The 2018-19 Budget: Resources and Environmental Protection

1 MAC TAYLORLEGISLATIVE ANALYSTFEBRUARY 14, 2018 Resources and Environmental ProtectionThe 2018-19 Budget: LEGISLATIVE ANALYST S OFFICE2018-19 BUDGET gutteranalysis BUDGET1 Table of ContentsExecutive Summary ..3 Overview of Governor s Budget ..5 Cross-Cutting Issues ..7 Cap-and-Trade ..7 Implementation of Natural Resources Bond (SB 5) ..16 Ventura Training Center ..20 Summary of New Natural Resources Capital Outlay Projects ..25 california conservation Corps ..25 Expansion and Replacement of Residential Center Facilities ..25 Corpsmember Counseling, Case Management, and Transition Assistance ..30 department of Fish and Wildlife ..33 Structural Deficit and Program Expansion ..33 department of Parks and Recreation ..42 Parks Funding Augmentation ..42 Regional Infrastructure Projects ..47 department of Forestry and Fire Protection ..48 Helicopter Fleet Replacement ..48 department of Water Resources .

2 50 Central Valley Flood Protection Board ..50 State Lands Commission ..53 Abandoned Oil and Gas Wells ..53 department of conservation ..56 Well Statewide Tracking and Reporting (WellSTAR) ..56 Regulatory Field Inspection ..58 california Energy Commission ..60 ZEV Infrastructure ..61 State Water Resources Control Board ..66 Safe and Affordable Drinking Water Fund ..67 Summary of Recommendations ..72gutteranalysis fullLEGISLATIVE ANALYST S OFFICE2018-19 BUDGET2gutteranalysis BUDGET3 Executive SummaryIn this report, we assess many of the Governor s budget proposals in the Resources and Environmental Protection areas and recommend various changes . Below, we summarize our major findings and recommendations . We provide a complete listing of our recommendations at the end of this report .Budget Provides $11 Billion for ProgramsThe Governor s budget for 2018-19 proposes a total of $10 .5 billion in expenditures from various sources the General Fund, various special funds, bond funds, and federal funds for programs administered by the Natural Resources ($6.)

3 3 billion) and Environmental Protection ($4 .2 billion) Agencies . (These figures include the administration s proposed spending plans for cap-and-trade auction revenues and zero-emission vehicle (ZEV) infrastructure, which were released after the Governor s budget .) The total funding level in 2018-19 reflects numerous changes compared to 2017-18, the most significant of which include (1) decreased bond spending of $3 billion, largely attributable to how prior-year bond expenditures are accounted for in the budget; (2) an increase of $989 million to fund projects authorized under Proposition 68, which will appear on the June 2018 statewide ballot; and (3) a net reduction of $587 million from the General Fund, in large part due to one-time funding provided in 2017-18 related to emergency firefighting and recovery costs .Cap-and-Trade Spending Plan Based on Reasonable Revenue EstimatesThe administration assumes $2.

4 4 billion in cap-and-trade auction revenue in 2018-19 . While the Governor s revenue estimates are slightly lower than ours, we find them to fall within a reasonable range . Importantly, the Legislature s recent extension of the cap-and-trade program through 2030 should result in additional revenue stability compared to prior years, though there continues to be potential for volatility . Based on the administration s revenue estimate (and a projected year-end fund balance in 2017-18), the Governor proposes to spend $2 .8 billion from these funds in 2018-19 (including $1 .3 billion in discretionary spending) . The administration s spending plan is similar to that adopted for the current year, though it includes a couple of new programs . The plan also proposes to make $232 million of the spending ongoing, mostly for light-duty ZEV rebates ($200 million) . As we have in our past reports on cap-and-trade, we recommend that the Legislature ensure that the spending plan is consistent with its highest priorities for this revenue, which could include greenhouse gas reductions, as well as such things as local air pollution reductions and/or climate adaptation.

