Requires a one-time, two-thirds vote in both houses of the Legislature

Proposition 70 proposes to change the way cap-and-trade revenues are deposited and spent beginning in 2024.

The state’s cap-and-trade program began in 2012 to reduce greenhouse gas emissions by issuing a limited number of permits to manufacturers to emit greenhouse gasses.

Under current law, in-state companies that emit high levels of GHG must obtain, through purchase or other means, permits for each ton of GHG they emit. The state gives about half of the permits away to certain industries for free and sells the remainder at auction.

Revenue from permit sales is spent through the state’s annual budget process on programs that reduce GHG.

Prop 70, authored by high desert Assemblyman Chad Mayes (R-42), resulted from negotiations among Gov. Jerry Brown (D), legislative Democrats and legislative Republicans over the future of the state’s cap-and-trade program. The negotiations resulted in three bills that passed in July 2017 — an extension of cap and trade until 2030 (AB 398), new air pollution regulations (AB 617) and ACA 1 (Prop 70).

For Mayes and legislative Republicans, Prop 70 seeks to ensure that members of the minority party (presently Republicans) may be needed to approve spending of cap-and-trade revenues.

Prop 70 would require, beginning in 2024, that cap-and-trade revenue be deposited and accumulate, during a specified period, in a new fund in the state treasury called the Greenhouse Gas Reduction Reserve Fund.

These funds could not be spent unless the Legislature votes by a two-thirds majority (a “super majority”) to authorize spending the accumulated reserves. Once that two-thirds legislative vote occurs, the requirement that new revenues accumulate in the fund will expire.

If a two-thirds vote is not secured, cap-and-trade revenues would continue to accumulate in the new fund and could not be spent — in effect locking them until and if a super-majority vote occurs.

Prop 70 is on the ballot to secure a one-time, super-majority vote in each chamber of the Legislature to help assure the current minority party would have potentially decisive input into how cap-and-trade revenues are spent — clout to demand concessions in cap-and-trade spending, including on Brown’s legacy project, high-speed rail.

After the effective date of the spending bill secured by the super majority, future revenue would go back to being deposited in the GGRF and could be spent by a majority vote of the Legislature.

According to the nonpartisan Legislative Analyst’s Office, estimated 2017-18 cap-and-trade spending of $3.3 billion includes:

• $810 million for incentives for low-emission vehicles and equipment

• $730 million for high-speed rail

• $584 million for affordable housing near transit

• $438 million for forestry and fire prevention

• $250 million for agricultural emission reductions

• $187 million for “other” allocations

Between Jan. 1, 2024, and the passage of the spending bill by two-thirds majority, the measure would also suspend a sales-tax exemption for manufacturers, potentially increasing state-tax revenue by about $260 million per year. But that increase would not continue after passage of the spending bill.

Mayes, Brown and Allan Zaremberg, president of the California Chamber of Commerce, wrote official arguments supporting Prop 70. “The future of California’s signature climate change program depends on demonstrating that we can protect our environment while growing our economy … Proposition 70 helps ensure that the money to reduce greenhouse gases is spent in the wisest and most cost-effective way.”

Prop 70 is opposed by the California Democratic Party and numerous environmental groups and unions.

Writing in opposition in a ballot argument, Chris Chavez, deputy policy director for the Coalition for Clean Air, said, “Supposedly ACA 1’s two thirds vote requirement in 2024 is to ensure that cap and trade allocations maintain support from the state Legislature. We agree that it makes sense for the program’s allocations to be reviewed, but the Legislature should do that every year through the budget process … the fact is ACA 1 itself was part of a deal to get two thirds vote for the cap and trade extension.”

Media editorial opinion is mostly in opposition to the measure. The Los Angeles Times opines, “[voters] should reject this pointless exercise. There is little indication that a supermajority vote in 2024 would result in more responsible spending. History shows that when legislators need to find enough votes to reach a two thirds threshold, they are more likely to end up funding pet projects to persuade [or buy the votes of] on the fence lawmakers.”

Said the Sacramento Bee, “This measure is an attempted end run around a much-needed public works project [bullet train] that a lot of Californians want and that the majority of voters approved, at the behest, by the way, of a Republican governor [Arnold Schwarzenegger].”