Legislative Analyst's Office
Analysis of the 2001-02 Budget Bill
The Department of Fish and Game (DFG) administers programs and enforces laws pertaining to the fish, wildlife, and natural resources of the state. The Fish and Game Commission sets policies to guide the department in its activities and regulates fishing and hunting. The DFG currently manages about 850,000 acres including ecological reserves, wildlife management areas, hatcheries, and public access areas throughout the state.
The budget proposes total expenditures of $281.4 million from various sources. This is a decrease of about $15 million (5 percent) from the estimated current-year level. Of that amount, $275.8 million is for support and $5.6 million is for local assistance. The decrease reflects mainly a reduction in federally funded expenditures for salmon restoration and state-funded emergency cleanup of a state wildlife area.
Since the 1950s, salmon and steelhead populations in California have significantly declined due in part to the degradation of their freshwater habitat. Since 1981, DFG has provided grant funds through the Fisheries Restoration Grant Program (FRGP) to landowners, public agencies, and nonprofit groups to restore salmon and steelhead population through improved habitat.
In the following sections, we review the implementation of FRGP by DFG. Specifically, we discuss:
In our review of FRGP, we found that DFG operates primarily as a grant administrator. In that role, it primarily processes grant applications submitted to it, instead of setting restoration priorities. We found that the program has successfully increased involvement by landowners and watershed groups in local watersheds and resulted in many projects designed to improve salmon habitat. We also conclude that the department should develop a strategic approach to restoration that includes identifying restoration priorities for more effective targeting of grant funds. Additionally, we make recommendations for streamlining the application process, establishing an evaluation program, and specifying the criteria under which Proposition 13 bond funds will be expended for salmon restoration. Several of our recommendations call for statutory changes that can be incorporated into one piece of legislation.
Since 1981, more than $89 million has been expended on the FRGP and over 2,000 grants have been awarded. Many of the grants fund habitat restoration projects such as removing fish passage barriers, stabilizing streambanks to control soil erosion, and repairing roads that are delivering sediments to nearby streams. The program also funds projects that do not involve direct habitat restoration such as watershed assessment, planning, and education efforts. Finally, FRGP provides support for watershed organizations.
Funding Increased in Recent Years. As shown in Figure 1, funding for FRGP has increased in recent years. Most notably, between 1999-00 and 2000-01, program funding increased by $19.2 million, primarily as a result of additional federal and bond funds. With this increase, the number of grants awarded is expected to increase from 152 in 1999-00 to about 318 in the current year. Recognizing the growing workload for administering the program, the Legislature also increased the staffing of the program by 14 personnel-years in 2000-01. The budget proposes $14.5 million for FRGP in 2001-02, a reduction of $11 million.
Funding for Fisheries
1981-82 through 1996-97
For 2000-01, there are three primary sources of funding for FRGP: Salmon and Steelhead Trout Restoration Account (SSTRA), federal funds, and Proposition 13 bond funds. Specifically, Chapter 293, Statutes of 1997 (SB 271, Thompson) established SSTRA and provided six years of fundsfrom 1997-98 through 2002-03 from tidelands oil revenues for fish restoration projects meeting specific criteria. In addition, the federal Pacific Coastal Salmon Recovery Program provided $9 million. Chapter 715, Statutes of 2000 (SB 1087, Sher) requires that these federal funds be used in the same manner as SSTRA funds. Lastly, Proposition 13, passed by the voters in March 2000, provides $25 million in bond funds for improving salmon habitat, of which $7.5 million is appropriated for the current year.
We find that the Department of Fish and Game (DFG) should strategically target grant funds to the highest-priority fish restoration projects. We recommend the enactment of legislation that directs DFG to identify and establish restoration priorities. Additionally, we recommend that the department report at budget hearings on its plans to provide restoration information and assistance to potential project applicants.
