BILL ANALYSIS Ó SB 535 Page 1 ( Without Reference to File ) SENATE THIRD READING SB 535 (De León) As Amended August 31, 2012 Majority vote SENATE VOTE :23-15 NATURAL RESOURCES 6-3 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Chesbro, Brownley, |Ayes:|Gatto, Blumenfield, | | |Dickinson, Huffman, | |Bradford, | | |Monning, Skinner | |Charles Calderon, Campos, | | | | |Davis, Fuentes, Hall, | | | | |Hill, Cedillo, Mitchell, | | | | |Solorio | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Knight, Grove, Halderman |Nays:|Harkey, Donnelly, | | | | |Nielsen, Norby, Wagner | | | | | | ----------------------------------------------------------------- SUMMARY : Requires the investment plan related to the Greenhouse Gas (GHG) Reduction Fund (GHGR Fund) that is developed and submitted to the Legislature pursuant to AB 1532 (John A. Pérez) to allocate: 1) a minimum of 25% of the available moneys in the fund to projects that provide benefits to identified disadvantaged communities; and, 2) a minimum of 10% of the available moneys in the fund to projects located within identified disadvantaged communities. This bill is contingent on the enactment of AB 1532. Specifically, this bill: 1)Requires the California Environmental Protection Agency (CalEPA) to identify disadvantaged communities for investment opportunities. 2)Requires disadvantaged communities to be identified based on geographic, socioeconomic, public health, and environmental hazard criteria, which may include either of the following: a) Areas disproportionately affected by environmental pollution and other hazards that can lead to negative SB 535 Page 2 public effects, exposure, or environmental degradation; and, b) Areas with concentrations of people that are of low income, high unemployment, low levels of homeownership, high rent burden, sensitive populations, or low levels of educational attainment. 3)Requires the investment plan related to the GHGR Fund to include all of the following allocations: a) A minimum of 25% of the available moneys in the fund to projects that provide benefits to identified disadvantaged communities; and, b) A minimum of 10% of the available moneys in the fund to projects located within identified disadvantaged communities. This minimum 10% allocation may be for projects included, in whole or in part, in the set of projects supported by the minimum 25% allocation described above. 4)Requires any funding guidelines developed for administering agencies to include guidelines for how the agencies should maximize benefits for identified disadvantaged communities. 5)Includes reporting requirements, as specified. 6)Declares that nothing in the bill shall be construed as resulting in any taxpayer paying a higher tax. 7)Prohibits the bill from becoming operative unless AB 1532 (John A. Pérez) is enacted. EXISTING LAW , under the California Global Warming Solutions Act of 2006 (AB 32 (Núñez and Pavley), Chapter 488, Statutes of 2006): 1)Requires the Air Resources Board (ARB), pursuant to AB 32, to adopt a statewide GHG emissions limit equivalent to 1990 levels by 2020 and adopt regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. SB 535 Page 3 2)Authorizes ARB to adopt fees to be paid by the sources of GHG emissions regulated pursuant to AB 32. Fee revenues must be deposited in the Air Pollution Control Fund and may be spent for purposes of carrying out AB 32. 3)Authorizes ARB to permit the use of market-based compliance mechanisms to comply with GHG reduction regulations, to be adopted by 2011 and operative by 2012, once specified conditions are met. Prior to adopting a market-based compliance mechanism, to the extent feasible and in furtherance of achieving the statewide GHG emissions limit, ARB must: a) Consider the potential for direct, indirect, and cumulative emission impacts from these mechanisms, including localized impacts in communities that are already adversely impacted by air pollution. b) Design any market-based compliance mechanism to prevent any increase in the emissions of toxic air contaminants or criteria air pollutants. c) Maximize additional environmental and economic benefits for California, as appropriate. 4)Requires ARB, to the extent feasible and in furtherance of achieving the statewide GHG emissions limit, to: a) Design market-based and certain other regulations, including distribution of emissions allowances where appropriate, in a manner that is equitable, seeks to minimize costs and maximize the total benefits to California, and encourages early action to reduce GHG emissions. b) Ensure that activities undertaken to comply with the regulations do not disproportionately impact low-income communities, and complement efforts to achieve and maintain federal and state ambient air quality standards and to reduce toxic air contaminant emissions. 