Assembly Standing Committee on Budget

All right. Good morning, everybody, and welcome to our first hearing for the Assembly Budget Committee for 2024. We officially have 144 days before our constitutional deadline to enact a budget, and we are excited to dive in and get to work. And I understand that the Senate will begin their budget deliberations today as well.

This week, we expect to notice over 60 hearings that will allow us to begin the detailed work of crafting a budget that addresses the challenge facing our state. As reflected on the Assembly Budget Committee website, today's hearing will focus on the Governor's January Budget Proposal. In particular, we will hear testimony today from Erika Li, Chief Deputy from the Department of Finance, Gabriel Petek, the Legislative Analyst, and Carolyn Chu, the Chief Deputy Legislative Analyst. Will provide their perspective and recommendations.

And Nicole Vazquez, the Deputy Chief Consultant of the Assembly Budget Committee is also here to help facilitate answers as needed. After their presentations, Members of the Committee will have an opportunity to ask questions and provide comments, and we will then take any public comment from those in the hearing room. I do want to note that today's hearing will adjourn no later than 12:00 noon. However, there will be many more opportunities, and I would add more impactful opportunities for public comment at our upcoming Subcommittee hearings.

We will take roll as soon as we have enough Members here to establish a quorum, and if you are a staff member listening to this or a Member of the Assembly Budget Committee, we would invite them to come down here and join us in the hearing room. I should also note that Speaker Rivas has made two important changes to our Budget Committee structure this year.

First, we are excited about the addition of our new Subcommittee Two on Human Services, which will now be separate from Subcommittee One on Health. This split will allow us to dig deeper into the critical investments in both areas, and we're grateful to have two talented professionals, Dr. Weber and Dr. Jackson, chairing Budget Subcommittees Number One and Two, respectively. We're similarly excited about the speaker's decision to form a new Budget Subcommittee Number Seven on Oversight and Accountability.

As you'll hear repeatedly this year, our Democratic Caucus is committed to greater oversight, and we're grateful to have Assembly Member Valencia leading us in that key role. I also want to thank Assembly Member Bennett for returning as Chair of Budget Subcommittee Four and to officially welcome our new Subcommittee Chairs, Assembly Members Alvarez, Quirk-Silva, and Ramos. And I also want to welcome our new Committee Members, Assembly Members Flora, Ortega, Ward, Wilson, and Zbur.

We have an excellent group of Subcommittee Chairs and Committee Members, and I'm confident that we will be in good hands with their leadership. As noted both by the Governor and the LAO, we will need to confront several major challenges in crafting this year's budget. The first is a multibillion revenue shortfall, the precise scope of which is not yet certain.

Regardless, it is important for the Legislature to be honest with the public, with advocates, and with ourselves about the scale of the challenge we are facing. The shortfall is real, and it will require tough choices. There is no magic wand. So as we begin our budget deliberations, it is important that everyone acknowledges this reality so that we can all recalibrate our expectations.

Second, beyond the current shortfall, it is critical that folks recognize that both the LAO and the Department of Finance are projecting ongoing deficits of approximately 30 billion dollars annually, even if we were to accept all of the proposed solutions outlined in the Governor's Budget. This means that even as we solve for the challenges confronting us today, we must be mindful about what lies ahead.

Our responsibility to the people of California requires us to think beyond this year, this election cycle, and for many of us, our term of service in the Legislature. And finally, it is critical that we recognize the significant economic, financial, and political uncertainty that surrounds us at this difficult moment. This uncertainty is itself a major challenge and should not be underestimated.

Indeed, in a few months, we may find ourselves in a much better situation or one that is significantly worse, and so we must be prepared to adapt quickly as circumstances change. The good news is that we have a number of tools at our disposal to confront these interlocking challenges. We are fortunate that wise planning in previous years has provided us with reserves and other avenues to address this shortfall.

With strategic, responsible choices, we can protect our most vulnerable communities, preserve progress on key goals, and lay the groundwork for stability and long-term success, all while remaining true to our core values. One essential element to this success will be enhanced oversight and accountability. We will need to look even more closely at our programs and services to understand what is really moving the needle on the issues most important to Californians.

I have heard repeatedly from members of the Democratic Caucus about the need to improve our oversight of state spending, and oversight remains a top priority for Speaker Rivas and me. To that end, stakeholders who approach this Committee should be prepared to do more than just describe the relevant problem or challenge they seek to address. On the contrary, they should be able to explain why their proposed solution is the most effective and why it is worthy of public investment.

Finally, as I'll discuss later in greater detail, I have concerns about some of the strategies proposed in the Governor's January Budget, particularly cuts that I worry could undermine our ability to meaningfully address California's housing and homelessness crisis, as well as funding for the Office of Emergency Services and the Nonprofit Security Grant Program. Before I turn it over to Assembly Member Fong, I did want to flag one additional item.

In particular, one of the issues I've heard about repeatedly from Members on both sides of the aisle is the proposed withholding of funding for previously agreed upon legislative district requests. Unsurprisingly, conversations around this proposal have generated anxiety across the state, including at many small nonprofits, which are focused on uplifting our most underserved communities. So while we appreciate the Governor's leadership in considering various solutions to our budget challenges, I'm confident that withholding this funding is not something that the Legislature would agree to.

And I look forward to working closely with the Governor and our legislative colleagues on other more appropriate solutions. With that, I look forward to the conversations ahead. I'm grateful to the witnesses from the Department of Finance and the LAO who've joined us today, and I'm pleased to turn over to our Vice Chair, Assembly Member Fong, for his opening remarks.

Thank you, Chair. I just want to welcome the new Chair. I know how hard he works for his constituents, and I look forward to working with him and his staff as we tackle what could simply be described as a fiscal mess. This is quite the year to take over. Whether the deficit is 40 billion dollars or 68 billion dollars, California has a massive deficit and we have our work cut out for us. Such a massive deficit demands prudence and accountability.

Unfortunately, in my opinion, the Governor's Proposal does not reign in spending adequately. And if we don't act immediately, the fiscal mess grows larger and larger year over year. And as state spending grows more and more out of control and unsustainable, everyday, Californians will bear the brunt of the Governor's inaction. He wants to solve the many problems plaguing the state, but he cannot do it with unchecked spending. Spending doesn't define success. Californians are demanding real results, and that's why we have to do more accountability.

We have to do more audits. I look forward to these Subcommittee hearings so that we can go into specifics about what is being proposed when it comes to this budget. That's why we're here. We have to make hard decisions now and exercise the restraint required to reprioritize the spending of taxpayer dollars. We have to get back to the basics. When I talk to Californians up and down the state, gas prices are still high. Roads are still crumbling. Retail theft needs to be stopped.

We need to invest in water infrastructure, prepare for significant rain or drought years that are ahead of us. I have a tribe in my district that still does not have clean drinking water, and this is a personal issue for me, but I don't know why our state is still spending on wasteful programs like the mismanaged high-speed rail, which continues to languish in the Central Valley.

These are not new problems, and I'm ready to work with anyone in the Legislature and even the Governor to get our state back on track, but we have to get back to the basics, and we have to focus on the fundamentals. So thank you, and I look forward to the back and forth.

Thank you very much, Mr. Vice Chair, and I know that you and I don't always agree on everything politically, but I appreciate your straightforward approach and look forward to working with you. At this point, I want to just take a moment to establish quorum. So, Madam Secretary, if you could please establish--do the roll call.

[Roll Call].

All right. Now that we have established a quorum, thank you very much, Madam Secretary. We are now going to turn it over to our panelists. I want to thank them all for joining us today. And we're going to go ahead and start with Erika Li, the Chief Deputy with the Department of Finance. Thank you for being with us.

It's been a while. Good morning, Chair Gabriel and Vice Chair Fong and Members of the Budget Committee. Erika Li with the Department of Finance, and I'm here to provide you with an overview of the 24 Governor's Budget. To begin with, I want to start with the fact that this Governor's Budget was developed with the backdrop of some extraordinary events happening prior to it. First, record surge in revenues from 2019-20 through 2021-22.

For example, the big three tax revenues grew by a record 55 percent, largely propelled by gains in the stock market. Capital gains realizations increased 11.6 percent of personal income, and this is the highest ever, more than doubling the five percent historic average. When the state experiences such highs, it's expected that it will be followed by a period of declines in revenue, and the big question is always how much and when.

Projecting revenues is not an easy task, and it was made even more challenging this year by the second extraordinary event, which was the tax filing push, the IRS decision to delay tax filing first to October and then to November 16th. So again, projecting revenues is a difficult science/art made even more difficult by this event. So such a lengthy delay is unprecedented. Cash data we usually have at hand and incorporated in the May Revision and then subsequently in the Governor's Budget was unavailable.

At that time, having that cash data would have informed the size of the revenue correction, again, that we were expecting, but we didn't have that at hand. However, the 2023 Budget did include a downward revision in regards to--a downward trend in regards to revenue, but it wasn't until tax receipts were received late in the fall that we understood the magnitude. The 23 Budget projected that 42 billion of personal PIT and corp taxes would be pushed to later in the year.

And what happened was that we were short by 25.7 billion when that time came. And we now project General Fund revenues to be about 44 billion lower than was assumed in the Budget Act over the budget window, which was the three years: the prior year, the current year we're in, and then the budget year. The Governor's Budget, however, does not assume a recession.

We see this more as a correction or quote unquote, a 'normalization' back to normal revenue patterns that were similar to pre-pandemic or more in line with the pre-pandemic years. For example, the 22-23 revenues are 23 percent higher than what we were experiencing back in 1819. So we continue to project slow but steady growth. So with cash data in hand, we are now estimating the budget shortfall to be 37.9 billion, and this includes a 3.4 billion state fund for economic uncertainty.

And this is basically our checking account for costs that come up that are basically risks. Had the filing delay not been in place, again, most of the revenue drop would have been reflected in lower revenues at the time of the May Revision and in the Budget Act. So essentially, a large amount of the current shortfall that we're seeing would have been solved already. However, we find ourselves here and we must correct for it now.

So overall, the Governor's Budget includes expenditures of 291.5 billion dollars in total funds. 208.7 billion of that is General Fund. Proposed total spending is actually 19.3 billion lower total and 17.2 billion lower in General Fund in the Governor's Budget compared to the Budget Act. The Governor's Budget, much like last year, proposes a package of balanced solutions to address this budget shortfall, and I just want to say that none of the solutions that we'll be talking about were discussed or chosen lightly. They're all difficult.

But we do have to bridge this gap and I will spend a little bit of time discussing at a high level what these buckets and categories are. The first is reserves. The budget proposes 131.1 billion in reserve solutions and just as a reminder, we left reserves intact in this current budget. So we knew that there were risks that lay on the horizon and we wanted to have that budget resilience should we need it. And now we are proposing to use it.

12 billion is from the Rainy Day Fund or the BSA. We are proposing 900 million withdrawal from the Safety Net Reserve, and on the other side of the budget, we are also proposing to withdraw 5.7 billion from the school's Rainy Day Fund. And important to note, we still have 18.4 billion total left in reserves, again for more budget resilience should we need it next time. The next bucket, the next largest bucket is Reductions.

And obviously there are a lot of things in here that I think will be discussed today. This makes up 8.5 billion of our solutions, and as the Governor mentioned at his budget briefing a couple of weeks ago, we're looking first to the Administration for some savings.

In addition to a budget letter that we issued in December to direct all entities under the Governor's authority to rein in expenditures, the Governor's Budget also includes a proposal to sweep funding available for vacant positions on a one-time basis in our departments, and that is about 760,000,000 in terms of a solution. Other reductions include climate programs, so cuts to some of our climate programs about 2.9 billion. We have education program reductions, about 1.6 billion.

That includes School Facilities Aid Program, the Student Housing Revolving Loan Fund Program, UCLA Institute of Immunology and Immunotherapy, and the Middle-Class Scholarship 2.0. We have about 1.2 billion in reductions. These are proposed reductions in housing, including Regional Early Action Planning Grants, Multifamily Housing Program, Foreclosure Intervention Housing Preservation Program, Infill Infrastructure Program. We also have on the table proposed CalWORKs reductions for a family stabilization program, employment services, intensive case management, expanded subsidized employment, additionally some programs within the child welfare program.

Our next category of solutions includes delays and deferrals. This is about 7.2 billion. And just note that these are still commitments that we plan on making, but they are pushed to later dates. Some examples of delays are in transit, the Transit and Intercity Rail Capital Program. We are proposing delaying one billion of the two billion that is set for budget year, pushing out one billion to budget year plus one, the Clean Energy Reliability Investment Plan. We are proposing delaying 400 million there.

In the Health and Human Services Program area, we are proposing DDS service provider rate reform delay and actually going back to the original planned timing in 25-26 as well as a delay in the Behavioral Health Bridge Program. In addition, we have some delays to the economic development programs such as the California Jobs First, formerly known as CERF, the City of Fresno funding as well, and then in education, we have a delay for the Education Infrastructure Program of about 550,000,000.

Some notable deferrals are the UC and the CSU Compact, so we defer for a year the budget year commitment for both systems. For the UC that's about 228,000,000, plus 31 million for the nonresident revenue offset, and for the CSU it's about 240,000,000. The idea here is that we are delaying with the commitment to pay in a year that five percent base increase which allows the CSU and the UC to use interim financing to support their spending in the budget year.

The next bucket is Revenue and Borrowing, and some notable proposals here are an increase to the MCO tax General Fund offset, about 3.8 billion and conforming to the Tax Cuts and Jobs Act net operating loss or NOL limitation, and that's about 300 million in revenue. And then we have fund shifts, about 3.4 billion.

This last category includes notably General Fund shifts to the Greenhouse Gas Reduction Fund. So much of the story of California's budgets as we've been hearing over the past few years, it's really based on boom and bust cycles, and it's due to the progressive nature of our tax structure, and to mitigate this volatility, which we have seen hit extreme measures in the past few years, voters pass Prop Two.

Prop Two set requirements that build reserves during our upswings so that we can prevent deep cuts during our downswings. However, as the Governor mentioned just several weeks ago, it's likely time to revisit and boost these reserve requirements, so we hope to continue having conversations with the Legislature around potential changes that would allow us to save more funds during these upswings. You'll see that one of--our largest solution is actually the budget resiliency that was created in part with the mandatory reserves required by Prop Two.

So finally, as always, the Governor's Budget is the starting point for the conversation of this budget. All of these proposals, as mentioned, are up for consideration and discussion with the Legislature, and we look forward to engaging with you in the coming weeks, particularly as we consider some of these items for early action.

We believe it is our shared goal to have a balanced approach to meet the shortfall, as well as to protect the progress that we've made in a lot of priority areas that, again, share goals and, of course, to maintain significant reserves for those downswings. Thank you. I'm very happy to respond to questions after LAO.

Wonderful. Thank you very much, Ms. Li. We appreciate you being here, and we are going to hear from our other panelists and then we'll do questions and comments from Members of the Committee. So now we're going to hear from our experts at the Legislative Analyst Office, and so I want to welcome Gabe Petek and Carolyn Chu. Thank you for being with us today.

Thank you very much, Mr. Chair Gabriel and Vice Chair Fong. Thank you for having our office here today, and Members, we look forward to working on the budget process that you sketched out, the days that we face ahead and as we meet the constitutional deadline of adopting a budget by June 15th. So before we start going through my comments and some of our characterizations of the Governor's Budget Proposal, I did also want to start by just slightly setting the table with three sort of framing questions.

They are listed on the first page of your handout, which hopefully you have. The first is similar to how my colleague from Finance did, but, why is the state facing a budget problem? And I do think it's useful to go back and remember that when we adopted the state budget for the current year back in June, the Department of Finance multiyear estimates at that time anticipated a 14 billion dollar deficit for the upcoming budget year. So that was sort of baked in already.

