Socioeconomic Analysis

REVISED Proposed Rule 9310:

School bus emissions (FINAL Draft)

19 October 2006

Prepared for

San Joaquin Valley Unified Air Pollution Control District

1990 E. Gettysburg Avenue

Fresno, CA 93726

Prepared by

Applied Development Economics

2029 University Avenue • Berkeley, California 94704 • (510) 548-5912

1029 J Street, Suite 310 • Sacramento, California 95814 • (916)
441-0323

www.adeusa.com

CONTENTS

  TOC \o "1-3" \h \z    HYPERLINK \l "_Toc138821360"  1. Executive
Summary	  PAGEREF _Toc138821360 \h  6  

  HYPERLINK \l "_Toc138821361"  2. Introduction	  PAGEREF _Toc138821361
\h  10  

  HYPERLINK \l "_Toc138821362"  3. Description of New Rule 9310	 
PAGEREF _Toc138821362 \h  11  

  HYPERLINK \l "_Toc138821364"  4. Methodology	  PAGEREF _Toc138821364
\h  12  

  HYPERLINK \l "_Toc138821365"  5. Impacted Industries Subject to New
Rule 9310 (school bus fleets)	  PAGEREF _Toc138821365 \h  14  

  HYPERLINK \l "_Toc138821366"  5.1 Regional demographic and economic
trends	  PAGEREF _Toc138821366 \h  14  

  HYPERLINK \l "_Toc138821367"  5.1.1 Regional Demographic Trends	 
PAGEREF _Toc138821367 \h  14  

  HYPERLINK \l "_Toc138821368"  5.1.2 Regional Economic Trends	  PAGEREF
_Toc138821368 \h  16  

  HYPERLINK \l "_Toc138821369"  5.2 Description of affected sources	 
PAGEREF _Toc138821369 \h  18  

  HYPERLINK \l "_Toc138821370"  5.3 Transportation Funding	  PAGEREF
_Toc138821370 \h  23  

  HYPERLINK \l "_Toc138821371"  5.3.1 California School Bus Funding
Programs	  PAGEREF _Toc138821371 \h  23  

  HYPERLINK \l "_Toc138821372"  5.3.2 Federal, Other State, and Other
Programs	  PAGEREF _Toc138821372 \h  28  

  HYPERLINK \l "_Toc138821373"  Federal Funding Programs	  PAGEREF
_Toc138821373 \h  29  

  HYPERLINK \l "_Toc138821374"  EPA's Voluntary Diesel Retrofit Program	
 PAGEREF _Toc138821374 \h  29  

  HYPERLINK \l "_Toc138821375"  Clean School Bus USA Program	  PAGEREF
_Toc138821375 \h  29  

  HYPERLINK \l "_Toc138821376"  State Funding Programs	  PAGEREF
_Toc138821376 \h  29  

  HYPERLINK \l "_Toc138821377"  ARB's Lower-Emission School Bus Program	
 PAGEREF _Toc138821377 \h  29  

  HYPERLINK \l "_Toc138821378"  California Energy Commission's Safe
School Bus Clean Fuel Efficiency Demonstration Program	  PAGEREF
_Toc138821378 \h  30  

  HYPERLINK \l "_Toc138821379"  California Department of Education’s
Small School District and County Office School Bus Replacement Program	 
PAGEREF _Toc138821379 \h  30  

  HYPERLINK \l "_Toc138821380"  5.3.3 Local Funding Programs: One Time
or Limited Time Funding Sources	  PAGEREF _Toc138821380 \h  30  

  HYPERLINK \l "_Toc138821381"  SJVAPCD Heavy-Duty Air Quality
Attainment Program	  PAGEREF _Toc138821381 \h  30  

  HYPERLINK \l "_Toc138821382"  San Joaquin Valley Emergency Clean Air
Attainment Program (VECAP)	  PAGEREF _Toc138821382 \h  30  

  HYPERLINK \l "_Toc138821383"  Indirect Source Review Program (ISR
Program)	  PAGEREF _Toc138821383 \h  30  

  HYPERLINK \l "_Toc138821384"  5.3.4 Local Funding Programs: On-Going
Funding Sources	  PAGEREF _Toc138821384 \h  31  

  HYPERLINK \l "_Toc138821385"  DMV Surcharge Fees	  PAGEREF
_Toc138821385 \h  31  

  HYPERLINK \l "_Toc138821386"  Congestion Mitigation and Air Quality
Improvement Program	  PAGEREF _Toc138821386 \h  31  

  HYPERLINK \l "_Toc138821387"  6. Socioeconomic Impacts	  PAGEREF
_Toc138821387 \h  33  

  HYPERLINK \l "_Toc138821388"  6.1 Compliance cost estimates	  PAGEREF
_Toc138821388 \h  33  

  HYPERLINK \l "_Toc138821389"  6.2 Business responses to compliance
costs	  PAGEREF _Toc138821389 \h  34  

  HYPERLINK \l "_Toc138821390"  6.3 Impacts on Affected Industries	 
PAGEREF _Toc138821390 \h  34  

  HYPERLINK \l "_Toc138821391"  6.4 Impacts on Small Businesses	 
PAGEREF _Toc138821391 \h  39  

 

TABLES AND figureS  TOC \h \z \t "TABLE / FIGURE TITLE,1" \c "Figure"  

  HYPERLINK \l "_Toc138841869"  FIGURE 1 San Joaquin Valley Unified Air
Pollution Control District (SJVUAPCD) Air Basin	  PAGEREF _Toc138841869
\h  10  

  HYPERLINK \l "_Toc138841870"  TABLE 2.  Public School Population
Growth: San Joaquin Valley Region, 1993 - 2003	  PAGEREF _Toc138841870
\h  16  

  HYPERLINK \l "_Toc138841871"  TABLE 3. Employment Profile Of The San
Joaquin Valley Region 1998 – 2003	  PAGEREF _Toc138841871 \h  18  

  HYPERLINK \l "_Toc138841872"  TABLE 4. Public Schools Districts in San
Joaquin Valley Air Basin	  PAGEREF _Toc138841872 \h  19  

  HYPERLINK \l "_Toc138841873"  TABLE 5. General Fund Expenditure
Trends: Public School Districts in the San Joaquin Valley Air Basin,
1998-2003	  PAGEREF _Toc138841873 \h  21  

  HYPERLINK \l "_Toc138841874"  TABLE 6. General Fund Expenditure
Trends: Restricted and Non-restricted Expenditure As Percent of Total
Public School Districts in the San Joaquin Valley Air Basin, 1998-2003	 
PAGEREF _Toc138841874 \h  21  

  HYPERLINK \l "_Toc138841875"  TABLE 7. General Fund Revenue Trends:
Public School Districts in the San Joaquin Valley Air Basin, 1998-2003	 
PAGEREF _Toc138841875 \h  23  

  HYPERLINK \l "_Toc138841876"  TABLE 8. General Fund Revenue Trends:
Restricted and Non-restricted Expenditure As Percent of Total Public
School Districts in the San Joaquin Valley Air Basin, 1998-2003	 
PAGEREF _Toc138841876 \h  23  

  HYPERLINK \l "_Toc138841877"  TABLE 9. School Bus Funding Programs of
the California Department of Education	  PAGEREF _Toc138841877 \h  23  

  HYPERLINK \l "_Toc138841878"  TABLE 10. Public School Bus
Transportation Expenditure Trends, 1998-2003: Public School Districts
San Joaquin Valley Air Basin	  PAGEREF _Toc138841878 \h  25  

  HYPERLINK \l "_Toc138841879"  TABLE 11. Public School Bus
Transportation Expenditures, 2003: Cost Per Mile: Public School
Districts San Joaquin Valley Air Basin	  PAGEREF _Toc138841879 \h  27  

  HYPERLINK \l "_Toc138841880"  TABLE 12. State and Local Revenues For
School Bus Operations Versus Total Expenditures	  PAGEREF _Toc138841880
\h  28  

  HYPERLINK \l "_Toc138841881"  TABLE 13. Total and Annual Compliance
Cost: Replacing, Repowering and or Retrofitting 2,581 Out of Compliance
School Buses	  PAGEREF _Toc138841881 \h  33  

  HYPERLINK \l "_Toc138841882"  TABLE 14. Unrestricted General Fund
Revenues versus Unrestricted General Fund Expenditures and Resulting
Fund Balance	  PAGEREF _Toc138841882 \h  35  

