Joint Legislative Budget Committee

Doesn't help us. Don't worry, the minute there's enough people I will establish quorum. Okay, that's cool.

The Joint Legislative Budget Committee will come to order. We will not yet call the roll because we do not have the forum yet.

But I will do the opening remarks that we do when we open a committee and that is that we have folks here in the hearing room who when we get to public testimony, which will happen towards the end, you can speak at the mic. And then we also have our phone in service for those who want to do that by phone. The number is 877-226-8163. The access code is 439-8318.

So again, any Committee Members who are in the building, please come down to 1200. We wood like to establish a quorum.

And today, we will receive testimony from our legislative analyst, Gabe Petek. And he's in person today. Unclip my clip. And as I mentioned, we will have both public comment both from folks in the room and from those on the telephone. And I gave that telephone number, but you can also find it on the Budget Committee's website which is also the JLBC website, Senate Budget Committee website.

So I want to welcome everyone here. You're all probably wondering what is the JLBC? And believe it or not, as the chair of it, I also wondered that. But today our first goal will be to organize the committee by adopting our committee rules and by electing our chair and Vice Chair. And then I will give an overview of the JLBCs responsibilities.

And if you read the very fascinating background materials we got, you have learned that we started in 1941. It's very impressive history. But we are not the Budget Conference Committee. That is a separate entity which hasn't met in a while but hopefully will at some point. We are neither the JLAC, which is the Joint Legislative Audit Committee. Instead, we are the Joint Legislative Budget Committee.

So part of today wilk be to help clarify that. And that's part of what Mr. Petek will help illuminate us on. And of course we also appoint the Legislative Analyst and oversee that office. And Mr. Pettock is the 6th person to serve min that grove. And yet the office has been established for 82 years. So very impressive.

So let me see first if whether my Vice chair, Assembly Member Ting or Senator Niello or Assembly Member Fong who's not here. Oh yeah, Jesse's here. Sorry. If you would like to make any remarks before we go to the adoption of committee rules.

One madam Chair, I just like to point out that it is particularly nice to have Gabe here in person to testify. Thank you very much for being here.

Great. Okay. Mr. Ting?

I haney no remarks. I was just going to move to adopt the rules.

All right. Now I think we can't do it yet because we don't have quorum.

But I will point out that the JLBC also has a committee consultant, that is Hans Hemann, who is here and who prepared the materials for you other than those prepared by the LAO. So we are now going to continue on as a Subcommittee because we might as well just continue and then once we have a quorum we will then go to the adoption of committee rules. Okay? And we'll also do the election of Chair and Vice Chair at that point.

So what I want to do now is briefly talk about the role of the JLBC. As I mentioned, it was established in 1941 by the Legislature, because at the same time that the Legislature created the legislative analyst office, and the feeling by the Legislature at that time, they were in a bit of a tussle with the then Governor Culvert and felt like they needed some independent analysis to be able to understand the budget fully and not just have the person, the entity that wrote the budget, which is the Administration, be the only ones giving them any perspective on those proposals.

So that was part of their motivation. So as I mentioned, the desire for independent information and expertise was the impetus. And our Legislative Analyst Office was the first established in the US. Other states have followed it. We've been a model. It is a nonpartisan. Notice I said nonpartisan. So they really approach their work with just what's the good of the state.

And are the proposals that were put forward either the things that we ask the Legislative Analyst Office to look at for us to study more, they're really looking at it from the point of view is what is of the best interest to the state. So we have three we, the JLBC, have three primary responsibilities.

First, on behalf of the Legislature, both houses. Our role is to review changes or other actions that the Administration Governor's office DOF proposes related to the budget that has already been enacted. So in other words, changes that they want to make, like now to our 22'-23' budget or perhaps even to our 21'-22' budget.

Because notice sometimes when we adopt those, we are doing multi year programs and we, the JLBC, receive about 150 to 200 of those kinds of notifications from the Administration in any given year. And those can range from really small things. Our statutory framework sometimes requires very McKinnor things. But they can't just do it. They don't have the authority to do it. They have to notify us.

And sometimes we will just take that notification, not at we don't need to act on it. We don't need to respond. The fact that we've been notified is adequate for them to chen proceed. Other times we will, of course respond and I will get into some of those examples.

But the chart on page two of the background paper summarizes some of the hearing notices that we most commonly receive. The LAO also receives these notices. And if the LAO feels there's something that warrants our attention that we haven't caught, they will give us a written analysis. And everyone on the dais every Member of the JLBC gets that written analysis. So your staff do receive that.

Now, as I indicated, oftentimes I, as the chair, will respond to the notifying entity, but min that when I do that. Our good consultant has reviewed the Lao's material, has checked with the leaders of the two houses, meaning the staff to the other officers of this body and also in both parties, too, so that you all have the ability to weigh in if there's a difference, a differing opinion on those.

So while we don't have to bring those to the whole to the full Assembly or the full Senate for a vote or to any other committee, we certainly do a very thorough both noticing and vetting process. And most of the times it is something that the Administration is just allowed to proceed.

There are times, however, that we express concern and we will write a letter and raise issues and either indicate that we request certain information before we allow them to proceed or we ask for a change. So we do that. And when we do send those letters. You all get copies of those also.

