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Legislative Analyst's OfficeAnalysis of the 2002-03 Budget Bill |
The California Department of Forestry and Fire Protection (CDFFP), under the policy direction of the Board of Forestry, provides fire protection services directly or through contracts for timberlands, rangelands, and brushlands owned privately or by state or local agencies. In addition, CDFFP (1) regulates timber harvesting on forestland owned privately or by the state and (2) provides a variety of resource management services for owners of forestlands, rangelands, and brushlands.
The budget requests $551 million for the department in 2002-03, including support and capital outlay expenditures. Of this total, 89 percent is for fire protection, 7 percent is for resource management, and the remainder is for State Fire Marshall activities and administration.
The total proposed budget is a decrease of about $151.7 million (or 21 percent) below estimated current-year expenditures. Most of this decrease reflects eliminating the General Fund support for emergency fire suppression (which totaled $100 million in the current year, including deficiencies) and other one-time expenditures that occurred in the current year.
The General Fund will provide the bulk of CDFFP's funding--$312.3 million (about 56 percent). The remaining funding will come from federal funds and reimbursements ($162.6 million); the Forest Resources Improvement Fund ($14.8 million); and various other state funds. Major budget proposals include: (1) the elimination of the baseline General Fund budget of $55 million for emergency fire suppression, (2) a funding shift of $20 million from the General Fund to reimbursements from local entities for firefighting costs, (3) a reduction of $547,000 for various resource management programs, and (4) a reduction of $96,000 for various administrative functions within the fire protection program.
The California Department of Forestry and Fire Protection is responsible for fire protection in state responsibility areas. In the following section, we discuss a number of issues related to the funding of these activities. We raise concerns with the Governor's proposal to (1) eliminate the General Fund support for emergency fire suppression, (2) reduce General Fund expenditures for "day-to-day" firefighting activities by increasing reimbursements, and (3) eliminate an existing legislative notification requirement. We also offer options for the Legislature to consider for funding fire protection services.
Areas Of State Responsibility. The CDFFP is responsible for fire protection on approximately one-third (31 million acres) of California's lands. The lands for which CDFFP is responsible are mostly privately owned forestlands, watersheds, and rangelands referred to as "state responsibility areas" or SRAs. The SRA lands must be designated by the Board of Forestry and must be covered wholly or in part by timber, brush, or other vegetation that serves a commercial purpose (such as rangeland or timber harvesting) or that serves a natural resource value (such as watershed protection). There can be several different types of landowners in SRAs, such as timber operators, rangeland owners, and owners of individual residences. However, CDFFP is not responsible for the protection of structures in SRAs.
The designation of land as SRAs is reviewed by the Board of Forestry every five years. This review ensures that land classified as SRA continues to meet the criteria established for SRA and allows additional lands to be designated as SRA. The most recent review was completed by the department in 2000 and is currently awaiting final approval from the Board of Forestry.
Normal Firefighting Costs Versus Extraordinary Costs. The budget distinguishes between the "normal," day-to-day costs of firefighting and the "extraordinary" costs associated with large fires that require additional resources beyond the typical equipment and staffing level dispatched for firefighting. Normal firefighting costs are relatively predictable and are thus budgeted as part of the department's ongoing support costs. When the conditions of a fire require CDFFP to deploy additional resources beyond the equipment and staffing that is ordinarily available, the costs of those additional resources have traditionally been budgeted separately as "Emergency Fire Suppression," commonly referred to as "e-fund" expenditures.
In the past, if the costs for emergency fire suppression exceeded the amount budgeted in the e-fund, then the department has sought additional funding through a deficiency appropriation. Over the past decade, expenditures for emergency fire suppression have consistently exceeded the base amount of funding provided in the budget for this purpose. The base amount of funding was $20 million until 2000-01, when it was increased to $55 million in recognition of the history of underbudgeting. However, in spite of the higher base amount, estimated 2001-02 expenditures from the General Fund for emergency fire suppression will still require a $45 million deficiency appropriation.