  HYPERLINK \l "_Toc138841883"  TABLE 15. Total General Fund Revenues
versus Total General Fund Expenditures and Resulting Total Fund Balance	
 PAGEREF _Toc138841883 \h  36  

  HYPERLINK \l "_Toc138841884"  TABLE 16. Potential Revenues to Further
Mitigate Annual Compliance Rule 9310 Cost: Savings From Reductions in
“Services and Other Operating Expenses”	  PAGEREF _Toc138841884 \h 
38  

 1. Executive summary

There are approximately 700,000 on-road diesel-fueled vehicles currently
in use in California, and school bus fleets are part of this inventory
of on-road vehicles.  In California, the majority of on-road
diesel-fueled engines are found in the heavy-duty vehicles category with
a gross vehicle weight (GVW) rating greater than 14,000 pounds, which
include any school buses.  To reduce emissions from on-road fleet
vehicles, particularly school buses, Draft Rule 9310 is intended to
achieve greater and earlier NOx and PM emission reductions than would
occur through the normal vehicle replacement process for fleets in
public service.  Emissions could be reduced in a number of ways,
including (1) replacing buses before their scheduled retirement (2)
replacing engines/power trains of existing buses with cleaner technology
(3) retrofitting emission control technology to existing sources (4)
switching to cleaner fuels.  

In the eight-county region, there are 185 public schools districts. 
Included in this count of school districts are unified school districts,
elementary school districts, middle school districts and high school
districts, as well as County Office of Education and Joint Powers
Agreements (JPAs).  The school districts can be broken down into the
following size categories, of small, medium and large.  There are 136
small-sized school districts, or 74 percent of the total.  Medium and
large school districts comprise 19 and 7 percent respectively of all
school districts.

The analysis shows that in the eight-county region public school General
Fund expenditures increased by 5.2 percent per year between 1998 and
2003, going from $9.0 billion to $11.6 billion.  Of these expenditures,
the expenditures in restricted categories increased the fastest, growing
annually by nine percent, from $2.6 billion to $4.0 billion.  While
unrestricted expenditures are the bulk of General Fund dollars at $7.6
billion out of a total of $11.6 billion, these expenditures did not grow
as fast as restricted expenditures.  Unrestricted expenditures increased
by 3.4 percent annually between 1998 and 2003.  On a per pupil basis,
non-restricted General Fund expenditures, which is money available for
all students, went from $9,135 in 1998 to $9,860 in 2003, growing by
$725 or 1.5 percent per year.  The analysis also tracks General Fund
revenues, and it shows that revenues are growing fastest in those
revenues centers that are restricted in nature – meaning dollars that
flow to local school districts from the state or other sources must be
used for specified uses and certain student populations with specific
needs.  Between 1998 and 2003, restricted revenues increased by almost
nine percent annually for districts in the eight-county region, whereas
unrestricted funds grew by three percent annually.  On a per pupil
basis, unrestricted General Fund revenues increased from $9,936 in 1998
to $10,656 in 2003, growing by $720 or 1.4 percent per year.

The analysis also shows that there are approximately 3,302 buses in
operation in the eight-county region, and, of these, 2,581 would be
affected by the rule. These affected buses carry 203,400 students,
traveling an estimated 46.6 million miles during the school year.  On a
per mile basis, the $174 million transportation expenditure amounts to
$3.73 for the region.

School districts can satisfy rule requirements in three basic ways. 
First, they can replace existing diesel buses with a new bus that will
cost approximately $120,000.  Non-conforming buses that are sold will
sell on average for an estimated $7,000, resulting in a net replacement
cost of $113,000 per bus.  Multiplied against the maximum number of
buses that need to be replaced, the total compliance cost associated
with replacing existing diesel busses amounts to $214.9 million. 
Assuming a twenty-year period and a ten percent interest rate, the
annual cost associated with replacing diesel buses equals an estimated
$25.1 million for all the school districts in the region.  The District
also contemplates that 115 buses can be re-powered, the cost for which
on a per unit basis is $45,000. Thus, the cost of re-powering these
buses is an estimated $5.1 million, or $843,500 annually.  Finally,
school districts can retrofit approximately 592 buses at a total cost of
$4.7 million, or $771,968 dollars a year.  In terms of replacing,
re-powering and or retrofitting noncompliant school buses, the total
annual compliance costs associated with Draft Rule 9310 amounts to $26.7
million over a limited number of years.

The District recognizes the financial impacts facing school districts
and commits to assist in identifying funding sources to mitigate some of
the costs associated with this rulemaking. Federal, State, and local
programs have been developed to encourage (dependent upon available
funding) school districts to obtain less-polluting, safer school buses.
These programs are summarized in the report.  

To assist local schools in covering some of the annual compliance costs
associated with the rule, the District’s Emissions Reduction
Incentives Program (ERIP) anticipates the receipt of an estimated $30
million to $58 million in the next five years with the potential to
replace at least 200 school buses.  Furthermore, ERIP has funded
approximately 200 retrofits and continues to offer retrofit incentives
with approximately 70 projects awaiting funding allocation.  Additional
funding sources for future school bus emission reduction projects
include DMV Fees, Carl Moyer Program, VECAP, Lower Emission School Bus
Program, Rule 4694 (Wine Fermentation & Storage Tanks) and the
District’s Indirect Source Program.  On an annual basis, the
anticipated receipt of $30 million to $58 million over the next five
years amounts to anywhere between $6 million and $11.6 million annually,
or $8.8 million on average.  Thus, the $26.7 million annual cost can be
reduced by $8.8 million to $17.9 million.  

The analysis also shows how school districts can reduce General Fund
“Services and Other Expenses” to the tune of $5.3 million, which, in
turn, could be re-directed to cover a portion of the remaining $17.9
million in annual costs associated with Rule 9310, reducing this amount
to $12.6 million.  If the unaccounted for annual compliance costs of
$12.6 million is covered by school districts’ overall fund balance
(reserve), the reserve ratio will decline from current 3.28 percent to
3.17 percent for the region as a whole, which is above the minimum as
stipulated by state law.  By law, school districts are required to
maintain a minimum reserve of 3 percent.

2. Introduction

This report describes the socioeconomic impacts of Draft Rule 9310
(School Bus Fleets). Following this introduction, the report summarizes
the proposed amendments and describes the methodology for the
socioeconomic analysis. In Section 5, the report describes the economic
characteristics of sources affected by Draft Rule 9310. The sixth
section analyzes the socioeconomic impacts of compliance costs on the
affected sources and the regional economy.  This report is based on the
version of Draft Rule 9310 that was published on April 25, 2006.

The report is prepared pursuant to the provisions of AB2051 (Section
40728.5 of the California Health and Safety Code), which requires an
assessment of socioeconomic impacts of proposed air quality rules. The
findings in this report can assist District staff in understanding the
socioeconomic impacts of New Rule 9310, and can assist staff in
preparing a refined version of the rule. Figure 1 is a map of the
eight-county region that comprises the San Joaquin Valley Air Basin. As
indicated in the map, Kern County is not completely in the District.

FIGURE 1

San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD) Air
Basin

3. Description of New Rule 9310

The District’s 2003 PM10 Plan and the 2002 and 2005 Rate of Progress
(ROP) Plan identify the need for fleet rules to address mobile source
emissions in the San Joaquin Valley region.  In particular, fleet rules
seek to achieve this objective by reducing emissions from on-road fleet
vehicles and consequently reduce the public’s exposure to air toxic
contaminants and other pollutants through the use of cleaner vehicles in
public and private fleets performing public services.  In an effort to
achieve this goal of reducing emissions from on-road fleet vehicles,
school bus fleets are the subjects of this initial rulemaking.

There are approximately 700,000 on-road diesel-fueled vehicles currently
in use in California, and school bus fleets are part of this inventory
of on-road vehicles.  In California, the majority of on-road
diesel-fueled engines are found in the heavy-duty vehicles category with
a gross vehicle weight (GVW) rating greater than 14,000 pounds, which
include any school buses.

To reduce emissions from on-road fleet vehicles, Draft Rule 9310 is
intended to achieve greater and earlier NOx and PM emission reductions
than would occur through the normal vehicle replacement process for
fleets in public service.  Emissions could be reduced in a number of
ways, including (1) replacing buses before their scheduled retirement
(2) replacing engines/power trains of existing buses with cleaner
technology (3) retrofitting emission control technology to existing
sources (4) switching to cleaner fuels.  

