Across the country, an increasing number of state and local leaders are coming together to create State Transition Funds. Tailored to the needs of the affected communities in the state, State Transition Funds can supplement local property tax revenues, cover the cost of worker retraining programs, pay for the cleanup and reclamation of coal and power plant sites, and contribute to related economic development programs. Taken together, these state funds offer a model for scaling and advancing federal action.
What do State Transition Funds Include?
State Transition Funds are designed to meet the specific needs of local communities. While they vary by state, these Funds often include resources to:
- Help affected workers find high-quality jobs in 21st Century sectors by providing critical investment in workforce development, education, and training opportunities.
- Conduct community economic development planning, diversify and strengthen local economies, and address tax base erosion (from lost property and severance taxes).
- Expand availability of and access to broadband connectivity.
- Restore degraded former coal mine lands and contaminated plant sites and protect communities from cleanup liability.
The opportunities and needs of local communities will dictate what supports are most critical for your state fund.
Where Does the Money Come From?
Revenue for State Transition Funds can come from a variety of sources. To get your transition fund started, engage someone who knows your state’s budget and its various funding streams to think creatively about potential opportunities. Some common sources include:
- A designation from the state’s general funds.
- Taxes or fees on power generation.
- Contributions from utility companies.
- Market-based programs to reduce greenhouse gas emissions.
- Grants for redevelopment planning processes.
Who Oversees State Transition Funds?
States can design Transition Funds to best meet the needs of local communities. Just Transition Fund recommends establishing an Advisory Board tasked with determining how to accumulate, disperse, and track the funds. To ensure the Transition Fund meets the needs of all stakeholders, the Advisory Board should include a diverse set of stakeholders (e.g., representatives from affected communities, labor and environmental groups, local government, local businesses).
Who Operates State Transition Funds?
Some states create a new agency to operate a Transition Fund. Others place responsibility for the Transition Fund within an existing state agency, such as the Department of Commerce, Department of Economic Development, or Department of Labor. To determine what will work best for your state, consider the role the Transition Fund agency will play. Responsibilities are likely to include:
- Conducting assessments of economic and social impacts in affected communities.
- Making recommendations for additional policy solutions to support transition in the state.
- Guiding communities and providing necessary support as they apply for funding (either from state transition offices or from other federal resources).
- Coordinating with and ensuring the goals of the State Transition Fund are consistent with any statewide programs that are funded in transitioning communities (such as state workforce development and economic development programs).
- Coordinating transition activities with other state agencies and the federal government.
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What other revenue sources could support a State Transition Fund?
Below is a list of additional sources of state funding to consider as part of your transition funding portfolio.
Learn more about each of these funding sources at: New and Emerging Sources of State Funds to Support Coal-Dependent Communities.
Securitization Financing of Retired Coal-Fired Power Plant
This type of refinancing uses low-cost government- and ratepayer-backed bonds. This strategy requires state legislation that guarantees the full and timely cost recovery of the interest and principal on new debt from utility ratepayers.
Revenues from Carbon Pricing Programs
Carbon pricing can take the form of carbon cap and trade policies or carbon taxes. Both programs are typically established through legislation.
Public Benefit Funds Funded by Utility Ratepayers
Under this scenario, utility customers pay a modest charge on their bill each month and the funds go to specific public purposes. Some states create public benefit funds through legislation and others by actions of state energy regulatory bodies.
Fees and Subsidies to Fossil Extraction Activities
Most states that produce coal receive production revenue. Some states provide subsidies to fossil producers. By reallocating state revenues received from severance and mineral royalties, or reducing subsidies paid to fossil producers, states can increase support for coal-dependent communities.