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 CIWMB--showing how 50 percent of solid waste will be diverted from landfills by 2000. (As of 1997, the statewide diversion rate was 32 percent.) 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, CIWMB oversees the cleanup of abandoned solid waste sites.

The budget proposes expenditures of $83 million from various funds (primarily special funds) for support of CIWMB. This is a reduction of about $1 million, or 1 percent, from estimated 1998-99 expenditures. Major budget adjustments include (1) an increase of about $2.6 million to reduce landfill disposal of organic materials and construction and demolition debris, (2) an increase of about $1.8 million for enforcement of landfill regulations, and (3) an increase of $726,000 to assist some of the 25 percent of local governments currently not on track to meet the 50 percent waste diversion goal by 2000. The net reduction reflects the elimination of a one-time expenditure of $5 million in the current year for cleanup and enforcement at waste tire stockpiles.

State Agencies Failing to Recycle And to Purchase Recycled-Content Products

We find that state agencies are recycling at rates far below the statewide average, and are failing to meet statutory goals to purchase recycled-content products. We recommend that the board and the Department of General Services report at budget hearings on actions they plan to take to address these failings.

Role of State Agencies in Diverting Waste From Landfills. State agencies have two major roles in diverting waste from landfills. First, by establishing recycling programs, state agencies are an important source of supply of recyclable materials to be used in the manufacture of recycled-content products (RCPs). Second, state agencies are an important source of demand for RCPs. Without markets for RCPs, recyclable materials can end up being disposed at landfills.

Failure of State Agencies to Meet Recycling Mandates. Under current law, each state agency is required to initiate activities to collect, separate, and recycle "recyclable materials." The board administers the state agency recycling program--known as Project Recycle--and is required to approve recycling programs and recycling contracts at each state agency. State agencies are required to report annually to the board on their recycled amounts and submit the revenues from these contracts to the board.

As discussed in greater detail in our Analysis of the 1998-99 Budget Bill (please see page B-79), we find that state agencies are failing to fulfill these statutory requirements. Specifically, we estimate that:

• Less than 20 percent of state facility sites have recycling programs.
• State agencies are diverting less than 6 percent of their waste from landfills by recycling, far below the statewide average of over 32 percent.

We also find that:

• Many state agencies are not reporting their recycled amounts to the board.
• Some state agencies are keeping their revenues from the sale of recyclables, rather than submitting them to the board (as required by statute) for support of the state agency recycling program.

Report on State Agency Recycling Delayed. In light of the above problems, the Legislature, in the Supplemental Report of the 1998 Budget Act, directed the board to report to the Legislature by December 1, 1998 on actions that the board will take to assist state agencies to improve their recycling efforts. However, the board notified the Legislature in January that it will not be submitting the requested report until March 1, 1999.

Failure to Meet Mandates to Buy Recycled-Content Products. Under current law, state agencies are required to meet a number of requirements related to the procurement of RCPs. Specifically, state agencies are required to:

• Purchase RCPs in sufficient quantities to attain statutory goals. For example, the goal for 1994-95 was 20 percent of total purchases of specified categories of products. For 1998-99, the goal increased to 50 percent of those purchases.
• Report annual purchases of RCPs to the Department of General Services (DGS).
• Submit plans identifying how the annual goals for RCPs will be met.

Chapter 672, Statutes of 1997 (SB 1066, Sher), required the board to submit a report to the Legislature on RCP procurement activities of state agencies. Our review of the board's report (dated September 1, 1998) finds that:

• Many state agencies do not report their RCP purchases to DGS. In 1997-98, 17 percent of the agencies failed to report.
• State agencies are very far from meeting mandated goals for RCP purchases. For example, while the statutory goal for RCPs in 1997-98 was 30 percent of the dollar amount of goods purchased, the board estimates less than 2 percent of state agency purchases were for RCPs.

State Agency Failure to Recycle and Purchase RCPs Impedes Local Waste Diversion Efforts. Under current law, local governments are required to divert 50 percent of waste from landfills by 2000. Since state facilities generate waste, they have a role in helping local governments where state facilities are located to meet these diversion requirements. In some local jurisdictions, state facilities are among the major contributors to the waste stream (for example, prisons). If state facilities do not recycle and/or purchase RCPs, they may significantly hinder local governments in meeting the diversion requirements, potentially subjecting local governments to civil penalties.

Recommend Reports at Budget Hearings. In order that the Legislature can evaluate actions necessary to facilitate state agency recycling and the procurement of RCPs, we recommend that the board and DGS report at budget hearings on (1) specific actions that they have taken and plan to take to improve state agency compliance with recycling and procurement requirements and (2) obstacles that they have faced in enforcing compliance by state agencies with these requirements.

The Legislature should also consider having large state agencies that generate substantial amounts of waste and/or purchase large amounts of products report at budget hearings on their recycling and procurement activities. These agencies could include, for example, the Departments of Transportation, Corrections, and Parks and Recreation, and the University of California. These agencies could be asked to report on:

• Their recycling programs, and estimated recycling rates. The extent to which they follow requirements to (1) report to the board on their recycling amounts, (2) obtain board approval for recycling contracts, and (3) submit recycling revenues to the board.
• Their RCP procurement practices, and estimated proportion of purchases that are RCPs. The extent to which they follow requirements to report to DGS on their RCP purchases.

