Senate Standing Committee on Governance and Finance

Committee on Governance and Finance will come to order. Good morning, everyone. The Senate continues to welcome the public in person and via the teleconference service for individuals wishing to provide public comment. At today's hearing. The participant numbers is 877-226-8216 and the access code is 621-7161 we are holding our committee hearings here in the O Street building, and it looks like we probably have a quorum. We are in room 2100, so why don't we go ahead, and we don't. We're one short. I can't count. Okay.

All right. Well, we don't have enough people for a quorum, so we will pass that and begin as a subcommitee. We have 18 bills on today's agenda with three proposed for consent. The consent items are file item number two, SB 264 by Senator Niello, item number four, SB 454 by Senator Ochoa Bogh, and file item number 18, SB 521 by Senator Seyarto. So, we have our first author. Want to welcome Senator Nguyen and her Bill. Is SB5 on file item number one. Welcome.

Good morning, Madam Chair. Good morning, colleagues. I'm here to present SB five. Californians are suffering from the high cost of inflation and the cost of living. Continuous high few costs is one of those effects. In 2017, the state passed SB one, which, among other things, required the BOE board of utilization to annually adjust the motor vehicle gasoline excess tax rates based on the California Consumer Price Index, which is also known as CCPI.

According to the Committee analysis, in 2021 fiscal year, the increase under SB one was 1.2%. The next increase was for 5.5%. For the upcoming fiscal year 2023 and 2024, the rate will be increased by 7.4%. All these increases are a result of the increase in the California Consumer price index. In conjunction with the provisions of SB 1, consumers are required to drastically adjust their transportation budgets in order to pay inflated prices on gasoline, which right now we are the highest in the country.

Just to go about their daily activities like taking their children to school or after school programs, grocery stores, medical appointments, work, et cetera. Allowing an automatic rate increase, automatic tax rate increase as inflation increases is the kind of thing that frustrates and angers everyone who purchases gasoline, and they are reminded of this unfair situation. In time, they fill up their tanks, but not only those who purchase gasoline, but those who ride the public transportation, too. As those prices goes up, adding more burden to families.

Not what we should do since the cost of few is one part of the CPI. As few prices increases so does the CCPI. And even worse, in addition to the increased price of few pursuant to SB 1, the tax on the sale of that few also is increased. This becomes a double whammy that causes the total cost of few for consumers to increase even more. Basically, a tax on the tax. SB five is just a reasonable and common sense measure.

It does not prohibit a tax increase from SB one that was previously passed. Rather, it merely limits the amount that the gas tax may increase to no more than 2% per year. Why 2%? The Federal Reserve has used 2% as its target rate for inflation since 1999. SB five simply parallels that same rate as an allowable amount that few taxes may increase.

Let's give California families a break to weather the high cost of goods and also living in this state and help them because summer season is coming. I'm respectfully asking for your. I vote on SB five. Thank you.

Thank you very much. Do you have any lead witnesses here today?

I don't.

Very good. Is there anyone who would like to testify in support of SB one? I'm sorry, five. I need my coffee. SB five, file item number one. SB five here in room 2100, seeing no movement. Is there anybody who would like to speak in opposition to SB five here in room 2100? Seeing none. We're going to go to the phone lines and ask the moderator to please queue up the phone lines to see if there's anybody who wants to testify either in support or in opposition.

And I'll read that number one further time. The participant number today is 877-226-8216 and the access code is 621-7161 anybody wishing to testify in support or in opposition of SB five, thank you.

As Madam Chair stated, if you're in support or opposition to SB five, please press one filed by zero at this time. One filed by zero. And nobody is queuing up at this time.

Very good. I'm going to bring this back to the Committee, but before we take any comments or questions, I'm going to establish a quorum. Please call the role Senators.

Caballero.

Here. Caballero. Present. Seyarto. Here.

Seyarto. President Blakespear. Dahle. Dahle. President Durazo. Durazo. President Glazer. Glazer. President Skinner. Wiener. You have a quorum.

We have a quorum. And I'm advised that Senator Blakespear will not be here today. So moving on, any questions or comments from the Committee?

I'll move the Bill.

There is a motion by Senator Seyarto. Senator Glazer.

Thank you, chair. Senator, I know that you might think that I might be an easy, predictable vote on this. I wouldn't assume it, given that oppose the gas tax that the Legislature passed. I guess it was five years ago.

I don't know.

Five years ago I was there.

Not serving me, right. I cast that vote for a variety of reasons, not the least of which is the effect on working families in our state. I also felt that our priorities were a little out of whack in terms of transportation spending. We're spending this year, I think, $500 million on a high speed rail system that will never be finished. $500 million. So, not sure our transportation spending priorities are really aligned.

And I appreciate the goal of this Bill, which is to have some level of predictability and certainty, and that's admirable, and thank you for pushing that good value on us. But let me tell you why I can't support the Bill today. A fixed rate, while seemingly reasonable, doesn't take into account the circumstances that we may find ourselves in next year, the next year after that, five years from now, 10 years from now.

And part of the challenge of legislating is not to create formulas that don't always work. It's to have leadership that can make even hard decisions in each succeeding year. As we look at the exact circumstances in which we find ourselves, and in regard to the gas tax, that's the choice that we get to make each year, if we so choose. I appreciate why we don't like those choices, because they're uncomfortable choices. Sometimes we have to raise taxes and it's unpopular.

But a fixed amount, even as it seems reasonable on the surface to me, is not necessarily good governance for us going forward. And I don't want to lock in a future Legislature in that way. And that's why, unfortunately, I can't support your Bill today.

Seeing no further comments, I'm going to align myself with the comments of Senator Glazer. I appreciate what you're trying to do here. This was a really tough vote, and I supported it. One, because I do believe that high speed rail would be finished. It may not be exactly what we anticipated, and there may be some. Well, there have been some bumps along the way, but I think what we've seen, if there's anything from the storm, is that we need these resources now more than ever.

I had roads, major roads in my district that were washed out. And part of this SB 1 is contribution to local government coffers as well. It's matching as well. So I'm not going to be supporting it at this time. But I do appreciate you bringing this forward. So I'll allow you to conclude.

Thank you, Madam Chair.

Okay. Excuse me. Senator Durazo does want to make. No, I'm more than happy to hear what you have to say.

Yeah.

The main reason that I would not be supporting is, I think, is a much bigger conversation that has to do with a budget, has to do with, there's just much, very big implications here. And I don't think that's the kind of thing that will be solved with a cap like this. Senator? Senator Dahle.

Well, I wasn't going to say much, but after the conversation, I need to say some stuff. So first of all, I have trucks. As a business, we pay a heavyweight use tax. It creates about $1.0 billion a year, and it goes to the General Fund. It doesn't go to the roads that they actually, the weight of the truck, it's supposed to go to the roads because the heavier the truck, the more damage it does to the road.

But we put that in the General Fund and it doesn't go to roads. To Senator Glazer's point and to the chair's point about high speed rail, if it's about the environment, we should do good work. And we talk about that. And a lot of the taxes that come in from gas tax derives to the greenhouse gas reduction Fund. And we use that for many things.

We use it for helping dairy digesters reduce pollution, and we use it for bicycle lanes and all kinds of things to get people out of cars. But we also use it for the high speed rail. The high speed rail is $168,000 per ton, is what the estimated cost is for reduction of greenhouse gas if we ever build it. And so I think we're disingenuous. We continue to Fund things that aren't in line with the goal of actually reducing carbon.

That legislation was passed to actually create jobs. It wasn't to reduce carbon. And so when we talk, I think the thing that really is frustrating as a Legislator is we hear almost every Bill about the disadvantaged folks in our state who are getting crushed. These are the kind of policies that crush those people. And then on top of that, we take those funds, and we waste them on things like high-speed rail.

And so, if you want to actually help low-income people reduce the cost so they can actually get to work and feed their families, and this Bill would do that. So, I will support your Bill today. And I think we need to have these discussions more openly. And the transparency of what we do in this building hurts people. And because labor wants something doesn't mean that we should do it. It just means it's jobs. But it's costing.

Our roads, at the same time are in terrible shape because we don't actually put the money towards the roads because they don't want people to fix the roads because they want people driving cars. They want them riding bicycles or whatever it is. So, we use sticks and carrots here, more sticks than carrots. And the carrots we give out don't actually improve the things that we're trying to do. So for those reasons, I'll be supporting your Bill. Thank you for bringing it forward.

And I think it's awesome to have these conversations because I think the public needs to know what happens here. We're not serving them. We're serving special interest. And that's unfortunate because at the end of the day, special interest doesn't, they don't care about the poor individual who's having to license their car, put fuel in it.

Senator Seyarto, I see you preparing.

Yes. Since everybody is going to weigh in, I am, too. You know what? People are tired of not getting the bang for their buck. They don't mind paying taxes. They don't mind paying a little bit more taxes if we're actually going to deliver to them what we're promising them. What you're proposing is to limit that amount to 2% instead of this 4.3 or 5% jumps and all these other jumps in the inflation part of it.

Because at the end of the day, if we're not going to give people their bang for their buck, if they're not going to see improved roads, which we don't invest enough in, then I really struggle continuing to raise their taxes more and more and more while they get less and less and less.

And we invest more into failing systems, as some of my colleagues have already pointed out, things like the high speed rail, the high speed rail is not a bad thing to have for transportation if you can afford it. And in California, we can't afford it, we just, just, that's the way we're built.

And until we change that so it becomes more affordable, so we can actually put in an entire line in the years prescribed, as opposed to a really short segment of it in 10 more years, in addition to the 10 years that we've taken so far. You know what? People are sick and tired. We're sick and tired of getting charged more and more. And that's what we're doing with these inflationary increases in our tax rates.

And especially for this, you know, what, electric cars need roads to drive on, too. And we are not putting the money into the road infrastructure via this that we need to. The cities aren't getting the money they need. And certainly, even though we're raising the taxes more and more every year, they're getting less, not more. And until they start seeing the end product, they don't want us voting for things like this. They don't want us to vote to give them another 4.3% hike on their gas.

So I am supporting your Bill because I think it makes sense. Like I said, I think people are sick and tired of us not managing what they're giving us already. And I think this is a little bit of a step in the right direction. If in the future we find that all of a sudden we're doing projects that people want and people need and we need a little bit more, then we could go back and readjust that.

But for now, I think we need to go on a tax diet, because we're not giving people what they want. So, thank you for your Bill. I do appreciate it, and I appreciate what you're trying to do for our taxpayers.

Thank you, Senator Nguyen. You may conclude.

Thank you, Madam Chair. I thank you for the comments and the discussion. You're right. Some of the comments. Our transportation funding is not aligned with our priorities.

Why?

I respect the fact that, yeah, SB five does give funding to local government. But I'll tell you right now, driving Orange County, half of the cities in Orange County is in my district. It doesn't matter the wealthiest area of my district or the poorest area of the district. The roads are a mess. And it's been like that for years. The funding is not getting where it needs to be. And as local government and the residents, Californians see that, we'll pay for it.

But then what improvement are we seeing? There isn't. Most people have to get their alignment fixed, get more brakes, new tires. The bottom line with this Bill is SB 5 is not taking away any tax increases. It's just capping it at 2%. So, more predictability. And you saw last year where some areas in California, in Orange County, we average about $7, or up to about seven, $8 a gallon. Other areas in California were about $10 a gallon.

Gas per gallon in gasoline costs more than a gallon of milk for a family. And that shouldn't be the case because we need the transportation to get to 1.0 to another, and we can talk. I mean, I haven't been on the Board of Supervisor. I actually, back then, one day wanted to prove the transportation agency that riding a bus would not be efficient for a working individual like myself.

I went from Garden Grove to Santa Ana, which usually take me an average of 3020 minutes without traffic. I took the bus. It took me an hour and a half to get to the office. An hour and a half. That's a long time for an individual to have to get to work.

And I told the transportation authority, if you want individuals like me, the majority who has to get to work somehow or get their kids to school, you're going to have to fix that system to be more efficient. And that's where our transportation funding is not aligned. And so, this Bill, again, does not stop the tax increase. It just caps it at two more predictability.

And right now, our transportation taxes is the highest in the country, yet our roads are not the most not perfect in the country. And so all I'm asking is we continue this discussion so that we can put our priorities together. And I respectfully ask for your. I vote.

Very good. Thank you very much. Please call the roll. We do have a motion. The motion is do pass to appropriations.

Senator Caballero? Seyarto? Aye. Seyarto. Aye. Blakespear. Dahle. Dahle. Aye. Durazo. Glazer. No. Glazer? No. Skinner. Wiener. Two to one?

Two to one. We'll leave that on call for the absent Members.

Thank you, ma'am.

Thank you, Members. How about taking up the consent calendar, the three proposed items, item number two, item number four, and item number 18. There is a motion. Please call the roll.

Motion is adopt a consent calendar. Senators. Caballero, aye. Caballero. Aye. Seyarto. Aye. Blakespear. Dahle. Dahle. I. Durazo. Durazo I. Glazer. Glazer I. Skinner. Wiener. Five to zero.

Five to zero. We'll put that on call for the absent members as well. Moving on to Senator Roth. Welcome. File item number three, SB 419.

Thank you, Madam Chair and colleagues. 10 years ago, California created a property tax exemption that launched a new and exciting aerospace industry in this state. This Bill, Senate Bill 419, would extend that sunset on this tax exemption for another 10 years, from 2025 to 2035. Prior to the rapid expansion of the private aerospace industry, California tax policy was not designed to address the unique industry that space is. Launch vehicles and spacecraft, unlike most manufactured commodities, are not built to be sold.

Rather, they're built as a delivery service for satellites and cargo to the International Space Station. This created an ambiguity in the tax code as to how spaceflight property should be assessed for tax purposes. Our Board of Equalization in the state first clarified that business inventory built to go into space was not subject to personal property taxes through its written tax opinion dated December 24, 2013. This tax opinion was subsequently codified into law in 2014 by Assembly Bill 777.

