Analysis of the 2007-08 Budget Bill: General Government
The Office of Emergency Services (OES) is responsible for assuring the state’s readiness to respond to and recover from natural and man-made emergencies. During an emergency, the office functions as the Governor’s immediate staff to coordinate the state’s responsibilities under the Emergency Services Act. It also coordinates federal assistance for natural disaster grants. Since 2003-04, OES has administered criminal justice grant programs formerly managed by the Office of Criminal Justice Planning. Funding for the Office of Homeland Security (OHS) is also included in the OES budget.
The budget proposes to spend approximately $1.3 billion in support of OES in 2007-08. Over $1 billion of this amount is from federal funds, primarily local assistance funding for disaster assistance and homeland security grants. The department’s General Fund spending is proposed to grow by 3 percent to $185 million.
We recommend deleting a $5 million proposal for port security grants from the Antiterrorism Fund. Recently approved bond funding provides $100 million for the same purpose. (Delete Item 0690-111-3034.)
Ports and Funding for Security. The state has about a dozen public ports and harbors, which import hundreds of billions of dollars in goods each year. Since the terrorist attacks of September 11, 2001, there has been considerable national concern about the vulnerability of ports to future attacks. Consequently, California’s ports have received about $142 million in federal grants over the past five years to upgrade their security. While a small portion of these federal funds was distributed to ports by OHS ($5 million), the remaining funds were provided directly to the ports by the federal government.
Proposed New Program. The Governor’s budget proposes $5 million in 2007-08 to establish a state-funded grant program for port security, with ongoing funding of $1 million in subsequent years. Funding for the program would come from the state Antiterrorism Fund, which receives its support from the sale of California memorial license plates. The department’s priority would be the creation of a worker identification program. The proposal contains no details regarding the worker identification program, but the proposed large one-time grants in 2007-08 would presumably be for necessary equipment and other startup costs. The administration would specify how much funding each port would receive—from $150,000 for smaller ports to $775,000 each for the Ports of Los Angeles and Long Beach.
Proposal Ignores Availability of Bond Funds. The proposal ignores the availability of $100 million for port security from the Proposition 1B transportation bond passed in November 2006. The bond specifies OES as the administrator of these grant funds, which are intended to focus on equipment purchases. (We discuss the Legislature’s choices in implementing bond-funded programs below.)
Antiterrorism Fund Is Flexible. The Antiterrorism Fund is the state’s only dedicated fund source for homeland security activities, and the original intent of the fund was to address multiple departments’ homeland security requests. Since it can be used to fund activities that are ineligible for federal funding, the fund is an important flexible tool for the Legislature. For instance, the Legislature was able to use the fund to pay for homeland security activities of the Department of Food and Agriculture in 2006-07 that otherwise would have been borne by the General Fund. The proposed use of the Antiterrorism Fund for port security would take most of the fund’s resources in 2007-08 and in future years. (The fund currently has a comparatively large fund balance due to minimal spending in prior years.) As such, the proposal would leave little funding available for other departments.
Recommend Deleting Funding. Given the availability of bond funds for port security, we recommend the Legislature delete the proposed funding from the Antiterrorism Fund. The Antiterrorism Fund should be preserved for spending that has no other available funding source. As discussed in more detail below, we believe that port security should be addressed through competitive grants using bond proceeds.
We recommend that the Legislature provide more specific statutory frameworks for the port and transit security grant programs funded by the recent transportation bond. We recommend the funds be distributed competitively in a manner which provides long-term benefits and leverages other funds.
Bond Funds for Security. As noted above, Proposition 1B provides $100 million for port security equipment grants to be administered by OES. In addition, the bond provides $1 billion for transit security without specifying a state administering department. The administration proposes (through trailer bill language) that OES administer the transit security program as well. The Governor’s budget does not propose appropriations for either program.
OES Makes Sense for Both Programs. In our view, OES administering both programs is reasonable for a number of reasons. First, OES has considerable experience administering grant programs. Second, OES is the state’s lead agency related to emergency preparedness and homeland security (in conjunction with OHS). Finally, the two programs are similar in purpose, so a single administrating department should be able to achieve efficiencies by running both programs.
Structure Bond Programs for Long-Term Benefit and Competitive Selection. As we discuss in more detail in our recent report
Implementing the 2006 Bond Package (January 2007), the Legislature should take an active role in crafting the frameworks for the new programs authorized by the bond in order to ensure their success. Below, we provide some key considerations in developing the frameworks for these two security programs.
Long-Term Benefit. The Legislature should ensure that the bond proceeds only support projects that will provide a long-term benefit to the state. Otherwise, it would mean that future taxpayers decades from now would be paying bond debt service for the short-term benefits enjoyed by today’s California residents. For instance, the Legislature should require that any equipment purchased with the funds have a reasonably long expected lifespan.
Defining Goals and Priorities. For both programs, Proposition 1B provides only broad parameters for how the funds should be used. Prior to appropriating any funds for the programs, the Legislature should further define the specific goals and priorities of the programs to focus the funding in those areas which can most improve the state’s overall security.
Competitive Selection. In addition, the Legislature should define the criteria for selecting projects. The administration’s port security program proposal for the Antiterrorism Fund described above would guarantee each port a certain share of the funds. In contrast, we recommend that both the port and transit security programs be established as competitive grant programs. Rather than guaranteeing grant amounts, OES should evaluate applications on a competitive basis to ensure that the projects chosen are those that improve the state’s overall security to the greatest extent possible.
