The 2025-26 Budget: Various California Air Resources Board Proposals

2025-26 BUDGET The 2025-26 Budget: Various California Air Resources Board Proposals GABRIEL PETEK | LEGISLATIVE ANALYST | FEBRUARY 2024 SUMMARY In this brief, we analyze various budget-related proposals from the California Air Resources Board (CARB) including: (1) budget trailer legislation expanding CARB’s regulatory fee authority, (2) two budget change proposals requesting permanent staff to implement three zero-emission vehicle (ZEV)-related regulations, and (3) funding and positions to explore the potential for allowing a higher blend of ethanol in fuel (known as E15) to be sold in the state. Regulatory Fee Authority Budget Trailer Bill. The Governor proposes budget trailer legislation that would provide CARB with broad authority to levy fees on the entities it regulates to recover the costs of developing, implementing, and enforcing air pollution and greenhouse gas (GHG) reduction-related programs and regulations. We do not believe that CARB has provided a compelling rationale for why it needs such a broad expansion in its authority to assess fees. Moreover, we find that the proposal would delegate too much legislative control and authority to the administration. Accordingly, we recommend the Legislature reject the proposed legislation. Permanent Regulatory Staff. The Governor’s budget proposes to provide CARB with a total of nearly 50 positions and over $9 million annually from the Air Pollution Control Fund (APCF) to implement the Zero-Emission Forklift (ZEF), Advanced Clean Fleets (ACF), and Zero-Emission Airport Shuttle (ZEAS) regulations. CARB has not yet secured the waivers from the federal government that are required for it to be able to enforce most of the components of these regulations. Moreover, signals from the new federal administration suggest it is not likely to grant California additional waivers, making it unlikely that CARB will be able to enforce the bulk of these regulations for at least the next four years. In light of this lack of enforcement authority, we recommend the Legislature direct CARB to provide information at spring budget hearings on alternative approaches that the state could explore to meet its climate goals and air quality standards as well as its plans for state operations and vacancy reduction savings. We recommend the Legislature incorporate this information into its decisions regarding how any additional funding and positions could be used to achieve state goals most cost-effectively. E15 Fuel Specification. The Governor proposes $2.3 million on an ongoing basis from APCF and ten positions to explore adopting the E15 fuel blend, as well as to conduct ongoing program implementation and enforcement of potential future regulations. Because whether E15 regulations ultimately will be developed and adopted still is uncertain, we find authorizing ongoing funding for positions to support its implementation now to be premature. We therefore recommend the Legislature instead provide the requested funding on a two-year basis. www.lao.ca.gov 1 2025-26 BUDGET OVERVIEW In this brief, we analyze various CARB budget CARB Also Plays a Key Role in the State’s proposals. The brief is organized into four main Efforts to Reduce GHG Emissions. In addition to sections. In this first section, we provide an helping regulate pollutants that affect air quality, overview of CARB and a summary of its proposed CARB is the lead state agency responsible for budget for 2025-26. Next, we analyze proposed directing the state’s efforts to meet the GHG budget trailer legislation that would substantially reduction targets established in the Global expand CARB’s authority to levy fees. In the third Warming Solutions Act of 2006 (Chapter 488 of section, we analyze two proposals to provide 2006, [AB 32, Núñez]) and subsequent legislation permanent staff to implement regulations related (such as Chapter 249 of 2016 [SB 32, Pavley] and to forklifts, medium- and heavy-duty vehicle fleets, Chapter 337 of 2022 [AB 1279, Muratsuchi]). and airport shuttle operators. We conclude by Budget Overview. The Governor’s budget discussing a proposal related to allowing a higher for 2025-26 proposes $1.2 billion to support blend of ethanol in fuel (known as E15) to be sold in CARB’s activities, mostly from special funds. the state than currently is authorized. This represents a net reduction of $240 million— Federal, State, and Local Governments Have or 17 percent—compared to CARB’s estimated Responsibilities for Improving Air Quality. expenditure level in 2024-25. This year-to-year The United States Environmental Protection Agency decline is largely the result of a significant (U.S. EPA) sets air quality standards for specified accumulation of unspent one-time funding criteria pollutants—such as ozone, particulate from prior years that is included in the 2024-25 matter, and nitrogen oxides—pursuant to the amount. The Governor’s budget proposes a total federal Clean Air Act. U.S. EPA