BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 39 (DeLeon/Steinberg) - Energy: school facilities: energy efficiency upgrade projects. Amended: May 7, 2013 Policy Vote: Ed 8-0, EU&C 11-0 Urgency: No Mandate: No Hearing Date: May 23, 2013 Consultant: Marie Liu SUSPENSE FILE. AS PROPOSED TO BE AMENDED. Bill Summary: SB 39 would require the State office of Public School Construction (OPSC), in consultation with the Public Utilities Commission (CPUC), the State Department of Education (SDE), California Energy Commission (CEC), and the State Allocation Board (SAB), to administer a competitive grant program for energy efficiency upgrade projects for K-12 schools, funded by Proposition 39 revenues. Fiscal Impact (as approved on May 23, 2013): Annual costs likely in the hundreds of thousands to low millions from the Clean Energy Job Creation Fund (special fund) for OPSC for the administration of the program. Annual costs of approximately $200,000 from the Clean Energy Job Creation Fund for SDE staff and outreach travel. Annual costs likely in the hundreds of thousands from the Clean Energy Job Creation Fund for the State Allocation Board to approve grants. Minor and absorbable cost to the PUC for consulting with OPSC. One-time costs in the millions of dollars from the Clean Energy Job Creation Fund in FY 2013-14 to the CEC to develop criteria and guidelines. Background: The California Clean Energy Jobs Act of 2012 (Proposition 39), which was approved by the voters in November 2012, requires most multistate businesses to determine their California taxable income using a single sales factor method. This change has the effect of increasing state corporate tax revenue. For a five year period (FY 2013-14 through FY 2017-18), Proposition 39 requires that half of the annual revenue raised from the measure, up to $550 million, be transferred to a new Clean Energy Job Creation Fund to support projects intended to SB 39 (DeLeon/Steinberg) Page 1 improve energy efficiency and expand clean energy generation. Proposition 39 caps administrative costs at four percent of total funding. The Governor's revised proposed budget would exclusively allocate Proposition 39 funds in the Job Creation Fund to energy efficiency and alternative energy projects at K-14 schools. For FY 2013-14, $413 million for K-12 schools and $51 million to CCC would be appropriated on a per-student basis. The minimum grant size would be $50,000 or $15,000 for districts with less than 200 students. Eight positions and $4 million are proposed for CEC to provide technical assistance to small districts. Proposed Law: This bill would require the creation of a competitive grant program for school districts. The CEC would be responsible for developing the criteria for project development, ranking, approval, and energy savings reporting. The SDE, in consultation with the OPSC, would be responsible for offering technical assistance to applicants and providing outreach. The SAB would be responsible for approving the grants and the OPSC would be responsible for administering, processing, and distributing funds to the school districts. The grant program would be required to give priority to applications for projects that would provide an energy upgrade at a school facility with above average energy consumption, will benefit an economically disadvantaged school community, are located in an area with above average unemployment, include training and information to pupils and classified school employees, enhance workforce development or utilize members of the California Conservation Corps, and are a joint partnership between two or more agencies. Related Legislation: SB 35 (Pavley) would require the California State University (CSU) and the California Community Colleges (CCC), and requests the University of California (UC), to develop and implement a near- and long- term strategy for energy savings projects. Status: Sen. Education, hearing canceled. SB 64 (Corbett) would require the State Energy Resources Conservation and Development Commission (CEC) to provide financial assistance, from monies resulting from the passage of Proposition 39, to school districts, cities, and counties SB 39 (DeLeon/Steinberg) Page 2 to install energy efficiency or clean energy technology in public schools or municipal facilities. SB 64 is on the Senate Appropriations Suspense File. SB 729 (Fuller) states Legislative intent to enact Legislation to implement Proposition 39. Status: Senate Rules Committee. AB 29 (Williams) would allocate $152 million over five years to the CEC to administer financial assistance for the UC, CSU, and CCC, to reduce energy demand and consumption. Status: Assembly Utilities and Commerce, hearing canceled. AB 39 (Skinner) would direct the CEC to develop and provide financial assistance to K-12 schools and community colleges to improve energy efficiency, install clean energy technology, or make energy system improvements. Status: Assembly Appropriations. AB 114 (Salas) would direct the Labor and Workforce Development Agency to award grants to eligible entities for projects to provide job training on energy efficiency and clean energy projects that are located in economically disadvantaged communities. Status: Assembly Appropriations. AB 239 (Hagman) would require the Office of Public School Construction to fund a zero-interest revolving loan program and grant program for school districts to perform energy efficiency retrofit or clean energy installation projects at public schools. Status: Assembly Utilities and Commerce, failed, reconsideration granted. Staff Comments: This bill would have five agencies coordinate in developing and administering a competitive grant program. Staff notes that the bill expresses a specific role for all of the five agencies except for the CPUC. Proposition 39 capped administrative costs to 4% of the funds made available. Given that Proposition 39 is anticipated to make $550 million available for energy efficiency projects, 4% translates to $22 million, a substantial amount which should be more than sufficient for administrative costs. However, this bill proposes a grant program that will be developed and administered by five agencies. While each of these agencies bring a unique perspective and expertise to the program, the administrative costs for five agencies to co-develop and administer a grant program is likely to be significantly more expensive than a program administered by one agency. SB 39 (DeLeon/Steinberg) Page 3 This bill seems to suggest that the CEC would likely only be involved in in the initial year for the development of criteria and guidelines, but the SDE, OPSC, and SAB would have ongoing roles in the program. The CEC estimates that their responsibilities can be completed with between one and three percent of the allocated funding. SDE estimates costs of approximately $200,000 annually. CPUC believes their costs will be minor and absorbable. Staff estimates that OPSC costs will likely be in the hundreds of thousands to low millions and SAB costs are likely in the hundreds of thousands annually. This bill would give priority to projects that are a joint partnership between two or more agencies. Staff notes that the benefit of that criterion is unclear as such a partnership does not necessarily mean that a project will be more energy efficient or more efficiently implemented. Proposed Author Amendments: Expands eligible projects, declares projects as public works projects, makes specific requirements of contractors and subcontractors, and adds additional project requirements.