With the above information, the Legislature will be in a better position to evaluate actions it can take to ensure that the Legislature's goals in this area are met.

The State Water Resources Control Board (SWRCB), in conjunction with nine semi-autonomous regional boards, regulates water quality in the state. The regional boards--which are funded by the state board and are under the state board's oversight--implement water quality programs in accordance with policies, plans, and standards developed by the state board.

The state board carries out its water quality responsibilities by (1) establishing wastewater discharge policies and standards; (2) implementing programs to ensure that the waters of the state are not contaminated by underground or aboveground tanks; and (3) administering state and federal loans and grants to local governments for the construction of wastewater treatment, water reclamation, and storm drainage facilities. Waste discharge permits are issued and enforced mainly by the regional boards, although the state board issues some permits and initiates enforcement action when deemed necessary.

The state board also administers water rights in the state. It does this by 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 $456.5 million from various funds for support of SWRCB in 1999-00. This amount is a decease of $34.5 million, or 7 percent, from estimated current-year expenditures. Much of this decrease reflects a reduction of $20.5 million from the Underground Storage Tank Cleanup Fund due to lower resources in the fund. (Available resources in prior years were greater due to substantial reserves in the fund that have since been drawn down.) Other major budget proposals include (1) an increase of $6 million in federal funds to address water pollution in the most seriously impaired water bodies in the state, (2) an increase of $1.4 million in the Stormwater program to comply with federal regulations expanding the universe of municipal and construction dischargers requiring permits, and (3) an increase of $1.3 million to address permit backlogs in the water rights and landfill regulatory programs.

Improvements Needed in Clean Water Enforcement

In order to enforce compliance with clean water laws, the state and regional water boards issue permits to over 20,000 dischargers of waste impacting the state's surface and ground waters. Assuring compliance with permit requirements and taking enforcement action when violations are found are fundamental to meeting the state's water quality objectives. However, as discussed in the sections that follow, we find that:

• Certain compliance assurance and enforcement activities are not being carried out, while others are not being carried out effectively.
• Enforcement policies and procedures are being implemented inconsistently among the nine regional boards.
• Violation and enforcement data tracking has been incomplete and inconsistent.
• Information on compliance and enforcement expenditures is limited.
• Existing compliance and enforcement-related performance measures are not tied directly to water quality outcomes.

While we find that the boards are taking actions to address these problems, we make several recommendations to further improve the boards' compliance assurance and enforcement programs so as to better achieve the state's water quality objectives.

Background

Regulation of Waste Discharges. Since the 1960s, discharges of waste into the state's surface waters and groundwater have been regulated by the state and regional boards. The state board assesses the state's water quality, sets standards, and develops statewide plans to control water pollution. To control pollution from point sources that discharge waste directly into water bodies, the boards issue and enforce compliance with permits ("waste discharge requirements") that set limits on the types and amount of discharges. While most permitting and enforcement takes place at the regional board level, the state board issues some permits and initiates enforcement action when considered necessary. The state board also serves as an appellate body for regional board decisions on permitting and enforcement actions.

Nonpoint source pollution--created when water picks up contaminants from pesticide use, mining, logging, and other sources and deposits them in water bodies--is controlled mainly by a state board program. This program develops voluntary best management practices to be adopted by farmers and other nonpoint source waste dischargers. An exception pertains to stormwater pollution, which, while sometimes nonpoint source in nature, is regulated through a series of statewide or countywide permits that apply to a multitude of construction, industrial, or municipal sources of pollution.

This analysis focuses on the boards' three programs that issue and enforce permits for point sources, as well as the Stormwater program, as set out in Figure 1. (For purposes of this analysis, we refer to these programs as the boards' core regulatory program. The underground fuel storage tank and nonpoint source programs are thereby excluded from this analysis.) Figure 1 shows the type and number of facilities regulated under the core regulatory program. Figure 2 (see page 106) shows the program's expenditures and funding sources over the last several years.

Figure 1
State Water Resources Control Board Core Regulatory Program Components
Program Component
Rivers, lakes, coastal waters (NPDES)a	Regulates about 2,100 dischargers of waste into the state's streams, rivers, lakes, and coastal waters. Regional boards issue NPDES permits to dischargers. Under federal law, NPDES permits generally must be reissued every five years.
Landfills (Chapter 15b)	Regulates about 1,200 dischargers of waste to waste management units such as landfills. Regional boards issue Chapter 15 waste discharge requirements (WDRs) to dischargers. WDRs are to be updated every 5, 10, or 15 years, based on relative threat to water quality of the permittee's activities.
Lands, other than landfills (Non-Chapter 15c)	Regulates about 3,600 dischargers of waste to land, excluding landfills and other specified lands. Regional boards issue Non-Chapter 15 WDRs to dischargers. WDRs are to be updated every 5, 10, or 15 years as above.
Stormwater	Regulates about 14,000 construction and industrial sites contributing to stormwater runoff under a statewide general NPDES permit. Regulates municipal stormwater runoff under areawide general NPDES permits.
a National Pollutant Discharge Elimination System, implementing the federal Clean Water Act under agreement with U.S. EPA.
b Chapter 15, Title 23, California Code of Regulations, pursuant to Porter-Cologne Water Quality Control Act.
c Pursuant to Porter-Cologne Water Quality Control Act.

