Background

Governor's 1998-99 Initiatives. For 1998-99, the budget proposes to further implement this broader approach to natural resources management. Specifically, the budget proposes four initiatives as shown in Figure 11. They are:

Figure 11
Proposed Resources Initiatives
1998-99 (In Millions)
Purpose	Funding
Natural Community Conservation Planning	$20.6
Lake Tahoe	11.5
Watershed Initiative	9.0
Coastal Initiative	17.7
Total	$58.8

• Natural Community Conservation Planning (NCCP) Program. The purpose of this program is to facilitate economic development, while also protecting wildlife and plant species and their habitat through an ecosystem approach to resources management.
• Lake Tahoe Initiative. This initiative is intended to preserve and enhance the Lake Tahoe Basin through soil erosion mitigation, watershed restoration and water quality monitoring.
• Watershed Initiative. The purpose of this initiative is to protect and enhance state watersheds through improved coordination of technical and financial assistance for local watershed planning efforts.
• Ocean and Coastal Initiative. The goal of this initiative is to improve the management of California's coastal resources through coastal access and protection, coastal wetlands restoration and coastal water quality monitoring.

In general, all four proposals continue and expand existing state resources activities. We review and comment on these proposals below.

NCCP Program Needs Legislative Policy Review

We further recommend that $1.1 million be approved to extend 13.3 personnel-years of staff on a two-year limited-term basis because the NCCP program is a pilot program and the department has not provided an evaluation of the program's impact to date to merit making the program a permanent one.

Chapter 765, Statutes of 1991 (AB 2172, Kelley)--known as the Natural Community Conservation Planning Act--authorized a pilot program for the Department of Fish and Game (DFG) to assist public and private agencies in preparing and implementing natural community conservation plans. These plans are intended to facilitate economic development, while also protecting wildlife and plant species and their habitat.

Governor's Budget Proposes $21 Million for NCCP's Funding. The Governor's budget proposes to significantly expand funding for NCCP, as show in Figure 12 (see next page). As the figure shows, NCCP expenditures are proposed to increase by $14.2 million, or 222 percent, between the current and budget years. Specifically, the budget proposes a total of $17 million to the Wildlife Conservation Board (WCB), DFG, and the State Coastal Conservancy (SCC) for NCCP land acquisitions and state operations. The budget also includes $3.6 million in DFG's budget for local assistance grants. The DFG budget also proposes to convert 13.3 personnel-years from limited-term to permanent status to administer the NCCP program.

Figure 12
Natural Community Conservation Planning Funding
1997-98 and 1998-99 (In Millions)
Department/Purpose		1997-98 Budgeted	1998-99 Proposed	Change
				Amount	Percent
Wildlife Conservation Board
Acquisition		$6.4	$10.9	$4.5	70.3%
Fish and Game
Local assistance		--	3.6	3.6	--a
State operations		--	1.1	1.1	--a
State Coastal Conservancy
Acquisition		--	5.0	5.0	--a
Totals		$6.4	$20.6	$14.2	221.9%
aNot a meaningful figure.

Further Policy Review Required. As indicated earlier, the general goal of NCCP is to facilitate economic development, while also protecting wildlife and plant species in their habitat. While these are important goals, we have expressed several concerns in prior Analyses about the implementation of NCCP. Those concerns can be summarized as follows:

• Lack of Authority to Acquire Land. Chapter 765 does not authorize the state, as part of its role in NCCP implementation, to provide local assistance grants or acquire land.
• Lack of Evaluation. The administration has proposed to increase funding for NCCP even though it has yet to evaluate the effectiveness of the program.
• Geographic Scope of Program Uncertain. The program is currently limited to San Diego, Orange, Riverside, and San Bernardino Counties. It is not clear when and whether other parts of the state will be eligible for funding.
• Large Future Costs Expected. The DFG estimates that the state's share of the NCCP program in San Diego alone will be $97 million. These costs could increase as land is acquired by the state for Orange, Riverside, and San Bernardino Counties, as well as other counties that might be added to the program.
• Future Funding Sources Unspecified. Total potential state costs are unknown at this time and DFG has not identified funding sources for the programs on an ongoing basis.