Generally, older school buses emit more toxic air contaminants (TACs)
and other air pollutants than more current models.  More than one-third
of the school buses are fifteen years old or older.  These are subject
to less stringent emission standards than those for later model school
buses and would benefit from replacement or repower in reducing
emissions.

4. Methodology

The socioeconomic analysis involves the use of information provided
directly by affected sources, as well as secondary data used to describe
the industries affected by the proposed provisions of Draft Rule 9310.
The approach is briefly described below. 

Applied Development Economics (ADE) began the analysis by preparing a
statistical description of the industry groups of which the affected
sources are a part, analyzing data on the number of jobs, revenues,
expenditures, and fund balance of affected industries.

This report relies heavily on the most current data available from a
variety of sources, such as the California Department of Education and
the State of California’s Employment Development Department (EDD)
Labor Market Information Division.  

With the above information, ADE was able to quantify trends with respect
to employment, General Fund revenues, General Fund expenditures, and
school bus-related expenditures.  In other socioeconomic analyses, ADE
calculated ratios of profit per dollar of revenue for affected
industries, showing what proportion of profits the compliance costs
represent. Based on assumed thresholds of significance, ADE would
discuss in the report whether the affected sources are likely to reduce
jobs as a means of recouping the cost of rule compliance or as a result
of reducing business operations. To the extent that such job losses
appear likely, the indirect multiplier effects of the jobs losses are
estimated using a regional IMPLAN input-output model.  Given the nature
of the affected sources, this report analyzes socioeconomic impact
differently from previous approaches.

Public school districts are different from commercial business in that
they are not profit-motivated, and, in terms of revenue generation,
depends for the most part on local revenues, much of which is property
taxes that are sent to Sacramento which sends back the funds on a
formula basis.  Many local school districts supplement their funding
with local parcel tax money that is generated within and controlled by
their respective jurisdictions.  In addition, federal and state dollars
also flow to school districts to pay for programs and activities, much
of which is targeted to specific populations.

Given this difference between school districts and commercial
enterprises, ADE chose to analyze the impact of the annual compliance
costs on affected sources slightly differently than the way we do in
other socioeconomic impact analyses.  In short, we analyze what impacts,
if any, the annual compliance cost can have on reserves of affected
sources.  As it is, the State of California requires all public school
districts to maintain a minimum reserve for economic uncertainties equal
to three percent of their respective annual budgets.  If the annual
compliance costs reduces the reserve ratio below the minimum three
percent ratio, then we indicate that the rule has a significant impact.

5. Impacted Industries Subject to New Rule 9310 (school bus fleets)

This section of the socioeconomic analysis describes demographic and
economic trends in the San Joaquin Valley region. The first part of this
section compares the San Joaquin Valley region against California as a
whole, and provides a context for understanding demographic and economic
changes that occurred within the San Joaquin Valley region between 1998
and 2003. Starting with sub-section 5.2, the second part of this section
narrows the focus of the socioeconomic analysis to industries affected
by Draft Rule 9310. The second part of this section describes the
economic characteristics of potentially impacted industries that might
be subject to Rule 9310. 

In this report, the San Joaquin Valley region is defined as Fresno,
Kern, Kings, Madera, Merced, San Joaquin, Stanislaus and Tulare
counties. Data for Kern County in Tables 1 and 2 are for all of Kern
County, although Kern County is only partially in the San Joaquin Valley
Air Basin. Starting with Table 3, data for Kern County are for the part
of Kern County that is in the San Joaquin Valley Air Basin.

5.1 regional demographic and economic trends

5.1.1 Regional Demographic Trends

The San Joaquin Valley region experienced tremendous population growth
during the 1990s. Many came to this area because of affordable housing.
As a result, population increased significantly. The eight-county
region’s population increased by 22 percent (or approximately 2.0
percent annually), from 2.9 million in 1993 to 3.6 million in 2003.
While the State of California’s population increased by 15 percent (or
approximately 1 percent annually), all the counties in the region
experienced faster rates of growth, and two counties grew at rates that
were triple the State’s growth rate, as Table 1 shows. While by many
standards Madera County continues to be a small county– at 135,262
residents according to the Department of Finance–it still experienced
a 35 percent growth in population during the last decade (or three
percent annually). Kings County also grew by three percent per year. As
demonstrated in the following section on regional economic trends, the
demographic changes that occurred in the San Joaquin Valley region
during the 1990s significantly influenced the economy of this
eight-county region.

TABLE 1.  Population Growth: San Joaquin Valley Region, 1993 - 2003

	1993	1998	2003	Distribution, 2003	Annual % Chng        93-98	Annual %
Chng        98-03	Annual % Chng        93-03

California	31,303,452	32,670,019	36,144,267	 	1%	2%	1%

SJV Region	2,959,911	3,192,439	3,615,696	10%	2%	3%	2%

     Fresno	722,608	781,936	862,642	24%	2%	2%	2%

     Kern	593,087	637,227	724,883	20%	1%	3%	2%

     Kings	109,648	120,957	141,434	4%	2%	3%	3%

     Madera	100,297	114,137	135,262	4%	3%	3%	3%

     Merced	191,883	203,181	232,141	6%	1%	3%	2%

     San Joaquin	507,170	546,852	630,577	17%	2%	3%	2%

     Stanislaus	400,417	428,272	491,929	14%	1%	3%	2%

     Tulare	334,801	359,877	396,828	11%	1%	2%	2%

Source: Applied Development Economics, based on California Department of
Finance



Table 2 below tracks student population in public schools in the
eight-county region.  Data are for elementary, middle, high school
districts, as well as unified school districts and the County Office of
Educations for each county in the region. Student population is
distributed similar to the way in which population as a whole is
distributed.  For example, 24 percent of all children and youths
enrolled in public schools in the region are enrolled in school in
Fresno County, and this rate is similar to Fresno’s share of total
regional population as discussed in Table 1.  In terms of growth,
population of students in public schools has been increasing at an
annual clip similar to population for the region as a whole, or
approximately two percent annually between 1998 and 2003.

TABLE 2.  Public School Population Growth: San Joaquin Valley Region,
1993 - 2003

	1993	1998	2003	Distribution, 2003	Annual % Chng        93-98	Annual %
Chng        98-03	Annual % Chng        93-03

California	5,089,808	5,633,646	6,181,260	 	2.1%	1.9%	2.0%

SJV Region	640,669	700,500	768,461	12%	1.8%	1.9%	1.8%

     Fresno	160,417	174,924	187,697	24%	1.7%	1.4%	1.6%

     Kern	128,596	141,619	154,695	20%	1.9%	1.8%	1.9%

     Kings	22,656	24,799	26,354	3%	1.8%	1.2%	1.5%

     Madera	21,933	24,016	25,186	3%	1.8%	1.0%	1.4%

     Merced	44,652	49,068	53,833	7%	1.9%	1.9%	1.9%

     San Joaquin	100,083	110,587	128,363	17%	2.0%	3.0%	2.5%

     Stanislaus	83,743	91,612	103,992	14%	1.8%	2.6%	2.2%

     Tulare	78,589	83,875	88,341	11%	1.3%	1.0%	1.2%

Source: Applied Development Economics, based on California Department of
Education



5.1.2 Regional Economic Trends

Economic development practitioners and planners have traditionally
divided economies into two broad industrial categories—the economic
base and local support industries. Economic base industries are the
drivers of local and regional economies in that these industries draw
income into an economy by selling products outside of the local or
regional economy, much like the export industries of a national economy.
Accrued earnings then circulate throughout the local area in the form of
wages and salaries, investments, purchases of fixed assets, and goods
and services, generating more jobs and wealth. The economic base is
typically comprised of industries within the manufacturing,
minerals-resource extraction, and agricultural sectors. 

In addition to the economic base, there are also the “local support
industries” such as retail or service sectors, the progress of which
is a function of the economic base and demographic changes, and more so
the latter than the former. As population increases in a given area,
aggregate demand for services–such as realtors, teachers, and
healthcare–increases, as does demand for basic retail items like
groceries, gas for commuting, or clothing at the local apparel shops.

