BILL ANALYSIS Ó AB 1550 Page 1 (Without Reference to File) CONCURRENCE IN SENATE AMENDMENTS AB 1550 (Gomez) As Amended August 23, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: |54-23 |(June 2, 2016) |SENATE: | |(August 31, | | | | | |26-11 |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: NAT. RES. SUMMARY: Requires that 25% of the Greenhouse Gas Reduction Fund (GGRF) be spent on projects located within disadvantaged communities (DACs), and requires that an additional 5% be spent on projects that benefit low-income households. The Senate amendments: 1)Reduce the amount dedicated for projects that benefit low-income households from 20% to 5%. AB 1550 Page 2 2)Allocate 5% of the GGRF to projects that benefit low-income households and that are located within a half mile around a disadvantaged community. 3)Specify that this bill will only become operative if AB 1613 (Committee on Budget) of the current legislative session is chaptered and $205 million is appropriated from the GGRF. 4)Make related technical changes. EXISTING LAW: 1)Requires the Air Resources Board (ARB), pursuant to California Global Warming Solutions Act of 2006 (AB 32 (Núñez), Chapter 488, Statutes of 2006), to adopt a statewide greenhouse gas (GHG) emissions limit equivalent to 1990 levels by 2020 and adopt regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. AB 32 authorizes ARB to permit the use of market-based compliance mechanisms to comply with GHG reduction regulations, once specified conditions are met. 2)Establishes the GGRF and requires all moneys, except for fines and penalties, collected by ARB from the auction or sale of allowances pursuant to a market-based compliance mechanism (i.e., the cap-and-trade program adopted by ARB under AB 32) to be deposited in the GGRF and available for appropriation by the Legislature. 3)Establishes the GGRF Investment Plan and Communities Revitalization Act to set procedures for the investment of GHG allowance auction revenues. Authorizes a range of GHG reduction investments and establishes several policy objectives, including: a) Maximize economic, environmental, and public health AB 1550 Page 3 benefits; b) Foster job creation; c) Complement efforts to improve air quality; d) Direct investment toward the most disadvantaged communities and households in the state; e) Provide opportunities for businesses, public agencies, nonprofits, and other community institutions to participate in and benefit from statewide efforts to reduce GHG emissions; and, f) Lessen the impacts and effects of climate change on the state's communities, economy, and environment. 4)Requires the investment plan to allocate a) a minimum of 25% of the available moneys in the GGRF to projects that provide benefits to identified DACs, and b) a minimum of 10% of the available moneys in the GGRF to projects located within identified DACs. FISCAL EFFECT: According to the Senate Appropriations Committee: 1)Increased GGRF expenditures in DACs and for low-income households and to low-income communities. 2)Increased annual ongoing costs of up to $465,000 (GGRF) for ARB to modify existing guidelines and tracking systems, provide guidance to administering agencies, and conduct outreach. 3)Unknown cost to administering agencies to update tracking systems, track GGRF expenditures in DACs and low-income AB 1550 Page 4 communities, and report to ARB regarding expenditures in these communities. COMMENTS: Since November 2012, ARB has conducted 15 cap-and-trade auctions, generating over $4 billion in proceeds to the state. State law requires auction revenues be used to facilitate the achievement of GHG emissions reductions and outlines various categories of allowable expenditures. Statute further requires Department of Finance (DOF), 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 DOF, in the investment plan, to allocate at least 25% of available moneys in the GGRF to projects that provide benefits to DACs, and at least 10% to projects located within DACs. Additionally, SB 862 (Committee on Budget and Fiscal Review), Chapter 36, Statutes of 2014 requires ARB to develop guidelines on maximizing benefits for DACs by agencies administering GGRF funds, and guidance for administering agencies on GHG emissions reduction reporting and quantification methods. SB 862 (Committee on Budget and Fiscal Review), Chapter 36, Statutes of 2014 continuously appropriated portions of the GGRF for designated purposes. The bill continuously appropriated 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 would have appropriated over $3 billion to a variety of programs and projects in the transportation, energy, natural resources, and waste diversion sectors. CalEnviroScreen was developed by the Office of Environmental Health Hazard Assessment, at the request of CalEPA and pursuant to SB 535, to identify those communities in California that are AB 1550 Page 5 the most vulnerable and pollution-burdened. Using CalEnviroScreen, the California Environmental Protection Agency (CalEPA) identified DACs throughout California in October 2014. 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 DACs for the purposes of SB 535. The areas where the majority of DACs 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. In 2014, ARB published interim guidance for meeting the requirements associated with GGRF appropriations, as well as maximizing benefits to DACs, 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 DAC, 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, DACs. If the project is not within the DAC, 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 DAC 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 25% of GGRF money required to benefit DACs. AB 1532 (Pérez), Chapter 807, Statutes of 2012 requires DOF to submit an annual report to the Legislature on the status and AB 1550 Page 6 outcomes of projects funded from the GGRF. The 2016 Annual Report states that for implemented projects funded by GGRF, 51% of investments provided benefits to DACs, and 39% of GGRF investments were for projects located within DACs. Analysis Prepared by: Elizabeth MacMillan / NAT. RES. / (916) 319-2092 FN: 0004911