Assembly Budget Subcommittee No. 3 on Climate Crisis, Resources, Energy, and Transportation

Good morning and welcome to Assembly Budget Subcommitee Three. Today we'll hear an overview of the May revision and hear from the public. We do not plan to hear a presentation on every single change, but the letters in the agenda show every new proposal and the May revision. We will not be taking any votes. We will have four panels and we'll let Members discuss them after each one. After all the items are heard, we'll take public comment in regards to the departments before us today.

First in the room, followed by phone testimony. Each Member of the public will have 1 minute to speak. The phone number is on the Committee website and should also be on the screen if you're watching over the Internet. That number is 877-692-8957. The access code is 131-5447. If you encounter any problems, please contact the Assembly Budget Committee at 916-319-2099 and a staff member will assist you. And we're ready to begin. We'll start with transportation, and let's begin with the major proposals in transportation.

And if the panelists will all approach and please identify yourself as you first begin to speak. James, could you pull that microphone a lot closer? There you go. Can you guys. Can the public hear James? Help. There you go, James. We fixed it. With all my technical prowess, Isolved the problem. I hit the yellow button.

Good morning, chair. My name is James Moore and I, along with my colleague Matt Mesato, will be briefly highlighting the transportation issues included in the May revision. After our presentation, we and departmental representatives will be available to answer any questions. First, I'd like to highlight that the total investment in the transportation package remains the same as in the Governor's Budget. The Administration did not propose adding to or reducing any of the proposed cuts in the Governor's Budget.

However, the May revision proposes to shift a $150,000,000 of the $1.2 billion ports package from general fund to state highway account. The transportation agency reviewed its list of potential projects and identified $150,000,000 of Port and Freight Infrastructure Program, or PFIP, projects that were eligible for state highway account use under Article 19. Second, the California Transportation Commission requests $200,000 ongoing for CEQA related legal work.

The Commission has traditionally relied on Department of Justice staff for its CEQA legal work, but the DOJ has informed the Commission it can no longer perform this work due to resource constraints. The requested resources will allow the Commission to retain independent counsel for these issues. On May 1, Caltrans submitted its annual Capital Outlay Support letter to increase engineering resources for various transportation project work performed by Caltrans.

This year's request is $39.1 million and 143 full time equivalents and conforms to the traditional 90-10 split between state workers and contract resources. Caltrans requests $6.6 million and 27 positions one time to begin onboarding to fiscal. Caltrans received pre-onboarding planning resources for fiscal in the 2022 budget and is now ready to begin onboarding to fiscal. This is the first year of what will be a multiyear effort.

Caltrans also requests $29.8 million in 23-24 and $7.3 million ongoing for a variety of technical adjustments, including vehicle insurance premiums and augmenting federal authority for a recently received road usage charge federal grant. Now I'll turn it over to my colleague, Matt Macedo, who will summarize the DMV's May revision proposals.

Thank you.

Thank you. Good morning, Mr. Chair and Members. My name is Matthew Macedo with the Department of Finance. Starting off for the Department of Motor Vehicles, we have a General Fund solution related to Real ID. First is a reversion of $24 million in 21-22 and 22-23, and a decrease of 69 million in 23-24 as a result of lower revenue projections and a resulting increase in the budget problem.

The May revision proposes adjustments to this expenditure to assist in the closing of the projected shortfall and ensuring the submission of a balanced budget plan. The Federal Department of Homeland Security shifted the Real ID enforcement date from May 3, 2023 this year to May 7, 2025, which has allowed more time to meet the Real ID demand. Since driver's license renewals are on a five-year cycle, most Californians have had a chance to visit a DMV field Office to get a Real ID.

However, out of the 27 million Californians that were originally projected to convert to a Real ID, 15.6 million have done so. DMV is currently providing approximately 200,000 Real IDs per month. However, the majority of these are on-cycle renewals, meaning they're coming in as their license is due to expire.

These resources were originally provided to meet the surge for Real ID demand as we approached the deadline we were originally expecting kind of an average of 600 to almost up to 800,000 per month, and at some points as we approached the deadline, 1.2 million per month. But they're only doing 200,000 a month so far. The positions provided for this funding were there to meet that demand, and so far it is not materializing.

We don't believe that the removal of these positions will cause a significant impact in meeting that Real ID mandate due to the fact that, as I said, that Californians can get their Real ID on their normal cycle. We will closely monitor throughout the year, and DMV will continue its efforts to innovate and modernize, providing customers more and more options to process transactions outside of visiting a field office.

They've made many improvements since 2018, when they first started issuing Real IDs, such as the Virtual Field Office and the ability to upload documents ahead of time, among others. It's important to note that DMV does not plan on laying off workers. Rather, through natural attrition, it will reduce its field office workforce. Second is I'll briefly discuss the motor vehicle account. That fund is in a structural deficit.

The motor vehicle account is funded primarily by a $65 vehicle registration fee and a $30 CHP fee. Compared to our Governor's Budget Forecast, revenue is projected to be lower by 358,000,000 from a period between 22-23 and 27-28.

Finance estimates that original forecasted driver license fee revenue totaling $53 million in current year will not materialize because DMV customers who are choosing to apply for a Real ID come in on their normal renewal cycle, as I mentioned, and so it will not be extra revenue on top of the renewal. Furthermore, expenditures are expected to increase between 22-23 and 27-28 by a net total of 75 million compared to Governor's Budget.

In addition, a $128,000,000 increase is expected in 24-25, mainly attributable to an increase in employee compensation and retirement contributions. The fund is experiencing this operational deficit mainly because projected employee compensation retirement increases are outpacing the statutory consumer price index increases in the registration fee. I'd be happy to take questions about that. Furthermore, the May revision proposes 4.5 million for Motor Voter to meet the requirements of AB 796.

DMV plans to initiate an IT project to capture voter information in DMV incomplete transactions so they can send that voter information to Secretary of State. Furthermore, there are reappropriations for the Digital Experience Platform Project, which is a comprehensive replacement of all of DMV's IT projects as well as a reappropriation of 6.6 million for the commercial driver licensing information system to continue activities related to commercial driver's license data sharing. Furthermore, there's a trailer Bill related to mobile driver's license.

The May revision proposes statutory changes to increase the population size for that pilot project. The Administration was informed that the population cap that was in statute is too small and we need to raise that to conduct meaningful testing. And finally, the May revision includes an incremental $6 million to rebid the construction phase of Delano Field Office. Specifically, 11.4 million General Fund would be reverted and new funding of 17.3 million in lease revenue bonds provided for that project. Thank you.

Thank you very much, LAO.

Good morning, Mr. Chair. Frank Jimenez with the Legislative Analyst Office. We have three comments in relation to transportation issues in the May revision, two comments related to proposals directly and one general comment. On the first one the proposal to shift General Fund $150,000,000 for the port and freight infrastructure program to the state highway account. We find that this proposal merits consideration by the Legislature.

Shifting funding from the General Fund to the state highway account for this program would ensure that the original intended amount of port and freight infrastructure projects the Legislature originally intended to fund would continue. However, this comes with a trade off. It would be trading off state highway maintenance and rehabilitation projects which are normally funded from the state highway account to roadway and highway projects adjacent to ports. Second, when it comes to the DMV General Fund reduction, we recommend that the Legislature approve this proposal.

We find that the reduction aligns with associated workload adjustments that are associated with the federal extension of real ID requirements. And then finally, we note that the Administration does not propose any proposal related to providing fiscal relief to transit agencies.

We note that this Committee in particular has shown interest in that the Legislature may want to ask the Administration on what its plan is to support transit agencies in the absence of a proposal and for the Legislature to begin now to think about its ultimate proposal, if it wishes to provide some sort of relief to transit agencies. But happy to take any questions.

First, certainly I would like to express, and I think I express on behalf of many Members of the Assembly, the Legislature's disappointment that the transit capital dollars did not show up in the may revise. On the transit fiscal cliff we're working to try to create long term solutions that get transit much better prepared for the future and the future changes that we're going to see out there.

So we're looking forward to working with the Administration and continuing to try to figure out how we handle this transit issue, but certainly one that is top of mind for many people at this point in time. With regard to the port, how much funding can we divert from the state highway account for other projects? What are we allowed to do?

James Moore, Department of Finance. Those projects haven't been released yet, but our $150,000,000 proposal is based on the applications and the funding mix of likely projects. And so 150,000,000 is our conservative estimate on what we could switch to the SHA.

Okay, great. Thank you. I see no other Committee Members here. I almost want to ask staff if they have any questions, but not allowed to do that. So. We will move on to our next topic, unless anybody has any reason why we shouldn't. Right. LAO, thank you very much for your panel. And we're on to item two. And that's resources money.

Good morning, Chair. Sergio Aguilar, Department of Finance. So we're going to try to break this up into three different parts just to be able to have questions on some specific areas and make it a little bit more manageable. And I think for art one, we're going to talk a little bit about the overall General Fund framework, including the additional solutions that May revision and the restorations, and then also talk a little bit about the wildfire and flood proposals.

In part two, we'll talk about a few key trailer bills, including harbors and watercraft, the water drought, TBL, and then also the Energy Resource Program Account trailer Bill, and then also SBX 12. And then the third part will cover the Clean Energy Reliability Investment Plan, CERIP. So we'll have different panelists come for each of the three different parts and then also welcome questions after each segment. And we also have colleagues from various departments here with us as well to be able to answer questions.

So, just starting out on our part one. So since the release of the Governor's Budget, monthly revenue shortfalls have continued. And the additional budget shortfall at May revision when accounting for transfers and adjustments, is $9.3 billion. So we're at Governor's Budget, we were at $22.5 billion shortfall. Now we're facing a $31.5 billion shortfall. And while the May revision does not project a recession, it does recognize that there are some continued increased risks since the Governor's Budget.

And some of those risks, if they materialize, they could significantly change the state's fiscal trajectory in the near term. So that and these risks underscore the reason why the May revision does not necessarily tap into the reserves at this point in time to close a projected shortfall. However, if there's continued downward economic and fiscal conditions, I think that's when we'll need to potentially look at the Reserve to protect some of the core programs in addition to looking at potentially other reductions.

But the May revision incorporates a balanced approach to address the additional $9.3 billion shortfall with a mix of different spending reductions, pullbacks delays, fund shifts, and revenue borrowing. So I'll highlight those within the natural resources, environmental protection, and energy areas. There's about $1.75 billion worth of fund shifts to both a climate bond and then also to Greenhouse Gas Reduction Fund.

So of the 1.75, 1.1 billion General Fund is being shifted to the climate bond, and I'll highlight the mix of programs that are within that 1.1 billion. There's 270,000,000 for water recycling, 169,000,000 for salt and sea restoration, 160,000,000 for community resilience centers, 100 million for transformative climate communities, 100 million for the regional resilience program, 100 million for urban greening, about 87 million for statewide parks, 60 million for the Sustainable Groundwater Management Act program, 50 million for dam safety and flood management and 20 million for multi-benefit land repurposing.

And these programs do remain a higher priority for the Administration and will be included as part of a future climate bond proposal. And the Administration is, of course, committed to engaging with the Legislature over the next coming months to work out details of what that bond will look like.

There's an additional 635,000,000 that is being shifted of ZEV investments from the General Fund to the Greenhouse Gas Reduction Fund. And so this aligns with the framework that the Administration had at the Governor's Budget, where we shifted a lot of the General Fund from ZEV to Cap and Trade.

And as part of the kind of May process, the Administration was able to complete a reconciliation of the Fund itself and then also updated the revenue estimates to account for the most recent February auction, which provided some additional room to be able to shift more of the ZEV programs to the Greenhouse Gas Reduction Fund compared to what we had proposed at the Governor's Budget.

As predicted by LAO a few months ago. Right. Congratulations.

So, moving on to the next area, there is about 324,000,000 of reductions as part of the May revision. So at Governor's Budget, we had put aside 125,000,000 for a drought set aside. And as a result of some improved statewide conditions based off of the most recent storms and also acknowledgment of the significant amounts of funding that we have supported for immediate drought over the past couple of years, including the most recent drought contingency that we just allocated last week.