Agriculture is the economic base of the San Joaquin Valley region by
virtue of the amount of goods this sector produces and exports
throughout the nation and the globe. Fourteen percent of all workers in
the region are employed by industries within agriculture, as Table 3
shows. However, in 1998 the proportion of workers in agriculture was 18
percent. In fact, over the five-year period between 1998 and 2003,
employment in agriculture declined by three percent per year, or by 15
percent over five years.  Even with the decline in employment,
agriculture remains the eight-county region’s economic base given the
high volume of agricultural products that continue to be exported to all
points of world.

Between 1998 and 2003, local support industries gained in prominence
within the San Joaquin Valley region. Service-rendering industries
employed the most workers as a proportion of total employment in the
region. As Table 3 shows, excluding wholesale, retail and
transportation, service-rendering industries comprise the largest
employment sector in the region, at 647,100 or 53 percent of all jobs.
With retail, transportation and wholesale, services accounts for
slightly over 70 percent of all jobs. In 1998, service-rendering
industries represented 50 percent of all jobs, and when including
retail, wholesale and transportation in the mix, 67 percent. 

Increases in employment in service-rendering industries are consistent
with regional population growth.  In the region, local support
industries of construction, education and health, financial activities,
and government increased annually by six percent, four percent, three
percent and three percent respectively between 1998 and 2003.   

[This space is intentionally blank]TABLE 3. Employment Profile Of The
San Joaquin Valley Region 1998 – 2003

 MAJOR SECTORS	San Joaquin Valley Region Employment 1998	San Joaquin
Valley Region Employment 2003	San Joaquin Valley Region Employment
Distribution, 2003	Annual Percent Change 

1998 to 2003	California Employment Distribution, 2003	Annual Percent
Change 

1998 to 2003

Agriculture	204,200	174,900	14%	-3%	3%	-2%

Resources, Mining and Construction	57,400	78,100	6%	6%	5%	5%

Manufacturing	114,300	110,300	9%	-1%	10%	-4%

Wholesale	34,400	39,000	3%	3%	4%	1%

Retail	121,400	133,200	11%	2%	11%	2%

Transportation/Warehousing/Utilities	37,600	45,700	4%	4%	3%	-1%

Information	15,000	14,200	1%	-1%	3%	-0.5%

Financial Activities	40,400	46,600	4%	3%	6%	3%

Professional and Business Services	88,000	95,100	8%	2%	14%	1%

Educational and Health Services	101,500	122,200	10%	4%	10%	3%

Leisure, Hospitality and Other Srvs	112,500	116,400	9%	1%	13%	2%

Government	221,200	252,600	21%	3%	16%	2%

Total Employment	1,147,900	1,228,300	100%	1%	100%	1%

Source:  Applied Development Economics, based on data from California
Employment Development Department LMID



The emergence of local support industries in the San Joaquin Valley
region mirrors and leads statewide trends, as Table 3 shows. In the
region, construction, health-education, and government increased
annually by six percent, four percent and three percent, whereas,
statewide, these industries grew by five percent, three percent and two
percent per year between 1998 and 2003.  In short, while agriculture
remains the leading edge of the economy, the San Joaquin Valley
region’s economy has become more diverse, with the growth occurring
within population-driven local support industries rather than the
export-focused economic base industries of manufacturing and
agriculture.

5.2 description of affected sources

In the eight-county region, there are 185 public schools districts. 
Included in this count of school districts are unified school districts,
elementary school districts, middle school districts and high school
districts, as well as County Office of Education and Joint Powers
Agreements (JPAs).

The school districts can be broken down into the following size
categories, of small, medium and large.  There are 136 small-sized
school districts, or 74 percent of the total.  Medium and large school
districts comprise 19 and 7 percent respectively of all school districts
(see Table 4).

TABLE 4.                                         Public Schools
Districts in San Joaquin Valley Air Basin

School District Size	Number	Percent

 Large	13	7%

 Medium	36	19%

 Small	136	74%

	185	100%

Source: San Joaquin valley Unified Air Pollution Control District

Tables 5 through 8 track expenditure and revenue trends for affected
schools districts in the eight-county region, including joint power
agreement districts (JPA) and County Offices of Education.  Dollar
information is adjusted for the affects of inflation, so as to properly
compare 1998 figures against 2003.  

Table 5 shows that in the eight-county region public school General Fund
expenditures increased by 5.2 percent per year between 1998 and 2003,
going from $9.0 billion to $11.6 billion.  Of these expenditures, the
expenditures in restricted categories increased the fastest, growing
annually by nine percent, from $2.6 billion to $4.0 billion.  While
unrestricted expenditures are the bulk of General Fund dollars at $7.6
billion out of a total of $11.6 billion, these expenditures did not grow
as fast as restricted expenditures.  Unrestricted expenditures increased
by 3.4 percent annually between 1998 and 2003.  Table 6 distributes
expenditures and unrestricted dollars as percentages of total General
Fund expenditures.  In short, Tables 5 and 6 demonstrate that, while the
bulk of General Fund expenditures are unrestricted in terms of use,
these expenditures are not growing as fast as restricted funds.

Tables 7 and 8 track General Fund revenues.  Similar to findings of
Table 5 and 6, General Fund revenues are growing fastest in those
revenues centers that are restricted in nature – meaning dollars that
flow to local school districts from the state or other sources must be
used for specified uses and certain student populations with specific
needs.  Between 1998 and 2003, restricted revenues increased by almost
nine percent annually for districts in the eight-county region, whereas
unrestricted funds grew by three percent annually.  On a per pupil
basis, unrestricted General Fund revenues increased from $9,936 in 1998
to $10,656 in 2003, growing by $720 or 1.4 percent per year.  As a share
of total dollars, unrestricted dollars remain the bulk of General Fund
revenues, but the proportion of the funds declined from 73 percent to 68
percent, and this was true for all counties.

[This space intentionally blank].

TABLE 5. General Fund Expenditure Trends: Public School Districts in
the San Joaquin Valley Air Basin, 1998-2003

	--------------- 1997 - 1998 ---------------

--------------- 2002 - 2003 ----------------





General Fund Expenditures     1997-1998	 Restricted        1997-1998
Nonrestricted        1997-1998

General Fund Expenditures     2002-2003	Restricted        2002-2003
Nonrestricted        2002-2003	GF Exp.               Annual Per. Chng
97-98  -  02-03	GF Restricted             Annual Per. Chng 97-98  - 
02-03	GF Nonrestricted             Annual Per. Chng 97-98  -  02-03

SJV Region	$9,006,635,897	$2,607,006,487	$6,399,629,410

$11,626,402,934	$4,049,053,232	$7,577,349,702	5.2%	9.2%	3.4%

     Fresno	$2,199,073,496	$603,387,156	$1,595,686,340

$2,803,416,042	$940,083,270	$1,863,332,772	5.0%	9.3%	3.1%

     Kern	$1,844,147,358	$488,897,953	$1,355,249,405

$2,343,842,464	$780,539,890	$1,563,302,574	4.9%	9.8%	2.9%

     Kings	$321,337,080	$84,927,896	$236,409,184

$383,514,334	$129,064,480	$254,449,854	3.6%	8.7%	1.5%

     Madera	$314,069,047	$91,104,891	$222,964,156

$397,554,884	$126,935,546	$270,619,338	4.8%	6.9%	4.0%

     Merced	$637,760,405	$207,004,595	$430,755,810

$789,556,206	$285,277,730	$504,278,476	4.4%	6.6%	3.2%

     San Joaquin	$1,358,087,751	$380,944,820	$977,142,931

$1,841,134,442	$641,780,044	$1,199,354,398	6.3%	11.0%	4.2%

     Stanislaus	$1,209,130,640	$370,261,158	$838,869,481

$1,633,759,016	$602,984,176	$1,030,774,840	6.2%	10.2%	4.2%

     Tulare	$1,123,030,121	$380,478,018	$742,552,102	 	$1,433,625,546
$542,388,096	$891,237,450	5.0%	7.3%	3.7%

Source: Applied Development Economics, based on California Department of
Education







TABLE 6. General Fund Expenditure Trends: Restricted and Non-restricted
Expenditure As Percent of Total                                         
 Public School Districts in the San Joaquin Valley Air Basin, 1998-2003

	--------------- 1997 - 1998 ---------------

--------------- 2002 - 2003 ----------------

	General Fund Expenditures      1997-1998	 Restricted        1997-1998
Nonrestricted        1997-1998