Figure 2
State Water Resources Control Board Core Regulatory Program Expenditures
1997-98 Through 1999-00 (In Millions)
Fund Source	Actual 1997-98	Estimated 1998-99	Proposed 1999-00
General Fund	$12.6	$13.0	$13.0
Waste Discharge Permit Fund	11.9	12.3	13.7
Integrated Waste Management Accounta	4.5	4.8	5.6
Federal funds	4.1	4.5	5.1
Totals	$33.1	$34.6	$37.4
a Revenues from "tipping fees" on solid waste disposed at landfills.

Checking and Enforcing Compliance. The regional boards rely mainly on inspections by their staff, their review of self-monitoring reports submitted by waste dischargers, and their investigations of complaints, to ensure compliance with the core regulatory program's permit and other regulatory requirements.

Enforcement of waste discharge permits and other clean water requirements is important as it serves to induce compliance with these requirements that are collectively designed to meet water quality objectives. A lack of consistent and effective enforcement would erode the credibility of the requirements and allow violations to continue undeterred, resulting in water quality objectives not being met.

Enforcement Tools Available. Under state law, the regional boards have a variety of enforcement tools at their disposal. Depending on the nature and severity of the violation, the boards may take informal enforcement action by issuing a warning letter to a violator, or more formal enforcement action, including issuing orders requiring corrective actions within a particular time. Civil penalties may also be levied administratively or cases may be referred to the Attorney General or District Attorney who may seek higher penalties in court.

Some Core Regulatory Activities Not Being Carried Out

We find that a number of the core regulatory program's compliance assurance and enforcement activities are not being carried out. As a consequence, the state's ability to meet water quality objectives is impaired.

Compliance Assurance and Enforcement Activities Not Being Carried Out. Our review finds that there are various cases where compliance assurance or enforcement activities are not being carried out by the regional boards, when measured against work plan commitments, state board objectives, minimum work plan standards set by the U.S. Environmental Protection Agency (U.S. EPA), or needs identified by the boards. Examples include the following:

• Inspections. In 1997-98, one regional board conducted only 25 percent of the inspections committed to in its annual work plan for the Non-Chapter 15 program. For 1998-99, another regional board has committed in its work plan to conduct only 70 percent of the NPDES inspections required under U.S. EPA minimum standards, ". . . due to resource constraints and permitting workload." More generally, the state board's recent assessment (completed in June 1998) found that the number of inspections per regulated discharger ". . . fell far short of the number recommended by the [state board's] Administrative Procedure Manual, . . ." which requires between one and three inspections per discharger per year, depending on threat to water quality. This failure is particularly acute in the Stormwater program where as few as 10 percent of the dischargers have been inspected annually by some of the boards. Compliance Assistance. According to one of the regional boards, many industrial stormwater dischargers regulated under a statewide general permit lack the technical expertise necessary to develop feasible pollution reduction strategies. These reduction strategies are necessary in order to meet the permit's basic requirement that pollution be reduced "to the maximum extent practicable." However, practically no resources have been devoted by the boards to assist these dischargers to comply with the permit requirements. Following Up on Known Violations. According to the state board, there are "fairly significant backlogs" in the regional boards' follow-up to known violations. As an example, the Bureau of State Audit's November 1998 audit of one of the regional boards found that over 20 percent of the dischargers in that region failed to submit at least one-half of the self-monitoring reports required of that board in 1997-98. However, in all but one case, the board made no apparent attempt to obtain the missing reports. This is of concern since self-monitoring reports are a primary means by which violations of effluent limitations are detected.
• Review of Water Monitoring Reports. In addition to monitoring their effluent discharges, some dischargers are required to monitor the quality of the water receiving the discharge. According to one board, it has a substantial backlog in reviewing these reports, with some reports not having been reviewed "for years."

Outdated Permits Result in Ineffective Enforcement. Our review also finds significant backlogs in the update and renewal of permits in the core regulatory program. Permits are updated and renewed in order to conform to changing state and federal laws, pollution control technology, and water quality conditions. For example, our review found that at the beginning of 1998-99, 400 out of 2,400 Non-Chapter 15 permits had not been reviewed and updated to conform to changing laws and water quality conditions.

With outdated permits and other core regulatory activities not being carried out, the state's ability to meet water quality objectives is impaired and the state risks losing federal grant funds. In the sections that follow, we make a number of recommendations which address this problem.

Needs Analysis Should Be Updated

The board has not substantially updated a baseline needs analysis for the core regulatory program for over ten years. We recommend that the Legislature adopt supplemental report language directing the board to perform the necessary update.

Core Regulatory Program Needs Analysis Should Be Updated. As discussed above, there are certain compliance assurance and enforcement activities that are not being done and others (such as in the case of outdated permits) that are not being carried out effectively. In part, this may reflect either inadequate resources or an inappropriate allocation of resources. To appropriately assess and address this problem, it is first necessary to identify the total needs of the core regulatory program in light of current statutory responsibilities under state and federal law and existing water quality conditions and threats. However, according to the board, it has not substantially updated a statewide needs analysis for the core regulatory program since the late 1980s.

While the board has made budget adjustments to address particular water quality problems that have arisen, we think that the board should update the needs analysis of the core regulatory program on a comprehensive basis. Some of the information for such an analysis should be readily available from existing work plans of regional boards.