The second JLBC responsibility I want to highlight is we receive between 200 to 300 reports from agencies and departments on the implementation of state programs. And the committee staff distribute those reports throughout the year to all of our offices and the relevant budget and policy staff. Examples of those include things like annual reports on the status of major technology projects like fiscal, monthly reports from the Secretary of State on business filing, processing times, things like that.

Then the final responsibility I'll highlight about the JLBC is our grove in selecting and overseeing the Legislative Analyst. So our most recent appointment of Mr. Petek was made in January of 2019. And that was a bicameral and bipartisan Subcommittee.

And that who vetted and recommended to the JLBC that we hire Mr. Petek. And the JLBC then voted in full on that. So let me see if there's any questions any of you have about the role of the JLBC. And then perhaps I wood ask whether staff or could text some of those offices just so we can get that quorum.

I think we only need what, one? We have to have five from each house. We have to have five from each house. Yeah, we only need one Carillo is not in town, I think. So I think you need Mr. Bennett's at a lunch upstairs. You could text him. Who's your other member? Okay Mr. Bennett may be your best shot. All right, let me see if anybody has questions in this. Henry Stern I'm going to all.

All right. So we don't have questions. I think we will go to our Legislative Analyst and we can establish a quorum. We will not go to anything yet except for a roll call. Go ahead.

Senator Skinner? I'm here. Present. Becker? Dahle Here. Present. Durazo? Durazo present. Senator Eggman? Eggman present. Senator Niello? Here. Niello. Present. Senator Padilla? Senator Roth? Here. Senator Roth Here. Assembly Member Ting? Here. Ting? Present. Assemblymember Arambula? Present. Assemblymember Bennett? Assemblymember Bonta? Bonta present. Assemblymember Wendy Carillo? Assembly Member Vincent Fong? Present. Assemblymember McCarty? McCarty present. Assemblymember Patterson? We've established a quorum.

Wonderful. We've established a quorum. So what I'm going to do now is go back to the business part. And our first action of business is the adoption of the Committee Rules. And the Committee last adopted its rules in 2021. There are no changes to the proposed rules that we have before us today. So it's the same ruless. And I would like to entertain a motion on those rules.

Move to adopt the rules.

Great. We have a motion and we have a second. So with that, I would like to have a roll call on the rules. Oh, I can do it without establishing the vote first. Okay. Is there agreement to establish or rather to adopt those rules by unanimous consent? Ayes. All right. Seeing all agreement on that, we now have unanimous consent for the adoption of our 2023 Rules.

All right? Oh, yes. I said the last time we did it was 2021. That's because we adopt our rules for the two-year session, not annually. Okay. All right. Now we will go to the next item of business, which is the election of the Chair and Vice Chair. It has been the long-standing tradition of the Legislature for the chair of the Senate Budget Committee to serve as the JLBC Chair and the Chair of the Assembly Budget Committee to serve as the JLBC Vice Chair.

All right? So we have a motion for the chair. I wonder we are allowed to do it both Chair and Vice Chair in one motion. Are we comfortable with both the election of chair and vice chair in one motion? Great. Wonderful. And are we comfortable with a unanimous roll call on that motion? Ayes.

Alright. Seeing agreement. Seeing agreement amongst all those present. Then we have passed now unanimously the election of the Chair and the Vice Chair, which is good, because that is the business we had to do. So we can now go to our section on hearing from Mr. Petek and the oversight of the LAO. Gabe.

Working. Okay. Apologies. Okay. Gabe Petek, Legislative Analyst. Thank you, Madam Chair and Mr. Vice Chair and Members for being here today and for holding the hearing. As you mentioned, I was appointed to my position in 2019 by the JLBC, and it's been a great honor to work in this capacity for the state and for the Legislature so just starting with that, what I thought I could do is briefly go through a handout, which I hope that you have.

We have it on the screen and it's available on our website as well for anyone viewing remotely. Starting on the first page, just touch on the history, mission, and accountability of our office. The history as the Chair mentioned, we were established in the 1940s. Our history traces back to the 1930s when the Legislature was increasingly desiring to have its own analytical support to serve as a counterweight to the Department of Finance, as was mentioned.

And the Governor at the time wasn't as enthusiastic about that idea and actually vetoed the first Bill that came forward to create the office. But the Legislature went ahead and created the office through a joint rule of the Assembly and the Senate and funded our office's budget out of a transfer from the legislature's budget split evenly between the Assembly and the Senate.

And I mentioned that mostly because it still serves a valuable purpose. It actually insulates us and makes us an independent office from the Administration. It enables us to really call it like we see it on behalf of you. As we unpack the governor's budget proposal, proposals and other things I can tell you, being in the office, it continues to sort of affect the culture of our office and the way that we do our work regarding the mission of our office.

The joint rule established rule 37 and then it was adopted into statute later on in the 1950s. But we are charged with analyzing the state budget, revenues and expenditures of the state and then also the organization and functions of the state and its departments and agencies.

So the way we describe it is we have a broad but fiscally oriented mandate. The broad part reflects or the fiscally oriented mandate is the budget and the revenues and expenditures. Of course, the broad component of our mandate is that we're also looking at the organization and functions of state government.So those are kind of the key ways in which we analyze policy proposals and issues before the state.

