BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 114
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          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  
           
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          |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.








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          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:









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          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  








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          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 


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