CA Legislature Passes ‘Illegal’ Green Slush Fund

When California enacted AB 32, the California Global Warming Solutions Act of 2006, the bill was touted as a way to make California environmentally friendly. But it’s also turning into a billion dollar slush fund for Democratic pet projects, which theCalifornia Chamber of Commerce has labeled an “illegal tax.”

AB 32’s goal is to reduce greenhouse gas emissions to 1990 levels by 2020 — a total reduction of 25 percent, or 80 million metric tons. Most of the reduction is planned to come from regulatory crackdowns on businesses. The remainder, about 18 million metric tons, would come via a Cap and Trade program on heavy manufacturers and energy-intensive businesses. A cap is placed on the emissions allowed by a business, which can be exceeded by purchasing an allowance. Each allowance is equivalent to one metric ton of CO2.

Periodic auctions of allowances (the first is scheduled for Nov. 14) will be conducted by the California Air Resources Board; $1 billion is expected to be raised from the auctions in the 2012-13 budget year, according to Gov. Jerry Brown. His budget creates a Greenhouse Gas Reduction Account, in which $500 million is planned to be spent for greenhouse gas mitigation activities. The other $500 million could go for “investments” in clean energy, low-carbon transportation, natural resource protection and sustainable infrastructure development.

Billion-Dollar Green Pie

Naturally, everyone wants a piece of that billion-dollar green pie. The Chamber is most concerned about three bills passed on the last day of the legislative session – SB 535AB 1186 and AB 1532 – that slice up the pie.

SB 535 dishes a quarter of it to “disadvantaged” communities.

AB 1532 allows the money to be thrown at a smorgasbord of projects, including biofuels, electric vehicles, land conservation, public transportation, sustainable housing and recycling.

AB 1186 slates money for energy efficiency projects in public schools; but a late amendment removed the connection to Cap and Trade funds, according to the bill’s author. Assemblywoman Nancy Skinner, D-Berkeley.

The Chamber is urging its members to call on Brown to veto the bills, which, it says on its website, “will increase energy costs, including fuel prices, on consumers and businesses.” On the question of legality, the Chamber argues that “the California Air Resources Board lacks authority and has been unable to justify the need to raise billions of dollars in revenue for the purposes anticipated in the bills. AB 32 was not intended to be a revenue source.

“If the state moves forward with a billion-dollar auction, the impacts on the state’s economy would be devastating. Entities subject to the illegal tax include manufacturers, public agencies, universities, refineries, food processors and others. The impact on these entities will be severe and on top of the higher fuel and energy costs due to other climate change regulations. Not only is an auction unnecessary for a successful cap-and-trade program, but the planned collection and distribution of auction revenues raises legal uncertainties.”

The California Taxpayers Association also questions the legality of the green slush fund, sending a letter to legislators asserting, “AB 1532 is … inconsistent with the constitutional definitions of taxes and fees.”

That was echoed by Republicans in the debate over SB 535 on the Assembly floor on Aug. 31. Assembly Speaker John Pérez, D-Los Angeles, introduced the California Communities Healthy Air Revitalization Trust, which was authored by Sen. Kevin de Leon, D-Los Angeles.

As de Leon wrote, “SB 535 ensures that, as California takes steps to address climate change, we invest in the neighborhoods that continue to suffer from higher levels of pollution and are least able to confront the expected impacts of environmental reality. The bill directs the California Environmental Protection Agency to develop a methodology to identify disadvantaged communities based on socioeconomic and environmental criteria. It then directs that no less than 25 percent of all available funds from cap-and-trade auctions annually are invested in such a way that they provide benefits to those identified communities, and that no less than 10 percent are invested in projects directly within these communities.”

Cap-and-Trade Conspiracy

Assemblyman Curt Hagman, R-Chino Hills, led the opposition: “We talk about conspiracy theories with Cap and Trade. This is why. This bill arbitrarily takes off 10 percent of the Cap and Trade auction revenues to projects in disadvantaged or disproportionately impacted communities — and does so when there’s no evidence that cap-and-trade will harm those communities. So it’s a way to gain revenue at a time when we trying to impose taxes on these businesses. It is a fee for a program — this is not a pool of money and funds to spend on pet projects. You wonder why voters are not in favor of us passing more taxes. They don’t believe we manage them correctly. We tell them we’re doing one thing with a bunch of fees. And here’s evidence again that we’ve got this pool of money, so let’s go have fun with it.”

