that this information is presented to the Legislature in future budget years, we recommend that the Legislature adopt the following supplemental report language:
In order for the Legislature to better evaluate budget proposals for the CALFED Bay-Delta Program, it is the intent of the Legislature that the Governor's budget display include the CALFED Bay-Delta Program as a program element. This display should be included in the budget for the department for the 2000-01 and future budget years. The department, as part of its 2000-01 and future years' budget requests, shall also provide information to the Legislature on staffing in the CALFED Bay-Delta Program over the two years preceding the budget year, including the position authority for all staff working in the program and information on any interagency loan agreements.
Recommend CALFED Bay-Delta Program Be Scheduled in Budget Bill. The Legislature's oversight of the CALFED Bay-Delta Program has also been compromised by not scheduling the program in the budget bill. By scheduling a program in the budget bill, the Legislature can ensure that funds appropriated for a particular purpose are used for that purpose. Accordingly, we recommend that the Legislature amend the budget bill to schedule the CALFED Bay-Delta Program within the item for the Department of Water Resources (Item 3860).