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

All right, Welcome. Subcommitee number four on state Administration and government will be in order, and we'll proceed with docket items until we get all Members and can establish a quorum. We appreciate everyone's participation presentations this morning. For individuals who wish to provide public comment via teleconference who cannot participate in person, there is a participation toll free number, which is 877-226-8163 and the access code is 718778, 718778 reminder to all participants and those providing testimony to please maintain good decorum at all time.

We are going to be taking up the items on the notice docket for discussion only, and we will move to that first item, which is the Department of Cannabis Control, issue 18. We will take the LAO for an update presentation. Welcome, Please state your name and title for the record and proceed when you are prepared.

195.

Thank you.

AB 195 last year eliminated the Cultivation Tax, effective July 1, 2022 and shifted remittance responsibility for the Retail Excise Tax from distributors to retailers effective January 1, 2023. And so, as you can see in the graph in your agenda, cannabis retail excise tax revenue has been declining for six straight quarters from the middle of 2021 through the end of calendar year 2022, which is the last publicly available quarterly data point.

Prior to that, it was growing quite rapidly, but then for a year and a half, has been declining. So as of late February, when that most recent data point became available, our forecast for cannabis tax revenues for fiscal year 2022-23 was 484 million dollars and for 23-24 was 543 million dollars. And so that 22-23 projection represented a158 million dollar decline relative to the administration's January Governor's Budget estimates. And so we are looking ahead.

We are expecting that the Administration will be updating their estimates in conjunction with the May Revision, and then we plan to update ours when the next quarterly data point is published, which we expect to be around late May. Thank you. And available to answer questions.

Do we have any comments from LAO or DLF? I mean, excuse me. From finance?

Thank you.

Colby White, Department of Finance. No additional comments. As Mr. Kerstein mentioned, we will be updating our estimates as part of the May Revision forecast.

Thank you. You have three enforcement offices. You've got a BCPN for additional enforcement, infrastructure, and staffing. How would you characterize the enforcement and compliance sort of picture here, given that the whole public policy construct here is to support and encourage a legitimate, regulated, commercialized market, that is, in theory, a safer product.

There are a lot of questions about how on the regulatory side, but we hear a lot as politicians of input from the field, from folks who observe who are regulated, who are in compliance, who are participating in the legalized sort of industry of competitors, for lack of a better word, that are popping up constantly, operating with impunity, it seems. What are the challenges on the compliance and enforcement side and the demand side as we look forward?

Well, thank you for the question,

Mr. Chair.

I think as we move through some of the items on the agenda, you'll be hearing from folks both from our office and from the Administration, who maybe have a better sense of what's going on from an enforcement and compliance standpoint. But certainly I don't think there's any question that competition with unlicensed sellers of cannabis is certainly a huge pressure on this industry and on the resulting tax revenues.

Okay, and I know that look on your face. Just to be clear, I'm really asking for your assessment in your role, your office's assessment of, have you examined this issue? I mean, obviously I'll be asking the Department as well, but I want to be clear, are we tracking and seeing and studying this dynamic and how it impacts the overall regulatory sort of scheme here?

Right.

I don't know if maybe my colleague could speak to this, who covers sort of more the enforcement and licensing sorts of issues. I think certainly the state has a significant challenge in terms of enforcement, and that's something that affects the revenues.

Drew Soderborg, Legislative Analyst's office. It's something that we continually look at. There's quite a bit of different avenues of enforcement, as you're well aware. Obviously, there's enforcement that takes place at the state level. There's many different state entities that are responsible for cannabis enforcement. When we looked into this in recent years, there were about 90 million or so state dollars, but also a significant amount of enforcement is really the responsibility of local governments.

And so it's something that our office is monitoring, but it absolutely is a significant pressure on legal operators. The existence of the illegal market. The state does need to look at ways to better approach that.

And I'll be asking the Department in terms of their collaboration with local authorities and integrating the state licensing vis a vis local. But thank you. Appreciate the answer. All right, let's take the other presenters from the Department. Please come forward. Morning, and welcome. Please proceed when prepared and state your names for the record. Will each of you be presenting or will you have one primary presenter?

Good morning, chair. I will be presenting on the behalf of the Department of Cannabis Control.

All right, welcome.

Good morning, chair and Members of the Committee. My name is Rasha Salama and I serve as the Chief Deputy Director at the Department of Cannabis Control. I will be providing you with an update on two grant programs administered by the Department this morning. First, I will start with the implementation of the Cannabis Local jurisdiction retail access grant. Currently, nearly two thirds of California cities and counties do not allow legal cannabis retailers limiting existing consumer access to legal tested products.

This grant program, authorized by the 22 Budget act, dedicated 20 million dollars in grant funding to support local jurisdictions that wish to establish a cannabis retail licensing program and do not currently have one. To inform the development of the grant requirements and guidelines, the Department consulted with local governments with associations that support local governments, as well as, sorry, as the cannabis Advisory Committee.

Guidelines have been established based on this input and priority funding will be given to jurisdictions in which consumption of cannabis products exceeds that jurisdiction's proportional share of legal cannabis retailers, jurisdictions that plan to permit cannabis retailers throughout the existing permitting process, and jurisdictions that prioritize equity applicants. Eligible uses of funds include program Administration and implementation, development of CEQA documents, and providing technical assistance and fee relief to support equity applicants. Funding will be distributed in two phases.

Phase one, funding not to exceed 10 million will be dedicated to the development and implementation of cannabis retail licensing programs and phase two, funding not to exceed 10 million will be dispersed to grantees based on the number of retail licenses that they issue. The key deadlines associated with this program include phase one, which just closed on April 28th. The Department did receive 19 applications that are currently under review.

Phase one funding awards must be done by June. And phase two funding awards open starting June 30 and grant funds must be expended by June 30, 2026. The Department will share with the Committee and Legislature which local jurisdictions are selected and will continue to keep you appraised to progress made via our statutorily mandated annual report.

A quick update on the local jurisdiction Assistance grant program this grant was authorized in the 21-22 Budget Act and dedicated one time allocation of 100 million dollars from the General Fund to aid local jurisdictions in transitioning provisional licenses to annual licenses. In January 2022, the Department awarded these funds to 17 cities and counties with the highest number of provisional licenses in amounts ranging from 400 Thousand to 22 million. Jurisdictions must expend these grants by March 31, 2025.

To date, this funding has been used to, among many things, streamline and more effectively administer local licensing processes, hire additional staff, contract for CEQA consultants, and finance mitigation measures related to environmental compliance. The Department has been tracking the progress of the grants through the review of biannual reports submitted by grantees to see if the grant money given to the local jurisdiction is being spent in accordance with their work plan and to monitor their progress. Sorry.

While many jurisdictions have expended grant funds with great success, we have observed that some jurisdictions have been slower to use this money to move their provisional license pipeline. This is mostly due to changes in local permitting requirements, a need to realign budgets to reflect new needs, or administrative lags in posting expenses. The Department continues to work closely and meet with grantees to align deliverables with the objectives of the grant to support steady progress in the transition of provisional licenses.

Thank you for this update, allowing me to give you this update, and I'm happy to answer any questions the Committee may have.

Any update on the granting program from.

Jared Sippel with the LAO. No comments to add.

Thank you.

Any questions at this point, Senator Niello?

One quick kind of unrelated question. The list of jurisdictions we have here, are these all of the jurisdictions in the state that have authorized cannabis businesses, or are there other jurisdictions and they just either didn't request or didn't receive grants?

For the local jurisdiction access grant, that I apologize. For the 100 million dollar grant program, those were defined in the budget act because they were the jurisdictions with the highest number of provisionals, in the state.

I see. So this is not an exhaustive list?

Correct.

Thank you, Senator.

All right, please proceed.

All right. Thank you for your patience with my laptop. Good morning, chair. My name is Rasha Salama and I'm here to represent the Department of Cannabis Control. I would like to start with just a short overview of how provisional licenses came to be. So, after the passage of Proposition 64 to on ramp existing legacy operators into the legal market, state licensing entities were authorized by state law to start issuing temporary licenses on January 1, 2018. Temporary licenses were authorized for one year.

They were intended to provide operators quick access into the legal market, while also allowing them time to gather the documents necessary and get local approvals to meet annual licensure requirements. As the temporary sunset deadline of January 1, 2019 approached, it became apparent that the timeline to accomplish annual licensure was unrealistic when transitioning a legacy market the size of California's.

The state took swift action to retain temporary licenses who had not yet met annual requirements by creating a provisional license that would phase out by January 1, 2020. The hope was this interim solution would provide the necessary time for licensing entities, state and local, to process permit applications to receive a provisional license. Applicants had to submit a complete annual license application, including evidence that compliance with the California Environmental Quality Act, CEQA was underway.

As January 1, 2020 approached, it became clear that more time was needed and the deadline in state law for provisionals was extended again for two more years, to January 1, 2022. The state incorporated a new requirement this time that provisionals could only be renewed if licensees were actively and diligently pursuing requirements for annual licensure, including compliance with CEQA. Then again on July 12, 2021 Assembly Bill 141, which established the Department, set a sunset date of January 1, 2026 for provisionals.

Additionally, The Bill established phase out deadlines for the issuance and renewal of provisionals and lastly created specific and detailed CEQA benchmarks for each renewal period of a provisional license. As you can see, each extension to the provisional licensing process has not just extended the sunset deadline but also sought to require a higher level of deliverables from licensees.

Further complicating the licensing framework. To support the phasing out of provisional licenses, the state invested in the distribution of $100 million to 17 local jurisdictions holding the highest percentage of provisional licenses. Currently, under the statutory provisional deadlines enacted by the Legislature, applicants may only apply for an annual license. Existing provisional license application and provisional licenses are subject to the following key deadlines. June 30, 2023 is the last day for the Department to issue provisional licenses to local equity applicants.

July 1, 2023 provisional renewals become subject to additional requirements for CEQA and other benchmarks, and January 1, 2024 is the last day for provisional cultivation licenses that result in the operation equivalent to a Type Five, known as a large license, can be in effect. And January 1, 2025 is the last day for the Department to renew a provisional license before the sunset date and statute of January 1, 2026. Overall, the Department has seen an increase in application license renewals and provisionals transitioning to annuals.

The Department has transitioned nearly 2000 provisionals to annual licenses and processed over 4900 license applications. Currently, there's over 11,000 active licenses, 5300 are annuals and 5700 are provisionals. Approximately 77% of our provisional licenses are in jurisdictions that have received local jurisdiction grant funding to support the transition of these licenses to annual license.

In closing, working closely with our licensing priorities this year we'll be working closely with those jurisdictions to monitor the effective use of the local jurisdiction grant funds to transition provisional licenses to annuals, processing local equity applicants to meet the June 30th deadline, and to review provisional license renewals to ensure they meet the benchmarks set in statute. Thank you for your time and available to address any questions the Committee may have.

Thank you. Is there additional comment by the Department? All right, Senator Caballero.

Thank you very much.

I appreciate the recitation of kind of all the changes. And I think a big part of the reason for all those changes was we were trying to give time to the legal market to kind of catch up with a process that was not elegant. We asked them to get a license, and we just didn't have the framework to make sure that they could go through the sequel analysis in time.

Are we really going to be able to get to those 5700 provisional licenses by the deadlines that have been set?

That is the goal. That is the goal. I want to re-emphasize the partnership with local jurisdictions and how critical it is that the state and the locals work closely to make that transition happen in time. I think it's also important to reiterate that those provisional licenses were an interim solution, and that if we keep using the interim solution, it doesn't support the sustainability of annual licensure over time. It also creates some challenges with compliance, which I know Senator Padilla is interested in.

So we are working diligently with our local partners through the local jurisdiction grant program. We are also resourcing applicants and licensees through technical assistance, providing resources on the website. But I think a key challenge that I hear repeatedly is CQA. It's a big lift for licensees. It's a difficult lift for some of the local jurisdictions as they try to process permittees through their local process.

So the other piece of information we got, and it's been a while since we've had this discussion, was that there were some jurisdictions that just didn't have the infrastructure in place to be able to process these licenses and had done none. So my concern is, that's why we put the 100 million dollars out there, so that they could do what they needed to do to bring in staff, contract, whatever. Has it worked?

I'm really concerned that there's a deadline looming, and I get the provisional was never intended to be the end all, but, in transitioning from an illicit market to a legal market, we don't want to be driving out people that are trying to do the right thing, that have come to the table, but local government didn't have the resources, and now we gave them the resources, but they still are in a position where things aren't finished. And to a certain extent, these dates are arbitrary.

We don't lose the money to the Federal Government if we don't get it done. And it's not that kind of drastic thing. I'm not suggesting we extend it. I guess I'm just trying to get a sense of what's the extent of the remaining licenses. Did the technical assistance help? How do we get them all legal?

I guess is really what I'm getting to, because as we try to tap down on the illegal market, we need to make sure that we're supporting people that were bona fide trying to enter the legal market.

Yeah, thank you for that question. Yes, there are jurisdictions that are doing this well. So I think you are correct in stating that there were challenges initially with people ramping up their programs, recruiting staff, initiating their contracts to have CEQA be put in place specifically for cannabis. We are seeing through the local jurisdiction assistance grant program, jurisdictions that have done that well. Humboldt, City of Sacramento, have been able to institutionalize and streamline their processes, and there are jurisdictions that are struggling or are more challenged.