When it comes to accountability. As was mentioned, I was appointed by the JLBC, but we really think of ourselves as an office as accountable to the Legislature as a whole, but certainly more directly to the JLBC as our overseeing committee.

Moving to page two, I'll just quickly tell you some of our main responsibilities are in the budget primarily. We've been very focused on this in recent weeks, as you may be aware. We do well known revenue and expenditure estimates which we provide to the Legislature for an alternative source of that information. We also independently run all of the state funding formula calculations, which, as you know, are quite complex.

There sometimes are differences in opinion of how they should be calculated and we've brought those to your attention. These include Prop 98, Proposition two and so sometimes there are questions about what should be in there or not and how should it be calculated. And so we serve as something of a double check on the administration's calculations in this area. So we think that that's an important function.

And then undoubtedly you're familiar with the way that we unpack the Governor's proposals. We go through them item by item and provide an assessment to you. We provide recommendations, and if not a straight up or down recommendation, we often provide alternatives or options for changes you could make to make the proposal better in our view and so you see those in all of our budget publications and documents that have come out over the past few weeks.

Less visibly, we are working with committee staff behind the scenes, assisting them with helping prepare for committee hearings and budget hearings and providing technical assistance as needed. And then finally, it is less high profile, but we do evaluate all of these spending requests that are made by the Administration and occur outside of the regular budget cycle, which occur through those control sections of the budget that the chair was referencing at the opening.

Our other Legislative responsibilities outside of the budget include responding to Member requests. It's an important activity that we devote a lot of our staff resources to. We try to make sure that the Members are aware of our availability to provide this service. And it's one of the more important things that we do on behalf of the Legislature is often a little more behind the scenes, but we are doing a lot of work on requests that come in from the Members to look into particular issues.

In addition, we prepare fiscal analyses of the memorandums of understanding between the Governor and the employee unions when it comes to collective bargaining and point out both issues with the particular agreements, but also some structural issues that we've highlighted before related to the timing of when these get done. And sometimes they get done kind of late in the fiscal year, which can put some time pressure on the Legislature. And so we've tried to highlight some of those concerns, particularly in recent years for the Legislature.

But I mention it now because in the context of a budget problem that we're facing, it takes on added importance. And then third of really important activity in our view is our work on the ballot measures, our ballot related responsibilities, as we say in the office. This is really the one area of our work portfolio where we're not working directly for the Legislature, we're working for the other policy making body of California, the voters themselves.

And this was part of our responsibility. It was included in the political reform act of 1974. We're charged with providing an impartial analysis particularly focused on the fiscal impact to both state and local governments of all the ballot measures that are going to be going before the voters in elections. And I will just say that our staff as a personal know, really take this quite seriously. They spend a lot of time on these. They work hard to reach out to both sides on every one of these.

So that to ensure objectivity, they're reaching out to both opponents and proponents of each measure. They're doing research on both sides of the issues and then working to write the analysis of the measure in a very accessible way. So we try to write it so that all voters in California would have a good chance to be able to understand our main points. And we put those through a readability committee of the general population volunteers that help review that for those purposes.

Moving on to page three. There's a table here that shows a breakdown of our published or our written work products by category, by year. And what I would just point out here when you look at this is that each year our budget related work does represent about 50% of our overall work products.

And so it's a substantial portion of our work portfolio. But I'd like to draw your attention once more. The Chair is mentioning this, but the notification letters referred to at the top, these relate to the control sections of the Budget Act or existing statute. And they really lay out the criteria for when it's appropriate for the Administration to make changes to the budget once it's been enacted or outside of the regular budget process.

And I would just like to take the opportunity to remind the committee that the control sections really are a delegation of the legislature's authority to the Administration. Certainly it's intended to provide the Administration with flexibility. It's intended to make it so that the state can be responsive to emergency situations that arise that are unexpected. But at the end of the day, this really isn't a legislative prerogative. It's your decision to do that. And in many cases it makes sense. But that is why we take very seriously when they do come in.

And as the Chair mentioned, we'll get anywhere from 150 to 250 of these per year. Our office will review every one of them closely and many of them raise no concern and there's no real response necessary. But we do provide written analysis on a subset of them.

And the criteria for when we would make a written analysis has to do with certain concerns that we may have, such as is what the Administration proposing to do consistent with past legislative action? And if it's inconsistent with what the Legislature has done in the past, we would often raise a concern, or is it generally reasonable or is the timing of it questionable? Is there a need for it to be done now, or could it just wait until the upcoming budget cycle? And if that's the case, we'll point that out.

The other time that we would raise a concern or provide a written analysis is if the Administration is actually requesting a waiver from the typical notification period, which is 20 to 30 days. So sometimes, almost always when they request this waiver, it is because they view it as an urgent matter. And so that may make sense, but we'll always write those up as well.

Then just at the bottom of the page, I just mentioned some of the other forms of support that we provide to the Legislature, which includes ongoing monitoring of the state's budget condition, testifying at committee hearings, technical support and I would note too, that we also do a fair amount of speaking with outside stakeholders and speaking at conferences. Our office is full of experts on various all the key issues facing the state and key topics within the budget, and so they're in demand to speak.

And I think that we help amplify issues facing the Legislature to those stakeholder groups. It can be helpful. The reason I think it's a valuable thing is I think it can ultimately help the Legislature to have that information out there.