5)Requires ARB to ensure that the GHG emission reduction rules, regulations, programs, mechanisms, and incentives under its jurisdiction direct public and private investment toward the SB 535 Page 4 most disadvantaged communities in California and provide an opportunity for small businesses, schools, affordable housing associations, and other community institutions to participate in and benefit from statewide efforts to reduce GHG emissions. 6)Creates the GHGR Fund and requires all moneys, except for fines and penalties, collected by ARB from the auction or sale of allowances pursuant to a market-based compliance mechanism to be deposited in the GHGR Fund and available for appropriation by the Legislature. 7)Requires the Department of Finance (DOF) to submit proposed legislation, on or before January 10, 2013, that provides a detailed spending plan for moneys in the GHGR Fund, unless the Legislature passes a bill on or before August 31, 2012, that establishes a long-term spending strategy for moneys in the GHGR Fund. Requires any state agency, prior to expending any moneys appropriated from the GHGR Fund, to prepare a specified record. 8)Authorizes the DOF to allocate or otherwise use an amount of at least $500 million from moneys deposited in the GHGR Fund, and make commensurate reductions to General Fund expenditure authority, to support the regulatory purposes of AB 32. Requires ARB and DOF, at least 60 days prior to allocating any funds, to submit a plan for the expenditure or use of the funds to the chairpersons of the Senate and Assembly Appropriations Committees and the Chairperson of the Joint Legislative Budget Committee. Prohibits the use of funds for the purpose of developing a high-speed rail system for at least two years. FISCAL EFFECT : Unknown COMMENTS : According to ARB, a total reduction of 80 million metric tons (MMT), or 16% compared to business as usual, is necessary to reduce statewide GHG emissions to 1990 levels by 2020. ARB intends to achieve approximately 78% of the reductions through identified "regulatory" measures. ARB proposes to achieve the balance of reductions necessary to meet the 2020 limit (approximately 18 MMT) through a cap-and-trade program. The first auction of allowances in the cap-and-trade program will take place on November 14, 2012, and the auctions will be held quarterly thereafter. SB 535 Page 5 The 2012-13 Budget Act (AB 1464 (Budget Committee), Chapter 21, Statutes of 2012) authorizes DOF to allocate at least $500 million from cap-and-trade revenue, and make commensurate reductions to General Fund expenditure authority, to support the regulatory purposes of AB 32. The Resources Budget Trailer Bill (SB 1018 (Budget and Fiscal Review Committee), Chapter 39, Statutes of 2012) creates the GHGR Fund for cap-and-trade auction revenues and requires DOF to submit proposed legislation, on or before January 10, 2013, that provides a detailed spending plan for moneys in the GHGR Fund, unless the Legislature passes a bill on or before August 31, 2012, that establishes a long-term spending strategy for moneys in the GHGR Fund. AB 32 requires ARB to ensure that the GHG emission reduction rules, regulations, programs, mechanisms, and incentives under its jurisdiction direct public and private investment toward the "most disadvantaged communities" in California and provide an opportunity for small businesses, schools, affordable housing associations, and other community institutions to participate in and benefit from statewide efforts to reduce GHG emissions. With regard to any market-based compliance mechanisms, including cap-and-trade, ARB is required to "consider the potential for direct, indirect, and cumulative emissions impacts from these mechanisms, including localized impacts in communities that are already adversely impacted by air pollution." In addition, in adopting and implementing AB 32, ARB is required to "ensure that activities undertaken to comply with the regulations do not disproportionately impact low-income communities." With regard to "co-pollutants," AB 32's GHG-reduction regulations must be designed and implemented to "prevent any increase in the emissions of toxic air contaminants or criteria air pollutants" and "complement efforts to achieve and maintain federal and state ambient air quality standards and to reduce toxic air contaminant emissions." According to the author and many of the supporters, "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 Page 6 This bill is contingent on the enactment of AB 1532. AB 1532 requires GHGR Fund moneys to be used to facilitate the achievement of feasible and cost-effective reductions of GHG emissions. Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916) 319-2092 FN: 0005854