The 2022-23 Budget: Green School Bus Grants

2022-23 BUDGET The 2022-23 Budget: Green School Bus Grants Summary School Districts Own Many Older Diesel Buses. Districts own nearly 16,000 school buses, nearly two-thirds of which operate on diesel fuel. More than 5,000 of the diesel buses were manufactured prior to 2007, when the latest federal emission standards took effect. Governor Proposes $1.5 Billion for Electric School Buses. The proposal would provide grants to replace existing school buses with electric buses. Districts that are small, rural, enroll high shares of disadvantaged students, or propose to replace the oldest buses would receive priority. Grant awards would begin at $500,000 and assume districts would use about $450,000 for each bus and its charging station. Districts could use the remaining $50,000 for any other school transportation expenditure. The $1.5 billion Proposition 98 General Fund proposed for this program would fund approximately 3,000 electric buses. The proposal is in addition to a similar state program created in 2021-22 and a large federal program created last November. Electric Buses Have Several Advantages but a Few Limitations. Districts currently own a couple hundred electric buses statewide. Districts generally describe them as smooth, quiet, and clean. Electric buses release no local pollutants like nitrogen oxides and particulate matter, and they reduce greenhouse gas emissions. Electric buses also reduce fuel costs for districts. The main drawback is their limited range, which can make them unsuitable for long routes and certain strenuous conditions. An electric bus also costs more than twice as much as a diesel bus. Recommend Adopting Modified Version of Governor’s Proposal. The proposal would allow the state to obtain emission reductions and lower operational costs that would benefit students and districts for many years. We recommend adopting it with several modifications: • Prioritize Replacement of the Oldest Buses. Focusing grants on replacing the oldest buses (rather than using age as one of several factors) would maximize potential air quality improvements because older buses emit more pollution. • Allow Funding for Other Types of Buses When Electric Buses Are Not Feasible. For rural and other districts in which electric buses are not feasible, providing funding to purchase nonelectric buses could achieve notable reductions in air pollution. • Eliminate Proposed Allowance for Other Transportation Expenditures. This portion of the proposal does not seem well connected with underlying costs and could discourage districts from pursuing bus replacement funding from other programs. • Provide Smaller Amount Initially and Adjust Future Funding Based on Demand. If the state allocated funding over several years, it could adjust future allocations based on district interest and progress toward replacing older buses and reducing pollution. GABRIEL PETEK | LEGISLATIVE ANALYST FEBRUARY 2022 www.lao.ca.gov 1 2022-23 BUDGET BACKGROUND In this section, we provide background on school Districts Can Operate Their Own Programs transportation in California, various types of school or Contract for Service. Districts can provide buses, state efforts to reduce greenhouse gas (GHG) school transportation in various ways. Many districts emissions, funding for school bus replacement, and operate their own transportation departments in the state appropriations limit. which employees work for the district. Some districts contract with other local educational agencies, such School Transportation as their county offices of education, neighboring State Law Authorizes School Transportation districts, or transportation joint powers authorities. Programs. State law allows school districts and other Other districts contract with private companies. local educational agencies to provide home-to-school Districts also can rely upon a mix of these options transportation for their students. (Throughout this (operating some services themselves and contracting post, we refer to all of these agencies as “districts.”) for the rest). Districts generally have the discretion to decide Approximately One in Ten Students which students qualify for transportation and the in California Receives Home-to-School organization of their bus routes. State and federal Transportation. The federal government periodically laws require districts to provide transportation in collects information about school transportation only three cases: and other travel information through the National • The federal Individuals with Disabilities Household Travel Survey. According to the 2017 Education Act requires a district to transport version of the survey, most students in California students with disabilities who require travel to school in private automobiles (Figure 1). Only transportation to access their education (such about 9 percent of students receive transportation on as students with orthopedic impairments). school buses. A comparison with the previous version of the survey indicates that school bus ridership has • The federal McKinney-Vento Homeless declined over time. In 2009, for example, the survey Assistance Act requires a district to transport found that nearly 14 percent of California students homeless students in certain circumstances, received school bus transportation. generally related to avoiding disruptions in their education. Figure 1 • State law requires a district to provide transportation assistance to low-income How California Students Get to Schoola students who have transferred into the district on interdistrict permits (if requested by their parents/guardians). Automobile 67% Many districts in California provide home-to-school transportation only for the students in one of the above groups. Districts providing transportation to Walk/Bike 20% other students generally condition eligibility on the distance students live from school. A few districts provide transportation to encourage participation School Bus 9% in specialized programs (such as magnet schools). In addition to home-to-school transportation, districts regularly transport students for field trips and Otherb 4% extracurricular activities. a Data based on most recent U.S. Federal Highway Administration Survey (2017). b Primarily includes public transit. 