BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Bob Wieckowski, Chair 2015 - 2016 Regular Bill No: SB 189 Hearing Date: 04/15/2014 ----------------------------------------------------------------- |Author: |Hueso | |----------+------------------------------------------------------| |Version: |3/26/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Rebecca Newhouse | |: | | ----------------------------------------------------------------- Subject: Clean Energy and Low-Carbon Economic and Jobs Growth Blue Ribbon Committee ANALYSIS: Existing law: 1. Under the California Global Warming Solutions Act of 2006 requires the California Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level and approve a statewide GHG emissions limit that is equivalent to that level, to be achieved by 2020, and to adopt GHG emission reduction measures by regulation (Health and Safety Code §38500 et seq.). The Act requires the ARB to appoint an Economic and Technology Advancement Advisory Committee (ETAAC) to advise on technological research and development opportunities. 2. Establishes the Greenhouse Gas Reduction Fund (GGRF) in the State Treasury, requires all moneys, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the fund, and requires the Department of Finance, in consultation with the state board and any other relevant state agency, to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. (Government Code §16428.8) 3. Requires moneys from the GGRF be used to facilitate the achievement of reductions of GHG emissions in this state consistent with the California Global Warming Solutions Act of 2006. Annual budget appropriations of GGRF funds are SB 189 (Hueso) Page 2 of ? required to be consistent with the investment plan. (Health and Safety Code §39712) 4. Requires the GGRF investment plan to allocate, at a minimum, 25% of the funds to benefit disadvantaged communities, and to allocate 10% of GGRF monies within disadvantaged communities. (HSC §39713) 5. Under the California Alternative and Renewable Fuel, Vehicle Technology, Clean Air, and Carbon Reduction Act of 2007 (HSC §43865 et seq.) funded through various vehicle and vessel related surcharges, requires the State Energy Resources Conservation and Development Commission (CEC) to implement the Alternative and Renewable Fuels and Vehicle Technology Program (ARFVTP) to provide funding measures to develop and deploy technologies and alternative and renewable fuels in the marketplace to help attain the state's climate change policies. The CEC is required to develop an investment plan for the program in consultation with an advisory committee, pursuant to specified requirements. An evaluation of the efforts funded by the ARFVTP that includes research, development, and deployment efforts funded by this program is required every two years, beginning in 2011. 6. Under the California Clean Energy Jobs Act, (Proposition 39 passed on November 6, 2012) requires that $550 million be transferred to the Clean Energy Jobs Fund for five fiscal years, beginning in 2013, is available for appropriation by the Legislature for eligible projects to improve energy efficiency and expand clean energy generation in schools. The Act also creates a Citizen's Oversight Board to review and assess effectiveness of expenditures from the Fund. (Public Resources Code §26200) 7. Under the Electric Utility Industry Restructuring Act, authorizes the Public Interest Renewable Energy Program administered by the CEC, to support the operation of existing renewable facilities as well as the development of new and emerging renewable technologies. 8. Establishes the Governor's Office of Business and Economic Development (GO-Biz) within the Governor's Office for the purpose of serving as the lead state entity for economic strategy and marketing of California on issues relating to SB 189 (Hueso) Page 3 of ? business development, private sector investment and economic growth. (GOV §§12096 - 12098.5) 9. Under the California Green Collar Jobs Act of 2008 (Unemployment Insurance Code §15000), establishes the Green Collar Jobs Council to focus on developing the framework, funding, strategies, programs, policies, partnerships, and opportunities necessary to address the growing need for a highly skilled and well-trained workforce to meet the needs of California's emerging green economy. 10. Establishes the Commission for Economic Development to provide continuing bipartisan legislative, executive branch and private sector support and guidance for the best possible overall economic development of the state. (GOV §§14999.8 and 14999.9) This bill: 1. Creates the Clean Energy and Low-Carbon Economic and Jobs Growth Blue Ribbon Committee to consist of five members appointed by the Governor and two members appointed by the Speaker of the Assembly and the Committee on Rules and requires the members to have expertise in economic, financial, clean-energy economic growth, job creation, workforce standards, and employment opportunities for disadvantaged workers. 