BILL ANALYSIS Ó AB 114 Page 1 Date of Hearing: April 29, 2013 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Steven Bradford, Chair AB 114 (Salas) - As Amended: April 23, 2013 SUBJECT : Proposition 39: implementation: workforce development SUMMARY : Establishes the Clean Energy and Jobs Workforce Development Program (Workforce Program) within the Labor and Workforce Development Agency (Labor Agency) to oversee the implementation of the Proposition 39 (Prop 39) goal related to job training and workforce development. Specifically, this bill : 1)Establishes the Workforce Program within the Labor Agency to provide competitive grants to organizations with existing workforce development programs to train and employ disadvantaged youth, veterans, and others on energy efficiency and clean energy projects, including the California Conservation Corps, certified community conservation corps and YouthBuild. 2)Requires the Labor Agency to establish and implement a procedure to develop training goals, identify performance metrics, institute a data tracking system, including a geographic distribution, and evaluate training outcomes. 3)Specifies the Labor Agency shall administer grants to eligible entities for the purposes of workforce development and job training on energy efficiency and clean energy projects. 4)States the Labor Agency shall consult with the Chancellor of the California Community Colleges (Community Colleges), the State Department of Education (Education), the California Energy Commission (CEC), and the California Public Utilities Commission (PUC) to develop a competitive process to award grants to eligible entities, and evaluate and select applications for grants. 5)Requires funded projects serve low-income or unemployed residents of an economically disadvantaged community. 6)Prioritizes how grants should be awarded to eligibility AB 114 Page 2 entities. 7)Requires grantees to submit a report to the Labor Agency detailing the program results. 8)Specifies annual reporting requirements for the Labor Agency. 9)Establishes related definitions, findings and declarations. EXISTING LAW : 1)Establishes the Clean Energy Job Creation Act to create good-paying energy efficiency and clean jobs in California; put California to work repairing and updating schools and public buildings to improve efficiency and make clean energy improvements; promote new private sector job creation through energy efficiency improvements in commercial and residential buildings; achieve maximum job creation and energy benefits; and supplement, complement, and leverage existing energy efficiency and clean energy programs. (Public Resources Code 26201) 2)Allocates up to $550 million to the Job Creation Fund in fiscal years 2013-14, 2014-15, 2015-16, 2016-17, and 2017-18. (Public Resources Code 26205) 3)Creates the Clean Energy Job Creation Fund to improve energy efficiency and expand clean energy generation, including all of the following: a) Public schools, Universities, and Colleges: Energy efficiency retrofits and clean energy installations, along with related improvements and repairs that contribute to reduced operating costs and improved health and safety conditions b) Other public buildings and facilities: Financial and technical assistance including revolving loan funds, reduced interest loans, or other financial assistance for cost-effective energy efficiency retrofits and clean energy installations on public facilities. c) Job training and workforce development: Funding to the California Conservation Corps, Certified Community Conservation Corps, YouthBuild, and other existing workforce development programs to train and employ disadvantaged youth, veterans, and others on energy efficiency and clean energy projects. AB 114 Page 3 d) Public-private partnerships: Assistance to local governments in establishing and implementing PACE programs or similar financial and technical assistance for cost-effective retrofits that include repayment requirements. Funding shall be prioritized to maximize job creation, energy savings, and geographical and economic equity. Where feasible, repayment revenues shall be used to create revolving loan funds or similar ongoing financial assistance programs to continue job creation benefits. (Public Resources Code 26205) 4)Establishes criteria for expenditures from the funds: a) Existing state and local government agencies, with expertise in managing energy projects and programs shall provide project selection and oversight. b) All projects awarded funds are to be based on in-state job creation and energy benefits for each project type. c) All projects must be cost effective and may include consideration of non-energy benefits, such as health and safety. d) All project contracts must include project specifications, costs, and projected energy savings. e) All projects shall be subject to audit. f) Program overhead costs shall not exceed 4 percent of total funding. g) Funds can only be appropriated only to agencies with established expertise in managing energy projects and programs. h) All programs must be coordinated with the CEC and the California Public Utilities Commission (PUC) to avoid duplication and maximize leverage of existing energy efficiency and clean energy efforts. i) Eligible expenditures include costs associated with technical assistance, and with reducing project costs and delays, such as development and implementation of processes that reduce the costs of design, permitting or financing, or other barriers to project completion and job creation. (Public Resources Code 26206) 5)Creates a COB comprised of three members appointed by the Treasurer, three members by the Controller, and three members by the Attorney General. Each appointing office shall appoint one member with expertise in building construction and design, financial transactions and cost-effectiveness, and expertise in energy efficiency and clean energy. The CEC and PUC each AB 114 Page 4 serve as ex office members. 