BILL ANALYSIS Ó SB 1018 Page 1 SENATE THIRD READING SB 1018 (Budget and Fiscal Review Committee) As Amended June 26, 2012 Majority vote. Budget Bill Appropriation Takes Effect Immediately SENATE VOTE :Vote not relevant SUMMARY : Contains necessary statutory and technical changes to implement the Budget Act of 2012 related to resources. Specifically, this bill : 1)Provides for funding flexibility for state parks by providing a two-year continuous appropriation from the State Parks and Recreation Fund for revenue generating activities, creates an Enterprise Fund for entrepreneurial capital projects, increases flexibility of existing funding sources for all state parks, and provides a funding for water and wastewater projects. 2)Reduces the number of members on each regional water quality control board from nine to seven, eliminates categorical selection of individuals who may serve on a board, and revises conflict of interest rules for board members to more closely mirror the Political Reform Act of 1974. 3)Establishes new legislative oversight and controls over the California Air Resources Board (CARB) including: the creation of a separate expenditure fund for funds from the auction or sale of allowances pursuant to the market-based compliance mechanism (Cap and Trade program); the establishment of a separate Cost of Implementation Fee account for oversight and tracking of funds; oversight of actions taken on behalf of the State of California related to market-based compliance and auctions, specific to the Western Climate Initiative and Western Climate Initiative, Incorporated; and, provides for return of funds to certain ratepayers of Investor Owned Utilities from funds related to the auction or sale of allowances. 4)Allows for the creation of an Electricity Procurement Investment Charge (EPIC) fund for the sole purposes of creating an investment plan for proceeds of the EPIC proceeding at the California Public Utilities Commission. No SB 1018 Page 2 funding from this item is proposed or allowed to be used for any existing or new policies in the California Energy Commission. Provides for the elimination of defunct statutes funded under the previous Public Goods Charge. 5)Removes existing barriers on the funding of the New Solar Homes (NSHs) program thereby providing a steady stream of funding and a signal to multiple markets that California values clean solar electricity and the attendant good paying jobs. These changes also support the California Solar Initiative (CSI) as they help ensure that the NSH program does not cannibalize the CSI. 6)Requires payments to the Beverage Container Recycling Fund, as of July 1, 2012, to be made no later than the last day of the month following the sale of a qualifying beverage. Provides necessary amendments to require a business that generates four cubic yards or more of commercial solid waste per week to arrange for required recycling services. Shifts enforcement of electronic waste primarily to the Department of Resources Recycling and Recovery from the Department of Toxic Substances Control. 7)Provides necessary statutory changes to reduce underutilized program activities funded by in the Department of Toxic Substances Control. Provides necessary statutory changes from budget reductions and adjustments to the Toxic Substances Control Account. Eliminates statutory references to the now defunct Registered Environmental Assessor program. 8)Provides for expanded permitting and inspection fee requirements, and revised assessment of fees related to production, licensing and inspection of milk and dairy products. 9)Provides statutory changes to allow for an ongoing transfer of funds from the Harbors and Watercraft Revolving Loan Fund for reimbursement of costs of the State Water Resources Development system incurred for related recreation and fish and wildlife enhancements, including in particular for the ongoing obligation for boating and fishing related activities at facilities within the system. Provides for a legislative hearing and notification for new long-term water contract terms and conditions prior to final approval by the parties. SB 1018 Page 3 10)Provides for, within the Fish and Game Code, the elimination of the Salton Sea Restoration Council on January 1, 2013. Requires the Department of Fish and Game to provide certification of the full mitigation of identified significant environmental impacts and for a fee structure to fully cover all costs of the department prior administering permits to operate vacuum or suction dredge equipment. 11)Provides necessary changes to: adjust expenditure authority for the purpose of hazardous or idle-deserted wells in a given year; extend the period of liquidation in the School District Act from the Underground Storage Tank Cleanup Fund; and, requires local unexpended bond funds from the Lower-Emission School Bus Program to be re-allocated locally rather than revert to the State Air Resources Control Board. 12)Provides necessary cleanup to provisions related to the San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy relative to appointment of state personnel. 