Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government

Afternoon and welcome. At this time the Budget Subcommitee number four and State Administration General Government will come to order. Welcome, everyone. We're continually take precautions with regard to the legacy of our wonderful experience with COVID-19 over the last few years. We're grateful that we can continue to allow participation in the hearing both in person and via teleconference. People want to provide testimony via teleconference. The dial in number will be 877-226-8163 877-226-8163 and the access code is 694-8930. Access code again is 694-8930.

Obviously appreciate the department's participation in testimony as well as Members of the public. Of course, we request that at all times decorum is maintained. As we're all aware, on May twelveth, the Governor released a may revision to his January budget proposals. Today's hearing is informational and overview. The Governors may revise for State Administration and General Government at this time will establish a quorum.

[Roll Call]

All right, thank you very much. All right, let's move on to the docketed items with respect to taxes and economic development. Let's bring the first presenters forward from FTB with respect to middle class tax refund savings, and proceed when prepared. Please state your name and title for the record.

Good afternoon. Dirk Simmons, Department of Finance. For the first item today, 9.5 billion was appropriated last year for the middle class tax refund. The 200 million in savings before you today represents approximately a 2% of that appropriation. This isn't stemming from people not getting the refunds. It is just stemming from the fact that we erred on the side of caution by providing a bit more funding as a safety cushion to ensure that everybody received what they were entitled to.

These funds are not needed, and we're proposing to revert them in the current year. In addition, there's a proposed reversion of 18 million of state operation costs for that workload, and at this time, I'd be glad to answer any questions you may have.

All right, are there additional comments for anyone on the panel? All right. To the Subcommitee, are there questions or comments with respect to this particular item? All right. That makes things fairly simple and short unexpectedly. Thank you. Obviously, we will come back with a more complete interrogatory or Q and A, based upon public comment or testimony as well. All right, I think that takes us to the next subheading, which is Tax and Fee Administration and FTB. Main street. Small business tax credits 1 and 2.

Okay. Sorry. Dirk Simmons, Department of Finance. The Main Street Small Business Hiring Credit provided financial relief to qualified small businesses for the economic disruptions in 2020 and 2021 that resulted in unprecedented job losses. The adjustment for you today reflects a reversion of 101,000,000 from the Small Business Hiring Credit Fund. These funds were not claimed, and the reservation period to claim these funds closed on November 30 of 2021. We are proposing to revert the unclaimed funds in the current year.

Again, I'd be glad to answer any questions you may have.

All right, questions from the sub. Just curious, on the administrative side, are there any remaining issues? Folks that may have qualified but weren't able to make a reservation due to some element beyond their control or some technical administrative issues that left a large amount of qualifying businesses from actually.

We did work with the California Department of Tax and Fee Administration, and they have some funds in reserve for possible reversions or for possible requests for funding, but we haven't heard of any other issues with not being funded.

All right, let's hope it wouldn't be substantial in any regard. All right, Senator Niello.

Just a quick comment, but for the budget problem, I'd prefer to see this program extended. And if that is truly an alternative, then this is essentially a cut. And there have been so few actual cuts in the Governor's proposal, it's kind of unfortunate that we see what I kind of view as the equivalent of a cut that impacts small businesses. Again, it's not a question, it's just a comment.

Thank you Senator. All right, we'll move to the to GO-BIZ, I believe. Thank you all. Welcome back. So with respect to partial reallocation of City of Fresno's public infrastructure plan, please proceed when ready. State your name for the record.

Sure. Lauren Greenwood, Deputy Director of Legislation for GO-BIZ. Thank you Chair Padilla and Committee Members for the opportunity to present today. I'll review the partial reallocation to the City of Fresno public infrastructure plan. In sum, the request is for 250,000,000 to provide economic revitalization to the City of Fresno's downtown area by building a high-speed rail station, parking, green space, various water infrastructure projects, and mixed use high density housing with goals to improve walkability.

This includes 50 million in 2023 to 2024 and 100 million in 2024 to 2025 and 2025 to 2026. Economic development involves housing, transportation and quality of life improvements. These are all things that are important to businesses and attracting businesses can lead to potential job creation. We are still finalizing the plan for how the funding would be allocated and we'll provide that to staff as soon as possible. Thank you and I'm available for any questions.

All right, first, is there additional comment?

Brian Euler, LAO we don't feel that this proposal is consistent with the original intent of the Local Government Sustainability Fund, which, as your agenda notes, was to provide funds to counties to promote projects that would promote revenue stability in those counties. And there was, we think, envisioned sort of a competitive evaluation process for the allocation of those funds. We don't think that the selection of redirecting the funds to the City of Fresno is really consistent with that intent.

And so we're viewing it essentially as akin to a new funding proposal. A new funding proposal may revision. We think, given the overall budget problem, we don't think that this as a new funding proposal can be justified at this time and therefore are recommending rejecting the redirection.

Further, that the Administration is proposed redirecting this funding from the Local Government Sustainability Fund does raise a question for us of whether or not the 300 million that was originally allocated to that program still has a clear and immediate need or whether or not redirecting that could also be considered as a broader budget solution.

All right, we'll bring it to sub. Questions or comments? Senator Niello followed by Senator Caballero.

So I'm new this year, obviously, and I thought that I was assuming the program was intended for cities. I hear that originally it was intended for counties. So my question is even more appropriate and that is why? We have plenty of communities in the Central Valley, in particular in some areas in the north of the state. Heck, my unincorporated City of Fair Oaks could use some help too, but that was just a joke. But why the focus?

Fresno is a great town, I've got a lot of friends there, there's a lot of self-help projects that are going on there. But why Fresno as opposed to any other, especially when it's intended for counties? Why the City of Fresno versus any other city or county in the state?

Sure. So I can talk about the original intent about the local Government Sustainability Fund. And so when we think about those eligible counties that this program was originally intended, they have to appear on both the high unemployment and high poverty list. And so those potential applicable counties would include Fresno, Imperial, Kern, Madera, Merced. And so in future counties would potentially look like Humboldt, Trinity, Modoc, King, Sutter and Alpine County.

And so we're really focused on those counties that need the most need both in terms of economic investments and jobs for those citizens. And so Fresno was included on that list. And we would think of the City of Fresno infrastructure plan as an example of something that could be funded down the road by either the LGSF program or other available fund sources.

And just given the current budget constraints and the May revision proposes to reallocate this existing funding for Fresno's project to support projects that are shovel ready now while still maintaining funding for the Local Government Budget Sustainability Fund so we can still help those eligible counties get the startup resources needed to develop projects that support their counties.

Since you were reading, I gather you were anticipating that question.

Thanks, Senator Caballero.

So if I could add a little bit to that. It's a really good question in terms of why Fresno? And I think the best argument for why Fresno? In full transparency, it's part of my district is that the high-speed rail station area has been cleared for construction and the entire city has been redone. All their zoning has been totally redone.

