BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE  
          DEVELOPMENT
                              Senator Jim Beall, Chair
                           2015 - 2016 First Extraordinary

          Bill No:          SBX1 6            Hearing Date:     9/1/2015
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          |Author:   |Runner                                                |
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          |Version:  |7/13/2015                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Erin Riches                                           |
          |:         |                                                      |
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          SUBJECT:  Greenhouse Gas Reduction Fund:  transportation  
          expenditures


            DIGEST:  This bill prohibits expenditure of Greenhouse Gas  
          Reduction Fund (GGRF) monies on the high-speed rail project and  
          appropriates the majority of GGRF monies to the California  
          Transportation Commission (CTC) for allocation to high-priority  
          transportation projects, as specified.

          ANALYSIS:
          
          Existing law: 

          1)AB 32, Núñez, Chapter 488, Statutes of 2006 requires the state  
            Air Resources Board (ARB) to develop a plan to reduce  
            emissions to 1990 levels by 2020.  It also requires ARB to  
            ensure that programs to reduce greenhouse gas (GHG) emissions  
            are targeted, to the extent feasible, to the most  
            disadvantaged communities in the state.  AB 32 authorizes ARB  
            to deposit any fees paid by GHG emission sources into the  
            GGRF.  

          2)AB 1532, Pérez, Chapter 807, Statutes of 2012 specifies that  
            GGRF revenues must be used to facilitate the achievement of  
            GHG emissions reductions.  

          The 2014-15 budget agreement allocated $832 million in GGRF  
          revenues to a variety of GHG emission reduction programs.   







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          Beginning in 2015-16, the budget agreement appropriates 25% of  
          GGRF revenues to the state's high-speed rail project, 20% to  
          affordable housing and sustainable communities grants, 10% to  
          intercity capital rail projects, and 5% to low-carbon transit  
          projects.  The remaining 40% of GGRF revenues are available for  
          annual appropriation by the Legislature.  

          The 2013-14 budget agreement provided for a loan of GGRF monies  
          to the General Fund.  The 2014-15 budget agreement provided that  
          $400 million in GGRF loan repayments shall be directed to the  
          high-speed rail project beginning in 2015-16.  To date, no  
          appropriations have been made to repay the loan.

          This bill:
          
          1)Deletes the continuous appropriation of 25% of GGRF monies to  
            high-speed rail.

          2)Continuously appropriates 65% of GGRF monies to the CTC for  
            allocation to "high-priority transportation projects," as  
            determined by the CTC.   

          3)Requires the CTC to allocate 40% of these monies to state  
            highway projects; 40% to local street and road projects,  
            divided equally between cities and counties; and 20% to public  
            transit projects. 

          4)Prohibits any GGRF monies from being used for the high-speed  
            rail project.

          5)Deletes the requirement for the $400 million GGRF loan  
            repayment to be directed to high-speed rail.   

          COMMENTS:

          1)Purpose.  The author asserts that the state's continuous  
            appropriation of GGRF monies to high-speed rail will not  
            accomplish AB 32's goals; on the contrary, the most optimistic  
            estimate of when the first phase of the high-speed rail  
            project may be operational is 2022, two years after the AB 32  
            target date.  The author also states that according to the  
            Legislative Analyst's Office report, The 2012-13 Budget:  
            Funding Requests for High-Speed Rail, this project would  
            initially  increase  GHG emissions for numerous years.  This  
            bill seeks to redirect GGRF revenues to projects that will  








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            actually reduce GHG emissions and help enable the state to  
            meet its AB 32 emission reduction target by 2020.

          2)A bullet in the bullet train budget.  In 2008, California  
            voters approved Proposition 1A, the Safe, Reliable High-Speed  
            Passenger Train Bond Act for the 21st Century (Prop. 1A),  
            which authorized $9 billion in general obligation bonds for  
            the high-speed rail project.  In 2009, the federal government  
            augmented the Prop. 1A bond funding with roughly $3.3 billion  
            in funding from the American Recovery and Reinvestment Act and  
            other federal funding programs.  The High-Speed Rail Authority  
            (HSRA) committed to match these federal funds with  
            approximately $2.3 billion in state funding.  Of the $8.8  
            billion appropriated thus far for high-speed rail, HSRA spent  
            $950 million through 2013-14 and an estimated $917 million in  
            2014-15.  For 2015-16, HSRA plans to spend $3.0 billion: $1.4  
            billion in Prop. 1A bond funds, $1.2 billion in federal funds,  
            and $500 million in GGRF revenues.  By removing GGRF monies  
            from the mix, this bill creates a large hole in high-speed  
            rail funding; it is unclear what other funds could fill that  
            hole.  

          3)Piece by piece.  GGRF investments must facilitate the  
            achievement of GHG emissions reductions.  However, after that  
            requirement is fulfilled, there are a number of other policy  
            goals that should be considered, including benefits to  
            environmental quality, resource protection, public health, and  
            the economy, as well as benefits to disadvantaged communities.  
             And although the GGRF is growing, it is still a limited  
            source of revenue.  In order to create an optimized strategy  
            from GGRF monies, proposals should not be considered in  
            isolation, but be assessed in aggregate to determine what  
            suite of measures best meets the requirements of the GGRF,  
            uses resources most efficiently, and maximizes policy  
            objectives.  As budget discussions on a cap-and-trade  
            investment strategy have been pushed later and later this  
            session, an opportunity exists to have a comprehensive  
            discussion on the universe of GGRF proposals currently in the  
            Legislature.  The committee may wish to consider whether the  
            subject of this bill is more appropriate to the budget  
            discussion than the transportation special session.

          Related Legislation:
          
          SBX1 2 (Huff) - would require GGRF monies generated from  








          SBX1 6 (Runner)                                    Page 4 of ?
          
          
          transportation fuels to be spent on transportation  
          infrastructure, excluding high-speed rail.  SBX1 1 is also being  
          heard by this committee today.
          
          SBX1 3 (Vidak) - would have redirected Prop. 1A bond proceeds to  
          state highways and freeways, and local streets and roads, upon  
          voter approval.  SBX1 3 failed passage in this committee on  
          August 19, 2015.  

          SBX1 8 (Hill) - would increase the percentage of GGRF funds from  
          10% to 20% for the Transit and Intercity Rail Capital Program  
          and from 5% to 10% for the Low Carbon Transit Operations  
          Program.  SBX1 8 is also being heard by this committee today.  

          ABX1 7 (Nazarian) - is identical to SBX1 8 (Hill).  ABX1 7 is  
          pending committee assignment in the Assembly.

          FISCAL EFFECT:  Appropriation:  Yes    Fiscal Com.:  Yes     
          Local:  No


            POSITIONS:  (Communicated to the committee before noon on  
                       Thursday, August 27, 2015.)
          
            SUPPORT:  

          None received

          OPPOSITION:

          None received



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