The 2022-23 Budget: UC Climate-Related Proposals

The 2022-23 Budget: UC Climate-Related Proposals FEBRUARY 2022 Summary. The Governor’s budget includes CLIMATE CHANGE a total of $185 million one-time General Fund for MITIGATION AND ADAPTATION three University of California (UC) climate-related Climate Change Has Become a Key Policy proposals focused on research, technology Challenge. Climate change is the variation in global incubators, and workforce development hubs. or regional climate patterns resulting from human Of the three proposals, we think supporting climate activities that increase greenhouse gases (GHGs) change research has the most merit, as additional in the atmosphere. Climate change is expected to research could help the state achieve its climate bring about many adverse effects, such as rising change goals. If the Legislature chooses to fund sea levels, exposure to extreme weather events, more research in this area, we recommend it better and increased wildfire severity. Federal and state coordinate the research across key state agencies actions addressing climate change fall into two key and adopt statutory guidance. Compared to areas. The first area—mitigation—aims to reduce more research, the benefit of supporting more GHG emissions, thereby limiting human impact on technology incubators is less clear. The incubators the climate. The second area—adaptation—focuses proposal also lacks enough information to fully on efforts to prepare for the various adverse assess it. Before acting on this proposal, the impacts associated with climate change. As Legislature would need more information from the described further below, California has undertaken administration. Regarding workforce development, both mitigation and adaptation efforts. we recommend the Legislature reject the proposal, California Has Adopted Mitigation Goals. as the state already has many such programs and California began adopting GHG emission reduction the administration has not made a strong case for goals in 2006, with the current statutory goal to the proposed hubs. reduce California GHG emissions to 40 percent INTRODUCTION below the 1990 level by 2030. (State law also established a goal to reduce to the 1990 level The Governor’s budget funds three UC by 2020, which the state met a few years early.) climate-related proposals focused on research, The Legislature has funded many ongoing technology incubators, and workforce development. programs and one-time initiatives to attain the This post analyzes these proposals. It begins with state’s emission reduction goals. Most notably, a brief background section on climate change the California Air Resources Board oversees mitigation and adaptation efforts in California. a “cap-and-trade” program, which caps GHG It then has three sections analyzing each of the emissions for the state’s largest emitters (such proposals in turn. This post is a companion to as large industrial facilities and transportation our main brief on UC budget issues, The 2022-23 fuel suppliers) and allows the affected industries Budget: Analysis of Major UC Proposals. to sell their emission allowances in the market. Funds generated from this program are deposited in the Greenhouse Gas Reduction Fund, which in turn generally supports many other mitigation and adaptation initiatives. 2022-23 Budget Series 1 State Also Is Undertaking Adaptation California Has Several Research Programs Activities. To help guide the state as it prepares for Studying Issues Related to Climate Change. impacts of climate change, the state has undertaken California’s major research programs do not focus four climate assessments (in 2006, 2009, 2012, and solely on climate change, but several programs 2018). Each assessment included a series of reports at UC, the California Energy Commission, the summarizing the current scientific understanding of California Department of Transportation, and other possible climate change risks and impacts to the state agencies study areas related to climate change. and identifying potential policy solutions. Beyond For example, UC spends hundreds of millions of these assessments, the state recently has provided dollars of its base General Fund support annually significant funding for activities to prepare for the on agricultural and natural resource research, impacts of climate change. For example, the 2021-22 including research on certain issues related to budget agreement included a $3.7 billion “climate climate change adaptation. The California Energy resilience package,” as well as additional packages Commission also spends hundreds of millions aimed at addressing environmental risks that are of dollars annually in special funds on research exacerbated by climate change (such as $4.6 billion promoting clean energy technologies. In 2015, for drought and water resilience and $988 million California’s Climate Action Team—a coordinated for wildfire and forest resilience). We provide a team comprised of the state’s environmental summary of these packages in our post The 2021-22 protection, agricultural, transportation, housing, California Spending Plan: Natural Resources and and utility agencies—released a comprehensive Environmental Protection. research plan to coordinate and direct state agency climate change research. The state also created a RESEARCH climate change research program at the Strategic Growth Council, providing the program a total of In this section, we provide background on the $34 million (Greenhouse Gas Reduction Fund) from state’s climate-related research efforts, describe the 2017-18 through 2019-20. Governor’s climate-related research proposal, assess that proposal, and offer associated recommendations. Proposal Background Governor Proposes $100 Million One-Time General Fund for Climate-Related Research Many Entities Fund and Conduct Research on at UC. Proposed budget bill language states that Climate Change. Each year, research universities these funds shall support “seed and matching (including their various research centers and institutes) grants” for applied research. The language further and private industries engage in climate-related directs UC to make the grants available on a research and development (R&D). This work spans competitive basis to researchers without regard to from