Maybe you remember voting in the November 2012 election for Proposition 39? Or maybe not. There were 13 statewide ballot propositions to consider in that election.
According to a Sacramento Bee editorial in August 2015, Prop. 39’s promoters promised in 2012 that “The initiative would generate $1 billion a year by shutting a corporate tax loophole, and earmark $500 million to combat climate change and provide good blue-collar jobs.”
In that editorial (“Trust in Short Supply as Prop. 39 gets Off to a Slow Start”), the paper noted how Attorney General Kamala Harris summarized Prop. 39 in the official California voter pamphlet: “Dedicates $550 million annually for five years from anticipated increase in revenue for the purpose of funding projects that create energy efficiency and clean energy jobs in California.”
In a 2012 op-ed piece, hedge fund billionaire Thomas Steyer, who contributed $21.9 million of his own money to pass the initiative, predicted the measure would generate $1 billion annually, half of which would be earmarked for energy efficiency in each of the first five years after its passage.
“It will boost our state’s economy, create badly needed quality jobs and increase funding to our schools,” Steyer wrote, “all by closing an unfair tax loophole that currently benefits out-of-state corporations.”
Many of us who had kids in the public schools probably heard “increase funding to our schools” and “clean energy” and voted “yes,” helping the Proposition to pass with 61.1 percent.
Half of the new tax revenue was supposed to be spent on clean energy projects, including those for schools. After five years (2013-2018), that corporation tax money would go strictly to the general fund.
In reality, this bill wasn’t about energy saving in the schools or even clean energy but was about corporations paying taxes in California. Until Prop. 39, companies doing business in California could either pay tax via the “three-factor” or “single-sales factor” method. The three-factor method was based on half of a company’s tax bill on in-state sales and the other half on in-state property and employees. The single-sales tax was based solely on sales.
Exactly what did the schools get from Prop. 39 and how much did the state take in over that five-year period?
The amount each school would receive was figured by the California Department of Education based on attendance and those eating free and reduced lunch. Each school or district would need to submit a description of the energy-saving project. The California Energy Commission would approve the expenditure plan and then the California Department of Education could disburse funds.
Palisades High School received $157,647, which was used to replace lights inside and out with LED lighting. (To see different school’s allotments and which schools still had money that was not used, visit: https://www.cde.ca.gov/fg/aa/ca/prop39cceja.asp)
At a recent September meeting between Circling the News and PaliHi’s Chief Business Officer Greg Wood and Facility Manager Don Purcell, the men lamented the fact that they would like to install energy-saving thermostats in the bungalows, but Prop. 39 funds are no longer available, even though there was still $115 million left in that fund in 2018.
According to Principal Fiscal and Policy Analyst Ross Brown (Legislative Analyst’s Office), “Prop. 39 required that half of the revenue raised by the measure in the first five years be transferred to the Clean Energy Job Creation Fund. There was a $550 million annual cap on the amount that could be transferred. However, that cap was never reached because annual revenue was less than $1.1 billion.”
Over the five years, according to Brown, “About $1.75 billion went to the main K-12 education program ($350 million a year). Another couple hundred million total went to projects at the community colleges, workforce development efforts and the loan program.”
But many schools never reached out for money to implement clean-energy programs. “About $115 million of the $1.75 billion that was originally allocated for the main K-12 program went unspent,” Brown said. “The state reallocated these funds to the School Bus Replacement Program ($75 million) and provided additional funding to the ECCA loan program ($40 million).
Did voters specify what should be done with unspent money after five years? Not directly, but through legislators.
Senate Bill 110 was passed by the Senate and Assembly in June 2017 and signed by Governor Brown in July 2017. The bill stated: “(a) Of the moneys provided to the Job Creation Fund for purposes of paragraph (1) of subdivision (a) of Section 26205, the available remaining funds, which are the funds allocated to a local educational agency that has not submitted an energy expenditure plan, as determined by the Energy Commission as of March 1, 2018, shall be appropriated as follows:
(1) The first seventy-five million dollars ($75,000,000) shall be provided to school districts and county offices of education for grants or loans for school bus retrofit or replacement through a program administered by the Energy Commission, in consultation with the State Air Resources Board.”
Prop. 39 and Job Creation: In 2013, the Don Vial Center on the Green Economy projected that Proposition 39 would create an estimated 3,410 direct jobs and 7,843 indirect and induced jobs annually. The Associated Press wrote in 2015 that much of the money given to schools so far had gone to consultants and energy auditors, that a board created to submit annual progress reports to the Legislature had never met, and only 1,700 jobs had materialized.
Prop. 39 and Revenue: Revenue estimates were also high. The California Department of Finance reported that Proposition 39 generated $464 million for energy efficiency in 2013-14 fiscal year, $352 million in 2014-15, and an estimated $360 million in 2015-16. Not the $550 million promised by the Proposition’s promoters.
But the State of California calls “Prop 39 K-12 Program a Success.” Visit: energy.ca.gov/programs-and-topics/programs/california-clean-energy-jobs-act-proposition-39-k-12-program.)
The website states that “The Clean Energy Jobs Act (Proposition 39) K-12 Program allocated more than $1.5 billion over five years to schools across the state to improve facilities and help lower energy bills. Upgrades include switching to LED lighting, replacing inefficient air-conditioning and heating units, and installing solar panels.”
The tax revenue coming in because of the changed law through Prop. 39 now goes to the general fund.