Of the funds appropriated pursuant to Item 3900-001-6053 of Section 2.00 of the Budget Act of 2007, the State Air Resources Board shall allocate the funds in accordance with all of the following:

(a) All schoolbuses in operation in the state of model year 1976 or earlier shall be replaced.

(b) (1) The funds remaining after the allocation made pursuant to subdivision (a) shall be apportioned to local air quality management districts and air pollution control districts based on the number of schoolbuses of model years 1977 to 1986, inclusive, that are in operation within each district.

(2) Each district shall determine the percentage of its allocation to spend between replacement of schoolbuses of model years 1977 to 1986, inclusive, and retrofit of schoolbuses of any model year. Of the funds spent by a district for replacement of schoolbuses pursuant to this paragraph, a district shall replace the oldest schoolbuses of model years 1977 to 1986, inclusive, within the district. Of the funds spent by a district for retrofit of schoolbuses pursuant to this paragraph, a district shall retrofit the most polluting schoolbuses within the district.

(c) All schoolbuses replaced pursuant to this section shall be scrapped.

(d) These funds shall be administered by either the California Energy Commission or the local air district.

(e) If a local air district’s funds, including accrued interest, are not committed by an executed contract as reported to the State Air Resources Board on or before June 30, 2012, then those funds shall be transferred, on or before January 1, 2013, to another local air district that demonstrates an ability to expend the funds by January 1, 2014. In implementing this section, the State Air Resources Board in consultation with the local air districts shall, by September 30, 2012, establish a list of potential recipient local air districts, prioritizing local air districts with the most polluting schoolbuses and the greatest need for schoolbus funding.

(f) Each allocation made pursuant to this section to a local air district shall provide enough funding for at least one project to be implemented pursuant to the Lower-Emission School Bus Program adopted by the State Air Resources Board. In the event a local air district has unspent funds as of January 1, 2014, the local air district shall work with the State Air Resources Board to transfer the unspent funds to an alternative local air district with existing demand.

(g) Funds made available pursuant to this chapter to a local air district shall be expended by June 30, 2014.

(h) All funds not expended by a local air district by June 30, 2014, shall be returned to the State Air Resources Board.

(i) Funds authorized by the State Air Resources Board during or subsequent to the 2013–14 fiscal year shall be allocated to local air districts by prioritizing to retrofit or replace the most polluting schoolbuses in small local air districts first and then medium local air districts as defined by the State Air Resources Board. Each allocation shall provide sufficient funding for at least one project to be implemented pursuant to the Lower-Emission School Bus Program adopted by the State Air Resources Board. If a local air district has unspent funds within six months of the expenditure deadline, the local air district shall work with the State Air Resources Board to transfer those funds to an alternative local air district with existing demand.

(Amended by Stats. 2013, Ch. 356, Sec. 8. (SB 96) Effective September 26, 2013.)