(June 3, 2009) The California Chamber of Commerce has added a new bill to its “job killer” list because the legislation will increase costs and discourage job growth by granting the California Air Resources Board (ARB) broad authority to implement unlimited fees and taxes with little or no oversight.
The broad purposes in SB 31 (Pavley; D-Agoura Hills) are far beyond ARB’s current limited fee authority under the climate change law, AB 32 (Núñez; D-Los Angeles; Chapter 488). SB 31 would grant ARB vast new revenue-raising authority and would impose additional costs on the state that go beyond AB 32 implementation.
Adds Significant Costs
The state will incur significant costs to implement SB 31. This bill requires ARB to distribute the funds collected under AB 32 for uses such as renewable energy and energy efficiency programs; investments in technologies reducing greenhouse gas emissions, including research, development and deployment; and green jobs development.
In order to implement SB 31, the ARB will have to develop guidelines or regulations that lay forth a plan for distributing the funds, if appropriated by the Legislature. Developing the criteria needed for distribution will require an approval process, public workshops, public comments and the Office of Administrative Law review process, all of which will add to the expense of implementing the program.
New ARB fees under SB 31 could reach billions of dollars. The bill provides no guidance, no limits and no controls over the amount ARB could raise, or from whom.
Majority Vote Bill
As a majority vote bill, the fee-raising authority granted ARB must pass the tests set forth in the “Sinclair Paint” line of cases— showing a relationship between the social harms or benefits described in the purposes outlined in SB 31 and a payer’s responsibility to pay a fee of a certain amount. Absent such a relationship (a likely result), the fee must be declared invalid as an illegal tax. Fees imposed under SB 31 therefore will be subject to litigation, regulatory uncertainty, delay and damage to AB 32 implementation schedules.
Large new fees would be another burden on a fragile economy already absorbing the impact of tax increases to solve the budget crisis. SB 31 fees will make companies less competitive in California and/or raise costs for consumers.
Cap-and-Trade System
Furthermore, ARB is considering a cap-and-trade system that allocates emission credits from an auction system that could impose new burdens amounting to tens of billions of dollars for California companies, municipal utilities and others. Lastly, local governments in California are imposing their own global warming regulatory programs and the federal government is likely to impose a national global warming strategy.
When AB 32 passed, its author, Assembly Speaker Fabian Núñez (D-Los Angeles), submitted a letter to the Assembly Journal, stating, “It is my intent that any funds provided by Health and Safety Code Section 38597 are to be used solely for the direct costs incurred in administering this division.” Thus, legislation that provides ARB greater authority to implement an auction and to use the funds in addition to fees raised for other purposes than administering costs goes well beyond the intent of the AB 32.
AB 32 allows the ARB to include “market-based compliance mechanisms” in its plan to achieve the 1990 target greenhouse gas levels in the state. A market-based compliance mechanism could include cap-and-trade systems or other mechanisms that involve recognizing or distributing greenhouse gas emission allowances, but AB 32 does not expressly sanction — nor does it even mention — distribution of greenhouse gas allowances by an auction mechanism. An auction mechanism would be complex and affect all or most of the California economy and could raise and redistribute billions of dollars of auction revenues.
The CalChamber believes that the Legislature should keep firm control of the ability to impose, or relax, new fees and/or taxes to fund important government services and encourage the creation of new jobs. It should not provide the ARB with vast new revenue-raising authority.
Action Needed
SB 31 is awaiting action on the Senate floor. The CalChamber is urging members to contact their senators and ask them to oppose SB 31.
Staff Contact: Amisha Patel