Finance and LAO outline cap‑and‑trade revenues and GGRF plan; committee urged to monitor auction volatility

The subcommittee received an overview of the governor’s cap‑and‑trade revenue estimates and the proposed greenhouse gas reduction fund (GGRF) discretionary spending plan.

Brandon Merritt of the Department of Finance said the governor’s budget estimates auction revenues for 2024‑25 at roughly $4.1 billion — about $600 million lower than prior estimates — and projected 2025‑26 auction revenues of approximately $4.2 billion. Finance noted strong interest earnings in the State Money Investment Fund, projecting $650 million in interest for the current year, about $250 million above prior projections. The February 2025 auction returned about $851 million, below the $1.02 billion per‑auction estimate the administration used.

The governor’s budget proposes $1.8 billion in discretionary GGRF expenditures for 2025‑26 that largely follow the 2024 spending plan, with one change: a transfer of $81.2 million to the motor vehicle account. The Legislative Analyst’s Office told the committee the proposal is largely consistent with last year’s plan but recommended monitoring auction results because future lower receipts could require modest adjustments to the plan. LAO also highlighted tradeoffs tied to reshuffling funds between GGRF and Proposition 4 (fire prevention bond) to support the motor vehicle account.

Members raised the budgetary importance of cap‑and‑trade reauthorization and the program’s market signals; one lawmaker urged executive‑branch public statements to support market certainty ahead of auctions. Several committee members said the recent lower auction receipts increased the urgency to monitor fund condition at Finance and LAO as the May revision approaches.

No formal changes to the governor’s plan were made at the hearing. Committee staff and Finance will continue to evaluate revenues and the fund condition ahead of the May revision.