In response to these and other concerns, the Legislature adopted supplemental report language requiring WCB, DFG, and SCC to submit reports by March 1, 1998 that provide (1) the location, acreage, and acquisition cost of lands purchased in 1997-98, (2) the NCCP plan for which the parcel was acquired, and (3) the plant and wildlife species which the acquisition is intended to help protect. The Legislature also requested specific information pertaining to each NCCP plan which has been approved to date by the DFG, or which is being developed.

We believe that this information will be important in addressing the concerns noted above. Pending receipt and review of the reports, we withhold recommendation on funding for the NCCP program, local assistance, and acquisition.

We further recommend that the request to extend on a permanent basis 13.3 personnel-years of staffing for the NCCP program support be denied. Instead, these staff should continue as limited-term positions. This is because the NCCP program was established as a pilot program. However, DFG has thus far not provided the Legislature with an evaluation of the program's impact and effectiveness to warrant making the program a permanent one.

Lake Tahoe Initiative

The Governor's budget proposes $11.5 million from various funds for the Lake Tahoe Initiative. The purpose of the initiative is to preserve and enhance the Lake Tahoe Basin. Budget-year funding for the initiative is comprised of three components: (1) $10.3 million for soil erosion mitigation, watershed restoration, and acquisition, (2) $0.7 million for forest health and fire danger improvement, and (3) $0.5 million for Lake Tahoe water quality and monitoring. Figure 13 shows the distribution of these funds. According to the administration, these funds are the first installment of state funds for support of the Environmental Improvement program (EIP) for Lake Tahoe.

Figure 13
Lake Tahoe Initiative
1998-99 (In Millions)
Department/Purpose	Amount
California Tahoe Conservancy	$10.3
Soil erosion mitigation and watershed restoration
Tahoe Regional Planning Agency	0.3
Water quality and monitoring
State Water Resources Control Board	0.2
Water quality and monitoring
California Conservation Corps	0.7
Forest health and fire danger improvement
Total	$11.5

Environmental Improvement Program (EIP). The EIP is a joint effort of California, Nevada, the federal government, local governments, and the private sector to repair environmental damage done to the Lake Tahoe Basin. This joint effort is intended to help the overlapping jurisdictions in the area achieve the following nine environmental thresholds: water quality, air quality, soil conservation, vegetation, fish habitat, wildlife habitat, noise, science resources, and recreation. Thresholds are quantitative and qualitative standards that have been established to improve and maintain environmental quality.

The EIP is divided into two ten-year plans. The first ten-year plan, covering the period from 1997 through 2007, focuses mostly on water quality control and improvement. The goal is to achieve 75 percent of the water quality target threshold by the end of this period. The EIP also plans to achieve 50 percent of each of the other eight thresholds during this period. The EIP estimates that the first ten-year period will require a total investment of $906 million by all of the participants. Figure 14 shows the amount each entity has agreed to contribute toward the $906 million. Of this amount, California's share is $274 million.

Figure 14
Lake Tahoe Environmental Improvement Program Funding Responsibilities
1997 Through 2007 (In Millions)
Federal government	$297
State of California	274
State of Nevada	82
Local governments (California/Nevada)	101
Private entities (California/Nevada)	152
Total	$906

Funding Sources. The Governor proposes that California meet its share of the EIP costs through direct funding in the budget for 1998-99 and through proposed bond funds for subsequent years. In addition to the $11.5 million requested in the Governor's budget, the administration proposes to earmark $95 million in the proposed "Watershed, Wildlife, and Parks Improvement" Bond for implementation of the EIP. (Please see our discussion in the Crosscutting Issues section of this chapter on Fund Conditions for Resources Programs.) Together these funds represent only $106.3 million, or 39 percent of California's share of the EIP expenditures.

Findings and Recommendation--Budget Year. We recommend approval of the $11.5 million for the Lake Tahoe Initiative. Specifically, we believe that the proposed expenditures of $10.3 million for the California Tahoe Conservancy, as well as the remaining $1.2 million for the California Conservation Corps, Tahoe Regional Planning Agency, and the State Water Resources Control Board, are consistent with their ongoing activities.

