State Budget Deficits Threaten Renewable Energy Trusts

When outgoing Massachusetts Acting Governor Jane Swift handed a symbolic gavel to incoming Governor Mitt Romney, she handed him a heavy burden indeed.

Boston, Massachusetts – January 8, 2003 [] The Bay State, mired in a US$1-3 billion fiscal crisis depending on who does the math, is not alone in its budgetary problems. The issue is mirrored in varying degrees in dozens of State Houses across the United States. Renewable Energy trust funds, established to both encourage the domestic RE industry as well as improve the environment, are being eyed in many states as sources of funds to bridge mammoth budget gaps that threaten everything from social programs to education. The Massachusetts Renewable Energy Trust (MRET), created in 1998 as part of the Massachusetts Technology Collaborative, boasts a bank account of US$160 million – US$81.6 million of which Swift pointed to as a source of cash as she headed out the door. Romney’s administration has taken this and Swift’s other suggestions under advisement as it attempts to balance the budget while holding to a “no new taxes” campaign pledge. Robert L. Pratt, MRET’s director, said he is concerned about the future of the program, but confident that a “win-win” solution can be found. “I think that every state that has a budget deficit clearly impacts the state (Renewable Energy) funds and definitely is a concern,” said Pratt. “My feeling is that we’re going to find a creative solution.” The large sum of money on hand in the MRET is due, in part, to a lawsuit brought against the state for initiating a tax on customer’s utility bills to fund the trust. Since being established in 1998 to the settlement of the lawsuit in 2000, fund managers (Pratt had yet to join) collected money while under orders not to commit the funds while in litigation. Of the US$160 million in the bank, US$20 million is committed to waste-to-energy programs. Of the remaining US$140 million, US$117 million has been committed to various green building, green power and industry support activities with another US$45 million close to being committed. Only US$10-15 million of the fund has been distributed thus far, according to Pratt. Steven J. Strong, president of Solar Design Associates based in Cambridge, Massachusetts and a member of the board of directors of the Solar Energy Business Association of New England (SEBANE) said he expected the fund might face budgetary pressure this year. “It certainly is an attractive target and we anticipated that this would happen back in the fall,” said Strong. “It’s just awful, to raid renewables to balance the budget deficit and it’s against the law.” Paul Gromer, SEBANE’s director, said the RET fund is important for solar companies in Massachusetts who add to the economy by creating jobs and creating valuable exportable products. “The money in the Renewable Energy Trust fund was collected from electric ratepayers with the promise that it be used for a specific purpose,” said Paul Gromer, SEBANE director. “In our view it would be wrong to now take that money and use it for a completely different purpose.” In addition to Massachusetts, 13 states have public energy trusts. They are: California, Connecticut, Delaware, Illinois, Minnesota, Montana, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island and Wisconsin. These states face budget deficits for 2004 ranging from US$100 million to US$25 billion. The money collected for those states trust funds ranges from US$1.5 million in Delaware to US$540 million in California. Wisconsin became the second state to establish a public benefit fund without deregulating its electric utility industry. According to Don Wichert, chief of energy resources for Wisconsin’s Department of Adminstration, annual funding for energy programs is roughly US$100 million with an average of five percent going toward Renewable Energy projects. The remainder is mostly targeted toward energy efficiency projects throughout the state. According to a December report by the Center on Budget and Policy Priorities on States’ budget deficits, Wisconsin is among many U.S. states facing critical budget shortfalls for 2004. The report said Wisconsin’s projected 2004 budget deficit may be somewhere between US$1.3 to 2.8 billion. It remains to be seen whether the funds will be targeted to alleviate the state’s financial shortfalls again. Wichert said Wisconsin’s previous governor proposed taking US$40 million from the public energy trust but those efforts failed. “We don’t know at this point,” said Wichert. “The new governor was just sworn in and has not yet come up with an energy policy. We’re holding our breath but it wouldn’t be a surprise to anyone if these funds were targeted. We’ll just have to see.” Some states’ public benefits trusts simply don’t have a large sum of money that can be targeted by state officials looking to assuage budget shortfalls, said Jeff Peterson, Program Manager for New York State Energy Research and Development Authority (NYSERDA). “We get the money in a similar way, but we’ve been using it as we get it,” said Peterson. “We don’t have huge bank account with excess money in it.” In Pennsylvania, which is facing similar budget shortfalls, the government cannot access the money generated for a public benefits trust, which was established through a settlement with utilities, said Calvin Birge, of the Pennsylvania Public Utilities Commission. Although Pennsylvania’s public benefits fund is safe, Birge felt that such a possibility in other states would be an unfortunate breech of trust. “Everything is getting tight, and it will just get worse, but I think when you dedicate yourself to something you’ve got to stick with it,” Birge said.

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