And in their downtown in particular, they have created buy right opportunities to build high density and have the potential to build 75,000 housing units by right. And part of that was that they took very seriously the state admonition to get ready in order to be able to do, as opposed to other communities who will remain unnamed in the southern part of the state.

When we've built infrastructure to be able to do train and light rail, they haven't done the increased densities around their stations at all as they were supposed to. And so this is really an example, as we get closer to the operation of high-speed rail, to actually creating an urban setting where people can walk to both the train station and the light rail station and create a walkable community.

So I think Fresno has recognized that they've done a significant amount of sprawl over the years and this is their attempt to bring people back to the downtown area, but they'll need infrastructure money for water main, sewer, and electrical reconfiguration because it was never built for the high-rise units that they expected to build here. So that's part of what the Fresno allocation is hoping to do, is it's really to spark and get things moving in this area.

Thank you.

Appreciate it. Thank you, Mr. Chair.

Thank you. Just to be clear, this was a prior cycle program allocation as well. And the initial purposes noted by LAO is for stability and budgeting for qualifying regions or counties or public entities. Can you give us any more depth or breakout on the past allocations characterizing the type of qualifying? Obviously, you have a tier one threshold qualification that is set forth and how it was allocated in the budget.

And then you probably within that, I would hope, have some further framework for prioritization shovel-ready projects, high strategically appropriate or priority infrastructure development. Can you break that out a little bit more so we have a clear picture of how internally we're priority setting and allocating. And that's a separate question. That's assuming, of course, that we're along the guidelines for which the initial allocation was intended. What's before us for consideration is a departure from that, clearly, as noted.

But it would be helpful to understand how you internally prioritized from among qualifying regions or counties.

Sure. Thank you for the question. This program was set up by the 2022 Budget Act. However, funding wasn't available until 2023 to 2024 to support the funding or to support the program. So I can't speak to any existing projects. However, to your point about breaking out what the funding is for, it's designed to support the climate, resilience and economic development. So our thought is the first tranche of funds is designed to help locals identify those projects that are shovel-ready.

Ideally, these projects will be augmented by state, federal, or private dollars. And in helping locals identify these projects, counties would likely seek additional funding to hire industrial development and grant writing experts to do asset mapping to establish a baseline for these investable projects. These experts are required to report back to GO-BIZ bi-monthly to ensure project alignment with the goals of the fund and then moving on to additional funds.

Once shovel-worthy projects are identified, future LGBSF funds could be used for environmental impact studies, pre-CEQA design, power studies, et cetera. And so those are the types of projects that we'd hope that this Fund would support.

All right, I appreciate the response. Additional comments or questions. All right. I think we also have an issue with respect to technical assistance to small businesses.

Sure. Lauren Greenwood, Deputy Director for GO-BIZ. Cal OSBA, our Office of the Small Business Advocate, is requesting statutory authority to spend a federal award of $25.3 million. This federal award is part of the 1.2 billion from the US. Treasury State Small Business Credit Initiative. SSBCI. The American Rescue Plan Act of 2021 included 10 billion overall for this program.

Cal OSBA will use this federal award to leverage the existing state investment and augment existing resources and staff with a venture capital program with IBank and the State Treasurer's Office. Specifically, the award will be used to provide grants to federal technical assistance partners and fund four positions for outreach, engagement, program management, data reporting, monitoring and evaluation. It will complement the existing technical assistance program administered by Cal OSBA.

And since 2018, when it was launched, it served over 500,000 unique small businesses with free consulting and no to low cost training in over 40 languages.

All right. Additional comment. All right, if you could just put it in the record for me.

Sorry, Brian Euler LAO. No comment.

Bringing it back to the sub. Are there questions or comments? Just a nerdy question. In the Administration, are they providing any reporting out about how the assistance breaks out, whether it's the outreach component that consumes most of the referrals, or it's actual application management, actually ombudsmanship, for lack of a better word. Do we know what's consuming most of the resources, or is it simply just making folks aware of the opportunity to take advantage of the program? Or do we know?

Let me get back to you on that for the specific plans.

I appreciate that. Thank you very much. All right, let's see, what do we have next? So COVID-19 Relief Grant Funding.

Sure. In building the Governor's Budget in the fall, there is an estimated $92 million of savings with the Small Business COVID-19 Relief Grant program. Based on applications for relief with the May revise, we estimate an additional 50 million of savings that could be captured with this program. Thank you.

Brian Euler, LAO. No concerns.

All right, back to the sub. Senator Caballero.

Could you describe we did so much COVID funding in so many departments. I don't remember, I mean, I know we did the grant program right for small business is the one that was referenced earlier, but what went unspent in this particular fund?

Was it intended to do, in other words.

Sure.

Sure. Directly. It was about 4% of the overall funds that were allocated to this program that were unspent. As a whole, the state invested nearly $4 billion and provided assistance to roughly 330,000 small businesses. Cal OSBA has continued to provide outreach to these eligible small business. However, participation in the program has decreased over time, and we're working on establishing the final end dates for the program.

So these were the grants that you administered? Got it. Okay. Thank you very much. I appreciate that. Thank you, Mr. Chair.

Any further comment or question? All right, I think that wraps for that. Did I skip one, or do we cover them all? One more.

For the Office of the Small Business Advocate, they're requesting statutory changes to be made to extend the sunset dates for several grant programs to allow additional time for program closeout activities so the statute aligns with the funding available.

All right. Any further comment?

Brian Euler, LAO. No concerns.

All right. To the sub. Senator Caballero

So that brings up a question. I'm not sure if you're the appropriate person to answer this, but we did roll out a significant program, which is a relief to small businesses. It was a huge effort, and I heard nothing but really good things about the program. Anytime you do a grant program and try to get money out quickly, it's a challenge. But what are we doing in regards to the staff that did that work?

Are they being absorbed within the office, or were they temporary? What's the status of staffing in regards to that?

Thank you for the question. Let me get back to you with those staffing resources.

Thank you. I appreciate that.

Thank you, senator. All right. Affordable housing and homelessness will the next subject. Business consumer services and housing. Accountability for state spending on homelessness.

Welcome back. Please proceed when ready. State your name and title for the record.

Good afternoon, Mr. Chair and the Members. My name is Ted Doan from Department of Finance. Since 2019, the state had invested over 17 billion to assist the local government in addressing homelessness. Consistent with the Governor budget, the mayor vision continued to include $3.7 billion in funding for homelessness program for 2023 and '24. The Administration continued to believe in the importance of homeless outcome link accountability. The Administration believe a three part framework should consist of number one, creating mechanism for local effort to address homelessness.

Number two, increasing regional coordination on homelessness solution and number three, holding local government accountable for their respective role in achieving outcome that lead to unhoused and unsheltered person to access affordable permanent housing and services. The Administration is prepared to work with the Legislature over the coming week to enact a complete homeless outcome accountability framework. And with that being said, open to any question and comment that the Members may have.

That is the crux of it, isn't it? Thank you. Thank you, Mr. Doan. Any LAO comment?

