Senate Standing Committee on Budget and Fiscal Review

Good morning. The Senate Committee and budget and fiscal review will come to order. And as we continue to take precautions to manage our ongoing COVID-19 risks the Senate welcomes the public and has provided access to both in-person and teleconference participation for our public comment.

For individuals who wish to provide public comment today we have the teleconference service and the participant toll free number and access code is posted on our Committee website. It will also be displayed on the screen, but for your listening and write it down. Today's participant number is 877-226-8163.

The access code is 7362834. I will maintain decorum as is customary. Any individual who is disruptive may be removed from the remote meeting service or have their connections muted.

We are holding our committee here at 1021 O Street, Room 1200. And as I indicated before, I hope all the committee Members will come down here so we can establish our quorum. Those providing testimony before the committee today are participating remotely and remote participants.

You know the drill. But you can please mute your phones or computers when you are about to present. And every time you want to be recognized, please use the Raise your hand feature in the program and I can acknowledge you. Our IT personnel.

You unmute yourself before you present but our IT personnel will put you back on mute when you are done. To allow the public access. We have admitted Members of the public in the hearing room to the extent that social distancing requirements allow.

And as I mentioned in opening, we will have the teleconference service. Public comment will be heard after we've received the presentations from the LAO and the Department of Finance and after the committee has been able to ask the questions they may have. So, let's see.

Can we establish a quorum yet? Oh, we can. Excellent. Secretary, please call the roll.

[Roll call]. We have a quorum.

Great. Do you want to call the Members who just came in just to and you had already captured Mr. Minn? Great. Excellent. All right, so we have quorum. So before we hear from the Department of Finance and the LAO, let me open with this is our initial budget hearing for the year and the purpose of this hearing today is to get an overview of the budget that the Governor presented just last week or the week before. It's already been so fast.

Anyway, that is our purpose. And subsequent to today's hearing, our subcommittees, of which we have five, will hold numerous hearings to begin to get into great detail about various of those proposals and also do some oversight on the significant budget appropriations that we have made in the last two years. We will also have full committee hearings both on larger topics and on some oversight issues.

And that schedule will be announced soon. But the more in depth discussions, so the point of today is the overview. The more in depth discussions regarding the proposal will take place in both subsequent full Budget Committee hearings and Budget Subcommittees.

Now, that's not to indicate that you are free to ask questions today, of course, to make comments, but I'm just laying out that we are getting the overview on the whole budget and not necessarily delving into one particular proposal specifically. Our Budget Subcommittee hearings will start at the end of February and run through May. And of those of you who followed the Governor's announcement and his proposal, you will note that it reflects the changing economic conditions since the Budget Act of 22-23, which we adopted last year.

So what it notes is that there's slower economic and revenue growth projected both this year and projected for the next several years. But the Governor noted, and I would note, that given that there has been over a decade of legislative action, voter approved action, and administrative action around establishing and funding various rainy day funds, dealing with long sum of the long term debt that we have very good fiscal resiliency right now in the state. If we compare to the circumstance we faced in a much greater shortfall at the beginning of the recession.

So the State is in a strong position to adapt to at least the projections of changing revenues to date. And I was pleased to see that the Governor's proposal retains many of the important investments that the Legislature and he agreed to made in past budget acts. Now obviously, the Governor's budget does recommend some shifts in funding, some delays and perhaps some cuts.

And those of course, are our purview to discuss in detail and to negotiate as to whether those are the directions in terms of dealing with the shortfall. Is that the same approach that we would take? So we look forward to discussing the mix of proposed solutions and determining the right mix of prudent changes to protect our progress as we continue to focus on supporting California's residents, families, businesses. And of course, the work that we are doing is essential as ever.

And I look forward to working with all of you as a Committee to complete the Senate's work in crafting the State's budget for the upcoming fiscal year. So, as I indicated earlier, we have the Department of Finance and the Legislative Analyst Office with us today. They are both participating remotely.

And before I start with their presentations, I would like to welcome our new Chair, who is not new to the Committee, though new to the Senate's Committee, rather, he's not new to Budget, Vice Chair, Senator Niello. And our Vice Chair, Niello, was in. Now, Senator Niello, were you Vice Chair of the Budget Committee in the Assembly?

I was with Senator Laird. Last time we had a rather significant budget challenge in 2008 and nine, it's deja vu all over again.

Though the magnitude is quite different, however. But thank you for.

Madam Chair I think the message is don't put him on the Budget Committee and then we'll be in great shape.

Well that might speak for you, too. Let's begin.

Have we elected the Chair? What's happening here?

Let's begin with the presentation of the Governor's budget by Erica Lee, our chief deputy Director at the Department of Finance. And Erica, I see that you're poised and ready, so you can begin.

Good morning. Good morning. Madam Chair, Vice Chair Niello and Members of the Committee.

Erica Lee with the Department of Finance and I will be providing an overview of the Governor's budget to the Committee this morning. As mentioned by Madam Chair, we enter 2023 in a very different economic position than the previous two years. The last two budget acts included significant General Fund surpluses, each around about $100 billion.

This year the Governor's budget, which includes expenditures of about 297 billion forecast revenue declines of 29.5 billion over the budget window, and that includes the three years, the prior year, the current year that we're in, as well as the budget year. And after transfers and adjustments, we are actually facing a $22.5 billion budget deficit. So while it is a deficit, it is much less. It's still significant, but much less than Great Recession, obviously, and even in 2020.

California, however, is used to the ups and downs caused by our progressive tax structure, which includes significant reliance on the personal income tax of high income earners as well as capital gains revenues. And not surprisingly, most of the downward revision that we're seeing and forecasting in the Governor's budget, when compared to the Budget Act of 2022 is due to a $25 billion reduction in personal income taxes. While we are up against declining revenues, this is really more a moderation of the growth that we've been seeing over the last few years.

However, despite these revenue decreases, we are better positioned to handle the slowdown than we ever have been in the past. Again, as mentioned before, through previous actions, including Proposition Two, which the voters approved in 2014, California now annually sets aside about exactly 1.5% of General Fund revenues and transfers, as well as capital gain revenues above 8% of General Fund tax proceeds. And additionally, and importantly, over the last two budgets, we have built in budget resilience measures in case of a downturn in the economy.

In fact, at the May revision, as well as at the Budget Act, I testified to the risks that were on the horizon and indeed, some of those risks have been borne out. However, the budget resilience that we did include, which includes strong reserves, supplemental deposits to both the Rainy Day Fund as well as the Safety Net Reserve Fund, an inflationary adjustment factor to deal with price increases as well as reducing bond liability through cash payments and importantly, spending most of the past revenue, which was one time on one-time programming rather than ongoing commitments. All of these measures are important because they help mitigate some of the cuts that are required to bridge the gap and protect our safety net programs which were deeply cut during the Great Recession.

They also help protect many of the priority investments. Again, that was noted at the onset. So how do we solve the budget problem? The Governor's budget solves the $22.5 billion budget problem through a balanced mix of approaches, and this includes 7.4 billion in funding delays.

And essentially what this means is that the budget spreads either initiates some programming later or spreads over the multi-year, the programming that was committed to over the previous budgets. We have 5.7 billion for reductions and pullbacks. The budget reduces spending for various items, again across the 21 through the 2021-22 through the 22-23 fiscal years through that budget window, and pulls back certain items that were included in the 2022 Budget Act that provided that additional resilience that I mentioned.

Most notable is 3 billion in inflationary adjustment that we included in last year's budget, as well as a 750,000,000 Unemployment Trust Fund payment that was included for this year. There was a total of 1 billion, of which 250,000,000 was for the current year. However, the 750,000,000 for the budget year is included in our reductions.

We have 4.3 billion in fund shifts and the budget shifts certain expenditures in the current year and in the budget year from General Funds to other funds. Most notable are a lot of CSU capital projects. We will be providing General Fund for debt service.

So rather than paying for those capital programs with cash, we're proposing CSU issued debt instead reverting certain bonds to cash projects from the '22 Budget Act back to bonds, and most notably, 1.4 billion that was provided for the ZEV Package. The Zero Emission Vehicle Package will be shifting to the Greenhouse Gas Reduction Fund. Another set of solutions is 3.9 billion in trigger reductions and the budget reduces from 2021 through 23-24 the budget year certain proposals and places them in a trigger that would restore the reductions in a year's time.

So at the next Governor's budget, if there's enough revenue to provide for workload as well as those trigger reductions, then the trigger would be turned off essentially. The trigger would be effective January, sorry, July 1 of this year and could potentially be triggered off in January. The bulk of those trigger reductions are in climate and transportation, and those were where we had most of the one-time spending.

A total of about 3.1 billion for climate and transportation is included in that trigger, along with 600 million for housing, about 100 million for parks, and 55 million in workforce training. And our last solution bucket is 1.2 billion for limited borrowing and revenue generation. The majority of the funds in this category for the budget year are derived from loans from special funds to the General Fund, as well as a proposal to renew the Managed Care Organization Tax or the MCO Tax.

So, I previously mentioned the significance of including budget resilience measures in the previous budgets. We use many of them. But of note, I just wanted to let the community know we did not touch the reserves.

The Governor's budget does not propose a withdrawal from the reserves at this time. And this is important because we are looking to the spring to see how things continue. If things continue to go badly on the economic front, then we potentially may have to tap into that as we head into the May revision and the Budget Act.

So I just wanted to note that. And at this time, the total reserves are $35.6 billion, of which 22.4 billion is in the Rainy Day Fund with the Budget Stabilization Act. 8.5 billion is for the School Rainy Day Fund, another 900 million in the Safety Net Reserve, and then 3.8 billion in our state's operating reserve, or the Special Fund for Economic Uncertainties.

The Governor's budget does not forecast recession. However, we do recognize that, as I stated earlier, that there are many risks, some which have been borne out, but risks that still remain on the horizon, namely high inflation and further tightening of monetary policy as the Federal Reserve potentially continues to raise rates. Should things get worse, we could enter a mild recession, and that could potentially lead to a reduction in General Fund revenues between 20 to 40 billion General Fund on top of this, 22.5 billion.

If things get worse and there is a moderate to a severe recession, we could be looking at an over 60 billion drop in General Fund revenues. Again, this is on top of the 22.5 billion that we're talking about now. Again, right now, not drawing from our reserves gives us flexibility and more options, more tools in the toolkit, so to speak, should revenues continue to decline further in the spring.

And one thing to note is that this budget does protect many of the priorities that were agreed upon by the Administration and the Legislature. And I just want to note some of those priorities in K12 and our Proposition 98. The revised estimates of General Fund revenue are only modestly reduced and modestly reduced the Proposition 98 guarantee by 1.5 billion, actually less than what was forecast at the 2022 Budget Act for this budget year.

The Proposition 98 guarantee is 108.8 billion, so 109 billion. And this equates to essentially 17,519 per pupil spending per General Fund.

And if you add all funds, that's $23,723 per pupil. So again, protecting funds for public schools and our students. We also include funding for the universal TK for all four year olds, universal school meals.

We include a statutory COLA of 8.13%, as well as an equity multiplier to support our highest need schools and continued arts and cultural enrichment while that is reduced, it is offset by about $940,000,000 through the newly enacted Proposition 28. In the higher education, the Governor's budget maintains the Higher Ed Compacts with CSU and UC, as well as the roadmap with community colleges. We further support resident undergraduate enrollment at three UCS and support financial aid programs to continue to reduce the overall cost of attending higher education.

In health and human Services, the budget is full steam ahead on healthcare access to all eligible Californians, no matter their immigration status. We continue to support CalAIM, which will include 10 billion when fully implemented. The budget maintains the support for the behavioral health continuum over 8 billion in commitments there, as well as maintains public health infrastructure and supports grant increases for the SSI SSP program, as well as a 2.9% increase for the CalWORKs-based grant. In public safety, the Governor's budget continues to create safer communities by supporting positive policing strategies, reducing organized retail theft, gun violence, illegal drugs, and other crimes.

For homelessness and housing, the Governor's budget maintains investments and homelessness supports and connects those with accountability accountability plans at the local level. And it continues to provide funding for technical assistance and other programs to support local entities so they can build their fair share of housing, including affordable units as we, as a state, work towards building another 2.5 million units. And climately, importantly, the budget continues to include record one-time fines to address the negative impacts of climate change.

Over the past two years, the budgets have included 54 billion one-time over multiple years investments. This budget maintains 48 billion, or 89%, and continues to prioritize equity and equity investments in priority populations that are disproportionately hit from pollution and the climate crisis. Given the projected decline in General Fund revenues, the budget includes reductions across several climate programs, some of which are offset by shifts to other funds.

Important to note, most of these reductions are included in the trigger that I mentioned earlier, and should there be enough revenue in a year, they will be restored. Further, the Administration continues to, will continue to pursue aggressively federal funding, both through the Inflation Reduction Act, IRA or the Investments, Infrastructure, Investment and Jobs Act, or IIJA to attempt to offset some of those cuts. Additionally, the Administration will be reaching out to the Legislature to discuss the possibility of a bond.

So, in conclusion, despite a significant turn in revenues, this budget is able to protect and sustain high priority commitments from previous budgets that were committed to by both the Legislature and the Administration. And this in no small part is due to the strong fiscal foundation that we have built over this past decade, as well as to wise decisions we've made in the last two budgets in regards to budget resilience. So we look forward to discussion to further discussions with the Legislature as we work toward building the 2023 budget.

Thank you. I'm joined by several of my colleagues on the line and we're happy to answer questions at the appropriate time. Thank you.

Thank you, Ms. Lee. I think what I would like to do is have the LAO present before we take questions so that we get the overview not only from the Governor's office, meaning the Department of Finance, but also from LAO, which, as you know, is our nonpartisan analyst for such issues. And we will then hear what their take is. So let me turn now to Gabe Petek who is the head of LAO to present. Mr. Petek?