General Fund Expenditures         2002-2003	Restricted        2002-2003
Nonrestricted        2002-2003

SJV Region	$9,067,055,904	29%	71%

$11,626,402,934	35%	65%

     Fresno	$2,199,073,496	27%	73%

$2,803,416,042	34%	66%

     Kern	$1,844,147,358	27%	73%

$2,343,842,464	33%	67%

     Kings	$321,337,080	26%	74%

$383,514,334	34%	66%

     Madera	$314,069,047	29%	71%

$397,554,884	32%	68%

     Merced	$637,760,405	32%	68%

$789,556,206	36%	64%

     San Joaquin	$1,360,381,134	28%	72%

$1,841,134,442	35%	65%

     Stanislaus	$1,256,874,053	29%	69%

$1,633,759,016	37%	63%

     Tulare	$1,133,413,331	34%	66%	 	$1,433,625,546	38%	62%

Source: Applied Development Economics, based on California Department of
Education



TABLE 7. General Fund Revenue Trends: Public School Districts in the
San Joaquin Valley Air Basin, 1998-2003

	--------------- 1997 - 1998 ---------------

--------------- 2002 - 2003 ----------------





General Fund Revenues      1997-1998	 Restricted        1997-1998
Nonrestricted        1997-1998

General Fund Revenues       2002-2003	Restricted        2002-2003
Nonrestricted        2002-2003	GF Rev..               Annual Per. Chng
97-98  -  02-03	GF Restricted             Annual Per. Chng 97-98  - 
02-03	GF Nonrestricted             Annual Per. Chng 97-98  -  02-03

SJV Region	$9,471,102,296	$2,510,241,276	$6,960,861,020

$12,008,050,396	$3,818,899,700	$8,189,150,696	4.9%	8.8%	3.3%

     Fresno	$2,320,083,299	$599,194,393	$1,720,888,906

$2,861,493,548	$845,923,286	$2,015,570,262	4.3%	7.1%	3.2%

     Kern	$1,945,170,447	$461,887,271	$1,483,283,176

$2,452,670,682	$719,425,304	$1,733,245,378	4.7%	9.3%	3.2%

     Kings	$334,683,107	$78,337,053	$256,346,054

$401,433,744	$121,172,526	$280,261,218	3.7%	9.1%	1.8%

     Madera	$346,427,544	$90,731,478	$255,696,066

$403,706,490	$124,649,534	$279,056,956	3.1%	6.6%	1.8%

     Merced	$678,707,401	$205,194,754	$473,512,647

$815,562,858	$269,911,268	$545,651,590	3.7%	5.6%	2.9%

     San Joaquin	$1,418,155,168	$379,401,817	$1,038,753,351

$1,813,477,996	$558,464,392	$1,255,013,604	5.0%	8.0%	3.9%

     Stanislaus	$1,252,253,771	$342,346,079	$909,907,692

$1,638,285,478	$537,076,452	$1,101,209,026	5.5%	9.4%	3.9%

     Tulare	$1,175,621,558	$353,148,432	$822,473,127	 	$1,621,419,600
$642,276,938	$979,142,662	6.6%	12.7%	3.5%

Source: Applied Development Economics, based on California Department of
Education







TABLE 8. General Fund Revenue Trends: Restricted and Non-restricted
Expenditure As Percent of Total                                       
Public School Districts in the San Joaquin Valley Air Basin, 1998-2003

	--------------- 1997 - 1998 ---------------

--------------- 2002 - 2003 ----------------

	General Fund Revenues            1997-1998	 Restricted        1997-1998
Nonrestricted        1997-1998

General Fund Revenues         2002-2003	Restricted        2002-2003
Nonrestricted        2002-2003

SJV Region	$9,471,102,296	27%	73%	$12,008,050,396	32%	68%	$9,471,102,296

     Fresno	$2,320,083,299	26%	74%	$2,861,493,548	30%	70%	$2,320,083,299

     Kern	$1,945,170,447	24%	76%	$2,452,670,682	29%	71%	$1,945,170,447

     Kings	$334,683,107	23%	77%	$401,433,744	30%	70%	$334,683,107

     Madera	$346,427,544	26%	74%	$403,706,490	31%	69%	$346,427,544

     Merced	$678,707,401	30%	70%	$815,562,858	33%	67%	$678,707,401

     San Joaquin	$1,418,155,168	27%	73%	$1,813,477,996	31%	69%
$1,418,155,168

     Stanislaus	$1,252,253,771	27%	73%	$1,638,285,478	33%	67%
$1,252,253,771

     Tulare	$1,175,621,558	30%	70%	$1,621,419,600	40%	60%	$1,175,621,558

Source: Applied Development Economics, based on California Department of
Education



5.3 Transportation Funding

The San Joaquin Valley Unified Air Pollution Control District recognizes
the financial impacts facing school districts and commits to assist in
identifying funding sources to mitigate some of the costs associated
with Rule 9310.  This section of the report discusses existing funding
programs for school buses.  First, the section discusses the primary
state programs that fund school bus programs.  Then, the section
identifies federal, state and local programs that have been developed to
encourage school districts to obtain less polluting and safer school
buses.  

5.3.1 California School Bus Funding Programs

The State of California Department of Education manages a limited number
of programs that fund school bus services for school districts across
California.  Table 9 lists these programs and, of these, the most
important are the Home-to-School and Special Education (SD\OI) programs.

TABLE 9. School Bus Funding Programs of the California Department of
Education

Transportation: Special Education  (Severely Disabled/Orthopedically
Impaired) (SD/OI)	Funding for transportation for special education
students who are severely disabled (SD) or orthopedically impaired (OH)
and transportation is included in their IEP.

School Bus Safety 624/92	Handling of all the Mandated Cost Claims.  AB
2781 suspended funding for FY 2002-03.

Transportation-School Bus Replacement	This program allocates money to
Small School District Transportation program through which small
districts (ADA of less than 2,501) receive grants to replace certain old
school buses. 25% of the grant is received upfront.

Transportation Home-to-School Program	Local education agencies receive
funding in reimbursement of their approved prior year costs less any
amount in excess of the amount received in the prior year.



While funds from the above programs are made available to local school
districts to assist in paying for the cost of bus services, the approved
amounts from either the School-to-Home or the Severely
Disabled/Orthopedically Impaired (SD/OI) programs do not necessarily
cover full expenses for operating bus services, forcing local districts
to make up the difference through revenues sources such as the General
Fund.  Table 10 identifies FY 2002-2003 total transportation
expenditures by county.  Total public transportation spending for
1997-1998 school year are estimates based on public transportation data
for fiscal year 2002-2003, data for which was provided by the Department
of Education.  In 2002-2003, public schools in the region spent $174
million on public transportation, and 80 percent of this amount was
spent on salaries and benefits for bus drivers, maintenance workers and
anyone else involved with transportation services.

It is worth noting that between 1997-1998 and 2002-2003, total public
transportation spending increased by an estimated 1.5 percent per year,
going from $161.4 million to $174.0 million.  Salaries and benefits
increased at a faster rate, by 2.4 annually.  Transportation spending on
items other than salaries declined for the region as a whole by 1.6
percent annually, although there was wide variation between counties. 
Kings County declined by 34 percent per year between 1997-1998 and
2002-2003, whereas San Joaquin and Tulare Counties increased annually by
20 percent and 87 percent respectively.  