Lourdes Morales, with the Legislative Analyst Office. As the Department of Finance noted, there was intent language proposed to the Legislature in February indicating an interest in enhancing the oversight for homelessness. That intent language was not revised as part of the May revision to really flesh out how that would work. And so we have submitted questions to your staff that we hope would help the Legislature think through how to implement that. As I mentioned, it's with your staff.

But just to highlight a few things on our mind are what are the programs that would be included? Really the main framework for homelessness oversight is around the HHAP program today. And so is there an interest in expanding it to other state programs, federal funds or local funds? If you are working towards enhancing regional collaboration, what is the role of local governments? Would there be a lead entity? What would be the scope of that lead entity's oversight as well? On the state level, who would oversee the effort? As of today, it's the Interagency Council of Homelessness that has overseen the state efforts.

But do they have capacity to take on this new role or how would you scale that up? There's other questions as well, but that just gives you a brief highlight. And overall we would recommend the Legislator to think through how to make sure that this effort is a success. We've made as a state has made changes on the HHAP program year after year to improve oversight, most recently through the implementation of the local actions plans as part of the third round of HHAP.

That was a major undertaking for the state. And so if the Legislature were to move forward with a very broad expansion of oversight, we'd want to think through how to appropriately support local governments and provide them guidance. So for example, the Legislature could consider maybe worth moving forward with expanded oversight on a few communities, perhaps those with the largest number of individuals experiencing homelessness.

So the state could probably support and provide that guidance to ensure that they are successful as we continue to make progress in this effort. Thank you. Happy to take any questions.

Thank you for that. Bring it to the sub. Comments or questions? Senator Niello.

One concern that I have, well, several of a few concerns is the governor's repeated preference to allocate and commit money year by year with no commitment on multiple years. My understanding is he is continuing to stand by that position. Am I correct?

Chris Hill, Department of Finance. That is correct, Senator. We are proposing right now to fund the homelessness programs proposed for funding in the Governor's Budget, and the May revision are proposed just for the budget year.

I fail to see how a local government can effectively attack a problem like homelessness, which is multifaceted and given certain infrastructure shortages like mental health beds and even shelters and the like, that a local government can effectively commit to strategies with only 12 months of funding. To make spending commitments to address these problems takes more than a 12 month period, and I fail to understand why the Governor continues to remain on that particular commitment.

Now with regard to local governments and the role of collaboration and a lead entity, if you will, locally. Traditionally, counties have been social service providers, and I know cities have asked for a significant amount of money, and really that reflects the need in counties as a whole, the cities within the counties and the counties for the funds to address these problems. Again, I think it should be more than one year.

But the point that I'm making is counties have traditionally been social service providers and it looks to me like we're moving a little bit away from there. The state has taken over some direct involvement in these areas and cities have been very much involved and there have been, shall we say, challenges in collaboration between cities and counties. We've had it here in Sacramento, they've come a long way and I think it's going well here.

But it is a challenge without it being clear that counties are the primary social service providers. Last thing, with regard to accountability measures, this is a big deal and it would be good. I would like to know what does the Administration think that appropriate objectives are accountability measures? What are the right things we should be looking at in terms of what our outcomes should be, the measurement of what are the specific outcomes that we want to measure?

Yes, Senator, I think that is the crux of the whole matter is what the framework is going to look like. Broadly speaking, the Administration is picturing an accountability framework that's going to consist of regional coordination, probably at least at the county level where each local entity, cities and counties, would have defined rules in terms of roles and responsibilities.

And we're also envisioning and having discussions with the Legislature on maybe something broader than just existing homelessness programs, maybe looking at programs in the health and human services and behavioral health spheres as well. Because as you noted in your comments, the funding is not ongoing. The state cannot commit to ongoing funding for homelessness, particularly given the current and fiscal situation.

So that's why we're interested in looking at creating a framework that would be broader than just the existing programs and find a way to help locals leverage resources from existing programs as well to address homelessness on a regional basis.

You're kind of talking about activities, right?

Yes.

That's not outcomes. What should we be looking for? I realize you're delegating that to the Legislature, but I'm curious, what does the Administration think should be actual outcomes of our homelessness efforts?

At the end of the day, I think the Administration believes the outcome should be to reduce the number of persons living on the street who are homeless and create additional permanent housing opportunities for people. And in terms of how to get there, I think that's where, as my colleague noted, we're looking to have discussions with the Legislature in terms of how to build that framework.

I hear a lot about getting people into shelter, into housing, hopefully into treatment. Never once since I've been here have I heard anybody say our objective is to get people that are homeless currently to a point of self sufficiency. I've not heard that. And in my opinion, we're not doing the job unless we say that's what we need to do.

Now, maybe the problem is so daunting at this point that we can't see that light at the end of the tunnel, but eventually that's what we have to aim for, is not just to get people off the street. Just getting them off the street makes it if we haven't solved the problem, it makes the problem invisible. Self sufficiency is what always should drive our social services programs.

So that's my lecture, and that'll be my input in the legislative process to the extent that we get somewhere on that.

Thank you, Senator Niello. And to some great extent, I'd associate myself with my distinguished colleagues' comments and sentiments. My only comment here before I go to Senator Caballero is I'm going to be particularly paying attention to the language that ends up being agreed upon that deals with the compliant housing element linked to the receipt of funds.

I mean, there's such a direct correlation there, and so many communities continue to resist the actual production of product and resist being able to be in a position to submit a compliant housing element. It continues to be problematic for a number of reasons. But I'm particularly interested in that. Senator Caballero.

So, I really appreciate this conversation, and I think a lot of the things that my learned colleague said is important. I think we heard in this Committee, I do believe it was this Committee when we had our- was it an informational hearing on housing? I've been in too many housing hearings, but what we heard loud and clear is regional coordination is really important. And I believe we need to do it through the counties because we have many areas of the state that are wealthier that don't have social services.

And so we tend to put the social services in areas where there is a great need, which means that if you put the affordable housing only near the social services, you're over concentrating poor people in one region. So it then leaves the wealthier communities with a pit count that's so low that it's not fair in relation to the other parts of the county.

So my point about that is that I think there has to be a way for everybody to participate financially in figuring out how to house and have the services that the homeless need. So I think that's one way to get there is to do it by county. I think we need goals and a reportable method to determine how many beds are available to get people off the streets.

And that probably has got to be very similar to the pit count, which is that you hear about communities, the beds available waxing and waning depending on what's going on in the community. We need those beds to be available. And as you're recruiting people off the street, there has to be a bed available for them.

The number of people housed permanently, we need to know that number as well that'll tell us whether we're building the permanent housing that we need, the number of people with a job, or that are eligible for safety net resources. I've heard from a number of the advocates that have worked with the homeless that they have found individuals that are eligible for veterans pensions, for example, and pensions that may have been earned by a homeless individual that they didn't know was available to them.

