BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 675 (Steinberg) Hearing Date: 05/11/2009 Amended: 04/02/2009 Consultant: Dan Troy Policy Vote: ED 7-0, BP&ED 8-1 _________________________________________________________________ ____ BILL SUMMARY: SB 675 would enact the Clean Technology and Renewable Energy Job Training, Career Technical Education, and Dropout Prevention Act of 2010, for the purpose of providing funds to qualifying entities for construction or reconfiguring facilities that prepare program participants (pupils) for employment related to clean technology, renewable energy or energy efficiency. Funds would be provided in the form of grants for $3 million for qualifying new education-related construction projects and $1.5 million for qualifying education-related modernization projects. This bill would create a council for the purpose of developing guidelines to implement this act and would be empowered to issue and renew negotiable bonds, notes, debentures, or other sources of security that would be secured by moneys appropriated by the Legislature from the Public Interest Research, Development, and Demonstration Fund. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2009-10 2010-11 2011-12 Fund Bond issuance Amount unspecified, Bond Potential costs in the 100s of millions over 20 years OPSC workload $900 $900 Bond _________________________________________________________________ ____ STAFF COMMENTS: This bill meets the criteria for referral to the Suspense File. Current law establishes the Public Interest Research, Development, and Demonstration Fund (PIER), administered by the California Energy Commission (CEC) for the purpose of making awards for projects or programs that are not provided for by competitive and regulated markets. The revenue for this fund comes from electrical utility corporations and is available upon appropriation by the Legislature. This fund is authorized for this purpose until 2012. Proposition 1D, authorized by AB 127 (Nunez and Perata. Chapter 35, Statutes of 2008) and approved by the voters in November 2006 authorized the issuance of $7.3 billion on general obligation bonds for K-12 school facilities, and established the Career Technical Education Facilities Program, which allocated $500 million for the construction and modernization of career technical education facilities. This bill enacts the Clean Technology and Renewable Energy Job Training, Career Technical Education and Dropout Prevention Act of 2010, and would also establish the Page 2 SB 675 (Steinberg) Clean Technology and Renewable Energy Job Training, Career Technical Education and Dropout Prevention Fund in the State Treasury to provide competitive grants for the construction or reconfiguring of new education-related facilities with a useful life expectancy of at least 20 years or the length of bond maturity to provide program participants with skills and knowledge necessary for successful employment related to clean technology, renewable energy or energy efficiency. The bill would further establish the Clean Technology and Renewable Energy Job Training, Career Technical Education and Dropout Prevention Council comprised of the Secretaries' of the Natural Resources Agency, Labor and Workforce Development, Environmental Protection, the Superintendent of Public Instruction, the Chancellor of the California Community Colleges, two members appointed by the Senate Rules Committee (one who is a renewable energy projects employer and another who is a member of a nonprofit environmental advocacy organization) and two members appointed by the Assembly Speaker (one who represents disadvantage communities and another from a labor organization that provides state approved renewable energy development pre-apprenticeship or apprenticeship programs). According to information provided by the author's office, this bill is intended to address two key state priorities: 1) reducing the high school dropout rate by encouraging the construction or reconfiguration of facilities that will provide engaging career technical education (CTE) to students and, 2) developing a skilled workforce that is prepared to take advantage of opportunities created by emerging green technologies. This bill would provide grants to eligible entities which are defined in the bill as public schools serving any of grades 7-12, California community colleges, public entities providing CTE including county offices of education or school agency joint powers authorities, publicly or investor owned facilities, non-profit organizations, labor organizations, business entities, state-approved apprenticeship programs, regional collaboratives, the California Conservation Corps or a certified local conservation corps, public postsecondary educational institutions or any other entity approved by the Council. The bill outlines various elements of the competitive grants program proposed by the bill. Specifically, it does the following: 1. Requires the State Allocation Board (SAB) to administer grant applications and to implement the program pursuant to regulations and guidelines established by the Council. 2. Requires grants be allocated on a per square foot basis and prohibits any requirement that students be unhoused or that facilities meet any age requirements to receive a grant under the program. 