2 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Districts Spend About $1.8 Billion Annually • Diesel. Diesel is produced through the on Home-to-School Transportation. Districts refinement of crude oil, a common fossil reported spending $1.8 billion on home-to-school fuel extracted from natural underground transportation in 2019-20. Salaries and benefits reservoirs. Diesel buses have provided the for transportation personnel, including bus drivers, primary form of school transportation in dispatchers, and mechanics account for most of California and other states since the 1950s. these expenditures. The next largest cost is fuel, A full-size diesel bus typically costs up which typically accounts for 10 percent to 20 percent to $200,000. of a district’s transportation budget. Other expenses • CNG. CNG consists primarily of methane, include parts, supplies, insurance, and training compressed to less than 1 percent of the materials. Districts pay for most of these costs using volume it occupies at standard atmospheric their local general purpose funding. A few districts pressure. Districts began adding CNG buses charge fees for home-to-school transportation, to their fleets in the late 1990s. A full-size but fee revenue generally covers a relatively small CNG bus typically costs up to $250,000. share of total transportation costs. (The $1.8 billion • Propane. Propane is a byproduct of includes spending on home-to-school transportation processing natural gas that is compressed provided by districts or private contractors, and stored as a liquid. Districts began adding but excludes spending related to field trips and propane buses to their fleets in the late 2000s. extracurricular activities.) A full-size propane bus typically costs slightly more than $200,000. School Buses School Districts Own Approximately 15,800 School Buses. Districts operating their own transportation programs are responsible for Figure 2 purchasing and maintaining school buses. State law Diesel Buses Account for Nearly requires districts to ensure their buses are registered Two-Thirds of School District Fleets and inspected on an annual basis. The available Approximately 15,800 School Buses data indicate districts currently own approximately 15,800 school buses. This total includes full-size buses designed to carry more than 50 students Propane Electric as well as smaller buses designed for as few as 10 students. Many of these buses operate on a daily basis, but some are used as spares or in other limited roles. (The total excludes approximately Gasolinea 9,000 school buses owned by contractors.) Several Types of School Buses Available. School buses can operate using various types of fuel. For full-size buses, four main options are CNG available: (1) diesel, (2) compressed natural gas Diesel (CNG), (3) propane, and (4) electricity stored in batteries on the bus. Smaller buses can use one of these options or regular gasoline. Figure 2 shows the approximate breakdown of district fleets by fuel type. Districts currently own approximately 10,200 diesel buses, which constitute nearly two-thirds of their fleets. Electric buses are the a Includes flexible fuel buses, which can operate on gasoline or a blend of gasoline and ethanol. least common, currently accounting for only a few CNG = compressed natural gas. hundred buses statewide. Below, we provide more information about each of the options available for full-size buses: www.lao.ca.gov 3 2022-23 BUDGET • Electric. An electric bus relies on the power even stricter requirements in the coming years. stored in its batteries, which are charged before In addition, many school bus manufacturers already the bus begins its route. Districts began adding sell diesel buses that emit less pollution than the electric buses to their fleets approximately five 2007 standards allow. years ago. A full-size electric bus typically costs Filters for Older Diesel Buses Address Some around $400,000. Emission Concerns. Regulations adopted by CARB require districts to retrofit older diesel school buses Diesel Bus Emissions Can Have Harmful Health with high-quality filters that trap certain emissions. Effects. Diesel buses emit several pollutants that The requirement applies to all school buses with can have negative effects on human health and the engines manufactured before 2007 and driven at environment. The most concerning pollutants are least 1,000 miles per year. The filters are at least nitrogen oxides and particulate matter. Nitrogen 85 percent effective at reducing particulate matter, oxides are a key contributor to smog, which can provided the engine is well maintained. These filters, irritate the human respiratory tract. Prolonged however, do not control the higher levels of nitrogen exposure can increase the risk of asthma and other oxide emitted by older buses. In addition, filters respiratory diseases. Particulate matter refers to tiny degrade over time and must be replaced periodically. solid particles and liquid droplets that can become embedded in the lungs or bloodstream. Sustained Propane and CNG Buses Have Low Emissions. exposure can cause breathing problems and lung Propane and CNG naturally combust more cleanly damage. Research also suggests that particulate than diesel. Newer buses powered by these fuels matter emitted by diesel engines—known as diesel tend to have emission levels significantly below the particulate matter—can increase the risk of cancer. U.S. EPA standards, and older buses also have Children are more likely than adults to experience relatively low emissions. Largely due to these lower negative health effects from these pollutants because emissions, the state historically has encouraged their bodies are still developing. (Nitrogen oxides districts to replace diesel buses with CNG and and particulate matter are known as local pollutants propane buses. because they mainly affect the areas in which they are emitted. School Figure 3 buses also emit GHGs—described Emission Requirements