basic science research to the development UC affiliation. The budget bill language does not of new technologies that reduce GHG emissions. contain any other details about the initiative, and Similar to other research endeavors, research on the administration has not proposed associated climate change issues is supported through a mix of trailer bill language. federal research grants, private industry revenues, and other sources. Unfortunately, comprehensive UC Intends to Fund Three Types of Research information as to how much is spent nationally or in Grants. At our request, the administration California on climate change mitigation and adaptation and UC provided more written detail on the research is not currently available. This likely is due to proposal. According to UC, the proposal would the interdisciplinary nature of climate change research fund three categories of grants: (1) “translational and the many academic departments and agencies science research grants that will accelerate undertaking that research. (As we noted in our post, climate resilience through transfer of ideas and Overview of Federal COVID-19 Research Funding, technologies to practice,” (2) “emergency seed the state spends billions of dollars annually on R&D grants to invest in climate disaster preparedness across all fields.) and mitigation,” and (3) “seed and matching grants to support other climate-focused funding opportunities.” UC indicates that the Office of the 2022-23 Budget Series 2 President’s Research Grants Program Office would Proposal Has Very Little Statutory Direction. administer the program, with oversight from UC’s Despite the magnitude of the proposed amount of Vice President for Research and Innovation, the funding, the Governor has only a few sentences UC division of Agriculture and Natural Resources, of budget bill language. The proposed language UC Health, and UC’s three affiliated national offers no guidance on the program’s objectives or laboratories. At the time of this post, UC did not intended uses of funds. In the absence of statutory clarify how many grants it would support, noting that guidance, UC would have considerable authority the grant sizes for each of the three grant categories to decide what types of research to undertake. would be determined by university leadership and Without statutory guidance, UC might choose to relevant stakeholders. undertake lower-priority research objectives or potentially pursue research objectives that are not Assessment aligned with legislative interests. Climate Change Research Is a Reasonable Recommendations Use of One-Time Funding. Private entities tend to underspend on R&D without government Weigh Research Against Other One-Time intervention. This is because the costs and risks Priorities. Given the state’s climate change of R&D can be high, while the benefits tend to be mitigation and adaptation goals, we think funding diffuse. In the climate change area, benefits can more climate change research is a reasonable use be especially diffuse, with regional, statewide, and of the one-time funding. That said, the Legislature even global effects. Though the upfront costs can has many other calls for one-time funding—both be high, the federal and state governments tend to within and beyond the climate change area. To that value R&D given that so many people potentially end, we recommend the Legislature weigh funding can benefit from new discoveries and technologies. additional climate change research against its other Moreover, climate change R&D could be viewed General Fund priorities. as particularly warranted in California because the Enhance Coordination of Supported state has set its own GHG reduction goals. More Research. If the Legislature is interested in research could help the state identify new means of supporting additional climate-related research, we meeting these climate change mitigation goals. With recommend it explore ways to ensure this initiative the state in a strategic position to coordinate across is coordinated with other state climate-related local governments, supporting more climate change research efforts. For example, the Legislature could research also might further assist state and local redirect the funds to existing initiatives (such as the adaptation efforts. Strategic Growth Council’s climate change research Proposal Appears to Lack Coordination program), thereby bolstering recent efforts in lieu With Key Agencies. Climate change mitigation of creating a new initiative. Alternatively, were the and adaptation is a multifaceted issue, touching Legislature interested in funding a UC-specific on many areas of state government. Recognizing program, it could direct UC to coordinate with the this complexity, recent state efforts have sought state’s various environmental and natural resource to coordinate activities across the various agencies to ensure alignment with existing climate environmental protection, natural resource, and change efforts and identified research needs. other related state agencies. The Governor’s Set Forth Key Program Components in proposal, however, offers no certainty that UC would Trailer Legislation. If the Legislature chooses coordinate with these state entities. Without to provide more funding for climate-related including the state’s other key agencies in the research, we recommend it adopt clear program development and oversight of the program, the components in trailer legislation. Specifically, additional research could be duplicative, with state we recommend the Legislature set forth clear funds used inefficiently. Moreover, the additional goals, the types of grants to be offered, grant research might fail to address the state’s highest amounts, matching requirements, grant duration, climate change research priorities, with state funds performance measures and milestones, and not being used as effectively as possible. reporting requirements. Adopting statute clarifying 2022-23 Budget Series 3 these components would better ensure funds partnerships between local governments, align with legislative priorities. Moving forward, universities and research institutions, private it also would help enhance legislative oversight industry, and economic development organizations and accountability. to support innovation