That was sort of our starting point. We're starting out a bit behind. Then the revenue erosion that we began experiencing in 2022 persisted throughout all of 2022-23 fiscal year, and as Chief Deputy Li mentioned, we didn't find out about the magnitude of it until much later than normal. In the end, our office did revise down our revenue estimates by 58 billion, which is about 15 billion more of a downward revision than what Finance did.

Both of our offices would agree that the prior year that we now know about, there was a decline of about 26 billion in that fiscal year. So there's agreement on that because it relates to a prior fiscal year. Where we begin to differ is when the revenue recovery really begins or when we can expect to see some rebound in revenues.

Finance's numbers show that they're anticipating General Fund revenues increasing by about eight percent in the current fiscal year, and we don't really see the basis for that. Historically, that's not what happens. Historically, when you see a large decline in revenues, it will persist. There will be some stagnation for a year or two thereafter. And in addition to just that historical experience, that is not what the cash collections are telling us so far this fiscal year.

So far, the cash collections are lining up on a lower trajectory than what Finance estimates, and so we think that's just something to be aware of as we go initiate this process. Secondly, on a somewhat better note, really, is that the question of how prepared is the state for a budget problem? And the good news here is we go into this situation on much better fiscal footing than we did the last recession.

The state has high reserve levels compared to historically, and also our cash position is quite strong, so we have the liquidity to fund our expenditures, and there's no anticipation that there would be cash crises like we experienced in that period. In addition, a lot of--a very high share of the allocations made with those very large surpluses in prior years did go to one-time and temporary spending purposes. So that gives us more flexibility to pull back on some of those allocations without impacting core governmental services. So that's also good.

Then the final question I wanted to address before just going through my remarks briefly here is that what is the outlook going forward? And I think the Chair already acknowledged that. We have 30 billion dollars, roughly, of deficits similar to what Finance is estimating in each of the subsequent three years. And so the budget challenges are not just the upcoming year, but the years ahead.

And because of that, our recommendations that you'll hear about in this hearing but also throughout these coming months, is that we developed our thinking with an eye towards mitigating those future challenges and really trying to make it easier for the Legislature in those subsequent years to navigate the uncertainty that lies ahead.

Okay. So moving to page two, one of the questions that we've been receiving a lot and I've been seeing a lot about is just really this difference between the 38 billion dollar deficit that the Administration is citing and the 68 billion dollar deficit that we have cited. So even for California, a 30 billion dollar discrepancy is noteworthy and warrants some attention. So I wanted to just kind of walk through on this slide very quickly, a reconciliation, which is what the figure on this page attempts to do.

If you start at the far left, the bar there represents the Administration's cited 38 billion dollar deficit. Now, the shorter two bars to its right are some changes to the expenditure base line that the Administration assumes will happen, and these sum to about 20, 21 billion dollars worth of changes to the estate's expenditure base. The largest of these is a reduced level of funding for K-14 education under Proposition 98.

There are some smaller ones as well, but when you add that 20 to 21 billion to the 38 billion, then you get to 58 billion, which is our estimate of the actual size of the deficit that the Administration has solved for. So when you look at it like that, the two deficits, 58 billion versus 68 billion, are not as different.

The reason we don't think of these smaller bars as baseline changes--we think of these as potential solutions--is because the Legislature will have to vote for these to take effect. So in that sense, these are policy choices. These are your choice whether or not to adopt these changes. They are not just occurring as a course of implementing the existing law.

So then to the panel on the right, we take the 58 billion, which is our estimate of the Administration's actual deficit problem that they solve for, and you lower the revenue estimates. As I was mentioning, we have a somewhat lower revenue estimate than the Administration, and then some other smaller changes. That brings us to this 68 billion dollar problem that we've identified.

Okay. So with that, I can move to the third page and here, basically, kind of providing some characterization of the Governor's proposed solutions and then our brief assessment of some of them. So, to begin, you can see that almost half of the total solutions are spending-related changes that he's proposing. Those sum to about 26 billion, not including the change to Proposition 98 that I mentioned. These are the other types of changes.

Then about 13 billion of use of reserves, which accounts for about 22 percent of the total solution, and then some smaller amounts in terms of cost shifts and revenue increases making up the balance. Our assessment of these is that--I'll just start with reserves. We think it's generally an appropriate use of reserves when facing a large deficit, using some amount of reserves for--we refer to it as a Rainy Day Fund for a reason. And right now, the fiscal situation constitutes a rainy day.

And so using some of the reserves for helping with solving the budget problem makes sense. We also agree that retaining--after the Governor's Proposal, there would be about 11.1 billion still in the budget stabilization account, which we really think is prudent. The Chair mentioned the uncertainty ahead. We really agree with that caution about the uncertainty, and even our existing outlook calls for more challenges. So it makes sense to have some reserves still in place.

The other one I did want to touch on here is this proposed reduction to Proposition 98. So this proposal is lacking a full explanation, frankly. The proposal seems to rest on an eight billion dollar reduction to the prior year funding for Proposition 98. But the budget documents also refer to making sure that the local education agencies are not impacted adversely, and so that suggests to us that there's funding coming from somewhere to offset that eight billion dollar reduction to Proposition 98, but it's just not explained fully.

Our staff has been looking into this and we'll continue to do so, but we do think that's an area that will require a more fulsome explanation in the coming time here. As for the spending-related solutions, the 26 billion of non-Proposition 98 spending reductions--spending solutions, rather--these include reductions, delays, reversions, and fund shifts that sums to 26 billion. About 8 billion of these are in the form of delays.

So while many of these spending-related solutions are warranted and make sense, some of them pose challenges given your fiscal outlook that we face. Eight billion of delays of that 26 billion means that we save that amount of expenditure in the budget year, but of course implies that we'll be spending it in subsequent years.

So given that we face these outyear budget deficits, the proposal would take eight billion and spend five billion in the 2025-26 year, two billion in 2026-27, and one billion in 27-28. And you may need to wind up thinking of those as outright reductions given our fiscal outlook rather than delays if we're going to be upfront about the challenge we face.

So that leaves us with page four, the final page of my prepared portion of the presentation, and here what we have presented are kind of a list of principles for the Legislature to keep in mind, which is to things like planning for the possibility of lower reserves, developing a plan, as I mentioned, the kind of questions we have about the Proposition 98 reduction. We think the Legislature could proceed with its own plan around that.

We put forward something in our fiscal outlook back in December, and several other of those principles. In general, our recommendations are aimed at mitigating the problem that you face in future years, but at the same time preserving some of the state's fiscal resilience for the additional uncertainty that remains and is to come. There may be hundreds of millions in unspent funds, for example, in the natural resources and climate investments that have been made in recent years.

We don't have necessarily all of the detail at this point. We're still unpacking the proposal, but there could be these types of allocations that you could consider pulling back that haven't been encumbered at this point, and so this will all be a part of the process as we go forward. But I'll stop there, and along with my colleague, we'll be happy to respond to any questions that you may.

We have. All right. Thank you very much. You've certainly given us a lot to think about. So we appreciate you and your deputy being here. At this point, we're going to go ahead and bring it back to Members of the Committee. This is an opportunity for folks to share their thoughts and observations, to ask questions of our panel.

I'm going to go ahead, and I know we have some other Committee Members that need to go other place, so I'm going to defer till the very end with my questions and comments and turn it over to our Vice Chair to begin.

Sure. Thank you, Mr. Chair. I just want to kind of stay a little high level before going to specifics. But to the Department of Finance, it is my understanding that as of last week, personal income and corporate taxes were coming in almost 8 billion short of estimates. Can you shed some light on the January numbers?

Yeah, I'll just start at a high level, and then I think one of my colleagues will join me. But yes, we've noticed also the reduction in revenues coming in compared to the Governor's Budget. I would just note that it is still early and we are really anticipating the upcoming months, particularly our April tax receipts. And so I would say we are watching that with some concern, noticing that already the revenues are coming in Shorter. I'll turn over to my colleague.

Thank you for the question. Colby White, Department of Finance. I haven't seen the $8 billion number, but LAO did put out an update yesterday afternoon referencing about 3.8 billion. So January is coming a bit weaker than expected. As Ms. Li stated, it is early in the process. We still have significant amount of cash data that will come in prior to May revision. For example, over 40 billion in personal income tax payments in February through March, over 13 billion in refunds.

There is significant variability in monthly results, not to mention economic developments, as well as changes in the stock market prior to the May revision.

So I guess to follow up, please correct me if 8 billion is not the number, what number do you have in terms of the estimates compared to reality?

January is not over yet, so we don't have a specific number. We'll be reporting in mid February on results through January, the LAO reported 3 billion in estimated payments based on their projections and 800 million withholding for January alone. It did not include the overage for withholding in November and December.

And maybe, I don't want to put you on the spot in terms of responding to the LAO, but in terms of his analysis, in terms of your assumptions about revenue coming back, and historically, revenues being a little stagnant over time and then maybe rising later in the future. Do you have a response to that?

Yeah, I would just say that over the six years that we're looking at the budget window and the following three years, we are very close in regards LAO and the Department of Finances. Revenue forecasts are only $2.5 billion difference, and that's pretty significant in its insignificance in regards to the timing. That is where we differ. The LAO does, or I'll say finance is a little more optimistic in the budget window, whereas the LAO is less so and more optimistic in the three years following.

And just to be clear, if I'm reading your projections, or at least Department of Finance projections, and please correct me if I'm wrong, but you have projected deficits of 36.5 billion in 2526 30.2 billion in 2627 and 28.5 billion in 2728. Is that correct?

Yeah, that's about correct.

Okay. So in your analysis, you are projecting those deficits in those budget years, even with the proposal that you've performed?

Yes, we do see out year deficits, as noted, comparable to the LAO, about 30 billion in each of those years. I think just we'd like to note that our constitutional obligation is to ensure that the budget year is positive. This budget does that. We recognize that there are out year deficits and also recognize that it is not unusual to have out year deficits in situations similar to the fiscal situation we're in.

We also note that we will have to make tough decisions in regards to ongoing cuts because we have a lot of one time proposals on the table that will help. We have some one time dollars in the out years, but there may need to be ongoing cuts in future years. I think that's something that we will be assessing in the future months and discussing with the Legislature in regards to how to win and how to handle that situation.

I guess I would like to ask the LAO, and I think this is an important conversation for the entire Committee to participate in. And you and I have had this conversation about how everything is kind of interlinked together, that if we don't take actions today or in the near future, it does affect a lot of these baselines moving out, and, of course, would either restrict or prevent us from having options in the future.

Can you kind of expound on that in terms of how we have to act now and how it impacts future years?

Yes, Mr. Fong, I think that is correct. As I mentioned in my remarks, a theme of our guidance to the Legislature this year will be to think about those out year implications of the choices you make now. And just to unfortunately add to the challenge, the $30 billion in annual deficits in the future years that we are facing are unlikely to be resolved just from natural revenue growth. We've estimated that you would really need $50 billion of revenue growth to solve those deficits on the natural.

And that's because of the Proposition 98 effect, of course, because about 40% of our revenue would go there. So the challenge that we face is significant. And as to the question about the choices and the ongoing effects of those, one, maybe I can best answer this with some information. In the recent years where we had very large surpluses, we have all acknowledged that a majority of the allocations made from those surpluses was to one time and temporary spending allocations, which is prudent.

It does give us an opportunity to pull back without affecting core programs. But even a small share in the single digit percentages of the ongoing expansions and augmentations are not immaterial. So in those several years where we had the large surpluses, even a few of the augmentations that we added to, we've estimated in this current year are costing 13 billion and will grow to 19 billion by 2027/28. And that doesn't even include the program growth or inflationary impacts.

That's really just the cost of implementing these programs as assumed at the time of the enactment of those programs. And so it just gives you a sense that even a smaller, new ongoing commitment will grow in time and add to the budget expenditure base significantly. Even.

I appreciate that you've given us sobering information, and I think if the Members have read previous reports, you've warned us about that, about the need for not overextending. You even actually talked about taking into account interest rates and inflation in terms of our budgeting, which I think is an assumption that we also have to take into account here, is that what is being proposed does not assume a recession.

And if inflation and interest rates get worse, then we also are going to have even more difficult challenges in the future. Is that correct?

Yeah, that's correct.

Just a few more questions, and I want to leave time from my colleagues in reading the government's budget proposal to the Department of Finance. There's about $37.9 billion of action to address this, but in my reading, there's only about 1.2 billion in actual ongoing spending reductions. The rest comes from tapping the RHNA Fund one time, borrowing from special funds, deferrals, and some other cost shifts. Is that correct?

Yeah, that's about right.

And so if the revenue numbers were to continue to deteriorate, would there be more spending reductions proposed?

Yeah. And again, looking very closely and tracking the cash and revenue, but yes, if this budget deficit grows, then we will have to close it with additional solutions.

And then on the MCO tax, the governor's proposed increasing that tax by 1.5 billion. Have you received any input from stakeholders in terms of that proposal that you could share?

We continue to have conversations. I don't have any particular feedback at this point. I think I just would note that the structure of the MCO tax is exactly the same as was included in the Budget act. We will have to go back to the Federal Government to ask for that additional 1.5 billion that will allow us to offset General Fund costs. But in terms of feedback, stakeholder feedback, we continue to have those conversations with both stakeholders and the Legislature.

My last question, and this is something that's important, I think, to a lot of legislators, and I would argue that there are probably other decisions that can be made besides this one, which I think the Legislature would oppose, which is delaying the implementation of the developmentally services rate reform. This was something that Members, including myself, have advocated for the rate study and the rate increase, and now providers would have to wait even longer. What's the rationale in delaying the implementation?

Are there other decisions or other cuts or other delays that can be made instead of this one?

Again, I would just highlight that none of these proposals were made lightly or easily. I think the DDS delay was basically bringing it back to the original implementation deadline. So pushing out one more year. Understand the comment about providers and expectations, but we put a lot of things on the table and this is one that provided a sizable solution.

Okay. Thank you for the answers. Thank you to LAO. I would encourage the Members to sit down with Mr. Pete, if you haven't already. He is a wealth of information and take his advice and his recommendation seriously. Thank you.

Thank you very much, Mr. Fong. We have a number of Members who have indicated an interest in joining the conversation, so we're going to go with Dr. Weber, Dr. Jackson, and then Mr. Patterson.

Well, good morning, everyone, and thank you, chair, for this Committee hearing. And thank you all so much for being here. My initial questions, I'm really just going to focus around the issue of health and sub one and the fact that here in California, with some of the things that had previously been done, kind of made a statement that we consider healthcare a human right and we have expanded access to health care to essentially almost everyone here in the State of California.

However, for years, the state has ignored the fact that our medical reimbursement rates are dismal. And because of that, we have issues with the ability for patients to actually access the providers that we have now said that they can see. And so I have a series of questions based on the proposals for the Governor. The first kind of revolve around the issue of Proposition 56 and also the MCO tax.

So do the reductions to the Proposition 56 funded state increase apply to all medical physicians or just those that are going to be receiving the bump, slight bump, because of the MCO tax?

Andrew Duffy, Department of Finance. So Proposition 56 is declining revenue source. The past few budgets, General Fund has supported Proposition 56, given that expenditures have exceeded the revenue coming in. To answer your question, the Governor's Budget proposes to decrease physician services by 77 million. However, given the increase with the MCO tax, physicians will still see an increase of a provider rate.

But we know that that MCO tax only applies to a certain group of physicians. Your primary care, OBgynl Health. So my question is this reduction in the Proposition 56 funding, does this apply to all physicians or only those that are receiving the slight bump in the MCO tax?

So the 23 codes that physicians receive a Prop 56 increase for, and Proposition 56 is still being. Physician services is still receiving a $465,000,000 increase within Prop . 56. Those are a subset of what is being received in the MCO.

So it's only applied to those who are getting a bump in the MCO tax.

