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ORIGINAL

JAMES C. H A R R I S O N , state Bar NO. 161958
T H O M A S A . W I L L I S , state Bar No 160989

FILED
Supierior Court Of Californiji

2 REMCHO, JOHANSEN & PURCELL, LLP
1901 Harrison Street, Suite 1550

3 Oakland, CA 94612
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03/05/2018
mrubdicdba

Phone: (510)346-6200
Fax: (510)346-6201
Email: twiUis@rjp.com

, Deputy

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Ca&vt Nlumbur:

Attomeys for Petitioner

34-2018=80002819

6 Chad Mayes
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IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA

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COUNTY OF SACRAMENTO

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(UNLIMITED JURISDICTION)

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No.:

CHAD MAYES,

Action Filed: March 5,2018

Petitioner,

VERIFIED PETITION FOR WRIT
OFMANDATE

vs.

14 ALEX PADILLA, in his official capacity as
Secretary of State of the State of Califomia,

(Proposition 70)

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Respondent.

ELECTION MATTER - IMMEDIATE
ACTION REQUESTED
[Elec. Code, § 13314]

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17 DAVID GERALD HILL, in his official capacity
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as State Printer of the State of California, and
XAVIER BECERRA, in his official capacity as
Attomey General of the State of Califomia,

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Real Parties in Interest.

Writ Hearing:
Date:
Time:
Dept.:

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(The Honorable

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VERIFIED PETITION FOR WRIT OF MANDATE

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Petitioner CHAD MAYES petitions this Court pursuant to Califomia Govemment Code
section 88006 and Elections Code sections 9092 and 13314 for a writ of mandate directed to
respondent ALEX PADILLA, Secretary of State for the State of Califomia, to revise the proposed
copy for the ballot pamphlet for the June 5,2018, statewide election.

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By this verified petition, petitioner alleges:

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1.

Califomia and is now and has been at all relevant times a registered voter of the State of Califomia.
Assemblymember MAYES currently represents the 42nd Assembly District in the Califomia
Legislature. Assemblymember MAYES is the author of Assembly Constitutional Amendment No. 1
(ACA 1), which will be voted on by the electorate at the June 5,2018, statewide election as
Proposition 70.

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2.

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sections 88000-88002 to prepare and distribute to the voters of Califomia a ballot pamphlet for each
statewide election. Mr. PADILLA is sued in his official capacity only.
3.

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Real party in Interest DAVID GERALD HILL is the Califomia State Printer.

The State Printer is designated by Elections Code section 9082 to print the ballot pamphlet, and is
required by Elections Code section 9092 to be named as a real party in interest in any writ of mandate
seeking to amend or delete any copyfromthe ballot pamphlet. Mr. HILL is sued in his official
capacity only.

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Respondent ALEX PADILLA is the Secretary of State of the State of Califomia.

The Secretary of State is directed by Elections Code sections 9081 -9096 and Govemment Code

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Petitioner CHAD MAYES is a resident of the County of San Bemardino,

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Real Party in Interest XAVIER BECERRA is the Attomey General of the State

of Califomia. The Attomey General is directed by Elections Code sections 9003 and 9050 to prepare a
Title and Summary and Ballot Title for each initiative. Mr. BECERRA is sued in his official capacity
only.
5.

This Court has jurisdiction over this matter pursuant to Elections Code

sections 9092 and 13314 and Code of Civil Procedure sections 1085, et seq.
6.

The proper venue for this action is the County of Sacramento pursuant to

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VERIFIED PETITION FOR WRIT OF MANDATE

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Elections Code sections 9092 and 13314.
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On July 17,2018, the Legislature passed a resolution placing ACA 1 on the

ballot as part of a comprehensive, bipartisan agreement to extend Califomia's market-based
mechanism to reduce greenhouse gas emissions through 2030. Under the current program, the State
issues a limited number of allowances (emission permits) that large greenhouse gas emitters may
purchase on an open market auction or on a private market. Revenuesfromthe auction of these
permits are placed in the Greenhouse Gas Reduction Fund (GGRF) and may be appropriated as part of
the annual budget by a majority vote of the Legislature. Thefimdsare required to be spent on state
and local programs to reduce greenhouse gas emissions.
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ACA 1, which wdll appear on the June 2018 ballot as Proposition 70, would