for in the next section—which have Heavy-Duty Vehicles Have Become Much Stricter broader climate effects.) U.S. EPA Emission Limits as a Percent of 1984 Limitsa Newer Diesel Buses Required to Meet Stringent Requirements. Prior to 1977, emissions from school 100% buses and other heavy-duty vehicles Particulate Matterb were largely unregulated. Since 80 that time, the U.S. Environmental Protection Agency (U.S. EPA) 60 has phased in strict emission requirements. The current emission Nitrogen Oxides standards apply to buses with 40 engines built in 2007 or later. As Figure 3 shows, the emissions 20 allowed for newer engines are a small percentage of earlier limits. The California Air Resources Board 1984 1991 1998 2004 2007 (CARB) also has adopted regulations a Reflects emission requirements for school buses and other heavy-duty vehicles. that will require school buses and b Reflects requirements for particulate matter smaller than 2.5 microns in width. other heavy-duty vehicles to meet U.S. EPA = United States Environmental Protection Agency. 4 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Notable Differences in Fuel Cost and Price State Goals for GHG Reduction Volatility. Different types of fuel vary in their cost. Transportation Is a Key Source of GHG Figure 4 illustrates these variations by showing the Emissions. GHGs are gases that trap heat from average retail price for diesel, propane, CNG, and the sun within the atmosphere, thereby increasing electricity in the United States over the past ten the earth’s temperature. Both natural phenomena years. Diesel and propane exhibited the highest (mainly the evaporation of water) and human prices and the greatest volatility. By contrast, activities (principally burning fossil fuels) produce CNG and electricity exhibited lower and more stable GHGs. The primary GHG emitted through human prices. (The prices in the figure reflect calculations activities is carbon dioxide. Carbon dioxide is by the U.S. Department of Energy, which adjusts for a relatively stable gas and can remain in the differences in the energy content of each fuel and the atmosphere for hundreds of years. The state’s greater efficiency of electric engines. The prices paid official statewide GHG inventory shows that by large organizations like districts can vary from human activities in California produce just over retail prices. Prices in California also tend to exceed 400 million metric tons of GHG emissions per the national average.) year. The transportation sector is responsible State Law Requires Seat Belts for All School for nearly 40 percent of these emissions (not Buses by 2035. In the late 1990s, the state enacted including emissions related to extracting and legislation to implement seat belt requirements for refining crude oil). Heavy-duty vehicles, including school buses. Specifically, the law required seat trucks, buses, and delivery vans, are responsible belts for small school buses manufactured after for about 20 percent of the GHG emissions within July 1, 2004 and large buses manufactured after the transportation sector. School buses contribute July 1, 2005. The seat belt requirement did not to the GHG emission totals for heavy-duty vehicles, apply to buses manufactured prior to these years. although they account for a relatively small share. Chapter 206 of 2018 (AB 1798, Chu) ends the Specifically, the latest available data indicate that exception for older school buses on July 1, 2035. the school buses owned by districts constitute After this date, all school buses transporting approximately 2 percent of the heavy-duty students must have seat belts. vehicles in California. Figure 4 Average Retail Price of Fuel in the United Statesa Cost Per Gasoline Gallon Equivalentb $5 Propane 4 3 Diesel CNG 2 1 Electricityc 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 a Reflects estimates prepared by the U.S. Department of Energy Alternative Fuels Data Center (AFDC). b A gasoline gallon equivalent is the amount of fuel required to match the energy content of a gallon of gasoline. c The AFDC reduces electricity prices by a factor of 3.54 based on its analysis indicating electric motors are 3.54 times more efficient than internal combustion engines. CNG = compressed natural gas. www.lao.ca.gov 5 2022-23 BUDGET State Goals for Reducing GHG Emissions. buses with electric buses. The program The Legislature has adopted laws intended to prioritized the replacement of the oldest reduce GHG emissions over time. Chapter 488 of buses, with additional consideration for 2006 (AB 32, Núñez) initially set a goal of reducing disadvantaged communities and low-income overall GHG emissions in California to 1990 levels schools. The state provided $75 million in by 2020. Chapter 249 of 2016 (SB 32, Pavley) Proposition 39 (2012) funds for the program. established a statewide GHG limit of 40 percent • Volkswagen Environmental Mitigation below 1990 levels by 2030. Although the state met Trust. This one-time program provides grants its initial goal ahead of schedule, the newer target to cover the full cost (districts) or most of the is substantially more ambitious. (The Governor cost (contractors) to replace existing school also has an executive order establishing a goal buses with electric buses. The program of statewide carbon neutrality by 2045, but this awards funding primarily on a first-come, target is not in state law.) The state has established first-serve basis. The program has $130 million a number of regulations to meet these goals. available, and the state has allocated the first One significant component is a cap-and-trade $65 million already. Program funding comes program that places an aggregate limit on from a settlement with Volkswagen over GHG emissions from large emitters. As part of the allegations that it sold vehicles designed to program, the state auctions the right to emit certain circumvent emissions testing. amounts of GHGs. The state generally uses the • Rural School Bus Pilot Project. proceeds of these auctions for activities to reduce This program provided funding for districts GHG emissions. In addition to broader regulations to replace