So the Governor's Budget decreases the physician services rate by 77 million, it maintains 465,000,000. And physician services are still seeing an increase in its rate with the MCO payment, with the MCO rate increase.

So not all physicians are getting a bump based on the MCO rate. Right. So my question is, is this reduction in supplemental funding by Proposition 56, is that going to be applied to all physicians that get these fundings or only those that are also getting a bump in the MCO tax? And if you don't have the answer, you can get back to me.

Yeah, absolutely. My colleague on the MCO assignment, Laura.

Yala, Department of Finance. All of the codes currently that can be billed by the physicians in Prop. 56, all of those are receiving MCO tax rate increases. So it impacts the same providers.

Okay, thank you. And so how much less would these physicians receive because of this reduction in the Prop. 56 revenue and the decision not to backfill it with General Fund?

So the Governor's Budget proposes to decrease physician services by 77.1 million. However, physician services are still receiving an increase on net overall with the MCO.

Increase of how much?

Laura Ayala, Department of Finance the increase for the physician services is approximately 1.5 billion specifically to those that physicians can Bill for.

Okay. And how much less will physicians receive due to the proposed shift of 3 billion in the MCO tax revenue that was originally slated to go to them, but now the Governor is proposing for it to go back into the General Fund.

The Department of Finance or the Administration was required pursuant to AB 118 to submit a plan based on specific providers for the budget act agreement. And there's no decrease in the rate amounts that were agreed upon at Budget act. So the only change that the Governor's Budget proposes is it updates the projected timing of claims and actual implementation of the rate increases because most of them will take effect January 12025. So it provides those updates.

And that is why the additional 3.1 billion in the expected Fund balances at the end of current year and budget year are now being proposed as supporting the Medihelp program.

So what you're telling me is that there will be no reduction to the MCO tax increase for physician salary at all?

That's correct. As you're aware, the Administration committed to ongoing rate increases and those are still being implemented as agreed upon on the date agreed upon and according to the categories pursuant to the Budget act.

And so this extra 3 billion is.

Coming from where it's coming from at Budget act. It hadn't been, I guess, like refined in the timing of the actual implementation of the rate increases. And now, based on the additional shortfall that we're facing and updates in projections, now that the Administration had time to update actual timing of payments, we are proposing to use those Fund balances. But again, it doesn't change. The only thing that the Governor's Budget is proposing to change is the behavioral health piece implementation that is being proposed six months later.

But everything else is being implemented as according to the Budget act agreement, including.

The time frame where the time frame.

Is Shorter, the time frame of the.

Amount that the MCO tax payments would be, or the increase would be available. You're saying that's Shorter given the governor's.

Budget is proposing the use of the balance, the 3.1 billion in supporting the medical program, we estimate that it will reduce the MCO tax funded rate increases by about one year.

Okay, so there will be a decrease because they won't be getting it as.

Long for the MCO taxes for how long the MCO tax can Fund it? Yes.

Okay. So there is that decrease. Now, there was a request for early action, and I think someone else had mentioned the fact that we would need to go to the Federal Government to request a bump in our MCO tax. Is there a specific deadline that we would need to reach out to the Federal Government?

Yes, Erica Li with the Department of Finance. The deadline that we have is the middle of march to have approval from the Legislature to go back to the feds on that.

So you would need this early action by the middle of March?

Yes, that's right. And I would just add that in regards to your questioning on timing, as my colleague mentioned, we have committed to those ongoing higher rates and the idea of using the 3.1 billion that was set in the out years and pulling it forward to create General Fund offset and as part of a solution for the budget year. That commitment remains.

And the idea is that there would be a renewed MCO tax in the future, potentially looking at other Fund sources, but the commitment remains to maintain those provider rates.

I'm sure you can see the concern from those within the health space, the fact that this was something that had been negotiated with the already understanding that we don't pay our providers enough that see our medical patients, which is one of the reasons why it is so challenging for patients to get to providers, especially within the behavioral healthcare space. And so when we see reductions and shifts, it is a concern. Another question deals with workforce.

So the Governor's Budget proposes to delay significant investments in healthcare workforce programs, particularly in behavioral health. How are we supposed to effectively address our behavioral health issues here in the state when we know right now our workforce isn't adequate? And yet we're proposing to not increase it, but decrease our ability to address those issues. And.

Matt Aguilera, Department of Finance. Thank you for the question. In the workforce space, the state has committed approximately a billion dollars of General Fund and Mental Health Services Funds over a multi-year package. And unfortunately, due to the budget situation and resource availability in both of those areas, we've had to push some of the funds that were previously planned back in the schedule. And so that's what we've proposed in the budget.

And I would note that these programs complement paths to the workforce, but by no means do these provide the entire workforce needed for these various areas. For example, I mean, the education system and just the labor market has other means for providing workforce.

Which we already know is inadequate. I know this is a proposal. I know that it's a lot. And I really appreciate the Governor's team, really appreciate the LAO, and I know there will be a lot more discussions in the future. I just want to remind all of us, and we talked about this within our own caucus, that when our bodies are stressed, right. Our body has the ability to preserve what is most important, and that is our heart and that is our head.

A lot of the other functions kind of go by the wayside because our body is stressed. Our state is going into that situation at this point, and we have to determine what we as a state determine is most critical for us to be able to sustain and grow in the future. And that is often the health and the welfare of the residents of this great state.

And so as you're looking at things to where there should be reductions, where there should be cuts, perhaps looking at health and areas of human services should not be the first areas. In fact, those should be the areas that have the least amount of cuts, because that is really what takes care of everyone throughout this state.

And so I just really ask for everyone to kind of keep that in mind as we're looking to see what is it that we can hold off on, what is it that we should actually continue to support and uphold. And it is really ensuring that our residents have the ability to access health care and healthcare providers.

It is the ability for our residents to be able to have housing and programs that are associated with that and good education, and that there are some other things that we fund that are important, but maybe not as important of making sure that everyone is safe and educated and healthy in this state. So thank you for your work, and I look forward to us continuing to figure out what we can do for our residents during these times. Thank you.

Thank you very much, Dr. Weber, and appreciate that diagnosis. I think it's spot on in a lot of respects. We're now going to go to Dr. Jackson, and then after that, Mr. Patterson.

Thank you very much, Mr. Chair. You know, as a trained social worker, I can't express the critical need to learn from the mistakes that this state made during the Great Recession and the lessons we must not forget during the pandemic. And that is the important priority the Legislature and the Administration must commit to, which is to ensure the budget promotes the long term stability of our population. This includes the preservation of CalWORKS, CalFresh, SSI, and SSP benefits.

Now, there's no doubt that big and hard decisions must be made, but they must also be wise. And this budget must ensure that cuts or delays that are made will not create instability among our most vulnerable populations. We must keep our population out of crisis mode and find ways to get more of our population out of crisis. Because we know that it actually costs more in the long term to get people out of crisis than it is to keep them stable.

So the most pressing question that I will be asking is, does any cut, delay, or revision promote the long term stability or instability of our population? That's why I'm gravely concerned and vehemently opposed to the following proposed decisions in the budget proposal. Of course, unless they've been proven to be ineffective or will not risk the stability of the intended population.

The first I want to talk about are the CalWORKS proposed eliminations or delays, specifically the elimination of the family stabilization services, subsidized employment programs, intensive care hours, and an ongoing reduction to County Administration. Department of Finance, do you believe that this will promote the stability or instability of our population?

Thank you, Dr. Jackson, and appreciate your perspective and where you're coming from. As I stated before, none of these cuts, none of these reductions were made easily. We have proposed packages to the Legislature for consideration. Understand where you're coming from on this. And again, had to solve for a $37.9 billion problem. And we're looking in all areas. In regards to this particular cut, also understand the intended population and the recipients and want to continue to work with you on alternatives if this is not something that the Legislature agrees to.

So does this promote the stability or instability of our population?

I think that is a bit of a trick question. It is not something that we would want to do.

No, I don't do trick questions. Right. That's not how I roll. The question is, do these services... Now, it could be a no, and I'm okay with that. And we're diving more, even deeper into what these programs do, how effective they are, right? I'm trying to get a sense from Department of Finance on whether it meets the test of keeping our population stable or will it promote instability, which will actually drive up cost in the long term. And if you can't answer that, is there anyone else that you have that might be able to answer that?

Well, I do believe that there are proposals on the table that will have impacts, negative impacts on Californians. And this is part of the reason why the Governor wants to have discussions on having larger reserves so that when we have good times, we can sock away those dollars to address issues just as we are addressing now that we don't cut our core safety net programs.

Unfortunately, we have a large enough deficit that there are proposals on the table that are negatively impacting Californians, and we are trying to mitigate those. Again, if this is a proposal that the Legislature does not agree with, we are interested in feedback and interested in alternatives.

Thank you for that. Also in the child welfare space, we have the Family Urgent Response System that we have concerns about, the Housing Supplemental for Foster Youth and Supervised Independent Living Program, Child Welfare Services, Public Health Nursing Program, and others.

I would also note that even though we completely deplete the Safety Net Reserve, which was intended to provide more resources for programs that are expected to expand in economic downturns due to the basic food, shelter, and healthcare services, obviously, even though we completely eliminate that, we're still making cuts to the social safety net programs. And so I want to make sure that we have continued discussion about that. Also, I'm actually concerned about the withdrawing of funds from the immigration programs.

And that is, of course, just say again, as our local governments and many of which along the border have declared a humanitarian crisis, as they're facing issues like homelessness and other things, it is my fear that without being able to provide additional services for those immigrants that are crossing the border, many of which California is not their final destination, many of which are going outside of California.

I think by preserving as much of this funding as possible, it'll alleviate local governments from bearing a brunt that we're seeing across this nation. And I would also like to associate my comments with the Budget Vice Chair in terms of the delays of the Developmental Services.

I think that if we can find a way to, if we can't fully implement the next phase, finding ways to continue to make progress. Because again, if we don't have the workforce that we need, we cannot have the McDonald's paying more than these people who are providing this critical need. And if we don't have the workforce, then there's another population that can go into crisis mode. My last one is in terms questions in returns of the Anti-hate Funds, have those funds been completely spent yet? And this is separate from the security?

Right, yeah. I believe much of the funding has been spent in the prior year. We have some in the current year that is likely not all spent, but that was over a multi, I think it was 150 million over three years. And so some of those dollars have gone out. I don't believe all those dollars have gone out. I can follow up with exact numbers

You can give me that number, I'd appreciate it. So again, I just want to look forward to working closely with my colleagues in Administration. Again, I think there are some wiser cuts that can be made. No doubt we have to make some cuts. I'm actually of the opinion that we need to make the deepest cuts now so that we can begin to be on an upward projection in the future. But I think that overall we need to. There's still some to be. Quite frankly, I think there's still some shiny stuff in the budget that may not be in overall priority in order to keep our population stable. So thank you very much, Mr. Chair.

Thank you very much, Dr. Jackson. We're now going to turn to Assembly Member Patterson.

Thank you, Mr. Chairman, I appreciate. Earlier in your presentation, the Finance Department, you referenced the delays of the $250 million to Fresno, California. Prior to being elected to the Legislature, I was the two term Mayor of the City of Fresno, and for the last 11 years I have been representing Fresno and that region here. Needless to say, the $250 million announcement was received with a great deal of appreciation and joy and was part of significant and serious planning that the current Administration has been doing in Fresno.

When the announcement of the delay came out, I mean, it was kind of a kick in the gut to us for obvious reasons. But in deciding on delay, we also, in this hearing, have now been made aware that in those out years where the $250 million was delayed, we still are looking at $30 billion deficits. So I need to ask, should the City of Fresno be continuing to plan and count on and manage a delay, or how serious is it that that delay will turn into simply a cut?

Thank you, Mr. Patterson. So this proposal is a delay and not a reduction. It is our intent to continue to fund it at 50 million in the current year and move out the 100 million that was scheduled for this year and next year to later years. And that is our proposal, a delay, not a reduction. So it is in a different category.

But the Legislative Analysts talked about the possibility that these delays can turn into cuts. So, I mean, are we seriously... That's the concern we have. It doesn't sound like the deficits are getting much better, and so we're going to be here in the year that 100 million was delayed. What I'm trying to do is to understand what I can take back to the Mayor of Fresno and to those that have been planning. Is it wise for us to consider that this money is in jeopardy?

Yeah, and I do think it's a good question. I think that we have discussed out year issues. I think the plan as it is currently is a delay to this particular proposal. There are many other delays in here, and I think we have to consider holistically the full budget. Again, the proposal as it is, is currently a delay. We do need to have further discussions on all of the delays in regards to out years. And I think that is what the Spring is for. And we look forward to having those conversations.

Were other cities that were anticipating large amounts of state help, are they also in a delay?

This proposal is only impacting the City of Fresno.

So that leads me to the question, why choose Fresno?

This proposal was only for Fresno in the current budget. So there were no other cities that were receiving such a sum.

Again, I want to ask maybe the Legislative Analyst. It feels to me like Fresno is again sort of being picked on and overlooked. We appreciate the fact that the 250 million was put forward, but we feel like it's been pulled back. A delay over time is as good as a cut until the delay is actually in the next fiscal year. We can count on it. So I'm trying to assess. And look, the current Mayor and I have been longtime friends.

He was my Police Chief when I was Mayor. I wear mayor's hat for Fresno as well. I've been there 30 years. I'm trying to determine the likelihood, with $30 billion deficits in the next three fiscal years, the likelihood that this delay will turn into a cut, or will the delay be, we'll delay it that fiscal year. We'll delay it another fiscal. So regular delay is essentially a cut. So what should our Administration be doing?

Can I just also rewind a little bit? Initially, the package was 300. The proposal of the actual budget allocation was 300 million for the Local Government Sustainability Fund. And that was two years ago. Last year, the proposal was to move 250 of that 300 million to the City of Fresno. So I would just like to highlight the fact that the Governor was very supportive of providing funds to the City of Fresno in anticipation of infrastructure projects.

I understand that. We appreciate it, but...

Just there's additional funding, that is the CERF Jobs First that's available. There's other funding in the budget for City of Fresno and other cities similar who are experiencing or going through project and infrastructure development. To your point, on the delay, of course, it is something that will have to be considered. I just want to highlight again, it is currently a delay.

Please. I'm trying to assess, given the 30 billion in the out years. We just heard that that's an actual number. We're what, three upcoming budget cycles? That sounds to me like we're being set up for a cut. And I think that it's important for the City of Fresno, the Administration, and others to plan cautiously because the spigots getting turned off and that's troubling.

Mr. Patterson, I certainly understand where you're coming from. I think one thing I would just remind you is what the Chair said at the beginning. There's so much uncertainty each year that we go out. There's greater uncertainty. It grows. So things could be better, but they could also be worse than what we're projecting currently. And unfortunately, my read of this is that you cannot be given any assurance for sure on these delays.

To me, not to speak for my colleague, I think by putting it as a delay instead of a reduction, it signals to me that it's in, the Administration has some element of priority relative to other items. But it will be up to the Legislature in that year whether or not to fund it. And so it is a question, and currently the current estimates that the Administration and our office have is not affordable. We have the, the deficits mean it's not affordable.

So it's a question of what priorities are maintained and what other items are excluded. Or other options which could include other actions like tax increases or cuts elsewhere or further delays. But that's the range of options. Unfortunately, all of these options have downsides to them, from stakeholders to the economy, to the programs and the people that administer them. So there's no easy answer here, but that's the way I would read it, is that there cannot really be an absolute assurance provided to you.

I appreciate the candor in that. And I think that, given what we are hearing here today, that there are out year deficits in the $30 billion range, I get concerned that delay becomes more delay, more delay, until it becomes a cut. And that would be very troubling. We appreciated that came at a good time. I mean, we're in the midst of huge planning. In mean, people need to understand, Fresno is really on the go. I mean, our airport is booming. We're improving it.

