BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: AB 1550
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|Author: |Gomez |
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|Version: |5/31/2016 |Hearing |6/29/2016 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Rebecca Newhouse |
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SUBJECT: Greenhouse gases: investment plan: disadvantaged
communities.
ANALYSIS:
Existing law:
1) Under the California Global Warming Solutions Act of 2006,
requires the California Air Resources Board (ARB) to
determine the 1990 statewide greenhouse gas (GHG) emissions
level, to approve a statewide GHG emissions limit equivalent
to that level that will be achieved by 2020, and to adopt GHG
emissions reductions measures by regulation. ARB is
authorized to include the use of market-based mechanisms to
comply with the regulations. (Health and Safety Code (HSC)
§38500 et seq.)
2) Establishes the Greenhouse Gas Reduction Fund (GGRF) as a
special fund in the State Treasury; requires that all moneys,
except for fines and penalties, collected pursuant to a
market-based mechanism be deposited in the fund; and requires
the Department of Finance, in consultation with the state
board and any other relevant state agency, to develop, as
specified, a three-year investment plan for the moneys
deposited in the GGRF. (Government Code §16428.8)
3) Requires that GGRF moneys be used to facilitate the
achievement of reductions of GHG emissions in the state
consistent with the Global Warming Solutions Act of 2006.
Appropriations of the GGRF funds in the annual budget are
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required to be consistent with the three-year investment
plan. (HSC §39712)
4) Under the GGRF Investment Plan and Communities Revitalization
Act, requires the California Environmental Protection Agency
(CalEPA) to identify disadvantaged communities for investment
opportunities related to the Act. (HSC §39711)
5) Requires the GGRF investment plan to allocate a minimum of
25% of the funds to projects that benefit disadvantaged
communities and to allocate 10% of the funds to projects
located within disadvantaged communities. (HSC §39713)
6) Requires the California Environmental Protection Agency
(CalEPA) to identify disadvantaged communities for GGRF
investment opportunities and requires those communities be
identified based on geographic, socioeconomic, public health,
and environmental hazard criteria. (HSC §39711)
7) Requires the ARB, in consultation with the California
Environmental Protection Agency (CalEPA), to develop funding
guidelines for administering agencies receiving allocations
of GGRF funds that include a component for how agencies
should maximize benefits to disadvantaged communities. (HSC
§39715)
This bill:
1) Revises the requirement that 25% of the GGRF be expended to
benefit disadvantaged communities to require that the funding
be allocated for projects located within the boundaries of,
and benefiting individuals in, disadvantaged communities.
2) Requires that an additional 20% of the GGRF be allocated for
projects that benefit low-income households.
3) Defines "low-income household" as those with household
incomes at or below 80% of the statewide median income or
with household incomes at or below the threshold designated
as low income by the Department of Housing and Community
Development's list of state income limits.
4) Requires that, to the extent feasible, a "fair share" of the
moneys allocated to benefit low-income households target
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households with incomes at or below 200% of the federal
poverty level.
Background
1) Cap-and-trade auction revenue. Since November 2012, ARB has
conducted 15 cap-and-trade auctions, generating over $4
billion in proceeds to the state.
State law specifies that the auction revenues must be used to
facilitate the achievement of GHG emissions reductions and
outlines various categories of allowable expenditures.
Statute further requires the Department of Finance, in
consultation with ARB and any other relevant state agency, to
develop a three-year investment plan for the auction
proceeds, which are deposited in the GGRF.
SB 535 (de León, Chapter 830, Statutes of 2012) requires the
Department of Finance, in the investment plan, to allocate at
least 25% of available moneys in the GGRF to projects that
provide benefits to disadvantaged communities, and at least
10% to projects located within disadvantaged communities.
Additionally, SB 862 (Committee on Budget and Fiscal Review,
Chapter 36, Statutes of 2014) requires ARB to develop
guidelines on maximizing benefits for disadvantaged
communities by agencies administering GGRF funds, and
guidance for administering agencies on GHG emissions
reduction reporting and quantification methods.
Legal consideration of cap-and-trade auction revenues. The
2012-13 Budget analysis of cap-and-trade auction revenue by
the Legislative Analyst's Office noted that, based on an
opinion from the Office of Legislative Counsel, the auction
revenues should be considered mitigation fee revenues, and
their use requires that a clear nexus exist between an
activity for which a mitigation fee is used and the adverse
effects related to the activity on which that fee is levied.