3. Establishes a maximum of $3 million per project per eligible entity for new construction grants for either stand-alone projects or as supplements to the per pupil allocation under the existing new construction program. Page 3 SB 675 (Steinberg) 4. Establishes a maximum of $1.5 million per project per eligible entity for modernization grants for the purpose of reconfiguration and provides that the grant be supplemental to the per pupil allocation provided under the existing modernization program. 5. Requires the eligible entity to contribute toward the project on a 50/50 match basis and authorizes the local contribution to come from private industry groups, the school district or a joint powers authority and authorizes the reduction, but not the elimination of the match at the discretion of the Council. 6. Authorizes the repayment of the local contribution over time but prohibits the SAB from waiving the local contribution on any basis. 7. Requires applicants meet any criteria established by the Council and also enter into agreements, as specified, to engage in specified activities related to education, job training, or providing employment and career opportunities to program participants. 8. Requires the Council to develop guidelines for awarding the competitive grants, specifies a number of elements to be included in the grant application and requires priority be given to projects serving students in grades 7-12, dedicated to dropout prevention and career technical education, in communities with schools that rank in the bottom three deciles of the Academic Performance Index (API), in communities with higher than average rates of dropouts, low-income households, or other challenges, as specified, and projects initiated by the California Conservation Corps or a certified local conservation corps. 9. Authorizes the Council to use state agency personnel in administering outreach, education, technical assistance, guideline development and grant application review. 10. Requires every proposed activity or project financed be in compliance with the California Environmental Quality Act and that real property acquisitions are from willing sellers. 11. Authorizes up to five percent of funds be allocated for administrative costs of the program. 12. Requires the body awarding a contract for a public works project financed from these funds to adopt and enforce a labor compliance program, as specified. 13. Requires the Chair of the Council to provide for an annual independent audit of expenditures from the fund. The bill provides that the Council would be authorized to incur indebtedness and issue and renew negotiable bonds, notes, debentures or other securities of any kind or class. The indebtedness incurred would be paid solely from the Public Interest Research Page 4 SB 675 (Steinberg) Development and Demonstration Fund (PIER) and from funds appropriated by the Legislature in the annual Budget Act for this purpose. Proceeds from the sale of these instruments would be deposited into the fund established through this act. Rather than a statewide general obligation bond, then, this bill proposes the creation of a revenue backed bond issuance, i.e. bonds backed by the revenue that accrues to the PIER fund as well as appropriations made by the Legislature. According to the California Energy Commission, its proposed FY 2009-10 budget includes $74.2 million in PIER funds to support approximately 70 positions, operating and baseline technical support contracts and $62.5 million for pass through research, development and demonstration projects. PIER funds are currently used to fund research projects to develop new energy technologies. These funds would be redirected for the purposes outlined in this bill. Current law restricts the expenditure of these funds for specified purposes from 2007 until 2012. To make the funding mechanism of this bill viable, it will likely be necessary to extend the statutory life of the PIER fund. As the bill does not currently specify an amount of debt that would be issued by the Council, the exact cost of this bill is unknown. Assuming, for one example, that the intent was to use approximately half of the available amount of the PIER fund to pay off the debt issued by the Council at an interest rate of 5%, the Council could issue $450 million in bonds. The total repayment over 20 years would be $722 million. Of course, the actual amount will be dependent on future legislative action concerning the fund and the authority ultimately granted to the Council. In addition to the costs of debt repayment, the Office of Public School Construction indicates costs of $900,000 for administering grant applications and operating the program. Similar legislation, SB 1672 (Steinberg, 2008), would have authorized, upon voter approval at 2010 statewide election, $2.25 billion worth of state general obligation bonds to fund capital outlay projects at institutions offering career development related to clean technology, renewable energy or energy efficiency and to fund a revolving loan for capital outlay projects undertaken by public and private entities involved in such career development. The measure was held under submission by the Assembly Appropriations Committee last year.