Fire Protection Funded From General Fund. Funding for fire protection on SRA lands has come almost entirely from the General Fund. The department also receives reimbursements from federal or local agencies to cover those instances in which CDFFP responds to incidents for which other agencies are responsible. For 2002-03, the budget proposes $282 million from the General Fund for its fire protection program.
The budget proposes eliminating General Fund support for emergency fire suppression, leaving essentially no funding. Because it is highly likely the state will incur additional costs for emergency fire suppression, we provide options for legislative consideration to budget more realistically for this purpose. We also recommend the deletion of the proposed budget bill language providing the Director of Finance the authority to approve deficiency expenditures without advance notification to the Legislature.
Budget Proposes Eliminating General Fund for Emergency Fire Suppression. The budget proposes no General Fund support and $4 million in federal funds for emergency fire suppression in 2002-03.The budget also includes language to eliminate the current requirement that the Director of the Department of Finance provide advance notification to the Legislature of his approval of expenditures for emergency fire suppression that would require a deficiency appropriation. Instead, the budget proposes that the Director have the authority to approve such deficiency expenditures without advance notification to the Legislature.
Highly Likely CDFFP Will Need Additional Funding For Emergency Fire Suppression. As shown in Figure 1, although annual costs for emergency fire suppression have fluctuated, they have consistently placed a significant demand on General Fund resources. For example, annual costs have consistently been greater than $35 million during the last decade, averaging $70.5 million over this period. Accordingly, it is highly likely that the state will again require substantial expenditures for emergency fire suppression during 2002-03.
Recommend Budgeting More Realistically for Fire. Because it is highly likely the state will incur additional costs for emergency fire suppression, we recommend the Legislature provide a more realistic budget than the Governor's proposal. There are several options for increasing the funding available to provide a reasonable budget amount for emergency fire suppression. For example, the Legislature may wish to consider enacting legislation to establish fees payable by beneficiaries of the department's firefighting services, including emergency fire suppression. We discuss this option next in this Analysis. The Legislature could also consider funding emergency fire suppression with General Fund savings arising from recommendations we present in this Analysis as well as options we identify in our companion document, Options for Addressing the State's Fiscal Problem.
Recommend Maintaining Legislative Oversight. As discussed earlier, under the Governor's proposed budget bill language, the Director of Finance will have the authority to approve deficiency expenditures for emergency fire suppression activities without advance notification to the Legislature. According to the department, the notification process may cause cash flow problems which could create difficulties in paying its vendors. However, we find that this potential problem can be averted by the department getting a short-term loan from the General Fund to pay its vendors, as it has in the past. Furthermore, we find the proposed budget bill language weakens legislative oversight and therefore recommend disapproval of the language.
We recommend enactment of legislation to partially offset the cost of fire protection services (both ongoing and e-fund costs) by imposing fees on property owners who benefit from these services.
Direct Beneficiary of Fire Protection Service Ought To Share Costs. Property owners in SRAs directly benefit from CDFFP's fire protection services (both ongoing and e-fund costs), as does the state's general population though the preservation of natural lands and their wildlife habitat. As we noted in our discussion of financing resource programs in the Analysis of the 1992-93 Budget Bill, combining fees and General Fund revenues to finance a program enables a sharing of costs among private beneficiaries of services and the general public (please see page IV-19 of the 1992-93 Analysis). We think that the Legislature should consider enacting legislation that would provide for such a sharing of both ongoing and e-fund costs.
Several Fee Structure Options Available. Several other Western states require landowners to share in the costs of fire protection services provided by the state. These states use different types of fee mechanisms to cover the costs of fire protection in SRAs. Some states use a combination of fee mechanisms. These fee mechanisms include the following:
Issues to Consider When Establishing Fee Mechanisms. There are several issues that the Legislature should consider in establishing a fee mechanism for ongoing and e-fund fire protection costs.
First, the Legislature needs to determine the proper allocation of costs between fees and the General Fund. For example, as discussed, the 2002-03 budget proposes $282 million from the General Fund for fire protection. Therefore, a fee that covers 50 percent of program costs would generate about $141 million in General Fund savings based on the budgeted General Fund expenditures for fire protection.
