Summary of LAO Findings and Recommendations on the 2011-12 Budget

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	Program	Budget Issue	LAO Finding Or Recommendation	Last Updated
Go Back	Department of Forestry and Fire Protection (CalFire)	Realignment of fire and emergency response activities	The Governor’s proposal to realign a portion of CalFire's fire protection program to local government has merit and warrants serious consideration by Legislature.The context of the Governor's proposal, discussed further below, has been the rapid development in State Responsibility Areas that has raised state costs to fight wildland fires and has resulted in the department being increasingly involved in activities that are outside its core mission and more appropriately a local responsibility.	1-26-11

Detailed Narrative
In addition to the commentary that follows, please see the handout on this issue that we presented at budget hearings on February 2 and 3. Proposal. Currently, CalFire provides wildland fire protection services in State Responsibility Areas (SRAs)--lands that encompass roughly one-third of the state’s acreage. These SRAs are primarily privately owned timberlands, rangelands, and watersheds that, in recent decades, have become increasingly populated and developed. Under the proposed realignment plan, responsibility for fire protection and medical emergency response in the relatively more populated wildland areas would be assumed by local governments. Under the Governor's plan, there would be a statutory change in the criteria for designating lands as a SRA, and the Board of Forestry (BOF) would redraw SRA boundaries based on the new criteria for SRAs. Realignment Has Merit in Concept. Increasing development in SRAs has increased fire risks and the state’s costs to fight wildland fires. In addition, CalFire has found itself increasingly responding to medical emergencies and providing structural protection in SRAs, activities that are outside its core wildland fire protection mission. We have previously recommended that the Legislature review the criteria for SRA designation. The criteria could be changed in a way that serves to encourage local planning agencies to give more consideration to the dangers of wildland fire when making decisions regarding new development. In other words, local governments could be made more accountable for the fiscal consequences of their planning decisions as SRAs are reverted to local responsibility. Fiscal Impact of Realignment Is Highly Uncertain. The administration estimates that up to $250 million in CalFire’s program costs, along with a like amount of funding, would be realigned to local governments under this proposal. The level of realignment funding that would be transferred to local governments under the Governor's plan is highly uncertain, as it depends on the outcome of the SRA reclassification effort that has yet to begin and for which guiding criteria have yet to be developed. Accordingly, the amount of the transfer could be much less than $250 million. Role for Legislative Policy Direction and Oversight. As noted above, the Governor's plan is for a statutory revision to the SRA criteria and definitions to guide the BOF's reclassification of SRA lands. The development of these statutory criteria and definitions would provide the Legislature with an important opportunity to establish its policy direction regarding the core mission of the department and the scope, both programmatically and fiscally, of the state's wildland fire protection activity. The Legislature should review the results of the BOF's reclassification effort before such takes effect to ensure that the effort was carried out consistently with the Legislature's policy direction. Issues. If the boundaries of SRAs were to be redefined, several issues may arise that the Legislature should be aware of and that may require legislative action to address: Some State Responsibilities Would Remain. First, regardless how SRA boundaries are redrawn, the state remains responsible for repayment of lease-revenue bonds for its existing capital projects, whether the project remains in a SRA or not. Interagency Agreements Would Have to Be Revised. Second, CalFire has a complex set of intergovernmental agreements that would likely need to be renegotiated. These include "mutual aid" agreements relating to initial response to incidents, who acts as the lead agency during an incident, and to whom and when reimbursements are made when such aid is provided. Also subject to revision are the department's "Schedule A" contracts with local agencies (where the department acts as the local fire protection and emergency response provider) and the department's contracts with "contract counties" (where counties provide fire protection services on behalf of the department within SRAs). Differential in Firefighting Costs. Third, CalFire's per-firefighter labor costs tend to be less expensive than that of local fire agencies. Accordingly, if the amount of the realignment funding transferred to local agencies reflects CalFire's relatively lower labor rates, local agencies assuming responsibilities under the realignment might either have to hire fewer staff than CalFire to assume these responsibilities or spend additional funding for these purposes beyond the monies they received under realignment. Alternatively, the Legislature could adjust the funding provided under realignment to account for this differential in costs. LAO Fee-Based Alternative. Another way of addressing the fiscal consequences to the state of increasing development in SRAs, and to promote better local development decision making, is to enact a new state assessment on private property owners in SRAs that directly benefit from CalFire’s wildland fire protection services. This budget option--which could result in General Find savings of up to $300 million annually--is discussed in another CalFire-related budget item on this "Summary of LAO Findings and Recommendations on the 2011-12 Budget."