Our community colleges are building campuses in areas that have needed it for a long period of time. Our zoo is becoming a destination. That's Fresno, California. We're the fifth largest city in the State of California, and I think we're at 600,000. We are one of the fastest growing in California. We have to look forward. We have to line out resources, and then we have to be able to count on those resources to come.

So I appreciate the uncertainty, and I think that I'll be having conversations with Mr. Dyer, and we'll see what the City of Fresno needs to do in anticipating the real potential that maybe these delays will even be further out and possibly even cut if the economy of the state doesn't rebound the way you're proposing it to do. So, uncertainty, that's a hard thing to plan for. We appreciate that it's there, but we feel like it's teetering on not just a delay, but a cut.

Thank you very much, Mr. Patterson. We are now going to go to Assembly Member Alvarez and then Mr. Muratsuchi.

Thank you, Mr. Chair. I only have three questions, which you all might not be prepared to answer today, but certainly will be asked again at our Committee. In the Governor's directive to the departments, was there also a directive to stop executing any contracts that have not been already initiated? Were any stops to that effect?

Thank you. Mr. Alvarez. The budget letter that was sent out was more specific to operations in regards to state savings. I think what you're asking about are the particular local requests that Mr. Gabriel mentioned.

No, I'm actually referring to anything that was budgeted where departments received augmentations to increase programming, to increase projects, and that would require maybe contracts with agencies, local agencies, local districts, new expenditures.

So new expenditures in this year, in the current year. So we do have some current year solutions. By that, meaning some proposals that would impact current year. And so to the extent that you're suggesting we were halting contracts, that was not a direction. Obviously, there are a lot of departments and a lot of programs that are impacted, and we continue to have conversations with those departments to try to have more direction and communication, but that has not been communicated.

Okay. And, yes, I was referring to new expenditures, not current contracts that obviously, we don't want to violate those contracts. We want to continue. But I think we'll ask more questions about that. I'll refer to two slides, two graphics, prepared by the LAO in both today's presentation and the one that we received, I believe, yesterday. One is on the K-14, the bar graph that has a discrepancy in the roughly $8 billion of unidentified sources of reductions.

If you're not prepared today to discuss what that's in reference to, I definitely suggest we are prepared to have that conversation at Committee. Because it doesn't seem like there's an explanation as to what this is referring to.

I'm sorry, is that the K-14 bar?

Correct.

Okay. And I'll give a go at it and then I'll turn it over to my colleague if I get anything wrong or if she has more details. The difference is really in the approach of how we look at Prop 98 and how we look at the prior revenues. And so what we are proposing in the Governor's Budget is to bring down, to basically align Prop 98 with the new revenues, now that we know what the revenues are.

So the revenues that were included in the Budget Act assumed a certain number. And then, of course, Prop 98 gets a share of that. Because revenues have declined so much, we are proposing adjusting the prior year guarantee, which we count about at 8 billion. And that's part of that difference because the LAO is not doing that. And what we are proposing is providing those as supplemental payments to schools so that schools don't lose out on the funding. The other additional change is just in the revenues.

So because we anticipate higher revenues than the LAO, again, that share of that revenue is a part of the guarantee. So that is the difference from that bar in the K-14 section. And that's my understanding of the difference between the LAO and Finance.

Have you heard concerns from either legislative budget staff or the LAO on the constitutionality of that? And have you done any assessment of that?

Well, along with this, as was stated, this is a proposal, so we will have trailer bill that has more detail on that. And we are currently having discussions and I don't know if there's additional...

I don't know if the LAO or staff want to mention anything about this particular issue from the response you've just heard or I don't know if it's similar to what you've already heard.

Mr. Alvarez, It's similar to what we've already heard, but we still don't fully understand it because these supplemental payments, I'm not sure if they're coming from the non-Proposition 98 side of the Budget. We haven't really seen where they appear in the expenditure tables shown to us or the multi-year projections. I still am left with that question.

Thank you. Anything you want to add, Aaron? No. So I would just say, if the LAO has a problem understanding this proposal, guarantee you people sitting up here have a problem also understanding. So this is certainly something we have to spend some significant time on in Committee to further understand. The other question I'd ask, it's in line with the expenditures. And has there been any analysis done, this is again from the LAO's chart, on the delays.

We've talked about delays a little bit already, but on the delayed programs and whether some of those delayed programs can just what the impact of those delayed programs would be if they just were reductions going forward as opposed to delays.

So you're proposing rather than a delay that they would be outright reductions.

Have you analyzed which one of those delays could be reductions and what those impacts would be?

As we were developing the Governor's Budget, I think we did, and that's why we have these separate categories. Having more ongoing reductions is something that, again, look forward to having that conversation with Legislature in regards to alternatives to the delays, as an example. But yes, we did look at impacts.

Okay. I think we will also further analyze that at Committee. Thank you. And certainly will have more questions. I want to just start off by acknowledging our Speaker and the Chair for the focus of this Committee and certainly the direction that the subcommittees will be taking on making sure that the dollars that have been spent in the past were spent in a way that prioritized the needs.

I believe the Assembly has, in the Legislature and in working actually with the Governor over the last several years, has really focused on a few items that are continuing this budget, which I think is good. But I want to highlight a few items that we have to be very conscientious about in the education budget in particular. Protecting classroom funding is going to be a priority.

We need to ensure that any reductions do not impact any of the schools spending on student services and instruction, in particular, in our schools. Preventing school layoffs also very important, and protecting other transformative priorities that, again, the Legislature and the Administration have agreed to in the past, including universal TK, meals programs, after school programs.

But all of these should be focused, and it will be a very, very clear focus of our Committee on accountability, focused on student outcomes, making sure that students are receiving the return on that investment that we are making. The Governor's Budget framework, again, mirrors a lot of these priorities. However, we have some concerns. I've already mentioned the $8 billion, lack of understanding as to how exactly that proposal will work, so we will be spending time on that.

Also, the proposal does not provide a 2% LCFF base increase, which really could jeopardize local districts and schools by potentially creating layoff situations, as school districts were not anticipating only a .78 base increase. Further delays to the previously enacted facility funding for preschool in TK.

As we ask school districts and schools to ensure that every TK eligible kid has a spot, if you don't have the classrooms to do so, there will not be a spot available for a lot of students, and we need to focus on that. And it creates new spending, this budget proposal, at the expense of classrooms for school buses, park passes, and other state support systems.

I think it's really important that our local leaders, our school leaders, our school boards, our superintendents, educators, families, that we share with them exactly where we stand. I'm encouraged by the language that's been shared and the concerns have been shared by a Budget Chair and other sub chairs.

But I think we do owe it to all of these families and school leaders to freeze one time funds that schools are not already planning to use at the local level and to reject any new proposals until we know that we can stabilize our current shared historic priorities that we've made.

On the higher education side, the same approach. I would say there are two items of concern for me that the Committee will be focusing on, and that two items are student housing and the significance that student housing has meant for many, many students over the last several years. And the second would be Cal Grant reform. There is one budget proposal that can literally impact tens of thousands of students and that is implementing Cal Grant reform.

There is nothing else in the budget, in my opinion, that I've identified that will significantly improve access to higher education outside of Cal Grant reform. So I believe it is going to be very important for us to identify ways to further enact Cal Grant reform, and we will be focusing our discussions in Higher Ed on that. I do want to acknowledge UC and CSU for increasing, again, access.

This is a theme for this Committee on Higher Education, 10,000 full time equivalent students that were added between the two systems. Nonresident enrollment, which means more Californians, nonresident enrollment is down, which means more Californians are being enrolled, indicating that the cap on nonresident enrollment and the funding to replace non residents at the three campuses at UCLA, Berkeley, and San Diego is working.

And so the priority will continue to be on building on that momentum to ensure that both segments continue to add opportunities for more California students. And the other thing is that I'm concerned about, especially we heard last night, CSU and the Faculty Association, we thank them for their work to reach tentative agreements, and that agreement is contingent on us funding our segments.

And so delays in funding of those segments means potential impacts, certainly to students, but also to the men and women who are in our workforce who do the job of educating our students in our CSU system. So I believe I've outlined for you all the highlights of what our Committee will be focusing on.

It is entirely focused on what we have done, the significant progress we've made, maintaining the progress where it makes sense, understanding that there are likely going to be some difficult choices, making those choices based on accountability and data that inform those decisions that we will make, hopefully, in our Committee. Thank you, Mr. Chair.

Thank you very much, Mr. Alvarez. I just want to do a quick time check for those who are not in the room at the beginning. We have a hard cutoff of noon for this hearing, and we still have a number of Members who would like to ask questions, and hopefully, we'll leave a little bit of time for public comments. So with this, we're going to turn to Mr. Muratsuchi, who I suspect also has some thoughts about education. And then we will go to Assembly Member Quirk-Silva and Assembly Member Bennett after that. Thank you.

Thank you, Mr. Chair. And I wanted to follow up on our Subcommitee Chair, Mr. Alvarez, on our focus on K-12. Specifically, I want to preface my comments. I was on a local school board during the Great Recession, and like many districts throughout the State of California, we had to lay off teachers and classified staff in order to deal with the massive state budget deficits that we suffered during the Great Recession.

And so it is my number one priority, as the Subcommitee Chair indicated, to protect classroom funding to avoid the teacher and classified layoffs. Because I don't think I need to say that that is going to affect every single one of the districts in the California Legislature, Republicans and Democrats. I'm sure that K-12 funding will continue to be the top priority for the Legislature as well as for the Governor.

To that end, I wanted to follow up on the line of questioning from Chair Alvarez. The $8 billion in reduction in the Prop 98 funding for the 2022-23 budget year, as well as the 23-24 budget years, how is that not a budget cut?

So that $8 billion in prior year, that adjustment that we're proposing to make, those dollars have gone out the door. Those dollars are at the local level at this point. And so our proposal is to accrue a total of 8 billion over the multi-year, not taking those dollars back but accruing them as supplemental payments in future years. Understand that there is some confusion around that, and I hope that with our trailer bill language that is forthcoming, there would be more clarity.

But that is the overall proposal. And I would say in response to, I believe, either the LAO or Member question, that is on the non-98 side, those dollars would be coming from, not from within Prop 98.

So in other words, because revenues are lower than we had projected when we passed the last budget, we're going to essentially backfill future payments to cover the reduction in the Prop 98 funding?

Right. I call them supplemental payments in the future. I don't know if it has a terminology, so to speak, but yes.

Okay. And that is in the context of both Department of Finance and the Legislative Analysts projecting $30 billion budget deficits over the next three years?

That is part of our proposal in the Governor's Budget, understanding that we have to assess what those out years look like. Yes.

All right. Again, I think whether you're a Republican or a Democrat, I always learned that we should always under promise and overdeliver and assume the worst and be able to deliver the best for our constituents. And I hope the Department of Finance will keep that in consideration as we move forward. Moving on to the cost of living increase. I know, again, as a former school board member, that, well, a 0.76 cost of living proposal...

I believe last year's inflation rate was estimated to be 3.4%. And, of course, all of our districts not only have to deal with the step and column increases for their teachers and classified staff on top of any negotiated agreements that they've entered into with their employee unions. Bottom line is a 0.76 cost of living proposal is woefully inadequate and it will lead to the issuance of pink slips in our districts unless we take action. Is the Administration proposing to block the March layoff pink slip issuance requirement?

I think that we're interested in talking more with Legislature in the near term on that.

All right. And last but not least, school facilities. We are all excited to roll out universal transitional kindergarten by 25-26, and yet many if not all of our school districts are saying that they don't have the facilities ready to accommodate this our next great step in expanding early childhood education. The budget proposal is proposing to delay $550 million in early childhood education facilities. That is a concern. I want to make it clear. Is the Governor's budget proposal relying, assuming on the passage of a school bond in the November 2024 election, in order to address our facilities needs.

As the Governor stated at the Budget Briefing in early January, we are supportive of that facilities bond for many reasons. One, obviously fiscal, because the General Fund has been backfilling for a couple of years now because those bonds have been depleted. And so we do look to a future facilities bond to help augment the costs to the state, and that would include this program as well.

All right. I look forward to continue to flesh out the focus on these issues in our upcoming Subcommitee hearings. Thank you very much.

Thank you very much, Mr. Muratsuchi. We are now going to go to Assembly Member Quirk-Silva, and then Assembly Member Bennett.

Good morning. This is my first time on budget, even though this is my 10th year in the California State Assembly, and it certainly is a critical time in the state of California to be part of this discussion.

Coming from local government and now ten years at the assembly, being in a budget crisis is the least part of the job that any elected official likes because you have to scour not only records, you have to look at programs critically, and you have to make cuts that are not popular.

That being said, as the new chair of Budget Sub Five, which was Budget Sub Four, the state is the very expansive committee that has under not only state administration but things like veterans, cannabis, GO-Biz, and even our film tax credit. There will be quite a bit of scouring that I intend to do through that committee for not only oversight, I'm a big supporter of housing. As we know, in California, we are seeing people leave our state because of the affordability.

So certainly, looking at how we house Californians, but also how we prevent homelessness, we continue to see people on the verge, so every program does not line up equally. When we need to make cuts, we have to look at the most vulnerable Californians. And there are programs we have in our California State budget, all of our programs, whether it's education, whether it's higher ed, whether it's the arts, whether it's healthcare, what are our most essential programs, what do we need to continue to do?

Because the data has shown it's working and what can we let go folks out there, I see quite a bit of people tuned into this herring, and people are advocates for their programs, and they are advocates, and it's very hard to let go of something, but they don't all work. So, when we look at some of the programs that are under my committee, certainly, there are significant cuts under housing and homelessness.

And I'm going to be wanting to understand how those cuts were proposed and why others weren't. An example is, I believe we have $350 million in an encampment program. The information that we're seeing is that in those encampments, there is removal, but then we don't know the outcome. Where do those individuals go? Are we really housing them? Or are we just moving them off to somewhere else so somebody else, other jurisdiction, can have that responsibility to deal with it?

I know we all believe in homeownership as the California dream, and yet some of the early indicators show that in that first rollout of people getting first-time homeownership support, many people actually were on their way to home ownership without that program. Did we really identify people that really needed it? So that's the lens that I'm going to be looking through as a sub chair for subchair five, which is: what is working, what's not working, and where do we need to make cuts?

Because I think what we all know here is we have to make cuts. I'm also going to be looking at the most important issues, from health care to housing to food. Those are the basic needs of Californians. And we already have people moving into homelessness, and we have to do what we can to prevent homelessness. So that's the lens I'm going to be looking at some of these questions I will be asking in committee. So, I'm not going to address them here.

I do want to put on your radar. Broadband is under my committee, and we see a $1.5 billion increase in that budget after what I believe was a $7 billion infusion in the last handful of years. So one of my question is going to be is where is that access? Who still doesn't have access? So, for almost an $8 billion funding augmentation, are we actually going to give access to those who don't have access? That's a critical question I'm going to have under that -

- and again, looking under cannabis, we know that the Governor looked at using some funds from those budgets. Why isn't that money been rolled out? So, I have a lot to ask. I look forward to these committees, and I know that we're going to have to make tough decisions. Thank you so much.

Thank you very much. Ms. Assembly Member Quirk-Silva and I just have reminded the Members that we have 61 subcommittee hearings that are going to be noticed. So there'll be plenty of opportunities to really dive deep into the details of all these issues that are really important. But I do want to just try to move us along a little bit so we have some time for public comment at this hearing. So, I'm now going to turn it over to Assemblymember Bennett.

I'll speak at my Hubert Humphrey speed instead of normal speed. But my first question is a question for LAO. I just want to try to understand from an overall budget revenue standpoint: the stock market did better than what everybody expected last fall. When do we actually see the capital gains revenue increase? I know this is not a big solution to all of our brothers' problems, a temporary increase in the stock market, but when would we see that?

