The Association is fighting to protect Greenhouse Gas Reduction Fund revenues for transit programs.
By Arianna Smith
Managing Editor
Transit California
The Greenhouse Gas Reduction Fund (GGRF), which has been a centerpiece of the state’s climate strategy since 2015, provides critical funding to a range of programs that are intended to contribute to the state meeting its greenhouse gas emission reduction targets and improving local air quality. These programs, include the Affordable Housing and Sustainable Communities Program (AHSC), which funds affordable transit-oriented housing; the Transit and Intercity Rail Capital Program (TIRCP), which funds major transit projects and zero-emission vehicle deployments; the Low Carbon Transit Operations Program (LCTOP), which funds transit service and fare free and discounted transit passes; and AB 617, which funds community-led air quality initiatives in California’s disadvantaged communities.
Despite these programs’ track record of success, and action by Governor Newsom and the Legislature to reauthorize them through 2045, amendments proposed by the California Air Resources Board (CARB) in mid-April, and approved despite heavy opposition on May 29, threaten their future.
A coalition of organizations, established by the Association and representing transit, affordable housing, local government, environmental, and labor interests are now working together to mitigate the potential damage in the budget.
How we got here
In 2025, SB 840 extended the Cap-and-Trade program through 2045, renamed the program the “Cap-and-Invest,” and established tiers of funding priority for Cap-and-Invest dollars. Tier 1 was supposed to guarantee $1 billion for the California high-speed rail project and Tier 2 would provide $1 billion for discretionary expenditures. Tier 3 would maintain continuous appropriations to a variety of large-scale climate programs, including the AHSC, TIRCP, LCTOP, and ongoing funding for air quality initiatives in communities disproportionately affected by air pollution (AB 617 communities).
Additionally, SB 840 changed the method of allocating annual funding to the programs now in Tier 3 – taking them from a percentage of total annual GGRF to flat dollar amounts. For transit programs, this meant taking TIRCP and LCTOP from 10% and 5% of total annual GGRF, respectively, to $400 million and $200 million, respectively. To fully fund all programs in Tiers 1 through 3, total annual GGRF would need to be approximately $4.2 billion. If total annual GGRF revenue were to fall below that level, all programs in Tier 3 would be proportionally reduced.
Unsurprisingly to Association members, the allowances auction did not generate enough revenue. During 2025 negotiations, the Association warned that a weak market for Cap-and-Invest allowances could mean less funding for key transit programs. That fear was borne out with a weak market resulting in a Cap-and-Invest auction that did not generate enough revenue to fully fund the dependent programs, including TIRCP and LCTOP.
When the Governor released his initial budget proposal in January, these programs were proposed to receive just $283 million and $141 million respectively in FY 2026-27 from GGRF – amounts that fall far below the respective $400 million and $200 million annual flat amounts agreed upon in 2025. AHSC and AB 617 communities were proposed to take similar cuts.
Even worse, in April 2026, CARB released Proposed Amendments to the Regulation for the California Cap on Greenhouse Gas Emissions and Market-Based Compliance Mechanisms, which proposed to increase allowances, including to the state’s electricity and gas utility companies, by nearly $2 billion annually. Such a proposal would reduce the GGRF revenue by a commensurate amount annually, which would guarantee that total annual GGRF would fall short of $4.2 billion by more than $2 billion, zeroing out the hard-fought annual funding for the AHSC, TIRCP, LCTOP, and AB 617 communities.
Together, the programs that would be zeroed out have delivered nearly a reduction of nearly 38 million Metric Tons of Carbon Dioxide Equivalent greenhouse gas emissions for a $9.3 billion investment, largely to communities disproportionately affected by air pollution, climate change, and disadvantaged local economies. CARB’s proposed amendments were released with the intention to center affordability in budget discussions, but the trade-offs would create even higher costs in numerous other parts of Californians’ lives, including health and safety.
The Association leads the fight
In response to the proposed amendments, the Association established and led a broad coalition of 120 organizations – 70 stakeholders and 50 transit agencies – to fight to protect GGRF-funded programs.
The coalition summed up concerns about CARB’s amendments in a letter to Chair Lauren Sanchez: “[We] believe the Proposed Amendments must apply an understanding of affordability that extends beyond utility bills.” Further, signatories explained, “To the constituencies we represent and/or serve, addressing affordability requires continued state investment that supports good paying, life-sustaining jobs and means access to affordable housing and transit options, travel timing savings that buy Californians more time with family and friends, and personal health unburdened by the harms of air pollution – not just lower utility bills.”
An immediate priority for the coalition was to stop CARB from approving the proposed amendments for consideration.
The Association approached this work methodically, educating legislators and their staff on the proposed amendments and their impacts to Tier 3 programs; pushing for legislative oversight in the Senate and the Assembly; and soliciting opposition to the proposed amendments from legislative leaders. To expand our reach, the Association mobilized our coalition of partners and Association members, including through Action Alerts and lobby days, and harmonized messaging through a fact sheet and talking points.
The efforts produced results.