On page four, just briefly operationally, we have a staff of 47 people, 38 analysts, and nine support staff, and the size of our office has remained pretty steady over the years, and I expect it will remain consistent going forward. This is largely the product of the budget limitations that were placed on the Legislature back in 1990 with passage of Proposition 140. And so our budget is out of the legislature's budget, and so we don't anticipate it growing substantially.

And as a result, our staff size is probably going to be remaining constant for the most part going forward. You can see here how we're organized essentially around the major areas of the state budget. Each of these units is managed by a deputy within the office, and then we also have two chief deputies that work closely with me on strategic decisions for the office.

Lastly, I'll just close with page five. I wanted to mention for you just to provide transparency on some of our recent activities and what we've been up to. One of them is just to note that as with everyone, we really had to adopt on the fly changes in our approach to doing our work throughout the pandemic changes basically in our work protocols, an increased usage of electronic communications, and an increased usage of online meetings with each other and with Members and with other folks.

Fortunately, we're kind of past that phase. We're back working in the office. I, and along with the rest of our office has been hoping to increase our meeting participation in purpose, in person rather. That being said, some of our practices were proven to be somewhat helpful, I think, that we adopted. So I've been sending Members of the budget committees key takeaway points about upcoming publications from our office, and I hope those are helpful. But we think it's an opportunity to give the Legislature a heads up before those publications go out. And so we've continued to do that even though we're kind of through that more acute phase of the pandemic style.

Recently, as a part of our culture of ongoing improvement, we've adopted some methodological enhancements to our revenue estimating process and to our expenditure forecasting techniques. Just some technical changes, increasing our use of backtesting on revenues and changes in the way that we estimate future expenditure growth in a way that I think makes it more comparable with how the Department of Finance presents it overall, I think it makes the forecasting, hopefully, a bit more accurate.

It's always probably never going to be perfect, but we're always trying to improve and make it better. And so we've continued to adopt some of those technical modifications over the past year.

And then the last thing I wanted to say is we aye continuing an effort to focus on ensuring that we have a diverse workforce within the office, that we're casting a wide net when we do our recruitment. Not just going back to the same schools or same programs every time, but trying to ensure we hear a range of voices, a range of backgrounds, a range of perspectives to have a robust debate within the office.

But then also we want all of our staff to feel included and be welcomed at the office. And so we are undertaking some activities to ensure that people feel included in that way. And then as a companion to that effort, we're also, where appropriate, providing some additional information to the Legislature, min our analytical work on the distributional aspects or the distributional implications of policy decisions and key issues facing the state.

So in a way you could think of this as like looking at some issues with an equity mindset. And I think that this is a way for us to provide a more comprehensive and richer analysis for the legislature's consideration. And when I say diverse or equitable equity perspective, it is not just the traditional subsets of populations that we think of, like race and gender, and ethnicity, but it also includes regional and geographic populations as well. So we're trying to think of it across a range of dimensions.

We've done all of this work, all of this DEI type of work with a real emphasis on maintaining our adherence to a nonpartisan approach to our work. And so when we initiated this effort, we began by consulting with the GAO, the Federal Government Accountability Office, who has a similar effort. They're a nonpartisan research oriented entity. And so we looked at their plan, we talked with them.

Likewise, we did the same with the Rand Corporation, which is nonpartisan and research oriented, and we had panel discussions with representatives from their offices to speak with our staff as well about how to do these kind of initiatives with a nonpartisan philosophy. So I think I can stop there with the overview of the office and be happy to respond to any questions you may have.

Excellent. Thank you very much. I have a question, but before I just want it struck me when I read the background materials that when I was in the Assembly, I was rules chair for a period of time. And so I was aware of the proposition that when the term limits got created, it also capped the legislature's budget. What I didn't and of course that's what I was paying attention to because it was the budget we oversaw in terms of rules.

However, what I didn't pay attention to is that same action it affected the Lao's office. So what struck me chen you look at this background material is that min 1966 when the state's budget was 4.7 billion, the LAO had approximately the same number of analysts that it has today, when our budget today is like 447 billion 100 times. And I just raise it because it's something that measure trying to affect that capping of the budget was put on the ballot, meaning to try to modify it was put on the ballot a number of years ago, before my time and the voters did not approve it.

But I think it is one of those things that when we look at the complexity of just the state and the size of what we are economically in the world that it would I think behoove us to have. I am amazed at what the LAO produces for us given the constraints they have in terms of budget. But I think we would probably benefit from bains able to increase that and having it more robust.

And given that we can't right now, my question is two part one how do you think we should measure your success? So do you have indicators for your own internal office how you measure success? So then how the JLBC might do that. And then the second part is how might we utilize you more effectively? If there is ways?

Sure. Great questions. I'll start with the question, Madam Chair, on measuring success and tell you how we approach this and maybe some of it could be useful for you. The way we think about it is for us, success is when we see our research and our analysis serving as a source of input or influencing the deliberations of the Legislature. So it's a factor in wahab you're talking about it's useful min your deliberations in committee hearings.

And ideally, our research should not just be responsive but even try to anticipate what the priorities of the Legislature will be. Now, I recognize that's a very qualitative response that's not really giving you any metrics and they're difficult to provide metrics because we stay away from doing things like what percentage of our recommendations does the Legislature adopt? Because we recognize there are other considerations. We're providing our recommendations based on the factors we consider, which is our efficiency of state government and effectiveness of certain policies.