require, begirming in 2024, that the revenue generatedfromthe auction of emission permits instead be
deposited in the Greenhouse Gas Reduction Reserve Fund (Reserve Fund) until the effective date of a
bill that contains an appropriationfromthe Reserve Fvmd. The bill must be approved by a two-third
vote of each house of the Legislature and thefimdsmust be appropriated for the "same piuposes"
applicable to the GGRF on January 1,2024. Ex. A, (Text of Prop. 70, Cal. Const., art. XX, § 24(c).)
After the effective date of the legislation, the requirement that the revenues accumulate in the Reserve
Fimd expires, and the auction revenues would again be deposited in the GGRF, subject to
appropriation by the Legislature by majority vote. Thus, Proposition 70 changes the vote threshold for
a one-time appropriation of auction revenues after January 1,2024, but does not change the underlying
requirements for how thosefimdsmay be spent. See Proposed Cal. Const., art XX, § 24(c) (fimds in
the Reserve Fimd shall be used "for the same purposes applicable on January 1,2024, to the
Greenhouse Gas Reduction Fund ...").
9.

On Febmary 20,2018, respondent PADILLA, acting pursuant to Govemment

Code section 88006 and Elections Code section 9092, made available for public inspection the final
proposed copy for the ballot pamphlet to be used for the June 5,2018, election. The 20-day period
specified by Govemment Code section 88006 and Elections Code section 9092 for public examination
of and challenges to the proposed ballot pamphlet copy will expire on March 12, 2018. The Secretary

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VERIFIED PETITION FOR WRIT OF MANDATE

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of State's office has stated that March 12,2018, is the latest date on which it plans to deliver the final
ballot pamphlet copy to DAVID GERALD HILL, the State Printer, who is named as a real party in
interest here as required by Govenmient Code section 88006 and Elections Code section 9092.
BECERRA is also named as a real party in interest as required by Elections Code section 9092 because
his office drafted the copy being challenged in this case.

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10.

Proposition 70 includes the followdng sections, tme and correct copies of which are attached separately
as exhibits to this petition and incorporated herein by reference:

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Exhibit A: the text of Proposition 70;

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Exhibit B: the Ballot Title and Summary prepared by Xavier Becerra, Attomey General
of the State of Califomia;

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Exhibit C: the Ballot Label prepared by Xavier Becerra, Attomey General of the State
ofCalifomia; and

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Exhibit D: the Legislative Analyst's Office Analysis of Proposition 70.

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The ballot pamphlet copy released by respondent PADILLA respecting

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Pursuant to Govenmient Code section 88006 and Elections Code section 9092,

petitioner brings this petition for writ of mandate to require the amendment of portions of the Attomey
General's Ballot Title and Summary and Ballot Label for Proposition 70 on the groimds that they are
false, misleading, and would cause prejudice against Proposition 70.

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STATEMENTS BEING CHALLENGED

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BALLOT T I T L E AND SUMMARY

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12.

The followdng Ballot Title and Summary of Proposition 70 is false, misleading,

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and likely to cause prejudice against Proposition 70, and therefore should be amended in the ballot

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pamphlet:

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LIMITS LEGISLATURE'S AUTHORITY TO USE CAP-ANDTRADE REVENUES TO REDUCE POLLUTION. LEGISLATIVE
CONSTITUTIONAL AMENDMENT.

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Beginning in 2024, cap-and-trade revenues wdll accumulate in a
special fimd.

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VERIFIED PETITION FOR WRIT OF MANDATE

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• These cap-and-trade revenues caimot be used unless the
Legislature authorizes such use by a two-thirds majority.

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On the effective date of any such authorization, the requirement
that new revenues accumulate in this special fimd wdll expire.

• Suspends certain tax exemptions, including for equipment used in
manufacturing and research and development, begirming in 2024,
until the effective date of any such authorization.

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Ex. B (Prop. 70 Ballot Title and Summary).
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The Ballot Title and Summary, particularly the title, "LIMITS

8 LEGISLATURE'S AUTHORITY TO USE CAP-AND-TRADE REVENUES TO REDUCE
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POLLUTION", is false, misleading, and likely to cause prejudice against Proposition 70 for two

10 reasons. First, the title and simunary mischaracterize ACA 1 as placing a "limit" on the Legislature's
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authority to use auction revenue to reduce pollution. In fact. Proposition 70 simply requires a higher

12 vote threshold (two-thirds instead of a majority) for a one-time appropriation in 2024. Furthermore,
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the bolded title in particular, and title and summary in general, suggest that the change is permanent

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rather than making clear that the higher threshold applies only once, to an appropriation in 2024.