buses more than 20 years old with like cap-and-trade, the state has many other electric and other low-emission buses. Grants requirements, standards, grants, and incentives generally covered the full cost for electric intended to reduce GHG emissions specifically in buses and most of the cost for other types the transportation sector. of buses. The program prioritized applicants located in small air districts. The state Funding for School Bus Replacement provided nearly $62 million for the program Several Programs Have Provided Funding from cap-and-trade revenues between for Bus Replacement. At least 14 programs have 2016 and 2018. provided funding for school bus replacement over the past two decades (Figure 5). Some of the 2021-22 Budget Plan Created New programs also provided funding for infrastructure Program to Fund Electric School Buses. or retrofitting older buses. Together, they have The new program has two components. The awarded grants totaling more than $1 billion. first component is administered by CARB and (Several of the programs also provide funding for will provide $400 million for districts to replace other types of vehicles, but the amounts in the 1,000 older buses with electric buses. The second table reflect the portion for school buses.) The main component is administered by the California sources of funding for these programs include state Energy Commission and will provide $50 million for General Fund, cap-and-trade revenue, and local charging infrastructure to support these buses. The air district revenue (including vehicle registration 2021-22 budget plan provided an initial allocation of fees). Some of these programs received funding on $150 million from non-Proposition 98 General Fund a one-time basis, and others are ongoing. Below, ($130 million for buses and nearly $20 million for we profile the three programs that have provided infrastructure). The state is planning to provide the the largest amounts of funding for school bus remaining $300 million (non-Proposition 98 General replacement within the past five years: Fund) over the next two years. This program supersedes the Rural School Bus Pilot Project • School Bus Replacement Program. but will retain some elements of that program, This one-time program provided grants to including priority for small and rural areas and the districts to cover the cost of replacing diesel requirement to scrap the buses being replaced. 6 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET CARB and the California Energy Commission are Federal Infrastructure Bill Included School currently developing the application procedures Bus Replacement Funding. The federal and other program guidelines. (The authorizing Infrastructure Investment and Jobs Act, enacted legislation allows the program to fund any type of in November 2021, contains $5 billion for school zero-emission school bus, but battery powered bus replacement grants. The U.S. EPA will allocate electric buses are the only technology currently the funding in installments of $1 billion per year for available to meet this requirement.) the next five years. The law sets aside half of the annual amount for electric school buses. The other Figure 5 Previous Funding for School Bus Replacement in California Amounts Through August 2021 (In Millions) Projects Funded Amount Electric Other Programa Administrator Allocatedb Period Buses Buses Infrastructure Retrofits Lower-Emission School Bus Variousc $310 Since 2001 X X Program AB 923 (vehicle registration Local air districts 237 Since 2008 X X X X surcharge for emission reductions) Clean Truck and Bus Vouchers CALSTARTd 89 Since 2010 X X (HVIP) School Bus Replacement CEC 75 Since 2019e X Program Volkswagen Environmental SJVAPCD 65 Since 2018 X Mitigation Trust Small School District and CDE 64 Since 2000f X X County Office of Education Bus Replacement Program Rural School Bus Pilot Project NCUAQMD 62 Since 2016e X X X Community Air Protection Local air districts 56 Since 2017 X X X Incentives Clean Mobility in Schools Pilot CARB 25 Since 2018 X X Project Clean Transportation Program CEC 21 Since 2012 X X Carl Moyer Program and State Local air districts 16 Since 1998 X X X Reserve Federal Diesel Emissions U.S. EPA 15 Since 2008 X X X Reduction Act Sacramento Regional Zero- SMAQMD 15 Since 2017e X X Emission School Bus Deployment Project Supplemental Environmental CARB 5 Since 2012 X X Projects for School Buses Totals $1,054 a Excludes new state program established by the June 2021 budget plan and new federal program established in November 2021. These programs have not yet allocated any funding. b Amounts reflect estimates by CARB except for Small School District and County Office of Education Bus Replacement Program. c Various iterations of this program have been managed by CARB, local air districts, and SJVAPCD. d CALSTART is a national nonprofit organization focused on clean transportation. e Program funds fully allocated and additional allocations not expected. f Reflects funding allocated from 2000-01 through the end of the program in 2012-13. HVIP = Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project; CEC = California Energy Commission; SJVAPCD = San Joaquin Valley Air Pollution Control District; CDE = California Department of Education; NCUAQMD = North Coast Unified Air Quality Management District; CARB = California Air Resources Board; U.S. EPA = United States Environmental Protection Agency; and SMAQMD = Sacramento Metropolitan Air Quality Management District. www.lao.ca.gov 7 2022-23 BUDGET half is available for any type of bus powered by Appropriations subject to the limit consist of total alternative fuels, including electric, CNG, and state tax revenues after subtracting excluded propane buses. The U.S. EPA must award grants on spending, including capital outlay, certain spending a competitive basis, but no state may receive more on emergencies, and certain subventions to local than 10 percent of the available funding in any year. governments. For the purpose of the limit, capital Districts and contractors are both eligible to apply. outlay means spending on assets that cost at least The