Grants Not Targeted Strategically to Maximize Program Effectiveness. Our review finds that in implementing FRGP the department operates mainly as a grant administrator. This involves processing and evaluating applications and managing grant contracts. In some limited areas, DFG is able to provide information on restoration priorities based on staff work in particular watersheds, but such efforts are limited and priorities are not published as part of the request for proposal (RFP) process. These efforts, however, fall short of a strategic approach because the program is driven by the proposals submitted by grant applicants rather than being driven by an established set of restoration priorities.
Department Should Set Restoration Priorities. In order to move to a more strategic approach, the program should build upon its current efforts by identifying watersheds that are priorities for restoration; and within those watersheds, identifying the types of projects that are of the highest priority. For example, in certain priority watersheds, projects that address sediments delivered by roads may be a high priority, whereas in other watersheds where the initial assessment work has not been done, the priority for funding may be assessment.
We think that identifying priorities will have a number of benefits. First, identifying these priorities and making them known will encourage applicants to submit proposals for the highest-priority projects. This would result in more effective use of grant funds for fish restoration. Providing information on priorities could also facilitate larger projects. These projects are costly and risky for project proponents to develop without knowing whether they will be funded.
Second, identifying priorities for a watershed may encourage multiple projects to be proposed and funded in a watershed, thereby having a greater cumulative effect on the watershed. Third, the review and approval process could be expedited. This is because in identifying priorities, DFG will have already assessed the restoration needs of a particular area and, therefore, will be better able to judge whether the proposed project addresses those needs.
Department Should Provide Information and Assistance to Target Projects. In order to encourage proposals which reflect the department's priorities, we think the priorities should be published in the department's RFPs and proposals meeting the identified priorities should score higher in the evaluation process.
In addition, we think DFG should serve as a clearinghouse of restoration information for project proponents and should assist proponents in developing projects. We found that in areas where staff are available to provide resource information, the number of proposals is higher than in areas where no staff are available. Discussions with members of the program advisory committee, established under SB 271, also suggest that the quality of proposals is higher where departmental staff are available to provide assistance to project proponents.
Recommendation. In order to encourage funding of the highest-priority projects, we recommend the enactment of legislation that directs DFG to identify and establish restoration priorities to be applied in awarding grant funds under FRGP. Additionally, we recommend the department report at budget hearings on its plans to provide restoration information and assistance to potential project proponents.
In order to provide more flexibility to project applicants, we recommend the enactment of legislation directing the Department of Fish and Game (DFG) to accept grant proposals for the program more than once a year. We further recommend the adoption of supplemental report language requiring DFG to submit a report on streamlining the evaluation process.
Current Process Involves Multiple Reviews. Currently, proposals for FRGP funding are due once a year. Proposals are subject to at least four levels of review. First, a preevaluation team of DFG staff from across the state conducts a desk review of projects and provides focused questions for the field staff. Second, projects are then reviewed at the site by field staff and scored. It is during this stage where the actual substantive review occurs. Third, field scores are then reviewed by a technical team (often consisting of the same members as the pre-evaluation team). The technical team may assign a different score to projects. Finally, a citizen's advisory committee, established as required by SB 271, then convenes to review each project and recommend projects for funding. A final list of recommended projects is then forwarded to the Director for approval. Once selected, projects are reviewed again by contract managers to make sure they comply with environmental laws.
Applications Should Be Accepted Several Times a Year. Having applications due once a year can lead to several problems. First, it creates a workload peak problem for DFG staff because all of the projects must be evaluated at the same time. An annual process also means that project applicants often have to wait a year before they can apply even if restoration projects are identified early in the annual cycle. Projects that were not funded also have to wait a year before proposals can be resubmitted.
We think that accepting applications several times a year would even out the workload throughout the year and provide greater flexibility to applicants. We therefore recommend the enactment of legislation directing DFG to accept proposals for FRGP more than once each year, with equal amounts of grant funds to be made available for each application cycle.
