BILL ANALYSIS                                                                                                                                                                                                    Ó






                            SENATE COMMITTEE ON EDUCATION
                                  Carol Liu, Chair
                              2013-2014 Regular Session
                                          

          BILL NO:       SB 39
          AUTHOR:        De Leon and Steinberg
          AMENDED:       March 21, 2013
          FISCAL COMM:   Yes            HEARING DATE:  April 17, 2013
          URGENCY:       No             CONSULTANT:Kathleen Chavira

           NOTE  :  This bill has been referred to the Committees on  
          Education and Energy, Utilities and Communications. A "do pass"  
          motion should include a referral to the Senate Energy, Utilities  
          and Communications Committee.
           
          SUBJECT  :  Clean Energy Employment and Student Advancement Act of  
          2013.
          
           SUMMARY  

          This bill enacts the Clean Energy Employment and Student  
          Advancement Act of 2013 which requires the Office of Public  
          School Construction, in consultation with the State Energy  
          Resources Conservation and Development Commission (CEC) and the  
          Public Utilities Commission (PUC), and pursuant to the  
          provisions of the Clean Energy Jobs Act established by  
          Proposition 39 in November 2012, to:

     1)Establish a competitive grant program to provide assistance to K-12  

               school districts for the purpose of energy efficiency  
               upgrade projects.

     2)Develop 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 other financing  
               methods.
           
          BACKGROUND 

          In November 2012, the voters passed Proposition 39, enacting the  
          California Clean Energy Jobs Act (Act) which changed the way  




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          multistate corporations are taxed in California and provided for  
          the use of the new revenues this change would generate. Elements  
          of the Act include the following:

          1)   From 2013-14 through 2017-18, half of the annual revenue  
               (up to $550 million) raised from the measure must be  
               transferred to a new Clean Energy Job Creation Fund (Fund).  
               Moneys in the fund are to be available for appropriation to  
               fund projects that create jobs in California, improving  
               energy efficiency and expanding clean energy generation. 

          2)   An outline of the type of eligible projects that could be  
               included at public schools, colleges, universities, and  
               other public buildings and for job training and workforce  
               development purposes and public-private partnerships. 

          3)   Criteria applicable to all fund expenditures which includes  
               that:

               a)        Project selection and oversight be managed by  
                    state and local government agencies with expertise in  
                    managing energy projects and programs. 

               b)        Projects be selected on the basis of in-state job  
                    creation and energy benefits, cost-effectiveness  
                    (total benefits greater than project costs over time,  
                    including non-energy benefits). 

               c)        Contract requirements to identify project  
                    specifications, costs, and project energy savings.

               d)         All projects are subject to audit.

               e)        Program overhead costs are capped at four  
                    percent.

               f)        Funds only be appropriated to agencies with  
                    established expertise in managing energy projects and  
                    programs. 

               g)        All funded programs be required to coordinate  
                    with the California Energy Commission (CEC) and the  
                    California Public Utilities Commission (PUC) in order  
                    to avoid duplication and leverage existing energy  
                    efficiency and clean energy efforts.
           




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          4)   Establishment of a Citizens Oversight Board comprised of  
               nine members, to be appointed by the Treasurer, Controller,  
               and Attorney General and tasked with the responsibility of  
               annually reviewing all fund expenditures, commissioning and  
               reviewing an independent audit of the fund and a selection  
               of completed projects and their effectiveness in meeting  
               the Act's objectives, and annually publishing a complete  
               accounting of all expenditures. The Citizen's Oversight  
               Board is also required to submit an evaluation of the  
               program to the Legislature identifying any necessary  
               changes to meet the Act's objectives. (Public Resources  
               Code Division 16.3, commencing with 26200)