So having the services available so that they can determine if there are and I think this gets back to your self sufficiencies, right? If people are working or if they're eligible for pensions because they're elderly, then that's a good thing. The individual that I heard about was an electrician in Santa Barbara that was encouraged to receive treatment and he's got a pension. And now he'll be buying a house in Santa Barbara. Doesn't get much better than that.

And then also the housing, I think it's important that the housing element be part of that equation as well. And at some point we ought to be looking at communities that are housing, what's the term? It's housing friendly. It's not that term. There's a whole list of housing things you can do to make it easier to build housing in your community. And I always forget what the terminology is.

But if you've removed the barriers for the construction of housing in your community, then it means that you've done what the state has asked you to do, in which case maybe you get extra resources in that regard. So I just think there's some things we ought to be looking at. And I'm very excited that the Governor has moved in this direction because I really do think that we need more accountability if we're going to keep funding this year over year.

And I do think we need to do it, and I do think we need to make a longer term commitment at some point. But I think we need to set up the framework for that to happen before we do that. So thank you very much, Mr. Chair. That's all.

Thank you, Senator Caballero. All right. Think that will take us to Department of Housing, Community Development. Consumer Services and Housing. Excuse me. Deferment of Foreclosure Innovation Housing Preservation Program, FIHPP. All right, please present when ready. State your name and title for the record.

Good afternoon. Andrew March, Department of Finance. So, starting with the first issue of the deferment of the Foreclosure Intervention Housing Prevention Program. So in addition to the $350,000,000 in general fund solutions proposed in the Governor's Budget, the Mayor revision proposes a $345,000,000 deferral of the $500,000,000 one-time general fund that was provided for the Foreclosure Intervention and Housing Preservation Program. The May revision proposes to revert this funding in the current year and spread it out over the next four fiscal years.

Overall, the funding for the program is maintained, though over the multi-year. Happy to answer any questions.

All right. Additional comment?

Lourdes Morales, LAO we would just note that to the extent that the budget problem persists for the state, which we anticipate is likely, the Legislature will have to revisit the funding delays or any other budget augmentations in the budget.

All right, thank you. Back to the sub. Is there a particular framework for the ultimate distribution and timeline as we sort of bump the funding back?

So the proposal would maintain $155,000,000 for the program in the current year, and then it would allocate 50 million in the budget year, $100 million in budget year plus one, $100 million in budget year plus two, and then $95 million.

I understand the layout, but it was a particular basis for the allocation in that timeline.

Yes sir. I'll defer to my colleagues at the Department.

Thank you.

Good afternoon. Jennifer Seeger, Deputy Director with the Division of State Financial Assistance at HCD. So the way that we've designed the program is somewhat consistent with the way that the budget appropriation is being proposed. So we are looking for an Administering Fund Manager that will run the program on behalf of HCD. Our plan is to provide funding in advance to that Fund Manager to then make allocations to implementing Fund Managers, but to not release all the funds all at once.

So our initial plan had always been let's release $100 million to the Fund Manager. Once they've disbursed and spent 75% of that, we would have a supplemental disbursement to them to bring them up to another 100 million. So with the funds that are available to us currently, plus what is planned in budget year and then budget year plus one, two, and three, it is consistent with the way that we've designed the program.

All right, thanks for the clarification. All right, questions from the sub? All right, I think that brings us to Downtown Rebound, is that correct?

That's correct. So the May revision proposes to revert $17.5 million of an original $25,000,000 one-time general fund appropriation originally from the Budget Act of 2000, so quite some time ago, for the Downtown Rebound Program, which was initially intended to provide loans to developers for adaptive reuse or other sorts of projects within certain boundaries of elementary schools.

Comment from LAO?

Lourdes Morales with the LAO. No concerns to raise on this item.

A little surprised by that. I'll bring it back to the Committee and I'll ask we've got a little bit of a balance. What's our analysis about the driving factor here that's not insignificant had an absolutely good program purpose. How did we end up with a balance, particularly circumstantially?

I can speak to a little bit about the program history. So the funds were allocated to us in the 2021 budget year. We immediately put out a program guidelines and anofa. We did fully award all of the funds within that fiscal year. So we made awards to three projects. Unfortunately, only two of those projects were ultimately able to move forward. So we had a disencumbrance for two of the projects. Now, disencumbrances, they're infrequent right for our programs, but they're not uncommon.

And it can be as a result of economic kind of market conditions. It can be a result of project scope changes. It can be a result of just local support for the program as well. So it's unfortunate that the funds were disencumbered, but we did initially make those awards.

I've always found that particular element of budgeting and accounting fascinating, but I won't give it any more comment as we sit here, except that sometimes it's good to have balance laying around somewhere, and particularly in this case, I can understand why. All right, other questions or comments from the sub? Senator Caballero.

Just a real quick comment. And it's too bad we're in this budget situation, because the number of requests that I get for help in revitalizing downtowns now with the redevelopment agency gone is just I could go through the communities in my district that have asked for money from small businesses because downtown small businesses are usually the cornerstone of the downtown. But they're also, in many instances, at least in my region, they're immigrants. The space is small, it's not very attractive.

And so they're looking to beef up the front of the building make it look better. Fix the sidewalks. The curbs need curb cuts because they're not ADA accessible. And so to have a downtown rebound program with additional resources there is when we need housing desperately, and there's nothing better than people living downtown. It's too bad. But I understand this is from 2021, and at some point, you got to move on. We'll be back to revisit this, I'm sure, at some time in the future.

Thank you Senator.

Thank you.

All right. Thank you. I think that brings us to OPR Office of Planning and Research. On staffing reconfigurations.

Good afternoon, Chair, Members of the Committee. Kevin Clark with the Department of Finance. I will be providing an overview of notable May revision proposals, too, for OPR Office of Planning and Research. First, the Mayor vision includes 5.3 million General funds and 15 positions ongoing to establish an Information Technology Unit within the Office of Planning and Research. And really, this proposal will support internal developments or, excuse me, departmental oversight and Administration of IT needs.

Second, the May revision includes a reduction of 2 million General funds and 10 positions in the budget year, decreasing to 1.5 million beginning in 26-27, and ongoing to address declining General Fund revenues and begin the process of transitioning OPR to a more traditional Department that has state civil service positions. So, be hearing from the Legislative Analyst Office momentarily. There's a few concerns that they've raised related to the IT Unit proposal.

And we'll just note that we understand that the state's in a precarious budget situation, and we took that into account when we were looking at the IT unit proposal. And really before you, the IT Unit proposal represents the base level, the minimum amounts of positions and resources necessary for OPR to establish an Information Technology unit within their Department. And OPR oversees a myriad number of different policy areas, California volunteers, land use and planning, strategic growth council, the Office of Community Partnerships and Strategic Communications.

And so we recognize that there's going to be some bandwidth that's necessary to cover all those programmatic areas within OPR. So we're happy to answer any questions you might have. And we're also joined with folks from OPR to answer your questions.

Thank you very much. LAO.

