Senate Budget and Fiscal Review Subcommittee No. 5 on Corrections, Public Safety, Judiciary, Labor and Transportation

Good morning. The Senate Budget Subcommittee Number Five on Corrections, Public Safety, Judiciary, Labor, and Transportation will come to order. Good morning. The Senate continues to welcome the public in person and via the teleconference service for individuals wishing to provide public comment. Today's participant number is 877-226-8163 and the access code is 6948930 we are holding our Committee hearings here in 1021 O. Street. I ask all Members of the Subcommittee be present in Room 2200 so we can establish our quorum. Can we wait until?

Okay. We can establish a quorum. Okay, let's do that. Consultant?

[Roll call]

Okay. We have established the quorum. This Subcommittee Number Five today is divided into two parts, Part A and Part B. Part A will cover transportation issues, including California State Transportation Agency, Department of Transportation, California Transportation Commission, California Highway Patrol, and the Department of Motor Vehicles. There are 23 issues on today's agenda. We will have discussion, then public comment, and then we will vote on the vote-only items, one through 19. Okay? Yeah. Okay. We're going to move on to issue 20, which is the first one.

I just want to make a couple of comments on our transportation budget. Transit, infrastructure, and operations are a vital piece of California's response to the climate crisis, not to mention for other needs and issues. California invested $1.3 billion in nearly 19,000 climate projects last year. We have approved more than $5 billion for the transition to zero-emission vehicles, including almost 3 billion for electric vehicle charging and hydrogen refueling, and two and a half billion for a wide range of zero-emission vehicle projects.

But what about the families that rely on public transportation this year? Our investments in reducing emissions can make a real impact in communities that are not dependent on cars. This is why I and others fought to double our investments in transportation last year. In Los Angeles alone, the household income of 83% of metro riders is less than $49,000. We will not mitigate the climate crisis with addressing how these families, students, and working people move. Let's get started now with issue 20, transit operations.

Before we get started with the presentations, I want to thank Assembly Member Bennett, who started the conversation in the Assembly Budget Subcommittee Three and acknowledged that he requested the LAO to look into some options that the Legislature has in supporting transit agencies. And so we get the benefit from that request by hearing from the LAO on their preliminary analysis today.

So with that, first, let's hear from Frank Jimenez from the LAO's Office, who will start us off, and he will be followed by Mister Michael Pementel from the California Transit Association, and then we'll move on to California State Transportation Agency.

Good morning, Madam Chair and Committee Members. Frank Jimenez with the Legislative Analyst Office. We've been asked to present today on the overview of the state of transit in California. I'll be making my remarks through a handout which you all should have received. If not, it should be being passed around by the sergeants. For those that are watching the hearing online, our handout is available on our website at lao.ca.gov if you would like to follow along.

So turning to page one of the handout, as I mentioned previously, the Committee has specifically requested that we provide background on transit in California, discuss the operational funding shortfalls that transit agencies are projecting, and to identify various options for the Legislature in providing short-term fiscal relief to transit agencies. Turning to page two for an overview of transit, there are over 200 transit agencies that operate in the state, delivering services to the public through buses, trains, ferries, and paratransit vans.

These systems are generally owned by local governments such as cities, counties, and local transit authorities. Funding for transit comes from fare revenues, but as well as local, state, and federal sources. If you look at the bottom of the table on the far right, you can see that total funding for transit in California in 2019 was $12.8 billion. We use 2019 numbers to show transit funding under normal conditions.

Data and out years would have impacts related to the pandemic and also show federal relief dollars, which I'll get into later. If you look at the figure and operations, you can see 2.8 billion for operations and 4.6 billion for capital. A couple of takeaways is that local funding makes up the bulk of transit funding in the state. If you look at fares and fees, fares and fees make up about a quarter of operational expenses.

Not much of fares and fees go to capital. State funding I'll get on to for the next page, but if you look at the federal side, most of the federal funding that the state receives to support transit goes towards capital expenditures. That has historically been the Federal Government's role in this space. Federal dollars can be used for operations in very limited circumstances, such as for more rural transit agencies. Turning to page three, so the state provides funding to transit through several major formula and competitive programs.

These programs are largely funded on an ongoing basis from fuel taxes and vehicle fees, and a smaller portion coming from annual greenhouse gas reduction fund revenues. If you look at the top of the figure on the formula program side, the largest program is the state transit assistance, which provides general operational and capital support for transit agencies. It's estimated to provide about $1.0 billion in the current year.

Some of the other formula programs are smaller in scale and a bit more targeted in what those eligible expenses are. On the competitive side, the largest program is the Transit Intercity Rail Capital Program, also known as TIRCP. This program funds projects that reduce GHG emissions, vehicle miles traveled, and congestion, and it's estimated to provide $540 million in the current year. Not displayed in the figure, the 22-23 Budget Package provided $4 billion from the General Fund to temporarily augment the TIRCP.

It also included budget agreements to provide $2 billion in both the budget year and budget year plus one through TIRCP. Instead of being funded on its normal competitive basis, this $4 billion in the out years would be provided to regional agencies on a formula basis according to population. So local jurisdictions would dictate how that funding would be spent within their jurisdictions, but would still be for capital expenditures in alignment with TIRCP. Transit can also receive funding through other state transportation programs.

For instance, the state Transportation Improvement Program and the Solutions for Congested Corridors Program support highways, local streets and roads, and transit, with the state Transportation Improvement Program being a formula program and the Solutions for Congested Corridors Program being a competitive program. Outside of the transportation space, transit agencies are also eligible to receive funding from CARB's HVIP program, which provides vouchers to transit agencies to purchase zero-emission buses.

Turning to page four, as you can see, ridership was on a gradual increase from 2010 to 2014 and after that was on an annual decline and fell significantly in 2020 during the pandemic. When compared to 2019, ridership was 50% lower when comparing 2020 to 2019. Ridership has returned somewhat, but in 2022 was still roughly 40% lower than 2019 levels. Turning to page five, the pandemic significantly impacted transit agencies.