Therefore, in order for their use to be valid as mitigation
fees, revenues from the cap-and-trade auction must be used to
mitigate GHG emissions or the harms caused by GHG emissions.
In 2012, the California Chamber of Commerce filed a lawsuit
against the ARB claiming that cap-and-trade auction revenues
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constitute illegal tax revenue. In November 2013, the
superior court ruling declined to hold the auction a tax,
concluding that it is more akin to a regulatory fee. The
plaintiffs filed an appeal with the 3rd District Court of
Appeal in Sacramento in February of 2014, and that case is
pending.
Budget allocations. SB 862 (Committee on Budget and Fiscal
Review, Chapter 36, Statutes of 2014), a budget trailer bill,
established a long-term cap-and-trade expenditure plan by
continuously appropriating portions of the funds for
designated programs or purposes. The legislation
appropriates 25% for the state's high-speed rail project, 20%
for affordable housing and sustainable communities grants,
10% to the Transit and Intercity Rail Capital Program, and 5%
for low-carbon transit operations. The remaining 40% is
available for annual appropriation by the Legislature.
The Governor's 2016-17 proposed budget appropriates over $3
billion to a variety of programs and projects in the
transportation, energy, natural resources, and waste
diversion sectors.
2) CalEnviroScreen and disadvantaged communities.
CalEnviroScreen was developed by OEHHA, at the request of
CalEPA and pursuant to the GGRF Investment Plan and
Communities Revitalization Act (SB 535, de León, Chapter 830,
Statutes of 2012), to determine a list of disadvantaged
communities in California that are the most vulnerable and
pollution-burdened. The tool is used to help direct those
GGRF investments targeted for disadvantaged communities, as
well as to guide CalEPA in administering its Environmental
Justice Small Grants Program and prioritizing resources for
cleanup and abatement projects and outreach efforts by the
Agency.
Using CalEnviroScreen, CalEPA determined a list of
disadvantaged communities throughout California in October
2014. According to CalEPA, the current version incorporates
19 indicators, including those for exposures, environmental
effects, sensitive populations, and socioeconomic factors.
Census tracts in the top 25th percentile of cumulative
CalEnviroScreen scores have been designated disadvantaged
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communities for the purposes of SB 535 (de León).
The areas where the majority of disadvantaged communities
were identified included the San Joaquin Valley, parts of Los
Angeles and the Inland Empire, and large portions of the
Coachella Valley and Mojave Desert, in addition to
communities located near industrial areas and major roadways.
Update. OEHHA intends to update CalEnviroScreen this year to
incorporate the most current information available. Other
improvements are also expected to be part of this update.
The proposed changes will be released in a draft version of
the tool this summer.
3) ARB Guidance on GGRF. In 2014, ARB published interim guidance
for meeting the requirements associated with GGRF
appropriations, as well as maximizing benefits to
disadvantaged communities, for agencies appropriated GGRF
moneys. This guidance was finalized and released in late
2015.
In meeting the SB 535 requirement, the guidance states that
agencies should first assess whether projects will be located
within a disadvantaged community, as identified through
CalEnviroScreen, and whether the project will provide direct
benefits to that community, consistent with specific criteria
in the guidance document for each program type. If
investments meet this requirement, then the guidance
specifies that the projects and administrative funds count
towards both the 10% and 25% requirements for GGRF
investments within, and providing benefits to, disadvantaged
communities.
If the project is not within the disadvantaged community, the
guidance directs agencies to evaluate whether the project
provides direct, meaningful, and assured benefits in
accordance with specified criteria for each project type.
Projects within a half-mile of a disadvantaged community and
that provide increased service or access to those
communities, or projects that result in at least 25% of
project work hours performed by residents of disadvantaged
communities, may count towards the SB 535 mandate requiring a
minimum of 25% of GGRF money benefit disadvantaged
communities.
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4) GGRF benefits report. AB 1532 (Pérez, Chapter 807, Statutes
of 2012) requires the Department of Finance (DOF) to submit
an annual report to the Legislature on the status and
outcomes of projects funded from the GGRF. The 2016 Annual
Report describes the status of funded programs and lists the
projects funded and also provides estimates of the GHG
reductions expected from project investments and statistics
on benefits to disadvantaged communities, demand for funding,
and leveraging of funds. Specifically, the report states
that for implemented projects funded through GGRF, 51% of
investments provided benefits to disadvantaged communities,
with 39% of GGRF investments directed within disadvantaged
communities.