          Current law establishes the 10-member State Allocation Board and  
          provides that members consist of the Director of Finance; the  
          Director of Department of General Services; a person appointed  
          by the Governor; the Superintendent of Public Instruction; three  
          members of the Senate appointed by the Senate Committee on Rules  
          two of whom shall belong to the majority party and one of whom  
          shall belong to the minority party; and three members of the  
          Assembly appointed by the Speaker of the Assembly, two of whom  
          shall belong to the majority party and one of whom shall belong  
          to the minority party.  Current law authorizes the SAB to  
          apportion funds for the construction of school facilities and to  
          establish any qualifications, procedures and policies, and rules  
          and regulations it deems necessary to administer and expend  
          funds made available for school facility construction purposes.   
          (Education Code § 17070.35, Government 
          Code § 15490)

          Current law also establishes the Office of Public School  
          Construction (OPSC) within the Department of General Services  
          and authorizes DGS to assign an executive officer to the OPSC.   
          The executive officer may be appointed by the Governor, upon  
          recommendation of the Director of DGS and serves at the  
          Director's pleasure.  (Government Code § 14620)

           ANALYSIS
           
           This bill  establishes the Clean Energy Employment and Student  
          Advancement Act of 2013 to provide for the use of funds  
          generated as a result of the Clean Energy Jobs Act established  
          by Proposition 39 in November 2012. 
          More specifically it:

          1)   Requires the OPSC, in consultation with the State Energy  




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               Resources Conservation and Development Commission and the  
               Public Utilities Commission to establish a competitive  
               grant program to distribute funds to economically  
               disadvantaged school communities for energy efficiency  
               upgrade projects that offer the highest energy efficiency  
               savings. Additionally it requires the OPSC to:

                    a)             Encourage full participation in the  
                    program by offering technical assistance to all  
                    applicants.

                    b)             Use existing benchmarking tools to  
                    determine present average energy consumption for a  
                    school facility by size and type.

          2)   Requires the OPSC to award a grant, upon approval of the  
               State Allocation Board, only to proposed projects that:

                    a)             Meet the qualifications of an energy  
                    efficiency upgrade project.

                    b)             Assure district compliance with the  
                    required labor compliance and contractor qualification  
                    standards.

                    c)             Meet all implementation costs for the  
                    project with the grant and any other matching  
                    contribution.

                    d)             The school district agrees to allow  
                    OPSC to audit all expenditures made with grant funds  
                    and to track and report to OPSC the number of jobs  
                    created by the project and the operational costs  
                    savings and the district and site level. 

          3)   Requires the OPSC to assign higher priority to energy  
               efficiency upgrade project applications that meet  
               additional criteria. Specifically, higher priority is  
               assigned if the proposed project:

                    a)             Is located at a school facility with an  
                    above average energy consumption, as specified.

                    b)             Is located in an economically  
                    disadvantaged school community based on the percentage  
                    of pupils eligible for the federal free and  




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                    reduced-price lunch program.

                    c)             Is located in an area with an above  
                    average unemployment rate as compared to the statewide  
                    unemployment rate.

                    d)             Has actively involved pupils and  
                    classified school employees at the school facility  
                    site in the planning and design of the energy  
                    efficiency upgrade project. 

                    e)             Includes a plan to fund and train  
                    classified school employees to service and maintain  
                    the projects. 

                    f)             Enhances workforce development and  
                    employment opportunities, utilizes members of the  
                    California Conservation Corps or certified local  
                    conservation corps, or accommodates learning  
                    opportunities for school pupils or at risk youth in  
                    the community. 

                    g)             Maximizes the investment and benefit to  
                    the public through a joint partnership between two or  
                    more agencies including, but not limited to, other  
                    school districts, nonprofit organizations, and local  
                    government agencies. 

          4)   Requires the Office of Public School Construction (OPSC),  
               in consultation with the State Energy Resources  
               Conservation and Development Commission, to develop a  
               financing program by evaluating the potential to fund  
               projects, for K-12 schools, community colleges, and  
               campuses of the UC and the CSU through the use of matching  
               funds, low-interest loans, or other financing methods.

          5)   Authorizes the OPSC to establish standards for  
               implementation of the financing program required by the  
               bill upon the appropriation of funds to implement the  
               financing program by the Legislature.

          6)   Makes a number of related declarations and findings.