We note that bond funds have been used in the past to fund capital improvements including water quality projects and land acquisitions in the Lake Tahoe area. According to the California Tahoe Conservancy, it received $80 million in bond funds from 1984-85 through 1991-92 for land acquisition. By 1992-93, the conservancy had exhausted its bond funds, and from 1992-93 through 1997-98 it used $14.3 million from the General Fund for acquisition. Thus, it appears that the Governor's proposal is returning to bond funding for the conservancy's activities.

Findings and Recommendations--Beyond Budget Year. Based on our review, we conclude that there are three major fiscal uncertainties involving the Lake Tahoe Initiative. First, a major source of funding for the initiative is the Governor's proposed bond measures, which are subject to voter approval. Second, there are no details on how the bond funds would be used for the initiative. Third, the initiative identifies only 39 percent of California's funding share of the EIP, but provides no details as to how the Governor plans to fund the remaining 61 percent of the initiative's future cost.

In view of these uncertainties, we recommend that the Resources Agency provide to the Legislature, prior to budget hearings, a ten-year expenditure plan including specific funding sources and purposes for the expenditures.

Watershed Initiative

The goal of the Governor's Watershed Initiative is to improve coordination and cooperation among departments, watershed groups, and local governments. The budget proposes $9 million from various funds (the General Fund, Salmon and Steelhead Trout Restoration Account, and the Public Resources Account) to implement this initiative. Funds would be used to provide financial and technical assistance to community-based groups, local governments, and other entities interested in developing and implementing watershed stewardship plans and restoration projects. Figure 15 shows the funding proposed for the initiative by department.

Two Faceted Approach. The watershed initiative is comprised of two components: (1) technical assistance, and (2) local grants. The technical assistance component directs the Departments of Fish and Game (DFG), Conservation (DOC), Fire and Forestry Protection (CDFFP), and the State Water Resources Control Board (SWRCB) to provide technical assistance to local governments and community-based groups in developing and implementing watershed stewardship plans and restoration projects. While these departments already provide technical assistance to these entities, the initiative is attempting to better coordinate the delivery of such assistance.

Figure 15
Watershed Initiative
1998-99 (In Thousands)
Department/Purpose	Funding
Department of Conservation	-- a
Geological support
Review watershed grant funding proposal
Department of Forestry and Fire Protection	$120
Forestry support
Review watershed grant funding proposal
Department of Fish and Game	8,000
Watershed assessments
Monitor recovery of species
Training in watershed assessment restoration and monitoring
Biological and ecological support pertaining to fish and wildlife
Coordinate review and determine competitive grants under SB 271
State Water Resources Control Board	931
Ten watershed management coordinators
Review watershed grant funding proposal
Total	$9,051
aUtilize existing funding sources.

The second component of this initiative is $7 million for grants to local agencies and other community-based entities for salmon protection and restoration projects as well as other watershed projects. These funds are made available pursuant to Chapter 293, Statutes of 1997 (SB 271, Thompson) which specifies that at least 65 percent of the funds in the Salmon and Steelhead Restoration Account, be allocated for salmon protection and restoration projects. The remaining funds (up to 35 percent) may be spent on a variety of watershed projects as outlined in the statute. At the time this analysis was prepared, DFG was unable to provide information on how the funds would be allocated among these two purposes and what projects would be funded. Therefore, we withhold recommendation pending receipt of this information.

Watershed Coordinator Positions. We recommend approval of the request by the State Water Resources Control Board (SWRCB) for watershed coordinator positions given that these staff will help to implement existing five-year to seven-year work plans of the regional boards. (For more details on this component of the initiative, please see the write-up under the State Water Resources Control Board.)

Ocean and Coastal Initiative

Coastal Access and Protection Proposal Lacks Detail

Budget Request. The budget proposes $5.7 million for the State Coastal Conservancy (SCC) to plan, design and construct public access-ways to the shoreline as part of the Governor's Ocean and Coastal Initiative. The funds are to be used to acquire lands to further connect the fragmented Coastal Trail (which basically runs from the Oregon border to the Mexico border) and the San Francisco Bay Trail. These funds are also to be used to effectuate offers-to-dedicate (OTD) public access. Offers-to-dedicate are easements on private property that were required to be offered to the state as a condition of receiving a development permit. The SCC has the opportunity to develop these easements into public access points. The OTDs expire if they are not developed within a twenty-year period. The conservancy has stated that many of these OTDs will expire this year. If the conservancy does not develop these access-ways prior to the expiration of the OTD and they later decide to develop an access point at that location, the conservancy will have to buy that right of access. This would be more costly to the conservancy and the state for the same level of benefit.