requires states to of 2,120 positions for CARB in 2025-26. This develop state implementation plans to achieve is an increase of 118 positions—or 6 percent— compliance with these standards. In California, from 2024-25. responsibilities for regulating air quality are divided As we discuss later in this brief, the 2024-25 between CARB and 35 regional air pollution control budget agreement assumed ongoing General Fund and air quality management districts. In general, state operations savings of up to 7.95 percent regional air districts manage the regulation of across the budget beginning in the current year, stationary sources of pollution (such as factories) as well as additional savings from permanently and prepare regional implementation plans eliminating vacant positions. As the administration to achieve compliance with federal and state has not yet provided detailed information on how it standards. CARB is responsible primarily for the is allocating these reductions across departments, regulation of mobile sources of pollution (such as programs, and fund sources, the funding and cars and trucks) and for reviewing and approving position levels cited above do not incorporate these regional district programs and plans. modifications and therefore overstate CARB’s actual funding and staffing levels. (We discuss the administration’s implementation of the state operations and vacancy reductions in greater detail in our February report, The 2025-26 Budget: State Departments’ Operational Efficiencies [Control Sections 4.05 and 4.12]). 2 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET REGULATORY FEE AUTHORITY BUDGET TRAILER BILL Background support any and all climate and air quality-related programs; generally, the department’s existing fee State Levies Fees to Fund Certain Costs. authority is for activities or programs specifically The state assesses a variety of fees and charges enumerated in law. to help fund its operations. Typically, the state levies fees to pay for the costs of specific regulatory Legislature Has Provided CARB Particularly activities or for providing specified government Broad Authority to Establish Regulations. services or products. Under the State Constitution, As discussed later in this brief, the Legislature fees must be set at a reasonable level, generally has authorized CARB to establish regulations reflecting the costs of the services or benefits related to meeting the state’s climate goals and air provided. The State Constitution allows the pollution standards. In general, the authority that Legislature to increase fees to cover the costs the Legislature has granted to CARB is broader of specific state activities with a majority vote of than what is typical; for most other departments, each house of the Legislature. (This is in contrast the scope of the authorized regulatory power to taxes, from which revenues can be used for a is more limited and specific. CARB has used broader range of activities and which require a its broad authority to promulgate numerous two-thirds vote of each house of the Legislature.) regulations, such as those that require entities to shift to ZEVs (including the ZEF, ACF, and ZEAS Legislature Has Longstanding Practice of regulations discussed elsewhere in this report) Granting Departments Authority to Assess and require reductions in the carbon intensity of Specific Fees. In many cases, the Legislature has transportation fuels (known as the Low Carbon enacted statutes that delegate some of its authority Fuel Standard program). to set and/or modify fees to state departments. When the Legislature delegates this authority, it Governor’s Proposal often provides direction in statute regarding how Budget Trailer Legislation Would Expand such fees are to be assessed. For example, the CARB’s Authority to Assess Fees. The Governor Legislature may specify the entities and activities proposes budget trailer legislation that would that will be subject to the fees, the amounts provide CARB with authority to levy fees on the of the fees to be collected, the mechanism for entities it regulates in order to recover the costs of increasing the fees (such as to adjust for inflation), developing, implementing, and enforcing programs the authorized uses of the fee proceeds, and the and regulations. This authority would apply to any duration of the fee authority. of the activities the department conducts pursuant Legislature Has Provided CARB Authority to Division 26 of the Health and Safety Code. to Collect Certain Fees. The Legislature has Division 26 is the main portion of state law that authorized CARB to collect various specified pertains to CARB, and includes the department’s fees and charges. For example, under existing broad authority over air pollutants, as well as its statute, CARB has explicit authority to assess authority to implement some programs aimed at fees related to a range of specific regulatory reducing GHGs. programs, such as to certify and audit motor vehicles and motor vehicle engines