Note this is an exception or exemption from personal property tax, not a tax credit. This sensible shift in policy paved the way for commercial space companies to replace the well paying jobs that left the state, along with the Department of Defense contracts when aerospace industry the aerospace industry originally left California, and for those of us in Southern California, we know how that impacted us over the past decade. Thanks to our tax policies, California's aerospace industry is robust once again, you will hear from my witness.

Producing satellites, rocket engines, fuselage and capsules. The production made possible by this tax credit has also birthed a group of sub vendors who manufacture and provide support services to aid this industry. These vendor relationships with California based suppliers located throughout this state have resulted in an increase that's been estimated at 2.4 billion in revenue for California businesses, half of which are considered to be small businesses.

So in order to continue encouraging such innovation in manufacturing, an extension of this business inventory property tax exemption originally provided by AB 777 is essential to ensure that the aerospace industry stays in California and continues to grow. I accept the amendments identified in the analysis and at the appropriate time, respectfully ask for an aye vote.

Very good. Thank you very much.

I should say, Madam Chair, I have with me to testify Richard Lee, the senior Director of tax and treasury for SpaceX.

Very good. Welcome.

Thank you, Madam Chair and Members of the Committee. My name is Richard Lee, and as senior Director of Tax and treasury of SpaceX, I'm honored to be here to testify in support of Senate Bill 419. Founded in 2002, SpaceX is proud to design, build and launch the world's most advanced, safe and reliable spacecraft and launch vehicles.

In California, the tax exemptions for qualified property used in spaceflight, first passed by this Committee in 2013, enabled SpaceX to grow from a startup, with only 12 launches into the world's leading launch and space service provider. With over 11,000 employees, SpaceX has now completed over 220 launches in support of critical national priorities, including astronaut missions to the International Space Station that return human spaceflight capabilities to the United States, deploying national satellite, national security satellites, commercial satellites and next generation broadband service.

In 2022, SpaceX returned the majority of the world space launches previously ceded to Russia and China to American shores, an unprecedented development in American access to space that could not have been achieved without greatly expanding our network of California based suppliers. The provisions included in this Bill enable SpaceX to spend over $2 billion on over 1700 California suppliers last year, supporting more than 44,000 small business jobs across the state.

This Bill also helps SpaceX expand its engineering and manufacturing operations in Hawthorne, where more than 3800 additional high skilled manufacturing and engineering jobs have been created since 2013, representing 10% annual job growth each year that the build has been in effect. This expansion, helped by the provisions included incentive Bill 4119, allows SpaceX Hawthorne based employees to play a critical role in the development of SpaceX next generation vehicle called Starship.

SpaceX is proud that engines built by Californians will power the vehicle that will return American astronauts to the moon for the first time since 1972 and make humans a multiplanetary species. On behalf of SpaceX 8000 California based employees, thank you for your time and your work to ensure California maintains a strong commercial space industry for decades to come.

Thank you very much. Appreciate you being here today. Are there any other witnesses that would like to testify in support in room 2100?

Lawrence Gaden, on behalf of the California Manufacturing Technology Association as well as the aerospace, defense and alliance of California in support. Thank you.

Thank you very much. Is there anyone else seeing no further movement? Is there anybody in the room 2100 that would like to testify in opposition? Seeing none, we'll go to the teleconference line. Is there anyone on the teleconference line that would like to testify either in support or in opposition? Add on as a me too.

Thank you. If you are in support or opposition, please press one followed by zero at this time. One followed by zero.

Very good. We'll bring it back to the Committee for comments. Senator Glazer.

It's an exciting Wednesday morning. I talk more than I typically would, but Senator Roth, I know this reflects your passion for the jobs and the industry that come from your part of the world, and you're to be praised for that. I think that the thing that...

Yours too, by the way.

Yeah. A little bit, but you accepted the Committee amendments which refers to a report and a study being done. Typically, the questions that the Committee has raised would be questions that we would have answered before voting on an extension of a tax like this or a tax credit like this. At the same time, the extension on the bill is a significant extension. It's a ten-year extension.

So I'm trying to reconcile the value that the Committee staff has pointed out in terms of actually trying to understand the value of this tax credit in terms of employment and the rest.

It's not a tax credit, Senator.

Okay. Excuse me.

Which is--if I may--the questions typically arose several years ago--

Property tax exemption.

When Senator Wolk was the Chair of the Committee, as I recall, and we put in place certain parameters for tax credits, proving up jobs which we do for the film industry, jobs impact on the economy, and a whole variety of things.

It's not to say this shouldn't be done in this situation, which is why, of course, I accepted the amendments which were suggested. They were not in place when the original AB was passed in 2014.

Got it. I'm going to support your bill today, but I think that the flaw--as I see it going forward--is that this type of analysis to help us make these kinds of judgments because we're going to deal with all kinds of other tax credit issues, property tax exemption issues going forward today, but is that we--it's really hard to kind of put all that stuff together and make good choices about where our revenues go because this is obviously going to reduce revenues.

I guess I would ask as the bill moves forward that you consider whether or not this extension of ten years is the appropriate amount of time given the study that you've acknowledged would bring some value.

I think, well--Madam Chair, if I may?

Yes, please.

I think the witness identified--and certainly I can clarify--jobs increased and the number of dollars that put back into the economy; it's rather significant. The industry itself has done its own analysis, perhaps not as thorough as we will do with these amendments in place, but the testimony certainly talked about the number of jobs that were increased and the number of businesses that expanded and the vendors around the state that contribute to this industry.

I will point out for those of you since we keep talking about tax credits, and I understand it because it's sort of wonky, but the California Constitution, as you may know, says all property is taxed. The issue is, since 1981, the Revenue and Taxation Code in this state has said that business inventory--which this is--is not taxed. The issue for the space industry is business inventory is defined as inventory held for sale or lease.

That's what commonly you do if you have business inventory and you manufacture it. As the Board of Equalization opinion recognized when it was issued in--what, 2013--this is a unique industry. The business inventory in the space industry is not really held for sale or lease. It launches vehicles. It either blows up in space or when it comes back, at least currently, it's not usable. So it's not held for sale or lease.

Now, what the Board of Equalization did in its opinion in recognizing that was to say, since it's not held for sale or lease but this is a unique industry, the sale of this business industry is restricted by the Department of Defense.

The Export Acts that deal with defense equipment, and in this particular case, when an industry partner--SpaceX or Virgin Galactic or anybody else who does it--launches a vehicle at the point of launch on the pad, the absolute control and essentially title to the equipment transfers to the Department of Defense and the manufacturer has no control over the equipment at that point which the Board of Equalization said was tantamount to a sale or lease. So business inventory held for sale or lease in California has not been taxed personal property since 1981.

We're simply--through this bill and the Muratsuchi Bill, AB 777--attempting to sort of fit this unique situation into our Revenue and Taxation Code, if that helps tell you where we are.

Senator Dahle.

Thank you. That was actually very informative. I appreciate that. So is it unsecured or--your unsecured roll is property that is not attached to a property? So, for example, I'm a farmer. I have a tractor. It's mobile. It's still an unsecured roll. I pay a tax on it, and wherever it's parked, if I have property in one county versus another, wherever that tractor is parked as of January 1st is the county I pay the unsecured roll in. So for this, if it's in space--

I defer to staff on--I'm not--certainly not a tax expert. I will say that if your tractor burned up every time you plowed a field, you'd probably be more akin to the space industry.

Yes, Senators. The measure is exemption from personal property tax which is on the unsecured roll as a general matter.

Okay. Thank you.

Senator Seyarto.

Boy, do I love that I work down in that area. I was able, actually, to witness first--it's one thing to talk about the trade off between property tax and the benefit to the community, but it's another thing to see it firsthand. I worked in the community right next to Hawthorne, and this is one of those routes that I used to drive to work and pass by this area all the time, pretty much every shift.

And watching it go from what it was and the depressed economic condition of that entire square mile around it to what it is today is amazing. The first thing that happened when they took it over from--I think it was Hughes--it revitalized the airport. It spurred a shopping center across the street.

And shopping centers in those areas failed miserably all the time, but this one brought in a shopping center with a Lowe's, some other good retail stores, some restaurants, and it's just right across the street, and a lot of that was fueled by the amount of people that were working at SpaceX. When you're looking at our property tax amount versus just the sales tax and retail economic benefit, that's one thing.

But the other thing that you noticed and we noticed in our area that I worked in was we had a lot of businesses that popped up in the industrial areas that supported all of the needs of SpaceX. So you had people going to work making components and things like that that SpaceX needed, and so there was that benefit, and it benefited other areas around it. So this has been a massive influx of economic benefit for an area that now has a stadium and all this.

And they were headed nowhere but down in the 80s, and when they introduced SpaceX into that, that shows what the economic benefit--and it far outweighs what they would be getting in property taxes for the area. So I've seen it, I'm a believer, and I think ensuring that we retain those jobs, we have kids that are graduating from schools with engineering degrees and they don't have places to work necessarily, but this place, I know a few kids that have gone and worked here for SpaceX.

So I think it's worth what you're doing. Senator Roth, thank you so much for bringing this. I think it needs to continue that economic benefit that it brings, and so I'll be, of course, supporting your bill today and I'll also make a motion for the bill.

We do have a motion. Senator Dahle.

Just one quick follow up. So you mentioned that once it's launched--I'm not familiar with what happens there, but is it all government for defense or is there private satellites or something gets launched there for private enterprise as well?

No, these are private companies that are privately held companies.

They're contracting with the Governor. The government.

SpaceX, of course, is the one that's most--Virgin Galactic is another. There are other companies, others we hope come forward because, of course, the government has to some extent backed out of the operating space transport vehicles. I don't know what the current status is. Maybe there are some, but mostly, if you notice from the news, SpaceX is launching equipment personnel to the international--has launched to the International Space Station and I'm sure we're going to see more of that as space exploration continues.

Which is why in the current business model, we need to try to fit what they do within our current Revenue and Taxation Code. The Board of Equalization did so in the opinion, and it was codified, of course, so it's in statute now. It's going to expire. I think we need to extend it and then we need to provide the reports that the Committee has requested and my Colleagues think are important and actually I think are important.

We need to justify these even though it's not a tax credit against income. It is a property tax exemption or exception, and that has some impact as well.

Thank you very much. Well, I want to second the positive comments that have been made up to this point. This makes a lot of sense to me. Two billion dollars in economic impact to benefit the state. 8,000 employees.

The aerospace industry has always been a cornerstone of California, of the Californian economy, and I'd like to see it continue, and as was mentioned, the jobs that it creates are tremendously important in our university system. So, Senator Durazo. I keep asking and then you say no, but I'm not ignoring you over here.

I know. I apologize.

No problem.

Things come to mind after you ask me. I will be supporting the bill, Senator, and as Senator Caballero mentioned, this industry has a history of providing good jobs--aerospace industry.

Unfortunately, there are some companies that don't live up to those standards, don't live up to the treatment on labor issues that they should, particularly SpaceX, and so while I don't want to make that the standard for supporting your bill, I think it's really important to raise the issue of how a company that could get this kind of exemption should also be far more respectful of the labor laws, especially when they come to their employees wanting to unionize.

So I'm mentioning that because SpaceX has been raised here as one of the companies that could benefit. That part bothers me, but I know you and I support your bill.

Very good.

If I may?

You may conclude.

Senator, thank you, and I appreciate those comments and I share them. Obviously, this is a property tax exception or exemption--personal property tax that applies industrywide. So certainly to more companies, hopefully more in the future, and the one you identified, I think we need to perhaps address that certainly in another way, but it is very important and I guess I just want to thank you all for your patience of the issue and of me.

Thank you for your explanation, and we do have a motion.

Respectfully ask for an aye vote.

Thank you very much. Please call the roll.

Motion is 'do pass as amended to the Committee on Appropriation.' Senators Caballero? Aye. Caballero, aye. Seyarto? Aye. Seyarto, aye. Blakespear? Dahle? Aye. Dahle, aye. Durazo? Aye. Durazo, aye. Glazer? Aye. Glazer, aye. Skinner? Wiener? Five to zero.

Five to zero. That bill is out. We'll put it on call for the absent Members.

Colleagues, thank you very, very much.

Thank you very much. Senator Limón, it looks like you're up. Am I missing either Senator Padilla? No. Or Senator Bradford? Okay, you're up. Thank you so much for being here. This is file item number nine, which is SB 533.

Thank you, Madam Chair and Senators. First, I'd like to thank the Committee staff for their work on this Bill and would like to accept their suggested amendments. I present to you SB 533, a Bill that provides a 30% tax credit for the cost incurred by a taxpayer for childcare program startup expenses, and for the cost paid by the taxpayer for contributions to a qualified care plan.

Accessing quality and affordable childcare is a consistent challenge for our working families, where ever-increasing demand for care frequently surpasses the supply. Single mothers are often hit the hardest by high cost of childcare and spend a majority of their income ensuring their children receive care while they make ends meet. According to 2014 data, a typical mother with two children may spend around 70% of her income on child care at a licensed childcare center.

This Bill reintroduces a tax credit that existed in this state from 1988 to 2012, with, on average, over 10,000 children benefiting from the credits each year. SB 533 is essential to incentivize businesses to invest in their employees and their families and to add in the need for more childcare facilities within California. With me today supporting the Bill is Preston Young, advocate for Cal Chamber, and Silvia Solis Shaw, advocate for the City of Golita.

Very good, welcome.

Thank you very much, Madam Chair and Committee Members. Preston Young from the California Chamber of Commerce here today in support of SB 533. First off, thank you to the Senator, to the Committee and the Committee staff for the work that's gone into this Bill. During the Covid-19 pandemic, approximately 110,000 childcare workers left the labor force, and many childcare centers that had to shut down early in the pandemic ended up closing permanently.