Recommendation. At the time this analysis was prepared, SCC was unable to identify how much of the $5.7 million was to be spent on the Coastal Trail, the San Francisco Bay Trail, or OTDs. We recommend that SCC provide the Legislature, prior to budget hearings, a breakdown of how the $5.7 million will be split between the two trails and the OTDs. The conservancy should also provide the Legislature with a list of the OTDs that will be expiring this year, a priority ranking of these easements, as well as an estimated cost per OTD it plans to develop in the budget year. We further recommend that the conservancy identify its overall goal for coastal access (i.e., the number of coastal access points per mile throughout the state) so that the Legislature can determine the extent to which the budget-year proposal for OTDs will further the achievement of that goal.

Southern California Wetlands Clearinghouse Merits Consideration; But Needs More Detail

The Governor's budget proposes the establishment of a Southern California Wetlands Clearinghouse as part of the Ocean and Coastal Initiative. The clearinghouse was a component of the Governor's Coastal Initiative for 1997-98. (This component was not funded as the result of the final Public Employees' Retirement System settlement.) The purpose of the clearinghouse is to better prioritize wetland projects, pool funds from various sources to undertake these protects, and fund the actual restoration of wetlands. Participants in the clearinghouse would include resource managers, wetland scientists, private industry and the environmental community. The budget proposes to fund the clearinghouse for one year, complete the wetland prioritization process, initiate a public involvement program, prepare conceptual wetland restoration plans for at least four priority sites, and construct one or more wetland restoration projects.

Current Efforts and Expenditures to Launch Clearinghouse. The Resources Agency, SCC, and state and federal resources managers have been working together to develop a conceptual framework and guidelines for operating the clearinghouse. The conservancy and agency established a number of goals to be met in 1997-98. One goal was to prepare a work plan for the first year that identifies the criteria and process to determine wetland priorities and an implementation strategy. The SCC and agency also plan to be able to report on the clearinghouse's progress in meeting its short and long-term goals. We recommend that SCC report on the status of these goals at budget hearings.

Mitigation Banks. Traditionally, when a developer builds adjacent to or on top of wetlands, the developer is responsible for mitigating the impact of the development on the environment. Mitigation efforts can be improvements to adjacent wetlands or development of new wetlands. The Governor's budget proposes a wetland mitigation "bank" as a component of the clearinghouse in order to offer an alternative to mitigate or offset wetland destruction due to development.

Under the proposed approach, instead of engaging directly in mitigation projects, developers can opt to buy "credits" from a wetlands mitigation bank in order to compensate for wetlands they damage or destroy elsewhere as a result of a development project. The proceeds from the purchase of "credits" would then be used by the clearinghouse to either purchase existing wetlands or develop new wetlands.

The administration believes that mitigation banks offer several advantages over the current system. First, by having mitigation projects in Southern California planned and paid for out of one account, high priority projects would be identified and completed first. Second, the quality of wetlands may be higher if SCC creates and restores them versus a developer who may not have the same expertise. Finally, mitigation banks have the potential of decreasing the cost of doing business because the development permitting process may be faster.

While mitigation banks may have merit in concept, our review finds the conservancy has not yet defined a number of important details about how the proposed mitigation banks would operate. One such uncertainty is how mitigation banks would meet California Environmental Quality Act (CEQA) requirements. Under CEQA, public agencies are required to assess a proposed development's impacts on the environment. If the reviewing agency finds that there would be significant adverse impacts, CEQA typically requires the developer to implement feasible measures to mitigate those impacts as a condition of project approval. It is not clear that CEQA requirements are met if the developer buys mitigation credits from the clearinghouse for a project in one county and the clearinghouse decides the highest priority for wetland restoration is in another county and therefore applies the credits toward that higher priority project. Also, it is not clear what criteria will be used to determine the number of credits that developers must purchase or how the cost of credits would be determined. Depending on how the credits are priced, mitigation banking could become a subsidy for developers. Furthermore, the willingness of a developer to participate in the clearinghouse will depend on the price of mitigation credits.