efforts. (The program is a relaunch of a previous innovation hub program CLIMATE TECHNOLOGY established in 2013.) These partnerships—also INCUBATORS referred to as “innovation hubs”—play a similar role to incubators by providing promising businesses In this section, we provide background on mentorship opportunities, technical assistance, incubators in California, describe the Governor’s and start-up funding. These partnerships also tend climate technology incubator proposal, assess that to include incubators. (The Governor’s budget proposal, and offer associated recommendations. proposes an additional $20 million one-time General Background Fund in 2022-23 to continue and expand the iHub2 program. Specifically, these funds would support Incubators Support Industries in Emerging 13 innovation hubs, providing funding to cover four Fields. Incubators assist entrepreneurs and years of operations at each hub and seed funding start-ups with developing their businesses. for up to five start-up businesses at each hub.) Incubators can provide a variety of services, ranging from management training, facility space, Proposal and start-up financing. Many different entities Governor Proposes $50 Million One-Time operate incubators, including universities; nonprofit General Fund for UC Climate Technology organizations; and private, for-profit entities. Incubators. Budget bill language states that the Some incubators focus on specific industries. funds would support climate-related incubators, For example, according to the U.S. Department of as well as competitive grants to incentivize Energy, there are over 30 climate-related incubators climate-related innovation. The budget bill language nationwide, with at least three based in California. does not contain any other details about the California’s Public Universities Operate initiative, and the administration has not proposed Innovation Centers. All of UC’s 10 campuses and associated trailer bill language. 16 California State University (CSU) campuses UC Indicates Incubators Would Be Established operate incubators (some campuses operate Through Competitive Process. According to more than one incubator). Most incubators appear UC, the funds would establish up to three new to have been driven by campus interests and climate-related incubators. UC states that it would resources, but a few incubators were established submit a call for proposals and would select directly by the state and receive a direct allocation proposals based upon considerations of equity, of state funds. Most notably, the state established regional context, community partnerships, and four California Institutes for Science and Innovation ability to leverage nonstate funding. UC further at UC in 2000 supporting various applied science states that it would aim to support incubators that industries. The state provided one-time General leverage existing facility space and programming at Fund to support the construction of the institutes, UC and other climate-related incubators in California. and today the institutes receive ongoing General Fund support for their operations. (We provide Assessment more information on these institutes in our brief Creating Climate-Focused Incubators Could The 2021-22 Budget: The California Institutes for Have Merit, Though Impact Is Uncertain. In Science and Innovation.) concept, creating incubators could help advance Inclusive Innovation Hub Program (iHub2) the state’s climate change objectives and support Also Supports Start-Up Businesses. The 2021-22 regional economic development by developing new budget provided the Governor’s Office of Business businesses and technology. That said, determining and Economic Development $2.5 million one-time the need for new incubators and overall impact General Fund to implement iHub2, which supports 2022-23 Budget Series 4 of creating new incubators is difficult. The state clear problem statement; a more comprehensive does not have specific goals for the amount of budget plan; a description as to how this incubator innovation and economic development it seeks to proposal coordinates with existing innovation and achieve. Moreover, incubators are only one of many incubator programs; an explanation as to whether strategies that states and businesses can use to try the incubators are intended to be ongoing; and, to spur economic development. Additionally, once if so, a long-term plan to sustain the initiative on incubators are developed, it is difficult to prove that an ongoing basis (with fund sources identified). the affected entrepreneurs and businesses would If the administration were able to provide this detail not have otherwise emerged through other avenues. in time for spring hearings, the Legislature could Proposal Lacks Key Detail. The limited detail revisit the proposal later this year. available on the proposal—consisting of a few lines of budget bill language and a short description from WORKFORCE DEVELOPMENT UC—makes fully assessing it difficult. Based on the In this section, we provide background on proposal presented by the administration and UC, it workforce programs in California, describe the is difficult to determine whether the new incubators Governor’s climate-related workforce proposal would coordinate or duplicate activities with at UC, assess that proposal, and offer an existing incubators or the state’s iHub2 initiative. associated recommendation. The Legislature also cannot assess the statewide impact of the proposal, as the proposed location, Background scope, and service areas of the incubators have Many Ongoing State Programs Support not been identified. Moreover, the administration Workforce Development. California spends and UC have not provided a plan clarifying how billions of dollars annually to support the the incubators would be sustained in future years. development of the state’s workforce. Some Though many incubators operate without direct of these programs assist students and other state support, some state-developed incubators— individuals with entering the workforce for the first such as the California Institutes for Science and time, whereas other programs assist unemployed Innovation—rely on ongoing state support to cover or underemployed individuals with re-entering the a portion of their base operations. workforce