BILL ANALYSIS Ó AB 2094 Page 1 Date of Hearing: April 11, 2016 ASSEMBLY COMMITTEE ON TRANSPORTATION Jim Frazier, Chair AB 2094 (Obernolte) - As Amended March 18, 2016 SUBJECT: Transportation: Greenhouse Gas Reduction Fund: state and local transportation funds SUMMARY: Transfers $1 billion annually from the Greenhouse Gas Reduction Fund (GGRF) to the Retail Sales Tax Fund to allocate to regional and local transportation agencies as part of the existing Transportation Development Act (TDA) process, and then allocates an equivalent $1 billion from the Retail Sales Tax Fund to the state and local governments for road improvements. Specifically, this bill: 1)Declares that this bill complies with Article XIX of the California Constitution which prohibits loans from local transportation funds and prohibits the expenditure of money in a local transportation fund for purposes for which it was not authorized. 2)Declares that this bill does not change the current collection level and allocation of the sales and use tax to local transportation funds. 3)Requires $1 billion from the GGRF be transferred to the Retail AB 2094 Page 2 Sales Tax Fund if: a) $1 billion is available from the GGRF after the required 60% continuous appropriations for affordable housing and sustainable communities, transit, and high-speed rail; and, b) The amount of taxes collected for local transportation funds equals or exceeds $1 billion. 4)Requires $1 billion be allocated from the Retail Sales Tax Fund be continuously appropriated with: a) 50% to the California Department of Transportation (Caltrans) for maintenance projects or the State Highway Operations and Protection Program (SHOPP); and, b) 50% to cities and counties based on existing distribution formulas for local streets and road maintenance. 5)Declares that GGRF funds transferred to the Retail Sales Tax Fund shall be considered part of the revenues allocated to local transportation funds. EXISTING LAW: 1)Protects local transportation funds from being transferred, AB 2094 Page 3 diverted, appropriated, borrowed or loaned for other purposes. 2)Provides state funding through the Local Transportation Fund (LTF) of the TDA, which is derived from a 1/4-cent of the general sales tax collected statewide. These funds are distributed to each county according to the amount of tax collected in that county. LTF funds a wide variety of transportation programs, including planning and program activities, pedestrian and bicycle facilities, community transit services, public transportation, and bus and rail projects. In limited cases, counties may also use LTF moneys for local streets and roads construction and maintenance. 3)Requires the California Air Resources Board (ARB), pursuant to AB 32 (Núñez), Chapter 488, Statutes of 2006, to develop a plan of how to reduce statewide greenhouse gas emissions to 1990 levels by 2020. Under AB 32, ARB is authorized to include the use of market-based mechanisms to comply with these regulations (cap and trade). 4)Establishes the GGRF in the State Treasury and requires all money collected pursuant to cap and trade, with limited exceptions, be deposited into the fund and makes the GGRF funds available for appropriation by the Legislature. 5)Established the Affordable Housing and Sustainable Communities, the Low Carbon Transportation, and the Low Carbon Transit Operations programs and continuously appropriates 60% of GGRF fund proceeds, beginning in the 2015-16 fiscal year, for transit, affordable housing and sustainable communities programs, and high-speed rail. 6)Requires, pursuant to SB 535 (de León), Chapter 830, Statutes of 2012, that a minimum of 25% of the moneys available in GGRF be used to benefits disadvantaged communities. FISCAL EFFECT: Unknown AB 2094 Page 4 COMMENTS: This bill would essentially "swap" $1 billion derived from the state's cap and trade program with $1 billion of funds collected for the LTF. This bill would then require that the cap and trade funds be expended for the existing purposes of the LTF, including local planning and transit programs, and the $1 billion of LTF funded that have been "swapped" be allocated to Caltrans and local governments for road maintenance. The author states that "California roads are in a serious state of disrepair and the funding situation is just as bleak." He states that according to a February 2016 report by the Legislative Analyst (LAO), the state has significant ongoing maintenance needs including an annual funding shortfall of $2 billion in maintenance and the State Highway Operation and Protection Program (SHOPP). The Legislature and the Administration continue to discuss state and local transportation needs for deferred maintenance and funding solutions for the problem. Governor Brown identified the $59 billion backlog of maintenance on the state highway system as a priority in his State of the State address in both 2014 and 2015. Additionally, in June 2015, the Governor called a Special Legislative Session on transportation directing the Legislature to act on a permanent, sustainable funding source for state and local transportation infrastructure. Local governments are also facing a nearly $80 billion shortfall in funding for local streets and roads. Additionally, the loss AB 2094 Page 5 of funding for the State Transportation Improvement Program (STIP), which received a $754 million cut this year by the California Transportation Commission due to reductions in the gasoline excise tax, has caused projects to be delayed or cancelled. The author states that infrastructure is a core function of government and California's economy and residents deserve better. Adding that it is crucial that the Legislature identify ways to improve funding for deteriorating state highways and local roads. He contends that this bill would help address these funding needs by redirecting the 0.25% sales tax that is currently going to fund local transit projects back to state and local roads. Currently, a 1/4-cent sales tax collected statewide is deposited in LTF in the Retail Sales Tax Account and funding is distributed to each county according to the amount of tax collected in that county. The funding is used for transportation activities authorized by the TDA which was enacted in the early 1970's. Regional transportation planning agencies, transit agencies and cities and counties utilize LTF funds a wide variety of transportation programs, including planning and programming, pedestrian and bicycle facilities, community transit services, public transportation, and bus and rail projects. Additionally, some counties, usually in rural areas, may also use LTF moneys for local streets and roads construction and maintenance. Committee Concerns: Although the need is great and funding discussions have yet to yield a solution, AB 2049 is likely not AB 2094 Page 6 constitutional and also raises numerous concerns for the use of funds and for the agencies that would be affected. Specifically, Article XIX of the California Constitution protects local transportation fund revenues from being transferred, diverted, loaned or borrowed for any purposes other than those authorized in the TDA. Additionally, Article XIII prohibits any change in distributing the Bradley-Burns Uniform Local Sales and Use Tax Law, which authorizes collection of the 1/4 cent statewide sales tax. Also, current law does not allow funds from the GGRF to be used for any programs that do not have a clear nexus to greenhouse gas emissions reductions as required by AB 32. Although the author contends that the "swap" would not violate law and would also provide a nexus to AB 32 due to LTF funds being used on transit, which is questionable and does not accurately reflect how LTF funds are currently used. LTF funds are currently used for planning and programming activities by regional transportation agencies and in some areas, after a finding of no unmet transits needs, counties can use their LTF funds for local streets and roads. In commenting on this bill, the Rural Counties Task Force (RCTF), who represent 28 rural county transportation planning agencies and local transportation commissions, noted that they are concerned that any swap of greenhouse gas funds for LTF will open the door to possible restrictions on the current eligible uses of LTF funds that are critical to regional transportation planning agencies functions and transit operators statewide. RCTF added a concern that current LTF funds that are used for local street and road maintenance which may not be an eligible use for greenhouse gas funds. AB 2094 Page 7 Additionally, if funds from the GGRF were "swapped," the receiving regional and local agencies would be responsible for all spending and reporting requirements that accompany this funding source including documenting greenhouse gas reductions and directing 25% of funds to benefit disadvantaged communities. Double referral: This bill will be referred to the Assembly Local Government Committee should it pass out of this committee. REGISTERED SUPPORT / OPPOSITION: Support Howard Jarvis Taxpayer Association Opposition California Chamber of Commerce AB 2094 Page 8 Analysis Prepared by:Melissa White / TRANS. / (916) 319-2093