Recommendation. We recommend that SCC report to the Legislature at budget hearings on the progress that has been made in achieving the goals established for 1997-98. We also recommend that the conservancy address the uncertainties and concerns pertaining to the number of credits to be sold, how the credits will be priced, and how mitigation banks would satisfy CEQA requirements. Pending receipt of this information, we withhold recommendation on $6.9 million requested for the clearinghouse.

Marine Resources Management

Coastal Water Quality

Overview. Current state law calls for the preservation of habitat and wildlife through the acquisition, restoration, and enhancement of wildlands. Responsibility for carrying out these activities is spread over seven departments and is financed through various funds. Figure 17 (see next page) identifies the major funding sources that are available for habitat and wildlife preservation. The Legislature appropriated approximately $62.1 million in 1997-98 for the preservation of habitat and wildlife, as shown in Figure 18 (see page 49). The Governor proposes approximately $69.2 million in 1998-99 for this purpose.

Figure 19 (see page 49) shows by broad categories how the funds are spent for habitat and wildlife protection. The expenditures are for:

• "Acquisition" of lands which includes purchase of property to increase coastal access, develop trail systems, and protect habitat and wildlife.

• "River Parkway" which includes expenditures funded through Proposition 204 for acquisition of riparian and aquatic habitat, and for river stream trail projects restoration.

• "Restoration/Enhancement/Development" which includes all other wildlife and habitat-related expenditures. Generally, these include activities that bring the environment into a condition suitable for wildlife. This could include, for example, restoring stream beds to improve spawning conditions for salmon.



• "Minor projects" which are capital outlay expenditures for habitat and wildlife preservation.

Comments. Based on our review, we draw the following conclusions concerning the proposed state expenditures for wildlife and habitat preservation. First, the budget generally does not identify the specific projects for which the funds will be used. Specifically, the conservancies and the Wildlife Conservation Board (WCB) do not identify the projects which they are proposing to purchase. In some cases, the conservancies and the board provide lists of potential acquisitions and development projects to support the budget proposals. However, these lists are (1) tentative, and subject to change, or (2) not necessarily projects that will be funded in the budget year. We note, however, that the Departments of Fish and Game (DFG) and Parks and Recreation do identify the specific projects for which they plan to use their funds.

Without knowing which specific projects are proposed to be acquired or restored, it is not possible to determine how the proposed expenditures maximize the state's goal of protecting habitat and wildlife. Similarly, it is not possible to determine what operating and maintenance costs these projects will impose on future budgets.

Second, the budget does not indicate how the proposed expenditures are split between (1) acquisition projects and (2) enhancement, restoration, and development projects. We note that such information is important because enhancement, restoration, and development projects can have important implications for state operations and maintenance costs in the future. For example, WCB restores property for DFG which manages the land. The type of property restored (for example, a stream bed or meadow) will result in different costs in the future. It is also important to know which projects are being restored, enhanced, or developed because it allows the Legislature to determine if the departments are targeting the highest priority projects.

Summary. In the absence of information about the proposed expenditures for wildlife and habitat preservation, it is impossible to determine how the budget proposal maximizes the state's goal of protecting habitat and endangered and threatened species. It is also difficult to determine what operation and maintenance costs these projects will impose on the budget in future years.

Background

• Air Resources Board (ARB).
• California Integrated Waste Management Board (CIWMB).
• Department of Pesticide Regulation (DPR).
• Department of Toxic Substances Control (DTSC).
• Office of Environmental Health Hazard Assessment (OEHHA).
• State Water Resources Control Board (SWRCB).

Prior to the creation of Cal-EPA by a Governor's reorganization plan in 1991, the programs of Cal-EPA departments were spread among five agencies and departments, including the Health and Welfare Agency and the Department of Food and Agriculture. The Cal-EPA was proposed as a means of consolidating in one agency programs that were individually focused on particular areas of the environment (such as air or water) or particular pollution sources (such as pesticides or hazardous wastes).

