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Analysis of the 2005-06 Budget BillLegislative Analyst's Office
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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. These areas of CDFFP responsibility are referred to as "state responsibility areas" (SRA). 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 about $877.4 million for the department in 2005-06, including support and capital outlay expenditures. Of this total, 94 percent is for fire protection, 5 percent is for resource management, and the remainder is for State Fire Marshal activities and administration.
The total proposed budget is an increase of $6.4 million over estimated current-year expenditures. As in the current year, the proposed budget bill for 2005-06 authorizes the Director of Finance to augment the budget for emergency fire suppression by an amount necessary to fund these costs.
The General Fund will provide the bulk of CDFFP's funding for state operations—$524.8 million (about 65 percent). The remaining funding will come from reimbursements ($224.8 million), federal funds ($31.3 million), and various other state funds. Major budget proposals funded from the General Fund include: (1) $10.8 million for fire apparatus and helicopter replacement; (2) $9 million for year-round staffing in Southern California; and (3) $2.9 million for conversion and replacement of radio equipment.
We recommend a deletion of $10.8 million from the General Fund requested for fire apparatus and helicopters because the proposal lacks details and the plan to purchase helicopters is premature. We also recommend that the department resubmit its budget proposal for fire apparatus as part of the May Revision. Finally, we recommend the adoption of budget bill language to prohibit helicopter purchases in the budget year and require a study on the department's helicopter requirements. (Reduce Item 3540-001-0001 by $10.8 million.)
Fire Apparatus and Helicopter Budget Proposal. The budget proposes an augmentation of $10.8 million (General Fund) for the purchase of fire apparatus and helicopters on an ongoing basis. The budget request is in addition to the $6.3 million currently in CDFFP's budget for ongoing annual purchases of fire apparatus. Fire apparatus includes equipment necessary for firefighting, such as fire engines, bull dozers, pickup trucks, and other vehicles.
The department's budget proposal requests authority to purchase new helicopters in order to eventually replace its existing fleet of 11 helicopters, two of which are used as back-ups. The CDFFP augments its fleet of helicopters by using commercial helicopter services when additional helicopters are needed. All of CDFFP's helicopters were received over several years from the federal government's excess equipment program and then refurbished to meet the department's firefighting requirements. (These helicopters were given to the state by the federal government at no cost; the state incurred costs to refurbish the helicopters.) Beginning in 2011, these helicopters will reach the end of their recommended useful life. The department reports that excess federal helicopters are no longer available and therefore the department must begin purchasing helicopters in the private marketplace at a price of $7 million to $15 million per helicopter depending upon the type of helicopter purchased.
We have several concerns with the department's fire apparatus and helicopter proposal, as discussed below.
Expenditure Plan Not Well Defined. Our review of the department's proposal finds that it does not provide information on how many and what types of equipment it will buy in the budget and future years. This information is necessary in order for the Legislature to evaluate how the requested funds will be spent.
Proposed Financing Plan Is Incomplete. The CDFFP has indicated it plans to finance some portion of this proposal. We think financing expensive equipment such as fire apparatus could be an appropriate fiscal strategy that reduces costs in one budget year and extends the costs over mul tiple years. Financing, however, increases the overall purchase price of equipment because of interest costs. However, the department's expenditure proposal does not include sufficient details of its financing plan. Specifically, it has not indicated how many and what type of apparatus will be financed. Without information on the extent to which this proposal will be financed, the Legislature cannot evaluate whether the funding requested in the budget proposal is consistent with the department's financing plans.
Helicopter Proposal Is Premature. Our review also finds several significant concerns with the department's proposal to acquire helicopters. First, CDFFP has not yet completed a study to determine which type of helicopters should be purchased or the replacement cycle of these helicopters. Second, the proposal does not specify when or how many helicopters will be purchased. Lastly, CDFFP has not sufficiently considered the option of meeting its helicopter requirements by contracting out for commercial helicopter services. Given the significant cost implications of replacing CDFFP's helicopter fleet, we think the information discussed above is essential in order for the Legislature to evaluate this proposal.
Recommend Department Resubmit Equipment Proposal. In summary, our review finds that the budget proposal to purchase firefighting equipment does not provide information necessary for the Legislature to evaluate it. We therefore recommend the Legislature deny this proposal, reduce the department's General Fund budget by $10.8 million, and direct CDFFP to resubmit its equipment proposal at May Revision. We recommend the revised proposal include funding for fire apparatus, but not helicopters, since as previously discussed, we find helicopter purchases are premature. We further recommend that CDFFP include the following information in its resubmitted proposal: (1) a listing of the specific fire apparatus (with costs) to be purchased from the baseline equipment budget and the requested augmentation, including when the apparatus will be purchased and (2) specific details on which equipment purchases the department plans to finance, including the financing costs.
The CDFFP Should Complete Study Before Helicopters Are Purchased. As discussed, CDFFP's proposal to purchase new helicopters represents a significant change in CDFFP's aviation program which currently relies on the use of excess federal helicopters supplied to the state at no cost. The decision on which helicopters to purchase or whether to even purchase helicopters will have long range fiscal and operational impacts. As such, we recommend the adoption of budget bill language directing the department to undertake a study to more fully evaluate the options available to it in addressing its helicopter requirements. Because the department has indicated that it does not plan to purchase helicopters in the budget year, we recommend that the budget bill language specify the Legislature's intent that the department's General Fund appropriation is not available for the acquisition of helicopters. We recommend the adoption of the following budget bill language:
Item 3540-001-0001. It is the intent of the Legislature that funds appropriated in this item shall not be used for the acquisition of helicopters. It is also the intent of the Legislature that the California Department of Forestry and Fire Protection (CDFFP) complete a study, to be submitted to the Legislature by December 1, 2005, which will provide the basis for the Governor's 2006-07 budget proposal. The study should provide information on (1) the use of contracted resources in CDFFP's helicopter program; (2) the type(s) of helicopters CDFFP should purchase; and (3) a financing plan and schedule for replacement of CDFFP's helicopter fleet.