We're trying to be cognizant, though these are pockets where this is happening, and also to make sure that, not to be remiss, that if we continue to extend provisionals, that it does create compliance issues over time. And I just want to speak a little bit to what that means. The way the provisional license is set up is it says compliance is underway. Right? Like the licensee is trying to comply with local requirements and with state requirements.

So that means there's requirements that they don't meet and it begins to create inconsistencies with other licensees that have met annual requirements. So I think we have to continue to work diligently in conjunction with our local partners, come back and report out on how that is going through the Bi-annual report and through our annual report, but to make that push as the state to push towards annual licensure.

So I appreciate that. I just think it would be important to note where the roadblock is, because if it's at the local jurisdiction level, that's different than if it's because there were some issues about non-compliance being related to people really not wanting to enter the legal market, that was a game. And so I just don't want to penalize people that have spent years trying to get through a process that is opaque at best. Anyway, I appreciate all the information. It's very helpful.

Thank you, Senator. Senator Niello.

Thank you. Before I ask the question that I was going to ask relative to the conversation with Senator Caballero, in those communities where they've had better success, Humboldt and Sacramento, as an example, have they had success at eliminating the illegal market or bringing the illegal operators into legal standing or is the processing of the legal market just allowing it to compete better with the ongoing illegal market?

Which is it?

That's a really big question. So I would say those jurisdictions have focused on how to streamline the process to make it more accessible for legacy operators as well as their existing applicants to continue through the process. Right, to gain and retain licensure. I think the issue of the illicit market is larger than just a licensing issue

Because that's not just legacy operators that are not. These are organized criminal organizations. These are enterprises that we're dealing with that are feeding some of the smaller guys. But there's really big enterprises in the illegal market space. I think there are two issues that sit side by side. They influence each other, right. Because the illegal market can make it not competitive for legal operators. But our goals have to be to support stability for the legal market. And the steps the Department is taking to do that.

Are these pieces of working closely our grant programs? I think I spoke a little bit to the retail access grant. That grant focuses on jurisdictions that do not have any retail access right now. And so by having no retail access, consumers who exist in those jurisdictions, their only avenue is going to be the illegal market. So we're trying to support that, to support some more stability for the legal market and tamper the illegal market through the avenues we can. As a Department. I hope that addresses your question.

I think, the most important comment. It's a difficult question, and it's a difficult question because as I've learned more about this business, it's just obvious to me that it was set up to be very difficult to implement by the sponsors of the initiative in the first place because they crafted something that would pass. It would not have passed, I don't think, if it had not provided full flexibility for local jurisdictions to do as they please that set into place the conflicts, if you will.

And the only thing in the long term that's going to overcome the illegal market in favor of the legal market, is to make the illegal market more difficult to operate. And we can't do that through regulatory measures. They'll ignore it. The only way to do it is through enforcement, and enforcement is only as strong as the penalties that exist for violation. And I would submit that we may need to,

In terms of this particular policy area, we probably need to look at enforcement that is backed up with much more severe penalties than we currently have for operating in the illegal market. This Legislature typically doesn't like to do such things, but nonetheless, that's my story and I'm sticking to it. My question is, we've had three informational items and I appreciate them because, as I said, I'm learning about this and each one of these helped me.

But this is a budget hearing, and I'm wondering if there is some follow up of a budget request that will be coming down the line in reaction to these informational items. And do you know what that might be?

Yes, it's my next topic.

Before we go there, let's follow up on this, because it seems to me that the schematic we've created with the discretion afforded to local jurisdictions to choose or not to choose to regulate a commercial market is sort of the big elephant in the room. That creates difficulty both on the administrative regulative side, but also to Senator Niello's very accurate point that we've created a system that doesn't work without very strong enforcement.

Because you create a regulatory scheme for honest brokers and providers and producers and deliverers and retailers that have to navigate a system that the underground market just simply doesn't ignore. And that partnership, it isn't just a matter of local control or problem. I mean, I know that there are those that are of the view that really not the state's problem, it's local problem. But the reality is the Department here has three separate enforcement offices in the state.

The Department has requested and is looking to acquire and construct another enforcement division. So I think it's important to have an understanding about what the State Department's idea of enforcement looks like. Is it information on budsmanship, licensure, compliance, or is it working closer with the Department of Justice? What does that look like going forward to the Department? What does enforcement look like? What forms does it take?

And is it the department's view that that is something that needs to be an additional budget priority for the Legislature in order to make it work? Because I think one of the problems we're running into is that we've created a construct where we're throwing good money at the bad and not achieving the fundamental basis. The whole theory of the case was you create an environment for a legal market, you regulate it, you get safer product and incrementally it will dominate the market. Not happening.

So that's why enforcement is key here. So I'd really be interested in the department's view on this going forward.

Thank you for that question, Senator. So I will start by speaking to our approach so that you know how we are tackling this. So, as mentioned, this is a huge issue throughout the state. We are trying to be cognizant of, if we're going to try to only enforce our way through the issue, how cost prohibitive that could be.

We are putting a request for resources in front of this Committee and have added provisional language specifically so that as we continue our evaluation, if we need to, we can come back and say, here are the additional resources that we need. In terms of the approach the Department is currently taking, we're taking a multipronged approach. So we focus our law enforcement teams on large criminal enterprises. So that's where our key areas of focus are, because mostly they will supply smaller enterprises.

We work across the supply chain. We work across jurisdictions. So our law enforcement division works very closely with local, state and federal agencies so that we can leverage resources and share intelligence to create disruption in that illegal space.

We also, as I mentioned earlier, are trying to raise consumer awareness through a consumer awareness campaign so that existing consumers realize the impacts of purchasing from the illegal market. Not just to the illegal market, but to their own well being, as you had stated earlier. And then to support local jurisdictions that want to create access so that we have more legal stores than illegal stores, just to close again and to reemphasize, we are open to coming back to this body to request additional resources.

We just want to do it in a fiscally sound manner such that if we came back, we'd say, here's the evaluation we did, here's how much we think we need, and here's how we will leverage existing State resources, Federal resources, and Local resources as well.

Thank you, and I appreciate you filling in the blanks about where the department's sort of pronged approach and what that consists of and where the areas of focus are, and I would look forward to that continuing dialogue. Anything more on this particular issue? Item? If not, that brings us, I think, to 21, which is continuation of implementation, as you just referenced. Please proceed.

All right. Thank you, chair, for my final presentation. Today, I'm sharing the Department's budget request for 4 million dollars in fiscal year 23-24 to support the continued implementation of the Department's operations. The Department was established on July 12, 2021 with the passage of Assembly Bill 141 to create stability and continuity of services for licensees, employees, and stakeholders. The Department immediately entered into interagency contracts with the Department of Public Health, Department of Consumer affairs, and Department of Food and Agriculture through fiscal year 23-24.

These contracts provided key operational services such as information technology, human resources, fiscal and budget management, and contract oversight. Over the course of the last year and a half, we have worked diligently on establishing our own administrative and operational infrastructure to become self reliant and independent. Part of that effort included conducting a baseline assessment of what resources are needed to become fully self-sufficient with the expiration of these legacy contracts. A key immediate deficiency that was identified was information technology resources.

The Department is requesting in this proposal, eleven information technology positions to transition the workload that is conducted by legacy departments to the DCC. These positions will establish a minimum level of technology infrastructure, have the necessary IT security to meet the department's regulatory mandates, including maintaining track and trace and licensing systems. In this proposal, we also request one time costs associated with the lease and tenant improvements for a Central California Enforcement district field office.

As a Department, we have worked diligently to increase our enforcement efforts throughout the state to disrupt the illegal market. Our success relies on our ability to maintain an enforcement presence throughout the state. This office will support and enhance these overall efforts and efficacy of the Department in addressing unlicensed operators by maximizing law enforcement time spent in the field, by reducing travel costs when conducting field operations, and further strengthening strategic partnerships in the region.

Lastly, the proposal includes provisional language as a young Department that is barely two years old, we are continuously assessing our overall operation while aggressively working to meet our mandates and our mission. This provisional language will allow us to submit a letter to the Joint Legislative Budget Committee midyear outlining necessary resources to address critical workload or regulatory priorities if an urgent need arises that will negatively impact the progress we are making. Thank you and I'm available to answer any questions.

Thank you. Finance?

Yeah, this is Andrew Hong, Department of Finance. I do have some comments that are going to be in response to what the LAO is going to be saying. The Department of Cannabis Control is a relatively new Department that was created in just fiscal year 21-22 and has made a lot of progress since. The Department is continuing its assessment of programmatic, operational and administrative needs to find opportunities to streamline, centralize functions and address resource gaps to more strategically and effectively carry out the functions of the Department post consolidation

The Department anticipates there will be gaps in staffing during the next fiscal year and the provisional language would allow the Department to address those gaps with the midyear fiscal augmentation with notification to the Joint Legislative Budget Committee. The provisional language also requires that the Department consider the amount of funding available within the Cannabis Control Fund when making a request. Lastly, I'd like to note the Joint Legislative Budget Committee will have oversight and the opportunity to raise any questions prior to approving the resource request.

Thank you.

Thank you. LAO?

Chair Jared Sippel with the LAO for this proposal, we have no comments on the IT positions or the Fresno Enforcement Office. However, specific to the requested provisional language, we recommend that the Legislature direct the Department to report at this or subsequent hearings with specific details on the amount of funding that may need to be accessed through the provisional language and how such funding would be used.

While the provisional language does include notification to the Legislature, the notification process allows for less legislative oversight than the traditional budget process. And so, to the extent that the Department has identified specific resource needs, we would also recommend that the Legislature direct the Department to consider submitting those resource or those requests through the budget process this year. Thank you, and happy to answer any questions.

Thank you. We'll bring it to the sub. Caballero.

So let me just say that I always have a hard time with provisional language that is undefined, so I'm not thrilled about it. This is a whole open item, so I'll just make that statement. But also, I'm concerned about the Fund balance and ask if you have a plan for reducing the pressure on it. To have it be reduced by 58% in one cycle is very concerning because can run out of money next year if we're not doing something about it.

Thank you, Senator, for that question. Currently, the Cannabis Control Fund is absorbing costs for several State Departments just for a two year period. This came out of the passage of AB 195. So we anticipate that we will see a larger Fund balance probably over the next fiscal year once those departments are transitioned out of the Cannabis Control Fund.

Senator, thank you. All right, this item will be held. Thank you very much for your presentation. That'll move us to issue 22, the governor's Office of Business and Economic Development.

Once you are situated and prepared, please state your name for the record and please proceed.

Good morning, Chair Padilla and Senator Niello. My name is Will Cook and I'm with the Governor's Office of Business and Economic Development, also known as Go-BIZ. My team administers the Cannabis Equity Grants program for local jurisdictions. I'd like to provide a brief overview of the program, and then I'd be happy to answer any questions that you may have.

The program was statutorily created by the California Cannabis Equity Act to provide funding to local jurisdictions to develop and operate cannabis equity programs that focus on inclusion and support of individuals in California's cannabis industry who are linked to populations or neighborhoods negatively and disproportionately impacted by cannabis criminalization. Go-BIZ provides two types of grants to jurisdictions under this program, and we refer to them as type 1 grants and type 2 grants.

Type 1 grants are for jurisdictions to conduct a cannabis equity assessment and/or develop an equity program. Each jurisdiction may have their own unique history and circumstances relating to cannabis prohibition, and the assessments include things such as historical rates of cannabis arrests and convictions, and how prior cannabis policies impacted communities and populations within the jurisdiction, and how prior populations. Excuse me. The assessments are then used to inform the creation of their equity program.

The type 2 grants are funds provided to jurisdictions to provide direct support to their equity applicants and equity licensees, primarily through loans and grants for startup and ongoing costs. This includes things like rent, leases, local and state application fees, legal assistance, regulatory compliance, testing of cannabis furniture and fixtures, and other related costs.

The funding can also be used to provide technical assistance, which refers to support to help cannabis equity applicants and licensees acquire the knowledge and/or skills necessary in order to gain entry into and successfully operate in the regulated cannabis marketplace? Direct technical assistance includes one on one consulting and training, small business support services, professional mentorship services, training and education regarding state cannabis licensing and regulatory requirements, manufacturing assistance, financial management and business resilience, such as emergency preparedness.

We typically accept grant applications between October and December of each year and announce our grant awards generally in late February, early March of each year. The following year. We have a detailed scoring criteria and funding formula in our grant solicitation each year, which is used as the basis of our funding decisions and therefore our award amount determinations. Thank you and be happy to answer any questions that you may have.

Thank you very much. Are there comments or questions from south Senator Niello?

Yes. Thank you, Chair. So do you have any data that demonstrates that this has had an effect of increasing licensees and what impact that has had on the illicit?

