Legislative Analyst's Office

Analysis of the 2000-01 Budget Bill
CALFED Bay-Delta Program

Legislative Oversight of CALFED Bay-Delta Program Is Essential

It will become increasingly important for the Legislature to conduct effective oversight of the CALFED Bay-Delta Program as the program's focus will soon shift from planning to program implementation lasting 30 or more years. We recommend that legislation be enacted to establish an organizational structure that provides the necessary accountability to the Legislature for CALFED-related expenditures and policy decisions.

Problems in the Bay-Delta. The San Francisco Bay/Sacramento-San Joaquin Delta Estuary (the Bay-Delta) supplies much of the water used in the state for urban, agricultural, and environmental purposes. A number of interrelated water problems have developed in the Bay-Delta, including inadequate water quality, declining fish and wildlife populations, deteriorating levees, and uncertain water supplies.

The Bay-Delta Accord. In December 1994, federal and state agencies that have regulatory and resource management responsibilities in the Bay-Delta signed the Bay-Delta Accord. Among other things, the accord provided for the creation of the CALFED Bay-Delta Program to develop a long-term solution to the Bay-Delta problems. Specifically, the objectives of the program are to provide good water quality for all uses, improve fish and wildlife habitat, reduce the gap between water supplies and projected demand, and reduce the risks associated with deteriorating levees.

The CALFED Bay-Delta Program. Pursuant to the Bay-Delta Accord, the CALFED Bay-Delta Program was created in 1995 as a consortium of ten federal agencies and five state agenciesthe Department of Water Resources (DWR), the Resources Agency, the California Environmental Protection Agency, the Department of Fish and Game, and the State Water Resources Control Board. The program is divided into three phases: problem identification, planning, and implementation. The state has signed an agreement with the federal government (currently extended through the end of 2000) setting out respective responsibilities for the program. The agreement provides for the program's planning and administrative costs to be split evenly between the state and federal government.

This past June, CALFED released the draft environmental impact review (EIR) document for its "preferred program alternative." The preferred program alternative is a plan that provides a framework of broad actions and policies that will be used to guide decisions on specific projects over the long term. For example, the plan does not choose specific sites for new water storage. Rather, the plan provides for a process to identify storage projects that meet specified program goals. The plan consists of eight interrelated program areas. These are:

Before the program implementation phase can begin, the EIR document for the preferred program alternative must be approved by state and federal environmental agencies. Approval is anticipated in June 2000. The CALFED expects the implementation phase to last 30 or more years.

Current Organizational Structure. The existing organizational structure of the CALFED Bay-Delta Program has evolved administratively, and has not been spelled out in state statute. Currently, the program is housed in DWR and has an Executive Director. The structure is loosely configured, and the lines of accountability among the program's director and the heads of the various state agencies involved in the program are unclear. It is also not clear who is ultimately responsible for making decisions.

The staffing and funding arrangements for the program also have been complicated. In past years, staffing came mainly from employees loaned to DWR from a number of different federal, state, and local agencies or hired under DWR's blanket authority for temporary help. The program was funded through 1997-98 by a combination of State Water Project revenues, bond funds, and federal funds, none of which was subject to appropriation in the annual budget act.

The Legislature appropriated funds and provided position authority specifically for the program for the first time in 1998-99 by appropriating $6 million from the General Fund and approving 44 one-year limited term positions. For 1999-00, the Legislature appropriated $8 million from the General Fund and provided the authority for 44 three-year limited-term positions and about eight temporary staff. Our review finds, however, that there are additional staff working in the program beyond the positions authorized by the Legislature. These staff include (1) 13 permanent DWR employees that have been redirected to the program, (2) about eight other state employees from a number of agencies under interagency agreements, and (3) nine federal employees (on temporary assignments to the program or under interagency agreements).

Legislature's Past Concerns About Oversight of CALFED. As discussed in our Analysis of the 1999-00 Budget Bill (please see page B-95), it has been difficult for the Legislature to oversee the CALFED Bay-Delta Program in past years. In part, this was because of the program's complicated staffing and funding arrangements discussed above. Additionally, this was because CALFED expenditures have not been separately identified or displayed in the Governor's budget. To improve the Legislature's oversight of the program, the Legislature last year adopted supplemental report language requiring that (1) the Governor's budget display the CALFED Bay-Delta Program as a program element and (2) the program be scheduled in the budget bill.

Governor's Budget Displays Only Part of the Expenditure Story. The Governor's 2000-01 budget includes the "CALFED Bay-Delta Program" as a program element (Program 15) under DWR. The budget shows $42.3 million of proposed CALFED expenditures in 2000-01 under this element. Of this amount, $20 million is for ecosystem restoration projects, $12.3 million is for planning and operations, and $10 million is for local water management and water transfer programs in areas served by Delta water.

The Program 15 display in the budget document, however, is limited to DWR's expenditures only. Our review shows that substantial additional CALFED-related state expenditures have been excluded from this budget display. As Figure 1 shows, the CALFED-related expenditures proposed for 2000-01 across state agencies actually total $136.1 million.