Without an up-to-date needs analysis, the Legislature is unable to determine the appropriate expenditure levels and funding priorities for compliance assurance, enforcement, and the other core regulatory program activities. In order to be provided such an analysis, we recommend that the Legislature adopt the following supplemental report language:

The State Water Resources Control Board shall provide the Legislature with reports on a baseline needs analysis for the core regulatory program (the NPDES, Chapter 15, Non-Chapter 15, and Stormwater programs). A preliminary report shall be provided by April 1, 2000 and a final report by January 1, 2001. The needs analysis shall reflect current program responsibilities under state and federal law and the major threats to water quality needing to be addressed in light of existing water quality conditions. The analysis shall include, but not be limited to, an assessment of needs for a cost-effective compliance assurance and enforcement program that serves to maximize compliance with clean water requirements.

Legislature Should Reexamine Core Regulatory Funding and Fee Structure

We recommend that the Legislature reexamine the funding level for the core regulatory program as well as how the program is funded (government versus polluter). In order to determine the appropriate funding level, the Legislature should make use of an updated needs analysis for the core regulatory program. As regards the appropriate funding source, we recommend that the Legislature enact fee legislation to apply the "polluter pays principle," thereby requiring that the nonfederal share of costs be paid by fees. Finally, we provide some options to address funding needs in the municipal stormwater permit program in particular.

Mix of Fund Sources Support Core Regulatory Program. Over the past several years, the core regulatory program has been funded with a mix of General Fund, federal funds, and fees. Fees supporting the program are levied on waste dischargers (waste discharge permit fees) and on the disposal of solid waste at landfills ("tipping fees"). Since 1990-91, annual General Fund support and federal funding levels (which support NPDES-related permitting and inspection activities) have remained relatively stable. For 1999-00, the budget proposes about $13 million from the General Fund for support of the core regulatory program--about 35 percent of total program expenditures. Federal funds will total about $5 million, with fee revenues amounting to $19 million.

Current Waste Discharge Fee Levels Capped in 1980s. Currently, annual waste discharge permit fees are subject to a statutory cap of $10,000 that was set in 1988 (effective in 1990), based in part on the board's analysis of workload needs in light of statutory requirements at that time. Current fees range from $200 to $10,000, based on a discharger's relative threat to water quality.

Workload Has Increased. Since the fee cap of $10,000 became effective in 1990, the boards' core regulatory workload has increased significantly. For example, the Stormwater program began in 1991 as required by federal law. Also, additional workload has resulted from federal requirements for more detailed permits and more extensive reporting requirements. In particular, recently adopted federal regulations expand the number of chemicals subject to discharge requirements. Such changes not only increase the workload for new permits, but also create workload in the updating and renewal of existing permits.

Need to Reexamine Funding Level and Fee Structure. As discussed above, new workload needs have arisen since the current fees were capped in statute in the late 1980s, and certain core regulatory program activities are not being carried out. We think that at least some of this additional workload can be addressed through increased efficiencies. For example, wider use of general permits that apply to several like dischargers could help reduce existing backlogs in the reissuance and update of permits. However, other workload needs may require additional funding.

Accordingly, we think that the Legislature should reexamine the total program funding for the core regulatory program and the fee levels. In order to provide the Legislature with the information necessary to make this evaluation, we recommend that budgets submitted by the board subsequent to January 1, 2001 be based on the updated needs analysis that we recommend be conducted by the board. The needs analysis would provide a basis for setting funding priorities necessary to meet water quality objectives.

As part of this funding review, the Legislature should also consider the appropriate mix of funding from General Fund and from polluter fees. While the General Fund has partially supported the core regulatory program for many years, we think that fees should be assessed at a level that would eliminate the need for General Fund support. We have made this recommendation, based on the "polluter pays principle," in prior years. (For example, please see our Analysis of the 1993-94 Budget Bill, page B-65.) Under the polluter pays principle, private parties that benefit from using public resources are responsible for paying the costs imposed on society to regulate such activities. We think that the relationship between private degradation of resources and public costs is particularly strong in the case of point source pollution (the focus of the boards' core regulatory program), thereby justifying a fee-based recovery of the costs of the boards' core regulatory program. Accordingly, we recommend the enactment of legislation requiring that the nonfederal share of costs of the program be paid by the polluter through fees.

Needs Analysis Will Support More Rational Fee Structure. While our recommendation for "polluter pays" fee legislation would increase costs to the regulated community as a whole, we think that our recommendation would benefit certain segments of the regulated community. This is because under the board's current fee structure, the level of fees assessed on polluters often bears little relationship to the boards' workload to regulate those polluters. As a consequence, fees levied on one group of polluters are sometimes used to subsidize programs regulating other polluters. We think that by updating the needs analysis for the core regulatory program as recommended above, the board will be in a better position to align fees with workload needs.

Recommend Revision to Fee Structure for Municipal Stormwater Permits. Currently, municipalities are required to implement plans for controlling stormwater runoff. These plans are regulated under municipal stormwater permits issued by the regional boards. Under state board regulation, a $10,000 annual fee (the statutory cap) is assessed on permits for areas with a population over 100,000. Rather than issue a separate permit to every city, regional boards generally issue a municipal stormwater permit to a county, with individual cities as "co-permittees." Issuing an areawide permit is more cost-efficient and is appropriate particularly when cities drain into a single county storm drain system.