Okay. Thank you very much. Good morning, Madam Chair. Mr. Vice Chair, and senators. Thank you very much for including us in today's hearing. My name is Gabe Petek, Legislative Analyst, and hopefully you have a copy of our handout, which I can also share and note that I'll walk through the handout and then, along with my colleagues, we'll be happy to respond to any questions you may have.

And also, for anyone watching remotely, you can access the handout at www.lao.ca.gov so with that, I will just go right into it beginning on page one. As my colleague from Finance indicated, actually, both our office in our November fiscal outlook and the Administration now estimate that the state does face a budget problem or a deficit for 2023-24.

As Ms. Lee indicated and the budget documents referenced, the Administration refers to a $22.5 billion budget problem. However, as we evaluate the package, our assessment suggests that the Governor's budget proposal solves a somewhat smaller $18 billion problem.

And so, just to help you understand the discrepancy, there are two main explanations for why we see the Governor's proposal as actually reflecting a somewhat smaller problem than how it is characterized is that first, the Administration, as was mentioned, the Administration does begin with its expenditure estimates, including a $3 billion amount of unallocated spending from the last budget process that was intended to cover the costs related to higher inflation. And then secondly, the Administration spending baseline does include that planned shift to cash fund certain capital outlay projects instead of using lease revenue bonds.

And as we review it, neither of these actions or changes had been approved in specific budget legislation. So our office does not include them in the incoming spending base. And therefore, we also do not thus don't contribute to the budget problem and the withdrawal of those proposals from prior years do not represent a solution in the way we would think of it.

And then, just to point out, additionally the Governor does propose around 2 billion in new discretionary spending that is not currently a part of existing law. And so the addition of these spending proposals necessitate additional solutions of a like amount given the budget situation.

And the categories of those spending proposals are shown here on this slide on the first page. So, moving to page two here. My colleague from finance really kind of walked through a lot of the overview of the proposed solutions that Governor has put forward. I can just help categorize a little bit of it by saying that we do recognize that the proposed solutions put forward by the Governor are substantially on the spending side.

Changes to the spending side of the budget, those in our calculation, come to about 13.6 billion or three quarters of the total solution. Then with the other 25% or around 4.3 billion being cost shifts, as we call it. Of the 13.6 billion in spending side solutions, we view around 7.1 billion of those as delayed spending, which, as was described, really is shifting the timing of certain proposed spending from occurring within the budget year, within the budget window to a later period, but still within the multi-year period which goes through 2026-27.

So within the next few years. Many of these delays are in the areas of higher education, health and broadband. Then, as also was talked about, there are several significant amount of spending reductions that are subject to trigger restoration around halfway through the year. In January of 2024, the Administration determines that there are sufficient resources.

We sum those to about 3.8 billion and those mostly do occur in the area of natural resources, transportation and then some in housing and homelessness activities. There are around 2.6 billion in more outright spending reductions, representing about 20% of the spending side solutions. The largest of those spending reductions is the cancellation of the discretionary principal payment towards the State's Unemployment Insurance Loan from the Federal Government.

Yes. And then the 4.3 billion in cost shifts include the 1.5 billion in shifting of the zero emission vehicle related initiatives from a General Fund to the Greenhouse Gas Reduction Fund shifting the cost there. And then several of the other items that Ms. Lee mentioned and also a minor revenue side solution include, relatively minor given the size of the budget is 350,000,000 General Fund benefit from the state seeking to reauthorize the managed care organization tax which would increase revenues by around 300-350,000,000 in 2023-24.

But it would have a larger General Fund impact in the out years of 2 billion or so by 2024-25. But this proposal would require federal approval. Moving to an overview of how we see the state's budget condition, under the Governor's proposal, as noted, there is no proposed use of the State's Rainy Day Reserve because the Governor does not declare a budget emergency which would be necessary to make a withdrawal from the BSA.

And on this slide you can see that at the end of the budget year, if all the assumptions were to hold, the state's operating reserve or discretionary reserve, this special fund for economic uncertainty would have a balance of about 3.8 billion at the end of the year. Not shown on this slide. But when we look ahead to the multi-year forecast, which goes through 2026-27, the Administration's proposal would result in deficits, if all the assumptions hold, would result in deficits of 9 billion in each of the 2024-25 and 2025-26 fiscal years, and then the deficit would decline to about 4 billion in 2026-27 under those assumptions.

Just a word on the Proposition 98 budget, which we refer to as the budget within the budget. And as Ms. Lee mentioned, compared with the enacted budget, the Administration estimates that the minimum guarantee would decline by 3.4 billion in the current year and then 1.5 billion in the budget year.

And this is primarily because of the lower revenue estimates. And with these declines, the current year minimum guarantee would come in at about 107 billion from 110.4 billion at budget enactment, and then the estimated guarantee in the budget year would be 108.8 billion. Even with this lower funding level though, there's still.

Approximately 6 billion available for new commitments. And that's because some previous one-time initiatives are reaching conclusion and also certain program costs within education are turning out to be lower than expected. In dollar terms. The most significant proposal in the governor's budget is for a cost of living adjustment of 8.13%, which comes out to about five and a half billion dollars when translated to dollars for schools and community college programs, and then another 920,000,000 to extend certain planned ongoing program expansions. To cover this, the budget proposal does rely on about 1.4 billion of one-time funds to support these ongoing costs, so that does leave a bit of a deficit in the following year absent an increase in the level of funding under Proposition 98. Moving to page six to provide you with LAO's comments on the budget, we do believe that the governor's approach, which does emphasize spending site solutions at first and not immediately tapping into the state's budget reserve, is prudent, and it's reflective of the fact that the state faces a notable but manageable budget problem.

We do note, however, that the governor's proposal for additional discretionary spending, as I mentioned, does add to the need for about $2 billion of the proposed solution he has put forward. Also, one thing we would point out is that under our revenue estimates from our November fiscal outlook, we estimated somewhat lower revenues than what the administration is currently estimating. And as a result, we would suggest the Legislature at least consider planning for a somewhat larger budget problem than what the administration is indicating.

And at this point in time, we do suggest continuing to explore potential reductions in the large one-time and temporary spending from recent years, because it will be easier to take a deliberative approach to examining those solutions now than it would be in May. And of course, the reserves are always still available if the problem turns out to be worse than anticipated. And then regarding the multi-year outlook, we just have two main observations.

The first is that really across the entire period, the six year period, the budget window plus the three future years, our office and Department of Finance have very similar revenue estimates. The difference that we have is really just in timing. That is, we have lower revenues in the earliers of that period, with our revenues recovering and reverting to historical growth rates toward the end of the outlook period, the administration has higher revenues at first and then more stagnant revenue growth in the future years.

Related to this, we do recommend that the Legislature think about planning, not adopting, a budget that would put the state on a course to have deficits in future years. So that would require taking some additional action to deemphasize spending delays, which could add to future out year pressure. Or the Legislature could also consider other mechanisms like trigger reductions in the event that revenues do not recover, or that the budget problem persists into future years.

Lastly, as a concluding point, we would note that although we think that the governor's approach is reasonable and prudent, from a structural standpoint, the set of solutions that the governor puts forward need not be the ones that the Legislature adopt. In other words, the Legislature may, even if you wanted to adhere to the general approach that the governor puts forward, could select a whole different set of specific solutions. And so with this in mind, in our overview document, we did provide some criteria that you may wish to employ for reviewing all of the recent augmentations that have occurred in the last couple of years.

And when an augmentation meets these criteria, you may wish to retain them and those that do not, you could think of them as potentially good candidates for reduction or delay. So the list of those criteria is provided on this slide and is also available in our overview document. So with that, I'll stop and be happy to respond to questions.

Thank you, Mr. Petek. And of course, previously I already thanked Ms. Lee for the presentation from Department of Finance, but appreciate both of your presentations. I have a couple of questions before I recognize my colleagues. I see Mr. Laird has his hand up. If anyone else at any point, you can signal to me and I will put you on the list.

So first, for Mr. Petek, I appreciate the LAO's perspective that the administration's proposal, the governor's proposal, which includes 2 billion your estimate is 2 billion of new discretionary expenditures at a time when we have a projected shortfall. I will put it that you've characterized it as potentially not wise and you have not necessarily in your presentation given evaluation. And I imagine the office will during some of the budget subhearings, but on the merits or non-merits of, say, some of the trigger not trigger, but some of the reductions or delays that the administration has proposed.

However, the point of my question is, and this is obviously you haven't presented any analysis of the merit other than just not wise to new discretionary spending. There was no discussion really on the merit or non-merit of those specifics. And I guess conceptually, while I agree with that in principle, certainly there could be an area, a need.

We've just experienced inflation. We've just experienced nine atmospheric river events I think Mr. Laird will get into in a minute. We've experienced a number of things changes in addition to economic uncertainty since we adopted the last budget. And it is conceivable that we may we, the Legislature or the administration might identify appropriate new places to spend even in a time of shortfall to address immediate needs. So I don't know if you could comment on that.

Yes, Madam Chair, I think your point is spot on. It's actually true. What I was just trying to point out is the addition of those new proposed activities or the cost of those new activities just in this environment means that dollar for dollar, any increased new spending when we're faced with a budget problem requires an additional solution.

But some of the larger activities proposed include things like for urban flood management, for example. And so obviously with the atmospheric rivers that you just mentioned, that's certainly something that the Legislature may wish to consider. And of course, when faced with this kind of budget outlook which again, I do want to emphasize, we think is manageable. It's a manageable size problem. But there's no easy solutions here. There's going to be trade offs. Doing more of something new requires doing less of something we're already doing. That was the perspective I was just hoping to bring into the discussion.

Great. And then one request I would have is that as we do our subsequent budget hearings and this committee's subcommittees have hearings if the LAO has any information or research on available federal funds or federal funds we might tap into in some of the areas that we have identified as priorities that come forward. I'm certain that our own staff and DOF will also be looking to that. But LAO's perspective on it would be helpful too as we go forward.

Absolutely.

Thank you. And I have some things I wanted to raise potentially about transit and childcare and a few others. But I will see whether other members raise those. I'll hold off on mine and call on other members. And then if the points that are rather the issues that I wanted to get a few little more information on don't come up, then I'll return to myself and ask those questions. All right. So let me go to Mr. Laird and then I have Senator Min and Ms. Durazo and Senator Menjivar and no worries if I don't have you yet and you decide that you want to ask, then of course I will call on you, Ms. Grove, and then Mr. Becker. Okay, Mr. Laird.

Thank you very much, Madam Chair. And I have a couple of comments and then two questions and just prep finance one's in K-12 and one's in higher education. And two, just quick comments. Last year the Legislature made a deal with regard to Diablo Canyon with the governor and it involved $1 billion to kick start renewable energy to add to electricity. And it was over three years and the administration has held to the deal and not done a reduction in this. And I just wanted to call it out and thank them and that we will be looking for that.

And then on the subject that Chair Skinner teed up in climate, the budget approved at 54 billion. This budget lowers it to 48 billion. It's an 11% reduction and it applies that reduction across the different programs. In some cases it's five. It's eleven, it's 14. And the one place that was out of sync with that was a 43% cut in coastal resiliency, including a cut to help local governments plan for the impacts of sea level rise.

Now, in the administration's defense, this was done before even the first of nine atmospheric rivers hit. But this last weekend I went everywhere and saw the Hearst Castle Road state road is undermined in Pismo Beach. Things are just falling in the ocean in Capitola, it swamped the businesses, it knocked down the wharf. It knocked down the wharf to a state park where it even took the seawall. So strong it took the seawall, it was going into homes and just waves breaking into living rooms. In my hometown, the iconic West Cliff Drive started to fall into the ocean.

And so in the discussions and we had Members of congress and legislators in the discussions, it was basically, okay, here comes the tough planning. What do you actually rebuild? What don't you rebuild? What do you have to consider in stepping back from the ocean? So the major pot that was cut was planning money for local governments to answer these questions. And I can deal with an 11% cut, but a 43% cut is out of sync.

And I would just say we have four months to do the budget and I just hope we consider getting that back to where it was. And then the other comment which is on the education budget and in some ways it's as much for my colleagues if you look at the top lines and some of them were mentioned in the presentation, it's totally confusing and your constituents will be totally confused because the revenue drops slightly. And yet we are increasing the local control funding formula for school districts by over 8% in this budget.

And so it's cognitive dissidents. Money goes down, formula increases. And we put amazing amounts of money that were one time into COVID response learning loss and that has gone away in a major way. And so we will have to look at that architecture when we go through this. And we will have to help the members try to explain this when they have incomings from school districts that don't understand how formulas are going up but revenue is going down. It will mean less money to school districts, but it'll be less money that they will experience in one time programs that expired.

And some of the school districts believe that the learning loss need is still there even if the money and the program expired. So we will have discussions at least in the Education Budget Subcommittee about whether that's the proper adjustment, how to explain it to people. And I just wanted to offer that because I know that superintendents and school boards will, some of them are already meeting with me, so I just know that will be happening to members and I wanted to do that.

And then on the two questions, one in K-12 and that's that the voters just approved arts in schools and that's scheduled to start. And then the one time investments that were included in recent budgets led to decision to reduce the arts, music, and instructional materials block grant. And could somebody in finance talk about how we're reducing those block grants when we're adding the money from the initiative? And I know that people in the initiative thought that there wouldn't be cuts and the initiative would just be an addition.

So could somebody comment on the priorities between the addition in general but the cut in the block grant?

