LFO Analyst: Rocco

The Department of Agriculture's mission is centered on three broad policy areas of ensuring food safety and providing consumer protection, protecting agricultural natural resources, and promoting economic development in the agricultural industry. The agency emphasizes public education and technical assistance in its provision of regulatory oversight on legislatively mandated programs. Oregon's agricultural industry is one of the state's most important economic activities. Producers are active in over 200 major commodity groups with a farm level value of more than $3.5 billion per year. Another $1.5 billion per year can be counted as value-added through food processing activities.

The Department consists of permanent staff and up to 450 seasonal employees. The permanent staff are primarily located in Salem, Portland, or one of nine regional offices. Some permanent staff in the Food Safety, Measurement Standards, and Animal Health and Identification Divisions work out of their homes. Seasonal employees are used to provide industry requested inspection services in the Commodity Inspection, Animal Health and Identification, and Plant Divisions and are located throughout the state.

Administration and Support Services provides policy direction and support functions for the agency, including financial management, development and maintenance of information systems, public information, personnel, purchasing, budget development, grants administration, facilities management, and fleet operations. The Office of the Director is also included within the Administration and Support Services program area.

Approximately 20 percent of program expenditures are covered by the General Fund. Other Fund revenues include service charges, cost reimbursements, management assessments for central administrative services, and transfers from other and federally funded program areas. The method used to assess central administrative costs varies depending on the program funding source. General Fund programs do not contribute to central services since the administration function receives a separate General Fund appropriation. Other Fund programs contribute based on a modified total budget formula where programs dealing primarily with pass-through funds are assessed at a lower rate. Federal Fund programs are assessed at a federally approved indirect rate. Federal Funds received directly by the Administration and Support Services program area are from the U.S. Department of Agriculture's Farm Services Agency.

The need for administrative and support service functions within the agency continues to rise as external demands on agency programs increase. The agency expanded use of the Statewide Financial Management System (SFMS) data warehouse for financial reporting functions during the 1997-99 biennium. The system has allowed for enhancements in the analysis and reporting of business information to Department divisions. The agency has also expanded the use and capacity of the Department's website to include searchable databases and other agriculture based information.

The Governor's recommended budget for Administration and Support Services was 19.8 percent higher than the estimated 1997-99 expenditures. The budget continued existing programs and added four new positions (4.00 FTE) for information systems, personnel, and accounting functions. Two Information Systems Specialist 5 positions would provide user support primarily to field staff in Food Safety, Measurement Standards, and Nursery Inspection. . The positions were to work with remote users to troubleshoot computer-related issues and problems. A Personnel Officer 2 position was added to address recruitment issues and to coordinate agency training activities. The recommended budget also added an Accountant 1 position to work with accounts receivable and payable for transaction processing. The four new positions were funded with a total of $483,235 Other Funds through administrative indirect charges to all agency programs receiving other funds revenues. The packages increased the indirect charges to these programs by approximately 15 percent.

The legislatively adopted budget of $5.8 million for the Administration and Support Services policy area is 15.4 percent above 1997-99 levels, but a decrease of slightly less than 4 percent from the Governor's recommendation. The approved budget added three positions from 1997-99 including the two requested information management specialists and the personnel officer for a total of 42.50 FTE positions. The proposal to add an accountant position was not included in the adopted budget, reducing the budget request by $87,739 Other Funds. The adopted budget also included an efficiency reduction of approximately $50,000 from miscellaneous services and supplies expenditures.

The Food Safety Policy Area consists of the Food Safety, Measurement Standards, Animal Health and Identification, and Laboratory Services Divisions. These divisions are primarily responsible for addressing public concerns over the safety of the food supply, the regulation of livestock diseases, and the labeling and packaging of food products.

• The Food Safety Division's mission is to ensure a safe, wholesome, and properly labeled food supply. The program is implemented by a combination of central support staff and field inspectors to license and inspect all food establishments except food service providers. The division uses 30 field inspectors located throughout the state to sample food and inspect some 9,500 facilities including dairies, food processors, grocery stores and meat markets, food storage warehouses, bakeries, delicatessens, and home kitchens operated for commercial purposes. Inspectors examine food handling practices and equipment for safety and cleanliness and sample food for pesticide residues and food borne pathogens. The division also operates the shellfish program to monitor shellfish and their habitats for bacteria and toxins.
• The Measurement Standards Division licenses and inspects measuring devices to prevent consumer fraud by ensuring goods are accurately weighed and measured. The division is also responsible for ensuring motor fuels meet national standards for quality and providing official mass, volume, and length standards calibration services for the state. Field inspectors are responsible for the licensure, inspection, and certification of 45,000 weighing and measuring devices. The division includes 14 inspector positions, including one added in 1997-99 as part of the motor fuel quality program. The increase in the number of annually licensed weighing and measuring devices has substantially exceeded the agency's level of staffing. Device inspection frequencies are typically exceeding the once per year standard.
• The Animal Health and Identification Division protects Oregon's human and animal communities from infectious animal diseases and prevents livestock theft through the registration and inspection of livestock brands. The division also regulates and permits exotic animals, regulates commercial feeds, and operates animal damage control programs in partnership with local governments and the U.S. Department of Agriculture. The division includes the State Veterinarian. Division personnel also include 67 brand inspectors, three field veterinarians, and five laboratory staff. All cattle sold in Oregon and all cattle and horses leaving the state are brand inspected to ensure legal ownership.
• The Laboratory Services Division provides analytical services for the Department's food safety, pesticide, feed, and fertilizer regulatory programs. The lab also provides an export certification program to assist domestic companies in meeting the food safety import requirements of foreign countries. The regulatory laboratory remains located in Salem, but is scheduled to move into the Food Innovation Center in Portland during 1999. The division also operates the Export Service Center in Portland. The lab program uses physical, chemical, microbiological, immunological, molecular, and chromatographic methods to test food and feed supplies. The program provides testing services to various other state agencies.

The Food Safety Policy Area is funded through a combination of General Fund, Other Funds, and Federal Funds. General Fund support comprises approximately 30 percent of the policy area's expenditures. Other Fund revenues are primarily received from license fees, registration fees, and charges for services performed. Services include inspections, surveys, and laboratory tests. The General Fund historically financed a greater proportion of agency costs. General Fund losses over the past several biennia have generally been replaced by increased Other Fund revenues. Federal Funds are derived from cooperative agreements and contracts with the U.S. Department of Agriculture, the U.S. Forest Service, Bureau of Land Management, Bonneville Power Administration, and Environmental Protection Agency.

Several factors continue to contribute toward the increases in workload - population growth, more sophisticated technology, growing consumer protection expectations, and increased plant and animal exposure to introduced insects and diseases. The Department is responding to an expansion in the number of food establishments in the state, the growing complexity of retail food stores, and the rapid growth of advanced measurement technologies in the marketplace. The agency is also focusing on increasing food safety information for both the general public and the food products industry. Recent outbreaks of food borne diseases have increased public awareness of food safety issues. Workload increases led to an Emergency Board decision in June 1998 to authorize the establishment of three additional permanent inspector positions to assist with the food safety program.

The Governor's recommended budget for the Food Safety Policy Area was 7.3 percent above the 1997-99 estimated expenditures. The budget increased the amount of General Fund provided for food safety programs by 5.9 percent from last biennium. The recommended budget added 15 positions over the current service level, including ten in Measurement Standards, three in Food Safety, and two in the Animal Health and Identification program. The recommended budget included the following program enhancements:

• Measurement Standards added ten permanent staff including seven Measurement Standards Specialist 2 positions, one Metrologist, and two Principal Executive/Manager B positions. The positions were needed to maintain timely inspections of weighing and measuring devices and calibration services. The positions were to be funded with $1.2 million Other Funds from revenues collected through existing fees. Sufficient cash balances from fee collections existed to pay for the additional staff for at least the next two biennia under the current fee structure.
• Food Safety added three permanent positions including two Natural Resource Specialist 3 positions and one Natural Resource Specialist 4. The positions were approved as permanent by the Emergency Board at its June 1998 meeting, but were not able to be included in the agency's base budget for 1999-01 due to timing issues. The program needed additional staff to meet the increasing number and complexity of food industry businesses in the state. The positions were to be funded with $311,958 Other Funds from existing fee revenues. Due to the increasing number of businesses subject to licensing fees as a result of economic growth, ending cash balances allow the additional costs to be funded with no change in current fee structures.
• The Veterinary Product Registration program was restored in the Governor's budget, but depended on the passage of legislation to re-establish the program. The program sunsets at the end of the 1997-99 biennium. Due to the sunset, the agency's current service level budget eliminated $222,160 Other Funds and 1.23 FTE. The funding and FTE were restored in a program option package. The program conducts investigations to control animal based diseases and to maintain food safety. Funding is provided by a combination of General Fund and a $75 registration application fee on any biologic or pharmaceutical agent used on animals.
• The Animal Health and Identification Division added two permanent, half-time Livestock Brand Inspectors to enforce livestock theft laws. The Division anticipated locating the positions in the northeast and south central portions of the state. Funding of the $107,391 Other Funds cost for the positions was from existing livestock brand fees.

The Governor's recommended budget also included $15,000 Other Funds for the travel-related expenses of State Field Veterinarians attending professional training and $49,564 Other Funds for the reclassification of seven technical positions in the Department's Portland laboratory.

The adopted budget for the Food Safety Policy Area of the Department is 6.5 percent above 1997-99 estimated levels and less than one percent lower than the Governor's recommendation. Packages recommended in the Governor's budget to reclass laboratory staff, to continue ten limited duration positions in Measurement Standards as permanent, to continue three food safety inspector positions, and to add two part-time livestock brand investigators were all approved by the legislature. Passage of House Bill 2120 authorized the continuation of the veterinary products registration fee and resulted in the continuation of funding for a number of positions in the Animal Health program. The program had been scheduled to sunset at the end of the 1997-99 biennium. HB 2120 permanently removed the sunset date for the program.

Changes to the Governor's recommended budget included the identification of $246,643 in General Fund efficiency savings from miscellaneous services and supplies and the elimination of one package requesting additional Other Funds expenditure limitation for travel. The approved budget included an additional $100,000 for predator control to be passed through to the U.S. Department of Agriculture as a special payment. The total amount provided for predator control through the Oregon Department of Agriculture was approved at $464,399, a 57 percent increase from the amount provided in 1995-97 and a 31 percent increase from 1997-99. The agency was also directed to work with the Department of Fish and Wildlife on a review of programs and methods for reducing the damage caused by wildlife to crops and livestock.

The Natural Resource Policy Area includes the Natural Resources, Pesticides, and Plant Divisions. These three divisions are responsible for protecting the state's agricultural natural resource base.

• The Natural Resources Division mission is to conserve, protect, and develop agricultural natural resources on public and private land to ensure agriculture will continue to be productive and economically viable. The Division administers programs to provide administrative oversight and financial assistance to Soil and Water Conservation Districts, to regulate confined animal feeding operations (CAFOs), to protect threatened and endangered plants, to conduct field burning smoke management and research, to implement agricultural water quality management (SB 1010), and to conduct groundwater research and development. The Division consists of 31 Salem based staff and 9 field staff positions. Program staff includes positions added by the 1997 Legislature in support of the Oregon Plan to restore salmon populations and watersheds.
• The Pesticides Division administers state laws regulating the availability of fertilizer and pesticide products, and the uses of these products. Fertilizer regulation involves the content of plant nutrients contained in the fertilizer. Pesticide regulation includes product registration, distribution and use recording, user licensing, and use of the products.
• The Plant Division uses permanent staff and seasonal employees to detect and eradicate exotic insect pests, weeds, and plant diseases, and to inspect and certify nursery stock, Christmas trees, and seed crops for pests and diseases. The Division also includes inspection of imports of exotic raw logs and wood products. The program supports a forest pathologist position through fee revenues. The spread of exotic weeds on public and private land remains a growing concern for land managers.

The Natural Resource Policy Area is funded by a combination of the General Fund, Other Funds, and Federal Funds. The General Fund provides roughly half of the policy area revenue, but is only provided to the Natural Resources and Plant Divisions. The Pesticides Division receives no General Fund support. Other Funds include revenue from licenses and fees, such as oyster fees, CAFO registrations, field burning fees, nursery and Christmas tree licenses, and pesticide applicator fees. Other Funds also includes revenue from reimbursable work and charges for services. Federal Funds are received for plant conservation and water quality programs.

Population growth in Oregon has led to increased competition for available natural resources, including water and land. The Department's level of involvement with coordination and development of water use, land use, and conservation plans with other agencies and affected parties has been steadily increasing. Conservation issues are becoming more complex, requiring more planning and inter-agency cooperation. Nonpoint source pollution control, threatened and endangered plant species, confined animal feeding operations, and field burning alternative programs will continue to call for agency attention. The Natural Resources Division has also continued to develop model conservation plans for the 61 species on the state list of threatened and endangered plants.

The Department's Natural Resources Division was given a prominent role in the state's Oregon Plan for the restoration of salmon and watersheds. The 1997 Legislature appropriated nearly $3 million General Fund and approved the establishment of 19 positions in the Natural Resources Division to implement the plan. Sixteen of the positions were approved to develop and carry out management plans to meet state water quality standard 1 basins where agricultural nonpoint source pollution is a major factor. These positions include 6 regional coordinators and 7 technical specialists responsible for complement of management plans, a program coordinator, a fiscal support specialist, and an office specialist. Three additional positions were approved to work with confined animal feeding operations (CAFO's) to improve the level of compliance with water quality regulations. State efforts to enhance salmon populations and riparian habitat have also focused attention on local Soil and Water Conservation Districts (SWCD). The Natural Resources Division has worked with the existing 45 SWCD's to deliver conservation programs for water quality improvements and watershed management.

The Natural Resources Policy Area of the Department of Agriculture provides a number of the core elements of the Oregon Plan for restoration of salmon populations and watersheds. The Governor reflected the importance of the Department's natural resource activities with a recommended budget that was 45.1 percent higher than estimated 1997-99 biennium expenditures. Nearly $4.0 million of the additional expenditures for 1999-01 were from Ballot Measure 66 Lottery Funds distributed for various Natural Resources Division proposed activities. Increases in General Fund, Other Funds, and Federal Funds were also included in the proposed budget. The recommended budget added 17 new positions, eight funded with the lottery funds and nine from other funds sources.

The recommended budget provided Measure 66 Lottery Funds for the following purposes:

• $409,177 for Plant Division control of noxious weeds that compete with native vegetation and degrade habitat in the state's watersheds. The funding was to be used for replacement of outdated spray equipment and to establish four positions including a Natural Resource Specialist 1, two Natural Resource Specialist 2 positions, and a Natural Resource Specialist 4 for weed control, biological and entomological controls, and field activities. The program option package also included $62,133 Federal Funds from grants to partially support the two weed control positions.
• $50,000 for a Plant Division personal service contract to conduct research on aquatic weed control as part of salmon restoration activities.
• $540,823 for Plant Division grants through the State Weed Board to counties, weed control districts, and other groups for cost-share programs to develop local programs toward controlling exotic noxious weeds.
• $120,667 for Natural Resources Division implementation of SB 1010 activities in eastern Oregon. The funds were for a permanent regional planner position (Natural Resource Specialist 3) in Klamath Falls to address increased needs for water quality planning due to listings under the federal Endangered and Threatened Species Act.
• $114,111 for Natural Resources Division implementation of SB 1010 activities in the Willamette Valley. Funding supported an additional permanent regional water quality planner position (Natural Resource Specialist 3).
• $2,400,000 for Natural Resources Division distribution to the 45 Soil and Water Conservation Districts (SWCD's) to maintain technical assistance to private landowners in developing management strategies to support the Oregon Plan. The Department received an equal amount from the Governor's Watershed Enhancement Board for distribution to the SWCD's in the 1997-99 biennium.
• $247,172 for Pesticides Division activities related to the development and delivery of educational programs targeting urban users of pesticides and fertilizers. The funds were to be used in support of two new Natural Resource Specialist 3 positions. The program option package included $30,000 Other Funds in support of the urban pesticide education program.

In addition to the infusion of Measure 66 Lottery Funds, the recommended budget included several other program enhancements. The Pesticides Division added four positions to meet expanding workloads. The new staff included two Natural Resource Specialist 2 positions to assist with enforcement and complaint response and to enhance education and outreach efforts for pesticide users. Two Office Specialist 2 positions were also added for clerical support functions. The positions were proposed for funding with existing fee revenues. The Pesticides Division also requested an increase of $34,000 Federal Funds for out-of-state training needs of Division employees who help the U.S. Environmental Protection Agency regulate pesticide use.

To increase the ability of the Plant Division to address nursery inspections and certifications, the recommended budget added authority to hire two additional Natural Resource Specialist 3 positions (0.75 FTE). The new Horticulturists were funded with $266,737 Other Funds from nursery industry licensing fees. The positions were planned for phase-in with one starting in July 2000 and the other in January 2001. The Plant Division also received approval in the recommended budget to reclassify seven positions by transferring services and supplies expenditure limitation to personal services. The reclassification was sought to improve retention of qualified employees. The reclassification included the elimination of two positions and the establishment of one new Natural Resource Specialist 2. The seven seasonal positions scheduled for reclassification are currently budgeted at less than 24 months. The program option package increased each to full FTE status.

The recommended budget also established two existing half-time limited duration Natural Resource Specialist 3 positions in the Natural Resources Division's Confined Animal Feeding Operation (CAFO) program as permanent, half-time positions. The program option package total of $150,840 Other Funds included $25,000 for vehicles for the two positions. Revenue for the CAFO program was derived from license fees and a direct base General Fund appropriation.

At the legislatively adopted total budget of $28.2 million, the Natural Resources Policy Area budget is nearly 43 percent above the 1997-99 level and only 1.5 percent less than recommended by the Governor. The approved budget included enhancements to the Plant Division, Natural Resource Division, and Pesticide Division.

The legislature provided a total of $1.5 million of lottery funds limitation for Measure 66 revenues to be used in support of noxious weed control efforts in aquatic, riparian, and wildlife habitats. The amount represented a $500,000 increase over the amount recommended by the Governor. The funding was split between the Measure 66 resources identified for operating expenses and for capital expenditures. House Bill 3225 defines the term "capital expenditures" in terms of grants and projects. Of the $1.5 million allocated to the Department of Agriculture, $354,677 was for operational expenses and the addition of four positions in the Plant Division. The remaining $1.1 million was identified for weed control grants through the State Weed Board. An additional $2.4 million of Measure 66 lottery funds were allocated to the Department for funding Soil and Water Conservation District activities related to the Oregon Plan for salmon and watersheds as proposed in the Governor's recommended budget.

The adopted budget does not include funding for three other proposed uses of Measure 66 lottery funds including additional positions for assisting in the development of agricultural water quality management plans in Eastern Oregon and the Willamette Valley, and the development of a program to expand educational efforts aimed at the urban use of pesticides.

The legislature approved a request to enhance the investigation capacity of the Pesticide Division by adding three of the four position included in the request. One position was eliminated due to revised revenue forecasts showing reduced amounts of revenue available from existing fee sources. Another position in the Pesticides Division was added by the legislature with passage of House Bill 3602, which establishes a pilot program to track pesticide sales and uses. The program was funded by a combination of $100,000 General Fund and an increase in the pesticide use registration fee of $40, which is expected to generate an additional $180,000.

The adopted budget includes the addition of two nursery inspector positions requested in the Governor's budget, but with a reduction of $118,000 Other Funds expenditure limitation to match projected revenues. Other changes to the Governor's budget in the legislatively adopted budget include:

• elimination of a request for an additional $34,000 Federal Funds expenditure limitation for training expenses;
• continuation of two Confined Animal Feeding Operation positions as permanent;
• reduction of $195,861 General Fund and the elimination of one position serving as the program manager for the Governor's Watershed Enhancement Board in the Department of Water Resources; this position was historically funded in the Department of Agriculture, but was moved in the 1999-01 budget to the new Oregon Watershed Enhancement Board;
• efficiency reductions of $369,380 General Fund in miscellaneous services and supplies expenditures;
• additional $75,000 General Fund as a one-time appropriation to support the completion of a study of the interaction between groundwater and surface water for the cranberry industry; and
• establishment of a $500,000 special purpose appropriation to the Emergency Board from base General Fund resources, which may be requested by the agency after reporting on the status of attaining the Department's goals in developing agricultural water quality management plans.