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Proposition 70 in no way "limits" the Legislature currently. Second, and perhaps more problematic,

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the title is misleading because it implies Proposition 70 limits or prohibits the Legislature from

17 "us[ing]" the auction revenue to reduce pollution or greenhouse gas emissions, when in fact the exact
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opposite is tme. Under current law, revenues generatedfromthe auction of emission permits are

19 placed in the GGRF, and those funds may only be used for programs that facilitate greenhouse gas
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reductions. Health & Safety Code, § 39712(b) (GGRFfimdsmust be "used to facilitate the

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achievement of reductions of greenhouse gas emissions in this state"), § 39716(3)(A) (Department of

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Finance submits to Legislature three-year investment plan that "identify priority programmatic

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investments of moneys that will facilitate the achievement of feasible and cost-effective greenhouse

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gas emissions reductions" to meet the state's overall reduction goals), § 39719(a) ("the Legislature

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shall appropriate the aimual proceeds of thefimdfor the purpose of reducing greenhouse gas emissions

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in the state in accordance with the requirements of Section 39712."). Proposition 70 requires that the

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revenues in the Reserve Fund be appropriated for the "same purposes." Ex. A (Text of Prop. 70, Cal.

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Const., art. XX, § 24(c).).
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VERIFIED PETITION FOR WRIT OF MANDATE

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While Proposition 70 requires that as of January 1, 2024,fimdscollected from

auctions be deposited in the Reserve Fund and are subject to a two-thirds vote of each house of the
Legislature, it does not change the requirement that thefimdsbe spent to reduce greenhouse gas
emissions under the provisions that apply to GGRF. Proposition 70 states that money in the Reserve
Fund shall be used "for the same purposes applicable on January 1,2024, to the Greenhouse Gas
Reduction Fvmd." Ex. A at 2. The LAO's Analysis confirms this: "The measure also requires that the
money in the Reserve Fimd be used to fimd the same general types of programs that could be fimded
by the GGRF on January 1,2024." Ex. D at 2-3. Thus, Proposition 70 changes the vote threshold
(from majority to two-thirds) for a one-time appropriation of revenues collected on or after January 1,
2024, but it does not change the underlying requirements goveming how thefimdsare spent. Yet the
title drafted by the Attomey General falsely and misleadingly implies the Legislature is somehow
"limited" from using those fimds to pay for programs to reduce pollution or greenhouse gas emissions.
15.

The Supreme Court has emphasized the need to "avoid misleading the public

wdth inaccurate information." Amador Valley Joint Union High School Dist. v. State Board of
Equalization, 22 Cal. 3d 208, 243; see also McDonough v. Superior Court, 204 Cal. App. 4th 1169,
1174 (2012) (issuing writ of mandate ordering biased ballot label to be altered); Huntington Beach City
Council V. Superior Court, 94 Cal. App. 4th 1417,1433-34 (2002) (modifying ballot label because
original label was "insufficiently neutral").

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Therefore the title should be amended as follows (changes in italics):

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REQUIRES THE LEGISLATURE TO APPROVE A GREENHOUSE
GAS REDUCTION RESERVE FUND SPENDING PLAN BY A
SUPERMAJORITY VOTE IN 2024. LEGISLATIVE
CONSTITUTIONAL AMENDMENT.
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Beginning in 2024, money from the state's market-based
compliance mechanism will accumulate in a special reserve fund.

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These moneys will be held in the reserve fund until a two-thirds
majority of the legislature authorizes a spending plan.

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On the effective date of any such authorization, the requirement
that new revenues accumulate in this special fimd wdll expire.

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VERIFIED PETITION FOR WRIT OF MANDATE

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Suspends certain tax exemptions, including for equipment used in
manufacturing and research and development, beginning in 2024,
until the effective date of any such authorization.
BALLOT LABEL

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The followdng statement in the Ballot Label is false, misleading, and likely to

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cause prejudice against Proposition 70 and should be amended in the ballot pamphlet:

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LIMITS LEGISLATURE'S AUTHORITY TO USE CAP-ANDTRADE REVENUE TO REDUCE POLLUTION. LEGISLATIVE
CONSTITUTIONAL AMENDMENT.

