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

Overview

The budget proposes significantly higher state expenditures for resources
and environmental protection programs in 2001-02 compared to the estimated current-year level. The increase is exclusively due to a $1 billion set-aside proposed in the budget. The amount will be used to fund unspecified initiatives to address the state's energy problems.

Net of the set-aside amount, total state expenditures for resources and environmental protection programs in the budget year are proposed to be moderately lower than the current-year level. This is mainly due to (1) the elimination of one-time General Fund expenditures in the current year for land and habitat acquisition and state and local park development and improvements, and (2) lower bond fund expenditures for various water-related purposes.

Expenditures for resources and environmental protection programs from the General Fund and various special funds are proposed to total $4.7 billion in 2001-02, which is 4.6 percent of all state-funded expenditures proposed for 2001-02. This level is an increase of about $583 million, or 14 percent, above estimated expenditures for the current year. Of the total state funding for resources and environmental protection programs, $3 billion (or 65 percent) will come from the General Fund. The remaining 35 percent of these expenditures will be supported by various special funds, including the Environmental License Plate Fund, Fish and Game Preservation Fund, Natural Resources Infrastructure Fund, funds generated by beverage container recycling deposits and fees, and an "insurance fund" for the cleanup of leaking underground storage tanks.

Figure 1 shows that state expenditures for resources and environmental protection programs increased by about $2.7 billion since 1994-95, representing an average annual increase of 13 percent. The increase includes about $2.2 billion in General Fund expenditures and the remainder in special fund expenditures. When adjusted for inflation, these expenditures increased at an average annual rate of 11 percent. General Fund expenditures increased at an average annual rate of about 21 percent over this period. When adjusted for inflation, General Fund expenditures increased at an average annual rate of 18 percent.

Increase Skewed by Set-Aside for Energy Initiatives. The significant growth in resources and environmental protection expenditures is skewed by the budget year proposal to set aside $1 billion from the General Fund for energy initiatives. According to the Governor's budget, these initiatives, yet to be developed, will seek to increase energy efficiency, reduce energy consumption, and increase the supply of electricity. (The $1 billion set-aside proposal and other energy-related issues are discussed in the "General Government" chapter.) Adjusting for the set-aside amount, total state-funded expenditures for resources and environmental protection programs are proposed to be about $417 million (or 10 percent) lower than current-year expenditure level. The reduction reflects mainly (1) the elimination of one-time General Fund expenditures in the current year for land and habitat acquisition as well as state and local park development and improvements and (2) lower bond fund expenditures for various water-related purposes.

The adjusted 2001-02 expenditures from all state funds represent an average annual growth of 9.5 percent since 1994-95, or 6.6 percent, when adjusted for inflation. In particular, General Fund expenditures grew at an average annual growth rate of 14 percent since 1994-95 (and 12 percent when adjusted for inflation). This increase is mainly the result of the improved state fiscal condition in recent years. Specifically, through the early 1990s, General Fund expenditures for resources and environmental protection programs were greatly curtailed due to the state's fiscal condition. Since 1998-99, the trend has reversed and General Fund support for these programs has increased.

Spending by Major Program

Figure 2 shows spending for major resources programs—that is, those programs within the jurisdiction of the Secretary for Resources.

Figure 3 shows similar information for major environmental protection programs—those programs within the jurisdiction of the Secretary for Environmental Protection and the California Environmental Protection Agency.

Spending for Resources Programs. Figure 2 shows the General Fund will provide the bulk of the California Department of Forestry and Fire Protection's (CDFFP) total expenditures, accounting for 74 percent ($467.7 million) of the department's 2001-02 expenditures. The General Fund will account for less in the support of other resources departments. For instance, for the Resources Agency and the Department of Fish and Game (DFG), the General Fund will constitute about 33 percent ($76.9 million) and 31 percent ($88.2 million) of their budget-year expenditures, respectively. In the case of the Departments of Parks and Recreation (DPR) and Water Resources (DWR), the General Fund will pay for about 23 percent ($148.9 million) and 22 percent ($279.7 million) of the respective departments' total expenditures.

Figure 2 also shows that compared to current-year expenditures, the budget proposes a reduction in many of the resources departments except for the Resources Agency and CDFFP. Specifically, the budget proposes a significant reduction in DPR expenditures of $655.9 million, or 50 percent less than current-year estimated expenditure level. The reduction includes (1) about $102 million less in department support and operations, mainly due to the elimination of one-time expenditures for state parks deferred maintenance, and (2) a drop of $504 million in expenditures for state and local park improvements funded by Proposition 12 bond money. For DWR, the budget proposes 22 percent less in expenditures for 2001-02, compared to the estimated current-year level. The reduction includes a decrease of $254 million (mainly in local assistance) for various projects and programs funded with Proposition 13 bond funds.