U.S. EPA is still developing the details of the $100,000 and are expected to last at least ten program, including application procedures and the years. If the state exceeds the appropriations limit methodology for ranking applications. over any two-year period, it has excess revenues. Districts Sometimes Use Local Funds to The Legislature can respond to excess revenues Purchase School Buses. When state grants are by (1) lowering tax revenues, (2) splitting the excess unavailable or provide less than the full cost of a revenues between taxpayer rebates and one-time school bus, districts turn to local funding sources. payments to schools and community colleges, or Districts can use their local general funds to cover (3) spending more money on activities excluded the cost of school buses, including reserves they from the limit. build up over time. Some districts have been able Under Governor’s Budget, State Is $2.6 Billion to work with other local governments to obtain Above the Limit. The Governor’s budget reflects additional revenue. For example, Fresno County revenue estimates that are significantly above the has a sales tax for transportation, and the county June 2021 estimates. The Governor proposes to reserves a small portion of this revenue for school spend a large amount of the additional revenue on bus replacement. Some districts are able to obtain activities excluded from the limit, including capital small grants for bus replacement from their local outlay. Even accounting for these proposals, utilities. The availability of these local revenue however, the administration estimates the state sources varies across the state. is $2.6 billion above the limit across 2020-21 and 2021-22. If the Legislature were to spend less on State Appropriations Limit capital outlay or other excluded purposes than California Constitution Contains Limit the Governor proposes, the state would exceed on State Spending. Proposition 4 (1979) the limit by a larger amount. Prior to finalizing the established the state appropriations limit. Under upcoming budget, the Legislature will need to adopt the measure, the state must compare its limit to a plan for responding to the excess revenues. the appropriations subject to the limit each year. GOVERNOR’S PROPOSAL Proposes $1.5 Billion Grant Program to charging stations). The remaining 10 percent would Fund Electric School Buses. The proposal would be an allowance for any school transportation establish a competitive grant program for districts expenditure, including supplies, hiring incentives, to replace nonelectric school buses with electric training, administrative costs, infrastructure, buses. Applicants would receive priority if they and spending on other buses. The proposal (1) have high concentrations of low-income students also would require recipients to scrap their old and English learners, (2) propose replacing the buses within a year of receiving their new buses. oldest buses, (3) have 2,500 or fewer students, or The California Department of Education (CDE) (4) are located in rural areas. The individual grants would administer the program and develop the would start at $500,000 for the replacement of one application procedures, maximum grant amounts, bus. The proposal would require recipients to use and other details. The Governor’s budget proposes at least 90 percent of their grant for purchasing $1.5 billion in one-time Proposition 98 General the electric bus and related infrastructure (such as Fund for the program, with the funding attributable 8 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET to 2021-22. The administration estimates this appropriations limit. (Each electric bus and charging funding would allow districts to replace 3,000 older station together costs more than $100,000 and has buses with electric buses. a useful life of more than ten years.) This scoring Scores Most of the Proposal as a State allows the state to reduce its appropriations subject Appropriations Limit Exclusion. The budget to the limit by $1.35 billion (90 percent of the identifies the amount reserved for purchasing proposed grant amount). The budget identifies the electric school buses and related infrastructure remaining $150 million (the portion available for any as excludable capital outlay under the state transportation expenditure) as spending that counts toward the appropriations limit. ASSESSMENT In this section, we review the benefits and Electric Buses Would Reduce Air limitations of electric buses, assess the demand for Pollution, Especially if Replacing Older Buses. bus replacement funding, and identify a few fiscal Electric buses produce no tailpipe emissions while considerations for the state and districts. transporting students because they rely on the power stored in their batteries instead of internal Benefits and Limitations of combustion. Replacing another type of bus with Electric Buses an electric bus would eliminate the emission of Districts Generally Report Positive nitrogen oxides and particulate matter. The lower Experience With Electric School Buses. emissions could benefit students and drivers, We spoke with a handful of districts that as well as people and natural environments purchased electric buses and asked them about located near bus routes. The greatest potential their experiences. Districts indicated the buses improvements would involve replacing older diesel provided smooth, clean, and quiet transportation buses manufactured under the pre-2007 emission for their students. Districts also appreciated that standards. Available data suggest that districts own electric buses reduced their fuel costs. In a few more than 5,000 diesel buses manufactured before cases, districts were exploring the possibility of these standards took effect, including a couple obtaining additional financial benefits through hundred buses manufactured prior to 1991 (when “vehicle-to-grid” arrangements with their local emission standards were substantially less utilities. (Under these arrangements, the buses stringent). Replacing these buses could reduce the remain connected to the grid when not in use emission of nitrogen oxides