2. Requires the Committee to advise state agencies on the most effective ways to spend clean energy and greenhouse gas-related funds in order to implement policies to maximize economic and employment benefits in the state and requires the Committee to do the following: A. Develop guidance for tracking and reporting jobs outcomes for state clean energy and low-carbon investments and use that information to evaluate jobs outcomes. B. Develop guidance to measure the quantity and quality of jobs created by state investments in clean energy and low-carbon investments, as well as guidance to measure the geographic and demographic distribution of jobs, in consultation with the Labor and Workforce Development Agency. SB 189 (Hueso) Page 4 of ? C. Advise state agencies on the most effective ways to require responsible contractor standards, and minimum worker training and skill certifications to ensure high-quality work for state clean energy and low-carbon investments, and the most effective ways to connect disadvantaged communities and other target populations to good quality jobs created by those investments. D. Advise state agencies on the most effective ways to align state clean energy and low-carbon training funds with existing state workforce development investments and strategies. E. Provide annual updates to the Governor and appropriate policy and fiscal Legislative committees on the committee's activities. 3. Requires CEC, PUC, ARB, and any other state agency responsible for implementing clean energy and low-carbon policies and programs to submit an annual progress report to the Governor and appropriate Legislative committees describing how they implemented or responded to the advice, guidance, and any recommendations provided by the Blue Ribbon committee. 4. Specifies that the above reporting requirement is inoperative on January 1, 2021. Background 1.Workforce and Economic Development Efforts at the State Level. There are a number of entities throughout state government aimed at increasing workforce and economic development efforts, with a particular emphasis on emerging technology, green jobs and the green economy. GO-Biz: The Governor's Office of Business and Economic Development Office (GO-Biz) serves as California's single point of contact for economic development and job creation efforts. GO-Biz markets the business and investment opportunities available in California by working in partnership with local, regional, federal, and other state public and private institutions to encourage business development and investment in SB 189 (Hueso) Page 5 of ? the state. The iHub Program within GO-Biz designate 'iHubs' within the state to stimulate partnerships, economic development, and job creation by leveraging assets to provide an innovation platform for startup businesses, economic development organizations, business groups, and venture capitalists. These assets may include, but are not limited to, research parks, technology incubators, universities, and federal laboratories. Commission for Economic Development: The commission, consisting of the Lieutenant Governor as Chairperson, three each appointed by Senate Committee on Rules and Assembly Speaker, and 10 members appointed by the Governor, was established to provide bipartisan legislative, executive branch and private sector support and guidance for the best possible overall economic development of the state. The commission is tasked with: (a) Assessing specific regional or local economic development problems and making recommendations for solving problems. (b) Providing a forum for ongoing dialogue on economic issues between state government and the private sector. (c) Recommending, where deemed appropriate, legislation to require evaluation of demonstration and ongoing economic development projects and programs to ensure continued cost effectiveness. (d) Identifying and reporting important secondary effects on economic development of programs and regulations which may have other primary purposes. (e) Undertaking specialized studies and preparing specialized reports at the request of the Governor or Legislature. (f) Reporting its activities, findings and recommendations to the Governor and the Legislature annually. (g) Considering programs to further the economic development of the state. SB 189 (Hueso) Page 6 of ? California Workforce Investment Board: The CWIB is charged with developing a unified, strategic planning process to coordinate various education, training, and employment programs into an integrated workforce development system that supports economic development. As such, the CWIB has adopted "sector strategies" as the statewide framework for workforce development and works with partners, including other state agencies, to support the emergence of effective statewide and regionally driven sector initiatives. Green Collar Jobs Council: AB 3018 (Núñez, Chapter 312, Statutes of 2008) created the California Green Collar Jobs Council (GCJC) to perform specified tasks related to addressing the workforce needs that accompany California's growing green economy under the purview of the CWIB. The GCJC makes recommendations and creates strategies for comprehensive and effective workforce training opportunities to help prepare California's current and future workforce to meet the skills demand from businesses supporting the energy efficiency and clean energy sectors. The GCJC is