[ This space is intentionally blank ]



TABLE 10. Public School Bus Transportation Expenditure Trends,
1998-2003: Public School Districts San Joaquin Valley Air Basin

	Public Transportation Expenditures     1997-1998	 Salaries       
1997-1998	Other Operations 1997-1998	Public Transportation Expenditures 
   2002-2003	 Salaries        2002-2003	Other Operations   2002-2003	PT
Expenditures               Annual Per. Chng 97-98  -  02-03	PT Salaries
Expenditures               Annual Per. Chng 97-98  -  02-03	PT Other
Expenditures               Annual Per. Chng 97-98  -  02-03

	 	 	 	 	 	 	 	 	 

SJV Region	$161,435,623	$124,421,918	$37,013,705	$174,018,187
$139,901,972	$34,116,215	1.5%	2.4%	-1.6%

     Fresno	$41,026,370	$29,470,753	$11,555,617	$44,784,653	$31,968,226
$12,816,427	1.8%	1.6%	2.1%

     Kern	$45,164,383	$30,732,628	$14,431,755	$39,672,917	$37,897,018
$1,775,899	-2.6%	4.3%	-34.2%

     Kings	$4,105,030	$3,873,364	$231,666	$4,727,494	$4,343,380	$384,114
2.3%	2.3%	10.6%

     Madera	$10,555,014	$8,177,830	$2,377,184	$9,298,007	$8,930,954
$367,053	-2.5%	1.8%	-31.2%

     Merced	$10,213,533	$9,035,012	$1,178,521	$12,246,818	$10,049,036
$2,197,782	3.7%	2.2%	13.3%

     San Joaquin	$20,788,113	$18,337,972	$2,450,141	$27,916,044
$21,748,138	$6,167,906	6.1%	3.5%	20.3%

     Stanislaus	$14,728,088	$10,144,522	$4,583,566	$18,248,476
$12,201,546	$6,046,930	4.4%	3.8%	5.7%

     Tulare	$14,855,093	$14,649,837	$205,255	$17,507,892	$12,763,674
$4,744,218	3.3%	-2.7%	87.4%

Source: Applied Development Economics, based on California Department of
Education (note: King's County 'switch' - I.e. fax salary data becomes
total)(salaries = J200, total = fax'd)



Table 11 includes more detailed information for the year 2002-2003. 
That year, there were approximately 3,302 buses in operation in the
eight-county region, and, of these, 2,581 would be affected by the rule.
These affected buses carry 203,400 students, traveling an estimated 46.6
million miles during the school year.  On a per mile basis, the $174
million transportation expenditure amounts to $3.73 for the region.  The
cost per mile for most counties in the eight-county region hovers around
this regional average, with the highest costs recorded by Kern County at
$4.15 and the lowest costs recorded by San Joaquin at $3.26 per mile.

[ This space is intentionally blank ]



Table 11. Public School Bus Transportation Expenditures, 2003: Cost Per
Mile: Public School Districts San Joaquin Valley Air Basin

Area	Nos. of School Buses	Nos. of Affected School Buses	Total # Pupils
Total Miles	Net Transportation Expense	Net Cost per Mile

SJV Region	3,302	2,581	203,418	46,615,897	$174,018,187	$3.73

     Fresno	794	507	50,220	11,801,420	$44,784,653	$3.79

     Kern	787	597	49,871	9,553,944	$39,672,917	$4.15

     Kings	112	160	5,328	1,090,652	$4,343,380	$3.98

     Madera	165	158	8,004	2,382,544	$9,298,007	$3.90

     Merced	255	251	18,084	3,545,802	$12,246,818	$3.45

     San Joaquin	464	321	25,217	8,570,476	$27,916,044	$3.26

     Stanislaus	318	235	23,588	5,125,877	$18,248,476	$3.56

     Tulare	407	353	23,106	4,545,182	$17,507,892	$3.85

Source: Applied Development Economics, based on California Department of
Education





Table 12 compares total expenditures in 2002-2003 against available
funding from the state and local sources.  For the region, the state
allocated $71.5 million in funds via the School-to-Home and SH-OH
programs, which is below the total transportation services expenditures,
or $174 million.  At $71.5 million, the state covers approximately 41
percent of the cost of operating school buses, a finding that is in line
with comments raised by school officials who attended a
District-facilitated focus group meeting on Rule 9310 that was held in
August, 2004. Thus, school districts in the region filled the difference
with local revenues to the tune of $102.5 million.  More than likely,
the revenues came out of the General Fund.

Table 12. State and Local Revenues For School Bus Operations Versus
Total Expenditures



	-Expenditures-

 ---------- Revenues ----------









Area	Nos. of School Buses	Nos. of Affected School Buses	Net
Transportation Expense

STATE          School-to-Home and SH\OH Allocations	LOCAL               
 All Other Revenue Sources

SJV Region	3,302	2,581	$174,018,187	 	$71,511,350	$102,506,837

     Fresno	794	507	$44,784,653

$17,961,678	$26,822,975

     Kern	787	597	$39,672,917

$14,086,469	$25,586,448

     Kings	112	160	$4,343,380

$1,704,225	$2,639,155

     Madera	165	158	$9,298,007

$4,968,613	$4,329,394

     Merced	255	251	$12,246,818

$6,517,103	$5,729,715

     San Joaquin	464	321	$27,916,044

$12,063,174	$15,852,870

     Stanislaus	318	235	$18,248,476

$5,867,840	$12,380,636

     Tulare	407	353	$17,507,892	 	$8,342,248	$9,165,644

Source: Applied Development Economics, based on California Department of
Education

	

5.3.2 Federal, Other State, and Other Programs

The District recognizes the financial impacts facing school districts
and commits to assist in identifying funding sources to mitigate some of
the costs associated with this rulemaking. Federal, State, and local
programs have been developed to encourage (dependent upon available
funding) school districts to obtain less-polluting, safer school buses.
These programs are summarized below:

Federal Funding Programs

EPA's Voluntary Diesel Retrofit Program

The program operated by the Office of Transportation and Air Quality
(OTAQ) provides assistance to public agencies for partnership projects
that implement verified pollution control equipment on controlled diesel
fleets. The Retrofit Program is a voluntary program addressing emissions
from in-use fleets operating vehicles that are not subject to the
federal Heavy-Duty Diesel Rule for 2007 and later engines. Awards will
be offered at a funding level of $50,000- $100,000 per agency with
potential for awards in subsequent years totaling up to $500,000.

Clean School Bus USA Program

The EPA’s OTAQ assistance program helps school districts in their
efforts to reduce pollution from diesel-powered school buses providing
funding for new; cleaner buses and EPA verified or certified pollution
reduction technologies. Grant recipients are eligible for a maximum
award of one million dollars ($1,000,000) during the first year (2003),
with potential for additional awards funded incrementally in subsequent
years. Results from these pilot demonstration projects will be shared as
case studies for school districts electing to pursue similar projects.

State Funding Programs

ARB's Lower-Emission School Bus Program

The ARB's Lower-Emission School Bus Program (Program) is the primary
source of funding for the replacement and retrofit of school buses in
California. The Program, co-administered by the ARB and California
Energy Commission (CEC), provides grants to upgrade California's aging
and high-polluting school bus fleet through two program components: 1) a
new bus purchase program to replace the oldest school buses, with an
emphasis on replacing pre-1977 model year buses; and 2) a retrofit
program to equip in-use diesel school buses with emission control
technologies verified by the ARB to reduce particulate matter emissions.
Grantees are required to provide matching funds. Since the Program's
inception in December 2000, a total of 66 million dollars has been
dedicated to purchasing new alternative fuel and lower-emitting diesel
school buses (49.5 million dollars allocated) and retrofitting in-use
diesel school buses (16.5 million dollars allocated).

California Energy Commission's Safe School Bus Clean Fuel Efficiency
Demonstration Program

The CEC operates the program designed to replace school buses
manufactured prior to 1977 with newer clean school bus technologies.
During the first four phases of this program, 826 new buses were
replaced through an initial allocation of $100,000,000. Program goals
include promotion of bus safety features, new fuel and emission
technology, and operational efficiency.

California Department of Education’s Small School District and County
Office School Bus Replacement Program

This program has an allocation of $4.7 million for the 2004-05 fiscal.
School districts with an average daily attendance of 2,500 or less are
eligible to receive these funds.

5.3.3 Local Funding Programs: One Time or Limited Time Funding Sources

SJVAPCD Heavy-Duty Air Quality Attainment Program

This program is operated on an on-going basis, as funding is available.
Funding may be used for the incremental cost of new alternative fueled
buses, engine repowers (replacements) that demonstrate at least a 15%
NOx reduction, and the full cost of school bus PM retrofits.

San Joaquin Valley Emergency Clean Air Attainment Program (VECAP)

These funds must meet the basic Moyer Program eligibility criteria and
are not subject to the Environmental Justice Criteria.

Indirect Source Review Program (ISR Program)

The purpose of the District’s ISR Program is to reduce emissions from
new development projects. The District anticipates that the ISR Program
will generate funds for future emission reduction projects including the
replacement of school buses.

5.3.4 Local Funding Programs: On-Going Funding Sources

DMV Surcharge Fees

These fees are collected by the DMV and provided to the District to be
used solely to reduce air pollution from motor vehicles and for related
planning, monitoring, enforcement, and technical studies necessary for
the implementation of the California Clean Air Act.

