Michael Bernick
Adjunct Fellow; Counsel to Sedgwick LLP; former Director, California Employment Development Department
California and Human Capital and Labor
Michael Bernick, the former director of the California labor department, the Employment Development Department (EDD), joined the Milken Institute in February 2004, as a research fellow, focusing on job creation and workforce development projects.
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Will Proposition 39 Finally Jump Start Green Jobs in California?
By: Michael Bernick
December 17, 2012
Over the past two decades in California, there have been several job sectors -- internet commerce, construction, green technology -- which were promoted as the next major job generators, only to come up short.

In the late 1990s and early 2000s, the 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. closed in late 2000 after losing more than $147 million, and Excite@Home laid off its 250 workers early in 2001. It took only a few years for the boom in California became the 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 was green technology. The green jobs movement was to be jump-started 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. But the major job growth never materialized.

So it is smart to approach with skepticism any claims of explosive and sustainable job growth associated with any sector. Still, there are reasons to think that Proposition 39, developed by 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 (aEURoeTax Treatment for Multistate Businesses, Clean Energy and Energy Efficiency FundingaEUR?) requires out-of-state businesses to calculate their California income tax liability based on the percentage of their sales in California. The Legislative AnalystaEUR(TM)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 aEURoecreate energy efficiency and clean energy jobsaEUR? in California. A aEURoeClean Energy Job Creation FundaEUR? is established for the $2.75 billion to cover 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 GovernoraEUR(TM)s office is developing its spending plan for both the capital improvements and workforce training. Brian McMahon, Acting Undersecretary of the Labor and Workforce Agency, emphasizes that any workforce training will be closely tied to employers and job openings, and be focused on placements in on-going jobs.

Nick Josefowitz is an active young entrepreneur and investor (one of the drivers of the next California economy). he 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.

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 the 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 for 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, 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.