July 1, 2024: State School Bond Deal Reached
State leaders have reached a deal on the SEC-supported bond bill, AB 247 (Muratsuchi). AB 247 was amended on Sunday to reflect the deal recently negotiated between the Governor and Legislative leaders to place a $10 billion statewide school facilities bond on the November 5, 2024 General Election ballot. The bill will be heard in the Senate Committee on Education today. We anticipate approval by the Senate and concurrence by the Assembly on Wednesday, July 3rd, at which point the bill would be sent to the Governor for signature, officially placing the measure on the ballot.
• The bond will provide $8.5 billion to TK-12 schools and $1.5 billion to community colleges. The bill allocates the TK-12 portion as follows:
• $4 billion for Modernization (including $115 million for testing and remediation of lead in water)
• $3.3 billion for New Construction (including a 10% set-aside for assistance to small school districts)
• $600 million for Career Technical Education facilities
• $600 million for charter school facilities
The bill expands the purpose and uses of New Construction and Modernization grants to include “the costs of design, materials, and construction to advance state energy goals pursuant to state law, support outdoor learning environments, or to directly shade and protect pupils from higher average temperatures, which may include incorporating nature and natural materials.”
It also replaces the existing 10% supplemental grant for exceeding energy efficiency standards with a grant of up to 5% for a broader array of energy and climate change adaptation projects. Eligibility for this grant still requires that the project exceed the Title 24 nonresidential building energy-efficiency standards.
The language included in the bill largely mirrors what was proposed by SEC except that the final grant is smaller and maintains the requirement to exceed Title 24. The purpose of the grant is to support the cost of “components that enable school facilities to advance state energy goals and adapt to higher average temperatures that pose a threat to the health and safety of pupils and staff.” Allowable uses include but are not limited to:
Shade structures and the conversion of ground and rooftop surfaces to materials with low absorption and reflection of heat, which may include, but are not limited to, natural surfaces.
Electric heating, ventilation, and air conditioning (HVAC), school kitchen equipment, and water heating.
The use of ground source temperatures for heating and cooling.
Energy and water conservation, load reduction, peak-load shifting, and building energy efficiency measures.
Solar water heating technologies.
Onsite renewable energy and storage, such as photovoltaics and battery storage, microgrid controllers, and service panel upgrades.
May 22, 2024: SB 1374 Passes California State Senate
The SEC-sponsored SB 1374 was approved by the Senate on May 21, 2024. The bill now advances to the Assembly where the next hearing date is pending. We have overcome significant opposition and will continue to need a strong coalition of supporters to get the bill through the second house.
Please send a letter requesting support for SB 1374 to the Assembly Utilities and Energy Committee and copy your Assembly representative(s).
How to Submit a Letter to the Legislature
The Legislature has moved to an online system for submission of bill letters. Please allow time to create the login required in order to upload your letter if you have not already done so. More information on the submission process is available in the Legislative Position Letter Portal.
Please also email a copy of your letter to Aileen Dalen at adalen@m-w-h.com.
If you need assistance with the Position Letter Portal, please contact Aileen.
Alternatively, you can email your districts logo and the individual who would sign the letter to Aileen. Here is the Coalition letter sent to the Senate Appropriations Committee. It will be modified for the Assembly.
Please see this recent news article about the bill.
May 22, 2024: CEC Extends CalShape Deadline for School HVAC Assessments, Repairs and Upgrades
The Funding Round Five application deadline for Assessment and Maintenance (A&M) and Upgrade and Repair (U&R) grants is extended to July 31, 2024, and the processing deadline for A&M and U&R grant agreements is extended to October 31, 2024.
The Funding Round Five application deadline for the CalSHAPE Plumbing Program is 5:00 p.m. on May 31, 2024. The CEC is not able to execute grant agreements for the CalSHAPE Plumbing Program after June 1, 2024, due to the final program reporting deadline of June 1, 2026, and the two-year project term provided for all grant projects, as described in the guidelines. Please make every effort to submit complete and accurate CalSHAPE Plumbing Program applications well in advance of the May 31st deadline and submit notice of proposed award documents as soon as the application is approved to ensure a grant agreement is able to be executed prior to the deadline.
Notices of Funding Availability are posted under the expandable menus for each program. The notices provide the relevant funding round information, including eligibility, the application process, and available funding amounts. The CalSHAPE Ventilation Program will now be accepting applications for both the Assessment and Maintenance and Upgrade and Repair (U&R) Grants.
Applications for all programs are submitted electronically using the CalSHAPE Online System. An access link, instructions, and a video training can be found under the “Online System” expandable menu.
April 12, 2024: California Supreme Court to Review Rooftop Solar Net Metering
A controversial rooftop solar rulemaking decision has risen to the Supreme Court of California, with the state’s highest court granting review for a petition filed by the Center for Biological Diversity.
