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2010

Other Budget Issues

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Governor's Proposal. The Governor’s budget proposes $1.1 billion in the budget year (and $697 million in 2011-12) for programs in various departments (including the Department of Water Resources, Department of Fish and Game, Department of Public Health, Natural Resources Agency and the State Water Resources Control Board) to be funded by the water bond measure being placed for voter approval on the November 2010 ballot. (This amount does not include potential expenditures from the $3 billion of continuously appropriated funds to the California Water Commission for statewide water system operational improvements.) With one noted exception, proposed funding is allocated at the broad program level, mainly to existing programs for which funding from existing bond measures is either low or has run out. The notable exception is the allocation of $57.9 million for a specific project, the Red Bluff Diversion Dam fish passage project. This amount represents the state’s share of a multi-agency cost-sharing program with the federal government to match 25 percent of the cost of the project (the state's cost-share). The project is currently under construction, with the majority of funding provided through an American Recovery and Reinvestment Act (ARRA) federal commitment.

Proposal is Mostly Premature, Pending Development of Multiyear Expenditure Plan and Program Expenditure Criteria. We find that most of the administration's May Revise proposal is premature, for two main reasons. First, the administration has not prepared a comprehensive, multiyear expenditure plan for the future bond. This is problematic because, unless expenditures from multiple bond provisions that serve similar objectives are well coordinated over the lifetime of the bond, the Legislature cannot be assured that the bond funds are being spent as effectively and efficiently as possible. (As an example of such multiple bond provisions, the Department of Water Resources budget proposal includes $4 million (over two fiscal years) for a groundwater assistance program using the future bond's Integrated Regional Water Management allocation. The May Revision proposal also proposes nearly $300 million for expenditure over the next two years for other groundwater-related state operations and local assistance programs, using various other allocations in the bond that total over $1 billion.) Second, criteria have yet to be developed to guide the expenditures of many of the programs funded from the future bond. While criteria may have been established for previously funded programs, it is clear from the budget proposals that these criteria are likely to change for the new water bond. Lacking these criteria to evaluate, the Legislature cannot be assured that the administration's spending plan is consistent with its expenditure priorities.

Recommendations. We recommend the Legislature deny most of the funding for the implementation for the 2010 water bond, instead approving funding at a level mostly for planning purposes, with a direction to the administration to submit (1) a comprehensive, multiyear bond expenditure plan and (2) details of program expenditure criteria, to the Legislature in conjunction with the Governor's 2011-12 budget. With this additional information, the Legislature will have a better basis from which to evaluate the administration's bond expenditure proposals during the 2011-12 budget process. Second, we recommend approval of the proposed state share of funding for the "shovel- ready" Red Bluff Diversion Dam project, as this specific project clearly fits within a provision of the bond allocating funds expressly for projects that improve salmonid fish passage in the Sacramento River watershed.