BILL ANALYSIS Ó AB 88 Page 1 Date of Hearing: May 27, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 88 (Gomez) - As Amended May 20, 2015 ----------------------------------------------------------------- |Policy |Revenue and Taxation |Vote:|9 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: Yes State Mandated Local Program: NoReimbursable: No SUMMARY: This bill establishes, beginning the first day of the first calendar quarter commencing more than 90 days after the effective date, and until December 31, 2020, a sales and use tax exemption for any energy or water efficient refrigerator or clothes washer purchased by a public utility and provided at no cost to a participant in a federal, state, or ratepayer-funded energy efficiency program. The bill requires that any amount saved by the public utility as a result of not paying the sales and use tax must be used to purchase additional energy and water efficient appliances to be provided at no cost to low-income participants in energy efficient programs. AB 88 Page 2 FISCAL EFFECT: 1)Minor and absorbable costs to the Board of Equalization (BOE) to update systems and procedures. 2)Estimated revenue decreases for the state and local jurisdictions of $4.5 million per year, $2.1 million of which is from the General Fund. COMMENTS: 1)Purpose. According to the author, this bill helps further the state's environmental and energy efficiency goals by reducing energy and water consumption while reducing costs for a greater number of low-income customers. Proponents note that following an audit in 2014, BOE determined there is no exemption for energy or water efficient appliances purchased by public utilities and provided, at no cost, to qualified low-income customers participating in energy efficiency programs. As a result, BOE established a sales tax for these appliances. The author believes appliance replacement programs already serve too few of those who qualify, and an additional sales tax only weakens the effectiveness of those programs. 2)County Opposition. The California State Association of Counties (CSAC) opposes the bill because it exempts the qualifying purchases from all state and local sales and use taxes. Total revenue losses are estimated to be $4.5 million per year, with local governments suffering the majority of those losses. CSAC argues almost half of county revenue is derived from sales and use tax, and much of that revenue is used to provide local public safety services, criminal justice AB 88 Page 3 and rehabilitation services, and child welfare services. CSAC has requested AB 88 be further narrowed to apply only to the state portion of the sales tax. 3)The Energy Savings Assistance Program. In general, the state's Energy Savings Assistance Programs (ESAP) provide no-cost services to low-income households to improve energy efficiency, such as weatherization and insulation. Certain ESAP customers may also be eligible to receive energy-efficient replacement appliances, for example when older units are either too old or inefficient to reasonably repair, or when those units are unsafe. The author notes ESAP helps reduce energy and water consumption while lowering utility costs for low-income customers. The program also fosters safer recycling of older appliances, helping to reduce illegal dumping and ensuring hazardous components are handled properly. According to the California Public Utilities Commission, preliminary 2014 ESAP expenditures for the four largest investor-owned utilities was $230 million, reflecting a broad range of purchased appliances and devices, as well as installation costs. Analysis Prepared by:Joel Tashjian / APPR. / (916) 319-2081 AB 88 Page 4