Transit agencies faced significant declines in fare revenues as ridership fell and declines in local and state funds dedicated to transit. The Federal Government provided nearly $70 billion nationwide in operational relief to stabilize agencies' budgets, prevent layoffs, and maintain service levels. This funding was provided on a formula basis and the state received $9.8 billion. As I mentioned previously, the Federal Government has historically provided funding for transit for capital expenditures, but the Federal Government deemed this operational support to be necessary to stabilize agencies' budgets.

Despite ridership and fare revenues not fully recovering, many transit agencies have been using federal relief dollars to sustain their current operations. Some individual transit agencies across the state are projecting operating funding shortfalls as they begin to exhaust federal relief dollars and as ridership is projected to remain below pre-pandemic levels. While some agencies are projecting shortfalls in the budget year, most of these shortfalls will occur in budget year plus one.

Unless these structural budget deficits are addressed, transit agencies will likely have to institute some combination of fare increases and service cuts. Turning to page six, as I mentioned before, the committees requested us to look at potential options in providing short-term relief to transit agencies. We've identified five potential fund sources for the Legislature to consider in developing a potential relief package. The first one being is providing flexibility over existing and planned funds.

As I mentioned earlier, the Legislature had a budget agreement to provide $2 billion in both the budget year and budget year plus one through the TIRCP program that would be allocated on a formula basis. Currently, that program is limited towards capital expenditures, but the Legislature could look into this program and open up this funding to allow for operational expenses. The Legislature could also redirect funding from transportation accounts and existing programs to the extent allowable under the California Constitution.

Transportation accounts and programs are funded through fuel taxes and vehicle fees. Some of these can be used to support transit operations, while others are limited in that aspect. The Legislature could also provide funding through GGRF, either the discretionary portion or redirecting funds from the existing continuous statutory appropriated programs. The Legislature could also provide additional General Fund.

Within the context of the state's current budget problem, this could be done through three ways, redirecting funding from the recent one-time and limited-term augmentations provided from the state's recent budget surpluses, rejecting and redirecting new General Fund spending proposed by the Governor in his January Budget, or redirect funding from ongoing activities. The Legislature could also raise revenues on a temporary basis, either by increasing state fuel taxes, vehicle fees, or other taxes outside of the transportation space.

We've also identified two statutory changes that could provide relief to transit agencies, the first one being continuing program allocation adjustments and suspension of certain financial penalties that were enacted during the pandemic. For example, many of the state's formula transit programs are allocated based on operating revenues of transit agencies from the prior year. The Legislature enacted statutory changes that made those allocations based on pre-pandemic numbers. Those exemptions and measures are expected to or will expire at the end of the current year.

The Legislature could continue those. The Legislature could also direct CARB to adjust its innovative clean transit regulations, which phase in a requirement for transit agencies to purchase zero-emission buses. The Legislature could direct CARB to make this short-term adjustment to agencies that are facing operational funding shortfalls but ultimately still keep true to the regulation's long-term goals. Turning to page seven, we've identified three areas for the Legislature to consider as it thinks about developing potential relief package.

The first one is defining the Legislature's primary short-term and long-term goals. Developing these goals will help the Legislature identify to what extent it wants to provide relief and the structure and conditions which go with relief. These goals could include providing time for transit agencies to develop long-term changes needed, mitigating equity impacts of potential fare increases and service reductions, or ensuring that transit agencies are able to help the state meet its climate goals.

The Legislature will also want to think about how to structure a potential relief package. These factors include timing, whether to provide funding in the budget year or a future year, duration over one year, or over multiple years. magnitude to address the full statewide operating funding shortfall or partially, structure the Legislature could look at providing direct grants to transit agencies or loans, and the distribution whether it should be need-based or formula-based.

Finally, the Legislature will also want to think about appropriate accountability measures to be tied to a potential relief package. Such measures could include requiring transit agencies to do analyses of their operations and ridership, requiring increased data reporting from transit agencies, not just those that are facing operational funding shortfalls, but transit agencies broadly, or increasing state oversight and management in this space. That completes my comments. Happy to answer any questions.

I think we're going to move on. We're going to move on to Mister Michael Pimentel from the California Transit Association.

Well, good morning, Madam Chair and Committee Members. I'm Michael Pimentel, Executive Director of the California Transit Association. We are a nonprofit trade organization that represents here in Sacramento more than 220 member organizations from across California's transit industry. Our membership includes transit, rail, and ferry agencies, MPOs, RTPAs, as well as the manufacturers and suppliers who provide goods and services to our industry.

I want to start by just showing my thanks and appreciation for the invitation to join you in the Legislature to discuss the operations funding challenges faced by California transit agencies and to speak to more specifically how we can work together to address them. I'll note that today's discussion is my third such engagement with the Legislature this year, having presented at a Joint Hearing of the Senate Transportation and Assembly Transportation committees in February and to the Assembly Budget Subcommittee Number Three in March.

Now, in my testimony this morning, I will restate several of the critical messages I delivered at those hearings, but I will also speak directly to the details of the Association's new budget request that request was delivered to Legislature and Governor Newsom this past Tuesday, April 25, and preceded the release of the Senate's Budget Plan, which we are grateful to see released just yesterday morning.

Now, before I proceed, I want to take a moment to thank you, Madam Chair, and your fellow Senators for including language in that plan that clearly communicates the Senate's commitment to working with us, the Assembly and the Newsom Administration to address the operations funding needs of transit agencies statewide.

Your continued interest and leadership on this issue is absolutely critical as we seek to address in calendar year 2023 an estimated $6 billion funding shortfall over the next five fiscal years against, as you know, a difficult state budget outlook. Now, our budget request letter goes into detail on this shortfall, but for today's purposes and for today's discussion, I'll highlight a few important facts that help contextualize the challenges that we face.

First, I'll note that the majority of our statewide need derives from agencies in the San Francisco Bay Area in Southern California, with the remaining balance deriving from agencies in the Central Valley, Central Coast, and broader Northern California region that would be exclusive of the San Francisco Bay Area.