Congestion Mitigation and Air Quality Improvement Program

Pending Federal reauthorization, local Transportation Planning Agencies
may allocate funds for air quality and transportation projects,
including school buses and alternative fuel infrastructure.

Although the Carl Moyer Memorial Air Quality Attainment Program (Moyer)
is mentioned as a possible funding source, it is important to note that
Moyer funds are restricted by the California Health and Safety Code
Section 44281, which in general, states that Moyer funds cannot be used
to comply with existing rules and regulations. If Rule 9310 is adopted,
Moyer funds will not be available for the purchase, repower, or retrofit
of school buses to assist in meeting the rule requirements. Until then,
Moyer funds are available to assist in such projects, which improve air
quality.

The current state and local government budget constraints present
obvious obstacles for school districts desiring to mitigate their school
bus emissions. The lack of a state law requiring districts to provide
general transportation has also tended to divert money away from
transportation toward classroom needs. With the release of the results
of the ARB school bus study, however, state and local agencies have
expressed greater interest in mitigating diesel school bus emissions. As
discussed at the December 8, 2003 hearing of the California Senate
Select Committee on Air Quality in the Central Valley, the need for a
secure source of funding for cleaner school buses is clear. District
staff anticipates that a portion of the funding needed for districts to
comply with the new rule could come from existing District mobile source
mitigation funds, and potential new revenue streams such as the Indirect
Source Review (ISR) fee rule.  

As it is, the District’s Emissions Reduction Incentives Program (ERIP)
anticipates the receipt of an estimated $30 million to $58 million in
the next five years with the potential to replace at least 200 school
buses.  Furthermore, ERIP has funded approximately 200 retrofits and
continues to offer retrofit incentives with approximately 70 projects
awaiting funding allocation.  In addition to projected contributions
from newly adopted District programs the estimated funding levels are
based on historical funding trends form federal, state and local
allocations.  Funding sources for future school bus emission reduction
projects include DMV Fees, Carl Moyer Program, VECAP, Lower Emission
School Bus Program, Rule 4694 (Wine Fermentation & Storage Tanks) and
the District’s Indirect Source Program.

6. Socioeconomic Impacts

This section of the report compares the economic characteristics of
affected industries against the compliance costs. The first part of this
section discusses annual compliance costs.  Section 6.2 discusses
general business responses to compliance costs.  Section 6.3 analyzes
the socioeconomic impacts of Draft Rule 9310.

6.1 compliance cost estimates

School districts can satisfy rule requirements in three basic ways. 
First, they can replace existing diesel buses with a new bus that will
cost approximately $120,000.  Non-conforming buses that are sold will
sell on average for an estimated $7,000, resulting in a net replacement
cost of $113,000 per bus.  Multiplied against the maximum number of
buses that need to be replaced, the total compliance cost associated
with replacing existing diesel busses amounts to $214.9 million. 
Assuming a twenty-year period and a ten percent interest rate, the
annual cost associated with replacing diesel buses equals an estimated
$25.1 million for all the school districts in the region.

The District contemplates that 115 buses can be re-powered, the cost for
which on a per unit basis is $45,000. Thus, the cost of re-powering
these buses is an estimated $5.1 million, or $843,500 annually. 
Finally, school districts can retrofit approximately 592 buses at a
total cost of $4.7 million, or $771,968 dollars a year.

TABLE 13. Total and Annual Compliance Cost: Replacing, Repowering and or
Retrofitting 2,581 Out of Compliance School Buses

	Replace (Net)	Re-power	Retrofit	Total

Number of Diesel Buses	1,875	115	591	2,581

     Total Cost of Compliance	$214,923,300	$5,175,000	$4,736,000
$224,834,300

     Annual Cost of Compliance	$25,126,719	$843,525	$771,968	$26,742,212

Source: San Joaquin Valley Unified Air Pollution Control District

6.2 business responses to compliance costs

Industries impacted by the air quality rules may respond in a variety of
ways when faced with new regulatory costs. These responses may range
from simply absorbing the costs and accepting a lower rate of return, to
shutting down the affected business operation altogether and, where
practical, shift from lower-value to higher-value product and or crop.
Affected sources may also seek to renew efforts to increase productivity
and reduce costs elsewhere in their operation in order to recoup the
regulatory costs and maintain profit levels.  

Public school districts are unique in that, unlike for-profit
businesses, they are not generating revenues or profit, other than the
revenues provided by the state for purposes of delivering a necessary
service, i.e. education.  Given that existing state revenues from the
Home-to-School and SH-OH programs only pay a part of the cost of
transporting youths via buses, more than likely, the rule will force
school districts to cut even more into their General Funds.

6.3 IMPACTS ON AFFECTED INDUSTRIES

This section of the report analyzes how school districts will absorb the
anticipated annual cost of the rule.  First, we examine if there is
enough non-restricted General Fund revenues, all the while recognizing
that these money support valuable educational services, including
salaries.  In addition, we analyze what impacts, if any, the annual
compliance cost can have on reserves.  The State of California requires
all public school districts to maintain a minimum reserve for economic
uncertainties equal to three percent of their respective annual budgets.


Table 12 above indicated that school districts are having to pay the
difference between the actual cost of providing bus services and the
amount of funds provided by the state through programs such as
Home-to-School and SH\OH.  Funds from the state are not enough to cover
program costs, and, as a result, school districts in the eight-county
region are funding the difference to the tune of $102.5 million. 
Assuming no change to the amount of funds from the state’s
Home-to-School and SH\OH programs, Rule 9310 adds additional annual
costs to the tune of $26.7 million for a limited time period.  To offset
these costs, the District anticipates the receipt of an estimated $30
million to $58 million in the next five years with the potential to
replace at least 200 school buses.  Over the next five years, the
District anticipates anywhere between $6 million and $11.6 million
annually, or $8.8 million on average.  Thus, the $26.7 million annual
cost can be reduced by $8.8 million to $17.9 million.

Table 14 below identifies the total amount of unrestricted General Fund
reserve for all school districts in the region.  In total, the school
districts in the region have a total of $8.2 billion in unrestricted
General Fund revenues versus $7.6 billion in unrestricted expenditures. 
Overall, unrestricted revenues outpace unrestricted expenditures
resulting in a positive fund balance of $611.8 million.  It is not clear
if and to what extent this positive balance supplements expenditures
incurred by activity that falls within General Fund restricted
expenditures, although the data suggests this to be the case. 

TABLE 14. Unrestricted General Fund Revenues versus Unrestricted General
Fund Expenditures and Resulting Fund Balance

	Unrestricted Revenues                  02-03	Unrestricted Expenditures 
        02-03	Balance                02-03	Balance as a Percent of
Unrestricted Expenditures

SJV Region	$8,189,150,696	$7,577,349,702	$611,800,994	8.07%

     Fresno	$2,015,570,262	$1,863,332,772	$152,237,490	8.17%

     Kern	$1,733,245,378	$1,563,302,574	$169,942,804	10.87%

     Kings	$280,261,218	$254,449,854	$25,811,364	10.14%

     Madera	$279,056,956	$270,619,338	$8,437,618	3.12%

     Merced	$545,651,590	$504,278,476	$41,373,114	8.20%

     San Joaquin	$1,255,013,604	$1,199,354,398	$55,659,206	4.64%

     Stanislaus	$1,101,209,026	$1,030,774,840	$70,434,186	6.83%

     Tulare	$979,142,662	$891,237,450	$87,905,212	9.86%

Source: Applied Development Economics, based on California Department of
Education



Table 15 shows that for the region as a whole the total fund
(unrestricted and restricted costs and revenues) balance is $381.6
million, which suggests that some of the fund balance resulting from the
interaction between unrestricted revenues and unrestricted expenditures
was spent on restricted activities.   So, while on paper there appears
to be a positive fund balance of $611.8 million in unrestricted funds,
in reality a good portion of these funds are spoken for.  Thus, it would
be premature to identify the unrestricted activities fund balance as a
source of revenues to pay for the anticipated $17.9 million annual cost
of the rule.

