California Budget Shortfall Impacts Implementation Of New Climate Disclosure Law

A trailblazing state law requiring some companies to report emissions for their entire supply chain doesn’t have funding to get the ball rolling. The shortfall could set back the program's start date.

Gov. Gavin Newsom's proposed budget, released Jan. 10, did not include the roughly $3M needed to staff up the California Air Resources Board to allow them to act as the law directs. The board's deadline to develop and implement the rules is Jan. 1, 2025.

Newsom signed SB 253 in October 2023. The law directs the California Air Resources Board to create new regulations requiring companies in the state with more than $1B in annual revenue to disclose greenhouse gas emissions. 

The rules would apply to property owners, which would have to report emissions created by their buildings.

SB 253 wasn’t alone. The overwhelming majority of bills signed into law in 2023’s legislative session did not receive funding in the governor’s proposed budget, said Alex Stack, deputy communications director in the governor’s office. 

That might have something to do with the state’s estimated $68B shortfall. 

“With a few limited exceptions, the budget proposal defers all new discretionary spending decisions to this spring, for discussion with the Legislature, based on actual revenues,” Stack told Bisnow via email. 

Though news of the state’s expected shortfall had already tempered expectations among some of the bill’s backers, the confirmation that funding was not assigned still stung. 

“We're still disappointed that there aren't resources in place, because from what we understand, all it would take is about $3M for the air resources board to be able to get started and do what they need to do,” said Monica Palmeira, climate finance strategist at The Greenlining Institute, which co-sponsored the bill. Palmeira said that the money would go toward allowing the California Air Resources Board to hire the staff necessary for implementation. 

"It sounds like the governor's office needed to make a lot of tough decisions with this budget environment," Palmeira said. "We're hopeful because this has already been publicly touted and we're talking about a very small amount of resources that it will take to get it done." 

A CARB spokesperson did not confirm how the agency would use the needed funding but did say, with regards to implementation, that CARB was “currently assessing SB 253 … implementation needs and scoping out potential workstreams to deliver on the tasks and actions required.”

The fact that funding was not included in the provisional budget is “good news for those of us that don't like that law,” California Business Properties Association CEO Matthew Hargrove told Bisnow. 

Hargrove and other opponents of SB 253, such as the California Chamber of Commerce, said that they were eagerly anticipating so-called clean-up legislation that would somehow address what they say is one of their chief concerns with the bill: the anticipated cost of compliance. 

“We'll need to wait and see, through this legislative cycle, what, if any, fixes come forward from the governor and the legislature,’ Hargrove said. 

It's unclear what fixes are in the works. 

In his signing of the bill in October 2023, Newsom called the January 2025 deadline “likely infeasible,” adding concerns about the potential for inconsistent reporting and “the overall financial impact of this bill on businesses." He asked CARB to monitor costs and noted that he anticipated his office would “work with the bill's author and the Legislature next year to address these issues.” 

The governor’s office doesn’t comment on potential legislation, Stack said. A spokesperson for Sen. Scott Weiner, the bill's author, did not respond to requests for comment.

Where opponents see a roadblock thrown in the path of enacting SB 253, supporters see a mere bump in the road. 

“The ship hasn’t sailed,” Palmeira said. “We still have May.”