Leveraging Other Funds. The measure does not specify whether local matching funds are expected as a condition of grants. We recommend that the Legislature establish local matching requirements for the programs. This would ensure that the grant recipients have a vested interest in making cost-effective spending decisions. In addition, the Legislature should require OES to review applications for commitments of ongoing operations costs. For instance, it would not be a good state investment to fund the purchase of surveillance equipment if there is no guarantee that the recipient will have the resources to use the equipment daily to monitor activities. Finally, the grant applications should be reviewed to make sure projects are coordinated with federal funds that are available for similar purposes.
Recommended Funding Approach. Once the Legislature develops the statutory framework for these programs, the budget bill should be amended to include program appropriations. Since these programs are new, we recommend that the Legislature commit only a portion of the funds in 2007-08. This would give the Legislature the opportunity to review the program’s operations and make any necessary changes prior to committing additional funds.
We recommend that the Legislature reject a proposal for open-ended spending authority for public-private partnerships on emergency preparedness. Once it begins to receive donations for this purpose, the administration should present a specific spending proposal. (Delete Item 0690-001-8039.)
Legislature Authorizes Public-Private Collaborations. Chapter 232, Statutes of 2005 (SB 546, Dutton), specifically authorizes OES to collaborate with private entities to improve the state’s emergency preparedness. Chapter 232 provides broad direction as to the types of activities that OES may undertake, including conducting outreach to businesses and developing information sharing systems for use during disasters. Chapter 232 creates the Disaster Resistant Communities Account to receive any private donations to help implement the bill’s purpose.
Administration Requests Expenditure Authority. The Governor’s budget requests a $1 million appropriation from the Disaster Resistant Communities Account. The proposal states that the $1 million would be for contracts with private entities to promote the purposes of Chapter 232. In addition, proposed budget bill language would allow this appropriation to be increased by the Department of Finance at any time if additional funds are received.
No Funds, No Plan. Despite seeking the appropriation, OES reports that it has collected no donations to the account. In addition, the department could not provide a plan for how the funds would be spent even if received. Instead, OES reports that a working group of state entities, private companies, and nonprofit organizations currently is developing some spending options.
Recommend Rejecting Appropriation Until Plan Is Developed. The state has not received any private funds for Chapter 232, and the administration has no plan as to how the funds would be spent once received. By approving the administration’s request, the Legislature would be writing a blank check to OES to spend any monies received on a wide array of possible activities. Instead, we recommend that the Legislature reject the request. Once donations are received, the administration should seek an appropriation based on a specific spending plan.
We recommend that the Legislature delete $1.1 million in General Fund requests for consulting contracts to prepare various reports and perform other tasks. Departmental staff should be able to perform the work without these added costs. (Reduce Item 0690-001-0001 by $1,075,000.)
Requested Funding to Implement Legislation. The department requests $1.9 million from the General Fund and 7.3 personnel-years to assist the department in implementing six bills that were passed by the Legislature in 2006 aimed at improving the state’s disaster preparedness. The requested staff would coordinate information and planning with various nonstate entities such as harbors, railroads, and the disabled community.
Consulting Services. Of the amounts in the proposals, $1.1 million is for external consulting services. Specifically:
$600,000 to prepare a biennial report for the California Emergency Council required by Chapter 502, Statutes of 2006 (AB 1889, Nava). The council is an advisory board, staffed by OES, that advises the Governor on issues related to emergencies and emergency preparedness. The report is to include a review of recent disasters and steps to address any gaps in readiness.
$250,000 to prepare a report for the Legislature by January 1, 2009, on improving planning and evacuation procedures specific to disabled residents required by Chapter 600, Statutes of 2006 (SB 1451, Kehoe).
$225,000 to assist in implementing Chapter 859, Statues of 2006 (AB 2274, Karnette), which requires OES to integrate harbor agencies into the state’s overall preparedness structure. The proposed contracts would be used for training exercises.
Legislature Did Not Expect Contract Costs. In last year’s session, none of the bill analyses performed by legislative committees identified significant OES costs associated with these bills—generally citing costs as either insignificant or less than $125,000. For instance, in the case of Chapter 502, the analyses indicate the Legislature’s expectation that OES’s staffing of the Emergency Council is part of its baseline duties. While other analyses occasionally reference increased departmental staff work, none of them mention any costs associated with outside consultants.
Consultants Not Necessary. In addition, the consulting contracts have not been justified on a workload basis. Regarding Chapter 502, the department reports that the large contract is largely based on researching and reviewing other reports on emergency preparedness. Yet, in response to a requirement in the 2006-07 Budget Act, OES has already entered into a $647,000 contract (using federal funds) with a consulting firm to provide a report on the gaps in the state’s preparedness. This report is due by July 15, 2007, and should provide much of the baseline information for the council report. In the case of Chapter 600, it is not clear why the state emergency services coordinator position requested in the proposal would be unable to prepare the required report in 18 months by the statutory deadline. Finally, regarding Chapter 859, the proposal provides no detail regarding the training exercises, their cost, or why federal homeland security funds are not available for this purpose.
Recommend Deleting Contract Funds. The department has failed to justify why existing and new state staff could not prepare the reports and perform the duties required by recent legislation. Accordingly, we recommend the Legislature delete $1.1 million in contract funds included in its budget requests.
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2007-08 Budget Analysis