BILL ANALYSIS                                                                                                                                                                                                    Ó






                 Senate Committee on Labor and Industrial Relations
                              William W. Monning, Chair

          Date of Hearing: July 10, 2013               2013-2014 Regular  
          Session                              
          Consultant: Alma Perez                       Fiscal:Yes
                                                       Urgency: No
          
                                   Bill No: AB 26
                                   Author: Bonilla
                        As Introduced/Amended: June 25, 2013 
          

                                       SUBJECT
          
           California Global Warming Solutions Act of 2006: Greenhouse Gas  
                                   Reduction Fund 


                                     KEY ISSUES

          Should moneys from the Greenhouse Gas Reduction Fund be  
          classified as public funds for purposes of public works  
          provisions under the labor code, thereby, requiring the payment  
          of prevailing wages for workers on those projects?

          Should the Legislature define what classifies a worker as  
          qualified to perform work to reduce greenhouse gas emissions? 

          Should the Legislature require the Chief of the Division of  
          Apprenticeship Standards to develop a curriculum for advanced  
          safety training in performing work processes to reduce  
          greenhouse gas emissions to be taught by apprenticeship programs  
          and the community colleges? 


                                      ANALYSIS
          
           Existing law  defines the term "public works" 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. (Labor Code §1720)

           Under existing law  , "paid for in whole or in part out of public  
          funds" means, among other things, the following:
             1.   Payment of money or the equivalent of money by the state  









               or political subdivision directly to or on behalf of the  
               public works contractor, subcontractor, or developer.
             2.   Performance of construction work in execution of a  
               project.
             3.   Fees, costs, rents, insurance or bond premiums, loans,  
               interest rates, or other obligations  normally required in  
               the execution of the contract, that are paid, reduced,  
               charged at less than fair market value, waived, or forgiven  
               by the state/political subdivision.
             4.   Money loaned by the state/political subdivision that is  
               to be repaid on a contingent basis. 
           
          Existing law  requires all employees who work on public works  
          projects costing $1,000 or more to be paid the general  
          prevailing rate of per diem wages (the hourly wage rate being  
          paid to a majority of the workers in a particular craft within a  
          given locality) and the general prevailing rate for holiday and  
          overtime work for the specific location where the public work is  
          to be performed. (L.C. §1771) The Director of the Department of  
          Industrial Relations (DIR) is tasked with the responsibility of  
          determining the general prevailing rate of per diem wages in  
          accordance with specified standards. (L.C. §1773)  
           
          Existing law, under the CA Global Warming Solutions Act of 2006  
          (Act)  , requires the California Air Resources Board (ARB) to  
          determine the 1990 statewide greenhouse gas (GHG) emissions  
          level and approve a statewide emissions limit that is equivalent  
          to that level, to be achieved by 2020.  (Health and Safety Code  
          §38500 et seq.). Among other things, the Act does the following:  


             1.   Establishes the Greenhouse Gas Reduction Fund (Fund) to  
               receive cap-and-trade auction proceeds and price  
               containment reserve sales, and provides the framework for  
               administration of these proceeds. The State portion of the  
               proceeds is deposited into the Fund to support programs  
               that further the purposes of the Act. (Gov. Code §§16428.8  
               and 16428.9).

             2.   Requires the Department of Finance, in consultation with  
               the ARB, to submit to the Legislature on or before January  
               10, 2013 a proposal that provides a detailed spending plan  
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               for the expenditure of moneys in the Fund (GOV §16428.85).

             3.   Requires the Department of Finance, in consultation with  
               the ARB and any other relevant state entity, to develop and  
               submit to the legislature a three-year investment plan that  
               does all of the following (Healthy and Safety Code §39716):

                  a.        Identify the state's near-term and long-term  
                    greenhouse gas emissions reduction goals and targets  
                    by sector.
                  b.        Analyze gaps, where applicable, in current  
                    state strategies to meeting the state's greenhouse gas  
                    emissions reduction goals by sector.
                  c.        Identify priority programmatic investments of  
                    moneys that will facilitate the achievement of  
                    feasible and cost-effective greenhouse gas emissions  
                    reductions toward achievement of greenhouse gas  
                    reduction goals and targets.
           