also tasked with developing, collecting, analyzing, and distributing statewide and regional labor market data on California's new and emerging green industries workforce needs, trends, and job growth and identifying funding resources and making recommendations on how to expand and leverage these funds. CWIB is required to report annually to the Legislature on the status of GCJC activities, grants awarded, and its development and implementation of a green workforce strategic initiative. The GCJC issued a Proposed Jobs and Workforce Development Program Elements for Carbon Reduction Investments in California in January 2014 which proposed "a common approach to workforce development and job creation for California's multiple public investments in carbon reduction initiatives under the umbrella of AB 32." According to the proposal: "California's energy efficiency, clean energy, and clean transportation programs currently invest several billion dollars each year in incentive programs, public works projects, and a variety of other contracts and subsidies?While the primary purpose of these programs is to meet our energy and carbon reduction targets, these investments create and transform jobs and businesses in a variety of industries in California, particularly the energy, building and construction, and SB 189 (Hueso) Page 7 of ? transportation industries. State agencies, utilities, and others responsible for these programs are therefore drivers of economic development and job creation, in addition to their primary role in implementing energy and environmental policy." The GCJC states "specific program elements for California's carbon reduction public investment programs?can support a skilled workforce that performs the quality work necessary to accomplish the state's ambitious energy and environmental goals, while providing career-track jobs for California residents, including those from historically disadvantaged communities." 1.Clean Energy and Low-Carbon Funds. A. Energy Efficiency and Alternative Energy Programs. According to the Legislative Analyst's Office's report from December 2012, "Energy Efficiency and Alternative Energy Programs," excluding cap-and-trade auction revenue as well as revenue from Proposition 39 (described below), "California currently maintains over a dozen major programs that are intended to support the development of energy efficiency and alternative energy in the state. Over the past 10 to 15 years, the state has spent a combined total of roughly $15 billion on such efforts, the vast majority of which has been funded by utility ratepayers. The state's incentive programs generally fall into one of the four following categories: (1) energy efficiency programs, (2) renewable energy programs, (3) alternative transportation and low-carbon fuels programs, and (4) energy research programs." A few examples include: IOU Energy Efficiency Programs: The PUC oversees the development and implementation of rebate and incentive programs by Investment Owned Utilities (IOU) for energy users in order to encourage the purchase of energy-efficient appliances and equipment. IOUs have also implemented programs to achieve long-term market transformations in the development of "zero net energy" buildings. These programs are funded through ratepayer utility bills. Public Interest Renewable Energy Program: This program is implemented by CEC to support the operation of existing renewable facilities as well as the SB 189 (Hueso) Page 8 of ? development of new and emerging renewable technologies, and is funded through a surcharge on IOU electricity bills. Alternative and Renewable Fuel and Vehicle Technology Program: This program is implemented by the CEC and funded through vehicle-related surcharges for administering financial assistance in the form of loans and grants to help transform vehicles and fuels to meet the state's climate change goals. Additional revenue for greenhouse gas emission reduction as well as energy efficiency programs has been generated from the cap-and-trade program and from the passage of Proposition 39. A. Cap and Trade Auction Revenue Funds. ARB conducted nine cap-and-trade auctions between November 2012 and November 2014, generating a total of $970 million in proceeds to the state. A tenth auction was held jointly with Quebec in February of this year, but the proceeds have not yet been published. Several bills in 2012, and one in 2014, provided legislative direction for the expenditure of auction proceeds including SB 535 (de León) Chapter 830, Statutes of 2012, AB 1532 (J. Pérez) Chapter 807, Statutes of 2012, SB 1018 (Budget Committee) Chapter 39, Statutes 2012, and SB 862 (Budget Committee) Chapter 36, Statutes of 2014. SB 535 (de León) Chapter 830, Statutes of 2012, requires that 25% of auction revenue be used to benefit disadvantaged communities and requires that 10% of auction revenue be invested in disadvantaged communities. AB 1532 (J. Pérez) Chapter 807, Statutes of 2012, requires that GGRF monies be used to facilitate the reduction of GHG emissions and further the regulatory purposes of AB 32. The bill also directs the Department of Finance to develop and periodically update a three-year investment plan that