Sure, Senator Laird. Erica Lee with the Department of Finance. I will start that response, and then I may hand it over for more details to one of my colleagues on the line. But you are right. The 2022 budget did include 3.5 billion in Prop 98 general fund for an arts and music grant and discretionary grant block grant. Proposition 28 was passed this past year, which did and I think I mentioned this in one of my highlights, 940,000,000 additional funds. And as part of the governor's budget within the budget, within the budget, the Prop 98 guarantee, a decision was made to bring that larger number down to help fund some of the other proposals that are on the table.

Okay, I appreciate that response, but it's just obvious we're going to talk about that as we head into it. And then in higher education, there were some projections made, and maybe it's two parts, because community colleges sometimes is with Prop 98, but there was a projection about 1% growth and what that meant for the University of California and the Cal State University. And then there's been a fall off in enrollment at community colleges that is starting to come back. And I was wondering if you could talk about how you arrived at the projections for next year on enrollment and how you see those trends going and what it means for us in doing this budget.

Sure. Just to start off with, both the UC and the CSU will be receiving their 5% based increase. I know you're talking about enrollment, and we have seen a drop off of about 16% in enrollment at the CCCS, the community colleges. We do have 200 million included in the Prop 98 package to support retention and to support more students coming back into the community colleges. As for enrollment, the numbers, I will have to turn to a colleague on the line for some more specifics.

Sure. Chris Ferguson with the Department of Finance. So I think what we're seeing in enrollment trends across the segments, in reverse order, it's flattened to soft enrollment at the University of California. We've seen some recent enrollment declines at the California State University, and we've seen the most significant enrollment declines at the California community colleges.

I think we're starting to see some positive signs this year that the enrollment trends are reversing and that the universities are starting to regain some of that lost enrollment. What we have done through the compacts and our discussions with the segments on the UC and CSU front, we've certainly worked with them to say the long-term goal should be to get back to the prior enrollment levels plus the agreed upon 1% increases and that should be their focus. With the community colleges, we have certainly put forward 200,000,000 one time to help with recruitment and retention of students at the community college system. But we've also put forward language indicating that if we don't see community college districts begin to reverse some of those enrollment declines that we saw during the Great Recession, that they should expect the administration to propose a mechanism in the next budget cycle, so in 24-25, to begin adjusting district budgets to account for those enrollment trends.

John, do you mind if I just ask him?

Go for it, and then I'll have a comment and be done.

Based on what you just described, Department of Finance, you've indicated that you are seeing some that the CSU and UC system, which is enrollment, was also down. You're seeing that enrollment catch-up. But are you stating that we are not seeing which is what I understand also. But are you saying that we're not seeing the community college enrollment catch up in the same way?

Yeah, effectively, we're seeing some indication, depending upon the district, that there's some level of return on enrollment in the community college system. But it's not universal, and it's certainly not near the amount of decline that we saw.

This is Jennifer Pacella at the Leg Analyst Office, so just in case it's helpful. What we're seeing at UC in 22-23 is down very slightly, just a few hundred students. So, as you're saying, virtually flat. Now, their incoming freshman classes, we think, are increasing, but their continuing students are continuing to decline. At CSU, the enrollment trends are more steeply down, but again, their freshman incoming classes are looking to rebound, but their transfers are down. We know from trends over the last few years that transfer rates are down.

I'm sorry, the number of transfer students is down, retention rates are down, and credit load per term is down. So these potentially could create challenges moving forward with these smaller cohorts working their way through college. So the administration has these 1% enrollment growth targets for the universities penciled in throughout the next several years.

But we do have more data. So we're looking at that data to see what demographics, what the job market, what unemployment rates are indicating in terms of what growth might occur, where we can do some analysis regarding retention rates if they rebound, what we would see with continuing student growth. So we're looking at all that information. When you get to subcommittees, we hope to be able to dive into those issues more deeply.

And then that tees up the comment that the Chair made at the outset, that this year might include more oversight. And I think in the Education Budget Subcommittee, we would like to examine four or five issues in depth and then see what falls from it in the budget. And I think one of them that just came up that's a logical candidate is enrollment in community colleges because it's down.

And historically, when there's an economic downturn, enrollment goes up. People go to community colleges at the local level to retrain. And it presents an awkward budget situation to us because at the time, we have less revenue and we're supposed to cut their resources, go or what they do goes way up in demand. And we have to figure out how to balance that. And I think we have to understand that if there's some mechanism to cut them because of enrollment, that might not be the right response in and out year. And so we're going to want to talk about that and go deeply into it.

And then just on UC and CSU, one elephant in the room is that last year the Legislature sent a budget higher in each of them to the governor, and he blew penciled the money down to the 5% in the plan. And that barely keeps up with inflation or doesn't even at a time that particularly CSU is doing negotiations with classified employees. And we wanted to make sure that they were set for that and that money didn't survive.

And so I think there will be discussions like that in the Budget Committee. I want to appreciate the administration for the fact that in a tight revenue time, they're keeping with the compact for 5%, but that doesn't keep up with inflation and it doesn't address all the issues at the level, and we won't want to have conversations about that. I know education is roughly half the budget, so I was trying not to take half the time. So thank you, Madam Chair, for allowing me to ask this question.

You're welcome, Senator Laird. I'm going to just allow Senator Smallwood to ask a quick follow-up on that and then I'll go back to my list, as I've indicated.

No, I just appreciate. Thank you so much, Madam Chair. I appreciate the context and sort of institutional knowledge that the Senator Laird shared. One of the things, as we look at enrollment, I think we also have to look at the disparity within the disparity and some analysis that was done by the National Student Clearing House particularly looking, and I think the governor's office mentioned the recession, but I think COVID also did a double whammy and a double punch on enrollment. And particularly in communities of color where Black students and immigrant students were already in the declining participation. The stat was that 19% of Black men, for example, in community colleges have disappeared coming out of COVID and that's an overall decrease that's significant.

So my question is, how are we using the demographic data in terms of setting priorities for the funding that we have to so preciously consider for this next budget round? And how are we also looking, particularly at adult education, where we see a lot of folks in our district participating in just how is the governor going to be thinking about the demographics and setting priorities for these funds?

Hi, sorry, I'm going to turn that question to Chris Ferguson.

Yeah, sure. So as we think about it, in both higher education and K-12 education, our focus has largely been closing equity gaps, trying to ensure that all students that are entering our systems can be successful in completing their educational journey. Whether that's a high school diploma, whether that's a certificate, a degree, trying to get to that particular aspect.

The compacts and the CCC roadmap reflect that commitment. They both have a goal of focusing the system on closing equity gaps or systems, not system. So certainly that remains a focus within the community college budget. Specifically, we do have programs that are focused on student it's called the Student Equity and Achievement Program that is certainly focused on trying to help close achievement gaps that is one of the largest, if not the largest, categorical program in the community college budget. Additionally, in the K-12 budget, we have put forward an LTFF equity multiplier as well as we are proposing trailer bill language to adjust the K-12 accountability system to better assure that all students can be successful.

Appreciating that. And I know we don't have a lot of details on the proposed Prop 98 equity multiplier, but could you share some specifics about how that multiplier is expected to work?

Sure, if I could turn to my colleague, Amber Alexander.

Thank you, Chris. I appreciate the question. So in terms of the mechanics on the allocation funding piece, the funding would flow out to local educational agencies with school sites that are serving high percentages of students that are eligible for free meals. So at the elementary and middle school, we anticipate that that threshold would be 90% or more free meal eligibility at those school sites, and at the high school level that would be 85% or more free meal eligibility at those school sites. And from there, the LEAs that are generating the funds would be required to use those funds that are coming from the LCFF equity multiplier at those particular school sites that are actually generating the funding through that proposal. Additionally, there would be some accountability measures, as my colleague mentioned, to ensure that the funding that is generated through that LCFF equity multiplier is being used for a variety of purposes, including addressing student groups that are in the red and low-performance level on California School Accountability Accountability Dashboard. And those are the two lower tiers in terms of performance levels.

Appreciate that. And I just want to always recognize for my district, looking at our school district, second largest in the nation, LAUSD, where we have 80% of our children, our students in families that are at or below the poverty line. So would love look forward to watching more closely how the equity multiplier will be applied and how those students will be served. Thank you, Madam Chair.

Great. Now I'm going to go back to my list. So it'll be Senator Min followed by Senator Durazo followed by Senator Menjivar and the others who indicated, don't worry, you are on the list. So, Senator Min, go ahead.

Thank you. I want to thank LAO and Department of Finance for being here today. Obviously, this is a very sober topic and I want to thank my colleague from Los Angeles for making those comments. I think I look forward to working with her and the other members of the Education Subcommittee and drilling down. We often talk about how budgets are reflection of our values. But we know that in education, in this state, equity and access are very important and we want to make sure that as this budget gets fleshed out that we're not hampering those goals.

So I had two high-level questions and I guess the first one I wanted to ask really could be for either the LAO or Department of Finance, but have we seen any trend lines on revenue that kind of give us a sense of what the longer-term budget picture looks like? Obviously, this downturn that we're dealing with is revenue-driven. Do we see any tea leaves in the economy that might lead us to believe without being obviously we can't predict the future, but are there tea leaves that lead us to maybe sense that this is going to be a longer situation we're facing or maybe something like a two or three-year situation?

Go ahead.

Thank you for the question, Senator Min. I can start that and then maybe turn it over to a colleague or to Mr. Petek. But as stated, we are not forecasting a recession and what we're seeing is very slow growth over the forecast period and into the multi-year.

And so that just means, again, coming out of two years of 100 billion dollar surpluses, we are kind of moderating or going back to normal. And it feels painful because of the past two years. But what our economists are saying is that we should see slower growth.

There is always the risk. As I mentioned during my presentation of inflation. The sticky inflation remaining or going even higher at this point has decreased over the past few months. I think we're seeing the Fed respond and the last rate hike was smaller than the previous ones. So I think those are the things that we're monitoring over the course of the next several months as we go into the May Revision and we'll have an updated forecast to provide as well. Maybe I'll turn it over to Mr. Petek.

Maybe if I could just follow up really quickly on that, Ms. Lee. When you say we're expecting a period of slower growth in revenues, your economists, do they have a sense of how long that period of slow growth is likely to last?

Let me turn to the economists on the line, if they're present, and if they are not, I will get back to you on that.

Hi, sorry. This is Colby White, Department of Finance. Just adding a bit to what Erica mentioned. We're really seeing just a moderation of growth in recent years and we are expecting that to continue for multiple years. We saw during the pandemic and following it, we saw a lot of the income accrued to high-income earners that had as asset prices inflated and during 2021. So the state experienced very strong revenue growth during fiscal year 21-22.

And so we do see that things like certain indicators like employment is still strong, but we do see anecdotal reports of layoffs and things like that at technology firms that have higher income earners that affect our revenues. So our multi-year forecast really does reflect just a moderation of this growth over the longer term.

If I may. This is Gabe Petek

Yes, you may, but I was going to call on you, but for the future, Ms. Lee, if you could of course answer the questions of our colleagues and turn to any of your colleagues in the DOF that you want to have add, but allow me to indicate whether there's anybody else that we will have join this. So, in other words, I will indicate whether we want to hear from the LAO additionally. And of course, Mr. Pettick, we do. So go ahead.

Well, thank you. Yeah, I think it's a very good question. If I go back to our fiscal outlook in November, what we were seeing is the sharpest decline in revenue is happening this year, going into the budget year. And then what we see is some stagnation kind of at that trough for a couple of years. And then in 2025-26 and 2026-27, we see revenue growth resuming to kind of historical growth rates. Of course, there's a lot of uncertainty.

The further you go out in that period, the more uncertain the revenue forecast becomes. And I think, as Ms. Lee said, I do believe we would agree that a lot of this hinges on what happens with the inflation trends, which have come down a little bit. But we have to be careful about a false dawn here because it's still quite high on a year-over-year basis. It's in the 6% range, which is well above the Fed's target. And so to the extent the Fed remains very focused on bringing down inflation, the way that they do that, of course, is by raising interest rates.

And that has the effect of slowing the economy. So it does continue to put our economy at risk of experiencing a recession, which we have indicated we believe there is an elevated risk of recession. Like finance, we do not assume a recession in our estimates of revenues. But we do think that there is an increased risk of recession relative to other recent years. And if that happens, if there really were a recession, the revenues that we estimated could be down by an additional 30 to 50 billion. And, of course, it could push out the recovery of those trends that I just referenced. So it could be a longer experience than that. Unfortunately, I can't give a definitive answer, but that's kind of how we're seeing the world at this time.

Thank you. I just had one other question, and I think that's helpful just because obviously we need to have a better understanding of how long this trend will last. And I note that Mr. Petek, I think, you know, pretty articulately that so much of the spending solutions for the next few years are predicated on delayed spending and trigger restoration.

I think if I'm looking at these numbers correctly, something like 10.9 billion out of the 13.6 billion in spending-related budget solutions come out of these basically kicking the can down the road. And I guess my question is this all comes out of the unallocated portion of one-time spending. Sort of two subparts to my question.

One, how much unallocated spending do we have at this point if we need to have a broader solution, if revenues decline even further between now and later this year? And then the second question I have is piggybacking a little bit on my colleague from Santa Cruz on learning loss and other things. What are the impacts of these trigger restorations, delayed spending, and what would be the impacts if we ended up having to delay these beyond two to three years if that budget situation continues to remain one that is problematic?

So, Mr. Min, it's my understanding you're asking Mr. Petek around the unallocated spending and that you're asking DOF around the learning loss. Is that?

I think I'm asking both around if they have any comments on this or if they've done any analysis.

Well, let us start with Mr. Petek, and then we'll turn to DOF.

Thank you.