We're, in essence, shifting these dollars to what will be a flood contingency set aside, which my colleague will speak to in a little bit more detail later. So that 125,000,000 is more so of a shift from drought to flood. There is a $25 million reduction in the AG Delta Drought Response Program, also known as Landflex. And this program had $50 million. It was a pilot program. There was 25 million that was recently awarded to initiate the pilot. And so this would reduce the additional 25 million.

There's a reduction of 24.5 million associated with salinity barriers. And now with the improved conditions, there is no longer a need to install these salinity barriers. And so that 24.5 million is being reduced. And then also as part of the California Arrearages Payment Program, which supported energy utility Arrearages, there's a reversion of about $150,000,000. And this is just reflective of updating savings figures from the program as a result of the actual applications received and approved for this program.

So it's just, in essence, trueing up what the actual expenditures were for that program. There's also some special fund borrowing in this area. There's $100 million that is being borrowed from the Beverage Container Recycling Fund being loaned to the General Fund. And this loan is anticipated to be repaid over a three year period. However, there is specific language within the loan provisions that if there is a programmatic need in that Fund, we would repay back that loan sooner.

So the intent is to not have any programmatic impact on the bottle Bill the beverage container recycling program itself. Then there are some restorations that we made at May revision of some solutions reductions that we had proposed at Governor's Budget. So the Climate Catalyst Fund, the May revision restores 25 million and it's a partial restoration. And this is just an acknowledgment that there were actually some projects that were very close to being in the final stages of getting awarded.

And one of the key kind of principles that we had as part of the solution that we looked at for the Governor's Budget was to not adversely impact certain programs that were already very far along in the process and being close to being awarded. So after relooking at this program, there was 25 that was very close. So we're just restoring 25 so those loans can move forward.

A $1.6 million restoration in the Explore the Coast Program and this is just to account for an additional amount that was encumbered, that we didn't realize was encumbered at the Governor's Budget. And then also the May revision does restore the 40 million General Fund for the San Joaquin Floodplain Restoration, which is part of the broader flood package proposals that I'll now turn over to my colleague to cover.

Good morning Crystal. Asorto with the Department of Finance, so building on the $202,000,000 that was included in the Governor's Budget for flood investments, the May revision includes an additional $290,000,000 to support flood related activities. And a portion of this is the $40 million that my colleague just went over in terms of the restoration for the San Joaquin floodplain restoration projects. In addition, the 290,000,000 includes $125,000,000 flood contingency, again that my colleague mentioned.

So this is a shift of previously, funding that was previously allocated for the drought contingency and based on improved conditions, we are now doing a net zero shift to a flood contingency. This is set aside to support costs associated with preparedness, response, recovery and other associated activities, both with the storms from the last several months, resulting in snowmelt associated as well as potential future flood impacts. In addition, there are $75 million for the flood control subventions program at the Department of Water Resources.

This supports local flood control projects, including in communities that have been impacted by the recent storms, such as the Pajaro River Flood Risk Management Project. In addition, there's $25 million for the Small AG Business Relief Grant Program at GO-Biz to expand the current program that's focused currently on the Drought Relief Grant Program, which provides direct assistance to eligible AG-related businesses that have been affected by the recent storms.

And then finally, there's a $25 million set aside for the Disaster Response Emergency Operations Account, DREOA, in anticipation of potential future disaster relief costs, again associated with potential, not potential, the actual snow melt impacts that we anticipate seeing over the coming months. So with that, I will turn it over to my colleague to talk about new funding for CAFR.

Good morning, Stephen. Benson with the Department of Finance. As you probably are aware, the last couple of years, each year in the last couple of years, the state has augmented fire protection resources in the spring and then sort of laid down staffing in the fall. This budget, the May revision, includes a proposal similar to that this year. The proposal is for 118.8 million one-time. It provides a number of things. One is a flexible pool of 432 firefighters. It includes six hand crews.

It also includes funding for sawyers, which are the firefighters that use chainsaws and stuff with the military hand crews. And then it includes proportional funding for contract counties, which is a statutory requirement. There are two major differences in this year's proposal versus last year's that I'll hit on real quick. One is that I just mentioned the flexible resource pool of firefighters. That wasn't necessary last year because the 2020 budget included a sort of partial relief staffing proposal.

And that provided in Cal Fire's base budget the funding for that flexible pool of firefighters. When we did the full release staffing proposal last year, that flexible pool funding was offset was removed from the base budget when we did the full release staffing proposal. And so that's no longer there. And so this year, we are putting that in as part of the one time augmentation. And then last year's proposal included 17 hand crew firefighter hand crews.

There was a separate proposal last year that made those 17 hand crews permanent in base budget. So this year's proposal is a smaller augmentation based on a number of logistical reasons. So it's six additional this year. But those are the two main differences on that. So I'll stop there and questions on this section of the agenda.

LAO?

Okay. Good morning. Rachel Ehlers with The Legislative Analyst Office. I'll keep my comments very brief and high level. We have our team here to hop up anytime you have specific questions on specific proposals. I think the main message that we want to start with is just concerns about the overall structure of the May revision, and in particular, based on our revenue outlook, we find the Governor's revenues to be pretty optimistic. We think there's a lot of downside risk.

Our revenue forecast across the budget window is $11 billion less than the Governor's. And so our concern here is that if you were to adopt the Governor's framework, you're really setting yourself up for potentially having some much more difficult decisions in the coming years, perhaps even in the middle of the fiscal year that we're facing, coming in for mid year reductions if the revenues don't end up being what the Governor is projecting.

And at that point, you will have lost some of the tools that you have available to you right now. It's always easier to reduce one-time spending than ongoing based programs, and it's always easier to not easy, but easier to pull back and reduce spending that hasn't gone out the door yet as compared to trying to claw back funding that has been allocated.

So I think our primary recommendation to you right now is really to adopt a greater level of solutions than the Governor to avoid having those more difficult decisions come before you. So as we have talked about through many hearings over the past few months, you have a lot of options before you. You don't have to take the package of reductions and solutions that the Governor has put before you. You have other options, none of them are easy.

But you do have room to exercise your priorities and prioritize your kind of most important programs. We think you can continue to make really significant progress on your environmental and climate goals, even at a moderately reduced spending level as part of our overarching recommendations across the budget, across different. My colleagues are saying this in all of the different subcommittees this week.

We think one of the steps you can take to try and help make this a little bit easier is not to approve new spending proposals before you, to kind of start with your base, not make the problem worse. Without prejudice, some of these proposals could have a lot of merits, but at this point, kind of sticking with what you've got as your base program rather than growing the problem. Now there may be some exceptions in particular proposals that are around addressing health and safety issues.

For example, some of the flood proposals you have before you we think could merit consideration and meet that sort of higher bar for new spending. But overall, looking at kind of rejecting without prejudice some of these new spending proposals just to avoid making your budget problem worse. Regarding the climate bond proposal before you, bonds can be a really important tool in your toolbox. It can offer you the opportunity to fund projects upfront and then pay over time, especially given your cash situation.

But they're not without trade-offs, they're not free. They involve debt service, which increases the costs of the projects you're funding overall.

And in particular around this proposal, we want to highlight for you that it's not exactly well aligned with your budget solutions in terms of the timing and the certainty. So any program that you are shifting to a climate bond, there's still a lot of uncertainty about whether the Legislature will put it on the ballot, when it will go on the ballot, and ultimately whether voters would approve it or not.

And so I think our recommendation to you here certainly an available tool for you to consider, but for your highest priority programs that you want to be sure are getting funded in the next couple of years. Probably you want to prioritize your General Fund for those programs and then think about the other ones as reductions for now with the possibility of funding being restored, but not that same level of certainty.

And then finally as we'll hear I think on the next panel, there are some pretty significant policy proposals being brought before you here as part of the May revision. And this is not a great time for you to be faced with big, complex decisions. You just don't have that much time before your constitutional deadline to pass a balanced budget.

So while some of these proposals may need some immediate action in particular to address some shortfalls that are coming in the budget year, I think overall we would recommend where you can defer action. You might want to consider that if it's not an urgent need. Just to give you a little bit more time for deliberation and consideration and stakeholder input and understanding what the long term consequences are. Even if the proposal may have merit. Just give yourself a little bit more time and consider it. Either throughout the summer or perhaps next year, if the need isn't urgent. And with that, our team is here to answer any questions you have.

Directly for LAO you talked about the $11 billion difference between the Administration and your projections in terms of revenue. Does the LAO's office have any or can you create, from your perspective, are the most appropriate targets for us to consider if we wanted to not go with as high a revenue projections in terms of what to cut?

Right. So you have always options when you have a gap between your spending and your revenues. One is to reduce your spending or delay it. I think with delays we would recommend a lot of caution because the multi year window doesn't look great either. Even under the governor's proposal, there are deficits in the out years and then certainly always raising revenues is another option that comes with trade-offs.

So, yes, in our report that we put together for you in February we kind of itemized a lot of other options from the climate budget that we think might be good candidates for reducing funding for now. Again, without prejudice, many of them are our higher priority programs but maybe not as urgently needed, could be reduced without disruption. So we're happy to work with you and your staff to help identify those.

I think there are also other items in other areas of the budget and again, starting with not approving new spending gets you part of the way there as well.

Thank you.

First, I just want to thank the Administration for restoring the San Joaquin Floodplain Restoration dollars. After all the risks that we are identifying here and the funding to clean up the Excite Facility Parkways. I think you find the Assembly feeling pretty strongly. Money to GoBiz: California Small Agricultural Business Drought Relief Grant Program. We're funding more there when they haven't gotten out last year's money out the door yet.

So, could you tell us why you're doing that GoBiz funding when they haven't performed on the first side of it?

Sure. Lauren Greenwood, Deputy Director of Legislation for GoBiz 2022. Tax returns are a criteria element for the Drought Relief Grant program. Cal OSBA, our Office of the Small Business Advocate, communicated with stakeholders when the language was negotiated last summer that this criteria element would delay the start date, and it would most likely launch in Q2 of 2023. Since tax returns aren't usually due until April, Cal OSBA did not want to launch the program before tax returns were due.

Of note, the Federal Government extended the tax deadline for 56 counties to October. While more sophisticated farmers have their tax returns on standby, Cal OSBA is mindful that smaller farmers may not have the accounting resources as others and is concerned about equity and access if the program was pushed out before the initial April tax deadline by launching in Q2, but we're anticipating July. Now, the program would still launch three months before these 2022 taxes are due.

Thank you. We could fund California's Underserved and Small Producers program instead of the CDFA and just expand their program to cover flood relief. What are your thoughts on that?

Yeah. Sergio Aguilar, Department of Finance, I'll answer that. I think both departments work collaboratively and have been working collaboratively on this new program that we stood up under GoBiz for drought last year. Just by working together, we determined what we felt was the most appropriate program to move forward at this point in time, acknowledging the experience that GoBiz has with supporting a broader array of businesses.

And so that's why we're putting the 25 million under the GoBiz program, just acknowledging the kind of alignment of how this would work compared to the existing drought funding that my colleague elaborated on.

Great. LAO?

Yeah. Thank you, Mr. Chair. Good morning, members. Sonia Pettick with the Legislative Analyst Office. We'd note that we're still in the process of analyzing the proposal for 25 million to GoBiz, but we just note you have several options before you. One of the questions we're trying to learn more about is sort of the level of the anticipated need for both the 75 million that was allocated last year as well as the proposed 25 million for flood.

One option you might think about is making the 75 million from last year more flexible to include both drought relief and flood relief. In addition, you have another option, which is if you do prefer the program, the Cusp program, through CDFA. The language in that program could be expanded to include additional businesses beyond just the producers themselves. As we understand it, one of the components of the GoBiz program is that it's eligible for or businesses that are agriculture-adjacent are eligible for those funds.

So you could adjust the cusp program to be made available to those businesses as well. So you have a number of different options and as we learn more, we'll be sure to provide you our thoughts on that.

A thought I've had as the administration has been reprogramming dollars from the drought to the flood side of the equation is it might just, given how variable things are in California, it might just make sense for us to call it drought flood category so that you can move back and forth as conditions change and need arises. GoBiz, what agriculture is agriculture is adjacent that you are referring to?