And I state that because I think it's important to be clear that this is not an issue that is specific only to the Bay Area and that goes counter to some of the early press reports that we had seen on this issue.

Second, I want to note that these shortfalls are driven by a series of factors, many of them external, including one lost transit ridership, which itself is a function of changed commute patterns, rider safety concerns, and our state's housing affordability crisis, which have all reduced fare revenues. Two, increased operations costs driven by a tight labor market and supply chain shocks to our nation's fuel supply, which have driven up the cost of doing business. And then finally increased capital costs resulting from supply chain issues, inflation, and also the adoption of more expensive, cleaner transit vehicle technologies.

And I present this because we believe it's an important note to demonstrate why reforms or accountability measures alone will not themselves solve this crisis. Now, I also want to highlight for you that these shortfalls are most acute for agencies that have historically relied on choice riders as the base of their ridership, and that is to say, higher income riders who have the financial means to choose another mode or that today have the option to work from home.

These agencies are typically, though not exclusively, commuter-based systems like BART and Metrolink, which also historically had high fare box recovery and that, pre-pandemic, were viewed as some of the most productive services in California. Finally, with regards to timing, and Frank noted this quite well, the funding shortfalls really begin for agencies in Fiscal Year 23-24. They increase over time and are inversely related to the data depletion of federal COVID-19 relief funds.

So, as I present this information, I want to acknowledge that these statewide figures and General observations abstract what the shortfalls mean in practical, more tangible terms. And to put it plainly, these shortfalls mean less service to the communities across the across the state, with disproportionate impacts to our most vulnerable Californians, who today comprise the base of our ridership, layoffs, and hiring freezes for a workforce that is heavily unionized, that has robust collective bargaining protections, and that is a pathway to middle-class jobs.

It also means a slowdown in purchase orders for buses and locomotives, which, due to state policies, are increasingly manufactured here in California by union workforce. And finally, it means the wholesale erosion of our state's ability to meet our carbon neutrality goals.

And that is why we have been bold in calling on the Legislature and the Administration to provide multiyear transit operations funding in the Fiscal Year 23-24 Budget to address these immediate shortfalls faced by our industry and to support the implementation of an array of ridership, retention and growth strategies.

Our near-term state request is two-pronged because we recognize that each transit agency has different needs, but also because we know that the Legislature and the public expect transit agencies to adapt to new business models and to overcome factors like safety that are preventing Californians from riding our systems. And specifically, we are calling on the Legislature to provide $5.15 billion for transit operations over the next five years from a variety of funding sources that already support public transit capital and operations.

And these funding sources include an additional appropriation of sales tax on diesel fuel revenue for transit operations, which would total $1.36 billion over five years, which would not require a new tax but would require a General Fund offset.

We're also calling for an additional appropriation of discretionary cap and trade revenues totaling $2.5 billion over five years, conversion of $300 million in transit capital funding to transit operations funding in Fiscal Year 26-27 and 27-28 only, which would honor existing multi-year funding commitments to capital projects and then finally, flexibility in transit capital funding to allow for regions to flex up to $1 billion of the previously appropriated $4 billion for transit capital toward transit operations.

And on this last point, I want to note that that does assume that the Legislature and the Administration come to an agreement on maintaining that $4 billion that was previously appropriated in last year's budget. Now these suite of options were unanimously endorsed by a 15-member transit operations funding subcommittee that we oversaw, which included participation from agencies across the state, including agencies of different sizes and modal balance.

And moreover, this suite of funding sources was deliberately crafted to reflect the message we have heard consistently from the Legislature to limit, to the extent possible, new impacts on the state's General Fund and to seek flexibility from funding that already supports public transit. And we believe that the revenue generated from these funding sources will address the most immediate shortfalls, stave off the service cuts and layoffs that otherwise would materialize, and help us reach our near-term fiscal footing.

I also want to signal, as reflected in our letter, that we've heard your message on the importance of continuing to improve transit service and the rider experience to increase the attractiveness of public transit and to set transit agencies on a path to achieving long-term operational and financial sustainability.

Our members are responding to this message with iterative updates and improvements to their services, and we at the Association are responding to this by supporting important legislation here in Sacramento, including SB 434 Min, AB 1377 Friedman, which would support transit agencies in addressing street harassment and homelessness on our systems and by committing to participating constructively in the transit transformation task force process outlined in AB 761 authored by our two Transportation Committee chairs, Lena Gonzalez and Laura Friedman.

That process is geared toward identifying operational, legislative, and regulatory recommendations for improving public transit here in California and would also take on reforms to transit performance and accountability measures like those in the Transportation Development Act. Finally, as I close, I want to highlight that the transmittal of our budget request letter earlier this week does not in any way, end my association's work to internally develop recommendations to the Legislature on this issue.

We understand that both houses intend to establish an accountability framework around any new operations funding that the Legislature provides.

We are leaning into that legislative priority and are now working to develop recommendations for consideration by the Legislature for establishing accountability on the use of any new operations funding, and we intend to submit to the Legislature in the coming weeks an addendum to our budget request which includes these recommendations, which would balance the transparency and accountability objectives of the Legislature and the public with the agency's imperative for funding certainty.

And so with that, again, I want to thank you for the opportunity to present to you today. I know that we'll have a robust discussion and I'll be happy to take questions at the appropriate time.

Thank you very much. Thank you, Mister Pimentel. Appreciate that. Now we want to move on to Mister Chad Edison and Mister Carlos Quant from the California State Transportation Agency.

Good morning, Madam Chair. Carlos Quant, Deputy Secretary for Budget and Fiscal Policy at California State Transportation Agency. I just want to note that the Administration is aware of the challenges that transit operators are facing. We've begun our outreach to major planning organizations, statewide transit advocacy organizations, and transit operators, and have scheduled listening sessions to get input on the needs of the transit operators throughout the state. Those are scheduled for early May in both Southern California and in Northern California.

So we look forward to continuing working with the Legislature and stakeholders to develop a solution to address this problem.