identifies feasible and cost-effective GHG emission reduction investments to be funded with cap-and-trade auction revenues. SB 1018 (Budget Committee) Chapter 39, Statutes of 2012, created SB 189 (Hueso) Page 9 of ? the GGRF, into which all auction revenue is to be deposited. The legislation requires that before departments can spend monies from the GGRF, they must prepare a record specifying: (1) how the expenditures will be used, (2) how the expenditures will further the purposes of AB 32 (Nuñez, Pavley) Chapter 488, Statutes of 2006, (3) how the expenditures will achieve GHG emission reductions, (4) how the department considered other non-GHG-related objectives, and (5) how the department will document the results of the expenditures. SB 862 (Budget Committee) Chapter 36, Statutes of 2014, requires the ARB to develop guidelines on maximizing benefits for disadvantaged communities by agencies administering GGRF funds, and guidance for administering agencies on GHG emission reduction reporting and quantification methods. B. Legal Consideration of Cap-and-Trade Auction Revenues. The 2012-13 budget analysis of cap-and-trade auction revenue by the Legislative Analyst's Office noted that, based on an opinion from the Office of Legislative Counsel, the auction revenues should be considered mitigation fee revenues, and their use requires that a clear nexus exist between an activity for which a mitigation fee is used and the adverse effects related to the activity on which that fee is levied. Therefore, in order for their use to be valid as mitigation fees, revenues from the cap-and-trade auction must be used to mitigate GHG emissions or the harms caused by GHG emissions. In 2012, the California Chamber of Commerce filed a lawsuit against the ARB claiming that cap-and-trade auction revenues constitute illegal tax revenue. In November 2013, the superior court ruling declined to hold the auction a tax, concluding that it's more akin to a regulatory fee. C. AB 32 Auction Revenue Investment Plan. The first three-year investment plan for cap-and-trade auction proceeds, submitted by Department of Finance, in consultation with ARB and other state agencies in May of 2013, identified sustainable communities and clean transportation as one of the key sectors that provide the best opportunities for achieving the legislative goals and supporting the purposes of AB 32. The plan recommended the aforementioned sector receive the largest SB 189 (Hueso) Page 10 of ? allocation of funds from the GGRF, but did not specify a monetary amount. SB 189 (Hueso) Page 11 of ? D. Budget Allocations. The 2014-15 budget allocates $832 million in GGRF revenues to a variety of transportation, energy, and resources programs aimed at reducing GHG emissions. Various agencies are in the process of implementing this funding. The budget agreement specifies how the state will allocate most cap-and-trade auction revenues in 2015-16 and beyond. For all future revenues, the legislation appropriates 25% for the state's high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to intercity capital rail projects, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature. The Governor's proposed 2015-16 budget assumes the receipt of $650 million in cap-and-trade auction revenues in 2014-15 and $1 billion in 2015-16. The Governor's proposed 2015-16 cap-and-trade expenditures are largely the same as the 2014-15 plan, albeit with larger amounts allocated for affordable housing and sustainable communities grants, the transit and intercity rail capital program, and the low-carbon transit operations. 1.Prop 39 Revenue. The California Clean Energy Jobs Act was created with the approval of Proposition 39 in the November 6, 2012, statewide general election. Under the initiative, up to $550 million annually is available to be appropriated by the Legislature for eligible projects to improve energy efficiency and expand clean energy generation. The 2014-15 California Budget Act appropriated $354 million of Proposition 39 revenue primarily for school and community college energy efficiency projects. Comments 1. Purpose of Bill. According to the author, "As the Legislature and the Governor articulate next steps for our clean energy and climate policies, it is important to have a permanent and formal committee that can advise agencies implementing such policies on the best ways to maximize expenditure of public funds to ensure the state achieves the greatest economic growth and job SB 189 (Hueso) Page 12 of ? creation. SB 189 would establish a high-level expert Blue Ribbon Committee to serve that role of advising state clean energy and climate actions to ensure maximum job creation and economic benefits to California." The author notes that the bill was created through collaboration with the Office of the Senate President Pro-Tempore, and is part of the California Climate Leadership Package. 2. Legislative Intent. The bill's findings and declarations state that ARB, PUC and CEC have all created advisory committees to help better understand the implications of their clean energy and climate policies and that the purpose of the bill is to create a single independent blue ribbon committee to provide advice to agencies on the most effective ways to maximize the state's economic benefits and jobs growth via investments in a cleaner economy. It is unclear whether the bill intends the Blue Ribbon Committee to take the place of, or supersede, existing advisory committees for these investments. 