and to regulate Assessment non-vehicular sources of emissions. CARB uses New Proposed Authority for CARB to Assess the revenues it collects through this existing fee Fees Appears Quite Broad. The proposed budget authority—along with funding from penalties, taxes, trailer legislation could have the effect of greatly and other sources—to carry out its functions. expanding CARB’s authority to assess fees to However, existing statute does not include a fund its activities related to air pollution and GHG broad authorization for CARB to assess fees to reductions. In contrast to its current fee-setting www.lao.ca.gov 3 2025-26 BUDGET authority, which is limited to specific regulatory that are targeted around supporting those activities. programs, this proposal would provide broad CARB has not offered a persuasive explanation authority for the department to assess fees related for why the Legislature should depart from this to the activities it conducts pursuant to Division 26 traditional approach to setting fee policy. Second, of the Health and Safety Code. The exact scope of CARB has not provided adequate information over the fees or other charges that could be assessed how it would use the proposed new authority. under this proposed authority is not entirely clear. CARB is effectively requesting that the Legislature However, the language appears to be broad enough grant it authority to raise additional fees without that it could potentially be interpreted to allow providing a clear understanding of what those fees CARB to assess charges that go beyond the simple would include, which entities would pay them, or administration and enforcement of regulations. the amount that would be charged. This lack of For example, should the proposed budget trailer information makes it impossible for the Legislature legislation receive a two-thirds vote of both houses to assess the costs or benefits of potential fees of the Legislature, it potentially could be interpreted CARB might impose, thereby also precluding it to allow CARB to assess fees on certain entities from comparing and balancing those two key (such as high polluters) and use the revenue to considerations before approving this proposal. make payments to other entities (such as low Proposal Requests Legislature Delegate Core polluters). As discussed above, CARB already has Responsibility for Setting Fees and Charges. broad authority to promulgate regulations related Given the lack of detail around why CARB needs to air pollution and GHG emission reductions. the expansive proposed authority to accomplish When taken together with the proposed expansion the state’s goals or how the department would of fee authority, CARB would have a wide-ranging use it, we think this proposal requests that the ability to craft new policies and raise the funds to Legislature delegate too much of its constitutional support them without additional legislative action, fee-setting responsibility to the administration. so long as the department believes the policies The California Constitution entrusts the Legislature would help the state achieve its air pollution with the fundamental “power of the purse,” which standards and climate goals. includes the responsibility to determine the fees Breadth of Requested Fee Authority Does and charges assessed on Californians. In general, Not Appear Justified. We have two significant we believe the Legislature should be cautious in concerns with the administration’s proposal. delegating this core responsibility, particularly First, we do not believe that CARB has provided a without specific parameters and a compelling compelling rationale for why it needs such broad justification. Any new fees CARB might assess fee authority to pursue the state’s climate and air under the proposed new authority would be subject quality goals. CARB argues that the scale of actions to a public rulemaking process and approval by its needed to address California’s air pollution and board. However, in our view, such processes are climate challenges require more funding and that not an adequate substitute for decisions made by the proposed legislation would enable it to raise the Legislature, which is the state’s elected body those funds. While some additional funding may charged with determining overall state fee and ultimately be needed for CARB to implement its expenditure policies. Also, while the annual budget programs and regulations, in our assessment, the process would give the Legislature an opportunity department has not made an adequate case for to appropriate the money raised by the proposed why the proposed broad delegation of authority new fees, that also would not serve as an adequate is warranted and why a more narrowly crafted substitute for legislative approval of the specific authorization to increase fees for specific activities fees—by the time the department requests that the would not suffice. For example, the department Legislature appropriate the revenue, CARB could could identify a