TABLE 15. Total General Fund Revenues versus Total General Fund
Expenditures and Resulting Total Fund Balance

	Total Revenues 02-03	Total Expenditures     02-03	Balance              
 02-03	Balance as a Percent of Total Expenditures

SJV Region	$12,008,050,396	$11,626,402,934	$381,647,462	3.28%

     Fresno	$2,861,493,548	$2,803,416,042	$58,077,506	2.07%

     Kern	$2,452,670,682	$2,343,842,464	$108,828,218	4.64%

     Kings	$401,433,744	$383,514,334	$17,919,410	4.67%

     Madera	$403,706,490	$397,554,884	$6,151,606	1.55%

     Merced	$815,562,858	$789,556,206	$26,006,652	3.29%

     San Joaquin	$1,813,477,996	$1,841,134,442	-$27,656,446	-1.50%

     Stanislaus	$1,638,285,478	$1,633,759,016	$4,526,462	0.28%

     Tulare	$1,621,419,600	$1,433,625,546	$187,794,054	13.10%

Source: Applied Development Economics, based on California Department of
Education



While the fund balance for a given fiscal year is not precisely the same
as reserves since the latter includes money accumulated over time,
school districts generally do not accumulate hefty reserves.  So, the
fund balance for a given year is a reasonable proxy for reserves. As a
matter of practice, school officials use the reserve to pay for one-time
expenses, or expenses that arose out of some kind of unplanned event
that disrupted the normal flow of business.  Thus, funding the annual
compliance cost out of reserves could be viewed as consistent with
standard practice to the extent that the replacing, re-powering and or
retrofitting out of compliance school buses is viewed as a one time
event.  

School districts are limited in how they can cover the $17.9 million
shortfall from the overall fund balance (reserves).  It is important to
note that at $381.6 million, the fund balance for all districts in the
region as a whole is at approximately 3.28 percent, which is slightly
above the minimum three percent reserve ratio that is required by law.  

If the $17.9 million annual cost is taken from the overall fund balance
(reserve), the reserve ratio will decline from 3.28 percent to 3.13
percent for the region as a whole – still above the minimum as
stipulated by state law.  It is important to note that some counties
within the region are already indicating reserve ratios of less than
three percent, suggesting that some schools districts in these counties
(Fresno, Madera, San Joaquin and Stanislaus) are in some financial
difficulty and may not be able to cover their share of annual costs with
reserves.

Before cutting salaries and benefits, which comprise almost two-thirds
of total expenditures for most districts, school officials in all
likelihood will seek to make cuts in a category of spending called
“services and other operating expenses”, which includes housekeeping
services, membership dues, and non-capitalized improvements. “Services
and other operating expenses” comprise almost eleven percent of total
unrestricted General Fund expenditures, and when utilities and
housekeeping costs are excluded, “services and other operating
expenses” amount to, on average, seven percent.

Table 16 estimates the amount of “services and other operating
expenses” expenditures, which is based on factoring the seven percent
average against unrestricted General Fund expenditures identified in
Table 14.  In addition, the table identifies a range of “services and
other operating expenses” savings that could be directed toward the
annual compliance cost associated with Rule 9310.  

[ This space is intentionally blank ]

TABLE 16. Potential Revenues to Further Mitigate Annual Compliance Rule
9310 Cost: Savings From Reductions in “Services and Other Operating
Expenses”

	Unrestricted Expenditures          02-03	Share of “Services and Other
Expenses”           (Utilities and housekeeping not included)	1%
Reduction in “Services and Other Expenses”	2.5% Reduction in
“Services and Other Expenses”	5% Reduction in “Services and Other
Expenses”

SJV Region	$7,577,349,702	$530,414,479 	$5,304,145 	$13,260,362 
$26,520,724 

     Fresno	$1,863,332,772	$130,433,294 	$1,304,333 	$3,260,832 
$6,521,665 

     Kern	$1,563,302,574	$109,431,180 	$1,094,312 	$2,735,780 
$5,471,559 

     Kings	$254,449,854	$17,811,490 	$178,115 	$445,287 	$890,574 

     Madera	$270,619,338	$18,943,354 	$189,434 	$473,584 	$947,168 

     Merced	$504,278,476	$35,299,493 	$352,995 	$882,487 	$1,764,975 

     San Joaquin	$1,199,354,398	$83,954,808 	$839,548 	$2,098,870 
$4,197,740 

     Stanislaus	$1,030,774,840	$72,154,239 	$721,542 	$1,803,856 
$3,607,712 

     Tulare	$891,237,450	$62,386,622 	$623,866 	$1,559,666 	$3,119,331 

Source: Applied Development Economics, based on California Department of
Education

	

If local officials reduced unrestricted General Fund expenditures for
“Services and Other Expenses” by a conservative one percent, for the
region as a whole, this could result in an annual savings of $5.3
million.  In turn, savings could be directed to cover a portion of the
remaining $17.9 million in annual costs associated with Rule 9310, which
could reduce this amount to $12.6 million to zero, depending on how much
funds are saved from “Services and Other Expenses” and redirected to
cover the outstanding annual compliance cost associated with Rule 9310. 
If the $12.6 million annual cost is taken from the overall fund balance
(reserve), the reserve ratio will decline from 3.28 percent to 3.17
percent for the region as a whole – still above the minimum as
stipulated by state law.

In the worst-case scenario, if school officials had to reduce the
workforce to find money to pay for the $12.6 million annual cost, in the
region as a whole the $12.6 million is equivalent to 192 full-time
teachers (assuming an average salary of $54,500 plus benefits), or 4.8
percent of the total number of public school teachers in the eight
county region.

6.4 IMPACT ON SMALL BUSINESSES 

In addition to analyzing the employment impacts of Draft Rule 9310,
state legislation requires that the socioeconomic analysis assess
whether small businesses are disproportionately affected by air quality
rules.  This rule applies primarily to local school districts and
therefore the small business impact analysis does not apply.

This page intentionally blank.

 3.17% = ($381.6 million - $12.6 million)/$11.6 billion

When analyzing the socioeconomic impacts of proposed new rules and
amendments, in a typical socioeconomic impact analysis involving
for-profit enterprises, ADE works closely within the parameters of
accepted methodologies discussed in a 1995 California Air Resources
Board report called “Development of a Methodology to Assess the
Economic Impact Required by SB513/AB969” (by Peter Berck, PhD, UC
Berkeley Department of Agricultural and Resources Economics, Contract
No. 93-314, August, 1995).  The author of that report reviewed a
methodology to assess the impact that California Environmental
Protection Agency proposed regulations would have on the ability of
California businesses to compete.  The California Air Resources Board
(ARB) has incorporated the methodologies described in this report in its
own assessment of socioeconomic impacts of rules generated by ARB.  One
methodology relates to determining a level above or below which a rule
and its associated costs is deemed to have significant impacts.  When
analyzing the degree to which its rules are significant or
insignificant, ARB employs a threshold of significance that ADE follows.
 Berck reviewed the threshold in his analysis and wrote, “The Air
Resources Board’s (ARB) use of a 10 percent change in [Return on
Equity] ROE (i.e. a change in ROE from 10 percent to a ROE of 9 percent)
as a threshold for a finding of no significant, adverse impact on either
competitiveness or jobs seems reasonable or even conservative.”  

On a per pupil basis, non-restricted General Fund expenditures, which is
money available for all students, went from $9,135 in 1998 to $9,860 in
2003, growing by $725 or 1.5 percent per year.

 http://edgewood.wcusd.org/negotiations/negotiationscomm-3-17-06.html

 3.13% = ($381.6 million - $17.9 million)/$11.6 billion

 The California Department of Education categorizes the following cost
centers within “services and other operating expenses”: personal
services of instructional consultants, lecturers, and others (code
5100); travel and conferences (code 5200); dues and memberships (code
5300); insurance (code 5400); utilities and housekeeping services (code
5500); rentals (code 5600); direct costs – interprogram services
(5710-5749); direct costs – interfund services (5750-5799); other
services (code 5800); and intergovernmental fees (code 5900).

 3.17% = ($381.6 million - $12.6 million)/$11.6 billion

SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Analysis for Rule 9310	October 19,2006

 PAGE   

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2029 University Avenue, Berkeley, California 94704   Tel 510.548.5912   
Fax 510.548.6123   Email ade@adeusa.com 

1029 J Street, Suite 310, Sacramento, California 95814   Tel
916.441.0323   Fax 916.441.   Email adesac@igc.org

  HYPERLINK "http://www.adeusa.com"  www.adeusa.com 

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