BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 39
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          Date of Hearing:  April 15, 2013

                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES
                                Wesley Chesbro, Chair
                     AB 39 (Skinner) - As Amended:  April 9, 2013
           
          SUBJECT  :  Proposition 39:  implementation

           SUMMARY  :  Establishes a program to be administered by the  
          California Energy Commission (CEC) for the distribution of funds  
          allocated by the Clean Energy Jobs Act (Prop 39) to clean energy  
          projects undertaken by public schools.

           EXISTING LAW  , Prop 39, an initiative approved by the voters at  
          the November 6, 2012 statewide general election:

          1)Repeals existing law allowing multistate businesses to choose  
            a formula for calculating their California income or franchise  
            tax liability and, instead, requires those businesses,  
            starting in 2013, to utilize the "single sales factor" (SSF)  
            method of determining their taxable income.

          2)Establishes a Citizens Oversight Board (COB), composed of nine  
            members appointed by the State Treasurer, the State Controller  
            and the Attorney General, whose expertise may contribute to  
            the effective execution of energy projects.  The COB is  
            intended to ensure that funds are used appropriately, and to  
            evaluate the cost effectiveness of projects.

          3)Dedicates $550 million, or 50 percent of the annual increase  
            in revenues from the SSF, whichever is less, annually for five  
            fiscal years (2013-13 through 2017-18) to the Clean Energy Job  
            Creation Fund (Fund) for projects that create energy  
            efficiency and clean energy jobs in California, upon  
            appropriation by the Legislature.  The funding may include:

             a)   Energy efficiency and clean energy installations at  
               public schools, universities and colleges, and other public  
               buildings; 

             b)   Job training and workforce development on clean energy  
               and energy efficiency programs; and,

             c)   Financing and technical assistance to fund Property  
               Assessed Clean Energy (PACE) programs.








                                                                  AB 39
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            THIS BILL  :

          1)Defines "eligible institution" as a K-12 public school or  
            school district, or a community college (i.e., K-14)

          2)Requires the CEC to administer grants, loans or other  
            financial assistance to K-14 recipients for eligible energy  
            efficiency, clean energy or other energy system improvement  
            projects.

          3)For each fiscal year that Prop 39 revenue is deposited in the  
            Fund (i.e., the next five years), requires:

             a)   75 percent for grants to K-14 recipients for eligible  
               projects; and,

             b)   25 percent for low- or no-interest revolving loans to  
               K-14, public universities or public buildings for eligible  
               projects and technical assistance.

          4)Requires the CEC to ensure that each region of the state  
            receives a share reasonably equivalent to its proportion of  
            statewide average daily attendance (ADA).

          5)Requires K-14 applicants to propose projects to the CEC and  
            consider the following factors:

             a)   Potential for energy demand reduction.

             b)   Proportion of students receiving free and reduced-price  
               meals.

             c)   School facilities' age.

             d)   Whether facilities have been modernized recently.

             e)   Whether facilities are operated year-round.

             f)   School facilities' rating from Energy Star or another  
               energy rating system.

             g)   Ability to facilitate matriculation into certified  
               apprenticeship programs.









                                                                  AB 39
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          6)Requires K-14 recipients to report energy and cost savings to  
            the CEC according to a schedule and in a manner established by  
            the CEC.

          7)Requires the CEC to ensure that adequate energy audit,  
            measurement and verification procedures are employed to ensure  
            funded projects result in energy savings and GHG reductions.

          8)Requires the Fund to be available, upon appropriation by the  
            Legislature, to support: 

             a)   Energy-related job training and workforce development by  
               the California Conservation Corps or other specified  
               workforce development programs.

             b)   PACE or similar programs.

          9)Requires all recipients to submit a specified report to the  
            COB within one year, and requires the COB to report this  
            information to the Legislature and the public annually.

          10)Establishes related definitions, findings and declarations.

           FISCAL EFFECT  :  Unknown

           COMMENTS  :

           1)The voters give Props.   In November 2012, California voters  
            approved Prop 39 to close a corporate tax loophole that  
            previously allowed multi-state corporations operating in  
            California to choose between two methods of determining  
            taxable income.  This shift to a single sales factor method is  
            estimated to increase the state's annual corporate tax  
            revenues by as much as $1.1 billion.

            Prop 39 also specified how a portion of this new revenue  
            should be spent.  First, half of the revenue generated from  
            2013-2018, up to $550 million, should be transferred to the  
            Fund. The Fund should support energy efficiency and  
            alternative energy projects at public schools, colleges,  
            universities and other public buildings, as well as related  
            public-private partnerships and workforce training.  Second,  
            the funds can only be appropriated to agencies with  
            established expertise in managing energy projects and  
            programs.  And third, programs must be coordinated with the  








                                                                  AB 39
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            CEC and Public Utilities Commission (PUC) to avoid duplication  
            among agencies, and leverage existing efforts. 