specific set of problems it wants already have set and levied the fees. to address and actions it wants to undertake and request authority from the Legislature to raise fees 4 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Recommendation include a robust justification for the specific fees the department proposes to levy, as well as key Reject Proposed Budget Trailer Bill details on the proposed fees such as: (1) the Language. We recommend the Legislature specific activities that would be subject to the reject the proposed budget trailer legislation as fees, (2) the proposed fee amounts, (3) the entities the breadth of the requested fee authority is not that would be subject to paying the fees, (4) the justified and would delegate too much legislative level of expected fee revenues, and (5) how the control and authority to the administration. To the fee revenues would be used. This type of detailed extent CARB requires additional authority to raise information is critical to enable the Legislature to revenues to implement specific programs and adequately weigh the anticipated costs and benefits regulations, the department can return at a future associated with providing CARB with additional date with a more narrowly crafted proposal for the fee-raising authority. Legislature to consider. Such a proposal should PERMANENT REGULATORY STAFF Background Federal Waivers Required for Many of CARB’s Regulations. In order to avoid a patchwork of Legislature Has Delegated CARB Broad differing state-level regulatory requirements from Authority to Establish Air Quality and Climate developing across the country, federal law generally Regulations. Existing statute directs CARB to preempts state governments from adopting their adopt regulations that are technologically feasible own air pollutant emissions standards for new and cost-effective to achieve federal air quality motor vehicles and new motor vehicle engines. standards and state GHG emission reduction Currently, however, federal law includes an goals. In pursuit of these objectives, CARB has exemption specifically for California which allows undertaken many actions, including adopting the state to apply to U.S. EPA for waivers from recent regulations such as: federal preemption. To date, California has applied • ZEF. Requires fleets to phase out the for and received over 100 waivers for a variety of air operation of the majority of their Large quality and vehicle-related regulations. Spark-Ignition (LSI) powered forklift equipment and prohibits fleets from adding new Governor’s Proposals LSI forklifts after specified cut-off dates. The Governor’s budget includes two proposals • ACF. Requires three types of medium- and to provide CARB with ongoing resources in order heavy-duty vehicle fleets in California to to implement regulations aimed at improving air transition to ZEVs according to specified quality and reducing GHG emissions: schedules. These include drayage fleets that • ZEF. $3.5 million on an ongoing basis from serve ports and railyards, state and local APCF and 17 positions to support the government fleets, and “high-priority” fleets implementation and enforcement of CARB’s (fleets of entities that have $50 million or recently adopted ZEF regulations. more in gross annual revenue or 50 or more • ACF and ZEAS. $5.8 million on an ongoing vehicles). The regulation further specifies that basis from APCF starting in 2026-27 and the manufacturers may sell only zero-emission conversion of 32.5 limited-term positions medium- and heavy-duty vehicles in California to permanent positions in 2025-26 to starting in 2036. implement CARB’s recently adopted ACF • ZEAS. Requires airport shuttle operators and ZEAS regulations. to begin adding zero-emission shuttles to their fleets in 2027 and to fully transition to ZEVs by 2036. www.lao.ca.gov 5 2025-26 BUDGET Assessment For example, a modified approach could rely more on (1) other regulations or activities that are Lack of Federal Waivers Prevents California covered under existing waivers and/or (2) activities From Enforcing Most Components of ZEF, ACF, that are unlikely to require federal waivers, such and ZEAS Regulations. Because they represent as financial incentive programs, programs that unique state-level vehicle standards, under federal assess varied fee levels based on a vehicle’s law, CARB must secure federal waivers to enforce emissions, or indirect source rules. (Indirect source the ZEAS and ZEF regulations, as well as most of rules are regulations that address air pollution the ACF regulation. While CARB secured a waiver from mobile sources that are indirectly associated for the ZEAS regulation in 2023, it has not done so with a facility. For example, they could require the for its ZEF and ACF regulations. Accordingly, while operator of a warehouse to offset the emissions CARB can enforce the ZEAS regulation and certain from the trucks that use its facility.) These types portions of the ACF regulation, it does not have of modified approaches