Thank you.

In addition, Chad Edison, Chief Deputy Secretary of Rail and Transit at CalSTA, and in addition, we recognize that the state's role in supporting transit continues to be significant. Increasing transit ridership with an efficient and well-integrated rail and transit network has been and continues to be an essential strategy of this Administration as greater transit use both reduces greenhouse gas emissions and improves the safety of our transportation systems.

The revenue streams of both the state and Federal Government have been well designed, both by this Legislature through SB 1 and in the case of the Federal Government, through the bipartisan infrastructure funding that they put in place in 2021.

And we continue to support the administration of those funds that are increasingly healthy and robust this year as diesel sales tax revenues have risen significantly and are funding about 40% more state transit assistance and as the federal funding is about 30% higher than 30% higher than pre-pandemic levels. These are both funding sources that have some flexibility for both operations and capital, and their strength is really helping in some of this situation.

In addition, we have continued to put out our capital funding through the transit Interstate rail capital program that this Legislature provided through the augmentation last year of General Fund Dollars. The $2.5 billion that went to existing projects back in January supported over $8.25 billion of full funding grant agreements from the Federal Government, many of those to be signed in this coming year. So that funding that was provided is helping agencies go out and solidify their capital programs.

We were able to award another $690 million to new projects this week, and that money is helping obtain federal funding and solidify capital budgets so that agencies have options on how they spend the remaining resources. Having certainty around your capital projects for some agencies, and this isn't true of every single agency, can provide more resources for operations. And so in some cases that certainty that they have Caltrain was one example of this.

Having that certainty around their capital funding for their electrification project allowed them to be able to make firmer commitments to operating funding in the next year and two. It pushes off their fiscal cliff but didn't eliminate it. It still has one in the future. In terms of how we want to support transit agencies, continuing to run these programs well is part of what we're doing.

And of course, we're still talking to folks about other things that we can do that would help both from a statutory regulatory framework as well as how we can help be flexible in how some of our funding is used. On the category of the state's role in overseeing transit, a couple of notes I'd like to make there. The Transportation Development Act lays out most of this framework, and there are kind of three different activities that happen on a regular basis under the TDA.

One is an unmet transit needs assessment which is done locally and is done on an annual basis. The second is a fiscal audit that is done on an annual basis. That does not come to any of the state transportation agencies. It goes to the State Controller's Office and to the regional transportation planning agencies for their review. And then the performance audits that have been done historically every three years. There were some waivers on these during the pandemic.

Those are the only audits that come into Caltrans and are reviewed by Caltrans. So, you know, in terms of our role here, the primary agency role that we have on the funding itself is for the small rural and the rural and small urban operators where we have a direct grant-making role and help them with some of their Administration. And then on the performance audits, Caltrans sees these once every three years as they come in through the TDA requirements. Glad to take any other questions that come. Thank you.

Thank you. Okay, and we have Mister Moore, any comments?

James Moore, Department of Finance. Just want to echo what Mister Quant, his comments that we're aware of this real issue and are committed to continuing conversations to help resolve it. Thank you.

Okay. Can you, someone from CTA, can you describe? I'm sorry, did I miss? Which types of agencies are most affected by these budget problems, meaning there's urban, there's rural areas, suburbs, there's the Bay Area, there's Southern California, more populated, less populated, but still, who the ridership, you know, are? Could you talk about that a little bit?

Sure thing. I think we find from our survey data that the agencies that are most impacted by these financial shortfalls are agencies that have primarily provided commuter-based service, and so that would be things like our state intercity passenger rail services, our commuter rail agencies, and those bus agencies that had a strong focus on bringing riders into downtown cores. And for that, it's a fairly intuitive mechanic there.

Just recognizing that many folks are not coming into downtown centers any longer for employment or working from home, or are modifying their work schedule so that they have a hybrid model of coming into the office, and that has led to then depression in their ridership and their ability to recover from the pandemic. Now, because those systems have primarily supported what are white-collar, higher-income earners, those individuals were typically paying their full fare. As they were riding the systems, oftentimes there were partnerships with employers to support those agencies. All that has been now scaled back.

And those agencies, because of that model of having folks who could pay full fares, were generally more dependent on farebox for their operations, we would say that those agencies had a high farebox recovery. And so now that those riders are no longer there, the base of their revenue that supported operations is no longer there either. And so that's why for those agencies in particular, there are some significant challenges.

And I would contrast that with other agencies that have primarily provided service to more transit-dependent populations, folks that are lower income, oftentimes blue-collar workers who have always continued to go through, or rather go into downtown centers, go into their place of employment for work. Much of those jobs cannot be brought into a work-from-home dynamic, and those folks have continued to ride public transit throughout the pandemic, and those same agencies now are the ones who've regained the ridership at the fastest clip.

You can look at agencies like San Diego MTS, LA Metro, that have seen pretty strong ridership recovery for LA Metro. I believe the number's in the 70 percent for San Diego, in the 90 percent of pre-pandemic levels. For agencies that are commuter-based, oftentimes we find ridership recovery in the 40 to 50 percent levels relative to the pre-pandemic levels.

And so how does that, if you connected with what would be the best direction to go in as far as ridership and these trends, where does that aim you?

Yeah, I think where it aims us is toward a reinvention of our business model. Just recognizing that we may not be able to regain office workers to our systems, we have to be thinking about other growth opportunities, and so agencies are thinking through how they might change, for example, their schedules. Before, they would have a heavy balance of their service provided during commute hours, the start of the day, at the end of the day.

They're thinking through how might they smooth the services that they provide over the full balance of the day to allow for them to provide service that is much more similar to your local bus operator that's running service fairly consistently throughout the day. That provides an opportunity for agencies to capture either errands or recreational travel.

You're going to grocery store, you're going to the park, you might be able to ride public transit and with that, bring those riders in, shore up your ridership base, but it also provides an opportunity for them to do more work with regards to support for students, for example. A lot of agencies are leaning into the conversation of partnership with school districts, with California Community College system, with UC, and the CSU systems as a way of having a more sustainable base of ridership.