Require Field Reviews and Streamline the Evaluation Process. Our review found that certain stages of the review process are more appropriate for streamlining than others. For example, during the latest round of funding, DFG tried to streamline the process by eliminating field reviews for projects funded by federal funds and bond funds because of staffing constraints. However, field reviews are essential for DFG staff to examine the conditions of the restoration site in order to determine if the proposed project is appropriate for the site. Additionally, field review comments are important because they are used by the advisory committee to evaluate projects. Consequently, we conclude that the field reviews should not be eliminated. We therefore recommend legislation be enacted requiring all projects to be field reviewed. Exceptions could be made if the department can document it has sufficient knowledge of a project such that a field review would not be required.
Based on our review, we have identified other options for streamlining the review process. One option would be to eliminate the preevaluation team review as well as the technical review that occurs after the field review. Eliminating the preevaluation team review is an option worth considering because its contributions could be built into the project evaluation process in other ways. This could be achieved by the department providing staff training to ensure consistency in field reviews, and relying on comments of field reviewer supervisors. Eliminating the technical review is also an option because we found that in most cases comments from the review were relatively minimal. In fact, in almost 90 percent of the projects the last three years, the technical team concurred with the field scores. Furthermore, because most of the technical review team members attend the advisory committee meetings, any additional comments and input regarding projects can be provided at those meetings.
In order to address the need for streamlining the evaluation process, we recommend the Legislature adopt the following supplemental report language.
The Department of Fish and Game shall report to the Legislature on or before December 1, 2001, on how it plans to streamline the evaluation process for the Fisheries Restoration Grant Program. The report should identify how much time will be saved in the evaluation process by implementing the streamlining recommendations.
Under the California Environmental Quality Act (CEQA), the department must conduct an environmental review of restoration projects funded by the Fisheries Restoration Grant Program. The department is now considering a different approach to meet CEQA requirements. We recommend the Legislature adopt supplemental report language requiring the Department of Fish and Game to submit a report on the approach it will take to meet CEQA requirements and an explanation of why that approach is the most appropriate.
Restoration Projects Subject to CEQA. The CEQA requires agencies to evaluate the environmental impacts of projects and avoid or mitigate environmental impacts when feasible. Although projects funded under FRGP are intended to enhance natural resources, they are subject to CEQA requirements and must be reviewed for their environmental impacts. While the projects may benefit fish, there are other species including amphibians and native plants that may be harmed by the changes to their habitat.
Department Response to CEQA Requirements. In order to simplify the CEQA process for FRGP projects and avoid the time-consuming process of preparing separate environmental documents for each project, DFG has adopted in recent years the practice of reviewing individual projects and then grouping projects together in each region and preparing one "negative declaration." A negative declaration states that no substantial evidence exists that the projects may have a significant environmental effect.
Although grouping projects has advantages, there are two main concerns with this approach. First, some projects are held up while waiting for the field review of other projects to be completed. Also, if the environmental review is delayed for one project, it could hold up other projects. Second, as larger, more complex projects are funded, a negative declaration may not be sufficient to adequately cover the environmental implications of these projects because negative declarations can only be used for projects with "no significant environmental effect."
The department recognizes the problems with its current approach to meeting CEQA requirements for FRGP-funded projects. Department staff indicate that DFG is considering developing a programmatic environmental impact review (EIR) which would examine the implications of the fish restoration program as a whole. The main advantage of this approach is that once certain types of projects are covered under the programmatic EIR, DFG would not have to conduct a separate environmental review process for each project. This could substantially reduce project review and approval time. However, discussions with CEQA experts suggest that developing a programmatic EIR that will be comprehensive enough may be complicated because it will have to address different types of projects in different habitats. Furthermore, if there are many projects that do not fit into the programmatic EIR (thereby requiring individual environmental review), then the costs of developing a programmatic EIR may not be justified.
LAO Recommendation. Given the concerns with DFG's current approach to CEQA and the concerns raised regarding the use of a programmatic EIR, the department should analyze how best to meet CEQA requirements for the restoration program. Accordingly, we recommend the Legislature adopt the following supplemental report language.
The Department of Fish and Game shall report to the Legislature, on or before December 1, 2001 on how it will meet its California Environmental Quality Act requirements for the Fisheries Restoration Grant Program. The report shall provide an analysis justifying why the selected approach is the most appropriate to take, including its costs and benefits.
