May revision shifts $1.5 billion in Cal Fire costs to Greenhouse Gas Reduction Fund; LAO urges caution

The May revision to the governor’s budget would shift $1.5 billion of CAL FIRE operations from the general fund to the Greenhouse Gas Reduction Fund (GGRF) and set a floor of at least $1 billion annually for high‑speed rail, Department of Finance and administration officials said at a Senate Budget Subcommittee No. 2 hearing.

Rachel Ehlers of the Legislative Analyst’s Office (LAO) told the committee the administration’s revenue estimates are in the LAO’s ballpark and that treating GGRF as a tool to preserve higher‑priority programs can be reasonable — but she and several senators urged caution. Ehlers and other LAO staff said the May revision provides limited details about a comprehensive GGRF spending plan and recommended deferring major policy decisions not essential to passing a balanced budget.

Finance officials said the Cal Fire shift is intended as a general‑fund backstop in the event GGRF auction proceeds fall short; under the administration’s proposal CAL FIRE funding would grow to $1.9 billion by 2029–30 and finance would protect CAL FIRE operations with general‑fund support if auction revenue is insufficient.

Senators raised several concerns: that reassigning GGRF monies to CAL FIRE would reduce discretionary funds for transit and clean‑energy projects; that the proposal changes the mechanics of current continuous appropriations without adequate legislative deliberation; and that auction volatility poses a risk for ongoing operational funding. LAO staff recommended developing a multiyear plan for GGRF and to avoid making complex policy choices in the immediate budget window.

Larger context: Administration officials said average recent GGRF auction proceeds were about $4.4 billion and that the two administration priorities — at least $1 billion for high‑speed rail and the CAL FIRE shift — would leave additional funding for other programs. The administration indicated it intends to negotiate a comprehensive GGRF expenditure plan with the Legislature, rather than impose a final spending allocation in the May revision.

Why it matters: GGRF is a major funding source for climate, transit and clean‑energy programs; moving large amounts of money to ongoing fire‑prevention operations and to support high‑speed rail would reduce available discretionary funding and change long‑term program financing. Several senators said they support using GGRF for high‑priority climate programs but opposed making immediate, broad changes without full legislative hearings.

Next steps: LAO and Finance staff said they will work with the Legislature on a comprehensive GGRF plan. The committee asked for more details on continuous appropriations, securitization options and contingency plans if auction revenue falls below projections.