likely would come with authority to enforce most of the ACF regulation or trade-offs—including related to costs, expected any of the ZEF regulation. Moreover, signals from amounts of emission reductions, and impacts on the new federal administration suggest it is not regulated industries—that would be important for likely to grant California additional waivers and may the Legislature to weigh prior to deciding how to even attempt to rescind already-approved waivers. move forward. For example, on January 20, 2025, President Trump signed an Executive Order stating that it Lack of Information on State Operations and is the policy of the United States to eliminate the Vacancy Reductions Complicates Legislative “electric vehicle mandate” and to terminate, “where Decision-Making. At the same time that CARB appropriate, state emissions waivers that function is requesting additional positions to implement to limit sales of gasoline-powered automobiles.” these new regulations, the administration is in Accordingly, CARB is unlikely to be able to enforce the process of making reductions that could the ZEF regulation or most of the ACF regulation for affect other programs and/or regulations aimed at least the next four years. at helping the state meet its climate goals and air pollution standards. Specifically, as mentioned Given Lack of Enforcement Authority, above, the administration currently is in the process Re-Evaluation of Approach Could Make Sense. of implementing two reductions across nearly Together, the Governor’s two proposals would all state departments—one aimed at achieving provide nearly 50 positions and over $9 million ongoing General Fund state operations savings annually from APCF to implement all three of up to 7.95 percent beginning in 2024-25 and regulations. This proposed use of APCF funds another aimed at capturing additional savings from comes with trade-offs, as they could otherwise permanently eliminating vacant positions regardless be used to support a variety of other types of of their funding source. As of this writing, CARB has regulations and programs that also would help provided minimal details on how these reductions the state meet its climate goals and air pollution will be implemented across the department. standards. As such, the Legislature will want to give Absent such information, the Legislature has no careful consideration to which activities it believes way to assess how these reductions will affect will be most cost-effective at achieving the state’s other existing programs or regulations that might objectives. CARB contends that implementing the help the state meet its air quality standards and ZEF and ACF regulations is an important step in GHG-reduction goals or other key legislative helping the state achieve its climate goals and meet priorities. This complicates the Legislature’s efforts air quality standards. However, absent the authority to assess whether the proposed new positions are to enforce the bulk of these regulations, the state the highest priorities for limited funding, or whether will likely need to step back and consider whether funding might more effectively be used to help to shift efforts and resources towards alternative maintain support for existing priority programs and strategies to achieve GHG and air quality goals. regulation implementation. 6 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Recommendations changes are consistent with legislative priorities, and (3) how to prioritize the Governor’s new Direct CARB to Report at Budget Hearings proposed position and funding augmentations on Potential Approaches to Meeting Goals against a broader context of department-wide Given Lack of Waivers. In light of the lack of resources. (Our recent report, The 2025-26 federal waivers for the ZEF and ACF regulations Budget: State Departments’ Operational and resulting limitations on the state’s regulatory Efficiencies [Control Sections 4.05 and 4.12], enforcement abilities, we recommend the provides a framework with some questions the Legislature direct CARB to provide information Legislature could ask the administration regarding at spring budget hearings on the various types the impacts of these reductions.) of alternative approaches that the state could explore to meet its climate goals and air quality Direct Implementation Resources Toward standards, as well as the associated advantages Priority Activities. We recommend the Legislature and disadvantages. This would give the incorporate information that CARB provides at Legislature more information about the types of budget hearings—including on alternative options strategies that it could consider for helping the for meeting the state’s air pollution standards state meet its goals. and GHG emission reduction targets, as well as planned reductions associated with state Direct CARB to Report at Budget Hearings operations and vacant positions—into its decisions on Plans for State Operations and Vacancy regarding whether to fund the proposed