Today, California Governor Jerry Brown signs the state budget for 2013-2014, including a bill that will allocate Proposition 39 funds — an estimated $2.75 billion over five years — for energy-saving projects in schools.

In our analysis of school districts’ resources and needs, we found that Proposition 39 can most effectively drive energy savings in schools if it provides financial assistance that takes into account the wide variation in school districts’ existing resources and needs, and if it also offers technical assistance to help districts identify projects and put together funding. So how did these goals fare in the legislative process?

Mixed news in the legislative agreement

The final agreement includes some important provisions that will help Proposition 39 funds have an impact: targeting funds to needier districts, expanding a low-interest loan program to make it more useful for school projects, and providing for technical assistance. However, most of the funding is not need-based. And given the small size of many districts’ allocations, there is a risk that Proposition 39 grants will largely support small projects that might have occurred anyway, rather than truly catalyzing long-lasting energy savings.

The good news: While most of the Proposition 39 funds will be allocated at a flat per-pupil rate, some will be allocated based on districts’ population of low-income students. And small districts are guaranteed a minimum grant, meaning that some will receive more than their flat per-pupil allocation. These targeting measures mean that more Proposition 39 funds will go to the districts with fewer local resources to support energy-saving projects. Small districts, and those serving economically disadvantaged communities, are less likely to have passed local bonds to fund facility projects, thus amplifying their need for support from Proposition 39.

In addition, some Proposition 39 funds will also be used to expand the California Energy Commission’s revolving loan program, which provides low-interest loans to school districts for energy-saving projects. Previously, the program only offered loans for a maximum of 15 years, even though many energy-saving projects last much longer. We found that this 15-year limit has been a significant factor limiting school districts’ ability to use these loans to finance projects. The Proposition 39 agreement will raise this limit to 20 years, allowing more energy-saving projects to qualify.

The less-good news: Allocating funds per pupil to all 1,000+ school districts means that most of the funds aren’t targeted to the greatest need or greatest energy savings potential. And some districts will receive very small grants, even after the adjustment — the minimum is $15,000 per year, which doesn’t go very far when you’re upgrading an entire school building. The allocations will carry over from year to year if they’re not used — allowing a district to choose to hold off for now, but then claim a larger grant in a few years. This could make it possible for more districts to participate and for the grants to support larger projects that save more energy and money. Still, the grants by themselves won’t pay for much in smaller districts, even aggregated over several years. And school districts don’t have money sitting around in their budgets to stretch the money further.

Implementation details could make a big difference

Although the bill has been finalized, many important questions will be up to the California Energy Commission and other state agencies to decide. The Energy Commission still has a major role to play in determining Proposition 39’s impact by providing technical assistance and establishing requirements for districts to receive their grants.

To ensure that Proposition 39 money goes to support more comprehensive, longer-lived projects, the Energy Commission could require projects to attain substantial energy savings to receive their grant money.

This is also where technical assistance can play an important role. If technical assistance dollars from Proposition 39 are used to help schools access other funding sources — including the low-interest public loans discussed above, as well as ratepayer-supported rebates and private capital — the resulting energy and dollar savings to schools will be much larger.

A draft guidance document issued last month by three California agencies (the Energy Commission, the California Department of Education, and the California Public Utilities Commission) includes some language consistent with relatively deep, comprehensive Proposition 39 projects: it discusses a “whole-building” approach, “maximizing” cost-effective energy efficiency, and bundling multiple measures.

We’ll continue to follow Proposition 39 as it moves into implementation, and we hope that our findings on school district needs can continue to inform the policy process. This program is a huge opportunity to help California’s schools save energy and money, and we’re looking forward to seeing it become a reality.