Will Proposition 39 Finally Jumpstart Green Jobs in California

Michael Bernick
Former California Employment Development Department Director & Milken Institute Fellow

Over the past two decades in California, there have been several  job sectors—Internet commerce, Construction, Green technology–that were promoted as the next major job generators, only to come up short.

In the late 1990s and early 2000s, the dot.com companies were ushering in a new wave of software technology and internet commerce jobs. Remember Webvan, Pets.com, and Excite@Home: each of these California firms was publicized as the future of California employment. In November 1999, after its stock went public, Webvan had a market value of $7.9 billion and more than 400 employees. Within less than two years, Webvan had run through $1.2 billion in investments and laid off everyone. Pets.com closed in late 2000 after losing more than $147 million and Excite@Home laid off its 250 workers early in 2001. It was only a few years that the dot.com boom in California became the dot.com bust.

Construction employment exploded in California during the 1990s and early 2000s. By late 2006, the state had 937,000 construction jobs, and projections showed an increase to over one million jobs in the next few years. Caltrans and other infrastructure building entities worried that there would not be enough skilled construction workers for the future.  Instead, construction employment went into free-fall starting with the Great Recession. Today, the state has around  560,000 construction jobs.

The most recent job generation hope of course was Green technology. The Green Jobs movement was to be jumpstarted by the federal Stimulus in 2009 and 2010. The Stimulus did pump money into the California economy for alternative energy manufacturing firms, solar panel installation, energy efficiency projects, and weatherization projects.

Yet, the major ongoing  job growth never materialized.

So it is smart to approach with skepticism any claims of explosive and sustainable job growth associated with any sector. Saying this though, there are reasons to think that Proposition 39, developed by Mr. Thomas Steyer, and overwhelmingly approved last month by California voters, may well spur sustainable job creation in energy efficiency and perhaps alternative energy production.

Proposition 39 (“Tax Treatment for Multistate Businesses, Clean Energy and Energy Efficiency Funding”) requires out of state businesses to calculate their California income tax liability based on the percentage of their sales in California. The Legislative Analyst’s Office estimates that Prop 39 will generate $1 billion in additional annual state revenues.  $550 million per year for five years (total $2.75 billion) is targeted at projects that “create energy efficiency and clean energy jobs” in California. A “Clean Energy Job Creation Fund” is established  for the $2.75 billion to fund three categories of expenditures: (1) energy efficiency retrofits and clean energy installations for public schools, universities and public buildings, (2) job training and workforce development on energy efficiency and clean energy projects, and (3) public-private partnerships for Clean Energy programs.

Within state government, two bills, SB39 and AB39 have been introduced to start with funding to public schools retrofits—described as the low-hanging fruit of energy conservation.  In addition, the Governor’s Office is developing its spending plan, for both the capital improvements and workforce training.

Mr. Nick Josefowitz is one of our active young entrepreneurs and investors in California (the drivers of our next California economy). Mr. Josefowitz graduated from Harvard  in 2005. His first entrepreneurial efforts were in Europe,  developing and building solar power plants. He now lives in San Francisco, and is an energetic investor in renewable energy, energy efficiency and clean transportation projects .

Mr. Josefowitz sees the Prop 39 public sector investment  as jump starting the energy efficiency sector in California. The Prop 39 funded projects  will directly create jobs in energy retrofit of public schools and public buildings. Beyond the direct jobs, the expertise gained by the energy efficiency contractors should enable them  to improve  quality of services, and also lower prices to other markets, including residential markets, in California and elsewhere. As commercial  lenders are drawn into the process, these institutions should become more familiar and comfortable with energy efficiency project lending.

The failure of the federal Stimulus to stimulate sustainable clean energy sectors in California is not likely to be the last word. Rather, this failure may well be part of a process of developing these sectors.

Which brings us back to Webvan, Pets.com and the dotcom boom and bust of the early 2000s in California. Though these companies failed, the internet commerce sector did not disappear.  Within a few years, this sector emerged in modified forms, growing to the economic engine it is today in our state.

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