BILL ANALYSIS Ó AB 1697 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1697 (Bonilla) As Amended August 15, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: |80-0 |(May 31, 2016) |SENATE: |27-11 |(August 18, | | | | | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: J., E.D., & E. SUMMARY: Expands the project preference and selection criteria under the Alternative and Renewable Fuel and Vehicle Technology Program (Program) to more effectively target workforce training opportunities that are aligned with clean technology and alternative/renewable fuel career pathways. The Senate amendments make technical clarifying changes. EXISTING LAW: 1)Establishes the Program, administered through the State Energy Resources Conservation and Development Commission (Commission), for the purpose of providing a variety of funding opportunities that assist in the development and deployment of technology and alternative and renewable fuels AB 1697 Page 2 in the marketplace. 2)Authorizes the Commission to provide preferences to those projects that maximize the Program's goals, based on specified criteria, and limits workforce related funding to alternative and renewable fuel feedstock production and extraction; renewable fuel production, distribution, transport, and storage; high-performance and low-emission vehicle technology and high tower electronics; automotive computer systems; mass transit fleet conversion, servicing, and maintenance; and other sectors or occupations related to the purposes of this chapter. FISCAL EFFECT: According to the Senate Appropriations Committee: 1)One-time CEC costs of approximately $50,000 for outreach and information technology costs. (ARFVT Fund) 2)Ongoing CEC costs of approximately $150,000 annually and 1 personnel year (PY) of staff to update program regulations, incorporate changes to the workforce development component, and administer the revised program. (ARFVT Fund) COMMENTS: To address the long-term goals of reducing the emissions of greenhouse gases in California, the Legislature approved and the Governor signed the California Alternative and Renewable Fuel, Vehicle Technology, Clean Air and Carbon Reduction Act of 2007 that established the Alternative and Renewable Fuel and Vehicle Technology Program. The Program is administered through the Commission, which each year awards up to $100 million in grants to support the development and deployment of innovative technologies related to alternative fuel and vehicle types. Although workforce development is among the list of eligible activities, funding for training has been limited. Of the $100 million available each year, the Commission planned to set aside $2.5 million in 2014-15 and $3 million in 2015-16 for workforce related investments. This bill modifies the selection criteria to provide grant AB 1697 Page 3 applications for workforce-related activities a more equal playing field among the various authorized funding purposes. California's High-Carbon Economy: California is home to over 38 million people, providing the state with one of the most diverse populations in the world, often comprising the single largest concentration of nationals outside their native country. In 2014, this diverse group of business owners and workers produced $2.3 trillion in goods and services; $174.1 billion of which were exported to over 220 countries around the world. California's 2014 Gross Domestic Product (GDP) ranks the state economy as the eighth largest in the world. Many policy makers and economists describe California as having not a single economy, but having a highly integrated network of a dozen or so regional economies. While biotech has a comparative advantage in some regions, information technology drives growth in others. This economic diversity is one of the reasons California was able to so aggressively move out of the recession, ranking number two in the nation by Business Insider for fastest growing economy in the nation in August 2014 and as having the fourth best overall economy in March 2015. There are approximately 19 million people within the California labor force, generally contributing to 11 industry sectors, including government. The chart below displays California employment by industry sector, based on the 2015 annual average. The Trade, Transportation, and Utility sector is the largest employment sector and the second largest contributor to the GDP. In 2014 (most recent data available), this sector contributed $351 billion to the California economy and supported jobs in other industry sectors including Manufacturing, Professional Services, and Financial Activities. While providing significant economic advantages, these same industry sectors are primary contributors to the state's greenhouse gas emissions. In January 2015, Governor Brown announced a commitment to set new greenhouse gas emissions reduction targets. The Governor's AB 1697 Page 4 Integrated Plan calls for: 1)50% of the state's electricity to come from renewable energy sources by 2030; 2)A 50% reduction in petroleum