6)The duties of the board include: a) An annual review of all expenditures b) And annual independent audit of the fund and a selection of projects completed c) A publicly available accounting of expenditures d) An annual evaluation of the program to be provided to the Legislature (Public Resources Code 26210) FISCAL EFFECT : Unknown. COMMENTS : 1)Yes on 39 : In November 2012, California voters approved Prop 39 to close a corporate tax loophole that previously allowed multi-state businesses to select one of two different methods to determine the amount of taxable income associated with California and taxable by the state. Prop 39 now requires these businesses to determine their California taxable income using a single sales factor method which is estimated to increase the state's annual corporate tax revenues by as much as $1.1 billion. Prop 39 also specifies how a portion of this new revenue should be spent. Half of the revenue generated from the measure - up to $550 million - will be transferred to a new Clean Energy Job Creation Fund to support projects intended to improve energy efficiency and expand the use of alternative energy at public schools, colleges, universities, and other public buildings, as well as public-private partnerships and workforce training related to energy efficiency. Prop 39 funding can only be appropriated to agencies with established expertise in managing energy projects. In addition, the programs must be coordinated with the CEC, and PUC in order to avoid duplication among agencies, and leverage existing energy efficiency and alternative energy efforts. However the state's funding obligations under Prop 98 is impacted by Prop 39. In 1988, the voters passed Proposition 98, modified it in 1990, which requires a minimum level of state and local funding each year for school districts and community colleges. This is commonly known as the Prop 98 minimum AB 114 Page 5 guarantee. This assures local school districts and community colleges that they will receive at least a minimal level of funding from the state and local governments. The Prop 98 guarantee can grow with increases in state General Fund revenues (including those collected from state corporate income taxes). Therefore, revenues generated by Prop 39 can affect the state's Prop 98 funding requirements. The Governor's 2013-14 Budget includes a plan to implement the provisions of Prop 39, including funds allocated to energy projects toward the Prop 98 minimum guarantee. The Governor also proposes to designate all energy-related Prop 39 funds to K-12 schools ($400.5 million) and the community colleges ($49.5 million) for the next five years. The proposal would allocate funds on a per student basis, which averages school districts and community college district to receive $67 and $45 per student, respectively. The Legislative Analyst's Office (LAO) has raised serious concerns with the Governor's Prop 39 proposal. In sum, the LAO argues: Governor's treatment of Prop 39 revenue to count toward Prop 98 purposes is questionable and a departure from the state's longstanding view of how revenues are to be treated for the purposes of 98. In fact, it is contrary to what the voters were told in the official voter guide as to how the revenues would be treated. The Governor's proposed treatment of funds, which is based on the accounts the funds are deposited into, is subject to manipulation. The proposal excludes many eligible projects that could potentially achieve a greater level of energy benefits, fails to account for energy consumption differences, does not sufficiently leverage existing programs and experience, and excludes job training and workforce development funding for disadvantaged youth, and veterans which is a primary component of the Prop 39. 1)Prop 39 equals more clean energy jobs : Many special interests tout the promise of clean energy jobs when negotiating energy policy. The methodology accounting for clean energy (i.e. green jobs) in this state has AB 114 Page 6 drawn much criticism and skepticism. Different surveys using various definitions yield different results which make it challenging to determine how many sustainable clean energy jobs exist in the state. For example, the range of green jobs includes transit operators, farmers, architects, etc. A 2010 report from California's Employment Development Department (EDD), for example, found more than 263,000 people in the state spent at least half of their time at work producing green products or offering green services. In 2012, the U.S. Bureau of Labor Statistics issued a report estimating there