The Agricultural Development Policy Area consists of the Agricultural Development and Marketing Division and the Commodity Inspection Division. The mission of the Agricultural Development and Marketing Division is to work with the state's agricultural producers to increase sales in both domestic and international markets and to expand the existing, and develop new, agricultural value-added food processing capacity in Oregon. The program provides producers with information on product positioning, market research, sales promotion, buyer access, logistical and transportation planning, and tariff and non-tariff barrier consultation. The Division's primary geographic emphasis is on Pacific Rim markets, however, an expansion into Central and South America is being considered for 1999-01. The program attempts to provide assistance to the state's small to medium sized companies in need of expanded markets while providing new trade opportunities to experienced exporting businesses.

The Commodity Inspection Division assists growers and industry in moving products into the domestic and international markets through inspection and certification. The Division ensures the proper labeling of seed, produce, and other products, protects grain deposits in public grain elevators, and certifies hay for export. These services are provided by a staff of 75 permanent employees and up to 170 seasonal positions located throughout the state.

The Agricultural Development and Marketing Division is funded primarily by the General Fund. The Division historically was a General Fund program until a shift to lottery funding occurred in the 1995-97 biennium. The 1997 Legislature returned the Division to General Fund, but requested in a budget note that the Department of Agriculture investigate alternative funding mechanisms for the Division and report to the next legislature on ways to fund the program without the use of General or Lottery funds. The Division receives a small amount of Other Funds from outside marketing projects. Federal Funds are received for special commodity marketing projects.

The Commodity Inspection Division receives minimal General Fund and is supported entirely on the basis of Other Funds revenues from inspection fees, establishment licenses, sales, and contract projects with non-governmental and governmental units.

Oregon agricultural producers currently sell 85 percent of their products outside of the state. Assistance for farmers, ranchers, and specialty food producers in finding new domestic and global markets for their products is a priority for the Department. Building markets is accomplished through attendance at trade shows, direct negotiations with international buyers, and promotional activities aimed at specific Oregon products. The Department is attempting to identify new and innovative ways to partner with industry to provide an efficient, high quality inspection service as a means of removing shipping impediments. The Commodity Inspection Division is also emphasizing the detection of questionable dealings to protect Oregon's producers and warehouses within the grain inspection and grain warehouse program.

The Governor's recommended budget funded the Agricultural Development Policy Area at the current service level, which is 1.6 percent higher than 1997-99 estimated expenditures. The budget included an increase of 5.8 percent in General Fund due to a combination of scheduled salary increases and the standard inflation factors applied to services and supplies expenditures.

The legislatively adopted budget approved the Governor's recommendation with a $111,391 General Fund efficiency reduction from miscellaneous services and supplies.

The Special Programs Policy Area consists of various administrative and policy functions not included in other departmental program areas:

• The Wine Advisory Board administers industry funds for research, development, and market promotion projects with two staff positions.
• The Pesticide Analytical Response Center (PARC) operates an interagency evaluation of pesticide exposure incidents.
• The Enforcement program uses one staff to pursue enforcement action against delinquent accounts and other violations of agency law and rule.
• The Agricultural Mediation program is designed to reduce the cost of resolving loan problems by providing a neutral mediator to assist farmers/ranchers and their creditors to discuss options other than bankruptcy and forced liquidation.
• County Fairs are provided General Fund as a pass-through by the Department for financial assistance related to county fair activities.

The Department, in the past, has also used the Special Programs Policy Area to administratively move lottery funds allocated by the legislature to various agriculturally related programs.

The primary funding source for the Special Programs Policy Area had been Lottery Funds until the 1997 Legislature shifted funding support to the General Fund. For the 1997-99 biennium, the legislature provided $3.0 million General Fund for support of county fairs. The remaining General Fund was used in the PARC program for enforcement activities. Other Funds revenue is collected from the Wine Advisory Board for reimbursement of staff expenses and state government service charges. Federal Funds from the U.S. Department of Agriculture's Farm Services Agency are used in the Farm Mediation program, but are budgeted in the Administration and Support Services program unit for 1999-01.

The 1997 Legislature eliminated state support for the Center for Applied Agricultural Research (CAAR). CAAR had awarded competitive grants to industry toward finding solutions to problems in agricultural activities. All grants provided by CAAR required a 100 percent match by the recipient.

The Governor's recommended budget for the Department of Agriculture's Special Program area was 77.2 percent below 1997-99 estimated expenditures. The decrease was due to the Governor's decision to eliminate funding for support of county fairs. The agency's current service level budget included $3.0 million General Fund for county fairs, the same amount provided by the legislature in the 1997-99 budget. The Governor's budget continued all other activities in the Special Program unit.

The recommended budget included funding for an Office Specialist 1 position to provide clerical support for the Wine Advisory Board. The Board's activities are growing as the wine industry expands in Oregon. Expenses associated with the position, budgeted at $66,616 Other Funds, will be paid out of existing Wine Board revenues.

The budget, as adopted by the legislature, restored General Fund support for county fairs at the 1997-99 level of $3.0 million. The legislature also approved funding for additional clerical support for the Wine Advisory Board.

Debt service represents repayment of certificates of participation (COP's) issued in 1995-97 and used to buy equipment for the new food innovation center in Portland. Debt service costs were incorporated in the Food Safety Policy Area budget until a subsection was included in the agency's 1997-99 appropriation bill to separately identify debt service payments.

Debt service is calculated on a pro-rata basis of General Fund and Other Funds.

The Governor's recommended budget funded debt service payments for 1999-01 at the current service level.

The legislature approved the Governor's recommended budget.

LFO Analyst: Rocco

The Columbia River Gorge Commission was authorized by the 1986 Columbia River Gorge National Scenic Area Act and created as a regional agency through an interstate compact between Oregon and Washington. The Commission was established to implement the National Scenic Area Act's purposes of protecting and enhancing the scenic, cultural, recreational, and natural resources of the Gorge while encouraging compatible growth within existing urban areas of the Gorge region.

The Commission functions as the permanent regional land use policy body for the Scenic Area, a 292,000-acre region straddling the Columbia River for 80 miles, just east of the Portland OR-Vancouver WA metropolitan area. The Columbia River Gorge encompasses three counties in Oregon (Hood River, Multnomah, and Wasco) and three in Washington (Clark, Skamania, and Klickitat) and includes 13 designated Urban Areas. The Commission consists of 13 members, one appointed by each of the six counties within the Scenic Area, six appointed by the two states (three by each Governor), and one ex officio, non-voting member appointed by the U.S. Secretary of Agriculture. The Commission's office is in White Salmon, Washington, and functions with a staff that are employees of the State of Washington.

Commission responsibilities include the adoption and maintenance of a management plan, review and approval of local land use ordinances for the Scenic Area, appellate review of decisions made under the ordinances, and coordination of Gorge resource development efforts envisioned by the Scenic Act. The Commission adopted the management plan in 1991. Under the management plan, the Commission sets policy for land use and resource protection on non-federal lands in the Gorge, monitors implementation of the plan, ensures that Scenic Area ordinances are effective, and facilitates enhancements of the economic and natural resource elements of the Scenic Area. Five of the six counties are implementing the management plan through land use ordinances. Klickitat County, Washington, has not adopted land use ordinances, leaving review of proposed developments to the Gorge Commission.

The Columbia River Interstate Compact requires each state to pay its Commission members' expenses and to contribute equally to operating costs. Because of this requirement, the budget is, in effect, set by the state appropriating the lesser amount for operational expenses. The Commission has also received grant funding for monitoring program activities from the federal government. These grant funds are generally not factored into the development of the Commission's operating budget.

The Gorge Commission initiated a monitoring program in 1997 designed to track various components of the National Scenic Area. One of the products of the monitoring program, the "Growth Report," was released in April 1998, detailing development patterns and trends of the past ten years with special focus on new houses and land divisions within the Scenic Area. The Commission also described economic development activities with an "Economic Monitoring Report," released in January 1998. The report focuses on economic trends in the Gorge and provides details on economic development activities, including the investment of funding from the Scenic Area Act towards construction of the Skamania Lodge and the Gorge Discovery Center. Other pieces of the monitoring program will focus on how farm and forestlands are being used, how new development is affecting the Gorge's protected resources, and how the management plan is being administered by the Gorge partners.

The Commission has identified continued rapid growth in the Portland/Vancouver metropolitan area as its major concern for the next 20 years. Population projections for the Portland Metro area predict an increase of approximately 700,000 individuals over the next 20 years, to a total of more than 2.2 million residents. The proximity of the entire Gorge area to this population base affects planning efforts by pressures for new development, changing composition of urban areas, availability of affordable housing, uses of resource lands, and increased visitation to tourism and recreations sites. As the regional planning agency, the Commission must work with stakeholders to ensure these pressures are dealt with in a manner consistent with the requirements of the National Scenic Area Act.

The Commission identified various key strategies and objectives for fulfilling its goals in the 1999-01 biennium, including: 1) building systems to provide regular information on the Scenic Area Management Plan's effectiveness; 2) conducting a deliberate, meaningful review of the Scenic Area Management Plan; 3) increasing outreach and education on the Scenic Area, Commission, and agency roles and plan results; 4) increasing efforts to ensure consistency with the Act, plan, and ordinances; 5) increasing efforts to advance recreation and economic development and other enhancements; and 6) meeting other commitments and all statutory obligations.

According to the Commission, base funding levels for Commission activities represents the most limiting factor affecting fulfillment of key strategies. Funding appropriated by the states for the 1997-99 biennium represented a 16 percent reduction from the previous biennium and resulted in the loss of planning staff. The level of appropriation was able to support 3.75 FTE instead of the 7.8 FTE employed during the 1995-97 biennium. Without additional financial support, the Commission believes it will be unable to adequately fulfill its responsibility to balance continued growth against preservation of the Scenic Area's resources.

Interest has developed for the provision of funding directly to counties for work in implementing the land use ordinances required under the management plan. Oregon has provided planning grants directly to the Gorge counties through the Department of Land Conservation and Development since the 1989-91 biennium. These grants typically averaged $20,000 per county per biennium. In 1997-99, the Oregon legislature shifted $100,000 of the General Fund for Commission operating expenses to be shared equally by the three Oregon counties in the Scenic Area. Amounts provided for county functions under the Scenic Act do not have to match between the states. There is no mention of providing funds to counties and no requirement of matching funding for counties between the two states in the interstate compact, the Scenic Act itself, or in any other legislation.

The Governor's recommended budget for the Commission of $796,318 represented an 80.4 percent increase over 1997-99 estimated expenditures. The recommended budget included $31,357 for Oregon Commission member expenses, $100,000 for grants to the three Columbia Gorge counties, and $664,961 for Columbia River Gorge Commission operational expenses. The budget supported current service level activities including 3.75 FTE and added $298,000 General Fund in two policy option packages to support an additional 4.50 FTE. Only one position funded in the Governor's recommended budget was actually a new position. The other positions represented staff supported in the 1997-99 biennium by federal funds obtained by the Commission for the 1997-99 biennium to continue programs not funded by the Oregon and Washington legislatures. The additional positions supported by the Governor's budget included a monitoring planner, development review planner, outreach coordinator, secretary, and GIS coordinator.

The functions supported in the two recommended policy packages included review of county land use decisions for consistency with the Act, assistance to counties to encourage consistent land use decisions, and initiation of legal action to ensure compliance with the law. The budget also supported efforts to update the natural resource inventory database, to incorporate existing mapped and digitized parcel information into the planning information system, to inventory all quarries in the Scenic Area, and to report on progress attaining enhancement actions as outlined in the Plan.

The Governor's recommended budget included $30,000 General Fund for replacement of personal computers that are not Y2K compliant and for purchase of additional information systems hardware and software. The recommended budget also included the same amount of county grant funding that was provided by the legislature for the 1997-99 biennium, $33,333 for each of Multnomah, Hood River, and Wasco counties.

The legislatively adopted budget totals $662,404 General Fund, a 20 percent reduction from the Governor's recommended level, but an increase of 50 percent from the 1997-99 budget. The adopted budget eliminates funding for packages to review county ordinances for compliance with the Scenic Area Act and to address Year 2000 computer issues. The budget redirected $100,000 in the Commission's base budget from county grants to operating expenses. The county grant program was funded entirely through the budget of the Department of Land Conservation and Development (DLCD). In the 1997-99 biennium, the three counties of Multnomah, Hood River, and Wasco each received a total of $53,333 in grants to partially support expenses incurred by the counties in enforcing Scenic Area Act ordinances. Each county received $20,000 from the Department of Land Conservation and Development and $33,333 from the Columbia River Gorge Commission. The legislatively adopted 1999-01 budget increased the total amount provided for county grants to $240,000, the entire amount funded through the DLCD budget and provided in the following amounts: $90,000 to Wasco County; $80,000 to Hood River County; and $70,000 to Multnomah County.

The legislatively adopted budget supports plans to review the effectiveness of the Scenic Area Management Plan. Under the standards established in the original Scenic Area Act, the plan review must be completed by 2001. The budget includes funding to begin the process of reviewing the plan with approval of a portion of Package 102, Monitoring and Plan Review, and the county grant funding redirected to operational expenses. When combined with the State of Washington approved funding, the legislatively adopted budget will support approximately 8.5 FTE, all employees of the State of Washington.

The Commission's General Fund appropriation includes $100,000 set aside in a special purpose appropriation in the Emergency Board. The Commission was directed in a budget note to request the funds from the Emergency Board after submitting a status report on the monitoring system components to be implemented in the 1999-01 biennium and on the progress of the Scenic Area Management Plan's first periodic review required under the Scenic Area Act.

LFO Analyst: Rocco

The Department of Environmental Quality (DEQ), with policy direction from the five-member Environmental Quality Commission, administers the state's laws regulating air, water, and land pollution. The agency's mission is "to be an active leader in restoring, maintaining, and enhancing the quality of Oregon's air, water, and land." The Department establishes the standards for clean air, water, and land; determines whether or not these standards are being met; and then takes action to ensure that the standards are met. The agency is attempting to use technical assistance and education whenever possible to enhance compliance. The Department also manages the federally delegated Clean Air, Clean Water, and Resource Conservation and Recovery Act programs. In addition to the federal environmental programs, DEQ administers the state environmental programs in the areas of solid waste management, planning and recycling, groundwater protection, and environmental cleanup. The agency is comprised of four major program units: Air Quality, Water Quality, Waste Management and Cleanup, and Management Services. DEQ headquarters are in Portland with regional administrative offices in Bend, Eugene, and Portland. The agency also maintains field offices in Baker City, Coos Bay, Grants Pass, Hermiston, Klamath Falls, Medford, Pendleton, Roseburg, Salem, The Dalles, and North Coast. The Department manages a pollution control laboratory on the Portland State University campus.

The Air Quality program is responsible for compliance with federal and state air quality standards. The program monitors air quality to protect the public health through the development and implementation of pollution reduction strategies. Federal ambient air quality standards for six criteria pollutants must be maintained (sulfur dioxide, lead, nitrogen dioxide, ozone, carbon monoxide, and respirable particulate matter). The primary sources of air pollution in Oregon are motor vehicles, forest slash burning, woodstoves, industrial facilities, field burning, and area sources. Program clients include the regulated community (primarily industries, businesses and local governments) and the general public that benefits from clean air. The federally delegated air quality program includes statewide air quality monitoring and emissions inventory, strategic planning for pollution reduction, and a permit system. Permits are issued under two industrial source air quality programs operated by the Department. The Air Contaminant Discharge Permit program (ACDP) issues permits for approximately 1,100 minor industrial emission sources. The Title V Operating Permit program issues permits for about 130 major industrial emission sources.

The Air Quality Program includes headquarters, laboratory functions, regional operations, and a local air pollution control agency. Headquarters is responsible for program planning and development, rules and guidance development, data analysis and reporting, technical services, and the vehicle inspection program. The vehicle inspection program requires tests of vehicles operating in the Portland and Medford areas every two years as part of the vehicle license renewal process. The laboratory provides air quality sampling, monitoring, and analytical support services. Air Quality staff in regional offices are responsible for ensuring that industrial sources of air pollution are operating in compliance with rules and permit conditions. Regional staff are also responsible for certification of asbestos removal, regulating open burning, monitoring field burning, and responding to public complaints. The Lane Regional Air Pollution Authority operates the air pollution control program in Lane County and receives a share of state funding. Of the Division's 210 FTE in the 1997-99 biennium, 37 were located in headquarters, 61 in regions, 26 in the laboratory, and 86 in the vehicle inspection program.

The federally delegated clean air program is primarily financed with permit and emission fees (such as the Air Contaminant Discharge Permit fee) supplemented by a General Fund appropriation and Federal Clean Air Act funds. Federal law requires that the full cost of the permit program for major industrial sources be fully paid from emission fees (Industrial Air Emission Fee). These are currently set at $25 per ton and generate about $7 million. Other non-General Fund sources include fees for asbestos certification and inspection, field burning permits, vehicle inspection, and fuels management which combines stage II vapor recovery and oxygenated fuels. The Vehicle Inspection Program is entirely supported by fees for certificates of compliance, currently set at $21 every two years as part of the vehicle licensing process. Federal maintenance of effort requirements apply to all air quality programs that contribute to maintenance of air quality standards. Federal Clean Air Act program grants require a state match each year that exceeds the previous year's expenditures.

The Clean Air Act requires compliance with federal air quality standards and prevention of air quality deterioration in areas that exceed federal standards. Eight areas in Oregon have exceeded air quality standards in the past and have officially been declared nonattainment areas by the U. S. Environmental Protection Agency (Salem, Eugene-Springfield Air Quality Maintenance Area, Klamath Falls, Medford, Grants Pass, LaGrande, Oakridge, and Lakeview). Each of these has failed to meet one or more of three criteria pollutants -- ozone, carbon monoxide, and particulate matter. The Portland Air Quality Maintenance Area was redesignated by EPA as being in attainment with standards after previously being considered a nonattainment area. The penalties for failing to meet standards include increasingly costly control measures, limitations on the siting of new industries, and, ultimately, loss of federal Highway Funds. Under the federal Clean Air Act, EPA reviewed the standards for respirable particulate and ground level ozone in 1997. The Department anticipates several areas of the state will experience difficulty in meeting the new standards developed by EPA from the review of fine particulate.

Most of the air quality gains in the future are anticipated to come from non-point sources, such as vehicle, household, and small business emissions, and from area sources. The agency expects additional work due to activities related to the new air standards for PM2.5 (particulate matter) and ozone, and will continue efforts toward streamlining the industrial permitting program.

The Air Quality Division's recommended budget was an increase of 8.3 percent from the 1997-99 estimated expenditures, added approximately $1.5 million General Fund over last biennium's level, and proposed the addition of 83 positions for the vehicle inspection program instead of using contracted services. The recommended budget attempted to maintain current service levels by restoring positions reduced in the base budget due to revenue shortfalls. The Governor's recommended budget for the Division of $41.1 million included the following changes:

• $890,000 General Fund to restore five positions eliminated in the Division's base budget. The restored positions would be responsible for writing rules and procedures, conducting dispersion modeling, operating PM10 monitors in communities where air quality is sub-standard, and providing administrative support. The positions would assist the program to achieve and maintain compliance with national air quality standards.
• $648,518 General Fund to finance a revision in the agency's indirect cost accounting required under agreements with the U.S. Environmental Protection Agency. The new practice would involve charging an indirect rate on all fund types instead of only Other and Federal Funds. The increase of General Fund to the program Divisions, such as Air Quality, was offset by a decrease of General Fund to Agency Management.
• $294,669 Other Funds to restore two of four positions reduced in the base budget due to revenue shortfalls in the point source control program. The positions, including a Natural Resource Specialist 3 and an Environmental Engineer 3, would be field staff that review construction projects, write permits, conduct inspections, and provide technical assistance to permitted sources of pollution. The revenue for the restoration assumed passage of proposed legislation to index permitting fees to changes in the Consumer Price Index.
• $130,000 Other Funds to expand the Vehicle Inspection Program to include heavy duty diesel trucks. The existing vehicle testing program only covers gasoline powered vehicles and light duty diesel vehicles. The program included funding for testing equipment, publications, training, and implementation costs. Revenue for the program would derive from fees on tested vehicles.
• $777,303 Other Funds and the establishment of 83 positions (83.0 FTE) for the continuation of the enhanced Vehicle Inspection Program approved by the 1997 Legislature. The recommended budget included funding of 75 inspector positions at a cost of $4,073,928 partially offset by a reduction in services and supplies expenditures of $4,034,021 due to the elimination of contracted inspectors. The budget also included the addition of eight new positions including clerical support, technicians, and a manager. Revenue to support the change and additional positions was from existing vehicle emission testing fees.
• $1.7 million Federal Funds and the establishment of eight positions (8.0 FTE) for implementation, operation, and maintenance of a new particulate monitoring network for particles 2.5 microns and larger, known as PM2.5. The U.S. Environmental Protection Agency (EPA) established new National Ambient Air Quality Standards for these particles and requires that a network of air samplers be in place and operating by the end of 1999. EPA is awarding grants under the Clean Air Act for the first two years of implementation and operation of the sampling network.