Sure, so we do issue an annual report to the Legislature in July of every year. And so, for example, the report that we issued last year, in July of last year, for the jurisdictions that have received funding from us, they reported roughly 600 equity licensees. So they report number of equity applicants and number of equity licensees, the individuals that they've issued a license to, to 600 throughout the state. For the report, that is just to give you a little bit of a glimpse into the report that's coming in the next couple of months, that number is increased to 900. So that's good progress from going from 600 to 900. This program did start in fiscal year '19/'20 on the onset of COVID, and so we did see not as much progress in the beginning in this first few years that the world stopped, if not slowed down.

But we are starting to see some really solid progress with the jurisdictions getting these funds out and deployed to their equity applicants and licensees.

600 and 900 out of how many in the aggregate total existing?

In the state, so we get numbers that they've reported to us. And so that number is roughly 4000 non-equity licensees, which is reported to us. And so that's roughly 25%. And in terms of the illicit market, that isn't our area of expertise, my office's.

But I would say the more support and ease of entry into the regulated marketplace, I think that would have an impact on the illicit market, the easier we make it for folks to get into the regulated marketplace is going to have an impact on the illicit marketplace.

I would respectfully disagree. I refer back to my comments and Senator Padilla's comments about enforcement and how important that is, but I don't want to be completely redundant. How do you recognize who qualifies for these?

Sure. So we provide funding to the jurisdictions and each jurisdiction is supposed to use their equity assessment. That looks at how was cannabis prohibition impacted in their jurisdiction in the community.

Right. How do you recognize individuals that qualify?

Well, so the individuals go through the local jurisdictions program, so the jurisdictions create their own criteria. Mostly it's based on years of residency within certain census tracks or zip codes in the jurisdiction that had high incidence of cannabis arrest or convictions. They look at folks that, or their immediate family members have had a cannabis arrest or conviction. In some areas of the state, there may be not a whole lot of arrests, but there are raids.

And so they'll look at was there a raid on that person's property that they're doing farming or whatnot. So there are a variety of different criteria that each jurisdiction has created, but it's really supposed to, per the statute, focus on individuals that have been negatively impacted by cannabis criminalization and their families and poverty. So those two things are hooked in the legislative intent of the California Cannabis Equity Act. Of course.

All right, thank you very much for the information item. We'll keep an eye. Thank you. All. That will bring us to Issues 23 and 24. Starting with 23: the Military Department. Good morning and welcome. Currently, proceed whenever you're prepared, sir.

Thank you, sir, Mr. Chair and Members. I'm Darren Bender with the California Military Department. Issue number 23 involves ongoing General Fund costs of 2.3 million and 18 full time state active duty positions to provide 24/7 security for the new Military Department headquarters. Located in Mather, Rancher Cordova. The new complex is 31 acres, includes five buildings, and will house over 1000 employees.

The requirement for this security force was determined with the help of the state Threat Assessment Center and their critical infrastructure protection team, who did an analysis of the threats and of the complex itself, the dynamics of the complex itself, and determined this force to be the required security element. With that, happy to answer any questions.

Thank you, sir. Any comments from LAO?

Jared Sippel with the LAO, we have no comments on this proposal.

Thank you.

Anthony Franzoy, Department of Finance. No additional comments at this time.

All right, thank you. We'll bring it to the sub for their questions. All right, this item will be held. I think that Item 24 is: State Active Duty Pay Adjustment (Spring Finance Letter).

Yes, sir. So the state active duty force, by statute, the pay is tied to the US military pay charts, and so every year it has to be adjusted in order to stay aligned. Unfortunately, because of the federal budget and the state budget are not aligned, we have to submit a spring finance letter every year.

This year, we need an increase of 959,000, which includes a variety of a General Fund and Trust Fund, Mental Health Services Fund, and reimbursement authority, just to align the force with the required pay scale. And with that, happy to answer questions.

Interesting how we do that, isn't it? All right, any comments from DOF or LAO? All right, thank you to the sub. All right, this item will also be held. Thank you, sir. Bring us to Department of Veterans Affairs, CalVet. Issue 25, initial support for Yountville skilled nursing facilities, spring finance letter. Welcome. Please state your name and titles for the record, and please proceed when you are ready.

Yes. Good morning, Chair. My name is Thomas Martin. I'm Chief of Future Operations and Planning for the Veterans Homes. With me--

Good morning. Afternoon. Afternoon. Okay. Good morning. My name is Brett Laff. I'm with Future Operations and Planning with Department of Veterans Affairs. The issue before you that I'm going to talk about is the ramping up of the new skilled nursing facility in the Yountville Veterans home. The request right now is for 2.2 positions and $365,000 for '23/'24 and then 10 positions and 1.325 million annually thereafter for the initial phase of the ramp up of the home.

I just want to point out that the 2.2 positions that we're asking for in '23/'24 are full time equivalents. So we're ramping up the last quarter of '23/'24 there are actually 10 positions, but because they're just the last quarter, the equivalent is 2.2 positions. So just want to clarify that. I'm sorry. Go ahead? Okay. All right, thanks. So we are excited here to talk about our new skilled nursing facility that's currently being built on the Yountville campus.

The current facilities that our skilled nursing residents are in a depression built-era building. It wasn't designed for skilled nursing. We have veterans sharing rooms, and in some places, in some areas of the building, there are three or four veterans sharing a bathroom. So this new skilled nursing facility will be ensuite rooms. There'll be more space for our veterans. It'll be a more modern facility. It'll be a more homelike environment for our veterans.

And we thank the Legislature and the Administration for the support that we've received in bringing this building to reality. And with that, I'll be happy to answer any questions you may have.

Thank you. Comments from LAO or Department of Finance? All right. Thank you. Questions from the sub?

What year was the Yountville facility first constructed? Was it one of the first in the state?

It is one of the, it is the first in the state, and, yeah.18 what? Sorry.

Yes. So the home was constructed in 1884. As Brett mentioned, the building that this is effectively replacing was built in the 1930s.

1930s. Yes.

So I thought. Thank you. Thank you very much. That brings us to Issue 26, Reappropriation for the Rector Creek Assessment Study (Spring Finance Letter). Switch chairs.

Okay. Well, again, good morning. Again, Thomas Martin, Chief of Future Operations and Planning for the Veterans Homes. With me, I have Dave Gerard, the Assistant Deputy Secretary for Capital Outlay with CalVet. So the second BCP before you is a reappropriation of $950,000 one-time for a study of the Rector Reservoir and Dam. So this study is assessing the water flow coming out of the reservoir into the Rector Creek.

This is part of a settlement stemming from a 2016 lawsuit, and this study has been ongoing for several years now. We're asking for repropriation to allow the money to extend one additional year because the lack of rainfall in recent years has made it so if you don't have water, you can't study the water. So we're just asking to extend the same funding for a little bit longer to allow us to complete the study, which will be completed by the end of next fiscal year. And with that, I'd be happy to answer any questions you have.

Thank you. Comments from LAO or Finance? All right, thank you. To the sub, other questions or comments? All right, thank you. That item will be held, and it'll bring us to Issue number 27: Settlement Costs (Spring Finance Letter). And while you're getting settled, let's not forget to establish a quorum. So I'll ask the consultant to call in roll, please.

Calling Senators Padilla? Caballero? Niello? Quorum has been established.

Thank you. Morning, welcome. Please proceed.

Good morning. Thank you, Mr. Chair and fellow Senators. My name is Samantha Carden. I am an attorney with the legal division at the California Department of Veterans Affairs. With me this morning, I have Daniel Mawalam, who is our Chief Counsel at the legal division for the Department. Issue number 27 involves the department's request for a one-time appropriation in the amount of $8,659,000. Excuse me.

In order to pay a judgment following an adverse jury verdict in connection with a lawsuit involving a trip and fall at one of our veterans homes in Chula Vista. The total amount requested does include the entirety of the jury's award of damages, as well as all of the statutorily permitted litigation costs that plaintiff has claimed. I will leave you with that, and I'm happy to answer any specific questions you may have.

I remember this case. Comments from Department of Finance or from the LAO? To the subcommitee? All right, that item will be held. Oh, I'm so sorry, Senator. I didn't see you.

Quick question, this was, as I understand it, a physical--I'll use, barrier, for lack of a better word--that the individual tripped on, which can exist in pavements all over the place. And I'm wondering if, given the size of this settlement, if there have been any risk assessments of where this happened as well as other areas where it could happen.

Absolutely. Thank you, Senator, for your question. So, with respect to this specific feature involved in this lawsuit, which has been described as sort of a double curb, it's our understanding that this double curb feature is unique to this particular area at this particular home. Since we have received the jury's verdict determining that this feature constituted a dangerous condition, the home took immediate remedial measures in order to reduce future similar incidents from occurring. The home has since painted the concrete lip in a high-visible yellow color.

This was the most immediate remedial measure that we could take. The home is also currently in the process of looking into installing a fence or gate near this curb, but that does require the home to go through the state contracting process, which takes time. But that process is underway. So, to answer your question about other areas, as we sit here today, it's our understanding that this very unique physical feature only exists at the Chula Vista veteran's home in this one particular area.

Any other questions or comments? If not that item will be held, we'll move to Issue 28 for the Secretary of State. Disqualification from voting.

Good morning almost and welcome. Please state your name, titles for the record and proceed when prepared.

Thank you. Hello chair Padilla and Members, my name is Tamara Johnson, Chief Financial Officer with the Secretary of State's Office. Thank you for the opportunity to present the proposal that's before you today. We are requesting resources to support workload related to AB 2841. This particular Bill will impact our elections and information technologies divisions.

AB 2841 requires notice to voters at the time registration is canceled and requires coordination of conservatorship files with the superior courts of California, which will require the creation of a secure process for the receipt, maintenance, and monitoring of conservatorship files from the courts.

It will also require development and implementation of an online annual training of court officers and county elections officials in consultation with, in coordination with the Judicial Council and CalHR related to the responsibilities of superior courts and county election officials and the legal standards for voting rights disqualification and restoration.

It will also require tracking of the training completed by the court officers and elections officials and require design and development of a website to track conservatorship statistics and deliver and manage a web-based learning platform for the training of officials. Again, this will impact our elections division and our information technology division. So we are requesting a total of 11 positions.

Four of those positions are IT staff that are required to design, develop, implement, and translate business requirements for related integrations, transformations and database, and the secure electronic transfer of conservatorship files and the other seven positions are for election staff that are required to coordinate the receipt, management, and maintenance of the conservatorship files create and implement a process, a review of files to ensure accuracy and security of data, develop and implement required notices to voters, develop and implement training, program, and tracking and participate in design and the implementation of the required system updates and website and the compilation of statistics.

There are other costs that are also we are requesting resources or funding to support, which is the Axway licenses and fees, a Cloud application and interagency agreement with CalHR, and then also modifications to the VoteCal System. With me here today is our chief of the elections division, Janeline, and we are happy to answer any questions you may have.

Thank you very much. Are there comments from Finance or LAO? All right, we'll bring it to the sub. Senator Caballero.

Thank you very much for the information. I guess the question I have is you're asking for 11 positions and I'm trying to figure out why 11 permanent positions. Once you set up the system and then it starts becoming operative, some of the positions, in my mind, should or would disappear.

Thank you for the question, Senator. So there are activities that would be annually and ongoing. A maintenance of the website, of course, would require us to not just set up the website but require us to maintain the website. We do have the Axway license. It's an annual update or subscription that we would have to also maintain. And then there's also the Cloud applications that also require not just implementing but maintaining those systems annually and ongoing. So staff, permanent staff would be necessary to accomplish those efforts.

The other thing is, do we know how many individuals will be affected by this? Do we have a ballpark number? Because this is really important stuff. Right. Because you're taking away the right, maybe taking away the right of people to vote and restoring it. So it is really important. But are we talking about 5000 people in the state? I'm looking at this and I'm saying. It's 11 staff people. That's a lot of people.

And once you set up a system and you train people on how to use that system, and by that I mean the courts. Right. Because you're getting information from the courts. I just have a hard time understanding how 11 people are needed.

Good morning. My name is Jana Lean. I'm Chief of the Elections Division. So I understand your question. So honestly, there's a lot of ongoing processes that will still need to happen for all those positions. We will get reports from the courts every single month. So there's definitely an ongoing workload. Also, this will be the first time that we're really completely coordinating with all the courts and they're not under a one specific system. So we do have to figure out how we're going to do that.

For the number currently, unfortunately, we do not know because not all of the courts currently send us all the information that's needed. So they send us reports but on a sporadic time period and it's all manual. So this will be a new, completely automated, hopefully, system that we're working towards. We do know it's going to take a while to get the courts up and running and to make sure they take the training and that we're getting those. So we have to maintain compliance.

So we'll need to follow up a lot with the courts. I think it's not going to be a one time, it's a continual workload.

I understood. I guess my thing is if there's one part of the system that you can pretty much assume will get it right, it's the courts. They have to get it right. Right. I mean, they're the ones that have the data and the information, so hopefully it's automated and it becomes much easier.

But I just had a question about the, it's just unusual to come and say, yeah, we need them permanent at the beginning without saying, well, half of them is what we need to get it going, and the other half, and we may be back to ask for them to be made permanent. Anyway, I appreciate that. Thank you very much for your response.

Thank you, ma'am.

