Commentary: Could complex cap-and-trade deal derail Jerry Brown’s bullet train?

The political deal that led to reauthorization of California’s cap-and-trade program to reduce carbon emissions has many pieces, but one of the strangest is Assembly Constitutional Amendment 1.

To win support from Assembly Republican leader Chad Mayes and presumably several other Republicans, Gov. Jerry Brown and his fellow Democrats agreed to place the measure, authored by Mayes, on next year’s statewide ballot.

ACA 1 would, if approved by voters, place in the constitution a requirement that money from the quarterly auctions of cap-and-trade emission allowances be diverted into a special reserve fund beginning in 2024 and an appropriation from the reserve would require a two-thirds legislative vote.

Mayes, et al, contend that the two-thirds vote requirement would give Republican legislators a meaningful role in deciding how the cap-and-trade funds are spent, with a subliminal corollary that it would give them a potential veto on Brown’s controversial bullet train project.

However, as political cover for Republican cap-and-trade votes this month – seven in the Assembly and one in the Senate – ACA 1 is thin gruel.

First of all, it would have to obtain voter approval next year, by no means a certainty. Voters tend to reject ballot measures they don’t understand.

Secondly, it doesn’t apply until 2024, so until then Democrats will be free to spend billions of dollars in cap-and-trade auction funds however they wish, including a mandatory 25 percent to keep the bullet train project alive.

Next, it’s highly unlikely that Republicans will have enough legislative members in 2024 to block an appropriation. Democrats have two-thirds “supermajorities” in both legislative houses now and the next round of redistricting, after the 2020 census, will likely generate even more Democratic seats and make those supermajorities permanent.

Finally, the wording of ACA 1 contains a potential escape route for Democrats. It frees up the cap-and-trade money to be spent by simple majority votes after “an appropriation” from the reserve fund. Thus, appropriating even one nickel removes Mayes’ restriction.

The real impact of ACA 1, if any, might be to make it slightly more difficult for the High-Speed Rail Authority to pledge cap-and-trade funds as repayment for a bond issue to build the second phase of the bullet train, linking the San Joaquin Valley to San Jose.

The first stretch of track running down the San Joaquin Valley from Merced to an orchard north of Bakersfield is now under construction. But to have a system that would actually be useful, it would have to be electrified, locomotives and passenger cars would have to be purchased and, most importantly, it would have to link something with something.

Bullet train promoters believe that linking Fresno with San Jose (and to faster Caltrain service from San Jose to San Francisco) would generate enough ridership to prove viability and attract outside capital, but there are no current prospects for financing the $20 billion second phase.

Pledging cap-and-trade money for a construction bond, which officials have suggested, might generate enough to make it happen. But bond buyers would have to believe that emission auctions would generate a sufficient and permanent source of revenue, and that belief could be undercut by the requirement for a two-thirds vote after 2024. Brown appears to be betting that it won’t hurt his pet project.

It’s one of those tangled financial and political webs that Capitol insiders savor and ordinary people despise.