          Under existing law, the Division of Apprenticeship Standards  
          (DAS),  within DIR, is charged with the responsibility of  
          administering California apprenticeship law and enforces  
          apprenticeship standards for wages, hours, working conditions  
          and the specific skills required for state certification as a  
          journeyperson in an apprenticeable occupation. (Labor Code  
          §3073)  Also within DIR, the Division of Occupational Safety and  
          Health is tasked with the responsibility of protecting workers  
          from health and safety hazards on the job (L.C. §140).


           Existing law  , under the California Emergency Services Act,  
          creates the California Emergency Management Agency (Cal/EMA) to  
          coordinate the overall state agency response to major disasters  
          in support of local government (GOV §8550).
           
          This Bill  would enact various provisions related to the payment  
          of wages for projects funded from the Greenhouse Gas Reductions  
          Fund. 

          Specifically, this bill would:

             1)   Provide definitions for the following terms:
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                  a.        "Registered apprentice" means an apprentice  
                    registered in an apprenticeship program approved by  
                    the Chief of the DAS. 

                  b.        "Approved advanced safety training in  
                    performing work processes to reduce greenhouse gas  
                    emissions" means curriculum of in-person class and  
                    laboratory instruction that is approved by the Chief  
                    of the DAS.

                  c.        "Skilled journeyperson" means a worker who  
                    meets  all  of the following:

                        i.             The worker has either: 
                            1.                  Graduated from an  
                              apprenticeship program approved by the Chief  
                              of the DAS or by the federal Office of  
                              Apprenticeship;  or  
                            2.                  Has at least as many hours  
                              of on-the-job training as would be required  
                              to graduate from an approved apprenticeship  
                              program. 

                        ii.            The worker is being paid at least  
                         the prevailing hourly wage rate for a  
                         journeyperson in the applicable occupation and  
                         geographic area.

                        iii.           The worker has completed within the  
                         prior 2 years,  at least 20 hours  of approved  
                         advanced safety training in performing work  
                         processes to reduce greenhouse gas emissions.  
                         However, this requirement shall apply to work  
                         performed on or after January 1, 2018. 

             2)   Provide that moneys from the fund shall be public funds  
               as the term is used in Labor Code for public works  
               projects, thereby, requiring the payment of  the prevailing  
               wage. 

             3)   Insofar as money from the fund may be made available to  
          Hearing Date:  June 26, 2013                              AB 26  
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               the owner or operator of a refinery (per existing law) to  
               perform work to reduce GHG emissions, require that all work  
               that falls within an apprenticeable occupation be performed  
               by skilled journeypersons and registered apprentices.  
               (Except work by the refinery's own workers)

             4)   Specify that funds shall be made available for work at a  
               refinery only if it is related to complying with a  
               market-based compliance mechanism established per the CA  
               Global Warming Solutions Act, and is not required by any  
               other law, regulation, or court order.

             5)   Require the Chief of the Division of Apprenticeship  
               Standards to approve, no later than January 1, 2016 and in  
               consultation with the CA Emergency Management Agency and  
               the Division of Occupational Safety and Health, a  
               curriculum for advanced safety training in performing work  
               processes to reduce greenhouse gas emissions to be provided  
               by a DAS approved apprenticeship program or by the  
               California Community Colleges. 
                                      COMMENTS

          1.  California Global Warming Solutions Act of 2006:

            In 2006, the Legislature passed the CA Global Warming  
            Solutions Act (AB 32 Nunez) which called for California to  
            reduce its greenhouse gas emissions to 1990 levels by the year  
            2020.  The Act designates the State Air Resources Board as the  
            state agency charged with monitoring and regulating sources of  
            emissions of greenhouse gases.  The act authorizes the state  
            board to include the use of market-based compliance  
            mechanisms. 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 auction started in the fall of 2012 for  
            electric utilities and large industrial facilities. The  
            program will incorporate the distributors of transportation,  
            natural gas and other fuels starting in 2015. AB 1532 (John A.  
          Hearing Date:  June 26, 2013                              AB 26  
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            Pérez) signed by the Governor in 2012, requires the Department  
            of Finance, in consultation with CARB to develop a 3-year  
            investment plan identifying greenhouse gas reduction goals and  
            targets, analyzing gaps in state strategies to meet those  
            goals, and identifying investment priorities. 

