Analysis of the 2007-08 Budget Bill: Resources
The Department of Fish and Game is responsible for promoting and regulating hunting and fishing for game species, and for promoting resource protection for all California native plants, fish, and wildlife. The Fish and Game Commission sets policies to guide the department in its activities. The department currently manages about one million acres including ecological reserves, wildlife management areas, hatcheries, and public access throughout the state.
The budget proposes total expenditures of $447 million from various sources, a decrease of about $64 million below estimated current-year expenditures. Most of this decrease reflects a reduction in available Proposition 40 bond funds and the elimination of various one-time General Fund expenditures (totaling about $70 million) that occurred in the current year. Of the total proposed expenditures, $86 million comes from the Fish and Game Preservation Fund (FGPF) (19 percent), $79 million from the General Fund (18 percent), $69 million from federal funds (16 percent), $67 million from Proposition 84 bond funds (15 percent), and the rest from reimbursements and other special and bond funds.
Several of the programmatic changes in the department’s budget relate to expenditure of Proposition 84 funds, including for the CALFED Bay-Delta ecosystem restoration program ($47 million) and anadromous fish management ($11 million). Other changes include $4.5 million for increased environmental review and $2.9 million for management of department lands.
The department has a history of fiscal management problems, particularly with respect to the Fish and Game Preservation Fund (FGPF). While the department has made progress in complying with legislative requirements for improved fiscal management and budget transparency, we have identified opportunities to further improve the clarity and the accuracy of FGPF fund condition statements. We also recommend a reduction in the expenditure authority of one FGPF account, to better align revenues and expenditures and create a prudent fund reserve. (Reduce Item 3600-001-0200 by $528,000.)
History of Fiscal Problems Within FGPF. The FGPF provides the largest source of ongoing support for the department’s activities. The FGPF receives revenues from hunting and fishing licenses and taxes, commercial fishing permits and fees, and environmental review fees paid by project proponents. However, many of the fund’s revenue sources show a long-term decline, largely due to declining participation in hunting and fishing activities in the state. In addition, over time the department’s mandated activities have increased. In many cases, increased mandates either did not come with a new funding source or were not accompanied by increases in existing funding sources, such as license fees, to fund them. The FGPF is divided into a “nondedicated” account—for which revenues can be spent on a variety of department-funded activities—and 27 “dedicated accounts”—for which revenues can only be spent on specified activities.
For many years, the department has had problems with fiscal management, particularly with respect to the management of FGPF. (See our
Analysis of the 2006-07 Budget Bill for a description of some of the department’s past problems.) Over the years, the department has shifted funds from one account to another within FGPF, in order to address revenue shortfalls in certain accounts. This caused revenues dedicated by statute for specific uses to be used for other purposes. Also, these fund shifts created negative fund balances in several accounts within FGPF, even though the fund as a whole had a positive fund balance.
Legislative Actions to Address Fiscal Problems. In the 2006-07 Budget Act, the Legislature provided $19.9 million from the General Fund (one-time) to address past deficits within FGPF. The Legislature also provided an ongoing General Fund shift of $5.9 million, so that certain activities previously funded from FGPF are now funded from the department’s General Fund budget. Included in the $5.9 million (ongoing) General Fund shift is $1.2 million to offset lost revenue due to the federal closure of the commercial salmon fishing season. While the closure of commercial salmon fishing is not necessarily permanent, it is unknown if and when this commercial fishing will resume. The Legislature found that while fee revenues from salmon fishing were not likely to be collected in the foreseeable future, the management and restoration activities previously funded with license and other fee revenues should continue.
In addition to providing additional General Fund monies to address past and ongoing fiscal problems, the Legislature required, through trailer bill language, that the department make certain improvements in its fiscal disclosures, to ensure that past fiscal mismanagement and opaque budgeting would not continue. Specifically, Chapter 77, Statutes of 2006 (AB 1803, Committee on Budget), requires that the department:
Include in the budget proposal a fund condition statement for FGPF that includes information on revenues and expenditures for the fund, including both the nondedicated account and the dedicated accounts.
Provide a fund condition statement similar to the fund condition statement included in the 2003-04 budget proposal.
Post on its Web site, on or before January 10th of each year, fund condition statements for each subaccount within FGPF.
