Legislative Analyst's Office

Analysis of the 2002-03 Budget Bill

Department of General Services (1760)

The budget includes requests totaling $174 million of bond funds for the Department of General Services (DGS) capital outlay program. This amount includes $21.1 million in general obligation (GO) bonds for management, design, and construction of previously funded seismic retrofit projects to improve the earthquake safety of state buildings, and $152.9 million of lease-payment bonds to fund the four previously approved renovation projects of state office buildings, consistent with the department's Sacramento regional area development plan.

State Building Seismic Retrofit Program

The administration's proposed seismic program for 2002-03 is a reasonable one. In approving it, however, the Legislature would effectively be committing itself to $47 million in General Fund spending in 2003-04. In addition, we recommend that future seismic retrofit projects be prioritized based on the actual usage of the building, rather than the building code prescribed occupancy, in order to minimize the risk to life.

The DGS administers the state's seismic retrofit program in order to decrease the risk to life resulting from major earthquakes by rehabilitating state-owned buildings. In June 1990, the voters passed Proposition 122--the Earthquake Safety and Public Buildings Rehabilitation Bond Act--that provided $300 million in general obligation bonds for the purpose of earthquake safety improvements. The act allocated $250 million for state buildings (excluding higher education programs) and $50 million for matching grants for local government buildings. Provisions of the bond act specify purposes for which the proceeds can be used, including the retrofit, reconstruction, repair, replacement, and relocation of state and local buildings found seismically deficient. Currently, only about $23 million in the state's share of bond proceeds remains unspent.

Project Selection. Projects are selected for funding based on consideration of seismic stability and risk-to-life issues. Based on these factors, the department has assigned a "risk level" ranging from level VII (in danger of imminent collapse) down to level I (negligible risk to life). The department has committed to funding those buildings identified as risk level V (substantial risk to life) or above. There are 29 projects in the department's current inventory that meet this criterion. It would cost almost $130 million to complete all phases of these projects.

Budget Proposal. Given the small amount of bond funds remaining and the current pressures on the General Fund, the administration chose not to start any new seismic projects in the budget year. Instead, the funding included in the budget--$21.1 million--would either complete or continue design and construction for ten previously authorized projects. These projects have a future cost (primarily in 2003-04) for completion of $47.3 million. In addition, the remaining 19 projects on the department's current inventory would cost $60 million to construct.

Given the current fiscal condition of the state, we believe the administration's seismic proposal is a reasonable one. It targets the remaining bond resources on projects already started, and these projects address seismic deficiencies in buildings generally serving the greatest number of people. We would caution the Legislature, however, that approval of the administration's seismic proposal effectively commits the state to a General Fund cost of up to $47.3 million in 2003-04. This is because virtually all the bonds are committed in the budget year. We would also note that the state may again face a very difficult fiscal situation in 2003-04. (See "Part I" of the Perspectives and Issues for more detail.)

Consequently, we recommend that the Legislature approve the seismic proposal only if it feels that it can cover the remaining costs to complete the projects from the General Fund in 2003-04. If not, the Legislature's basic alternative would be to fund a more limited number of projects that could be completed within the existing bond funds.

Prioritization of Future Projects. In prioritizing seismic projects within a given risk level, the administration has used building occupancy as a selection factor. We think this makes sense. To gauge building occupancy, however, the administration has used code occupancy, which represents maximum building usage not actual building usage. We recommend that in order to minimize the actual risk to life from seismic events, funding for future projects be prioritized on the basis of actual use of the facility (average hours of use times the average number of occupants), rather than code occupancy. This will more accurately reflect the risk to people posed by a building's seismic deficiencies.

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