Evaluating the effectiveness of the restoration projects is important for accountability and program planning purposes. To date, the Department of Fish and Game has made limited efforts in this area. We recommend that the Legislature statutorily include evaluation as an essential component of the Fisheries Restoration Grant Program and require the department to submit periodic evaluation reports to the Legislature. We further recommend the adoption of supplemental report language requiring the department to submit an evaluation plan by February 1, 2002.
Monitoring and evaluating funded restoration projects for their effectiveness is important for both accountability and program planning purposes. Project evaluation is necessary in order for the Legislature to know what has been achieved with grant funds. Evaluation is also important for program planning purposes because it identifies which kinds of projects are most effective. Such information can provide the basis for funding future projects.
Little Effort to Evaluate Project Effectiveness and Impact. Current law does not require project evaluation and DFG has dedicated limited efforts to this activity. Current evaluation efforts are limited to a small sampling of only one of three categories of restoration projects.
In order to ensure that monitoring and evaluation of project effectiveness is conducted, we recommend the enactment of legislation that explicitly makes evaluation a component of FRGP and requires the department to submit periodic evaluation reports to the Legislature.
Department Is Developing Evaluation Plan. Our review indicates that the department is in the process of developing an evaluation component for the program. In order to ensure that DFG develops, in a timely manner, an evaluation plan which identifies the methodology to be used as well as how evaluation efforts would be staffed, we recommend the adoption of the following supplemental report language:
The Department of Fish and Game shall submit to the Legislature by February 1, 2002 an evaluation plan for the Fisheries Restoration Grant Program (FRGP). The plan shall include the methodology to be used to evaluate various types of projects funded by FRGP. It shall also identify the staffing levels which the department deems necessary to conduct project evaluations using the identified methodology.
While we support the department's effort to develop an evaluation program for the Fisheries Restoration Grant Program, we are concerned that funding for the current-year efforts were secured without legislative review and oversight. We therefore recommend adoption of budget bill language to prohibit the use of any funds for program-wide evaluation efforts without legislative review and approval of the expenditure proposal.
Programmatic Evaluation Proposed Without Legislative Approval. In order to fund the development of an evaluation program, (as discussed above) the department acted as a grantee to the FRGP and submitted a proposal in the current year for $2.9 million to develop an evaluation and monitoring program. The DFG was eventually granted $600,000 for the development effort.
We concur that developing a project monitoring and evaluation program has merit. However, we find that proposals such as the evaluation request are programmatic in nature. As such, they should receive legislative review and approval because they have fiscal and policy implications for the overall program. Therefore, in order to prevent the department from redirecting FGRP or other funds to support an evaluation plan without legislative review and approval, we recommend the adoption of the following budget bill language:
No funds appropriated to the Department of Fish and Game shall be used for a program-wide evaluation of the Fisheries Restoration Grant Program without the review and approval of the Legislature.
Proposition 13 provides a total of $25 million in bond funds to improve salmon habitat, but does not provide specific criteria on how the money is to be spent. We recommend adoption of budget bill language and the enactment of legislation directing the money to be spent in accordance with statutory provisions governing Department of Fish and Game grants for salmon restoration.
Proposition 13, passed by the voters in March 2000, provides a total of $25 million to DFG for salmon restoration. These funds can be used directly by DFG for projects or to provide as grants to various entities for projects. However, other than limiting to 3 percent the amount of funds that can be used to pay administrative costs, Proposition 13 does not specify how the funds are to be used or the process and criteria by which grants are to be selected.
For the current year, $7.5 million in Proposition 13 funds are appropriated, which DFG plans to spend in accordance with current statutory provisions relating to FGRP. For the budget year, $5.5 million will be available, with additional amounts available in subsequent years. In order that these bond funds are expended in the budget and future years in a manner consistent with other state funds used for fish restoration, we recommend that DFG expend Proposition 13 bond funds as part of FGRP. This can be achieved through the adoption of budget bill language for 2001-02 and the enactment of legislation for subsequent years. Doing so would provide more accountability regarding how the bond funds are expended.