The recommended budget also included a reduction of $123,756 Other Funds tied to proposed legislation to restructure the current pollution control tax credit program.

The Air Quality Division's adopted budget of $40.9 million total funds was 0.3 percent less than the Governor's recommendation and 8.1 percent higher than the 1997-99 estimated level. The adopted budget included restoration of 7.5 FTE in the permitting program threatened to be lost due to revenue shortfalls. Senate Bill 5511 included $1.1 million General Fund to restore these positions for the 1999-01 biennium, but with direction that the General Fund support was to be a one-time infusion in order to allow discussions concerning the desired split of funding for DEQ permitting programs to proceed. Nearly $300,000 of the amount needed to restore the permitting positions had been requested through a proposal to index permitting fees to changes in the Consumer Price Index.

Establishment of the PM2.5 monitoring network with $1.7 million federal funding and authorization of eight positions was approved by the legislature. The Vehicle Inspection Program was continued with the addition of eight new positions to support testing activities, but the Department was directed to continue 75 vehicle inspector positions through a professional services contract instead of as state employees. While this change resulted in the reduction of 75 positions from the Governor's recommended budget for the Air Quality Division, there was no net effect to the program's operation. The 1997 Legislature authorized the program's expansion for enhanced vehicle testing through a similar contracting provision for inspector positions.

Due to the failure of implementing legislation, budget proposals to expand the vehicle testing program to heavy duty diesel trucks and to roll back the pollution control tax credit program were not included in the adopted budget. The adopted budget also included reductions for Attorney General expenses due to an hourly rate change imposed on the Department of Justice.

The Water Quality program goal is for the state's water bodies to meet water quality standards and support beneficial uses of water such as fishing, swimming, irrigating, and drinking and to sustain healthy communities of fish, plants, and other aquatic life. To attain this goal, the Water Quality program has set measurable objectives to characterize water quality trends in groundwater and surface water, to initiate protective actions in known, clean water bodies, and to reduce pollutant levels in water quality limited water bodies. The primary measurement tool is the Oregon Water Quality Index, a single number expressing water quality by integrating measurements of eight water quality parameters, including temperature, dissolved oxygen, biochemical oxygen demand, pH, ammonia plus nitrate nitrogen, total phosphates, total solids, and fecal coliform.

The Water Quality program's primary functions are implementation of the Oregon Plan for the restoration of salmon populations and watersheds, setting and monitoring water quality standards and assessments, controlling wastewater through permits and certifications, providing financial and technical assistance, and implementing portions of the Safe Drinking Water Act. The Department is responsible for two permit systems, the federally delegated National Pollutant Discharge Elimination System (NPDES) for discharges into surface waters and the state Water Pollution Control Facility (WPCF) permit program for all discharges such as sewage lagoons and effluent irrigation. Approximately 2,600 water quality permits are enforced in Oregon under the NPDES program with an additional 700 WPCF permits and 700 Confined Animal Feeding Operation permits subject to agency review and enforcement. In addition, the Water Quality program operates the on-site sewage permit program in counties that opt not to conduct the program.

Other Water Quality program initiatives include the Lower Columbia River Estuary Program, the Environmental Partnership for Oregon Communities (EPOC), Groundwater Management Areas, and the Use Attainability Analysis project. The Water Quality program also operates the nonpoint source pollution program in Oregon. Section 319 of the Clean Water Act requires states to have nonpoint source management programs to address the protection and restoration of surface water and groundwater. The Water Quality program also manages a wastewater financial assistance program for municipalities and conducts Section 401 certifications of dredge and fill work and hydroelectric projects.

In order to maintain these programs, the Division's positions are distributed between headquarters, the regions, and the laboratory. In the 1997-99 biennium, 63 of the Division's 211 FTE were located in headquarters, 115 FTE were in regional offices, and 33 FTE were assigned to the laboratory.

The federally delegated and state water pollution permit programs are financed from a combination of sources - the General Fund, industrial and municipal fees, and Federal Clean Water Act funds. The Water Quality program received an increase of $4 million General Fund in the 1997-99 biennium due primarily to appropriations for the Oregon Plan of $2.5 million and authorization of 19 new positions and for an offset of requested fee increases in the Industrial Permitting program. The 1997 Legislature decided to reduce the amount of the fee increase to approximately 20 percent, a level sufficient to support the restoration of three positions, and provided additional General Fund of $666,000 to support five other water quality permitting positions.

The Water Quality program has struggled over the past several biennia to achieve fee increases necessary to maintain these programs as General Fund support has diminished and Federal Funds have failed to keep pace with inflationary increases in program costs. The primary Other Funds sources of revenue include industrial waste discharge permit fees, municipal wastewater permit fees, and subsurface sewage disposal fees. Other Fund sources also finance the administrative costs of the wastewater finance program. Federal funds are received primarily under the Clean Water Act for operational expenses (Section 106) and for nonpoint source project grants (Section 319) and from other miscellaneous grant sources for a variety of program activities.

Under the federal Clean Water Act, either the state or federal government must operate programs to protect the quality of rivers, streams, lakes, and estuaries. The Department of Environmental Quality must operate programs to carry out the mandatory requirements of the Clean Water Act that are acceptable to the U. S. Environmental Protection Agency (EPA) in order to retain program delegation. The alternative would be EPA program assumption. Were EPA to operate the program, funding would be limited to the amount EPA now allocates to the state and would be sufficient to finance enforcement only. In addition to the EPA required level of program activity, the state legislature has also required additional water quality programs to be maintained by the Department.

During the 1995-97 biennium, the Department identified 870 streams as not meeting water quality standards. The list of streams, referred to as the "303(d) list" because of the requirements of section 303(d) of the federal Clean Water Act, must be submitted to EPA by April 1 of each even-numbered year. In March 1998, the Department issued a new draft 303(d) list that included over 1,000 rivers, streams, lakes, and estuaries. The most controversial aspect of the list is the number of water bodies included due only to violation of temperature standards. Once a water body is included on the 303(d) list, the Clean Water Act requires that the state develop a plan to meet water quality standards. The plan is referred to as a Total Maximum Daily Load (TMDL) and is used to describe the maximum amount of pollutants from point sources and surface runoffs, which can enter the water body without violating water quality standards. Much of the recent workload of the Water Quality program has been directed toward the development of TMDL's for Oregon's watersheds.

The Governor's recommended budget for the Water Quality Division reflected an effort to maintain existing programs, restore positions reduced due to revenue shortfalls, and enhance activities associated with restoring the state's water quality. The recommended budget was 23.5 percent above 1997-99 estimated expenditures and added a total of 20 positions. The Governor's proposed budget used $1.95 million Ballot Measure 66 Lottery Funds for programs related to salmon and watershed enhancements. The following program option packages were included in the recommended budget:

• $555,644 General Fund and $345,608 Other Funds to restore five positions (5.25 FTE) in the wastewater discharge permit program eliminated from the current service level due to revenue shortfalls and higher expenditures resulting from cost-of-living increases. Failure to restore the positions would result in slower processing of new industrial wastewater permits, restricted levels of oversight, and reduced technical assistance levels, with potential consequences for the amount of pollutants entering the waters of the state. The Other Funds revenue for the position restoration assumed legislative approval of proposed legislation to index industrial and domestic wastewater discharge permit fees and operator certification fees to the Consumer Price Index.
• $1.2 million Other Funds to restore four positions reduced from the current service level in the On-Site program and to add five new positions (4.5 FTE) for program enhancement. The positions identified for restoration included three Natural Resource Specialist 3 positions and one Natural Resource Specialist 4 located in regional offices to provide field response to permitting activities including complaint investigation, technical assistance, permit review, and enforcement actions. The new positions included an increase to full-time of an existing, half-time soil scientist, three Natural Resource Specialist 4 positions for additional complaint response and enforcement, and an Office Specialist 2 for administrative support functions. Revenue for the program option package was to be from proposed fee increases in the On-Site program.
• $817,257 Other Funds and eight positions (7.0 FTE) for implementation of the 1996 amendments to the federal Safe Drinking Water Act. The positions received Emergency Board approval in November 1997 as limited duration for the 1997-99 biennium to work with the Health Division to implement the source water assessment requirements for drinking water in the state. The program option package continued the positions as limited duration for the 1999-01 biennium. Funding is from a Health Division transfer of federal Safe Drinking Water Act revenues.
• $527,280 Other Funds and four positions (4.0 FTE) for work associated with hydroelectric project reauthorization. The 1997 Legislature passed legislation mandating the Departments of Environmental Quality and Fish and Wildlife work with the Water Resources Department in reviewing the re-licensure of hydroelectric projects and authorizing application fees. The legislature directed a task force be established to determine a method of calculating water right annual fees for hydroelectric projects. The positions (four Natural Resource Specialist 4's) included in the recommended budget are funded through a combination of hydroelectric application fees and annual fees. The amount of annual fee revenue will be determined in legislation being proposed by the Water Resources Department.
• $1.25 million Lottery Funds (Measure 66) to support the Willamette Basin Restoration Plan. In a report issued in December 1997, the Governor's Willamette River Basin Task Force recommended a number of actions be taken in the areas of human health, ecosystem health, coordinated watershed management, water quality monitoring and data management, and public outreach and education. The recommended budget proposed to speed up development of TMDL's in the 12 sub-basins and main stem of the Willamette River in conjunction with Oregon Plan efforts. The package also supported continuation of current Steelhead Supplement efforts of the agency, which consists of three positions approved by the Emergency Board as limited duration for the 1997-99 biennium.
• $700,000 Lottery Funds (Measure 66) and $358,976 Federal Funds to support the Lower Columbia National Estuary Program. The recommended budget added three limited duration positions (Program Director, Program Coordinator, and an Office Specialist 2) funded with federal National Estuary Program funds. The Lottery Funds would be used to provide grants for habitat restoration demonstration projects, monitoring of water quality in the Lower Columbia River, and education projects. The program assumed equivalent support from the State of Washington.

The recommended budget also included a reduction of $108,795 Other Funds dependent on proposed legislation to restructure the current pollution control tax credit program. The agency's change in indirect cost accounting methodology resulted in the addition of $2.1 million General Fund to the Division's current service level budget; a corresponding amount is reduced from Agency Management to make the change cost neutral at the agency level.

The $42.7 million total funds budget adopted for the Water Quality Division represented a 4.7 percent increase from the Governor's recommended level and more than a 29 percent increase from 1997-99 estimated levels. Most of the increase over the Governor's recommended budget was due to the inclusion of the LaPine National Decentralized Wastewater Treatment and Disposal Project funded with $3.2 million Federal Funds and adding six limited duration positions. This project was originally approved by the Emergency Board in January 1999 and was not included in the Governor's recommended budget due to timing issues. The project is one of three national demonstration projects funded by the federal government to find alternative and innovative subsurface sewage disposal systems. The bulk of the funding will be passed through to Deschutes County for demonstration projects.

The adopted budget included the restoration of wastewater permitting positions (5.25 FTE). Although these positions were proposed to be funded with a combination of General Fund and increased fee revenues from a proposal to index permitting fees to the Consumer Price Index, the adopted budget funded the entire amount with $874,000 General Fund in Senate Bill 5511. As was the case for the Air Quality Division, this General Fund was provided as a one-time infusion with direction to the agency to return with a long term funding plan for permitting activities. The adopted budget also included support for the expedited development of TMDL's in the Willamette Basin from Package 201 with the addition of $800,000 General Fund, also in SB 5511, to support eight limited duration positions. The agency was directed in a budget note to report on the progress in developing the TMDL's in nine sub-basins of the Willamette by the year 2003. Approximately $400,000 from Measure 66 Lottery Funds were provided to the Division for continuation of positions approved as part of the Steelhead Supplement to the Oregon Plan.

The approved Water Quality Division budget included a proposal to restore and expand the on-site subsurface sewage disposal program with nine positions. The adopted budget authorized the agency to fund the program with fee increases to be adopted in the interim through a rule-making process. The adopted budget also included approval to continue work to implement the Safe Drinking Water Act and to conduct hydroelectric reauthorization and relicensing work in conjunction with the Water Resources Department.

Other changes to the Division's budget included the elimination of two positions, one in the Environmental Partnership for Oregon Communities Program and one in Public Affairs; the elimination of base budget General Fund for the Newberg Pool study; a reduction in base budget grants through the Lower Columbia National Estuary Program; and the elimination of the proposed use of Measure 66 Lottery Funds for grants in the Lower Columbia National Estuary Program. A proposal to reduce Other Funds limitation due to a restructuring of the pollution control tax credit program was not approved due to failure of the implementing legislation. The adopted budget also included several budget note directions to the agency related to progress in developing TMDLs and to determination of various funding issues.

The Waste Management and Cleanup program goal is to protect human health and the environment by preventing and reducing waste generation, assuring that waste generated is properly managed, reducing and preventing pollution, responding to emergency spills, and cleaning up sites contaminated with hazardous substances and uncontrolled releases of toxic chemicals. Activities are organized into the four main program areas of solid waste, hazardous waste, hazardous substance cleanup, and underground storage tanks. In each area, the Waste Management and Cleanup program focuses on the hierarchy of waste management, starting with prevention, reduction, reuse, recycling, recovery, and ending with proper disposal.

Waste Management and Cleanup operates the federally approved solid waste landfill compliance program and the federally delegated hazardous waste program. Other federal programs include underground storage tank cleanup and superfund site cleanups. In addition, the Waste Management and Cleanup operates various state programs, including waste reduction and recycling, hazardous waste generator reporting and technical assistance, oil spill response planning, hazardous materials spill response, voluntary cleanup, toxic materials cleanup, and policy and program development. Waste Management also manages an underground storage tank financial assistance program for gas stations located in small rural communities.

The Waste Management and Cleanup programs are implemented by regional office staff. Regional staff conduct inspections, issue permits, provide cleanup oversight, and offer technical assistance. Headquarters staff in the Waste Management and Cleanup program provide centralized functions such as hazardous waste facility data collection, Underground Storage Tank (UST) facility registration, orphan site cleanup management, rule and policy development, billing and financial operations, and federal grant and contract administration. The agency's laboratory provides soil, air, and groundwater sampling analyses and monitoring activities at hazardous waste facilities, solid waste landfills, and contaminated sites involved in cleanups. In the 1997-99 biennium, 91 of the Division's 245 FTE were located in headquarters, 143 FTE were in regional offices, and approximately 11 FTE were in the laboratory.

Most Waste Management and Cleanup programs are financed almost entirely from dedicated Other and Federal Funds. The exception is the Solid Waste Program, which receives General Fund support as well as revenue from solid waste permit and disposal fees. Although the program is federally approved, federal funding is not available for the program. Solid waste disposal fees, also known as "tipping" fees, are collected on waste disposed at municipal solid waste sites at a rate of 81 cents per ton. Tipping fees are expected to generate approximately $6 million in 1999-01. The state also operates the federally delegated hazardous waste management program. A small amount of General Fund and permit fees provide the 25 percent match required for receipt of federal funds. Maintenance of an EPA approved program is a condition of program delegation. Lottery funds have, in the past, financed the underground storage tank financial assistance program. No financial support was provided during the 1997 legislative session for the financial assistance program, but the Emergency Board allocated $2,000,000 from the Emergency Fund in April 1998 to provide grants to rural service stations. The 1997 Legislature also funded a UST financial assistance program for port authorities with $500,000 lottery funds. Programs financed exclusively from Other and Federal Funds include the state Orphan Site program which is financed from bond sale proceeds.

Hazardous waste disposal fees are deposited into the Hazardous Substance Remedial Action Fund which finances state hazardous waste cleanup programs, including start-up costs for voluntary cleanups which are then reimbursed by property owners. Fund balances have also provided supplemental funding for related programs including Orphan Site Bond debt service which is regarded as a loan to be repaid when a permanent debt service fund source is identified.

Federal law sets uniform standards for all landfills and relies on citizen lawsuits for enforcement. States have the option of obtaining federal "program approval" which allows the state to develop site specific requirements that are often less burdensome. The Resource Conservation and Recovery Act hazardous waste program is federally delegated. The consequences of returning the program to EPA are similar to those described for the Clean Water Act program.

Funding of the Orphan Site program continues to be unresolved. Orphan sites are contaminated sites where the owner is either unknown, unable, or unwilling to pay for cleanup costs. The 1989 Legislature authorized the sale of orphan site bonds to provide funding for state-sponsored cleanup of industrial hazardous orphan sites. Repayment of the bonds was to be financed through a petroleum load fee and revenue from the hazardous substance fee. General Fund and lottery funds were also used to partially support debt service requirements of the orphan site bonds. In 1993, the Attorney General advised that the petroleum load fee should not be used for orphan site debt service. In 1995, the legislature limited collection of the hazardous substance fee to an amount necessary to service debt from previous bond sales only. Due to a lack of funding alternatives outside of additional General Fund commitments, the 1997 Legislature made no change to this funding arrangement.

The Waste Management and Cleanup program continues to experince projected revenue shortfalls. The legislature made various adjustments to the program's 1977-99 budget in response to an unanticipated $5.5 million revenue shortfall from the Arlington hazardous waste facility. The shortfall was caused by continued declines in the volume of waste being deposited at the landfill facility. The legislatively approved strategy to deal with the shortfall:

• delayed the planned orphan site bond sale from September 1997 to June 1998, reducing General Fund needed for debt service by $600,000;
• eliminated support for the Home Heating Oil Tank program;
• increased the overhead charge on cleanup oversight;
• eliminated the spill response program and 3.5 FTE and shifted coverage of the worst spills to the cleanup program;
• used Hazardous Substance Remedial Action Fund ending balances; and
• increased the amount of General Fund provided to the program by $1,350,000 to avoid additional program reductions.

The recommended budget for the Waste Management and Cleanup Division was 1.9 percent above 1997-99 estimated expenditures and added a total of eight positions. The proposed budget eliminated lottery funds from a marina/ports tank assistance project and reduced $1.9 million in General Fund from an Emergency Board allocation for the rural service station financial assistance program. A revenue reduction of $4 million Federal Funds was included due to lower funding for the McCormick and Baxter superfund cleanup site. The recommended budget included an additional appropriation of $462,909 General Fund for the agency's revised indirect cost accounting methodology, but an equivalent reduction of General Fund was made in the Agency Management Division.

Three enhancement packages were included in the proposed 1999-01 budget for the waste management and cleanup programs:

• $286,399 Other Funds for continuation of two positions in the Underground Storage Tank program. Tank owners are required under federally imposed standards to either upgrade or replace all underground regulated tanks by December 1998 or close the tank. Tanks not upgraded by the deadline must be permanently decommissioned by December 1999. The positions (1.70 FTE) will not be able to be supported within projected revenues, but are needed to provide tank compliance assistance and inspections. Revenue to support the positions depends on application of an annual $60 permit fee on all regulated tanks. The 1997 Legislature approved the $60 fee for tanks that had not upgraded while maintaining the existing $35 per year fee on upgraded tanks.
• $958,189 Other Funds for implementation of a home heating oil tank cleanup program. The funding would be used to provide decommissioning grants to homeowners and to support five positions (four Natural Resource Specialist 3's and a Program Coordinator) to provide technical assistance and oversight to the decommissioning work. Funding is anticipated from the 2.865 percent assessment on heating oil sales currently established in existing law but not being collected by the Oil Heat Commission. The proposed budget also includes three additional positions to operate a voluntary decommissioning program funded directly by tank owners. The voluntary program is dependent on legislation being proposed to allow the Environmental Quality Commission to establish the fees.
• $549,025 Federal Funds for oversight of the disposal activities at the Umatilla Chemical Weapons Depot. Congress is requiring disposal of the chemical stockpile at the depot by December 2004. Completion of the construction of the chemical weapons disposal facility is expected during the 1999-01 biennium. DEQ is to provide compliance oversight until the facility is decommissioned. The federal funds will be used to support four new positions at the Hazardous Waste Umatilla project including a manager, two permitting staff, and a compliance officer.