Specifically, our review finds in addition to the amount displayed in the Governor's budget, another $21.7 million of DWR expenditures would be appropriately characterized as CALFED expenditures. For example, it is not clear why Program 15 excludes $20 million for water storage investigations but includes $10 million for local water management and water transfer projects. The budget also proposes $72.1 million in other state departments related to CALFED. These expenditures include $51.5 million to the Resources Agency for ecosystem restoration projects and $15.9 million to the Department of Fish and Game for fish and wildlife habitat restoration improvements.
Figure 1
CALFED Expendituresa

(In Thousands)

Department and Proposed Activities Amount
Department of Water Resources--Program 15
Ecosystem restoration projects $20,000
Planning, program operations 12,258
Local water management and transfer programs in areas

served by Delta water

Subtotal ($42,258)
Department of Water Resources--Other CALFED Expenditures
Integrated storage investigations $20,000
Salmon habitat and river restoration projects on San Joaquin

River tributaries

Technical assistance for agriculture water conservation 752
Subtotal ($21,721)
Resources Agency
Ecosystem restoration projects $51,500
Department of Fish and Game
Restoration planning, implementation, and monitoring for

Central Valley fish and wildlife

Salmon and steelhead assessment and monitoring 1,313
Hydroelectric power project relicensing reviews 967
Subtotal ($18,179)
State Water Resources Control Board
Technical program support $1,448
Agriculture drainage management in San Joaquin Valley 972
Subtotal ($2,420)
Total CALFED Expenditures $136,078
a Based on Governor's budget summary.

Major Decisions, Major Expenditures in CALFED's Future. While the program's focus in recent years has been on planning (although there has been some implementation of projects), this will soon change. After the EIR document for the broad program plan is approved, the focus of the program will shift to the implementation phase. During this phase, decisions will be made on specific projects (which will themselves be subject to the EIR process), and construction will begin on some of these projects. The decision-making process will involve setting and balancing expenditure priorities among the program's eight activity areas.

While a majority of the activity during the implementation phase is likely to involve capital projects, some activity will continue to be operational in nature, such as monitoring, planning, and feasibility study work. The CALFED estimates that costs for the first seven years of these implementation activities will total about $5.2 billion. These costs could double over the projected 30-year term of the plan. The CALFED anticipates that funding would come from a variety of federal, state, and local sources.

Currently, CALFED is in the process of preparing a financing plan for the implementation phase at a very aggregate level (that is, without deciding on specific projects). It expects the plan to be finalized by the time the EIR document is approved this summer. This plan will assist the Legislature in evaluating legislative actions that may be needed over time to fund the program's implementation, including appropriating funds in the budget act and providing authority for new fees and bonds.

The approval of the environmental document will trigger substantial funds for CALFED projects from Proposition 204 bond funds and, if approved by the voters, the water bond on the March 2000 ballot. Specifically, $390 million of Proposition 204 bond funds for ecosystem restoration projects in the Bay-Delta will become available for expenditure. In anticipation of the approval of the EIR document, the budget proposes $51.5 million of these funds for allocation by the Resources Agency in the budget year. Additionally, the water bond on the March 2000 ballot (Proposition 13) would make available $250 million to DWR for projects identified in the certified EIR document.

Need for Organizational Structure That Holds Administration Accountable for CALFED Expenditures and Decisions. As discussed above, the CALFED Bay-Delta Program will be faced with making a large number of major decisions in the coming years. Because the "preferred program alternative" is a plan at a very general level, decisions regarding the type, location, timing, and financing of specific projects will have to be made. A number of important policy decisions will also have to be made, both in terms of developing project criteria as well as setting expenditure priorities within and among the program's eight activity areas.

Because of the substantial state funding potentially at stake as well as the important decisions yet to be made, we think that it is essential that an organizational structure for the CALFED Bay-Delta Program be in place that has clear lines of accountability. While the current structure may have worked passably during the program's planning phase, we think that a more formalized structure is needed to oversee and coordinate the implementation phase of the program. This is necessary to hold the program accountable for CALFED-related decisions and expenditures, particularly in light of the fact that there will be much more substantial involvement of multiple state agencies outside of DWR during this phase.

The revised organizational structure could take many forms. For example, a new state oversight commission could be established, as proposed in AB 909 (Machado) introduced last session. Alternatively, an oversight unit within DWR could be retained, provided changes were made to clarify decision-making responsibilities and lines of accountability. Whatever form it takes, we think that the organizational structure should at a minimum include the following responsibilities for the entity overseeing CALFED program implementation:

Therefore, in order to ensure that the administration is effectively held accountable for CALFED policy decisions and expenditures, we recommend the enactment of legislation that establishes an organizational structure that provides this accountability.

Few Details on $10 Million Proposal For Local Water Management Programs

Few details have been provided with the budget proposal for $10 million in state matching funds to be allocated by the Department of Water Resources to local public agencies for local water management and water transfer programs. We withhold recommendaiton on this proposal, pending receipt of a written work and expenditure plan that justifies the proposed expenditures.

The budget proposes $10 million from the General Fund, to match $10 million of federal funds, for allocation to public water agencies served by Delta water. The only detail provided by the proposal is that the funds are for the purpose of "implementing water management programs and water transfer programs to mitigate water shortages and water quality impacts." The proposal refers to a recent federal decision that certain amounts of water from the Central Valley Project be dedicated for fish, wildlife, and habitat restoration purposes as a basis for this proposal.

Our review finds that the $10 million of federal funds referred to in the proposal are currently available to the state. These funds were part of a 1999 federal appropriation of $60 million available for a broad range of activities related to Bay-Delta restoration. The funding is for activities "in accord with the CALFED Bay-Delta Program" and "consistent with plans approved by the Secretary of the Interior." The federal funding can be used for various projects, including projects to improve water use efficiency, water storage, and water conveyance. According to CALFED staff, the basic purpose for the proposed expenditures has been approved by the Secretary of the Interior and a policy group consisting of the heads of all 15 federal and state agencies under the CALFED Bay-Delta Program.

While the request for $10 million to match a like amount of federal funds may be reasonable, we think that it is premature for the Legislature to approve this amount without being provided with a plan that provides details of the basis for allocating funds to local agencies and the department's priorities for the specific types of local projects to be funded. Accordingly, we withhold recommendation on this proposal, pending receipt of a written work and expenditure plan that provides sufficient detail to justify the expenditures.

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