Auction shortfalls and CARB rulemaking put GGRF-dependent transit and community programs at risk, lawmakers say

Department of Finance told the Senate Budget Subcommittee that greenhouse-gas allowance auction results and pending Air Resources Board rulemaking have reduced estimated Greenhouse Gas Reduction Fund (GGRF) revenues. Andrew March said the February auction produced about $240 million less than the governor's January estimate, prompting downward revisions to current- and budget-year GGRF forecasts.

Committee members said declining GGRF revenues threaten Tier 3 priorities—transit capital and operations programs (TRSIP, LCTOP), clean-water projects for disadvantaged communities, and community air-protection programs such as AB 617. Senator Blake Spear and others urged the Legislature and administration to reopen the SB 8 40 allocation framework negotiations if revenues fall below previously assumed levels.

Finance staff explained that the May Revision reflects lower estimated auction revenues and that some program allocations were structured to offset general fund obligations (notably Cal Fire). The Legislative Analyst's Office recommended planning for multiple revenue scenarios and urged the Legislature to consider reserve strategies and contingency planning for different GGRF outcomes.

Members asked about the effect of proposed CARB changes, including a manufacturing decarbonization incentive and proposed allocations of free allowances; Finance said those changes could further reduce auction revenue available for GGRF programs. Committee members and stakeholders pressed for updated revenue estimates and for consideration of alternative state funding to backfill critical programs if auctions fall short.

No final policy decision was made; members asked Finance and LAO for updated estimates and for the administration to identify options to protect high-priority transit and community programs.