BILL ANALYSIS Ó AB 114 Page 1 ASSEMBLY THIRD READING AB 114 (Salas and V. Manuel Pérez) As Amended May 8, 2013 Majority vote NATURAL RESOURCES 6-0 UTILITIES & COMMERCE 14-0 ----------------------------------------------------------------- |Ayes:|Chesbro, Garcia, |Ayes:|Bradford, Patterson, | | |Muratsuchi, Skinner, | |Bonilla, Buchanan, | | |Stone, Williams | |Chávez, Fong, | | | | |Beth Gaines, Garcia, | | | | |Gorell, Jones, Quirk, | | | | |Rendon, Skinner, Williams | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- APPROPRIATIONS 16-0 ----------------------------------------------------------------- |Ayes:|Gatto, Harkey, Bigelow, | | | | |Bocanegra, Bradford, Ian | | | | |Calderon, Campos, Eggman, | | | | |Gomez, Hall, Ammiano, | | | | |Linder, Pan, Quirk, | | | | |Wagner, Weber | | | | | | | | ----------------------------------------------------------------- SUMMARY : Establishes the Clean Energy Jobs and Workforce Development Program (Workforce Program) within the Labor Agency and allocates 9.6% of the funds allocated by the Clean Energy Jobs Act (Prop 39) to clean energy projects. Specifically, this bill: 1)Establishes the Workforce Program within the Labor Agency to provide competitive grants 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 funded projects to serve low-income or unemployed residents of an economically disadvantaged community. AB 114 Page 2 3)Requires 9.6% of revenue deposited in the Clean Energy Job Creation Fund (Fund) created by Prop 39 for fiscal years 2013-14 through 2017-18 to be available to the Labor Agency for purposes of the bill. 4)Establishes related definitions, findings and declarations. 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% of the annual increase in revenues from the SSF, whichever is less, annually for five fiscal years (2013-14 through 2017-18) to the Clean Energy Job Creation 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. FISCAL EFFECT : According to the Assembly Appropriations Committee: AB 114 Page 3 1)Cost pressures in the $50 million range from Prop 39 proceeds for this program. 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 : 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 2013-18, 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 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% 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 AB 114 Page 4 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. Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916) 319-2092 FN: 0000986