According to the Annual Report, "CALFIRE's urban forestry
program is planting trees in disadvantaged communities
throughout the State, providing community shading and
reducing energy demand while improving active transportation
and recreational opportunities for these residents. Caltrans'
Low Carbon Transit Operations Program is supporting new and
expanded services and facilities that improve mobility for
disadvantaged communities and low-income residents in these
communities. The Department of Community Services and
Development's (CSD) Low-Income Weatherization Program is
helping low-income residents in disadvantaged communities
reduce their energy use and energy costs. The current
appropriations will easily meet and exceed the SB 535
disadvantaged community targets without including High Speed
Rail. However, the High Speed Rail Project is expected to
greatly benefit disadvantaged communities throughout the
State by creating thousands of direct construction-related
jobs as well as indirect jobs and related economic
development benefits in communities of the Central Valley,
which has some of the highest unemployment rates in the
country."
Comments
1) Purpose of Bill. According to the author, "Low-income
communities and communities of color are and will continue to
be disproportionately impacted by the effects of our changing
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climate. As we think about how to structure our state's
climate programs - as we discuss percentages and parameters -
this is a reality we cannot ignore and must strive to remedy.
AB 1550 builds on the successes of our climate equity efforts
to date by ensuring a greater investment in California's
environmentally and socioeconomically disadvantaged
populations. The bill requires that at least 25% of
cap-and-trade funds be spent on projects located directly
within disadvantaged communities, as identified by the
state's environmental health screening tool, to ensure that
the level of investment in DACs equals their share of the
population. The bill also requires an additional 20% of
funds to benefit low-income households.
"While CalEnviroScreen is a valuable tool for capturing
cumulative impacts in communities, it is widely recognized
that there are poor and working-class households that lie
outside of DACs - but that struggle to make ends meet and
spend a large portion of their incomes on necessitates - such
as energy, water, housing, and transportation. If we wish to
foster a shared, statewide commitment to tackling pressing
environmental issues, we must take advantage of opportunities
to reduce greenhouse gas emissions and build sustainable
communities while lifting poor and working Californians out
of poverty.
"A greater investment in California's environmentally and
socioeconomically disadvantaged populations has the potential
to yield significant climate, public health, and cost
benefits while helping bridge the 'green divide'."
2) Amending SB 535. AB 1550 amends requirements put in place
through SB 535 (de León, Chapter 830, Statutes of 2012) for
spending cap-and-trade auction proceeds in disadvantaged
communities and adds additional requirements for minimum
spending for low-income households. Specifically, SB 535
requires a minimum of 25% of GGRF moneys benefit
disadvantaged communities and 10% be spent within those
communities. AB 1550 eliminates the distinction created in
SB 535, where appropriating funds to "benefit" a
disadvantaged community do not necessarily have to be spent
within the disadvantaged community, and instead requires a
minimum of 25% GGRF moneys be spent to benefit disadvantaged
communities within those communities. Additionally, AB 1550
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requires a minimum of 20% of GGRF moneys be directed to
benefit "low-income households," as defined, and does not
allow investments toward disadvantaged communities to count
toward the minimum percentage required to benefit low-income
households, or the reverse.
3) Benefiting low-income households. The bill requires a minimum
of 20% of GGRF be spent to benefit "low-income households."
AB 1550 defines these households as those at or below 80% of
the statewide median income, or as households designated as
low-income based on area-wide median incomes, based on
figures from the Department of Housing and Community
Development (DHCD). The area-wide "low-income" income
thresholds better account for high cost of living and rent
burdens in various regions across the state.
Some of the current programs funded through GGRF, like
weatherization programs and car retirement and replacement
programs, may be counted as benefiting a household. However,
it is difficult to ascribe benefits specifically to
individual households for a number of other GGRF programs,
including transportation projects that provide enhanced or
improved public transit (i.e., the Low Carbon Transit
Operations program or the Transit and Intercity Rail Capital
program, which both receive continuous GGRF appropriation)
and, urban forestry and greening projects. In this way, the
20% requirement for benefiting low-income households may be
1) difficult to measure, 2) limit access of low-income
households to a variety of other GGRF programs with more
community-wide impacts, and 3) create implementation
challenges, since funding for the subset of programs directly
benefiting households may not be sufficient to meet the
bill's 20% requirement.