5 Governor Proposes New ProgramsImplementation of Resources Bond. The Governor s 2018-19 budget provides $989 million from Proposition 68 (authorized by Chapter 852 of 2017 [SB 5, de Le n]) for various Resources and Environmental Protection departments to administer Resources -related programs, such as to expand and rehabilitate local parks and implement habitat restoration projects . With only a couple of exceptions, we find the administration s funding plan for 2018-19 to be reasonable . However, we recommend small modifications to a couple of programs and that the administration report to the Legislature on a long-term funding plan . gutteranalysis fullLEGISLATIVE ANALYST S OFFICE2018-19 BUDGET4 Safe and Affordable Drinking Water Fund. The Governor proposes new charges on drinking water customers and certain agricultural entities to generate revenue to implement a new financial assistance program to address unsafe drinking water, particularly in small and disadvantaged communities.

6 When fully implemented, these charges are expected to generate roughly $150 million annually . In this report, we identify three issues for the Legislature to consider as it deliberates this proposal: (1) consistency with the state s human right to water policy, (2) uncertainty about the estimated revenues that would be generated by the proposal and the amount of funding needed to address the problem, and (3) consistency with the polluter pays principle .Ventura Training Camp. The proposed budget provides a total of $9 million from the General Fund to the department of Forestry and Fire Protection , california conservation Corps (CCC), and california department of Corrections and Rehabilitation to create a new firefighting training program for 80 parolees . According to the administration, the primary purpose of the proposal is to reduce parolee recidivism . We recommend rejection of the proposal because there is little evidence that the plan would be a cost-effective way to achieve the stated goal.

7 Instead, to the extent that the Legislature wanted to prioritize recidivism reduction programs, there are likely to be evidence-based programs that could serve many more individuals than what is proposed .Budget Includes Significant Program ExpansionsZEV Infrastructure. The administration proposes to spend $235 million for the california Energy Commission an increase of $199 million in 2018-19 from various special funds to install electric vehicle chargers and hydrogen refueling stations throughout the state . The proposed spending plan would provide a total of $900 million over eight years and is intended to support the Governor s goal of having 5 million ZEVs on california roads by 2030 . In considering the proposal, we recommend the Legislature direct the administration to provide additional information regarding how it developed its funding estimate, expected outcomes, risks, and efforts to coordinate across state programs.

8 CCC Residential Facilities. The Governor s budget plan proposes to expand CCC s residential program over the coming years by building four new facilities . The budget includes $10 million from the General Fund for the acquisition and initial planning stages of these projects, which are estimated to cost a total of $185 million to complete . The decision about whether to take the initial steps towards a major expansion of CCC residential centers is ultimately a policy decision for the Legislature . We recommend the Legislature (1) wait for more information before approving funding for four new residential centers and (2) require CCC to provide reporting on corpsmember outcomes . department of Fish and Wildlife (DFW) Funding Augmentation. The Governor proposes providing $51 million in new funding for DFW from three sources tire recycling fees, vehicle registration and driver s license fees, and the General Fund to (1) address an ongoing operating shortfall ($20 million) and (2) expand several existing activities ($31 million).

9 We recommend the Legislature approve the additional funding to address the funding shortfall and provide some level of additional augmentation for activities that reflect legislative priorities . However, we recommend rejecting the proposed use of tire fees, approving only the level of Motor Vehicle Account funding that DFW can provide evidence would support vehicle-related workload, and relying on General Fund and fees for the remaining augmentations .Parks and Recreation Program Expansion. Under recent legislation, the State Parks and Recreation Fund (SPRF) will receive additional ongoing revenue $79 million in 2018-19 from an increase in the state s fuel taxes associated with off-highway vehicles . We find that the administration s proposal to utilize these funds to (1) address the SPRF structural deficit and build a reserve, (2) increase service levels at state parks, and (3) continue certain activities begun in the current year is reasonable.

10 However, we recommend that the Legislature identify park services and programs that it prioritizes and adopt a budget package that reflects those priorities .gutteranalysis BUDGET5 OVERVIEW OF GOVERNOR S BUDGETT otal Proposed Spending of $ Billion. The Governor s budget for 2018-19 proposes a total of $10 .5 billion in expenditures from various sources the General Fund, various special funds, bond funds, and federal funds for programs administered by the Natural Resources and Environmental Protection Agencies . This total includes $6 .3 billion for natural Resources departments and $4 .2 billion for Environmental Protection departments . (These amounts include the Governor s spending plans for cap-and-trade auction revenues and zero-emission vehicle (ZEV) infrastructure, which were released after and, therefore, not included in the Governor s budget .)Half of Natural Resources Funding From General Fund.