Sure. So in some of these other businesses and we're talking about production agriculture, some of these other businesses are farm inputs, processing of raw commodities for market, livestock and dairy feed providers. So when farms recover from flooding, which in many cases will be years out, they will need these adjunct businesses as part of the necessary agricultural infrastructure to return to full production and profitability.

Thank you. And then can you tell us how the fund relief funds will be dispersed and why do we need the general fund up front instead of the emergency fund or the Disaster Response Emergency Operations account?

So, to clarify, are you talking about the $125,000,000 contingency fund?

Yes.

Okay, perfect. So, the important distinction I would make between DREO and what we're envisioning here is that since there is a set aside for DREO, there are specific limitations or eligibility requirements for what would be eligible to be funded by DREO. So, in that case, we're generally talking about those very urgent emergency-related expenditures.

So, for example, when Department of Water Resources or other departments have to go into the field when there's a levee breach, for example, that's often eligible for DREO. In some cases where there's an existing levee project, for example, that could be funded through the Flood Control Subventions program or others that are not necessarily responding to an immediate emergency; there's a gap in funding there.

For example, the other potential so the flood contingency is quite broad in terms of what flood activities could be included in it. But another example would be support or economic relief for farm workers or vulnerable populations. So again, those wouldn't necessarily qualify for DREO. They wouldn't necessarily be FEMA reimbursable. So this flood contingency is really filling a gap that DREO wouldn't otherwise cover.

LAO, let us know if there's anything you want to jump in on.

I can jump in.

It looks like your body language indicated...

I have no poker face, apparently. I think just the point about the drought and flood, as the Department of Finance mentioned, just last week, we got a letter to allocate last year's drought contingency funding, a significant amount of funding for communities that are still without drinking water, that still have dry wells despite our wet winter that could continue.

So I think, along with what my colleague mentioned about the GoBiz money, thinking about maybe drought/flood, that's another consideration you might want to have for this 125,000,000. The drought is over in some places, but not in others. Flood is affecting some places, but not in others. So thinking a little more flexibly given the realities of the climate change we're facing now.

The drought impacts are one issue, drought preparation is another issue. It's easier to prepare for drought while we have less dire conditions sometimes. So that's why I would encourage us to try to keep these funds as flexible as possible so that the administration can use them for the highest and the most pressing needs and that will give us the best bang for our buck. So I'm not sure that it's always drought or flood.

Yeah, maybe I can add a point on that. I think in the 2021 and 2022 budget acts, there has been about $1.5 billion included for immediate drought support. And that really because of the multi-year drought that we were faced with, it really kind of runs the full spectrum of different sorts of drought investment, including drought relief and, as LAO mentioned, the drought contingency.

On the other hand, while we've been very supportive of flood investments, even in a drought, over $1.3 billion has been included since 2019 and about 738,000,000, I believe, in the 2022 Budget Act. Those flood investments have largely been for levee and infrastructure-type projects.

So it's not necessarily, again, while we were investing in flood, importantly during a time of drought, it didn't kind of run that full spectrum in the same way that we had for the drought, just given that that was sort of the immediate that we are facing.

So just want to say I fully understand and agree with your comments in terms of being prepared for drought and flood at all times and given kind of the weather whiplash that we've been facing in the state and will continue to face in the state.

But I think this contingency is really focused on flood to fill a gap again because we've kind of covered the full spectrum of drought and have quite a bit of investments that are still there to help support communities from the impacts of drought, whereas we don't have the same level of relief in the flood space. So that's why this is really focused.

Thank you. Final quick question: I appreciate the numbers you've given us on the number of firefighters, but how many firefighters does CAL FIRE have this year compared to last year? And then the other specific question was, why do we need hundreds more? And you did a pretty decent job of why we need more this year because we have less sort of contingency. But if you could just give us that number. How many firefighters did we have last year?

How many firefighters are we going to have this year?

I don't know that I have the exact number available at my fingertip. I can say that, last year we did a similar level of augmentations. I mentioned, there was the 432 flexible that was in the base budget. This augmentation makes sure that it stays in place. The things that were added last year that would certainly be in place this year that weren't last year is we were phasing in the Relief Staffing Proposal. That's a four-year phase-in.

So there's a total of 455 firefighters that will be added. All 455 firefighters positions. Most of those are firefighters, but that will be added over a four or five-year period. There are about 200. Maybe I shouldn't be saying numbers that you're going to remember, but I think it's about 200 that are in the first year. Those are being filled. The rest phase in over that. And there are the 17 firefighter hand crews that were temporary and that are now permanent.

Most of that will be phased in this year that were temporary last year. But again, it's not really an increase because we had them temporarily. Now they're permanent. So it's sort of a continuing of that level from last year. So there is an increase of some firefighters. But I would emphasize that the biggest increase is really in that release staffing space.

And again, the policy discussion and sort of decision around that was to allow firefighters to take time off, not really so that there's more of them to surge up at a particular time. So the idea was they're working 60, 80, 100 days in a row, and we need them to be able to take time off at least every 60 days or something like that. And so that's really where that's focused. Having that proposal in place doesn't really augment our surge space.

It's more the health and wellness of firefighters.

Appreciate that. Go ahead.

Thank you so much. Helen Kerstein with the Legislative Analyst Office. Just a couple of extra points to add on. I also don't have exactly the numbers in front of me, as Mr. Medson mentioned. Some of it does ramp up, but I think it really is striking the investments and the augmentations the Legislature has made.

Last year was a big year, certainly with both the relief staffing and the addition of the 17 new firefighting crews. In total, I think CalFire got, and some of them are phased in, but I think about 1500 new positions. So that's a huge increase. And not all of those were firefighters. Some of them were support staff, but many of them were firefighters. We've really augmented CalFire's staffing tremendously. And that was just this last year.

If you look over the last, I think, several years, you'd see quite a huge increase in CAL FIRE's budget and staffing. So I think that is one question the Legislature will want to kind of have before it. We're operating off of a higher base than we were last year. And then also last year we were really anticipating a particularly severe fire season. This year, in some ways it's just a different type of year. We've had so much water, we've had so much snow.

In some ways it can add fuel to the fire in terms of grasses, but it also means we have snow sitting in many parts of the state. We still have snow on the ground. And so we're really operating in a little bit of a different situation than we were last year. And so, I am thinking about whether this sort of additional augmentation, temporary augmentation, is still necessary. I think is really important. A couple of other points I wanted to add on this piece.

One is that I did want to flag for the Committee that some of the ways that this proposal are structured really aren't entirely consistent with a one year proposal. So, for example, 500 new positions authorities are proposed, and typically position authority is not requested for these one year augmentations. Also, one of the things to note is that it includes some things that are like ongoing equipment, like the purchase of new vehicles.

So it includes the lease of new vehicles, but also the purchase of those vehicles, which take several months to arrive. So this is supposed to be sort of a one year proposal, but we do have some questions about sort of that longevity and the extent to which it makes sense to provide ongoing position authority and the purchase of new vehicles for one year staffing. Also, just another thing to quickly flag.

Sorry to take so much time, but one thing I wanted to make sure to mention to the Committee is that this proposal does reference that many of these resources have already been brought on board. They were brought on board in March. The Legislature is just hearing about them because they were brought on board through the department's Emergency Fund Authority. And the Administration uses that authority very broadly to enable it to bring on board resources, sometimes for a period of a number of months.

And it's supposed to be during times of high fire risk, and they use that to bring on board many of these resources. So, a few weeks ago, I think May 1. I said April yesterday, but I realized it was May 1.

We've released a report looking at the eFund and the structure of that eFund because we have some concerns about the use to bring on this type of resource in this type of situation where we really think there is a policy choice in front of the legislature. Do you want to have this augmentation? What mix of resources do you want?

And we think that doing the augmentations first through the eFund, the way that they were done. For example, in this particular situation, it basically means that the legislature can't exercise that authority and control because these folks already were authorized, and probably already some of them are probably already on the ground working. So it makes it really hard. So we also wanted to flag that for you and that piece for you, and we are happy to send you that piece as well if that's helpful.

Go ahead.

Just respond to a couple. So a couple of clarifying points I'd like to make is don't dispute the number 1500 positions roughly that were added last year. But I did want to make sure that it's clear that probably about half of those are for seasonal firefighters. And I think it's important to remember that those positions last nine months. The actual people fill a nine-month period of time. And so it's not a matter of 1500 positions available all at once.

Some of those are you have to phase in the nine-month lag time: "Do you have a full year in?" And when you're talking about the number of engines and things, that's a significant number of them. And so you can't just look at 1500 positions and say, "That's 1500 more firefighters available at one given time." There is that seasonal flow, if you will, and then the staffing shifts. Stuff that they've covered.

The other point I wanted to make is the April augmentation through the eFund is not atypical. We do an eFund augmentation along in the spring each year for the last several years, as well as we've done these augmentations through the budget in the fall.

The reason why they're done in the spring that way is that when you bring in these hand crews and these seasonal firefighters, you have about an eight to twelve-week training period before they're actually able to go out and serve in their crews, and on the lines. And so you need a time to hire them up and to train them so that when the conditions do get bad, they're ready to go.

The other piece that I would point out on that is when we authorize something from the eFund, we can only provide funding through the end of the fiscal year. So if the legislature chooses not to approve the Fire Augmentation Proposal, that's in the May revision on June 30, the funding and those resources will just go away. And it's not like we can commit them and use them through the rest of the year without doing a subsequent emergency-type action that we could absolutely talk with you about.

And then those temporary firefighters would be laid off?

Well, we'd stop filling them and then, yes, the ones that had been we would have to be left let go if there's not funding for them.

I think, given the projections of where the budget is going to be for the next couple of years, both by the administration and the LAO, I think it's prudent for us to be very conscious of how much we're growing the base and what do we have to maintain as we go down the road in the future. While we're on this issue too, I appreciate two members showing up. Do you have any questions on this item?

Thank you. Maybe just a quick follow-up to that. Do we feel like we have enough firefighters adequately staffed now for the needs of CAL FIRE? Where are we at in terms of necessary staffing?

So I'll say two things on that. First of all, I would be remiss to note that the Director of CAL FIRE is actually here if you guys would like to hear from him. But I'm happy.

But I'll tell you one follow-up: is the Department confident we can properly respond to the next catastrophic wildfire event? So, taking it up a pay grade on that, maybe Sophie wants to?

I will absolutely let the Director respond to that. What I will say is that in terms of where we were last year, we have very similar resource levels. We just talked about some enhancements that have been made, and some of that's available this year, too, to help out where there's probably the biggest. When you look at a multi-year window, it wasn't that many years ago, probably seven or eight, where we had a lot more hand crews through the Inmate Conservation Camp Program, that's decreased substantially.

And while we've made some investments in the Conservation Corps and in CAL FIRE and the Department of Military to sort of backfill some of that, there's still a gap there. Chief Tyler, the director, will talk to you about how important hand crews are.

Thank you, sir. Good morning. My name is Joe Tyler. I'm the director and fire chief of CAL FIRE. Thank you for the opportunity to provide updates. Your specific question was related to whether we are prepared for the upcoming wildfire season. As I've said many times, the State of California has a robust fire service organization above and beyond just CAL FIRE. No one agency in the State of California can battle a catastrophic fire by themselves.

But it's having the resources available and the proposal before you really provides staffing in all aspects of response, prevention and resilience. I'm hopeful that the success of building and having these resources available will offset the potential for billions of dollars of losses, personal losses, economic losses, losses to our watershed, losses to personal costs, and those recovery costs as well.

Adding these resources that are in this proposal today bolsters our ability to be able to respond effectively, and add the hand crews necessary that we are significantly sitting in a deficit. When we look back at the hand crew population in and of itself, we have found ourselves from having 196 CDCR hand crews just specifically concentrating on CDCR to 192. I'm sorry, 196 to 192 to 152. And currently, of the 152 this week, 60 are staffed.