Good afternoon. Rachel Elhers with the Legislative Analyst's Office. So regarding the new Information Technology Unit, we did take a really careful look at this and walked through, especially given the General Fund condition. We were convinced that there is some need at OPR to establish this new office, given its recent growth. But we do think that they may be able to do it at a slightly downscaled level, at least for the initial year specifically, rather than the 15 positions they're requesting.

We went through and identified 10 that we think are really essential. And then perhaps the five could wait. As they're getting scaled up, they could continue to rely on the governor's office for some of their services. So we estimate that this could save about 1.4 million as compared to the proposal before you. We do think, again, some new resources are required, but just didn't see the compelling evidence for the level that were requested.

Regarding the second proposal to reduce the January request by 10 staff for General Fund savings, we would recommend approving that, but we do think you are probably going to want to keep a pretty close eye on the office over the coming year or two, because some of the proposals that they retracted were actually to implement some recent legislation. And so your priorities, so they have stipulated that they think they can achieve those goals and requirements with the resources they are requesting.

But given those were legislative mandates, we think keeping a close oversight role on that through budget hearings next spring will be important just to make sure that they are implementing the law that you passed.

Thank you. Bring it to the Subcommitee. Senator Caballero.

So let me just ask, at one point, the decision was made and it kind of flip-flopped. The Department of Technology was a Department and then it became an agency and then went back to being a Department. And the strategy at one point was that the Department of Technology would be the go-to Department for everything technology initiated, whether it was to hire a contractor to come in and work to upgrade the technology in a Department.

Part of the reason for that was that you didn't want the proliferation. Everybody had an attorney, everybody had a comms person, everybody had technology experts. And the question became, is it necessary to have people that are diversely spread out and not have a consistency in terms of the quality and the ability to make recommendations to the Department and then have the Governor's office understand? So why are we setting up a new Information technology unit in OPR?

What is it you're going to accomplish by having that unit that you wouldn't accomplish with some contract staff from the Department of Technology? I just need to understand a little bit better because, and I'll say this again, one of the things that happened when we hit our budget crisis is government downsized. And from my perspective, some of that downsizing was really important because local government had done it, but the state had never done it.

And it just seems to me like we've grown the state budget so much and part of that's our fault. I do have to say that it's really hard to vote against somebody's idea if it's a really good idea. But given our budget, I'm worried about it.

Sure. I'll take-

Your name and title for the record.

Scott Morgan, Chief Administrator with the Governor's office, Planning and Research. Yes. We are actually working closely with Department of Technology. They do not provide all of the services that would be needed to provide the daily support. We are working with them on technical assistance, on the setting up of the actual network, of the security type of needs that we would need and are looking at an interagency agreement with them on some of that.

But they don't provide kind of the daily staff support, ongoing network support, and all of those things that an individual department would need to have to support their employees and budget programs, grant programs, all of those things that are entailed in that.

So budget and finances, I understand. What is the technology needs- Are you talking about just the operation of the computers and the phones and all that kind of good stuff?

Yeah, that's definitely part of it. So the support to individuals, 24/7 IT help, desk support, your computer breaks down fixing of the computer or getting a new one. And then business needs for grant programs. So grant management, software systems, those variety of different business needs that the different programs have. Currently, we rely on the governor's office for that.

And we have just grown past their internal capabilities from an IT support standpoint and quite frankly, sometimes deviate from their strict policies on how they want to run their IT show.

So it's really looking at, how do we develop a system for the new needs of OPR that have come on board over the last 10 years that have really changed how we do our job, as compared to how the Governor's strict security rules are and how they're looking to really protect the appointees that are within the Governor's office.

Got it. So how many staff does OPR have now?

We're somewhere over 200. It'll depend on how this budget rolls out, right? On what those total numbers will be. And that's the largest OPR has ever been. During Governor's Brown's first term, it got up to about 150 people, and that's the only time where it's been at that number. So we're far beyond what it's been historically.

Thank you. Appreciate that.

Senator Niello.

Thank you, Mr. Chair. I said earlier that I'm new, but I'm not really new. I departed here in 2010 and I am amazed at the growth in OPR since 2010. LAO had a tallying comment, given its recent growth, and I guess that's true, but I have to wonder why the recent growth. LAO's comment also was that they would recommend approving the positions now being requested that are still remaining from the January request because they help implement legislative priorities.

But how was that done back in 2010? The legislative priorities still had to be met. And has the growth in OPR been matched with a reduction or a reduction of other areas that might have implemented those priorities before? The government doesn't usually operate that way, but maybe it was. So it seems to me my inclination would be to deny the request entirely from January. But what are the essential roles that OPR is filling now that it wasn't able to back in 2010?

So again, Scott Morgan, Chief Administrator with Office of Planning and Research. Great questions. It's literally brand new programs that have come online. So last year we did not have the Office of Community Partnership and Strategic Communication, brand new office, 34 employees involved in that. Strategic Growth Council grant programs, when you were originally here, there was one small grant program. There are now four quite large ones, including Affordable Housing Sustainable Communities, which is a Greenhouse Gas Reduction Fund ongoing program, as well as a Transformative Climate Communities.

So it's really just been an exponential growth in the amount of work, funding, grant programs, et cetera, that have come to the office over the last 10 years. And so we have added staff to meet those programs while also relying on existing staff to meet our other statutory obligations.

Kind of like the exponential growth we've had in our General Fund in the last five years or so, right? LAO has a comment?

Yeah, if I'd just add, definitely agree in the growth and the additional responsibilities and funding that the Legislature and Governor have tasked to this office. It's starting to look a little more like a traditional Department in some ways, where it used to be kind of just an arm of the Governor's office, and now the Legislature has tasked it and provided funding.

So I think one of our comments would be if and as that continues, making sure that you all feel that you have the accountability and transparency over this office, given that it is a little bit different in terms of its structure than a traditional department. You know, the leadership is not appointed by the Senate for example. So that's beyond the scope of today's conversation. It's an ongoing issue.

But in terms of today's conversation and this information technology unit, just want to note that many of these recent responsibilities are limited term in nature. They're programs that were set up with one time money for the next three years or something like that, and then it will be a decision before you and based on the overall condition of the General Fund whether to continue those or not. So as you're thinking about their IT needs, they may not be ongoing and permanent.

It may be kind of on the shorter term linked to how many staff and responsibilities they have right now. So you might want to think about that in terms of the permanency of the size of the office you're setting up and whether you might want to think about contract staff or that sort of thing, temporary funding to meet the needs they really do have now, but that may not be permanent.

So back to the growth in the budget in the last five years. That's what's growing the demand for your services. We have been flush with money for the last five years, in some cases surprisingly so. And we are looking now at anticipated deficits over the next several years. And the solutions to this year's budget are largely deferrals, borrowings, fund transfers, very few cuts. And I think we're delaying the inevitable. And I've said repeatedly we need to prioritize. Now, our priorities are going to be different.