But there could be other considerations that the Legislature takes into account. So we generally refrain from grading ourselves by that measure. So what we do is reach out to key Budget Committee staff once or twice a year and ask them. We try to solicit their feedback. They're generally pretty willing to sit down and talk with us about how we might have done things differently, better formatting reports, tables just really sometimes into the detail.

The other thing that we've done is engaged an outside consultant to actually help survey our staff for their level of engagement. So this is a measure of how we're doing. The measure of success as an organization or as an employer. Is staff morale healthy? Because we find that when staff morale is healthy they perform better. They're more engaged in their work and generally we've had pretty positive results on that front but that's another way that we've measured our own success.

Certainly though we are open to other ideas that you may have or others when it jones to how could the Legislature utilize us more or better. The one thing that I've thought of when it comes to this question is and I do think it's somewhat been affected by the effects of the Pandemic experience but our staff is available and really quite happy to come over and provide briefings on the budget analysis that they write up.

Some of these reports can be fairly technical. Sometimes they're kind of long we send out the summaries, the key takeaways. But I have found even in my position that reading the reports, reading the takeaways and then also having a conversation with the analysts where it can be a little bit of a back and forth dialogue is just a really helpful way to kind of fully absorb what went into the analysis. And so I think I'm mostly here to say that we welcome that our staff is happy to do it.

We're across the street. We can certainly do it online but we're happy to come over and provide that. And I think it's one area where I think there's been a bit of a slower uptake coming out of the Pandemic. Maybe people have gotten out of the habit of thinking of us in that way.

Questions.

Senator Roth and Senator Eggman and Senator Niello.

Thank you Madam Chair. Since I've been up here and this is my 11th year now and I've been on the Budget Committee one or the other, one Subcommittee or the other for most of my time. One of the frustrations that I have had and that I see is that we adopt or the Governor proposes and we adopt jointly a whole bunch of programs in areas whether it's housing, whether it's healthcare, or human services.

Housing is a particularly prolific subject in terms of programs and budgetary expenditures. The difficulty is in evaluating the first of all identifying the goal and objective, the goals and objectives for the program and secondly identifying the effectiveness of the programs both individually and collectively and in budget subs over the years. We sit you're with us, budget Committee is with us and we sort of pick apart individual programs and we say well, what was your goal and objective and how do you measure success? And maybe we get an answer and maybe we don't.

The problem is trying to do that globally with a subject such as housing and homelessness, for example. And it is my question, as I will ask a question is how can the LAO help us with that? Because obviously if globally the programs would be more successful if ten were eliminated or consolidated, five were changed and we could save $2.5 billion. That would be helpful in any year but it would certainly be helpful in years where we're budgetarily challenged.

Yes, that is correct. So Senator Roth, if I may, I would pick up on the housing example as a model for this conversation and our analysts assigned to that area has been doing a lot of work frequently recently I should say, compiling the large dollar amounts and the various entities and state agencies where these responsibilities have been allocated.

It's quite diffuse as you say. It's been spread across many agencies. A lot of the dollars are then going to local agencies for flexible funding and so what are we really getting for the investment? And so we have been talking about doing a project where our analysts will work on kind of establishing the lay of the land of who's responsible for what, where have we allocated dollars just to kind of start the conversation.

And I think what I'm using that as an example to say that it's difficult, it's not always easy to come in with a completed answer and I think sometimes an iterative process over the course of several months to kind of build the foundation. First off, what have we invested, where has the money gone? Get a good understanding of that. Even that is not an easy task essentially is my point there and then to build upon that into a more granular level of information in subsequent efforts or iterations of our reports or in hearings.

And so we have mentioned in this recent year that an increasing focus on oversight and implementation is appropriate when we're facing a budget problem. And with having invested large amounts of resources into some of these state problems, it makes a lot of sense to kind of take a step back and take stock of where are we with these investments? I think it's a complicated question but that's sort of the thinking that I have around it at this time.

Well, first of all, I think we lack the bandwidth here to really effectively do that on a global basis with these large scale subjects where you might have 10, 20, 30 or more programs spending billions of dollars. But it might be something that the LAO could help us with.

Of course, one of the problems is I don't necessarily think we identify goals and objectives before we and the Administration adopt some of these programs. But I think if the LAO could help with a more global review, I think that would help us accomplish our budgetary objectives and duties and responsibilities with respect to oversight. That's just a thought. Thank you, Madam Chair. Thanks for your response, sir.

Thank you, Senator Roth. It's a very good question. Senator Eggman, followed by Senator Niello, followed by Senator Durazo.

Thank you. And thank you, Mr. Petek. Kind of along the lines of Senator Roth. I first wanted to say this last two years are my first year sitting on a budget sub or a budget committee. And I was reintroduced in some ways to the LAO and their prime function in helping us out on budgetary issues and just how helpful that was and how comforting it was as a first-time budget chair to have your office to be able to bounce things off of.

And then secondarily, I guess I'm a little bit interested because I use your reports, we use auditors reports, how those work in concert, if they do at all. And then to Senator Roth's question, and I agree, I think we need to do a better job at when we pass bills and establish programs that we really set up more concrete indicators to how do we know if we're being successful? As stated, if there's multiple programs addressing one issue in multiple departments and divisions.