We have built upon our relationships with the California Military Department to build 13 Task Force Rattlesnake crews for fire prevention, resilience, and response. We have built our relationship with the California Conservation Corps to staff up to 32 hand crews and then opened the Ventura Training Center to add crews there. But when we look at proposal for hand crews, we are still sitting in a deficit. Hand crews are critical.

They go places that other mechanized equipment cannot go, so continuing to build out of that deficit is one of the actions that continue to move forward here.

Great. The one issue I want to revisit with you because we had a healthy conversation about that, but with the staffing that you have with the resources that the state is committing, we get the most bang for our buck. If during all of these periods where we don't have intense fires, we are using those resources for fire prevention, brush clearing, getting those defensible spaces created, and that is a cultural shift that we hope you're going to be.

Very successful with particularly with all the snow on the ground right now. We have time and we may be able to make some real progress. And it's one of those unmeasurables that it'll be hard to sort of measure how much success we have. But to the extent that we can identify later, perhaps years down the road, how those things did create critical breaks, critical strategic opportunities for you to keep a fire from becoming bigger. That'll be full circle when we come back.

But I hope we can get a lot done on the fire prevention side while we're staffing with greater resources and have less fire out there to deal with. Best investment we can make is fire prevention.

Absolutely. I am committed to prevention and resilience. And if I may, Chair Bennett, it's important to recognize that I am trying to recreate an organization that is, you've heard before, a total force organization where we have had serious discussions about having designated resources prevention, designated resources for fire protection. As I said yesterday in the Senate as well, I don't care from a Civil service classification if you are a forester, a fire captain, a forestry aide or a firefighter.

If they are not responding to emergencies, I expect them to be doing resilience work and fire prevention work on the ground. In 2022, we started the season significantly with the Colorado Fire on the Big Sur coastline, followed by March, the coastal fire in Laguna Nigel that burned some significant homes that had defensible space clearance but could have been better home-hardened.

And then, we found an opportunity in September of 2022 where Mother Nature assisted and brought precipitation across California that allowed all of the resources that we normally designate as firefighters or are perceived as firefighters to conduct 14,000 acres in the next 40 days of fuel reduction efforts. Those resources continue to do that to meet the targets that we are obligated to meet and exceed moving forward.

Great. Thank you very much. And it's time for us to move on to controversial trailer bills as we're trying to keep this section moving. But thank you, everybody. So the most substantial trailer bills are by the administration, and we've been going at it for an hour here. I will step out in a minute and turn it over to Mr. Connolly to run this. But go ahead, kick us off.

Yeah, so I'll kick us off. The first trailer bill Language is the Drought and Flood Streamlining Trailer Bill Language. So, this proposed legislation codifies provisions from recent executive orders that allow for diverting flood flows for groundwater recharge purposes, subject to various restrictions to protect water quality, infrastructure, and wildlife habitats. These provisions make it easier to capture floodwater to recharge groundwater by setting clear conditions by diverting floodwaters, by which we can divert floodwaters without permits or affecting existing water rights.

In addition, this trailer bill language extends existing statutory exemptions from CEQA and other requirements when the state is experiencing drought conditions as defined by a declared state of emergency or when the water board finds that drought conditions necessitate expedited action. So this was modifying trailer bill language from 2021, which was also modified last year.

In addition to recognizing the extreme drought gripping the Colorado River, the proposed legislation also extends certain streamlining provisions, or streamlining efforts related to water conservation, specifically in the Colorado River. And with that, I will turn it over to my colleague to go over some of the Energy Trailer Bill.

Yeah. Good morning. Eamon Nalband, Department of Finance. So, the May revision includes $7.1 million of resources for the Energy Commission, the Air Resources Board, and the Department of Industrial Relations to implement the Special Session Bill SBX-12, the bulk of which will go to CEC, about 5.9 million.

SB-2 gives CEC the authority to establish a maximum margin for refiners, set a price gouging penalty backed by experts in information following threshold determinations, collect information needed to effectively monitor and deter harmful conduct by the fuels industry, and leverage information collected to assess, plan, and make recommendations on ways to reduce oil prices.

The resources will provide greater visibility into the transportation fuels industry's pricing, contracting, and marketing practices. Participants, including a new independent division within the CEC to oversee the adequate, affordable, and reliable supply of this resource. At the May revision, we include some technical statutory changes to SB-2, primarily for the Transportation Fuels Assessment. We're introducing additional clarity on the work group composition.

This involves membership from but is not limited to, environmental justice, labor, environmental issues, public health, land use interests; state fuels producers and refiners, and relevant state, regional, and local agencies. Additionally, we introduced some enhanced private data protection for disclosure to the independent Consumer Fuels Advisory Committee to ensure there is not a resulting negative impact on market competition. So those are the primary changes in SB-2.

Additionally, the May revision proposes language to help support the Energy Commission's main operating account, the Energy Resources Program account, which has been in a structural deficit for the last 10 years. The Energy Resources Program May revision accounts IRPA revenues are linked to the sale of metered electricity or front-of-the-meter generation and consumption.

As building and appliance standards have become increasingly more energy efficient through the utilization of behind-the-meter generation, IPA's revenues have decreased steadily. In 2324, the revenues are estimated to be around 71 million, while expenditures are estimated to be around 92 million. This has led to a structural imbalance within the fund.

So the proposal at the meer revision consists of raising the statutory cap on the IRPA surcharge, tying the surcharge to the Consumer Price Index to account for inflation, and extending this IRPA surcharge to behind-the-meter generation. With that, I'll turn it over to my colleague.

Good morning, Mike McGinnis with the Department of Finance. The May revision includes...

You have to be closer to your mic, please.

The May revision includes the fiscal stability for boating programs proposal. This proposal seeks to resolve the long-standing structural deficit within the Harbors and Watercraft Revolving Fund. The proposal includes an increase in the vessel registration from $20 every two years to $80 every two years. This increase is necessary as the registration was last increased in 2005, the only time it has been increased in the 40-year history of this program. Additionally, there are two ongoing expenditure reductions included in the proposal.

The first is a $5.3 million reduction to the aquatic invasive Species program. This reduction would only reduce activity in areas where the aquatic invasive species program does not directly benefit recreational vessel operators, and the other reduction is a 6 million reduction to the Vessel Launching Facilities Grant program.

Instead of funding this program on a current service level approach, we will make determinations every year to identify projects which are most suitable for these grants and also make decisions based on the availability of the balance of the fund to support these projects.

Thank you. LAO?

Thank you again. Rachel Ehlers with the LAO. As I mentioned at the outset, we're still looking into these proposals. There are certainly merits that we see. Addressing funding shortfalls has merit extending charges to behind-the-meter consumers so that they pay their fair share of regulatory costs makes sense. Updating fees that haven't been updated in decades makes sense. Streamlining and facilitating floodwater groundwater recharge makes sense. But the details matter, and you just don't have a lot of time.

Nor do we, as your staff trying to help understand these. So, I think one of the key tasks we are focused on right now is trying to understand what requires urgent action from you. And I think our overarching recommendation would be to defer decisions on anything that doesn't require urgent action, just to give more time to understand what the potential implications of these are.

So, again, we're working hard to understand, and we'll have recommendations to you, hopefully by the end of this week, through your staff for some of the specific pieces we think do need action now. For the rest, again, we would suggest taking a little bit more time.

Thank you, Members. Questions? Go ahead.

Yeah, just kind of a point of clarification. So, regarding the meter fee charges, is it anticipated those will be used to fund new positions for the enforcement of SBX-12?

So I would say there's not a direct correlation. The positions for SB-2, similar to all CEC operations, would come from just the available fund balance for the Energy Resources Program account. Multiple expenditures hit that account and require year-over-year looking at the actual revenues coming into the account.

So, the extension to behind-the-meter does support CEC operations. SB-2 is a part of CEC operations now. So, in time, yes, those contribute to it, but you can't look at them in isolation. There's a whole bunch of things that impact that.

Yeah, I think it'll be important to clarify that that's not something that obviously was discussed as part of the debate or known to the public necessarily. That kind of a new tax would go toward funding that. So I think just clarifying that.

And again, I would say that they're not related. So, we're proposing to fund SB-2 resources in the budget year with the available fund balance of IRPA. IRPA has been in a structural deficit for 10 years. We proposed the same solution for the last three years so they could advance independently of each other.

I'm going to start with voting with the fee increase. Note, you're going to reassess every four years. We have been trying to push, and it seems like the administration has supported as much as possible. Having our fees go up by the consumer price index at least, and then you can still reassess if you have structural changes. Is there a reason why you're not using consumer price index increases? Even if they're staggered in so they come in $5 increments for that voting fee?

So the administration would be open to including such a mechanism in the reassessment. The reason that we've specifically identified a four-year window is that the program operates on a biennial registration structure. So that would give us two years of activity at the proposed rate increase, at which point the administration would come back to the legislature to clarify the four-year period that was identified in the proposal is not any sort of statutory authority to do this unilaterally.

This would be a subsequent proposal if any changes were requested that goes back to the legislature.

So you're open to having both the four-year review and a CPI?

We could certainly take that into consideration, yes.

And want to go to the waters. I'm going to have a number of questions on the water, so I'm going just to jump. So basically, you're saying there's no connection between the behind the rate increase, but fundamentally, are there other examples where we would have the electric ratepayers paying to investigate gasoline price gouging? How do we justify that to electric rate?

So I have some folks in the CEC here to help, but I would say that the Energy Resources Program account funds all of the CEC's activities. They had activities prior to the new legislation that also required them to look at refining activity within the state, which was also funded by the Energy Resources Program account. This is the same thing. It's an operational Fund. It's not linked to the activity. Got it.

Thank you. So water granting a water right for groundwater recharge to private parties: how does that help small disadvantaged communities that rely on domestic wells?

Great. I appreciate your question, and I will actually turn that question over to a representative from the State Water Resources Control Board here.

Great, thanks.

Good morning, Chair and members of the panel. My name is Erik Ekdahl. I'm the Deputy Director for the Division of Water Rights at the State Water Resources Control Board. I'll try to answer your question and any others that might come up. So I think the first thing to clarify is that the trailer bill language would actually not create a new water right. It's actually clarifying a scenario where you don't need a water right.

And the diversion of flood waters strictly for the purposes of flood control historically has not needed a water right in California. This trailer bill would continue that, but clarify when and how you can kind of identify when flood conditions are occurring. This really emerged over the course of this winter when we had the record number of atmospheric rivers hit California. We had a number of inquiries, is it a flood condition? Is it not? Who's responsible for identifying when imminent threat downstream is occurring?

And it turns out there's no single one entity that's responsible for determining when or where there's a threat of flood. It can be distributed between flood control boards, cities, counties, other overlapping entities. And so this proposed language would streamline who can identify when there's a threat downstream, but it would not require a water right. In doing so, it does help recharge aquifers which do affect disadvantaged communities. And so anytime you can get water into the aquifer without affecting downstream water right holders or the environment, while also minimizing damaging flood is a net benefit.

Given how newly we've been focused on sort of the public trust doctrine and groundwater being a public resource, which SGMA clearly sort of identified. There is a great deal of confusion out there with this trailer bill in terms of, is this granting a water right and a new water right? The language you just referred to as a right to divert, which a question is, does that translate into a water right? And does it translate. Because in your position, does it protect the public trust doctrine or does it put it at risk?

The proposed language, in our opinion, would protect the public trust doctrine and would it actually add new elements to better protect it. Because flood control diversions historically have not required a water right. Reporting has not been required as well. And so this has been going on for years or decades, but we don't know about it. And so the provisions here would add an element where there are reporting requirements to the Board. There would also be enforcement authority and that would be a net positive step.

Okay, I appreciate the intention of what you're trying to do. There is a lot of confusion out there. I shouldn't say confusion, but disagreement maybe, about what this does or doesn't do. And I see that great body language coming from LAO right. So here we go. Right.

Yeah. Thank you, Mr. Bennett. Sonja Petek with the LAO. I think the issue that you're highlighting is one of the reasons that we're suggesting that this trailer bill language might need a little more time to discuss, to consider, to make sure that the actual language matches up with the intent behind the language. And I think what you're highlighting is there are differing interpretations of what the language does as currently written.