You'll have three sets of priorities up here behind this dais probably, but that's the legislative process. So what the Legislature has done has created a, pardon the expression, monster in OPR. I don't mean that pejoratively, I mean that in its relative size. So we've driven the growth, and I think we need to look in the mirror and ask, where have we implemented new programs and new spending in the last five years that in a different budget scenario, we would not have done and maybe start looking at real cuts so that we can more easily prioritize as we head into probably five very difficult budget years.

Senator, if I may, I will just note that of the reductions that are proposed in the Governor's January budget, several of them are at OPR and SGC. We've been talking about them in sub-two next door all month. So I think to Mr. Morgan's point, that's part of, I think why he referenced, depending on what happens in this budget, is how many staff there have.

So just for your reference, there are several reductions from the one time kind of climate budget, and some of them are at OPR and SGC.

Thank you. All right, thanks to the Members. Thank you very much. That takes us to discussing cannabis next.

Welcome back. Proceed when prepared. State your name and title for the record, please. This will be with respect to updated allocation of the Cannabis Tax Fund.

Thank you, Chair, Members. Colby White, Department of Finance. So for an update on the cannabis excise tax revenues, included in the May revision was our revised forecast, and we revised revenues downward from 642 billion to 485 billion in fiscal year 22-23 and 715 million to 496 million in 23-24. This relatively substantial downward revision was primarily driven by the first two quarters of tax data in fiscal year 22-23 that came in at 243 million. We had expected revenues to decline because of the elimination of the cultivation tax.

However, this was well below what we expected. And within this industry here, we've had very strong growth for a number of years leading through the pandemic, and then more recently, we have had this correction following the pandemic. So it is a period of high uncertainty. However, our forecast is assuming going forward that revenues stabilize at these lower levels that we saw in the first two quarters of 22-23 and then grow with the economy going forward. And with that, I'll turn it over to my colleague, Andrew.

Yeah, Andrew Hahn, Department of Finance. I'll be providing additional information on cannabis tax funding, specifically relating to allocation. Three funding Proposition 64 specifies the allocation of resources in the Cannabis Tax Fund, which are continuously appropriated. Expenditures are prioritized for regulatory and administrative workload necessary to implement, administer and enforce the Cannabis Act, followed by research and activities related to the legalization of cannabis and the past effects of its criminalization. Once these priorities have been met, the remaining funds are directed to what is known as allocation three programs, which includes youth education, prevention, early intervention and treatment, environmental protection, and public safety related activities. AB 195 requires that these allocation three programs are funded at a baseline of approximately 670,000,000 to the extent available, and included 150,000,000 General Fund appropriation to backfill revenues to meet that paceline, the May revision estimates 567.4 million will be available for allocation three in 23-24, which includes 150,000,000 General Fund to backfill the estimated decline in revenues. These figures reflect a total decrease of 102.2 million compared to Governor's Budget estimate. Allocation three provides funding to three areas. 60% of allocation three funding is dispersed for the education, prevention, and treatment of youth substance use disorders in school retention. The May revision estimates 340.4 million will be available in 23-24. 20% of allocation three funding is dispersed for the cleanup, remediation, and enforcement of environmental impacts created by illegal cannabis cultivation. The May revision estimates 113.5 million will be available for 23-24, and the remaining 20% of allocation three funding is dispersed for public safety-related activities. The Mayor Vision estimates that 113.5 million will be available for 23-24. Thank you, and we're available to answer any questions.

Thank you. Any comment from LAO?

Seth Kirstein, Legislative Analyst's Office. We have two comments. First off, the May revision revenue estimate for the current year is nearly identical to an estimate that we published a couple months ago based on similar data, and so certainly no disagreements there, although we do anticipate that the Administration will be publishing the most recent quarter of cannabis tax revenue data sometime before the end of May, and at that time, we plan to update our own estimates incorporating that data. Second comment is in relation to the 150,000,000 backfill. So this was an appropriation that was made in AB 195, a trailer Bill last year, and the appropriation is available for disbursement spread across two fiscal years. So to support allocation three funding in 23-24 or in 24-25, in some combination. And so the administrations may revision estimates, assume that the entire 150,000,000 amount is dispersed in the budget year, but then under their revenue forecast, that would then not only would it not leave any for the subsequent fiscal year, but then, under their forecast, the sort of funding that would lead to further funding declines. Given that the forecast revenue growth in 24-25 is quite a bit less than 150,000,000, So just sort of flagging that for you as part of sort of the architecture here of the Cannabis Tax Fund.

All right, thank you. We'll bring it to the Subcommitee. Senator Caballero.

So the commitment we have well, the commitment was in the budget from last year, correct? 150,000,000 backfill?

That's right. It was appropriated last year.

Beyond the appropriation from last year, is there a requirement that we continue to backfill this as the potential decline in revenue grows?

Andrew Hahn, Department of Finance So, last year, our estimates we set aside 150,000,000, which was included in AB 195. That was anticipated to cover two years. The Governor's Budget included 95.4 million. But as my colleague mentioned, the revenues are declining more than anticipated. So we're utilizing the entire 150,000,000 General Fund. We aren't allocating any additional General Fund to meet that baseline.

Let me ask it a different way. Does Proposition 65 require that we backfill if the revenue doesn't materialize?

I don't believe so. We set aside 150,000,000 General Fund to backfill declining revenues, but nothing holds us to meeting that baseline.

One more comment. Seth Kirstein LAO on this. So this whole idea of sort of having a baseline sort of target level of funding wasn't sort of a concept that was included in the original measure. This was sort of established last year sort of as a way to fiscally manage the elimination of the cultivation tax primarily, which was also part of that legislation. And so in addition to the 150,000,000 we've been discussing, there were two other provisions in that law that were intended to try to support funding for these programs, one of which was to set aside any funding, excess funding above that target amount. Unfortunately, that hasn't really been borne out so far. And then the third one is one that will become available starting in 25-26, which is that it authorized administrative adjustments to the retail excise cannabis tax rate. But for 23-24 and 24-25, that's not sort of a tool that was authorized. And so if you look at AB 195, it's not entirely clear if even this scenario was contemplated because it refers to trying to hit sort of this baseline funding target, but it's a little bit ambiguous, sort of what happens if these tools that were established in that law aren't available.

Okay, so then the question that I have in regards to the three allocation buckets, if you will, is there a way for us to get information on how those funds have been distributed? And and I and the reason for it is, frankly, I have absolutely no idea what we're doing in terms of prevention and treatment of youth substance disorders, cleanup and remediation and enforcement of environmental impacts. We've had legislators that say there's absolutely no enforcement and remediation going on. I'd just like to be able to see for myself where is it going? Is it going to the sheriff's offices or are we using it at Fish and Game in terms of cleanup and remediation? Who's doing that? I know it's being done. Just to get a sense of that. This really goes to the issue of at some point we're going to have to go back and take a look at this and figure out what have we learned, lessons learned, and what would we do differently. And maybe there's another ballot measure that we need to put on and then public safety related activities. The local law enforcement say we don't have the resources. If you could get us a compilation of where the monies go in these three buckets, I think that would be really helpful. It's not really germane to do we approve this as a budget item or not? Those are believer statutorily constructed funds. And so we've got to continue doing them. But the question, it seems to be that nobody really knows if in fact any of this is happening. And maybe we can share it with our colleagues as we discuss the construct of how we've gone from an illegal product to a legal product and trying to eradicate the illegal market.

