Legislative Analyst's Office Analysis of the 2002-03 Budget Bill

Tahoe Environmental Improvement Program

The Tahoe Environmental Improvement Program (EIP), a collaboration of over 50 state, federal, academic, local, and private interests, is a capital improvement program designed to achieve environmental standards in the Lake Tahoe basin. Program implementation began in 1997. Over a 20-year period, the program is estimated to cost approximately $1.5 billion.

The 2002-03 budget proposes $26.6 million in state funds in six departments for the Tahoe EIP. There are a number of policy, fiscal, and programmatic issues for the Legislature to consider in evaluating the proposed budget for the Tahoe EIP.

Tahoe EIP Created to Meet Environmental Standards in the Lake Tahoe Basin

Program Created to Address Environmental Degradation. The Lake Tahoe region has experienced environmental degradation for the past 100 years, most notably in the lake's water clarity and the health of the basin's forest lands. The lake's water clarity--which reflects water quality--has become the primary measure of the basin's environmental health. As shown in Figure 1, the lake's water clarity has steadily declined over the past several decades.

To counter this degradation, the Tahoe Environmental Improvement Program (EIP) was established in 1997. The Tahoe EIP is a 20-year capital improvement program involving multiple state, federal, local, academic, and private entities. In 1997, the state signed memoranda of agreement with the federal government, Nevada, the Washoe Tribe, and the Tahoe Regional Planning Agency (TRPA) committing to implement and fund the Tahoe EIP. Over 50 entities are involved in implementing the program. Figure 2 lists the main California participants.

The objective of the Tahoe EIP is to meet nine categories of environmental standards for the Tahoe region that were established by a regional working group in the 1980s. These standards include numeric and measurable targets for categories such as water quality, soil conservation, wildlife, recreation, and air quality. Pursuant to a California-Nevada bistate compact, TRPA (a bistate agency) performs evaluations every five years to determine whether the region is "on track" to meet the environmental standards.

Twenty-Year Costs Total at Least $1.5 Billion. As shown in Figure 3, TRPA projects costs of almost $1.5 billion for the Tahoe EIP over a 20-year period. The TRPA expects estimated costs to increase beyond this amount as more precise estimates for operations and maintenance costs for completed projects are developed. Figure 3 shows that capital outlay costs make up the bulk (90 percent) of expenditures over this period. During the first ten years, capital outlay costs total $908 million. Of this amount, the allocation of costs are as follows: federal government ($297 million), California ($275 million), private sector ($153 million), local government ($101 million), and Nevada ($82 million).

Budget Proposal. As shown in Figure 4, the Governor's budget proposes $26.6 million of state funds for various state departments to implement the Tahoe EIP in 2002-03. This is a decrease of about $1.9 million (7 percent) from the current year. Of the total proposed budget, $2 million is from the General Fund, $19.7 million is from bond funds, and $4.9 million is from special/other funds. 

Enhancing Legislative Oversight of Tahoe EIP

In order for the Legislature to effectively evaluate budget proposals related to the Tahoe Environmental Improvement Program (EIP)which are spread throughout several state departmentsand provide appropriate policy direction to the Tahoe EIP, we recommend that the natural resources and environmental quality policy committees and budget subcommittee in each house jointly consider Tahoe EIP budget proposals. We also recommend the adoption of supplemental report language to require an informational display of Tahoe EIP expenditures in future-year Governor's budgets.

Why Legislative Oversight of Tahoe EIP Is Important. Because of the state's potentially large financial commitment to the EIP effort in coming years, it is important for the Legislature to be provided up-to-date and accurate information about the effectiveness of the program in meeting environmental standards set for the Lake Tahoe region. A recent status report conducted by TRPA showed that the program was failing to meet most of its short-term environmental goals. This is of concern because, to the extent the region continues to fail to reach these goals, potential consequences include:

• Potentially irreparable loss of Lake Tahoe's water quality and clarity.
• Increased threat to the lake's aquatic and terrestrial ecosystems.
• Increased threats to wildlife in the basin, particularly to endangered species such as the bald eagle or the Lahontan cutthroat trout.
• Increased potential for catastrophic fire in the basin's forest lands.
• Deleterious impacts on the regional economy that is largely dependent on the basin's high environmental quality.
• Increased regulation of residential, commercial, and recreational development and activities in the region.

Legislature's Oversight Has Been Difficult. We find, however, that it has been difficult for the Legislature to oversee the Tahoe EIP. In part, this is because Tahoe EIP expenditures are not separately identified or displayed in the Governor's budget. Rather, Tahoe EIP expenditures are spread among several state agencies and are not always identified as such. Thus, it is difficult for the Legislature to identify program expenditures, staffing, and activities to hold the various participating agencies accountable.

It is also important for the Legislature to be informed of the policy choices, trade-offs, and funding priorities that are inherent in the budget proposals of the program. However, to the extent that Tahoe EIP funding proposals are reviewed by the Legislature on a department-by-department basis, it will be difficult for the Legislature to evaluate whether the policy and funding priorities inherent in the budget proposals are consistent with the Legislature's own priorities.

Finally, it has been difficult for the Legislature to evaluate the performance of the Tahoe EIP because numeric measures for evaluating the effect of individual EIP projects on environmental quality have generally been lacking. In other words, the Legislature has not been apprised of what improvements in environmental quality have resulted, or will result, from the state's investment in the particular capital improvements proposed by successive budgets. We understand, however, that TRPA is in the process of developing better "outcome-oriented" performance measures for the program's projects.

Recommendations to Enhance Legislative Oversight. To facilitate the Legislature's review of the Governor's budget proposal for the Tahoe EIP this budget session and in future years, we make the following recommendations.

First, we recommend that each house's environmental quality and natural resources policy committees and budget subcommittee hold joint hearings on Tahoe EIP budget proposals. This will help identify any need for legislation to provide policy direction to the program and will provide a policy basis for the budget subcommittees as they decide which proposals to fund. These oversight hearings should be held on an as-needed basis.

As regards the 2002-03 budget proposal, TRPA (as a coordinating agency for the program) should be directed to provide at the joint hearings certain information to present the "big picture" of the Tahoe EIP so as to facilitate the Legislature's decision-making process. The TRPA should be directed to:

• Provide a summary of the major activities planned for the program in the budget year, including project specifics and time lines.
• Explicitly set out the policy choices made and the funding priorities inherent in the budget proposal.
• Provide a status report on Tahoe EIP's programs to date and inform the Legislature on the results and implementation of TRPA's recent evaluation of environmental standard attainment in the Tahoe region.
• Provide a status report on the development of outcome-oriented performance measures to enable legislative review of Tahoe EIP's effectiveness in meeting environmental goals.

Additionally, in order for the Legislature to better evaluate the budget's proposal for the Tahoe EIP in future years, we recommend that the Legislature adopt the following supplemental report language:

In order for the Legislature to better evaluate budget proposals for the Tahoe Environmental Improvement Program (EIP), it is the intent of the Legislature that the Governor's budget display include an informational item that contains all Tahoe EIP expenditures of all state agencies implementing the program. This display should be included in the budget for the 2003-04 and future budget years.