LAO Discusses Major Water-Related Proposals within the Governor’s Budget Proposal

The Legislative Analyst’s Office (“LAO”) presented a report to the Senate Budget and Fiscal Review Committee titled and concerning Major Water-Related Proposals in the Governor’s 2015-16 Budget on February 12, 2015.  Within this report, the LAO commented on the Governor’s proposals on drought response as well as the 2014 water bond – Proposition 1 and the 2006 flood protection bond – Proposition 1E.

Of the projects in the current proposal concerning drought response, only six have continued to receive proposed funding from the Governor’s Office for 2015-2016: Forestry and Fire Protection, which received the most, for “increased fire suppression and prevention;” Public Health/State Water Resources Control Board (SWRCB) for “emergency drinking water supplies;” Fish and Wildlife for “ actions to protect fish and wildlife;” Water Resources for “emergency water supply activities and education;” SWRCB for “emergency regulations and enforcement;” and Office of Emergency Services for “drought response coordination and guidance.”

Drought Proposal

In 2013-14 and 2014-15, the Legislature approved a total budget of $839 million for drought-related activities. However, only 27%, $234 million, of that budget was expended. For this year, as of February 12, 2015, the Governor has proposed a $115 million budget funding drought-related activities.

Concerning the Governor’s drought proposal, the LAO acknowledge that the Governor’s proposal takes into consideration the significant problems that have arisen during the current drought and has applied learned lessons from previous years. However, the LAO suggests that the Legislature should consider investing in actions to improve “the state’s resilience to dry conditions.” As an example, the LAO mentioned enhancing monitoring and enforcing water right systems before emergency actions are needed since drought is a reoccurring even in California. Therefore, the LAO suggested that programs and procedures should be established statewide and locally similar to other potential disasters.

Proposition 1

Watershed protection and restoration, water recycling and desalination, and drinking water quality – major purposes of Proposition 1 – have been allocated the most funds in 2015-16’s proposal. Within these action arenas the LAO reminds the Legislature that its action should: pursue state priorities, support cost-effective projects, and emphasize accountability and oversight in order to facilitate transparency and better outcomes. In order to do so, the Legislature should fund projects through bond funds (which are repaid through state tax revenues), set a common method of analyzing the cost-effectiveness of projects, require a submissions of project staffing plans, and set data collection methods.

Proposition 1E

With the passing of Proposition 1E, $4.1 billion in general obligation bonds, which must be appropriated by July 1, 2016, were made available to fund flood protection activities. From the latest update, only $1.1 billion remains to be appropriated; however, only $1.9 billion has been expended or encumbered as of June 2013.

The Governor proposes to use the $1.1 billion for the Department of Water Resources (“DWR”) in unspecified flood control activities. However, the DWR would not be obligated to the 2016 appropriation deadline; instead, they would have ten years to commit the funds to specific projects.  The LAO outlines several factors that DWR should consider when determining which projects to fund: local and federal contributions, initiation time period of projects, value of environmental and state-level benefits, minimizing of state financial liabilities concerning levee failures, and short-term versus long-term activities and projects.

Under this proposal, the Legislature’s involvement is limited since the administration has control to shift funding among projects. Therefore, the LAO suggests that either the Legislature fund flood protection on a Pay-As-You-Go basis meaning, modify the Governor’s proposal, or a combination of the two. Through Pay-As-You-Go, projects will be paid upfront without borrowing and the Legislature would have more control over what projects would be funded while avoiding paying interest on bonds in the long run. If the Legislature pursues the alternative and chooses to modify the proposal, the LAO suggests to keep in mind: “(1) require annual reporting on projects and expenditures, (2) require legislative review of projects prior to encumbering funds, and (3) prohibit transfers to state operations (except levee maintenance),” in order to provide greater accountability.

Written by Stratecon Staff