BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 1018
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          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 








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            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. 








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          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.  








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          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.








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          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 








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          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


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