The recommended budget included a reduction of $125,448 Other Funds related to proposed legislation to restructure the current pollution control tax credit program.

The Waste Management and Cleanup Division's adopted budget of $61.2 million total funds is nearly unchanged from the Governor's recommended level and is an increase of nearly 2 percent from 1997-99 estimated amounts. The number of positions in the adopted budget increased by five from 1997-99 estimates. The adopted budget included approval of the federally funded disposal activities at the Umatilla Chemical Weapons Depot which provided $550,000 for four new oversight positions.

The Governor's recommended budget included two proposals to deal with tank issues, one related to underground storage tanks and one related to home heating oil tanks. The legislature dealt with these two issues through the passage of two pieces of substantive legislation:

• House Bill 2186 authorizes the continuation of a $60 per year fee assessed on all underground storage tanks through December 31, 2001. The estimated revenue of $331,000 Other Funds from the fee will be used to support two existing positions (1.70 FTE) in the Division's UST Compliance Management Program to enforce the decommissioning of non-upgraded tanks and to continue compliance efforts to assure operating tanks meet requirements.
• House Bill 3107 requires the Department to adopt a program to regulate the decommissioning of home heating oil tanks and to oversee corrective action taken in cases of soil contamination. The legislation authorizes a licensing system for contractors providing oil tank services. The combination of $300,000 General Fund and $240,000 Other Funds will be used to support four agency positions to provide technical assistance, inspections, and development and maintenance of the licensing system.

Another issue addressed by the legislature that affected the Waste Management and Cleanup Division's adopted budget was Community Right to Know. House Bill 2431 creates a Community Right to Know Technical Committee to be staffed by the State Fire Marshal and directs the Department of Environmental Quality to establish a policy group charged with reporting on options for enhancing statewide toxic substance reporting and data collection. The bill also establishes requirements that new local right to know programs must follow, including allowable program fee structures, maximum fines, and public process assurances. The Department was provided with $149,000 General Fund and $139,000 Other Funds from the State Fire Marshal to support DEQ activities.

A proposal to reduce Other Funds limitation due to a restructuring of the pollution control tax credit program was not approved due to failure of the implementing legislation. Approximately $97,000 General Fund was eliminated in the adopted budget to meet efficiency reduction targets including miscellaneous services and supplies expenditures in the hazardous substance cleanup program and contract spending in hazardous waste permitting support. The Division was also directed in the form of a budget note to develop additional refinements to the Independent Cleanup Program.

Cross Media is a new section established within the agency's structure to highlight the needs of addressing environmental issues that cross the agency's traditional program lines. The operations of the new section were formerly included within Agency Management. The separate section approach will enable these efforts across a broader spectrum of the agency's responsibilities to be distinguished from general management and centralized services.

Major cross media efforts planned for the 1999-01 biennium include studying impacts of sediment removal, increasing public involvement in facility permitting, incorporating best management practices to prevent pollution associated with non-value added processing, encouraging environmental performance beyond statutory requirements, and increasing attention to the environmental impacts of facility permitting on low-income areas.

Revenue for Cross Media activities is from Environmental Protection Agency pollution prevention grants. In previous biennia, these grants were included as part of the Hazardous Waste and Air Quality federal special projects budgets.

In the 1997-99 biennium, a Green Permit program was authorized by the legislature and provided $70,000 General Fund and expenditure limitation of $73,000 Other Funds. The program was funded to establish rules for a permitting system that would encourage the use of innovative environmental approaches to achieve results significantly better than required by existing law. Any continutation of the Green Permit program would be provided through the Cross Media program.

The agency plans on implementation of cross media projects on a limited basis during the 1999-01 biennium in order to enhance coordination of effort across program lines. The projects are anticipated to increase agency efficiency in measuring environmental results and each project will include outcome measures.

The Governor's recommended budget for the new Cross Media Program consisted of $414,800 Federal Funds transferred from Hazardous Waste and Air Quality Federal Special Projects budgets for pollution prevention grants and three new initiatives.

• $1.2 million Other Funds expenditure limitation and 8 positions (7.75 FTE) for the Portland Harbor Sediment Study. The funding is for a cooperative work and planning effort with stakeholders on determining the best course of action for dealing with potentially hazardous substances in the Portland Harbor sediments. Five positions (5.0 FTE) would be functionally tied to the Waste Management and Cleanup Division and three (2.75 FTE) would be Water Quality Division positions. The proposal is threefold: to conduct a statewide study on how to address the sediment issue in general; to develop a plan on how to address the Portland Harbor situation specifically; and to evaluate the sediments in the Ross Island area. Revenues are anticipated from cooperative agreements with responsible parties.
• $89,339 General Fund and $804,051 Other Funds for the Governor's Livability Initiative. The funding will be used to support five new positions to work in the regional solutions offices to be located throughout the state. The Other Funds revenue represents Transportation Efficiency Act (TEA-21) funds transferred from the Department of Transportation. The General Fund represents the 10% match needed for TEA funds. The package also supports an existing 0.50 FTE that participates in the Governor's current Community Solutions Team effort. The regional solutions offices will be staffed with team members from several agencies involved in the livability initiative.
• $40,000 General Fund for support of environmental justice activities.

The Office of Director/Cross Media adopted budget of $2.3 million is approximately 8 percent less than the Governor's recommended level. The adopted budget included support for the Portland Harbor Sediment Study proposal, but reduced the package by $153,000 as a technical adjustment to correct a double-count of agency indirect charges. The adopted budget did not include General Fund for the environmental justice program; the legislature instead discussed the need to include environmental justice activities as part of the agency's strategic planning. As a result of passage of legislation to extend the Green Permit program (Senate Bill 774), the adopted budget included $112,000 Other Funds expenditure limitation and authorization for one position (0.67 FTE).

After lengthy deliberations, the budget included support for the Community Solutions Team portion of the Governor's Livability Initiative. The adopted budget eliminated one position from the proposed package to reduce the cost and eliminated a base position from the Environmental Partnerships for Oregon Communities program to obtain the General Fund match for the federal transportation planning funds. The net result was the addition of four positions for the agency's participation in the team approach to dealing with local development and livability issues, funded by $78,000 General Fund and $704,000 federal TEA-21 funds to be received through the Department of Transportation as Other Funds.

The Agency Management program provides leadership, coordination, and support for the Department and staff assistance for the Environmental Quality Commission. Agency Management includes the Office of the Director, the Public Affairs Office, and the Management Services Division. Management Services consists of the Administration, Business Office, Budget, Human Resources, Information Systems, Business Systems Development, and Health and Safety sections.

Agency Management is financed primarily from indirect cost revenues. The indirect rate is calculated as a percentage of personal services. In previous biennia, the indirect rate was applied to personal services from Other Funds and Federal Funds sources. Agency Management received a direct General Fund appropriation to account for the remaining approved central service expenditures. Beginning with the 1999-01 biennium, the indirect collection methodology will be changed to include all funding types, including the General Fund. The budgeted indirect rate is set at 19.2 percent of personal services to provide sufficient revenue to fund Agency Management's Current Service Level budget. The actual rate will be negotiated with the Environmental Protection Agency after the actual budget is established. The change in methodology was necessary in order to meet the conditions of the agency's agreement with EPA on charging the indirect rate against federal revenues. Since the indirect rate will be applied to General Fund personal services, Agency Management will not receive a direct appropriation of General Fund for operational expenses.

Agency Management was responsible for coordinating the Department's Strategic Planning effort during the 1997-99 biennium. The agency's Strategic Plan will be used as a tool for describing agency functions, for measuring success in attaining the agency's goals, and for determining priorities between and within programs.

The Governor's recommended budget for Agency Management was 17.0 percent higher than 1997-99 estimated expenditures, but only 5.4 percent above the current service level for the program. Various positions were shifted to Agency Management during the 1997-99 biennium to better reflect the actual usage of budgeted resources. These were generally positions performing agency management functions but being charged against the programs. The current service level budget also reflected the indirect cost accounting methodology change by a reduction of $2.4 million General Fund. The General Fund amount was instead proposed for appropriation to individual program areas. The amount would then be collected based on the approved indirect rate of 19.2 percent of personal services on all fund types and transferred to Agency Management as Other Funds. One budgetary effect of this procedure is a double counting of the indirect charged against General Fund positions. The budget first counts the General Fund appropriation to each program for personal services and then counts 19.2 percent of that General Fund amount as Other Funds expenditure limitation in the Agency Management program.

The recommended budget included two enhancement packages. Additional support for information systems technology was provided with $733,611 Other Funds and five positions (5.0 FTE). Four of the positions, including three Information Systems Specialist 3's and one Information Systems Specialist 4, would be used to improve computer network support in the regional offices and laboratory. An Information Systems Specialist 6 would serve as a Web Administrator to lead and coordinate web site development and to improve public access to Department information. The positions and associated costs for training and equipment were to be financed with indirect cost revenue.

The recommended budget also included $114,743 Other Funds and one position (Program Technician 1) for additional accounting system support within the Business Office. The position would address workload increases in Agency Management resulting from additional staff proposed in various policy packages from operational program areas. Demands for administrative and management support functions increase when positions are added at the program level. The position was also proposed for funding with indirect cost revenue.

The adopted budget for Agency Management of $15.5 million was 7 percent less than the Governor's recommendation, but 9 percent above the 1997-99 estimated expenditures. The adopted budget continued most base budget activities, but eliminated consideration of both proposed enhancement packages due to uncertainty regarding the amount of indirect revenue available to support additional positions. The legislature opted to allow the agency to determine the actual amount of projected indirect revenue that would be available based on other legislative decision regarding the budget and then reprioritize the Agency Management needs. The agency was directed to report to the Emergency Board to request expenditure limitation and position authority to address these priorities once the amount of available indirect revenue is known.

The sale of pollution control bonds is used by the Department to finance the State Revolving Fund, the Sewer Assessment Deferral Loan program, and the Orphan Site program. Bond proceeds are used to finance municipal waste water facility construction, an assessment deferral program for low income households, and cleanup of hazardous waste sites where the responsible party is either unknown, unwilling, or unable to pay for cleanup costs. Bond proceeds also provide the 20 percent state match for federal capitalization funding.

Debt service for the waste water program was initially paid from the General Fund, but in 1993-95 was shifted to Lottery Funds. Lottery Funds are also used to pay for a portion of the Orphan Site Bond debt service. Other Funds nonlimited expenditures are for loans to municipalities and the related debt service.

For the Orphan Site program, excluding solid waste sites, the legislature initially provided that debt service would be financed in equal shares from the hazardous substance possession fee and the petroleum load fee. Following a 1993 court ruling on petroleum assessments, the Attorney General advised that the load fee no longer could be used for this purpose. The legislature substituted temporary funding and directed a Joint Legislative Task Force to find a permanent funding source. The task proved difficult, and no alternative was recommended to the 1995 Legislature. The legislature froze the hazardous substance possession fee at a level sufficient to pay the debt service on past bond sales and funded 1995-97 orphan site bond sales from a combination of base budget savings, lottery funds, and General Fund. The Department was directed to convene a task force to make recommendations to the 1997 Legislature on a funding mechanism to replace the financing arrangement. With the failure to adopt any recommendations for change, the financing mechanism has remained unchanged, representing a combination of General Fund, Lottery Funds, and the Hazardous Substance Possession fee.

Communities with exceptional pollution control problems are able to receive grants under the Department's bond programs. The grants and interest costs are supported out of the sinking fund as debt service obligations are met. To date, a total of $21.4 million has been appropriated from the General Fund for application toward the debt service on $39.8 million in grants.

The Governor's recommended budget continued the same funding mechanism for debt service approved by the 1997 Legislature. Lottery funds were used to support debt service for wastewater financing projects ($5.2 million) and a portion of the Orphan Site debt service needs ($2.3 million). Orphan site debt service also received $1.6 million General Fund in the proposed budget. The Governor's recommended budget also included $2.9 million General Fund for debt service on amounts granted to local governments from bond proceeds in the 1971 to 1981 period. The program estimates that a final General Fund appropriation of $3.7 million will be needed in the 2001-03 biennium to retire the debt.

The legislatively adopted budget for Department of Environmental Quality debt service is $15.8 million, five percent less than proposed by the Governor. The adopted debt service budget also fund shifted all debt service paid with Lottery Funds to the General Fund and directed the agency to delay planned Orphan Site bond sales for six months. The bond sale delay resulted in a net General Fund savings of $830,000. The total General Fund debt service was approved at $11.2 million.

The Nonlimited program represents bond sale activity for all Department programs. Use of bond sales for 1999-01 are anticipated for the State Revolving Fund ($12 million), orphan site environmental cleanup ($8 million), and loans to local governments for construction of eligible waste water treatment and solid waste facilities ($21 million). The loans to local governments are anticipated for use as companion loans when the amount of State Revolving Fund proceeds available to the community is not sufficient to meet the wastewater capital investment needs.

The primary repayment sources for the bond proceeds include Lottery Funds for State Revolving Fund matching bonds, loan repayments from local governments for the companion loan bonds, and a combination of General Fund, Lottery Funds, and the Hazardous Substance Possession Fee for orphan site bonds.

The Governor's recommended budget includes nonlimited authority for $100.1 million in new State Revolving Fund loans, $21.0 million in new loans to local governments for solid waste facilities and sewer systems, and $150,000 in sewer assessment deferral loans.

The Governor's recommended nonlimited amount of $121.3 million was approved by the legislature.

LFO Analyst: Rocco

The Department of Fish and Wildlife (ODFW), under direction of its seven-member Commission, manages the fish and wildlife resources of the state. The agency mission is to "protect and enhance Oregon's fish and wildlife and their habitats for use and enjoyment by present and future generations."

ODFW manages the state's fish and wildlife policies through four primary divisions: Fish, Wildlife, Habitat, and Administrative Services. Enforcement of the state's fish and wildlife laws is provided by the Oregon State Police, Fish and Wildlife Division. The agency is facing a number of major issues including declining fish populations, potential listings of fish species as threatened and endangered, operation and maintenance of fish hatcheries, landowner relationships and access for hunting, and the continuation of Department programs under reduced staffing from declining revenues. The agency proposed a fee increase on angling and hunting licenses to support programs in the 1999-01 biennium.

The Department of Fish and Wildlife approached the 1999-01 biennium facing a $10.5 million revenue shortfall necessary to maintain existing programs. The budget hole developed from a combination of static license sales and the rising cost of conducting business. The budget shortfall put 71 positions at risk, including field biologists and State Police fish and game officers, and would have resulted in customer service reductions, trout production curtailments at several hatcheries, and restrictions on landowner assistance.

Through a combination of funding strategies, the legislature was able to provide sufficient revenues to forestall many of the threatened service cutbacks. The Legislatively Adopted Budget of $195.1 million is 3.5 percent higher than the 1997-99 estimate. The adopted budget included:

• $20 million in state support, including $3.7 million of lottery funds from Ballot Measure 66, up from $17.6 million total in 1997-99;
• additional support for State Police fish and wildlife game officers from General Fund and lottery funds to maintain current levels of service and to relieve payment for these services from license revenues; and
• approval of House Bill 2100 which increased certain fishing and hunting license fees to generate an estimated $6.3 million in Other Funds.

HB 2100 was structured by the legislature to actually result in a reduction in the cost of certain fees, such as the resident angling license and the daily angler license. The decrease in some angling fees were offset by increases in hunting licenses and tags and was made possible by reducing the surcharges imposed for the Fish Restoration and Enhancement Program.

The Fish Division manages and enhances the habitat, production, and use of fishery resources for the benefit of Oregon's citizens and communities. The economic value from the commercial and recreational fisheries is significant to the state both in terms of direct earned income from industry salaries and wages and expenditures of anglers during sport fishing activities. The Fish Division is organized into four program areas: Propagation, Natural Production, Marine Resources, and Interjurisdictional Fisheries.

• Fish Propagation Program - the purpose of the Fish Propagation program is to produce fish through artificial propagation to augment natural production and to provide fish for the sport and commercial fisheries. The program's 34 hatcheries and satellite rearing facilities, Salmon and Trout Enhancement Program (STEP) facilities, and the Clatsop Economic Development Committee facility combined produce about 75.5 million salmon, steelhead, and trout annually. Seventy percent of all fish caught by recreational anglers are hatchery fish. The 1997-99 estimated budget for the Fish Propagation program totaled $46.3 million ($27.8 million Federal Funds, $8.4 million General Fund, and $10.2 million Other Funds) and 299 FTE. Funding supports program administration, technical expertise on fish culture and rearing, and hatchery operation and maintenance, which includes fish health monitoring, tagging/fin clipping, and stocking. Anglers, both recreational and commercial, benefit from the hatchery program. Hatcheries are also a tourist attraction and receive 1.4 million visitors per year.
• Fish Natural Production Program - the Fish Natural Production program manages warmwater fish, trout, steelhead, and salmon within the state's rivers, streams, and lakes. The program is responsible for rehabilitation of lakes and streams, coordination of statewide fish management planning, and the biennial revision of angling regulation. Staff biologists oversee implementation of species management plans with emphasis on individual basin plans and are responsible for technical oversight of sensitive, threatened, and endangered species fish management. The 1997-99 estimated budget of the program totaled $40.6 million ($25.3 million Federal Funds, $10.4 million Other Funds, and $5.0 million General Fund) and 275 FTE.
• Fish Marine Resources Program - the Fish Marine Resources program recommends regulations and assesses harvest of commercial fisheries including ocean salmon, ocean groundfish, estuary bait fish, shrimp, crab, urchin, and other estuarine species. The program also monitors recreational fishing and is responsible for developing new sustainable fisheries and for assessing harvest levels and making allocation decisions between competing user groups. New fisheries must be provided with sufficient attention to ensure orderly development and sustainable yields over time. Recent Endangered Species Act listings have increased attention on protecting marine habitat and the management of ocean resources. The 1997-99 estimated budget for the program totaled $7.8 million ($3.7 million Federal Funds, $3.3 million Other Funds, and $0.9 million General Fund) and 78 FTE.
• Fish Interjurisdictional Fisheries Program - the Fish Interjurisdictional Fisheries program is a new program unit being created in the 1999-01 budget from a reorganization of the Natural Production and Marine Resources programs. The program will be responsible for management of Columbia River anadromous fisheries, coordination of Columbia Basin activities, and participation in regional and international management councils for the management of marine and migratory fishes. The program also includes overall planning and management of the Fish Division.

Funding of Fish Division programs is derived from a number of sources. General Fund is used primarily to support hatchery operations and the Oregon Plan activities toward the restoration of salmon populations and watersheds. Other Fund revenues are received from recreational and commercial fishing licenses, tag sales, commercial landing fees, hydroelectric operator fees, contracts with non-federal agencies, interest income, and donations. The 1997 Legislature authorized the agency to begin retaining 100 percent of the commercial fishing industry fees for deposit into the Commercial Fisheries Fund. Prior to the 1997-99 biennium, 75 percent of the commercial fishing industry fees were deposited into the General Fund.

The major Federal Fund source is Wallop-Breaux funds from a federal excise tax on angling equipment. Other federal sources include the U.S. Department of Commerce (National Marine Fisheries Service), the U.S. Department of Energy (Bonneville Power Administration), U.S. Army Corps of Engineers, Department of Interior (U.S. Fish and Wildlife Service), Bureau of Land Management, and Regional Fish Management Councils. Federal funds are received under contractual agreements to operate hatcheries, conduct specific research, provide mitigation, and perform administrative functions. Matching fund requirements vary between 25 and 50 percent by individual agreement.

Depressed fishery resources and sales of sport fishing licenses and tags at levels unable to sustain current service levels have plagued the Fish Division. Over the past four years, coho salmon stock conditions have been weak resulting in restricted fishing seasons. Federal Endangered Species Act (ESA) listings or proposed listings of salmon populations on the Oregon coast, the Klamath River, and the Columbia Basin have led to severe fishing constraints. Additional listings under the ESA are proposed for various populations of steelhead, cutthroat trout, and bull trout, which could result in more restrictive regulations on inland fisheries. Major reductions in allowable harvests for various important groundfish species have adversely affected commercial fishing harvesters and processors. In addition to the shorter seasons and more restrictive fishing regulations, demographic changes appear to be affecting sales of sport angling licenses. Angling participation rates may also be declining due to the aging of the state's population and the availability of numerous other recreational opportunities. The Department has attempted to accommodate the combined effects of these environmental factors by reorganizing, streamlining, and refocusing program efforts.

