BILL ANALYSIS Ó AB 26 Page 1 Date of Hearing: May 1, 2013 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 26 (Bonilla) - As Amended: April 22, 2013 SUBJECT : California Global Warming Solutions Act of 2006: Greenhouse Gas Reductions Fund. SUMMARY : Enacts various provisions related to projects funded from the Greenhouse Gas Reductions Fund and related curriculum. Specifically, this bill : 1)Requires the three-year investment plan to allocate moneys from the Greenhouse Gas Reductions Fund (Fund) consistent with the following additional statewide goals: a) Transition the state's workforce away from carbon intensive project job skills to greenhouse gas emissions reducing project job skills. b) Reinvest on a regional basis to meet economic needs resulting from climate change policy. 2)Specifies that moneys appropriated from the Fund may be allocated through investments that may include funding for apprenticeship and job training programs associated with greenhouse gas emissions reduction technologies. 3)Provides that construction, alteration, demolition, installation, repair, line and maintenance work paid for in whole or in part from the Fund shall be considered "public works." 4)Provides that moneys from the Fund may be made available to the owner or operator of a refinery to perform maintenance work to reduce greenhouse gas emissions if all maintenance work at the refinery related to reducing greenhouse gas emissions that falls within an "apprenticeable occupation" will be performed by "skilled journeypersons" and "registered apprentices," as those terms are defined. 5)Provides that "approved advanced safety training in performing work processes to reduce greenhouse gas emissions" (as AB 26 Page 2 defined) may be provided by an apprenticeship program approved by the Chief of the Division of Apprenticeship Standards (DAS) or by the California Community Colleges. 6)Requires, no later than January 1, 2016, the Chief of DAS to approve a curriculum, and, in consultation with the California Emergency Management Agency and the Division of Occupational Safety and Health, to periodically revise the curriculum to reflect current best practices. 7)Provides that an apprenticeship program or community college shall issue a certificate to a worker who completes the approved curriculum. 8)Specifies that employers shall not be required to pay for the costs of the training or to pay wages to workers for the time spent in the training unless the employer has agreed to do so. 9)Makes other related and conforming changes. EXISTING LAW : 1)Enacts the California Global Warming Solutions Act of 2006 to facilitate the achievement of reductions of greenhouse gas emissions in the state, as specified. 2)Designates the State Air Resources Board (CARB) as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. 3)Authorizes CARB to include the use of market-based compliance mechanisms, as specified. 4)Requires all moneys, except for fines and penalties, collected by CARB from the auction or sale of allowances as part of a market-based compliance mechanism to be deposited in the Greenhouse Gas Reduction Fund and to be available upon appropriation by the Legislature. 5)Requires the Department of Finance, in consultation with CARB and any other relevant state agency, to develop, as specified, a 3-year investment plan for the moneys deposited in the Greenhouse Gas Reduction Fund. AB 26 Page 3 6)Requires the prevailing wage rate to be paid to all workers on "public works" projects over $1,000. 7)Defines "public work" to include, among other things, construction, alteration, demolition, installation or repair work done under contract and paid for in whole or in part out of public funds. 8)Establishes a definition for "paid for in whole or in part out of public funds," as specified. FISCAL EFFECT : Unknown COMMENTS : In 2006, the Legislature passed the California Global Warming Solutions Act (AB 32) which called for California to reduce its greenhouse gas emissions to 1990 levels by the year 2020. The Cap and Trade Program is a key element in California's climate plan. It sets a statewide limit on sources responsible for 85 percent of California's greenhouse gas emissions, and establishes a price signal needed to drive long-term investment in cleaner fuels and more efficient use of energy. The Cap and Trade Program covers about 350 businesses throughout California which represents 600 facilities. The Cap and Trade auction started in the fall of 2012 for electric utilities and large industrial facilities. The Cap and Trade program will incorporate the distributors of transportation, natural gas and other fuels starting in 2015. Assembly Bill 1532 (John A. Pérez) signed by the Governor in 2012, requires the Department of Finance, in consultation with CARB to develop a 3-year investment plan and to submit the plan to the Legislature. The first plan is scheduled be released this May. Brief Background on Prevailing Wage Law State prevailing wage laws vary from state to state, but do share a common history that actually predates federal prevailing wage law. Many of these state laws were enacted as part of general reform efforts to improve working conditions at the end of the 19th and the beginning of the 20th centuries. Between 1891 and 1923, seven states adopted prevailing wage laws that required payment of specified hourly wages on government construction projects. The State of Kansas enacted the first prevailing wage law in 1891. AB 26 Page 4 Eighteen additional states and the federal government adopted prevailing wage laws during the Great Depression of the 1930s amidst concern that acceptance of the low bid, a common requirement of government contracting for public projects when government had become the major purchaser of construction, would operate to reduce the wages paid to workers on those projects to a level that would disrupt the local economy. California's prevailing was law was enacted in 1931. In