BOARD MEETING DATE: May 4, 2007
AGENDA NO. 27

PROPOSAL:

Adopt FY 2007-08 AQMD Budget and Work Program

SYNOPSIS:

The Executive Officer's Budget for FY 2007-08 represents the input over the past several months from Board members, staff, and the public. This year's process included meetings of the Budget Advisory Committee; a public hearing on February 2, 2007 to receive input on the AQMD's Program Goals and Objectives; and two budget workshops, one for the public held on April 18 and one for the Board held on April 20, 2007. This submittal transmits the required appropriations and reserves necessary to adopt the proposed budget.

COMMITTEE:

Administrative, April 13, 2007, Item deferred to Governing Board Budget Workshop, April 20, 2007
Board Budget Workshop, April 20, 2007, Recommended for Approval

RECOMMENDED ACTIONS:

1. Remove from Reserves and Designations all amounts associated with the FY 2006-07 Budget;

2. Approve appropriations in the Major Objects for:
    

3.  Approve a Fund Balance of the following:
    

4. Recognize revenues of: $125,528,470²

5. Adjust Board Assistant/Consultant Compensation by 3.8 %; raise the amount of Board Assistant/Consultant compensation afforded the Vice Chairman position to the same amount afforded the Chairman; and direct staff to negotiate Health Insurance coverage for up to one Board Member Assistant per Governing Board member.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

The Executive Officer’s Budget for Fiscal Year (FY) 2007-08 represents the input over the past several months from staff, Board members, and the public. This year’s process included meetings with the Budget Advisory Committee; a public hearing, held on February 2, 2007 to take input on the AQMD’s FY 2007-08 Program Goals and Objectives; and two budget workshops, one held for the public on April 18, 2007 and one held for the Governing Board on April 20, 2007.

Since the early 1990’s, the AQMD has implemented regulatory reform to introduce market-based principles in cleaning up urban air, has streamlined aspects of permit processing, privatized to improve operational efficiency, and remained committed to treating regulated businesses fairly. This year’s balanced budget proposal includes a total of 813 positions, which is still 30% (350 FTEs) below FY 1991-92 levels, and program expenditures which are $6.4 million (approximately 5%) above last years adopted budget. Using inflation adjusted dollars; this year’s expenditure request is 36% less than the budget approved in FY 1991-92.

Proposal

This budget request is based on the goals and objectives presented to the Board at the February 2, 2007 meeting. These goals emphasize continued efforts to improve efficiency and productivity; implement the 2007 AQMP; MATES III; implement the Board’s initiatives; implement the Fleet Rules; reduce air toxics; and continue to address other priority issues.

This budget request includes cost increases associated with the final year of the agency’s three-year labor agreements, which in the long-term will continue to reduce the agency’s overall retirement cost by reducing retirement benefits for new employees. This proposal includes the addition of seven funded positions (two new positions and the refunding of five authorized positions lost in previous budget reductions) targeted to Carl Moyer program administration; recruitment/selection and risk management; AB 32 implementation; public affairs, laboratory and ambient air monitoring quality assurance/quality control; and Refinery permit processing, bringing total staffing to 813. Also reflected in the 813 is an increase of 17 positions added mid-year, related to replacement of long-term temporary positions, Carl Moyer program implementation, chrome plating enforcement, Permit Streamlining and the new Mobile Sources office. Services and Supplies and Capital Outlays have been increased by $2.7 million (excluding debt service) associated with upgrading/replacing building and computer systems and enhanced field enforcement activities.

Based upon input from the Budget Advisory Committee regarding the use of one-time penalty/settlement revenues to reduce the agency’s long-term debt, the Board, in December 2006 approved the investment of $19.1 million in a Guaranteed Investment Contract (GIC) which will provide approximately $3.0 million in annual budgeted debt service payments through 2014, and made a one-time $10 million payment to the retirement association to further reduce the AQMD’s unfunded liability which resulted in an average annual budget savings of approximately $1.1 million.

Board members must address an ever-increasing range of complex issues related to performance of their duties, requiring increased assistance and it is appropriate to make an adjustment to compensation for the Board Member Assistants at this time. Consistent with the 3.8% salary adjustments afforded most AQMD employees for FY 2007-08 it is recommended that the contract and hourly compensation amount for a Board Member Assistant/Consultant be similarly adjusted. In addition, due to the increased amount of work undertaken by the Vice Chairman position, it is proposed, effective July 1^st, that the total amount of Board Assistant/Consultant compensation afforded to Vice Chairman position be increased to the same amount afforded the Chairman. Also, it is proposed that Board Member Assistants be granted health insurance coverage, and that the Board direct staff to negotiate health insurance coverage equivalent to the amount afforded professional employees, limited to one Board Member Assistant per Governing Board member.

Resource Impacts

In order to finance the FY 2007-08 Budget, staff is recommending a CPI increase of 3.3% for all stationary source fees with the exception of Permit, Annual Renewal and Emission fees which are scheduled to be adjusted by 10% this year (to support the agency’s cost recovery efforts), plus an appropriation of $560,000 in prior year revenues set aside (Designated) in the Fund Balance for equipment replacement and enhanced compliance activities.

Copies of the proposed budget have been transmitted to the Board under separate cover. Copies for public review have been available in the AQMD Library since early April. The Draft Budget and Work Program is available via AQMD’s web site at http://www.aqmd.gov/finn/financialinformation.htm. Budget abstracts are available by request from the Public Information Center (909) 396-3600.

                                         
¹ The terms Reserve, Designated, and Undesignated are terms established by the Government Accounting Standards Board.  
² Includes $560,000 in prior year revenue set aside in Fund Balance Designations for Equipment Replacement and Enhanced Compliance Activities.