Goals Set for Cal-EPA. In the reorganization plan, the Governor set a number of goals for Cal-EPA:

• To focus on assessing and addressing the greatest environmental and public health risks, using the best available science.
• To coordinate the state's environmental programs, and reduce overlap, duplication, and conflict in the regulation and administration of these programs.
• To serve as a primary point of accountability for these programs.

Goals Are Not Being Met

Our review finds that the agency has made progress towards achieving some of its goals. Specifically, progress has been made to reduce overlap, duplication, and conflict in the regulation and administration of the state's environmental programs. For example, the agency has initiated a number of external program reviews and task forces to identify cases of overlap, duplication, and conflict. Findings of these reviews have resulted in statutory and regulatory changes, and coordinating agreements among Cal-EPA departments, to address the identified problem areas. The agency has also served to better coordinate agency-wide efforts in some areas, including environmental technology development, military base cleanup, and permit assistance.

However, we have identified a number of instances where the agency has failed to achieve its goals. For example:

• A Failure to Assess Risks. In the Department of Pesticide Regulation, there are significant backlogs in completing high-priority risk assessments, and the department has failed to respond to legislative direction to address this. (See our discussion under Item 3930, Department of Pesticide Regulation.) Also, regulatory decisions have been made by Cal-EPA departments without due consideration of the impact on public health and the environment outside their program areas. For example, the ARB has approved the use of MTBE as an ingredient in reformulated fuels to address air quality concerns, but MTBE may create adverse impacts on water quality if fuels migrate to water supplies. Neither ARB nor SWRCB identified and assessed these impacts when the ARB regulation was adopted. In fact, the Legislature had to enact legislation in 1997 to require an assessment of these impacts.
• A Failure to Coordinate Programs. As discussed below, planning and priority-setting has not been coordinated among Cal-EPA departments. Moreover, Cal-EPA has failed to coordinate with the Resources Agency to submit a single statewide environmental plan to the Legislature--a statutory requirement since the 1970s.
• A Failure to Be Accountable. As we have discussed in previous analyses (see Analysis of the 1995-96 Budget Bill, page B-33), a substantial number of employees have been loaned or re-assigned from their legislatively approved positions to work in some other capacity at Cal-EPA, such as at Cal-EPA's permit assistance centers. This has made it difficult to hold departments within the agency accountable.

In the following sections, we identify and discuss some of the key reasons why these goals are not being met.

Failure to Focus on Primary Mission

The primary mission of Cal-EPA and its constituent departments is to protect public health and the environment. However, for the reasons discussed below, we find that the creation of Cal-EPA has not resulted in a coordinated, agency-wide vision and plan for protecting public health and the environment. Lacking this, it is difficult for the agency as a whole to focus its efforts on addressing the greatest risks to the environment overall.

Agency's Strategic Plan Lacks Vision for Environmental Protection. Our review of the most recent strategic plan of the agency (the 1996 plan) finds that there is little coordination between the development of the agency's plan and that of individual Cal-EPA boards and departments. Specifically, the agency's plan does not demonstrate how it coordinates with the environmental protection goals set out in the strategic plans of the constituent departments. Furthermore, the agency's plan does not provide a vision, goals or a plan for where the state should focus its efforts in the protection of all environmental media (air, water, etc.). Rather, the agency's strategic plan focuses on strategies to increase efficiencies, reduce costs, and improve service delivery. While these strate- gies may have merit, they fail to address the agency's primary mission of public health and environmental protection.

Agency Lacks Process to Establish Agency-Wide Environmental Protection Priorities. We find that Cal-EPA does not have a formal, interdepartmental process to identify the top environmental protection priorities and to direct agency-wide efforts on an ongoing basis. Such a process is needed in order that the agency as a whole can be held accountable for meeting its primary mission, and to provide the Legislature and the administration with a rational basis for allocating resources among environmental programs.

The Governor stated his intent in the reorganization plan to establish such a process by creating an Environmental Policy Council (consisting of the heads of each Cal-EPA board and department and the Governor's Office of Planning and Research) which was to "develop recommendations for the Legislature and Governor as to actions necessary to effectively protect and enhance the environment." However, that process has not been established. While the agency and its constituent departments meet informally to discuss priorities, the objectives for the meetings are not defined, and the Legislature is not advised of the group's findings and decisions about environmental protection priorities.