And so that is what we've seen as a dominant trend for our industry. But of course, all that reinvention and that smoothing over of their schedules and the services they provide are going to take time to bring into effect. We've got to do things like public notice requirements for the general public. We have to take in public comment on major service changes that we are providing.

We've got to do equity analyses in the changes to our service to make sure that there are no disparate impacts to communities of concern. All that does take some additional time. All that would require additional resources so that agencies have that runway for reinvention and then long-term sustainability.

And how does it impact when the ridership that's dependent on transit to get to work, to do the basics in life? How does that come into play here, either financially because is there a potential there in that group of people for more growth? So any more thoughts?

Yeah, I would say absolutely. One of the ways that agencies are approaching that is thinking through how they could, with additional resources, increase service levels, decrease headways, so that rather than waiting every 30 minutes for a bus, you might wait every ten or 15 minutes. That is something that we've seen from a national perspective as being a key driver of transit ridership.

If you can walk out your door and know that in the next ten minutes, a bus is going to be there, you're more inclined to do that rather than, say, checking your phone or checking a website and saying, am I going to make this bus or do I have to wait another 30 minutes or an hour? So there is a growth opportunity there. A lot of it will support the ability for those individuals to take more rides on public transit. We're also, though, wanting to address, and I mentioned this in my comments, the safety concerns that we've heard very prominently from the general public.

I think there is a mixture of one very real safety concerns that communities face, but then also two perceptions of safety, and so we do want to make sure that we are making improvements to ensure that there is certainly limited to no harassment on our systems, primarily for women, for people of color, for the LGBTQIA communities, but then also want to make sure that one of the things that has served as a turn for a lot of riders to come back to our service has been the incidents of homelessness on our systems.

And that is something that is an outgrowth of, of course, larger societal issues that are just, unfortunately, because we are one of the few still very open public spaces coming home to public transit. We've had some challenges in being able to access the dollars that the state has provided over these past few years. Frankly, that money has not been something we can directly access as agencies.

But there is a movement here in Sacramento to help modify that and require that there is greater partnership between localities who are receiving those dollars and the transit agencies. Recognizing that we're all in this together, we've got to be able to address these issues in a coherent and coordinated fashion, and so we're trying to make those improvements that would have impact on those who have never left our systems, who've been with us throughout the pandemic, and who have come back with greater force on our systems in this aftermath.

Thank you. That was very helpful. Anything else on the flexibility that transit agencies have with regards to the budget issues?

I would say on that front, one of the dominant requests that we have within our framework is that focus on being able to flex the $4 billion that was previously approved in the budget toward operations. Here we're recognizing that the state does not have limitless resources to address these issues, but you have already provided very robust support to the transit agencies.

If there is an ability for us to flex that at a regional level and make determinations as to regional priorities, we can use within the existing resources that we have some of those monies for addressing these really trenchant operations funding issues. I want to note for you that that type of flexibility is necessary, because, frankly, when we look at state and federal sources, there are often very key strictures that limit the use of those dollars toward capital and not operations.

That same type of requirement applies to, for example, all the funds that agencies are getting in the urbanized areas from the Bipartisan Infrastructure Law. We can only use that for capital, and so we are looking to bring online at that stateside that ability to flex the dollars again on a regional basis, based on regional priorities to address some of our needs. Here we're also articulating very clearly in some regions of the state, there isn't a significant operations funding challenge.

And in that case, as the Legislature had envisioned those monies to go to capital, they will go to capital, but we do want to make sure that we are being cognizant to the financial challenges that the state itself has in this discussion.

Great. I'm sorry, Senator Seyarto.

That's okay.

I've been taking up here all the time.

No, that's all right. Every question that you're asking is questions that helped all of us understand better a lot of these challenges, and I think the number one challenge is everybody recognizes that we have a real problem, and it's based on something that sometimes we don't have the ability to control, which is the ridership issue.

And so you've already talked about reinvention of the system, and sometimes it goes back to thinking about, okay, if we didn't have any system at all, what would we put in to be able to serve the underserved and make it all work? One of the things that you have talked about is finding other ridership to replace the well-paying ridership that has left the system, and I think that's something that's really important for the transit system if they don't tap into that, and that's usually a tourism type of effort.

When Metrolink was brand new down in LA, I used to actually enjoy, I'd drive up to the Rancho Cucamonga Port and take that into Downtown LA, and that was an enjoyable trip. It was clean, it was safe, we had people on there, the police, that would keep it safe, and we seem to be lacking a lot of that.

So given that the ridership issue is probably the number one thing that we're going to have to address, what are some of the plans that we're making to improve the cleanliness aspect? And then I'm going to ask for the other ones, the other impacts that are creating a negative perception of transit agencies right now.

Yeah. On this front, we've seen a bit of a scattershot approach for the agencies and it generally comes down to where are you operating and what is the severity of the issues that you're faced with. And so the agencies that I'm most familiar with in terms of addressing cleanliness, safety considerations have been those in the large urbanized areas, LA Metro, obviously in LA, BART in San Francisco Bay Area, also Muni in SFMTA.

And the way that they're choosing to approach these issues comes down to things like the establishment of ambassador programs where there are more eyes on the systems that are able to spot and serve as a deterrent to crime on those systems, also help with the cleanliness of the systems themselves.

We've also looked to programs that were recently established, like the Clean California Program that was authorized a few years back to allow for agencies to take access to new dollars for things like litter abatement at their stations, at their stops, to be able to do other types of visual improvements that can address both that cleanliness consideration but then also to safety perceptions. For example, lighting is a dominant thing that we hear about in our survey data around why someone might not take public transit.

And so those plans are moving forward. We have seen the three agencies that I just described and who are also some of the largest in the state move forward with these plans in this last year, and one of the things that we're going to be looking for in this conversation around operations funding is ensuring that not only are we accessing dollars to address those shortfalls, but that we also take a portion of those dollars and apply them toward these larger safety service improvements that will be necessary for us to grow the ridership. We recognize that there's an interrelation between those two. To the extent that we're addressing those issues, bringing riders back, we can help depress what are the needs for the agencies in those out years.