           STAFF COMMENTS  

           1)   Why schools  ? According to the author, seventy percent of  




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               school facilities in California are over 25 years old, and  
               there are over 919,000 K-12 students in classrooms that are  
               in need of modernization. The author asserts that studies  
               show that the continuing high cost of energy and utilities  
               due to inefficient lighting, insulation, heating  
               ventilation and air conditioning systems, plumbing, windows  
               and irrigation systems, take needed money away from  
               educational programs. Energy efficiency improvements for  
               public schools will reduce long-term energy costs and the  
               savings can be directed to classroom needs. According to  
               the US Environmental Protection Agency (EPA), modification  
               of pre-existing buildings for energy efficiency can save a  
               typical 100,000 square-foot school building between $10,000  
               and $16,000 annually, and simple behavioral and operational  
               measures alone can reduce energy costs by up to 25 percent.  
               (U.S. EPA 2008). 
                
                Proposition 39 specifically provides that project selection  
               may include consideration of non-energy benefits.  In the  
               case of schools, benefits could include the redirection of  
               operational savings from the use of more energy efficient  
               systems to educational programs and the realization of  
               healthier and more productive learning environments for  
               students. 

           2)   More on Proposition 39  . Proposition 39 specifically  
               articulates as its objective the creation and then  
               employment of Californians in energy efficiency and clean  
               energy jobs and achievement of the maximum amount of job  
               creation and energy benefits with available funds. It also  
               provides that funding to achieve these objectives may be  
               provided for: 

                    a)             Projects to conduct energy efficiency  
                    retrofits and clean energy installations in public  
                    schools, universities and colleges, and other public  
                    facilities. 

                    b)             Financial and technical assistance that  
                    includes revolving loan funds and reduced interests  
                    loans for these projects at other public facilities  
                    and for public-private partnerships.
           
                    c)             Training and employment of  
                    disadvantaged youth, veterans, and others, on energy  
                    efficiency and clean energy projects, specifically  




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                    citing the California Conservation Corps, Certified  
                    Community Conservation Corps, YouthBuild, and other  
                    existing workforce development programs.

           3)   Related budget proposal  . The Governor's proposed 2013-14  
               budget includes a plan to implement the provisions of  
               Proposition 39 by designating all Clean Energy Job Creation  
               Fund monies for K-12 schools and community colleges in  
               2013-14 and for the subsequent four years. 

               The Governor's proposal appropriates 89 percent of the  
               funding to the California Department of Education (CDE) and  
               11 percent to the California Community Colleges (CCC)  
               Chancellor's Office who are to allocate this funding to  
               districts on a per-student basis. 

               The CDE and Chancellor's Office would issue guidelines,  
               which could be developed in consultation with California  
               Energy Commission and the Public Utilities Commission, for  
               prioritizing the use of the funds by districts. School  
               districts and community college districts would report  
               their project expenditure information to CDE and the  
               Chancellor's Office, respectively, upon project completion.  
               According to the Legislative Analyst's Office (LAO), in  
               2013-14, the Governor's proposal for distribution of these  
               funds would result in school districts and community  
               college districts receiving $67 and $45 per student,  
               respectively.

               The LAO has proposed an alternative to the Governor's  
               proposal which would designate the CEC as the lead agency,  
               in consultation with the PUC for distributing Fund monies  
               through a competitive grant program open to all public  
               agencies. Applicants would first be required to have an  
               energy audit performed to identify potential cost-effective  
               energy upgrades, and include in their application  
               information regarding climate zone, size, design, and age  
               of a building.

           4)   Is this the appropriate agency/structure  ? Although this  
               bill requires the Office of Public School Construction  
               (OPSC) to consult with the California Energy Commission  
               (CEC) and Public Utilities Commission (PUC), as currently  
               drafted this bill extends very broad authority to the OPSC  
               to implement the provisions of Proposition 39.  It may be  
               that other agencies are better equipped to develop  




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               processes, criteria, and programs for implementing  
               Proposition 39 and for evaluating savings from energy  
               efficiency and renewable energy projects.  However, to the  
               extent that it is the intent to distribute Proposition 39  
               funding to school districts, arguably no single agency  
               possesses all the expertise necessary to administer every  
               element of a successful program. The OPSC's strength is in  
               its experience and existing infrastructure for  
               administering and processing applications for school  
               facility programs and projects, as well as the performance  
               of the program audit function.  The California Department  
               of Education may be more appropriate to conduct outreach,  
               marketing and analysis of applicants to ensure broad  
               participation in the program. The CEC likely has the best  
               understanding of energy audit standards and procedures.  

