Proposition 39 – Energy Efficiency 

The Governor’s proposed budget contained several unanticipated proposals this month. One of them included his treatment of Proposition 39 revenues. 

As you may recall, Prop. 39, approved by the voters in November 2012, eliminated the ability of a multistate business to choose how their taxable income is determined. Instead, most multistate businesses will have to determine their California taxable income using the location of the company’s sales. When using this method, the more sales the multistate business has in California, the more of the business’ income is taxed, this is also known as the single sales factor method. This change is expected to generate roughly $1 billion annually for the State. 

Prop. 39 also established a new state fund, the Clean Energy Job Creation Fund, to support projects intended to improve energy efficiency and expand the use of alternative energy in public schools, colleges and other public agencies for the next five years. The measure states that the fund could be used to support: (1) energy efficiency retrofits and alternative energy projects in public schools, colleges, universities, and other public facilities; (2) financial and technical assistance for energy retrofits; and (3) job training and workforce development programs related to energy efficiency and alternative energy. 

The measure also allows for “assistance to local governments in establishing and implementing Property Assessed Clean Energy (PACE) programs or similar financial and technical assistance for cost-effective retrofits that include repayment requirements.” Prop. 39 also states that funding shall be prioritized to maximize job creation, energy savings, geographical and economic equity. Between FY 2013-2014 and FY 2017-2018, Prop. 39 will dedicate up to $550,000, or half of the total revenue generated, annually to the Clean Energy Job Creation Fund.

This was the measure’s intended use. However, the Governor’s proposed budget makes a slight departure by allocating all funds earmarked for energy efficiency projects, half of the total Prop. 39 revenues this year, or $450 million, to schools on a per- student basis. This allocation includes $450 million in 2013–14 and $550 million annually for the next four years. Not only does this allocation leave out cities, counties and all other public agencies, it distributes the funds statewide based on student population rather than actual need. 

According to the Legislative Analyst’s Office (LAO), Proposition 39 specifically states that projects must be selected based on the number of in–state jobs they would create and their energy benefits. By dedicating all the energy–related funding over the five–year period only to schools and community colleges and excluding other eligible projects that potentially could achieve a greater level of benefits, the Governor’s proposal very likely would not maximize state energy and job benefits. To further complicate matters, the Governor’s proposed budget includes all revenues generated by Prop. 39, $900 million in total this fiscal year, towards the Proposition 98 education funding guarantee. According to the LAO, this is problematic because revenues are to be excluded from the Proposition 98 calculation if the Legislature cannot use them for general purposes—typically due to restrictions created by a voter–approved initiative or constitutional amendment.

It appears that that the Legislature is not entirely comfortable with this proposal either. Several bills have been introduced in the past few weeks dealing with the allocation of Prop. 39 funds, including Assembly Bill 39, by Assembly Member Skinner and Assembly Speaker Perez. This bill would require the California Energy Commission (CEC) to distribute the funds via a grant program and would put in place certain criteria to be used to prioritize projects from public schools, school districts, public colleges and universities, and other public buildings and facilities. 

Cal/EPA’s Environmental Health Screening Tool – Comment Period Extended 

As reported in prior CSAC Legislative Bulletins, the California Environmental Protection Agency (Cal/EPA) has developed a method for evaluating the cumulative impacts of pollution on communities. The California Communities Environmental Health Screening Tool (CalEnviroScreen), uses existing environmental, health and socioeconomic data to create a cumulative impacts score for communities across the state. The tool compares areas of the state against other areas, creative a relative ranking. The potential uses of the tool include guidance for grant allocations and prioritizing cleanup and abatement projects to direct resources to the communities with the greatest need. 

Cal/EPA and the Office of Environmental Health Hazard (OEHHA) released a second public review draft of the screening tool on January 3. They also recently extended the public comment period to Friday, February 1. Counties are encouraged to review and comment on the draft screening tool and the accompanying January 3 Guidance Memo from Arsenio Y. Mataka, Cal/EPA Assistant Secretary and George Alexeeff, Director, OEHHA. We have been informed that comments are welcome on both documents which are available on the OEHHA website.