|Budget Issue:||Statutory requirement for submittal of AB 32 zero-based budget by April 1, 2011|
|Program:||AB 32 Implementation|
|Finding or Recommendation:||Reverse prior approval of AB 32 expenditures in 2011-12 budget due to failure of administration to submit a statutorily required zero-based budget justifying AB 32 workload across state government.|
AB 32-Related Work Cuts Across State Government. The Global Warming Solutions Act of 2006 (Chapter 488, Statutes of 2006 [AB 32, Nunez)]) established the goal of reducing greenhouse gas emissions (GHGs) statewide to 1990 levels by 2020. While the act charged the Air Resources Board with monitoring and regulating the state's sources of GHGs, AB 32-related work is currently being conducted by 183 positions in nine departments throughout state government at a cost of $38 million. A spreadsheet that includes a list of all departments currently conducting AB 32-related work, and at what level of expenditure, can be accessed here .
Legislature Required Administration to Submit Justification of All AB 32- Related Work in a Zero-Based Budget (ZBB). In a 2010 report to the Legislature, we highlighted the fact that the implementation of AB 32 will soon be at a crossroads. The program focus has now begun to shift from regulatory development to implementation and enforcement. A such, the Legislature included language in the 2010-11 Resources trailer bill (SB 855) requiring a zero-based budget be submitted by April 1, 2011 for all AB 32 expenditures across state government in order to reevaluate the base funding requirements of AB 32 program implementation. Additionally, this was intended to help ensure that the AB 32 Implementation Fee (which is assessed on larger carbon-intensive industries in order to support AB 32 implementation) is set at an appropriate level. The trailer bill language in effect assumes that all AB 32 work in the budget year is to be unfunded unless justified in the ZBB report.
Legislature Approved AB 32 Funding Assuming Administration Would Comply With ZBB Requirement. Funding for AB 32 implementation in the budget year was approved by the Legislature earlier this year in the budget process, presumably based on the assumption that the Administration would make a good-faith effort to comply with the statutory requirement (and be on time) and that the Legislature would make any necessary adjustments to the AB 32 budgets after having evaluated the ZBB report.
Administration Has Failed to Comply with ZBB Requirement. On April 1, 2011, a letter was sent from Cal-EPA Secretary Linda Adams to Senator Mark Leno regarding the administration’s inability to comply with the statutory requirement to submit the AB 32 ZBB to the Legislature. The letter stated that the Governor "has been unable to devote sufficient attention to completing a careful review of the important report." While the letter states that the Governor intends to complete his review and submit the report, it is uncertain when the report will be submitted and whether it will be submitted in time to provide the Legislature an adequate review period.
LAO Recommendation. Given that the administration has failed to comply with the statutory requirement for a ZBB, we recommend that the Legislature reverse, for now, all AB 32-related expenditures in the budget year that it has previously approved. Such action should serve to encourage the Administration to submit the ZBB report in a timely enough manner to allow for thoughtful legislative evaluation of the report in the continuing budget process and to take necessary actions based on its review.