The state board interprets the current statutory cap on fees--set before the Stormwater program evolved--as limiting fee assessment to one fee per permit. Our review finds that generally the compliance assurance and enforcement workload associated with these areawide permits greatly exceeds $10,000 annually. In order to enforce compliance with municipal permits, the regional boards often redirect resources to the municipal program from other programs--mainly the construction and industrial stormwater programs. Even then, the level of regional board oversight over the municipal permittees remains minimal.

Given workload demands, we think that a change in the fee structure to provide greater funding for the municipal stormwater permit program is warranted. One option is to increase the annual $10,000 statutory cap. Another option would be to provide statutory authority for the boards to assess waste discharge permit fees on individual municipalities who are co-permittees under an areawide municipal stormwater permit based on some annual workload measure.

More Consistent Implementation Of Enforcement Policies Needed

We find that the regional boards implement enforcement policies and procedures inconsistently. We recommend that the Legislature direct the state board to take a number of actions to ensure greater consistency among the regional boards in enforcement activity, including: (1) establishing an enforcement action review panel of board members; (2) standardizing the quarterly enforcement reports of the regional boards; and (3) codifying the state board enforcement policy in regulations.

State Board Enforcement Policy. The state board adopted a water quality enforcement policy in 1996 (revised in 1997) to ensure that enforcement throughout the state is consistent, predictable, and fair. Among other things, the policy provides that violations should result in "a prompt enforcement response." In addition, regional board staff shall "consider" escalating their enforcement response to more formal and severe enforcement actions when a violation continues after the initial action taken. Generally, though, the policy provides the regional boards with substantial discretion in pursuing enforcement action. The policy also requires regional board staff to report quarterly to their boards (in a public hearing) and to the state board on cases of "significant noncompliance" in the prior quarter, including cases that exceed effluent limitations by a specified percentage amount.

Statutory Policy Directives. The Legislature also has established enforcement-related policy directives in statute. For example, the state board's policy is consistent with Chapter 775, Statutes of 1996 (AB 2937, Brulte) that requires informal enforcement actions in cases of unintentional, first-time minor environmental violations. Second, Chapter 998, Statutes of 1998 (AB 2019, Kuehl) provides a process of escalating enforcement to ensure compliance with stormwater discharge requirements, and mandates that penalties be assessed in particular cases of noncompliance. Statute does not otherwise provide for mandatory penalties for violations of clean water requirements.

Inconsistencies in Enforcement Continue. A recent state board assessment found that, even after the adoption of a statewide enforcement policy in 1996, inconsistencies in enforcement continued among regional boards. For industries that operate under the jurisdiction of a number of regional boards, the lack of consistency, and therefore predictability, adds to the costs of compliance.

Our review also finds inconsistencies in the violation and enforcement data that are tracked and reported quarterly by staff to the regional and state boards. For example, some of the regional boards' quarterly reports include details of all violations, while others are limited to more serious violations. (We discuss the boards' problems with data tracking in greater detail below.)

Additionally, a number of recent reviews of regional board enforcement activity, including ones conducted by the Bureau of State Audits and others, have found that regional boards have not always followed the state board's policy for escalated enforcement when the initial enforcement action is not effective. The state board recognizes that this type of problem exists, but has not quantified it. We think that when the policy of escalating enforcement is not implemented, this reduces the effectiveness of enforcement in inducing compliance in general.

As shown in Figure 3, for 1996-97 only 5 percent of core regulatory program violations resulted in a formal enforcement action and only 1 percent resulted in the assessment of an administrative civil penalty. Accordingly, for about 95 percent of the violations, an "informal" enforcement action (a warning letter) was taken. Because many of these violations were minor violations, an informal enforcement action was the appropriate response in light of the Legislature's policy in Chapter 775. However, the Bureau of State Audits and others were able to identify numerous examples of cases where regional boards had not appropriately taken escalated enforcement action.

Figure 3
Violations and Enforcement Actions Core Regulatory Programa
1996-97
Program	Violations and Enforcement Actions b
	Violations	Formal Enforcement Actionsc	Administrative Penalties
NPDES	1,202	82	18
Chapter 15	234	21	3
Non-Chapter 15	462	31	6
Stormwater	2,850	99	22
Totals	4,748	233 (5%)	49 (1%)
a NPDES, Chapter 15, Non-Chapter 15, and Stormwater programs.
b Based on 1998 assessment conducted by board's Compliance Assurance and Enforcement Unit.
c Includes time schedule orders, cease and desist orders, cleanup and abatement orders, modification/rescission of permits, administrative civil liabilities (monetary penalties), and referrals to Attorney General or District Attorney.

Improvements Can Be Made to Ensure Consistency. We find that, in addition to adopting a statewide policy, a number of further actions can be taken by the state board to ensure that regional board enforcement actions are consistent among regional boards, and also consistent with state board and statutory policies. We make the following recommendations:

