Analysis of the 2008-09 Budget Bill: Resources

California Conservation Corps (3340)

The California Conservation Corps (CCC) provides young people between the ages of 18 and 23 work experience and educational opportunities. The program participants, referred to as corpsmembers, work on projects that conserve and improve the environment, such as tree planting, trail building, and brush clearance. Corpsmembers also provide assistance during natural disasters, such as filling sandbags during floods. Work projects are sponsored by various governmental and nongovernmental agencies that reimburse CCC for the work performed by corpsmembers.

The CCC receives the majority of its funding from the General Fund and from reimbursement revenues. When CCC corpsmembers work on projects for other public agencies or private entities, CCC is reimbursed for the labor provided. This reimbursement revenue is used to support the corpsmembers’ salaries and benefits as well as department–wide administrative and operational costs. The CCC sets a statewide reimbursement rate target (currently $13 per hour for corpsmember labor) and staff in the field use this target rate when negotiating contracts with client agencies. In the current year, about 60 percent of CCC’s budget is funded from the General Fund, with most of the balance coming from reimbursements.

The budget requests about $109 million in total spending in 2008–09, of which $62 million is for state operations, $30 million is for local assistance, and $17 million is for capital outlay. The proposed budget is about $4.3 million—or 4 percent—above estimated expenditures in the current year. However, the proposed budget reflects both increases in local assistance of $30.3 million (bond funds), reduced capital outlay expenditures of $27 million (mostly lease revenue bonds), and a General Fund budget–balancing reduction of $3.8 million.

After accounting for the Governor’s General Fund budget–balancing reduction proposals, CCC estimates about 4,000 men and women (about 1,200 full–time equivalent positions) will participate in the program during 2008–09. Corpsmembers earn minimum wage and it is proposed that they will work approximately 36 hours per week (down from the current 40–hour work week). On average, corpsmembers stay in the program for a little over seven months. The 2008–09 budget provides funding for seven residential and 15 nonresidential facilities throughout the state.

Budget–Balancing Reduction Can Be Partially Offset with Special Funds

As part of its budget–balancing plan, the administration proposes to reduce the CCC’s General Fund budget by $3.8 million in the budget year—primarily by reducing the corpsmember workweek and closing three non–residential centers, thereby eliminating 75 corpsmember positions. We recommend the Legislature accept $710,000 of these reductions and backfill another $1 million of these reductions with a special fund balance. We recommend the Legislature reject the remaining $2 million of proposed reductions, because the programmatic impact of these reductions would be significantly larger than the General Fund savings. (Increase Item 3340–001–0001 by $2 million and Item 3340–001–0318 by $1 million.)

Administration’s Budget–Balancing Reduction. The administration’s proposed budget–balancing reduction would reduce CCC’s General Fund budget by $1.2 million in the current year and $3.8 million in the budget year. In the budget year, the administration proposes to reduce the work week for corpsmembers by four hours ($2 million savings), close three non–residential centers thereby eliminating 75 corpsmember positions ($1 million savings), reduce funding provided by the state to local conservation corps ($337,000 savings), increase the monthly fee paid by corpsmembers for housing and other costs ($165,000 savings), and reduce staff at CCC headquarters ($207,000 savings). In contrast to the budget year, CCC has not yet determined how it will reduce its costs by $1.2 million in the current year.

Because corpsmembers generate reimbursement revenues for CCC, the proposed reductions in the corpsmember work week and the elimination of corpsmember positions will reduce the reimbursement revenue available to support CCC operations. Specifically, these proposals will save $3 million in General Fund, but cost the state $3.4 million in lost reimbursement revenue used to support CCC programs. As discussed below, we believe that there is a way to partially achieve the level of General Fund savings assumed by the budget while avoiding the full extent of the proposed programmatic reductions in the budget year.

Recommend Approval of a Portion of the Proposed Budget–Balancing Reduction, To Be Offset with Available Special Fund Revenues. In the budget year, after accounting for certain technical adjustments, the reimbursement–funded Collins–Dugan Account is projected to have a fund balance—about $2 million—sufficient to offset the proposed $1 million General Fund reduction achieved by closing three non–residential centers while leaving a minimally adequate fund reserve. Therefore, we recommend increasing CCC’s budget–year expenditure authority from the Collins–Dugan Account by $1 million—thereby avoiding the need to close the centers in the budget year while still achieving $1 million in General Fund savings.

Because current reimbursement rates do not cover the entire cost of CCC’s training and work program, our budget solution—relying on reimbursement funding to offset a $1 million General Fund reduction—is not sustainable in the long term. While our recommended fund shift can be accomplished in the budget year, it will leave the Collins–Dugan Account with a modest balance of less than $1 million at the end of the budget year. It will be necessary for CCC to either raise reimbursement rates or increase the percentage of corpsmember hours spent on reimbursable projects in order to avoid additional programmatic cuts in the long term. Therefore, we also recommend the Legislature direct CCC to make every effort to increase reimbursement revenues in the budget year.

We have no concerns with the proposed General Fund reductions involving funding for the local corps, increasing the housing cost for corpsmembers, and eliminating two administrative positions (totaling  $709,000). Therefore, accounting for our recommendation to backfill another $1 million reduction with special funds discussed above, we recommend the Legislature approve a total of $1.7 million of the Governor’s proposed budget–balancing actions.

One of the key legislative goals for CCC is to provide work training and education for corpsmembers. However, if CCC is required to reduce the corpsmember work week as proposed by the administration, we are concerned that corpsmember training and education would correspondingly be reduced. Because these activities generally do not generate reimbursement revenues, CCC is likely to reduce these activities rather than reimbursement–generating projects in implementing the proposed work–week reduction. We believe that this would reduce CCC’s ability to meet its core statutory mission to provide training and job skills to corpsmembers. Therefore, we recommend the Legislature reject the proposed General Fund budget–balancing reduction of $2 million in the budget year. In Part V of our companion Perspectives and Issues publication we offer an alternative budget approach to address this and other budget solutions for 2008–09.

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