The budget proposes $3.3 million for habitat assessment and conservation planning. The proposal would in effect expand the state's Natural Community Conservation Planning (NCCP) efforts beyond Southern California to the Central Coast and the Sierra foothills. Because the Legislature has expressed concerns about expanding the NCCP program, we recommend the proposal not be funded until legislation is enacted providing further guidance on expanding the state's role in NCCP. (Reduce Item 3600-001-001 by $2,327,000 and Item 3600-101-0001 by $1 million.)
Chapter 765, Statutes of 1991 (AB 2172, Kelley)known as the NCCP Actauthorized the department to assist public and private agencies in preparing and implementing natural community conservation plans. These plans are intended to balance economic development with wildlife and habitat protection.
The NCCPs Represent a Different Approach to Habitat Protection. The NCCP process is designed to provide an alternative to the more traditional project by project, single species habitat protection efforts by developing regional habitat protection plans to protect the numerous species inhabiting targeted regions. Typically, under NCCP, species are conserved on a habitat basis in designated preserve areas. Economic development is facilitated elsewhere, outside the preserves, by contributing to the establishment of the preserve as mitigation for the adverse impact on species caused by the development. This approach to habitat conservation has been somewhat controversial. In particular, questions have been raised as to whether there is scientific evidence that shows NCCP plans in fact provide species protection.
Existing NCCP Efforts Limited to Southern California. Since 1991, the department's NCCP activities have been confined to Southern California and have focused on the habitat of the coastal sage scrub. To date, the state has contributed significant funds toward land acquisitions to implement existing NCCPs. Although the Southern California NCCP effort was initially proposed as a pilot program, to date there has been no evaluation of the effectiveness of the program in conserving habitat and species.
Over the years, the Legislature has consistently expressed its intent through budget bill language that the state's NCCP program should be limited to existing efforts in Southern California. In large part, this is because the Legislature has raised several concerns regarding the program, including: the scientific standards used for developing NCCP plans, the lack of evaluation of the NCCP pilot making it difficult to determine the effectiveness of the NCCP approach, and the costs of state involvement in implementing NCCP.
Budget Proposes to Expand NCCP. For 2001-02, the department proposes to continue its existing NCCP functions in Southern California at a cost of $2.7 million. In addition, it proposes $3.3 million to expand conservation planning efforts into the Central Coast and the Sierra foothills.
The proposal has three components. First, $1.6 million is requested for data collection and habitat assessment and monitoring efforts, most of which will be used to support conservation planning needs. Second, the proposal includes about $667,000 for large scale conservation planning efforts. While the proposal does not specifically limit these efforts to NCCP, discussions with DFG indicate that the conservation planning efforts will focus on NCCP. Third, the proposal includes $1 million for grants to local governments to develop NCCP plans.
Proposed Expansion Warrants Legislative Direction. The conservation planning activities proposed in the budget represent a significant expansion of the department's NCCP program. Based on the program's experience in Southern California, such expansion is likely to lead to additional future state expenditures for habitat acquisitions to implement adopted plans. Given the Legislature's concerns with expanding the NCCP program, we recommend the Legislature not fund the proposed expansion until legislation is enacted providing further guidance on the state's role in expanding NCCP efforts.
Policy direction should be provided regarding the following issues:
Moreover, to address the Legislature's concerns with establishing standards and evaluations for NCCP, the legislation should provide for:
(1) specific conservation requirements that must be included for approval of NCCP plans and (2) an independent evaluation of the effectiveness of existing NCCP efforts with regards to species protection and habitat conservation.
Accordingly, we recommend the request for $3.3 million for NCCP efforts be deleted from the budget.
The environmental filing fees charged by Department of Fish and Game have been ruled to be constitutional. However, the department's efforts to collect the fees are minimal. We recommend the department report to the Legislature at budget hearings on actions it plans to take to more effectively collect the environmental filing fees.