significantly, as existing and the utility uses the batteries on the bus to filter requirements do not mitigate these emissions. help manage demand for electricity.) Electric bus Electric Buses Would Reduce GHG engines also contain significantly fewer moving Emissions. Figure 6 on the next page displays parts than traditional engines, potentially allowing the estimated annual GHG emissions for various districts to obtain savings on maintenance. types of school buses. The amounts reflect However, districts expressed less agreement estimates by the Argonne National Laboratory using about maintenance savings. Most reported default assumptions about fuel and other factors lower maintenance costs, but a few said that for school buses driven 12,000 miles per year in a few costly repairs had negated the expected California. The GHG emissions reflect estimates on savings. Other districts said their electric buses a “well-to-wheel” basis, meaning they account for were so new that they were unsure about future emissions produced indirectly. For example, the maintenance savings. estimate for electric buses includes GHG emissions attributable to the electricity required to charge the batteries on the bus. As the figure shows, GHG emissions for an electric school bus are www.lao.ca.gov 9 2022-23 BUDGET approximately one-third of the amount attributable all district buses) are more than 20 years old. These to a diesel bus. Research by CARB, which accounts buses are already operating beyond the typical for additional California-specific factors (such as lifespan of a school bus. (Industry sources often state emission standards), suggests an even larger assume a lifespan of 12 to 15 years for school buses difference. Specifically, CARB estimates that GHG operated on a regular basis.) Even if these older emissions for an electric bus are about 15 percent buses are well maintained and used only as spares, of the emissions generated by a diesel bus. districts generally will have to replace them before Electric Buses Have Limited Range. The main 2035 to meet the seat belt requirement. Retrofitting limitation for electric school buses is the limited an older bus with seat belts generally is not possible range they can operate between charges. Early because it involves working on the frame of the models often had a maximum range between bus. Bus frames are designed to dissipate strong 70 and 90 miles. Recent models have longer forces and modifications potentially could affect their ranges, often between 120 and 150 miles. These performance in a collision. ranges, however, assume relatively favorable driving Recent Programs Funding School Bus conditions. Strenuous conditions—such as driving in Replacement Have Been Oversubscribed… mountainous terrain—can reduce the range. Weather Recent school bus replacement programs have conditions are another factor because the heat and received more applications than they could fund. air conditioning systems draw additional power The School Bus Replacement Program administered from the batteries. Other factors affecting the range by the California Energy Commission received include the number of stops along the route and requests for 1,549 electric buses from 196 districts. the behavior of the driver. Buses powered by diesel, The $75 million available for the program funded CNG, or propane all have significantly longer ranges 236 buses for 63 districts. The Volkswagen than electric buses. Environmental Mitigation Trust received requests for Costs for Charging Stations and Electrical nearly 500 electric buses and the $65 million available Connections. In addition to the cost of buses, districts incur a few other costs when they add Figure 6 electric buses to their fleets. Most notably, districts must purchase charging stations. Relatively Annual GHG Emissions Much expensive stations can cost around $50,000, but Lower for Electric School Busesa have the ability to charge a bus completely in a Short Tons Per Year few hours. Other stations cost less, but require six to eight hours to charge a bus. In addition, 25 districts typically must upgrade their connection to Type of School Bus the electrical grid. The cost of an upgrade varies 20 depending on the condition of existing infrastructure and the amount of construction and trenching 15 involved. In some cases, utilities may contribute to the cost of the upgrade. Other costs, such as training for 10 drivers and mechanics, tend to be modest compared with the infrastructure costs. 5 Demand for Electric Buses and Bus Replacement Electric CNG Diesel Propane District Will Need to Replace a Significant a Reflects estimates developed by the Argonne National Laboratory for the Number of Buses in Coming Years. Districts own Alternative Fuel Life-Cycle Environmental and Economic Transportation a significant number of buses that they will need Tool for school buses driven 12,000 miles per year in California. to replace in coming years. Available data suggest GHG = greenhouse gas and CNG = compressed natural gas. that more than 4,000 buses (almost one-quarter of 10 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET for the first round of applications allowed it to fund for many years after it allocates the funding. The approximately 80 buses. The Rural School Bus Pilot potential benefits from electric buses, including lower Project received requests for nearly 600 electric pollution, reduced GHG emissions, and decreased and nonelectric buses and the $62 million available operating costs, would last for the lifespan of those allowed it to fund approximately 180 buses. buses. Some other potential uses of one-time …But Interest Specifically in Electric Buses Proposition 98 funding, by contrast, might produce Seems to Vary Notably Across Districts. Although short-term benefits that would last only until the funds districts will need to replace a significant number expire. The proposed grants also would provide of buses in coming years, their interest in electric near-term cost relief for districts by covering bus buses varied. A few urban and suburban districts replacement costs they might otherwise pay from indicated