BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 787 (Hill) Hearing Date: 8/2/2010 Amended: 7/15/2010 Consultant: Bob Franzoia Policy Vote: T&H 8-0 _________________________________________________________________ ____ BILL SUMMARY: AB 787 would increase from $1,500, or more, if cost effective, to $2,000, the amount to be paid by the Bureau of Automotive Repair (BAR) within the Department of Consumer Affairs to the owner of a vehicle that has failed its most recent smog check inspection. This bill would require the department to permit vehicle retirement for any motor vehicle that has been continuously registered in the state for at least two years prior to vehicle retirement, and that fails any type of legally required smog check inspection. This bill would make the test only station repair assistance program available only to low income participants whose income does not exceed 300 percent of the federal poverty level. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Expanded vehicle retirement Up to $11,000 to $22,000 annually* Special** program BAR program administration $1,674 to $3,350*** annually Special** Reduction in eligibility Estimated savings of ($4,066) annually Special** for vehicle repair assistance * Assumes 22,000 vehicle retirements at $500.00 to $1,000.00 over current payment. ** High Polluter Repair and Removal Account (all costs beginning July 1, 2011). For 2009-10, this account will end the year with a projected fund balance of $2,240,000. This account made a $20 million loan to the General Fund in 2008-09 and is proposed by the Governor's Budget to be repaid in 2010-11. *** Based on 25 to 50 percent increase in participation _________________________________________________________________ ____ STAFF COMMENTS: This bill meets the criteria for referral to the Suspense File. According to the Air Resources Board (ARB) there are currently over one million vehicles retired in the state every year as part of normal fleet turnover with the state's low-emission new car standards dependent on this turnover for emission reductions. However, extra emission reductions benefits can be achieved through the early retirement of fully functional but high emitting vehicles. The BAR vehicle retirement program retires roughly 22,000 older vehicles annually and local air districts scrap an additional 5,000 vehicles, primarily for air quality benefits. By 2010, vehicles 15 years and older will account for about 20 percent of the fleet (and about 14 percent of the miles traveled), but still be responsible for over 62 percent of the smog-forming emissions from cars. Page 2 AB 787 (Hill) The CAP provides financial assistance for qualified consumers whose vehicles fail the biennial Smog Check. The statutory authority for CAP is implemented through regulations adopted by BAR. Participation in CAP is limited to available funds and under the following options: Repair Assistance Qualified consumers can receive financial assistance toward emissions-related repairs to help their vehicles pass their Smog Check inspection. Approved applicants must take their vehicles to a Gold Shield repair station for repairs. Gold Shield stations are licensed Smog Check facilities that are independently owned and under contract with BAR. There are two ways to qualify for repair assistance. (1) Income Eligible - Qualified consumers whose household incomes meet the income guidelines (derived from the federal poverty guidelines) can receive financial assistance toward emissions-related repairs. A copayment is required and is applied toward diagnosis and emission-related repairs. (2) Directed Vehicle Eligible - Certain vehicles are directed to Test-Only or Gold Shield stations for their initial smog tests. If a Department of Motor Vehicles registration notice requires a test at a Test-Only or Gold Shield station, and the vehicle fails, the owner may qualify for financial assistance toward emissions-related repairs at a Gold Shield repair station. Test-Only stations cannot perform repairs. A copayment is required and will be applied toward diagnosis and emissions-related repairs. Vehicle Retirement Eligible consumers can receive payment to retire their high-polluting vehicle. There are no income or Directed Vehicle eligibility requirements. Approved applicants must take their vehicle to an authorized dismantler. The vehicle must pass a visual and operational inspection before it is retired. Chapter 761/2006 (AB 1870, Lieber) increased the maximum amount BAR may pay a vehicle owner to retire his or her vehicle and authorized BAR to increase the amount up to $1,500 if it deems doing so is cost-effective. (BAR's administrative costs for this bill would be $0 if it determines the increase is not cost-effective to $2,574,900 to $5,149,800 annually if it determines otherwise.) BAR prepared a regulation package to increase the VIR incentive to $1,500 for low-income consumers. This proposed regulation was rejected by the Department of Finance (DOF). Staff notes participation in the Air Resource Board's (ARB) Enhanced Fleet Modernization Program (EFMP) would be affected by this bill. As noted, the CAP program addresses the retirement of vehicles failing a biennial Smog Check. The EFMP handles the retirement of off-cycle vehicles (the vehicle does not need to fail a smog check). Both programs use the same application and not raising both retirement incentives to the same level would draw vehicles away from the program that offers the lesser incentive. (ARB was planning to raise the EFMP threshold from $1,000 to $1,500 but delayed action when DOF rejected the BAR proposed regulation.) Staff recommends this bill be amended to set the incentive threshold for both programs at Page 3 AB 787 (Hill) the same amount. A total of 88,000 vehicles have been retired since the program's inception. In 2005-06, 2006-07, 2007-08, and 2008-09, 15,536, 16,906, 21,909, and 22,331 vehicles respectively, were retired. BAR projects the retirement of 20,025 vehicles in 2009-10. In addition, 352,121 vehicles have received repair assistance since 2000-01, which includes a projected 59,084 for 2009-10.