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Beginning in 2024, requires that cap-and-trade revenues accumulate in a
special fimd until tiie Legislature, by a two-thirds majority, authorizes use
of the revenues. Fiscal Impact: Beginning in 2024, potential temporary
increase in state sales tax revenue i-anging from none to a few hundred
million dollars annually, and possible changes in how revenue from sale of
greenhouse gas emission permits is spent.

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Ex. C (Prop. 70 Ballot Label).
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The Ballot Label is false, misleading and likely to cause prejudice against
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Proposition 70 for precisely the same reasons that the ballot title and summary is false and misleading.
Therefore, it should be changed as follows (changes in italics):

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REQUIRES THE LEGISLATURE TO APPROVE A GREENHOUSE
GAS REDUCTION RESERVE FUND SPENDING PLAN BY A
SUPERMAJORITY VOTE IN 2024. LEGISLATIVE
CONSTITUTIONAL AMENDMENT
Beginning in 2024, money from the state's market-based compliance
mechanism will accumulate in a special reserve fund. These moneys will
be held in the reserve fund until a two-thirds majority of the legislature
authorizes a spending plan.
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Unless ordered otherwise by this Court, respondent PADILLA wdll, on or about

March 12,2018, submit to the State Printer the proposed ballot pamphlet copy described above.

22 Petitioner has no speedy or adequate remedy at law other than the mandate action authorized by
23 Government Code section 88006 and Elections Code section 9092. Unless this Court orders
24 amendments to the ballot pamphlet copy described above, petitioner wdll suffer irreparable injury and
25 damage in that false, misleading, and not impartial statements wdll be distributed to voters and wdll
26 have irreparable effects on the outcome of the vote on Proposition 70.
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VERIFIED PETITION FOR WRIT OF MANDATE

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CAUSE OF ACTION

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fWrit of Mandate)
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Petitioner incorporates by reference each and every allegation made in

paragraphs 1-18 above as though fully set forth herein.
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Accordingly, petitioner is entitled to a writ of mandate amending the false,

misleading, and prejudicial statements contained in the Ballot Title and Sununary and Ballot Label for
Proposition 70.
WHEREFORE petitioner prays:
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That this Court issue a writ of mandate compelling respondent BECERRA, his

officers, agents and all other persons acting on his behalf and through his orders, to amend the abovedescribed sections according to proof and as set forth herein;
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For costs of suit, including reasonable attomey's fees; and

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For such other and further relief as the Court deems just and equitable.

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Dated: March 5, 2018

Respectfiilly submitted,
James C. Harrison
Thomas A. Willis
REMCHO, JOHANSEN & PURCELL, LLP

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By:
Thomas A. Willis
Attomeys for Petitioner Chad Mayes

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VERIFIED PETITION FOR WRIT OF MANDATE

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VERIFICATION

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I, Chad Mayes, hereby declare as follows:

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I am the petitioner in this action. I have read the foregoing Petition for Writ of Mandate

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and know the contents thereof I certify that the same is tme of my own personal knowledge.

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1 declare under penalty of perjury that the foregoing is tme and correct. Executed this
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day of March, 2018, at ^Ng<^»>1gUf?I Califomia.

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CHAD M

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VERIFICATION

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PROOF OF SERVICE

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I, the undersigned, declare under penalty of perjury that:

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I am a citizen of the United States, over the age of 18, and not a party to the within
cause of action. My business address is 1901 Harrison Street, Suite 1550, Oakland, CA 94612.

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On March 5,2018,1 served a tme copy of the following document(s):
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Verified Petition for Writ of Mandate

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on the followdng party(ies) in said action:
Steven Reyes
Chief Counsel
Secretary of State
1500 11th Street
Sacramento, CA 95818
Phone: (916)651-8297
Email: steve.reyes@sos.ca.gov
Xavier Becerra
Attomey General
Office of the Attomey General
13001 Street
Sacramento, CA 95814
Phone: (916)445-9555
David Gerald Hill
State Printer of the State of Califomia
Office of State Publishing
344 North 7th Street
Sacramento, CA 95811-0212
Q

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BY UNITED STATES MAIL: By enclosing the document(s) in a sealed
envelope or package addressed to the person(s) at the address above and
I I depositing the sealed envelope wdth the United States Postal Service, wdth
the postage fully prepaid.
EH placing the envelope for collection and mailing, followdng our ordinary
business practices. I am readily familiar with the business's practice for
collecting and processing correspondence for mailing. On the same day
that correspondence is placed for collection and mailing, it is deposited in
the ordinary course of business wdth the United States Postal Service,
located in Oakland, Califomia, in a sealed envelope wdth postage fully
prepaid.

