Dan Walters

Dan Walters: California politicians jousting over how to spend cap-and-trade money

Dan Walters
Dan Walters

We humans crave free money – which explains why we buy so many lottery tickets despite infinitesimal chances of winning. Politicians are no different.

Free money?

There is, of course, no such thing, but politicians consider money borrowed via bonds, federal aid and money from fees “free” because they can spend funds as they wish without directly tapping constituents’ wallets. So it means free of voter backlash.

California may – or may not – be generating a big pot of free political money via the “cap-and-trade” fees extracted from business to curb emissions of greenhouse gases. And there’s a political fight brewing on how to spend it.

The Air Resources Board is auctioning off emission credits and has received several hundred million dollars, a few of which have been spent.

It’s very uncertain, however, what lies ahead – whether the tens of billions of dollars that some envision will materialize, whether some of the proposed uses, such as financing a bullet train system, are legal, or whether the fees themselves will pass legal muster.

The California Chamber of Commerce and other business interests contend in a lawsuit that the auction system was imposed by the Air Resources Board without explicit legislative permission and therefore is an illegal tax.

The plaintiffs lost an initial round in Superior Court, but the case is on appeal with the outcome very uncertain.

It centers on a decades-long dispute, which the state Supreme Court has only partially clarified, over the legal difference between a fee and a tax.

If the system survives the legal test, it’s still uncertain how much money it will produce. The Legislature’s budget analyst, Mac Taylor, tabs the range at $12 billion to $45 billion between 2012 and 2020, the target date for reducing carbon emissions to 1990 levels.

Gov. Jerry Brown’s 2014-15 budget would spend $850 million, with his financially troubled bullet train receiving $250 million, plus a guaranteed one-third of future revenues.

Taylor has opined that it may be illegal to spend fees on the bullet train because it would not meet the law’s emission reduction mandate. Environmentalists who like the cap-and-trade system are leery of that commitment as well, preferring direct spending on greenhouse gas reduction.

Senate President Pro Tem Darrell Steinberg, meanwhile, has unveiled his own fee proposal that provides markedly less for the bullet train and emphasizes two of his personal priorities, low-income housing and commuter transit, although housing may have even less nexus to greenhouse gases than the bullet train.

So politicians see it as free money for pet projects and programs, while business sees it as an onerous tax – and no one knows whether it will even materialize.

That’s the way California makes public policy.