California Budget Surprise

In Governor Jerry Brown's proposed 2012-13 State Budget, there is a line item that anticipates $1 billion from the still-developing cap-and-trade carbon emission program in California. Though that money is not identified with any particular programs yet, the Governor intends for it to be spent on environmental programs that are outside the scope of the cap and trade program.

It's appropriate to provide a timeline here. The most manufacturing intense -- but most energy efficient -- state in the Union passed the farthest reaching carbon reduction mandate in 2006 with the intention that the rest of the country and world would follow. Since then, no state has joined and California is going it alone. The state developed its cap-and-trade system to force California manufacturers and others to reduce their emissions and/or pay millions in carbon auction costs (taxes) and emission credits. This while competitors in other states already enjoy 50 percent lower electricity costs. Before the cap-and-trade system is even started, the State is chomping at the bit to spend precious resources extracted from struggling California companies in the first year of the program for purposes unrelated to companies efforts to reduce emissions at their facilities.

Misuse of the funds raised in the program will hurt AB 32 and the cap and trade program. It will drive critical new investment, jobs and innovation away from our great state.

The employer group that has been working so diligently to help implement AB 32 in a cost effective and technologically feasible manner put out this statement on Thursday. It sums it up much more eloquently than I did:

Dorothy Rothrock representing the AB 32 Implementation Group, a coalition of employers and taxpayer groups advocating for policies to achieve greenhouse gas emission reductions in a manner that will protect jobs and the economy issued the following statement regarding authority to expend $1 billion of AB 32’s cap-and-trade revenue:

“We are greatly concerned that the Governor’s budget would allow use of $1 billion raised in the AB 32 cap and trade program in a manner that is beyond the scope of authority under AB 32 and the California constitution.  The purpose of cap and trade is to reduce greenhouse gas emissions from regulated sources – including manufacturers, electric generators, universities, and public agencies. AB 32 and cap and trade is not intended to be a revenue source for the state of California.

At a time when the public is concerned about jobs and the economy, the budget proposes a new tax on California businesses for climate change activities. The anticipated $1 billion is not windfall revenue.  The funds will be paid by California employers suffering the worst recession since the Great Depression.  To avoid litigation and protect jobs, the revenues should be maintained within the cap-and-trade program and must be used in a manner that meets the requirements of a legal fee.”