Which gets us to the next. Why is it necessary for the Legislature to codify by June 30 the Governor's executive order?

We believe that there is an ongoing immediate threat right now, and by moving this proposed language into law, it would facilitate and make easier additional flood diversions throughout the summer. The record snowpack is going to keep melting off. They believe that it may go well into July and this would allow everyone to take advantage of those diversions while minimizing risk to downstream.

Okay, thank you very much. We're ready to move on. Go ahead. You have another comment?

Well, sorry, I was just going to say we don't disagree that there is definitely going to be some snowmelt and potential flood risk. If you don't want to approve this language right away, there is another option available, which is the Governor could extend the executive order or even issue another one this coming year if we face floods over the winter and spring next year too.

Thank you very much, appreciate that. Thank you, everybody. And we're ready to move on to issue four under the guidance of Mr. Connolly for a couple of minutes.

So Eamon Nalband. And I'll just begin. So the May revision requests $1 billion to implement the SB 846 Clean Energy Reliability Investment Plan funds, which are funds for reliability and enabling investments that will accelerate the clean energy transition. The Governor and Legislature sought to dedicate $1 billion over three years through SBA 46 to support clean energy reliability through a plan developed by the CEC in consultation with the Public Utilities Commission and the Air Resources Board.

The plan, presented at the May revision proposes four categories of investments. Enabling investments of about $67 million, which primarily focus on planning or setting up initiatives to make resource scaling possible. This includes $2 million for transmission planning, $13 million of support for greater involvement of community based organizations to inform planning, $32 million to support the timely deployment of long lead time resources by the standup of a central procurement function at the Department of Water Resources.

And $20 million to Governor's Office of Business and Economic Development to provide resources to entities to address the growth and interconnection and permitting. The next two categories of the Clean Energy Reliability Investment Plan support scaling demand side and scaling supply side resources using different approaches to carry the boat, and this carries the bulk of funding at $745,000,000.

For $445,000,000 in the demand side category, we see priorities in improving demand flexibility in general to take greater advantage of technologies already being deployed and specifically expanding the ability of the state to benefit from vehicle to grid and vehicle to building capabilities. For $300 million in supply side, the resources will support diversifying utility scale technologies and long duration storage, most of which will support net peak. Resources will also be available for innovative ideas that are not easily funded under existing programs.

This pool of funds could also be used for cost share or for federal opportunities. And lastly, the plan supports 148,000,000 to expand resources available during extreme events in the state by providing additional resources to demand side grid support and Distributed Backup Assets Program at the CEC initiated last summer as part of the Strategic Reliability Reserve. With me here today are a couple of Department representatives, and we're happy to take your questions.

Thank you. I'm Sarah Cornett with the LAO. So just as a refresher, this plan is being submitted through the requirements in SB 846, which was the extension of the Diablo Canyon plant. And that bill required the Administration to develop a plan of $1 billion of investments in reliability over three years.

So while reliability clearly has merit, the budget situation has changed since this bill was adopted, and we think the Legislature may want to consider whether it wants to move forward with these investments now and potentially prioritize some General Fund savings. In addition, more than 3 billion was invested in reliability programs last year through the budget and the energy package, and not all of those funds have been spent.

So for some of the programs that the plan is proposing to invest in, including the Distributed Electricity Backup Assets, and the Demand Side Grid Support Program, there are still funds remaining in the balance. So it may not be necessary to provide those programs with additional funding at this time.

If the Legislature wants to act on the plan now, if it's still a high priority for this year, we think you could consider acting on the 100 million proposed for 23-24, but potentially wait and come back in a future year for the funding proposed in the out years just to again think about General Fund savings. And our office is projecting that that will be something that you will want to be thinking about over the next couple of years.

And if you do choose to move forward on the 100 million for this year, we recommend that you may want to consider whether the funding for DWR to stand up the central procurement entity is needed. As we've discussed in this Committee, the central procurement function is proposed in trailer bill language, and it's not yet clear, one, if that will move forward, and two, if DWR would be selected as a central procurement entity under the language. Our recommendation to you is just to consider whether you would want to provide that funding now instead of waiting until DWR is formally selected. Happy to answer any questions.

Thank you. Are we done with everybody's presentations? Yeah, go ahead.

If it would be all right with the Chair, I'd love for our CEC lead to give a short overview as well.

Great. And we welcome going back and forth if you would love to have people challenge each other's comments and assumptions, et cetera. Right, so go ahead.

Thank you so much for the opportunity to go back and forth and challenge each other. I thought it'd be worthwhile just taking a few minutes to talk about the process that we took to get to the plan. So, as was mentioned, required in SB 846 for us to develop the plan with stakeholder input and in collaboration with CPUC and Cal ISO excuse me, and CARB. So last October we initiated with a public workshop to give an overview of the approach that we were taking and start to get stakeholder feedback. We had put out a request for information in early November for all entities to provide input on priorities they felt were important for the plan received over.

Received over, I think, 50 different entities responding to our RFI and that included technology associations and vendors. Included nonprofits, both from an environmental perspective and from stakeholders, and also some utilities provided some input as well on that. We assessed those comments, we developed a draft report and put that out in early February, received comments on that, and then it went to our end of February business meeting for adoption by the Commissioners, and then was submitted to you by March 1, which is the deadline for the report.

And throughout that process, we were also collaborating very closely with CPUC and CARB on the development of the program and the initiatives. As was mentioned in a previous hearing, we have discussed some of the major challenges facing the state, including the need for improving our planning processes to support reliability, our need to scale resources, both supply and demand, as well as making sure that we are having some ability for extreme events and being able to support those.

So the proposed investments in this plan align with those priorities to be able to try to increasingly improve our planning process in specific areas. The vast majority of it goes to scaling of demand and supply side resources, which is consistent with the input that we receive from the stakeholders and with a small amount going to provide additional augmentation in extreme events. So with that, I give my overview and happy to answer any questions you may have.

Do we have any questions from Committee Members? Assembly Member Rivas.

Thank you. I have a question for the LAO. You mentioned that we should consider potentially holding off on allocating the 32 million to the central procurement entity until the decision is made on whether DWR is the entity. Do you mean later this year or wait until the next year to allocate that? And would that cause any delays in getting this started?

Yeah, I think in terms of holding off, we think it is worth considering potentially waiting until next year once more is known about the fate of the trailer bill. The Legislature could always elect to come back and to provide DWR with those resources should they be selected to procure. And again, there may be some delays as a result in terms of DWR staffing up, but the plan does indicate that the funds would primarily be used for contract consulting support, and those timelines generally are shorter for bringing on those types of supports instead of full time staff, which could make it a little bit easier.

So I just want to sort of emphasize some of the comments from the previous hearings on why this funding is needed now. So ultimately, DWR needs this funding to begin establishing the central procurement function in order to be a viable option for the PUC. And so, unfortunately, any lag in that is going to prevent the Department from setting up the necessary program to be a viable option in that process.

And then just to add on to my colleague, as part of the CPUC process and proceeding, that will involve stakeholders as well, too, knowing that DWR doesn't have a CPF fully built out will also kind of create some impact on how they go through their proceeding as well. So I think there are some impacts to delaying funding for the 32 million on the larger CPF question.

Okay, you wanted the back and forth, so we'll give it to you. Again, Rachel Ehlers from the LAO. I think our main concern here is just, the main question before you is do you want to spend 32 million of General Fund in a time when the General Fund is really short to establish an office that may not be used? First of all, you don't know whether you're even going to authorize a central procurement function that the legislation is still in process for that.

So it's certainly premature from that perspective. But even once you do adopt that, the way it has been presented by the Administration is that there's not certainty whether DWR will ultimately be selected by CPUC. So spending 32 million to staff up an office and get it ready to be an option that may not be selected and then would not be used, I think in a time when General Fund resources are really scarce seems like a pretty sort of questionable use of General Fund resources.

But if I could ask LAO, if in fact DWR is the agency that is selected and has this responsibility, would it be better for them to have this funding approved in this budget?

Certainly, based on the information we've gotten, that would avoid delays. But I guess it's just the question before you is, is the potential of avoiding those delays worth the risk of spending $32 million that may not be needed?

And I would just offer, just to get it out there, that concerns about delays are, I think, a significant issue when it comes to power reliability, number one. And just, I'm not reading anything that indicates DWR is not most likely going to be selected. So I think that, I very much appreciate highlighting that for us, those two things. Since we're all going back and forth, I would get out there. We have a lot of public comment that we're trying to get in. I don't have any questions on this. Any Members have anything else on this?

Yeah, maybe just a couple and did appreciate that conversation we just had. How does funding the Distributed Electricity Backup Assets program or DEBA and the Demand Side Grid Support Program, which both fund fossil fuels, advance the state's clean energy goals?

Happy to answer that question, thank you. So the combined Strategic Reserve, both the DSGS and the DEBA programs, will provide additional resources in the event that we have some of these extreme heat events that we've seen in the last few summers. And we feel that, when we look at the state's ability to build out clean energy resources at the scale and the speed necessary to meet the orders by CPUC, that there is risk from supply chain interconnection permitting that may make those difficult to come on in a timely fashion, and that having some additional funds, which was a relatively small amount of the overall 1 billion, additional funds to those programs, would be valuable to providing that additional resource. For DEBA, the Distributed Electricity Backup Assets program, that is intended to be clean energy resources.

So it is intended to help replace and get rid of fossil backup assets that we have now and build out new emergency assets but also focus on the clean energy technologies. Those guidelines and programs are in development, and we anticipate having GFOs coming out very shortly to get those programs started and those technologies in place. In the meantime, we feel that having some additional support from the Demand Side Grid Support program is valuable given that it does provide us with utilizing existing infrastructure, albeit not the best, but existing infrastructure that can provide backup during these emergency situations.

I appreciate that. And more broadly speaking, reports show that we are still mainly funding dirty energy sources for grid stability during peak hours like diesel and natural gas generators. Does the Commission have a plan to transition away from these sources?

May I ask for a clarification? Are you referring to the Strategic Reserve Assets that are being procured for emergency or are you referring to just general resources that are being procured for the state?

Yeah, basically just following up on what we were talking about. Yeah, basically for grid stability, there is still a lot of expenditures toward dirty energy sources. So just what is the plan to transition away from that?

So I would say that the Public Utility Commission has a very strong process in their IRP and their RA programs to ensure that we are procuring clean energy resources moving forward to meet our greenhouse gas goals, as well as SB 100 goals. And so the bulk of new procurement is going to be in clean energy resources. For the backup assets, that is Department of Water Resources Strategic Reserve portion, I would prefer to have Department of Water Resources respond to that question first.

Good morning. Delphine Ho, Department of Water Resources. Happy to respond to that. I agree with my colleague from the CEC. I think there are a lot of planning processes there to look at our energy transition and getting to our ultimate goals. I think for the Department of Water Resources, the pool of resources that we have is really those extreme event resources that are backstop. And as I mentioned, we are taking measures to look at our portfolio more and try to move away from fossil fuel.

But I think in the beginning of the portfolio, when we started during that emergency event, it was fairly gas-centric. So we're looking to improve in that. But in this energy transition, I think where we have struggled is the net peak shift where so much of the solar energy the state depends on goes away during those hours when there is still significant load. So that's something that we have been working closely on together with all the energy agencies to address. Thank you.

I'd just like to make this comment while we're on this topic, and that is that distributed energy, it seems like our crisis is big enough that all options should be, all tools should be implemented. And it feels like we're not as interested in distributed energy. There's some resistance to distributed energy. And the advantages that I see is that if we have at the local retail level more and more people putting in solar, and if we required or we incentivized that, that be with batteries.

And we required that those batteries be tied into the system in such a way that they could provide demand reductions at our peak time. That all may happen so much faster than these big, large projects that are going to take more time and give us a significant amount of flexibility and also, I think, be very well received by the public that would like to participate and would like to feel like they very locally have some greater ability to protect themselves and their communities.