So I think making it a little bit more simple is when we hear, hey, we're investing money into the system because the system is broken and these are the things that are bothering us. And they show up at there, they decide to give it a try, and they go down to the train station, get on, and they see two people on that train that are on a thing of like four cars or something, and those people, all they're doing is keeping it clean.

They're going to say, hey, they are spending money on keeping it clean. I feel a lot better about this. If they see a transit police that can actually do something about deterring crime and deterring assaults and being able to stop the harassment that goes on with the groups you're talking about. But frankly, also, I don't like being harassed either when I'm doing a public transportation mode of transport.

And so those are the kind of things that if they see those things, they may start to leak back. But if we tell them we're going to invest in these things and we're making sure it's all got all the right words, but then they get on the train, it's still going on, they're never ever going to come back again and they're never going to take it to go down to Olvera Street in LA from where they are.

So I think we really have to drill down on that, and the reinventing is something that you guys are going to have to come up with. How do you serve who is left and the most reliable? Because that's the other part of it is you want commuters. Commuters need to be reliably at work at certain times. Have you guys done any average commute distance studies for the riders that are left over? How far are they commuting? Because that's going to be, I think, a big thing that you're going to have to take into consideration when you're reinventing how we're going to do service lines.

At a statewide level and within our association, no, but the individual agencies have, and part of how this comes into place is under what we call comprehensive operational analyses. These are plans that agencies conduct on a regular basis to evaluate their service lines, to evaluate the ridership demographics, the ease of access to the services, and then to make improvements to reflect what may be adjustments to how folks are using the services where people live.

And we have seen in the pandemic most of the large agencies move forward with those types of plans to be more reflective of what demand looks like. Now, one of the impediments, though, to the implementation of it has been one, funding, and then two, workforce. And one of the things that I did not address is the reality that we do have a very major workforce recruitment and retention issue. There are very few agencies that are operating today with the workforce that they had pre-pandemic.

And that has meant that even if an agency wants to increase service or wants to provide more coverage to address safety considerations, they may not have the workforce to do so. And so we are thinking through how we approach that as well. Part of it comes through things like hiring incentives, jobs fairs, things of that nature, but I would just stipulate that is a low-hanging fruit.

And we need to find a way to build out a pipeline of consistent workers that can go into our systems. That, too, is going to require that we address issues of safety, not necessarily specific to the riders, but to the operators who at times find themselves in the crosshairs of a public that is aggrieved, a public that is angsty about any number of issues. And so those are the types of things that the agencies have done, and, Senator, if there are more specific examples, I can certainly chase down that with my membership and present them to your office.

Yeah, I appreciate that because we're basically being asked to invest a tremendous more amount of money, and when we're investing a lot of money into transit and away from roads, that means we're going to have congested roads and nobody riding transits. And if that's the case, we're going to have a lot of frustrated people out there.

We want to make sure we're not throwing good money after bad, and that when we are investing in improving a program, a transit system, that it will not be the butt of jokes, basically, and not be reinforced by when somebody finally gets the gumption to go up and get on a train or a transit thing that they won't be met with exactly what they were afraid of, because like I said, that's just going to erode it even farther.

And then you'll never get that tourism base that we're going to have to replace people with because I don't know if the other part of it is ever going to come back because if it does, it'll come back at one-half or one-third of what it was. So anyway, I appreciate all of the information that you have given us today, and also that it's rather apparent that you understand all of our concerns that we have expressed before, and I appreciate that.

Did you go?

So I understand there was a past Statewide Needs Assessment, and again, I'm coming late, so you might have touched on it. Is there any consideration of updating that assessment?

So the answer is yes, and there is a process that is being overseen by a bill that was passed with the authorship of Senator Lena Gonzalez, I believe, last year, that was going to be taking a look at the transportation system as a whole featured prominently within it. It's going to be a focus on the transit needs, both from an operations and a capital perspective.

And as I understand it, the bill and its intent is intended to address very specifically what are going to be the needs of the systems over the long term, specifically to meet certain objectives of the state, whether it be climate, workforce, or air quality and equity issues, and so there is a process that is underway. I'll just note from our end, we have not yet received that invitation to participate in that process.

I understand it is just getting underway, but we understand, I believe, from conversations with the California Transportation Commission, that that process should be starting up in earnest and in short order.

And then, you know, with respect to some of the questions that you've answered in response to Senator Seyarto, reforms by operators who participate in the system, can you talk a little bit about past experience and kind of how you might apply that in the future to bring operators to the table for necessary reforms?

Yeah, so I think with regards to reforms, there are probably two ways in which I can address this question. One would be reforms to the services themselves, and then also reforms to the laws and the regulations that oversee public transit agencies. On that first front, on operational reforms, I think the way that we have approached this as an association and as an industry is, frankly, through leaning on one another. We are a highly collaborative industry that doesn't have any specific trade secrets.

We're more than happy to share with one another what are our best practices for bringing riders back, and from that, I would just highlight for you the dominant areas where there is potential for reform and improvement relate to the provision of service and its frequency and its reliability. There, one of the things that we are looking at very clearly is the need for there to be more transit prioritization on our city streets, on our county roads, but also on our state highway system.

The reality is that folks are going to be disinclined to take public transit if you hop on that bus, you hop on that rail car, and you find yourself stuck in traffic like everyone else. And so we as an industry have established some statutory mechanisms to allow us to move forward with a greater focus on transit prioritization to bring riders into our systems.

We're also sharing information with the state now through a process overseen by CalST and Caltrans under the Cal-ITP umbrella that speaks specifically to real-time information. Folks want to know when I can hop on that bus, when's the next one, and we are updating our information to feed into a larger database that's available to you on Apple Maps, on Google Maps, to allow for you to have some certainty on when that bus is going to arrive.