There's a care crisis in California that's impacting our state's employers as well as our working family, and this Bill begins to address that issue. This Bill will assist California's economy by providing a tax credit to employers that pay for care programs or construct a childcare facility to be used primarily by their employees' children. It also provides a tax credit for childcare contributions. The employer community recognizes the importance of a robust childcare system to assist working families.

Some companies support their workers through onsite childcare, allowing children in the workplace, helping employees pay for backup childcare, or allowing new parents to work part time or remotely. In interviewing employers on this topic, renting or building even a small childcare center cost millions of dollars due to the specifications required for such centers in the State of California. So this tax credit could provide some assistance towards that barrier. The Bill mirrors the tax credit that was available in the state until 2012.

Just to give you a snapshot in time about the results and the impact of that credit. In the final year of the credit, $1.8 million in credits were claimed by over 4000 taxpayers, and in 2010, $2 million in credits were claimed by over 5000 taxpayers. Based on Cal Chamber polling, cost is the most significant barrier in increasing childcare related employee benefits. 72% of employers say they lack resources to invest more in childcare.

California's willingness to assist employers who want to invest in childcare for their employees should be supported. Thank you for your time and consideration today. Respectfully ask for your aye vote when the time comes.

Thank you very much.

Good morning, Madam Chair and Members. Silvia Solis Shaw here on behalf of the City of Golita, which is in Senator Limón's district. The City of Golita strongly supports SB 533, which will address the lack of childcare in our state, which impacts our overall economy and the well-being of our families.

Last year, the United Way of Santa Barbara county conducted a childcare assessment in the cities of Santa Barbara and Golita, and that assessment found that the average dual income household in Santa Barbara county with two children ages zero to five, spends at a minimum 37% of their monthly income on childcare costs. That's for a dual income household.

The assessment also found that there are over 1000 parents on the waitlist for infant and toddler childcare spaces, and over 1100 parents are on the waitlist for children ages three to four years old. The city recognizes the problems posed by the lack of available childcare and has implemented a plan to encourage new facilities, including model zoning requirements, the elimination of business licenses, and development impact fees for in-home family childcare providers.

However, the tax credit provided for in this Bill could be the critical piece needed to increase the number of childcare slots in our region and statewide, and we thank the Senator for authoring this measure.

Thank you very much. Is there anyone else in support?

Good morning, Madam Chair and Senators. Rosanna Carvacho Elliott here, on behalf of the Early Care and Education Consortium, in strong support. And thank the Senator for her commitment to trying to grow the childcare space.

Thank you very much. Is there anyone else in room 2100? Seeing no movement. Is there anybody who would like to testify in opposition? Seeing none. We'll go to the teleconference line.

Moderator, if you could queue up anyone who would like to testify, either in support or in opposition, on the teleconference line.

Thank you. Madam Chair, I believe we are on SB 533. And if you are in support or opposition, please press one followed by zero at this time. Madam Chair, nobody is queuing up.

Thank you very much. We'll bring the Bill back to the Committee. Are there any comments, concerns, issues raised?

Move the Bill.

There is a motion to move the Bill. Senator Limón, you may conclude, and I want to thank you for your work on this. This is critically important. This determines whether parents have the ability to work and whether going to work. They have a safe and secure place for their children. And so this industry was decimated during the pandemic, and now it's time to beef it up. And so thank you for your support and your work on this.

Thank you. And with that, I respectfully ask for an aye vote.

Thank you very much. Please call the roll.

Motion is do pass as amended to the Committee on Appropriations. Senators Caballero? Caballero aye. Seyarto? Seyarto aye. Blakespear? Dahle? Dahle aye. Durazo? Durazo aye. Glazer? Glazer aye. Skinner? Skinner aye. Wiener? Six to zero.

Six to zero. That Bill is out. We'll leave it on call for the absent Members. I'm looking around and I don't see any other Members here ready to go. So, Senator, Seyarto you're up. We'll start with file item number 15.

That is the odd construction of this place. It file item number 15. SB 221. Senator, the floor is yours.

Thank you, Madam Chair. I'm here to present SB 221. And first, I would like to thank the Committee staff. They've done a great job working with my staff to help reform and reform the amendments for this important Bill.

Domestic violence is one of the primary causes of homelessness for women and their children, with women accounting for 65% of unhoused survivors from 2019 to 2022 alone, the Office of Emergency Services Domestic Violence Assistance Program served almost 19,000 individuals, but yet there were 28,000 requests for shelter that went unmet. On average. Women wait mate. Women wait more than 10 years to access stable housing.

They rate twice that of men, with women being forced to make a choice to stay in danger with their abusers or escape with nowhere to go. Oftentimes, escaping an abuser means running, sometimes for one's life at the first chance and leaving everything behind. Survivors then have to face the experience of having nowhere to sleep for the first time. Many survivors experience connecting with handfuls of shelter resources, only to be turned down by the very organizations that they've been referred to.

To make it even more complicated, even if survivors are aware of all the available shelter beds out there, they still cannot plan ahead to move in because technically they are still housed with one of the many requirements being survivors must be homeless to be accepted into the shelter. Moreover, those applying for a spot in transitional homeless shelters have to be unhoused for a whole year to qualify, with shelters actively prioritizing the most in need.

Some shelters, I'm sorry, some organizations only take survivors who have been physically harmed in the last 30 days, even if the violence is the reason for becoming unhoused. So even if survivors do meet all these requirements, space is limited. In LA County, there are about 1000 beds at emergency and transitional shelters for survivors, and that's just not enough to meet this demand.

California continues to be at the forefront of trying to innovate responses to homelessness and domestic violence by ensuring relevant service providers like nonprofits are incorporated into local planning. Unfortunately, a strain on housing resources within the state limits the ability to provide transitional housing to these women and their children. Nonprofits who are dedicated to assisting survivors with housing resources cite California's high-cost rental markets and landlord reluctance as a hindrance in identifying housing partners.

My Bill, SB 221 seeks to remedy the housing gap by granting a tax credit to individuals partnered with nonprofit service providers dedicated to assisting with providing transitional housing at below market rates to survivors of domestic violence, with the credit being equal to the difference between the discounted rate and the market rate.

With survivors of domestic violence and their children making up nearly 70% of unhoused in California, along with their children and nonprofits struggling to provide housing for this at risk population, creating new ways to beat the housing crisis through creating an incentive structure for these partnerships will close the housing gap for survivors of domestic violence. Members. I respectfully ask for an aye vote, and I did not bring any witnesses today.

Thank you. Thank you very much. Is there anyone who would like to testify in support? Anybody who would like to testify in support? Seeing, none, nobody rises. Or anybody who would like to testify in opposition? Nobody moving. Will go to the teleconference line. Is there anybody on the teleconference line that would like to testify in support or in opposition? Thank you, Madam Chair. If you are in support or opposition to Senate Bill 221 please press 10 at this time. Madam Chair.

Nobody is queuing up. Thank you very much. We'll bring it back to the Committee and see if there are any comments, questions, or concerns. Senator Glazer moves the Bill. I don't see anybody, but let me just say that I think this is a really creative way of trying to fill a gap, that there's obviously a huge need. The interest is protecting children and the abused spouse.

And so the more that we can provide alternative and places for them to move to to get out of a dangerous situation, the better it is. So I'll allow you to conclude.

Well, thank you so much. In my district, there are some nonprofits out there, and this is the number one issue that they have, is finding the actual space for the people that come to them for this type of assistance. And so with that, I ask for your. I vote respectfully. Thank you.

Very good. There is a motion by Senator Glazer. Do pass to appropriation. That's one, Senators. Caballero. Aye. Caballero aye. Siarato. Aye. Sierrato aye. Blakespear. Dahle. Dahle. Aye. Durazo. Durazo aye. Glazer. Glazer aye. Skinner. Skinner aye. Wiener. Six to zero. Six to zero. That Bill is out. We'll put it on call for the absent Members. Your next Bill is file item number six. Senator Seoto, if aye could. Aye understand Senator Bradford is here in the room.

He's outside. Senator Bradford more than happy to allow him to.

Very good.

Take his rightful place ahead of me.

In the Senator Bradford file item number eight, SB 512. If we skipped over you, my sincere apologies. We're looking for authors.

Not at all.

Welcome to the Committee, and the floor is yours.

Thank you, Madam Chair. And I want to start by thanking your committee staff and you for the amendments. And we want to acknowledge we're taking the Committee amendments. SB 512 would exclude the state's cannabis excise tax, as well as other local taxes, from the definition of gross receipts under the sales and use tax law. This Bill will end what is currently an unfair practice of adding both the cannabis excise tax and local cannabis tax to taxable gross revenue subject to the sales and use tax.

Last year, the Legislature passed AB 195 which did several things, including suspending the cultivation tax and shifting collection of excise tax from the distributor to the point of sale. As I raised issue last year, as did many small retailers and equity operators, AB 195 provided benefits to the cultivators and labor, but did little for retailers and ultimately individuals looking to buy cannabis from the legal market as well.

Since that measure passed, some municipalities have imposed additional burdens by mandating that cannabis businesses include excise tax collected as part of their gross receipt calculation. Additionally, recent guidance issued by the Department of Tax and fee Administration provides for an expanded approach to the excise tax calculation, inclusive of delivery fees and local cannabis taxes. Taxing the tax and ultimately increasing purchase prices De incentivizes the consumer from purchasing from legal retailers and only adds to the illegal market.

Right now, as we know, the legal market is definitely struggling to stay afloat. This Bill does two very simple things. Local taxes do not include the excise tax or the sales tax and use tax, and the sales and use tax does not include the excise tax or any local taxes. By making these clarifications, SB 512 will help remedy the situation by ensuring taxes are calculated on the actual goods being used and sold.

With me today is Jared Kylo, President of the United Cannabis Business Association, who can answer any questions. I respectfully ask for your vote.

Thank you. Thank you chair Caballero and Committee Members, for this opportunity to speak and the numerous Committee Members who have championed legislation in support of the growth of regulated legal cannabis. Today, I would like to thank Senator Bradford for recognizing and fighting to strip away the inequities in the legal cannabis industry. Every year, he proposes bold and necessary legislative changes to level the playing field for the people brave enough to enter the legal cannabis industry.

Welcome.

Last year, Senator Bradford proposed an excise tax reduction Bill that would have made the industry far more competitive against a deeply entrenched, unregulated market that has control of two thirds of the California's consumers. Last year's budget trailer Bill, AB 195, was to pick up the torch of tax reduction.

Recognizing the needs of the industry and the desire of the Senator to have more competitive taxing structure to uplift a struggling industry, AB 195 changed the collection, the calculation, and the participants in the taxing structure, and in doing so, it changed the definition of the state's 15% excise tax away from a cost of goods tax to a gross receipts tax. Moving the state's excise tax calculation and collection to the retailer had some unintended consequences.

Since the desire of AB 195 was to simplify and reduce taxes, AB 195 increased excise taxes and compounded excise tax calculation by including local taxes and a pointed sale tax and an excise tax liability calculation. Many issues have arisen from these changes. One example is the city and County of Los Angeles, where the gross receipts language places local tax as the final tax. And now the new definition of the state's excise tax also places this tax as the final tax.

That conflict has led to a circular taxing argument where everyone claims to be the final tax and no taxing authority has stepped up to clear up the conflict, leaving the taxpayer in a difficult position to not be able to comply. The penalties for not complying are harsh and punitive, up to a 60% penalty for underreporting state taxes and a nonrenewal of local licenses for underreporting locally. This is the definition of a rock and a hard place.

This Bill is to set everyone straight on how to calculate excise tax, local tax and sales taxes without compounding these already excessive taxes that have added over 15% to the final price to the consumer. This Bill recognizes the intended desire as a Governor in AB 195 and clears up the confusion of the new definition of state excise tax and removes the compounding nature of the current tax structure.

Removing the tax on tax on tax issue lowers the cost to the consumer and makes legal cannabis more competitive to the growing illicit market. I respectfully ask for your. I vote for SB 512. Thank you.

Very good. Is there anybody else that would like to testify in support? Bless you.

Good morning, Madam Chair and Members. Amy Jenkins, on behalf of the California Cannabis Industry Association and individual companies, Canacraft and Spark and strong support.

Thank you. Thank you very much, Madam Chair Members.

Rand Martin here on behalf of the Parent Company, in strong support of this. Bill to help this besieged legal cannabis industry. Thank you. Thank you very much.

I apologize. One more. I'm also here on behalf of the California Cannabis Manufacturers Association, in strong support.

Thank you. Thank you.

Good morning. Jonathan Svetko here in strong support of the Bill on behalf of the Long Beach Collective Association, as well as Andrew Samuel. Thank you very much. Thank you. Anyone else in support in room 2100? Seeing none, we'll move on to testimony in opposition. Is there anybody in opposition to this Bill? Seeing none, we'll move on to the teleconference line. Is there anybody who would wish to testify either in support or in opposition to this Bill? Thank you.

Madam Chair, if you're in support or opposition to Senate Bill 512 please press 10 at this time. One filed by zero. And we do have a few people queuing up. Adam share. We'll start out with line 17.

My name is Javier Montez, Vice Chair. Of UCDA out of Los Angeles, and

Good morning.

Strong support of SB 512. Thank you very much. And one moment. They'll be with us in a second. We're going to go to line 16. Please go ahead. Yes, this is Luis Rivera from Social Equity LA, and T-Canna, and support Senator Bradford and SB 512. Thank you. Thank you very much. Line 11, you are open. Sarah Armstrong, on behalf of the California division of Americans for safe access, in strong support of this worthy Bill. Thank you. Thank you very much.

And let's give a final reminder. One filed by zero. If you're in support or opposition to SB five. One, two. And line 14, please go ahead.