                Staff recommends the bill be amended to assign  
               responsibility as follows:

               a)        CEC to outline criteria which must be met in  
                    order to participate in the program and to establish  
                    energy audit standards and procedures, reporting  
                    standards, project approval criteria, and priorities  
                    relative to energy standards  

               b)        OPSC to administer, process and distribute funds  
                    to local educational agencies that meet the conditions  
                    outlined in 
                    EC § 26234, to rank priority for these funds on the  
                    basis of criteria outlined in EC § 26235, and to  
                    perform program expenditure audits, as specified in EC  
                    § 26234. 

               c)        CDE, in consultation with the OPSC, to provide  
                    technical assistance to schools, implement outreach  
                    and marketing strategies for the program and conduct  
                    analysis of participation, to inform and modify their  
                    outreach and marketing efforts. 

           5)   Conditions versus Criteria . It is the intent of this bill  
               to outline conditions which must be met in order to  
               participate in the program and then establish criteria for  
               evaluating and ranking applications received from school  
               districts.  As currently drafted, the bill appears to  
               establish two sets of criteria, and to require districts to  
               achieve  all  elements outlined in order to be granted higher  




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               priority. Staff recommends the bill be amended on page 6  
               line 7 to replace "criteria" with "conditions" and on page  
               6 line 23 to clarify that, "In evaluating and ranking  
               applications for grants that meet the conditions of EC §  
               26234, the office shall develop a methodology to assign  
               priority points to an application that meets any of the  
               following criteria."

           6)   Clarification of criteria for prioritization  .  This bill  
               currently establishes criteria for ranking an application  
               that requires the district has actively involved pupil and  
               classified school employees in the planning and design of  
               the project and that includes a plan to fund and train  
               classified school employees to service and maintain the  
               project. It is questionable whether students and classified  
               employees have the skills necessary to engage in facility  
               planning and design, and requirements to fund and train  
               specific employees could place the Office of Public School  
               Construction (OPSC) in the inappropriate position of  
               enforcing the hiring and professional development of a  
               specific group of employees, elements more appropriately  
               left to the bargaining process.  According to the author,  
               it was the intent of these provisions to ensure that  
               students and employees receive training and information to  
               understand how they can support and maximize the  
               achievement of energy efficiency savings envisioned by  
               these projects. Staff recommends the bill be amended to  
               delete the current relevant provisions and to reflect the  
               author's intent. 

           7)   Financing program  . This bill directs the OPSC, in  
               consultation with the California Energy Commission (CEC),  
               to evaluate the potential to develop a financing program  
               for K-12 districts, CCCs, CSU, and the UC and, to establish  
               standards for implementation of such a program. According  
               to the author, this section of the bill is intended to  
               respond to provisions in the Act which provide for  
               financial and technical assistance through revolving loan  
               funds, reduced interest loans, or other financial  
               assistance for achieving the goals outlined in the Act,  
               particularly for higher education institutions. The OPSC  
               has some limited experience with extending loans from state  
               bond funds to districts for purposes of the Career  
               Technical Education Facilities program, but it is the  
               California School Finance Authority within the Treasurer's  
               Office which conducts the financial soundness analysis that  




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               qualifies charter school applicants for grants and loans  
               through the Charter School Facility Program.  In addition,  
               CEC has experience administering the Bright Schools Program  
               which offers school districts a number of energy efficiency  
               design services and low interest loans from the Energy  
               Commission to finance recommended projects. 

