BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 398 (Leyva) - Green Assistance Program ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 14, 2015 |Policy Vote: E.Q. 6 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 11, 2015 |Consultant: Marie Liu | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 398 would create a technical assistance and outreach program, administered by the secretary of the California Environmental Protection Agency (CalEPA), for small businesses and small nonprofits who are interested in applying for grants from programs funded by the Greenhouse Gas Reduction Fund (GGRF). Fiscal Impact: Cost pressures in the millions of dollars from the General Fund or possibly the GGRF to the CalEPA for technical assistance, outreach, and application preparation assistance. Background: Under the California Global Warming Solutions Act of 2006 (referred to as AB 32, HSC §38500 et seq.) requires the California Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level, to approve a statewide GHG emissions limit equivalent to that level that will SB 398 (Leyva) Page 1 of ? 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. All monies, except for fines and penalties, collected pursuant to a market-based mechanism are deposited in the Greenhouse Gas Reduction Fund (GGRF) (Government Code §16428.8). Existing law requires that the GGRF only be used to facilitate the achievement of reductions of GHG emissions consistent with AB 32 (HSC §39710 et seq.). To this end, the Department of Finance, in consultation with the ARB and any other relevant state agencies, is required to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. The investment plan must allocate a minimum of 25% of the funds to projects that benefit disadvantaged communities and to allocate 10% of the funds to projects located within disadvantaged communities. Additionally, the ARB, in consultation with CalEPA, is required to develop funding guidelines for administering agencies receiving allocations of GGRF funds that include a component for how agencies should maximize benefits to disadvantaged communities. Section 39718 allows the GGRF, upon appropriation, to be used by the ARB and administering agencies for administrative purposes. 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. Proposed Law: This bill would require the secretary of CalEPA to administer a technical assistance program, named the Green Assistance Program, for small businesses, small nonprofits, and disadvantaged communities to apply for project funding from the GGRF. The secretary would be authorized to define what SB 398 (Leyva) Page 2 of ? constitutes a small business and a small nonprofit. The technical assistance may include information on the available GGRF-funded programs as well as assistance in application preparation and submission. The secretary would also be required to coordinate outreach activities to eligible program applicants. This bill requires the program to be funded using existing resources. Related Legislation: AB 156 (Perea) would require the GGRF Investment plan to allocate technical assistance funds to the ARB for a technical assistance program for eligible applicants assisting disadvantaged communities and other communities as specified. AB 156 is currently on the Assembly Appropriations Suspense file. Staff Comments: The 2014-15 budget appropriated GGRF funds for a wide range of purposes including affordable housing, sustainable communities, low carbon transportation, energy efficiency upgrades, wetlands and watershed restoration, and waste diversion. These programs are managed by 11 departments, only some of which are part of CalEPA. This bill would require several categories of assistance- (1) basic information on available programs, (2) referrals to designated contact people administering the program), and (3) assistance during the application preparation and submission process. The first two categories, depending on the level of interest by small business owners, small nonprofits, and disadvantaged communities, will likely require only a small increase in necessary positions at the agency, if at all. However, the third type of assistance, presuming it involves assisting the applicant in developing their application, could require a significant number of new positions as assistance in writing an application should not be done by the given program staff of the administering agency to ensure impartiality in the funding awards process. Also, additional staff would be necessary because CalEPA inherently does not have detailed SB 398 (Leyva) Page 3 of ? knowledge about programs that are run by departments outside its jurisdiction. While this bill will create substantial new workload for the secretary, the bill requires that the secretary use existing resources to create the Green Assistance Program. It is unclear what funding that CalEPA could redirect for this purpose. Staff notes that the secretary currently has 62 support positions funded by various special funds, including the Cost of Implementation Account (which funds the administration of AB 32) and the General Fund, but not the GGRF. The Cost of Implementation Account and the General Fund are likely the only two existing funding sources that can legally be used to support the activities required in this bill. Given that this bill may require expenditures that exceed what the secretary currently receives from either of these funds and that these existing positions have other existing responsibilities, the costs for this bill cannot be absorbed by the agency. While the secretary does not currently receive an appropriation from the GGRF fund, the GGRF may be considered as a future funding source for the Green Assistance Program. However, staff notes that it is questionable whether the use of GGRF monies to implement this bill is appropriate. Existing law requires that GGRF monies be used to facilitate GHG emissions (HSC §39712) or for administrative purposes (HSC §39718(b)). The program envisioned in this bill does not neatly fall into either of these categories. In regards to GHG reductions, the purpose of the program in this bill is to help certain entities apply for GGRF monies. Technical assistance in itself does not result in GHG emissions though GHG emissions may eventually be achieved if the technical assistance results in a project being completed. Is this nexus close enough to satisfy HSC §39712? In regards to administrative costs, technical assistance is frequently considered an administrative cost in many funding programs. However, the technical assistance being offered in this bill is unique in that it includes assistance in actually preparing applications, not just providing general guidance. Arguably such assistance is no longer an administrative activity. SB 398 (Leyva) Page 4 of ? -- END --