Sure. Gabe Petek, Legislative Analyst Office. So to my knowledge, there really isn't any additional unallocated spending. I referenced the 3 billion that we view as not a part of the spending base that was included in the budget process last year to cover higher inflationary costs. I suppose you could say the ending $3.8 billion balance in the SFEU is unallocated, but it is prudent to plan for a positive operating balance in that reserve. And as far as the second question on learning loss, maybe I could ask my colleague Edgar Cabral. He could weigh in on that one.

I think the question would be more specific is not just related to learning loss but more broadly, do we have a sense? I mean, I don't know if you've had a chance to look that closely, but what the impacts might be across the board of these delays, essentially in spending, and also what the impacts might be if we end up delaying them beyond two to three years or if we cut them completely.

Yeah. As I understand, that is actually one of the first things we will be looking at in the coming weeks.

All right, so we'll turn to Department of Finance.

Thank you again for that question, Senator Min. Erica Lee with the Department of Finance. And just on the topic of unallocated spending, I think both the LAO and the Administration have a different definition of current law.

And what we have counted as, for example, the 3 billion in the inflationary adjustment was something that was agreed upon at last year's budget for the out years. For 23-24, 24-25, and 25-26, we had a total of $10 billion set aside for inflationary adjustments. So essentially those were not allocated to particular programs and the intent was to be able to use them should cost increase.

And so we count that as part of it's an allocation that it was in the multi-year. So I would say that that isn't necessarily something we would count as unallocated. So just as an example. The same thing with the supplemental deposits to both the rainy day Fund and the Safety Net Reserve.

Those were sort of held as set asides to be supplemental payments in those years. So again, we wouldn't count that as an unallocated necessarily in the same way that the LAO would. In regards to learning loss, but I understand your question is more broad.

One thing I want to just cite is that the $7.9 billion that we have put into the delay bucket really is not necessarily I wouldn't necessarily describe them as kicking the can. These are programs that are obviously priorities that we want to maintain. But we will spread them out over multiple years, maybe three versus two or four versus three, potentially starting them in a later year in order to preserve the program for the future year.

Understand that it wouldn't necessarily start in the budget year or even budget year plus one. It could be beyond that. But we wanted to preserve those programs. I just wanted to make a note of that. Obviously, if they don't start as they were planned, then the benefits of those programs won't be accrued until later. But again, just wanted to cite that.

And what we attempted to do in the triggers was to provide some mechanism for some of those reductions which is different than the delays to be triggered back on should revenues come in higher than we're anticipating at this time.

Excuse me. Senator Durazo.

Thank you, Madam Chair. My first question is, if there's a layman's explanation possible, is as I understand that there's a difference of between $18 billion budget problem that the Governor's proposal is trying to address. And as I understand it, the LAO is saying it's closer to $24 billion.

Is that a correct understanding of what's at stake here or is there? The way the way around. Okay. Anyway, whoever is saying 18 billion, somebody else is saying 24 billion. Is that the difference that we're. Part of what we're having to address here is which one to follow when we come up with our proposed budget.

Go ahead, Ms. Lee.

Yeah. Senator Durazo, on that case, I would say that the Administration sees the budget problem as actually 22.5 billion. So somewhere in between those two numbers, and that does include having a balance of 3.8 billion in the Special Fund for Economic Uncertainty, or as we like to call it, or I call it, the state's checking account. So things that may come up that we need to have additional funds for, that's 3.8 billion on top of the actual budget gap, which brings us to 22.5 billion.

I believe that the LAO cited that they don't count certain things as expenditures, so they wouldn't count that as part of trying to solve for that budget problem. And so their number is a different number, but the Administration's number is 22.5 billion, which does allow for some balance in the State Fund for Economic Uncertainty.

Yes Mr. Petek?

Yes. Thank you, Madam Chair. Gabe Petek, LO. And I would agree. I think that on a technical level, we do have a different way of viewing some of the ways that the Administration measures the incoming spending commitments. So in our assessment, the Administration starts the process with somewhat higher level of existing spending. And when you start with a higher level of existing spending and then have lower revenue estimates because of the slowdown it results in the 22.5 billion that the Administration is referencing, we think some of that really is an in existing budget law.

So we would count the problem as 18 billion under the administration's proposal. However, that said, we actually think the real problem could wind up being larger and more like 24 billion, as we indicated in our fiscal outlook, or rather something larger than the 18 billion, because we think that revenue estimates will be lower than what the Administration is estimating. And so that's probably the key difference here, is what revenue estimates the Legislature decides to proceed crafting its budget with.

So if you adopt a lower level of revenues, like what we think is possible, then you would need to find additional budget solutions.

Thank you. If I have two more questions, one is on I know that our responsibility is going to be how do we fill the gap here? And that means going through all of different parts of the budget to see what's less painful, what will cause the least damage, where do we keep on moving forward and not lose momentum of what we started to do? And I think that's our challenge. With regards to student housing funding, housing in general, is a crisis in this state. And so for me, there's even greater housing insecurity when it comes to our students who are trying.

They're doing their best, they're studying, they're really making a lot of sacrifice and yet have housing insecurity. So there's a large reduction in the Student Housing Grant Program and the Revolving Loan Fund. I'm trying to look at what they're facing as a homeless prevention program because we really need to make sure that this doesn't get in the way of them being able to continue their studies.

So if someone, the LAO or probably the Department of Finance would explain the rationale. We're facing housing shortage, but we have shovel-ready projects that could get up and ready to go. What's the rationale in delaying this funding?

Yes, and thank you again, both those proposals are not cut. They are delayed in light of the General Fund circumstances that we're in. The Housing Revolving Fund had 1.8 billion allocated and it was supposed to start in budget year with 900 million.

We've moved that and spread it over to 24-25 and 25-26. In regards to the Student Housing Grant Program, which had about $2.2 billion in it. Already, we had 500 million go out in 21-22, 750 in the current year, and next year we will actually have 500 versus 750.

So 500 is still available for budget year, but 250 of that 750 that was initially allocated will be spread out to the 24-25 year. So I just wanted to make the point that the Administration agrees that we have a housing crisis. We have a housing crisis for students as well as families.

And so we don't want to cut those programs, but we are spreading them out. They are large amounts of money and trying to create solution and some space so that we can retain those programs but delay them and spread it out over multiple years.

Thank you. And I have one more, and that's on transportation. We have been working really hard to increase the funding for transportation. And I see it, I know it's put in its own bucket as transportation, but I really see it as climate issue. It's a workforce development issue. It's a moving people and goods issue.

It's an economic development issue altogether. And that's why I feel we all feel so passionate about the increasing the amount of money that goes into transportation. The governor's budget includes $2.7 billion in General Fund reductions.

And so I'm extremely concerned about that because we had just started to make some huge better progress in funding all the needs across the state and now the proposal is pretty dramatic. So what is the rationale and have you thought of other ways and how do we address this? This is be a huge problem for the progress that we've just barely started to make.

Yeah, so the Administration agrees that transportation can't be in its own bucket. It is really part of climate. And how do we deal with the negative impacts of climate when transportation, as the system does create over half of the emissions? So just to highlight that, two things in response to your question or to your questions, is that the actual cut to the transportation package.

We talk about the total amount that was allocated over the last two years was actually 2.2 billion because we did shift around 500 million from the state highway account. So the actual deficit is 2.2 billion. And the rationale really was, as we were thinking through reductions or thinking through all of the solutions, is where could we potentially backfill? And so the transportation dollars as well as some of the other climate bucket dollars, there's a huge opportunity at the federal level to provide funding for them, to provide funding to the state for transportation through the IIJA for climate, through the Inflation Reduction Act.

And so that is part of the rationale for some of these cuts, is where could we potentially backfill with larger amounts of funds? And transportation was one of that. Noting everything that you've said, we've also provided some well, we also want to talk about the possibility of a bond as well as there is a trigger for some of the climate cuts specifically for the ZEV Package. So really the Administration was looking for multiple ways, if we had to make some of those reductions, to attempt to backfill though.

Just on one thing that you mentioned, the $500 from the State Highway Account, what program was that intended for?

I will have to turn to one of my colleagues for the specifics on that. Hello.

Hello. Thank you. This is Steve Wells from Department of Finance. Just in regards to the 500 million on the SHA, essentially SHA funding goes towards the main highway rehabilitation program, which is the SHOPP program. And that program is a multibillion dollar multi-year program.

So over the four-year period, the next programming cycle, we will have 500 million less to program into that. But to put that into perspective, the program is about a $20 billion program. And as it stands right now, because of the timing of the program, we've yet to program in the new IIJA funds.

So we look to be increasing the four-year programming capacity by several billion dollars. So it was an attempt on these important programs to be able to make sure that we certainly were able to reach all of our commitments that we had already made. So that's kind of where that money comes from.

Okay, thank you.

Thank you Senator Durazo. Now I'm going to turn to the Senator Menjivar, followed by Senator Grove and then Senator Becker. And don't worry, I have more of you on the list.

Thank you, Madam Chair. And while this is a topic I want to dive into more in Sub Three, I just wanted some first base questions on this. I applaud the Administration's continued commitment to our mental health crisis and the Implementation of CARE Act. This is an assumption here.

We weren't anticipating L.A. County to initiate their program a year ahead of time, so I'm wondering if the Administration is looking at reevaluating the money, the funding allocation. I fear that given the county being the most populated county in the state, with 40% of our most in our most recent count, 40% of our unhoused individuals are dealing with mental health or struggling with addiction that we're going to put a lot of focus and resources on CARE implementation here.

So I fear that some of these cuts are going to impede L.A. County from being successful. So some of the things I just want to see if there's any continued conversation or reconsideration is around some of the delayed investments on workforce development programs that are going to be crucial for this if every other day I'm seeing in L.A. times L.A. County struggling in meeting the amount of mental health therapists or professionals needed to address this crisis. So in the section regarding our social work initiative, addiction psychiatry, and addiction fellowship, grants for our university and colleges for behavioral health professionals and our MSW Masters in Social Work slots.

Added to that question is a little bit more clarification on the delayed or not delayed of behavioral health bridge housing for my individual or everyone's clarification. I see under Housing and Homelessness, it states that it maintains the funding, but under Health, it states that it delays the funding. So those are my two first questions.

Okay, thank you, Senator Menjivar, I tried to write down all your questions, so I will try to address them in the order that you brought them up in regards to CARE Act and L.A. joining that cohort one. You're correct. They weren't part of the original envision cohort one. So we will have further discussions on the needs for that. In fact, we'll be discussing with the California Association of Counties for the needs at the local level.

In regards to workforce, many of our workforce, I think particularly the ones that you mentioned, social work, psychiatry, behavior health professionals, and MSWs, those workforce dollars have generally been delayed and so some of that will just go out again later or over multiple years. And then the delay for bridge housing.

That is correct. We did not cut bridge housing. It is just delayed. And that is I can find the years for you. Sorry. The amounts there is a billion in the current year, 250,000,000 will go out in. I'm sorry, a billion for 22-23. 250,000,000 will go after that in budget year, and then another 250,000,000 will go out in 24-25.

Okay so it's not. Okay, I see. It breaks it up. Is there a rationale, I guess, for the delay of these programs given the fact that we're lacking in mental health therapists across the state of California?

Sure. Again, I think on the delays, we were really trying to preserve those programs and keeping them whole and not cutting them. And so one solution was to spread them out over multiple times because we do in fact, have to address our $22.5 billion budget deficit.

Okay, and then my second question is on childcare. Can you talk to me about. There is a push for single rate structure. And I know we have a committee working on this, and I'm wondering if there's a proposed plan or a timeline to develop and implement this single structure and if there's room for other stakeholders to provide input into this outside of the committee.

Yes. So there is a joint labor management group that has a meeting to discuss the rate allocation. I believe there are many, many stakeholders that are represented. This budget does mention that we were in receipt.

The Department of Finance was in receipt of said report. And we will continue to review that and consider what are the next steps to move towards a single allocation. And I just also want to add that that is something that that would be bargained for as well, because we do have CCPU now involved. And so I think it's just important to state that that is part of the bargaining environment.

Thank you.

Just follow up on the mental health question that Senator Menjvar raised. So, Department of Finance, is it my characterization, but are you viewing the delay in mental health as a convenient delay to deal with the shortfall because of the workforce shortages, or do you really feel that? And again, does the Administration feel really that this is an area that, since it's been selected for delay, is whatever either deserving of or could legitimately be delayed?

And are you speaking specifically about the workforce?

Well, I could see a logic, though, from my point of view, the need here is so great, which is what Senator Menjivar's point was related to LA County. But I think any of us at the dais could describe the need in our areas that the need is so great. We've already acknowledged that our jails in effect, were they ever designed or intended to be mental health treatment facilities? No.

And yet they are. And yet they aren't because it's not that jail personnel have training and mental health dealing with mental health issues. So obviously, the Administration, the Legislature, all of us have realized and acknowledged this very serious gap in well, gap a very large need of increased demand for mental health services and a large gap in our ability to fill it.

And I think what we're seeing now is some of that gap is due to a workforce shortage. So what I'm asking is, are the various delays in these areas that the Administration is recommending due to your acknowledgment of that workforce shortage or some other reason?

I think it's informed by a little bit of everything you've just said. Yes, there are workforce shortages across multiple areas, and it's not obviously, we've seen it in the state sector. We're also seeing the private sector.

But on the flip side, as you mentioned, these are proposed for delay and not for cuts. And so acknowledging the importance of having this professional workforce in California. And I also just want to say that the governor's budget is always the starting point for discussions.

And as we continue to work through the spring, these will likely morph. And so also we are informed by stakeholders and by the Legislature, and we look forward to having more discussions on this and on all aspects of the budget. And

I think clearly most of the people on the dais also look forward to many more discussions in this area and digging into it deeper. So now let me call on Senator Grove, followed by Senator Becker, Senator Roth and Senator Smallwood-Cuevas, Senator Newman and Senator McGuire.