• Recommend Enforcement Action Review Panel. We recommend that the state board establish a review panel of state and regional board members to review and evaluate the consistency of enforcement actions taken by the regional boards. This was recommended by a 1994 external program review of the board and the 1998 Bureau of State Audits' audit of a regional board. Currently, the state and regional board staff meet in roundtables to discuss prospective enforcement actions as a means to ensure consistency. While this is a good first step, we think that after-the-fact reviews are equally important because, with these reviews, enforcement actions actually taken can be evaluated for consistency.
• Recommend More Comprehensive, Standardized Quarterly Enforcement Reporting. We recommend that the state board standardize and expand the content of the quarterly enforcement reports of the regional boards. Currently, it is difficult to evaluate the consistency of enforcement actions among the regional boards. This is because the regional boards do not consistently report on a comprehensive basis all violations and the enforcement actions taken. In particular, we recommend that the quarterly reports include all violations, not just violations of significant noncompliance, as currently done by the Los Angeles regional board. We think that this is important in order to identify cases where relatively minor violations by a large number of dischargers collectively result in a major problem to be addressed. We also recommend that the enforcement reports be expanded to include the compliance history of a discharger. This will help to identify chronic violators and provide a useful context for the severity of the enforcement action chosen.
• Recommend State Board Enforcement Policy Be Codified in Regulations. We also recommend that a statewide enforcement policy be codified in state board regulations. We think that this is necessary in order to provide greater certainty to the regulated community, thereby facilitating compliance. Also, we recommend that the codified policy include a more explicit protocol than currently exists regarding escalating enforcement in cases where prior, more informal enforcement actions have not proven effective. This would follow the approach taken by Chapter 998 for the industrial stormwater permit program, where levels of noncompliance have been particularly high.

Mandatory Minimum Penalties Induce Compliance

We find that mandating minimum penalties for serious and chronic violations is a cost-effective enforcement approach that induces compliance. We recommend enactment of legislation mandating minimum penalties in specified circumstances.

As discussed previously, enforcing compliance with permit and other clean water requirements is necessary to ensure that the state's water quality objectives are met. As shown in Figure 3 (please see page 113), there are a significant number of known violations of these requirements. Given that some core regulatory activities are not being carried out, it is likely that the number of actual violations is higher. While the board is unable to quantify the impact of these violations on water quality, it is probable that at least some of the violations impair water quality.

New Jersey Experience With Mandatory Minimum Penalties. Currently, California law does not generally mandate that minimum penalties be assessed for water quality violations. Our review finds that where minimum penalties for water quality violations have been mandated by law, substantial increases in compliance have resulted. This has been the experience in New Jersey, which in 1990 mandated minimum penalties for "serious violations" (includes exceeding effluent limitations by 20 to 40 percent) and for "significant noncompliers" (includes chronic violations, such as a failure to submit a self-monitoring report a number of times over a given time period). The number of violations has steadily decreased in New Jersey since the enactment of the law--decreasing by more than 60 percent from 1992 to 1997.

It is sometimes argued that mandating minimum penalties would result in a substantial increase in staffing costs given the additional time required to prepare for administrative hearings. However, the New Jersey experience has shown the policy to be cost-effective, in large measure due to lower enforcement program costs resulting from a substantial increase in compliance. Additionally, the New Jersey experience found that staff preparation for a penalty hearing under mandatory penalties is not as labor intensive as for hearings in cases where penalties are discretionary. This is because in mandatory penalty cases, less time is spent assessing mitigating factors to determine whether a penalty should be assessed.

Recommend Enactment of Legislation Mandating Minimum Penalties. We recommend the enactment of legislation to mandate the assessment of penalties for serious and chronic water quality violations. Such legislation could serve to make enforcement actions more consistent by prescribing a protocol for enforcement and would be cost-effective, based on the New Jersey experience. This approach has been proposed in AB 50 (Migden), as introduced this session. Assembly Bill 50 would require a minimum mandatory penalty of $3,000 be assessed for certain serious water quality violations, including exceeding effluent discharge limitations by a specified percentage.

Current Data Tracking Problematic

We find that compliance and enforcement data have been tracked and reported incompletely and inconsistently by the regional boards. Consequently, the state board is unable to target compliance and enforcement-related expenditures cost-effectively, assess levels of compliance, or evaluate the consistency of enforcement actions among the regional boards. A recent state board proposal for a new information system is intended to address these deficiencies.

Board's Own Assessment: Unreliable, Inconsistent, Incomplete Data Tracking. In 1997, the state board formed a Compliance Assurance and Enforcement Unit to coordinate and evaluate enforcement activities taken statewide by the state and regional boards. The unit's initial assessment of enforcement activities in the core regulatory program, completed in June 1998, identified many problems with the tracking of compliance assurance (inspections, self-monitoring report reviews, et cetera) and enforcement data. In particular, the assessment found that, in general, data compiled on a statewide basis are not reliable. Reliable statewide data are limited mainly to an identification of regulated facilities and a listing of scheduled and completed inspections. As regards data collected by the regional boards, the assessment found significant variability among the compliance assurance and enforcement data. Thus, there are no reliable historical data on a statewide basis that track:

Violations detected on inspections.

• Enforcement actions taken when violations are found.

Implications of Data Problems. Without reliable, consistent, and complete statewide data that make the linkages listed above, the board is not able to:

• Assess water quality in many water bodies of the state. Assess compliance levels over time.
• Target resources to compliance checking and enforcement activities cost-effectively by identifying where these activities are needed the most on a statewide basis. Evaluate the consistency of enforcement actions among the regional boards.

State Board Proposing Data Tracking Improvements. In order to address the above problem, the state board is proposing a new statewide compliance and enforcement data tracking system called "SWIM" (System for Water Information Management). The SWIM is based on an information management system already operated by the Los Angeles Regional Water Quality Control Board. If implemented, SWIM would, among other things, link violation and enforcement data on a statewide basis and would organize data on a geographic basis so that water quality impacts with respect to a particular water body can be assessed.

