Date of Hearing: April 24, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1430

Author:(Eduardo Garcia) – As Introduced Ver:February 22, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires four specified state agencies to provide a report to the Legislature with options for redefining the term “cost-effective” for purpose of prioritizing public investment opportunities. Specifically, this bill:

1. Requires the California Public Utilities Commission (CPUC), the State Air Resources Board (ARB), the California Transportation Commission (CTC) and the Labor and Workforce Development Agency (LWDA) to provide the Legislature, by January 1, 2021, a joint assessment of options to redefine “cost effective” for the purpose of prioritizing public investment opportunities.
2. Requires the specified agencies, when assessing the options, to consider the economic, environmental and public health benefits to the state; energy or transportation costs to households; and alignment with other state programs or priorities.
3. Requires the specified agencies to conduct a joint public process for completing the assessment that includes soliciting comments from stakeholders.

FISCAL EFFECT:

1. One-time costs to the CPUC, ARB, CTC and LWDA, likely in the low hundreds of thousands dollars collectively (various funds), for staff time to meet, research and assess the options for defining the term “cost-effective.” Actual costs will depend on the frequency and location of meetings and the amount of staff time spent on research and other duties to support the effort.
2. One-time costs to the CPUC, ARB, CTC and LWDA to conduct a public process for completing the assessment and to solicit comments from stakeholders. It is unclear how this requirement would be implemented. The ARB, CTC and LWDA could likely conduct and participate in a joint hearing for minor costs, likely less than $50,000 (various funds). However, the CPUC is a constitutionally independent agency and, unlike the other three agencies, doesn’t follow the Administrative Procedure Act for its public process requirements. If the CPUC is required to open a new proceeding, a process that requires public workshops, hearings, decisions, staff proposals and research apart from other external working groups, estimated costs could exceed $500,000 (PUC Utilities Reimbursement Account).

COMMENTS:

1. Purpose and Background. Existing law authorizes certain state agencies to invest public funds on various projects and programs and requires certain investments to be cost effective. The author is concerned that this narrow and varied assessment, while important, may overlook other important co-benefits of a project or an opportunity to align projects with other state objectives.

This bill seeks to recraft the definition of “cost-effective” among four state agencies for purposes of prioritizing public investment opportunities. According to the author:

We must ensure that money is well-used, but we should also be exploring every opportunity to be strategic with those investments – particularly when an opportunity exists to align that investment with other state goals or priorities. This study does not require the Legislature to take an action, but it will push the agencies to examine the question and explore potential ways to ensure that effective use in a way that enables them to pick the project best for our state.

Many state agencies have one or more definitions of cost-effectiveness for a variety of reasons, including many agencies not included in this bill. Some of the differences in the definitions are inherent to the activities of the agencies while others may be more arbitrary. The latter may be problematic, but the former may be necessary. If the goal of the bill is to determine best practices, guidelines and a definition of cost-effectiveness that will be meaningful statewide, it may be prudent to instead require all state agencies to report on the ways in which they ensure that public funds are being invested cost-effectively, including how they define that term, prior to engaging in a collective process such as the one required by this bill.

1. Related Legislation. AB 961 (Reyes), of this legislative session, requires the CPUC to develop, prioritize and prefer non-energy benefits (NEBs) in all clean energy and energy efficiency programs. The bill is pending referral to this committee.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: April 10, 2019

ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW

Cottie Petrie-Norris, Chair

ABPCA Bill Id:AB 1430 (

Author:Eduardo Garcia) – As Introduced Ver:February 22, 2019

SUBJECT: State government: public investment opportunities: cost-effective definition

SUMMARY: Requires four specified state agencies to provide the Legislature by January 1, 2021, a report with options for defining the term “cost-effective” for the purpose of prioritizing public investment opportunities. Specifically, this bill:

1. Requires the assessment of options to consider the economic, environmental, and public health benefits to the state; energy or transportation costs to households; and alignment with other state programs or priorities.
2. Requires the specified agencies to conduct a joint public process for completing the assessment that includes a solicitation of comments from stakeholders.
3. Repeals the provisions in this bill on January 1, 2025.

EXISTING LAW authorizes the state agencies named in this bill to invest public funds on various projects and programs, and requires certain investments to be cost effective.

FISCAL EFFECT: Unknown

COMMENTS: This bill requires the Public Utilities Commission, the State Air Resources Board, the California Transportation Commission, and the Labor and Workforce Development Agency to provide the Legislature, by January 1, 2021, a joint assessment with options to define “cost effective” for the purpose of prioritizing public investment opportunities. It specifies what should be considered in this process and requires a solicitation of comments from stakeholders.

While there are many references to the term “cost-effective” or “cost-effectiveness” in current law, most sections do not include definitions. Those that do, appear to be program specific. For example, in a section related to grants for cleaner-than required engines, cost effectiveness is “calculated by dividing annualized costs by average annual emissions reduction.” Other definitions in law include methods to conduct specified cost-benefit analyses to determine if something is “cost-effective.”

According to the author, “we must ensure that money is well-used, but we should also be exploring every opportunity to be strategic with those investments – particularly when an opportunity exists to align that investment with other state goals or priorities. This study does not require the Legislature to take an action, but it will push the agencies to examine the question and explore potential ways to ensure that effective use in a way that enables them to pick the project best for our state.”

REGISTERED SUPPORT / OPPOSITION:

Support

None on file.

Opposition

None on file.

Analysis Prepared by: Scott Herbstman / A. & A.R. / (916) 319-3600