BILL ANALYSIS                                                                                                                                                                                                    Ó


          |SENATE RULES COMMITTEE            |                   SB 535|
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                                 THIRD READING

          Bill No:  SB 535
          Author:   De León (D)
          Amended:  5/31/11
          Vote:     21

          AYES:  Simitian, Hancock, Kehoe, Lowenthal, Pavley
          NOES:  Blakeslee
          NO VOTE RECORDED:  Strickland

           SENATE APPROPRIATIONS COMMITTEE  :  6-3, 05/26/11
          AYES:  Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
          NOES:  Walters, Emmerson, Runner

           SUBJECT  :    California Communities Healthy Air 
          Revitalization Trust

           SOURCE  :     California Environmental Justice Alliance
                      Coalition for Clean Air 
                      Ella Baker Center
                      Greenlining Institute
                      National Resource Defense Council

           DIGEST  :    This bill establishes the California Communities 
          Healthy Air Revitalization Trust in the State Treasury.  
          The moneys in the trust would be used, upon appropriation 
          by the Legislature, in the most impacted and disadvantaged 
          communities, as defined, to fund programs or projects that 
          reduce greenhouse gas emissions or mitigate direct health 


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          or environmental impacts of climate change through 
          competitive grants, loans, or other funding mechanisms.  
          The bill requires the Air Resources Board (ARB) to 
          administer moneys appropriated from the trust, establish 
          criteria and procedures, and meet other specified 
          requirements in connection with implementation.

           ANALYSIS  :    The California Global Warming Solutions Act of 
          2006 (CGWSA) requires the State Air Resources Board to 
          adopt regulations to require the reporting and verification 
          of emissions of greenhouse gases and to monitor and enforce 
          compliance with the reporting and verification program, and 
          requires the state board to adopt a statewide greenhouse 
          gas emissions limit equivalent to the statewide greenhouse 
          gas emissions level in 1990 to be achieved by 2020.  The 
          act requires the state board to adopt rules and regulations 
          in an open public process to achieve the maximum 
          technologically feasible and cost-effective greenhouse gas 
          emission reductions.  The act authorizes the state board to 
          include the use of market-based compliance mechanisms.  The 
          act authorizes the state board to adopt a schedule of fees 
          to be paid by the sources of greenhouse gas emissions 
          regulated pursuant to the act, and requires the revenues 
          collected pursuant to that fee to be deposited into the Air 
          Pollution Control Fund and be available, upon appropriation 
          by the Legislature, for purposes of carrying out the act.

          This bill: 

             1.   Establishes criteria for "Most impacted and 
               disadvantaged communities" in relation to climate 
               change impacts.

             2.   Establishes The California Communities Healthy Air 
               Revitalization Trust within the State Treasury of 
               which moneys in the trust are available upon 
               appropriation by the Legislature.

             3.   Specifies that funds are used solely in the most 
               impacted and disadvantaged communities in California 
               and specifies that when provided to existing programs 
               they supplement rather than supplant those programs.

             4.   Specifies that the trust be used to fund programs 



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               or projects that reduce greenhouse gas emissions or 
               mitigate the direct health impacts of climate change 
               including green collar employment or training. 

             5.   Specifies that five percent of the moneys allocated 
               to the trust may be used for purposed of administering 
               the bill.

             6.   Requires the ARB to administer moneys appropriated 
               from the trust, establish criteria and procedure, and 
               before January 1, 2013, implement the program.  The 
               ARB is to begin implementation of the program within 
               90 days of finding that more than $5 million has been 
               deposited in the trust.

             7.   Requires ARB, following an open and public process, 
               to develop and adopt a report describing the 
               implementation, the list of most impacted and 
               disadvantaged communities, the types of programs and 
               projects to be funded, the selection and oversight 
               process and the eligibility criteria.  The report is 
               to be made available to the public on the ARB Internet 
               Web site.

             8.   Specifies, upon implementation of the program, and 
               by every third January 1, the ARB is to develop and 
               adopt the list of the most impacted and disadvantaged 
               communities in California and triennial plans 
               describing the specific type of programs and projects 
               to be solicited for funding during the three year 
               period.  The plans and lists are to be made public on 
               the ARB Internet Web site.

             9.   Requires ARB to only approve a program or project 
               for funding after determining, based on the available 
               evident, that the used of moneys for that program or 
               project is consistent with the requirements, for the 
               use of moneys derived from valid regulatory fees, as 
               established by the California Supreme Court in 
                Sinclair Paint Co. v. State Bd. of Equalization  (1997) 
               15 Cal.4th 866 and reaffirmed in  California Farm 
               Bureau Federation v. State Water Resources Control Bd  . 
               (2011) 51 Cal.4th 421.  This would not apply to the 
               use of penalty moneys, if those moneys are segregated 



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               from fee moneys.