The Fish Division's central role in efforts to restore salmon populations was recognized in the legislature's adoption of the Oregon Plan in 1997. The Division received authority for 14 new positions and was appropriated $2.3 million General Fund for Plan related activities such as stream monitoring, core habitat monitoring, population re-establishment, plan monitoring, technical assistance, and watershed education.

The Governor's recommended budget for the Fish Division was $104.5 million, an increase of 10.3 percent over the 1997-99 estimated expenditures. The proposed budget added 20 positions from the 1997 biennium and used $2.3 million of Ballot Measure 66 Lottery Funds to support additional Oregon Plan activities in the coastal and Willamette River Basin regions. Total General Fund was provided at the current service level. The recommended budget included a 10 percent increase in Federal Fund expenditures over 1997-99 estimates. The Division continues recent reorganization efforts by reducing the number of regions from five to four and consolidating the 24 fish districts into ten watershed areas.

The Propagation Program's recommended budget reflected an 8.5 percent decrease from 1997-99 estimated expenditures due to a combination of less General Fund and reduced Other Funds revenues. The recommended budget included a $150,000 General Fund reduction for the Sake of Salmon program eliminated as a one-time expense in a program adjustment package. Due to licensing fee revenue shortfalls, the current service level budget eliminated nine positions (8.17 FTE) and ended the state-funded production at the Cole Rivers, Willamette, and Fall Creek Hatcheries. These activities were partially restored in a program option package that depended on $755,436 Other Funds from the proposed license fee increase. The nine positions included seven Fish & Wildlife Technician 1 positions, a Fish & Wildlife Technician 3, and a manager.

The Natural Production Program's recommended budget increased by 14.1 percent from 1997-99 estimated expenditures. The program's current service level budget included a reduction of $567,496 Other Funds and the elimination of 56 positions (22.22 FTE) due to projected revenue shortfalls. The proposed budget restored some of these reductions with revenue from the proposed fee increase and used additional Federal Funds and lottery revenues for the following program activities:

• $297,959 Other Funds from license fees to support four new positions for landowner technical support on fish passage issues and $1,949,960 Federal Funds to continue 21 limited duration positions to fulfill a variety of contract obligations. The new positions would be used to coordinate statewide permitting processes and to document and review federal and state endangered species act provisions.
• $253,440 Other Funds from the proposed license fee increase and $149,874 Federal Funds to provide additional field support for fish biologists (5 half-time Experimental Biology Aides), to restore a trout restoration project leader position, and to extend a limited duration federally funded position engaged in writing conservation strategies for bull trout.
• $940,979 Other Funds from the proposed license fee increase and $1.6 million Federal Funds to provide new angling opportunities through partnerships aimed at developing urban and youth fishing ponds and warmwater fishing enhancements. The funding included the state match for Federal Funds anticipated for completion of the Diamond Lake Restoration project. The program option package included the addition of one position (Natural Resource Specialist 3).
• $2.3 million Measure 66 Lottery Funds and 14 positions (13.08 FTE) for support of additional Oregon Plan efforts in the coastal and Willamette River areas. The lottery funding was proposed for the following activities: continuation of steelhead smolt monitoring, surveys, and assessments of steelhead production ($1.3 million); coordination of permitting, data submissions, and document review to meet Endangered Species Act mandates ($139,500); instream water flow studies, data collection, and study coordination ($356,900); research studies on marine mammal predation ($106,500) and bird predation ($235,600); and additional studies of estuaries and spawning escapements ($165,900).

The recommended budget for the Marine Resources program was 5.0 percent below 1997-99 estimated expenditures. The program was refocused in the proposed budget to fishery research, data analysis, and monitoring. The budget included the reduction of $293,799 Other Funds due to revenue shortfalls and the elimination of a program manager position responsible for the ocean fin fish program. The recommended budget included one program option package funded with $528,000 General Fund for eight positions (5.51 FTE) to conduct at-sea, dockside, and near shore fisheries monitoring, research, and data collection.

The Interjurisdictional Fisheries Program's recommended budget totaled $8.3 million and 53.54 FTE. The program was established from a reorganization of the Marine Resources and Natural Production programs. The budget included a reduction of $83,471 and the elimination of a Natural Resource Specialist 2 position in the sturgeon sport sampling program as a result of projected revenue shortfalls. One program option package was supported in the Governor's recommended budget providing $452,714 Other Funds from the proposed license fee increase and $655,085 Federal Funds. The Other Funds revenue supported 12 positions (3.75 FTE) to collect and analyze biological data on sturgeon populations. The Federal Funds would be used to support seven limited duration positions (7.0 FTE) to fulfill a variety of contract obligations with federal agencies.

The Fish Division's adopted budget of $103.1 million is 1.4 percent less than the Governor's recommended level, but nearly 9 percent above 1997-99 estimated levels. The budget includes $15.7 million in state support consisting of $12 million General Fund and $3.7 million lottery funds. The adopted budget for the Division supports 684 positions, an increase of 31 from 1997-99.

The Fish Propagation adopted budget totals $42.2 million, 0.3 percent less than the amount recommended by the Governor. The adopted budget restores hatchery production at the Cole River, Willamette, and Fall Creek hatcheries with revenue from the approved fee increase. Additional General Fund of $282,000 was also provided for contract services related to enhanced trout production at the Fall Creek hatchery. The adopted budget includes a $113,000 General Fund efficiency reduction from miscellaneous services and supplies in the Propagation program. Within the program's adopted budget, the legislature also reserved $500,000 General Fund in the Emergency Fund to be released to the Department upon reporting on success in implementing changes in the state's wild fish policy identified in House Bill 3609 and addressing other hatchery related issues.

The Natural Production program's adopted budget totals $44.9 million, 3 percent less than the Governor's recommended level and 11 percent more than the 1997-99 estimated amount. The approved budget includes a fund shift for Oregon Plan activities and positions from General Fund to $2.5 million of Measure 66 Lottery Funds. The budget also includes $1.3 million Measure 66 Lottery Funds for continuation of positions related to the Oregon Plan's steelhead supplement initially approved by the Emergency Board in January 1998 and requested for continuation in the Governor's recommended budget. A proposal to enhance the Department's coastal activities related to the Oregon Plan was not approved as part of the budget. The program's adopted budget includes a base budget reduction of $150,000 General Fund and one position. Additional revenue from the fee increase is used to provide the state match for work planned at Diamond Lake. Senate Bill 5511 adds $186,000 General Fund to the program to pay for the restoration of five positions unable to be supported with fee revenues. These positions will be used to collect information and enhance fishing opportunities throughout the state. The adopted budget includes a technical adjustment of $330,000 Federal Funds and the authorization to establish five limited duration positions using resources from the Bonneville Power Administration. The program was directed to report to the Emergency Board on progress in implementing the Oregon Plan.

The adopted budget for the Marine Resources program of $7.6 million is nearly 2 percent higher than the Governor's recommended budget. The budget includes a technical adjustment to add a limited duration position funded with federal funds from the U.S. Fish and Wildlife Service made available after the development of the Governor's budget. Senate Bill 5511 provides the program with $500,000 General Fund to support six limited duration positions to provide at-sea and dockside fishery services for commercial fishing activities, including contracts for charter vessels to assist with research on catch. The Department was instructed to report to the Emergency Board on the collection of revenues in the Commercial Fisheries Fund. SB 5511 also provides $100,000 General Fund to the Marine Resources program for the establishment of one limited duration position to collect information on food habits and population dynamics of marine mammals and avian predators in Oregon estuaries.

The adopted budget for the Interjurisdictional Fisheries program was approved at the Governor's recommended level with a $15,000 General Fund efficiency reduction in miscellaneous services and supplies. The approved budget includes support of a proposal to use revenue from the license fee increase and federal funds to support additional monitoring and data collection and to continue 19 limited duration positions.

The Wildlife Division manages wildlife with the objective of maintaining all species at optimum levels for the recreational and aesthetic benefit of the public, consistent with the primary use of the land and waters of the state. The Division is organized into three program areas: Game, Habitat, and Diversity.

The Wildlife Division is funded entirely from Other and Federal Funds, except for the Wildlife Diversity program which receives approximately one-fourth of its budget from the General Fund. The primary Other Fund revenue source is the sale of hunting licenses and tags. Revenue is also obtained from sales of waterfowl and upland game bird stamps and prints, fines and forfeitures from game law violations, funds from contractual agreements with non-federal agencies, and donations. The Wildlife Diversity program receives Other Funds from non-game income tax check-off contributions and one-half the interest earnings of the Wildlife Fund.

Federal Funds received by the Wildlife Division result from federal laws or agreements with federal agencies to complete specific types of work. Primary sources are the U.S. Department of the Interior (Fish and Wildlife Service), Department of Agriculture (Forest Service), Department of Energy (Bonneville Power Administration), Department of Commerce (National Marine Fisheries Service), Department of Defense (Army Corps of Engineers), and the Bureau of Land Management. The single major source of Federal Funds is the Pittman-Robertson Act, which support habitat improvement projects and wildlife management areas. Pittman-Robertson Act funds require a 25 percent state match.

The Wildlife Division shared in the revenue shortfalls encountered by the Department over the past four years, but not at the same level of intensity found in the Fish Division. Hunting license sales for Wildlife Division programs are down, but by substantially less than fishing license sales. National and state trends indicate a declining proportion of the population engaging in hunting activities. Continuation of these trends coupled with difficulties in attaining easy access to traditional hunting locations could result in further erosion of hunting license and tag sales.

The Division continues to receive increasing numbers of complaints concerning wildlife damage to property. Increasing levels of bear and cougar damage complaints are addressed by district personnel. Limited resources in the Wildlife Diversity Program continue to restrict the agency's ability to monitor existing and potential threatened and endangered species. Staff concentrate on recovery actions instead of conducting preventive efforts that could avoid future listings of threatened and endangered species.

The Governor's recommended budget for the Wildlife Division was $33.9 million total funds, an increase of 6.8 percent from 1997-99 estimated expenditures. The budget included a net increase of 19 positions from 1997-99 estimated levels, but a decline of seven from the legislatively approved level. The program continues to be restricted from filling authorized positions due to revenue shortfalls from licensing fees.

The Game Program's recommended budget was 7.4 percent above 1997-99 estimated expenditures. Due to projected revenue shortfalls from current license fees, the budget eliminated positions used to manage upland birds, antelope, black bear, cougar, mountain goat, and bighorn sheep ($747,720 and 3.17 FTE). The recommended budget partially restored these cuts with $344,038 Other Funds from the proposed license fee increase and $87,190 Federal Funds. The Other Fund revenue restored two positions (Natural Resource Specialist 3 and Natural Resource Specialist 4) involved with wildlife species management and coordination of safety issues involving bear and cougar damage. The proposed fee increase revenue also supported the continuation of a limited duration marketing coordinator position (Program Representative 1) as permanent. The position would function as the marketing coordinator for the state migratory game bird program. Federal Funds are proposed for the establishment of a limited duration Natural Resource Specialist 2 position for bear, blacktailed deer, and cougar research issues.

The Wildlife Division's Habitat Program recommended budget was 7.4 percent higher than estimated expenditures in 1997-99. The budget included a reduction package of $1.0 million Other Funds and 5.33 FTE eliminated as a result of projected shortfalls in existing license fee revenue sources. The reductions eliminated the current Green Forage and DEAR programs and six field technician and biologist positions. The recommended budget restored services to landowners to deal with damage and provide habitat enhancements through a combination of revenue from the proposed fee increase and from federal contracts. A program option package included in the recommended budget adds $1.5 million Other Funds from fee increase revenues to restore four positions in the Green Forage and DEAR programs. The package also included $166,986 Federal Funds to support two limited duration positions, one located at the Fern Ridge Wildlife area and one to work on a long-term wildlife mitigation program in conjunction with the Columbia River hydroelectric projects.

The Wildlife Diversity Program's recommended budget was funded at the current service level, up 0.3 percent from 1997-99 estimated expenditures. The budget included reductions of $137,095 Other Funds and the elimination of one position due to revenue declines. The recommended budget did not restore the Natural Resource Specialist 3 position to the Diversity Program.

Although the Wildlife Division's legislatively adopted budget of $33.7 million is less than one percent under the recommendation by the Governor, it nearly doubles the amount of General Fund provided for the Division's programs. With insufficient Other Funds revenues from the restructured fee increase to support two restoration packages, the adopted budget includes an additional $711,000 General Fund in Senate Bill 5511 to maintain current program levels.

The Game program's adopted budget of $19 million includes $309,000 General Fund to restore three positions designated for field biology work in the bighorn sheep, upland bird, bear, and cougar subprograms. These positions were proposed to be restored with fee increase revenues, but instead are funded with General Fund. The adopted budget includes 99.99 FTE, the same as proposed in the Governor's recommended budget.

The adopted budget for the Habitat program of $11.7 million is slightly over one percent less than the Governor's recommended amount. Due to insufficient Other Funds revenue from the restructured fee increase adopted by the legislature, additional General Fund in the amount of $400,000 is provided in Senate Bill 5511. These funds were used to restore four base positions that provide field biologist functions in the Green Forage and DEAR programs. The adopted budget includes 55.24 FTE, unchanged from the Governor's recommendation.

The Wildlife Division's Diversity program received a budget of $3.0 million, 1.3 percent less than the Governor's recommended amount and one percent less than the 1997-99 estimated expenditures. The requested budget includes no policy option packages. The legislature adopted a $39,000 General Fund base reduction in miscellaneous services and supplies as an efficiency measure.

The Division was directed by the legislature in several budget notes to review and report on programs and methods to reduce damage caused by wildlife on crops and livestock and to provide additional assistance to the U.S. Department of Agriculture Wildlife Services program efforts on predator control.

The Habitat Division develops policies and procedures for preventing, minimizing, or mitigating impacts to fish and wildlife caused by habitat destruction. Division biologists, assisted by field personnel, analyze and comment on proposals under review by other state, local, and federal agencies. The Division coordinates analysis and written comment on public and private land proposals that affect fish or wildlife habitat. Division staff are also responsible for the Geographic Information System that contains standardized fish, wildlife, and habitat databases to assist in decision-making.

Statutory law in Oregon requires or permits Fish and Wildlife Department involvement in actions conducted by a number of other state agencies. The Habitat Division provides the agency involvement with the actions of the Departments of Agriculture, Environmental Quality, Forestry, Geology and Mineral Industries, Water Resources, the Division of State Lands, and the Office of Energy. The Division was directed to participate in the review of hydroelectric reauthorization projects with the passage of HB 2119 (1997). Federal laws also require federal agencies or their applicants to consult with ODFW on environment and habitat issues.

The Habitat Division receives Other Funds revenue from hunter and angler license and tag sales and from hydroelectric permit application fees. Federal Funds include revenue from the Federal Wallop-Breaux and Pittman-Robertson Funds. The Division also receives Federal Funds through contractual agreements with the U.S. Department of Energy, Department of the Interior, Environmental Protection Agency, and National Biological Service.

The recommended budget for the Habitat Division was 2.0 percent lower than 1997-99 estimated expenditures, primarily due to shortfalls from declining fee revenues. The proposed budget was funded at the current service level including the reduction of $201,077 Other Funds and one position due to the revenue declines. The eliminated position (Natural Resource Specialist 4) was responsible for statistical analysis of wildlife population and habitat data gathering. The program experiences a net loss of three positions from the 1997-99 approved budget. The recommended budget included no program option packages.

The legislatively adopted budget for the Habitat Division of $5.2 million is 11.4 percent more than recommended by the Governor and 9.2 percent higher than the 1997-99 estimated levels. The increase is the result of three technical adjustments that provided additional Federal Funds expenditure limitation ($96,000) for support of a limited duration Information Systems Specialist position, additional Other Funds expenditure limitation ($92,000) for higher than anticipated revenues from hydroelectric contracts through the Water Resources Department, and additional Other Funds expenditure limitation ($400,000) for Natural Resource Damage Assessment Program activities. The Division's adopted budget also includes a $50,000 General Fund reduction from miscellaneous services and supplies as an operating efficiency measure.

The Oregon State Police, Fish and Wildlife Division's primary responsibility is to ensure compliance with laws that protect and enhance the long-term health and use of the state's fish and wildlife resources, including recreational and commercial fishing laws and regulations and hunting laws. The Department of Fish and Wildlife contracts with the Oregon State Police to provide these law enforcement services. These enforcement positions are included in the State Police budget. Officers in the Fish and Wildlife Division also routinely enforce traffic, criminal, boating, livestock, and environmental laws and respond to emergency situations.

The State Police Fish and Wildlife Division receives General Fund support directly through the Oregon State Police Department budget and Other Funds revenue from the Department of Fish and Wildlife. The Department of Fish and Wildlife provides approximately 68 percent of the operating costs of the State Police Fish and Wildlife Division. The revenue provided by ODFW represents equal shares of fishing and hunting license resources.

The State Police Fish and Wildlife Division is more frequently being called upon to investigate natural resource violations outside of its direct fish and wildlife function. Examples include fill and removal, water quantity and quality, water pollution, and forest practices violations. One member of the Division has been assigned to work with the Department of Environmental Quality to investigate environmental crimes. The Division also serves a vital function in the Oregon Plan by providing enforcement of laws designed to protect the remaining salmon populations. Thirteen members of the Division were assigned to specifically work enforcement issues related to the implementation of the Oregon Plan. While this action will have a positive effect on efforts to protect salmon, the practical effect was a shifting of five game officer positions from Central and Eastern Oregon to Western Oregon.

The Governor's recommended budget for the State Police Fish and Wildlife Division was 32.1 percent above 1997-99 estimated expenditures. The total recommended budget of $16.2 million included $2.45 million of Ballot Measure 66 Lottery Funds for enhancement of enforcement activities. The recommended budget also included an additional $1.1 million from proposed fee increase revenues to be transferred to the State Police for enforcement. The combination of additional fee revenues and the infusion of Measure 66 lottery revenues would have restored 23 positions either lost previously or in jeopardy of elimination in 1999-01 due to revenue shortfalls. The recommended budget also enabled the Division to add five new positions for location in Central and Eastern Oregon to replace officers that were shifted to the Oregon Plan effort on the coast and Columbia River region in the 1997-99 biennium.

The legislatively adopted budget for the Department of Fish and Wildlife's contract with the Oregon State Police was reduced from the Governor's recommended level by $5.5 million, or a reduction of over 34 percent. The legislature, however, provided additional funding for fish and wildlife enforcement activities directly to the State Police instead of passing the funding through the Department of Fish and Wildlife. The adopted budget reduces the amount of Other Funds available for transfer to the State Police by $1.9 million to match revenues from the restructured fee increase. The legislature dealt with another proposed transfer of $2.5 million from the Department to the State Police Fish and Game Division by directly providing $1.5 million General Fund and $743,000 Ballot Measure 66 Lottery Funds in Senate Bill 5549 to the Division for support of 23 vacant positions. The legislature also established mimimum staffing levels by directing the Division to have between 101 and 115 sergeants and troopers assigned to field enforcement activities. In the adopted budget, the legislature was unable to fund the additional five positions moved from Eastern and Central Oregon during the 1997-99 biennium.

The Administration Division provides general support functions to all programs of the agency. The Division includes the Office of the Director, the Fish and Wildlife Commission, Commercial Fishery Permit Boards, Human Resources, Information and Education, and the Administrative Services Division. The Division is responsible for implementation and development of the Strategic Operational Plan and for management of the Point-of-Sale licensing system.

The Point-of-Sale licensing system was approved for development in the 1997-99 biennium after the vendor providing the previous system indicated its planned withdrawal of support. The new system was developed using internet technology for installation in all license agent locations, approximately 600 sites. The system provides benefits to both the agents and the Department.

The Division is financed through a combination of General Fund, Other Funds, and Federal Funds. Other Funds include license and tag sales, federal indirect cost recovery, and small amounts of miscellaneous revenue, such as interest from certificates of participation, donations, and miscellaneous sales. Federal Funds are received from the U.S. Fish and Wildlife Service in support of the Hunter Education and Aquatic Education Programs in the Information and Education Section.

The operational costs of the Point-of-Sale licensing system are paid out of an agent fee collected on each transaction. One-half of the fee is retained by the agent with the other half transferred to the Department. The costs of development and roll-out of the new POS system were financed with the sale of $3.0 million in Certificates of Participation.

The agency's budget development process for the 1999-01 biennium was initiated through the development of the Strategic Operational Plan. The Plan was developed to guide agency decision-making on budget challenges over the next six years. The agency presented the budget plan to the public at a series of public meetings in April and May 1998. Based on the responses to the plan, the Department made several changes in priorities especially in the areas of field biologists and law enforcement.

