Analysis of the 2007-08 Budget Bill: Resources

State Water Resources Control Board (3940)

The State Water Resources Control Board (state board or SWRCB), in conjunction with nine semiautonomous regional boards, regulates water quality in the state. The regional boards—which are funded by the state board and are under the state board’s oversight—implement water quality programs in accordance with policies, plans, and standards developed by the state board.

The state board carries out its water quality responsibilities by (1) establishing wastewater discharge policies and standards; (2) implementing programs to ensure that the waters of the state are not contaminated by underground or aboveground tanks; and (3) administering state and federal loans and grants to local governments for the construction of wastewater treatment, water reclamation, and storm drainage facilities. Waste discharge permits are issued and enforced mainly by the regional boards, although the state board issues some permits and initiates enforcement actions when deemed necessary.

The state board also administers water rights in the state. It does this by issuing and reviewing permits and licenses to applicants who wish to take water from the state’s streams, rivers, and lakes.

Proposed Funding. The budget proposes expenditures of $834.5 million from various funds for support of the state and regional boards in 2007-08. This amount is a decrease of $106.9 million, or about 13 percent, below estimated current-year expenditures. Most of this decrease reflects a reduction in bond-funded expenditures, mainly for loans and grants for local water quality and water recycling projects funded from pre-2006 bond funds. Despite this overall spending reduction, the budget does propose some increases in program funding. These proposals include $111.4 million in Proposition 84 bond funds to implement various water quality programs, $3.1 million (special funds) to accelerate brownfield cleanups, and $3.5 million (various funds) for cleanup operations and maintenance at Leviathan Mine in Alpine County. The budget also proposes to backfill the fee-funded Water Rights Fund with $2.7 million from the General Fund.

Information Technology (IT) at the Water Boards: An Assessment

The Importance of IT at the State and Regional Water Boards. Like any modern organization, the state and the nine regional water boards rely upon IT for many of their core business functions. The SWRCB IT systems serve a variety of purposes, including administrative functions, permitting and enforcement systems, water quality monitoring, and providing public access to water quality and enforcement data (through the Internet). The boards are constantly revising, updating, and adding to their IT systems. As seen in Figure 1, at least five separate IT projects are currently in progress, with one-time development costs projected to total about $3.7 million for these projects.

On numerous occasions, the Legislature has stressed the fundamental role that management of data—including permitting, enforcement, and water quality—at the boards plays in assisting the board to carry out its mission. This is critical to informing the board’s decision making and the public-at-large and in effectively targeting resources to program areas most in need.

Analyst’s Approach. In the following sections, we highlight the challenges facing the water boards in the area of IT and recommend steps that should be taken for improvement. In conducting our review, we examined current and proposed IT projects at the water boards related to water quality. We reviewed in depth one IT project—the California Integrated Water Quality System (CIWQS).

Based on our review, we find that there are significant problems in the way SWRCB has informed the Legislature of its new IT projects and in the way new projects have been rolled out to the regional boards. We make a number of recommendations to increase legislative oversight of the IT programs at SWRCB. Further, we recommend the Legislature withhold funding for future new projects until an updated IT strategic plan is in place.

IT Strategic Plan Needs Update; Legislative Oversight Critical

We recommend the adoption of budget bill language (1) requiring the board to conduct a needs assessment of its information technology (IT) programs in order to update its IT strategic plan, (2) prohibiting expenditures for new IT projects until the plan is updated and submitted to the Legislature, and (3) requiring the board to submit an IT implementation plan as part of the submittal of the annual Governor’s budget.

IT Strategic Plan Needs Update. Every state department is required to have a strategic plan to guide its IT activity, known as an Agency Information Management Strategy (AIMS) report. The purpose of this strategic plan is to ensure that departments have a clear direction with respect to IT, including identification of priorities. Along with its use internally to state departments, the plan is submitted to the Department of Finance to assist in its review of the budget. The board has indicated that its AIMS is outdated, and that a new IT plan is needed. Furthermore, as we discuss later, the board has changed its IT strategy, and a revised AIMS report must be prepared when there is a significant change in IT strategy. This plan is particularly important at SWRCB because, as the board adopts IT systems pursuant to the plan, the nine regional boards are then required to use these IT systems to accomplish their goals.

Because the board’s IT strategic plan is outdated, we find that the board’s basis for adopting new IT projects is unclear and the Legislature has no basis on which to review how new IT projects fit into the board’s overall IT strategy. Based on this, we recommend the adoption of budget bill language requiring the board to update its AIMS report and prohibiting expenditures for new IT projects until the report is updated and submitted for legislative review. We recommend:

Item 3940-001-0001. No money appropriated in this item or any other items appropriating funds to the State Water Resources Control Board, can be used for new information technology projects until the board’s Agency Information Management Strategy is updated to reflect the board’s current information technology strategy and submitted to the Joint Legislative Budget Committee no sooner than 30 days prior to any spending on information technology projects.

Development of IT System Outside Budget Process Circumvents Legislative Oversight. In past years, the Legislature, through the budget process, has reviewed IT proposals from the water boards. Most notably, a proposal for an upgrade to the core permitting and enforcement database was presented at hearings on the 2002-03 budget, but was rejected by the Legislature for funding based on the design of the system. Shortly thereafter, the board developed a contract with the federal government, wherein a system similar to the one rejected by the Legislature would be designed by the board under federal contract with certain development costs to be paid directly by the federal government. In other words, the board proceeded with an IT project that the Legislature rejected by going outside the budget process. In subsequent years, the board administratively directed program funds to continue the project, making legislative review difficult.