Would that be at the April 15 tax returns that come in? And then, we would find out how much of the increase in the stock market actually turned into capital gains for California taxpayers. Or is there some other time would we get that data? Thank you.

It's a great question. We, of course, follow the markets closely because of the revenue connection. I would just point out that the connection to California's revenues is fairly complicated. When we developed our revenue estimates in December, much of the 2023 appreciation in the stock market was factored into our models. So, there has been some continued appreciation in the markets throughout December.

And unfortunately, if we were going to see a great upside to that, we think we might have seen some of it appearing in January, which we did not really see. As has been discussed already, there was not a strong rebound in January. The numbers actually came in. We're estimating three or so billion below what was in the governor's estimate.

And just kind of for your framework, when we think about the translation of the stock market to state tax revenues, there are a couple of points, two in particular. One is that we do need to see some of the gains be sustained over a longer period of time so the market can go up and down. So if the gains are sustained over a longer period of time, of course, that's better for the California revenues.

Right now, we are at record highs, but that's really only a little bit higher than where we were in 2021. So we would want to see more continued appreciation and for it to be sustained. The second part is that the type of investment that we would like to see for California is the type that translates to increased investor appetite in California, businesses in particular. So business expansions, startup activity, initial public offerings.

And although this rally that we've seen in the stock market throughout 2023 has been obviously better than not, it really has not been accompanied by that type of activity, which is really the thing that gives us a boost in our tax friends.

Thank you very much. I appreciate that. And overall, I appreciate that if you look at the climate change package and everything that goes into that, energy, transportation, et cetera, we're still at 48 billion of the 54 billion that we had in Budget 21 and Budget 2022.

What I am concerned about, though, is that the cuts that are necessary that have to be made for us to get there are not evenly balanced, and they're particularly not balanced in that I believe that the cuts much more come out of the legislative priorities that the legislature has asked for in the last couple of years. And so that's a concern for me. I just want to highlight a couple of examples of that. The budget cut 57% of the water recycling program. That's $452 million.

And by the way, just a quick digression. Certainly, this program would prefer that to have been a delay than a cut, as we had a long conversation about. People would like to be prioritized with the benefit of the delay, but water recycling is probably one of the best long-term drought-resistant investments we can make. And certainly, as we're going through climate change, if you want to have - we need to have more reliability in our water supply.

So water recycling is something I think we want to make sure we take a good look at in terms of, are there other things in the budget that we would propose as a legislature for cuts instead? The second thing I'd like to call out is the eliminating of the community food program and the California Nutrition Incentive program. And that allows us to receive federal matching money so that low-income Californians can buy fresh fruits and vegetables. I think it's an extremely efficient program.

They've come up with a great way to administer this program, a way to really connect with families. And so I think it's one that I will be looking for other cuts to see if we can avoid the elimination of these two programs. Third thing I'd call out is that the dam safety program has been cut to a paltry $50 million. And when you have the state auditor saying that there are 89 dams that have significant or above hazard ratings, that's a concern.

A couple of other quick points to make, and that is, during our sub-four meetings, we will be asking - I wouldn't want to try to burden you with this, but for us to get an idea of there are significant cuts in the climate change package.

What is the impact of those cuts on our ability to reach the goals that we've set for ourselves as a state, our 2030 goals, etc. It's very easy for us to set goals, and then we don't have very good tracking in terms of whether we're actually on track. And it'd be, I think, very helpful for us to know, hey, these cuts are going to mean we're not going to get here until 2032 instead of 2030.

And that would be the goals for climate reduction and the 3030 investments that we have but for all of our goals. So that'll be a question that I'll ask, and then with my colleague right next to me, I'll do it with housing. I just want to get on the radar screen, not in budget sub-four, but I think that the REAP housing program has some significant benefits, and certainly, in my area in Ventura County, there are a lot of benefits with that reprogram.

And finally, I would say, as a number of other chairs have said, we will be trying as best we can in our subcommittee hearings to evaluate how well the money is being spent, and where is the money not being spent as well. And we can move it to areas that we think have better priority. And that's a really important thing for all of us to do. Thank you very much. Appreciate it.

Thank you very much, Mr. Bennett. We are now going to go to Assemblymember Zbur, then Assembly Member Ortega, Assembly Member Lee, and Assembly Member Bonta. So those are the folks that are up next. Assembly Member Zbur.

Thank you, Mr. Chair. And I'm going to try to abbreviate my comments and say that I want to align my comments with those of Dr. Jackson and Quirk-Silva about making sure that we're prioritizing basic needs of our vulnerable communities, as well as Assemblymember Alvarez about the importance of some of the priorities he mentioned on education funding.

The main reason why I wanted to comment was that really along the lines of what Mr. Bennett, Assembly Member Bennett just said, concerned about the level of the cuts and delays related to the climate programs, those are among the largest in the budget.

And I think the question that I, and you'd have to answer this today, but the question that I have that I think needs to be answered is the extent to which some of these cuts were looked at from the lens of what do we need to do to meet our climate goals and the goals and the scoping plan, as opposed to what's easy to cut because you have large numbers or the more fiscal issues.

And so I think the comment that I'd have is that I think it's really important that we sort of take a fresh look to the extent this hasn't happened already at how the budget aligns with the scoping plans. I know when we have more money, it's obviously easier to, it's easier to put money into things that are good for climate but may not be part of those crucial things that we need to meet the climate goals. So that's one comment.

Second, I've had conversations with Subchair Quirk-Silva. One of the things that I was hoping that this committee and her subcommittee might do is really take a fresh look at some of the programs related to the unhoused. My perspective from last year and looking at the budget was that we haven't made a priority enough of preventing homelessness. When you look at the cost of homelessness prevention versus intervention.

On the other side, when we actually have to look at the creation of social services, temporary housing, and permanent housing, it is much, much less expensive to actually intervene at the outset. And the California Commission on Aging, and you have a whole bunch of studies from a bunch of agencies that have recommended that housing subsidies be a key part of our overall goal to solve the homelessness crisis. So, that's something that really did not seem to be a priority in the prior budgets.

And I'm hoping that even though we are actually having to look at a reduction in potentially in resources, that we can actually look at some of these things with a fresh look and look at homelessness prevention as one of the components of the things that we look at. And then, finally, this was, I think along the lines of what Assemblymember Bennett raised.

I'm hearing from the outside folks on the outside that and you partially addressed some of this with what you're seeing in January, and I think folks are being optimistic about it. And I know we have to sort of plan for the worst, and I really am supportive of, I think, what this committee is doing and what the Governor has done in terms of looking at the best information we have at the time.

But I'm wondering sort of what the markers are in terms of when you sort of update projections. I mean, when are sort of the key periods of time where you think that we may have more information to sort of look at whether there is either more revenue sort of coming in that we can actually envision and anticipate by the time we have to adopt a budget or less revenue and have to do sort of different things.

So I'm just wondering when those time markers are and sort of when you will be looking at those projections again.

Sure. And at a high level, I'll revisit my earlier remarks in regards to the lack of information we had back in May when the tax filing delay was initially implemented. We generally have tax receipts, the bulk of them, when we are developing our May revision forecast that is then incorporated into the Governor's Budget. And we just didn't have that last year. So, generally speaking, it's that time of year. And I'll defer to my colleague for more specifics.

But even with the revenue coming in or not coming at this point, I think we anticipate looking and having more information in April.

Colby White, Department of Finance: yeah, so when we revisit the forecasts in April in preparation for the May revision, we'll have a pretty complete picture of tax year 2023 receipts, so those will be due on or around April 15. And at that point, we would have all the payments related to tax year or most of the payments related to tax year 2023, including January's results and estimated payments and refunds that led up to that point. We won't have payments, by extension, filers that come later in the year.

But then we also start to get a look at tax year 2024 as well. The first April estimated payment is due in 2024. So all of that is a significant amount of cash data, and also the corporations' as well. So, over 50 billion in payments are expected in February through April, and that will be incorporated into our May revision projections.

And from the Legislative Analyst Office, as you acknowledged, we've been doing some more frequent, periodic, shorter updates from time to time. But I'd like to ask my colleague to weigh in on just some of the markers that you're looking for.

Yeah. As Gabe mentioned, we're consistently monitoring both the cash and economic data, and we do provide now kind of a monthly update to our look at the forecast. As my colleague from the Department of Finance mentioned, there are some key kind of points in time where we get more important data. April is a key one when we get the tax collections.

But we are constantly monitoring information on the state's labor markets, consumer behavior, corporate profits, and a whole host of economic data that we're looking at on a monthly basis to try to gauge how the trends are shifting.

All right. Thank you very much, Assembly Member Zbur. We are now going to go to Assemblymember Ortega, then Assembly Member Lee and Assembly Member Bonta.

Thank you. Can you hear me? Is it on? Okay. Thank you, everyone, for being here and listening to everyone. I just want to thank all the work that you've put into this. I know it's a difficult time, and as a new Member, I understand the situation that we're in, and we're going to have to make some very difficult decisions. But I do want to acknowledge and thank the Governor for maintaining the expansion of MediCal to low-income Californians regardless of immigration status.

Many of these Californians were deemed essential during the pandemic, and I'm glad to see that we've learned some lessons in continuing to provide for them and making sure that they have access to health care. In the long run, it's a saver for the state of California. And again, there's a lot of dark things, a lot of things we're going to have to look at very closely.

I have a lot of other questions, but I did want to make a note of this significant maintaining of program in the budget.

Thank you very much, Assemblymember. We're now going to go to Assemblymember Lee.

Thank you, Mr. Chair. Of course, I also want to thank the LAO and Department of Finance for your work on this budget. It's not easy. It's a lot of tough choices, of course, you have to confront. But since we're running short on time, I'll just reserve it to comments. But I do question the wisdom, as many of my colleagues have mentioned, the wisdom of why certain things are being cut.

For instance, in the housing space alone, we know right now that the homeless encampment resolution program is maintained for hundreds of millions of dollars, yet there are already mixed results. Even in my own city of San Jose, in down San Jose, more of it used for moving people away beautification than getting people rehoused. In fact, in down San Jose, 10% of the state grants that they applied for were used just simply for park beautification, which is good but probably not what we intended the money for.

So I question why certain items are being delayed or cut when other things are being kept there, even though they don't produce the results that we say we want to. And in keeping in line with our caucus's mind of what we want to do, I question why certain things are cut if they are producing results that we want if they are actually yielding the outcomes that we want. Maybe, in another term, the return on investment is actually very good.

And, in fact, many of the citations of why the encampment clearance program isn't working is because there aren't enough beds or shelters or long-term housing for people who are unhoused. And so I worry that in the housing budget, a lot of the money that we rely on to build more housing, especially these, are things for the near future, are being decimated. The Multifamily Housing Program, decimated. The Foreclosure Intervention Housing Preservation Program, decimated. The Infill Infrastructure Grant also decimated.

The Housing Navigators program, decimated. Veteran Housing and Homelessness Prevention Program. And then, of course, that's not even adding in that there's no new low-income housing tax credit money. So all the money that we are future-proofing and trying to build more housing, which, of course, won't be delivered in one year, is being cut.

So I wonder why, if it is our expressed outcome to solve homelessness and housing crisis, we're pulling back so much our investment on housing, and while at the same time, just to be in this budget subcategory that Assembly Quirk-Silva chairs is that we're proposing to expand the GO-Biz Competes Grant, which is giving $60 million of new money for $50 million of new money to corporations.

So something that always baffles me is that while everyday working-class Californians and many young Californians are saddled with debt, high cost of living, and have to pay the bills every year, we are going to be the ones shouldering any of these cuts. Yes, they are, of course, paying their due taxes and their burden, but they will also be the one paying the cost of any cuts to services at the same time.

And so it's almost a paradox of they're paying into a system that doesn't invest in them. At the same time, the mega, mega rich of California, where there are more billionaires and more mega millionaires in California today than even when we started the pandemic, they are continuing to get richer and richer. They're continuing to get richer. They're going maybe getting richer a little slowly, but they still are.

While there is an income divide or wealth divide that is so vast, and I know in the budget there is a revenue solutions, which is only $400 million, which is just conforming us to net operating loss that many other states are finally doing.

But I hope the administration will pursue other revenue side solutions because the example I'm giving about average Californians is that: yes, we have high costs, high burdens, but we don't say for five years, when there's budget, when our own personal budget is uncertain, we're just going to stop eating for five years. We don't do that. We say we're going to fight for better wages, we're going to get a better job or fight for better conditions.

And that's what many, many Californians are doing; average California is doing. So, I think it is very unfair for the state to never look at revenue options. So I hope they'll look at perhaps maybe a wealth tax on billionaires, restoring the corporate tax rate, pre-Trump era or other tax breaks, or even other things where we're just shelling out money to corporations and rich people because those things still exist in this budget.

So, as many of my colleagues talk about preserving the essentials of this budget, I hope you also look at the things that are shiny and not essential, especially when we give to those who have everything already. Thank you.

Thank you, Assembly Member Lee. We will go to Assembly Member Bonta and then Assembly Member Essayli.

Thank you so much, Chair. I want to appreciate the DOF and LAO for putting together this analysis. My comments are largely going to align with Assemblymember Jackson and Assemblymember Dr. Weber on issues related to health. One issue that continues to perplex me is how we factor in opportunity costs associated with some of the cuts that we suggest, particularly as it relates to our workforce.

We have in this budget proposal indicated a delay of $189.4 million for mental health services a delay of $140.1 million for nursing and social work initiatives when we know we have really underinvested in the infrastructure, the workforce pipeline infrastructure related to that we need in order to be able to support many of the behavioral health and mental health programs that we've outlined.

So it seems to me like we should actually be taking this time to invest in those programs that are going to provide workforce in the healthcare space for us. Along with ensuring that we are increasing the reimbursement rates for medical, I'm also wanting to make sure that we live true to our commitment in SB 525 to recognize and support our healthcare workers with a living wage.

I look forward to working with the Administration to implement the law that we really worked hard to bring to a victory in the last legislative cycle for our healthcare workers and our heroes, who are our frontline workers. And I think it would be an incredibly move backwards if we actually don't invest in the entirety of our healthcare workforce because we need people, nurses, social workers, behavioral health specialists, to be able to provide the health care that we know that our community deserves.

I also want to just point out that largely, what we talk about is spending and cutting spending and cutting. Rarely do we actually talk about recognizing cost efficiencies. I just wanted to outline one particular program that I've been able to do a little bit of a deeper dive in around skilled nursing facilities. Skilled nursing facilities. One operator can actually have to deal with and negotiate over 25 different agencies in the regulatory framework to be able to engage in their business. 25 different agencies -

- that's state money, taxpayer money that we're spending to regulate one operator, which certainly is needed.

But how are we recognizing and ensuring that our agencies and the funding that we're spending to them is not actually taking over our ability to provide quality health care at the local level, much in the same way that my colleagues talked about making sure that we're not making cuts too close to the classroom, I don't think that we should be making cuts too close to the patient and the person that deserves care.

I wanted to move over next to an issue related to broadband that my colleague Assembly Member Quirk Silver raised. I'm very thankful the administration is going to commit to providing broadband to the neediest and most underserved parts of California by prioritizing the last of middle mile funding. It is an agreement and a commitment that the administration has made that I'm very supportive of.

I am concerned, however, of the Broadband Loss Reserve Fund being reduced and want to at some point, certainly in that committee, understand how we are going to address the challenges of reducing that infrastructure. A lot of the funding that we are able to have right now within the broadband space is us and our ability to leverage federal funding, which speaks to the increase in funding that my colleague spoke to.

But it is absolutely critical that California does its fair share and ensures that we're not continuing to isolate urban and rural communities, underserved and unserved communities.

