BILL ANALYSIS Ó AB 114 Page 1 Date of Hearing: May 15, 2013 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 114 (Salas) - As Amended: May 8, 2013 Policy Committee: Natural ResourcesVote:14-0 Utilities and Commerce 6-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill 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) goals related to job training and workforce development. Specifically, this bill: 1)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. 2)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. 3)Requires, for every year money is deposited into the Job Creation Fund, 9.6 % of the revenue shall be available upon appropriation by the Legislature for the Workforce Program created by this bill (This is about $50 million.) FISCAL EFFECT 1)Cost pressures in the $50 million range from Prop 39 proceeds for this program. AB 114 Page 2 2)The Labor Agency would require additional resources to administer a new program. Prop 39 prohibits overhead costs in excess of 4% of the total funding. Using this cap on administration, the Labor Agency annual costs could be in the $2 million range. COMMENTS 1)Purpose. This bill is intended to fulfill the Prop 39 requirement to dedicate a portion of the available funding to job training and workforce development for disadvantaged youth, veterans and others. 2)Prop 39. In November 2012, California voters approved Prop 39 to repeal the law allowing multi-state businesses to choose a formula for calculating their California income tax liability. Prior to Prop 39, businesses were able to calculate their tax liability by using the formula that resulted in lower taxes owed. Beginning in 2013, multi-state businesses are required to use the single-sales factor method of determining taxable income. This change is estimated to increase the state's annual corporate tax revenues by as much as $1.1 billion. This voter-approved measure dedicates $550 million, or 50% of the annual increase in revenues, whichever is less, for fiscal years 2013-14 through 2017-18, to the Clean Energy Job Creation Fund (Fund) for projects that create energy efficiency and clean energy jobs in California. Funds are available upon appropriation by the Legislature and 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. c) Financing and technical assistance to fund Property Assessed Clean Energy (PACE) programs. Prop 39 establishes a Citizens Oversight Board (COB), composed of nine members appointed by the State Treasurer, the State Controller and the Attorney General intended to ensure funds AB 114 Page 3 are used appropriately, and to evaluate the cost effectiveness of projects. 3)Prop 98. Approved by the voters in 1988, Prop 98 assures local school districts and community colleges will receive minimum guaranteed funding from the state (roughly equivalent to 40% of GF revenues). The increase in corporate tax revenues resulting from Prop 39 will increase overall GF revenues, thus increasing the minimum guarantee for schools. In his proposed January budget, Governor Brown proposes to count all Prop 39 revenue, including funds allocated to energy projects, toward Prop 98, effectively raising the minimum guarantee. 4)LAO Concerns. The Legislative Analyst's Office (LAO) has raised a number of concerns with Governor Brown's Prop 39 proposal. Specifically, LAO argues that: a) voter-approved limitations prohibit the use of all Prop 39 funds for Prop 98 purposes; b) the Governor's proposed treatment of funds, which is based on the accounts the funds are deposited into, is prone to manipulation; and c) 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 5)Related Legislation. The following 2013 bills propose various approaches to distributing Prop 39 energy funds. AB 29 (Williams) 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 29 is now a two-year bill. AB 39 (Skinner) establishes a program to be administered by the CEC for the distribution of funds allocated by the Clean Energy Jobs Act (Prop 39) to clean energy projects undertaken by public schools. This bill will be heard by the Appropriations Committee today. AB 114 Page 4 AB 239 (Hagman) 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 239 is now a two-year bill. AB 293 (Allen) requires the CEC to develop a program to award funding on a competitive bases for the purposes of Prop 39. This bill will be heard in the Appropriations Committee today. SB 39 (De Leon), pending in the Senate Appropriations, 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 Appropriations Committee, requires the CEC to provide financial assistance to K-12 public schools or municipal facilities. Analysis Prepared by : Jennifer Galehouse / APPR. / (916) 319-2081