The case involves NEM 3.0, a rate structure that went into effect in April 2023. The California Public Utilities Commission (CPUC) approved a request by the state’s largest investor-owned utilities to cut compensation to customers that export excess solar generation to the grid, a process called net energy metering.
Net metering rates were rapidly cut by 80% under NEM 3.0. This change, combined with a high interest rate environment, has pushed the state’s robust rooftop solar industry off a cliff, damaging the return on investment for homeowners, and leading to more than 17,000 solar jobs lost, demand falling 80% post-implementation, and numerous companies filing for bankruptcy.
Please click here to read the article in its entirety.
March 7, 2024: SB 1374 Self-Generation for Multi-Meter Utility Customers
SEC is officially Co-Sponsoring Senate Bill 1374 (Becker), which would restore self-consumption for multi-meter customers in IOU territories. This would address one of the most damaging aspects of the CPUC’s November 2023 NEMA/VNEM (now called NBT-A and VNBT) ruling. The bill would help to keep energy costs more affordable for LEAs, farms, water agencies, and many other local public agencies. It would also support the continued expansion of solar and storage necessary for resilience in the face of climate change and to power our growing electric vehicle fleets and parking lot charging systems. For more information, see the SB 1374 Fact Sheet.
Please support this important legislation by having your LEA or company sign onto SEC’s Coalition letter by Friday, March 22, 2024. No hearing date has been set, but it will take place in April. To sign onto the coalition letter, send a signature block, electronic signature, and logo to Aileen at adalen@m-w-h.com.
If you have information to share about how a specific project would benefit from this legislation, or how the loss of self-generation has negatively impacted one of your projects, you may want to send your own letter to the committee via the Legislative Portal. This type of information helps legislators to understand the real-world impact of their decisions. Aileen is available to help if you need assistance with the process of submitting your letter.
March 7, 2024: Inflation Reduction Act Regulations Published
On March 5, 2024, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) released final rules on key provisions in the Inflation Reduction Act. The Inflation Reduction Act allows tax-exempt and governmental entities to receive elective payments for 12 clean energy tax credits, including the major Investment and Production Tax (45 and 48) credits, as well as tax credits for electric vehicles and charging stations. Businesses can also choose elective pay for three of those credits: the credits for Advanced Manufacturing (45X), Carbon Oxide Sequestration (45Q), and Clean Hydrogen (45V).
The Inflation Reduction Act also allows businesses to transfer all or a portion of any of 11 clean energy credits to a third-party in exchange for tax-free immediate funds, so that businesses can take advantage of tax incentives if they do not have sufficient tax liability to fully utilize the credits themselves. Entities without sufficient tax liability were previously unable to realize the full value of credits, leaving only corporations able to take advantage of federal tax incentives. This raised costs, created challenges for financing projects, and limited the ability of communities and other organizations to realize the full economic and environmental benefits of clean energy. Final rules on transferability will be finalized in the near future.
Treasury’s elective pay final rules provide certainty for applicable entities to understand the law’s scope and requirements for eligibility. The final rules also lay out the process and timeline to claim and receive an elective payment.
Along with final rules on elective pay, Treasury today also issued a separate Notice of Proposed Rulemaking (NPRM) that is intended to provide further clarity and flexibility for applicable entities that that co-own clean energy projects and would like to utilize elective pay. These proposed regulations would:
- Permit renewable energy investments to be made through a noncorporate entity, rather than requiring direct co-ownership of the property or facility by the applicable entity;
- Modify certain joint marketing restrictions to provide that multi-year power purchase agreements would not violate the requirements to elect out of partnership tax treatment.
Treasury and IRS welcome written comments submitted through regulations.gov. The comment period is open until May 10, 2024. SEC staff is still analyzing the newest regulations. Stay tuned for information about an upcoming workshop focused on helping you navigate the IRA application process.
January 10, 2024: Governor Releases 2024-25 State Budget
Today, Governor Gavin Newsom presented his proposed 2024-25 State Budget. As anticipated, the State’s significant revenue shortfall led to a decrease in the General Fund appropriations proposed for the School Facility Program (SFP) and Preschool, Transitional Kindergarten and Full-Day Kindergarten Facilities (PTKFDK) Grant Program. Energy and environmental programs were subjected to a variety of budget deficit solutions
Climate Change, Natural Resources, Energy Efficiency and Generation
While state climate change programs are having an increasing impact on school facilities and maintenance departments (air and water quality, energy efficiency, extreme heat mitigation, energy, and disaster resiliency), this year there were few new programs, and existing programs from previous state budgets were deferred, delayed or were subject to funding source shifts.