that electric buses could replace significant their local operating budgets. For the state, the portions of their fleets. Rural districts, however, proposed grants qualify as excluded expenditures generally indicated that their interest would be limited under the state appropriations limit. to obtaining a few electric buses for shorter routes. Assumptions About Buses and Charging These districts cited concerns about the length of Stations Generally Reflect Current Prices. their routes and strenuous operating conditions The administration developed its proposal assuming as reasons for not adopting electric buses. These districts could purchase an electric bus for about districts indicated they likely would retain the diesel $400,000. Based on our review of other school buses in their fleets even if the state offered to cover bus replacement programs and our interviews with the cost for electric buses. districts that recently purchased electric buses, we Governor’s Proposal Assumes Very High think this assumption reasonably reflects the current Demand for Electric Buses. The Governor’s price of a full-size electric bus. Smaller electric proposal is in addition to several other funding buses typically cost less, but we assume CDE could sources available to fund electric school buses, make some allowance for these differences when including (1) the state program created in the 2021-22 it implements the program. The administration also budget plan, which will provide $450 million over the assumes districts would purchase a charging station next three years; (2) the new federal program, which for each bus at a cost of approximately $50,000. This potentially could provide a few hundred million dollars amount seems to correspond with current prices, for California districts over the next five years; and assuming districts purchase relatively expensive (3) a few smaller existing programs, which potentially stations that can charge their buses in a few hours. could provide tens of millions of dollars to a more Concerns With Proposed Allowance for Other than a hundred million dollars over the next several Transportation Expenditures. The 10 percent years. Across all of these programs, the total amount allowance for other transportation expenditures does available for electric buses over the next several years not seem well connected with underlying costs. The likely would range from $2 billion to $2.5 billion— main costs for an electric bus consist of the bus itself roughly double the amount for all school bus and related electrical infrastructure. Given that the replacement programs combined over the past two proposed grants generally would cover these costs, decades. It would represent enough funding to cover we think the state could expect districts to cover the full cost of 4,500 to 5,500 full-size electric school other expenses with their local funds. Districts do buses, including their charging stations. Implicitly, the sometimes express concern about the high ongoing Governor’s proposal assumes that within a few years, cost of providing home-to-school transportation, but the average district would replace roughly one-third of additional one-time funding seems unlikely to address its existing fleet with electric buses. this issue. In addition, the allowance could discourage districts from applying for federal funding and the Fiscal Considerations state program created in the 2021-22 budget plan. Proposal Could Provide Benefits for Students Neither of these programs contains an additional and Districts Over Multiple Years. Using one-time allowance, and districts might forego these programs funds for capital outlay and other infrastructure if they believed they would qualify for the grants the often allows the state to obtain benefits that last Governor proposes. www.lao.ca.gov 11 2022-23 BUDGET RECOMMENDATIONS Adopt Modified Version of Governor’s allowed districts to purchase nonelectric buses if Proposal. The Governor’s proposal would allow they could provide information about their routes the state to use one-time funding to support school and a consultation with an electric bus dealer transportation service that many students and demonstrating that electric buses would be districts find beneficial. The potential benefits of infeasible. Funding a nonelectric bus might not electric buses, including lower levels of pollution, reduce GHG emissions significantly, but could reduced GHG emissions, and decreased operating provide significant reductions in local pollutants like costs, could last for many years. The up-front costs nitrogen oxides and particulate matter. for an electric bus and its charging station are more Eliminate Proposed Allowance for Other than twice the cost of a diesel bus, and state grants Transportation Expenditures. We recommend likely would accelerate the adoption of electric the Legislature eliminate the portion of the grant buses. Some aspects of the proposal, however, providing funding for costs not directly related could be improved. In the remainder of this to the bus or its infrastructure. Eliminating this section, we recommend several modifications to allowance would create parity with other bus (1) achieve greater reductions in pollution, (2) allow replacement programs and avoid creating more districts to use the program, (3) improve incentives for districts to forego those programs. fiscal incentives, and (4) adjust funding based on Given that the proposed grants would cover the district interest. entire cost of the bus and charging station, we think Prioritize Replacement of the Oldest Buses. the state could expect districts to pay for other Whereas the Governor proposes four criteria costs out of their local budgets. that would give districts priority for funding, Provide Smaller Amount Initially and Adjust we recommend modifying the proposal so that Future Funding Based on Demand. Whereas it prioritizes replacing the oldest buses first. the Governor proposes to provide $1.5 billion for This modification would increase the potential the program immediately, we recommend the reductions in air pollution by focusing the program Legislature