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Attorney for Respondent Secretary of State
Alex Padilla

BY OVERNIGHT DELIVERY: By enclosing the document(s) in an envelope
or package provided by an ovemight delivery carrier and addressed to the persons
at tiie addresses listed. I placed the envelope or package for collection and
ovemight delivery at an office or a regularly utilized drop box of the ovemight
delivery carrier.

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PROOF OF SERVICE

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BY MESSENGER SERVICE: By placing tiie document(s) in an envelope or
package addressed to the persons at the addresses listed and providing them to a
professional messenger service for service.

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BY PROCESS SERVER: By placing tiie document(s) in an envelope or
package addressed to the persons at the addresses listed and providing them to a
professional process server for service.

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BY FACSIMILE TRANSMISSION: By faxing tiie document(s) totiiepersons
at the fax numbers listed based on an agreement of the parties to accept service by
fax transmission. No error was reported by the fax machine used. A copy of the
fax transmission is maintained in our files.

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BY EMAIL TRANSMISSION: By emailing tiie document(s) to tiie persons at
the email addresses listed based on a court order or an agreement of the parties to
accept service by email. No electronic message or other indication that the
transmission was unsuccessful was received wdthin a reasonable time after the
transmission.

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I declare, under penalty of perjury, that the foregoing is tme and correct. Executed on

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Michael Narciso
(00335305-6)

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PROOF OF SERVICE

 EXHIBIT A

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TEXT OF 
PROPOSITION 70



 

This amendment proposed by Assembly Constitutional Amendment 1 of the 2017-2018 Regular
Session (Resolution Chapter 105, Statutes of 2017) expressly amends the Califomia Constitution
by adding a section thereto; therefore, new provisions proposed to be added are printed in italic
type to indicate that tiiey are new.
PROPOSED AMENDMENT TO ARTICLE XX

SUBJECT TO COURT
ORDERED CHANGES
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 9—-

Res. CU los)
WHEREAS, The State Air Resources Board adopted the market-based
compliance mechanism, known as the Cap-and-Trade Program, which is
the most cost-effective means to assist tlie state in reaching tlie statewide
emissions reduction targets by allocating allowances to represent greenhouse
gas emissions and decreasing the number of allowances over time; and
WHEREAS, The market-based compliance mechanism includes the
distiibution of a portion ofthe allowances by auction and reseive sales, the
proceeds of which the Legislature has directed to be deposited in the
Greenhouse Gas Reduction Fund; and
WHEREAS, The projects funded by moneys derived from tiie auction
or sale of allowances, among other tilings, assist farmers in maldng changes
needed to reduce emissions; enable residejits to invest in enei-gy efficiency
and renewable energy upgrades; improve air quality for millions of residents,
especially in our most polluted communities; support low- and zero-cai'bon
transportation alternatives and sustainable communities; and enhance natural
resources, including healthy forests and pai'ks; and
WHEREAS, Moneysfromthe sale of allowances must continue to achieve
additional emissions reductions and provide benefits to low-income and
disadvantaged communities; and
WHEREAS, It is vital to protect the integrity of the Cap-and-Trade
Program; and
WHEREAS, The Legislature,representinga diverse rangeof Califomians,
should assess the efficacy of the programs funded by the Cap-and-Trade
Program to ensure those programs are furthering the state's ambitious plan
to reduce greenhouse gas emissions to 40 percent below 1990 levels by
2030; now, therefore, be it
Resolved by the Assembly, iim Senate concurring, That the Legislatuj'e
ofthe State of California at its 2017-18 Regular Session commencing on
thefifthday of December 2016, two-tliirds of the membership of each house
concurring, hereby proposes to the people of the State of Caiifornia that the
Constitution of the State be amended as follows:
That Section 24 is added to Article XX thereof, to read:
SEC. 24. (a) The GreehRouseTjS RedlicfiM Res^^^
created as a special fund in the State Treasuiy.
(b) For the time period specified in subdivision (d) only, all moneys
collected by the State Air Resources Board from the auction or sale of
allowances pursuant to a mai'ket-based compliance mechanism established
pursuant to the California Global Wanning Solutions Act of2006 (Division
25.5 (commencing with Section 38500) of the Health and Safety Code)
shall be deposited in the Greenhouse Gas Reduction Reserve Fund.
(c) Notwithstanding any other provision of this Constitution, moneys in
the Greenhouse Gas Reduction Reserve Fund shall be available upon
appropriation by the Legislature by rollcall vote entered in the journal,
two-thirds of the membership of each house concurring, for the same
purposes applicable on January 1, 2024, to the Greenhouse Gas Reduction
Fund, createcy)ursuanlLo.Se^