We think that an information system such as SWIM would provide the state and regional boards with important compliance and water quality information to allow for better targeting of resources to areas of greatest need.

Better Information Needed On Enforcement Expenditures

The board does not generally budget and track expenditures specifically for compliance assurance and enforcement. We recommend the adoption of supplemental report language to require the board to provide information on compliance assurance and enforcement-related expenditures with future budget requests.

Board Cannot Tell How Much It Spends on Compliance Assurance and Enforcement. The board is unable to provide information on total expenditures for compliance assurance and enforcement in the core regulatory program over the past several years. This is because it does not generally budget and track expenditures on the basis of these functions. Without information on these expenditures, and without reliable data on compliance and enforcement activities (discussed earlier), the Legislature is unable to evaluate whether (1) expenditures on compliance assurance and enforcement are adequate to achieve the state's water quality goals, and (2) resources are being targeted cost-effectively to achieve these goals.

Recommend Adoption of Supplemental Report Language. In order that the Legislature is provided with information on an ongoing basis that enables it to better evaluate the board's compliance assurance and enforcement expenditures, we recommend that the Legislature adopt the following supplemental report language:

The State Water Resources Control Board, as part of its 2000-01 and future years' budget requests, shall provide the Legislature with information on its compliance assurance and enforcement expenditures in the core regulatory water quality program (NPDES, Chapter 15, Non-Chapter 15, and Stormwater programs), as proposed for the budget year and for the preceding two fiscal years. The information should provide sufficient detail of the proposed expenditures to demonstrate and justify the board's proposed funding priorities for the core regulatory program and to show how the proposed expenditures serve to meet the state's water quality objectives in a cost-effective manner.

We think that the above information on expenditures, together with more comprehensive data on violations and enforcement activities, will enable the Legislature to evaluate the adequacy of the board's expenditures and the cost-effectiveness of its core regulatory program.

Need for Better Performance Measures

The board's performance measures for the core regulatory program are not based on water quality outcomes. We recommend that the Legislature adopt supplemental report language directing the board to develop more meaningful measures to fulfill the Legislature's intent in Chapter 418, Statutes of 1993.

As discussed throughout this write-up, the board is unable to provide information on compliance trends and related water quality impacts due to data tracking problems. Without this information, it is difficult to evaluate the performance of the board's enforcement programs, because ultimately a well-performing enforcement program is one that maximizes compliance with clean water laws so as to meet water quality objectives.

Our review finds that the board's core regulatory work plans and budget are not tied to water quality-based performance measures. Rather, the ten performance measures adopted by the board for the core regulatory program are mainly of a workload nature, such as "number of self-monitoring reports reviewed." We think that these measures fail to meet the Legislature's objectives for such measures as found in Chapter 418, Statutes of 1993 (SB 1082, Calderon). Chapter 418 required the state board, among other environmental agencies, to develop measurable performance objectives designed to enhance environmental protection. The measures adopted do not directly address whether there have been water quality improvements. An example of a measure relating to water quality improvements would be "number of beach closures due to water pollution."

Recommend Adoption of Supplemental Report Language. We think that the data tracking system proposed by the board would allow the board to develop more meaningful performance measures that are tied more directly to water quality objectives. Accordingly, we recommend that the Legislature adopt the following supplemental report language to direct the board to develop such measures:

The State Water Resources Control Board shall develop performance measures for its core regulatory water quality program (NPDES, Chapter 15, Non-Chapter 15, and Stormwater programs) that relate directly to water quality outcomes, pursuant to the requirement of Chapter 418, Statutes of 1993 (SB 1082, Calderon) for performance measures. The board shall report to the Legislature on these measures in a preliminary report by April 1, 2000 and in a final report by January 1, 2001.

Local Infrastructure Funding Needs Substantial

In a report to the Legislature, the board finds that there are substantial unmet infrastructure funding needs related to the control of point source pollution. The same report provides limited new information on the infrastructure funding needs to control nonpoint source pollution.

Supplemental Report Requirement. In the Supplemental Report of the 1998 Budget Act, the Legislature directed the board to report, with its 1999-00 and future year budget requests, on infrastructure funding needs to meet state and federal water quality objectives. The board addresses these needs under its local assistance programs that provide loans and grants for various water quality purposes, such as wastewater treatment plant construction or upgrades.

The Legislature requested this report because previous reports on these needs had provided incomplete information. For example, past projections had focused almost exclusively on point source pollution, even though nonpoint source pollution is a major cause of degradation of the state's waters. In addition, the board's previous estimates of needs were limited to a projection of funds available.

Needs to Control Nonpoint Source Pollution Still Largely Unknown. According to the board's report, there are currently no comprehensive data on the cost of infrastructure improvements needed to correct the water quality problems related to nonpoint source pollution. Until now, periodic needs surveys of local agencies conducted by the United States Environmental Protection Agency (U.S. EPA)--the primary source of information for previous reports--have focused almost exclusively on point source pollution, and on wastewater treatment and water recycling facilities in particular.

According to the board, one very rough indicator of the magnitude of needs is derived from examining local requests for federal funds for nonpoint source pollution control. For example, since 1990, local agencies have requested about $200 million under one federal grant program, while only about $26 million was awarded.