We also find that a statutory requirement for the Governor to submit a comprehensive statewide environmental plan to the Legislature has not been met since 1978. Specifically, the Governor is required to prepare and update every four years a comprehensive statewide environmental plan which contains an overview--looking 20 to 30 years ahead--of state growth and development, and a statement of goals relating to land use, conservation of natural resources, and air and water quality. While Cal-EPA, together with the Resources Agency, are the appropriate agencies to prepare such a report, no attempt has been made.

Agency's Allocation of Resources Not Based on Goal of Environmental Protection. We find that the agency's review of the budget proposals of its constituent departments is not based primarily on how they relate to the mission of protecting public health and the environment. Rather, according to Cal-EPA, in deciding how to allocate resources among environmental programs, the highest priority is assigned to proposals that either promote environmental technology development, enhance enforcement, streamline regulations, or implement the Governor's "California Competes" initiative (an effort to streamline and reduce duplication among state programs).

Analyst's Recommendation--Establish Environmental Protection Council Accountable to Legislature. We believe that the Legislature should be able to assess the agency-wide environmental protection priorities at Cal-EPA. This information is necessary for the Legislature to determine whether (1) the agency's priorities are consistent with the Legislature's own priorities and (2) the agency is assessing and addressing the greatest risks to public health and the environment, as proposed in the reorganization plan. To facilitate this, we recommend the enactment of legislation establishing an Environmental Protection Council, made up of the Cal-EPA secretary, the directors of Cal-EPA departments, and the chairpersons of Cal-EPA boards. We recommend that this Council be charged with the following responsibilities:

• To submit an annual report to the Legislature on it plans for protecting public health and the environment. This report should be provided in conjunction with the annual budget request submitted by the Governor. This report should include information on: (1) the risks which the Council identifies as posing the greatest threat to public health and the environment, (2) actions that ought to be taken in the short and long run to reduce those risks, and (3) how the programs of Cal-EPA and its constituent departments address the identified priorities for environmental protection and relate to their strategic plans. In addition, the report should provide a status report on the implementation of the priority list of actions identified in the prior-year's report .
• As part of the first annual report, the Council should assist Cal-EPA in developing a single, consolidated strategic plan for the agency as a whole.

Current Organizational Structure Inherently Problematic

We believe that formalizing the interdepartmental priority-setting process (as discussed above) will help provide a more coordinated, agency-wide vision for protecting public health and the environment. However, we think that Cal-EPA will continue to have problems in coordinating policy-making, implementing environmental programs among departments and boards, and serving as a primary point of accountability for these programs. This is mainly because under the current organizational structure, there are 12 independent boards in Cal-EPA: the Air Resources Board (ARB), the California Integrated Waste Management Board (CIWMB), the State Water Resources Control Board (SWRCB), and nine regional water quality control boards. These boards make independent decisions and are not directly responsible to the Secretary for Environmental Protection. Specifically, ARB, CIWMB, and SWRCB are policy-making bodies. In the case of ARB and SWRCB, the board members are appointed by the Governor and approved by the Senate. For CIWMB, the board members are appointed by the Governor, the Assembly Speaker, and the Senate Rules committee, and approved by the Senate. Similarly, the regional boards make independent decisions in implementing state board policies. As a result, the lines of accountability for making and implementing policies are unclear.

The Cal-EPA has made some efforts in coordinating enforcement across the agency by promoting "cross-media" (air, water, and land) training and inspections. However, the independent boards, who make enforcement decisions in a public setting, have varied widely in their implementation of enforcement policies.

The U.S. EPA Model. There are different ways of organizing environmental agencies. Our review shows that around 30 other states have organized their environmental agencies as "super departments," with divisions (air, water, etc.) that parallel the divisions of the U.S. Environmental Protection Agency. The department head has clearly defined authority over division directors. As single departments, the lines of accountability are relatively clear. Some states' structures include a council, comprised mainly of citizens appointed by the Governor, to advise the state's environmental department on environmental priorities. Yet other states' structures are comprised of a single environmental department, and an appointed board that serves mainly an enforcement function.