Thank you, Madam Chair. I apologize for the text. I wanted to do a follow up I didn't realize was next on the list.

I have a follow up to my colleague, Senator Menjivar's question. I guess in reading what we were able to extract from the information provided by the Governor, we all recognize on this dais that there is a very large need for mental health services, especially if you take the route I take into the Capitol coming down 12th street. There is an extraordinarily large need, especially in the homeless population.

And the Governor was just in Los Angeles last week rolling out the Care Court program, big press release. And so the two questions I have to follow up on Senator Menjabar's question is, why would the Governor hold back funding on the mental health beds but provide funds yet to be implemented for a new medical eligibility expansion program that is not yet even in the works? But they're ready to go, and some of our communities are ready to go with mental health beds. So why would that funding be delayed? And my second question for that follow up on the care court, I'd like to know if you guys agree, either Department of Finance, if you agree that the care court funding for counties because it's going to be a mandate for counties in the budget is insufficient or sufficient and what amount is going to be ongoing or going forward.

Maybe I'll start with your Cure Court question and work forward or backwards, so on Care Court, I think as we discussed at the Budget Act last year, when we first included Care Court dollars in the budget, we needed to have further discussions to better understand what the local implementation efforts would be like. And so we will continue to have those conversations throughout the spring. The first cohort won't begin implementation until later this fall, and so we'll have more information then, but we will also have opportunities for discussion.

In regards to local funding, I believe you asked about the investments in healthcare for all. That's definitely a priority, both a priority for this Governor, as you cited, as well as the Administration to provide full scope medical to all Californians who are eligible. And that continues to go.

That is something that will take a couple more years of investment. And so that is 100% funded in this budget. In terms of the Bridge funding, I think you also mentioned we do have funding.

I think it's really important to note that we have 1.3 billion going out last this year and next year, and we will continue to Fund that program. It's just some of that is pushed out into 24, 25.

Thank you. Thank you. Sure.

I hope I hit all your questions.

It created another question. Again, I guess I didn't ask it clear enough. And I really do appreciate and I'm sorry I'm looking at the screen like this, but I really do appreciate the information that you provided.

But again, and you just mentioned that the medical care for all will go out, won't be implemented for two years. And I may be different than my colleagues on the dais, but we have an immediate need for mental health services in my community and I'm sure in every one of our communities, I guess. Why would we not push out one that's a program that's not implemented yet or not ready to be put into action instead of funding an immediate need now that we all see every single day when we go through our districts.

Sure, and I apologize. The full scope medical will be in one year, will be effective January 1, by January 1 of next year. And there is implementation work that needs to be done in regards to systems now in order to make that deadline.

So I'm sorry, I just wanted to make myself clear in terms of that timing. Thank you.

Thank you, ma'am, very much. So those were my follow up questions. I do have questions, and I thank the chair for calling on me for Department of Finance. The Administration has gone back and has the Administration gone back and reevaluated programs put together, like measuring goals to see if programs that were implemented in the past, let's say five years, are they actually working, and do we have some type of success rate with that? And I say those mainly focused on the homeless population. We've invested a significant amount of money in the homeless population, but the population seems to be getting much worse.

And so I have that question, and then I also want to know if there's some type of, like I said, measurable goals. And then my second question that I have on that particular subject matter, we have spent roughly I think I calculated it in the 2020 to the 2021 budget, it was $166,000,000,000 for General Fund spending. The enacted budget for General Fund spending would be about 134,000,000,000.

And this budget that's being considered is roughly $100 billion more than that. Do we have a spending problem and we're not measuring the programs or setting goals for programs that we're spending money on, or is it truly a revenue problem? And I realize that revenue fluctuates a lot in California, but I'm concerned about the additional $100 billion. And have we gone back to measure the programs that we've been funding for the last six years, or is there some kind of I mean, in the business world, the real world, I call it an accountability system.

Is there some type of accountability system? Because obviously, if you take similar to what I just said about the homeless population, we've invested a significant amount of money and the population has gotten worse. I was just curious about that.

Sure. I'll start with your question on homelessness or accountability generally, but specifically on homelessness. And I just want to point out a few of the things that we highlight in this budget and that we have funded in the past are centered around accountability. And over the past few years, we've put in specifically over $3 billion for our local homeless grants or what we call HAP funding to local entities.

And in this budget, we are tying this last billion dollars that is going out this year budget in 23 24 to local accountability plans, where there are goals and there are metrics that locals need to make in order to receive those funds. And so in the past, that hasn't necessarily been the case. And understanding the need to show progress and to hit goals is really important to the Governor.

It's important to this Administration. A couple of years back, we funded the assistance of Legislature, of course, funded an accountability office at our Housing and Community Development, where they provide technical assistance to local entities to make sure that they are, one, following housing law, and two, producing their fair share of housing. Again, we are in a housing shortage, and we are providing billions of dollars for affordable housing and other units.

We are providing billions of dollars for local entities to address homelessness issues. And so in that regard, we want to tie it to accountability. I hope I responded to that question, Senator.

Absolutely, ma'am. Thank you.

You had another question, about 100 billion dollar in General Fund, and I'm not quite sure I understood the question, and I may have to turn that over to my colleague, Lisa Marzinski. But could you repeat the actual question and maybe the timing you mentioned?

Absolutely, ma'am. So the information that I have shows in 2020 to 2021, there's roughly about $166,000,000,000 in spending. In 22 to 23, we're looking at $240,000,000,000 roughly in spending, there's an increase of roughly about roughly 40 40. Okay, so $80 billion. $70 billion.

$75 billion. I guess my question is but I think the General Fund enacted budget was 134,000,000,000 back in 2021. But correct me if I'm wrong, you guys are the smart people.

So I guess my question is that there was an additional do we have a spending problem? Because we've increased spending by roughly $75 billion is what I see. Is that correct or not?

Just to point out, the 2021 budget was the COVID budget. And so you're seeing there was reduction of 54.3 billion. Well, there was a deficit of 54.3 billion.

And so obviously all of the spending, well, we had to address the deficit and bring down spending. So in the following two years, which are setting the 22 23 budget, the General Fund did go up because we were experiencing a huge surplus. That was one of our surplus years. So a huge amount of revenue above and beyond what was forecasted post pandemic.

Okay, that makes perfect sense. So thank you for highlighting that. I do appreciate it. So, staying on the focus of housing and accountability, I see that the Governor and I appreciate all the work that you guys are trying to do for the homeless population. I just see it getting worse. And the numbers verify that the Governor just openly just released a legally binding goal for local jurisdictions to have a plan to build 2.5 million homes.

So they have to put together a plan. It's requiring it's a legally binding goal. For the plan to be put together for all of our local governments that we represent and to spend $2.5 billion in new housing units by 2030.

Just previously, though, the Governor previously set a goal for the State of California to build 3.5 million new housing units in four years. This was set several years. A few years ago, there was a calmatter, a CalMatters article that pointed out that just 13% had happened.

Like we just built 13% of the governor's goal. I just am curious about what policy barriers that the Governor, I mean, meaning the State of California had this goal of producing 3.5 million new homes. What policy barriers? I don't know, maybe sequa, maybe other things.

But I'd like to know your thoughts on the policy barriers that prevented the Governor from achieving that goal at only 13%, but yet now requiring all of our locals to mandating them to achieve a goal of 2.5 million new units by 2030. So I guess my question is, and I'm not trying to be negative, I'm just trying to say if the state of California and the Governor couldn't do it, now he's going to mandate it to us. Can you highlight some of the barriers that maybe you guys encountered that prevented us from having that housing?

Sure, I'll respond to that question. I would say that building housing has really become a partnership between state support and providing, again, technical assistance and funding to local entities and to Fund programs to build more multifamily housing. I would point to the, again, shared partnership between the Administration and the Legislature in passing 20 sequel related housing bills to get just at what you're talking about, reducing some of the barriers to building more housing, more affordable housing at the local level.

And so I think that a lot of the barriers we are attempting to address through legislation, we are attempting to address through further funding the 2.5 million units is a goal to reach. It's a stretch goal. It's something that we would need to maintain enough housing for the growth of Californians.

And so that is something that is a laudable goal to work towards. And the state wants to provide again what it can, both through legislation as well as through funding for locals and technical assistance for locals to be able to do that. Some of the legislation has increased efficiencies, reduced time to actually build things.

We have provided again, those SEQUEST streamlining for certain buildings and certain locations. And so I think those are all things on all barriers that we have been attempting to address again with partnerships with Legislature, with partnerships with local entities. Okay,

I appreciate that. I guess I just want to focus on the one thing that I feel like that didn't get answered. I really do appreciate your comment.

Again, my concern is that the Governor and his words, not mine, legally binding. He is going to legally bind our local jurisdictions to put a plan together to build 2.5 million units by 2030, yet the state couldn't do it. And you said you're going to address those barriers with legislation.

I appreciate that. I'd love to be able to see those, because we do have barriers. It's, I don't know, $22,000 in permits and fees and all these things that you have to do, sequin everything before you can even drive the first nail.

So I guess that's my question, is that the State of California couldn't do it, but yet the Governor is using his words legally binding our local authorities to do it. And so I have a grave concern about that, especially when funding is going to be withdrawn. Comment, I guess, and I hope that with the chair's indulgence, I do have questions, obviously, regarding the UI Fund, so.

I will give that indulgence. But let me note that it is about seven minutes to eleven. I do have to create space for public comment. My intention is to start public comment at 1130. We will close at noon, and there are at least six other Members who do want to. So I'm not trying to impede you, Senator Grove.

I just wanted to put it in a context. But I think it is important for our Members to get their questions out and raise these issues for both the Administration to know what's on our minds, for our colleagues to see some of the directions we're thinking about, and also the public. But I would ask everyone to try to yes, ask your questions, but make those questions as communicate them as succinctly as you can. Thank you.

Thank you, ma'am. My last succinct question that I have is that we are roughly about $18 billion in debt on the UI Fund. There was roughly about $32 billion in fraud. I realized that was with the Pua. A lot of that came from the federal government and the funds were available. Businesses barely coming out, job creators where they employ people and give people an opportunity for success.

It looks like with the governor's withdrawal, this money that was promised for payment down for the UI Fund, for the overdraft is going to be pulled back. Do you anticipate that going back to the employers and the business owners in the state of California on the food and tax reduction, or do you anticipate there will possibly be money for the UI Trust Fund?

Yes, one of our reductions did include withdrawing the 750,000,000 for the UI Trust Fund payment. 250,000,000 was provided this year, but as part of our solutions, we pulled that second payment. So that does mean well, a couple of things.

Further discussion, obviously, with Legislature on that point, but it would be something that would be, at this moment, have an impact on the fuda in future, I believe next year.

Next year as in 2024?

Yes, I believe so. I can get confirmation from one of my colleagues on the line of when that food credit would go away.

Hi. Andrew Martin with Department of Finance. So the withdrawal of the $750,000,000 payment in 23 24 won't have any effect on food and tax credit reductions? The food and tax credit reductions continue to the the credit continues to be reduced as long as the UI trust Fund is in debt. So they wouldn't be fully like the tax credit reductions wouldn't be brought back online until the UI trust Fund is no longer in debt.

So when the entire debt is paid off so given that this $750,000,000 payment wasn't going to pay off the entire debt, we would still see the food to tax credit reductions continue as planned.

Thank you for that information, Ms. White. Thank you. You are always very informative, and I really appreciate you answering my questions. Thank you, chair.

Thank you. So I've already put the context that we're in right now. I've got Senator Becker, Senator Roth, Senator Newman, Senator Maguire, Senator Padilla, Senator Caballero and Senator Smallwood-Cuevas. So, Becker, go ahead.

Great, thank you. Two questions related to sub two and then two other, hopefully quick questions. First of all, just echoing my colleague from Santa Cruz on coastal resilience, very concerned about that significant funding cut given everything going on right now, specifically on the greenhouse gas funds.

There are numerous places in the budget where it says funding from the General funds being reduced for climate, and that has shifted to come from the greenhouse gas funds around over $2 billion, but nowhere can I find it. Does it say what current programs being funded through the greenhouse gas reduction funds to reduce our greenhouse gas emissions will not be funded? Is that listed anywhere? What areas of greenhouse gas Fund will get less funding?

So the shift that you're seeing from General Fund to GGRF, the greenhouse gas reduction administration's overall plan, it is not cited in our summary pages at this point.

Okay, so we can expect that at a later date?

Yes.

Okay, that'll be good. Is there an estimate on federal funding? We referred a couple of times to federal funding that might be available to fill some of that gap. Do we have a specific estimate of or even a range of funding that might be available from the inflation reduction act or the infrastructure act that might help fill some of those programs that we're delaying?

Sure. So at this point between both the IRA and the IIJA, the state of California has been not given the check yet, but has been allocated about $48 billion for both the IRA and IIJA. So that is generally in funding formula. We have competitive funds that we will be aggressively chasing after as well.

We can expect tens of billions more coming. Don't necessarily have a specific number at this point, but it could be up to tens of billions of dollars more for both federal Fund next.

Okay, great. Look forward to diving into how that money will be allocated. We won't do that at this current moment.

Two other General questions. Per people funding, it looks from our estimates it's about twenty three K per pupil funding now for 4K. What is that?

In total funds. Yes.

In total funds. That's up from about 20K last year, is that right?

I think it was about 22 last year. So it's 23 this year. About.

Okay, excellent. Do you get a sense where that ranks us now versus other states?

I don't know. Turn to a colleague on the line for a comparison.

We don't have that at this point. Historically, the rankings actually look back to prior year actual expenditures, and that's what's being compared. So we don't have that for the budget year at this point.

