BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 535| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 535 Author: De León (D) Amended: 5/31/11 Vote: 21 SENATE ENVIRONMENTAL QUALITY COMMITTEE : 5-1, 05/02/11 AYES: Simitian, Hancock, Kehoe, Lowenthal, Pavley NOES: Blakeslee NO VOTE RECORDED: Strickland SENATE APPROPRIATIONS COMMITTEE : 6-3, 05/26/11 AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg NOES: Walters, Emmerson, Runner SUBJECT : California Communities Healthy Air Revitalization Trust SOURCE : California Environmental Justice Alliance Coalition for Clean Air Ella Baker Center Greenlining Institute NAACP National Resource Defense Council DIGEST : This bill establishes the California Communities Healthy Air Revitalization Trust in the State Treasury. The moneys in the trust would be used, upon appropriation by the Legislature, in the most impacted and disadvantaged communities, as defined, to fund programs or projects that reduce greenhouse gas emissions or mitigate direct health CONTINUED SB 535 Page 2 or environmental impacts of climate change through competitive grants, loans, or other funding mechanisms. The bill requires the Air Resources Board (ARB) to administer moneys appropriated from the trust, establish criteria and procedures, and meet other specified requirements in connection with implementation. ANALYSIS : The California Global Warming Solutions Act of 2006 (CGWSA) requires the State Air Resources Board to adopt regulations to require the reporting and verification of emissions of greenhouse gases and to monitor and enforce compliance with the reporting and verification program, and requires the state board to adopt a statewide greenhouse gas emissions limit equivalent to the statewide greenhouse gas emissions level in 1990 to be achieved by 2020. The act requires the state board to adopt rules and regulations in an open public process to achieve the maximum technologically feasible and cost-effective greenhouse gas emission reductions. The act authorizes the state board to include the use of market-based compliance mechanisms. The act authorizes the state board to adopt a schedule of fees to be paid by the sources of greenhouse gas emissions regulated pursuant to the act, and requires the revenues collected pursuant to that fee to be deposited into the Air Pollution Control Fund and be available, upon appropriation by the Legislature, for purposes of carrying out the act. This bill: 1. Establishes criteria for "Most impacted and disadvantaged communities" in relation to climate change impacts. 2. Establishes The California Communities Healthy Air Revitalization Trust within the State Treasury of which moneys in the trust are available upon appropriation by the Legislature. 3. Specifies that funds are used solely in the most impacted and disadvantaged communities in California and specifies that when provided to existing programs they supplement rather than supplant those programs. 4. Specifies that the trust be used to fund programs CONTINUED SB 535 Page 3 or projects that reduce greenhouse gas emissions or mitigate the direct health impacts of climate change including green collar employment or training. 5. Specifies that five percent of the moneys allocated to the trust may be used for purposed of administering the bill. 6. Requires the ARB to administer moneys appropriated from the trust, establish criteria and procedure, and before January 1, 2013, implement the program. The ARB is to begin implementation of the program within 90 days of finding that more than $5 million has been deposited in the trust. 7. Requires ARB, following an open and public process, to develop and adopt a report describing the implementation, the list of most impacted and disadvantaged communities, the types of programs and projects to be funded, the selection and oversight process and the eligibility criteria. The report is to be made available to the public on the ARB Internet Web site. 8. Specifies, upon implementation of the program, and by every third January 1, the ARB is to develop and adopt the list of the most impacted and disadvantaged communities in California and triennial plans describing the specific type of programs and projects to be solicited for funding during the three year period. The plans and lists are to be made public on the ARB Internet Web site. 9. Requires ARB to only approve a program or project for funding after determining, based on the available evident, that the used of moneys for that program or project is consistent with the requirements, for the use of moneys derived from valid regulatory fees, as established by the California Supreme Court in Sinclair Paint Co. v. State Bd. of Equalization (1997) 15 Cal.4th 866 and reaffirmed in California Farm Bureau Federation v. State Water Resources Control Bd . (2011) 51 Cal.4th 421. This would not apply to the use of penalty moneys, if those moneys are segregated CONTINUED SB 535 Page 4 from fee moneys. 