Just briefly to follow on that, I think probably, I'm guessing, and looking at the sort of the electronic information and transfer of information, particularly with regard to licensure and the unique requirements that go along with the adjudication of a conservative leadership matter, and getting that information from the judicial system over to your Department involves some interesting steps and protections as well. And I imagine probably was a little bit of a challenge getting the systems aligned.

But to the Senator Caballero's point, once you have the right it systems, you have the right protocols, hopefully aligned. I think the inquiry here is just, we don't have a quantification of the number of dispositions that you're going to deal with that affect voter rolls as much on an annual basis. And so in the absence of that, how do we get to 11? Right.

And so I think it's helpful now and in the future that there's a way to sort of be clear about what methodology, what thinking was employed within the department's analysis of how we got to a quantified number of FTs. This seems very like, well, it's 11. Well, how do we get there? Based on what? So I wanted to just echo that concern as well and put that out there.

If you want to comment on that, you don't have to, but I wanted to add my comment to Senator Caballero's. Any other comments or questions on this? All right, thank you. This item will also be held. Thank you for your work. That bring us to issue 29, Commission on the Status of Women and Girls. Update on Commission activities, and continued implementation of SB 24 spring finance letter. Thank you. One minute still morning. So good morning. Welcome.

Good morning.

Name and title for the record, and please proceed.

Sure. Good morning. Holly Martinez here, Executive Director of the California Commission on the Status of Women and Girls. Thank you. Chair and Members of this Committee. At the Commission, I am also joined by our Deputy Director of Operations and Grants, Tiffany Barto, who oversees the SB 24 program and can answer any additional questions as well. Let me start by just giving a really brief overview about the work of the Commission.

At the Commission, we champion policy and program solutions so women and girls can achieve economic security, health, and justice for all women and girls throughout the state. Together, we are fighting for equality and justice for women and girls by advocating on their behalf with the Governor, the Legislature, and members of the public. To be effective champions of this work, we have to be relevant and compelling. We can no longer talk about women's issues as a moral obligation, expecting people to do the right thing.

Instead, our work at the Commission has been focused on reframing the conversation about women and bring to light an accurate representation of our challenges, roles and contributions as more than half of California's population, because we know women are essential to California's future. But that future has been threatened by the long standing impact of the pandemic. In 2021, we advocated for first of its kind funding with the support of Members of this Committee here today to secure 7.9 million, and launched a statewide Women's Recovery Response Program.

We created a $5 million grant program, the first in our nearly 60 year history, developed an extensive research partnership with UC Berkeley Policy Lab, launched a statewide public awareness campaign, all within a six to 12 month period of time, which, as we all know, is pretty fast and nimble for government. The Women's Recovery Response helped to support women who were essential workers, caring for loved ones in hospitals, educating our kids, keeping stores open, all while the added burden of their responsibilities in the home.

California's women's employment fell significantly more than men's during the first two years of the pandemic. Female-dominated occupations such as the care industry, hospitality, education sector suffered the largest share of job losses across the nation. Women of color were the first to lose their jobs and last to regain them. Black and Latino immigrant women lost even more jobs. Unemployment affected poor women and women without college degrees the hardest.

On the contrary, women with degrees and without children who remain employed saw their earnings rise, which just goes to show, it indicates that our systems were not built for women, women of color, and working mothers to thrive. And as the pandemic continued to impact women economically, our rights to bodily autonomy was also attacked.

As a state that works to eliminate inequities in state laws and practices and conditions that affect women and girls, the Commission stands committed to ensure reproductive health care access in the face of actions that deteriorate progress and equality.

The College Student to Right to Access Act, formally Senate Bill 24, authored by Commissioner Senator Connie Leva, required that on or after January 1, 2023 each student health care center clinic on University of California or California State University campuses must offer abortion by medicated techniques through campus health centers. I commend the foresight of the Legislature to pass this act back in 2019.

This legislation increases access to reproductive health care at UC and CSU campuses and is designed to reduce barriers for hundreds of California Public University students who are forced to go off campus to seek care every month, often missing classes and delaying their access to these vital health services. The Commission is responsible for the administering the College Student Health Care Sexual and Reproductive Preparation Fund, which provides private funding for statewide readiness efforts across all State of California University campuses.

The Commission is also tasked with providing non-monetary assistance and support, as well as activity and expenditure reports. To that end, we have published two year end reports in December of 2021 and 2022. The implementation of this program has been groundbreaking, institutionalizing improved readiness and access to medicated abortion across California's University system. This has truly been a nation leading model.

We respectfully request your support to extend the existing position authority by two additional years for three limited term positions tasked when implementing SB 24 to develop, implement, report, monitor, and oversee the work of the program. There is sufficient funding balance of private dollars to continue to support the positions that we are requested for extension. Thank you very much.

Thank you very much for the work you do. Are there comments from Finance or from LAO? I'll bring it to the Subcommittee for comments or questions. Senator Caballero.

I just want to thank you for the report. It's good to hear what's going on and kind of what you're involved in, and I see you've got some kind of report, so I'm sure you want to give it to us, and I appreciate that very much. So thank you for being here today.

Thank you for those comments.

Thank you. Yes, please present it up and we'll be happy to take them.

Thank you.

That'll bring us to Scholarshare Investment Board issue 30, CalKIDS savings accounts.

Afternoon and welcome. Please state your name and titles for the record and proceed when you're ready.

Thank you. Noah Lightman with the scholarshare Investment Board. Good afternoon. We appreciate the opportunity to present before this Committee. This is about the Calcuts program, which is a statewide children's savings account program that just launched in August of 2022. The proposal before you redirects existing funds from one component of the program to another and requests $1 million for marketing purposes for the program. With that, I'd be happy to answer any questions of the Subcommitee.

All right. Comments from finance or Lao?

Yes. Lisa King with the LAO. I will briefly comment on each of the proposals in this issue. First, regarding the proposed increase in calcid seed deposits for newborns, we recommend rejecting this in light of the state budget condition. As you know well, the state faces a budget problem, and so there is a high threshold this year for program expansions.

At this time, we don't have evidence that increasing the seed deposit for each newborn from $25 to $100 is likely to improve the calcuts program's effectiveness at promoting college access. We would note that children in Low income families already under current law receive an additional $500 deposit upon entering first grade.

We estimate you could generate 30 million in ongoing savings if you were to reject the proposed increase in the newborn seed deposit and instead align funding in this program with the most recent cost estimates for the current deposits provided to both newborns and first graders. Regarding the proposed funding for marketing, we also recommend rejecting this funding. Last year in the state budget, the state provided significant funding related to Cal kids marketing and outreach, totaling about $15 million across several initiatives.

Most of the funding provided last year has not yet been spent, and so we think it is too soon to determine whether additional funding is needed for this purpose. Thank you. Happy to take any questions.

Thank you to the Members of the Senate. All right. What is the nature of the outreach programmatically, what does that look like and how are we estimating the kind of actual impact we might anticipate in the event that the request moves?

Yeah, we appreciate the question, Senator. So outreach is being conducted in a few different ways from an outreach perspective for schools. We have a top down approach and a bottom up as well. What we're doing is we're working with the Department of Education to notify school administrators about the program. We've sent out letters to superintendents, principals, even teachers, letting them know, hey, this is what the program is.

These are funds available for your students, and we've created specific marketing collateral specifically for schools, which include flyers with QR codes, newsletter content that can be emailed to students and families, as well as scripts for robocall announcements. We've also engaged a variety of different statewide associations that represent county superintendents, school board Members, teachers, and we're really working on a county by county approach to engage with as many leas across the state.

We also do currently work with our scholarship program manager, Tia Pref, for broad marketing, and they've assisted with digital and radio as well. But as you all know, in the State of California, marketing is very expensive. We were given a $1 million budget allocation last year. We actually just released and accepted a proposal for an RFP for marketing services, and so we plan to encompass those funds by the end of the fiscal year.

And if the Committee were to accept this proposal, it would just reaffirm the state's commitment to ongoing outreach efforts for this program.

All right, thank you. With that, I think this item will be held and appreciate your, your work and your testimony. That'll take us to FTB Franchise Tax Board issue 31 data sharing trailer Bill Language Good Afternoon and welcome, and please proceed when you're ready.

Thank you so much. Good afternoon. My name is Jeanne Harriman with the franchise tax board. Thank you for hearing item 31 today. So FTB has been working very diligently for the last 56 years with many local advocacy groups as well as many Members of the Legislature in regards to making sure that individuals throughout the state know about the California Earned Income Tax Credit and hopefully provide them ways that they can simplify their access to that credit.

The proposal that you have in front of you is one key way to do that. Existing law requires employers and public assistance programs to notify all of their employees and clients on an annual basis, and typically in the month of January of the existence of the Cal EITC, and that must be done in writing for the employers.

This proposal in front of you would extend that notification to having one more notification to all employees and public assistance programs eligible individuals in the month of March to again encourage them and to be aware of the Cal EITC. And this proposal also expands a standardized notification language that includes federal credits, notifications of free filing methods such as Vita or Cal file, and then also includes notifications of perhaps other anti poverty credits focused on Low income families across the state.

The second part of this proposal deals with outreach that Franchise Tax Board as well as communities, sorry, the social service programs do, and we exchange data in order to facilitate those activities. The language in the current statute is allowing for the sharing of stale data, which is less effective. And the trailer Bill in front of you extends that data sharing function between our organizations with current data so that we are able to better understand these filing dynamics and do our own respective outreach programs to them.

Also, again, encouraging folks to file and claim the tax credits that they're eligible for. Your support is appreciated and happy to answer any questions you may have.

Thank you. Are there comments from finance or from Paleo? All right. To the Subcommitee, are there comments for Senator Caballero?

Well, I just want to say thank you very much because this is really important. The uptake on some of these tax credits are. It's difficult because people don't understand exactly how to do it and sometimes filing becomes mentally challenging for just if they don't have to file, then why do it? And so I really appreciate the work that FTB has done on this.

These tax credits have shown long term reductions in poverty, and so the fact that we can do it in conjunction with the Federal Government means that people get money, real money, in their pocket. So appreciate your language and doing it in this way.

Thank you so much.

All right. Thank you very much. This item will be held and that'll bring us to item 32, I believe. Film Intelligence Tax Credit Administration Spring Finance letter thank you.

Good afternoon. My name is Toy Wong with the Franchise Tax Board. Issue number 32 requests resources to implement and support the expansion of the film and television tax credit proposal which was included in the Governor's Budget. FTB is requesting 721,000 and 4.1 full time equivalent positions in fiscal year 2425767,000 and 5.3 full time equivalent positions in fiscal year 2526 and tapering down to 292,002 positions in fiscal year 2627 and ongoing.

In order to support and make the necessary changes to implement the film and television refundable tax credit by January 1 of 2026. These resources will update existing tax forms and corresponding instructions, as well as create a new form for this refundable business entity. Credit resources will also make the system changes to capture new form data, perform calculations, and update system rules for our return processing and accounting systems.

In addition, FTB will also create robust fraud validation rules and processes to mitigate fraud risk and ensure that accurate credits are allowed. Previously, FTB submitted a technology expansion for business entities refundable credit budget change proposal to modify and expand the tax systems necessary to support refundable credits for business entities. This proposal is for resources needed to implement this specific refundable film and television tax credit. FTB will need resources from both proposals to effectively implement the credit.

Please note that since the development of our spring finance letter, the proposal has evolved to eliminate the need for a reservation system and therefore resources are no longer needed. In 2324. Thank you for your time and happy to take any questions you may have.

Thank you for your testimony. Any comments from the departments?

Brian Euler, Lao, no concerns on this proposal.

Thank you to the Subcommitee. Any questions or comments? Senator Pabio?

Thank you very much, Mr. Chair. So I know we're, we're going to be looking at the investments we make through tax credits and any ways that we're reducing the liability of individuals to individuals, a company to pay during a budget deficit year. That's always kind of critically important. And there are promises made in terms of reporting requirements, those kinds of things with some of these tax credits. So the question I have is, I know that there was discussion in a prior budget to create the opportunity for diversity within the industry.

In particular, a couple of programs that were part of the money would go to, which is the career pathways or Hollywood CPR. Those programs are operating, as I understand it, as part of this tax credit. And do we know what the success of those programs are? They're like apprenticeship programs, and we don't usually require that as part of a program, but we do in this tax credit. And so I'm wondering if we get data or if we can get data as part of the budget language.

I'm talking about trailer Bill, as opposed to the resources that are requested. Is there a way for us to know, to track what happens to the graduates of these apprenticeship programs and whether they're getting jobs and where they're getting the jobs, those kinds of things.

And I do think we'll also have a broader forum on the next issue item, too. It's further, just structure it. But I know that this is sort of a capacity item, but if you want to briefly address and direct, that's fine, too. And then we're going to take it on the next segment as well.

Yeah, thank you for that. And thank you for the question. So I think the next topic on the agenda will actually answer your question better than we can. So I know we've had and heard conversations with the film Commission, who really probably has the source data, if anyone has it, that you're looking for in prior hearings in this Committee itself, there have been some discussions held with some of that data.

So I think if they're up on the stand later or otherwise, ask them if they have access and you can have access to that sort of data, because I suspect they might have something that would meet your needs. Thank you.