Okay, great. My last question on the affordable housing. There are some comments from Senator Durazo, Senator Grove, I just want to be clear. I know when I started, I think the gap in terms of affordable housing dollars being requested by localities for Shovel Ready affordable housing projects versus what was being funded from the state was about 1.5 billion, as I recall. And I think about 750,000,000 of that was funded my first year here two years ago, and then last year about 300 million.

So is there more additional funding to fill that gap of projects that are ready to go right now that need funding from the state?

At this point, there's no additional funding for housing. There are new funding. We do have billions of dollars that we have invested over the past couple of years that are still going out.

And in one year in particular, we had about 1.75 billion that was going out to shovel ready projects. So at this point, a lot of the funds that were committed in the past are maintained, but no new funding in this governor's budget.

Okay, great. Yeah, it'd be great at some point to understand what that gap is currently because obviously we want to build housing, as you mentioned. But in the past, certainly my district, there's been affordable housing projects ready to go that are waiting for state money, can't get state money.

So be good to understand netting all that out with what the gap is today. So hopefully we can do that in the future. Thanks, Chair. That concludes my questions.

Thank you, Senator Grove. Senator Becker. I mean, Senator Becker.

Apologies, Senator Roth.

You can call me whatever you want, Madam Chair. Just two quick comments. Just want to join with my colleagues in noting the mental health crisis and the need for serious funding here in the state, in addition to the shortage of mental health workers.

As you all know, in the Administration, we have a critical shortage of mental health acute care psychiatric beds around the state, for example, is my understanding, subject to confirmation. And in Riverside County, we have no pediatric acute care psychiatric beds, period 1 second comment has to do with the transportation funding and the offsets. And I do appreciate the administration's linkage between climate programs and transportation programs.

But given the relationship, at least as I understand it between SB One, the gas tax, and the state highway Fund and the sensitivity of that issue to some of us, certainly from Southern California, I'd ask that the Administration also be sensitive to that relationship when preparing to use the state highway Fund to offset some of our funding shortfalls in the state with that. Thank you, Madam Chair.

Thank you, Senator Roth. Assuming you making the point, not necessarily asking for their response.

That's correct, Madam Chair.

Okay, so let me now call on Senator Newman, followed by Senator Maguire, followed by Senator Padilla.

So. Thank you, Mr. Chair. Glad Ms. Madam Chair, I'm glad to align my comments with Senator Roth as it relates to SB One and highway funding.

I want to go back to what seems like a long time ago to Senator Min's question regarding the deficit. And I think the point was made, man made well, that this deficit this year, as with last year's surplus, is the result of the structure of California's revenue system and it is highly dependent on capital gains performance of stock market, high net worth earners. So we do run the risk.

In fact, we run, I think, the reasonable certainty of additional deficits and greater deficits, particularly as our economy changes, particularly where there is the real possibility that some of the industries that have created these windfalls may or may not thrive, may or may not even be located in California. So it's a comment, but I just want to kind of lay down a marker.

I'd like if we could Mr. Pettick, if you could respond quickly, but it would behoove us to turn to the LAO as we look forward to start thinking seriously at how to address those structural problems in the coming years. Otherwise, I think we do face the certainty of much larger deficits with less room to maneuver in the future. Thank you.

Yes, Senator Newman, I think we'll be happy to work with you and the other Members on those kinds of questions. I think the points you said about the income, the revenue volatility and the structure of our tax system are germane. I would note, like, in addition to our capital gains related taxes, our withholding taxes are also down at this time as well.

Of course, that is also related to some of the investment activities because a lot of the stock grants that are given out when a company goes public in the tech sector, for example, that does generate the high level of withholding tax proceeds. And so right now, with higher interest rates and a weaker stock market, we're seeing a lot lower level of activity in the IPO market. And so these things are all interconnected, of course. But yes, in General, we'd be happy to work on these questions with you.

Thank you, madam Chair.

Thank you, Senator Newman. Senator McGuire.

Thank you so much. Madam Chair. And I appreciate you bringing us back together here for another year has flown by. My goodness. I'm going to be quick and I just have comments had the opportunity to be able to sit down with Senator Caballero here. That's why we were late on all issues of broadband.

And two comments on broadband. Number one, understand that we are seeing some challenges with the budget. Number one, on the deferral of the 550,000,000 to the California Public Utilities Commission for the last mile.

I'm deeply concerned about that. Deeply concerned because that's the money that goes to governments that will then connect to the middle mile that the state is going to be deploying in that 550,000,000 deferral. As we all know, deferral could also be code for it's never going to come back.

So I think that we need to have our aye on that. This has been a bipartisan priority of the Senate as well as the Assembly and think that we're going to need to have a further discussion on that. In addition, there's 175,000,000 deferral, 22, 23, 400,000,023, 24 for the Loan Loss Reserve Fund on broadband and that is access for local governments, tribal governments, to be able to use for technical assistance, for example.

And that deferral I worry about will impact how last mile hooks up to middle mile and especially since the middle mile has such stringent time limits, have to be having the construction contract out for those 10,000 miles of middle mile by 2024. And the vast majority of that is federal funding, then the construction projects actually have to wrap up per federal guidelines by 2026. So if we're taking away that 550,000,000 from last mile that goes to local governments.

How does that coordination work and how do we be able to meet the deadlines? We just don't have a middle mile where locals can't hook up to so deeply concerned about that. I know there's a lot of priorities but want to put a flag into that. The last item on this issue is the 2 billion for rural and urban.

So I think it was 24 months ago there was a deal struck between the Senate, the Assembly and the Administration on last mile funding and 2 billion guaranteed for rural, two guaranteed for urban. So that both got equal that agreement at sunsets, June 30 of 2023. So we're going to need to have that conversation and do believe that we may need to be able to extend that, obviously with the leadership of the Chair and know that there are a lot of competing priorities.

So I say this with that understanding. The last item, and this is not related to the issue of broadband is on coastal protection and especially what we've seen with these storms over these past three weeks. I think we've received more rain and since Christmas.

Than we have in almost 130 years time period is the 500 million over two years now has been went on down to about 175,000,000 for coastal protection. And what we know is that is absolutely critical for coastal resources and for ocean resources and the impacts of sea level rise and other impacts of climate change. I know that will be a further conversation that Chair Becker will be having in budget sub two, but I just wanted to put a flag into that because that is a massive hit, especially when it comes to coastal resiliency and planning.

And I will stop talking and greatly appreciate the opportunity to be able to say these few words.

Thank you, Senator McGuire. Senator Padilla floor is yours.

Thank you very much, madam Chair. And just briefly, I'll first associate myself with the numerous comments from my colleagues with respect to changes in acute circumstances dealing with resiliency planning in the coastal zone and certainly on the question of the mental health care crisis with respect to housing and homelessness and just a flag for staff. I'm assume we'll drill down a little bit more detail in sub four, but the proposed budget suggests a $350 million dollar reduction in housing related programs.

And can you give me a little bit more of a sense of how that breaks out in terms of programmatic impact, what amount of suggested reductions would affect access and affordability program and what amount may impact programs designed to facilitate or incentivize production on the production side. So program on affordability and impact to programs that would incentivize production?

Department of Finance?

Yes. So in regards to your question overall, what we were looking for as we were making decisions for cuts, particularly as a concerned housing, was to actually not impact any affordable housing, any building, so to speak. And what we did look at instead was some of the home ownership programs that maybe this is not the best time to be encouraging or supporting programs that would get folks involved in high interest rate mortgage loans. And so you're seeing some of that here.

We have a $350,000,000 reduction, of which 200 million is for Dream for all program. And that's essentially out of 500. So leaving 300 left in there, there is a $100 million reduction for Cal Home and that was initially 350,000,000.

So we have 250,000,000 remaining. And then we had 50 million from the Accessory Dwelling Unit program or ADUs. And again, these were three programs that were more on home ownership supports versus actual units, building units and building affordable units in particular. So that was the rationale for why those programs in particular took a cut.

And I appreciate that, that's helpful and I want to drill a little further down in that. I think that's also a deeper conversation we need to have because one of the concerns that I've long had is the focus of the conversation is on the production side and the reality is when it comes to affecting affordability, it's not simply a question of supply and demand or scarcity. We're not going to build our way into affordability no matter what we're told.

And I think that in the scenario where we're looking at reducing program allocations, we need to really think about how strategic we're being and where we're allocating resources and what that end impact really looks like. And it isn't just on facilitating more and more production because there's certain fallacy associated with that, in my humble opinion, and I don't want to come back to that. Second of all, the proposed budget looks at maintaining sort of a status quo on programs directed at homelessness.

But the Governor budget message continually references additional accountability. It's noted in the memo, and obviously we're aware of what some of those issues were. But where are we with that in terms of the development of a potential criteria for program evaluation metrics on developing data sets? Where are we with that and what does that look like?

Sure, I will turn to one of my colleagues for any more detail on the metrics.

Kris Cook with Department of Finance. So the accountability metrics that was noted by the Governor and as you mentioned, are forthcoming in our trailer bill language, which we released at the beginning of February. So those are still being finalized, those metrics. But would just note that what we're doing is building on a lot of the existing accountability metrics and program design that were already in place for the homeless housing assistance program prevention program that is currently in the budget.

So there'll be forthcoming trailer Bill language that outlines the accountability and the implementation for the billion dollars for the homeless aid that's in the budget. Thank you, Madam Chair.

Thank you, Senator Padilla. I'll go to Senator Caballero, followed by Senator Smallwood-Cuevas and Senator Seyarto.

Thank you very much, madam Chair. I want to associate my comments with Senator Maguire. Also the discussion about mental health resources and in particular the accountability, additional accountability for homelessness dollars. I've been harping on that, it seems like forever.

But I also want to raise an issue that I think we're going to have to deal with at some point, and that is medical funding and its impact, or it's the coronavirus and medical funding impact on small hospitals, and that's to include rural hospitals, but some in the urban centers. I've got one hospital that has closed. It provides urgent care resources in the city of Madeira, and it has caused a huge crisis in the counties, in the adjoining counties, because that was the only hospital.

And I've got a second hospital that's poised to close in the district as well. And we've done some research with the Cha and some of the other entities that provide hospital services, urgent care services. And I'm going to be asking a number of senators to join me on a committee because they have hospitals that are imminently going to close probably within the next year.

So we may see a whole cascading impact of hospital closings. Trying to keep the group of us small. So there's probably about eight or nine of us, but there's another eight or nine of us, which gets to half the Senate that could see a hospital closing within the next 18 months to two years.

So the point of that is that I think we need to rethink how we're doing health care a little bit better and look at how we provide resources for our hospitals to remain vibrant parts of our community. It's estimated that to keep these to solve the whole for this year, it's probably a billion dollars. We're not talking about chump change, but this is critically important when you start thinking of emergency services, and I'm not talking just about emergency services.

These are maternity ward. They're urgent care facilities or clinics, and it's all the services that we take for granted. So I put that up on the radar screen because I think ultimately we're going to have to take a look at our medical funding to figure out how we're going to help our hospitals to continue to provide all of these service.

Thank you so much. And I wanted to make reference to this comment about where do we make those investments that will make a difference and further recession-proof our communities. And I wanted to point out that workforce development, the legs have been completely cut from underneath workers. And if we want to see a way to protect communities, we've got to be investing in ways for workers to gain skills to access quality jobs that will help them sustain their families.

Right now there's about a half a billion dollars in workforce training programs that have been withdrawn or delayed, 447,000,000 just in the health care sector. And we know, we talked about the hospitals and health care. If we don't have workers who could actually provide those services, we have yet another side of the crisis.

And Senator Newman talked about capital gains and the ways in which business tax helps to sustain our communities. But income tax does too, and so does sales tax. And I believe in an economy where workers are actually sustaining and growing our economy, when we are in a real recession and economic crisis, we give checks to citizens to invest in our economy to get it going again.

Workforce development and investment in quality jobs is as much an economic stimulator as a Capital Gains tax. So I want to understand why we are not investing heavily in recession prevention tools like workforce development. And as I look at the list of cuts, we talk about housing that's also the construction in those jobs and opportunity to build, that's also a way to recession proof our economy.

The delays in the capital projects that you see also hurting our ability to actually recession proof our community. So I want to understand the metrics for how we decided that workforce development and investment in quality job training and access is going to be on the sort of the chopping block across the board in the budget and for us to hear from the Governor's office in ways that we in this budget, the ways that we may want to think about the concentration of delays, withdrawals and deferments in this particular part of the budget.

Did you want to respond? Go ahead.

Just at a high-level, Senator, the Governor did mention in his discussion last week on the budget that child care and workforce development are the drivers for our economy. And I think that we try to acknowledge that in our budget by we have billions of dollars of investments in educator workforce, in healthcare workforce, in high road training and others that we've invested in over multiple years. While there are some delays and there are some cuts, the acknowledgment of the importance and the value of those workers to the economy can't be stressed enough.

And again, we look forward to having those discussions with the Legislature in regards to the right mix of delays and cuts and trying not to hurt any particular one group or another, but realizing what the right balance is. So, again, the Governor's budget is a launching pad for discussion, and we look forward to working with Legislature on what those solution subsets look like.

Thank you.

Great. Thanks. Senator Seyarto.

Thank you so much for all of the comments from my colleagues because they're all very very valid.

The problems that we have in California are many, and we need to try and figure out how to solve those. But I think one thing that the last six years should teach us is that no matter how much money you pour into a problem, if you don't fix the process, we're not going to fix the problem. We could have $350 billion to spend this year, and I would bet you in two or three years, we'd still have a bunch of homeless people.

We have a bunch of housing projects that can't get built. We'd have a lack of employment because we have lack of people coming into that want to set up businesses here in California. And so in order for us to responsibly do a budget for California, we need to look at our process and match that.