Department’s Actions to Follow Legislative Requirements. We find the department has generally complied with the requirements of Chapter 77. The Governor’s budget document includes fund condition statements for both the nondedicated and dedicated accounts of FGPF, reflecting the format of the 2003-04 budget proposal. (We note that the department has subsequently made corrections to the online version of the fund condition statements.) The department has posted on its Web site separate fund condition statements for each of the accounts within FGFP.
Department Is in Compliance with Legislative Mandates, but Additional Steps Needed for Full Budget Transparency. We find that the department has made a good-faith effort to comply with the requirements of Chapter 77 and to provide additional information to allow legislative oversight of its management of FGPF. However, based on our review, we find that there are ways that the FGPF fund condition statements could be presented more clearly. For example, in the current year, the Legislature provided a one-time General Fund transfer of $19.9 million to pay off past deficits within the fund. In the fund condition statements, however, this transfer is not explicitly shown as a separate line-item transfer, but rather it is embedded within the revenue line for the various subaccounts, without any acknowledgement that there was a General Fund transfer. In other words, while the statements are factually correct, they do not clearly explain the Legislature’s actions or their impact on FGPF’s account balance. For instance, displaying the $19.9 million transfer as part of the fund’s revenues may give the false impression that revenues from fees have increased.
We recommend the department report at budget hearings on potential revisions to its fund condition statements that would more clearly and accurately reflect the condition of the fund. We will work with the department on potential ways to increase transparency.
Legislature Should Consider Transferring Ongoing General Fund Replacement Support Directly Into FGPF. In the 2006-07 Budget Act, the Legislature provided $5.9 million in ongoing General Fund support for program expenditures previously supported from FGPF. While these funds will be used to support program activities previously funded from FGPF, the actual expenditures will come from the department’s General Fund budget item. In order to improve budget transparency, we recommend the adoption of budget bill language transferring General Fund monies to the various accounts within FGPF. This will allow interested parties to see where the Legislature has augmented FGPF revenues with General Fund. In addition, transferring these funds into the specific accounts within FGPF will ensure that the funds are spent on specific program activities as intended by the Legislature.
Department Has Overestimated Certain Revenue Projections. Based on our review, we find that the department has failed to reduce projected fee revenues relating to salmon fishing in several FGPF subaccounts. As was mentioned above, the federal government has closed commercial salmon fishing indefinitely off the California coast. While the department was given an ongoing General Fund augmentation intended to offset lost revenues in the budget year, its revenue projections do not seem to take into account reduced salmon fishing and its impacts on department revenues. Specifically, we find that revenue projections for the following four accounts are too high: the Commercial Salmon Stamp Account, by $62,000; the Commercial Augmented Salmon Stamp Account, by $210,000; the Commercial Salmon Vessel Permit Account, by $48,000; and the nondedicated account, by about $900,000. We recommend the department prepare updated fund condition statements for these four accounts that more accurately reflect projected revenues, taking into account the closure of the commercial salmon fishing season. We also recommend the department report at budget hearings on its long-term plans for managing these four accounts, since we project that the revenue adjustments will put the three dedicated accounts in deficit beginning in 2008-09, absent corrective action.
Finally, the department projects a zero fund balance in the Upland Game Bird Account at the end of the budget year, due to declining revenues. In fact, proposed expenditures exceed projected resources by $436,000. The department plans to rely on unspecified program savings of $436,000 to ensure that this subaccount does not go into deficit. Instead, we recommend reducing budget authority for this account by $528,000, to reflect the declining revenue projections and to provide a prudent year-end projected reserve in the account of $92,000 (5 percent of expenditures).
The department’s budget request inadvertently includes $2 million in General Fund for Marine Life Management Act implementation, which was provided as one-time funding in the current year. We recommend the Legislature reduce the department’s General Fund request by this amount. (Reduce Item 3600-001-0001 by $2 million.)
Department’s General Fund Budget Includes One-Time Funding From 2006-07 Budget Act. In the 2006-07 Budget Act, the Legislature provided $10 million in one-time General Fund monies for activities associated with the Marine Life Management Act and the Marine Life Protection Act. Of these funds, $8 million went to the Coastal Conservancy and $2 million went to the department. The department has indicated that this $2 million augmentation was inadvertently included in the department’s 2007-08 budget request.
Reduce Department’s General Fund Budget by $2 million. We recommend the Legislature reduce the department’s General Fund budget appropriation by $2 million to reflect the one-time nature of the appropriation provided in the 2006-07 Budget Act.
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2007-08 Budget Analysis