               To more appropriately achieve the author's intent, staff  
               recommends the bill be amended to delete lines 15-28 on  
               page 7 and to instead require the CEC, in coordination with  
               the Treasurer's Office to develop guidelines for a  
               financing program that utilizes revolving loan funds,  
               reduced interest loans or other financial assistance for  
               energy efficiency and clean energy projects at community  
               colleges, CSU and the UC.

           8)   Unresolved questions to consider  .  As currently drafted,  
               this bill fails to address a number of education policy  
               issues/questions. The committee may wish to consider the  
               following:

               a)        What structure is necessary to ensure access to  
                    these funds for smaller school districts that may not  
                    have the in-house staff to be successful in a  
                    competitive grant program?

               b)        Should there be a cap on the amount of funding  
                                                                                 able to be received by a single district?

               c)        Should a smaller district be assured a specified  
                    level of funding whether or not an energy audit  
                    indicates sufficient project costs to expend all  
                    funds?

               d)        How will the assessment of needs and potential  
                    savings via an energy audit be standardized across all  
                    school districts throughout the state?

               e)        Should the priority for funds be adjusted to  
                    reflect variations in energy savings across the state  
                    based on climate zones in order to ensure fairer  
                    competition for the funds by school districts?

               f)        How can a program be structured to ensure the  
                    costs to a district to effectively compete for grants  
                    are minimized and to maximize the use of moneys to  




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                    fund local employment opportunities and actual project  
                    costs?  

               g)        Does/should the bill provide for sufficient  
                    support of energy efficiency retrofits and clean  
                    energy installations at the CCC, UC and CSU?

               h)        Should a parallel competitive grant program be  
                    established for community colleges through the  
                    Chancellor's Office?

               i)        How should efforts to ensure broad participation  
                    be balanced against the initiative requirement to  
                    maximize job creation and energy savings? 

           9)   Similar Legislation  . Several bills that propose  
               implementation of the provisions of Proposition 39 have  
               been introduced this session.  These include:

                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 64 has  
               been referred to the Senate Energy, Utilities and  
               Communications Committee and is set for hearing on April  
               16, 2013.

                SB 729 (Fuller)  states the intent of the Legislature to  
               enact legislation
               to implement the provisions of Proposition 39.  SB 729 is  
               pending referral in the Senate Rules Committee. 

                AB 39 (Skinner and Perez)  requires the CEC to administer  
               grants,
               no-interest loans, or other financial assistance and to  
               establish a priority system  to K-12 school districts for  
               projects that create jobs in California by reducing energy  
               demand and consumption at their institutions and further  
               requires the CEC to establish a priority system to  
               prioritize eligible institutions for this program, in  
               consultation with the Superintendent of Public Instruction.  
               AB 39 is pending hearing in the Assembly Natural Resources  
               Committee.  

                AB 114 (Salas)  requires the Employment Development  




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               Department,
               using funds made available from the Clean Energy Job  
               Creation Fund
               for job training and workforce development purposes, to  
               administer
               grants, no-interest loans, or other financial assistance  
               for allocation to
               existing workforce development programs for the purposes of  
               creating
               green energy jobs in California. AB 114 has been referred  
               to both the Assembly Natural Resources and Utilities and  
               Commerce committees. 
                
                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 239 has been referred to  
               both the Assembly Natural Resources and Utilities and  
               Commerce committees and is pending hearing in the Assembly  
               Natural Resources committee.

                AB 293 (Allen)  requires the CEC, in consultation with the  
               PUC and other state agencies it deems appropriate, to  
               develop a program to award funding, on a competitive basis,  
               for the purposes established by Proposition 39, and  
               requires a report to the Legislature on the progress, 
               applicants and disbursement of funds and to make  
               recommendations to improve allocation of these funds by  
               July 1, 2016.

           SUPPORT  

          African American Student Social Work Association
          American Lung Association
          California School Boards Association
          California School Employees Association, AFL-CIO
          County Schools Facilities Consortium
          Los Angeles Unified School District
          PolicyLink 
          School Energy Coalition
          South Coast Air Quality Management District
          TRANE

           OPPOSITION




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           None received.