Legislative Analyst's Office Analysis of the 2001-02 Budget Bill

Utilities Costs (9911)

Increased Department Costs for Natural Gas and Electricity

We withhold recommendation on the $50 million proposal ($25 million General Fund and $12.5 million each from special funds and nongovernmental cost funds) to fund departments' increased natural gas and electricity costs, pending receipt and review of documentation justifying the requested amount. Further, we recommend that the Legislature approve any funding on a one-time basis, instead of annually as requested, and delete proposed budget bill language that would authorize the Department of Finance to augment the $50 million.

The Governor's budget proposes $50 million ($25 million General Fund and $12.5 million each from special funds and nongovernmental cost funds) annually to fund higher costs departments face for various utility expenses such as natural gas and electricity. Proposed budget bill language specifies that with 30 day advance written notification to the Legislature, the Department of Finance (DOF) can (1) allocate funds to state departments and (2) augment the $50 million appropriated in these items.

In view of the current situation concerning the price of natural gas and electricity, a set-aside of funds for increases in the price of these expenses may be warranted. The administration, however, has not provided any supporting documents to justify the amounts proposed. Further, given the uncertain circumstances surrounding these utility costs when this analysis was written, we withhold recommendation on the $50 million proposal. The Legislature should have more information on the need for this item and an appropriate amount during the budget process.

In any case, however, we recommend that the Legislature delete the proposed budget language that would allow DOF to augment the $50 million. We are not aware of any need to grant the department such open-ended authority.