The Administration proposes to maintain 89 percent ($48.3 billion) of funding commitments made in previous budget years through a combination of measures including use of reserves, funding source shifts, and borrowing. They also indicate they anticipate additional federal funding.
Zero-Emission School Buses
The proposed State Budget maintains $500 million one-time Proposition 98 General Fund to support greening school bus fleets through programs operated by the California Air Resources Board and the California Energy Commission in 2024-25. These programs provide LEAs with grants for the replacement of internal combustion school buses with electric school buses and the necessary charging infrastructure.
Zero-Emission Vehicles
Because local educational agencies are eligible for some programs that are open to non-LEAs, it is also significant that the proposed Budget maintains $10 billion in commitments made in the 2021 and 2022 Budget Acts to the state’s Zero-Emission Vehicles (ZEV) agenda. The Budget proposes to expend these funds over seven years instead of the original five years. This funding addresses a broad array of programs from cleaning up short-haul trucks and school buses, to accelerating equitable electrification of passenger vehicles—coupled with infrastructure and incentives for in-state manufacturing.
Energy
The Governor touted the state’s commitment to climate change adaption, and proposes both statutory changes and one-time expenditures to address the challenges to instructional continuity created by severe climate events, illness, or other barriers that impact attendance. But is notably silent on the rising costs for schools of adopting the technologies necessary such as solar and storage to prevent interruptions in educational services.
Overall Budget
In his presentation, the Governor stressed the impact that revenue volatility is having on California’s revenues , which he believes is now normalizing. His $291.5 billion proposed Budget includes a total of $208.7 billion in the General Fund and a $37.9 billion shortfall. To address the shortfall, $18.8 billion of resilience solutions would be created through withdrawals from reserves, including the Public School System Stabilization Account (PSSSA), as well as borrowing. A total of $11.9 billion in solutions are included in belt-tightening, which include reductions and fund shifts, and $7.2 billion is addressed through both delays and deferrals.
Priorities highlighted were: addressing homelessness, mental health support, creating a safer California, increasing career education in California’s educational systems, providing greater climate support, and maintaining California’s economic dominance.
TK-12 Education Budget
The Budget includes total funding of $126.8 billion ($76.4 billion General Fund and $50.4 billion other funds) for all K-12 education programs. K-12 per-pupil funding totals $17,653 Proposition 98 General Fund and $23,519 per pupil when accounting for all funding sources.
It also includes a Local Control Funding Formula (LCFF) cost-of-living adjustment of 0.76 percent. When combined with population growth adjustments, this will result in a decrease of roughly $1.4 billion in discretionary funds for local educational agencies (LEAs). However, to fully fund the LCFF and to maintain the level of current year principal apportionments, the Budget proposes withdrawing approximately $2.8 billion from the PSSSA to support ongoing LCFF costs in 2023-24, withdrawing approximately $2.2 billion from the PSSSA to support ongoing LCFF costs in 2024-25, and using available reappropriations and reversion funding totaling $38.6 million to support ongoing LCFF costs in 2024-25.
School Facility Program
With Proposition 51 bond authority funds nearly exhausted, the 2022 and 2023 Budget Acts provided roughly $1.3 billion one-time General Fund and $2 billion one-time General Fund, respectively, for the SFP. To address the projected budget shortfall, the Governor’s proposed Budget adjusts a planned 2024-25 investment for the SFP from $875 million to $375 million one-time General Fund.
The Governor’s Budget Summary reiterates the Administration’s intent to “enter into negotiations with the Legislature this Spring on their education facilities bond proposals to reach agreement on a bond proposal to be considered in the November 2024 election.” The infrastructure section, later in the document, also stated that: “This spring, the Administration expects to move forward with discussions with the Legislature on an education facilities school bond to be considered on the November 2024 ballot.”
In his presentation, the Governor described the SFP reduction as part of “belt-tightening” necessary to address the revenue shortfall, while reiterating this expectation that “we’re going to have a bond.” The document released today, and the Governor’s comments, are the strongest commitment to date to a school facilities bond on the November 2024 ballot.
Next Steps
The Senate and Assembly Budget Committees, and their respective subcommittees, will soon begin a series of hearings to discuss the Governor’s proposal, request additional information, and stake out their own priorities. The Administration will refine its proposals in response to these discussions and to the updated fiscal data available in the Spring, and present its May Revision in mid-May.
The Budget committees will then undertake a shorter series of hearings leading into negotiation between the Governor and the leaders of both Houses. The California State Constitution requires passage of the State Budget by June 15th, but the trend in recent years has been for the approval of a largely symbolic bill by that deadline, with substantive agreement emerging later. SEC staff will remain engaged throughout the process and continue to provide updates until the adoption of the final State Budget.