Legislative Analyst's Office Analysis of the 2001-02 Budget Bill

Department of Consumer Affairs (1110-1600)

The Department of Consumer Affairs is responsible for promoting consumer protection while supporting a fair and competitive marketplace. The department includes 28 semi-autonomous regulatory boards, commissions, and committees that regulate various professions. These boards are comprised of appointed consumer and industry representatives. In addition, the department has ten bureaus and programs that regulate additional professions which are statutorily under its direct control.

Expenditures for the support of the department and its constituent boards are proposed to total $375 million in 2001-02, an $18 million increase from the current year. Several incremental increases across the boards contribute to this increase, the largest being the $2 million imaging and workflow automation systems project at the Contractors State Licensing Board. Included in the budget-year total are $2 million in expenditures from the General Fund for support of the Athletic Commission and various public outreach programs.

Smog Check Update

We withhold recommendation on the Bureau of Automotive Repair's budget (Items 1111-002-1421 $91.6 million and 1111-002-0582 $47.5 million) pending receipt and review of information concerning (1) progress toward meeting requirements in the State Implementation Plan`s proposed changes in the smog check program and (2) the expenditure of current-year funds and the results from spending these funds.

Background. The original framework for a statewide biennial Smog Check program was implemented in 1984 by the Bureau of Automotive Repair (BAR). Under this program, both smog (emission) testing and needed vehicle repairs were permitted at any privately owned smog test-and-repair station. The 1990 federal Clean Air Act amendments required a somewhat different smog program in states with the worst air quality, including California. Federal regulations define a region's air quality in one of two ways:

• A geographic area that meets or exceeds a national ambient air quality standard is referred to as an attainment area.
• An area that does not meet this standard is a nonattainment area. These nonattainment areas are the focus of the federal Environmental Protection Agency (EPA).

The Smog Check program components as agreed to by California and the federal government are laid out in the State Implementation Plan (SIP).

Basics on the SIP. The SIP was adopted by the Legislature in 1994 and approved by the federal EPA in 1996. The SIP divides California into three types of program areas based on air qualityenhanced, basic, and change of ownership. The smog test required varies by area. In the enhanced areas vehicles are tested on a dynamometer. This device acts like a treadmill and allows the car to be tested under road-like (load tested) conditions. In the basic areas, a simple tail-pipe emission test at two idle speeds is used (no load) without simulating road conditions. Enhanced and basic smog checks are required every two years. The change of ownership areas only require a tail-pipe emission test when a vehicle is sold.

To monitor California's performance, the SIP includes performance standards and deadlines for implementation of key SIP components. Essentially, the SIP calls for the entire state to meet federal air quality standards by 2010.

In addition to the requirement in the SIP, the bureau administers several smog-related programs that have been adopted by the Legislature. These other nonmandated programs are the Low-Income Repair Assistance Program and the Voluntary Retirement Program. The state's Smog Check program is funded from two fundsthe Vehicle Inspection Repair Fund (VIRF) and the High Polluter Repair and Removal Account (HPPRA). The VIRF funds the SIP-mandated program and the HPPRA funds the other programs.

Evaluation for Federal EPA. The SIP required the state (the bureau, in conjunction with the Air Resources Board [ARB]), to submit an evaluation of the Smog Check program to the federal EPA in February 2000. In July 2000, the ARB released a report evaluating the program. The evaluation indicates that the current enhanced inspection and maintenance improvements under the Smog Check program have fallen far short of the target requirements called for in the SIP. For example, the program had only achieved 60 percent of the hydrocarbon (HC) reductions and 59 percent of the nitrogen oxide (NOx) targets called for under the SIP by summer 1999. In the evaluation sent to federal EPA, the state indicated that several changes would be made to the program in an attempt to close this gap between the targets and actual performance. These changes and the schedule for BAR to implement them are shown in Figure 1.

In addition to program changes identified in Figure 1, the state report indicated that further changes in certain regions of the state would be necessary in order to meet the 2005, 2008, and 2010 targets required in the SIP. The report also indicated that these changes could involve legislative action to increase the number of vehicles subject to the Smog Check program. These changes would involve: (1) removing the rolling 30-year model year exemption (currently, pre-1974 vehicles are exempt and beginning January 2003 all vehicles 30 or more years old are exempt); and (2) extending the program to all eligible vehicles registered in a nonattainment region that is already subject to enhanced smog check requirements (currently, only urbanized areas of 50,000 or more in these regions are subject to these requirements).

Given the problems the state has encountered meeting the SIP requirements and the proposed changes, the bureau should report to the Legislature on the following:

• The status of each of the proposed changes.
• The anticipated cost associated with each change.
• The anticipated contribution towards SIP goals for each change and how BAR determined these values.
• The status and results of all existing SIP elements of the Smog Check program.
• Program and administrative costs in the current year and budget year for each element of the element.

Consumer Assistance Program. As mentioned above, the Legislature enacted several smog-related programs that are not mandated in SIP. These consumer assistance programs include:

Income-Eligible Repair Assistance

• Vehicle owners income must be less than or equal to 185 percent of federal poverty guidelines.
• Owners must provide a $20 copay on emissions-related repairs.
• The state pays up to $500 towards emission-related repairs.

Repair Assistance for Vehicles Directed to Test-Only Stations

• No income test for vehicle owner to receive assistance.
• Vehicle must be directed to a Test-Only inspection station.
• Vehicle owner must provide a $100 copay on emissions-related repairs.
• State pays up to $500 toward emission-related repairs.

Vehicle Retirement

• Generally open to all vehicle owners.
• Eligible vehicles include passenger cars, light-duty or medium-duty trucks with a gross vehicle weight of less than 8,500 pounds.
• Vehicle must have failed the smog check.
• Vehicle must have been continuously registered as an operable vehicle with DMV for past 24 months prior to current registration expiration.
• Vehicle must be operable at the time it is retired. State will pay vehicle owner $1,000 to retire the vehicle.

The Supplemental Report of the 2000-01 Budget Act requires BAR to submit a quarterly report on the performance of these programs. Figure 1 summarizes the results from the first-quarter report for 2000-01 (second-quarter results were not available when this analysis was written).

We recommend BAR report to the Legislature during budget hearings on the following:

• The BAR's administrative costs for each program in the current year.
• The BAR's most recent information for each program detailing (1) participation, (2) payments to vehicle owners, and (3) emission reductions.
• An assessmentfrom a cost per ton of emission reduction perspectiveof the cost-effectiveness of each program's contribution toward SIP targets for HC, NOx, and CO.

The Legislature needs, at a minimum, the information discussed above in order to assess the effectiveness of each element of the Smog Check program and to determine the appropriate level of funding for each. Consequently, we withhold recommendation on BAR's budget pending receipt and review of this information.