             10.  Provides that this bill will not result in any 
               taxpayer paying higher tax within the meaning of 
               Section 4 of Article XIIIA of the California 


          Status of Cap and Trade  .  ARB on December 16, 2011, adopted 
          draft regulations for a proposed cap and trade market-based 
          compliance mechanism and is expected to produce a final 
          version of those regulations this fall.  
           On March 17, 2011, the California Superior Court found ARB 
          had not properly considered alternatives to cap and trade 
          and thus failed to comply with the California Environmental 
          Quality Act (CEQA) and enjoined the ARB from proceeding 
          with cap and trade until the court determines it has fully 
          complied with CEQA.  
           Related Legislation
          AB 1405 (De Leon) which was vetoed by Governor 
          Schwarzenegger in 2010 where the governor noted in his veto 
          message that funds have yet to be realized by AB 32.

          SB 31 (Pavley) of 2009-10, requires revenues generated from 
          certain purposes to be appropriated by the Legislature "in 
          furtherance of Ŭthe CGWSA] for purposes determined by the 

          SB 143 (Rubio) requires the ARB, on or before July 1, 2012, 
          to adopt methodologies for determining the quantity of 
          greenhouse gas emissions reduced through specified 
          greenhouse gas emission reduction programs.  Requires the 
          ARB to adopt regulations governing the creation of 
          greenhouse gas emission reduction offsets based on 
          investments in those programs for purposes of banking, 
          trading, and using the offsets to comply with the 
          market-based compliance mechanism adopted by the ARB.  
          Requires the ARB to credit persons who invest in those 
          programs with greenhouse gas emission offsets, based on a 
          cost-effectiveness calculation determined by the ARB, with 



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          specified exceptions.  On Senate Third Reading File.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

          The Senate Appropriations Committee indicates the total 
          expenditures under the bill are unknown and will depend on 
          future revenues generated from the cap and trade program.  
          Based on initial projections of cap and trade auction 
          revenues, total program expenditures are likely to be in 
          the tens of millions per year.

           SUPPORT  :   (Verified  5/26/11)

          California Environmental Justice Alliance (co-source) 
          Coalition for Clean Air (co-source) 
          Ella Baker Center (co-source) 
          Greenlining Institute (co-source) 
          NAACP (co-source) 
          National Resource Defense Council (co-source) 
          American Lung Association of California
          Asian Neighborhood Design
          Asian Pacific Environmental Network
          Asian Pacific Islander Youth Promoting Advocacy and 
          Breathe California
          California Environmental Justice Alliance
          California League of Conservation Voters
          California Rural Legal Assistance Foundation
          Californian Pan-Ethnic Health Network
          Catholic Charities Diocese of Stockton
          Center for Community Action and Environmental Justice
          Center on Race, Poverty and the Environment
          Coalition for Clean Air
          Communities for a Better Environment
          East Yard Communities for Environmental Justice
          Environment California
          Environmental Defense Fund
          Environmental Health Coalition
          Latino Coalition for a Healthy California
          Los Angeles County Bicycle Coalition
          National Parks Conservation Association
          People Organized to Demand Environmental & Economic Rights
          Regional Asthma Management and Prevention



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          Sierra Club California
          Southeast Asian Community Alliance
          Trust for Public Land
          Union of Concerned Scientists

           OPPOSITION  :    (Verified  5/26/11)

          American Council of Engineering Companies
          California, Building Owners and Managers Association
          California Building Industry Association
          California Business Properties Association
          California Chamber of Commerce
          California Farm Bureau Federation
          California Forestry Association
          California League of Food Processors
          California Manufacturers & Technology Association
          California Metals Coalition
          California Retailers Association

           ARGUMENTS IN SUPPORT  :    According to the author, "SB 535 
          ensures that as California takes steps to address global 
          warming, we invest in the neighborhoods that continue to 
          suffer from higher levels of pollution and who are least 
          able to confront the expected impacts of the climate 
          crisis. SB 535 outlines a process to identify disadvantaged 
          communities and allows for a periodic modification, when 
          necessary.  It require that a minimum of ten percent of 
          revenues deposited in the Air Pollution Control Fund 
          pursuant to AB 32, other than administrative fees, to be 
          allocated to projects that reduce greenhouse gas emissions 
          and environmental and health benefits, and may include: 
          energy efficiency upgrades, deployment of pollution 
          reduction technology and investments in transit.  
          Additionally, a portion of funds could be used to help 
          these communities tackle the climate crisis, including 
          anticipated heat waves and rising sea levels."

           ARGUMENTS IN OPPOSITION  :    According to opponents "ŬARB] 
          has no authority to raise revenues other than for 
          administrative purposes. AB 32 grants ŬARB] authority to 
          raise revenues through a fee to cover the costs of 
          administering the program and for no other purpose."  
          Opponents contend that a regulatory fee must have a nexus 
          between fee payers, the fee amount and the revenue use, 



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          this "standard is not met in SB 535 because the amount of 
          fee revenue is arbitrary (10% of the total amount raised), 
          the purposes in SB 535 are unrelated to harm caused by the 
          payers, and there is no demonstrated connection between the 
          proposed recipients and harm caused by the payers of the 
          revenues."  Opponents further note "The cap and trade 
          market will not start until January 1, 2012. We do not know 
          how much revenue will be raised by ŬARB] nor how much 
          revenue will be needed to meet AB 32 emission reduction 
          goals and to mitigate unintended and harmful consequences 
          of the program." 
          DLW:nl  5/31/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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