So I would just like to encourage the Administration to examine carefully the option of adding that and being more aggressive about adding that to the mix, that there does seem to be some resistance to the whole microgrid distributed energy. And I get that it doesn't work scale-wise. If you're only talking about putting on rooftop solar, that then shuts off, and we get no benefit of it because we don't need a lot of that at 02:00 in the afternoon.

But if you combine that with battery and combine that with the batteries hooked up and the technology is there now, these companies can all so that you make sure those batteries do come on at 08:00 o'clock at the peak hour. I hope that we would take a careful look at that as we move forward. Go ahead.

I want to say I agree with you wholeheartedly. The demand side is very important, which is why we allocated almost half of the billion to the demand side.

We received a substantial amount of feedback from stakeholders that the focus on demand side is the most important and we've received information and opportunities for a variety of strategies and technologies that could be applied. And so those could be, as you mentioned, pairing storage with solar; could be additional controls to be able to control equipment at homes or other businesses.

Also, controlling of AG pumping, controlling water, wastewater, a number of activities that we can take on the behind-the-meter that can help support our overall help the customer on a day-to-day basis, but also support the grid any day, but hopefully in particular on those really bad days.

It's really a key emphasis of what we have in that demand side portion and work very collaboratively with the CPUC and their existing programs to make sure that we can utilize that demand side funding to augment and continue to build upon existing programs as much as possible to make them better and make them more effective for customers. Can we help reduce the cost of panel upgrades?

Can we reduce the cost of distribution upgrades that go along with the solar and storage and make those programs even stronger so it all goes into that bucket?

And does that include specifically trying to develop a program that actually has a pairing of people having charged their battery during the day, using it at the peak hour, using the battery and literally instead of them continuing to draw from the grid?

I'm not aware of that program out there yet, if it is out there, but does that include developing that kind of program?

So we have proposed or we have been recommended and we agree that those kinds of pilots should be made available to demonstrate their value. And so that would be included in our considerations for that demand-side support. In fact, there were a number of stakeholders who also recommended those kinds of approaches that we want to consider.

And so part of the first year of the funding is for us to be able to have the additional stakeholder feedback because we did receive feedback from stakeholders saying they would like even more stakeholder involvement in the individual development of the initiatives. And so we use that first year to build out the strategy for year two and year three, where the legislature had the most money allocated.

And so the first year is actually being able to create those initiatives that could be rolled out very quickly in years two and year three, which is also why we recommend having that have that full funding.

Final question: what about S-chip, the self-generated investment program? Can you give us a quick update on that?

I would prefer that the CPUC refer to that, that's one of their programs.

I'm not sure if there's anybody here from CPUC who can speak to the S-chip program.

Okay. I have a feeling you'll make the same. There we go. CPUC, right? Yeah. So, the S-chip program, right? Is the CPUC considering requiring batteries to be able to have this demand response and requiring batteries to be able to export at a certain period of time and coming up with some incentive for them to have that to do that?

Yes. Thanks, Chair. Good morning everyone. Rachel Peterson, Executive Director of the CPUC. I was sitting in the back listening to all your excellent questions and wondering if the CPUC was going to be asked to come to the front. I'll do my best to respond, Chair. Although, as you know, my expert, Deputy Executive Director Tesfai is normally the one who can offer a lot of detail. She's not with me today. But first, as to your questions to my colleague about the pairing of solar and storage.

We actually accomplished that in the new NEM program. So the new NEM program is an incentive for households to purchase both solar and storage in order to be able to discharge and serve their household exactly at that time during the evening peak when the solar panels themselves are not generating any longer. So we've set exactly that system up not as a requirement, but if you join the NEM program, then the incentive works to ask you to purchase both of those types of technologies.

With SGIP, it's more a voluntary program. It is not a mandate by any means. And so it is focused on low-income communities, very climate-vulnerable communities, and it is targeted towards our highest fire threat districts in California. And so there's an incentive that provides some assistance to people who want to purchase the backup battery and install it in their homes.

So do you have anything else since you're just pulled up based on all the questions that you heard that you would like to just...we're going to let you finish this up because we're going to move to public comment right now.

I thought my colleagues did an excellent job of answering all of the committee's questions. Thank you for the opportunity.

Thank you. And then committee members, before we go to public comment, do you have any comments on the cuts? We covered that in issue one, the cuts, and you were not here. I just want to make sure that you don't have anything that you want to add. Mr. Garcia?

Yes, Mr. Chair, and thank you. I'm going to focus on the climate budget conversation that took place earlier and so it may require some other folks to come forward.

But looking at some of these additional cuts and the dependency on a future climate bond is both good and bad. Because on one end, we do know that there is a conversation taking place in the legislature as it relates to a climate resiliency bond that could potentially backfill up many of these proposed cuts that are in front of us.

The flip side of that is that the voters may say we're not ready to take on additional debt in that capacity and therefore leaving us in a really unfortunate situation. Many of these proposed cuts, and I'm looking down the list here, water recycling, including direct impacts to items in our district, salt and sea restoration, climate community resilience centers. Really, these investments that were proposed and projected were, in some aspect, very modest investments that we decided to make for the next two years.

And the cuts that are in front of us are significantly steep. For example, the statewide parks program is looking at now getting $86.6 million of what was a $380,000,000 project. Prop 68 put about $700 million into that program to build parts, rehabilitate parts up and down the state of California to address some of the deferred maintenance on statewide parts. That money went out the door in four years. It was oversubscribed, and I don't remember what the number was.

But just give you an example, the cut that we're proposing there and just leaving $86.6 million good for a couple of $100,000 grants to rehabilitate parks and maybe build new ones, but it is not going to go very far. So I'm just wondering what is plan C? Because we have plan A. Plan B is the bond.

What would be plan C? What is the Department of Finance Administration thinking about as it relates to these particular proposed cuts in the climate area that make reference to the climate bond possibility?

Good morning. Krystal Acierto, Department of Finance. I'll just say, I think the approach, as my colleague had mentioned earlier, was really trying to take somewhat of a balanced approach in trying to find ways that we could protect administration priorities, but also acknowledging that there is a significant General Fund deficit and revenue decline that we're faced with as part of the May revision.

And so I think the thought process behind all of these shifts to bonds was really about trying to find a mechanism to protect these priority investments. We agree with you. These are really high-priority investments. Also mentioned that these aren't shifts for necessarily the entirety of the funding that's been provided for these programs. So most of them actually have funding that's also being maintained as there were sort of multi-fiscal-year investments for several of these programs.

But I think that the mechanism that we're taking here to shift to the bond really is kind of getting at what you're talking about, which is trying to protect these investments in the face of general fund revenue declines. Not just at what we're looking at now, but as Elio mentioned and we've alluded to, there's potential additional revenue declines that we might be faced with in the future.

And so shifting these to the bonds provides, while there is uncertainty around voter approval, of course, some certainty in being able to try and protect these programs in light of those potential revenue declines.

Have we exhausted all the possible investments that could and have a nexus to emission reductions using the GGRF fund? That seems to be a much more stable funding source these last few years, and perhaps not utilizing as much as we could. Has there been a look at that particular approach for some of these specific investments that have that emission reduction excess?

Yeah. So, Sergio Aguilar, Department of Finance. So, in terms of cap and trade at Mayor Vision, we do have an additional shift of about $635,000,000, which are focused on Zev programs, shifting those that were General Fund to cap and trade funds. And part of what we've worked on over the past few months is a reconciliation of the fund itself to ensure that we have a clear picture of the availability of the fund balance.

And also we've updated the revenue projections to include the most recent auction. So there was an additional room that we found, and I think we've pretty much maximized based off of the most recent kind of revenue estimates that we have the available balance in that fund. And it's, as part of the Mayor Vision prioritizing, similar to the governor's budget, our investments in zero-emission vehicles to make sure that we're protecting those critical climate investments as well. Thank you.

Along the same lines, as it relates to the ZEV program, are we doing anything or considering any policy shifts as it relates to how we prioritize those investments going to the most economically disadvantaged communities for purposes of really making the infrastructure much more available? We've heard throughout the conversations about our investments that we're not seeing certain areas of the state, perhaps even that overlay overlap with our CalEnviro screen where we want to focus our biggest emission reductions and clean air efforts.

I think of areas in the Central Valley. I think of areas closer to the border that still when you look at the infrastructure out there, it just hasn't made its way to a place where then we're going to see a reactive situation where people will start buying some of the more affordable electric vehicles. Is there anything that's being discussed by the administration in the context of the shift, the investments that we're going to continue making this area?

Yeah. Thank you. Assembly Member Garcia, Christian Beltran with the Department of Finance. I would just note that there isn't any specific language that the administration is proposing to put into the budget to explicitly call out that particular type of shift into those disadvantaged communities.

However, many disadvantaged communities do benefit from these programs, and ultimately, the Air Resources Board and CEC both have a public process in terms of working with stakeholders to make sure that those stakeholders in these disadvantaged communities are contributing to the conversation about where these dollars are allocated.

I recognize that there is a stakeholder process and it's an extremely important you know, sometimes when things are that much more important, we talk about it here in the budget process, right?

And we put it here for purposes of being intentional and getting the outcomes that we're trying to achieve. So that's the reason to bring it up here. Lastly, I'd be remiss if I didn't bring it up. I'm looking at the Salt and Sea Restoration efforts, 30,000 acres of land that will be exposed with toxic dust. Clearly, the state has a legal liability. I'm looking at the proposed budget that was $220,000,000 over the course of two years. That was General Fund investment.

We're now looking at leaning on the bond and between what we're saying the bond will pay for and the commitments that were made, there's a $51 million shortfall from the commitments that we were looking at. And so for us, it's kind of bittersweet. On one end we're looking at funding it through a bond, but at the same time, that $51 million that we're accounted for won't be there.

So for me, it's almost motivation to double down or if not triple down on the investment that we call out in the actual bond for purposes of addressing this legal liability the State of California has in our region. With that, I just want to thank you for your presentation and answering the questions.

Name body language.

Yeah, just really quickly. Mr. Garcia, on your question about GGRF, I would just note that our office estimates that there will be about 460,000,000 of additional discretionary revenue available above the administration's estimates. We will know more later. There's actually an auction today, so we will know more soon. And we'll be in touch with the committee through your Staff to provide more estimates on GGRF.

Thank you. Assembly Member Reevis.

Thank you, Mr. Chair. I also want to comment on the climate investments that have been cut in the latest revision. I'm particularly concerned around the community resilience centers, transformative climate communities, and urban greening. All of those cuts affect communities that are affected by extreme weather events like extreme heat. We're talking about preventing our power from going off during those events.

But these communities, like mine, like the communities that I represent, we're bearing the brunt of poor air quality, the urban heat, and other issues and relying on the bond that may not our voters may not pass, and then further delays in the future on some of these investments that were very critical last year when we were working on these climate investments. So I'm just really concerned that we're not prioritizing disadvantaged communities in the state and by cutting these investments.

So, I appreciate your comments and would agree with you that these are very high-priority programs for the Administration, as I mentioned previously. Well, first of all, one, that's one of the reasons that we are trying to protect them by shifting to the bond as opposed to doing peer reductions to meet the General Ffund deficit that we're faced with. But the other thing that I noted previously is that we've also maintained funding.

I think for all three of the programs that you mentioned, there is funding that's being maintained. For example, urban greening. There's still 50 million. And the sister program, the Urban Forestry and School Green Yards program. All of that funding is also being maintained as compared to the governor's budget. And then I guess the third piece I would mention is that for some of these programs, there may also be federal funding available for the Transformative Climate Communities program that you mentioned.

I also had heard that previously too, that there would be federal funding for something similar to our Transformative Climate Communities. Will the same staff that work on TCC be working to distribute that federal funding through this program?

Is that how it'll work or is it a separate program?

Yeah. So I'm not an expert, and I know we don't have our OPR colleagues, but I will say that the federal program is modeled off of the state Transformative Climate community. So it is a very similar program.

I think one of the differences is that, obviously, the TCC program is a state-administered program, and that funding is going through our OPR program versus the federal funds that would not go through kind of the state's program.

But those staff are very familiar with all of the requirements, and the applicants to that program would be the same applicants who are generally familiar with a lot of the requirements for the...