We recommend deletion of $9 million from the General Fund proposed for year-round staffing in Southern California because the proposal has not been justified. (Reduce Item 3540-001-0001 by $9 million.)
Current Southern California Staffing. Currently, the department generally provides staffing for state-funded fire stations in Southern California only from about April 15 to December 15—the normal fire season. The CDFFP operates 36 state-funded stations in Riverside, San Bernardino, and San Diego Counties. The department, however, extends the length of time it provides fire services beyond the normal fire season on an as-needed basis. It does this when Executive Orders are issued by the Governor (accompanied by a General Fund augmentation) or by redirecting existing resources within its budget. For example, in the current year, CDFFP kept open about one-half of the stations in San Bernardino, San Diego, and Riverside Counties through mid-January by redirecting funds in its existing budget.
In some areas of Southern California, local governments request CDFFP to continue providing services beyond the normal fire season on their behalf. In these instances, local governments contract with CDFFP to provide the services and reimburse the department for its costs. These contracts are referred to as "Amador Agreements." Generally, local governments contract with CDFFP for such services when local fire protection services are unavailable, or when they want the existing locally provided services to be augmented. The CDFFP has nine Amador Agreements in Riverside, San Bernardino, and San Diego Counties which will generate about $800,000 of reimbursements to CDFFP in the current year.
In other parts of Southern California, a couple of counties provide fire protection services during the normal fire season on behalf of CDFFP in SRA within county boundaries, as CDFFP does not have its own fire stations in these areas. The CDFFP reimburses these counties, which are referred to as "contract counties," for providing fire protection services on behalf of CDFFP. Contract counties include Los Angeles and Orange Counties.
Year-Round Staffing Budget Proposal. The budget proposes $9 million from the General Fund to provide year-round firefighting staff in Southern California. Of the $9 million, about $5.7 million is for the costs to operate 36 CDFFP stations in San Bernardino, Riverside, and San Diego Counties year-round and $3.3 million is for Orange and Los Angeles Counties to provide additional resources on behalf of the state for wildland fire protection in SRA. In addition to the costs to provide additional staffing, it is unlikely that CDFFP will continue to receive $800,000 in reimbursements from the Amador Agreements in Riverside, San Diego and San Bernardino Counties because, under the budget proposal, the state will be assuming the costs to operate these stations year-round. (The department's budget, however, does not reflect this reduction in reimbursement levels.)
Proposal Does Not Justify Year-Round Staffing. While there may be merit to the budget request, the department was unable to provide information to justify the need for year-round staffing. Specifically, while CDFFP has provided data that show fires occur throughout the year in Southern California, it has not provided an analysis which justifies the need to have the same level of services year-round, or where additional resources are specifically needed. For example, the proposal does not present data showing an increase in the number of and/or intensity of wildland fires during the off season. Further, the proposal does not provide sufficient information on how the requested funds will be used by contract counties to provide additional services to benefit the state. We think such information is necessary in order for the Legislature to evaluate the merits of this proposal. Therefore, in the absence of this information, we recommend that the Legislature deny this proposal and reduce the department's General Fund budget by $9 million.
We find that the Legislature lacks information on the receipt and use of unanticipated federal funds by the department. In order to improve legislative oversight, we recommend that within the department's overall budget appropriation item, the Legislature schedule individual amounts by program area. We further recommend that the Legislature require the California Department of Forestry and Fire Protection to notify the Legislature upon receipt of unanticipated federal funds.
Federal Reimbursements for Fire Protection. When CDFFP provides assistance for those fires or portions of fires that are considered a federal responsibility (namely fires on federal lands), it fronts money from the General Fund to cover these costs prior to reimbursement after the fire from the federal agencies. The length of time it takes federal agencies to reimburse CDFFP ranges from several months to several years. During 2003-04, the most recent year for which actual data are available, CDFFP received over $49 million in unanticipated federal funds (that is, federal funds received as reimbursements for which expenditure authority had not been provided in the annual budget act).
Legislature Lacks Oversight of Federal Reimbursements. The budget act generally requires that the Legislature be notified before a department can spend unanticipated federal funds which it has received. However, since 2002-03, the budget act has exempted CDFFP from this notification requirement. This exemption in effect allows the department to make significant changes to its legislatively approved budget without legislative notification. In fact the department has used the unanticipated federal funds to "free up" General Fund monies which it then used to augment other programs beyond their budgeted level of expenditures. This happens because the CDFFP's annual support budget is appropriated as a lump sum without any scheduling among program areas, such as fire protection and resource management. This lack of scheduling enables the department to transfer funds among program areas without legislative notification, thereby impeding legislative oversight. For example, our review found that in 2003-04, the department used about $39 million in unanticipated federal funds (cost recoveries) to in effect augment programs in various areas of the department's budget, including resource management, without legislative review. This type of diversion of funds circumvents the Legislature's appropriation authority.
Improving Oversight of Cost Recoveries. We recommend the Legislature take the following actions to improve legislative oversight of cost recoveries from federal agencies.