The Governor's recommended budget for the Department's Administration Division was 3.5 percent below estimated expenditures for 1997-99 and included a net increase of one position. Due to the projected revenue shortfall, the recommended budget included a revenue reduction package that eliminated 18 positions (17.83 FTE) and reduced Other Funds revenues by $5.8 million. The budget proposed to restore the reduction with almost $4.0 million General Fund and $1.9 million Other Funds. The additional General Fund would be used to pay for state government service charges assessed by the Department of Administrative Services. These charges historically have been paid out of license fee revenues. The additional Other Funds represents increased revenues from the proposed angler and hunter license fee increase.

After identifying the potential revenue shortfall of approximately $10.5 million for the 1999-01 biennium, the Department held a series of public meetings throughout the state to discuss the situation and receive public input concerning solutions to the problem. The Department's solution was to increase license and tag fees. The public response at the meetings indicated that support for a fee increase was conditional on making sure the additional revenue would be used to support field biologists and enforcement activities and not be directed toward additional administrative expenses. In order to maximize the amount of fee revenue available for field activities, the recommended budget included an increase of General Fund to pay for a larger portion of the agency's administrative expenses. This shift was based on the contention that the general public shares in the benefits provided by the agency's programs and should share more in the costs of providing those programs instead of relying heavily on anglers and hunters. By providing General Fund for administrative expenses, the Department's recommended budget was able to restore the field and enforcement positions threatened to be lost due to declining Other Funds revenues.

The recommended budget also included a program option package to use $82,661 Federal Funds for a limited duration position (Program Technician 1) to coordinate the establishment of a Watchable Wildlife program. A Watchable Wildlife program represents another way for the agency to diversify its constituency. The program will involve the design and placement of watchable wildlife sites and interpretive facilities and the coordination of community education/outreach events and activities.

The legislatively adopted budget for the Administration Division of $23.8 million is down 0.2 percent from the Governor's recommended amount and 3.7 percent below the 1997-99 estimated expenditures. The adopted budget did not approve the use of General Fund for state government service charges and instead directs the agency to continue using Other Funds sources of revenue to pay for these expenses. The legislature reduced the Division's base budget by $50,000 General Fund from miscellaneous licensing activities as an efficiency measure. Senate Bill 5511 provides an additional $321,000 General Fund to establish six positions for additional services in the point-of-sale licensing system in order to maintain and improve service levels to customers and agents. The restructured fee structure in House Bill 2100 includes an increase of $0.50 in the point-of-sale agent fee to be split between the Department and agents selling licenses and tags.

Nonlimited expenditures finance payment of debt service on previously issued Certificates of Participation for the Point-of-Sale computer upgrade and headquarters office building.

Debt service is financed from Department Other Funds revenue sources; the Point-of-Sale system is supported by half of the $1.00 agent fee charged on all transactions.

The Governor's recommended budget funded the Nonlimited program at the current service level, down 22.1 percent from the 1997-99 estimated expenditures. The decrease represented an adjustment for one-time costs associated with development of the new Point-of-Sale licensing system.

The legislatively adopted budget was approved at the Governor's recommended level.

The Capital Improvement budget finances hatchery and wildlife management area facility repairs and improvements. Projects include diking, nesting, and water control, repairs to roads, channels, intakes, and ponds, and installation of bird netting. The 1997 Legislature approved a limited duration position for clerical support to the Restoration and Enhancement Board, funded by surcharge revenues.

The Oregon Fisheries Restoration and Enhancement Act of 1989 authorized a surcharge on commercial and recreational licenses and poundage fees to finance fish restoration and enhancement. The 1997 Legislature not only extended the sunset of the surcharge for the Restoration and Enhancement Program, but increased the amount of the surcharge from $2

to $5. A portion of the additional revenue generated by the surcharge increase was directed to supplement funding for the Oregon Plan's Watershed Improvement Grant Fund. Lottery funds supplemented the Capital Improvement budget in 1995-97, but were shifted to the General Fund in 1997-99.

The 1994 Biennial Report on the Status of Wild Fish in Oregon proposed hatchery modifications. Generally, hatchery facilities are aging and need improvements to water supplies and waste water systems. A Hatchery Maintenance Study, completed at the request of the 1993 Legislature, estimated the following maintenance needs - hatcheries, $267.4 million; housing, $17.5 million; and liberation equipment, $1.4 million.

The recommended budget for the Capital Improvement program was funded at the current service level, 20.3 percent higher than 1997-99 estimated expenditures. The proposed budget continued a limited duration Office Specialist 2 position as permanent in order to address workload levels associated with the increased revenues available from the Restoration and Enhancement Board programs.

The legislatively adopted budget reduces the Other Funds expenditure limitation for Capital Improvements by $3.1 million due to the restructuring of the fee increase proposed by the Department in House Bill 2100. In order to provide additional fee revenues to the Department for operating expenses, HB 2100 includes a provision to return the Restoration and Enhancement Board surcharges to pre-1998 levels. The surcharge had been increased from $2 on a regular fishing license to $5 as part of the Oregon Plan strategy. A portion of these additional revenues from the surcharge increase had been dedicated to the Watershed Improvement Grant Fund, administered by the Governor's Watershed Enhancement Board as part of the implementation of the Oregon Plan. The restoration of the pre-1998 surcharge levels enabled the legislature to continue the previous level of R&E Board activity while providing additional revenues to fill the budget hole facing the Department's operations.

The Capital Construction budget is for major construction or acquisition projects. Projects proposed for the 1999-01 biennium are reconstruction of the Willamette Falls Fishway, remodeling of the Battery A ponds at the Bonneville Hatchery, and modifications to the Adult Holding/Acclimation ponds at Bonneville.

The Capital Construction budget for 1999-01 is entirely funded by Federal Funds ($8.4 million).

The Capital Construction budget was recommended at the current service level of $8.4 million. The budget anticipated an increase of $500,000 in Federal Funds over 1997-99 estimated levels, an increase of 6.3 percent.

The legislatively adopted budget for Capital Construction was approved at the Governor's recommended level.

LFO Analyst: Rocco

The Protection from Fire program provides fire protection for nearly 16 million acres of private, state, and federal lands, operates an industrial fire prevention program, and, through the Emergency Fire Cost Committee, finances costs of catastrophic fires. Of the total acreage, 12.1 million is privately owned, 1.2 million is state and local government land, and 2.5 million is federal, mostly Bureau of Land Management (BLM) Western Oregon lands. The total acreage has a current estimated value at risk of approximately $60 billion. The program finances costs for central and field administration, fire suppression crews, facilities maintenance, fire cache, communications, and weather and mapping services. Program services are delivered through thirteen forest protection districts including three locally managed Forest Protective Associations. Over one-third of all agency positions are assigned to this program.

The legislature combined two other program units with the Protection from Fire program in 1995. The four-member Emergency Fire Cost Committee is all forest landowners or their representatives. They manage the Oregon Forest Land Protection Fund (OFLPF) which is used to purchase insurance for catastrophic fires and to equalize extraordinary fire costs among forest protection districts. The Cooperative Fire Program contracts forest management services to public and private forest landowners. The purpose is to maintain trained fire suppression personnel through the off-season and to maximize the use of public services through the sharing of resources. Both programs are entirely Other funded.

The State's Protection from Fire program is provided in three levels with separate funding mechanisms:

• Base Protection - ODF's base protection program is delivered through ten local Forest Protection Districts and three private Forest Protective Associations. Each of the local fire protection units prepares an operating budget for prevention, detection, resource readiness, initial attack, and extra cost deductible. The revenue to support the local budgets comes from a combination of the Public Share Fire Fund (General Fund) and forest patrol assessments on local forest landowners. The assessment system includes more than 291,000 parcels, with and without improvements. The distribution is established in statute as 50% General Fund, 50% landowner assessment. Legislative action has modified the share to 45% General Fund, 55% landowner assessment for each of the last three biennia. Since each local budget is developed independently, the forest patrol assessments charged against subject landowners vary by district. The assessments are collected by county assessors and are made on a per acre basis with a minimum assessment of $18.00 per lot. Public landowners receive no General Fund match and pay the full cost of fire protection.
• Emergency Protection -The purpose of emergency protection is to pay for the excess fire suppression costs of major fires in Oregon. The enabling legislation is based on the belief that the emergency fire suppression costs on forest lands protected by the State Forester need to be equalized so that no single district is required to pay the full amount of fire fighting expenses. Funding for emergency costs is provided through the Oregon Forest Land Protection Fund (OFLPF), administered by the Emergency Fire Cost Committee. The OFLPF essentially serves as an insurance policy for local landowners in each of the fire protection districts. Revenues to support the OFLPF are estimated to be $14.95 million in 1999-01, and are generated from an assortment of landowner assessments and taxes:

• harvest tax of $0.50/million board feet (mbf) on all merchantable forest products ($4 million);
• acreage assessment on all protected forest land ($.04 per acre for Westside timber acres, $.06 per acre for Eastside timber acres, and $.06 per acre for all grazing acres) ($1.45 million);
• assessment of $3.00 per lot (out of the $18.00 minimum assessed for forest patrol) ($1.04 million);
• surcharge of $38.00 for each improved tax lot ($7.95 million); and
• interest from State Treasurer investments of the fund ($.51 million).

• Catastrophic Protection - State law requires the purchase of insurance to cover the fire suppression costs during catastrophic fire situations when expenses could exceed the capacity of the OFLPF. The current insurance policy provides $43 million total insurance with an annual deductible of $10 million and an annual premium of $2.4 million. Also by statute, the landowners' responsibility is limited to $10 million per year, including the cost of insurance premiums and all claims paid to local districts from the OFLPF. Beyond this limit, the cost responsibility falls on the General Fund.

Fire suppression efforts and costs are driven by forest health (insect and disease damage) and weather (drought and lightning storms) and cannot be predicted with certainty. Over 7.5 million acres of forestland in eastern and southern Oregon are suffering from poor forest health and remain untreated. The last decade of drought has impacted much of Oregon's forests. In addition, the siting of dwellings and other improvements on forest lands continues to increase the challenges to fire managers. Federal budget cuts and Measures 5 and 47 have decreased existing wildfire protection levels by reducing firefighting resources and revenues.

The Governor's recommended budget of $68.36 million was a 9 percent increase over the 1997-99 estimated expenditures. Most of the General Fund increase would return the Protection assessment program to the statutorily-required 50:50 distribution between the General Fund and private forest landowners. The legislature has approved a 45:55 split since 1991. The Governor's budget also recommended a $673,310 Other Funds enhancement to the Cooperative program, which provides summer firefighting teams for Forestry and winter workers for the Oregon Department of Transportation (ODOT). The 9.5 FTE included in the package are shared with ODOT, which reimburses ODF for its costs.

The legislature made the following changes to the Governor's recommended budget:

• a vacancy savings reduction of $18,810 General Fund;
• elimination of seven positions vacant more than one year ($96,326 General Fund, $265,289 Other Funds, 3.94 FTE); and
• a $300,000 General Fund reduction to the package returning the program to the 50:50 distribution.

Internal savings will be used to offset the program's share of new debt service for the Capital Construction project ($78,212 General Fund, $200,544 Other Funds).

The budget adopted for the Fire Protection program was based on the return to the 50:50 distribution between General Fund and landowner assessment, which is statutorily required. In addition to the $1.5 million General Fund package approved, $2.16 million General Fund was added to the Department's base budget. The addition of 23 positions in the ODOT Cooperative work program was also approved. The legislatively adopted budget of $67.35 million is a 7.4 percent increase over 1997-99 estimated expenditures.

The State Forest Management Program manages 786,000 acres of state forest lands on behalf of the counties and the Common School Fund. The Board of Forestry owns nearly 85 percent (654,000) of these acres, including the five state forests (Tillamook, Clatsop, Santiam, Sun Pass, and Elliot). Title to these lands was transferred in the 1930's and 1940's by the counties. The remaining 132,000 acres are the Common School Lands, which are managed by ODF under contract for the State Land Board. The primary goal of the program is to provide for healthy, productive, and sustainable forests through active management that will produce sustainable timber and revenue on Board of Forestry lands and maximize revenue over the long term on Common School Lands.

The Department participates in a cooperative tree improvement effort with other major landowners to increase the yield and quality of forest products. The State Forest Management Program also operates the J.E Schroeder Seed Orchard in Elton to provide improved tree seed for planting on state land, on non-industrial landowner properties, and on 13 industrial lands whose owners share orchard expenditures.

The State Forest Management Program is entirely self-financed from timber sales and the sale of special forest products. The Department retains 36.25 percent of timber sales for management of the county trust lands. The remaining 63.8 percent is distributed to the counties and local taxing districts where the forest land is located. ODF projects the state's share of timber sales to be $33-40 million for 1999-01. The agency is reimbursed for Common School Fund land management costs and the remaining revenue goes to the Common School Fund. Management costs are approved by both the Board of Forestry and the State Land Board. The timber market is projected to drop slightly from current levels and then remain relatively stable over the next biennium. Board of Forestry lands are expected to generate $57 million for counties and local taxing districts, and timber sales from Common School Fund lands will generate $38 million in revenue during the 1999-01 biennium.

The level of forest management on county trust lands is dependent on timber receipts. The Department must be careful to meet the statutory and constitutional fiduciary responsibilities through timber harvests while protecting and making available the other forest values. The program will plant 6,900 acres with trees and seeds, fertilize and prune 28,400 acres, and thin 27,600 acres of trees during the 1999-01 biennium.

The Governor's recommended budget of $55.3 million Other Funds was a 3 percent increase over the 1997-99 estimated expenditure level. The budget included $87,969 and .95 FTE to continue implementation of the Oregon Plan for Salmon and Steelhead Recovery. Also in the proposed budget was $2.1 million and 17.51 FTE for the State Forestland Investment program, consisting of five elements: 1) accelerate active management; 2) invest in comprehensive forest inventory and watershed assessment; 3) enhance public participation; 4) update and improve timber revenue accounting systems; and 5) improve resource management decision making.

The adopted budget makes a minor change to the Governor's recommended level to reflect a reduction in Attorney General hourly fees of $3,174 Other Funds. The Department indicated that it did not need the funding for its State Forestland Investment package, so $2.1 million Other Funds limitation was removed. The 21 positions (17.51 FTE) will still be needed.

Legislation was passed allowing donations to the proposed Tillamook Forest Interpretive Center. If the Department completes fundraising for the Center prior to the 2001-03 biennium, it may request expenditure authorization from the Emergency Board.

The Forest Practices Act, initiated in 1971, regulates timber harvesting and reforestation on 12.3 million acres of private, state, and county owned forest lands. The statutory objective is the promotion of forest management practices consistent with sound management of soil, air, water, fish and wildlife resources. The program's goals are to ensure that the continuous growing and harvesting of forest tree species and the use of forestland for these purposes is maintained as the leading use of privately owned forestland, and to ensure forest practices are consistent with the sound management of soil, air, water, fish and wildlife resources. The Forest Practices Act has been revised each legislative session since 1979, including major amendments in 1987 and 1991 to change the requirements governing stream protection, clear-cuts, reforestation, and scenic highway corridors. Staffing includes 54 Forest Practice Foresters across the state who review harvest plans and inspect operations for compliance. The Forest Practices program is also responsible for the Smoke Management/Fuels program using a total of 3.71 FTE positions. Smoke Management/Fuel regulates prescribed burning on all forest lands in Oregon in compliance with federal and state air quality standards.

The Forest Practices program is funded by a combination of 60 percent General Fund and 40 percent Forest Products Harvest Tax (FPHT). The harvest tax rate is set in statute each biennium once the FPHT budget is finalized, based on projections of harvest levels and the amount of revenue needed for program operations. The Smoke Management/Fuels program is funded by registration and burning fees collected from landowners (38 percent), General Fund (30 percent), harvest tax (19 percent), contractual payments from other government agencies (12 percent), and landowner assessments (1 percent).

Forest Practices workload has steadily increased as cutting on private lands accelerated due, at least in part, to federal supply cutbacks and increased timber values. Until 1988, "notices of operations" (intent to log) averaged about 10,000 annually. For the 1999-01 biennium, the Department anticipates processing over 20,000 notifications of operations per year, plus reviewing 3,000 written plans describing operating methods on sensitive sites, and conducting more than 17,000 on-site inspections for pre-operation planning, active operations, and reforestation auditing. Other factors affecting the Forest Practices program include implementation of the Oregon Plan; participation in the Healthy Streams Partnership; public concern about landslides on forestland, clearcutting, and the use of pesticides; increased workload necessary to achieve reforestation requirements; and a 15 percent increase in enforcement cases anticipated due to owl cases and "Free to Grow" regulations which began in 1997.

The Governor's recommended budget of $13.9 million was an 11.4 percent increase over the 1997-99 estimated expenditure level. A $632,378 package was included which would continue implementation of the Oregon Plan for Salmon. This proposal included $160,427 General Fund, $252,951 Other Funds, $219,000 Lottery Funds and 5.7 FTE.

The Oregon Plan implementation package was not included in the Department's budget bill, but is funded in Senate Bill 5549, which distributes Measure 66 lottery funds. SB 5549 funded the package with $379,427 Lottery Funds, $252,951 Other Funds, and 6.7 FTE. In addition, the following reductions were approved:

• The inflation rate for Professional Services contracts was lowered ($10,000 General Fund , $6,667 Other Funds).
• One position vacant more than one year was eliminated ($25,192 General Fund, $16,795 Other Funds, 0.56 FTE).
• Services and Supplies were reduced for savings ($100,000 General Fund, $66,667 Other Funds).

Internal savings will be used to offset the program's share of new debt service for the Capital Construction project ($93,854 General Fund, $62,569 Other Funds).

Senate Bill 12, the product of the Joint Interim Task Force on Landslides and Public Safety, establishes policy for protection of the public from rapidly moving landslides. In the bill, the legislature appropriated $224,000 General Fund and three positions (1.88 FTE) for the Department. Additional field staff will be required for geotechnical review and coordination with local governments to review construction activity near landslide-prone terrain.

The legislatively adopted budget of $13.7 million is a 10 percent increase over 1997-99 estimated expenditures.

The Forestry Assistance program's primary objective is to provide forest landowners and managers with the information, incentives, services, and assistance needed to encourage a voluntary investment in their forest land beyond the required standards. Oregon has approximately 166,000 non-industrial private forest landowners (NIPFLO) and community forest managers owning a combined 4.5 million acres. This acreage includes critical habitat for salmon and other fish and wildlife species and has the potential for increased harvest productivity. Forestry Assistance consists of three sub-programs:

• Service Forestry - provides technical and financial assistance to non-industrial private landowners on multiple resource management, forest property tax policies and options, federal cost-share programs, the Forest Resource Trust, and insect and disease prevention.
• Forest Health - surveys, evaluates, and monitors forest insects and diseases, and provides information, education, and advice on integrated pest management practices for non-federal forest landowners.
• Urban and Community Forestry - provides leadership and technical services to support the stewardship of the state's urban and community forests.

The Forestry Assistance services are provided through fifteen geographic service districts, thirteen with part-time service foresters and two with full-time service foresters.

1999-01 Forestry Assistance program projected revenues:

• General Fund of $897,257 for insect and disease activities, including integrated pest management services; and $567,393 matched with harvest tax on a 50/50 basis to provide information and technical assistance to NIPFLO.
• Federal Funds of about $1.4 million, provided through the U.S. Forest Service for stewardship, forest resource management, and forest pest management activities and requiring a 50 percent match provided through the Forest Protection budget. Federal funds for the Urban and Community Forestry and Stewardship Incentives Program do not require a state match.
• Other Funds revenue of around $2.3 million, received through the administration of the Western Oregon Small Tract Optional Tax (WOSTOT), the 30 percent Reforestation Tax Credit Program, and private donations to the Forest Resources Trust. Budget Environment.

Healthy, productive forests and abundant salmon populations make Oregon attractive to new businesses and tourists. Forest health remains a critical issue for the state's economy. About 8.2 million acres of Oregon's forests have been affected by drought, insects, disease and fire. The state loses about 1.6 billion board feet of timber every year to insects and disease. Forest managers are concerned about declines in the coastal Douglas-fir forests due to needle diseases, nutrient deficiencies, and weather factors. Dead and dying forests in Eastern Oregon due to past insect infestation need treatment in order to reduce fire hazards and replenish the forest stocks. Many wild salmon and trout populations have declined to all-time low numbers. Assistance is also needed for over 166,000 non-industrial private forest land owners regarding the potential listing of threatened and endangered species.