general, the proponents of prevailing wage legislation wanted to prevent the government from using its purchasing power to undermine the wages of its citizens. It was believed that the government should set an example, by paying the wages prevailing in a locality for each occupation hired by government contractors to build public projects. Thus, prevailing wage laws are generally meant to ensure that wages commonly paid to construction workers in a particular region will determine the minimum wage paid to the same type of workers employed on publicly funded construction projects. In general, "public works" is defined to include construction, alteration, demolition, installation or repair work done under contract and "paid for in whole or in part out of public funds." Over a decade ago, there was much administrative and legislative action over what constituted the term "paid for in whole or in part out of public funds." This action culminated in the enactment of SB 975 (Alarcón), Chapter # 938, Statutes of 2001, which codified a definition of "paid for in whole or in part out of public funds" that included certain payments, transfers, credits, reductions, waivers and performances of work. At the time, supporters of SB 975 stated that it established a definition that conformed to several precedential coverage decisions made by the Department of Industrial Relations (DIR). The determination of whether a project is deemed to constitute a "public work" is important because the Labor Code requires (except for projects of $1,000 or less) that the "prevailing wage" to be paid to all workers employed on public works projects. AB 26 Page 5 Specific Provisions of the Bill Relevant to this Committee Among other things, this bill provides that construction, alteration, demolition, installation, repair, line and maintenance work paid for in whole or in part from the Fund shall be considered "public works" for purposes of state prevailing wage law. This bill also provides that moneys from the Fund may be made available to the owner or operator of a refinery to perform maintenance work to reduce greenhouse gas emissions if all maintenance work at the refinery related to reducing greenhouse gas emissions that falls within an "apprenticeable occupation" will be performed by "skilled journeypersons" and "registered apprentices." The bill defines an "apprenticeable occupation" to mean an occupation for which the Chief DAS has approved an apprenticeship program pursuant to existing law. The bill defines a "skilled journeyperson" to mean a worker who meets all of the following: 1)The worker accomplished either of the following: a) Graduated from an apprenticeship program for the applicable occupation that was approved by the Chief of DAS or by the federal Office of Apprenticeship, or by its predecessor agency. b) Has at least as many hours of on-the-job experience in the applicable occupation that would be required to graduate from an apprenticeship program for the applicable occupation that is approved by the Chief of DAS. 2)The worker is being paid at least the prevailing hourly wage rate for a journeyperson in the applicable occupation and geographic area. 3)The worker has completed within the prior two calendar years at least 20 hours of approved advanced safety training in performing work processes to reduce greenhouse gas emissions. The bill specifies that this requirement shall apply only to AB 26 Page 6 work performed on or after January 1, 2018. The bill defines a "registered apprentice" to mean an apprentice registered in an apprenticeship program approved by the Chief of DAS who is performing work covered by the standards of that apprenticeship program and receiving the supervision required by the standards of that apprenticeship program. With respect to curriculum, this bill also provides that "approved advanced safety training in performing work processes to reduce greenhouse gas emissions" (as defined) may be provided by an apprenticeship program approved by the Chief of DAS or by the California Community Colleges. The bill requires, no later than January 1, 2016, the Chief of DAS to approve a curriculum, and, in consultation with the California Emergency Management Agency and the Division of Occupational Safety and Health, to periodically revise the curriculum to reflect current best practices. The bill also provides that an apprenticeship program or community college shall issue a certificate to a worker who completes the approved curriculum and specifies that employers shall not be required to pay for the costs of the training or to pay wages to workers for the time spent in the training unless the employer has agreed to do so. ARGUMENTS IN SUPPORT : The author states the following in support of this bill: "[P]ayments for auction allowances may result in workforce impacts. We want to ensure that Cap and Trade monies can be used for job retraining and apprenticeship programs so that employees affected by these changes can learn new skills to transition to the green economy. As we slowly evolve our economy from carbon intensive strategies, we need to provide an avenue for workers to be transitioned along with those strategies. By including this (transitioning the state's workforce to GHG emission reduction job skills) on the list of goals to be funded by the GGRF, we are allowing for this to occur. AB 26 also AB 26 Page 7 ensures that apprenticeship and job training programs are included on the list of potential investments that may be included in the investment plan. Furthermore, we want to ensure that monies are allocated in harmony with other state goals, such as reducing carbon emissions through land use decisions. Lastly, many of the projects to be funded are likely to be construction related. As a state, we want to be sure that we uphold our commitment to living wages. AB 26 clarifies that construction, alteration, demolition, installation, repair, and maintenance work paid for with