were 338,400 jobs in California offering green goods or services, accounting for 2.3 percent of employment within the state. The state's policies to reduce greenhouse gas emissions, increase the procurement of renewable energy, and encourage sales of electric cars have turned California into a leading market for clean technology products and services. California is still recovering from the recent economic recession. Earlier this month, EDD reported California's unemployment rate decreased to 9.4 percent. AB 114 proposes the Workforce Program which seeks to fulfill the Prop 39 requirement that requires a portion of the funding be dedicated to job training and workforce development for our state's disadvantaged youth, veterans and others with an emphasis on energy efficiency and clean energy projects. It appropriates 10 percent of the Proposition 39 revenue for the Workforce Program for each fiscal year that revenue is deposited into the Job Creation Fund. The bill targets projects that serve low-income or unemployed residents of an economically disadvantaged community. The bill specifies that first priority be given to projects providing training on energy efficiency and clean energy projects disadvantaged youth, veterans, or persons currently in the military but is not inclusive of women, pre-apprenticeship or job training programs. The author and this committee may wish to specify first priority shall be given to projects providing job training or pre-apprenticeshipjob training, or2) women, bridge programs like California Conservation Corps, Certified Community Conservation Corps, Youth-Build and other community based training programs that serve disadvantaged youth, women, veterans, and provide a path to apprenticeships or jobs in the energy efficiency and clean energy sectors . Second priority is given to projects providing upgrade training on energy efficiency and clean energy projects to incumbent workers enrolled in, or graduate from, state-certified AB 114 Page 7 apprenticeship programs. One of the objectives of Prop 39 was to allocate revenues to improve energy efficiency and expand the use alternative energy at public schools. Therefore, the author and this committee may which to include training projects that provide energy efficiency and clean energy training to incumbent school employees who are responsible for operation of school facilities. 2)Accountability and transparency : Although the bill does not predicate how many jobs will be created by this new Workforce Program, it does however, require the Labor Agency to implement a process to establish job goals, identify performance metrics, institute a data tracking system, and evaluate outcomes of the training program. The author and this committee may consider a technical amendment to revise this section by as follows: (1) Establish and implement a procedure to set explicitjobtraining goals, identify performance metrics, institute a data tracking system including geographic distribution, and evaluate training outcomes . The bill designates the Labor Agency, as lead, will administer grants to eligible entities and collaborate with the Community Colleges, Education, CEC and PUC for the purposes of workforce development and job training on energy efficiency and clean energy projects. This includes developing a competitive bid process to award grants, evaluating and selecting applications for grants. The bill, however, is silent on requiring the collaborating agencies to design implement a Workforce Program that is not duplicative of other statewide programs with similar goals. In the spring of 2009, the Energy Commission, the EDD, and the CWIB entered into a collaborative effort to combine American Recovery and Reinvestment Act (ARRA) funding from the State Energy Program and the Workforce Investment Act Governor's Discretionary 15 Percent funds to launch the Clean Energy Workforce Training Program. Coupled with a dollar-for-dollar match leveraged from public-private partnerships, the goal of the initiative was to promote the use of industry sector strategies as the framework for addressing the need for skilled workers in the industries related to energy efficiency, water efficiency, and renewable energy (distributed generation and utility-scale). Therefore, the author and this committee may wish to amend the bill require the Labor Agency to ensure the Workforce Program is complementary and not duplicative of other similar statewide job training programs . AB 114 Page 8 This committee may also wish to suggest an amendment that requires the Labor Agency, Community Colleges, Education, PUC and CEC to require an applicant requesting a grant to disclose if the entity is receiving incentives for energy efficiency or clean energy job training projects from other local, state and federal programs . This would not preclude the entity from receiving a grant nor reduce the amount of the grant. It serves primarily as an information tool for the Labor Agency. After the first year of implementation of the Workforce Program, the Labor agency is responsible for reviewing and assessing the specified goals of the program and identifying problems and barriers, as well as possible solutions to achieving those goals. The bill does not specify when or how this report should be