-X+a,\

SUBJECT TO COURT
ORDERED CHANGES
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 (;RCS. Ch. IOS}--'

(d) Subdivision (b) shall apply beginning January 1,2024, and until the
effective date of legislation that contains an appropriation from the
Greenhouse Gas Reduction Reserve Fund, After the effective date of that
legislation, all new moneys collected piu-suant to a market-based compliance
mechanism shall be deposited in the Greenhouse Gas Reduction Fund,
created pursuant to Section 16428.8 of the Government Code.
(e) Section 6377.1 of the Revenue and Taxation Code shall not apply to
sales that occur while the moneys specified in subdivision (b) are being
deposited in the Greenhouse Gas Reduction Reserve Fund, but shall resume
on the effective date of legislation identified in subdivision (d).

SUBJECT TO COURT
ORDERED CHANGES

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 EXHIBIT 

Proposition 70

February 2,2018
ACA 1 Resolution Chapter 105 (2017). Mayes.
BALLOT TITLE AND SUMMARY

LIMITS LEGISLATURE'S AUTHORITY TO USE CAP-AND-TRADE REVENUES TO
REDUCE POLLUTION. LEGISLATIVE CONSTITUTIONAL AMENDMENT.
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Beginning in 2024, cap-and-trade revenues will accumulate in a special fund.

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These c^-and-trade revenues cannot be used unless the Legislature authorizes such use
by a two-thirds majority.

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On the effective date of any such authorization, the requirement that new revenues
accumulate in this special fund will expire.

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Suspends certain tax exemptions, including for equipipent uged in manufacturing and
research and development, beginning in 2024, until the .effective, date of any such
autliorization.

Summary of Legislative Analyst's Estimate of Net State and Local Government Fiscal
Impact:
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Potential temporary increase in state sales tax revenuefromthe sale of manufacturing and
certain other equipment beginning in 2024. Amount could range from no increase to a
few hundred million dollars annually.

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Possible change in the mix of cap-and-trade funding provided to state and local programs.

OFFICIAL TITLE AND
SUMMARY PREPARED BY
THE ATTORNEY GENERAL

SUBJECT TO COURT
ORDERED CHANGES

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 EXHIBIT 

Proposition 70

February 2,2018
ACA 1 Resolution Chapter 105 (2017). Mayes.
BALLOT LABEL

LIMITS LEGISLATURE'S AUTHORITY TO USE CAP-AND-TRADE REVENUE TO
REDUCE POLLUTION. LEGISLATIVE CONSTITUTIONAL AMENDMENT.
Beginning in 2024, requires that cap-and-trade revenues accumulate in a special fund until the
Legislature, by a two-tiiirds majority, authorizes use of the revenues. Fiscal Impact: Beginning
in 2024, potential temporaiy increase in state sales tax revenue, ranging from none to a few
hundred million dollars annually, and possible changes in how revenuefromsale of greenhouse
gas emission permits is spent.

OFFICIAL TITLE AND
SUMMARY PREPARED BY
THE ATTORNEY GENERAL

SUBJECT TO COURT
ORDERED CHANGES
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 EXHIBIT 

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Legislative Analyst's Office
02/13/2018 1:30 P.M.
FINAL

ANALYSIS BY THE LEGISU\TIVE ANALYST
Proposition 70

ACA 1 (Resolution Chapter 105, Statutes of 2017), Mayes.
Greenhouse Gas Reduction Reserve Fund.

