Dear Friends and Colleagues,

Those that know me, know that I have long been an outspoken opponent of Assembly Bill 32 (AB 32),  California's so-called "Global Warming Solutions Act of 2006."  Of course, the folks that originally forced this broad-sweeping policy upon us have, by and large, abandoned the "Global Warming" scare tactics and have settled on "Global Climate Change" as their new scare buzzword.

Out of concern for the destruction that I knew AB 32 would have on our economy, in 2010 I authored Proposition 23 to suspend the implementation of AB 32 and index it to California's unemployment rate.  Unfortunately, Prop. 23 did not pass.  Now as we begin to see the provisions of AB 32 implemented, the California Air Resources Board has established the nation's first and only Cap and Trade system, whereby billions of dollars will be extracted from the private sector. 

The first response of Sacramento liberals has been to seek to tap those resources, but not for environmental clean-up, mitigation or compliance, as promised.  Rather, they are seeking to hijack the Cap and Trade funds in order to back-fill a $500 Million hole in the State General Fund.  They have also floated the idea of raiding about $1 Billion from it to bail out California's boondoggle high-speed rail project, which you may recall has an estimated price tag of $100 Billion.  This confirmed our worst fears - that AB 32 and Cap and Trade will be used as a Slush Fund for Sacramento's pet projects. 

Fortunately, this past week California's independent non-partisan Legislative Analyst notified the big spenders that use of Cap and Trade funds will be very limited without a two-thirds vote of the Legislature. However, the big spenders have not given up and won't - not when there's tax dollars available for the taking.

Assemblyman Dan Logue

The governor has suggested that one of the projects he plans on funding with the cap and trade funds is high speed rail. He has chosen an extremely risky and costly project over rural school transportation, state parks and prison reform.  The State Auditor himself referred to the proposal for high speed rail as "increasingly risky" and that "the author's weak oversight persists."  Even Lt. Gov. Gavin Newsom believes that Gov. Brown is out of touch with the current crisis.  The Governor is gambling not only with the state budget but with the safety of our communities and our children's futures. 

North State Assemblyman and Chief Republican Whip Dan Logue denounced Governor Brown's suggestion of using cap-and-trade revenues to fund the High Speed Rail project.

"AB 32 is becoming exactly what we feared - an oppressive regulatory program complete with a slush fund to pay for pet projects," said Logue. "This is an outrageous shell game the Governor is playing. This is a direct tax on manufacturing. We have lost 600,000 manufacturing jobs in the last seven years. This cap-and-trade sham will only continue the exodus of jobs and businesses out of state and now we are going to use those funds to build a High Speed Rail to nowhere."

In an interview with ABC 7-Los Angeles, Governor Jerry Brown said he does not believe the proposed High Speed Rail project will cost $100 billion over 20 years, as estimated by the High Speed Rail Authority in their latest plan. He also suggested that the fees that will be collected from California businesses under the AB 32 cap-and-trade auction will be used to fund the High Speed Rail project. The California Air Resources Board will be conducting its cap-and-trade auction in 2013, and the Governor estimates $1 billion will be collected from businesses.

"You cannot take one billion dollars out of the economy in order to save the environment, then turn around and use that money to fund a project that will wreak havoc on the environment and local economies," Logue added. "The High Speed Rail project has been criticized by the State Auditor, the Legislative Analyst, and even the project's own Peer Review Group. Now that voters know the truth, they should be allowed to vote to end this boondoggle."

The Governor will release a formal proposal for funding the High Speed Rail project in his May Revise Budget. The Legislature will consider this proposal in conjunction with the whole 2012-2013 Fiscal Year Budget that must be passed by midnight on June 15th.

Earlier this month Governor Brown released his proposed budget for the 2012-13 fiscal year.  The centerpiece of his proposal is to ask voters to approve $35 billion in higher taxes over five years at a time when our unemployment continues to be among the highest in the nation.

Much of the public's attention has focused on this job-killing tax hike, and appropriately so.  What may be less known to the public is that the Governor wants to spend half a billion dollars from the auction of greenhouse gas emission credits to help balance the budget.

Pursuant to Assembly Bill 32, the state's Global Warming Solutions Act, the California Air Resources Board (ARB) will be implementing a cap-and-trade system starting January 2013.  The Legislature passed this law in 2006 with the grandiose notion that other states and nations would follow California's lead to fight climate change by imposing their own burdensome regulations and taxes on job creators.

Liberals hoped that by making traditional energy sources and the products made from those sources more expensive, businesses and consumers would quickly switch to "green" energy.  It was a nice sentiment, but one rooted in fantasy.

What happened instead was California unilaterally shot itself in the foot.  Other states and nations have not followed our lead and even President Obama halted his effort to impose a national version of AB 32.  As we face a prolonged recession and high unemployment, imposing a complicated scheme of regulations and taxes will only encourage job creators to leave for friendlier business climates.

Yet the Governor is moving full steam ahead with AB 32, with the new twist of using some of the revenues it will raise to pay for the state's past spending mistakes.  I believe this is in direct violation of the State Constitution and the will of the people.

Under the ARB's cap-and-trade system manufacturers, energy producers, and other businesses will soon have to pay upwards of $1 billion to buy credits in order to operate in California.  Governor Brown has proposed using half of these funds to backfill budget debts to programs in other departments that have little or nothing to do with global warming.

State law says that fees (such as those AB 32 imposes) can only be spent on activities that are closely related to the regulation of a specific business; for example, using restaurant license fees to conduct health inspections.  To ensure that the state only uses fees for their intended purposes, the voters passed Proposition 26 in 2010 to stop the Governor and Legislature from raiding those fees to pay for other programs.

Unfortunately, Governor Brown is ignoring the people's voice by pushing ahead with his latest budget scheme.  Given that the revenues from the AB 32 cap-and-trade system are expected to grow significantly in future years to as much as $10 billion annually, I am concerned that future politicians will seize those dollars for their pet projects.

With California suffering through the worst economic climate since the Great Depression, the last thing the state should do is hit job creators with a back-door tax increase.  That is why I am urging the Governor to drop his planned raid of global warming revenues.  If he does not, AB 32 will become what we feared in the first place - a scheme to shake-down job creators to fund bigger government.

I believe it is essential that the Legislature make job creation its top priority. We need to lift the state out of its economic slump and get people working again.  Instead of fleecing businesses to the point that they leave California, Sacramento needs to curb its insatiable appetite and live within its means.