The final thing that I'll highlight on this front, on the operational front, has been that we are interested very much in sharing best practices on the safety considerations, and here there have been some best practices that have been adopted by BART and LA Metro specifically with an eye toward vulnerable communities.

And we have, within our association, promoted exactly what they are doing in terms of surveying their riders in terms of engaging deeply with the community groups that represent core constituencies and their ridership, and are putting that out as best practices that can be implemented by other agencies to address some of these long-term trenchant concerns. Finally, though, I do want to address what is that second band, which is more generally reforms to operations, to accountability.

And here, the way that we've organized that within our association is we've got various standing committees and task forces with distinct jurisdictions, zero-emission issues, operational issues, maintenance issues, and we seed from them, on a roughly annual basis, recommendations on things we ought to be pursuing from a legislative, a regulatory, or an administrative perspective to break past what are barriers to doing the things that either the agencies themselves want to do or the priorities that we're hearing from the Legislature and our constituencies that just need to be broken down and worked past?

And much of that came together fairly recently in the round of statutory relief that we had offered as recommendations to the Legislature in 2020 and 2021 that became law. We are going through another process of doing that same type of work.

Much of it will feature in the CalST listening sessions to be able to provide some further recommendations on reforms that can be pursued with a consensus focus from the industry, hopefully from the state, to be able to address some of these barriers to regaining ridership and having more stable systems.

I appreciate it. So, I know to your conversation with Senator Seyarto, clearly, the state systems are facing really meaningful challenges, but we also have a fiscal landscape that doesn't set up well for addressing those easily, directly. So I appreciate kind of the creativity that you've described in looking for additional sources of funds, but we've heard rumblings that some of the state highway funds may be looked toward for redirecting toward transit.

And I just have to say, I'm fully on board with all the work that needs to be done, but I won't support that. I think I'm one of many. We have worked too hard, and the challenges remain around transportation infrastructure and, I think, the promise we made to voters via SB 1 and Prop 69. So just as backdrop to that, I appreciate the work you have to do, but that's kind of the red line for many of us.

Yeah, totally understand that, and just note, as a party to those conversations on advancing SB 1 and supporting the No on Proposition Six Campaign, we as an association have taken a position where we are focused at this stage exclusively on the funding sources that are outlined within our letter. Much of that is focused on pulling from existing funding sources that support transit capital and operations. We've heard, I think, well, the feedback from the Legislature to reflect on a remark that Senator Seyarto made.

We have really tried to internalize your feedback and offering recommendations because we want to deliver a path forward that can have broad-based buy-in and lead us forward without there needing to be unnecessary tension between the operators and between the Legislature and ourselves.

Thank you, and thank you, Madam Chair.

I have one more thing.

Yes, sir. Of course, sir.

The last thing that I see in this umbrella of issues is that the Legislature, the state, the administration, pushing very, very hard on some of these goals, the climate change goals and stuff, and sometimes I see our agency heads and directors struggling to politely tell us that you're pushing so hard that we're collapsing a system, and I want to make sure that you know that we need to know that. You don't have to sugarcoat it. You could just say, you know what, that's unachievable and it's causing a lot of damage, but this is what we can do to eventually get to that goal.

So maybe instead of five years, we replace, we take a little bit longer, and that'll save us a tremendous amount of money and be able to not collapse the system and continue to serve a lot of people because I see a lot of self-inflicted wounds from our side. A lot of times, nobody wants to say, nobody wants to tell their boss that hey, this is not going to work because then the boss wants to find somebody else to do the job. Anyway, but we do need to know that, and if we're pushing too hard, we need to know that we're pushing too hard.

And I appreciate that comment, and I do want to remark that we have, over the last decade, established a very productive and very constructive relationship with the California Resources Board. I'll signal at times, specifically with regards to the early conversations about the transition to zero-emission buses, we were at odds, and we did have concerns, major concerns that we had voiced to CARB and to Legislature at that time.

But we were able to find a middle path, a compromise that was able to create a situation where CARB could move forward aggressively, but without compromising transit agencies. And just today, in fact, we were able to agree to and support a similar measure on the rail side, moves us forward with zero-emission transition for rail, but in a way that does respect the reality that we also have to provide service, and that service needs to be robust. But I'll also be candid.

If ever there isn't an issue on those fronts, we won't be shy about raising them to the Legislature. We understand that the paramount importance is getting people onto public transit. Zero-emission transition, of course, an important thing, but we need to focus on that mode shift as an industry.

Okay. I just have a few more questions. What are the local, I know there's a chart here, but what are the local and/or federal funding that agencies have considered?

Yeah, so there are very few options. I'll note first on the federal front, primarily because the strictures around dollars at the federal level for the large, urbanized areas are limited only toward capital. Now, I'll remark that the president's budget does include some language that suggests that Congress should authorize agencies to flex some of the capital dollars toward operations, but that does require Congress to act.

And I will just signal that with the divided Congress and the fracturous nature of the conversations there, may be very difficult for that type of proposal to actually be moved into law. And so that does neutralize for us the federal path on the state or rather local path.

There are conversations that agencies, I should say more specifically regions, are having around more self-help, and the dominant focus has been in the San Francisco Bay Area noted that that's one of the regions of the state with the most pronounced needs on the operations funding front. They are preparing to move authorizing legislation before the Legislature next year that would create a pathway for them to pursue a self-help measure, regional measure in 2026.

And so there are conversations that are taking place on that front, but what I would signal on that matter is that even if we were successful at securing a self-help measure, there is still some process and some timeline associated with when those dollars would actually flow to the agencies. And as I signaled for a lot of the agencies, that need is as immediate as fiscal year 23-24 or 24-25, we still will need some form of stopgap funding to smooth over into that transition to what may be self-help.

And along those lines. So what do you think transit operators should be required to provide for the state prior to receiving additional funds?

So I will note that this is still very much an active conversation within our association's membership. And I alluded to some forthcoming recommendations. But I'll highlight how it is that we are thinking about this particular question. We are thinking through the potential for there to be, for example, some front end requirements, some back end requirements, and I'll explain what that means.