Detailed Narrative

In addition to the commentary that follows, please see the handout on this issue that we presented at budget hearings on February 2 and 3.

Proposal. Currently, CalFire provides wildland fire protection services in State Responsibility Areas (SRAs)--lands that encompass roughly one-third of the state’s acreage. These SRAs are primarily privately owned timberlands, rangelands, and watersheds that, in recent decades, have become increasingly populated and developed. Under the proposed realignment plan, responsibility for fire protection and medical emergency response in the relatively more populated wildland areas would be assumed by local governments. Under the Governor's plan, there would be a statutory change in the criteria for designating lands as a SRA, and the Board of Forestry (BOF) would redraw SRA boundaries based on the new criteria for SRAs.

Realignment Has Merit in Concept. Increasing development in SRAs has increased fire risks and the state’s costs to fight wildland fires. In addition, CalFire has found itself increasingly responding to medical emergencies and providing structural protection in SRAs, activities that are outside its core wildland fire protection mission. We have previously recommended that the Legislature review the criteria for SRA designation. The criteria could be changed in a way that serves to encourage local planning agencies to give more consideration to the dangers of wildland fire when making decisions regarding new development. In other words, local governments could be made more accountable for the fiscal consequences of their planning decisions as SRAs are reverted to local responsibility.

Fiscal Impact of Realignment Is Highly Uncertain. The administration estimates that up to $250 million in CalFire’s program costs, along with a like amount of funding, would be realigned to local governments under this proposal. The level of realignment funding that would be transferred to local governments under the Governor's plan is highly uncertain, as it depends on the outcome of the SRA reclassification effort that has yet to begin and for which guiding criteria have yet to be developed. Accordingly, the amount of the transfer could be much less than $250 million.

Role for Legislative Policy Direction and Oversight. As noted above, the Governor's plan is for a statutory revision to the SRA criteria and definitions to guide the BOF's reclassification of SRA lands. The development of these statutory criteria and definitions would provide the Legislature with an important opportunity to establish its policy direction regarding the core mission of the department and the scope, both programmatically and fiscally, of the state's wildland fire protection activity. The Legislature should review the results of the BOF's reclassification effort before such takes effect to ensure that the effort was carried out consistently with the Legislature's policy direction.

Issues. If the boundaries of SRAs were to be redefined, several issues may arise that the Legislature should be aware of and that may require legislative action to address:

Some State Responsibilities Would Remain. First, regardless how SRA boundaries are redrawn, the state remains responsible for repayment of lease-revenue bonds for its existing capital projects, whether the project remains in a SRA or not.
Interagency Agreements Would Have to Be Revised. Second, CalFire has a complex set of intergovernmental agreements that would likely need to be renegotiated. These include "mutual aid" agreements relating to initial response to incidents, who acts as the lead agency during an incident, and to whom and when reimbursements are made when such aid is provided. Also subject to revision are the department's "Schedule A" contracts with local agencies (where the department acts as the local fire protection and emergency response provider) and the department's contracts with "contract counties" (where counties provide fire protection services on behalf of the department within SRAs).
Differential in Firefighting Costs. Third, CalFire's per-firefighter labor costs tend to be less expensive than that of local fire agencies. Accordingly, if the amount of the realignment funding transferred to local agencies reflects CalFire's relatively lower labor rates, local agencies assuming responsibilities under the realignment might either have to hire fewer staff than CalFire to assume these responsibilities or spend additional funding for these purposes beyond the monies they received under realignment. Alternatively, the Legislature could adjust the funding provided under realignment to account for this differential in costs.

LAO Fee-Based Alternative. Another way of addressing the fiscal consequences to the state of increasing development in SRAs, and to promote better local development decision making, is to enact a new state assessment on private property owners in SRAs that directly benefit from CalFire’s wildland fire protection services. This budget option--which could result in General Find savings of up to $300 million annually--is discussed in another CalFire-related budget item on this "Summary of LAO Findings and Recommendations on the 2011-12 Budget."