For both DFG and the Department of Conservation, the budget proposes minor reductions in departmental expenditures in 2001-02.

In contrast, the budget proposes a significant increase of $95.6 million (or 73 percent) in the Resources Agency's 2001-02 expenditures. The increase is mainly the result of an additional $70 million in General Fund expenditures proposed for the River Parkway program.

In addition to the proposed changes discussed above, the budget proposes to set aside $1 billion from the General Fund to pay for the cost of energy initiatives. These initiatives have yet to be determined. The budget expects further definition of these initiatives in April/May.

Spending for Environmental Protection Programs. As Figure 3 shows, the budget proposes increases in all of the environmental protection programs except for the California Integrated Waste Management Board (CIWMB). In particular, expenditures of the Department of Toxic Substances Control (DTSC) are proposed to increase by $59.7 million, or 35 percent, over the current-year level. This increase will be in various special-funded programs. In terms of General Fund expenditures in 2001-02, the budget proposes two increases totaling $58.8 million to
(1) provide low-cost environmental insurance to developers for the cleanup of contaminated urban properties ("brownfields") and (2) repay a loan made from the Superfund Bond Trust Fund. Despite these increases, total General Fund support of DTSC will decline in 2001-02 mainly due to the elimination of a one-time transfer of $85 million in the current year to clean up brownfields.

The budget also proposes to increase expenditures for the Air Resources Board (ARB) significantly by $64.9 million, or about 27 percent, compared to current-year expenditure level. The increase is mainly due to a proposed $150 million increase from the General Fund to replace high polluting diesel vehicles and to provide grants to purchase zero-emission vehicles.

While the budget proposes that total expenditures for the State Water Resources Control Board (SWRCB) will increase modestly by 5 percent, the board's General Fund expenditures are proposed to increase significantly, by $108.2 million, over the current-year level. The increase reflects mainly a proposed $100 million to improve the water quality of the state's beaches.

For CIWMB, the budget proposes total expenditures of $94 million—about 15 percent less than current-year expenditures. The reduction includes lower expenditures from the Used Oil Recycling Fund as well as lower grant expenditures for the development of markets for recycled materials.

Major Budget Changes

Figures 4 and 5 present the major budget changes in resources and environmental protection programs, respectively.

As Figure 4 shows, the budget proposes significant increases in funding for activities in various departments related to the CALFED Bay-Delta program. Specifically, the budget proposes (1) an increase of $185.9 million for DWR for water supply projects, levee improvements, the operation of an Environmental Water Account, and various other purposes, (2) an increase of $88.7 million for the Resources Agency for ecosystem restoration, and (3) $8.1 million for DFG to do restoration planning, implementation, and monitoring.

In addition, the budget proposes $70 million from the General Fund for the Resources Agency for the River Parkways Program. For DWR, the budget proposes an increase of $73.6 million for flood control subvention. Expenditures of Proposition 13 bond funds for water projects, however, are proposed to decrease by $254 million.

For CDFFP, the budget proposes $10.2 million for a computer-aided dispatch system and $7 million to replace emergency communications equipment. Similarly, the budget requests funds ($14.2 million) for DFG to implement various office automation and information technology projects.

For DPR, the budget proposes an increase of $11 million for ongoing maintenance of natural resources in state parks. The budget, however, does not propose any additional funds for deferred maintenance. The budget also proposes significantly less expenditures in 2001-02 for state and local park development. This reduction reflects the elimination of one-time expenditures for capital improvements on state and local parks.

Regarding environmental protection programs, Figure 5  shows that the budget proposes significant increases to enhance the state's air and water quality. Specifically, the budget proposes $100 million for ARB to provide grants to replace older diesel engines and $50 million to provide incentives for the purchase of zero-emission vehicles. The budget also proposes $100 million for SWRCB to provide grants for local efforts to address pollution problems at the state's beaches. Additionally, the budget includes $8.1 million to address the impact of storm water runoff on water quality.

In addition, the budget provides $37.5 million for DTSC to establish a low-cost insurance program to assist owners with the cleanup of contaminated urban properties ("brownfields").