by 2030; 3)Doubling the energy efficiency savings at existing buildings by 2030; 4)A Carbon sequestration strategy that involves new management techniques for the state's working landscapes, including farms, ranch lands, forests, and wetlands; 5)A reduction in short-lived climate pollutants; and 6)Mitigation strategies to safeguard California against the impacts of climate change. Meeting these new policy goals will require substantial restructuring within the economy, especially for manufacturing, energy production, and transport-related activities. Both workers and businesses will be impacted, requiring retraining, retooling, and repositioning. While this transition opens new opportunities for some, it also places new burdens on those that have not necessarily recovered from the impact of the Financial Crisis and subsequent recession. California's current economy appears to be diverging in two disparate directions. On the one hand, state unemployment in April 2016 was at a seven-year low (5.3%) and certain businesses and regions are experiencing strong economic growth. On the other hand, there were areas of the state and certain population groups who remain economically distressed with high unemployment AB 1697 Page 5 rates among blacks (10.4%), Hispanics (7.1%), young workers (19.6%), and inland California [Imperial County at (18.9%) and Colusa at (16.2%)]. Transitioning to a lower carbon economy has economic costs, which the state has been slow to acknowledge and address. The state has tools to help make this transition less of a hardship for impacted workers, businesses, and communities. This bill proposes the expanded use of an existing funding source to help retrain workers who face potential unemployment when their middle-skill jobs are eliminated. Career Pathways in the Clean Tech Industries: According to the Air Resources Board, their initial analysis on the employment impact of AB 32 (Núñez), Chapter 488, Statutes of 2006, showed that the utility industry would be the most significantly impacted. Employment losses could be nearly as high as 15%. A related policy brief by University of California, Berkley's Center for Labor Research and Education found that implementation of AB 32 would likely present significant workforce challenges and that a successful transition to green technologies would require a well-trained technical and blue-collar labor force. In the absence of careful and farsighted implementation strategies, the policy brief stated that California could lose businesses to other regions and ultimately result in trading well-paying jobs for new jobs of lesser quality. According to the 2015-16 Investment Plan for the Program, the Commission has three active interagency agreements on workforce, including $7.25 million with Employment Development Department (EDD), $9.5 million with the Employment Training Panel, and $5.5 million with the California Community Colleges Chancellor's Office. For the same time period, the Commission was setting aside an additional $3 million. AB 1697 Page 6 ----------------------------------------------------------------- | Interagency Agreements for Workforce Training Activities | | | | | ----------------------------------------------------------------- |------------+---------+----------+---------+---------+-----------| |Partner |Funded |Match |Trainees |Businesse|Municipalit| |Agency |Training |Contributi| |s |ies | | |(in |ons (in | |Assisted |Assisted | | |million) |millions) | | | | | | | | | | | | | | | | | | |------------+---------+----------+---------+---------+-----------| |Employment | $7.0 | $9.9 | 12,675 | 92+ | 14+ | |Training | | | | | | |Panel | | | | | | | | | | | | | | | | | | | | |------------+---------+----------+---------+---------+-----------| |Employment | $7.25 | $7.25 | 999 | 36+ | -- | |Development | | | | | | |Department | | | | | | | | | | | | | | | | | | | | |------------+---------+----------+---------+---------+-----------| |Community | $5.5 | N/A | N/A | 480 | -- | |College | | | | | | |Chancellor's| | | | | | | Office | | | | | | | | | | | | | | | | | | | | |------------+---------+----------+---------+---------+-----------| |Total | $19.75 | $17.4 | 13,674 | 608+ | 14+ | | | | | | | | | | | | | | | ----------------------------------------------------------------- ----------------------------------------------------------------- | Source: 2015-16 Investment Plan for the Alternative and | | Renewable Fuel and Vehicle Technology Program | | | | | AB 1697 Page 7 | | | | | | ----------------------------------------------------------------- Here is an example of the type of work being undertaken through these interagency agreements: The Employment Training Panel and Blue Sky received a $59,280 grant for 19 employees to receive training to update their manufacturing skills. Participants included yard workers, operations and maintenance staff, refiners, and drivers in the processing and distribution of biodiesel products. Analysis Prepared by:Toni Symonds / J., E.D., & E. / (916) 319-2090 FN: 0004401