Legislative Analyst's Office
Analysis of the 2003-04 Budget Bill
The Wildlife Conservation Board (WCB) acquires property in order to protect and preserve wildlife and provide fishing, hunting, and recreational access facilities. The budget proposes $5.9 million for support of the board's state operations in 2003-04, an increase of $2.5 million (or 76 percent) above current-year estimated expenditures. The increase mainly reflects a $3.7 million augmentation from Proposition 50 bond funds for administrative support for bond-funded land acquisition and restoration. The WCB's support funding comes from a number of fund sources, including the General Fund, Habitat Conservation Fund, Environmental License Plate Fund, and bond funds. The budget also proposes $411.9 million (mainly bond funds) for capital outlay expenditures in WCB. This is a decrease of $276.8 million (or 40 percent) from estimated current-year expenditures. The decrease reflects the drawing down of Proposition 12 and Proposition 40 bond funds available to WCB in prior years.
We recommend establishing appropriations in the budget bill for expenditures of the Wildlife Conservation Board funded by Proposition 40 and Proposition 50 bond funds for various acquisition, restoration, habitat conservation, and capital outlay projects, in order to provide greater legislative oversight. Further, we recommend approval of budget bill language to ensure the Legislature can exercise ongoing oversight of these expenditures.
In the sections that follow, we discuss the recently passed Propositions 40 and 50 bond measures and highlight barriers to legislative oversight over WCB's bond expenditures. We recommend three steps the Legislature should take to ensure adequate bond oversight. Specifically, we recommend that the Legislature (1) include bond appropriations in the budget bill, (2) schedule projects in the budget bill by project category, and (3) require legislative notification of major projects for which bond funding has been committed.
Propositions 40 and 50 Passed by Voters. Voters passed two large resources bond measures in 2002 allocating over $1.2 billion in bond funds to WCB. Proposition 40—The California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Fund—was passed in March 2002 and allocates $300 million to WCB. Proposition 50—The Water Security, Clean Drinking Water, Coastal and Beach Protection Fund of 2002—was passed in November 2002 and allocates a total of $940 million to WCB.
Under the terms of Propositions 40 and 50, WCB is given broad authority to expend the bond funds for various purposes, including acquisition and restoration of watersheds and wetlands, agricultural and grazing land, species habitat, oak woodlands, and other habitat categories.
Of the over $1.2 billion allocated to WCB in Propositions 40 and 50, all but $50 million (related to Colorado River management) is continuously appropriated directly to WCB by the terms of the bond measures. This means that almost $1.2 billion of WCB expenditures over time would be allocated outside of the budget process without legislative appropriation. The projects funded by these bond funds are also not subject to State Public Works Board review. This board provides a review and approval process to assure that capital outlay projects adhere to legislatively approved scope and budget.
Consistent with Proposition 50, the budget proposes to allocate $363.5 million from Proposition 50 directly to WCB (without a budget bill appropriation) for capital outlay expenditures in 2003-04. The budget also proposes $3.7 million for WCB from Proposition 50 for state operations. The Proposition 50 funds for state operations are appropriated in the budget bill. As regards Proposition 40, the Governor's budget does not propose any expenditures from WCB's continuous appropriations authority in 2003-04.
Bond Fund Expenditures Should Be Appropriated in Budget Bill. While the budget's proposal to continuously appropriate funds to WCB is consistent with the terms of both Propositions 40 and 50, such a process of allocating funds outside of the budget process reduces the Legislature's oversight over the expenditure of bond funds. Appropriating these expenditures in the budget bill would provide the Legislature with greater oversight of when funds are spent—consistent with the requirements of the bonds—and better ensure that the objectives of the bonds are accomplished.
We find that neither Proposition 40 nor Proposition 50 precludes the Legislature from considering the proposed expenditures in the budget process and appropriating the expenditures. Legislative Counsel has advised us that generally the Legislature has the authority to appropriate the bond funds in the budget bill for specified purposes, as long as those purposes are consistent with the bond act. Such an approach is consistent with current practice whereby expenditures from the Habitat Conservation Fund (Proposition 117) and Proposition 204, although continuously appropriated, are scheduled in the budget bill. Therefore, we recommend establishing these appropriations in the budget bill for both Proposition 40 and 50 expenditures in WCB.
Expenditures Should Be Scheduled in Budget Bill by Category. In addition to appropriating WCB's bond-funded expenditures in the budget bill, we conclude that the Legislature's oversight of these expenditures would be increased if the expenditures were scheduled in the budget bill at least by broad category. Currently, no such information exists. The Governor's budget documents simply show that of the $411.9 million proposed for capital outlay in 2003-04 (largely from Proposition 50), $385.9 million is for "unscheduled projects."
