Happy New Year from all of us at CSG! With the Legislature back in session and the Governor’s proposed 2016-17 state budget released last week, we are beginning to identify some key issues likely to come up in 2016. First, the Governor seems intent on continuing his efforts on climate change, focusing on the goals he set out last year of a 50% reduction in petroleum use and increasing carbon sequestration from working and natural lands. Second, water will continue to be a major focus for the Administration as it prepares to deal with El Niño this year and beyond.

Last week, Governor Jerry Brown introduced his proposal for the 2016-17 budget that includes significant increases in funding for natural resources programs, focusing on two main categories of funding:

• Cap and trade auction revenue to fund projects that mitigate climate change
• A mix of General Fund, Proposition 1 funds, and special funds to provide emergency drought relief and fund projects to further the goals of the California Water Action Plan

Cap and Trade

At first glance, the proposed $3.1 billion allocation of cap and trade auction revenue looks like a significant increase of spending from this source, but a second look reveals more to the story. Last year’s budget left roughly $800 million of cap and trade funds unallocated and on the table, although the May revision had a proposed expenditure plan to fund many natural resources programs and projects. This new expenditure plan does not take into account the previous proposal and instead skips all 2015-16 appropriations for those programs and projects. More than $1 billion is included for projects that reduce petroleum use including funding for transit, electric vehicles, and a low carbon road program.

The 2016-17 proposal for cap and trade contains several new funding programs to reduce greenhouse gas emissions (GHGs).  This includes programs to improve air quality and reduce GHGs from Short-Lived Climate Pollutants such as black carbon, methane, and fluorinated gases.  The proposal also includes a dedicated allocation for the state’s top five percent of disadvantaged communities to implement projects that reduce GHGs in an integrated, multi-benefit approach.  The budget also proposes an allocation to the Infrastructure Bank to provide loans for energy efficiency and renewable energy projects. This is the first cap and trade funded program that would use loans and work to stretch these dollars further.

Water

Despite record breaking rain projected from El Niño this winter, California is moving into its fifth year of drought.  Governor Brown’s 2016-17 proposed budget reflects ongoing investments to improve the state’s drought response, and plans for a more resilient water system as envisioned in the California Water Action Plan.  The budget allocates $323.1 million for emergency drought response with most of the funding ($212.1 million) coming from the General Fund and the remaining $111 million coming from cap and trade and special funds.

Last year’s budget contained the first allocations from Proposition 1, with billions of dollars allocated to improve water efficiency, watershed restoration and protection, stormwater capture and management, and groundwater cleanup. This year’s budget proposal for Proposition 1 focuses on providing funds to address several settlement agreements across California that the state is obligated to fund. Proposition 1 contained a $475 million allocation to the California Natural Resources Agency to address five statewide obligations and the 2016-17 proposed budget allocates those funds as follows:

• Klamath River Agreement: $250 million
• Central Valley Project Improvement Act: $90 million
• San Joaquin River Settlements: $45 million
• Salton Sea Restoration: $80 million

Last week’s budget proposal is the initial step in the budget process, a process that will culminate on June 15, 2016, the date by which the Legislature is required to pass a budget bill and submit the same to the Governor for his signature or veto.  Between now and June, budget committees will conduct weekly hearings to discuss items in the budget proposal.

The Governor’s summary of his proposed 2016-17 budget can be found here. The Legislature’s agenda is just beginning to take shape and we will have more on that later…

CSG Blog

CSG will be covering these important issues related to Water, Climate, and Conservation through our policy blog at www.csgcalifornia.com/blog. To stay up to date on major policy issues in California, sign up for our Policy Blog emails here.

Joe Caves
Principal/Founder
Conservation Strategy Group