            Existing law requires all moneys, except for fines and  
            penalties, collected by CARB from the auction or sale of  
            allowances to be deposited into the Greenhouse Gas Reduction  
            Fund to be available upon appropriation by the Legislature.

          2.  A Brief History on State and Federal Prevailing Wage Law:

            State prevailing wage laws vary from state to state, many of  
            which were enacted as part of Progressive Era reform efforts  
            to improve working conditions at the end of the 19th and  
            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 being the first in 1891.  Eighteen  
            additional states (including California in 1931) 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, would reduce local wages and disrupt the  
            local economies.  This was particularly in the depths of the  
            Great Depression, where, for some local economies, the  
            government had become the primary purchaser of construction  
            products and a significant employer.

                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.  Even today,  
            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. 


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          3. Need for this bill?  
           
            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."  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" be paid to all workers employed on public  
            works projects.  Classifying funds from the California Global  
            Warming Solutions Act as "public funds" would extend existing  
            public works requirements to those projects, primarily the  
            payment of prevailing wage for workers. 

            According to the author, many of the projects that may be  
            funded with revenues from the Global Warming Solutions Act  
            (cap-and-trade auction) are likely to be construction related.  
            Current law does not specify that projects funded with Fund  
            monies must pay the prevailing wage. The author states that AB  
            26 upholds California's commitment to living wages by  
            clarifying that work paid for with Greenhouse Gas Reduction  
            Fund revenues is considered a public work, and therefore,  
            subject to the payment of prevailing wage. 

          4.  Staff Comment:

             This bill does two main things, 1) defines monies derived from  
            the Global Warming Solutions Act as public funds for which  
            projects would be required to comply with existing prevailing  
            wage requirements, and 2) provides training qualification  
            requirements for the employees working on those projects. The  
            bill's proponents argue that this bill seeks to ensure that  
            workers on these projects are getting paid a good living wage  
            and are getting the training they need to ensure their safety  
            and that of their surrounding communities. These requirements,  
            however, have raised opposition from some of the workers on  
            these jobs. The bill appears to place two worker advocate  
            groups on opposite sides of the bill, the State Building and  
            Construction Trades Council and the United Steelworkers, both  
            groups trying to protect access to this work as well as  
            employee safety. The Committee encourages the proponents and  
            opponents to continue the dialogue on this bill and attempt to  
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            resolve their differences with regards to the concerns raised.  
             

          5.  Committee Suggested Amendments:

             Amendments taken out of Senate Environmental Quality used the  
            term "public funds" to specify that projects funded by the  
            Greenhouse Gas Reductions Fund would be considered "public  
            works," as defined in Labor Code.  However, under current law,  
            the actual reference to these publicly funded projects is  
            "public works." Therefore, the author may wish to amend the  
            bill to correctly reference funded projects as public works  
            for purposes of Labor Code.  

          6.  Proponent Arguments  :
            
            According to the author, as California's economy transitions  
            to meet AB 32 goals, we need to ensure that we also transition  
            our workforce and support jobs that pay a living wage and  
            contribute to improving our local economies.  Proponents argue  
            that by requiring projects arising from implementation of 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 will also  
            contribute to continuous training and education. 

            Additionally, the author argues, it is also crucial that we  
            employ the most highly trained workers in our refineries to  
            ensure the safety of all employees and promote continuous  
            safety training as technology develops. AB 26 seeks to work  
            within the confines of the investment plan and provide  
            additional requirements on potential recipients.  Proponents  
            state that the sole purpose of this bill is to ensure that  
            communities and workers in the counties where these facilities  
            are located are protected, that the work is done by the best  
            trained, highly skilled streamlined workforce available, and  
            that those workers be fairly compensated. 

            Lastly, proponents argue that there needs to be process where  
            funds spent out of the Greenhouse Gas Reduction Fund will not  
            only provide work for California construction workers, but  
            will also provide a training components as well.  This  
          Hearing Date:  June 26, 2013                              AB 26  
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            training component, they argue, 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. 

          7.  Opponent Arguments  :

            This bill is opposed by several organizations, including the  
            CA Chamber of Commerce and the CA Manufacturers and Technology  
            Association (CMTA). CMTA states that pending litigation filed  
            by the CA Chamber of Commerce and Pacific Legal Foundation 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 and argue that this bill jumps out  
            ahead of the information needed to make wise policy choices.

            Communities for a Better Environment (CBE) supports ending the  
            hiring of less qualified out of state contract employees to do  
            refinery work, however, they argue that the systems of  
            training workers in industrial unions versus construction are  
            different reflecting differences between the industries in  
            which they work. CBE believes that this bill and the  
            proponents are trying to "blame the workers" for events such  
            as the Chevron Richmond Refinery explosion and fire last year,  
            despite scientific evidence to the contrary. The United  
            Steelworkers (USW) argues that the US Chemical Safety Board's  
            Interim Investigative Report clearly states that management's  
            decisions were at full fault for the explosion and fire and,  
            in fact, it is because of the skills of the highly trained  
            steelworkers that there was no loss of life. 

            The United Steelworkers also argue that this bill replaces  
            permanent, long-term, certified and trained refinery workers  
            with temporary, contract employees. Additionally, they argue  
            that this bill jeopardizes refinery safety, refinery workers,  
            and surrounding communities by minimizing inclusion of safety  
          Hearing Date:  June 26, 2013                              AB 26  
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            records as a mandatory qualifying factor for project  
            contracts.  USW would like to see the training requirement in  
            the bill eliminated because 20 hours of training is not  
            sufficient to adequately train someone. Overall, they argue  
            that the substitution of proprietary, fully trained United  
            Steelworkers with transient, migratory workers would do  
            nothing to enhance public safety. 

          8.  Double Referral  :

            This bill has been double referred and prior to coming to this  
            Committee for a hearing, it was heard and passed by the Senate  
            Environmental Quality Committee.  Amendments coming out of  
            that Committee emphasize that moneys from the fund shall be  
            made available for work at a refinery only if the work is  
            related to complying with a market-based compliance mechanism  
            established pursuant to the California Global Warming  
            Solutions Act. This amendment clarifies that routine  
            maintenance type work will not be funded.    

          9.  Prior Legislation  :

            AB 32 (Nunez) of 2006:  Chaptered
            AB 32 enacted the Global Warming Act of 2006 (Act).

            AB 1532 (John A. Pérez) of 2012:  Chaptered 
            AB 1532 requires the Department of Finance, in consultation  
            with CARB to develop a 3-year investment plan identifying  
            greenhouse gas reduction goals and targets, analyzing gaps in  
            state strategies to meet those goals, and identifying  
            priorities. 

            SB 535 (De Leon) of 2012:  Chaptered
            SB 535 requires the CA Environmental Protection Agency to  
            identify disadvantaged communities for investment  
            opportunities, as specified. 

                                       SUPPORT
          
          State Building and Construction Trades Council of California  
          (Sponsor)
          California State Association of Electrical Workers 
          Hearing Date:  June 26, 2013                              AB 26  
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          California State Pipe Trades Council 
          California Teamsters Public Affairs Council
          International Association of Heat and Frost Insulators, Local 5
                                                      International Brotherhood of Boilermakers 
          Western States Council of Sheet Metal Workers 
          
                                     OPPOSITION
          
          Asian Pacific Environmental Network (unless amended)
          California Chamber of Commerce
          California Manufacturers & Technology Association
          Communities for a Better Environment
          United Steel Workers
                                       NEUTRAL
          
          Communications Workers of America, AFL-CIO - District 9

























          Hearing Date:  June 26, 2013                              AB 26  
          Consultant: Alma Perez                                   Page 11

          Senate Committee on Labor and Industrial Relations