BILL ANALYSIS SB 675 Page 1 Date of Hearing: August 4, 2010 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair SB 675 (Steinberg) - As Amended: April 2, 2010 Policy Committee: Education Vote:7-1 Natural Resources 6-3 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill establishes the Clean Technology and Renewable Energy Job Training, Career Technical Education (CTE), and Dropout Prevention Fund Act (the Act), which awards grants for construction and enhancement projects associated with educating and training individuals for jobs in clean technology industries. This measure further establishes the funding source for this Act as the proceeds from the sale of bonds (in an unspecified amount). Specifically, this bill: 1)Defines "eligible entity" as a public school serving grades 7-12 inclusive; a California Community College (CCC); a public entity that provides CTE (i.e., county office of education or school joint powers authority); a publicly owned or investor-owned utility; a nonprofit organization; a labor organization; a business entity; a state-approved apprenticeship program; a regional collaborative consisting of local education agencies (LEAs), higher education institutions; business and labor organizations; the California Conservation Corp; a public postsecondary institution; or any other entity approved by the Council. 2)Creates the Renewable Energy, Climate Change, CTE, and Clean Technology Job Creation Council (the Council), comprised of the Resources Secretary, the Labor and Workforce Development Secretary, the CalEPA Secretary, the Superintendent of Public Instruction, the CCC Chancellor, two members appointed by the Senate Committee on Rules; and two members appointed by the Speaker of the Assembly to develop criteria to evaluate the fund. SB 675 Page 2 3)Authorizes the Council to incur indebtedness and issue and renew negotiable bonds, notes, debentures, or other securities. This measure requires all indebtedness to be paid solely from moneys from the Public Interest Research, Development and Demonstration (PIER) fund. FISCAL EFFECT 1)This measure does not authorize a specific amount of bond debt. Instead, the Council is authorized to issue bonds, notes, debentures, or other securities (bonds) "form time to time." Assuming the Council issues a lease revenue bond of $500 million to be repaid over 25 years at an interest rate of five percent, there would be a special fund reallocation, of $36 million, from the PIER fund to secure debt issued for the purposes of implementing this Act. Total principal and interest repaid on a bond of this size would be $900 million. The governor's proposed 2010-11 budget provides $75.4 milion for the PIER fund. 2)GF administrative costs, of approximately $800,000, to the Office of Public School Construction (OPSC). This costs assumes nine positions to administer a $500 million grant program. This bill does not specifify a grant amount. OPSC, however, reports that for every $200 million in grant funding provided, it would need one position at a cost of $80,000 GF. This measure specifies not more than five percent of funds allocated for this Act may be used for administrative puprose. It is not known how much the Council would need to develop grant criteria, as specified. SUMMARY CONTINUED : 4)Allocates competitive grants to qualifying entities for the purpose of constructing new facilities or reconfiguring existing facilities, including purchasing equipment, in order to provide individuals with skills to obtain careers directly related to clean technology, renewable energy, or energy efficiency, as specified. 5)Requires new construction grants not to exceed $3 million per SB 675 Page 3 project and modernization grants not to exceed $1.5 million per project. This bill also requires the grants to be supplemental to grant amounts allocated pursuant to the State School Facilities Program (SSFP) and requires entities to provide an unspecified local match, as specified. 6)Requires the SAB to administer the grant program pursuant to this Act. 7)Applicants are required to do one of the following: (a) enter into agreements with entities to support integrated academic and technical learning to prepare pupils for college and career; (b) enter into agreements with entities to provide high school dropouts or high school graduates with job skills necessary for employment; or (c) enter into agreements with entities to provide individuals under 22 who are on probation or parole with job training, as specified. COMMENTS 1)Purpose . According to the author, "California suffers from too many high school dropouts, too little meaningful CTE at the middle and high school levels, and the lack of a skilled workforce to fuel the emerging green economy. California must lead the world in addressing both the problems of its youth and the opportunities created by the new green economy. [This bill] offers solutions at the intersection of these two state priorities. Investment in these emerging careers and industries will drive the next