To address this issue, amendments are needed to require 20%
of GGRF moneys be directed to "low-income households" or
"low-income communities," and to define a "low-income
community" as a census tract with a median household income
at or below 80% of the statewide median income or with a
median household income at or below the threshold designated
as low-income by the Department of Housing and Community
Development.
4) Smaller pot. As the cap for the state's cap-and-trade program
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is reduced, so are allowances that are offered for sale. As
it is the sale of these allowances at auctions that generate
cap-and-trade proceeds, this revenue source will continue to
shrink. Additionally, only 2% of the state allowances sold at
the auction in May, and resulted in the state receiving only
$10 million in proceeds where up to $500 million was
projected.
A larger fraction of moneys for disadvantaged communities and
low-income households, as prescribed in AB 1550, of a
shrinking pot of GGRF moneys may result in a significantly
reduced fraction of money from GGRF for emissions reduction
projects in the rest of the state.
5) More constraints on funding. As larger amounts of GGRF are
set aside to benefit various groups, flexibility for
allocating those funds is reduced. For example, a project
that does not rank as high may be funded over a project
ranked more highly in order to satisfy a requirement that a
certain percentage of funds be spent to benefit a particular
group. In situations where a tradeoff is required, policy
goals of providing benefits to vulnerable populations may
outweigh other policy goals for the GGRF, including funding
only the most highly ranked project. However, the more these
constraints are added to the fund, the more frequently these
policy tradeoffs will arise.
As the bill already specifically targets low-income
households with a significant fraction of the GGRF, the
committee may wish to consider removing the requirement in
the bill that a "fair share" of GGRF moneys target households
with incomes at or below 200% of the federal poverty level
"to the maximum extent feasible."
6) How will this change the way GGRF moneys are appropriated? It
is not clear how agencies will implement an increased
requirement for spending within disadvantaged communities,
and an additional mandate for spending to benefit low-income
households.
According to the annual DOF report on GGRF benefits and
funded projects to date, about 39% of GGRF has been spent
within disadvantaged communities-14% over the AB 1550
requirement. Assuming that the majority of those
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disadvantaged communities would also qualify as low-income
under the bill, that 14% of GGRF investment over the 25%
mandate could potentially count toward the 20% requirement
for low-income households or communities, leaving only 6%
more directed toward low-income households to meet the new
requirements under AB 1550. Under this scenario, there may
not be significant change in the way current GGRF investments
are made. However, as the author would like to capture a
distinct population from disadvantaged communities by
requiring a minimum investment for "low-income households,"
agencies may work to implement the intent of the legislation
by specifically directing expenditures to low-income
communities that are not also disadvantaged communities.
Therefore, it is not clear to what extent low-income
populations that are not identified as disadvantaged
communities according to CalEnviroScreen, will benefit from
the additional set-aside in AB 1550.
7) Targeting disadvantaged communities. SB 535 requires
disadvantaged communities for GGRF investment opportunities
be identified based on geographic, socioeconomic, public
health, and environmental hazard criteria. The resulting
tools uses socioeconomic and environmental pollution
indicators throughout the state to evaluate those vulnerable
populations experiencing cumulative pollution burdens and
specifically targets them for GGRF investment. The analysis
is complex, relying on 19 different indicators for an
aggregate score to identify disadvantaged communities for
targeted GGRF investment.
AB 1550 does not alter the methodology behind how
disadvantaged communities are identified, but further expands
investments to those communities as well as requiring 20% of
GGRF moneys be directed toward low-income households. In
contrast to CalEnviroScreen, this criterion is a relatively
simple method for targeting vulnerable populations.
In this way, the bill seems to establish an inconsistent
policy for identifying vulnerable or distressed populations
for GGRF investments-on one hand relying on a complex
analysis to assess aggregate socioeconomic factors and
environmental burdens, and on the other hand, simply
directing moneys to communities or households based on a
single economic metric.
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This also raises questions surrounding the original policy
goals of SB 535 in requiring CalEPA identify disadvantaged
communities based on a variety of criteria. Does singling out
an additional population for investment based on a single
measure fit within the original policy goals of SB 535?
