BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1078 (Evans) - State parks: state park revenue generation and
insurance risk pool.
Amended: April 17, 2012 Policy Vote: NR&W 8-0
Urgency: No Mandate: No
Hearing Date: May 24, 2012 Consultant: Marie Liu
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: SB 1078 would require the Department of Parks and
Recreation (DPR) to establish an innovation team with existing
employees to study and implement ways to generate new park
revenues. This bill would also allow park districts or units to
form innovation working groups in order to develop business
plans for their district or unit. Seventy percent of revenues
raised as a result of implementing such a business plan will be
continuously appropriated back to DPR for use at that park
district or unit.
Fiscal Impact:
Ongoing cost pressures of at least $200,000 from the State
Parks and Recreation Fund (General Fund) for review of
revenue generating ideas from innovation working groups and
park-wide revenue generation ideas, and annual reporting to
the Legislature.
Unknown one-time cost pressures, likely in the low tens of
thousands of dollars, from the State Parks and Recreation
Fund (General Fund) for the activities of the innovation
working groups and community advisory boards including
business plans development, public meetings, and report
preparation.
Background: California's state park system includes 278 park
units in 20 geographically-based districts. California's state
parks are in budgetary crisis. DPR has had to operate the state
park system on an increasingly thin budget. In the 2011-12
budget, the Legislature adopted and the Governor approved an $11
million reduction in General Fund support to DPR with an
additional reduction in 2012-13, for an ongoing annual General
Fund reduction of $22 million. These cuts culminate over two
decades of budget cuts to DPR. At the same time as DPR's budget
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has been shrinking, demands on the system have been increasing
due to new state park lands, a growing population, and an
increase in park visitation. These pressures have compounded
into a deferred maintenance backlog of over $1.3 billion,
reduced hours of operation and services at parks throughout the
system, and DPR's proposal to close up to 70 park units
beginning in July 2012.
Prior to the 1980s, the General Fund provided at least 80%, and
often virtually 100%, of the core parks budget. Now the General
Fund provides only half the budget and DPR has become more
reliant on fee revenues. Arguably, DPR has reached (or already
exceeded) the limits of supplanting General Fund reductions with
increased fee revenues, at least as traditionally collected by
DPR.
Proposed Law: This bill would require DPR to establish an
"innovation team" with no more than ten existing employees to
study and implement ways to generate new park revenues including
establishing regional park passes that may be joint with county
park departments in the region, offering a park pass with extra
value, creation of a tax checkoff option on state tax returns
for the purchase of a state park pass, and a plan to initiate
greater concessionaire contracts.
The innovation team would also be charged with reviewing
business plans generated by innovation working groups that would
be established by a park district or park unit for the purposes
of developing such plans. The business plans are subject to
approval by the director of DPR. If the director finds that the
business plan is not in compliance with the park's general plan,
this bill would require the director to amend the park's general
plan to accommodate the implementation of the business plan.
This bill would also require that 70% of revenues generated by
the business plan be continuously appropriated to DPR for the
support of the particular park district or unit which generated
the revenue. The remaining 30% of the revenues would be
deposited in the State Parks and Recreation Fund, which is DPR's
main operating fund. The director of DPR would be required to
submit to the Legislature an annual report of the expenditures
of the continuously operated funds.
This bill additionally would require DPR to provide technical
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assistance to nonprofit organizations seeking to establish or
join an insurance risk pool for the operation of a park unit.
Related Legislation: AB 1589 (Huffman), currently in the Asm.
Committee on Revenue and Taxation; Governor proposed trailer
bill for FY 2012-13.
Staff Comments: As the General Fund contributions to the park
budget has continued to decline far past what can be compensated
by fee increases, DPR begun to take a more entrepreneurial
approach to park operations by looking more broadly at revenue
raising opportunities. This has been a slow process that has
taken place without a Legislative directive. This bill, in
addition to AB 1589 and the Governor's proposed parks trailer
bill, aim to give DPR guidance in this shift.
This bill requires DPR to establish an innovation team comprised
of up to ten current employees. Given the requirements on the
innovation team to review potential revenue ideas, review
business plans generated by innovation working groups, and
reporting requirements, this bill will cause workload cost
pressures equivalent to three PYs at an approximate cost of
$300,000 annually.
Also, this bill would give DPR the option to form innovation
working groups on the district or unit level that would be
responsible for developing five year business plans. This
provision could result in the formation of 20 to 278 working
groups placing an unknown but likely significant (at least in
the hundreds of thousands of dollars) cost pressure on DPR. A
community advisory board would be required to collect public
input on a proposed business plan at a public meeting. The cost
for the community advisory boards is also unknown, but also
likely to be at least in the hundreds of thousands of dollars
given the number of park units and districts in the state.
This bill and the Governor's budget both propose a continuous
appropriation and a guaranteed return for a portion of new
revenues generated as an incentive for a park unit to increase
its revenue generation. Currently, revenues collected at all
park units operated by DPR are deposited into the State Parks
and Recreation Fund where, upon appropriation by the
Legislature, DPR can allocate the funds across the entire state
park system. This process offers no assurances that revenues
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generated at one park will ultimately benefit that park. DPR has
argued that without such assurances, the park superintendents
and park managers have little incentive to be innovative in
looking for revenue generating opportunities. The Legislative
Analyst's Office, in its report titled "Strategies to Maintain
California's State Park System," recommends rejecting the
Governor's proposed continuous appropriation. In regards to this
bill, staff recommends that it is possible to offer incentives
to park districts through spending authorities instead of a
continuous appropriation.
This bill would require a guaranteed return of 70% of new
revenues back to the unit generating the revenues. The
Governor's trailer bill proposes a 50% guaranteed return back to
the district of the unit which the revenue was generated. The
larger the guarantee, the less flexibility DPR will have to find
revenues for operating parks that inherently have less revenue
generating capabilities (i.e. remote location, lack of
infrastructure). Staff recommends that the bill's 70% guaranteed
revenue return is likely to perpetuate inequalities in the state
park system and instead recommends setting a minimum guaranteed
return (at a level much less than 70%) that would give DFG
flexibility to adjust the guarantee in order to optimize the
incentive program while protecting the park system as a whole.
Lastly, the bill would require DPR to provide technical
assistance to nonprofits on establishing or joining an insurance
risk pool According to DPR, existing staff does not have the
expertise to provide assistance on insurance issues, especially
given that park operations can have relatively high risks. Given
the lack of staff expertise, DPR feels that it would be
necessary to hire an outside consultant to adequately fulfill
this requirement at a cost of $500,000.
Recommended Amendments: Amendments are recommended to change the
70% revenue guarantee, delete the continuous appropriation, and
a number of technical and clarifying amendments.
Proposed Author Amendments:
Delete the requirement for the creation of the innovation
team and instead delegates DPR with the same
responsibilities.
Make the creation of innovation working groups optional
and limits the creation of 10 groups in the first year of
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implementation, 10 groups in the second year of
implementation, and the director's discretion on the third.
Allow the working groups to develop an "innovation revenue
proposal" instead of a more formal business plan.
Reduce the revenue guarantee to up to 50% (instead of a
set 70%).
Delete the requirements for the director to review and
approve business plans, and to revise general plans
accordingly.
Specify that technical assistance for the insurance pool
cannot include legal services.
Add a sunset date of January 1, 2020