phase of California's economic growth in a way that helps us meet the challenge of climate change. This investment in reducing the dropout rate, expanding workforce opportunities, and targeting climate change will create major economic stimulus for clean energy and technology jobs in California that will jumpstart our economy and improve our quality of life." 2)Is the PIER fund the appropriate source to secure the sale of bonds for the purposes of this Act ? Current law establishes the PIER fund, administered by the California Energy Commission, for the purpose of making awards for public interest energy, research, development, and demonstration projects that are not adequately provided by competitive and regulated markets. The goal of the PIER program is to bring to market energy technologies that provide increased environmental benefits, greater system reliability, lower SB 675 Page 4 system costs, and provide tangible benefits to electric utility customers. Statute also restricts the expenditures of proceeds in the fund for these purposes until 2012. The revenue source for this fund is a surcharge on electrical and natural gas utilities. This bill proposes to repurpose these funds to secure bonds sold by the Council to provide capital outlay grants for construction and modernization projects associated with educating and training individuals for jobs in clean technology industries. The committee may wish to consider whether PIER funds, paid by ratepayers, should be redirected to establish a grant program for the purpose of constructing facilities that provide CTE programs to pupils, as specified. 3)Existing law establishes the SSFP, administered by the SAB, to provide funding primarily to LEAs to construct or modernize education facilities. The SSFP receives funding from a variety of sources, including the state GF and proceeds from the sale of general obligation (G.O.) bonds. Programs under the SSFP include new construction, modernization, and CTE facilities. AB 127 (Nunez), Chapter 35, Statutes of 2006, authorized Proposition 1D: the Kindergarten-University Public Education Facilities Bond Act of 2006 for $10.416 billion. The voters passed Proposition 1D on November 7, 2006. Of the $10.416 billion, $7.329 billion was allocated for K-12 education facilities, including $500 million for CTE facilities. Chapter 35 also established the CTE school facilities (CTESF) program for the purpose of allocating $500 million in bond funds to construct or modernize CTE facilities, including, but not limited to, purchasing equipment with an average life expectancy of at least 10 years. Program grants are capped at $3 million for new construction and $1.5 million for modernization projects. As of June 2010, approximately $91 million CTESF program funds remain. Therefore, $409 million in CTE bond funds have been SB 675 Page 5 appropriated in the first and second funding cycles. LEAs submitted approximately $231 million in project requests for the third funding cycle. The SAB is anticipated to allocate the remaining $91 million by the end of the year. This bill establishes grant programs to fund capital outlay projects related to green technology and career development provided by schools, community colleges, and other entities involved in public-private partnerships. The CTESF program requires applicants to have a CTE plan; describe methods of accountability for pupil outcomes; and evidence of coordination with feeder schools, as specified. The current program also authorizes LEAs to construct or modernize a school facility with the purpose of establishing any CTE program. Unlike the CTESF program, this bill authorizes entities other than LEAs to apply for capital outlay funds for the purpose of establishing CTE programs. Applicants are required to demonstrate their ability to meet more rigorous programmatic requirements than required under the CTESF program, as specified. Likewise, this measure limits the allocation of capital outlay funding to programs providing instruction in clean technology industries. 4)Previous legislation . SB 1672 (Steinberg), held on this committee's suspense file in August 2008, is similar to this measure in terms of its programmatic requirements and purpose to award grants to for construction and enhancement projects associated with educating and training individuals for jobs in clean technology industries. The main difference between the two measures is the fund source. SB 1672 authorized the sale of a general obligation bond to fund the Act. SB 675, however, specifies the source of funding as an unspecified amount of bond debt issued by the Council and secured by PIER funds, as specified. SB 675 Page 6 5)Related legislation . AB 220 (Brownley), pending in the Senate Appropriations Committee, authorizes the Kindergarten-University Public Education Facilities Bond Act of 2010 for the issuance of $6.1 billion in G.O. bonds for construction and modernization of education facilities. Analysis Prepared by : Kimberly Rodriguez / APPR. / (916) 319-2081