Perhaps one of the things that you can help us with, if it's not a global evaluation, is just to help us with questions about where to drill down even more. And so some of those frameworks for evaluation that we could begin to apply to the subject. Does that make sense and your thoughts on that?

Yeah, well, first on the question about coordination with the State Auditor's office, we're not necessarily coordinating our reports. I think our analysts will pay close attention to what the reports are saying. It's good information, but we aren't coordinating with them.

As for establishing the objectives or key metrics or measurements in a piece of legislation or a budget-related Bill, one thing I might suggest is if you look into many of our reports, sometimes we have information along those lines. And this might be back to what I was referencing earlier before a hearing. You could consider having our analysts come over and help highlight some of those points and kind of crystallize where the focus of that conversation could be.

They're good at helping me think that way when I'm looking at one of the reports. And so I imagine it would be helpful for the Members as well. And it could perhaps be useful then when you go into the hearing to kind of shape that conversation. That might be one suggestion.

I'll jump in.

Okay.

First of all, to Senator Roth's point, I made the observation in a committee meeting, either earlier this week or last week, that the array of programs that we have, in just about every issue area, is mind boggling. It's very difficult for us, as policymakers, particularly those of us -- well, I'm not new. I guess I'm new-old. But coming back after all of these things have been adopted, for the most part, since I was here last, it's very difficult to understand what the heck's going on. And to Senator Eggman's point, how to assess them.

And maybe we need a serious attempt at consolidating things, maybe eliminating some programs to put them toward other programs, but some sort of consolidation so we could, as policymakers, much more easily understand what it is that the state is doing to try to address the problem that is being attempted to be addressed. I think another area that the LAO can help, as we do enter a budget with some financial challenges, whether it gets worse or not -- I happen to think that it probably will get a little bit worse.

But after five years of flush funding, where the legislature and the administration has been able to fund just about everything that people wanted to -- not everything, but just about everything -- the need for priority settings has not been a priority, and it's going to be a big priority in this budget cycle. And the LAO, I think, can help tremendously with that. And I have, now working with you, working with the third ledge analyst in my career in the legislature -- Liz Hill, at the beginning, who is still a good friend and I see regularly to this day -- Mac Taylor -- I was on the committee that hired Mac and so I worked with him.

And when I'm talking with community groups about what's going on in state government, I always tell them: LAO.CA.gov. That is the best source of information about what it is that we do here. And I think you do outstanding work. One comment that I want to make -- I don't expect you to comment on this, but -- with regard to ballot responsibilities, the LAO does great work, in terms of analyzing initiatives. I don't think enough people read that analysis. And I tell people it's easy to read. It doesn't take a long time. It gives you a good idea of what the initiative is. But I've never been able to understand the split responsibility between the attorney general for writing the thing that comes first, the title and summary, and the ledge analyst who does all the analysis.

Why not just have the ledge analyst do the title and summary? And indeed -- and you ask, "Well, what do we do about that?" I have a bill that I've introduced this year, that would do that, and I would welcome everybody here to support me in that effort, because that's really where the responsibility lies. Again, I don't expect any comment from you, Gabe, on that, but I think your department does great work.

Thank you very much.

Senator Durazo, before I call on you -- just in listening to, kind of a thread here, that in some cases we may -- our colleague, Mr. Niello, was here, last, when we were in the recession. And of course, at that point, we weren't creating any new programs. We were eliminating a lot. So it's true. We've had money since then, and we have started new programs. We had a hearing, an oversight hearing, with the Budget Committee on the housing and the homeless. And of course when the LAO showed us, "We've got the chart of all the different programs," I think a lot of us thought, whoa, shouldn't we be consolidating some of these? Where's the overlap and all -- but we have met the enemy and it is us. We're the ones who created -- not all, not all, but most all. So just a kind of reminder that when we asked the LAO to tell us what should we consolidate, it's what we created. But whatever. Anyway. Senator Durazo. Go ahead.

Thank you, Madam Chair. I just want to say, I always look forward to the LAO report. I mean, to me it's like, okay, cut through all of this. Let's get to the bottom of it. So I just want to start out by thanking you and everyone who works with you in your office, how important you are. And we rely on you. We depend on you to give us the kind of expertise. Primarily, I think, in terms of budget, it's not just sort of the dollars and cents that come in and out, but it's those dollars and cents, how they get spent in this economy -- this economy today, this economy 20 years ago, 20 years from now -- things are different. And so how we look at our budgets should be looked at different.

There was a time when the social contract provided health insurance through the workplace. I mean, the overwhelming majority of people had health insurance provided through their employers. That's not the case anymore. And so, how do the finances of our economy -- how do they get impacted by something that's so dramatically different today? Government is now having to provide -- help pay for health insurance. That wasn't the case before. But I want to bring up, also -- maybe part of this is a question -- is we really need, I think, more, I think, more on --information that helps us address economic justice issues. I'm not saying that you change from being the fiscal, the independent voice. But an independent voice needs to include many, many communities who are undergoing extraordinary hardships.

