The Coming Fight Over Cap-and-Trade Revenues

A new source of revenues is on the horizon. So is a big fight. Should average citizens get the new fees?

[LAgenerics] smoke factory greenhouse gases

In this era of perpetual budget cuts, the state faces a strange new problem on the horizon: a big new pool of revenues that is likely to produce a big fight.

That pool of revenues is expected to result from the sale of allowances to produce greenhouse gases under Calfiornia so-called "cap and trade program." Cap and trade caps the amount of pollution available -- and then auctions off available rights to polluters.

A new report from the Legislative Analyst's Office examines how this will work -- and how the money may be spent. This would be a big, if volatile, pot of money  -- at least $1 billion a year and perhaps as much as $14 billion in years.

With so many interests and projects starved for cash, expect a war over the money to ensue. Gov. Jerry Brown already has vague proposals in his budget on how to spend it -- and has suggested that this might be one source of funds for phase one of the state's beleagued high-speed rail plan. But it's unclear if this money will be -- or even can be used -- for such purposes. The LAO suggests that if the money isn't used for greenhouse gases -- essentially to mitigate the same problem, climate change, that is the target of the fee itself -- it could be considered the sort of fee that requires a two-thirds of the legislature. And when two-thirds votes are required, nothing much happens in the California legislature.

The money could be used to shore up the beleaguered state budget -- and especially the general fund. But that's complicated too--because adding new revenues to the general fund could raise the Prop 98 education funding guarantee, allowing schools to gobble up some revenues. This is the trouble with adding new revenues into a broken budget system. It's not clear what the system will produce with such revenues.

Facing such complications, the best answer might be to send the money back to Californian citizens. That would put more money in the pocket of people in a recession, and it would be fair.  We'll all pay higher prices for all kinds of goods and services that will have to be transformed in the name of reducing greenhouse gases. This refund could serve as a reimbursement.

 Let us know what you think. Comment below, send us your thoughts via Twitter @PropZero or add your comment to our Facebook page.

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