All right. Thank you. Anything. I'm sorry, Senator Niello. So this is not a request for the 2023 budget year, correct? It's a request for the 2425 budget year?

Yes, sir. When we originally developed the spring finance letter back in the beginning of the year, we were working with the assumption that a reservation system would be needed in order to make sure that we don't go with a cap. And in order for us to build that reservation system, we would have needed one year limited term position in 2324. But since then, the proposal has evolved, and that's no longer a requirement, and so we've eliminated that position.

Well, seemed to me that this would properly come before us a year from now, not for us to approve it right now for a subsequent budget year. But I'll ask a similar question to what Senator Caviar did. This is intended to incentivize the productions in the state, right. Do we have data to prove that the program works, the incentive works?

So I can kind of jump in on two of those points. So, yes, as you Noted2324 no longer has resources. However, I would note that this proposal is associated with the governor's proposal for the film credit expansion in the January budget. There is quite a lot of leadway that is necessary in order to do this work associated with the current version of that credit.

And so there is work that we could do within our own organizations to get ready for the additional resources that would come in in 2425 to ease the implementation. So without knowing that resources would ever be granted, and waiting a whole year could jeopardize our ability to do some of that pre work until we get a good sense that in future sessions and future years, that we would be granted those resources.

So I would put that out there because we want to make sure that we're able to implement in the time frame that the statute is adopted to say it is implemented in, if that makes sense.

So on that point, you're looking for an intent commitment.

I think the legislation itself does that. Right. But yes, in order to build it so that the system will function as is expected and intended, we do need to have that level of surety because we don't like to waste work. Nobody likes us to waste work. Right. So putting that investment in the event that a vendor is needed, I don't think this proposal has a vendor associated with it.

But in other proposals, that intent could be important as we engage in a contractual relationship with the vendor to do it, but that is not an issue at this point because it is just state staff doing it. But it helps us manage our work across the board.

There's a lot going on in our organization for technology, and we're trying to make sure that all of these proposals in flight and that were adopted last year, et cetera, that have future year implementations are able to be implemented as you would like us to, because that's what the law says. Right. And again, we just caught the error earlier this week as we were preparing for this hearing and said, zero, gosh.

So we don't mean to waste your time to be here, but it is preferred if it can be approved this year. But if not, we will absolutely certainly be back next year with the proposal as well. So that's on the first question. On your second question is regards to data. I think, again, the film Commission is really the entity that has that data points on how this goes.

FTB is really kind of the bottom part of the process, and we just get data flowed to us from that film Commission after they have granted these credits. And the granting of these credits is what establishes those data points that you're looking at, as well as the fulfillment of those data points before they authorize that credit. And tell FTB, yes, we've given this production x dollars in credits. Please allow it on the tax return.

So I think the film Commission is the best source for you to get that data point as far as is this a successful effort or is it needs some tweaks to be as successful as it could be?

Well, regardless of the source, it would be good to have that information at the point that we're agreeing to put resources toward it. So irrespective of the source, it would be good to have the information understood.

Thank you. So we can see if there's ability to facilitate that as well.

Let's hear from Lao.

Senator Niello. You may recall that we discussed the film tax credit more broadly back in March, and at that time, we did present on a report that we had done earlier in the year, kind of assessing the slate of the economic research that existed on the film tax credit. And just to summarize the findings from that report, there is a fair amount of academic research on state film tax credits.

And generally they do support the notion that the state film tax credit does increase the amount of film production that occurs in the state and overall increases the size of that sector of our economy. Now, a somewhat related and separate question is whether or not that makes the state's overall economy larger and on that piece, I think we think it's less certain.

And the reason for this is that while the film tax credit may make the film industry larger, those funds could have otherwise been spent in other areas of other areas of the budget, which could have had corresponding increases in other parts of the state economy. And so reviewing some of the potential economic, the research on potential economic effects from kind of potential alternative places you could allocate funds suggests you could have gotten a potentially similar increase in other parts of the economy.

So on the one hand, yes, it does appear to encourage additional production in the state, but it's less clear that that actually leads to the state's overall economy being larger.

Thank you for that. And I recall the discussion. I also recall wondering if the activities would have happened anyway. I realize the academic research is suggesting no, but I'm calling me skeptical.

And just one final point of clarification. A kid, a little bit of a repeat as to what Tay said. So this proposal is hooked up entirely to the governor's proposal to extend the credit. We are currently resourced for the existing film credit itself. But the other BCP that is pending before your Committee, which is the refundable proposal that mentioned. Right. It is separate and distinct.

That is really related to the policy decision as to whether or not in the future it may be warranted to give out refundable credits to business entities that otherwise might not qualify because they're only subject to minimum tax. Right. And so it is really a separate, distinct proposal from this film credit proposal and this BCP that you have in front of you as well.

Thank you. We understand that this item will be held. Thank you for.

Thank you so much.

Available. Next, we're going to take up issue number 33, which is an informational item with regard to the protect our progress budget plan and tax credits generally. And specifically. Obviously, the enactment of the suggested Senate plan will depend upon the final budget structure and revenue component. This is an information item. Please come forward. State your name and title for the record. Please proceed when you are prepared.

Yes. Brian Euler with the LAO. And we'll just kind of summarize the three proposals, tax credit proposals that are part of this item. The first is an expansion of the state's renters tax credit. And the proposal would do two main things. First, it would increase the benefit amounts to $250 for filers without dependents and $500 for filers with dependents. And the second major change is that it would make the credit refundable. It currently is non refundable.

The second item is an augmentation to the California Earned Income Tax Credit, which would increase the minimum amount of the credit to $275 per filer. And the third item is to allocate $400 million to Fund the workers tax Fairness tax credit, which would activate this credit for the 2024 tax year. And this is a tax credit that allows workers to receive a credit for a portion of their union dues.

All right, sir, comment good afternoon, everyone. My name is Anna Hasselbladden with United Ways of California. It's my pleasure to speak to you today and offer some perspective on the renters tax credit as a tool to reduce poverty, help renters deal with increasing costs, and why refundability is a critical aspect of tax credits. So just a bit of history and I'll try to keep this brief. In 1972, the California State Legislature stepped up to create it the first version of the renters tax credit.

This was seen as a game changer for Californians. However, the amount provided through the credit was only ever increased in 1979. Although the amount of the tax credit has remained the same over four decades, the price of rent in the state continues to rise, at least triple, if not quintuple or more, the amount that they were when the credit was established.

And data is showing that since the start of the pandemic, rents have increased significantly in the years since its creation, the value of the renters tax credit and income eligibility has varied a bit with time and budgetary considerations. Though the credit was once historically refundable, after a brief period of expiration and then reinstatement, the renters tax credit has remained unrefundable or nonrefundable since 1998.

Despite the Franchise Tax Board continues to find that the number of tax returns claiming the renters tax credit continues to increase year after year. More recently, the Covid-19 pandemic has only exacerbated the pressure of California renters. While the Legislature passed temporary forms of relief and protection through the Golden State stimulus, the middle class tax refund, and the now expired eviction moratorium, the affordable housing crisis for renters existed before the pandemic and certainly continues to weigh heavily on the minds of Low and middle income renters.

According to the LAO, renters have been disproportionately affected by the economic consequences of Covid-19 so I'm going to talk a little bit about the need for income supports via tax credits 2021. Data from the California Budget and Policy Center tells us that almost 17 million Californians, about 44% of all state residents, live in homes that are rented, so it's a huge portion of our population.

Data from United Ways of California real cost measure also found that one in three households in California struggle to make ends meet and afford the cost of living, despite having at least one working adult in the household. With California's exceptionally competitive housing market, I know I don't need to tell you how expensive housing costs are in every single county across the state.

The real cost measure also reveals that many of these struggling households are much more likely to be renters, leading advocates to push for solutions such as expansions to the renters tax credit, as well as measures that would make these tax credits fully refundable as outlined in the Senate budget plan. To put a bit more perspective on what Californians are facing for struggling households, three in four households earning below the real cost measure report spending more than a third of their income on housing.

Now this is in sort of contrast to the three times this is three times the rate of households that earn above the real cost measure. So essentially, folks that are earning more are spending much less of their income on rent. Further, a household that falls below the real cost measure, the greater that rental burden becomes. With some renters paying up to 80% of their income on housing, I encourage you to imagine how you could make your household budget work.

Put food on the table, gas in the car, et cetera, if up to 80% of your income had to go to rent each month. I would also note that California homeowners receive more than $9 billion in property tax, capital gains and mortgage interest deductions annually.

While the current cost of the renters tax credit to the state is around $160,000,000 per year, there is serious need and opportunity to right size this inequity, as outlined recently by California Budget and Policy Center, and is borne out in many studies. Black and Latinx renters are especially likely to face unaffordable housing costs, reflecting the effects of explicitly and implicitly racist policies and practices in housing, unemployment, et cetera. I'm going to wrap up with why refundability is so important.

California's current renters tax credit model, as I noted, is non refundable, meaning that you can get a refund only up to the amount you owe the government when you file your taxes. So while it can lower your tax debt owed to the government, it cannot be added to your household as a cash refund. In effect, a refundable tax credit, on the other hand, reduces the taxes owed and can result in a refund if it is more than what is owed.

We know that making tax credits refundable can provide significantly more value to families who are struggling to make ends meet. California's workers with the lowest incomes who often have no tax liabilities thanks to other exemptions in the state's progressive tax income structure, would be most impacted by the proposed change in the Senate protect our progress budget plan. Overall, the improvements to the renters tax credit would impact well over 3 million Californians.

And we know well the impact that tax credits have as a way to lift up Californians with Low incomes. So there's a real need for Low and moderate income households who are struggling to afford the cost of rent each month. And a more significant and refundable renters tax credit would uplift millions of renters who currently struggle. The current credit is regrettably meager and only provides $60 to single filers and $120 for joint filers.

Now is the time for us to do more for these families and increase the power of the California renters tax credit. Thank you for your consideration, and I'm happy to answer questions.

We'll take each one in turn. I think just because of the topic, how it's set up to be discussed, or there are questions or comments from the Members on the renters extra that's contained in the plan. All right, we'll move to the next one.

Hey, good morning, Senator Padilla and Members of the Committee. My name is Alissa Anderson, and I'm a senior policy fellow with the California Budget and Policy Center, which is a nonprofit research and analysis think tank. Thank you for the opportunity to speak about the importance of the California Earned Income Tax Credit. Every Californian deserves to have an income that allows them to achieve economic stability and thrive in their communities. And refundable tax credits are proven tools for doing just that.

The federal EITC has a decades long track record of lifting millions of people out of poverty every year. State credits like the CaLiITC further enhance the poverty fighting power of the federal credit. That's because the simple solution to poverty is money. The CaLiITC puts money directly into the pockets of millions of Californians with Low incomes each year, helping them to afford basic needs.

Unlike other state eitcs, the CaLiITC generally provides the most money to people with the lowest incomes who face the greatest challenges to making ends meet. As a result, the CaliITC helps lift many Californians out of deep poverty. Increasing the amount of money the CalI ATC provides is a simple way to amplify its effects. That's why the Senate's proposal is so important, it would increase the Cali ITC for many people who currently qualify for small credits to a much more meaningful $275.

Collectively, this would boost the incomes of Low income Californians by hundreds of millions of dollars each year, helping them to keep up with the rising costs that all of us are experiencing. This larger credit is especially important because the majority of CALATC recipients are not eligible for the federal EITC and need a more meaningful state credit. This includes people who file their taxes with items, as well as people ages 18 to 24 and adults 65 and older who are not supporting children.

Increasing the CALATC would also promote racial equity by boosting the incomes of many workers of color and immigrants who face racism and other structural barriers to advancement in the labor market. Our estimates show that about three out of four people who likely qualify for the CALATC are people of color, including over half who are latinx, 11% who are Asian, and 7% who are black. In addition, over a third are immigrants.

A larger CALATC would also help young adults who are just starting off in the workforce to build economic security. Around 30% of adults who receive the CaLI TC are 18 to 24, and these youth are about twice as likely to struggle to pay for basic needs as older adults. Finally, increasing the CaLAtc could boost takeup of the credit research on participation in both the CaliITC and federal EATC finds that people who are eligible for very small credits are less likely to claim the credit.

It's plausible that these individuals find it hard to justify the significant time, effort and stress of filing if they aren't required to file and they won't get much money back. Guaranteeing a more meaningful CaliITc would help make filing worthwhile. Plus, new filers who also claim the federal EATC would bring additional federal dollars into the state and local economies. California, and legislative champions in particular, have always been at the forefront of efforts to innovate how a state EITC can help workers fight poverty and build economic security.

And the Senate's proposal would continue to build on this progress. By increasing the amount of money that the CALATC provides with policies like this, state leaders can build toward an equitable California where all people have the income they need to pay for basic needs and thrive. Thank you very much.

Thank you. Are there questions from the south with respect to EITC? Is there any unique dynamic because of the expansion? We understand the theories on uptake in participation, but how about the relationship with the federal Earned Income Tax Credit?

Yeah, it's hard to put a precise participation rate on it simply because we don't have comprehensive data on how many people are actually eligible for the credit. There have been some studies done looking at subgroups who are eligible. So, for example, the California Policy lab did some research a few years back looking at Calfres participants and estimating how many look like they're eligible for the CALATC and claim it or don't. Their findings suggest that hundreds of thousands of people were missing out.

