Dan Walters

Dan Walters: ‘Cap-and-trade’ fee spending looms as major conflict

Spending a growing pot of money from “cap-and-trade” fees on businesses that emit greenhouse gases looms as a major conflict between Gov. Jerry Brown and legislators as they wrangle over the 2014-15 budget.

The fate of Brown’s pet bullet-train project may hang in the balance.

Brown has an $870 million plan and the Legislature wants to spend more, but the scope of revenue from carbon fees is unknown, especially after they are applied to automotive fuel next year. And a lawsuit challenges their legality.

The governor wants to spend $250 million on the bullet train in 2014-15 and permanently commit a third of future fees to the project, whatever they may be.

He needs the money because the state cannot yet tap voter-approved bond funds. A judge has ruled that they cannot be used until the High-Speed Rail Authority submits a more complete financing plan for constructing the “initial operating segment.”

The state now has only a few billion dollars in a federal grant, and while Brown is appealing the decision, he wants cap-and-trade money now to cover the state’s matching share for construction that’s supposed to begin in a few months.

The legality of using cap-and-trade fees for the bullet train, however, has been questioned by the Legislature’s budget analyst, and many environmental groups want them to be used for projects that quickly reduce carbon emissions, as state law requires.

The conflict was aired Thursday as an Assembly budget subcommittee voted to replace Brown’s cap-and-trade plan with a much different, $1 billion version limited to just one year.

While it would allow the fees to be used for the bullet train, it would have to compete with other state projects before an obscure state agency called the Strategic Growth Council.

However, the Assembly plan also would give Brown the power to seek a $20 billion federal loan and float a $20 billion revenue bond issue to finance the train, tapping cap-and-trade funds to repay the loans.

As if that isn’t complicated enough, the Assembly plan would give local governments and private groups a greater access to the funds for their carbon-reduction programs, such as mass transit, solid-waste treatment and “carbon farming.”

“This is worse than the governor’s plan,” Fresno Republican Jim Patterson, a member of the subcommittee and a bullet-train critic, said, but the chairman, Malibu Democrat Richard Bloom, said it has “some superior attributes.”

The Assembly plan drew a negative reaction from Brown’s Department of Finance, particularly its one-year limit.

Thursday’s hearing indicated that the cap-and-trade issue will be a thorny one for Brown and legislative leaders to resolve. It is, in political terms, free money that everyone wants to tap but, as Bloom observed, “there’s never enough money to pay for every project.”