Restructuring Cal-EPA in any of these ways would present both advantages and disadvantages. For instance, there might be enhanced accountability in program and policy implementation. However, by eliminating existing boards, the opportunity for public participation might be reduced. In addition, the boards' function as an adjudicatory and appeals body would need to be provided in an alternative manner.

Analyst's Recommendation--Appoint Task Force on Environmental Agency Organization. We think that a thorough evaluation of the pros and cons of the different organizational structures of environmental agencies would provide the Legislature with valuable information to determine what might be the most appropriate structure to facilitate Cal-EPA in achieving its mission. Therefore, we recommend that the Legislature appoint a task force to (1) evaluate other environmental agency structures in terms of their ability to facilitate Cal-EPA achieving its mission, and (2) make recommendations to the Legislature. The task force should consist of representatives from Cal-EPA and its constituent departments, fiscal and policy committees of the Legislature, the environmental community, and the regulated community.

Cal-EPA Should Be Held Accountable for Failing to Comply With Legislative Direction

Last spring, the Legislature adopted supplemental report language directing Cal-EPA to submit a plan by November 1, 1997 which implements the recommendations of the January 1997 report of the Unified Environmental Statute Commission. This commission, convened by Cal-EPA, made a number of recommendations on how Cal-EPA could better achieve its mission. In particular, the Legislature expressed interest about actions Cal-EPA has taken or plans to take to consolidate Cal-EPA departments' physical operations, implement a consolidated permitting system, unify informational and reporting requirements for the regulated community, and unify strategic planning. At the time this analysis was prepared, no report has been submitted to the Legislature.

In failing to follow the Legislature's direction, Cal-EPA has failed to live up to its goal to serve as the primary point of accountability for environmental programs. We recommend that the Legislature withhold action on Cal-EPA's budget until a report that is responsive to the Legislature's direction is submitted.

Increase in Permit Assistance Center Staffing Not Justified

Permit Assistance Centers. Between 1992 and 1996, Cal-EPA administratively established 13 permit assistance centers (PACs) throughout the state. The PACs are designed to provide (1) a single point of contact for businesses to obtain information on all required permits and (2) assistance in applying for such permits. These could be federal, state, and local permits necessary to start a business, including environmental, land use, and health and safety permits.

In the current year, the budget provides $664,000 from the General Fund for Cal-EPA to oversee the centers and to develop an Internet site for permit assistance. This level of funding does not provide any support for staffing the centers. Rather, 22.8 personnel years are being assigned temporarily to work at the centers in the current year from various departments. Support of these staff are paid by the various departments, and funded mainly from special funds.

Budget Proposal. The budget proposes $2.8 million from the General Fund in 1998-99 to support the PACs. This is an increase of $2.2 million--about 325 percent--over estimated current-year expenditures. This amount would enable Cal-EPA, for the first time, to reimburse the departments that contribute staff to work at the centers, and to do so at an expanded staffing level of 40 personnel years.

Reimbursement Approach and Fund Source Are Appropriate. We think that it is appropriate for the departments who contribute employees to work at the PACs to be reimbursed by Cal-EPA so that their staffing levels are kept whole. This approach addresses the Legislature's past concern that the assignment of employees to the PACs may negatively impact the ability of the contributing departments to handle their workload and address their core mission. Furthermore, we think that from an operational standpoint, it is reasonable for Cal-EPA to reimburse the contributing departments rather than to establish separate positions at Cal-EPA for the PACs. This is because flexibility is needed to meet the centers' staffing needs given that work requirements change frequently throughout a year depending on demand at the centers. The Legislature has also expressed the concern that budgeting positions specifically for the PACs could result in over-budgeting given the variation in workload. We also think that the General Fund is an appropriate funding source given the broad-based business assistance that is provided to customers of the centers.

No Workload Justification for Increase in Employees Assigned to PACs. However, Cal-EPA has provided no workload justification for the proposed increase in employees assigned to PACs. Without this justification, we recommend that the Legislature deny the request for $957,000 which represents the portion of the proposal to increase staffing at the PACs from current-year levels.