The California Legislative Analystâs Office is recommending the state Legislature reject Gov. Gavin Newsomâs proposal for a $1 billion green loan fund.
In January, when Newsom released his state budget proposal, he announced the four-year revolving loan program meant to help grow small-and medium-sized climate friendly businesses.
The progam is meant to jumpstart businesses like electric vehicle charging stations, climate friendly farming initiatives and other sustainability projects that have a hard time attracting private capital.
âAs we grow, we must demand that the benefits of this growth be widely shared by workers and small businesses â not just those with access to huge amounts of capital,â Newsom said at the time. â
But in a report released Thursday by the LAO, a nonpartisan advisory agency for the state Legislature, analysts said such a loan program would be problematic.
âIt wasn’t clear exactly what projects would be eligible and whether those projects would actually be appropriate for a loan,â said Brian Weatherford, a senior fiscal and policy analyst for the LAO, in an interview.
The program is designed to be self-sustaining â as borrowers repay loans, the state can use the money to issue additional ones.
But Weatherford said the administration hasnât identified projects that could both repay the loan and would otherwise be unable to attract financing from the private sector or elsewhere.
The analysts wrote in the report: âWe acknowledge that appropriate projects could benefit from access to the lowâcost financing this fund would provide. However, the administration has not demonstrated the actual size of this need.â
The LAO also said investing in businesses that could potentially provide the most benefit in terms of reducing emissions can be risky because many are not feasible, can’t get regulatory approval or do not have a way to repay the loan.
While there is value in helping to finance s these kind of businesses, the LAO said, it would be “inappropriate” given the risks.
The Newsom administration rejected the LAOâs reasoning. âWe disagree with the LAOâs assessment of the climate catalyst fund,â said Vicky Waters, Newsomâs press secretary, in an email. âCalifornia cannot wait to make major investments that deploy and scale technologies to meet our climate goals. We look forward to working with the Legislature on this issue.â
The report assessed all of Newsom’s major climate change proposals, including a $965 million cap-and-trade expenditure and a $4.75 billion climate fund.