Hi, my name is Wesley Hine. I'm with the Cannabis Distributors Association and also Mammoth Distribution Heavy Hitters, and we are in support of SB 512.

Thank you very much. And we have one more queuing up. Madam Chair should be with us momentarily. You. It.

And line 18, you are open.

My name is Edgar Escobar. On behalf of Edgar, LLC, I'm the CEO, a social equity manufacturer and distributor out of Los Angeles in support of SD 512 and Senator Bradford. Thank you.

And we have cleared the queue. Madam Chair.

Thank you very much. We'll bring the discussion back to the Committee. Are there any comments or concerns, Committee Members, I know I'm going to look twice at Senator Durazo just to be sure. Give her the look. Senator Skinner.

Thank you, Madam Chair. Senator, I appreciate your bringing this before us. I know your commitment, long-term commitment, around this issue, and it's an important Bill, so I'm happy to move it.

Thank you.

Very good. I couldn't have said it better. I really appreciate that you keep coming back and trying to make it work. There's no question that we need to stop the illicit market. And the best way to do it is make the legal market the one to go to and make it fair for everybody and do what we promised, which is that it would be a safe product and they wouldn't be overtaxed. So, with that, I'd allow you to conclude. I will have a motion.

Take your comments as my close. I think it's a straightforward measure that definitely will make the legal market far more competitive and deliver the promise that voters expected when we passed Proposition 64 six years ago. So I respectfully ask for your Aye vote.

Very good. We do have a motion. It's do pass as amended to Appropriations. Please call the roll.

[Roll call]. Three to zero.

We'll put that Bill on call for the absent Members. Thank you very much. Senator Padilla, you are here.

Good morning, Madam Chair and Members. It's my pleasure to present SB.

Actually, if we could. Can we, yeah. Actually, we'll start with file item number five. I'm sorry I lost my place here for..for a second. SB 4771.

Thank you, Madam Chair. It's my pleasure to present SB 471, and I want to thank your staff for working with us on this legislation. It would incentivize our burgeoning lithium industry to hire local workers residing in historically underserved communities, as well as those participating in this important and critical industry statewide, which is critical to California's energy future. Lithium is a mineral critical to California's climate change goals and America's energy Independence due to its use in a variety of electronics, especially batteries. Lithium batteries.

Are a critical component in electric vehicles and therefore vital to electrifying transportation. The global lithiumion battery market is expected to double by the year 2030. And yet the US currently produces just 1% of global lithium supply. There are some estimates that say, in particular around the Salton Sea in Imperial County alone holds as much as up to one third of the world's. Emphasize the world's current lithium demand and is a prime candidate for lithium separation and extraction.

Moreover, the methodology to be employed in California is one of the more environmentally superior separation and extracted methods available in the world. California, therefore, stands to be a global leader in lithium separation, creating green jobs, generating revenue in an emerging market. The Imperial Valley specifically has the highest unemployment rate in the state, higher than any county, and three times the state average. The benefits of this growing industry could bring to this underserved community and to the state as a whole are too many to count.

As we race to meet critical climate goals, we need to ensure that we continue to position ourselves as a state in the most highly competitive position possible. Let me just mention, Madam Chair and Members. We find ourselves in a national and global competitive situation. We have other states in the nation that do not have California's employment, community benefit and environmental review standards. They are standing ready to connect themselves to instant large markets and to build whenever and wherever needed.

If we are to capitalize on this, we need to be able to incentivize investment in a way that's meaningful. SB 471 will support the growth of this energy clean energy economy and see to it that we compete successfully in this critical emerging industry. And that one of our most disadvantages reasons as well, benefits as well. This simply builds on the new employment credit at a 50% rate. For those that are engaged in this critical emerging industry.

For California's economic future, I would like to introduce Eric Thronson from Imperial County, who is joining me, as well as Mike Monahan from the building trades. And following their testimony, I'd respectfully ask for an aye vote.

Thank you very much. Welcome to the Committee.

Thank you, Madam Chair. Good morning. Eric Thronson, on behalf of the County of imperial. While the county does not have a formal position as of this point, they are going to take a. A support position at the next available opportunity. They asked me to come here today and make sure that you all know that the County of imperial, as the Senator pointed out, is a very depressed area. And this tax credit would very much go a long way to benefiting the county and its residents.

Thank you.

Thank you very much.

Madam Chair. Members, Mike Monaghan, on behalf of State Building Trades, proud to support this Bill by Senator Padilla, had the opportunity to go to Salton Sea about a year and a half ago, and I saw the unemployment and the environmental issues that that region has to suffer through. This will go a long ways to improving that. Thank you.

Thank you very much. Is there anyone else that would like to like to testify in support of SB 471? Seeing nobody. How about if we move on to opposition to SB 471? Opposition here in room 2100? Seeing no one. We'll move on to the teleconference line. Is there anybody that would like to testify in support or in opposition on the teleconference line?

Thank you, Madam Chair, if you are in support or opposition to Senate Bill 471, please press one filed by zero at this time. One filed by zero. We do have one with an operator. One moment, Madam Chair. Anybody else, please take this opportunity and press one followed by zero. Please go ahead.

Hi, Katie Hardeman with the California Teachers Association and in opposition. Thank you very much.

And Madam Chair, no one else queued up.

Very good. We'll bring it back to the Committee for comments, questions, concerns. Senator Drazzo, thank you.

I thank the author and the supporters for a Bill that includes wages and decent wages. I would urge us to look at further at language about high road partnerships. High road partnerships. On the training front, we have some really extraordinary apprenticeship programs, and it seems like that. And then, of course, reaching out to communities that in your area is probably the entire community to recruit from. But that doesn't always get done. And sometimes working people are brought in from other areas.

So, I would really urge the high road training partnership programs and working with Labor and Workforce Development Board, we have developed over the last few years some really great language that helps both employers and the workers.

Thank you, Senator Glazer.

Thank you, chair. Senator, I'm going to support your Bill today. I know it comes from a great passion you have for your area, and certainly when you look at the potential for an emerging industry, certainly seems like one that is important for our environment and as well as for our folks that could be employed in that sector.

But I have to say that on this credit, tax credit, on others that we have had in this Committee, it is always a little bit of a challenge to understand how we weigh these choices among different sectors that also bring value, whether it's Hollywood, whether it's aerospace. And so this a challenge to understand because there are budgetary impacts on these types of things and how we make these choices. But for today, I'm happy to move your Bill ahead.

Thank you very much. Senator Dahle, I would just like to.

Echo some of the same comments. I think if we're going to really be honest with our goals and achieving the environment, we should be producing the materials we need for green jobs and green energy in California. And so for those reasons, I think we need to jumpstart it, because obviously we've seen even, I think it was Senator Bradford that brought to the floor a resolution to stop basically labor, child labor, in other countries where they're producing the products that we need to save the environment.

So I'd be glad to support your Bill today. I think this is something that California needs to move in this direction to actually produce the products that we need here in California. And so, thank you for bringing the Bill.

I see no other comments. Senator, I want to echo what has been said here today. We need to be in control of our own destiny. And if we're going to make the sacrifices and the commitment to go green, we ought to be making what we need in order for that to happen, if it's within our power to do that. And this lithium opportunity just is too good. To pass up other mining operations is a destruction of the natural environment. In other countries, there are significant abuses.

As was mentioned, child using children as labor with horrible living conditions is not something we should be proud of. And so I see this as a great opportunity for your region. But I do have to agree also that we have to evaluate what the impact is on our budget and make some difficult choices between some of these. If we can do it all, great.

If we can't, then we have to figure out which ones we want to support as an emerging issue, or one that will produce the jobs as well as the good product. So, with that said, I'll allow you to conclude. Do we have a motion? Okay.

Thank you very much, Madam Chair and distinguished colleagues. I take all of that input and critique to heart, and we'll continue working on a number of those measures that were mentioned, particularly on the workforce development side. I think this is a unique opportunity and a tool, Madam Chair, for the state to be in a position to be sure that local workforce are harnessed, developed and employed and not exploited.

I think that my argument with respect to making decisions about where we provide an incentive and pay a revenue cost has to look. And I would argue that this potential, because of the nature of how it can be extracted in the existing infrastructure that's already on the ground that exists and is being bought up like first prize in a turkey shoot by about every conglomerate there is around the world, to the tune of billions of dollars.

That this is a critical emerging industry, not just to my district, but throughout the state. And it's critical to our ability to actually make progress towards meeting our greenhouse gas reduction and conversion goals. And we are at an advantage on the infrastructure side and the resource side.

We are at a competitive disadvantage as a state with respect to the regulatory side, and anything we can do to incentivize investment and get a benefit for our state back is something I would strongly argue is worthy of the state to consider. And so, I thank for that input, and I'd respectfully ask for an aye vote.

Very good. We do have a motion. The motion is do passed to appropriations. Please call the roll, Senators. Caballero? Aye. Caballero, aye. Seyarto? Blakespear? Dahle? Dahle, aye. Durazo? Durazo, aye. Glazer? Glazer, aye. Skinner? Aye. Skinner, aye. Wiener? Five to zero. That Bill is out. We'll put it on call for the absent Members. Moving on to file item number six, SB 713. That is your Bill as well, Senator.

Thank you, Madam Chair. It's my honor to present Senate Bill 713, which simply clarifies for the purposes of our State Density Bonus Law, what development standards mean to include those that are adopted by local government or enacted by local government's electorate, exercising its initiative and referendum power, irrespective of whether that is derived from the constitution, statute, or charter.

And ordinances of local government don't need me to tell you we're in the midst of a housing crisis, and every step we take is vital as we work to bridge the gap between housing supply and demand. This Bill would clearly articulate state law as developers and cities collaborate to seek to build new units of housing that are compliant.

SB 713 codifies a recent technical assistance memorandum from the Department of Housing and Community Development that explicitly restates the existing law that local government cannot impose standards that stop state density bonus projects from moving forward. Greater clarity allows developers to proceed with confidence to develop more housing more quickly. Affordable housing developers cannot afford to waste extremely limited and important funding on unnecessary delays. SB 713 would simply provide much needed clarity, streamlining affordable housing projects by preventing trivial delays.

By restating and clarifying 713 will reduce building costs and significantly increase housing production. With me today, I have Dante Golden from San Diego Housing Federation.

Very good. Welcome.

Good morning, Chair and Members, my name is Dante Golden, Senior Director of Policy at the San Diego Housing Federation. We represent those who support, build and finance affordable housing in the San Diego and Southern California region. We are a proud sponsor of 713.

This Bill is a common sense statutory update to the State Density Bonus Law that clarifies a local government may not apply any development standard that precludes a project seeking a density bonus, even if the standard just adopted by the local electorate through a local initiative or referendum power.

This legislation is consistent with laws governing state preemption, provides greater certainty to developers considering projects that utilize the state incentive program, and is why the coalition supporting this Bill is made up of market rate affordable developers alongside pro housing advocates. Furthermore, the precarious capital stacks affordable housing developers have to construct to finance a project.

Coupled with delays, ambiguity and confusion that exists when there's a conflict between the voter proofs initiative and state law, further causes and drives up further causes delays and drives up costs for our members and could lead to loss of funding from any one of our funding sources. Without 713, proposed developments will likely not move forward due to the lack of clarity in current law.

This Bill will address this challenge and make it easier for our communities to deliver the housing we need to make a dent in the housing crisis and incentivize the development of much needed affordable housing. With that, I respectfully ask for you Aye vote. Thank you.

Thank you very much. Anyone in support?

Madam Chair, Senators, Dean Grafilo with Capital Advocacy on behalf of the California Life Sciences in support of SB 713. Thank you.

Thank you.

Good morning. Mark Stivers with the California Housing Partnership in support.

Thank you.

Hello. Chair and Members Patrick Bouteller with IQHQ in support.

Thank you. Is there anyone else who would like to testify in support of this Bill? Seeing none. Is there anybody that would like to testify in opposition? Seeing none. We'll move on to the teleconference line and see if there's anybody on the teleconference line that would like to testify either in support or in opposition to SB 713.

Thank you, Madam Chair. As she indicated if you're in support or opposition to SB 713, please press one zero. And we have nobody queuing up at this time.

Very good. We'll bring it back to the Committee. Are there any comments or motions on this Bill? There is a motion. Any comments? Seeing none. Again, very important Bill and I will be supporting the Bill today. Senator, we'll allow you to conclude.

Thank you. Madam Chair, respectfully ask for an Aye vote.

Very good. The motion is do passed to the floor. Please call the roll.

[Roll call].

Glazer, aye. Skinner? Aye. Skinner, aye. Wiener? Aye. Wiener, aye. Five to zero.

That bill is out. We'll put it on call for the absent Members, and finally, your last bill today here in this Committee is File Item Number Seven which is SB 751.

Thank you, Madam Chair and Members. It's my pleasure to present Senate Bill 751, and I want to start by thanking the Committee for working with my office and accepting Committee amendments that looks very familiar to me.

751 is necessary to remove an inappropriate and very clever--I might add--thumb on the middle of corporate and labor relations when it comes to often exclusive franchises between waste hauler providers and public entities: cities, counties, special districts that contract with these providers to provide a critical service to the public health and welfare; the refuse collection and disposal. SB 71 seeks to eliminate what has popped up in San Diego County and I suspect may be happening throughout the state, but not consistently.

With language being inserted into franchise agreements, licensing, and permits that characterizes what is a reasonably foreseeable labor dispute, pending labor action, or strike as an uncontrollable, unforeseeable circumstance or force majeure/act of God provision, the pragmatic effect of this is detrimental to the public well-being.

The pragmatic effect is that the typical and normal remedies for non-performance or breach between the exclusive contract and the public entity representing the public are typically available, whether that's general remedies under contract law, whether that's agreed upon schedule of liquidated damages between the parties.