In so doing so, I'm hopeful that we will continue to live true to our commitments related to the middle mile. I next wanted to turn my comments over to our I was thankful to be able to chair budget sub-five last year and so still very much, or I guess now I don't know the numbers anymore, six related to but public safety. But I did want to just point out that we have a great opportunity still.

We saw in today's Calmatter article that we've seen a dramatic increase in inmate spending. Though we are experiencing this incredible deficit, we know through this article and through the research and the work that we did last year in the budget subcommitee that the cost of imprisoning one person has reached a record high $132,860 annually. And this is a significant jump over 90% in the past decade.

Same article also talks about the fact that it's twice as expensive as the annual undergraduate tuition of $66,640 in the USC in our university system. And that's the most costly private university. So, I need to make sure that we're focusing on what is driving those costs. It certainly isn't an investment in rehabilitation and reentry because we know that we're spending less than 5% of our budget on rehabilitation reentry in our CDCR funds.

And we know that we have several failing facilities and we are investing essentially in buildings and not people. Again, let's make sure that we're spending our money wisely around the things that we know will actually lead to lower recidivism rates, greater public safety.

And that is an area where it would be incredibly disingenuous of us as a body if we don't actually say that we're prioritizing people when we're spending so much of our money on failing facilities instead of ensuring that we're taking care of everybody in wherever they are, to ensure that we have good neighbors coming back to us.

And finally, I wanted to just focus in a little bit, and I'll end with a question that I hope we have an opportunity to respond to, if not in this committee, in others. I'm very thankful that in the space of early childcare, we've continued to offer prior year commitments of 146,000 new childcare slots with a goal from the 21-22 Budget act to serve 200,000 new children by 2026 to 2027.

However, I want to make sure that we are committed to maintaining the formulary that would allow us to ensure that we are providing the total cost of care. We cannot enter into any kind of bait and switch where we're saying that we're continuing to provide the number of childcare slots that we need in order to be able to promote our economy, quite frankly, as well as educating and supporting our young people.

But we can't do that on the backs of our workers and our providers, and it would be disingenuous of us again if we are not actually ensuring that we are moving towards totaled cost of care. So, on that one, I know that we are out of time. It was the one big question that I wanted to make sure from the panelists that we are making sure to live true to our commitments in our formulary. So I know that we don't have time for that question.

I will ask it again in a different committee with that. Thank you very much.

Thank you very much, Assembly Member Bonta. I just want to take a moment to acknowledge Assembly Member McCarty, who has very generously agreed to share his comments at a later date. But we're grateful to have him on the committee and look forward to his wisdom and experience that I know that he will share with all of us. I know that some members are going to have to start leaving.

The Vice Chair and I are going to stick around a little bit after 12 so that we can have some public comment and have opportunities for that. With that, we're going to go to Assembly Member Essayli, we'll go to Mr. Ramos and Mr. Fong, and then we'll have opportunities for public comment.

I do commend that. He specifically said he's calling for new legislation to expand criminal penalties for those profiting on retail theft and auto burglaries. And he specifically called for increasing felony penalties and prison time. My question to the Governor's Office is, considering that the prisons are over capacity, are currently at 117% of design capacity, does the budget create any new capacity to send these criminals to prison? Where are they going to go?

I think that question is twofold. And obviously looking at public safety on the one end, and then I think your question about the results, what happens on the back end. And I will turn my comments over to colleagues in regards to capacity. But the governor is committed to cracking down on retail theft. He's invested in certain programs over the years to help locals and support locals in doing that. But I will turn over to my colleague Lynne.

Lynne Ishimoto, Department of Finance. Hi. There's no additional capacity included. And in fact, we're working to close prisons even though we are over 100%. The Department is allowed to go up to 137.5% of design capacity.

Okay. So despite calling for an increase in penalties, the budget still projects the closure of two prisons, I understand: Cal City Prison and Chuckawalla Valley Prison. Is that correct?

Yes, that's correct.

Okay, so there's no plans to add capacity, and then I just want to make sure you guys are aware. I talk to my county sheriffs all the time, my county sheriff all the time. All these proposals we have to increase penalties on misdemeanors--my sheriff tells me he only has 4,000 beds at the county level. Every single bed is occupied by someone who's committed a crime against another person. Assault, battery, rape. It does not have any capacity for property crimes.

So my concern is, while we're calling for additional punishment, there's nowhere for these criminals to go. And so I just really want to make sure we hone in and focus on that, because just giving someone a conviction doesn't provide sufficient deterrence or punishment. I'll move on to access to health care because I think this is a really critical issue. I'm sure you're aware combined Medicare and Medi-Cal pays only 75 cents for every dollar it costs to care for patients.

Fifty-two percent of California hospitals lose money every single day they operate. One out of five of our hospitals is at risk of closure. They're going to go bankrupt. So my question is, and I think you've sort of answered it, despite the insolvency or projected insolvency of our health care system, the governor intends to Fund $3.4 billion to provide health care for illegal immigrants. Is that correct?

Included in the budget and maintained in the budget is the expansion of Medi-Cal to all populations.

My concern is, I mean, I'd love to provide healthcare to everyone. We just can't afford it. Is there any limit to how many people can sign up for this new program? It's an entitlement. So if a million people cross the border tomorrow and come sign up for Medi-Cal, can they do that?

We've forecasted the number, the caseload essentially every year. And we do that and we will continue to do that going forward. In regards to eligibility, I don't believe there is any requirement or lack of a requirement.

Yeah, that's my concern, is there's no limits and it's going to create an incentive. We had 300,000 people cross the border illegally last month in December. That's only getting worse. It's not getting better. And if all those people decide to come to California and sign up for Medi-Cal, it's going to bankrupt the system. And more importantly, I hear from my constituents who have Medi-Cal, they can't get doctors' appointments. They're having a hard time getting procedures or seeing specialists that they need. And my question to the Governor's Office is, is adding 700,000 new patients into Medi-Cal going to help the system?

And sorry, I misspoke before in regards to, there's obviously income eligibility requirements for Medi-Cal. So I would point to that. This Legislature has been committed to expanding Medi-Cal, and I think we need to continue having those discussions about costs and how costs are being driven up going forward. Obviously, as we've discussed the out years, this is a program that we need to continue to support and figure out how we're going to do that.

Can you look Californians in the eye and tell them that adding 700,000 illegal immigrants under Medi-Cal is going to improve their access to health care? The citizens, the people paying taxes, is it going to improve their access to health care?

Again, this body has committed to the Medi-Cal expansion and we look forward to having more conversations.

Thank you.

All right. Thank you. We are now going to go to Mr. Ramos. Thank you.

Thank you, Mr. Chair. And thank you for all your hard work of working on this budget. We know there's some different discussions, tough discussions, that's going to come our way, and we're open to that communication moving forward. So thank you for all the work that you've done.

And as the representative of California's First People here in the State of California, we know the issue of people in this area, and I think that we have to be open in the State of California to start to address all the issues that are there.

One of the areas that we're going to be focusing on as Sub-Chair of Public Safety is continuing to bring attention and resources to the missing and murdered Native American women, Native American persons here in the State of California, where California still is moving in the wrong direction as number five of all states not investigating or bringing remedy to those areas. We also are going to look at victim services.

We know that there's potentially some cuts that will be there, so we're open to start discussion or find out if there's any remedies to that. But also with retail theft: within the 2022 Budget Act, 370,000,000 was allocated for that. And our law enforcement partners just received just recently, 240,000,000 of those resources this past fall. Our hearings will focus. We have a hearing that will focus closely on how that funding is planned and how it's being used to fulfill its intent and purposes.

So this is just a preview of what it is that sub six will be moving forward in and getting into dialogue deeper in. I also intend to focus on youth, our youth who are at risk of falling into the justice system. Too often, the resources are focused at the end of the result rather than also looking at prevention ahead of time within our youth components that are there. We also want to look at the fiscal climate where our decisions may impact the most vulnerable Californians.

I intend to focus our responsibility, oversight of state spending, and pushing for accountability, greater efficiency, and improved outcomes. Again, I look forward to working with the open dialogue and open communication to address these and other issues facing the State of California.

Thank you very much, Mr. Ramos. Appreciate that. We'll go last, certainly not least, to a Member who is known for his patience and also his kindness. Thank you very much, Assembly Member Fong.

Thank you so much, Mr. Chairman and Members, and good afternoon, everyone. Thank you so much for the work and efforts on the budget. We know it's been a challenging budget, time, but I really appreciate all the comments of my colleagues and to everyone here. In addition to access for higher education, we know that quality higher education is so critical to the future success of California. Not only do we need more graduates with four year degrees, we also need more graduates with technical skills to help fill the staff shortages across multiple industries and sectors.

And I'm grateful to see the governor's proposal for $60 million to expand nursing programs in our community colleges. But there are also areas of concern that I'd like to bring up at this time as well. You heard from Mr. Alvarez and some of my colleagues, the housing is critical and student housing. As a former trustee for the Los Angeles Community College District, a study showed that one out of five students experienced homelessness or housing insecurity in the prior year.

And student housing and housing is so critical for helping our students succeed. And so I urge allocation of funding to help kickstart the Student Housing Revolving Loan Fund. And that's something that I'm going to continue to advocate for and to bring up. Secondly, in terms of Cal Grant reform, with my colleagues and many folks here with the Cal Grant reform and the Committee's hard work and efforts on this, Cal Grant reform can transform and help expand access to over 130,000 students, particularly in our community colleges.

And this is something that I think we don't want to lose the momentum on in terms of Cal Grant reform and to expand access there. And so this is something I want to amplify and to bring up as well, to never really lose that momentum to expand access for our students here in California and really look forward to future discussions with our committees and my colleagues.

And thank you so much again, Mr. Chair, for the opportunity and look forward to working with you and colleagues going forward. Thank you.

Thank you very much, Assembly Member. I appreciate that. I'm just going to be extremely brief in my comments, and then I'll look forward to continuous opportunities to have conversations both with our panelists, but more importantly among the Members of the Committee here as we look to craft a budget that we can work on and work on in connection with our colleagues in the Senate and also with our partners in the Governor's Office.

As I did mention very briefly, I am concerned about some of the reductions to money for housing and homelessness, and particularly, as I think Assembly Member Zbur pointed out, things that go towards homelessness prevention. Right. And both the moral imperative of investing in that and keeping folks housed, but also the economic benefits that we can reap and more, I think interventions there that might cost a little on the front end but save us a lot of money on the back end.

And so I'm looking forward to conversations about how we can evaluate the programs in the housing and homelessness space, how we can determine what's really moving the needle for Californians. We know this is a top priority for communities up and down the State of California, and that this is something that we need to look at. And you've heard about, I think, from myself, but also from a lot of our Members about the interest in efficiency, accountability, making sure that we are getting ROI from our investments.

So that's an area that I certainly want to dig in on with the Administration and also with folks here on this Committee. And I know that even in some of the initial conversations we've had as an Assembly democratic caucus, there's a lot of concern about that, and folks want to dig in there as well. The second thing I did just want to mention is I appreciate the beginnings of a conversation about how we bring more stability and certainty to our budget process.

I appreciated what the governor said about looking at potential reforms to Proposition Two. I think that's a really important conversation to put our state on a long term path to success. And so I just wanted to know that I've heard that also from Members of the Assembly.

And so I think there are partners in the Legislature that are interested in that conversation, that want to be part of it and that we can work together on that, because that is a very important--even as we're in this moment, where we need to focus on the short term and on addressing the shortfall we have in front of us, addressing these $30 billion projected deficits that we have in the next couple of years, also starting that conversation about how do we set ourselves up for long term success in terms of more certainty in our budget process.

And then I think, as we saw here with Assembly Member Patterson, it's a moment--and this is for everybody, for the Members and for everybody to think about--it's a moment of recalibration of expectations. And I think folks need to really start to grapple wit--again, we have a significant shortfall. We don't know what the extent of that shortfall is, but there's really a lot of uncertainty baked in there as well about how much worse this could potentially get.

And I think it's important that all of us are honest with ourselves about the magnitude of the challenge that we're facing. And I appreciate the LAO's comments about acting prudently, acting thoughtfully, thinking about how we address the challenges we have now, but also knowing that those challenges, even if we implemented all of the proposed solutions in the governor's budget, which are certainly things that we'll discuss and talk about and learn more about.

There's more work to be done about the years ahead, and I'm glad that everybody is mindful about that and that we can have a conversation about where we go from here. So looking forward, there's a lot of things that my colleague said about higher-ed and protecting our most vulnerable and health and human services and other things that I'm very eager to dive into. But given the timing, I do want to give us the opportunity to go to public comment.

Now, as I mentioned, I know there's a lot of folks who are eager to share opinions with us. Unfortunately, many of our Members have to be elsewhere. But at least Mr. Fong and I are willing to stay for a while to hear that public comment. But again, just want to remind folks, we are going to notice 61 Subcommitee hearings.

You're going to have quite a few opportunities to make your voice heard, to be part of the process, and really to be part of the process where your particular issue is being discussed, debated, evaluated, and examined. So we're going to try to limit folks at this to 1 minute. If you can say it even more briefly than that, that would be appreciated.

But before we do go to public comment, first, let me thank all of our panelists today from the Department of Finance, from the Legislative Analyst Office. We appreciate you coming here, answering these questions, being part of the conversation, your patience and expertise, and also want to acknowledge our color-coordinated Assembly Budget Committee Staff for all of their hard work. We appreciate all of you, and thank you to the sergeants and everybody else who has made this hearing possible. So with that, thank you, and we will turn it over to public comment.

All right. Thank you, Chair Gabriel. Michael Pimentel here on behalf of the California Transit Association. I just want to acknowledge last year you all, as the Legislature working with the Administration, provided $5.1 billion for public transit agencies. We're hugely appreciative that the governor's budget maintains that funding and would encourage the Legislature, as you develop the budget, to keep that funding intact.

It's critical for our communities, for our riders, and, of course, for public transit agencies who are delivering the services. Finally, I'll mention that on behalf of the American Heart Association, the Heart Association requests that you keep the $35 million of continued support for the California Nutrition Incentive Program in CDFA's Office of Farm to Fork. Mr. Bennett gave voice to the importance of those dollars. Want to uplift that in the conversation today. Thank you.

Thank you.

Good afternoon, Mr. Chair and Members. Alchemy Graham with the California City Transportation Initiative, representing California's eight largest Departments of Transportation and Public Works Departments. I'd just like to uplift our support for maintaining funding levels for the active transportation program at the levels included in the fiscal year 2023 and 2024 budget. While we fully understand the gravity of the current budget outlook, investments in the ATP are essential to continuing to allowing cities to deliver on the state's climate, mobility, public health, and equity objectives. We urge the Committee to support maintaining funding for the ATP. Thank you.

Thank you very much.

Good afternoon, Members. Oracio Gonzalez on behalf of the Salton Sea Authority. We're a joint powers authority consisting of the Imperial Irrigation District, the Coachella Valley Water District, the County of Imperial, the County of Riverside, and the Torres Martinez Desert Cahuilla Native People that have inhabited the Salton Sea region for thousands of years.

We are thankful for the governor's proposed investment in the Salton Sea resources that will help scale up implementation of projects under the Salton Sea management program, as well as begin to address the importance of operating and maintaining projects once they are completed. There is also a $3 million investment that is the first contribution from the state to initiating the Federal US Army Corps Imperial Stream Salton Sea Study. Projects identified by that study will be eligible for up to 65% federal funding.

So it is a significant opportunity for the state and ultimately a cost savings. And on behalf of the California Alliance for Digital Equity at NextGen California, we are in strong support of the governor's proposal to fully fund the middle mile broadband initiative as well as the last mile grants. Thank you.

Thank you very much.

Hello. My name is Laura Deehan, State Director for Environment California. Thank you, Chair and Members. And we're also part of the Charge Ahead California Initiative and working with the Invest in Clean Air Campaign. And that's the thing we're most concerned about with the governor's proposed budget is the significant cuts to the clean air, clean transportation programs. By delaying those programs, we're really concerned that that does amount to a cut and we need to stand up for clean air.