3. Where is the Committee Housed? The bill does not specify in which agency the Committee will be located. Should the bill be amended to specify which agency the Blue Ribbon Committee will be affiliated with in order to have access to administrative and physical resources necessary to fulfill the requirements of SB 189? Which agency will post information regarding the Blue Ribbon Committee membership and contact information for the Blue Ribbon Committee to ensure transparency? Additionally, the bill doesn't provide any guidance on how often or when the Blue Ribbon Committee should meet. Should the bill specify how frequently the Blue Ribbon Committee is required to conduct meetings? 4. Which Funds are Included and Which Agencies will be Advised? SB 189 requires that the Blue Ribbon Committee advise state agencies on the most effective ways to expend clean energy and SB 189 (Hueso) Page 13 of ? greenhouse gas-related funds and to implement policies in order to maximize California's economic and employment benefits. However, the bill does not specify which funds and investments are included. The state has numerous agencies that implement programs on energy efficiency, renewable and alternative energy, and GHG emissions reductions. The author may wish to provide clarity on this issue as the bill moves forward. SB 189 (Hueso) Page 14 of ? 5. Who's Paying? Although the bill specifies that the members of the Blue Ribbon Committee shall not receive per diem, SB 189 requires that the members be reimbursed for their actual expenses incurred in connection with the performance of their duties. As the Blue Ribbon Committee's work will advise various agencies on multiple funds, which fund will be used to cover expenses? Which fund will cover the costs associated with producing the guidance documents and annual reports required in the bill? As cap-and-trade auction revenues are considered mitigation fees, these monies must be used to mitigate GHG emissions or the harms caused by GHG emissions. Therefore, because there is not a clear nexus to GHG emissions reductions activities and the activities of the Blue Ribbon Committee, the Blue Ribbon Committee should not be funded with cap-and-trade auction revenue, but with another fund that allows expenditures for job growth and economic development advisory committees. 6. So Many Reports. SB 189 requires CEC, PUC, ARB, and any other agency responsible for implementing clean energy and low-carbon policies, to submit an annual report to the Governor and the Legislature describing how it implemented or responded to the advice, guidance, and recommendations from the Blue Ribbon Committee. Although it is important to report whether recommendations from advisory committees are later incorporated into policies and programs, agencies may have valid reasons for not incorporating this advice or guidance, especially if the recommendations conflict with other policy goals of the program. Should there be language in the bill that acknowledges this consideration? Additionally, the cap-and-trade auction revenue is administered by almost a dozen agencies. Combined with reports from CEC, PUC, and ARB, and agencies administering other clean energy and low-carbon policies and programs (which are not defined in the bill), this bill could require more than 15 new reports per year until 2020. 7. Do we need another economic and green jobs SB 189 (Hueso) Page 15 of ? council/committee/panel/commission? As noted in the background section, there are several entities in the state that already exist in order to advise on economic activity and job growth. For example, the CWIB is charged with strategic planning process to coordinate various education, training, and employment programs into an integrated workforce development system that supports economic development. The Commission for Economic Development was established to provide support and guidance for advancing the overall economic development of the state. Additionally, the Green Jobs Council makes recommendations and creates strategies for workforce training opportunities, as well as develops, collects, analyzes, and distributes statewide and regional labor market data on green industries workforce needs and trends. They also identify funding resources and make recommendations on how to expand and leverage these funds. Does the state need another body to advise on economic growth and job creation for clean energy and low-carbon investments, or can an existing entity that currently performs a similar function be tasked with the requirements of the bill? Related/Prior Legislation Double Referral to Senate Business, Professions and Economic Development. This measure was heard in Senate Business, Professions and Economic Development Committee on April 6, 2015, and passed out of committee with a vote of 7-1. SOURCE: Author SUPPORT: None on file OPPOSITION: None on file SB 189 (Hueso) Page 16 of ? -- END --