And so just to give you an example, we passed, last year, the governor's climate bill package and we were all a part of that. But I think that the analysis for those bills wasn't sufficient when it came to socio-economic impacts. And so, I think, to step back and say, what changing role that your office can have, in providing us more of that kind of information, not only the dollars and cents, this cost this and this cost that. We really need to put it in the perspective of the majority of Californians are working people. So how do these policies impact them, those real life circumstances that they face every single day?

Yeah. Senator Durazo, thank you. It's a good question. It's a big question. And I think that my first cut at the response would be that, if you recall, one thing I said, was that we were making a point to try to bring in the distributional aspects of policy decisions and key issues facing the state. So that is partly what I have in mind, are some of the economic disparity issues that you're referencing. And when you look at some of the reports we've done recently, including our self-directed reports on -- a couple that come to mind include the effects of wildfire smoke on Californians and certain, different populations and neighborhoods, or communities, were affected differently -- and so that was one component of that report, looked at that aspect of it. The delays in getting some of the benefits payments out for the Employment Development Department was a report we did this summer, partly with that concern in mind.

And so we're doing other research on the question of the differential CalWorks take-up rate by certain subpopulation groups. Some populations, subpopulations, have a much higher take-up rate, despite having similar economic situations. And so we have some uncertainty about why that is. But those are the kinds of projects that we're working on. And so, my hope is that, as time goes on, that will be helpful to you. But again, we do remain steadfast in approaching this work in a nonpartisan way. And so in addition to those cuts at it, we're looking at the urban and rural divide, geographic differences throughout the state, central valley versus the coastal region, that sort of a thing.

And so we try to keep these different dimensions of our state population in mind. But this is a part of what we're working on. It's kind of an ongoing, bigger project in the background. We're trying to incorporate elements of it as we go, kind of on the fly. But it's a work in progress because it's not something we've emphasized historically, or over the years, in the past. But we do agree that it's an increasingly important issue facing the state. So it is definitely on our radar.

Yeah. And I'm not looking for -- take a position and try to guide us in a certain direction. It's just, we need to have all that information so that we could make the best decisions possible, as far as this impact, particularly on climate-related issues.

Thank you.

Right.

Thank you.

All right. I have Assembly Member Arambula, followed by Assembly Member Bonta and then Assembly Member Ting. And then, unless there's someone else, I would go to public comment at that point. Go ahead.

Thank you, Madam Chair. I'll begin by appreciating that the LAO has been accurate over the last several years, more accurate than our Department of Finance in predicting revenues. While the Department of Finance has been conservative for the last several years, we've seen surpluses that have exceeded those projections. This year, we see the Department of Finance being more optimistic in terms of revenues, than I would say the LAO has been, but wanted to ask a little more detailed and current event question, if I could. As we saw that the recent floods have caused the IRS to initially delay returns a month, and now it appears we're delaying those returns to October. I'd like to know what your suggestions would be to us, as a legislature, in terms of not having the appropriate information regarding returns, and how we can pass a pragmatic budget recognizing the current situation we're in.

Yes, Dr. Arambula, that is a tough question because we've been thinking about this ourselves. The first thing I would say is, I think the administration would have to choose to conform to that federal guidance. So if they do choose to, which on the one hand is understandable, given the hardship posed by the floods, but on the other hand, it does create a dearth of data and information on our tax collections that makes it difficult for us to model what our revenue estimates should be. And as a consequence of that, what I would say is, well, we'll do our best.

We're going to go back and look at what happened in 2020, when there was a delay, also, for different reasons of course, but we'll look at what taxpayers tended to take up that option, and some continued to pay on the regular timeline. But then I would just caution that it does increase the odds that there would be the need for a mid-year budget action if it turns out that we have less revenue than we anticipated. So for right now, that might be about as much as I could offer.

Assembly Member Bonta and then Mr. Ting.

Thank you, Mr. Petek. I, as a newer legislator, have really relied heavily on LAO's reports, and, certainly as now, budget chair of a subcommittee -- even more so. One of my observations is that we are often challenged with understanding the opportunity costs associated with our programming. So when we pass legislation, we get a DOF report that indicates to us, the dollars and cents of what it's going to cost us to be able to implement that particular legislation. And we rarely get any insight, if you will, on the opportunity cost of not actually moving forward with a piece of legislation or a budget priority.

I'm wondering, if in the kind of vein of seeking more of an equitable analysis by program, if there is an opportunity for the LAO to expand its analysis to include more of a kind of pure economics analysis of what it costs us to be able to do that -- which would allow us, I think, to be able to not only have the short term view over a two year cycle of the budget, but also provide us with insight into the impacts of our operations budget over time.

It's a very fair question, Assembly Member Bonta. A couple of thoughts come to mind. The first being, the approach to doing this kind of work in the office is -- our staff is very committed to doing work that is based on evidence in-hand and data that we have access to. What you are describing, I think, is a little bit more academic, where we're kind of modeling out a hypothetical -- like a counterfactual of doing a different policy path than the one that we're on. I think it's the type of work that our staff is capable of doing, but maybe not on a comprehensive basis.

So if there are particular questions that you, or other members, have about a specific policy question like that -- like what would be the cost of not doing this versus doing it? It might be the type of thing that lends to starting with kind of a member request with our office, that I mentioned as one of the things that we do. And our ability to do that, knowing my staff, would be that we would try to be clear with you, upfront, like what the limitations are -- kind of providing some caveats about how precise we could be. Because once we start going down that path, inherently, we're talking about a world that doesn't actually exist.