I know that there's a lot of support that goes into getting a community ready to be competitive for the TCC. I know I represent Pacoima, that is a TCC community, and it was several years to get the community ready. And I know I'm sure OPR has lots of great resources.

And I'm just wondering how, if we're saying that the federal funding, there's going to be federal funding for this, but is it going to be a brand new program and very disconnected from this existing TCC that has built up the capacity and resources to help these disadvantaged communities be competitive and apply?

Mr. Rivas, I think I can help with that. My understanding from previous conversations with I think it's the Strategic Growth Council, actually, that administered program under OPR.

The applicants will apply directly to the Federal Government. So it's not funding coming through our state agencies, but they have asked actually to be able to carve out a little bit of their existing funding to support staff and provide technical assistance to applicants to help them apply to the federal government.

So, I think there is some effort at the state level to make our California communities as competitive as possible, even though they have to interface directly with the federal government.

Because now that it's a federal program, it's not really replacing the TCC funds because now we're opening it up to the whole nation, right?

That's correct.

So it's not like, zero, well, there's federal funding that will replace this cut. When we say that here, it's not exactly true.

Right.

Unless it's going to OPR and just...

I think you're exactly right. There's no guarantee that it's a dollar-for-dollar shift. We will have to compete against communities from across the nation. I think there is a hope that California will be pretty competitive because we are familiar with the structure of the program and how it works and we will have state staff helping our communities try to be competitive. But I think you're exactly right. There's no guarantee it's a dollar for dollar switch.

So as long as I think that technical assistance is still provided, which makes many of our communities competitive even within our state, and now we're competing with others across the nation.

Right.

So I think that technical assistance has to be part of this program.

Member Garcia, just one last question for both the Department of Finance and IO. So we're now at about $6-7 billion of what we're kind of putting in a bucket that could potentially be funded by the bond or at least the reductions that are being proposed in the climate space. Would that be a fair assessment of what might be acceptable by the administration as it relates to a climate bond moving forward or are we looking at additional investments that we're trying to make?

Yeah, so there's no specific proposal at this time of what the climate bond would look like in terms of magnitude and that sort of thing. So the Mayor Vision only includes this $1.1 billion that we are recommending to shift into the climate bond. But that's certainly not a cap on sort of what we envision as part of the bond. So as you'll recall, at governor's budget we had several shifts to the trigger mechanism as part of the governor's budget.

And so those are also very high priority Administration programs. And so we would certainly be open to also discussing those as potential shifts to the bond as well.

Thank you.

Thank you. So I think we're ready to move to public comment at this time. Let's start with folks in the room. If you could line up and limit your remarks to 1 minute each.

Yeah, coming from you, that means a lot. Can I? Go ahead. Good morning, Members and staff. Rico Mastradonado with the Trust for Public Land. We're primarily concerned about how this budget is protecting our most vulnerable communities from extreme heat, period.

Despite all the meritorious billions of dollars we spend on charging stations and electrifying cars and all these long-term goals, global emissions went up by 1% last year. The world keeps getting hotter, and there's nothing we can do about it for the foreseeable future. Yet the governor zeroed out urban greening, urban forestry, statewide park program, TCC, and the January budget, and now we're suggesting it to shift all those programs to a future bond. The one thing that is counterintuitive to me regarding a bond is urgency.

If we pass a 2024 bond, that means the money isn't going to get out the door until 2026. So what are we telling our most vulnerable communities who are going to be harmed or die from extreme heat that you can wait three years for money instead of taking it from the general gund, especially when we have additional GGRF we can look at? Decisions are tough. It's a zero-sum game. You may have to take money from somewhere else.

But the health and safety of people that are in our most vulnerable paces, I think, should take the highest priority. Thank you.

Mr. Chairman, Members, Horacio Gonzalez on behalf of the Salton Sea Authority. We are a joint powers authority consisting of the Coachella Valley Water District, the Imperial Irrigation District, the County of Riverside, the County of Imperial, and the Torres Martinez Desert Kuya Indians.

We want to echo Mr. Garcia's comments regarding the governor's proposal to shift $169,000,000 of Salton Sea Restoration Dollars to the bond. Frankly, it doesn't acknowledge the deteriorating conditions at the Salton Sea or the state's legal obligation to the region. In 2017, the State Water Board issued a directive to the state requiring it to meet annual acreage milestones of completed projects on exposed playa. As of today, the state should have completed 8750 acres, but instead it's only completed 2600.

Just yesterday, the state reiterated that it intends to catch up by 2025 with 14,600 acres, but there's simply not enough money in the budget to do that. And in addition, even worse perhaps, is that in November, the state orchestrated an agreement with the Federal Government to reduce the state's reliance on Colorado River water. The resulting reductions to the Salton Sea from that agreement are going to be larger than the entirety of the QSA. Thank you.

Patrick Welch with the California Municipal Utilities Association. I wanted to thank Council Member Connolly for raising the issues concerning the proposal to increase the surcharge and expand it on ratepayers. We have questions and concerns about that. In particular, if that account is in a structural deficit, we have questions of why it would then be funding 24 new positions for the new oil windfall tax process, in addition to two additional positions for a new load management standards process.

In addition, the state does anticipate that electric utilities will sell more electricity over the coming years because of EVs and electrification. We're not aware of any analysis from the Energy Commission that takes that into account. In other words, will the fund grow in itself because we'll be selling more electricity? We agree with the LAO. Let's pause this. Let's not act on this this year. Let's dig into the details more and make sure we get it right. Thank you.

Good morning, chair members. Michael Jarrett. On behalf of the Community Alliance with Family Farmers. We represent over 8000 small family farms. We were really appreciative and thankful to the governor and his main revise for proposing additional funding for flooding. However, we would like the inclusion in that package of $5 million to the California Underserved and Small Producers Program.

We feel that that program, which was originally developed as part of the COVID relief package and then used for drought, could easily be expanded to flooding and could really capture a group of farmers that have lost their homes, their farm equipment, and will lose their farms unless they're helped. So that program could quickly distribute the funds it's already distributed half of the funds it received for drought. And so, we would urge its inclusion in the flood package. Thank you for the time.

Good morning, chair and members. Rebecca Marcus, on behalf of the Union of Concerned Scientists. We look forward to working with the legislature and Governor on the climate bond to invest in a resilient future. However, we encourage you to look for more certain ways to backfill climate funding, such as ending subsidies and tax credits for polluters and use of savings for climate priorities. Investments in Sigma implementation, water recycling, and multi-benefit land repurposing are just too important to be left to chance.

We are also happy to see the ZEV budget has remained intact since January. It is critical that AB-8 funds are reauthorized and that these funds are not diverted by carveouts for hydrogen. We also support the funding for the creation of the Transportation Fuels Transition Plan and encourage the legislature to ensure this plan is developed in a way that is consistent with what is proposed and promised in the Environmental Justice Advisory Committee and the Scoping Plan.

Also on behalf of the American Farmland Trust Carbon Cycle Institute and Certified Organic Farmers. We would ask that when crafting the climate bond, the Legislature and Administration keep in mind our food and farming systems. Thank you.

Mr. Chair, Members, Bo and I are going to talk about the Harbor and Watercraft Revolving Fund issue. It didn't get a lot of airtime in the hearing today, but I think George Skelton said it best. He had an article after the governor's budget came out: buried fees, cuts, and some gems. And the first line is, if you're a California boater, Governor Gavin Newsom wants you to pay the state more and get less in return.

I do want to acknowledge that we did participate in a rather extensive stakeholder process that the Division of Boating Waterways pulled together. But that stakeholder process had a number of elements associated with it. And what we have here is a proposal that came out on Friday with very little and. No notice to us with a 300% increase in vessel registration fees.

We have significant concerns about the amount of motor vehicle fuels tax that gets siphoned away from the vessel programs and used for general parks purposes. In the spurf, we have suggested that some of that money needs to come back to Harbor and Watercraft Fund. We do want to acknowledge the importance of addressing AIS and beach erosion. Those should not be the responsibility of the boating community exclusively.

The Department of Finance said as much in the hearing with the Senate yesterday that for over a decade, we have been paying for those programs and have been paying wrongfully for those programs. So are we going to get that money refunded to us because it's been taken away and that's part of why we've got a structural imbalance. We don't necessarily oppose fee increases, but not in this format and not a 300% increase with no additional benefits. Thank you.

Hi, Mr. Chair. Bo Biller, on behalf of the Marine Recreation Association and the California Yacht Brokers Association, last again, same as last week. We're also speaking on the Division of Boating and Waterways proposed budget trailer Bbll language. Mark discussed some of the issues relating to the fee increase, which we're opposing at this point in time. I think there's a broader question that he also alluded to with the spurf and the gas taxes. But I'd like to focus really on the positive side of the equation.

We spent a lot of time, at least a year, maybe a year and a half, with the Division working collaboratively together, talking about items like aquatic invasive species and beach erosion funds, which have been not servicing the boating community for the fees that we pay. And I think they've identified, I would say, finally and called it out in the budget itself and said, look, we're going to cut these down. I think in aquatic invasive species, it's a $5 million cut.

Beach erosion, things we don't cause, we're not going to pay for anymore. We think that's really positive. But I'd really, in my last seconds here, I'd like to emphasize the economic study was a big proponent.

Thank you very much. Appreciate it. The operator will now go to the phone lines. Could you tell us?

Thank you, Mr. Chair; if you would like to testify today either in support or opposition, please press one followed by zero. One followed by zero. At this time. We're going to begin with line 12. Please go ahead.

Yes, good morning. My name is Chris Chavez. I'm with the Coalition for Clean Air as well as the Charge Shead and Invest in Clean Air campaigns. We appreciate that the May revise does not cut clean transportation even further. However, California still needs to invest more in clean air. Our state is home to the dirtiest air in the nation, with transportation being the leading source of climate and health-harming pollution.

Nearly every Californian breathes air that fails national and state air quality standards, putting our health and lives at risk. We urge the senate and assembly not to disregard the goals of a Senate Majority proposal which would reinstate funding for clean transportation programs that will save lives, improve air quality and public health.

We want to make sure that the budget fulfills, to the greatest extent possible, the promised $10 billion dollar emissions vehicle package approved in previous budgets, prioritizes investments in low-income and disadvantaged communities hub programs that subsidize fossil fuel industry or harms communities. We also support 80118 reauthorization with a focus on equity. And in the future, we're going to need to figure out how to create a stable funding source for our clean transportation programs. Thank you for your time.

Next is line eight. Please go ahead. Good morning, Assembly Members. My name is Stephen King, and I'm the Clean Energy Advocate with Environment California. While we're relieved that the governor's May budget revision does not include additional cuts beyond what was proposed in January, we remain concerned about significant cuts to clean transportation and clean energy funding in the budget. California still needs to invest in clean air by funding important programs that promote clean transportation and clean energy.

Our state is home to the dirtiest air in the nation, and transportation is the leading source of climate and health-harming air pollution. No Californian should be exposed to this dangerous pollution day in and day out. So, we must embrace policies and programs that transition us to clean energy, zero-emission vehicles, and public transit.

We need a budget that to the greatest extent possible, supports zero emission vehicles, prioritizes investment in clean mobility and transit cuts, programs that subsidize the fossil fuel industry and harm communities, and create stable funding for clean transportation in the future. We appreciate the governor's of a climate bond and look forward to engaging in the process. Thank you.

Line 15, please go ahead.

Morning, chair members. Jerry Desmond with Recreational Boaters of California. Also, on the Harbors and Watercraft, revolving fund efficiency issue.

The boating public is quite concerned that a two-year subcommittee stakeholder process has resulted in an announcement of just some reforms addressing the deficit of the revolving Fund and raising registration fees 300%, and ignoring almost entirely the $107,000,000 in voting fuel tax dollars that do not get dedicated over to the revolving fund. We also worry that the automatic nature of the increase will have a detrimental impact on the opportunity of low-income disadvantaged communities and those on fixed incomes who want to get onto the water.

We want to increase opportunities, not diminish them. So we urge the Legislature to take the time to look at those other alternatives and have a public process to consider the best approach going forward. Thank you.

We will go to line 14. You are open.