GGRF monies is considered a public work. The bill also ensures that all refinery maintenance work which is funded with GGRF monies uses the tradespeople who are best trained in safety. It is very important that we utilize the best trained persons to ensure the safety of all employees at refineries." In addition, the author has submitted data and studies to show that prevailing wage laws encourage better training and the use of more experienced workers - both of which contribute to a safer work environment. In addition, this bill is supported by the State Building and Construction Trades Council of California who states the following: "When the California Global Warming Solutions Act of 2006 was passed, no one could have expected the amount of work that would need to be completed in order to meet the requirements of the Act. As the State Air Resources Board has worked through the process of crafting regulations that will ultimately shape how the Act will be carried out, it has become clear that there will be many opportunities for California construction workers to do work related to meeting the goals of the Act. Furthermore, it is clear that there will be a tremendous amount of projects on which apprentices can learn new clean energy skills. These skills will allow them to make a career out of doing environmentally friendly work on new projects and maintenance on existing infrastructure that needs to AB 26 Page 8 retrofitted in order to be cleaner. Because of these facts, it has become clear that there needs to be a process where funds spent out of the Greenhouse Gas Reduction Fund will not only provide work for California construction workers, but provide a training component as well. This training component is critical in order to prepare the next generation of workers on technologies being created to keep the environment clean and meet the requirements of the Act. Fortunately, there already exists a model to ensure that workers doing this work get paid a decent wage and that the next generation of workers is also trained. By requiring work arising out of the regulations implementing the Act to be considered public works, the prevailing wage will be triggered, which not only provides a middle class livelihood for the construction workers earning it, but includes a per hour dollar amount that goes back to apprenticeship programs so apprentices can be trained and hired to learn new skills. In addition to the per hour dollar amount that goes back to a workers' apprenticeship program, the prevailing wage allows contractors to spend a part of a worker's prevailing wage on fringe benefits such as healthcare coverage, pension, sick and vacation time, to name a few. These fringe benefits are one that many non-construction workers take for granted, but that construction workers receive as a per hour dollar amount on their paychecks that then goes to providing those fringe benefits. Given that construction is one of the most dangerous occupations in the world, it is important that these workers receive healthcare coverage and other benefits in case they are injured and need time away from work. These benefits also ensure that if these workers get injured they will have the healthcare coverage they need instead of relying upon receiving their care at an emergency room where the burden to pay is shifted to taxpayers. The wage and benefits provided by the Prevailing Wage lead directly to a middle class livelihood and any of the funds that come out of the Greenhouse Gas Reduction Fund should not only go towards making the environment cleaner, but also to the workers performing the work so that they can earn a livable wage with benefits." AB 26 Page 9 ARGUMENTS IN OPPOSITION : The California Manufacturers & Technology Association (CMTA) opposes this bill and, among other things, states that pending litigation to determine whether the sale of allowances is authorized under AB 32 makes it unwise to appropriate money until the legal questions have been fully resolved and we have a clear understanding of how any legally raised revenues may be spent. CMTA also states that the forthcoming investment plan will include a full assessment of the program, recommend new strategies and perhaps recommend adjustments for existing policies. They contend that when this work is complete, the priorities can be revisited to determine if revenues are needed to achieve the environmental goals or if the program focus should be protecting against emissions and economic leakage. CMTA concludes that this bill jump out ahead of the information needed to make wise policy choices. COMMITTEE STAFF COMMENTS : 1)This bill was previously heard by the Assembly Committee on Natural Resources. However, in light of the recent amendments, the bill was referred to this Committee as well. Please see the bill analysis prepared by the Assembly Committee on Natural Resources for a more thorough discussion of some of the other issues addressed in the bill. 2)This bill provides that moneys from the Fund may be made available to the owner or operator of a refinery to perform maintenance work to reduce greenhouse gas emissions if all maintenance work at the refinery related to reducing greenhouse gas emissions that falls within an "apprenticeable occupation" will be performed by "skilled journeypersons" and AB 26 Page 10 "registered apprentices," as those terms are defined. In light of recent incidents (such as the August 2012 fire at the Chevron refinery in Richmond) and if these requirements on who may perform the work are based upon safety arguments, the author may wish to consider whether the requirement should be applied to all refinery maintenance work performed, not just such maintenance work paid for from the Fund. REGISTERED SUPPORT / OPPOSITION : Support State Building and Construction Trades Council of California Opposition California Manufacturers & Technology Association Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091