The Governor’s 2013-14 budget includes a plan to implement the provisions
of Proposition 39, which increases state corporate tax (CT) revenues and requires that half of these revenues for a five-year period be used for energy efficiency and alternative energy projects. The Governor proposes to count all associated revenues toward the Proposition 98 minimum guarantee for schools and community colleges. The Governor also proposes to designate all energy-related Proposition 39 funds to schools ($400.5 million) and community colleges ($49.5 million) in 2013-14
and for the following four years. The Governor’s proposal to count all Proposition 39
revenues toward the Proposition 98 calculation is a significant departure from our longstanding
view that revenues are to be excluded from the Proposition 98 calculation if the Legislature
cannot use them for general purposes. In addition, the proposal excludes other eligible projects
besides schools and community colleges (such as public hospitals) that potentially could achieve
greater energy benefits. Further, the proposal does not coordinate
Proposition 39 funding with the state’s existing energy efficiency programs.
In view of the above concerns, we recommend the Legislature exclude from
the Proposition 98 calculation all Proposition 39 revenues required to be used on energy-related
projects and not count spending from these revenues as Proposition 98 expenditures. In addition,
we recommend the Legislature direct the California Energy Commission (CEC) to administer a
competitive grant process in which all public agencies, including schools and community colleges,
could apply and receive funding based on identified facility needs.
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