BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 1043 (Chau) - Safe Drinking Water, Water Quality and Supply,
Flood Control, River and Coastal Protection Bond Act of 2006:
groundwater contamination.
Amended: May 19, 2014 Policy Vote: EQ 7-0
Urgency: No Mandate: No
Hearing Date: August 4, 2014 Consultant:
Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1043 would allow a grantee of groundwater
cleanup funds from Proposition 84 to also be granted funds that
were recovered from a responsible party for further groundwater
cleanup activities.
Fiscal Impact:
Unknown costs, but potentially in the millions of dollars, to
the General Fund by redirecting recovered funds for further
groundwater cleanup.
Minor and absorbable costs to the Department of Toxic
Substances Control (DTSC) to administer the granting of
recovered funds.
Unknown costs, but potentially minor, to the State Water
Resources Control Board (board) to receive recovered funds.
Background: In November 2006, the voters approved Proposition
84, which authorized the sale of general obligation to fund safe
drinking water, water quality and supply, flood control, and
other natural resource protection and conservation efforts,
including $60 million to the Department of Public Health (DPH)
for loans and grants for projects to prevent or reduce
contamination of groundwater that serve as a source of drinking
water (Public Resources Code §75025). The proposition requires
repayment of costs that are subsequently recovered from parties
responsible for the contamination ("recovered funds"). The
Legislature later enacted enabling legislation that requires DPH
to develop guidelines for the distribution of loan and grant
monies and regulations governing the repayment of recovered
funds (PRC §75101).
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DPH has developed guidelines for the distribution of bond
monies, but did not adopt required regulations regarding
recovered funds. However, in the contracts between DPH and
grantees (aka "supplier) includes the following provision:
Supplier understands and agrees that the purpose of this
Agreement is to provide funding to enable Supplier to
prevent or reduce contamination of groundwater that serves
as a source of drinking water and that Public Resources
Code section 75025 requires Supplier to repay costs that
are subsequently recovered from parties responsible for
the contamination. Supplier agrees to comply with
regulations now or hereafter adopted or amended governing
the repayment of costs subsequently recovered from parties
responsible for the contamination. (Emphasis in original)
Proposed Law: This bill would require costs recovered from
responsible parties for groundwater contamination to be repaid
to DPH and deposited into the Groundwater Contamination Cleanup
Project Fund (fund) within the State Treasury.
This bill would continuously appropriate moneys in the fund to
the Department of Toxic Substances Control for the purpose of
awarding the recovered funds to the grantee that repaid those
funds to the state first for (1) projects and activities to
further cleanup contaminated groundwater where the initial
Proposition 84 grant was insufficient to pay for the full costs
for cleanup and then (2) to clean up additional areas of
groundwater within the grantee's jurisdiction. Granted monies
must be used to cleanup groundwater that is a primary source of
drinking water and in accordance with the grantee's expenditure
plan which has been reviewed with DTSC.
Excess monies shall be transferred to the Site Remediation
Account for DTSC to undertake projects for orphan groundwater
contamination cleanup projects.
Grantees would be required to submit an expenditure plan to DTSC
and provide public notice of the use of the funds.
Related Legislation: AB 467 (Eng, 2012) would have required DPH
to develop regulations that would have deposited all recovered
funds into a continuously appropriated fund. DPH would have been
authorized to enter into an agreement with a grantee who
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recovers funds from a responsible party, to use the recovered
funds for its additional groundwater cleanup needs. DPH would
have been authorized to keep up to three percent of the
recovered funds to cover administrative costs.
AB 467 was vetoed by Governor Brown stating, "I support the
leveraging of all available funding by ensuring that recovered
funds are effectively used in the jurisdictions that recover
them. Unfortunately, the structure that was developed is
cumbersome and inefficient. I am directing the Department of
Public Health and the Department of Toxic Substances Control, to
once again work with the Legislature to develop a more
streamlined way to reinvest these funds."
Staff Comments: Proposition 84 specified that recovered funds
must be repaid to the state, however it was silent as to
disposition of these funds once repaid. DPH's guidelines
similarly only specified that the recovered funds were to be
repaid to the state. Absent statute or regulations specifying
otherwise, presumably the funds are to be returned to the
General Fund where it could be used for a myriad of uses,
including but not limited to, repaying Proposition 84 general
obligation bonds, providing general revenue to the General Fund,
or, as this bill proposes, funding additional groundwater
cleanup. As this bill directs recovered funds for groundwater
cleanup, this bill has costs to the General Fund of an unknown
amount because no funds to date have been recovered from
responsible parties. Staff believes recovered funds have the
potential to be in the millions of dollars.
This bill directs the recovered funds to be administered by DTSC
instead of DPH to avoid administrative costs anticipated by DPH.
In discussions on AB 467, DPH anticipated costs to track
recovered funds and possibly regulation develop costs. In this
bill, other than initially receiving the recovered funds from
the grantee, all administration is handled DTSC. DTSC has
indicated that this bill would have minor and absorbable costs
for this administration of the granting of recovered funds,
including for the review of the grantee's expenditure plan. In
discussion of AB 467 and this bill, it was not clear why one
department would have administrative costs to grant out
recovered funds and another would not.
Since this bill was passed by the policy committee, the drinking
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water program has been reorganized so that it is administered by
the State Water Resources Control Board instead of DPH. This
reorganization was effective July 1, 2014. It is unclear whether
moving money around between DPH and DTSC to avoid administrative
costs is still necessary if the water board is not administering
the underlying program. The water board has not yet determined
whether it would have costs associated with AB 1043.
Staff notes that this bill does not explicitly allow the fund to
be used for the administration of the fund. This may not be an
issue as DTSC believes that there are minor and absorbable costs
associated with the bill.
Staff notes that it unclear why a continuous appropriation is
necessary and recommends it be stricken from the bill.
Generally, continuous appropriations limit legislative oversight
over the program, which is a key constitutional function of the
Legislature.