Here, this language, while characterizing a labor dispute as forced majeure as an uncontrollable and foreseeable circumstance--which it is not--basically puts a chilling effect on the ability of the public entity--which is granted often an exclusive franchise to these haulers--from taking enforcement action during the course of the labor dispute.

It also brings the public entity and the citizens in turn into the middle of the labor dispute and indirectly and very cleverly gives extra pressure and advantage to the private hauler to put pressure on the workforce to resolve the labor dispute. Meanwhile, the trash piles up, creating incredibly unnecessary public health detriment. This language has no business in exclusive franchises for a public service such as this.

It is unnecessary and it does put the thumb on the scale in favor of corporate interests when there is a labor dispute. This simply removes that. The amendments that we'll be accepting also include the ability to provide appropriate notice of rights to ratepayers to know that there may be an impending labor action and to have a process by which individuals can get credits or refunds for services they paid for that were not delivered. Very clever language.

I'm sure a very smart attorney somewhere got this into some franchise agreements. As a matter of policy, the state should not allow this language to be inserted into public, often exclusive franchise agreements for a public health service, and so following that, I would like to introduce Matt Broad representing the Teamsters, and following his testimony, would respectfully ask for an aye vote.

Thank you very much. Welcome.

Thank you. Excuse me. Madam Chair and Members, Matt Broad here on behalf of the California Teamsters in strong support of SB 751. I think Senator Padilla summed up pretty well our concerns and the need for this bill. It was actually inspired by a December 2021 strike at Republic Services in Chula Vista in the Senator's district. From the Teamster perspective, we had sort of 'a tale of two cities' experience. In Chula Vista, they had a forced majeure provision that included labor disputes. In Los Angeles, same group of workers doing the same job.

They didn't. One labor dispute was resolved very quickly. The other one was a prolonged strike, and I think we can all agree that acts of God should apply to floods, earthquakes, things that are really outside of an employer's control rather than a labor dispute which I would say is very much within an employer's control. All these provisions do are shield employers from liability and probably inadvertently prolonged labor disputes.

And I believe the new tact in the bill with recent amendments helps to protect consumers, workers, and local government, and with that, I would urge your aye vote on the bill. Thank you.

Thank you very much. Other witnesses in support.

Madam Chair, Members, I'm Nick Romo with the League of California Cities. I'd like to thank the author for his leadership here. We think this bill strikes the appropriate balance of making sure that cities--in the event of a labor stoppage--can make sure that the trash gets picked up and we prevent some major public health crisis that happens. So thank you so much.

Thank you. Really appreciate that. Anyone else? Anyone else? Seeing no one else in Room 2100, we'll move on to testimony in opposition.

Good morning, Madam Chair, Members of the Committee. John Moffatt, on behalf of Waste Management, we have an opposed and less amended position on the Bill. We've met with the Senator's office several times and look forward to those ongoing conversations. I think from our perspective, we understand the position that the Senator is coming from. And I think from our perspective, we don't disagree that labor impasse arises. There needs to be a plan in place to go and make sure that public health and safety is protected.

Trash, recyclables, all these things are picked up. I think our issue with the Bill is that as currently drafted, the Bill requires specific performance. That means whatever the schedule was the day before the strike, it has to be the same the day after the strike. And that's just not possible if we have a crew of 100 folks who walk out. We don't have 100 people sitting there ready to step in and continue providing services on day one right after the strike. That's extremely expensive.

And there are times, obviously, the goal here is to not get to that point in a negotiation. And so, our view is that we would like the Bill to move in the direction of not requiring specific performance, still not excusing performance, but requiring a modified approach of performance. Right.

Look, we're going to go through, things are still going to get picked up, but it's going to be on a different schedule than it was the day before. Requiring specific performance is very expensive and becomes challenging when you're in a franchise negotiation. And we think that puts unionized haulers like waste management potentially at a disadvantage when we're out there on the open market responding to a franchise RFP. Not all waste haulers have union locations in the state. Some of us do.

And so those who don't have union locations don't have to worry about this Bill, but we do. And so again, I think from our perspective, what we'd like to see is, and as we've suggested in our letter to the Committee, a modified performance approach that will be allowed can be worked out with the local jurisdiction as part of the franchise negotiation. Thank you.

Very good. Thank you so much. Is there anybody who would like to speak in opposition in the room? Please come forward.

Chair Members? RJ Cervantes here. On behalf of the California Waste Haulers Council, we align our comments with Mr. Moffat. Thank you. David Krieger, on behalf of Waste Connection, similarly aligned and thanked the author in his office for his willingness to meet on this.

We just did opposition.

Opposition. Okay, thank you. Okay. Moderator, we're ready now to hear from the public on the phone. Moderator we're now ready to hear from the public on the phones, if you would queue them up.

Thank you, Madam Chair. If you are in support or opposition to Senate Bill 751, please press one filed by zero at this time. One filed by zero. And nobody is queuing up at this time.

Okay, thank you. Moderator we will now hear from our colleagues on the Committee. Any comments or questions? Yes, Senator Glazer.

Thank you. Senator. I know that this Bill comes out of a real problem in your neck of the woods, and understandably so when trash isn't being picked up. It's a serious issue. And everybody, truthfully, everybody is to blame for the breakdown, not trying to point fingers one way or the other. But the challenge that I have with this Bill is that this isn't a problem that has occurred among unsophisticated parties. This is a problem that has occurred among very sophisticated parties.

I served for five years on my regional trash board and was involved in the process of reviewing the franchise agreement, which did serious time requirements to go out for bid and to make these agreements. You have lawyers on all sides in these agreements. You also have the unionized community, at least on the side of the hauler side, that also very sophisticated in the collective bargaining agreements that are negotiated.

And in this context, the challenge is that these franchise agreements are 10 years long, maybe even 20 years long in some cases. And sometimes jurisdictions do put in evergreens where they're never reviewed and they just go on and on and on. And yet in the middle of all that, you do have labor contracts that expire. They're not typically 10 year contracts. And so that can change things sometimes within the control of the hall or sometimes without.

But the challenge that I have on this Bill is that you're injecting the state into these franchise agreements among sophisticated parties, saying that this forced azure provision shouldn't apply. Well, they all can make that judgment today. The haulers can make that judgment about whether it's in or not.

The folks making the franchise agreements, whether it's a city or a collective of cities or counties, whatever that is, they can look at the provisions, their lawyers look at all the provisions, and they can make whatever judgment they want to make about whether it's in or it's out. But under this Bill, you're resolving that issue. You're taking it out of this agreement negotiation among, again, very sophisticated folks.

If the local jurisdiction wanted to make sure that in the case of a strike, and that's not an unusual event like that, never could ever be imagined, they can put it in agreement, a plan to deal with that problem.

Now, if we think that, and some people suggest that trash hauling is an essential service, and we have in our state defined essential services like police and fire, where they can't strike, well, then that's a different Bill that would be before us that would say trash hauling is so important that you got to work it out at the bargaining table, just like we do with fire and police. You can't have a strike, but that's not the Bill that's in front of us.

And so that's the challenge for me on this Bill I know comes out of the best of intentions, and I wanted to share that with you.

Other comments? Committee comments, questions or concerns? Senator Durazo? Yeah, just a question to clarify with the author. It's my understanding that what we're talking about is just to make sure that the services continue as is expected every single day. And so this is not to put anybody at a disadvantage. It's just simply saying if that is what's taking place, it doesn't really matter what the issue is. You got to keep providing the service. Did I get that right?

Yeah.

My position, Madam Chair and distinguished colleague, is a couple of things. The obligation is on the franchisee, often who contracts for, often an exclusive publicly funded contract, to provide an important public health service to public entities. This is not a contract between two private entities. So you have a public interest here, specifically health and welfare. What seemed to be forgotten here is that the franchisees already have an obligation for specific performance.

There are already remedies and incentives within the existing contractual construct that exist in the absence of this language. The problem with this language is it ties the hands of the public entity to take any enforcement action during the course of the labor action. It brings, contrary to respectfully to my colleagues, to bringing the state in the middle of the dispute.

This language very cleverly, was inserted in some of these contracts for a reason, and that was to bring the public entity into the labor dispute, to tie the public entity's hands from being able to take enforcement action for non-performance during the course of a labor dispute which is not unforeseeable or force majeure. And so, the net impact to the public health is that the strikes go on longer.

The incentives that the cities or counties or special districts might otherwise undertake under General contract law or invoking liquidated damages are not undertaken because of the force major language. And so indirectly, you're not only bringing the public entity into the dispute, but you're using the public entity to put leverage on the labor force instead of the other way.

So, I think the irony here with the argument that we're putting our thumb on the scale is this inappropriate language is the thumb on the scale, and it should be removed so that the normal course of checks and balances between the contracting entities can work what it's designed to do. And I would also point out that this language, these same franchise industry, operates very well in many jurisdictions without this language. And it's not a problem.

The problem is the language, and it is a matter of public policy, Madam Chair, that is inappropriate and has detrimental impacts to public entities and to the public at large.

I'm sorry, one more question. There was a comment made about how this only impacted unionized companies. Could you respond to that? Because that doesn't appear from the language that that's the case.

Well, I imagine you could construe scenarios where there may be a breakdown with the workforce that wouldn't be necessarily only related to a representative collective bargaining group. And I imagine in theory you could get creative with this sort of inappropriate language and construe it that way as well and constrain the ability of a public entity to undertake the normal enforcement provisions for non performance.

And so my position would be that the language itself is a, unnecessary, b, tips the scales, and c, is inappropriate as a matter of public policy.

Thank you. Other comments and concerns by the Committee? Senator, I think some issues have been raised in regards to the negotiations or continuing to negotiate. We've had discussions about negotiating and continuing to meet with everybody. And so can we have your commitment that you'll continue to meet with the waste haulers and try to work on some of the language issues that they're concerned about?

I do appreciate the opposition's input and desire. We will continue to work with them to be able to iron out differences.

That's great. And then also on the work stoppage language, continue to look at that and refine it if necessary.

Yes, Madam Chair, you have my very, very good.

Seeing there's no further, Senator Glazer, I.

Just appreciate the chair raising those issues. I know we're absent. We're short one Member here today, Senator Blakespear, and I did exchange messages with her, and she's supportive of this Bill as you've presented it. But given the fact that it needs five to get out, and that may not be here on the day as today, if required, I'll support your Bill moving forward, but I hope that you'll continue to work as the chair indicates to try to resolve some of these issues.

Thank you, Madam Chair. Thank you, Senator.

So I will allow you to conclude.

I would respectfully ask for an aye vote.

Thank you very much. There is a motion? Is there a motion? Senator Drazzo moves do pass as amended to the floor. Senators. Caballero, aye. Caballero, I. Serto.

No.

Ciarto? No. Blakespear? Dahle, no. Dahle, no. Durazo. Durazo I. Glazer. Skinner, aye. Skinner I. Wiener. Wiener I. Four to two. Four to two. We'll put that on call. Moving.

Thank you, Madam Chair.

Thank you very much, Senator. Appreciate it. Senator Allen, good morning. Senator Allen has file item number 10, which is SB 588.

Good morning.

Good morning.

Good morning, Members. So we all know a lot about the affordable housing challenges that our state has. I think median rent has increased nearly 40% since 2000, but median household income has only increased by about 7% when adjusted for inflation. So we're trying to find all sorts of thoughtful angles with regards to the affordable housing challenges we have as a state.

So, as you all know, nonprofit developers who use public funds like tax credits or state or federal grants or loans to build affordable rental housing are awarded a 100% property tax exemption so long as 90% of the tenants in the building are low-income and their rent rates don't exceed the rent levels prescribed in statute for low-income households. Conversely, nonprofit developers of a privately funded project that meets the same requirements are limited to a property tax welfare exemption of $20 million in assessed value annually.

So this means that nonprofit. So $20 million in some parts of the state, it's a lot of money everywhere, but it's a lot less in some places versus others when it comes to property. And so you end up getting a situation where nonprofit affordable housing developers with rental projects in high assessed value areas, like in our cities, and those with several projects throughout the state, they then face more cost burdens and tax liabilities than their publicly funded counterparts.

We're obviously trying to find ways to stretch our dollar with regards to affordable housing development, and from my perspective, it just seems counterproductive to tie the hands of nonprofits who want to advance affordable housing projects without tapping into public resources. If nonprofit developers are willing to step up and help meet the community's housing needs, California should be there with them, providing opportunities that allow them to maximize their funding and impact.

SB 588 will level the playing field among nonprofit developers by removing the current $20 million limit on property tax welfare exemptions for privately financed affordable rental housing projects if, and there's two key criteria. First of all, at least 90% of the units have to be made continuously available to or be occupied by lower-income household households through a recorded deed restriction. And you need both of these.

So the rent levels charged for those units cannot exceed the existing definition of affordable rent for lower-income households as prescribed by statute. The specific definition of continuous availability in our language ensures that the exemption only applies to properties where a county assessor has been able to verify that the units are truly being occupied by and advertised to low-income households. So this is really, really focused on providing housing to our most needy residents.

So this won't just ensure that the exemption tool can't be exploited to allow for land banking, which was a concern with past iterations of this effort. But it also ensures that the units that benefit from this exemption will meaningfully serve our most vulnerable and rent burdened community Members. Anyhow, here with me today, we have Chairman Tony Vasquez from the California Board of Equalization. The board actually voted unanimously, bipartisan, everyone. Ted Gaines voted for it, too, to support this important effort.

And we also have Susie Shannon, who's with housing as a human right. We'll start with Tony.

Welcome. Welcome, and thank you for the opportunity, Madam Chair Caballero, for this opportunity to stand here in support of this Bill. I had the opportunity to work with the Senator for several months on this issue, and I also reached out and been working with my assessor, who many of you may know, Jeff Prang, and didn't realize that this cap was such a hindrance. And like the Senator mentioned, 20 million.