And I think one of the most important findings from that research is that most of the people who appeared to be missing out on the credit were eligible for very small credits between about $82 to $85. So again, I think that seems to suggest that if you increase the size of the credit, it will make filing worthwhile. Many people who are eligible for the CALATC are not required to file, and so I think increasing the size of the credit would certainly help with that.

Appreciate that. All right, you can take up workers tax fairness. Welcome.

Thank you, Mr. Chair Members. Sarah Flocks, Legislative Director for the California Labor Federation. And I just wanted to thank the Senate for putting forward this package. I think this is a great suite of tax credits to fight poverty and income inequality. So I'm here to talk about the worker tax Fairness credit, which is provided around union dues.

And part of this is because unions provide significant public benefit, including higher wages, better benefits, safer working conditions, and also are a tool to fight income inequality and reduce gender and racial disparities in wages. And yet, union Members often can't claim the same benefits that businesses and professionals can in terms of tax deductions.

In 2017, the Trump tax law suspended the federal union dues deduction, making it unavailable to union Members at the federal level, even though many of the business and professional tax credits and deductions were preserved. And even at the state level, many union workers are unable to claim any benefits because they don't earn enough money to itemize or to even file credits.

And so there's an inequality between employers and union Members when employers are able to deduct many of their business expenses and many professionals are able to deduct Association fees. So you have doctors, lawyers, many other small business people who are able to claim deductions.

This would allow union workers to be able to get a refundable tax credit for a certain percentage of the amount that they pay for union dues, a percentage that would be set by the Legislature and appropriated through the budget Bill with a cap of $400 million. And so the refundability is especially important, given that there are many, many lower paid workers who are Members of unions and that ability to have a refundable tax credit can make the difference for them being able to afford that.

I mean, just looking at IHSS workers, many who are in unions, they make an average of $16.0.46 an hour. These are union workers, many of them living in counties where the living wage to be able to afford to live in that county is $43.

And so this small amount, the small refundable tax credit, along with the other two that are proposed today, we think are incredibly powerful to be able to fight income inequality and really increase uptake, because you're going to have different groups doing outreach, whether it's housing advocates, whether it's around the EITC or unions who are moving their Members to claim as well. And so we think that we'll actually be able to move more people to claiming these important benefits. Thank you so much.

Thank you. Are there comments or questions from the sub? Senator Niello, I appreciate the background information and the issue relative to income inequality and assistance to lower wage earners, though I haven't noticed in the past where we've had, usually we have presentations from agencies or the Administration, and then we have public comments from advocates. Here we have the presentation from the advocate, and perhaps we'll have public comments later. But that is different than the way things have been on this issue. I don't have a question.

I have a comment. There is a budgetary issue because we're headed into a deficit, and that obviously is a concern. But the bigger concern is the desire to help lower income people. Notwithstanding, this creates really a conflict of interest or even a confusion of interests. We have employees who are represented by a union, and the union's job is to negotiate wages and working conditions on behalf of workers.

And on the other side, we have the employer, which is the state, who negotiates with the union relative to working conditions and wages, but they're negotiating on behalf of the employer or in this case, taxpayers. The union is not negotiating in the interest of taxpayers, they're negotiating in the interest of their Members. And I get that that's the way representation should be. But here we have the employer essentially completely paying for the employee their costs of representation.

If the same amount of money was dealt with in another venue, I wouldn't have this particular comment. I might be concerned about the budgetary part of it, but not this particular issue. So I find the underlying policy to be a tremendous conflict of interest for the employer paying for the employee to be represented relative to wages and working conditions would tend to compromise at least the perception of the employer protecting the interests of itself, and in this case, particularly taxpayers.

All right, any other comments from the sub or Members? This has been an informational item. It has been helpful. Again, I'll refer to my opening comments before we took up the information item. We will see you again. Thank you. Participation at this time. Before we take up issue 34, the Subcommitee will take a brief recess for about five minutes and reconvene. So the sub will stand in recess for five minutes.

All right. We're ready to go. How was our tech, folks? We good? All right, we will reconvene the Subcommittee, and we are going to move to issue number 34, which focuses on a deeper conversation on diversity in the film and television industry tax credits. We're going to take two rounds of testimony and information. Again, this is an information item, um, on the Governor's proposal, per se. We heard this matter in Sub on the 2nd of March.

This item continues to be held, but there was quite extensive discussion and continues to be interest in the partnership between the State in the context of the ongoing and proposals around the tax credit and the progress in partnership with the State and the industry that we are all hoping can occur and continue to evolve in a more productive and transparent way, which I think we all would agree in California's premier industry that so many associate with our great state. We are a Pacific Rim State.

We are an international state. We are an incredibly diverse state. And that diversity and the need to continue to reflect that in this amazing industry, to build on the good progress we've made and to do so in a better and better manner, is important not only just for our state and our community and our society, but obviously has or should be recognized to have obvious economic benefits. And so it's a relevant part in relationship to consideration of the tax incentive.

That's very relevant in the context of that element of the conversation, partnership and oversight. So it's most appropriate that we expand on that conversation a little bit here today. We do have a couple of distinguished panels that are going to join us today. I think we have Lauren Greenwood from GoBiz. We have Victor Reyes, Executive Director, Hollywood Cinema Production Resources, and Melissa Patack, Vice President of state government affairs for MPA. Whatever order you'd like to present in is up to you. State your name and title.

And what we're going to do here, ladies and gentlemen, is we're going to give each presenter on the panel a total of five minutes in the interest and respect for time and out of respect for those folks who are waiting to provide public comment. So, please, I'm going to ask for some assistance and timekeeping, if we can get that. But we're going to have about five minutes each, and then we're going to take a remote panel that is participating remotely as well.

Their time will also be limited. After we hear from the three of you, we will have questions from Members of the Sub. We will do the same with the remote panel, and then we will take public comment on the entirety of today's discussion docket. So again, thank you for coming and for the information item, and please proceed.

Thank you chair Padilla and Committee. My name is Lauren Greenwood, Deputy Director of legislation for GoBiz. I will briefly cover some history related to the California Film Tax Credit Program and explain how the State is continuing to advance diversity, equity, and inclusion. This program began in 2009 out of a need to defend California's flagship film and television industry from runaway production that took jobs and investment to other states and countries.

These are jobs that range from the electrician who belongs to the basic crafts to local hires for services such as catering and equipment rental. Since the 2014 LAO report that validated this, we've seen an acceleration of new production incentives with more generous offerings and less restrictive criteria go after California jobs and investment. New York recently expanded its program by nearly 70% to bring its annual credit to 700 million through 2034.

Georgia has an uncapped program that spent 4 billion alone in 2022, and they're building new soundstages at a rapid pace. Other states, such as Illinois and Louisiana, extended their programs to 2032 and 2035, respectively. The list goes on. In comparison, California makes an annual 330,000,000 of tax credits available through a unique, incredibly competitive and rigorous application process that measures the number of jobs created and the total amount of in-state spending. $21 billion of economic activity is what we're talking about. Why reauthorize the program?

This program has been incredibly successful. Program 1.0 was created to retain jobs. 2.0 layered in workforce development and training. 3.0 effective 2020 and the newly created Soundstage Program launch new diversity initiatives and required data publication and the proposed 4.0 currently being considered, would strengthen California's national and global competitiveness and further embed diversity goals into the program.

The Governor put forward this latest proposal not only to keep California's film and TV industry competitive for another five years, but also to leverage our state dollars to incentivize the industry and actively diversify film production jobs. The new 4.0 encourages productions that receive approval for a tax credit award to submit a diversity work plan just 30 days after receiving this approval. The work plan will outline the specific steps to make productions more inclusive.

As an incentive to opt into the diversity work plan provisions.4% of the total tax credit award for each approved project would be placed and reserved until the production submits its final paperwork, including a report showing how they fulfilled commitments they made in their work plans.

With this change, there are now three elements of the state's approach to encourage productions to reflect California's population. One, requiring increased data collection and transparent annual reporting to track trends. Two, incentivizing the creation of diversity work plans specific to each production, demonstrating good faith efforts to achieve these goals and three, career training program participation to develop the workforce. I'll go into each of these a little more.

Data collection, approved projects in California's program are required to provide the CFC with information about the diversity of their casts, crew, and background players. This data is collected by production's third party payroll providers, and it is voluntary. The state cannot compel people to disclose their race, ethnicity, and gender under 2.0 from 2015 through 2020, the CFC analyzed projects diversity information for the 200 approved projects that received a tax certificate.

So far under 3.0, effective 2020 through 2025, CFC has analyzed preliminary data from 16 approved projects and it's now sharing this online so it's easily accessible. Compared with 2.0, there has already been a 7% increase in participation by women, a 5% increase among underrepresented groups in 3.0. But again, data collection in CFC's program is challenging because cast and crew are not required to share their information. For example, 14% of respondents in 3.0 chose prefer not to state.

In order to continue moving the industry towards additional diversity gains, the state is encouraging and proposing to incentivize the submission of this diversity work plan. One of the CSC's other programs, the Soundstage Filming Tax Credit Program, requires the submission of this diversity work plan specific to each project in a final report on outcomes. The 4.0 proposal extends this concept. These work plans contain a description of the goals a motion picture will seek to achieve for both above and below the line hires, as well as strategies to achieve and measure those stated goals.

Once their diversity report is submitted, it must include a description including evidence of whether the applicant achieved the initial goals. The CFC reviews and determines whether a good faith effort was made. The 4.0 proposal was carefully constructed in consultation with affected industry stakeholders to provide an incentive to increase diversity while retaining the integrity of the program and the funding level. Career Training, finally, CFC has run various career training initiatives since 2020 that are funded by tax credit applicants required contributions of 0.25% of their allocation.

The Career Pathways Program targets individuals from underserved communities and provides craft skills training for careers in the industry. To date, 257 individuals have participated by Hollywood CPR, Manifest Works, the Handy Foundation, and IOUT C Local 695 are partners. 64% have reported being Members of underrepresented minority groups.

CFC also supports pre-career training through its Career Readiness Program, developed in collaboration with CDE, we appreciate and thank the Legislature for prioritizing this work as partners in developing policy and the budget. With each new iteration of the program we have built upon progress, the 4.0 takes new steps to ensure that we have a robust program that incorporates our values and retains critical jobs here in California. Thank you.

Thank you very much. All right, who's the next presenter?

Good afternoon. I want to thank Chair Padilla and the Committee Members for giving me the opportunity to appear before you today. My name is Victor Reyes and I'm here on behalf of the California IATSE Council and the Entertainment Union Coalition to talk about the importance of the California Film and Television Tax Incentive program and what it means to the working men and women in the industry, and what the existence of the program is enabling us to do for the underserved communities.

I am a longtime member of IATSE and now business agent of Local 44, representing affiliated property craftsperson. Our 7,000 plus members work in 16 different skilled trade ranging from set decorators to prop masters, armors, and special effects. Our members are the unseen workforce of the entertainment industry. I am also the Local 44 Director of Member Education and Training and just recently I was appointed the interim Executive Director of Hollywood Cinema Production Resources, also known as Hollywood CPR and IATSE Union training program.

I was born and raised in South Los Angeles, south of Florence and Alameda, but I was lucky enough to be at the right place at the right time with the right skill set, and in 1996 I began to work as a prop maker in union member motion picture and television productions. From that job, I worked on over 25 TV shows and motion pictures. Shows like Austin Powers, Ali McBeal, The Practice. The one lucky break turned into a good union job and career for me.

But Californians shouldn't have to get lucky to break into the entertainment industry. My Local today looks very different than the Local I joined in 1996. In a recent survey conducted by Local 44 of its new members, since January 2016, 43% self reported and self identified as non-White. That number is only going to grow. Diversifying the industry requires dedicated resources and pathways to get young people of color and women into the film and television jobs. It's not enough that we recruit them.

We have to offer training, support, and job opportunity to make sure that they succeed and stay in the industry. Hollywood CPR is just one example of how IATSE and the industry are building those pathways to diversify the industry. Our program provides young people from underserved communities the craft experience, skill set, the life skills and the mentorship that opens doors and those opportunities.

Our program has been operating for 20 years and since 2021 has been one of the partnerships that are part of the California Incentive Career Pathway Programs. We have partnered with Los Angeles Community College District, Los Angeles Unified School District and the Anti-Recidivism Coalition, to name a few. And this year we are expanding satellite campuses to Los Angeles Trade Tech, and next year to East Los Angeles College, which will provide industry craft training.

In addition, we have partnership with Lucasfilm, NBC Universal, WarnerMedia, Discovery, the Motion Picture Academy and Netflix to provide job opportunities for our students. This gives our students hands on training to complete their 640 hours under Director studies. This is not an internship program. It is not just a job program. It's a career program because everyone who graduates becomes an IATSE union member and immediately goes on to the union roster. We've graduated hundreds of students and most of them are consistently working in the entertainment industry.