So we're depending on estimates and modeling out people's behavior, collectively, and what the cost of that would be or the savings of that would be. And I think it's a very fair question. I can understand why policymakers would want that information. But the challenge with it is that it's a construct, in a way, as opposed to what's happening in the actual world. And I think the workload involved with it would be difficult for us to do on a kind of comprehensive basis but, happy to work with you, individually, or other members on specific questions.

We have some real live opportunities, for instance, within public safety, thinking about, for instance, the cost of recidivism. Those numbers are known. We have a lot of analysis around what requires, or what indicates, the likelihood of recidivating, and we also know how much it costs us to keep people incarcerated. So I volunteer to test pilot with you.

Well, that's an area where we have done -- I think you're right -- there is an area where we have done, probably, some more robust work along those lines. And our staff could probably work with you on those kinds of questions. Yeah.

Vice Chair Ting.

Thank you, Madam Chair. I just want to thank Mr. Petek for his leadership of the office. The office continues to do excellent analysis, as you've heard from all the members. And it's been a resource for every legislator. In particular, I just want to thank him for really pushing the entire office to be more legislator-responsive or responsive to legislators. I found that when I had joined the Budget Committee, at times, that the approach by some in the office was fairly academic and did not seem to be as connected to the deliberations that we were having, separate from the budget, the major policy issues that we were grappling with.

And I really do appreciate, I think, that the Legislative Analyst Office has really started to tackle, and to really look at, what are some of the major issues that we are exploring, as well as deliberating and being more responsive to that. So I really appreciate that, and I really do believe it's because of your leadership and your taking over the office -- that it has become more of a legislator-focused office than I found when I started here ten years ago. Thank you. I know that the office -- it's very difficult. We have LAO, the Department of Finance. But just to set the proper context, you have 50 employees. Department of Finance has how many employees?

I was thinking you might ask that, and I think it's in the range of 300-400.

Yeah. But it just gives you a sense of -- this is just so that I know that myself and Senator Skinner are very aware that -- I just want to set the context for all the other legislators, especially for -- even the subchairs may not even know that fact. And so we really appreciate your work because, oftentimes, for every one legislative analyst, you have four or five people, three or four or five people in finance tackling the same issue. And we know that they only have to respond to the governor. You have to respond to 120 of us. And we have a diversity of opinions. So we really appreciate that.

We know it takes time, but I just want to say, personally, just thank you for being responsive. Because I did feel, at the time when I joined, it didn't feel like the legislature's -- the Legislative Analyst Office, or the Legislature's Analyst Office -- that it really had become, almost, like an academic think tank. And I really appreciate you sort of correcting that ship and turning that around and really being much more responsive to all 120 of us, regardless of what our viewpoints are or what our policy issues of interest are. So thank you.

Really appreciate it. Thank you.

All right. With that. Assembly Member Bennett.

Thank you very much, Chair Skinner. Being relatively new, I just wanted to offer two insights. One, similar to other people, I think your staff has done very good work, in terms of presenting sort of the subjective analysis, et cetera. So I second the things that they said, including what Mr. Ting said. The one thing that I've sort of discovered, only recently, that would be helpful, is, I think I spent the first two years reading the LAO reports and not realizing the depth of experience the LAO had in trying to identify how this is a systemic problem in a department.

And they're pointing it out again, but it's only pointed out as, "We don't think -- we disagree with the governor on this, this, this," and it takes me a while, digging, to find out that that's been a problem area in that department for many years. But it's only identified in the LAO report that I'm reading, as a single line item. And so if there is some way that the LAO -- it would just improve the efficiency of your communication with us, if they would say -- even if it's some other kind of communication outside of your own report.

But this has been an ongoing problem and it's not just a one time, "We disagree on this thing," or even, disagreeing on this thing doesn't even highlight that there is an ongoing problem, just that there's a disagreement about this budget expenditure. And then I find out it's because, well, they've constantly had a poor performing department in this area, and that's why the LAO was disagreeing with this. But you had to dig to be able to find that out. Just one small suggestion. Outside of that, great work. Thank you.

Thank you. Good point.

All right, so with that, I'm going to see if there's anybody in the hearing room who would like to offer any public comment. Anyone in the hearing room? Okay. Then I would like to just remind if there's anyone on the phone lines, I'll read the -- I will read that phone -- I got it here -- that number again. It is 877-226-8163, access code 4398318. So if there is anyone on the phone line who wants to call in. Moderator?

Madam Chair, no one has signaled that they wish to speak.

Okay. Well, that isn't necessarily unusual. This is a rather, we'll call it, wonky subject of -- not the usual hearing within the Capitol. I want to thank staff for the preparation of these materials. I want to thank the LAO for, not only a good background paper, but, I think, very illuminating testimony and responsiveness to the questions that the members asked. And I do appreciate the LAO's work a great deal. And I hope that we can, at some point, look at this conundrum we have of being in a situation where it's the same number of analysts, who used to analyze a $4.7 billion budget, compared to a $447 billion budget. But with that, unless there's any other comment or concern, we will conclude the meeting of the Joint Legislative Budget Committee. Adjourned.