13)Contains an appropriation allowing this bill to take effect immediately upon enactment. COMMENTS : Sustainable Funding Proposal for State Parks. In the 2011 Budget, the Legislature approved a reduction to the Department of Parks and Recreation of $11 million in the current year and a $22 million ongoing starting this year. To implement the reduction, the department submitted a list of 70 parks slated for closure. In the interim, members of the public, local agencies, federal agencies, and non-profit organizations have made efforts to find other ways to fund parks on the closure list. According to the department, to date, 16 parks have been removed from the closure list. Extensive review during the Budget Subcommittee process, revealed that not even simply funding the department at previous year levels is not sufficient to address the structural problems inherent at the department. The breadth of the problem includes a deferred maintenance backlog in excess of $1 billion, increasing operations and maintenance costs, collapse of septic and wastewater systems designed for a much lower capacity, restrictive funding sources, and a need for a cultural shift to match the changed funding streams at the department. SB 1018 Page 4 Rather than look for one-time solutions solely, the Assembly and Senate Budget and Policy Committee propose a suite of changes designed to address the structural funding problem and promote cultural shift within the department, including authorizing a specialty license plate and an opt-in vehicle license fee check-off. Cap-and-Trade Program. The Cap-and-Trade program is a key element in the state's climate plan to reduce greenhouse gas (GHG) emissions to 1990 levels by the end of this decade. It sets a limit on major sources of greenhouse gases and establishes a financial incentive for long-term investments in cleaner fuels and more efficient energy use. As part of its program, CARB will give free allowances to the state's large industrial emitters as well as the state's electric utilities in order to reduce the economic impact of the cap-and-trade program. In 2012, the CARB will begin auctioning GHG emission allowances as part of the cap-and-trade program. The Budget authorizes at least $500 million be used to offset existing General Fund costs of GHG mitigation activities. It also specifies that any additional expenditures related to GHG emissions reductions be made pursuant to future legislation. The Administration continues to move forward with a proposal to "link" auctions to the Quebec Cap and Trade system. This would allow for more credits to be auctioned in multiple jurisdictions. In order to facilitate this multi-government auction, the CARB assisted in the creation of the Western Climate Initiative, Inc. (WCI), an independent non-profit that would develop compliance, tracking, and market monitoring functions for jurisdictions participating in the auctions. In order to address concerns about the WCI, the Trailer Bill establishes legislative oversight and control over linkages, including requiring: two ex-officio, non-voting members of WCI's board of directors be appointed by the Senate Rules Committee and the Speaker of the Assembly. The CARB give notice to the Joint Legislative Budget Committee prior to any funds transfers over $150,000 to WCI, and restricting linkages to other jurisdictions unless the Governor issues findings that such jurisdiction has adopted and enforces equivalent or more stringent laws and regulations. SB 1018 Page 5 Electricity Program Investment Charge Program. In December 2011, funding for the state's Public Goods Charge (PGC) on electricity ratepayers expired. Efforts to continue the surcharge were not successful. The PGC funded energy efficiency research and development and renewable energy programs. The charge constituted about a quarter of the total energy efficiency programs funded by the state and energy utilities. In September 2011, the Governor sent a letter to the California Public Utilities Commission (CPUC) requesting that the Commission take action under the Commission's authority to ensure that programs funded like those funded under the PGC would be continued. In December 2011, the CPUC initiated a rulemaking to attempt to continue the programs of the PGC with a sole focus on the investor-owned utilities (IOUs). The CPUC selected the Energy Commission to be the administrator for the majority of the EPIC program. Concerns were raised about the legislative oversight and priorities given the new policy direction by the Administration to fund programs that were previously authorized under the PGC. As a compromise, the Budget approves half the proposal (funding and positions) gives the Legislature time to work with the Administration on a final EPIC policy. This bill's language cleans up defunct PGC authority and ensures that funding only goes to programs eligible under the new program. Beverage Container Recycling Fund Redemption Payments. CalRecycle makes payments from the Beverage Container Recycling Fund to container recyclers and processors within 20 days, but under current law distributor payments to the Fund have to be made within 60 to 90 days. This bill proposes to require beverage container distributors to submit beverage container redemption payments to CalRecycle by the last day of the first month following sale, rather than the last day of the second or third month following sale. This proposal will better align the state's cashflows with container recyclers and processors. General Fund Reduction. Last year, the Legislature approved a General Fund reduction to the California Department of Food and Agriculture of $19 million in 2011-12 and an additional $12 million (total of $31 million) in 2012-13 and ongoing. One component of the additional $12 million reduction in 2012-13 is a $1.028 million General Fund cut to the Milk and Dairy Food SB 1018 Page 6 Safety program. The 2012-13 Budget includes $1.028 million Agriculture Fund to offset this reduction. To collect the additional revenue in the Agriculture Fund, this bill raises specified fees sufficient to cover the additional $1.028 million Agriculture Fund appropriation. Davis-Dolwig Act. The Budget proposes a $10 million continuous appropriation from the Harbors and Watercraft Revolving Fund to fund the state's obligations under the Davis-Dolwig Act, which requires the state to pay for recreational, fish and wildlife benefits at State Water Project facilities. This bill provides statutory changes to allow for this ongoing transfer of funds. This proposal will resolve a long-standing problem and will provide a reliable source of funding for the department and state water contractors as they continue to manage and improve the state's water delivery system. Analysis Prepared by : Gabrielle Meindl / BUDGET / (916) 319-2099 FN: 0004227