This year, we expect to graduate 100 students who will transition out to IATSE union membership and new careers. There is a great difference in the industry today than when I joined, but that doesn't mean that the work is done. There is still so much work to do. With the support of union and the guilds and the partnerships we are creating with the studios, the colleges, and the outreach in the Los Angeles high schools, we can achieve these goals.

One of the biggest obstacles to bringing more people of color and women in the industry is creating financial structure to keep these programs thriving and keep jobs in California. In 2013, with runaway production, there was little work here when the California Film and Television Tax Credit Program began. The tax credit brought those jobs back and we began to rebuild the entertainment industry as an economic engine in Los Angeles and beyond.

Without the film tax credit, we would not be able to fund and leverage the incredible training programs we have now. Without tax incentives, there is less opportunity to train and place graduates. Without tax incentives, jobs will go to states like Texas, Georgia, Arizona and others that do not require any diversity in their credits. If California cannot lead, then my dream, and more importantly, the dreams of many young people who don't even yet know what is possible for them won't be realized. Thank you.

Thank you.

Thank you, Chair Padilla and Members of the Budget Subcommittee Number Four. Thank you for the opportunity to testify today. I am Melissa Patack on behalf of the Motion Picture Association and appreciate the opportunity to testify in support of the Governor's proposal to extend California's Film and Television Production Tax Credit Program and ensure that it remains competitive and maximizes economic and workforce development benefits to the state. Both Senator Niello and Senator Caballero raised questions at the previous panel.

I think we will get to those questions and we will take them in Q&A. But I think in the prepared remarks we'll get to some of that. The Production Tax Credit Program was enacted to make California more competitive to retain and attract film and TV productions that were leaving the state and leaving four states and countries with generous incentive programs. From the beginning, it prioritized job retention and additionally required productions to educate and expose students to careers in film and TV production.

That program is called Career Readiness. When the production tax credit was extended to create the 3.0 program, it established career pathways, a training trust funded by the participating productions focused on recruiting and training people from underrepresented communities. The Governor's proposal takes the next step to ensure that productions prioritize the diversity of cast and crew. Our member companies are collectively committed to diversity and inclusion both behind and in front of the camera and support this effort.

The 4.0 program adds an additional diversity requirement, mandating each production selected to receive tax credits to submit to the CFC a diversity work plan with goals for hiring both below the line, the behind the camera jobs and above the line, the actors, directors, writers and producers, and specific strategies to achieve them. If the production achieves its work plan or can demonstrate that it made best efforts to do so, the production will receive its entire tax credit amount.

If a production fails to show best efforts, it could lose up to 4% of its tax credit amount. In addition, there are discussions in process about how the California Film Commission can better track the graduates of career pathways and similar programs like Victor just highlighted to ensure they are working as intended. We're proud that each studio in the MPA has its own robust corporate diversity and inclusion policies, senior level diversity and inclusion executives across their business divisions to diversify the creative pipeline and foster representative storytelling.

MPA's member companies work with organizations like Victor's Hollywood CPR, which, as he explained, provides education and skills training for the below the line jobs, and also organizations like Ghetto Film School, which offers a curriculum on the art and business of cinematic storytelling and production. Since its inception, California's program has delivered for the state, helping it to sustain its leadership as the world's film and television production capital.

In 2014, the LAO reported that the number of film and television jobs in California declined from a peak of 122,800 in 2004 to 107,400, and overall employment in California, in contrast, increased during this period. Concurrently, California's share of national film and television production jobs declined from about 65% in 2004 to just over 50% in 2012. This happened during a period when many states were adopting new film and television production incentives.

In 2014, when the Legislature passed and Governor Brown signed the Bill creating the second iteration of the State's Film Tax Credit Program, Program 2.0, more than tripling the amount of funding from $100 million annually to 300 million. The impact was immediate. From 2015 to 2021, 34 productions that were already underway in other jurisdictions relocated to California thanks to the newly improved incentive program.

Overall, from 2015 to 2020, the program generated $22 billion in economic output, over $960,000,000 in state and local tax revenue, and supported 110,000 jobs. And 77% of those projects that didn't get the production tax credit took $7.7 billion with them to other states and countries. A recent but important new element of the State's Production Tax Credit Program is the creation of a Soundstage Film Tax Credit in 2021 to encourage the private capital investment in industry infrastructure which has lagged behind the state's competitors.

The landscape is even more competitive now than in 2014, with more than 100 jurisdictions around the world, including 37 states offering production incentives. The governor's proposal will extend the sunset on the film tax credit program for an additional five years, make improvements to the soundstage program, and additionally create a discounted, refundable tax credit option for program participants, thereby ensuring that California remains competitive in attracting large budget productions that yield the most impact in terms of job numbers and local spending.

We're happy to support the governor's proposal and happy to answer any questions. Thank you very much.

Thank you. Additional comments? Bring it to the Subcommittee. Questions for this panel? Absolutely.

Thank you, Mr. Chair. I should have a million questions, but you answered them all. I really appreciate the presentations. I think what we want to make sure is that we're clear about what we want to get out of the tax credits and that it's a partnership. Right. And the numbers that you presented, both in terms of the Hollywood CPR and the opportunity for training a workforce that may look a little bit different than what it was in 1996, is really important.

I think that's one of the items that is important, and it is about mentorship. It's really hard to break into an area where people look different than you and feel comfortable and feel like you're welcome and successful. And so that's really important. And it all started in Hollywood. We want the movie production here, the production capabilities here, whether they're movies or TV shows, TV programs. This is really a core, I think, value in the State of California.

So I appreciate the fact that it's bringing back business and employing 110,000 people is, I think, the victory. So I appreciate all of the numbers and the presentations and the 4.0 interest in creating the pathway for local folks that live in the community to be able to get a job in the industry as well. So thank you. I don't have any questions.

Just a few. First, thanks for listening to a lot of information challenge to define expectations award and then evaluate something positive, right. That everyone can be proud of. And it seems to me that would you agree that there might be additional, more specificity protocol development that might be something that is worth the department's Administration as well as the Commission to be a lot more metric-oriented, specific, goal-oriented, articulating that sort of elements?

I think that's one kind of area would be have we thought a lot about the program defines disability, defines diversity strictly by race and ethnicity. But have you thought about the elements that are relevant around disability, gender expression and even socioeconomic status? Only in that often those intersect, particularly with respect to access opportunities in the industry, economic and social, and they're also overlapping off of color.

So when we talk about maybe the protocol development areas as this evolves in the future, to really improve upon that, collaboratively acknowledging.

Sure. Lauren Greenwood with GoBiz I'm happy because goals are currently existing within the soundstage film program. I'm happy to just take a minute and talk about some of the goals that exist in regulation that we would carry over to 4.0.

So for below the line goals through the regulation, we're talking about ensuring qualified wage parity among all races, ethnicities and genders, considering factors as levels of experience and competency, goals to achieve broader awareness of available positions, goals to interview a broader pool of job candidates or more candidates who haven't previously worked on a motion picture for the applicant, goals to enhance industry access and career development for the broader career pool of California's employees and talking about above the line, we're talking about qualified wage parity among all races, ethnicities and genders, the broader awareness of available positions, interviewing a broader pool of job candidates and enhancing industry access and career development for a broader pool of Californians and employees.

And as it relates to the content and narrative, we're talking about goals relating to themes, narratives and storytelling of the motion picture, goals relating to on-screen representation. And through all of these, we hope that the work plan will help achieve outcomes that are broadly reflective of California's population. So those are the types of goals that we envision carrying over. But as far as concrete outcomes. And it is a little tricky due to legal limitations surrounding the state and federal equal protection clause.

We can't mandate concrete outcomes as that would require quotas and metrics. As a creative industry, filmmakers might choose to film their projects elsewhere if they felt that they were unable to hire or cast the best people for the job. And the program already contains many requirements that do not exist in other jurisdictions and that are coupled with the uncertainty of acceptance in the program.

We have roughly a 15% admittance rate, which makes consideration of filming in a state less appealing when other jurisdictions is first come, first served, or there is just guaranteed that it's uncapped. So you definitely get the tax credit program. So we definitely are open to feedback and want to work with stakeholders and organizations to improve the types of plans that we're requiring. But it is a little tricky with having specific metrics.

Well aware, and I think to be clear, there are a lot of factors that can be balanced and considered to make an objective and reasonable judgment as to whether there is, in fact, balance, representation and opportunity being achieved in a way that's both appropriate for the industry and complies with the law. So that's clear. And I think there's always room to improve upon that, I think is the point of the conversation. Right.

And I really do appreciate that the response and to the MPA generally, did you want to provide any additional information specifically, since with respect to the breakdowns in workforce involved in productions that have been awarded the credit over time and how that's changed from pre-credit days, maybe generally that might be helpful to have you comment upon.

So thank you very much, Senator. That's a very important question. The MPA doesn't keep that kind of employment data that our member companies. So I wouldn't have a frame of reference from before the production tax credit went into effect or currently, it's just not one of the things that the member companies rely on us for. They don't provide us that information. They do provide for the production tax credit programs to the Film Commission. And the Film Commission does have data on the breakdown.

And as Lauren, I think, said in her main testimony, the difference between the 2.0 numbers and the 3.0 numbers. We're already seeing more people from underrepresented communities getting jobs and being employed on these productions. I will say this, our companies have broad based programs across their business units. The film tax credit program is vitally important to our Member companies, but it is not all production. In California, for example, 30 minutes shows are not qualified productions reality shows are not qualified productions.

Our companies have programs across all of these kinds of programming to recruit and train the next generation of creative talent across all sorts of formats. And that is happening throughout our companies.

And that's important to reiterate, clarify folks that are concerned and are I think rightfully wanting to have a deeper discussion. And so I really appreciate that. And perhaps some of the things you mentioned that are currently qualified recipients is an area of policy and future cycles that the Legislature might want to be having conversations with in the Governor as well. So I appreciate that. All right. I think we have some other folks that are prepared to testify. Thank you all for your participation and your testimony.

I know that have Ricarlo Handy, CEO and founder of the Handy foundation. And we also have Franchanne Cox, President of Trujillo who are going to be participating via teleconference or Zoom. So I would like to have our technical folks bring up our remote panelists.

So we can welcome them. And again, as I indicated, we welcome your participation and testimony. If you could again state your name and title for the record, your time will be limited to five minutes in respect for and fairness out of everyone's time. So welcome and please proceed when you're ready.

Good afternoon, Chairman Padilla and committee members. My name is Fanshen Cox and I'm the President of TruJuLo Productions. I'm also the co-author of the Inclusion Rider. And I am here today as a stakeholder in the motion picture industry to testify on issue number 34, diversity in the film television industry, regarding Governor Gavin Newsom's film tax proposal, tax credit proposal.

So the inclusion writer is actually a four step inclusive hiring process, and it's been adopted by A-list celebrities, a coalition of 13 studios, and production companies. It's been used for inclusive hiring on the Grammys and by the fashion industry as led by IMG Talent. It is also, it has been cited as a seminal legal document by the White House in nominating my colleague and inclusion writer co-author Kalpana Kotagal to the EEOC.

So Kalpana and I created the Inclusion Rider with Dr. Stacey Smith, who heads the Annenberg Inclusion Initiative. They do really important data collection and analysis on representation in the industry. And we all realized that there were some deeply lacking efforts that Hollywood thought might be happening around diversity, equity, and inclusion.

I started working with Matt Damon and Ben Affleck at their production company in 2016 and got to know a number of amazing colleagues who are working at studios and production companies in diversity, equity, and inclusion, creating and running training programs and labs to really enhance the hiring pools. But what was happening is that all these incredible people were graduating from these programs and they still weren't getting hired. And so the Inclusion Rider really is about a step, a process for actually looking at inclusive hiring.

So the four steps of the Inclusion Rider include diversifying and deepening the hiring pools. And this is based off of the NFL's Rooney Rule. But it doesn't just stop there. The next step is to actually set flexible hiring targets and benchmarks to really look internally at how you've done before and be intentional in how you want to continue to do at your company or on particular productions. And then you collect the data and you reflect on that data all along as you are doing your hiring.

And then there's a final step that's an accountability measure, where once you've done all of your hiring, you really look at your targets and benchmarks. You look at your data collection and where you've fallen short on those targets and benchmarks.

You make meaningful contributions back into the organizations that serve to train and bring up and uplift those filmmakers, crew members, et cetera, that you weren't able to find to hire, or you may offer mentoring, but you're really looking at each time doing so much reflection that you're figuring out how to make sure that the industry is moving forward and meeting everybody's targets and goals around diversity, equity, and inclusion.

So I'm happy to report that on the recent film Air that Ben Affleck directed, they set an underrepresented hiring target of 30% for cast and crew, and they surpassed that at 35%. We're still working currently on what their contribution may look like, especially because they reached that hiring goal, but they're still very committed to making sure that they will continue to evolve and do better at their new company, Artists Equity. And the same goes for, most excitingly, the companies that we work with.

We originally created the inclusion writer for individual celebrities to take into their negotiations when they're working with studios. But now full production companies and studios are utilizing the Inclusion Rider across a slate of projects or year over year to look at improving. So those include places like Fifth Season and Endeavor Content. So we know that the Inclusion Rider is a great opportunity and resource that could be utilized in really focusing on the hiring.