BACKGROUND
State's Cap-and-Trade Program

Program Aimed at Limiting Greenhouse Gases. Califomia has several programs created to
reduce the amount of greenhouse gases (GHGs) that are emitted. GHGs—^such as carbon
dioxide—contribute to global climate change and come from vaiious sources, including
gasolme-poweied cars and industrial activities. One California program to reduce GHGs is
referred to as "cap-and-trade." Under this program, which began in 2012, the state issues a
limited number of permits to emit GHGrs, Certain companies responsible for large amounts of
GHG emissions must obtain a permit for each ton of GHG they emit. The state gives about half
ofthe pennits away to certain industries for free and sells the other half at auctions. A recent
state law allows cap-and-trade to operate in California through 2030.
Revenue Collected Usedfor a Variety of Programs. Revenue collected from cap-and-trade
auctions is deposited into a state fund called the Greenhouse Gas Reduction Fund (GGRF). The
state determines how to spend money in the GGRF, usually through the annual budget process.
The money in the fund is generally used for state and local progi-ams to reduce GHGs. As shown
in Figure 1, we estimate the state will spend about $3 billion from the GGRF on various
programs in 2017-18. The state can spend money from the GGRF with a bill passed with
majority votes in both houses of the Legislature.

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FINAL

ANALYSIS BY THE LEGISLATIVE ANALYST
Figure 1

Estimated 2017-18 Cap-and-Trade Spending"
(In Millions)
Incentives for low-emission vehicles and equipment
High-Speed Rail
Affordable housing near transit
Public transit
Forestry and fire prevention
Agricultural emission reductions
Other
Total

$810
730
584
438
326
250
187
$3,324

' Assumes $9 billion In revenues In 2017-18. Amouni could ba higher or lower depending on actual
auction resulls.

Some Business Equipment Exempt From State Sales Tax

Califomia's state and local governments charge a sales tax on retdl sales of most goods.
Revenue from part ofthe sales tax goes to the state's main operating account. This part of the tax
is not charged when some businesses buy certain equipment used for such things as
manufacturing and research and development. We estimate that this "manufacturing exemption"
currently reduces state sales tax revenue by about $250 million annually. The exemption is
authorized until July 1,2030.

PROPOSAL
Creates Temporary Higher Legislative Vote Requirementfor Spending Cap-and-Trade
Revenue. This measure requires that beginning on January 1,2024, cap-and-trade revenue be
deposhed in a new state fund called the Greenhouse Gas Reduction Reserve Fund (Reserve
Fund), rather than in the GGRF. These deposits would continue until the effective date of a bill
that: (I) spends moneyfromthe Reserve Fund and (2) is passed by each house of the Legislature
with a two-thirds vote (as opposed to the majority vote currently required). The measure also
requires that money in the Reserve Fund be used to fnnd the same general types of programs that
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ANALYSIS BY THE LEGISLATIVE ANALYST

02/13/2018 i:30r>^M.

could be funded by the GGRF on January 1, 2024. After the effective date of the bill, future
revenue would go back to being deposited in the GGRF and could be spent by a majority vote of
the Legislature,
Suspends Manufacturing Exemption Until Cap-and-Trade Revenue Is Spent. This measure
suspends the manufacturing exemption beginning on January 1, 2024. While the exemption is
suspended, the fiill sales tax would be charged when businesses buy certain equipment for such
things as manufacturing and research and development. The suspension would continue until the
effective date of a bill that: (1) spends moneyfi-omthe Reserve Fund and (2) is passed with a
two-thirds legislative vote.

FISCAL EFFECTS
Potential Temporary Increase in Sales Tax Revenue Beginning in 2024. The measure
could suspend the manufacturing exemption beginning in 2024. The state would generate
additional sales tax revenue while the manufactuiing exemption is suspended. The amount of
additional revenue would depend on when the Legislature approves spending moneyfromthe
Reserve Fund with a two-thirds vote. If the Legislature approves spending the money by eai'ly
2024, there would be little or no additional revenue. However, if there was a lengthy delay, the
additional state revenue would be up to a few hundred million dollars annually.
Possible Change in Mix of Programs Funded. Beginning in 2024, the two-thirds vote
requirement could, at least temporarily, change the mix of state and local progi-ams funded by
auction revenues compared to what would otherwise occur. Any change would depend on the
future composition and spending priorities of the Legislature, which are unloiown. As a result, it
is unclear which state and local goverrmient programs mightreceivemore or less money.
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