BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 913 (DeSaulnier) - Vehicular air pollution: retirement and
replacement.
Amended: March 25, 2014 Policy Vote: T&H 11-0
Urgency: No Mandate: No
Hearing Date: April 28, 2014
Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 913 would require the California Air Resources
Board (ARB) to include specific goals for the retirement and
replacement of high-polluting vehicles in the guidelines for the
Enhanced Fleet Modernization Program (EFMP). The bill also
requires ARB to cooperate with the Bureau of Automotive Repair
(BAR) to issue a specified number of vehicle retirement and
replacement vouchers through the EFMP and Consumer Assistance
Program (CAP) in the 2014-15 and 2015-16 fiscal years, and to
post a report on their respective websites indicating whether
they achieved those voucher issuance targets.
Fiscal Impact:
CAP vehicle retirement vouchers : The issuance of 15,000
vouchers in 2014-15 would be absorbable at current funding
levels. The issuance of 20,000 vouchers in 2015-16 would
require expenditures of approximately $8 million beyond
current funding levels for the program. (High Polluter
Repair or Removal Account [HPPRA])
EFMP vehicle retirement vouchers : The issuance of 25,000
vouchers in 2014-15 and 28,000 vouchers in 2015-16 would be
absorbable at current funding levels. (Enhanced Fleet
Modernization Subaccount [EFMS])
EFMP vehicle replacement vouchers : The issuance of 1,000
vouchers in 2014-15 would be absorbable at current funding
levels. The issuance of 2,000 vouchers in 2015-16 would
require expenditures of $1.84 million beyond current funding
levels for the program. (EFMS)
ARB would incur an additional $81,500 in 2014-15 and
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$163,000 for 1 PY of staff time for increased monitoring and
oversight of EFMP, and for increased coordination with BAR
and local air quality management districts. (EFMS)
Fund transfer of approximately $6.5 million from the
Vehicle Inspection and Repair Fund (VIRF) to the HPPRA to
cover fund deficiencies in 2015-16 as a result of the
voucher issuance requirements in this bill. This transfer,
which is authorized under current law (see background), is
unlikely to trigger General Fund loan repayments.
Background: Existing law establishes the Motor Vehicle
Inspection Program, commonly known as the smog check program,
which generally requires vehicles to be tested every two years,
with specified exceptions. The Department of Consumer Affairs
(DCA) administers this program through BAR. A vehicle owner
whose vehicle fails a smog test can obtain financial assistance
through the Consumer Assistance Program (CAP). In addition to
specified repair cost waiver and repair cost assistance
programs, BAR offers a vehicle retirement program through CAP.
Under this program, eligible vehicle owners may apply for up to
$1,500 in assistance towards a replacement vehicle in exchange
for the vehicle that failed the smog check as long as the
vehicle has been continuously registered for two years prior to
the application, as specified. The vehicle is then destroyed by
a BAR-approved vehicle dismantler. Approximately 12,000
vehicles were retired through CAP in 2012-13.
Existing law also establishes the Enhanced Fleet Modernization
Program (EFMP), administered by ARB in consultation with BAR for
vehicle retirement, and in consultation with local air districts
for vehicle replacement. This program provides for the
voluntary retirement of passenger vehicles and light- and
medium-duty trucks that are high polluters. Under the state
retirement component of EFMP, the owner of a high-polluting
vehicle may apply to ARB for a voucher of up to $1,500 towards a
replacement vehicle as long as the vehicle has been continuously
registered for two years prior to the application, or operated
in the state during that period, as specified. Under the local
replacement component of EFMP, the owner of a high-polluting
vehicle may apply to participating local air quality management
districts for a voucher of up to $2,500 towards a replacement
vehicle or public transit, as specified. Approximately 25,000
high-polluting vehicles were retired through the state component
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of EFMP in 2012-13. Less than two dozen replacement vouchers
have been issued under the local component of EFMP since its
inception in 2010.
A vehicle owner whose vehicle has failed a smog check may apply
to BAR for vehicle retirement assistance; BAR determines whether
the owner is eligible for CAP or EFMP (or neither).