It is particularly important for the Legislature to oversee these expenditures given the numerous resources agencies with overlapping missions to acquire and restore land. For example, WCB's capital outlay expenditures need to be considered in conjunction with the proposed expenditures of the seven regional state conservancies, the State Coastal Conservancy, the Department of Water Resources, and the Department of Parks and Recreation. All of these state agencies receive bond funds and other funding to acquire or restore land on behalf of the state—an overlapping mission with the WCB. By appropriating WCB's bond expenditures in the budget bill, the Legislature can evaluate the budget package for land acquisition and restoration as a whole, provided that the Legislature has some level of detail about projects proposed for funding.
We recognize that WCB may not wish to have a project-by-project list of proposed expenditures scheduled in the budget bill. This could limit its flexibility to act swiftly on opportunity purchases. However, we think that it is reasonable for the Legislature to be apprised of WCB's priorities for expenditures so that it has a basis on which to evaluate the budget proposal, in conjunction with the budget proposals of other departments that have similar or overlapping missions. Therefore, we recommend that WCB's capital outlay expenditures from Propositions 40 and 50 be scheduled in the budget bill using broad categories. These categories could include the following:
We recommend that WCB display its proposed expenditures in these categories and submit its schedule to the budget subcommittees prior to budget hearings. Finally, we note that Section 26.00 of the budget bill provides flexibility to the administration to make intra-schedule transfers under a specified threshold amount, and upon legislative notification for transfers above the threshold level.
Recommend Legislative Notification of Project Funding. In order for the Legislature to exercise ongoing oversight of WCB's expenditures from Proposition 50 funds, we recommend that the Legislature amend control section 9.45 in the budget bill to apply to Proposition 50 funds as well. This control section was added to the current-year budget act by the Legislature (and has been continued in the Governor's proposal for 2003-04) in order to provide notification prior to project purchases using Proposition 40 funds. (The control section requires prior legislative notification of the details of projects exceeding $25 million from all fund sources, including Proposition 40 bond funds.) By making this amendment to the budget bill, the Legislature would be notified of all major projects receiving Proposition 50 funding commitments from not just WCB, but any other state agency as well.
We recommend that $32.5 million requested from Proposition 50 bond funds for the Colorado River program be denied because the Legislature's conditions for expenditure of these funds—found in implementing legislation—have not been met.
Proposition 50 allocates, upon appropriation by the Legislature, $50 million to WCB for the acquisition, protection, and restoration of land and water resources necessary to meet state obligations for regulatory requirements related to California's allocation of water supplies from the Colorado River. Chapter 617, Statutes of 2002 (SB 482, Kuehl), established conditions for the expenditure of the $50 million, including the execution of a settlement agreement among various water agencies relating to Colorado River water entitlements by December 31, 2002. At the time this analysis was prepared, the required settlement agreement had not been executed.
The budget proposes $32.5 million from Proposition 50 for the Colorado River program, and does not request this through a budget bill appropriation. This is contrary to the Proposition 50 requirement that the Colorado River funds be appropriated by the Legislature, as well as contrary to the requirements of Chapter 617. Therefore, we recommend that this request be denied.
The budget proposes to transfer $21.7 million from the General Fund to the Habitat Conservation Fund to fulfill a funding requirement of the Wildlife Protection Act of 1990. The act specifically allows bond funds to be used for this purpose. We recommend deletion of the $21.7 million General Fund transfer to be replaced with a transfer of a like amount from Proposition 50 bond funds. (Delete Item 3640-311-0001, and create Item 3640-311-6031 in the amount of $21.7 million.)
The Habitat Conservation Fund. Proposition 117, the California Wildlife Protection Act of 1990, was passed by voters in June 1990. Among other things, the act requires an annual transfer of $30 million into the Habitat Conservation Fund (HCF) until the year 2020. Funds are then appropriated to various departments for the purposes of the act, with the balance of funds administered by WCB.
Bond Funds Eligible for Transfer to HCF. The act provides parameters for the transfer of money to HCF. Of the $30 million to be transferred annually, all must be General Fund unless funds are available and transferred from various other eligible sources. These eligible sources include the Cigarette and Tobacco Products Surtax Fund, Environmental License Plate Fund, the Wildlife Restoration Fund, and any bond funds which were authorized after July 1, 1990 and that may be used for purposes which are identical to the purposes specified in the act.
Proposition 50 an Appropriate Bond Source for Transfer. Our review finds that HCF funds proposed to be expended in 2003-04 are for acquisitions that meet the funding criteria of WCB's allocation under Proposition 50. We therefore recommend a one-time transfer of $21.7 million in Proposition 50 bond funds to HCF in 2003-04, in replacement of the proposed General Fund transfer of this amount.