Asked Assemblyman Tim Donnelly, R-Twin Peaks, “Do we really need another unelected, unaccountable bureaucracy? And how are we going to know there’s no conflict of interest with the board members on this? This is money that we are confiscating and extorting from businesses right now that hire people. There are food processors, there are all kinds of manufacturers, anybody who has anything to do with cement, and that’s a big industry in my district. These guys are paying exorbitant fees right now just to exist. And now we’re going to take this money and siphon it off for some community revitalization air trust?

“I mean, c’mon, I thought this was all about stopping the global warming and you were going to use that money to do something useful with it. And now I hear that there’s 15 other people that have lined up to try to get their hands in the pot. Really, what is Cap and Trade? What does it do? It’s real simple, it is a moving notice to companies that do business in California. It’s an invitation to leave the state, because you have to pay essentially blackmail or greenmail, or whatever color you want to call it, to the government.

“For us to be pushing a new government program to immediately gobble up these funds that we said are so necessary that we had to hit every business that produces any kind of energy, I think we lose credibility with the public. Because the public doesn’t believe we need a new agency at all. I don’t see that there’s any nexus between this agency, this board, this whatever you want to call it, and the tax that is being siphoned off of these businesses. I’ll tell you one thing this will do, and if this is about people that are in disadvantaged communities, they need jobs. And this will kill jobs.”

Steve Knight, R-Palmdale, questioned the criteria used to identify disadvantaged communities. “Areas disproportionately adversely impacted by environmental pollution and hazards — that could be anywhere in the state,” he said. “Areas with concentrations of residents with low income, high unemployment, low levels of home ownership, high rent burden and low levels of educational attainment. I don’t know about you, ladies and gentlemen, but I would think that that’s probably every district in the state. Every one of us could say we have an area, there was one comment here last week that said that they represented the armpit. Well, I think that there are bad areas in everyone’s district, and they are adversely affected.”

Another Nail in Business Coffin

Shannon Grove, R-Bakersfield, shared Donnelly’s concerns about adding more bureaucracy to this bureaucratized state.

“There’s no specifics in the bill about the new board that it creates, other than the California Air Resources Board will appoint a seven-member panel,” she said. “We know we can trust that: a rogue board appointing another rogue board that will do whatever they’re going to do. Keep in mind that the Air Resources Board is the same entity that said that AB 32 was not going to cost us any jobs. We can name company after company that have left this state because they are not going to compete with AB 32. Because they can go right across the border to Nevada, create the same jobs that they could create here and ship their products here on the back of a flatbed diesel truck. Voting for this bill would be just another nail in the coffin for our business owners.”

Pérez countered that the time for arguing against California’s efforts to curb global warming is long past.

“Much of the debate seems to revolve around the notion of whether we should move forward on reducing greenhouse gases — a decision made by a previous Legislature and governor in passing and adopting AB 32,” he said. “A question that members of this body were dissatisfied with the outcome of and then decided to go and referendize it in essence through Prop. 23. And the voters soundly rejected that and expressed their strong support for this greenhouse gas reduction effort.”

On the ballot in 2010, Proposition 23 would have suspended AB 32 until unemployment dropped. Voters rejected it.

The only question now is: Who should be making the decisions on how to spend the Cap and Trade auction money, Perez said.

“The reality is lack of action in this matter would result in a situation where the (Air Resources) Board wouldn’t have direction from the Legislature,” he said. “The Air Resources Board is moving forward with Cap and Trade. We want their decision on the expenditure of those monies to be informed by the interests expressed by the Legislature.”

It’s a near certainty that Brown, despite the veto pleas from the Chamber of Commerce, will sign the bills.

(Dave Roberts is a political commentator and contributes to CalWatchdog. Originally posted on CalWatchdog.)