SOURCE: Author
SUPPORT:
Alameda County Board of Supervisors
Amigos de los Rios
Asian Pacific Environmental Network
Asian Pacific Policy and Planning Council
California Association of Local Conservation Corps
California Bicycle Coalition
California Black Health Network
California Black Health Network
California Center for Public Health Advocacy
California Environmental Justice Alliance
California Environmental Justice Alliance
California Housing Partnership Corporation
California League of Conservation Voters
California ReLeaf
California Urban Forests Council
California Vanpool Authority
California Voices for Progress
Canopy
Catholic Charities
Catholic Charities, Diocese of Stockton
Center for Community Action and Environmental Justice
Center on Race, Poverty and the Environment
Central California Asthma Collaborative
Central Coast Alliance United for a Sustainable Economy
Central Coast Energy Services
City Project
Coalition for Clean Air
Communities for a Better Environment
Community Action to Fight Asthma
Community Health for Asian Americans
Defenders of Wildlife
Energy Solidarity Cooperative
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Environment California
Environmental Defense Fund
Environmental Health Coalition
Fallbrook Land Conservancy
Filipino/American Coalition for Environmental Solidarity
Fresno Economic Opportunities Commission
Fresno Interdenominational Refugee Ministries
Friends Committee on Legislation of California
Grayson Neighborhood Council
Green Education, Inc.
Green for All
Greenlining Institute
Greenspace-The Cambria Land Trust
GRID Alternatives
Growing Together
Huntington Beach Tree Society, Inc.
Liberty Hill Foundation
Little Tokyo Service Center
Los Angeles Conservation Corps
Los Angeles Neighborhood Land Trust
Move LA
National Parks Conservation Association
Pacific Asian Consortium in Employment (PACE)
Pacoima Beautiful
People Organizing to Demand Environmental and Economic Rights
Physicians for Social Responsibility - Los Angeles
Placer Land Trust
Propel Fuels
Public Advocates
Regional Asthma Management and Prevention
Rising Sun Energy Center
Rural County Representatives of California
Sacramento Tree Foundation
Safe Routes to School National Partnership
Santa Clara Valley Open Space Authority
Save the Bay
SCOPE
Sierra Business Council
Sierra Climate Adaptation and Mitigation Partnership (Sierra
CAMP)
Sierra Club California
Sierra Foothill Conservancy
Solar-Oversight
Stone Soup Fresno
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Strategic Actions for a Just Economy
Strategic Concepts in Organizing and Policy Education
The Nature Conservancy
TransForm
Tree Davis
Tree San Diego
Truckee Donner Land Trust
Trust for Public Land
TRUST South LA
Union of Concerned Scientists
Urban Releaf
Valley Clean Air Now
Watershed Conservation Authority
OPPOSITION:
California Chamber of Commerce
California Taxpayers Association
Metropolitan Transportation Commission
ARGUMENTS IN
SUPPORT:
Supporters state that, since CalEnviroScreen classifies a
quarter of the state's population as living in disadvantaged
communities, at least a quarter of GGRF proceeds should be
invested directly within the boundaries of disadvantaged
communities, which generally provides more assistance than
simply "benefiting" these communities. They further add that
this is a simple equity adjustment to the existing formula that
reflects the need to invest in these communities hit first and
worst by the adverse impacts of climate change. Additionally,
they state that some of the best GHG reduction strategies are
those that benefit low-income households whether they lie inside
or outside CalEnviroScreen-designated disadvantaged communities.
They further note that low-income Californians often lack
adequate and affordable transportation and housing choices,
access to green spaces, and spend a significant percentage of
their budget on necessities including fuel and energy, and for
those reasons, AB 1550 directs additional investments to
low-income households, communities and populations, as well.
ARGUMENTS IN OPPOSITION:
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The Metropolitan Transportation Commission (MTC) states that, as
written, AB 1550 would expand the state's reliance upon a flawed
definition of disadvantaged communities that excludes many
communities characterized by poor socio-economic conditions, and
state that the CalEnviroScreen should not be relied upon
exclusively to target cap-and-trade funds to disadvantaged
communities. They argue that CalEnviroScreen has the perverse
public health effect of encouraging growth and development in
locations where residents have greater exposure to environmental
harm. MTC states that they are opposed to the bill unless AB
1550 is amended to broaden the definition of disadvantaged
communities so that it includes communities with concentrations
of people living with poor socio-economic conditions-regardless
of their exposure to environmental hazards. California Chamber
of Commerce and California Taxpayers Association are opposed as
they argue that ARB lacks the authority to raise revenue through
auction of allowances.
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