Thank you, chair Members of the Committee. Alex Loomer, on behalf of the Environmental Defense Fund, California Environmental Voters, Civic Well Self Help Enterprises, and Sequoia Riverlands Trust, in strong opposition to removing the $20 million for the multimedia land repurposing program at the Department of Conservation from the budget. This program continues to be oversubscribed, getting double in applications with the budget is provided. There is clearly a high demand.

Given this demand and the amount of land we need to transition as a result of stigma, it is critical to provide ongoing funding for this program to help our rural communities both in times of flooding and in times of drought. Azaleo pointed out a bond is not guaranteed, and even if it passes, that funding won't be in hand for two to three more years. We strongly urge you to reject this cut. Thank you.

Line 16, please go.

Hello. This is Johnny Carlson, Water Policy Coordinator with the Planning and Conservation League, and we are opposed to the Drought trailer bill.The Bill first really does contain important policy changes that are best addressed by the Legislature's Policy Committee. We ask you to refer the trailer bill to the intended Water Parks, and Wildlife Committee to the Bill itself.

Really, there are vague definitions of a flood, and we believe insufficient protections for fish, high water flows, and flushing flows and that the bill, as written, could interfere with the state's groundwater recharge efforts already. Well got it. Thank you very much.

We'll go to line 25. You are open.

Good morning, chair and members. Just barely. Matt Klopfenstein over at California Advisors on behalf of a couple of clients.

First, on behalf of the Bioenergy Association of California, I want to really support the governor's allocation of funding to the Climate Catalyst fund, as well as maintaining funding for the circular economy and the climate-smart agricultural programs. Really both critical on behalf of the Center for Sustainable Energy and on behalf of SMUD, want to express our support for reauthorizing the AB-118 fees.

Thank you very much. Line 26, you are open.

Good morning. Kim Delphino, on behalf of Defenders of Wildlife and NRDC, we'd strongly object to the Flood Trailer Bill for the reasons raised by the LAO and others. You'll be getting a letter this week outlining all of the reasons why the proposal is deeply flawed and needs to move for the regular legislative process. And on the same note, we would probably say the same thing about this still-yet-to-be-seen permitting trailer bill.

On behalf of Defenders of Wildlife, California, NATO Plant Society, Sonoma Land Trust, and Mojave Desert Land Trust, we'd urge the legislature to reject the following reductions of $5 million to CAL FIRE, wildfire, and forest resilience monitoring program. $20 million to CDFW to finish fine-scale veg mapping. $6 million to CDFW to carry out their NCCP Planning and Land Acquisition Program and $4 million to the Department of Conservation's Climate Smart Lands Program.

This restoration of $35 million would go a long way to ensure that our investments in climate resiliency and 30 x 30 programs are science-based and support the NGO partners who've been called on to step up to help the state. We'd also note that the significant reductions in climate investments will set the state.

Thank you very much.

And at a minimum should be shifted.

To the bond I'm sorry, your time's up. Thank you very much.

Moving along. Line 30. You are open.

Good afternoon, chair members. Taylor Roshan. On behalf of Western Plant Health and various agricultural associations, we'd like to express opposition to the administration's may revise BCP for the Department of Pest head regulation. Didn't get airtime again today, but would provide seven additional permanent positions and ongoing budget liability. We agree with the LAO's assessment, which recommends to not pursue this discretionary proposal, especially when it's not mission critical and the farmers pay the bill.

Additionally, we'd like to remind the Committee that in January of 2024, this coming January, the Legislature will be negotiating a budget change proposal from the administration for wholesale changes to the Mill assessment which funds 90% of the Department's budget. We believe conversations should be comprehensive on funding the department rather than piecemealing it with some new positions and fund obligations this year. Thank you very much.

Line 33, please go ahead.

33, can you hear us?

Hello?

You're open?

Hi. Thank you. My name is Leanne Chang. I live in San Francisco. I'm calling in support of temporary gap funding for public transit. California has been investing for decades in transit. We need to protect our long term investment to give time for local regions to pass their own funding measures. 72% of transit agencies will be in trouble when the federal relief money runs out. And this funding will buy time, transit agencies to also rebuild their ridership post pandemic while they're also securing additional sources of funding. Personally, I just want to mention that I'm currently on Crutches and I've been on transit more than ever and it's been so wonderful. I'm shoulder to shoulder every day on the bus with other San Franciscans from all walks of life, and it just feels the opposite of everyone being separated from each other in their cars and feeling afraid. So I just think transit is so critical for our recovery from the pandemic, economically, of course, but also culturally. So thank you so much and please fund transit.

Please go ahead. Line 28.

Good morning, chair and Members. I'm Sandra Nakagawa, policy director at the California Climate Agriculture Network, also known as CalCAN. We are disappointed to see that the Governor's May revise continues to propose significant cuts to the Safe Climate Smart AG Program. Some of those investments from last year were cut, including a $15 million cut to the Healthy Soils Program, $40 million from sweets, and 25 million the Sustainable Agricultural Land Conservation Program. Out of those, just one has any funding proposed for the upcoming 2023 2024 fiscal year, the Healthy Soils Program, which is proposed for just 10 million. We are encouraged though, this year that the Governor is interested in pursuing a climate bond and encourage the Legislature to increase its investments in food and farm resilience through both the budget process and the bond routes. With the intensifying climate impacts that are being experienced by farmers and ranchers throughout the state, it's never been more urgent to invest in a sustainable and climate resilient food and farming system. Thank you.

Thank you.

Line 31, you are open. Please go ahead.

Good afternoon. My name is Zach Deutsch-Gross. I'm the policy Director at Transform. It is clear urgent action is needed to provide short term operations funding to address the transit fiscal cliff. As you know, 70% of agencies will run out of pandemic relief over the coming years and agencies will be forced to cut their risk, resulting in over 1 billion fewer transit trips in the next five years. This will take us further away from our climate and equity goals and leave essential workers on the curb. We hope the Legislature can come together around solutions and specific budget revenue sources to avert the fiscal clip this budget cycle and double down on public transit importance to all Californians. Thank you for your time and consideration.

Thank you.

Line 24. You are open.

Thank you, Chairman and members of Committee. Barry Nelson with the Golden State Salmon Association. Pardon me. Speaking in opposition to the Drought and Flood Trailer Bill, I just sent your Committee a letter explaining our concerns with regard to this Bill would nearly deregulate pumping from our rivers during high flow periods. Our community, our fishing community, is already shut down this year because of low fish populations, and those low fish populations are because of low flows. Our letter lays out in detail many of the problems with this legislation, which we urge you to oppose and to refer to the water committees in both houses. Thanks very much.

Thank you.

Line 22, you are open.

Good morning, Mr. Chair and members. This is Chris Reagan with the California Farm Bureau. We oppose the Department of Pestile Regulations BCP proposal because we believe it's premature. There'll be a robust discussion next year on DPR's potential increase in the mill assessment that will cover many of the same issues that are noted in this BCP.

Please go ahead. Line 27.

Hello, Assembly Members. My name is Voleck Taing with the Silicon Valley Leadership Group. SVLG is a proud member of the Survive and Thrive Coalition, and we strongly believe we need funding and the time funding will buy to ensure that transit both survives and thrives. This is an emergency for Bay Area transit. We need investment from the state and we need progress on the accountability and safety and cleanliness side. We will be willing to be at the table for discussion, for new options to fund transit, perhaps in a 2026 measure or beyond. Business in the Bay Area has been a strong supporter of transit, and we have supported transit because it is important to our economy, to the region and environment, and because it matters to the ability to attract and retain workers. SVLG has led four measures and cold another in the last decade or two to fund transit operations in capital. Most recently leading measure R and R to raise $3.4 billion for transit during the middle of pandemic. Public transit is one of the cleanest, most efficient ways for people to get where they need to go and where they want to go. Thank you for the opportunity to speak.

Thank you.

Line 29, please go ahead.

Good morning, Chair and Members. My name is Artie Valencia, representing Restored Delta and environmental justice communities here in Stockton. We stand in support with the funds for floodplain restoration projects for San Joaquin Valley. It's vital to protect vulnerable communities. In addition to the levee upgrades, we are also in opposition of the Drought Trailer Bill because it claims to allow diversion of flood flows during emergency. So you could prepare for a flout without permits through water rights. And this doesn't define what constitutes what a floodwater is and what exactly an emergency is. So we think that it should move through the legislative process because it is too far complex so we are in opposition of that. Thank you so much for your time.

Thank you.

You are open line seven.

Hi, my name is Kim Besick with Cal Trout and I'd like to know that Cal Trout appreciates the continued investment in natural resurface and water management through the general budget and investment necessary. We'd also like to flag that we should not be yo-yoing between drought and flood funding between the water years. Both are important, but we also see that there are often large floods, punctuating, extended periods of drought, and it doesn't necessarily make sense to take money from one to the other and kind of in an organized manner. And then our last point is that we're still reviewing the groundwater drought trailer Bill. We do feel compelled to note that the large scale water policy changes should be done within core committees during the entire legislative cycle, as groundwater recharge is super important and this dialogue should be daylighted much earlier in the process. Thank you.

Thank you.

We'll go to line 34, you are open.

Hi, Samantha Samuelsen on behalf of Audubon California. Thank you for your time. Audubon would like to see investments restored in the budget for the Multi Benefit Land repurposing program in addition to investments restored in the budget for Sigma projects supporting habitat in the Pacific Flyway, coastal protection and restoration, and funding for the Salton Sea. Thank you.

Thank you.

We'll give a final reminder, one followed by zero. If you're in support or opposition on today's session and we'll go to line 18, please go ahead.

Good morning, my name is Natalie calling in on behalf of Leadership Council. We are reviewing the proposed flood trailer Bill Language. We oppose redefining recharge as the beneficial use without time limitation, and we have serious concerns regarding the Flushing of contamination from soils to sources of drinking water as a result of unmonitored and or inadequate plant recharge. We'll provide suggested amends to address these issues. We're grateful to see the 125,000,000 for the contingency, but want to ensure that there are still adequate resources to address the ongoing drought crisis. And we strongly urge 20.3 million of that be allocated to the community of Planada. FEMA Relief has not funded recovery for everyone affected and has been inadequate. UC Merced estimates that 20 million is still needed to fill remaining gaps for home inspections and repairs, emergency rental assistance, lost vehicles and community infrastructure. Last, we strongly urge that the 160,000,000 for community residual use centers and the 100 million for transformative climate communities that the May revise shifted to a climate bond maintained in the budget with funding from the General Fund with the climate bond providing additional funding that augments rather than replaces the General Fund allocation.

Thank you.

Next we're going to go to line 35. You are open.

Good morning, chair Members. Vincent Wiraatmadja with Schneider Electric. Schneider Electric is an energy management company that is also a manufacturer of electric components and provides automation services. We strongly oppose the administration's proposal to ship $100 million from the distributed energy backup asset program that's articulated in the finance letter regarding CNRA and shipping that money to the electric supply Strategic Reserve Program to reimburse DWR reimburse electrical corporations for energy imported this summer. As we experience more extreme heat events, it's critical that we build out distributed energy resources for our communities to be able to keep power online during electrical outages, but also to utilize those resources during blue sky conditions to help shape load in order to avoid entirely the outages and integrate better integrate renewables. Thank you.

Thank you.

Please go ahead. Line 32.

Hello, folks. Can you hear me? Yes, we can. Okay, it's just afternoon, so good afternoon, Mr. Chairman, Members Abraham Mendoza on behalf of the Community Water Center expressing our concern with the drought and flood streamline finding trailerville language as others have already mentioned. This language proposes to codify the governor's executive order on groundwater recharge, and this would create a permanent program without conducting more proactive planning on where we should and shouldn't be diverting floodwaters. As our organization has already expressed in the letter to the Administration, this could create long term impacts on water quality for communities that rely on groundwater for their primary source of drinking water. Thank you for your consideration, and we look forward to working with the Legislature to add additional protections moving forward.

Thank you.

Mr. Chair, we have cleared the queue.

Hey, thank you very much, operator. You've been great to work with. And with that, we will adjourn this meeting.