BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 64 ()- Proposition 39: implementation. Amended: April 23, 2013 Policy Vote: EU&C 8-2 Urgency: No Mandate: No Hearing Date: May 23, 2013 Consultant: Marie Liu SUSPENSE FILE. Bill Summary: SB 64 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 to install energy efficiency or clean energy technology in public schools or municipal facilities. Fiscal Impact: Unspecified amounts from the Job Creation Fund (special fund) for financial assistance for energy efficiency or clean energy technology installation. Unknown costs to the CEC from the Job Creation Fund for the development and administration of programs. 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 improve energy efficiency and expand clean energy generation. Proposition 39 caps administrative costs at four percent of total funding. The Governor's 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, $400.5 million for K-12 schools and $49.5 million to CCC would be appropriated on a per-student basis. SB 64 (Corbett) Page 1 Proposed Law: This bill would require the CEC to develop and administer programs to provide financial assistance from the Job Creation Fund to school districts, cities, and counties to install energy efficiency or clean energy technology in public schools or municipal facilities. Eligible projects would be required to reduce fossil fuel emissions, reduce total energy use, and improve energy efficiency. Eligible projects would also be required to be consistent with the state's loading order which puts a priority on increasing energy efficiency. The CEC would be required to adopt guidelines governing the program at a publically noticed meeting with an opportunity for the public to comment. Guideline adoption would be exempt from the Administrative Procedure Act 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 39 (de León) would require the Office of Public School Construction to establish a school district assistance program to distribute competitive grants for energy efficiency upgrade projects pursuant to Proposition 39. Status: Sen. Appropriations, May 13th hearing. 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 SB 64 (Corbett) Page 2 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 contains an unspecified appropriation to the CEC for FY 2013-14 from the Proposition 39 Job Creation Fund. The Senate Budget Subcommittees #1 and #2 had a joint hearing on April 4, 2013 to discuss Proposition 39 spending, however, no action was taken. Legislative action taken on the Governor's proposed budget and numerous other bills that propose spending of Proposition 39 dollars will determine how much funding, if any, would be actually available for appropriation by this bill. Proposition 39 caps administrative costs from the Job Creation Fund at four percent. If administrative costs exceed the cap, the costs would either need to be absorbed by the administrating agency or paid for with other funds. Staff believes it is a reasonable assumption that four percent of the appropriation would be sufficient for administrative costs unless the CEC is required to run multiple programs from the Fund or if the CEC is appropriated only a small amount of money to allocate. If there are only a small amount of grant funds, administrative costs are likely to be a higher percentage of the available funds. This bill would allow the CEC to create numerous programs, but encourages the CEC to build off of existing programs which can assist with minimizing administrative costs. The Administrative Procedure Act (APA, beginning at Section 11340 of the Government Code) prohibits state agencies from issuing or enforcing any rule, regulation, order, or standard of general application unless it has been issued as a regulation under the APA. The purpose of the APA is to provide the public with meaningful opportunity to participate in the adoption of state regulations and to ensure that regulations are clear, necessary, and legally valid. Staff notes that exempting the CEC's guidelines from the APA may reduce administrative costs for the CEC, at least initially, but possibly at the expense of a less vigorous review of the guidelines than is provided under the APA process. SB 64 (Corbett) Page 3