BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1550 (Gomez) - Greenhouse gases: investment plan: disadvantaged communities ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: May 31, 2016 |Policy Vote: E.Q. 5 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 8, 2016 |Consultant: Narisha Bonakdar | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 1550 requires 25 percent of the AB 32 Greenhouse Gas Reduction Fund (GGRF) revenues to be spent on projects located within and benefiting disadvantaged communities, and an additional 20 percent to be spent on projects that benefit low-income households or are within low-income communities, as defined. Fiscal Impact:1) Increased GGRF expenditures in disadvantaged communities (from 10 percent direct investment to 25 percent) and for low-income households and to low-income communities (from 0 to 20 percent). Increased annual ongoing costs of up to $465,000 (GGRF) for the California Air Resources Board (ARB) to modify existing guidelines and tracking systems, provide guidance to AB 1550 (Gomez) Page 1 of ? administering agencies, and conduct outreach. Unknown cost to administering agencies to update tracking systems, track GGRF expenditures in in disadvantaged and low-income communities, and report to ARB regarding expenditures these communities. Background: The California Global Warming Solutions Act of 2006. The California Global Warming Solutions Act of 2006 (AB 32) requires ARB to adopt a statewide GHG emissions limit equivalent to 1990 levels by 2020 and adopt regulations, including market-based compliance mechanisms, to achieve maximum technologically feasible and cost-effective GHG emission reductions. As part of the implementation of AB 32 market-based compliance measures, ARB adopted a cap-and-trade program that caps the allowable statewide emissions and provides for the auctioning of emission credits. Auction proceeds are quarterly deposited into the GGRF, and available for appropriation by the Legislature. The 2014-15 Budget Act allocated cap-and-trade revenues for the 2014-15 fiscal year and established a long-term plan for the allocation of cap-and-trade revenues beginning in fiscal year 2015-16. The Budget continuously appropriates 35 percent of cap-and-trade funds for investments in transit, affordable housing, and sustainable communities. Twenty-five percent of the revenues are continuously appropriated to continue the construction of high-speed rail. The remaining 40% are to be appropriated annually by the Legislature for investments in programs that include low-carbon transportation, energy efficiency and renewable energy, and natural resources and waste diversion. An expenditure plan for the 40% was not included in the 2015-16 Budget Act, with the exception of $227 million appropriated to continue funding for specified existing programs. The remaining AB 1550 (Gomez) Page 2 of ? 2015-16 revenues, along with 2016-17 revenues, totaling $3.1 billion are available for appropriation this year. Disadvantaged and Low-income Communities. SB 535 (De León, Chapter 830, Statutes of 2012) requires that no less than 10 percent of cap-and-trade revenues fund projects located within disadvantaged communities, and that 25 percent of available revenues fund projects that benefit those communities. In October 2014, CalEPA released its list of disadvantaged communities for the purpose of SB 535. CalEPA relied on CalEnviroScreen to identify the areas disproportionately burdened by and vulnerable to multiple sources of pollution. CalEnviroScreen is a tool that assesses all census tracts in California to identify the areas disproportionally affected and vulnerable to multiple sources of pollution. Areas (census tracts) identified as disadvantaged for SB 535's purposes by CalEnviroScreen include: the majority of the San Joaquin Valley; much of Los Angeles and the Inland Empire; pockets of other communities near ports, freeways, and major industrial facilities such as refineries and power plants; and large swaths of the Coachella Valley, Imperial Valley, and Mojave Desert. Proposed Law: This bill: 1)Requires 25 percent of GGRF revenues to be spent on projects located within and benefiting disadvantaged communities. 2)Requires 20 percent of GGRF revenues to be spent on low-income households or to projects located within the boundaries of, and benefiting individuals living in, low-income communities. 3)Defines low-income households as households with incomes at or below 80% of the statewide median income or with median incomes at or below the threshold designated by the Department of Housing and Community Development (HCD), as specified. AB 1550 (Gomez) Page 3 of ? 4)Defines "low-income communities" as census tracts with median household incomes at or below 80 percent of the statewide median income or with median household incomes at or below the threshold designated as low income by the HCD's list of state income limits adopted pursuant to Section 50093. 5)Requires funds benefitting disadvantaged communities and funds benefitting low-income households to be counted separately for the purposes of meeting the targets. Staff 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 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. AB 1550 (Gomez) Page 4 of ? "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'." Taking a larger piece out of a smaller pie. The most recent auction in May of 2016 yielded a sale of only 2% of the state allowances, resulting in only $10 million of cap-and-trade revenues for the state (of the $500 million projected). This bill would result in a larger portion of moneys for disadvantaged communities and low-income households, which, in turn, will result in a significant reduction of funds available for emissions reduction projects in the rest of the state. To the extent that administering agencies focus on meeting the requirements outlined in this bill more than funding projects that yield the greatest GHG emission reductions, this bill could result in less efficient and effective uses of GGRF monies. -- END --