published. The author and this committee may wish to add a technical amendment requiring the report findings to be included in the first annual report due July 1, 2015 . The Workforce Program also requires grantees to submit to the Labor Agency an annual report, beginning July 1, 2015, on the quantity and quality of jobs created, demographic and geographic profile, the number of workers trained, the costs associated with training the workers, the number and type of credential and certificates awarded, job placement numbers, and other specified criteria. Although it is imperative for the report to include the pertinent figures relating to costs and job creation, it is equally important for the Legislature to know how many eligible projects were denied grants awards and the reasons for the denial. This will provide the Legislature with a complete view of the Workforce Program's success as well as the lessons learned. The author and this committee may wish to amend the bill to require the Labor Agency to include the number of grant applications denied as well as the reason for the denial in its annual report to the Legislature and on its Internet Website . 1)Job Creation . This bill requires grant recipients to provide an annual report to the Labor agency on the quantity of jobs created including the wages and benefits, and a number of other items. According to an analysis published by the Energy Resources Group at the University of California, Berkeley, of 15 job creation studies, job studies use a variety of ways to calculate job creation. They note that it is important to define employment terms because there is often confusion about types of jobs and job years because referring to 'jobs' created without duration AB 114 Page 9 can be misleading. One-job year is full time employment for one year. In addition, is it important to define whether the estimate of jobs created refers to direct jobs, indirect jobs, or induced jobs. For purposes of Clean Jobs Program jobs created is likely to mean direct jobs, including those jobs created in the design, construction/installation, project management, operation and maintenance. Indirect jobs would be those created through suppliers while induced jobs would be those created due to expenditures in the general economy. In order to ensure consistent, comparative results, the author may wish to amend the bill to define what is expected in terms of how job creation is to be calculated as follows: For purposes of reporting job creation, the person or entity shall report both the number of direct full-time jobs created and the job-years for each job created. Related legislation : AB 39 (Skinner), pending in this committee, establishes a program to be administered by the CEC for the distribution of funds to clean energy projects undertaken by public schools, with 75 percent to be awarded as grants and 25 percent to fund revolving loans. AB 239 (Hagman) requires the Office of Public School Construction, in consultation with the CEC and the PUC, to expend moneys to fund a zero-interest revolving loan program and a grant program for school districts to perform energy efficiency retrofit or clean energy installation projects at public schools. AB 293 (Allen), pending in this committee, requires the CEC to develop a program to award funding on a competitive basis for the purposes of Prop 39. SB 39 (De Leon, 2013) establish a competitive grant program to provide assistance to K-12 school districts for the purpose of energy efficiency upgrade projects and a financing program by evaluating the potential to fund energy efficiency projects for K-12 schools, California Community Colleges (CCC) and campuses of the University of California (UC) and the California State University (CSU), through matching funds, low-interest loans, or AB 114 Page 10 other financing methods. SB 64 (Corbett) designates the California Energy Commission as the lead agency to establish a grant program to distribute Proposition 39 funds to school districts cities and counties for energy efficiency and clean energy technology in school and municipal facilities. SB 729 (Fuller) states the intent of the Legislature to enact legislation to implement the provisions of Proposition 39. AB 1186 (Skinner, 2012) was vetoed by Governor Brown. The Governor stated, in his veto message, "Though well intended, it jumps the gun by establishing a program before we are ready." REGISTERED SUPPORT / OPPOSITION : Support Alliance for Boys and Men of Color Briones International LLC California Human Development (CHD) California Youthbuild Coalition (CAYB) Center for Employment Training (CET) City of Antioch CRLA Foundation El Concilio of San Mateo County Emerald Cities Bay Area Oakland Council Green For All Individual Letters (53 letters) Institute for Sustainable Economic, Educational and Environmental Design (I-SEEED) La Cooperativa Campesina de California Metropolitan Education District (MetroED) Monica E. Wilson, Antioch City Councilmember PolicyLink Profile Research & Marketing (PRM) Proteus, Inc. Southern California Watershed Alliance The Greenlining Institute Urban Habitat Valley LEAP, Latino Environmental Advancement and Policy Project Opposition AB 114 Page 11 None on file. Analysis Prepared by : DaVina Flemings / U. & C. / (916) 319-2083