For some of us that have been around for some time, we thought that was a pretty high cap. But as it turns out, especially when you're dealing with the west side or parts of California, whether it's down in the west side or up here in the Bay Area, 20 million by a nonprofit is not really considered quite a bit when you're dealing with the land cost. So lifting this cap with these restrictions, I think, would help and contribute to providing more affordable housing.

And the language in 588 also specifies that they would be deed restricted. And that was one of the conversations I had with my assessor, Jeff Prang, and they said that we can put a deed restriction on that. So we don't have, like the Senator mentioned, landlords, possibly land banking or taking advantage of the situation down the road, because it would be deed-restricted to at least that 90% level. So it would hopefully contribute to trying to minimize and create more supply in the affordable housing arena.

So we are hoping that we have your support on this so we can lift the cap, because there's several. You'll hear from one of the nonprofits, specifically in LA. And as I go around up and down the state and talking to some of the nonprofits, that seems to be one of the holdbacks for many of these folks.

And one of the things we've been doing at the BOE is we've been trying to figure out ways to create more tax incentives for those that are willing to build more affordable housing, whether it's a nonprofit or a for profit developer. And many of them are stepping up to step up to the plate to provide that.

So we're hoping with the passage of 588, we can put another debt in this market, because I think as the Governor is constantly talking about the need for more affordable housing, I think we need to try as many or use as many tools as possible to contribute to this. So hopefully, we could all pitch in and at some point start making a dent in the supply and the demand that's out there on affordable housing.

Thank you very much. Appreciate your testimony here today.

Thank you.

Hi. Good morning, Madam Chair and Committee Members. I'm Susie Shannon from housing is a human right, a division of AHF. 171,000 people are homeless in the State of California, and over 50% are rent burdened. And our cities and counties are desperate for affordable housing and specifically for low-income communities. Our current law is acting as somewhat of a barrier for the building and buying of this low-income housing, and this is for our seniors on a fixed income, your Starbucks barista.

People at Target who work at target, folks who make minimum wage, are having a lot of trouble. Our hotel workers, I should say, having a lot of trouble finding housing. And at the same time, our cities and counties are trying to find a solution to that. We spend a lot of money on homeless services. I'm also a health Commissioner for the City of LA. I'm testifying as Housing is a Human Right. We spend a lot of money servicing our homeless population.

And by passing this law, which would actually be an incentive to building or buying affordable housing, we actually can save money for our cities and counties in the state because we're spending about $45 to $55,000 per person annually that's chronically homeless. And so this actually will just provide nonprofits who deed restrict their properties and provide at least 90% of the units continuously to our low-income communities to provide that housing which is very much needed.

When you look at the housing elements pretty much across the state, a lot of times you'll see there's not enough production or buying of housing for our extremely low-income communities or very low-income communities. And so this will actually help that particular situation. As you've heard, the BOE unanimously supports this Bill along with the LA County Democratic Party. County Assessor Jeffrey Prang, Housing is a Human Right, and AHS.

I should also mention the Kaiser Foundation, Hilton Foundation have already pledged to put in $100 million for 100% affordable housing. And so we just want to make sure that those incentives are there and that people are not getting taxed as though their properties are market rate. Thank you.

Thank you very much. Is there anyone else who would like to testify in support of this Bill? Seeing no one in room 2100, we'll move on to those in opposition. Anybody in opposition would like to testify.

Good morning. Ben Triffo at the League of California Cities. Not in opposition, but we do have some concerns with the Bill. Want to thank the author's office for working with us and looking forward to continuing those conversations as the bills moves forward. Thank you.

Very good. Is there anyone in opposition or that just wants to make a comment? Seeing no one else, we'll move on to the teleconference line and see if there's anybody that wants to testify in support or in opposition of this Senate Bill 588.

Thank you, Madam Chair. As she stated, if you are in support or opposition to Senate Bill 588 please press one followed by zero. One followed by zero. And, Madam Chair, nobody is queuing up.

Very good. We'll bring it back to the Committee for comments, questions, concerns, anyone? Senator Glazer.

Senator Allen, I appreciate your work in this area. I mean, there's no doubt to you and to all of us that we have a housing crisis. And I certainly grind at some of the finger pointing that happens in this space, certainly as it relates to local government, somehow, the fact that they are impediments, and we debate quite vigorously that concern and that issue with colleagues around the dais today and on the floor.

But the reason that I think this Bill is particularly important is because we were actually going to talk about the elephant in the room, and that's the private capital, that it's going to have to build our way out of this problem, and that we try to put band aids on it by doing public financing on various low-income housing bonds. And I'm a big supporter of those types of activities.

We fight about whether the finger pointing should be because of the city zoning or entitlement and limitations. But at the end of the day, it's about whether there's a profit in building. They're going to be the capital. That's the billions that's ever going to get us out of this problem.

And your Bill is one of those few bills that focuses on that elephant, which is there has to be a better risk reward calculation, or all that private capital is never going to be put to where we need it to go. And so I appreciate the protections that you've put in this Bill. I think they're appropriately done. But I'm glad that it is another tool in the toolbox that is so required to get us out of this housing crisis. And happy to support the Bill.

Very good. Other comments? Questions, concern? I'll entertain a motion. Motions made by Senator Glazer. Second, what he said, I think this is an elegant solution, and I'll allow you to conclude.

Yeah, I think Senator Glazer did a great job of really underscoring why this is important. And thank you. Certainly looking forward to working with the league. Thanks for the IHF and the Board for working with us on this important measure with respectfully as for an Aye vote.

Very good. There is a motion. The motion is do passed to appropriations. Please call the roll.

[Roll call]. Seven to zero.

Seven to zero. That Bill is out. Members, we're going to move on to file item number 13. Senator. Oh, no, I'm sorry. Senator Rubio is here. File item number 12, SB 734. I don't understand why people sit back there.

Senator Rubio, the floor is yours.

Thank you, Madam Chair, Members of the Committee. Today I'm proud to present SB 734, which is an important Bill that will bring tax relief to certain low-income tenants. This is a simple Bill, but it will have a major impact for so many of our low-income families who are struggling, especially those that live in publicly owned housing projects.

We have an affordable housing crisis, as we've already heard in the previous Bill, and so families are having a harder and harder time trying to find affordable housing. In this particular case, we have a situation where some folks are having to go to homes that belong to housing projects. So one solution is supporting public housing projects owned by the government. These government entities offer housing units that are affordable.

Nonetheless, there is a concern, as many of us know, California law exempts government owned property from property taxes. However, the law is ambiguous in this particular case, whether the exemption applies when a publicly owned housing project leases housing units to low-income families. Over the last few decades, the California State Board of Equalization has addressed this issue with several legal opinions.

Those legal opinions state that low-income tenants that live in these types of housing projects should not be considered to hold a taxable property interest because it would be against the state's interest in providing affordable public housing to impose such a tax. My bill SB 734 will codify the long standing legal opinion of the board and makes it clear that the state exempts these low-income tenants from paying property taxes.

As California again continues to confront this critical issue of affordable housing shortage, SB 734 will ensure that public housing projects can continue to be part of the solution of addressing this crisis. This Bill is supported by the Board of Equalization and has no opposition. And with me today is joining me as Chairman of the board, Antonio Vasquez, who will be testifying in support of the Bill. Thank you.

Very good. Thank you. Chairman Vasquez, you're up again.

Welcome and once again thank you, Madam Chair Caballero, for the opportunity to speak on behalf of this Bill. Once again, this is another Bill, I think, that would help in the toolbox that was mentioned earlier in terms of providing more affordable housing. And some folks that are out there don't quite understand the process with possessory interest. And this is one of the issues we have.

And when you're putting together these joint powers of authorities, this Bill 734 would create that opportunity without giving them the taxation that they would receive otherwise. So we are hoping that we can get your support on this. The BOE has been looking at this for the last, I want to say, like 27 years now because it's been constantly coming up.

And as we're coming more and more with this crisis on the affordable housing front, we feel that this Bill 734 would address the issue on the possessory interest. So we're hoping we can get your support on this. And if there's any questions or comments, I'm here and willing to answer whatever I can. And I also have staff with me, too.

Very good. Thank you so much. Appreciate you being here today. Is there anybody else that would like to testify in support of SB 734? Seeing no one in the room. Is there anybody that would like to testify in opposition? Seeing no one. We'll go to the teleconference line. Is there anybody on the teleconference line that would like to testify either in support or in opposition?

Thank you, Madam Chair. If you are in support or opposition to Senate Bill SB 734 please press one zero at this time.One zero. We do have one queuing up. If you give us one moment, please. Anybody else, go ahead and hit one followed by zero so the operator can give you your line number. And we will go to line 21. You are open.

This is Aaron Pranos on behalf of Los Angeles County Assessor Jeff Prang in support.

Thank you very much, Madam Chair.

Nobody else did queue up.

Very good. We'll bring it back to the Committee. Any comments, questions, concerns or motion? There is a motion by Senator Wiener. Good Bill. You may conclude.

Thank you. Thank you, Madam Chair and Committee Members. I just think it's unacceptable for us to expect these low-income families to be responsible for paying the taxes. And I know that the issue is much broader, but at least this Bill will tackle this issue in some way to help bring relief to these low-income families. And with that, I ask for your aye vote. Thank you.

Very good. The motion is do passed to appropriations. Please call the roll, Senators. Caballero? Aye. Caballero, aye. Seyarto? Aye. Seyarto, aye. Blakespear? Dahle? Aye. Dahle, aye. Durazo? Aye. Durazo, aye. Glazer. Glazer, aye. Skinner? Skinner, aye. Wiener? Wiener, aye. Seven to zero. Seven to zero. That Bill is out. Moving on to file item number 13. Senator Archuleta, SB 871. Floor is yours, sir.

Thank you, Madam Chair and Members. Senate Bill 871 seeks to provide a property tax relief to veterans and their families. In California, veterans who own and occupy a home as their primary residence may be eligible for a property tax exemption, which can help ease the financial burden of owning a home for these veterans. This can be especially important for veterans who are facing other challenges related to their service, such as medical bills or disabilities or even PTSD.

The exemption is known as the veterans exemption, and it provides $4,000 reduction in taxable value of their property. According to the State Board of Equalization, at its peak, from 1956 to 1962, over 1 million persons received the veterans exemption. However, due to the constitutional restrictions for the exemption, the veterans exemption has become outdated and obsolete. According to the Board of Equalization, only one veteran received the exemption in 2018 to 2019. Only one. This exemption has fallen into disuse because of only $4,000.

Any veteran who owns a home can instead claim a homeowner's exemption of $7,000, nearly twice the amount of the veterans exemption. SB 871 makes conforming statutory changes to implement Senate constitutional amendment number six that would allow a taxpayer claiming the homeowners exemption to also claim the disabled veterans exemption or veterans exemption. With me today to testify in support of the Bill and to answer any questions is Scott Kaufman.

On behalf of the Howard Jarvis Taxpayers Association, and for the above reasons, I ask for your aye vote.

Thank you very much. Welcome.

Thank you. The veterans exemption, as currently prescribed in the state constitution, is effectively obsolete. The veterans exemption is not adjusted for inflation. As such, the exemption's value remains at $4,000, which is the equivalent of $40 in real terms, along with the limitations on the maximum total value of property owned by the veteran to remain eligible for the exemption. Not many. Take it, for example. There is some disagreement over how many people in the state claim the veteran's exemption, but the estimates range from zero to two.

Moreover, the homeowner's property tax exemption is nearly twice the amount of the veterans exemption, 7000 or $70. In real terms, both exemptions prohibit the application of the other exemption. And in other words, this is extremely unlikely that the veteran property owner would claim the veterans exemption. There's also added concerns now with Proposition 19, there are added tax benefits of the homeowner's exemption and claiming the primary residence for the purpose of the intergenerational transfer. You can't do that.

If you claim the veterans exemption or the disabled veterans exemption because they counteract one another, this Bill would allow you to claim all of Both12 or all. And our men and women of uniform are willing to give all for our country. I feel like this is the least we could do is give them a taxpayer benefit that is actually worthy of the name of veterans.

Thank you. Thank you very much. Is there anyone else in room 2100 that would like to testify in support? Is there anyone in 2100 that would like to testify in opposition? We'll move on to the teleconference line and see if there's anybody on the teleconference line that would like to testify in support or in opposition.

If you would like to provide public comment in support or opposition to SB 871, please press 10 at this time. And first we'll hear from line 21. Please go ahead. Aaron Fenwick, on behalf of Los Angeles County Assessor Jeff Brain, in support.

Thank you.

And we have no further comments at this time.

Very good. We'll bring the matter back to the Committee. Are there any comments, concerns or motions? Senator, Seyarto moves the Bill, seeing no further comments, will allow you to terminate or finish or whatever it is.

Thank you. Madam Chair and Members, I respectfully ask for your aye vote.

Thank you. Very much. The motion is due pass to appropriations. Please call the roll, Senators. Caballero? Aye. Caballero, aye. Seyarto? Aye. Seyarto, aye. Blakespear? Dahle? Aye. Dahle, aye. Durazo? Durazo, aye. Glazer? Skinner? Wiener? Aye. Wiener, aye. Five to zero. Five to zero. That Bill is out. We'll leave it on call for the absent Members.

Good.

You have the next bill which is File Item Number 14: SCA 6.

Thank you, Madam Chair and Members. Senate Constitutional Amendment Six seeks to provide property tax relief to veterans and their families. SCA 6 is a constitutional amendment that pairs with Senate Bill 871, which I just read, which makes it necessary--which makes necessary statutory changes to implement the change in law. SCA 6 removes a provision in the California Constitution that prevents veterans claiming the Homeowners' Exemption from also claiming Disabled Veterans or Veterans' Exemption, thereby allowing eligible veterans to stack the exemption.