The original purpose of this IT system—referred to as CIWQS—was solely to automate federal permitting for pollution discharges. (The state is delegated responsibility for issuing and enforcing federal water quality permits.) The project, however, has expanded significantly over time. Based on our review, we have identified total costs of about $4.6 million to develop and maintain CIWQS at the state board, of which only $1.7 million has been paid for by the federal government, as shown in Figure 2. Ongoing maintenance and operation costs are being paid by the state from special funds (mainly fees) as part of the board’s permitting and enforcement activities. Based on our review, we estimate $738,000 would be used to maintain the system in the budget year.

Budget for IT Difficult to Evaluate. The overall budget for IT projects at SWRCB is difficult to evaluate, as most IT costs are assessed to individual regulatory programs and are not consolidated for budget display purposes as a “program” themselves. We think that legislative oversight of the board’s IT projects would be significantly enhanced if the board were required to submit an IT implementation plan in conjunction with the submittal of the annual Governor’s budget. This plan should include information on ongoing and proposed IT projects, one-time design and development costs, and ongoing maintenance costs. We therefore recommend the adoption of budget bill language requiring the board to submit an IT implementation plan as part of the submittal of the annual Governor’s budget.

Scope Change of IT Project Leads to Data Entry Backlog at Regional Boards

We find that the rollout of the California Integrated Water Quality System (CIWQS) to the regional boards has led to a backlog of data entry related to permits, enforcement, and water quality monitoring. This has lead to outdated, incomplete, and therefore potentially misleading water quality data both on the boards’ publicly accessible Internet site and for its internal enforcement and permitting staff use at the regional board level. We recommend the board report at budget hearings on the extent of the backlog and its plans to reduce it in the budget year.

As mentioned previously, the original scope of the CIWQS project was to automate the federal permitting process. However, the state board has expanded the scope of CIWQS by beginning to link various other existing data management programs, including those used by regional boards, to the CIWQS system. For example, data entry related to state water quality permits issued at the regional board level must now tie into CIWQS. Moreover, the board has a number of new IT projects under development, each of which is specifically designed to link with CIWQS and will generally require the regional boards to change the way they conduct data entry.

While some regional boards have integrated well with the new scope of the program, others have struggled. For example, one regional board halted all data entry into the new system for six months because it was unsure of how the system would be used in the future. This board still uses a duplicate paper-trail system in addition to the new automated system for day-to-day activities, which is inefficient and adds unnecessarily to costs.

The ongoing expansion of the scope of CIWQS exacerbates backlogs in data entry that have developed at the regional board level, particularly related to permitting, enforcement, and water quality monitoring data. Because of backlogs in data entry that would otherwise provide regional board staff with a picture of the state of water quality in their areas, they may not be targeting their resources as effectively as possible. This data backlog is also problematic because it creates the potential for the public to be misled as it uses the Internet to seek water quality-related information. For example, where backlogs occur with only partial data being put on the Internet, it would not be clear to the public that the information they are viewing contains gaps or is outdated. At the time this Analysis was prepared, the state board was unable to quantify the extent of the data entry backlog, although board staff concur that it is a problem at some of the regional boards. We therefore recommend that the board report at budget hearings on the extent of the backlog and its plans to reduce it in the budget year.

Legislature Should Be Apprised of External Review Findings

Problems with the California Integrated Water Quality System have been brought to the state board’s attention and the board has requested an external review of the project. We recommend the Legislature direct the board to submit this external review in an unabridged version to the Legislature at the same time it is presented to the board.

Users of CIWQS, including regional boards, regulated entities, and the public have raised concerns to the state board about CIWQS, prompting the board to request an external review of this IT project to be completed in May 2007 by external program experts. We think the Legislature should receive an unabridged version of this review, and we therefore recommend that the board present the Legislature with the review at the same time as it is presented to the state board. This assessment would help the Legislature evaluate CIWQS and associated major IT projects at the board and assess the corrective actions the board is taking to address the identified problems with its IT programs.

Water Rights Fee Funding Uncertain

A recent court decision has called into question the constitutionality of the board‘s water rights fee, thus making fee funding for this program uncertain. Consequently, we recommend that the Legislature withhold action on the board’s water rights program budget, pending an update from the board at budget hearings on the status of litigation on the water rights fees.

Water Rights Program Overview. The SWRCB’s water rights program is responsible for (1) issuing new water rights for water bodies that have not been fully “allocated” to water rights holders, (2) approving changes to existing water rights (this may be to facilitate a water transfer), and (3) conducting ongoing enforcement and compliance monitoring of water rights under its jurisdiction. The boards enforcement authority applies only to water rights established after 1914.

Legislation was enacted in 2004 to require the water rights program to be fully funded from fees. The board adopted regulations to establish a new fee structure in response to this legislative direction.

Fee Litigation. The board’s water rights fee structure was challenged in court on the basis that the fees were an unconstitutional tax. While upheld at the lower court level, an appellate court has recently ruled against the state. At the time this Analysis was prepared, the board was considering its options, including seeking a rehearing or appealing to the Supreme Court.

Budget Proposes Significant Reliance on Fees. The budget proposes expenditures of $11.1 million for the water rights program, including $6.9 million from the fee-funded Water Rights Program Fund. The budget also proposes to continue a $2.7 million backfill from the General Fund that was made on a one-time basis in the current year resulting in total General Fund support of about $3.9 million.

Recommend Board Report on Status of Litigation. We recommend that the Legislature withhold action on this budget request as well as on the overall water rights program budget, pending an update from SWRCB at budget hearings on the status of litigation on the water rights fees.

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