Our taxpayers are frustrated out there with how their money is getting spent, and they are constantly asking themselves, how come we spend all this money and we still see all these problems? And I'm going to just point to two examples that are pretty, one everybody knows about and one probably nobody knows about. One of them is like high speed rail. The increase in the amount of cost for high speed rail, high speed rail in and of itself is not a bad idea.

It's a great idea. It's a great idea in Europe, it's a great idea in Japan. But in California, it's not a great idea. Why? Because it's not feasible. Because we have a process, we have regulations. We have all sorts of impacts that make it not a feasible project.

And so for us to go down that path and keep going down that path when we're not going to build this thing, it might get built in 100 years, but it's going to cost a lot of money that we need right now for other things, and yet we keep going down that path. We don't have a process in California that allows for those type of things. And unless we change that, then we're never going to.

So another thing, one of my colleagues brought up issues with housing. 2016, we started an affordable housing project in Murietta, and to this day, they're waiting for funding from the Housing Authority. It's been held up for six years.

In the meanwhile, we've had one, two, three other market rate apartment units start and get built before that. So we can't just blame the cities for not being able to do it. I've kept in communication with these folks. That's why it's not where, again, it's the process. It's not the amount of money. We're pouring billions and billions of dollars into things, and we're not seeing results.

And somehow we need to translate. We need to relook at this and decide it's more than just pouring money into it. We need to look at our process and see what's going wrong with the process because we will still have, at the end of the day, coastal erosion.

We have education issues. We have pre-K and TK. The folks that are in, though, if you talk to them, they have absolutely no idea what they're supposed to be spending money on that they're getting because there was no ramp up to, hey, this is what this program is supposed to look like and this is what you're supposed to teach.

They have people trying to figure it out right now, but in the meanwhile, we're pouring money into something that nobody knows what they're supposed to do with it. I'm talking to teachers out there that have no impact from what we've poured billions of dollars into education the last two years. They don't see an impact at their level at all.

So we really need to rethink how we're doing things. We need to look at this as a bigger picture in California and try to figure out how we can be more effective and more efficient with the dollars that we do spend and make sure that our taxpayers are getting the bang for the buck that they expect. Because right now, like I said, they're frustrated. And we hear about it. Thank you.

Thank you. I'm assuming that's a comment. All right.

Yeah, I'm sorry. It is a comment. No question.

Not a problem. All right. I turned off my mic. All right, so we are about to go to our public comment phase.

I do want to raise one issue, however, on transit, we've raised the fact that there is a recommended delay by the Administration in the transportation funding. But I would point specifically to the transit aspect. And while we know that transit ridership is down, thus someone might look at well, perhaps the need is not as great.

We know that our transit operators well, let me put it that is my perspective, that transit is an essential infrastructure and while it might not be utilized, at least in the Bay Area, to the level it has in the past. We certainly see very excellent ridership in the L.A. area. But the point being is that when you have an essential infrastructure, I'm concerned about the consequences of delaying its funding in a way that cripples its future and thus puts us in a situation where perhaps we do not have such an infrastructure to rely on the future, a future that we're going to need that.

So I don't know if Department of Finance wants to comment at all about that particular budget shortfall adjustment that the Administration is looking at, but I certainly expect that our subcommittees will get into some detail about it, but Department of Finance you're welcome.

Senator Skinner. And just to note that there's a $2 billion reduction, actually not a delay for transit. And going back to my previous comment, some of the rationale behind that was the backfill opportunities that exist at the federal level for again, billions and billions of new dollars as well as base dollars through the IIJA Program.

And so, again, we'll understand that we will have more plenty of discussions on this issue, but I just wanted again, just to highlight the rationale for that particular reduction.

Great, thanks. So I think everyone has been able to make question or comment. I think we're going to move to public comment now. Yes, Senator Durazo. Go ahead.

I know we've been trying to identify all the issues and the controversies and disagreements, but I want to give a big shout out to the Administration for continuing to include the Health for All in the budget. Thank you.

Thank you, excuse me, Senator Durazo, for making that point. Obviously, in our first hearing, many of us are allowing airing things that we know that we're going to want to go into more detail on. But I think it is very appropriate to acknowledge that.

I think most of us would agree that the administration's approach to protect and preserve those significant investments that we have made that are so necessary for many portions of our population that have highest need, that that is welcomed and we really appreciate it. And of course, as would happen in any kind of hearing, we might focus a bit more on those areas that we don't have full agreement on. But I think it is in general that we feel that this is, as the LAO pointed out, that addressing our shortfall with either deferrals, delays, or potentially expectations that we might get federal money are appropriate ways to look at this particular shortfall.

And of course, we'll just have to be in the discussion from this point on as to what we think are the appropriate reductions, deferrals or delays. So with that, let me now go to public comment. We will hear from those in the room first, and then we will go to the telephone comment line, which for those of you who want to use the teleconference line, let me state again what that number is.

It's 877-226-8163 with the access code 7362834. And I would ask that everyone be as brief as possible so that we can accommodate those who want to speak. Go ahead. Those in the room will start.

Good morning, Madam Chair and Members. Chris Micheli, on behalf of the Los Angeles County Metropolitan Transportation Authority, and if I can follow your earlier comments just made, Madam Chair. Our Board of Directors adopted L.A.'s transit funding on a number of important projects based upon the June budget.

Obviously, the deferral is of great concern. We've identified the East San Fernando Valley Project, the foothill extension of the Gold Line as well as the West Santa Ana branches, all projects potentially in jeopardy with that deferral. And as you also noted Madam Chair, although focused on the Bay Area, a number of transit agencies are facing the proverbial fiscal cliff and so funding for operations is critical for transit agencies including L.A. Metro.

Definitely in the next few years as we address issues regarding fares, certainly the homeless population at our facilities and on a number of our lines. So thank you.

Thank you.

Good morning Senators. Janice O'Malley with the American Federation of State, County and Municipal Employees. It's great to see you.

And happy New Year. We are still reviewing the impacts of some of the areas that were sustaining cuts like transit, childcare, prison closures. We believe that the overall approach to the budget preserves many of the good investments that the Legislature and government made last year, especially to Medicare for All.

We've had conversations with some of you all and look forward to having future conversations with the newer faces on the dais on recruitment, retention, working conditions and workforce stability and really appreciate your comments. Senator Smallwood-Cuevas on recession proofing the economy by bolstering up our workforce and ensuring workforce stability. So as we look towards that, just want to pin that these critical workforces such as EMS, our emergency medical services, our healthcare and education workforce.

Really looking forward to those conversations and finding solutions during this downturn. So thank you very much.

Thank you.

Good morning, Chair and Members. My name is Michelle Gibbons with the County Health Executives Association of California. We represent local health departments across the state and we're here in opposition to the Governor's budget proposal to cut $49.8 million in public health workforce development and training programs.

Appreciate the comments that were raised around workforce here today. Public health isn't optional. The Pandemic reminded us of that. Public health is a necessity. It keeps schools and businesses open and it keeps people alive and well. And it depends on a trained and skilled workforce that has been dealing with harassment and burnout for the last three years.

The programs that would be impacted includes programs that would take early career professionals from those very communities that were disproportionately impacted and allow them to come into fellowship opportunities within the health Department to gain the skills necessary to become part of that public health Department. It also includes programs to upskill our existing workforce, to allow them growth and promotional opportunities through training and education programs to grow the pool of epidemiologists, grow the pool of certified microbiologists and lab directors, all that work in our public health laboratories that have been on demand throughout the pandemic. This proposal is not a trigger cut.

It's not a deferral. It's just a cut to these much needed workforce development programs. California deserves a trained and robust public health program, workforce and Department.

And we respectfully would ask that the Senate reject the proposed cuts to these programs. I also just want to thank Senator Laird in his absence, for the comments on the cuts to the Climate Change Planning and Resilience grants. Those grants would go to local health departments to begin that planning process in terms of resilience building for communities, and we'd ask for your rejection of that proposal as well. Thank you.

Thank you.

Good morning, Madam Chair, Members. Mike west, representing the State Building and Construction Trades Council.

Thank you for the opportunity to comment today on the proposed budget. The Building Trades is in full support of the high-speed rail project and continued investments in infrastructure projects that will result in life changing career opportunities for apprentices and journey workers in the Building Trades. On workforce investment, we oppose cuts or shifts in funding to promote workforce investment, like the Women in Construction Unit at the DIR, especially related to childcare grants and other valuable programs to increase the number of women in the Building Trades.

On transportation infrastructure, the Building Trades opposes cuts or reductions in funding for state transportation projects. Regarding drought response and water resilience, the Building Trades urges full funding of water projects and eventual full funding in Prop One water projects. Related to wage claim adjudication, the Building Trade supports efforts to improve the efficiency and timeliness of processing of wage and hour claims. Thank you for the opportunity to comment today.

We look forward to working with you in the Subcommittee process on these issues, as well as other issues we have concerns about including housing, capital outlay, transit infrastructure, and maintaining building decarbonization programs. Thank you.

Thank you.

Good morning, Chair Skin, Skinner and honorable Members. Amy Hines-Shaikh with Wildcat Consulting for the California Community Land Trust Network. We have noticed the reduction in CalHome funds in the Governor's proposed budget.

We sincerely believe that now is the moment, more than ever then, that those funds need to be used in the most efficient way possible. We are proposing that the Community Land Trust model be permitted to utilize existing CalHome funds, which would be authored by Assembly Member Ward this year. The way California can maximize the use of CalHome funds without adding additional dollars is by placing ADUs on CLT land.

We can drive down the per unit cost for a property acquisition and make more projects pencil out, in addition to assisting more low-income, working class community members to stay in their communities and thrive. For the CLT Network and Housing Now, we hope this year to gain traction for the Community Anti-displacement and Preservation Program, otherwise known as the CAP, championed by Senator Anna Caballero for $500 million. Last year, we received 200 million in the joint legislative budget package before it was taken out during final budget negotiations with the Governor's office.

It is clear that preserving naturally occurring, affordable housing units is even more important today than it was last year. During economic downturns, precarious housing situations for our low-income, working class community members should be stabilized and prioritized. Please invest in the CAP this year. For Abundant Housing L.A., we are grateful that the 2022 Budget Act invested 10.2 billion into solutions to homelessness, but it is maintaining only about a third of the prior year spending level.

And we respectfully urge you to reconsider the cut of 3.4 billion on housing. On housing generally, we are concerned about the proposed 350,000,000 in cuts, including the 200 million for the California Dream for Fll program, 100 million for CalHFA to assist lower-income, first-time home buyers, and 50 million to assist in the financial ADUs. Please reconsider these cuts. Thank you.

Thank you.

All right, thank you, Chair, Committee Members and staff. My name is Ryan Morimune on behalf of the California State Association of Counties, which represents all 58 counties. Given the state's projected budget deficit, CSAC is grateful that the Governor's proposed budget preserves critical local investments for homelessness and encampment resolution, support for local public health departments, implementation of the CARE Act, as well as fire prevention, flood protection, and expediting water supply projects.

However, we remain concerned with any cuts to workforce development, resiliency programs, further delays to broadband expansion, and are in need of additional state support for DJJ Realignment. So counties remain eager to work with the Legislature Administration to ensure we can meet the needs of our communities and address our shared concerns. So in particular, we're committed to working collaboratively on the development of a comprehensive system for homelessness to address homelessness, and that clearly defines the roles, responsibilities and accountability for all levels of government and also provides sustainable funding. Thank you for your consideration.

Thank you.

Good morning, Madam Chair and Members. Jared Call with Nourish California. We also want to express our appreciation for the Governor's broad approach in his proposals that that does stave off major cuts to the safety net.

But we are very disappointed with the lack of investment in food and nutrition programs and services when one in five California is still facing food insecurity and our lines at food banks and our CalFresh roles are just as elevated as they've been throughout the Pandemic. And specifically, we're disappointed about the plan to delay the expansion of the California Food Assistance Program, which was set to extend eligibility to the Cal to vital food assistance to those denied CalFresh solely due to their immigration status that's now scheduled to not even begin until 2027.

California immigrants, and undocumented immigrants in particular, face food insecurity at more than twice the rate of the overall population. They can't afford to wait another half decade and be able to access an equitable safety net. So we look forward to working with you and the Legislature to move that timeline up and ensure full expansion as soon as possible.

And also look forward to working with the committee and the Legislature to mitigate the unprecedented hunger cliff that Californians are facing when the emergency allotments, those CalFresh bonuses that were happening during the Pandemic, will expire abruptly in March. And a lot of people are going to go from receiving, say, $300 a month all the way down to $23 a month. So really look forward to working with you to stave off that crisis. Thank you.

Thank you.

Thank you, Madam Chair and Members. Abraham Mendoza on behalf of the Community Water Center. We're an environmental justice nonprofit that's based in the San Joaquin Valley in the central coast of California. While our organization is glad to see the proposed increases to drought contingency funding and the continued investment to critical infrastructure such as levees, we wish to remind the committee that the drought is not over and neither are the numerous drought-related issues plaguing communities across our state.

Last year, over 1,400 wells went dry in the Central Valley, and this backlog could take over 20 years to address if the current rates of well drilling hold. While we know the economic forecast projects deficits for the next several years, the state must proactively plan for continued drought conditions, invest in the necessary infrastructure to address the well backlog, and ensure that we prioritize the families and communities who rely on our state's aquifer for their primary source of drinking water. And finally, I want to mention the need for the Legislature and the Governor to work on water affordability.

Water rates continue to rise faster than the rate of inflation, and the Governor identified this problem last year in his water supply strategy. We hope to work with everyone to address this need next year and thank you for your consideration.

Thank you.

Good morning, Madam Chair and Members. Good to see everybody. My name is James Thuerwachter.