If approved by the voters, the measure would allow a veteran who qualifies for the Veterans' Exemption or the Disabled Veterans' Exemption to also receive the Homeowners' Exemption. Under current law, in order to qualify for the Veterans' Exemption, the veteran may not own property, real or personal, worth more than an aggregate of 5,000 dollars if the claimant is single or 10,000 dollars if married. SCA 6 modernizes the Veterans' Exemption by removing those arbitrary limitations a veteran must meet in order to qualify for the exemption.

Members, in California, we have a proud tradition of supporting our veterans. We have always recognized the sacrifices that they have made, and we are committed to providing them with the best support that they need. That is what we do in California.

Updating the Veterans' Exemption is just one example of this commitment and is another way for California to show its support and to let our veterans know the value that they have to our state, to our nation, and their contributions to our local communities as well, and our great, great country. With me today again to testify in support of the bill and to answer any questions is Scott Kaufman on behalf of the Howard Jarvis Taxpayers Association.

Welcome.

Thank you. I'll be short because the arguments are effectively the same. This bill is just necessary because the Homeowners' Exemption, the Veterans' Exemption, and the Disabled Veterans' Exemption are all in the Constitution, so we need conforming changes in the Constitution for SB 871 to come into effect.

The only added benefit here is that it removes some of the language that makes it effectively impossible to raise the Veterans' Exemption now, and it would give the Legislature that ability to raise it in the future if they so choose. Thank you.

Very good. Thank you very much. Is there anyone else who would like to testify in support in Room 2100? Is there anyone who would like to testify in opposition in Room 2100? Moving on to the teleconference line, is there anybody on the teleconference line that would like to testify either in support or in opposition?

If you would like to provide public comment in support or opposition to SCA 6, please press one zero at this time. And we have a comment from line 21. Please go ahead.

Once again, Aaron Fenwick on behalf of Los Angeles County Assessor Jeff Prang, in support of SCA 6.

Thank you.

And we have no further comments at this time.

Very good. We'll bring it back to the Committee. Same drill. Anybody in--want to make a comment? Senator Seyarto moves the bill. Seeing no other comments, you may conclude.

Madam Chair and Members, I urge your aye vote and thank you for your time.

Thank you very much. Please call the roll. The motion is 'to adopt and re-refer to the Committee on Elections and Constitutional Amendments.'

Senators Caballero? Aye. Caballero, aye. Seyarto? Aye. Seyarto, aye. Blakespear? Dahle? Aye. Dahle, aye. Durazo? Aye. Durazo, aye. Glazer? Aye. Glazer, aye. Skinner? Aye. Skinner, aye. Wiener? Aye. Wiener, aye. Seven to zero.

Very good. We're going to move on to Senator Seyarto. I don't see Senator Hurtado here. She's the last individual that's not on the Committee, so we'll take up your next bill.

I'll keep an eye if she walks in.

It's all good.

Yield to her.

Ah, going back to six. That Bill is out. Have we finished? That one okay? Yeah. Sorry about that. I got ahead of myself. File item number 16. SB 230. Senator, the floor is yours.

Thank you, honorable chair. And I am here to present SB 230. And I accept the Committee's proposed technical amendments. So this Bill, in partial conformity with federal tax law, would allow income eligible taxpayers to claim a tax deduction equal to the amount the taxpayer contributes to a health savings account. Health savings accounts were created by federal law exclusively to pay for the qualified medical expenses of the account holder and his or her spouse and dependents.

They're called HSAs may only be open for individuals who are insured under a high deductible health plan, and the balance in an HSA can grow on a tax-free basis, provided that withdrawals are used for a qualified medical expense. However, California is currently one of only two states that currently tax contributions to these accounts. The other state is New Jersey. Historically, the California Legislature has been concerned that allowing HSA contributions to tax deductible to be tax deductible would amount to an inequitable tax break for higher income earners.

This is because higher income earners are more likely to have the discretionary income available to contribute to an HSA in the first place. However, the fact that higher income earners are more likely to contribute to an HSA does not mean that lower income contributors do not exist. Unfortunately, California's current policy on HSA contributions leaves lower income earners behind and provides no relief for those who cannot afford any monthly premiums other than those offered by high deductible health plans.

I believe that there is a middle road that is mindful of equity while also empowering Californians with another tax advantage tool to pay for ever increasing health care costs. SB 230 accomplishes this goal by specifying that an individual making less than $42,000 a year or a filing household making less than $87,000 a year is eligible to deduct their HSA contributions from their taxable income. To be clear, this Bill does not create, promote, or compel people to enroll in a high deductible health plan.

High deductible health plans have the advantage of more affordable monthly premiums and the drawback of high out of pocket deductible costs. In the event that care becomes necessary, Californians must make the decision which plan is most appropriate for themselves and their individual circumstances. However, should they find it necessary to enroll in a high deductible health plan, it is my hope that SB 230 would provide some relief to make that deductible a little bit more manageable for those who need it.

So health care costs, and especially trying to meet that deductible, is one of the issues that lower income families are having. One trip to the hospital with a high deductible will set them back financially for their entire year, and sometimes if it is an expensive enough trip to the hospital, it can bankrupt them.

So having an HSA available and an income tax deduction to encourage that, and also being able to build that up if they're not ill for the entire year, that continues to build up with interest. I think it's very useful tool, and I think it would be very helpful to people that are in that circumstance where they have these extremely high deductibles just so they can afford health insurance. So with that, I ask for an aye vote I did not bring any expert witnesses today to testify.

Trying to be brief.

Bless you.

Thank you.

So we'll see if there's anyone in room 2100 that would like to testify in support. SB 230, is there anybody who would like to testify in opposition?

Good morning, chair, members. Jose Torres with Health Access California, the statewide Healthcare Consumer Advocacy Coalition. I'm here today in opposition to SB 230, and I do want to thank the Committee consultant and the author's office with meeting me and hearing our concerns throughout the General process.

We do appreciate that the author's office took some of our concerns and amended the language to add the income limits to the tax deduction as it has been found, as mentioned, that HSA really just tend to favor higher income individuals who use these HSA more than others. That being said, health access is still opposed to this Bill. Health savings accounts themselves do not provide healthcare coverage.

They are linked to high deductible plans, and with these types of plans, they are just greatly unaffordable as consumers will pay potentially thousands of dollars in deductibles before the plan covers anything. In 2023, the minimum deductible was set at $1,500, but most deductibles are much higher. Most deductibles, they range between seventeen hundred to four thousand dollars and for a consumer, this is a large amount of money that they must pay in order to have their health insurance pay for coverage.

Health savings accounts were linked to these unaffordable high deductible health plans because the idea many years ago was that it would increase cost consciousness within healthcare coverage. But instead, hsas have only acted as a really small band aid, while healthcare costs and annual deductibles keep increasing annually. Providing a tax deduction does not address the systemic affordability issues within high deductible plans and instead only encourages reliance on these low value plans that can have catastrophic financial impacts on enrollees who need care.

HSAs are really just a tax advantage masquerading as health policy, as health care efficiency, but in reality, they are connected to unaffordable plans that negatively affect the impact of consumers. As such, I do thank you for your time and ask that you vote no on this Bill.

Thank you very much. Is there anyone else who would like to testify in opposition in room 2100? Seeing nobody come forward, we'll move on to the teleconference line and ask if there's anybody that would like to testify either in support or in opposition to this Bill.

For comments in support or opposition to SB 230, please press 10 at this time.

And we have no comments.

Very good. We'll bring it back to the Committee. Are there any comments, questions, concerns? There is a motion. Senator Skinner?

Yes, my mic's on. I will not be supporting your bill today. The, I think health access made some very relevant points. I think all of us, obviously, every year when we are able to set up, choose our health plan. So, if we're employed by the Senate, we also at that time, because you do it in a particular tax year, can choose whether we set up a health savings account.

And when you look into the details of setting one up, for most of us with employer supported health care plans, there's no real advantage because most of the employer supported healthcare plans do not have these high deductibles. So there's no real advantage to the health savings account. Now for our lower income residents. We in California, we have been supporting Covered California and trying to provide the best plans possible that do not have high deductibles or to, for the lowest income, expand to Medi-Cal.

And so the net result is that in California, it really is high income earners by and large, who use these HSAs. And their origination was, as a federal law in effect, was to, in a way, was kind of a band aid instead of providing any kind of real health care coverage or mandating real health care coverage. So, I don't think that it is wise for California, any tax credit is a tax expenditure.

And given that we are having trouble now even to continue to provide, to make sure that our Covered California plans are affordable, and they have low deductibles, and we want to be able to use our state resources for that purpose, I don't think it is wise for us to use a tax expenditure for this purpose. And so, I will not be supporting the Bill.

Very good. Any other comments? Senator Ciarto, from my perspective, I really kind of agonized over this, because people make choices about their health care coverage based on how they currently are and you can, how they currently are in terms of themselves and their family Members, their health, but also based on income.

And what I really appreciate about what you did with the Bill is you made it income eligible taxpayers so that we don't end up hitting the taxpayers that have the means to be able to make different choices. I think that many times people pick the high deductible one because they don't feel like they need very much coverage and they pick the HSA just in case.

And sometimes it's because they do have a lot of expenses they need to pay in the HSA is just a really easy way to be able to take care of that, to make sure there's resources. So I'm going to support it today. I have some concerns about it moving forward. I think Senator Skinner outlined them pretty succinctly. But the challenge I have with some of the arguments in opposition is that we want to drive people towards a different kind of model.

And while I agree that that may be something we want to do, people make choices on their own and they decide whether they're going to move to another model or not or whether they can afford it, quite frankly. And so I'll support it today. No guarantee that I'll support it on the floor.

But I do appreciate what you're trying to do here, which is to create an opportunity for people to cover their health care costs and to do it in a way that provides them a benefit if they're not high income. So I'll allow you to conclude. Senator Dahle, did you want to make a comment?

I just want to say this is an investment that you choose to make, which is what we want to get people to get better coverage, and it's their choice. I mean, we can help incentivize that. I think that's awesome. It's another avenue for actually getting people healthier. And so it's an investment, the way I look at it, personal investment in their health care.

Senator Ciarto, that sounds like a good closing.

It does sound like a great closing. However, I'm sad that Senator Skinner does not want to vote for my Bill today. However, I did want to address a little bit of the concerns raised by the Gentleman that came. An HSA is part of a financial plan. And those financial plans are built around an ability for your family to pay for expenses that may be unexpected, that might come up, and it's just another tool for that. 48 other states allow this deduction for just that reason.

The answer to our health care system costs too much is it can't be solved by an HSA. It's not going to solve that. But what will do is give some families, especially low-income families, the opportunity to save some money up in case they do get hit. Because whether it's a high deductible or the low deductible, because the low deductibles aren't that Low, they still need some kind of help that might be part of the planning to offset so they don't have to make the choice.

Okay. Do I pay my hospital Bill, my hospital deductible? Bill this month, or do I pay my rent? They've already saved the money up. It's building up there. It's on the side, just like you would do for any other unexpected expenses. It's an insurance policy within insurance policy. And that's why I brought this Bill forward, because I do see a lot of these issues with tax clients that my wife has, and I can see where this would be very helpful to them.

In deference to the opposition, this is better than them choosing not to have any health care plan and trying to fly under the radar and then being hit with a $20,000 hospital Bill. So, with that, I would appreciate your aye vote and respectfully ask for that.

Thank you very much. Senator, did you take the technical amendments that were addressed in the.

I most definitely did.

Great. Very good. So, the motion is do pass as amended to appropriations. Please call the roll, Senators.

Caballero. Aye. Caballero. Aye. Seyarto. Aye. Seyarto, aye. Blakespear. Dahle. Dahle. Aye. Durazo. Glazer. Glazer. Aye. Skinner. Skinner. No. Wiener. Wiener. No. 4 - 2.

Bill fails. Senator, I'm willing to grant you reconsideration.

Yes, if I could ask for reconsideration, I would appreciate that.

Okay, that objection. We'll move on to file item number 17, SB 243. Senator Sayerto, this is yours, too.

Thank you. I'm here to present SB 243. SB 243 seeks to establish a sales tax exemption on firearm safety devices. A firearm safety device is anything from a steel cord locked with a key to a full sized safe or lockbox. These devices can prevent acts of gun violence, suicide, and gun related crimes. A lot of times, these are crimes that are committed at the spur of a moment. So, it can make it more challenging for theft and misuse of firearms.

Across the country, states like Tennessee, Connecticut, Maine, Massachusetts, Texas, Virginia, and Washington incentivize gun safe ownership through various tax breaks on firearm safety devices. California has robust rules, regulations, and harsh penalties regarding firearms, and they are ranked first in the nation by Gifford's Law Center for the strength of our gun laws. SB 243 ensures the California residents have the resources and opportunities to practice safe and responsible gun ownership by establishing a tax exemption from state sales tax, just the state sales tax, on these firearm devices.

And I do have several co authors, Mr. Glazer. With that, I would respectfully ask for an aye vote. And I did not bring any witnesses in keeping with my trying to stay streamlined in our presentation process.

Very good. I'm going to check and see if there's anybody in room 2100. That would like to speak in support of SB 243? Is there anybody who would like to speak in opposition seeing no one will go to the teleconference line and see if there's anybody that would like to testify either in support or in opposition to SB 243?

To provide public comment in support or opposition to SB 243, please press 10 at this time. And we have a comment from line 13. Please go ahead.

Hi, Katie Harden with the California Teachers Association and in-opposition.

Very good. Thank you so much.

And we have no further comments at this time.

Very good. We'll bring this back to Committee. Comments, questions? Senator Skinner?

Apologies, Senator Seyarto, but I'm in a similar position, though different reasons. But again, this is a tax credit. A tax credit is a tax expenditure. And given that gun safety is a paramount concern for all of us, while one, we'd say, well, we should incentivize it, on the other hand, it is something that in many cases we've mandated. And I don't think that in those kind of circumstances, we should then also be rewarding with tax credits.