Andrew Hahn, Department of Finance I will note that in terms of specific dollars utilized versus allocated, a supplemental report detailing cannabis tax Fund usage is required to be submitted by the Department of Finance to the LAO and relevant budget and policy committees by March 1, 2023, March 1, 2024 and March 1, 2025. The report requires allocations actuals carryover amounts and other details of the cannabis tax funding. We could provide a copy of that report to you and we can also look into specific usage. If you have a specific area within the allocation that you want us to look into, we can provide that information.

That would be great. Thank you very much. Appreciate it.

Thank you, Senator. Senator Niello.

Thank you. Mr. Chair. Very bluntly stated, what we have here is a mess because the Proposition was sold as legalizing Marijuana. And clearly the voters have approved that threshold point, but it has created all sorts of other problems. And the fact that we have established parallel markets with the strongest of the two parallel markets not being the one that the voters passed. And that's what we struggle with. So the cannabis taxes are not meeting expectations. So last year, a budget trailer Bill allocated 150,000,000 to backfill that over two years. So the cannabis tax revenue is too Low this year to hit what we perceive to be a baseline. But if I heard you correctly, we anticipate it to be even less next year. Is that right?

Andrew Hahn, Department of Finance. Yeah, that's right.

So it's going to be even less next year, but we're going to use all of it this year. And I'm wondering where the logic is in that. Unless the assumption is that there's going to be another trailer Bill this year that's going to allocate into the next fiscal year, another shot of General Fund money to make up the baseline. Perhaps what we ought to talk about is not utilizing this money and scaling these expenses back to just what the cannabis taxes generate. These are very important programs to counteract unintended consequences of the perhaps anticipated, but in magnitude, perhaps unintended consequences of the Proposition. And I'd echo something that my colleague just said, and that is maybe we need a new Proposition to correct some of these really fundamental structural flaws of the original Proposition. But with declining revenues, both from the standpoint of our General Fund and declining cannabis revenues and allocating more General Fund revenues to match this specific decline, I would submit it's just illogical. Thank you, sir. I would just add to that comment that clearly we have an established methodology and framework put forth in the Proposition that requires compliance and that subsequent legislation, not without good intentions, modified the revenue picture. As such, I fear we may have backed ourselves into a structural situation that if the projections are anywhere near accurate, we could find ourselves in that situation, more structural, more permanent than we ever anticipated, which means going down the road and subsequent submittals. We're going to have to think about how we either address that or either subsequent legislation or ballot measures that look at contingency funding or another approach. But this practice to my colleagues comments both is something that I would argue is not appropriate or sustainable. Particularly this given cycle's example is a perfect example of that. So it's of great concern not to mention the separate questions about budget priorities and programmatic side enforcement, side compliance, all of those other things we've talked about in the oversight. Are there any other questions or comments?

Andrew Hahn, Department of. Yeah, go ahead. I'd like to make a couple of comments. I just wanted to clarify that the 150,000,000 General Fund is the only General Fund we're including as backfill in the Smear Vision budget. And additionally, I just like to note that the allocation funding that's provided to these programs is continuously appropriated. So these departments have carry over unspent dollars from previous years that they can utilize to maintain activities in budget year and ongoing to the extent they have that available. So I just wanted to add that comment.

Thank you, thank you, and that is understood. All right, thank you. Thank you very much. I think that wraps for the issue items and will bring us then to public comment. This is an opportunity for public to provide testimony to the Subcommitee. We welcome the public's participation and comment. We will afford an opportunity for anyone physically present in the hearing room who wishes to provide comment to do so. So is there anyone in the hearing room? Please step forward. State your name for the record. Your time is limited to 1 minute and welcome.

Thank you. Amy Hines-Shaikh with the California Community Land Trust Network. We have a requested compromise on the foreclosure Intervention Housing Preservation Program funding deferral. Given the long wait for the Fit funds since July of 2021, we are anticipating a flood of funding applications when the program opens, which would produce funding requests beyond the 105,000,000. We estimate applications for at least 65 million, equivalent to 200 units of preserved housing will go unfunded in 2024 under this proposal. Furthermore, the proposed 100 million appropriation of 24-25 will likely not be enough to catch up on the demand stemming from the 23-24 as well as meeting needs for New Year. We believe that the following compromise position should be appropriate to meet the state's fiscal needs along with the community's needs. So for 21-22 is the 155,000,000, 22-23 is 0, 23-24 is 115,000,000 24-25 is 115,000,000 25-26 is 115,000,000. We would deeply appreciate your consideration and look forward to the continuing discussions. Thank you.

Thank you.

Mr. Chairman, Members, Rand Martin, on behalf of the parent company. TPCO is one of the largest cannabis providers in the state, with operations ranging from Chula Vista all the way up to the Bay Area. We saw this problem with allocation three coming last year when the AB 195 was enacted. Notwithstanding some of the comments from the Department of Finance, we have seen the revenue from the excise and sales tax plummet every year for the last eight quarters beginning in the second quarter of 2021 to current time. And we hope that their projections about the future are positive, but we're not optimistic about it. So you are faced with a situation where your action last year on 195 requires you to meet a baseline of $670,000,000 to allocation three. The Governor is proposing 584,000,000, and it's up to you, obviously, to figure out if you want to make up that $102,000,000 difference. What we're here to ask you today is to make sure that if you do take that action, let's not put any more burdens on the industry that will make things worse than they currently are. Let's get things back on track, as several of you have indicated, and move forward in a positive way. I appreciate that. Thank you very much.

Thank you.

Good afternoon, Caitlin. Dean. I'm with California State Association of Counties. We represent all 58 counties and we were disappointed to see the 250 mil that was allocated or allocated away excuse me. From the local government budget sustainability Fund. We'd like to see those funds redirected for their original intent, which was to help counties with high levels of poverty and unemployment and to maintain budget sustainability. So we thank you for the reconsideration.

Thank you.

Justin Garrett with the California State Association of County, speaking on a separate issue related to homelessness funding. The counties share the goal of the Administration and the Legislature for enhanced accountability for state homelessness funding. To that end, we have developed the at home plan and specifically have drafted the accountability pillar of the plan as trailable language that we are sharing for your consideration as the accountability framework. We appreciated the opportunity to discuss this plan in detail in an earlier Subcommitee hearing. Just a quick recap. It requires collaboration among counties, cities and continuums of care. It requires counties and cities to have defined responsibilities and it would Fund provide ongoing funding in accordance with the county or regional plan through counties and cities to the local entities commiserate with their responsibilities. We thank the Senate for their leadership in support of ongoing funding for HAPP, and we look forward to the continued conversation on accountability. Thank you.

Thank you.

