BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        SB 207|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
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                                   THIRD READING 


          Bill No:  SB 207
          Author:   Wieckowski (D)
          Amended:  3/24/15  
          Vote:     21  

           SENATE ENVIRONMENTAL QUALITY COMMITTEE:  7-0, 4/15/15
           AYES:  Wieckowski, Gaines, Bates, Hill, Jackson, Leno, Pavley

           SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

           SUBJECT:   California Global Warming Solutions Act of 2006:   
                     Greenhouse Gas Reduction Fund


          SOURCE:    Author


          DIGEST:  This bill requires the expenditure record, prepared by  
          state agencies to which Greenhouse Gas Reduction Fund (GGRF)  
          monies have been appropriated, to be published on the Internet  
          web sites of both the administering agency and the California  
          Air Resources Board (ARB) prior to the agency expending any of  
          the appropriated GGRF monies.


          ANALYSIS:   


          Existing law:


          1)Requires, under the California Global Warming Solutions Act of  
            2006 (AB 32, Nunez, Chapter 488, Statutes of 2006), the ARB to  








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            determine the 1990 statewide greenhouse gas (GHG) emissions  
            level, to approve a statewide GHG emissions limit equivalent  
            to that level that will be achieved by 2020, and to adopt GHG  
            emissions reductions measures by regulation.  ARB is  
            authorized to include the use of market-based mechanisms to  
            comply with the regulations.  (Health and Safety Code §38500  
            et seq.)


          2)Establishes the GGRF as a special fund in the State Treasury;  
            requires that 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 ARB 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 a state agency, prior to expending any moneys  
            appropriated to it from the GGRF, to prepare a record  
            (expenditure record) consisting of a description of the  
            expenditure, how the expenditure will further the regulatory  
            purposes of AB 32 and contribute to achieving and maintaining  
            greenhouse gas emission reductions, how the agency considered  
            the applicability and feasibility of other non-greenhouse gas  
            reduction objectives, and how the agency will document the  
            results achieved from the expenditure.  ARB is required to  
            develop guidance on reporting and quantification methods to  
            ensure the requirements of this section are met.  (GOV  
            §16428.9)


          This bill:


          1)Requires the expenditure record, prepared by state agencies to  
            which GGRF monies have been appropriated, to be published on  
            the Internet web sites of both the administering agency and  
            the ARB prior to the agency expending any of the appropriated  
            GGRF monies.


          2)Makes technical cleanup changes to existing language for  
            clarity and consistency with current language in code.







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          Background


          Cap-and-Trade.  The cap-and-trade program is a market-based  
          regulation that sets a declining cap on total GHG emissions from  
          sources making up approximately 85% of statewide emissions.  The  
          program is a key component of the State Air Resources Board's  
          Scoping Plan, which describes the state's approach to reduce GHG  
          emissions to 1990 levels by 2020 as set forth under AB 32.   
          Proceeds from the sales and auctions of GHG emissions permits  
          (allowances) in the cap-and-trade program are deposited in the  
          GGRF and are subsequently appropriated to 12 agencies for  
          administering programs that support the goals of AB 32 to reduce  
          GHG emissions

          Cap-and-Trade Auction Revenue.  ARB has conducted ten  
          cap-and-trade auctions to date, generating $1.6 billion in total  
          proceeds to the state.  Appropriations from the first two fiscal  
          years, 2013-14 and 2014-15, totaled more than $900 million.  
          Several bills in 2012, and one in 2014, provided legislative  
          direction for the expenditure of auction proceeds. 

          SB 535 (de León, Chapter 830, Statutes of 2012) required 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) directed the  
          Department of Finance to develop and periodically update a  
          three-year investment plan. This plan identified feasible and  
          cost-effective GHG emission reduction investments to be funded  
          with cap-and-trade auction revenues, focusing on three sectors,  
          including: sustainable communities and clean transportation,  
          energy efficiency and clean energy, and natural resources and  
          waste diversion. 

          SB 1018 (Budget and Fiscal Review Committee, Chapter 39,  
          Statutes of 2012) created 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, (3) how  







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          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 and Fiscal Review Committee,  Chapter 36,  
          Statutes of 2014) required 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.

          ARB's Expenditure Record and Fiscal Procedures Guidance.  The  
          ARB's 2014 "Cap-and-Trade Auction Proceeds Interim Guidance to  
          Agencies Administering Greenhouse Gas Reduction Fund Monies:  
          Expenditure Record and Fiscal Procedures" document, prepared  
          pursuant to SB 862, provides guidance to assist state agencies  
          receiving appropriations from the GGRF in preparing their  
          expenditure records. 

          The document states, "The final expenditure record and  
          memorandum [documenting concurrence between the agency and the  
          ARB] are public documents and will be posted on the ARB auction  
          proceeds website," and "State agencies that receive  
          appropriations from the GGRF must prepare an expenditure record  
          for those fiscal year monies prior to expending any monies on  
          projects."  Though stated in ARB's guidance document, neither of  
          these points are required in statute, and as of today, not all  
          agencies that receive GGRF monies have expenditure records  
          available on the ARB Internet web site.
          
          Comments
          
          Purpose of Bill.  According to the author, "Cap-and-trade  
          auction revenue, with proceeds to the state of over $1.6 billion  
          since the initial auction, has been appropriated to more than 11  
          different agencies to administer a variety of programs in the  
          2014-15 fiscal year. In this and future fiscal years, auction  
          revenue will most likely continue to be distributed to other  
          entities over the course of the program as revenues from the  
          program increase. Current law requires these agencies to produce  
          a record documenting how their programs will reduce greenhouse  
          gas emissions, as well as further the regulatory purposes of AB  
          32-a requirement necessary to ensure the use of the revenue is  







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          justified.  And although ARB has issued interim guidance  
          specifying the documents that these various agencies create as  
          public, this is not required by current law. SB 207 simply  
          codifies this important provision in ARB's interim guidelines to  
          ensure statutorily enforceable transparency in the expenditure  
          record process so that both the public and Legislature have  
          timely and straightforward access to these important records."

          Related/Prior Legislation
          
          AB 1532 (Pérez, Chapter 807, Statutes of 2012), SB 535 (De León,  
          Chapter 830, Statutes of 2012), and SB 1018 (Budget and Fiscal  
          Review Committee, Chapter 39, Statutes of 2012), together  
          established the GGRF and provided direction for how auction  
          proceeds received by the GGRF are appropriated and expended.

          SB 862 (Budget and Fiscal Review Committee, Chapter 36, Statutes  
          of 2014) established the requirements that ARB develop  
          guidelines for agencies administering GGRF funds.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          SUPPORT:   (Verified 4/27/15)


          None received


          OPPOSITION:   (Verified 4/27/15)


          None received

          Prepared by:Rebecca Newhouse / E.Q. / (916) 651-4108,  Laurie  
          Harris / E.Q. / (916) 651-4108
          4/29/15 16:07:25


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