So if I think about other things that safety mechanisms on cars or safety mechanisms on other type of consumer products that we don't offer tax credits for, I think in this one, this is one of these where consumers with guns should have these devices, and we should not be in a situation of having to use state funds to reward them for doing what is, as my colleague, Mr. Bradford always says, common sense. So I will not be supporting the Bill today.

Very good. Other comments, questions or concerns?

I'll move the Bill.

There is a motion by Senator Dahle. Any other comments? Senator? I have the exact same issue, and this is one of those things where, with all the violence we've seen in our country, it is, it seems like a no brainer to do something that will increase the possibility that people get locking devices.

But the reality of the situation is this has been the law in California for many years, and it's the responsibility of gun owners to safely secure those guns and to keep them out of the hands of children and individuals that want to do bad things with them. And so I have the same issue just in terms of whether we should be utilizing tax dollars in order to make that more available and so I'll allow you to conclude.

Right. Well, I appreciate that. And I appreciate your concerns as well. My concerns come from a little bit different perception. I know we do have laws that when you're buying a new firearm, that you have to buy a safety locking device, but we have a lot of firearms out there that were purchased beforehand before this law came into effect. And it also guns that have been passed along down through the years.

Also, there are people that were without kids before when they purchased their guns and now they have guns in their possession. And it is their responsibility, it's their responsibility to do that. Unfortunately, I have also borne witness, treated, tried to save lives of kids who have been, unfortunately got a hold of a gun that did not have a safety lock on it and they died as a result.

And so, all the blaming of the parents for not being responsible is not going to bring back those kids. What will be incentivizing and make people think about, hey, you know what, they're actually giving me just the state tax break, a sales tax break, which isn't that much, but it'll put it into their heads, hey, maybe I should go down and get a safety locking device now that I have kids.

Maybe I should go get a locker for my guns and take the incentive that the state is offering so that I can be a safe and responsible gun owner. A lot of the guns, the issues that I have dealt with did not come from places where people had the wealth to go out and do that. So, every little bit of incentive for folks like that is helpful. So that's where I come from on this.

This does not benefit me in the least, and it's not going to be a big hit on the sales tax revenue for the State of California. I doubt very much that there'll be a lot of activity, but if it was just one person that said, you know what, there's a little tax break for this, I'm going to go do that. You know what, that's good enough for me because then I have about five less dead kids in the world.

So I appreciate your guys concerns about that. I would love to see us do something besides create laws that people don't follow anyway, but maybe create an incentive for people to be a little bit more responsible or at least plant the seed in their head. So thank you so much, and I respectfully ask for an aye vote.

Thank you very much. We do have a motion. The motion is do pass to appropriations. Please call the roll.

Senators Caballero? Seyarto. Aye. Seyarto. Aye. Blakespear? Dahle? Dahle. Aye. Durazo? Durazo. No. Glazer? Skinner? Wiener? Wiener. No.

Two to two that Bill fails.

Thank you.

I appreciate that. Thank you, Senator, we can grant you reconsideration if you'd like.

No, thank you.

Okay, sounds good. We have one final Bill, and that is file item number 11, SB 701. Why don't we lift the calls and see if either the file shows up so that I can present the Bill or Senator Hurtado shows up. So, we'll start with file item. We'll start with file item number one, SB five, by Senator Nguyen. The motion was do pass to appropriations.

The absent Members, Senators Caballero? Blakespear? Durazo? Skinner? Wiener? Wiener. No.

Two to two, reconsideration for that Bill.

We will grant reconsideration. Yes, that measure fails, so reconsideration is granted. Moving on to the consent calendar. We have three items. Please call the absent members.

Motion is adopt the consent calendar. Senator Blakespier. Skinner.

Zero, dear.

Wiener? Wiener. Aye. Six, 20.

That Bill is out, and we'll put it back on call for the absent Member. Moving on to file item number three. Senator. SB 419, by Senator Roth. The motion was do passed as amended, to appropriations.

Senator Blakespear. Skinner. Wiener. Wiener. Aye.

Six, 20, that Bill is out as well. Six to zero, and we'll catch the absent Member upon return. File item number five, SB 471, by Senator Padilla.

Motion is to pass to the Committee on appropriations. Senator Seyarto.

Aye.

Seyarto, aye. Blakespear, Wiener. Wiener I. Seven to zero.

Seven to zero. That Bill is out, and we're finished with that one. Moving on to file item number six, SB 713 by Senator Padilla.

Motion is to pass to the Senate Floor. Senator Seyarto.

Not voting.

Blakespear, Dahle. Five to zero.

That Bill is out. Have we picked the paperbid? File item number seven, SB 751, by Senator Padilla.

Motion is to pass us amended to the Senate Floor. Senator Blakespear. Glazer. Glazer, aye. Five to two.

That Bill is out. Moving on to file item number eight. Senator Bradford. SB 533 by Senator Limon.

Motion is to pass as amended, to the Committee on Appropriation. Senators Blakespear. Wiener. Wiener. Aye. 7 to 0.

That Bill is out. File item number 10 by SB. zero, that one's. That one's out. Okay, that one's out, too. File item number 13, SB 871, by Senator Archuleta.

Motion is to pass to the Committee on Appropriation, Senators Blakespear, Glazer.

File item13.

File item 13, Aye. Glazer Aye. Skinner.

We'll put that back on call. File item number 14, sca. Six by Senator Archuleta. What's out? Okay, 15. File item number 15, SB 221, by Senator Seyarto.

Motion is to pass to the Committee on Appropriations. Senators Blakespear, Wiener. Wiener. Aye. Seven to zero.

That bill is out. 16. Okay, Senator Hurtado, you are our final bill on file item number 11, SB 701.

Thank you, Madam Chair. Members, I'm here to present on SB 701 which makes necessary updates to existing law regarding registration fees for wholesalers of fruits and vegetables for food safety standardization programs. California established its first standards for all fresh fruits, vegetables, and nuts back in 1915, known today as a standardization program to ensure only quality produce is sold to California consumers. However, ensuring the quality and safety standards of produce in the California marketplace is complex, requiring collaboration from individuals up and down the supply chain.

In 1983, AB 1131 established the current registration fee system, which capped at 250 and charged to wholesalers of fresh fruit and vegetables so that county Agricultural commissioners would be able to conduct inspections. Among many other things, Ag commissioners are tasked with enforcing wholesomeness, absence of contamination or decay, standard containers and labeling, as well as accurate responsibility statements which help trace products back to origins in the event of food borne illness.

The interconnectivity of our food system, which requires thorough and consistent oversight to ensure the food safety standards of fruits and vegetables consumed by Californians. California ranks first in the United States for agricultural production and is the nation's largest food producer. Despite California being the country's top agricultural product exporter, the state must still import significant amounts of fruits and vegetables each and every day.

We often assume that the fruits and the vegetables we see at the California, at our grocery stores are safe, and we trust that we are buying high-quality produce, but that is not always the case. In a recent example, NPR reported that frozen organic strawberries sold at popular stores across the US had been recalled over a potential link to an outbreak of hepatitis A infections. This outbreak led to multiple people getting sick and even hospitalized a couple of them, which triggered an investigation by the CDC.

Two companies, including one company based in California, then issued voluntary recalls in response to the investigation out of an abundance of caution. The investigation indicated that the strawberries were imported fresh from certain farms located in Baja California, Mexico, in 2022 that produced and sold those strawberries to multiple companies. Food safety is a major problem that contributes to the food insecurity we have seen and will continue to see as the world changes around us.

And just to kind of highlight this hepatitis A, it's just a really scary thing. It could lead to liver damage and really could be fatal in worst-case scenarios. It really could have a life-changing impact to individuals. So we need to empower those who are doing what they can to ensure Californians are consuming safe and high-quality fresh fruits and vegetables, and SB 701 expands authority to any interested county to adopt a registration fee program.

Updates maximum fee to $500 to assist in covering the operational cost associated with fruits and vegetables standardization inspections and removes the requirement that limited the fees to one-third of the cost of the inspections conducted by the county agricultural commissioners. I do have one witness here with me today. Our witness is Ed Williams, the Agricultural Commissioner at the County of Intra.

Very good. Welcome.

Thank you, Senator Hurtado. Thank you, Chair, for the opportunity to speak to you today, and board members or committee members. Thank you. As Senator Hurtado mentioned, my name is Ed Williams. I'm the Ventura County agricultural commissioner and sealer of weights and measures. I am representing the California Ag Commissioners and Sealers Association, and we support this bill. We are sponsoring this bill, and we ask for your support of this bill as well.

The ag commissioners spend about $12 million a year doing produce standardization work in various forms, from organic integrity to direct marketing integrity, truth, and labeling, as well as fruit and vegetable standardization, which involves maturity testing for making sure that you're not getting sour grapes, checking oranges that may have been affected by a freeze, that you can't tell from the outside of that fruit. And so our job is to make sure that the public is getting a high-quality edible piece of product when they purchase produce.

This is a fairness of competition in the marketplace issue as well. The California producers, they have a standardization program. They're paying an assessment for inspections for producing and packing California products. But we also import a great number of products from other states and other countries. And as Senator Hurtado has pointed out, sometimes those come with some issues with even a foodborne illness or public health.

One of the major aspects of this program is checking the labeling on packages of fresh fruits and vegetables to make sure that there is a responsible party identified so that that can facilitate quick traceability back to who packed that product in the first place. And so that creates a food safety issue and facilitates a food safety traceability aspect to this program. So I would ask for your support for this program or for this bill. Excuse me. And we appreciate the time that you have given us today for consideration.

Thank you very much. Appreciate your time.

Madam Chair, members. Matthew Siverling, on behalf of the California Agricultural Commissioners and Sealers Association. Again, there's some lengthy testimony here. Just wanted to express our support for sponsoring this bill for this local option for counties to join into this program to ensure food safety and food quality and urge your aye vote. Thank you.

Thank you very much. Is there anyone else in room 2100 that would like to testify in support? Seeing none. Is there anybody in room 2100 that would like to testify in opposition? Seeing none, we'll move on to the teleconference line and ask if there's anybody on the teleconference line that would like to speak either in support or in opposition. And at this point, I want to ask committee members to please return because we're likely to take up a vote pretty quick.

Thank you, Madam Chair. If you are in support or opposition to Senate Bill 701 please press one, zero. And, Madam Chair, there are no participants queued up.

Very good. So I'm going to bring it back to the committee and see if there's any questions, comments, concerns, or motion. It's been moved. The bill has been moved. Any other comments? Thank you for this bill. I think this is really important, and obviously, a really important work is done on behalf of the public to ensure the safety. So with that said, I'll allow you to conclude.

Thank you, Madam Chair and members. I respectfully ask for an aye vote.

Very good. The motion by Senator Wiener is do pass to the Senate Floor. Please call the roll.

Senators Caballero. Aye. Caballero, aye. Seyarto. Aye. Seyarto, aye. Blakespear. Dahle. Durazo. Aye. Durazo, aye. Glazer. Skinner. Wiener. Wiener, aye. Four to zero.

Four to zero. We're going to put that on call. And please call the absent Members to advise them that we are ready to take the final vote. Thank you to all the Committee Members. So we're just about ready to finish, but before we conclude, I want to make sure to thank the moderator for the help today. Stellar job and appreciate all of your assistance. And also I want to thank the witnesses and the observers as well.

I think it was good testimony, and it helps the Committee do its work if there's, as long as we're here waiting for Members to come back to add on, I want to take a minute to recognize and to thank a staff Member who is getting ready to leave to go on to do bigger and brighter and more exciting things. Jessica, you've been a great addition to the Committee staff, and I want to recognize you and thank you so much for your contributions.

You give really concise, fantastic advice, and it's really helpful as a chair. Speaking as a chair, it's been really helpful to work with you and want to congratulate you going back for the Franchise Tax Board, excellent organization, and I know that we're going to miss you, but you're going to a really good place, so we know where to find you when we need some advice or when we have a question. So congratulations on that move and hope that it's a really good place for you.

So, thank you. Thank you for your service. Yeah, it's always sad when people leave. Yeah, that's right. The Senate Committee on Governance and Financing was back in session, and we're going to go over the bills one last time to add on. We'll start with the consent agenda. Please call the roll.

Motion is adopted. Consent calendar. Senators Blakespear? Skinner? Skinner.. I'm. Seven or zero.

That Bill is out. Moving on. File item number three, SB 419. Senator Roth, please call the roll.

Motion is to pass us amended to the Committee on Appropriation. Senators Blakespear. Skinner, aye. Skinner, aye. Seven to zero.

That Bill is out. Seven to zero. Moving on to file item number eight, SB 512.

Motion is to pass, as amended, to the Committee on Appropriations. Senator Seyarto? Blakespear? Dahle? Glazer?

Four to zero that Bill fails, and we will grant reconsideration. File item number 11.

I don't think I wrote it on item number one.

Closed up.

Hold on.

Let's see you close the roll. So it got out on the two to two.

Say that again.

It got out. Are you closed the roll, and it was two to two.

Anyway, that's fine.

Moving on to file item number 11, SB 701 by Senator Hertado. The motion is do passed to the Senate Floor.

Senators Blakespear? Dahle? Glazer? Skinner? Aye. Skinner, aye. Five to zero.

That Bill is out. Five to zero. And finally, file item number 13, SB 871. Senator Archuleta do pass to appropriations.

Senator Blakespear? Skinner? Aye. Skinner, aye. Seven to zero.

That Bill is out. Seven to zero. That concludes today's hearing of the Senate Committee on governance and Finance. If there's anybody still on the line that would like to, who have testified in support or opposition to a Bill and would like their public testimony recorded, please feel free to contact the Committee through the website and register your comments, and we'd be happy to include them in the file. Thank you very much for your attention today. We are adjourned.