positions Reduction Savings. We recommend that the to support the ZEF, ACF, and ZEAS regulations. Legislature direct CARB to provide a detailed The Legislature could then use this information to report at budget hearings on its plans for the more fully evaluate how any additional funding and state operations and vacancy reduction savings, positions could be used to achieve state goals most including identifying the specific personnel, cost-effectively. To the extent the administration is contracts, and programs that will be affected. not able to provide adequate information to inform We further recommend that the Legislature direct legislative decision-making within the time frame of CARB to provide information on any anticipated the spring budget hearings, the Legislature could programmatic impacts of the proposed reductions. consider rejecting the proposals without prejudice Such information is key to enabling the Legislature and directing the administration to provide further to better assess (1) how the changes may impact information prior to requesting ongoing funding at the state’s ability to meet its GHG reduction a later date. goals and air pollution standards, (2) whether the E15 FUEL SPECIFICATION Background of up to 15 percent ethanol in gasoline (known as E15) for 2001 and newer conventional vehicles. Current Regulations in California Allow (The use of E15 is not authorized for older vehicles, for 10 Percent Ethanol Blending in Gasoline. motorcycles, lawnmowers and other types of California statute provides authority for CARB off-road equipment, delivery trucks, or other types to issue regulations for motor vehicle fuel of heavy-duty vehicles.) Since the adoption of those specifications, among other areas. Under this waivers, all other states besides California have authority, CARB has established regulations that authorized the sale of E15. However, according to authorize the use of up to 10 percent ethanol in the U.S. Department of Energy, E15 only is available gasoline (a blend known as E10). CARB reports that at roughly 3,000 gas stations across 31 states virtually all gasoline currently sold in California is E10. (roughly 2 percent of gas stations that sell fuel to Since U.S. EPA Waiver Issued, Other States the public), and E10 continues to be the standard Have Approved Use of E15. Starting in 2010, U.S. blend nationwide. EPA has issued various waivers for the adoption www.lao.ca.gov 7 2025-26 BUDGET Statute Requires Certain Steps Prior to providing $2.3 million on an ongoing basis from Establishment of Regulations Governing APCF and ten positions to complete the regulatory Motor Fuel Specifications. Existing statute process related to E15, as well as to conduct requires CARB to undertake specific actions prior ongoing program implementation and enforcement to establishing regulations governing motor fuel of future E15 regulations. specifications. For example, CARB must conduct Assessment certain analyses, including an evaluation of the environmental impacts of the proposed policy Potential Trade-Offs Associated With change known as a “multimedia evaluation.” Shift to E15. Recent reports have highlighted CARB reports that a multimedia evaluation various potential trade-offs associated with includes three main steps (referred to as tiers) E15. For example, in August 2024, the California that generally involve the following activities: Energy Commission issued a Transportation (1) Tier I: summarizing existing research and Fuels Assessment that found that E15 likely would identifying knowledge gaps, (2) Tier II: conducting reduce gasoline prices and may present fewer experiments to fill the identified knowledge gaps, environmental harms than E10. However, the and (3) Tier III: preparing a final report summarizing analysis also noted that shifting to E15 could result the existing and new research and providing in a loss of fuel economy of roughly 1 percent, findings and conclusions. According to CARB, that fueling equipment and some vehicles may completing a multimedia evaluation typically takes lack the capability of operating with E15, and that two to five years. Statute further requires that more analysis is necessary to understand the the multimedia evaluation be approved by the pollution impacts. California Environmental Policy Council, which is Premature to Provide Ongoing Funding an entity composed of the heads of seven state for Program Given Uncertain Outcome of environmental protection-related agencies. Regulatory Process. To the extent that expediting CARB Is Undertaking a Process to Consider the development of E15 regulations is a priority for Allowing E15. CARB indicates that it initiated a the Legislature, providing resources to support that multimedia evaluation for E15 in 2018 and finalized activity in the near term is reasonable. However, the Tier I analysis in 2020. The department has authorizing ongoing funding for CARB positions to not yet completed Tier II or Tier III but anticipates support the implementation