Should California spend nearly $200 million helping public schools install healthier and more efficient heating, ventilation, air-conditioning, and plumbing systems? Or should it send the money back to the state’s biggest utilities so their customers can pay roughly a dollar less on their monthly bills over the course of a single year?
That’s the choice that California lawmakers must make in the coming months.
The funds at stake are part of the California Schools Healthy Air, Plumbing, and Efficiency program, or CalSHAPE, which funds schools’ HVAC and plumbing repairs and upgrades. The state required its three big utilities — Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric — to fill the initiative’s coffers with about $1 billion in fees collected from customers between 2020 and 2023.
Although much of that total has already been doled out, $194 million in CalSHAPE funds has been frozen since 2024 as state leaders debate ways to curb skyrocketing energy bills. Because current law sunsets CalSHAPE at the start of 2027, the leftover money will revert to utilities by year’s end without legislative action.
They want leaders to leverage a sprawling budget-negotiating document, known as a budget trailer bill, to extend the looming deadline and to direct the California Energy Commission, which administers CalSHAPE, to disburse the money to schools — many of which have already identified projects they want to pursue. That includes replacing old AC equipment to keep students comfortable as climate change fuels extreme heat, improving air-filtration systems, and swapping fossil-fueled heaters for all-electric heat pumps that can both warm and cool buildings.
“The $200 million or so that’s sitting unused would help about 120,000 students in California electrify their schools, which would reduce their air pollution and give them access to air conditioning,” said Leah Stokes, an associate professor of environmental politics at the University of California, Santa Barbara. That work, she added, is “not optional — it’s to protect kids from extreme weather events, from climate change, from fires, from heat waves.”
Nine members of the state Assembly have signed a letter asking lawmakers who chair key budget committees to extend the CalSHAPE funds. Unless legislation is introduced to alter the current state of affairs, the final decision on whether the $194 million will remain available for schools or be returned to the utilities on Dec. 1 will be made in budget negotiations between lawmakers and Democratic Gov. Gavin Newsom. While a final budget package must be settled by July 1, budget trailer bills that modify state law to implement a broader budget agreement have until Aug. 31, the end of this year’s legislative session, to be completed.
A long-running battle over utility rate relief
CalSHAPE was created by a law passed in 2020 that aimed to make schools — especially those in underserved areas and “fenceline” communities near polluting facilities — more energy efficient, healthy, and resilient. It has since given out nearly $800 million to more than 1,000 projects, according to a 2025 report from the California Energy Commission.
But the agency abruptly closed further grant applications in mid-2024.
It said it closed the program to ensure that schools had enough time to fully spend their awards before the program’s sunset. But according to a March analysis from a state Senate budget subcommittee, the funding was frozen “in part because legislation and other departmental reports focusing on energy affordability proposed to revert CalSHAPE funds to ratepayers.”
Critics of that plan pointed out that pushing that money back to utilities was likely to yield only $30 to $50 in one-time rebates for customers — an amount they said was too little to validate axing the programs. Those arguments won the day, with AB 3121 failing to advance.
Yet the CalSHAPE funding has remained frozen, and Newsom has continued trying to return the funds to utilities. That’s left schools stuck in limbo. Of the nearly 5,000 schools that received grants to conduct initial assessments — nearly half of which are in underserved communities — only 172 have secured follow-on funding to complete recommended HVAC work, according to the pro-CalSHAPE coalition.
“We’ve been working for two years to try to get this funding revived,” said Keith Butler, deputy superintendent of Torrance Unified School District, in Southern California. His district used $1.6 million in first-phase CalSHAPE funding to deploy carbon dioxide–detecting thermostats and to hire an engineering firm to identify about 300 buildings, serving about 6,000 students, that need to replace decades-old air-conditioning units, he said.