Existing law, through codified legislative intent, authorizes
transfers of funds from the VIRF to the HPPRA, to the extent the
VIRF maintains a prudent reserve, and specifies that transferred
funds are available for expenditure on the CAP, upon
appropriation by the Legislature. (Health and Safety Code,
Section 44091)
Proposed Law: SB 913 would require the EFMP guidelines to
include specific goals for retirement and replacement of
high-polluting vehicles. The bill would also require the
guidelines to include requirements to issue the following:
At least 15,000 retirement vouchers in 2014-15, and at least
20,000 retirement vouchers in 2015-16 through CAP.
At least 25,000 retirement vouchers in 2014-15, and at least
28,000 retirement vouchers in 2015-16 through the state
retirement component of EFMP.
At least 1,000 replacement vouchers in 2014-15, and at least
2,000 replacement vouchers in 2015-16 through the local
replacement component of EFMP.
ARB and BAR would also be required to post a report on their
respective websites by September 1, 2016 indicating whether
these specified goals for issuing retirement and replacement
vouchers were met, and if not, the manner in which CAP and EFMP
may be revised to increase the number of vehicle retirements and
replacements.
The bill would also state legislative intent that activities
undertaken to achieve the specified voucher issuance targets be
funded by the Enhanced Fleet Modernization Subaccount, the High
Polluter Repair or Removal Account, and the Vehicle Inspection
and Repair Fund. If these funds are insufficient to fully fund
these activities, the bill states legislative intent that any
and all outstanding loans to the General Fund from these special
funds be repaid to fund those activities.
Related Legislation:
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SB 359 (Corbett), Chap 415/2013, provided $48 million in special
fund loans and appropriations to fund specified clean vehicle
incentive programs, including an $8 million appropriation to BAR
to fund activities under the EFMP.
SB 459 (Pavley), Chap 437/2013, requires ARB, in consultation
with BAR, to update EFMP guidelines by June 30, 2015 to increase
the benefits of the program for low-income persons, promote
cleaner replacement vehicles, and enhance the program's emission
reductions, as specified.
Staff Comments: The EFMP is funded by a $1 vehicle registration
fee, generating approximately $31 million in revenues annually
that are deposited into the Enhanced Fleet Modernization
Subaccount. According to the most recent fund condition
statement, the subaccount is projected to have a reserve of
approximately $1.8 million at the end of the 2014-15 fiscal
year. DCA indicates that the requirements of this bill will not
result in insolvency. There is an outstanding loan of $40
million to the General Fund, $10 million of which is scheduled
to be repaid to the subaccount in 2014-15.
The CAP is funded by the smog abatement fee, which is charged on
new vehicles exempt from a smog check; the fee is $6 upon
initial registration of a new vehicle, and $4 for the second
through sixth years of registration renewal. The smog abatement
fee generates over $35 million annually in revenues that are
deposited into the HPPRA. According to the most recent fund
condition statement, this account is projected to have a reserve
of approximately $5.5 million at the end of the 2014-15 fiscal
year.
As noted above, SB 913 requires that BAR issue 15,000 CAP
vehicle retirement vouchers in 2014-15 and 20,000 vouchers in
2015-16. While the target is achievable at existing program
funding levels in 2014-15, the 2015-16 targets will require an
additional $8 million in funding. This bill would create a
funding deficit in the HPRRA, triggering a fund transfer of
approximately $6.5 million from the VIRF. According to the most
recent fund condition statement, the VIRF is expected to have a
reserve of approximately $50 million at the end of the 2014-15
fiscal year. The current balance on a loan to the General Fund
is $139 million, $14 million of which is scheduled to be repaid
in 2014-15.
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Staff notes that BAR is currently in the process of revising
regulations for CAP, and ARB is also updating regulations to the
EFMP, pursuant to the requirements of SB 459. Both of these
regulatory updates are expected to increase participation rates
in vehicle retirement and replacement programs, but draft
regulations do not propose to establish specific targets.