The Governor's recommended budget of $7.7 million funded the Forestry Assistance program at the current service level.

The legislature made the following adjustments to the Governor's recommended budget:

• General Fund was reduced $2,548 due to the decrease in Attorney General hourly fees from $92 to $90.
• Two positions vacant for more than one year were eliminated saving $52,883 General Fund and $37,329 Other Funds (1.2 FTE).
• General Fund was reduced $85,327 for technical assistance to forestland owners.
• Debt Service for the Capital Construction project of $68,585 General Fund will be offset by internal savings.

The legislatively adopted budget of $7.5 million is a 3.3 percent decrease from 1997-99 estimated expenditures.

The agency proposed a revision to its budget, adding a package of $5 million Federal Funds and 10 FTE for a federal program to improve salmon habitat, expand the forestland base by reforestation, convert under-producing forestlands into productive healthy forests, sequester carbon, and provide a state/federal/private partnership model for other states. Because of delays in the program and uncertainty regarding the timing and funding amounts, the legislature recommended the agency return to the Emergency Board for expenditure limitation and positions when the program is finalized.

Agency Administration includes the State Forester's office and traditional support functions such as finance, property management, personnel, computer services, and public information. Agency Administration is also responsible for policy development, forest resource analysis and planning, administration of the log brand inspection program, land use planning coordination, and facilities maintenance.

Agency Administration is funded by the General Fund (50 percent) and Other Funds (50 percent) assessed against agency programs on a pro-rated basis.

The Governor's recommended budget of $19.9 million for the Agency Administration program was a 36 percent increase over the 1997-99 estimated expenditure level. The proposed budget included $1.9 million Other Funds and 1.0 FTE for establishment of a department facilities manager and expansion of the scope of the Facilities Management, Maintenance and Replacement program. A separate dedicated interest-bearing account would be established to construct, operate, maintain, repair, replace, improve and dispose of real property and facilities for the Department on a statewide basis. The Governor's budget also included debt service of nearly $1.7 million, of which $1.1 million was existing debt and the remainder was new debt for capital improvements and capital construction. Also included was a $130,000 Other Funds package to increase the limitation for donations to the Forest Assessment Project. The project will describe the condition and trends pertaining to forest resource values, services and products.

The Governor's budget was adjusted as follows:

• An increase was made in state government service charges ($1,920 General Fund, $1,117 Other Funds).
• Department of Administrative Services and Secretary of State audit assessment charges were revised, with a net adjustment of $26,630 total funds.
• Support for the Governor's Natural Resource Office was eliminated, $180,389 General Fund.
• Resource planning activities were reduced, $41,192 General Fund, $27,461 Other Funds.

New debt service costs for the Department were reduced by delaying the sale of certificates of participation which will fund the Capital Construction project, saving $96,788 General Fund and $83,941 Other Funds. The remaining debt service costs will be offset by internal savings within the agency's Protection, Practices, and Assistance programs.

The legislatively adopted budget of $19.8 million is a 35.5 percent increase over 1997-99 estimated expenditures. Most of the increase is the result of approval of the Facilities Maintenance package, inflation, and debt service for Phase 2 of the Capital Construction project.

The Department's budget includes two nonlimited programs: the Equipment Pool and the D.L. Phipps Nursery.

• The Equipment Pool operates a motor pool of 525 vehicles and other pieces of equipment including airplanes, pickups, trailers, and heavy equipment; and a radio pool of 4,100 pieces of major communication equipment. The radio pool serves other agencies, such as the Departments of Forestry, Agriculture, Parks, Fish & Wildlife, Water Resources, Justice, State Fair, and Corrections. 1997-99 estimated expenditures: $9.7 million; 31.5 FTE.
• The Nursery provides quality, genetically adapted, tree seedlings to forest landowners for public and private reforestation. Currently about 50 percent of the Nursery's annual production goes to nonindustrial woodland owners, 28 percent to the forest industry, 12 percent to state forests, and 10 percent to the Bureau of Land Management. 1997-99 estimated expenditures : $5.7 million; 60.14 FTE.

Expenditures for both programs are nonlimited and financed 100 percent from sales and service charges. Equipment Pool fees are charged based on cost plus replacement. Fees charged by the Nursery change depending upon costs.

Both operations function on the business model and adjust expenditure levels to available revenue.

The Governor's recommended budget funded the Equipment Pool and Nursery at the current service level.

The legislature approved the Governor's recommended budget. The legislatively adopted budget for the Equipment Pool is $10.2 million, 31.65 FTE, and for the Nursery, $6.0 million, 60.14 FTE.

The Department owns and maintains 399 structures statewide. Examples include mountaintop lookout facilities, fuel facilities, remote guard stations, district offices, seed and seedling processing facilities, and automotive maintenance shops. Many buildings need either interior and exterior improvement or major construction because of age, type of construction and growth of the agency.

Generally costs are prorated among the funding sources of the programs that occupy the specific facility.

Many of the Department's structures were built in the 1930's, 40's and 50's, and are in need of renovation to prevent further deterioration and to meet new standards such as the Americans with Disabilities Act requirements. An architectural feasibility study of the Salem Headquarters site was completed during the 1993-95 biennium. The Department completed a long-range facilities management plan during the 1995-97 biennium to coordinate major maintenance, improvement, and construction needs over the next ten years. The plan envisions a mix of remodeled and new construction which preserves sites listed on the National Register of Historic Places and consolidates departmental operations. Construction plans call for two phases of construction for the Salem compound implemented over a four to six year period, with completion anticipated during the 2001-03 biennium.

The Governor's recommended budget would provide $11.7 million Other Funds to begin the second and final phase of the long-range capital construction plan to construct, relocate and remodel office and shop facilities in Salem. The budget included $600,000 for continued work on the Tillamook Forest Interpretive Center, the Forest Grove Compound, and the Tillamook District Headquarters Compound. The Salem compound portion of the project will be financed by sale of certificates of participation. Also proposed was $2.14 million Other Funds for capital improvements to facilities around Oregon, including Astoria, Klamath Falls, Coos Bay, Sisters, Tillamook, Forest Grove, Medford, Roseburg, Springfield, Philomath, Mollala, Santiam, and Schroeder Seed Orchard in Elkton.

The legislature approved the Governor's recommended budget, including a revision to the Capital Construction project which added $346,762 Other Funds for one-time finance costs associated with the new certificates of participation.

LFO Analyst: Rocco

The Department of Geology and Mineral Industries (DOGAMI) is the state's primary source of geologic information. DOGAMI gathers data and maps the state's geology including geologic minerals and hazards. The agency is also responsible for administering surface mining regulations. Department headquarters are located in Portland with the Mined Land Reclamation unit sited in Albany. Two small Geologic Survey offices are located in Baker City and Grants Pass. Employees of the Department are primarily geologists. Funding is from multiple sources including the General Fund, grants from federal and other state agencies, and fees. Agency clients include the mining industry, general public, and various state and local agencies that use geologic information.

The Geologic Investigations unit gathers geologic data and maps mineral resources and hazards. Earthquake preparedness and tsunami hazard mapping receive a high priority. Geographic areas needing tsunami hazard mapping, ground response studies, and earthquake risk mapping have been prioritized by the agency. The information is shared with state and local policy-makers for land use planning, facility siting, building code and zoning changes, and emergency planning. The Department uses economic demand modeling for aggregate materials to guide conservation and production of the resource. The Geologic Investigations program also regulates oil, natural gas, and geothermal exploration and extraction.

Federal Funds made up 37 percent of the total Geologic Investigation's budget in 1997-99. The unusually high federal funding was due to two FEMA grants totaling $1.6 million. The grants provided for metro seismic ground response evaluation and seismic retrofit for Weatherford Hall at Oregon State University. These two grants will end in July 1999. Federal Funds are expected to be only 22 percent of Geologic Investigations total budget during 1999-01. This is a comparable percentage to previous biennia. The U.S. Geologic Survey, U.S. Bureau of land Management, Federal Emergency Management Agency, National Oceanic and Atmospheric Administration and other Federal bureaus provide Federal Funds. Federal funding often requires matching General Fund.

Two of the agency's major goals are to reduce losses from geologic hazards and to inventory the state's mineral and water resources. The basis for hazard mitigation planning is data collection and the development of ground response models. Funding limitations have restricted data collection and modeling functions. This will adversely affect the agency's ability to provide hazard mitigation information and analysis for local communities. The current service level does not provide for tsunami, earthquake and landslide hazard mapping in several communities that are classified as high or moderate risk.

The Governor's recommended budget for Geologic Investigations was $1.9 million General Fund and $3.4 million total funds. This is a 26.7 percent decrease in total funds from the 1997-99 estimated expenditures. The decrease was primarily due to the elimination of one-time federal grants within Geologic Investigations. The recommended budget continued all current agency programs and increased General Fund by $250,000 to set up a coastal field office to address geologic hazard issues.

The legislatively adopted budget for the Geologic Investigations unit included $1.8 million General Fund and $3.3 million total funds. The General Fund appropriation represents an increase of 21.1 percent from the 1997-99 estimated level. The legislature approved the concept of a coastal field office in the agency's budget bill, Senate Bill 5516, and authorized the establishment of a position to assist with defining hazard zones and helping coastal communities with hazard awareness, preparation, and mitigation. Funding for the position was initially directed to be absorbed within the agency's base budget. With approval of Senate Bill 12, however, the legislature was subsequently able to fund the position and one additional limited duration position with $247,745 General Fund. Senate Bill 12 directs the Department to provide help to local governments with mapping and technical assistance needs in identifying landslide hazards. Despite the statewide focus of Senate Bill 12, the agency was directed to use the position approved as part of the coastal field office proposal to assist with implementation of the measure's landslide requirements.

The Geologic Investigations unit adopted budget also included a General Fund efficiency reduction of $65,185 from a combination of professional services and publication expenses. The legislature further reduced the base budget by $55,185 General Fund and provided the amount as a special purpose appropriation to the Emergency Board for allocation to the agency after presentation of an acceptable plan on the proposed use of these resources.

The Mined Land Reclamation program provides oversight and regulation for approximately 6,100 acres of surface mining activities and chemical leach mines in Oregon. The program's purpose is to provide for beneficial uses of the land after the mining use has terminated. The objectives are to conserve the mineral resource and protect the environment while providing for the economic uses of the mined materials. The program has reclaimed a total of over 4,000 acres once dedicated to mining.

The program is financed primarily from Other Funds derived from aggregate and metal mine permit fees and, in the case of chemical process mines, from cost reimbursements. Federal Funds from the Environmental Protection Agency (EPA) finance a tri-state training program on mining regulation. It is anticipated the EPA grant ($200,000) will continue into the 1999-01 biennium. Nonlimited expenditures are for reclamation work financed from forfeited bonds and security deposits.

There are approximately 810 mines in the state. Although the total acres mined increased by 12.5 percent over the past three years, the rate of increase is declining. The increase in total acres mined from July 1997 to July 1998 was only 1.3 percent. Mined acres reclaimed increased by 5.8 percent for the twelve months prior to July 1998.

The recommended budget continued all existing programs.

The legislature approved the Governor's recommended budget with one minor adjustment to reflect reductions in Attorney General charges for legal services.

The Technical Support and Administration program provides agency policy direction; performs clerical and fiscal functions; maintains a specialized geologic library; publishes maps and reports; and conducts public education and outreach. The section operates the Nature of Oregon Information Center. The Center is a one-stop shopping center for resource publications for DOGAMI and other natural resource agencies.

The majority of program funding is from the General Fund. Other Funds include indirect cost recoveries from federal and other funded programs using standardized overhead rates; receipts from publication sales; and other reimbursable projects.

The Center is located on the first floor of the Portland Office Building. It makes maps, brochures, books and other materials available to the public. In addition, it serves as an in-person focal point for inquiries from the general public. Per day, the Center receives 60-100 calls, 60-100 customer walk-ins, and 150-250 pieces of mail. If the services were not provided at the Center, each participating agency would need to respond directly to requests from the public for maps, brochures, books and information. Through the Northwest Information Center, DOGAMI partners with ten state agencies and five federal agencies. For the fiscal year ending June 30, 1998, the Center's expenses ($105,499) exceeded revenues ($54,934).

The Governor's budget continued all current programs.

The legislatively adopted budget for the Technical Support and Administration unit included $1.4 million General Fund and $2.5 million total funds. Reductions from the Governor's recommended budget were due to revisions in amounts provided for Department of Administrative Services assessments and Secretary of State audit charges. The adopted budget also includes $10,000 General Fund removed from the Technical Support and Administration unit and provided as a special purpose appropriation to the Emergency Board for allocation to the agency upon receipt of a report on proposed uses of the funding for publicity and publication functions.

LFO Analyst: Rocco

The Department of Land Conservation and Development (DLCD) manages Oregon's statewide land use planning system in order to protect the state's quality of life. The goals of the Department include fostering orderly development, maintaining a clear and predictable planning system, conserving farm and forest lands, reducing the costs of public facilities and services, ensuring efficient transportation systems, protecting environmental, historic, and cultural resources, and providing citizens an opportunity to be involved in community planning.

The seven-member Land Conservation and Development Commission (LCDC), assisted by DLCD, adopts state land use goals, assures local plan compliance with the goals, coordinates state and local planning, and manages the coastal zone program. Oregon's land use planning system is based on a set of 19 statewide planning goals. The goals express the state's policies on land use and related topics, such as citizen involvement, housing, public facilities, and urbanization. The planning program is a partnership between state and local governments and relies on achievement of the planning goals through local comprehensive planning efforts.

DLCD carries out the state planning responsibilities through the processes of land use plan acknowledgment, plan amendment review, and periodic review. State law requires each city and county to have a comprehensive plan and the zoning and ordinances necessary to implement the plan. When LCDC officially approves the local government plan, the plan is "acknowledged." After acknowledgment, local plans can be changed through plan amendments, which are small, unscheduled changes, or through periodic review. Periodic review is a broad evaluation of the entire local plan and occurs every four to ten years. Periodic review can lead to extensive modification of a plan or to minor adjustments as a way of accommodating changing conditions in the area. The Department implements the state land use planning laws and assists local governments through three major programs, Operations, Grants, and Landowner Notification.

The Operations program includes the Office of the Director, Administrative Services, and four major program areas (urban, rural, ocean/coastal, and transportation growth management). In addition to the planning staff assigned to each of these program units, specialists provide technical expertise for farm and forestry lands, dispute resolution, rules, and state agency coordination.

• Urban Community Services - The urban program oversees the implementation of statewide planning goals in Oregon's 88 largest cities and Portland's Metropolitan Service District. The program uses approximately five FTE to conduct the periodic review and plan amendment review processes for the urban areas. Staff typically participate in 50 periodic reviews and more than 1,000 plan amendment reviews each year. The program also provides technical assistance and grant management for local governments. The primary issues facing the program include affordable housing, urban growth boundaries, transportation planning, public facilities and services, and industrial land. The program is primarily funded with General Fund, but receives some federal funding for coastal cities.
• Rural Community Services - The rural program oversees the implementation of statewide planning goals in Oregon's 36 counties and 150 small cities. The program uses approximately 12 FTE for periodic review and plan amendment activities. Staff provide the same services as found in the urban program, but for a different set of clientele. The primary issues facing the rural program include conservation of farm and forestland, and the protection of natural resources. Also included under the rural program is management of the Regional Problem Solving Pilot Project and the Floodplain Management Program. General Fund funds the program with some federal funding support for coastal regions.
• Ocean and Coastal Program - The ocean and coastal program oversees the implementation of statewide planning goals, with emphasis on the coastal goals, by local jurisdictions in the coastal zone. The program is also responsible for oversight of state agency application of the planning goals in the coastal zone and for Oregon's federally funded coastal zone management program and the state's ocean planning project. The program uses approximately 11 FTE to participate in periodic reviews, evaluate plan amendments, provide technical assistance, manage coastal grants, coordinate state and federal programs in the coastal zone, and staff the Ocean Policy Advisory Council. The primary issues facing the ocean and coastal program include public access to the ocean, estuaries, and other waters; development on dunes, beaches, and in estuaries; protecting ocean resources; managing coastal hazards and nonpoint pollution; and natural resource protection, including salmon habitat. The program is primarily funded under the federal Coastal Zone Management Act.
• Transportation and Growth Management Program (TGM) -- The TGM program focuses on transportation planning and the issues of managing urban growth to maintain livability within Oregon's communities. The program is a joint effort with the Oregon Department of Transportation (ODOT). DLCD's urban program provides twelve positions to work with local governments on efforts to link transportation plans with land use plans and to develop tools for managing urban growth. Staff also provides technical assistance, manage grants, and help coordinate planning and public facilities. The primary issues facing the transportation and growth management program include dealing with transportation demands, affordable housing, the cost of providing urban and transportation services, mobility, air quality, and livability. The program relies primarily on federal funds through ODOT for operations and grants.

Slightly over half of the Operations program is funded with General Fund support. Approximately one-third of the program's costs are covered by federal funds, with the remaining from various Other Funds sources. Direct federal funding is from two federal agencies, the U.S. Department of Commerce's National Oceanic and Atmospheric Administration (NOAA) and the Federal Emergency Management Agency (FEMA).

NOAA funding under the Coastal Zone Management Act (CZMA) has historically provided between 20 and 30 percent of the overall costs of the state's land use program. Department activities affecting coastal communities are eligible for federal funding since the state's land use planning program represents the core of the federally approved Oregon Coastal Management Program. The Department anticipates receiving $3.6 million in CZMA funds for the 1999-01 biennium. The General Fund provided to the program serves as the match required to receive the annual federal grant. Use of the CZMA resources is limited to services provided to coastal planning activities. While base levels of CZMA funds have declined over the past several years, the Department has been able to maintain program levels by participating in competitive grants and seeking support through other NOAA programs.

FEMA funds are used to operate the Floodplain Management Program, which is a condition of participation in the National Flood Insurance Program. FEMA funds require a 25 percent state match, which is also provided by the program's General Fund appropriation. FEMA funds are estimated at $180,000 for 1999-01 and are restricted for use in floodplain management activities.

The Operations program receives federal Intermodal Surface Transportation Efficiency Act (ISTEA) funds through ODOT as Other Funds for support of the Transportation Growth Management program. The Department projects a transfer of $2.4 million in these funds (now known as TEA-21) for the program in 1999-01. ODOT also uses Highway Funds to finance the cost of an aggregate and minerals specialist position assigned to DLCD's rural program. The Department also receives small amounts of Other Funds revenues from the sale of publications, subscriptions to plan amendment and periodic review notices, and duplicating services.

Expansion of the state's population and the resulting pressures on transportation systems and land management will increase the Department's planning workload. Growth will present challenges on coastal developments, urban growth boundary expansion, development of agricultural and rural lands, and maintenance and development of adequate infrastructure.

The Department is under a federal mandate to participate in nonpoint source water pollution planning with the Department of Environmental Quality. Federal funding for the program is uncertain, but failure to meet the standards and time lines required by the program could lead to a loss of 30% of federal coastal zone management funds to DLCD and water quality funds to DEQ.

The Governor's recommended budget for the Operations Program was 31.4 percent higher than total 1997-99 estimated expenditures and represented nearly an 18 percent increase in General Fund. The recommended budget added 10 positions (9.50 FTE), provided for reclassification of existing positions, and restored legal expenses for Attorney General costs.

The recommended budget continued currently existing programs and included the following enhancements:

• Community and Regional Development was funded as part of the Governor's Livability Challenge. The program included a total of 14 positions in four different state agencies. The Department of Land Conservation and Development received four new positions to serve on regional community development field teams. The program is designed to provide early collaboration among local governments and state agencies. Funding is provided by federal TEA-21 funds through the Department of Transportation. These funds require a 10 percent General Fund match which was included in the recommended budget.
• Healthy Streams participation was funded as part of the Oregon Plan with two new planner positions to collect, update, and map estuarine habitat data. The Healthy Streams staffing package was accompanied by a companion grant package in the Grants Program. The Governor's recommended budget assumed funding for the data collection and staffing portion ($463,355) and the grants portion ($670,000) of the Healthy Streams program would be available from the Governor's Watershed Enhancement Board (GWEB) grant program. The assumption depended on a sufficiently funded GWEB grant program and a successful DLCD application to GWEB for the funds.
• Cultural Resource protection was included in the recommended budget as a new program to protect tribal resources in city and county comprehensive plan development. The program included a new planner position to an evaluation of existing protections and develop proposed improvements. Funding for the position was proposed to be from revenues transferred by unspecified tribal governments and other state agencies.
• Natural Hazards mitigation planning was supported in the recommended budget with $50,000 of Federal Emergency Management Agency funds transferred to DLCD through the Oregon Office of Emergency Management. The funding was planned to provide assistance to local governments in preparing, adopting, and implementing natural hazard mitigation strategies.
• A new Soils Analysis program was included in the recommended budget anticipating changes in the use of certain lands based on the collection of more specific soils information than currently available. The information would be used to determine whether a parcel is composed of high-value farmland. Funding was proposed from a new fee in legislation submitted by the Department. The revenue would be used to cover the costs of an independent soil scientist for review of soil samples.
• Agency administrative functions were enhanced in the recommended budget with the addition of three new positions to provide accounting, grant coordination, and clerical support services. The budget included $211,663 General Fund to support the three new positions and a reclass of the division manager position. The positions were established to address workload issues related to additional activities undertaken by the Department over the past two biennia. The recommended budget also included Other and Federal Funds expenditure limitation for other reclassifications in a management restructuring program option package.