In early May, the Chairs of the Senate Environmental Quality Committee and Senate Budget Subcommittee No. 2 sent a letter to CARB Chair Lauren Sanchez, demanding oversight of the proposed amendments through a joint legislative hearing. The letter noted “Specifically, this letter and Wednesday’s hearing [is] necessary because, unfortunately, the regulations CARB is proposing to implement AB 1207 and SB 840 are, in our view, inconsistent with direction provided by the Legislature.” At the hearing, at the urging of the Association, dozens of Association members and partners spoke in public comment to voice concerns about the proposed amendments (recording here).
In mid-May, the Assembly Budget Subcommittee No. 4 similarly held an informational hearing on the proposed amendments and their impacts to the GGRF. Like at the Senate hearing, at the urging of the Association, dozens of Association members and partners spoke about the impacts of the proposed amendments (recording here).
Senate Transportation Committee Chair Dave Cortese authored a letter to CARB defending GGRF investments in transportation programs. “CARB’s proposed changes to the program could jeopardize the future of the project that the Governor and Legislature clearly prioritized in reauthorizing the Cap & Invest program. As Chair of the Senate Transportation Committee, I am unwilling to concede that outcome,” he wrote. In addressing the reason given for the amendments proposed to the program, he added, “There is no guarantee CARB’s proposal will result in lower gas and energy bills for consumers. Giving the energy industry a break on estimated auction proceeds instead of investing in proven programs is penny-wise and pound foolish and a step backwards to meeting our goals.”
A letter authored by Senator Henry Stern and signed by 27 other legislators made a similar point: “The recently proposed amendments put both our 2030 targets and the stability of the Greenhouse Gas Reduction Fund at risk. They also depart from the spirit of our landmark agreement from last year by seeking to achieve affordability goals without accountability.”
The CARB vote
CARB held a two-day hearing to consider the proposed amendments on May 28-29.
Day 1 included a staff presentation on the proposed amendments, public comment, and board questions. Day 2 included board discussion and the vote. (day 1 recording here, day 2 recording here)
The Association’s coalition, and the parallel efforts of environmental justice organizations and transit advocates, resulted in huge turnout in opposition to the proposed amendments and in defense of investment in transit, housing, and AB 617 communities. Of the nearly 200 public commenters at the hearing, approximately 150 spoke in opposition, and 50 spoke in support.
Unfortunately, and despite the broad opposition to the amendments demonstrated at the hearing and the lead-up to the hearing from legislators and Association coalition partners, the CARB voted 10-3 to adopt the proposed amendments.
The vote followed eight hours of board discussion in which Board Members Guerra, Hopkins, Limon, Pacheco-Werner, Shaheen, Silva, Stern, Stigler-Granados, and Takvorian voiced concerns about the amendments’ impacts to GGRF revenues.
Board Members Hopkins, Limon, Shaheen, and Takvorian were the most vocal, aligning their remarks with those raised by our members and coalition partners, and highlighting their concerns with the amendments’ impacts to transit, housing, and AB 617 communities.
This was generally a clean adoption of the amendments, with additions made to the board resolution to:
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Direct the Executive Officer, working with the Governor and the Department of Finance, to communicate the importance of stable funding for AB 617 community air protection, transportation, and affordable housing programs to reducing emissions and to encourage funding in the state budget.
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Prior to receipt of MDI applications, and issuance of any MDI allowances…direct the executive officer to report to the board, and to evaluate and propose as appropriate future amendments to the MDI incentive program.
The Chair acknowledged that the addition relative to MDI would provide the Board with the opportunity to consider impacts of the MDI on GGRF revenues and review the sectors that would benefit from the MDI.
Immediately following the vote, the Association is pivoting to work on ensuring Governor Newsom and legislative leadership understand what’s at stake. The Association is reiterating that the amendments would reduce GGRF revenues by $2 billion and eliminate GGRF funding for all Tier 3 programs. The coalition will move toward urged the Governor and legislators to maintain the ongoing appropriation of $800 million for the AHSC, $400 million for TIRCP, $200 million for LCTOP, and $250 million for AB 617 originally negotiated as part of 2025’s SB 840.
The Association estimates that, due to the adoption of the amendments, the constituencies we represent and/or serve will lose up to $1.65 billion in GGRF annually. Given the GHG reductions from these programs outlined above, reducing this funding will jeopardize the state’s ability to meet its 2030 GHG reduction targets. The coalition is pushing for the Governor and the legislature to honor the state’s ongoing commitments to deliver more affordable housing units, more accessible and affordable public transit, and better air quality for our vulnerable communities.
What’s next
Despite the actions taken by CARB over the proposed amendments, decisions over the uses of GGRF are unlikely to be settled in June; Association staff and legislative leadership expect discussions to continue through the summer. The State Constitution requires that the Legislature pass the main Budget Bill by June 15; the Governor typically signs the bill into law by late June. However, the Legislature often delays decisions on large swaths of public funding until the end of session. In 2026, the last day that the Legislature will be in session is August 31; the Governor must sign bills passed during the end of session by September 30.
Association members should continue to watch for and utilize guidance, talking points, action alerts, and public affairs content from the Association’s Advocacy and Communications Teams. The Association is already transmitting a powerful message to lawmakers thanks to members raising their voices.