of the policy now—as finishing these remaining steps by summer 2025. the Governor is proposing—would be premature Once complete, CARB will use the multimedia at this time for two reasons. First, whether CARB evaluation process to determine whether to move ultimately will pursue and adopt E15 regulations forward with developing a regulation to authorize is uncertain, given that the multimedia evaluation the use of E15 in California. has not yet been completed. Notably, while CARB indicates that thus far its analyses have not Governor Issued Directive to CARB Related identified major environmental or public health to E15. In October 2024, Governor Newsom sent a concerns associated with E15, it cannot forecast letter to CARB directing the department to expedite the ultimate outcome of any regulatory process its actions related to E15. In that letter, the Governor or board action. Second, the program’s staffing also indicated that the administration “welcomes needs are subject to change as the policy moves a partnership” with the Legislature in 2025 to from regulation development to implementation and consider necessary statutory changes and funding enforcement. Initially, CARB proposes to use the that would further expedite CARB’s consideration of requested staff to complete development of the E15 authorizing the use of E15 in California. regulation to bring to the board for consideration Governor’s Proposal by summer 2026. (The department indicates the Governor Proposes Ongoing $2.3 Million to process likely would take until late 2027 absent the Support Development and Implementation of proposed additional resources.) After the regulation E15 Regulation. The Governor’s budget proposes has been adopted, CARB indicates that it would use 8 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET the additional staff for associated implementation obligates the state to hire and maintain permanent and enforcement activities. However, the staff staff—and support their associated future pension expertise required for regulation development benefits—even when they may no longer be needed likely would differ from that for implementation and or justified after the short-term workload they were enforcement, potentially resulting in differences in brought on to complete has ended. In the case of both the number of personnel needed as well as the E15 proposal, despite the trade-offs involved, their respective duties. we find providing limited-term funding to be more Modifying Proposal to Provide Limited-Term appropriate than ongoing support in light of (1) the Funding Would Better Align With Known uncertainty regarding whether the policy will be Workload, but Would Come With Trade-Offs. implemented and (2) if it is ultimately implemented, Because future E15-related workload still is the changing resource needs as the program moves uncertain, a stronger justification exists for from regulatory development to implementation. modifying the proposal to provide limited-term Recommendation resources to complete the regulatory process. The Legislature could then revisit the need for Modify Proposal to Provide Proposed and level of ongoing positions and funding once Funding for Positions on a Two-Year, more is known about future implementation and Limited-Term Basis. We recommend providing the requested funding for positions on a two-year, enforcement needs. However, such an approach limited-term basis rather than on an ongoing has associated trade-offs. The administration basis. To the extent CARB’s multimedia evaluation has indicated that activities which are funded on ultimately supports the development of an a limited-term basis present some challenges. E15 regulation, this modified action would provide For example, attracting and retaining qualified funding for the development of such a regulation. staff to complete activities supported with Should the regulatory process culminate in limited-term funding can be more difficult the adoption of an E15 regulation, CARB could since associated positions generally provide request the requisite amount of ongoing funding less stability for employees. This challenge for the appropriate number and classifications of can lead the administration to request ongoing permanent positions to implement and enforce funding and positions even when workload is the regulation as part of a future budget request. short term in nature or subject to substantial The department will be in a better position to uncertainty—as we believe is the case with the assess the level of this ongoing workload once the E15 regulation development and future workload. regulatory process is complete. Yet a key drawback to this approach is that it www.lao.ca.gov 9 2025-26 BUDGET 10 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET www.lao.ca.gov 11 2025-26 BUDGET LAO PUBLICATIONS This report was prepared by Helen Kerstein, and reviewed by Rachel Ehlers and Ross Brown. 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. 12 LEGISLATIVE ANALYST’S OFFICE