and potentially upskilling to a higher paying job. For occupations requiring less than Recommendations a bachelor’s degree, the state’s programs are Weigh Incubators Against Other One-Time primarily concentrated at high schools, community Priorities. Given the need for and potential benefits colleges, and local workforce development of creating new incubators is less clear relative to boards. These programs identify state and regional other climate-related activities (such as supporting workforce needs, support credit and noncredit research), we recommend that Legislature coursework in career-focused fields, and provide weigh this proposal against its other one-time a variety of other training opportunities (including spending priorities. Ideally, the Legislature would apprenticeships). For occupations requiring a select one-time initiatives it believes will yield the bachelor’s degree or higher, the state provides highest climate change impacts and/or economic ongoing support to UC and CSU to offer bachelor’s, development payoffs. Alternatively, the Legislature master’s, and doctoral degree programs. The could focus on addressing any of its high one-time state’s public universities also operate extended priorities across the state budget. education programs, which generally are If Proposal Pursued, Request Administration self-supported by student fee revenue. The state, Provide Key Details. Were the Legislature however, provided UC Extension $15 million interested in potentially creating new incubators, one-time General Fund in 2019-20 to develop we recommend it request the administration additional certificate programs serving adults who provide more information about the proposal. At a had some college credits but no college degree. minimum, the additional detail should include a 2022-23 Budget Series 5 State Supported $2.7 Billion in Additional Assessment Limited-Term Workforce Initiatives in 2021-22. State Already Is Supporting Workforce As our 2021-22 EdBudget table shows, the state Development Efforts. We caution the Legislature created or augmented funding for 24 workforce against supporting new workforce initiatives at development initiatives last year. Around 60 percent this time. The state already has an extensive array of the $2.7 billion was concentrated in three of ongoing programs intended to meet the state’s new initiatives: (1) the Community Economic workforce needs. These programs are designed Resilience Fund ($600 million federal relief funds), to be responsive to state, regional, and local which provides grants for regional partnerships workforce issues and to target occupations with focused on climate change mitigation and anticipated job growth, including occupations adaptation-related occupations; (2) the Golden related to climate change mitigation and adaptation. State Education and Training Grants ($500 million, Moreover, the 2021-22 budget added many new a mix of General Fund and federal relief funds), one-time initiatives to further assist first-time entry which provides grants to displaced workers seeking and re-entry into the workforce. Though these education and training; and (3) the Learning-Aligned initiatives were supported with one-time funding, Employment Program ($500 million General Fund), the state will continue to implement and spend which supports work experiences for students at these funds in 2022-23. Most notably, the state the public higher education segments. will still be implementing the Community Economic Resilience Fund, which appears to share some Proposal similar objectives to the UC proposal. Governor Proposes $35 Million One-Time Proposal Lacks Key Details. Even if there General Fund for Climate-Related Workforce was clear benefit to supporting more workforce Development Programs. Budget bill language development initiatives in California, this proposal states that the funds shall support regional lacks key details. The administration has not training hubs focused on reskilling, upskilling, and pinpointed what specific workforce development expanding the state’s climate-related workforce. problem it is attempting to address. Moreover, The language further directs UC to co-locate, it has not identified the size of that problem or coordinate, or integrate these workforce hubs demonstrated that the proposed amount of funding with the proposed climate technology incubators is sized such that it can have a meaningful impact. described earlier. The budget bill language does not The administration also has neither explained how contain any further details about the initiative, and the workforce hubs would address the identified the administration has not proposed associated workforce gap nor provided evidence showing trailer bill language. that the hubs would be a cost-effective solution. UC Suggests Several Uses of the Funds. Furthermore, the administration’s proposal includes According to UC, the workforce hubs would be no provisions holding UC accountable for meeting selected through a competitive process based on the state’s workforce objectives. Without clarifying their ability to leverage outside funding, collaborate these fundamental issues, the Legislature can with regional non-UC workforce entities, and have little confidence that the proposed hubs address specific regional climate-related workforce would provide greater benefits than other one-time needs. Additionally, UC states that the funds spending options. primarily would support the development of new UC extended education certificate programs and Recommendation student work study and internship opportunities. Reject Proposal. Given the plethora of existing UC further indicates that it expects broad workforce development programs already in place participation in these certificate and work-study for 2022-23 and the many key details missing from programs, including among existing students this proposal, we recommend the Legislature reject and alumni from the state’s three public higher the proposed funding and redirect it toward other education segments. high one-time priorities. 2022-23 Budget Series 6 2022-23 Budget Series 7 LAO PUBLICATIONS This post was prepared by Jason Constantouros, and reviewed by Jennifer Pacella and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 2022-23 Budget Series 8