The board has recently begun a multiyear effort to address all sources of water pollution in 470 water bodies (including lakes, rivers, and streams) throughout the state that are failing to meet water quality standards. Under federal law, the board is required to develop plans for each of these water bodies to allocate responsibility for reducing pollution among all sources, including nonpoint sources. A separate plan is required on a pollutant by pollutant basis. As these plans--called Total Maximum Daily Loads (TMDLs)--are developed, more useful information will be generated about local infrastructure needs relating to the control of nonpoint source pollution. The board anticipates that it will have to develop 1,380 TMDLs over a multiyear period. Thus far, only two TMDLs have been completed. The budget expects $6 million of federal funds annually to be available to develop 50 more TMDLs over the next five years.

Of the two TMDLs completed, only one places limits on nonpoint sources, and total costs for infrastructure changes in this one case have not been estimated. Accordingly, limited new information on infrastructure needs related to the control of nonpoint source pollution has become available over the past year.

Unmet Needs for Point Source Pollution Control Are Substantial. Based on the U.S. EPA needs survey, the board conservatively estimates local needs totaling about $3 billion over the ten-year period between 1999-00 and 2008-09 for wastewater and other water pollution infrastructure mainly for point source pollution control. The board projects that about $1.7 billion would be available from federal funds and existing bond funds (including bond repayments). The remaining $1.3 billion would have to come from a combination of additional state funds and local funds. Assuming that the state maintains its current level of financial assistance to local agencies, the state would need to provide about $600 million over the next ten years, with local agencies providing $700 million.

Need to Overhaul the State's Infrastructure Planning and Financing Process. We think that it is important for the Legislature to consider the water quality-related infrastructure needs discussed above in the context of statewide public infrastructure needs in general. We make a number of recommendations to improve the state's infrastructure planning and financing process in our write-up found in our 1999-00 Budget: Perspectives and Issues.

As of December 1998, state environmental agencies (mainly the department) have spent about $60 million at Stringfellow for investigations and cleanup activities. In addition, the Attorney General has spent over $15 million to defend the state in the Stringfellow litigation and to pursue litigation against the state's insurers. The budget requests about $13 million from the General Fund in 1999-00 for the department to continue cleaning up the Stringfellow site and to operate a water pretreatment plant at the site. The budget for the Attorney General also requests about $5 million to continue representing the state in Stringfellow-related insurance litigation in 1999-00.

Settlement Signed in December 1998. This past December, the state signed a settlement agreement with the private responsible parties (RPs) who had successfully sued the state, making the state liable for all past and future cleanup costs at Stringfellow. (The agreement becomes effective provided the U.S. EPA approves of the agreement by February 15, 1999.) Under the terms of the agreement, the department will assume full responsibility for the future cleanup and operations costs at Stringfellow, while the private RPs will forego reimbursement from the state for costs of about $92 million they have incurred through 1998.

However, the agreement is conditioned on the state obtaining insurance payments currently being pursued in litigation. Specifically, the state would need to obtain: (1) by January 1, 2001, amounts that are sufficient to cover both the state's obligation to U.S. EPA for its past costs (potentially as high as $115 million) and $85 million of the state's future costs; and (2) by January 1, 2002, amounts that are sufficient to cover an additional $85 million of the state's future costs.

If the insurance payments specified in either of the above two conditions are not forthcoming, the settlement agreement would be voided. In that event, the state presumably would reinstate its appeal of the court decision that found it liable for all past and future costs at Stringfellow. The state agreed to put its appeal of the court's decision on the liability issue on hold during the period when it attempts to obtain insurance payments to meet the above conditions. Based on discussions with the department, it appears likely that the state will receive significant insurance payments to cover much, if not all, of its liability at Stringfellow.

Benefit of the Settlement to the State. We find that the settlement agreement reached this past December is an important step in resolving over 15 years of continuous litigation over Stringfellow. In effect, the agreement reduces the state's potential liability at Stringfellow by about $92 million, provided the conditions in the agreement related to the receipt of insurance payments by the state are met. The state will now shift its litigation focus to the litigation against several insurance carriers.

Budgetary Implications. According to the Attorney General and the department, it is unlikely that a court decision or significant settlements in the insurance litigation will take place in the budget year. As the state remains obligated under federal law to perform various cleanup and maintenance activities at the site, we find that the proposed expenditures of $13.1 million from the General Fund for these activities in 1999-00 are warranted. For 2000-01 and 2001-02, the budget projects expenditures of $13 million and $14.3 million, respectively, for these activities. Any insurance proceeds received could be used to supplant the General Fund for these expenditures.

If the settlement agreement were voided because the insurance proceeds were not forthcoming, and the state reinstates its appeal of the liability finding, it would likely be a year or two beyond 2001-02 before final court resolution of the litigation. At that time, the state, if still found to be liable, would be responsible to start making payments out of state funds to cover other parties' past costs at the site.

Recommend Legislature Establish Account for Stringfellow. Insurance proceeds from settlements and court judgments will likely come to the state over a number of years, as there are several insurance carriers involved. We think that it is important that the state track both the receipt of the insurance proceeds and the use of these funds, and that the Legislature retain control over Stringfellow-related expenditures through the budget process.

In order that the Legislature retain oversight over the use of insurance proceeds received and state funds provided for Stringfellow-related activities (including cleanup, operations and maintenance, administration, and litigation), we recommend the enactment of legislation to establish a separate account for Stringfellow. We also recommend that expenditures from the Stringfellow account be subject to appropriations in the annual budget act.