Good afternoon, Caroline Cirrincione. On behalf of the League of California Cities, we're requesting a $3 billion annual appropriation beginning in the 2023 Budget Act to prevent and reduce homelessness and a boost the. Supply of affordable housing. While we appreciate the previous onetime investments that the Governor has made in this space, we really are focused on ongoing solutions key for local governments in addressing homelessness. Instead, this budget proposal really does the opposite. It calls for 712,000,000 in delays or cuts to key housing programs. We understand that the budget deficit creates difficult decisions, but local governments, housing service providers, housing advocates and business leaders all agree that ongoing funding really is a solution to ensuring the end of the homelessness crisis. With regards to accountability, being accountable to state funding is not new for cities. We expect to be held accountable to the public money that we receive to get Californians off the streets. We look forward to working with the Legislature on a number of those bills this year and hoping to better serve our shared constituents. Thank you so much.

Thank you.

Good afternoon, Kim Lewis representing the California Coalition for Youth on two issues regarding OPR and the staffing reductions. We are one of the co sponsors of the Youth Empowerment Commission, which we find we're very supportive of it moving to OPR to be successful. So we're just concerned about how the changes in the staffing reduction would impact the success of that Commission and welcome conversations with the Department around that. And then obviously on the homelessness funding pieces and accountability. We are very supportive of accountability measures for youth programs. It is very important we know that there is a lot of constraints when it comes to federal funds that come in through the COCs and how those dollars are spent. But we also know that the State Dollars have a lot of flexibility to fill the gaps that aren't being met from those federal funds. And we're welcome to work with the Legislature around ways that we can better serve our youth because particularly they haven't been on the streets as long as others, so they often fall at the bottom of the list in terms of getting served. And so in the first 24 to 48 hours, they're most vulnerable on the streets. So if we can support them, we can prevent lifetimes of harm and trauma. Thank you.

Thank you. Anyone else present in the hearing room like to provide testimony in the Subcommitee? None will go to the moderator. Excuse me. To see if we have anybody via teleconference.

Thank you. For public comment you may press one and then zero. We will go to line 10. Your line is open.

Hi, thank you for taking my call. I'm making comments on the partial reallocation to the City of Fresno public Infrastructure plan. My name is Ivanka Saunders, regional Policy Manager with Leadership Council for justice and Accountability serving the Communities of Fresno. We are just learning about this proposal to reallocate 250,000,000 of local government budget sustainability funds to the City of Fresno's infrastructure plan for investment into the high speed rail downtown Fresno area. We are talking to community Members and partners. As there have been no public conversations about this proposal, we have concerns with the projects included in this proposal. We look forward to engaging with the Committee and in this budget process as we learn more about this proposal. Thank you.

Thank you.

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

Good afternoon, Chair and members, Marky Cedar, on behalf of the County of Los Angeles, respectfully opposed to the reduction of the Small Business COVID-19 Relief Grant program and the continued need for financial support services for small businesses throughout the county who have been negatively impacted by the pandemic. Thank you.

Thank you. Next, we'll go to line 11.

Good afternoon, Chairman PDN. Committee Members. Mary Creasy, on behalf of the California Cannabis Industry Association. The passage of AB 195 and 2022 was the culmination of many years of work to advance meaningful tax reform for the legal cannabis industry. This landmark Bill zeroed out the cultivation tax indefinitely and included critical tax certainty for at least three years following its enactment with the Governor's May revise currently estimating $102.6 million shortfall in cannabis tax revenue. To meet the baseline, it is imperative that we preserve the 2022 agreement struck between the industry and Legislature and avoid any consideration of tax increases on the legal industry. While CCI appreciates the comments made by Finance, we would argue that dramatically decreased tax revenue is a symptom of the legal industry teetering on the brink of failure. Today, two out of every three cannabis purchases are made on the illicit market. Since May 2021, sales have decreased by 22%. We're seeing cascading business failures across the supply chain, and investors describe today's cannabis market as brutal and toxic. Despite these challenges, we believe there's still an opportunity to make changes that will allow California to build a vibrant, regulated, tax generating industry as voters intended. We look forward to working with you to find reasonable solutions to meeting the tax shortfall, and thank you for this opportunity to address the important challenges we face.

Thank you.

Thank you. Line 12, your line is open. Hello, is that line 12?

Yes. Welcome, please go ahead. Yes.

Hi, there. This is Sam Wilkinson with GRACE and End child poverty in California. I'd like to take the time to thank the Senate for your leadership and for including raising the cali ITC minimum expansion as part of a Senate priority in the most recent edition of the detailed Senate budget plan. And we also urge your continued support for a $300 cali ITC minimum, as well as a young child tax credit expansion that would expand the credit to include all Cali ITC eligible families. We know that these tax credits are effective programs to lift families out of deep poverty, and there's no better investment to make in times that are financially difficult. We also are in full support of the Senate proposal to Institute a graduated corporate tax rate. This is an incredible step toward introducing equity in our state tax system and is a terrific option to redistribute wealth and make sure our state's wealthiest corporations pay their fair share. Thank you so much.

Thank you.

Thank you. Next we'll go to line 16.

Hello, good afternoon, chair and Members. I am Jordan Penland with Golden State Opportunity, and I'm calling in to show my support and appreciation of the continued support for the YCTC expansion and raising the Cal EITC minimum. Thank you.

Thank you, thank you.

Next we'll go to line 13.

Good afternoon, chair and Members. My name is Sarah Bouabibsa. On behalf of Young Invincibles and the Cali ITC coalition calling in to thank the Senate for their commitment to prioritizing Cali ITC expansion and uplifting California families out of poverty. Thank you.

Thank you.

Thank you. Next, we'll go to line 18. Your line is open.

Good afternoon, Chair and Members. Sharon Rapport with the Corporation for Supportive Housing, and I'm talking about the issue area around accountability for homelessness and want to agree with Senator Nielo's comments about the need for ongoing funding. It does make a big difference in terms of ability to get people not only to exit homelessness, but to find work, to find access to benefit that Senator Caballero talked about and to be self sufficient over time and really to thrive in their community. We propose accountability framework under Assembly Bill 799, introduced by Assemblymember Luz Rivas specifically to have regional planning similar to the CSAC proposal, but to pull that out of the Hat program and really have a regional plan that comprehensively looks at jurisdictional responsibility to meet a series of regionwide performance metrics and specific actions. We also think it's necessary for state funding to be monitored a little bit more and overseen to make sure that the funding is being spent for best practices and evidence based interventions that we know are successful. There are any number of interventions that we know to be successful, but much of the state funding, almost 80%, is going for programs that may not result in somebody.

Thank you. Please summarize.

Okay, those are my comments and I appreciate you taking time to listen to them. Thank you.

Thank you very much.

Thank you, Mr. Chair. We have no further public comment in queue.

All right, thank you, moderator. Thanks again to staff and Members and to all those who may have wished to, but were unable to provide testimony. You can submit comments to the Committee staff. This time, the Committee will stand adjourned.