I've heard a lot today about the training programs, and I love those programs, and I love all of my colleagues who work on them. But if we don't also focus on the hiring, then we're not seeing the kinds of results that we're all committed to. So I'll open it up for questions now.

All right. Because we're taking you remote, and I want to be sure we have the capacity to maybe have both remote folks at the same time or not. We'll go ahead and see if there are questions or comments with regard to Fanshen's testimony. Questions from the subcommittee? Absolutely. Senator Caballero, for a comment.

Thank you so much for the work that you're doing in the presentation. It was really helpful to understand how to look at this issue from a really practical standpoint. And I really thank you for setting up a system that will push the industry to do better. So I just wanted to say thank you very much.

Thank you so much.

And I would echo my colleagues comments. It really found your testimony to be informative and helpful and reasonable and focused on the ultimate long term outcomes, and it's very helpful and appreciate your participation very much. We'll now move to Ri-Karlo Handy, the Handy Foundation CEO and founder. Can we bring. Welcome, sir.

Thank you for having me.

We'll take your testimony. Please proceed.

Thank you. Thank you. So, yeah, I'm Ri-Karlo Handy, CEO and founder of the Handy Foundation. And my background actually starts in a program similar to what we've been discussing today. I started at a program at 14 years old, KDOL TV 13, producing live TV every day after school for the public school station there and many others. Hundreds of kids participate in that program. This is in the 90s in Oakland, California.

And that time period, what I learned during that time period allowed me to have access and resources and skills, specifically that allowed me to have a Hollywood career. So I went on to edit television later, become a showrunner of many shows at BET, VH1, MTV, et cetera, We TV. Later I became the original head of original programming at Bounce TV, which was a new network that launched in 2012.

And we were later able to launch to get to an exit with that company and really grow it. And through all of that, a lot of stuff that I've done and produced has been produced through the lens of diversity. We're producing content for African American audiences, Latino audiences, et cetera. And the learnings that I had through that actually brought me to this sector.

And one of the major things that what we do at the Handy Foundation specifically is we do workforce development training on specific technical jobs. As we know, our industry and our world, the technology moves a lot faster than, let's say, the public sector education, right? So there are new skills and technology that people need to know how to operate, to work behind the scenes on some of your favorite shows, but they need workers that have those skills.

So while you have a line of people waiting to be an actor on the new Marvel movie, that same movie may be looking for technical workers behind the scenes to do operate Unreal Engine or be assistant editors or do data collection or data wrangling. And so what we do is we fill in that gap, and we do that training. This is short-term training, not years, but weeks or months. We provide the networking for them to network into jobs.

And we also have partnerships with dozens of production companies that service all the major studios. And we have a direct relationship partnerships with Netflix, AMC, Roku, a lot of different studios where they are actually pipelining directly from our organization into these jobs directly after training. So just for example, to get the scope of it, most of the series on stars that are produced by Landscape have one of our apprentices on them in post-production, and everything from the Bachelor to the Challenge to Survivor.

A lot of the jobs available in the industry, they come from a lot of different sectors. I know we look at the big kind of box scripted products, but there's a lot of unscripted, a lot of documentary, a lot of award shows, all different kinds of content that we supply, and they all need the same kind of skilled workers behind the scenes. Our results we do track, we do have the data of what our impact is.

What that looks like is 36% of our graduates were unemployed, are making below $20,000 before they started the program. And our average trainee increases their wages by 131%. So we've seen people go from incomes of $10,000 to $86,000 or $28,000 to $140,000 a year. Collectively, we've placed 118 trainees in jobs like assistant editor, virtual production, DIT. And these are all jobs that are not, they're entry-level, but they're skilled jobs. They require a specific skill set to do it.

So I liken it to nobody really cares who their IT guy or their plumber is. They just want to make sure that they can do the work that needs to be done. And that's really where our focus is, giving our trainees and workers that go through our program skills that can carry them through a career. In my case, I was an editor for many years, and that skill set carried me through my entire career.

It's still a skill set of storytelling, problem-solving, putting puzzles and pieces together, but also operating the software that's required. And that's really been kind of the secret sauce of our success in our partnership with the CFC and with all the studios. We're just like at the tip of the iceberg here. There's a lot more that we can do.

We're a small organization that is just really getting going, but we're getting a lot of steam because we've operationalized a process that can be adopted widely and used by every studio, every program. And I just want to say that a lot of people don't get a chance to look backwards at history about how we got here, right?

And so initially, the Academy and Warner Brothers, early on, 100 years ago, developed a concept of film school around the idea that there's this new technology that we need to make sure we have workers that can continue to do those jobs, right?

And so I think that as Californians being here with the technology growing and increasing, a lot of our virtual production jobs and our visual effects jobs have left the state because we need to build more skilled workers here that can do those jobs and have those workers build companies that will build better solutions for the studios. And so that's the ultimate investment. It's a longer term view than just the next few years. So I'm excited to see some of the work that we're doing get an opportunity to continue to go.

Thank you very much for your testimony and for informing us about your particular model of success and the impacts that you're seeing in that approach. Are there questions or comments from the sub? All right, I appreciate both. Appreciate your participation very much. And before we move off this information item, I want to thank staff. I want to thank everybody who participated. I would just offer a comment that it's an important conversation. It's a relevant and an appropriate conversation.

I think it's important for those of us in the Legislature, maybe perhaps those incredibly talented folks in the industry, to be reminded of something. And that is the best approaches to resolve a question like this or a conversation like this aren't always necessarily going to come from the industry or come from the Legislature.

And I think the more that we can do to be more iterative and interactive with organizations and community groups and people on the ground who are seeing success and have ideas to be open to, that is a very important way to avoid conflict and to move the ball forward. And I say that with every bit of respect. But if I had one observation, as chairing this sub hearing on this conversation, that's exactly what I come away with, and I hope we all remember that.

And with that, we will move to the very patient members of the public who are waiting to comment. We appreciate and invite everyone's participation in the subcommittee hearing. We provide opportunities for you to testify both here in person in the hearing room, as well as via the famous teleconference. So we will first start with individuals who'd like to provide public comment who are present in the hearing room. If you'd like to provide testimony, please come forward. When you do so, and depending on how many folks we have, state your name and organization and please limit your comments to one minute. A long one. We don't know how many we have. All right, please proceed. Welcome.

Good afternoon. Western States Council. Represent over 6000 industry professionals working under a collective bargaining agreement in California. I want to share ongoing concerns with the lack of enforcement across the cannabis industry, and I appreciate all of the concerns. According to various published reports, illicit unlicensed cannabis remaining 60% to 70% of the market. Repeatedly, we are informed that one of the greatest challenges for our licensed cannabis businesses is the competition they face in the thriving market. I'm going to jump forward.

I'm here today to ask that enforcement against the illicit industry become a priority. We appreciate the efforts of the Department of Cannabis Control. We feel the state must take a coordinated approach, leveraging existing expertise across. The USW respectfully requests that the subcommittee consider itemizing funding for the attorney general's EPIC program. EPIC is the eradication of cannabis.

It was recently rebranded to include not just illegal cultivators but broadened its scope to focus on environmental and economic harms and labor exploitation, which arguably would include illegal retailers as well. In closing, the booming illicit cannabis industry is a decentralized, robust entity and requires a multi enforcement solution. Your licensed cannabis operators support this approach as they can no longer compete. Please consider additional funding. So we have the program.

Thank you for your testimony. Hi. State your name for the record. Your time is limited to one.

Thank you. Genesis Gonzalez on behalf of Lieutenant Governor's Office. Lieutenant Governor is in support of issues and is grateful to see that the commission on site. However, in order for the commission to continue to award statewide grants and programming for communities, Lieutenant Governor is respectfully pressing a budget allocation of 7.9 million. The funding is critical to saving the women's recovery response program to assist women statewide and provide. Thank you.

Thank you. Next speaker.

Good afternoon, Chair and members. Mark Isidro on behalf of the County of Los Angeles in support of the Cannabis Equity Grants Program for Local Jurisdictions as discussed in item 22. The county is in support of the program. In fiscal year 21-22 the county was awarded type one grant funding, which has helped the county develop its equity assessment. Additionally, the county is supportive of augmenting the grant program as demand for these grants continues to increase as more jurisdictions launch their equity programs. Thank you.

Thank you. Are there any other public comment from individuals who are in the hearing room? If not, we will move to participation by teleconference. And again, that number is 877-226-8163 and the access code is 718778. Moderator have we reestablished contact?

Yes. Thank you for public comment. You may press one and then zero. Again, that is one and then zero for any public comment. And one moment while we get the line numbers. And we will go to line 21. Your line is open. Please go ahead.

Mr. Chairman, members of the committee, Shane Gusman, on behalf of the Teamsters and SAG-AFTRA. Just want to thank the committee for its thoughtful consideration of the matters raised today about the film tax credit. These two unions are very strong supporters of that credit and the extension proposed this year. This credit is critical to maintaining and growth of jobs in our industry, which is highly focused on below-the-line jobs which provide thousands of workers with high-wage, good-benefit jobs which we critically need in this economy to grow our economy. So we strongly support the proposal to extend this tax credit. Thank you.

Thank you.

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

Yes, hello. Good afternoon. My name is Sherri Bell. I am a member of the Los Angeles Black Worker Center and I am in support of the amendments to the Governor Newsom's film tax credit proposal. I am a stakeholder of the motion picture industry and I'm calling on and to encourage Governor Newsom to amend his proposal to increase diversity, inclusion, and accountability because we know that when we're not intentional about diversity, equity, and inclusion accountability, it doesn't happen. So this is very important that this is amended to include this language. Thank you.

Thank you.

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

Hi. Thank you. Good afternoon. My name is Cheryl L. Bedford. I am the founder of Women of Color Unite, the largest nonprofit of women of color and entertainment with almost 6000 members, creator of the JTC list, the most successful database of women of color above and below the line, and co-founder of Startwith8, a mentorship program for women of color which in two years has gotten 1700 women of color mentors in the entertainment industry which has led to them being hired, their projects funded, and their content distributed. I'm in support of the amendments of Governor Newsom's film credit proposal.

I'm a stakeholder of the motion picture industry and I'm calling to encourage Governor Newsom to amend his proposal to increase DEI accountability. Data in EIi is key. In 2022, 12% of our membership received gainful employment. For far too long, the entertainment industry has existed on the lack of transparency and the lack of accountability. Thank you.

Thank you.

Thank you. Next, we'll go line 20. Your line is open.

Hello. Good afternoon. My name is Khalil Edwards. I'm a Member of the Los Angeles Black Worker Center. I am calling in support of amendments to Governor Newsom's film tax credit proposal and I am a stakeholder of the motion picture industry. I'm calling to encourage Governor Newsom to amend his proposal to increase diversity, equity, and inclusion accountability. This is really key to ensure that we are having the data and are putting the measures in place to make sure that there is accountability across the industry. Thank you.

Thank you. Next, we'll go line 24. Your line is open.

Good afternoon. Thank you for taking my call. My name is Dejon Ellis. I am the business manager at IATSE Local 80. I am one of the first African American principal officers in the IATSE on the west coast. I represent 4000 grips, craft service, and medics. I was in the field as a grip for 25 years. I got in 1996. The industry looks substantially different than it did in 1996. We are working to make it better. We've come a long way. We have a long way to go. But we are hard at work on the union side, on the labor side into making that happen. I'm calling in support of the California film tax incentive. Thank you.

Thank you.

Thank you. Next, we'll go line 26. Your line is open.

Hello. Good afternoon, Chairman Padilla, senators, panelists, and general public. My name is Elizabeth Birks and I am the founder of Hummingbird Butterfly Productions. I'm a stakeholder of the motion picture industry and I'm calling to encourage Governor Newsom to amend his proposal to increase DEI accountability with a focus on hiring and retaining cast and crew of color and implementing institutional oversight. This includes, but is not limited to, the creation of a labor management community stakeholders table and funding to hire inequities are. I thank you, Chairman Padilla, for allowing us to have this item on the agenda.

Thank you.

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

Thanks to everyone who participated both in person and remotely. The subcommittee welcomes your commentary. We'll move now to the vote only calendar. We will take the issue items up in two separate groups. The first group will include issues 1, 3, 6, 9, 10, 11, 12, 14, and 16. And I'll entertain.

So I'll move the staff recommendation.

All right, those items are moved. Consultant, please call the roll.

Calling Senators Padilla. Aye. Padilla, aye. Caballero. Aye. Caballero, aye. Niello. Aye. Niello, aye.

Thank you. The ayes are three. The noes are zero. Those items are out. The second group of issue items include 2, 4, 5, 7, 8, 13, 15, and 17. I'll entertain

Move the staff recommendation.

Thank you. Those items are moved by Senator Caballero. Please call the roll.

calling Senators Padilla. Aye. Padilla, aye. Caballero. Aye. Caballero, aye. Niello. No. Niello, no. Thank you. The ayes are two. The noes are one. Those items are out. Again, want to thank everyone who participated in today's subcommittee hearing. If you were not afforded an opportunity to provide comment, you can do so in writing to the committee staff. Wish you all a good afternoon. Thanks for participating. The committee is adjourned.

Yay. Good meeting.