Chapter 1706, Statutes of 1990 (AB 3158, Costa) required DFG to collect environmental filing fees for projects subject to CEQA in order to defray the cost of managing and protecting fish and wildlife resources. The intent is to extend the user-based funding system used by the department, that relies heavily on the revenue from fishing and hunting licenses. Specifically, costs of wildlife protection and management would be expanded to those who would consume those resources through urbanization and development. The costs include the costs of reviewing projects under CEQA, maintaining databases, conducting research, and managing and protecting California's fish and wildlife resources.
The collection of the fees is delegated to the county clerks, Office of Planning and Research, and state agencies that act as lead agencies for the CEQA process. The amount of the fee paid to DFG is determined by whether a negative declaration ($1,250) or an EIR ($850) is prepared for the project. All CEQA lead agencies can exempt a project from the fee by finding the project is de minimis in its impact on wildlife.
Court Rules Fees Constitutional. In 1991, a suit was filed against DFG alleging that the fees were unconstitutional taxes. The suit charged that there was no nexus between the services provided by DFG in reviewing environmental documents and the amount of the fee charged. As a consequence, the suit alleged amounts charged were not fees but rather they were taxes. Further, because the State Constitution requires that new state taxes be enacted by a two-thirds vote of the Legislature, the suit argued that the fees violated the State Constitution in that they were enacted only with majority vote of the Legislature.
In April 2000, the Third District Court of Appeal ruled that the fees were constitutional. Specifically, the Court of Appeal found that DFG is a part of a regulatory system in the state to protect and sustain the environment, and it plays a vital regulatory role under CEQA. The fees charged under AB 3158 are imposed only to cover the reasonable cost of providing services necessary to implement CEQA. The court further found that DFG met its burden of proof showing that the amount of revenues generated by the AB 3158 fees was far less than the cost of the environmental reviews provided.
Department's Efforts to Implement AB 3158 Have Been Limited. The DFG suspended collection of AB 3158 fees during 1995 as a result of a settlement decision regarding AB 3158. Subsequently, that settlement was challenged and in 1996 DFG notified counties and lead agencies to resume collection. Because counties and state agencies act as collectors of the environmental filing fees, the department must work closely with them to ensure compliance with AB 3158. To date, DFG has only made limited efforts to encourage counties and state agencies to collect the fees. These efforts have consisted primarily of sending a letter to counties and state agencies informing them that they must collect the fees. The department also has not conducted a review of the fee as well as the adequacy of the revenues generated or recommended any changes be made to the fee statute, as required by AB 3158.
To address the Legislature's concern regarding the department's efforts to collect fees, the Legislature required, in the Supplemental Report of the 1999 Budget Act, DFG to report on a comprehensive plan to ensure AB 3158 fee collections consistent with law. In February 2000, the department submitted the required report. The report indicated that DFG would conduct an audit survey of selected noncompliance counties in order to identify the amount of fees not being collected. The report also indicated DFG planned to send a letter to all counties clarifying the AB 3158 statute. At the time this analysis was prepared, the department had not completed these activities and collection activities continue to be minimal.
Department Should Report on Its Fee Collection Plans. We think an effective collection of AB 3158 fees is important for two reasons. First, revenues
collected can be an important source of funding for the department's environmental review activities which are a key responsibility of the department. These
revenues can reduce the department's reliance on the General Fund. In the current and budget years, revenues are projected to be $1.8 million. However, the
current projections assume the existing minimal collection effort by the department. We think
AB 3158 has the potential of generating substantially more revenue with more effective implementation.
Secondly, in enacting AB 3158, the Legislature's intent was for the costs of managing and protecting the state's resources to be shared, in part, by those who would consume resources through urbanization and development. To the extent the fee is not consistently implemented throughout the state, the impact of urbanization and development is not equitably borne by those who caused it.
In view of the above, we recommend the department report to the Legislature at budget hearings on actions it plans to take to more effectively collect fees. The department should also advise the Legislature regarding any changes in the fee statute (such as fee schedule) it deems appropriate.