            An increase in state corporate tax revenues due to Prop 39,  
            however, can also affect the state's funding obligations under  
            Proposition 98.  Approved by voters in 1988, Prop 98 assures  
            local school districts and community colleges that they would  
            receive at least a minimum level of funding from the state and  
            local governments (roughly equivalent to 40 percent of General  
            Fund revenues).  Because an increase in corporate tax revenues  
            from Prop 39 can increase overall General Fund revenues, the  
            Prop 98 minimum guarantee for public education would increase  
            as well. 

            In his 2013-2014 proposed budget, Governor Brown proposes to  
            count all Prop 39 revenue, including funds allocated to energy  
            projects, towards the Prop 98 calculations, effectively  
            raising the minimum guarantee.  The same budget plan would  
            also apply all revenue towards meeting the minimum guarantee:   
            Estimated Prop 39 energy project revenue for the next five  
            years, $450 million in 2013-2014 and $550 million for each of  
            the next four years, would be distributed to K-12 school  
            districts and community colleges exclusively.  The proposal  
            would allocate funds on a per student basis, which would be  
            equivalent to $65 for each K-12 student and $45 for each  
            community college student. 

            The Legislative Analyst's Office (LAO) has raised a number of  
            concerns with Governor Brown's Prop 39 proposal.   
            Specifically, LAO argues that:  1) voter-approved limitations  
            prohibit the use of all Prop 39 funds for Prop 98 purposes; 2)  
            the Governor's proposed treatment of funds, which is based on  
            the accounts the funds are deposited into, is prone to  
            manipulation; and 3) the proposed allocation of funds is  
            inefficient and does not maximize potential benefits.   
            Instead, LAO suggests that Prop 39 revenue required for  
            transfer to the Fund should be excluded from the Prop 98  
            minimum guarantee.  The LAO also suggests designating the CEC  
            as the lead agency for administering Prop 39's energy funds  
            and directing the CEC to promulgate a competitive grant  
            process for fund distribution.

           2)Related legislation.   In addition to the Governor's budget  
            proposal described above, the following bills propose various  
            approaches to distributing Prop 39 energy funds.  Each of the  








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            bills has policy and technical conflicts with the rest.

            AB 29 (Williams), pending in this committee, appropriates $152  
            million per year to public higher education clean energy  
            projects from Prop 39 clean energy funds, with 50 percent to  
            be awarded as grants and 50 percent to fund loans.

            AB 114 (Salas), pending in this committee, establishes the  
            Clean Energy Jobs and Workforce Development Program within the  
            Labor Agency and continuously appropriates an unspecified  
            amount from Prop 39 clean energy funds.

            AB 239 (Hagman), pending in this committee, transfers 50  
            percent of Prop 39 clean energy funds to the Clean Energy  
            School Fund to be expended by the Office of Public School  
            Construction (OPSC) to fund energy efficiency retrofit or  
            clean energy installation projects at public schools, with 60  
            percent reserved for grants and 40 percent for loans.

            AB 293 (Allen), pending in this committee, requires the CEC to  
            develop a program to award funding on a competitive bases for  
            the purposes of Prop 39.

            SB 39 (De Leon), pending in the Senate Education Committee,  
            requires OPSC to distribute Prop 39 clean energy funds to K-12  
            public schools through competitive grants for energy  
            efficiency upgrade projects, with priority given to  
            "disadvantaged school communities."

            SB 64 (Corbett), pending in the Senate Energy, Utilities and  
            Communications Committee, requires the CEC to provide  
            financial assistance to K-12 public schools or municipal  
            facilities.

           3)Double referral.   This bill has been double-referred to the  
            Assembly Utilities and Commerce Committee.

           REGISTERED SUPPORT / OPPOSITION  : 

           Support 
           
          Albany Unified School District
          California Energy Efficiency Industry Council
          California School Board Association
          California State Association of Counties








                                                                  AB 39
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          City of Emeryville
          City of Oakland
          Coalition for Adequate School Housing
          County School Facilities Consortium
          Metropolitan Education District
          School Energy Coalition
          Small School Districts' Association
          South Coast Air Quality Management District
          TerraVerde Renewable Partners

           Opposition 
           
          None on file

           
          Analysis Prepared by  :  Lawrence Lingbloom / NAT. RES. / (916)  
          319-2092