Second, the Legislature needs to determine on what basis fees should be assessed. For instance, should fees be assessed based on acreage or on the level of property improvements, or both? Because fees should reflect the benefit of the fire protection services provided to the landowner, we think a combination of size of property and the value of property improvements would be an appropriate basis for assessment.
Third, the Legislature needs to determine whether all property owners should pay. For example, the Legislature might want to reduce the fee rate for those landowners in SRAs who already pay fees to local fire districts. This would recognize that these landowners have already purchased some level of fire protection, thereby potentially lowering the extent of state fire protection services that would need to be provided.
Finally, the Legislature also needs to consider how the fee should be collected. For instance, it could be collected by county tax assessors along with the property tax assessment. However, under this option, the state could be obligated to reimburse counties for an added administrative cost burden placed on the county. Alternatively, the fee could be collected through insurance companies as a fire insurance premium surcharge. This was the method used under the now prior state earthquake insurance program. The collection method selected should minimize the state's costs for collection, while ensuring the accurate collection of the fee.
The budget proposes $20 million in General Fund savings for its day-to-day firefighting costs by increasing reimbursements from local governments by a like amount. We withhold recommendation on this proposal given a lack of details. We recommend that the department present a detailed plan on how it will achieve the proposed General Fund savings prior to budget hearings.
In the preceding write-up, we recommend the enactment of fees on landowners in SRAs to partially offset the state's costs of providing fire protection services and create General Fund savings. Another way of reducing the department's General Fund expenditures for fire protection services would be to shift funding from the General Fund to reimbursements in cases where the state is providing firefighting services for which it is not fiscally responsible. While we support the concept of increasing reimbursements, as discussed below, the Governor's proposal to do so lacks sufficient detail.
Budget Proposes General Fund Savings, But No Details Provided. The budget proposes $20 million in General Fund savings for its day-to-day firefighting costs by increasing reimbursements from local governments by a like amount. The department was not able to provide details on how these costs savings would be achieved since it has just begun the process of identifying ways in which reimbursements can be increased.
The department reports it will consider a wide range of options to increase reimbursements. For example, increasing reimbursements may be possible in instances where CDFFP is presently providing fire services in non-SRA lands or responding to structure fires because it is the nearest fire service in the area. In cases such as these where the department is not fiscally responsible for fire protection, reimbursing the state's costs may be a reasonable option to explore. The administration reports it is also considering changes to the SRA boundaries so as to reduce the geographic area over which the state is fiscally responsible to provide firefighting services. Accordingly, to the extent the state continues to provide fire protection services in areas where it is no longer fiscally responsible, the state could seek reimbursement for its services.
Recommend Department Submit Detailed Plan Prior to Budget Hearings. While there is merit in increasing reimbursements for services for which CDFFP is not fiscally responsible, we withhold recommendation because the details of the proposal have not been presented to the Legislature. In order that the Legislature has the information it needs, we recommend the department submit a detailed plan for increasing local reimbursements to the Legislature prior to budget hearings.
The budget includes $415,000 to continue the second year of the Land Record Information Project. This project proposes to standardize land record information for each parcel in the state. Our review finds that there is no clear purpose and plan for the collection of the data at a statewide level. Accordingly, we recommend deletion of $415,000. (Reduce Item 3540-001-0001 by $415,000).
Background. The budget includes $415,000 to continue the second year of a two year (2001-02 and 2002-03) project, the Land Record Information (LRI) Project. The LRI project proposes to standardize land record information (such as assessed value, owner's name, and development status) for each parcel of land in the state. Generally, this information is currently collected and stored at the local level. During the current year, the project intends to conduct a study of how land record information can be used by various state agencies. In addition, the project will develop standards to be used in the collection of statewide parcel data.
No Clear Purpose for The Data Collection. In our review of the project, we found that there does not appear to be a clear purpose or immediate value for the state in collecting parcel data at a statewide level. Without further details of how these data will be used by state agencies, we find funding for this project in the budget year has not been justified. Accordingly, we recommend deletion of the $415,000 (General Fund) from the budget.