10. Provides that this bill will not result in any taxpayer paying higher tax within the meaning of Section 4 of Article XIIIA of the California Constitution. Comments Status of Cap and Trade . ARB on December 16, 2011, adopted draft regulations for a proposed cap and trade market-based compliance mechanism and is expected to produce a final version of those regulations this fall. On March 17, 2011, the California Superior Court found ARB had not properly considered alternatives to cap and trade and thus failed to comply with the California Environmental Quality Act (CEQA) and enjoined the ARB from proceeding with cap and trade until the court determines it has fully complied with CEQA. Related Legislation AB 1405 (De Leon) which was vetoed by Governor Schwarzenegger in 2010 where the governor noted in his veto message that funds have yet to be realized by AB 32. SB 31 (Pavley) of 2009-10, requires revenues generated from certain purposes to be appropriated by the Legislature "in furtherance of Ŭthe CGWSA] for purposes determined by the Legislature." SB 143 (Rubio) requires the ARB, on or before July 1, 2012, to adopt methodologies for determining the quantity of greenhouse gas emissions reduced through specified greenhouse gas emission reduction programs. Requires the ARB to adopt regulations governing the creation of greenhouse gas emission reduction offsets based on investments in those programs for purposes of banking, trading, and using the offsets to comply with the market-based compliance mechanism adopted by the ARB. Requires the ARB to credit persons who invest in those programs with greenhouse gas emission offsets, based on a cost-effectiveness calculation determined by the ARB, with CONTINUED SB 535 Page 5 specified exceptions. On Senate Third Reading File. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No The Senate Appropriations Committee indicates the total expenditures under the bill are unknown and will depend on future revenues generated from the cap and trade program. Based on initial projections of cap and trade auction revenues, total program expenditures are likely to be in the tens of millions per year. SUPPORT : (Verified 5/26/11) California Environmental Justice Alliance (co-source) Coalition for Clean Air (co-source) Ella Baker Center (co-source) Greenlining Institute (co-source) NAACP (co-source) National Resource Defense Council (co-source) American Lung Association of California Asian Neighborhood Design Asian Pacific Environmental Network Asian Pacific Islander Youth Promoting Advocacy and Leadership Breathe California California Environmental Justice Alliance California League of Conservation Voters California Rural Legal Assistance Foundation Californian Pan-Ethnic Health Network Catholic Charities Diocese of Stockton Center for Community Action and Environmental Justice Center on Race, Poverty and the Environment Coalition for Clean Air Communities for a Better Environment East Yard Communities for Environmental Justice Environment California Environmental Defense Fund Environmental Health Coalition Latino Coalition for a Healthy California Los Angeles County Bicycle Coalition National Parks Conservation Association People Organized to Demand Environmental & Economic Rights Regional Asthma Management and Prevention CONTINUED SB 535 Page 6 Sierra Club California Southeast Asian Community Alliance Trust for Public Land Union of Concerned Scientists OPPOSITION : (Verified 5/26/11) American Council of Engineering Companies California, Building Owners and Managers Association California Building Industry Association California Business Properties Association California Chamber of Commerce California Farm Bureau Federation California Forestry Association California League of Food Processors California Manufacturers & Technology Association California Metals Coalition California Retailers Association ARGUMENTS IN SUPPORT : According to the author, "SB 535 ensures that as California takes steps to address global warming, we invest in the neighborhoods that continue to suffer from higher levels of pollution and who are least able to confront the expected impacts of the climate crisis. SB 535 outlines a process to identify disadvantaged communities and allows for a periodic modification, when necessary. It require that a minimum of ten percent of revenues deposited in the Air Pollution Control Fund pursuant to AB 32, other than administrative fees, to be allocated to projects that reduce greenhouse gas emissions and environmental and health benefits, and may include: energy efficiency upgrades, deployment of pollution reduction technology and investments in transit. Additionally, a portion of funds could be used to help these communities tackle the climate crisis, including anticipated heat waves and rising sea levels." ARGUMENTS IN OPPOSITION : According to opponents "ŬARB] has no authority to raise revenues other than for administrative purposes. AB 32 grants ŬARB] authority to raise revenues through a fee to cover the costs of administering the program and for no other purpose." Opponents contend that a regulatory fee must have a nexus between fee payers, the fee amount and the revenue use, CONTINUED SB 535 Page 7 this "standard is not met in SB 535 because the amount of fee revenue is arbitrary (10% of the total amount raised), the purposes in SB 535 are unrelated to harm caused by the payers, and there is no demonstrated connection between the proposed recipients and harm caused by the payers of the revenues." Opponents further note "The cap and trade market will not start until January 1, 2012. We do not know how much revenue will be raised by ŬARB] nor how much revenue will be needed to meet AB 32 emission reduction goals and to mitigate unintended and harmful consequences of the program." DLW:nl 5/31/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED