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 Hearing Date: June 26, 2013 AB 26 Consultant: Alma Perez Page 2 Senate Committee on Labor and Industrial Relations 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: Hearing Date: June 26, 2013 AB 26 Consultant: Alma Perez Page 3 Senate Committee on Labor and Industrial Relations 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 Consultant: Alma Perez Page 4 Senate Committee on Labor and Industrial Relations 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 Consultant: Alma Perez Page 5 Senate Committee on Labor and Industrial Relations 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. Hearing Date: June 26, 2013 AB 26 Consultant: Alma Perez Page 6 Senate Committee on Labor and Industrial Relations 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 Hearing Date: June 26, 2013 AB 26 Consultant: Alma Perez Page 7 Senate Committee on Labor and Industrial Relations 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 Consultant: Alma Perez Page 8 Senate Committee on Labor and Industrial Relations 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 Consultant: Alma Perez Page 9 Senate Committee on Labor and Industrial Relations 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 Consultant: Alma Perez Page 10 Senate Committee on Labor and Industrial Relations 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