The recommended budget included $174,750 General Fund to restore funding for the agency's anticipated legal expenditures and $12,750 General Fund for dispute resolution costs. The additional General Fund for legal expenses represents the amount that was deducted from the agency's 1997-99 budget and provided to the Emergency Board for distribution during the interim. The Emergency Board ultimately allocated $130,510 of the amount reserved in the Emergency Fund. The dispute resolution funding was included to supplement funding received from circuit court filing fees in support of a DLCD position.

The adopted operations budget for the Department totaled $12.5 million, including $6.1 million General Fund, $2.7 million Other Funds, and $3.8 million Federal Funds. The budget represents a 17.5 percent increase from 1997-99 levels and a 10.6 percent decrease from the Governor's recommended budget. The adopted budget includes an increase of 2.50 FTE positions from the 1997-99 biennium.

The approved budget includes the addition of the Department's involvement in the Community Solutions Team with the addition of four positions funded through a combination of General Fund and federal TEA-21 funds passed through the Department of Transportation. The Community Solutions Team approach to solving local issues represented a primary component of the Livability Initiative, one of the central elements of the Governor's 1999-01 biennium budget. The 10 percent General Fund match required for receipt of the TEA funds was obtained by the legislature's decision to eliminate 1.5 FTE positions in the agency's regional development program with the expectation that these two efforts will be closely coordinated.

The adopted budget does not include proposals to add positions to assist local governments with planning efforts to comply with the requirements of the Oregon Plan for salmon and watershed protection, to add a position to provide improved levels of protection for cultural resources, and to add professional services for work related to soils analysis. These proposals were not funded due to the lack of identifiable revenues or to the failure of implementing legislation. The legislature approved a proposal to increase Other Funds limitation for natural hazard mitigation planning efforts and approved several management reclassifications of positions.

An increase of General Fund support for legal expenditures of $174,750 is included in the adopted budget. The 1997 Legislature reduced the base budget of the agency for legal services and appropriated the amount to the Emergency Board. The Board eventually allocated the majority of the amount in the reservation, but the action occurred after the 1999-01 budget development was completed. The additional General Fund restores the legal budget of the agency to 1997-99 levels. The agency was directed to report to the Emergency Board during the 1999-01 interim on the use of the funds appropriated for legal services.

DLCD awards grants to local jurisdictions for maintaining, improving and implementing comprehensive land use plans and regulations and for assisting local governments in meeting the statutory obligation for periodic review of these plans. The Grants program is intended to ensure continued compliance with the statewide planning goals through the provision of financial assistance. Grants awarded include those for periodic review, technical assistance, dispute resolution, regional problem-solving, and small city and county grants. In addition, coastal communities are eligible for small-scale construction grants for public access and waterfront development. Management of the Grants program is conducted within the Operations program; no staff positions are included in the Grants program unit.

The General Fund primarily funds the Grants Program. Other Funds represents the expenditure of dispute resolution matching funds provided by participants. The Federal Funds grant source is CZMA funds for support of the coastal management program, monitoring and assistance to local governments in the coastal zone, and special projects such as wetland planning, nonpoint pollution, and public access.

Since the 1993-95 biennium, the Department has been appropriated General Fund dollars to be transferred to each of the three Oregon counties included in the Columbia River Gorge National Scenic Area. The funds are to be used by the counties in complying with the requirements of the National Scenic Act.

The Department notifies local governments of the availability of grant funds and the grant requirements. Grants include competitive grants and grants available to any eligible local government applicant. After evaluation and review, recipients enter into an agreement with the Department regarding the specific work to be accomplished and a time schedule for completion.

The Governor's recommended budget for all funds in the Grants Program showed an increase of 15.5 percent from estimated 1997-99 expenditures. The recommended General Fund appropriation was up by only 2.8 percent from estimated 1997-99 expenditures and is unchanged from current service levels.

The recommended budget included two program option packages:

• Local Planning for Salmon Recovery and Healthy Streams provided funds to local jurisdictions for development of measures to protect water quality, aquatic habitat, and species recovery programs from the effects of land use and land development activities. The package had a companion package in the Department's Operations Program for staff to assist with data collection and grant distribution. The source of the program's $670,000 grant fund was identified in the recommended budget as the Governor's Watershed Enhancement Board's grant program for Oregon Plan activities.
• Coastal Zone Management activities were proposed for enhancement by an additional $100,000 Federal Funds for the purpose of enabling local governments to improve their capacity and ability to implement plans reducing the risks associated with natural hazards, flooding, and nonpoint source pollution.

The Governor's recommended budget did not specifically identify the continuation of grants in the amount of $20,000 for each of the three Oregon counties in the Columbia River Gorge National Scenic Area. The grants had been used in the past by the counties to offset a portion of the costs associated with implementing the land use ordinances required under the Gorge's management plan. Although the grants for the Columbia Gorge counties were not earmarked in the Governor's recommended budget, the amount is included in the current service level and available for distribution with legislative direction.

The legislatively adopted budget for the Grants Program of $3.5 million is approximately one percent below the 1997-99 estimated level and 14 percent less than the Governor's recommendation. The amount is reduced from the 1997-99 biennium primarily due to one-time grants related to the Oregon Plan and Goal 5 implementation. These funds were requested for restoration in the 1999-01 budget in the form of an option package, but were not included in the approved budget. The approved budget does include an increase in federal funds expenditure limitation to reflect anticipated increases in grant awards during the 1999-01 biennium in the coastal zone management program.

The adopted budget for the Grants Program includes a total of $240,000 General Fund for distribution to the three Oregon Columbia Gorge counties to assist with costs associated with implementation of the National Scenic Area Act requirements. In the past, the grants were provided equally to the three counties and averaged approximately $20,000 to $50,000 each per biennium. For the 1999-01 biennium, the Department is instructed to provide Wasco County with $90,000 in planning assistance grants, Hood River County with $80,000, and Multnomah County with $70,000. The amounts are to be provided in two equal fiscal year installments with a report to the Emergency Board on the county expenditures of the first fiscal year grant funds prior to the releasing the second year's funding.

The adopted budget also includes two special purpose appropriations to the Emergency Board for release to the Department following required reports. The legislature appropriated $250,000 of the base General Fund for Technical Assistance and Periodic Review Grants to the Emergency Board in order to receive additional information on planning efforts to assist small and distressed communities with grants to develop and complete inventories of buildable and commercial lands for economic development needs. Another $200,000 General Fund from the regional problem solving grant program was also appropriated to the Emergency Board as a possible source of funding for efforts to develop a computerized database capable of producing countywide maps showing the diversity of Oregon's rural lands. The mapping requirement was included in House Bill 2406 without funding. The Department was instructed to submit a work plan, including possibilities for financing the mapping efforts, to the Emergency Board by the end of 1999.

Ballot Measure 56 was referred to the voters by the 1997 Legislature and was approved in the November 1998 General Election, with an effective date of December 3, 1998. The measure required that cities and counties provide individual written notice to landowners when a new or amended zoning ordinance is proposed that will limit or prohibit uses of the landowner's property. The state is required to reimburse local governments for the notification costs when the proposed ordinance changes are related to changes in state law or policy.

The Department requested and received an Emergency Fund allocation of $511,500 in January 1999 to begin the landowner notification process. The funding was provided for reimbursement of local government costs ($500,000), for the expenses of a position (0.25 FTE) to manage the local claims ($3,600), and for legal assistance from the Department of Justice on interpretation of the measure's language ($7,900).

Costs of the notification process and associated legal expenses have been estimated to be as much as $4 million per biennium. Due to the passage of legislation changing land use regulations, expectations exist that increased costs for notification subject to state reimbursement will occur in the months following legislative sessions.

The Governor's recommended budget did not include any funding for costs associated with the Department's landowner notification costs associated with Ballot Measure 56. The Governor's budget suggested that DLCD obtain any necessary funding for implementation of the measure from the Emergency Board after potential expenses related to the measure are known.

During the 1999 Legislative Session, the Department reported that local government claims in the amount of $3,239 had been received and reimbursed. The adopted budget disappropriates the remaining $495,000 General Fund unspent by the agency from the January 1999 Emergency Board allocation and appropriates $500,000 General Fund to the Department for the continuation of the landowner notification program. The adopted budget includes authorization for a limited duration Administrative Specialist 2 position (0.50 FTE) to accommodate the implementation and maintenance of the notification system. The agency was directed to request additional funding from the Emergency Board when reimbursement costs exceed the amount provided in the Department's adopted budget.

LFO Analyst: Rocco

The Land Use Board of Appeals (LUBA) was established in 1979 to provide prompt, professional, and efficient resolution of land use issues and to create a consistent body of land use law. LUBA retains exclusive jurisdiction to hear appeals of land use decisions made by state agencies, local governments, and special districts. Decisions of LUBA may be appealed to the Court of Appeals and ultimately to the state Supreme Court. Private parties and public agencies - including agricultural interests, developers, environmental groups, individual property owners, and state and local governments - are able to bring issues to LUBA for review. Most appeals of local land use decisions are brought to LUBA by individual citizens with the responding party being a unit of local government. LUBA only obtains jurisdiction to review local government decisions for consistency with local and state land use laws after an appeal is filed. LUBA has no ability to file an appeal and has no control over the number of cases brought forward for review.

LUBA's mission is to decide appeals quickly and consistently, and to disseminate its opinions to create a body of land use law to allow for consistent land use decision making. Prior to the establishment of LUBA, review of local land use decisions was conducted by circuit courts, resulting in delays and inconsistent interpretations of land use law in different portions of the state.

The Board consists of three hearings referees, appointed by the Governor with Senate confirmation, who are members of the Oregon State Bar. Two clerical positions perform administrative support functions. A permanent staff attorney position was provided by the legislature in 1997 to conduct legal research and to assist with the production of final opinions and orders. The 1997 Legislature also provided a limited duration staff attorney position (0.50 FTE) to assist with the Board's publication and caseload backlog. In June 1998, the Emergency Board allocated $48,612 from the Emergency Fund to continue the limited duration staff attorney position for the remainder of the biennium.

LUBA's accounting, personnel, and payroll functions were provided through an inter-agency agreement with the Water Resources Department. The Board's 1997-99 budget included $25,000 General Fund to compensate Water Resources for these services. In April 1998, LUBA's offices were moved from the State Library to the Public Utility Commission building and accounting services were transferred from Water Resources to the Public Utility Commission.

LUBA's operational expenditures are supported entirely by the General Fund. Other Fund revenues represent sales income from publication of LUBA Reports. LUBA assumed responsibility for publishing its opinions in the 1985-87 biennium. The Board anticipates publishing four volumes in the 1997-99 biennium. Volume 33, including cases decided between March and December 1997, is expected to be published and available during the final quarter of the 1997-99 biennium. Revenues from published opinions, estimated at $68,840 for 1999-01, are declining as purchasers shift from hard cover volumes to computer disks. LUBA has formed an ad hoc advisory committee of private land use attorneys (at no cost) to address the need for the publishing function and how to keep it solvent. The Board plans on incorporating its decisions onto a website in order to enhance the research access to lawyers and citizens active in the appeal process.

LUBA also collects a filing fee, which is transferred to the General Fund. Due to an increase in the filing fee approved by the 1997 Legislature in House Bill 2642 from $50 to $175, estimated revenues from this source increased from $34,900 in 1995-97 to $66,100 in 1997-99. Assuming the number of appeals stays constant, estimated revenue from filing fees for 1999-01 is anticipated to be $91,000.

LUBA's annual caseload has more than doubled over the past 10 years with no change in the number of referees. Following the 120 appeals filed in 1987, the Board has experienced a steady and sustained increase in the number of appeals filed each year peaking with 269 in 1997. In addition to the increased volume of appeals, the issues involved in the appeals have become increasingly complex due to the sophistication of the arguments, the lack of case law on correctly interpreting acknowledged land use plans, and legislative changes to the basic state land use laws. Complicating the Board's workload problem was a complete turnover of referees during 1995. Two referees with a combined 14 years of experience resigned from the Board at the end of March and were not replaced until mid-May. The third referee, with 8 years of experience, was replaced in August. During this period of referee turnover and new referee training, the number of final opinions able to be issued dropped substantially and led to the development of a backlog the current Board is still trying to eliminate. LUBA experienced another referee vacancy in the spring of 1998 from a resignation.

Eliminating the appeal backlog is important for both legal and local development reasons. ORS 197.830(14) requires LUBA to issue final written opinions on appeals within 77 days after the date LUBA receives and settles the local government record. Certain local development efforts are stalled until a case is legally resolved. Legislative policy currently states that "time is of the essence in reaching final decisions in matters involving land use and that those decisions be made consistently and with sound principles governing judicial review." (ORS 197.805)

The Governor's recommended budget was 13.8 percent higher than the 1997-99 estimated expenditures. Most of the increase was due to higher Other Funds limitation provided in the 1999-01 budget. The recommended General Fund appropriation for the agency was increased by only 6.2 percent to a total of $1.07 million. Although the current service level budget eliminated a limited duration staff attorney position, the Governor's recommended budget added a permanent Program Technician 1 position to serve as a publications editor. Currently, referees must perform publication-related tasks that take time away from the primary function of writing and issuing opinions. The limited duration staff attorney position was approved for the first year of the 1997-99 biennium (0.50 FTE) to perform legal publication duties, and was then continued for the remainder of the biennium by the Emergency Board. For the 1999-01 biennium, the position was to be funded by a combination of General Fund and Other Funds received from the sales of publications.

The Governor's budget also included two policy option packages to support administrative functions. The budget provided Other Funds limitation in the amount of $19,300 for a one-time professional services payment for the conversion of past legal decisions onto LUBA's web page. The payment was to be made to the Public Utility Commission (PUC) for costs of the conversion and the additional space needed on the PUC server for the enlarged web page. The agency requested General Fund to pay for the costs of expanding the web page, but the Governor's budget recommended the agency try to obtain grants and donations to pay for improving access to LUBA opinions and orders. The recommended budget also included a policy option package for $9,500 General Fund to be used as a special payment to PUC for additional computer support services. LUBA's 1999-01 recommended budget included a total of $34,500 General Fund for the payment of contracted administrative functions through PUC, an increase from the $25,000 provided for payment to the Water Resources Department for similar services in the 1997-99 biennium.

The legislatively adopted budget totals $1.1 million, including $1.0 million General Fund, $101,505 Other Funds, and 6.50 FTE. The General Fund portion of the budget is 4 percent lower than the Governor's recommended budget, but up nearly 2 percent from 1997-99 levels. The adopted budget supports six full-time, permanent positions, including the three referees, a staff attorney, and two office support staff, and adds a limited duration copy editor position for one year. LUBA was directed to report to the Emergency Board on progress in bringing the agency's publication of opinions current and in eliminating the existing case backlog. The agency can request continuation of the copy editor position for the remainder of the biennium from the Emergency Board if the need continues to exist.

To correct a Governor's recommended budget understatement of revenue expected to be collected from the $175 filing fee, the legislature increased the amount of revenue estimated for transfer to the General Fund by $62,500. The budget did not include funding for two packages that would have allowed the agency to place opinions on its Internet website and would have provided additional resources for computer services. LUBA was instead instructed to identify other sources of potential funding for the website development, such as donations from the bar association or other groups, and to investigate other location and information management alternatives.

LFO Analyst: Jordan

The Oregon State Marine Board was established in 1959 and is responsible for registering and titling all recreational boating vessels in the state. The Board consists of five members appointed by the Governor for four-year terms. The Marine Board's budget is comprised of three separate program areas. These programs are dedicated to the Board's mission of boater safety, education, and access in an enhanced environment.

All agency programs are funded by three major revenue sources: registration and title fees (39%); marine fuel taxes (38%); and federal funds (23%). The agency receives no General Fund support or lottery fund allocations. Smaller amounts of revenue are received from late penalties, outfitter and guide registration, and charter boat licenses.

Registration fees are set by statute and vary based on type and size of vessel. Registration fees must be renewed once per biennium. A boat owner must also secure a one-time certificate of title from the Marine Board. The Board sets the title fee by rule, not to exceed $7. Each year the Department of Administrative Services estimates the amount of motor vehicle fuel taxes imposed during the preceding fiscal year on fuel purchased and used to operate motor boats. The amount, less refunds for commercially used motor boats, is transferred to the Marine Board's Boating Safety, Law Enforcement and Facility Account.

Federal Funds are received from the U.S. Coast Guard's Recreation Boating Safety (RBS) grant program and the Clean Vessel Act (CVA) program. RBS grants are obtained through the dedicated Aquatic Resources Trust Fund with revenues from federal motorboat gasoline taxes and excise taxes on sport fishing equipment. The Coast Guard restricts use of RBS grants to boating safety programs and requires a 50-50 state match. CVA funds were first made available in 1994 for the funding of vessel waste pump out facilities and dump stations to reduce the effects of untreated sewage from boats on the state's waters. CVA grants require a 25 percent state match.

The Administration and Education program is responsible for vessel titling and registration activities including floating homes and boathouses, outfitter and guide registration, and ocean charter boat licensing. The program also administers state boating laws, develops waterway management plans, serves as liaison with other government units, conducts boating accident analyses and boater surveys, coordinates the Adopt-a-River program, and provides the agency's central business functions. Education activities include coordination of statewide water safety school programs, development and distribution of safe boating promotional materials, and the production of public information materials for distribution to the media.

The increasing popularity of water-based outdoor recreational activities in Oregon continues to challenge the Administration and Education Program. Over 197,000 boats are currently registered with projections indicating continued growth in boater use of the state's waterways. Other non-traditional boating activities, such as personal watercraft (jet skis) and sail boarding, are expected to bring additional challenges to waterway management. In 1988, for example, 800 personal watercraft (PWC) were registered with the Marine Board; in 1998, the number of registered PWC's exceeded 13,000. The combination of increases in population, in the number and types of craft being used, and in the number and range of conflicts between users on the waterways is creating additional boating education and safety needs. Drowning remains the second leading cause of accidental death among children in Oregon. The State Marine Board adopted a new method to estimate the motorboat fuel consumption in Oregon for the calculation of fuel tax revenue. The current methodology is based on the U.S. Department of Treasury model designed for the estimation of annual fuel consumption by recreational motorboats at the national level. The new methodology bases the estimate of motorboat fuel consumption on an annual survey of Oregon boaters to be performed by the Survey Research Center at Oregon State University. Although the agency is projecting no change in fuel tax revenues, this new approach will improve the estimates of motorboat fuel consumption in Oregon and more accurately calculate the amount of fuel tax revenue allocated for State Marine Board programs.

The Governor's recommended budget for Administration and Education was $3.3 million, nine percent higher than the 1997-99 estimated expenditures. The budget provided 30 percent of the funding ($90,182) for business service enhancements including reclassifying an information specialist, continuing a limited duration accountant as a permanent position, and adding an office specialist. Also funded was .5 FTE for a study to investigate the need for mandatory boater education/operator licensing in Oregon ($50,331 federal funds) and an additional .25 FTE to support implementation of the Outfitter/guide Program fee increase.

The legislature approved an expenditure limitation of $3.2 million and 19.84 FTE total budget. This is a 2.1 percent reduction from the Governor's recommended budget. The legislature reduced this program for a reduction in the Attorney General's hourly rate, Secretary of State Audit and Department of Administrative Services assessments and the elimination of two policy packages that would have funded increased enforcement in the Guide/Outfitter program and a study on mandating boater education prior to licensing ($17,318 Other Funds and $50,736 Federal Funds and .75 FTE).