plan to allocate funding over multiple on replacing buses manufactured under less years and begin with a smaller amount. This stringent emission standards. Under this approach, approach would allow the state to adjust future the state could retain other considerations funding based on district interest and the progress (such as preference for rural schools or schools the state makes toward its goals for replacing with high numbers of low-income students) as older buses and reducing emissions. One way to secondary factors. implement this recommendation would be to plan Allow Funding for Other Types of Buses for a three-year program and provide an initial When Electric Buses Are Not Feasible. Under allocation of $500 million in year one. To help the Governor’s proposal, some districts might determine funding amounts for the subsequent two continue to operate older buses emitting higher years, the Legislature could require CDE to track levels of pollution because electric buses are not and report data on the number of applications viable replacements. We recommend modifying received and funded, as well as data on the age the Governor’s proposal to allow funding for of the buses being replaced. Alternatively, if the nonelectric buses in some cases. One option would Legislature decides to provide an immediate be to allow rural districts to receive funding to allocation closer to the $1.5 billion proposed by the replace a specified percentage of their fleets with Governor, it might want to expand the program to nonelectric school buses. The state could allow ensure it can allocate the full amount to interested additional nonelectric buses for these districts districts. The nearby box outlines a potential option, (or urban districts) based on their individual focusing on grants for expanding district fleets. circumstances. One previous program, for example, To the extent the Legislature makes changes to 12 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET the timing or amounts for the Governor’s proposal, other hand, CARB is already administering the bus it would need to account for the changes in capital replacement program created in the 2021-22 budget outlay spending as part of its plan for addressing the plan. Assigning the new program to CDE would state appropriations limit. result in different agencies administering two similar Consider Most Appropriate Agency to programs. Many districts likely would submit funding Administer the Program. CDE has an existing applications with each agency, and both agencies unit dedicated to school transportation, previously likely would incur additional workload to coordinate administered a bus replacement program for small their grant awards and ensure districts receive one districts, and regularly distributes other school grant per bus. If the Legislature wanted to streamline funding. Based on these factors, CDE likely has the the allocation of funding, it could assign the new ability to implement the proposed program. On the program to CARB. An Option for Fleet Expansion Funding Some Districts Might Be Interested in Expanding Their Fleets. The Governor’s proposal would provide funding specifically for districts to replace buses they already own. Some districts, however, might be interested in expanding the size of their fleets. The federal survey data, for example, suggest many districts in California previously operated larger transportation programs. Some of these districts might be interested in obtaining additional school buses to increase their current home-to-school transportation service, particularly if electric school buses allow for somewhat less costly operations. Reasons the State Could Consider Funding Fleet Expansion. The Legislature might want to provide funding for fleet expansion if it decides to provide an initial allocation for the program that is closer to the $1.5 billion proposed by the Governor. For example, the Legislature might decide to allocate funding at this level as part of its plan to meet the state appropriations limit. Making funding available for fleet expansion would increase the likelihood the state is able to allocate the entire amount to interested districts. Another reason could be to obtain additional reductions in pollution and greenhouse gas emissions beyond the amounts associated with replacing existing buses. According to the most recent survey data, trips to school in private automobiles—typically powered by gasoline—are the main alternative to district-provided transportation. A full-size school bus can carry more than 50 students, potentially eliminating several dozen trips in private vehicles and the associated emissions. Structuring a Fleet Expansion Grant. If the Legislature decides to provide funding for fleet expansion, we recommend structuring it as a separate component from the main program. Under this approach, districts could apply for grants to replace their existing buses, grants to expand their fleets, or both types of grants, depending on their local priorities. The fleet expansion grants would not require districts to scrap older buses, but would cover a smaller share of costs. For example, the state could structure the grants to cover half the cost of an electric bus (this proportion roughly corresponds to the additional cost of an electric bus relative to a diesel bus). A cost-sharing approach would increase the likelihood districts apply for fleet expansion grants only for buses they intend to use regularly. The Legislature also could target the fleet expansion grants toward areas where it believes expanded transportation service would be most beneficial. For example, if the Legislature wanted to promote transportation for low-income students, it could prioritize funding for districts with relatively high shares of these students. www.lao.ca.gov 13 2022-23 BUDGET 14 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET www.lao.ca.gov 15 2022-23 BUDGET LAO PUBLICATIONS This report was prepared by Kenneth Kapphahn with the assistance of Ross Brown, and reviewed by Edgar Cabral and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 16 LEGISLATIVE ANALYST’S OFFICE