I'm with the California State Council of Laborers and on behalf of the 70,000 men and women we represent throughout the state and the heavy construction industry. We are very thankful for the Governor's continued commitment to transportation investments throughout the state. However, we do share some concerns that were raised today in the committee regarding the proposed budget cuts to transportation capital and transit projects.

We understand the economic issues that the state is facing. However, these proposed cuts are not insignificant. As such, we think that they pose a lot of threats to good paying union jobs and they also may delay the state's GHG reduction goals. So with that, we look forward to working with the Legislature and finding some amenable solutions. Thank you.

Thank you.

Kimberly Rosenberger with SCIU. On behalf of our 700,000 members. We have some concerns, but we're also appreciative that a lot of the social services were maintained.

I think we've heard it a lot today by all of you and my colleagues that workforce is important. We saw a number of areas that gave us pause where we saw a divestment in training, in workforce, in 20,000 slots for childcare. These are serious concerns when we are looking at an economic downturn, because we are providing social safety net services. Childcare IHSS, our social service workers, our school workers, our health care workers, they are all crucial in this moment.

And we learned in 2008 that a short-term solution is much more expensive in the long-term to reimplement workforce. We're trying to find staffing now, but we aren't able to because we lost so many the last time. So we would urge consideration, we would emphasize that we are here for collaboration and we are willing to make some difficult decisions in order to protect California and our members. Thank you

Thank you for that comment. Before we key up and go to the phone lines. Again, for those who want to call in for public comment, that number is on our website.

I made the point after a number of Members raised issues around mental health that wondering whether the Administration's reaction to some of that delay was due to workforce shortages. I intended to also ask the question, or at least to make the comment, is if we look at the childcare slots that we appropriated a significant number. It seems like there's a rationale from the Administration to delay that or reduce it because they have not been taken up by families to the degree that maybe was hoped or anticipated. However, we also know there's a workforce shortage within our childcare programs and that it is very possible that we have families not taking up slots because they cannot find childcare.

So of course, we do not want to add to that problem, but we are obviously going to get into more discussion around that. The whole early care and education for zero to four will be one of the Committee's full Committee's oversight hearings as well as obviously the Subcommittee can get into that detail. But now to our phone participants.

Moderator you can open the lines and call the members of public individually. And again, we will have a hard stop at noon. So moderator go ahead.

Thank you. Ladies and gentlemen, if you would like to provide public comment, you may do so by pressing one, then zero. We will go to line 16. Your line is open. Let me see one moment where is 16. Line 16. You'll have to recue up. We will go to line 19. Your line is open.

Yes. Good morning, legislators. My name is Chris Chavez. I'm the Deputy Policy Director for Coalition for Clean Air, which is a member of Charge Ahead California. While we understand the difficult budgetary conditions facing the state, we urge both the Legislature and the Governor to find an alternative to the massive cuts to clean transportation. To be clear, these investments aren't just about rebates for electric cars.

Rather, cutting funding for transit, clean heavy duty trucks and charging infrastructure is going to hurt low-income earners and residents of disadvantaged communities the most as they live near polluting goods, movement corridors, and hubs. While these cuts undermine California's reputation as a global climate leader, they also move California even further away from meeting its obligations to meet the federal and state air quality standards. Failure to meet those standards will likely result in more pain, such as the loss of federal highway funding.

Further saying the proposed cuts only represent 11% of funding is inaccurate. While it does represent 11% of the multi year funding plan, they're all happening this budget year with multiple programs experiencing cuts far larger than 11%. California had the opportunity to prevent these sorts of cuts last year, and it's unfortunate the state didn't take that opportunity.

Now that we're facing a major shortfall, however, California must prioritize climate investments that maximize benefits to air quality and our most vulnerable Californians. Thank you very much for your time.

Thank you.

Thank you. Next we will go to line 16. Your line is open.

Good late morning Chair and Members Danica Rodarmel on behalf of the Debt Free Justice and Keeping Families Connected Coalitions, both of which advocate for reducing the economic impact of criminal legal system contact on California families. We want to thank the Senate and in particular Senator Becker, who authored SB 1008, and Senator Skinner and Durazo, as well as the budget staff for their hard work and leadership on these issues generally, and specifically on providing free phone calls in our state prison system. Since the free calls began at the beginning of the year, there's been an outpouring of gratitude from Californians impacted by this transformative policy change.

We also wanted to raise that now that the state is responsible for paying for these phone calls, it's time to reexamine the rate being paid to the telecom provider and to explore the possibility of negotiating a lower rate. Based on national information on phone call rates, we believe a rate far below the $30 million annual cost included in the Governor's January budget is achievable. We also look forward to ongoing discussions on ending restitution fines in California, which was named as a top budget priority for the Legislature to explore this year. Thank you so much.

Thank you.

Thank you and next we'll go to line 23. Your line is open. Please go ahead.

Good morning, Madam Chair and Members. Nicole Wordelman, on behalf of The Children's Partnership. The Children's Partnership thanks Governor Newsom for avoiding current and future cuts to safety net programs that hinder children's health and well being.

We support maintaining the expansion of universal health coverage, continuing to provide universal school meals, sustaining funding for supporting the mental health of youth, and funding Racial Equity and Youth Empowerment Commission. Now, there is more work to do in our state's budget to implement and expand policies and programs supporting the immediate and long term health of children of color and keep them connected to supports they need to be healthy and thrive. These include expanding the California Food Assistance Program to include all ages, including children, no matter immigration status, supporting the mental health of youth and young children, and valuing community wisdom and leadership in health delivery by not delaying the community health worker workforce certification and training.

We are also concerned about proposed trigger cuts in the areas of climate, transportation, and housing. Given the major impact these areas have on health, equity, and racial justice for California's children, we will watch these areas closely and advocate for the investments needed to support healthy communities for children of color in California. Thank you.

Thank you.

Thank you and next we go to line 26. Your line is open. Please go ahead.

Thank you. Thank you, Chair Skinner and Committee Members. My name is Woody Hastings. I'm the Fossil Fuel Phase Out Manager with the Climate Center. Thank you for your efforts to craft a sound budget for our state and for continuing to provide for remote public comment. The entire state of California just experienced yet another deadly climate disaster over the past few weeks.

This is no time to walk back investments in a climate-safe future. We should be holding the line on critical climate investments today or pay the price in lives and dollars for years to come. The Climate Center is particularly disappointed to see the 1.1 billion in cuts to programs that would accelerate California's transition to clean electric vehicles.

Not only is transportation the number one source of climate pollution in the state, but California's growing fleet of electric cars, trucks, and buses could be one of the greatest assets in improving the reliability of our electric grid. Investing in vehicle grid integration technologies today, particularly bi-directional charging, will unlock the potential to use batteries and electric vehicles to back up our homes and businesses when the grid goes down. The Climate Center is also dismayed to see some of the largest cuts being made to nature based carbon sequestration initiatives.

With the passage of AB 1757 last year, California is poised to become a world leader in solutions that both remove carbon dioxide from the atmosphere and build resilience to extreme weather like we've experienced over the past three weeks. Slashing the funding for everything from urban greening to compost application, undercuts this important work, just as it's getting underway. In December, the Climate Center sent Governor Newsom and state leaders a letter outlining recommendations to ensure state investments in zero emission vehicles also support grid reliability. We'd be happy to make sure that letter is available for this committee to review. Thank you.

Thank you.

Thank you. Next, we'll go to line 22. Your line is open.

Yeah. Thank you. Madam Chair and Members. Michael Pimentel, Executive Director of the California Transit Association.

I want to join you, Madam Chair, and Senator Durazo in voicing our concerns with the proposed cuts to the transit inner city rail capital program that were included in the governor's proposed budget. We, of course, understand that the state is facing some very difficult financial times, but I do want to recall that that funding for this program was a central component of last year's transportation funding package. And will be critical for leveraging federal funding to advance major capital projects in the coming years.

We thus ask that the Legislature and the Administration maintain funding for this program at the previously prescribed levels. Now, in the same breath, I also want to elevate that the Pandemic's impact on transit and rail ridership, as well as operating capital costs continues to loom large. As such, we are encouraging the Legislature and the Administration to advance new funding, to address operations funding shortfalls faced by transit agencies, and to ultimately support their recovery from the Pandemic.

Also, I do want to make a plug for an extension of the statutory relief that was previously provided by the Legislature. We would like to see that statutory relief extended through fiscal year 24-25, recognizing that the underlying conditions that necessitated that relief still obtain today. I'll just finally close to note that we have a full list of our budget requests and recommendations that were included in the letter we submitted to the Committee legislative leadership in December. Thank you for your time today.

Thank you.

Thank you. Next, we'll go to line 35. Your line is open.

Good morning, Chair and Members. I'd like to speak specifically about the item on page number 44, the SMARTER Plan implementation, which reads the budget includes General Fund expenditure authority of $176.6 billion to continue to protect the public against COVID-19. SMARTER, which stands for shots, masks, awareness, readiness and testing. A recent Rasmussen survey found that more than one in four Americans believes that they know someone who likely died as a result of the COVID shot.

There has been an alarming spike in deaths of professional athletes in their prime due to stroke and heart attack. Life insurance companies are reporting losses due to a 40% increase in all cause mortality rates of the employed population since the introduction of the COVID vaccine mandates. The Twitter files reveals that even heavy censorship could not stop this information from reaching the public.

You, the Legislature, and the Governor have spent billions of dollars of our dollars on vaccines, tracking, testing, tracing, and instead, we, the public, want to see these funds spent in a way that is consistent with this newly emerging data regarding the devastating injuries and deaths that are definitely irrefutably being caused by the COVID vaccine. So what do you, the Legislature, intend to do to help rebuild public trust in American institutions, in particular the CDC, NIH, and the FDA? Thank you for your time.

Thank you.

Thank you and next we'll go to line 38. Your line is open.

Hello, Erin Apte with Public Advocates commenting on the proposed K12 education budget.

We applaud the Governor for protecting investment in community schools, expanded learning opportunities, and creating a diverse and well prepared educator workforce. We are pleased to see the Governor's proposal establish an ongoing 300 million LCFF equity multiplier for schools with concentrated poverty to increase support for students who have been historically marginalized by our education system, especially Black and brown students. This is an important investment that would double down on improving opportunities and outcomes for low-performing student groups, close performance gaps, and help attract and retain qualified teachers at our state's lowest income schools.

We also applaud the Governor's proposal to update the state's public school accountability system. This year marks the ten year anniversary of passage of the local control funding formula and the Multiple Measures Continuous Improvement Accountability System is due for an update. You must be more intentional about closing opportunity and performance gaps at the school level for Black and brown students and multilingual learners.

We look forward to working with the Legislature and the Administration to refine these proposals to fulfill the equity promises of LCFF. Thank you.

Thank you. Just reminder, we will be stopping at noon. So for those who are still going to be called on, the briefer you can be, the more we'll hear from. Okay, go ahead, moderator.

Thank you. Line 48. Your line is open.

I'll be brief. You need to stay till midnight to hear from the public. Noon is arbitrary. As the Chair, you should extend. People should not be cut off. The First Amendment matters and you need to extend public comment. Thank you.

Thank you. Next we'll go, line 41.

Good morning, Andrea San Miguel on behalf of Planned Parenthood Affiliates of California, we are so to see the Governor's draft budget maintained last year's investments in reproductive health, including support to abortion providers and patients. We are also very supportive of the Reproductive Health Safety Net 1115 waiver concepts that was in the January budget and look forward to continuing conversations with the Administration on that. As for the MCO Tax proposal, PPAC joins fellow provider organizations in wanting to see the Medic health program improved to better serve patients.

So we look forward to working collectively with the Legislature to ensure that those healthcare dollars are directed to improve equity and accessibility where it's needed most. Thank you.

Thank you.

Thank you. Line eight, your line is open.

Good morning, Margo George on behalf of the California Public Defenders Association. We respectfully urge the Legislature and Governor to restore the 50 million for the third year of funding to the Public Defender Pilot Program. In the last decade, California has enacted a number of criminal justice reforms in an effort to reverse some of the harsh effects of mass incarceration the disparate impact on Black and brown communities, including felony murder law resentencing, post-conviction relief from defective convictions for non-citizen immigrants, and allowing the court to recall sentences that no longer serve the interest of justice among other reforms. We get results.

This funding saves the state money. Looking only at one medium-sized California county, public defenders over the last two years have already saved the taxpayers over $44 million in future prison cost by having individual sentences reduced by approximately 440 years. In addition, eliminating this funding will cost the state and local communities money because we reduce the risk to public safety by doing re-entry planning for individuals to be safely released after years.

Local communities will also suffer the loss of income taxes and family support when individuals are able to return home from prison and become productive members of our communities. Public defenders are committed to implementing these reforms, but without funding our ability will be reduced, leaving individuals who are no longer dangerous to languish in prison at state expense and non-citizens to be unjustly deported based on invalid convictions. Thank you and we look forward to working with the Legislature and the Governor.

Thank you. My apologies, but it is 12:01 now and I want to encourage those of you who may have been in the queue, we welcome your comments and you have the ability to submit them to us in writing to the Budget and Fiscal Review Committee, which you can do easily through that Committee's website or directly you can find on that website also the particular consultant's emails if you want to send it if it's regarding a specific area of the budget and you want to send it directly to that consultant.

So either way works. And of course we will start our Budget Subcommittee hearings in late February or March and the public has the opportunity to express their views there as well as at our oversight hearings and full Committee hearings that we hold in the future.

So I really appreciate everyone who participated today the good comments and questions by my colleagues, the Department of Finance and LAO's presentations, also all of the Members of the public that we were able to hear from. And thank you staff for your preparations for us. And with that I am going to conclude the meeting of the Senate Budget and Fiscal Review Committee.