During the fall campaign, California's attention was focused on the presidential race and Gov. Jerry Brown's tax measure. But in a historic, largely overlooked environmental shift, the state's voters also triggered a multibillion-dollar tidal wave of new green spending.
By overwhelmingly passing Proposition 39, voters closed a tax loophole on out-of-state corporations that will generate $1.1 billion a year. But the measure, buried in a crowded ballot, also required that half of that money fund projects to install new windows, better insulation, modern lighting and more efficient heating and air conditioning at thousands of public schools and other government buildings over the next five years.
That windfall, roughly $550 million a year, or $2.75 billion before it sunsets in 2018, dwarfs anything that California or any other state has ever spent on energy efficiency for public buildings.
The new program is on par with the $3 billion that voters approved in 2004 for stem cell research and the $3.3 billion that former Gov. Arnold Schwarzenegger committed to his "Million Solar Roofs" plan in 2006.
Critics worry, however, that lawmakers will fritter the Proposition 39 money away because they have too much power to decide the details.
While not as flashy as money for solar or wind projects, many experts say such seemingly routine changes as weatherizing buildings and replacing leaky windows is actually one of the cheapest ways to
reduce smog, greenhouse gases and utility bills.
"If we do this well and people see it as money well spent, as an investment that should be mimicked in the private sector, then this could really be a very big deal," said Tom Steyer, a San Francisco financier who spent $32 million bankrolling Proposition 39.
U.S. schools spend $8 billion a year on energy bills. If those were cut 25 percent, it would save $2 billion, enough to buy 40 million new textbooks. Steyer sees that as easy money for cash-strapped schools, and views his ballot measure as a demonstration project for other property owners.
A 55-year-old Stanford MBA with a net worth of $1.3 billion, Steyer cofounded Farallon Capital Management in 1986 and built the company into the world's 17th largest hedge fund. In 2010, he funded a large part of the campaign to defeat a ballot measure by Texas oil companies that would have suspended California's global warming law.
His latest campaign is energy efficiency.
One of Steyer's favorite examples is the Empire State Building. Two years ago, a Sunnyvale company, Serious Materials, replaced all 6,500 windows on the New York City landmark. It was part of a $13.2 million upgrade with new insulation, lighting and ventilation, which the building's owners calculate will cut energy costs 38 percent and pay for itself in three years.
"People in the public sector often confuse expenditures and investments," Steyer said. "If you go out to dinner that's an expenditure. If you send your kid to college, that's an investment. If this money is used wisely, we will get multiples of it back in savings down the road that can be used for schools."
All the new money has some Sacramento observers nervous, however.
"Look at the High-Speed Rail Authority, the stem cell money, the tobacco tax funds and the state recycling fund," said Jon Coupal, president of the Howard Jarvis Taxpayers Association. "There have been slush funds and corruption in all of them. We have very little confidence this money will be spent effectively unless there is a sea change in Sacramento."
Proposition 39 does not spell out in much detail where the $550 million a year should be spent. It says the money should pay to retrofit schools, colleges, universities and other public buildings; it can also be used to fund job-training programs in energy efficiency -- and incentives to put solar panels on homes.
Joe Caves, a longtime environmental lobbyist who wrote the measure, said the lack of specifics is on purpose. The measure notes that the Legislature must appropriate the money, which means next year lawmakers will pass a bill to create new programs in one or more agencies like the state Department of Education or the California Energy Commission, he said. Those agencies will set up grant programs for school districts and other local governments to compete for the money.
"It's got to go through existing public agencies, and the projects have to be evaluated as cost effective," Caves said. "It's not like legislators are going to be able to say, 'I want $100,000 to go this project or $50,000 to that one.' And they can't make the grants to private businesses. We built in a lot of controls."
The measure also creates a new nine-member oversight committee of engineers, architects and economists to commission yearly audits and post the results online.
For now, Steyer said, he'd like to see much of the money go to schools.
"When you drive around California and look at the physical condition of some of the schools, it can be a little shocking, don't you think?" he said.
As soon as next week, state Sen. Kevin de Leon, D-Los Angeles, will introduce a bill to spell out how to spend the money. De Leon said he would like to see most of it go to schools, with strict criteria, such as ranking schools by kilowatt hours of electricity used.
"It's not going to be a program of pork," he said. "We are going to go to schools of highest need, schools that don't have the resources to move forward with energy-efficiency projects, and do the work there and create jobs."
De Leon said that for roughly $500,000 each, crews could retrofit half of California's 10,000 public schools using Proposition 39 money. For that amount, they could replace windows, boost insulation, and fix leaks and lighting. In some cases, they could upgrade heating and cooling systems.
A study last year by the EPA found that public schools can easily save 20 to 40 percent on utility bills -- which run in the tens of thousands of dollars a year -- through simple energy-efficiency work.
Since 2009, the California Energy Commission has doled out $132 million to retrofit public buildings. But much of that came from federal stimulus dollars that have now run out.
There are success stories: The Sacramento City Unified School District, for example, replaced lighting, put in LED exit signs and made other upgrades, saving the average high school $53,000 a year, with a payback of seven years.
One of the state's top energy experts, Stanford University engineering professor Jim Sweeney, said he's watching the rollout carefully.
"Fixing insulation and leaky windows isn't as sexy as saying, 'Look at our new solar installation,'" he said. "But for every $1 spent you will save more on energy efficiency than a solar array."
Paul Rogers covers resources and environmental issues. Contact him at 408-920-5045. Follow him at Twitter.com/PaulRogersSJMN. ___
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