California has the worst air pollution in the whole country, and by cutting these investments, we're going to see worse air pollution, and that's going to mean more people affected by that problem. It's going to cost us more because it'll mean higher health costs and higher climate disaster costs. But then also it's going to mean worse cost for the people who are burdened with that pollution. So we just urge you to look for solutions from cutting subsidies to oil companies as well as redirecting funding from highway expansion. Thank you.

Thank you very much.

Hi, Samantha Sang with NextGen California, commenting on a couple of items, but I'll be quick. First, we urge you to fund the implementation of SB 253 and SB 261 to bring the resources of the private sector to bear on climate efforts at near negligible cost to taxpayers. We also urge you to reject the proposed cut to the active transportation program, which can be funded out of well-funded, flexible transportation funding sources.

Additionally, we ask to retain the funding for the Public Defense Pilot Program, which is the only statewide funding source specifically for indigenous defense. And finally, as part of the Cal Grant Reform Coalition, per the name, we are in strong support of Cal Grant reform and look forward to working with the Legislature and the Administration on this critical education work as well as working on the career education master plan. Thank you.

Thank you very much.

Thank you. Chair and Members of the Committee, I'm Amarantha Silva with Prime Voices California. Our comments align with the EC Coalition and the Childcare Law center. We ask you to remove the current path on childcare slot expansion to meet the governor's promise of 2,100 slots by 2026, 2027. There are 54,000 slots left to fulfill this promise, and every year that it gets extended, there are real babies and young children who miss out this best start in life. They don't get an overdue.

Also, we need to provide ongoing financial support to attract and retain early educators. We also align ourselves with the Safety Net for All coalition to create inclusion for immigrants left out of the safety net programs, such as our workers excluded from unemployment services.

Lastly, we align ourselves with In Child Poverty California and ask you to reject any cuts to the CALWORKS family establishment program so families, especially those who are experiencing domestic violence, have access to critical housing, mental health, and safety net services that they need to stay alive. Thank you.

Thank you very much.

Hi, my name is Edward Flores. I'm an associate professor of sociology and Faculty Director of the UC Merced Community and Labor Center, here to share some research relevant to Senate Bill 227 unemployment benefits for excluded workers. Last year, we released a fact sheet, worker relief, that indicated there's roughly 1.1 million undocumented workers in California. California employers annually contribute over $300 million to the UI system.

The average weekly benefit for a California undocumented immigrant would be $300 per week if they were eligible for UI and that state funded unemployment benefit system that provides 20 weeks of unemployment benefits at a level of $300 per week would provide an economic safety net similar to UI for the entire length of unemployment for most 57% of California undocumented workers in the course of a year.

The benefits of such a system, $193,000,000, would be less than the 302,000,000 that California employers already contribute to the system on behalf of undocumented immigrants. Thank you.

Thank you.

Good afternoon. Julia Forte Fruden from the Childcare Law Center, senior project manager and evaluator. We're also a member organization of the ECE Coalition. The state budget is the most important legislation for creating an equitable society and a sustainable California, where black and brown families have the childcare they need and childcare providers are fairly compensated for their hard work and dedication to our children.

The Childcare Law Center strongly urges the Assembly to include funding to implement the new cost based formula, to pay providers based on the true cost of enriching care, and to increase the number of new, affordable childcare spaces over the current 146,000 spaces that has already allocated, especially since no spaces were allocated last year and thousands of families, eligible families, are still waiting for care. Thank you, Chair.

Thank you very much.

Good afternoon. Kendra Harris, Government Affairs Manager with the Climate Center. I just want to thank the Committee for the hearing today and the Members who commented on the proposed cuts to the climate budget. We're concerned with those cuts, especially when there's a number of tax breaks and oil expenditures still on the table. The governor made some proposed cuts, but we'd like to see all tax breaks eliminated. That would give us millions of dollars to state budget and thank you for your support.

Thank you.

Good afternoon, Mr. Chair and Vice Chair. I'm Katie Van Deynze with Health Access California, the statewide Healthcare consumer advocacy coalition. We appreciate that despite the deficit, the governor's proposed budget continues key investments in healthcare, including in Medi-Cal, with improvements in rates, access, benefits, quality, equity, accountability, and eligibility, especially keeping Medi-Cal available for all income eligible individuals, regardless of age or immigration status.

To further this effort toward health for all, we will seek this year to allow all, including those barred by immigration status, to purchase health plans in Covered California with their own dollars. And to do this, we'll be advocating for a modest request for startup costs from Covered California Affordability Reserve to create a mere marketplace in parallel with AB four.

We are also heartened to see in the governor's budget make no changes to the planned increased affordability assistant for Calvert California, plans that the Legislature secured last year. We look forward to working with the Chair and Committee Members to protect these key health investments in the coming year. Thank you.

Thank you.

Good afternoon. Good afternoon. Martha Zaragoza Diaz, and I am representing the California Music Educators Association, whose members are classroom music educators with extensive experience and single subject credential to provide music instruction to students at both the secondary and elementary levels. CMEA is very concerned about a K through 12 budget proposal to create a CTE teacher authorization to teach the arts at the elementary level. Historically, teachers with CTE credentials have taught in grade seven through 12, emphasizing career training.

CTE does not provide requirements for pedagogical instruction to teach nor to assess elementary-age students. Alternative paths to credentialing already exist. CMEA believes that elementary students deserve a highly qualified educator in the arts providing age-appropriate instruction. CMA looks forward to working with you on this issue as well as with others. Thank you.

Thank you very much.

Mr. Chair, Members. Brendan Twohig, on behalf of the California Air Pollution Control Officers Association, representing the executive officers from all 35 local air districts. Given the significant budget deficit this year, we ask for your continuing prioritization of funding for programs that cost effectively address air quality, public health, and climate challenges, all at the same time.

Two air district administered programs, the AB 617 Community Air Protection Program and the Farmer Program are highly cost effective at reducing both criteria health pollutants, and greenhouse gases. We appreciate past and proposed funding. Prioritizing investments in these programs will make scarce resources go further. We appreciate the Community Air Protection Program is proposed to be reduced from 300 million to 250,000,000, and we ask that you restore funding to 300 million. Also, the Farmer Program is proposed to be zeroed out. It was already reduced 50% to 75 million in last year's adopted budget. Yeah. And we ask you, you restored 150,000,000.

Good afternoon. Nicole Wordelman on behalf of the Children's Partnership. We're very appreciative that the Administration has put forth a budget protecting children's and families issues. In addition to his proposals, the Children's Partnership urges the Legislature to green-light the immediate implementation of continuous Medi-Cal coverage for young children ages zero to five, as well as increased reimbursement rates for community health workers in Medi-Cal.

On behalf of Orange County and San Bernardino, County, I urge you to reject the proposed clawback of $40 million for the Public Defender Pilot Program. Funding is scheduled for disbursement in March, and hundreds of cases are currently in process for indigent defense. Cutting the funding will delay access to those vulnerable populations for justice. And then finally, a couple more on behalf of San Bernardino, county, opposing the elimination of the 30 million in the family urgent response system, 18.8 million for the supervised independent living.

Thank you. Thank you very much.

Good afternoon. Linda Wei with Western Center on Law and Poverty. We appreciate that the governor's budget honors past commitments, including expansion of Medi-Cal to all income eligible adults regardless of immigration status, and that there are no CALWORKS and SSI grant cuts. However, we are concerned that whenever there are budget deficit, the state looks to balance the budget by targeting programs that serve the lowest income Californians rather than looking at revenue solutions that Assembly Member Lee highlighted.

We oppose emptying the safety net reserve coupled with permanent cuts to CALWORKS. This acts as a double cut that destabilizes our most vulnerable families. We support the state applying for the federal TANF pilot and urge the Legislature to ensure the pilots are successful by including key reimagined reforms to center families. We also oppose cuts to legal services for immigrants, foster youth and housing. Finally, we urge timely implementation of share of cost reform and Medi-Cal continuous eligibility for children. Thank you.

Thank you.

Hello. Chair and Vice Chair, Jeannie Ward-Waller on behalf of Cal Bike and Transform. I want to express opposition to the proposed cut of 200 million to the active transportation program. It's the most effective transportation program in terms of addressing the climate and also overwhelmingly benefits disadvantaged communities. We recommend you look at backfilling from the state highway account, reducing freeway expansion funding to make the ATP whole. Also, on behalf of Transform, I want to express opposition to cutting the Regional Early Action Program or REAP. Thank you.

Thank you, Chair, Members. Nick Brown, on behalf of the Southern California Association of Governments. We urge you to protect the $300 million proposed to be cut to the REIT program. The program has provided over 100 projects across the Southern California region that are very real and ready to go today. So we hope to work with you all this year to protect that funding. Thank you so much.

Thank you. See, that's great. You can do it in 15 seconds, everybody.

Honorable Chair, Nico De Luca here to offer gratitude on behalf of the cities of Gardina, San Pablo, South San Francisco. Appreciate your comments about protecting last year's investments in district spending requests. We haven't gotten that funding yet, so thank you. And then on behalf of the City of Oakland, very grateful for the ongoing HAP funding over the past years. Looking forward to partnering with all of you to make sure to help get that funding going forward. So thank you.

Wonderful. Thank you.

Good morning, Mr. Chair, Members. Ross Buckley, on behalf of the South Coast Air Quality Management District. We very much appreciate the funding, including the governor's budget, for the AB 617 program for air implementation incentives, especially given the budget shortfall. We request the continued supply chain of the AB 617 funding, which the LAO has said that is highly effective in addressing air quality, public health, and climate challenges. The AB 617 program is severely underfunded.

To help address this, we strictly ask that the program funding be restored to last year's levels to help address program costs and provide a cost effective way of reducing emissions to meet federal air quality standards. Thank you.

Thank you very much. And I just want to do a time check. We only have about 10 more minutes left, so I know the folks in line behind you would appreciate if everybody can just do their best to make their points as quickly as possible. Reminder, there are going to be 61 more hearings coming up while you have an opportunity to really make your voice heard in a robust way.

Thank you, Chair. I'll try to be very brief. My name is Michael Jared. I'm with the Community Alliance with Family Farmers. We like to thank and echo Chair Bennett's comments related to the California Nutrition Incentive Program and the Community Food Hub Program. We believe those programs should not be cut and eliminated. They're at CDFA.

We also would urge the retention of the California Underserved Small Producer Program and an expansion of eligibility to flood impacts to small family farmers. On behalf of climate resolve, we would echo Climate Center's comments related to oil and gas tax expenditures to preserve the climate budget. The climate cannot wait for better fiscal conditions. And then finally, protection of the Extreme Heat and Community Resilience Program at OPR. Thank you.

Thank you very much.

Hello. Leslie Caldwell Houston for the California Public Defenders Association. I'm a retired chief defender for the Solano County public defender and I have 40 years of experience in indigent criminal defense. Public defender funding is essential to implement criminal justice reforms. Pilot indigent defense funding has saved millions of dollars for the state while keeping Californians safe and will continue to do so. Cutting these funds is pennywise and pound foolish.

We want to thank Assembly Member Bonta for her continued leadership for effective rehabilitation services, including re-entry support and workforce development, and highlighting the increasing incarceration costs. Thank you.

Thank you for your comments and for your service to the state.

Hi there. John Drebinger with the Steinberg Institute. We were heartened to see only limited proposed delays in behavioral health funding, noting, however, we do believe that bridge housing, BCHIP, and workforce dollars would have a more timely impact if they went out on time since those dollars will take years to have an impact.

We're also concerned about the proposed $7.8 million cut to the Board of State Community Corrections County data collection on the implementation of public safety realignment. This data is essential to ensuring we're using realignment dollars as intended to reduce recidivism. And without that data, we risk investing in programs that do more harm than good. Thanks for your work on these issues.

Thank you.

Good afternoon, Chair Gabriel and Vice Chair Fong. This is Megan Cleveland with the Nature Conservancy. Despite record-breaking state budgets, California's investments in natural resources and nature based climate solutions have not kept with pace and scale of the need. Historically, the state budget for natural resources has wavered around 5% of the state's budget, and this year, with the governor's 2024, 2025 budget proposal, that funding is reduced to about 3% of the state budget.

As the Assembly crafts their budget proposal, we encourage you to restore critical investments in nature-based climate solutions and biodiversity conservation. We particularly advocate for the restoration of funding for the Coastal Protection Package, which saw a lot of cuts and funding to the state Coastal Conservancy and the Ocean Protection Council to address sea level rise.

And then finally, just want to as California faces a sizable budget deficit for the second year in a row, we want to urge the Legislature to take strong action to lead on a climate budget that would provide critical investments.

Thank you very much.

Good afternoon Chair and Mr. Vice Chair. Melissa Cosio with Crime for Survivors for Safety and Justice. We are a network of over 50,000 crime survivors statewide. We just urge Legislature to reject the governor's proposal to delay funding for the flexible cash assisting program as it provides much needed support for survivors and their families. We also ask the Legislature to adopt a plan to close them with prisons. Thank you.

Thank you.

Good afternoon Chair and Members. My name is Ed Little with California's For Safety and Justice. We strongly encourage the Legislator to reject the governor's proposal to delay funding for flexible cash assistance for survivors of Crime Grant program. We also are advocating for further prison closures. Last year, the LAO analysis showed the state could close an additional five prisons by 2027, saving the state around $1 billion. We also thank Assembly Member Bonta for highlighting the cost of prisons.

It is important that the state commit to these closures now and reinvest savings in crime prevention, re-entry, and healing resources. Lastly, we are advocating for the Legislature to reject the proposal to pause funding for the adult re-entry grant. Thank you.

Thank you.

Good afternoon. Johann Cardenas with the California Pan Ethnic Health Network. Despite revenue shortfalls, CPEN commends the Governor for preserving the medical expansion for undocumented adults, the removal of the medical asset limit test, and continuing essential investments towards behavioral health and oral health.

However, we remain disappointed by the failure to include rate reimbursement increases for community health workers, promotoras, and health representatives. We believe community health workers are an essential resource for underserved communities and communities of color. We urge the Legislature and the governor to work together to support a base rate increase for community health workers to at least 87.5% of the Medicare rate. CPEN looks forward to securing your support on this effort. Thank you.

Hello. Melanie Morales on behalf of the Greenlining Institute, we are requesting implementation funding for SB 253. It was a globally acclaimed climate standard that was set by this body and the Administration last year. We're also going to be advocating very heavily to ensure that there's no delays to this implementation. Thank you.

Thank you.

Hello Mr. Chair and Vice Chair. Andrew Shane from End Child Poverty California. To be brief, we align with the Western Center on Lawn Poverty's comments. I would just highlight that on CALWORKS, we thank Chair Jackson for his comments and the acknowledgment by Department of Finance that these cuts will be painful. We're talking about 650,000 of the state's poorest children in households that are 90% moms of color.

And in fact, this will undermine the state's approach to the pilots, which will test real alternative outcomes in family stability, well-being and employment, yet at the same time cutting family stabilization and subsidized employment. So we need a new look at this program. Thank you.

Hi, Ann Quirk with Children's Law Center of California. We represent the children in foster care in Los Angeles, Placer, and Sacramento counties. When these children were removed from their families, California promised to keep them safe and take care of them.

We're asking California to fulfill that promise by maintaining the 18.8 million funding for the SOAP supplement to ensure youth have placements, the 13.7 Housing Navigation and Maintenance Program to ensure youth do not exit foster care to homelessness, and the 30 million for the family urgent response system to ensure people trained to address unique trauma.

Thank you very much. And I just want to remind folks we're really tight on time here. For those that maybe weren't in the hearing room earlier, we're going to notice today 61 additional hearings. So there's going to be a lot of opportunities during the process to comment. We are very eager to hear your feedback on all of this from the public, as we always are.

But there's going to be a lot of opportunities as we move forward discussing our budget process to really comment and dive into all of these issues in a very robust way. So don't feel like you have to comment today. There will be a lot of opportunities going forward to discuss the particular issues. The other thing that I would offer to folks is that you can submit written comments, as always, via the Assembly Budget Committee website.

So if you have a prepared statement that you're ready to read, if you want to just put that in the email and send it over to us, I promise that we will take a look at it. I just want to be mindful of the time since we're already about 25 minutes over when the hearing was supposed to end. And so with that, we're going to try to go now to even shorter public comment if we can.

Sarah Olsen with Environmental Defense Fund we just want to express concern with the delays that we see in clean air and transportation programs, as well as the cuts to the equitable building decarbonization program. We want to emphasize the need for investment in forest resilience management and workforce development to prevent catastrophic wildfire. Additionally, we're interested in seeing investment in successful programs like the multi benefit land repurposing program.

And we hope to see CARB receive the resources necessary to implement two SB 253 and 261, setting the state up for continued leadership. And we look forward to collaborating with the Legislature and Governor on this.

Thank you. Appreciate it.

Thank you. Good afternoon, chair and Members Tyler Rinde with the California Alliance of Child and Family Services. In the light of time, I would align my comments with the Children's Law center and concerns over the proposed cuts to the foster care system. Thank you.

Aj Johnson California competes echoing comments around Cal grant reform, affordable student housing and the bond solution in the budget. And I'll echo Children's Law center comments around foster youth housing.

Perfect. Thank you.

Savannah Jorgensen on behalf of the California Interfaith Power and Light and Lutheran Office of Public Policy asking for a restore to the Clean Air Programs. Thank you.

Thank you. Good afternoon, Mr. Chair. Malik Bynum with UDW AFSCME Local 3930 representing over 170,000 home care and childcare providers across the state, appreciate the administration's maintained investment in the IHSS space, including the expansion of medical inclusive of IHSS costs, but also look forward to working with you all on extending the current 10% over three years tool for state participation in locally negotiated wage increases and the IHSS career pathways program in the childcare space.

Thank you. Thank you very much.

We acknowledge the funding in this budget for provisions in our childcare contract from last summer. However, we respectfully urge the Administration to immediately implement rate reform and work towards fulfilling the goal of 200,000 slots for subsidized childcare when over 1.2 million to another.

Mr. Chairman. Members Tiffany White with SCIU California echo the comments on early education on early action related to health care minimum wage. Grateful for the ongoing public health commitments regarding the behavioral health we appreciate maintaining the funds, but the delays of the infrastructure may slow the progress. Disappointed in the delays related to the IDD funding oppose the proposed cuts for cowworks and child welfare, especially for FIRs and LA County CWS public health nurses.

We appreciate the commitment for funding for methodology for childcare, but it doesn't match the pace the state is going. We appreciate the efforts to close the funding gap in schools, but we urge consideration for layoffs and protections and we like to see some formal guarantees around higher education compact. And finally, regardless state employees, we're concerned with the proposals impacting vacancies and telework. Thank you.

Thank you

Good afternoon, Mr. Chair Members Barry Jardini with the California Disability Services Association, here to strongly oppose the governor's proposal to delay implementation of the developmental disability service providers rate reform. It's going to have a tremendous impact to access to services. Thank you.

Mr. Chair. Mr. Vice Chair. Andres Ramirez, on behalf of All Home, grateful for the Administration for maintaining round five Hap dollars. Look forward to working with the Administration Legislature to find funding for round six and the 1.2 billion cut for housing programs and on behalf of a number of cities including Hayward, Fremont, Pleasanton, Morro Bay and Mendota. Appreciate your commitment, Mr. Chair, to maintaining and keeping the dollars for district priorities. Thank you. Justin Garrett, California State Association of Counties one of our primary aims during this budget situation will be to advocate to preserve those safety net services that our vulnerable residents rely on.

Thank you very much.

Thank you very much.

And so while we are appreciative for the proposal to preserve some key recent investments, such as behavioral health and public health. We do want to highlight initial concerns with no new or ongoing funding for the HAPP program, which will make it more difficult to address the homelessness crisis, cuts to CALworks and foster care that will make it more difficult to provide support for vulnerable residents, and cuts to implementation of SB 1383. Implementation for diverting organic.

Becky Silva with the California Association of Food Banks. Food insecurity is still at record levels. The horrible images from news stories in the early days of the pandemic that I'm sure is seared in all of our memories. Lines of cars stretching for miles outside food banks. That is the level of service that food banks are still providing today. We're grateful for the governor's proposals to continue investing in California's landmark school meals for all and the national Cal Works pilot opportunity. However, we do have concerns about the complete withdrawal. Thank you very much. Safety Network. Thank you. Sorry. Thank you.

Thank you.

Thank you, todah rabah. Next.

Good afternoon, Lynn Berkeley Baskin, Bend the Ark. A Jewish anti hate and justice organization. We are asking the Legislature to reject the governor's proposed cuts to the public defense pilot program. Keep in mind that if this cut remains, we are undermining the work that has been done for years to increase public safety, restorative efforts that will change the trajectory of people's lives and cycles of harm. Restore these dollars. That evidence proves positive long term public safety outcomes.

Sofia Rafikova with the Coalition for Clean Air. We request the Legislature to reconsider cuts proposed to the zero emission and transportation budgets. Given the importance of these programs in combating climate change and air pollution. These climate transportation programs are not just nice halves. Rather, they're a vital part of the air safety net in the smoggiest State of the country. It's estimated that 7500 deaths can be attributed to air pollution each year in California. Though framed as delayed funding, the proposed budget essentially zero funds, zero clean vehicle programs for the upcoming budget year. This means communities will continue to be vulnerable.

Thank you very much.

Natasha Minsker, Smart Justice California. Close Prisons, Fund Victim Services, Fund Public Defense thank you.

Perfect. That's how it's done. Thank you, Natasha.

Eileen Cubanski with the county Welfare Directors Association here to express opposition to program cuts and eliminations that are going to impact the most vulnerable of California's families and children, including $300 million in ongoing cuts to CAL works and significant cuts to services for foster youth. Thank you.

Thank you.

Good morning, Graciela Castillo-Krings here on behalf of California Housing Consortium and enterprise community partners, really hoping that the Legislature will work with the housing advocates to restore some of the cuts that are being proposed on some of the core housing programs, including looking at a housing bond to help with the deficit. Thank you.

We look forward to doing that. Thank you.

Hello, my name is Alice Isip. I'm Patient Care Technician for Seniors Gateway San Diego, where I have worked for nine years. I have to say thank you to the legislators of the Governor for passing SB 525 last year, which set a new minimum wage for healthcare workers in California. We need all healthcare workers to have a minimum pay that helps and end short staffing and let us take care of our families. Thank you.

Thank you.

Susanna Knffin with Children Now asking the Legislature to reject cuts to children in youth in foster care. These cuts include prevention for young children, housing for older children, as well as the FURS program, which allows children to stay in family homes and avoid congregate care and law enforcement engagement. We remove them from their families. It's now your job to protect them. So please do so. Thank you.

Thank you.

My name is .... California and delegate with the Safety For All. And I hear support SFA 227 and ask you unpause the childcare. Thank you.

Fantil Isua paralla. Gracias. Just going to translate that very quick. She's Marisa De Leon. She's one of our Members for Paramboises California, also delegate for the safety net for all. And she's asking you your support for SB 227 and also to impose the pulse for those lots and childcare. Thank you.

Thank you.

Andrea Amavisca on behalf of the California Immigrant Policy center, we thank the Governor for maintaining our state's commitment to implementing health for all, as well as expanding California's food assistance program to immigrants over 55. We respectfully urge the Legislature and Governor to prioritize funding for food for all ages, expanding access to Covered California for immigrants regardless of status funding and creating a statewide excluded workers Fund and preserving the full $75 million investment for critical immigration legal services. Thank you.

Thank you.

Good afternoon. Ella Holman, representing the Housing Navigation Maintenance program that gives supportive services for over 1300 aged out foster youth. We give them hope on a daily basis as we see heroes for hope. Please support it.

Thank you so much.

Caryn Romero with Aspirinet, a statewide nonprofit organization serving foster youth and families in crisis. We're asking that you maintain funding for the housing navigation and maintenance program, the supervised independent living program housing supplement and the family urgent response system. Thank you.

Thank you.

San Francisco, California. Soy trovajadora De Lagar Esoida paratodos LA siete. Gracias. Gracias. Martha Vera from San Francisco in support of SB 227 with the safety net parole.

Thank you.

Buenos Tardes. The Pandel Ibango Le Sebedos benticiete Maria. Grandfather. His name is Roman. He's coming from Pearlville, California, also in support of the safety network. Something that he mentioned with it is that he's been here 30 years contributing to California. So if you can support the SB 270 will be great. Thank you.

Thank you. Thank you for translating honorable chair and Members Sammy Shaikh with Wildcat Consulting, representing California Community Land Trust Network speaking in favor of the foreclosure intervention Housing preservation program and your ongoing investment in this important housing justice strategy.

Thank you.

Amy Hines-Shaikh also speaking in support of the Foreclosure Intervention Housing Preservation program. Thank you.

Perfect. Thank you.

Wednesday Pope with John Burton advocates for youth. I'm here to ask the Assembly state Budget Committee to protect former foster youth and foster Youth win the state budget by maintaining funding for the Housing Navigation and Maintenance program, the supervised independent living housing supplement and the family urgent response system. Please support California's foster youth. Thank you. Thank you.

My name is Brittany Walker. I'm the Executive Director of Butterflies Haven. Silt funding has helped us provide housing for former foster youth while we also offer supportive services, which is a critical touch point to empowering our young people to realize their unlimited potential and create a lifetime of Independence and stability, often for the first time in their lives.

I am here to ask the Budget Committee to protect our foster youth in the state budget so that we can prevent the homeless rate amongst this population by maintaining funding for the Housing Navigation and Maintenance Program, the SILP Housing supplement and the family urgent response system, all of which are proposed for elimination in the Administration January budget. Please stand by California's foster youth. Thank you.

Thank you.

Jan Judson. I'm with a nonprofit called make it happen for Yolo County. We provide furnishings and household items for transition age foster youth. I'm here to strongly plea beg for you to continue to support the SILPS, the FIRS and the Housing Navigation Maintenance Program for Foster Youth. Thank you.

Thank you Assembly Member Fraser. It's always a pleasure. Thank you Mr. Chair and Mr. Vice Chair, good to see you again. I'm here representing The Arc of California and United Cerebral palsy, California. On behalf of the developmentally disabled in California, we are strictly opposed to the deferral of the DDS rate study implementation, the catastrophic occurrence that will happen if that is done to the service providers in California which are already having long waiting list, having a hard time getting employees.

This is an imperative funding mechanism that needs to occur. Look forward to your support. You guys have always been very supportive of the Legislature of the developmental disabled in California and we look to continue that dialogue. Thank you so much. Thank you and appreciate your passion and advocacy on this topic.

Good afternoon. Kim Stone of Stone advocacy on behalf of Persephone in support of the Legislature funding California Air Resources Board for implementation of SB 253 Wiener SB 261 Stern regarding carbon accounting, California can join Japan, the EU, the UK, Switzerland and others becoming leaders in having this important information available, not just to investors, but to policymakers and the rest of us. Thank you.

Thank you.

Melissa Romero California environmental voters here to voice that we are strongly opposed to the cuts and delays in the climate budget and urge the Legislator to work with the environmental community to maintain those investments and also to support the passage of a climate bond. Also want to mention the importance of funding the implementation of SB 253 and SB 261, Climate Corporate Accountability Act and the Climate Finance Disclosure Act, both incredibly important laws that need to be implemented.

Thank you, thank you and appreciate your advocacy.

Elena Pieri on behalf of series, I just want to echo the comments of the two speakers before me regarding SB 253 and 261 and say that companies covered under these laws are prepared to comply right now. Thank you.

Great. Thank you.

Abigail Smith on behalf of East Bay Regional Park District, Mid Peninsula Regional Open Space District, Save the Redwoods, Leaks and Providence Fund, and the Land Trust of Santa Cruz County, all strongly opposed to the proposed cuts to coastal resilience funding and the governor's proposal, as well as the cuts to wildfire funding. Climate change doesn't halt in a tight budget year. It'll only get more expensive the longer we wait.

Thank you.

Hello. Karina Paredes with the higher education team at Public Advocates here to Echo and uplift the support for Cal grant reform and affordable student housing. Thank you so much for your patience and for your time.

Thank you.

Hello Ines Rosales with Public Advocates on behalf of the K 12 education team. We're thankful for the governor's commitment to maintain the recent transformative investments in education, including community schools, universal TK and the equity multiplier, among others, and pleased about efforts in the budget to streamline the educator preparation process by eliminating the basic skills requirement. Thank you.

Thank you. Good afternoon. Rebecca Marcus, representing Leading Age and also a proud Gen Xer with my paper notes. We encourage the Legislature to do everything in its power to mitigate the cuts to housing and homelessness. In particular, we are concerned about the multifamily housing program and the infill infrastructure grant program, as well as the 500 $1.0 million cut to the 4% Low income tax credit program over at the treasurer's office. And we also ask that you reject the delays in funding for the HAP program. Thank you. Thank you.

Hello, Sam Wilkinson with the Cal EITC Coalition thanking the Governor for his proposal to protect our state's investment in low income refundable tax credits and urge the governor's Administration as well as the Legislature to maintain 20 million in funding for our free tax preparation assistance. Thank you. Thank you.

Good afternoon, Mr. Chair and Members. Mica Doctoroff, on behalf of ACLU California action, here to urge you to reject the governor's proposed cut to the public defense pilot program. The ACLU is deeply committed to ensuring that the guarantees of the 6th amendment are upheld and that all Californians are afforded the effective assistance of counsel when they are hauled into court in our state. Cutting this funding will deplete an already depleted system and we urge you to reject this. Thank you.

Victor Lira with Aveanna HEALTHCARE. We serve thousands of disabled Californians throughout the state. We also urge you to reconsider the delay of the rate implementation for dds. Thank you.

Good afternoon, Mr. Chair and Vice Chair. My name is Tony Anderson and I'm from the Association of Regional Center Agencies. We stand strongly in opposition to the delay in the provider rate, which represents essentially a $1 billion cut to the providers. That money goes to the direct support professionals who make community living possible. So we're standing strong against that also. Finally, the master plan. We want to make sure we have a commitment to the entitlement.

Thank you very much. Thank you.

Thank you.

Alexia Melendez Martineau with Plugin America. Thank you so much for your time today. We urge you to restore funding for California's clean air safety net in the form of the clean transportation program funding. Thank you very much.

Thank you.

Good afternoon. Alejandro Solis, on behalf of ... We'd like to thank the Governor for the inclusion of San Sea restoration funding and also highlight and encourage this body to continue, prioritize and protect AB 617 community air protection program funding as well. Thank you.

Thank you, Mr. CHAIR. Mr. Vice Chair. We'd like to thank the Governor for inclusion of the reduction in the work week for CAL FIRE firefighters and look forward to working with you on improving their health and safety. Thank you.

Thank you. Terry Mchale with Aaron Read and Associates, representing CAL FIRE. Thank you very much for the less onerous phasing in of the 66 hours work week. Thank you.

Excellent. Thank you.

Thank you very much. With that, we have concluded public comment. I want to again thank our very talented and hardworking staff. Want to thank all of the folks from the LAO and Department of Finance who joined us today.

We are off on a great adventure as we try to put together the state budget over the next 147 days. Appreciate this. Look forward to continuing the conversation, and this hearing is adjourned. Thank.