The front-end requirements would be along the lines of attestation from the individual agencies that speaks to specifically the need that they have and that substantiates that need. That information could go through a public process, for example, in front of a transit governing board where it is approved through resolution, and that serves as a basis of an application or a form presented to the state that demonstrates the need for the drawdown of some relief funds on the back end.

We also want to just reflect that there's been a lot of conversation around accountability, oversight, making sure that more money doesn't go after what could be an unproductive end-use. And so we are thinking through, can there be requirements for the agencies and taking receipt of those dollars to say we are committing to new reporting requirements that speak to our recovery or reinvention?

There could also be perhaps some more dialed-in requirements, for example, requirements that if you haven't completed a COA, a comprehensive operational analysis, within the last few years, that you've got to complete one as a means of continuing to access those dollars. And so that's at the highest of levels how we're talking internally, but we are again looking to bring some recommendations to the Legislature. We do maintain standing meetings with your staff here in the Budget Committee and the Transportation Committee. We'll be using those as sounding boards for recommendations. Make sure that what we deliver to you has potential buy-in from you all who are going to be charged with making decisions before we move them forward.

I mean, it seems to me just the other is the issue of ridership is knowing more about the ridership and what are the trends, where is the ridership going. And not to treat it in a passive way, but what could be the trends? What could we do? And I think you gave examples of that, but in LA, 67% of the writers are between 25 and 64 years old. What does that mean?

I mean, they are working people probably, and you look at their income, but does it have to be that? And also, if they are the core of the ridership and there's room for growth in that ridership, what else do we need to be doing that's different from, like you said, describing the commuter ridership? So it seems to me that kind of information should be provided as well as part of a plan as to what the future is going to be like.

Otherwise, we're just providing help and relief and help and relief. The other item I would point out is the kind of workforce not only to hire right now but where are the opportunities for the future workforce. I'm probably going to say something that raises eyebrows, but if more buses, because they're flexible, if more buses is the way to go in certain areas for riders, then how does that compete with the capital that we need for longer-term and trains?

There's different ways of providing the service that the riders need, and some of them might be in conflict a little bit with each other, but they can all provide also future jobs and future good jobs. Think about the manufacturing of the buses here in California and not just getting them from elsewhere. That could be an enormous source of jobs here. So I just think we need to both look at the information, gather the information, look at it and think out of the box for the future. Just a couple of questions for Mr. Jimenez. Can you picture combining some of the options that you've identified and combination of options that provide the transit agencies a bridge until ridership is addressed?

Thank you for the question. Yeah. On page six of our report, we notify potential fund options for the Legislature to consider as it thinks about developing a relief package. These potential fund sources do not have to be thought of as in a silo and the Legislature can look at multiple fund sources and providing a total relief package over the short term. I will note that in many cases, the operational funding shortfalls that agencies are facing are ongoing. So as you mentioned, that ridership portion is key or raising additional revenues at the local level to ensure that when the Legislature does provide bridge funding that there is a bridge to sustainability for these agencies.

Okay. And in your opinion, how urgent is state action needed?

As mentioned earlier in our remarks, most of the shortfalls will be occurring in budget year plus one. There could be a rationale to provide some funding in the budget year to provide certainty to agencies that funding is coming so they don't have to make these cuts today so they can rely on state funds. But I would defer to the CTA on the exact amounts that they are projecting statewide in the budget year plus one.

Okay. Do you want to say something?

Madam Chair, what I would note for you is that we are estimating for this upcoming fiscal year, fiscal year 23-24 about $300 million in need. That increases fairly significantly to about $1.2 billion and maybe.

From 300 million to 1.2 billion.

In that fiscal year 24-25. And the reason for that is the point at which agencies deplete their federal relief dollars. Most agencies will deplete that relief funding in fiscal year 23-24 which means that come 24-25 is when that fiscal cliff hits. Now, what we find then is that then there is in essence a sustaining of that level of need carrying us out toward fiscal year 27-28.

Now, don't have the exact numbers before me, but that should give you a picture of really what is the immediate need granted in this upcoming fiscal year 23-24 relatively minor relative to what is the need over the long term. But we do see that major jump because of the end of the relief funds.

Okay. All right. Well, maybe there's, anyway we need to connect both the immediate, the urgency now, and also what are we going to do midterm and long term, and I don't think we have enough information gathered and in front of us to be able to do that. We're sort of just reacting, and I'm not saying that in a bad way, we're reacting to a crisis and otherwise we're going to be expected and we're going to be needed, not expected. We're going to be needed to provide $1.0 billion every year and we're just not going to have that unless it's part of a real plan.

Right. And I'll just highlight that on that front. As we've talked about this five-year package, we have requested that five years so we can build that time to have that more thorough, that more accountable conversation on that long-term need. A lot of that conversation is going to take place, as I alluded to, under a process specified under AB 761.

Of course, the legislation still moving through the Legislature has not yet been approved by the Legislature and signed to law by the governor, but it does establish a framework for having that types of needs-based assessment for the system as a whole, working collaboratively with the industry, with the unions, with ultimately transit advocacy organizations to come up with a plan forward that builds us into that long term path of sustainability.

Thank you. And just going back to the LAO, what do you think is the kind of information that we can request, and who should review the information and assess if it meets the criteria for the transit agencies to receive the funds?

Yeah, I believe Mr. Pimentel provided a couple options and we largely find those to be reasonable. Having transit agencies provide front-end information on what their current needs are, what actions they've taken, what their plan is to do with potential relief funding provided by the state, and on the back-end, having some sort of plan sent to the state indicating what their path is forward for maintaining financial stability on an ongoing basis outside of short-term relief.

I think that is a question that the Legislature does face on. If this information is provided, who would be reviewing these plans currently the state doesn't have a department that is as involved in transit operations as Mr. Edison mentioned. There's limited information that is sent to Calsta and Caltran.

So that would be something the Legislature would have to consider is who is the appropriate agency and does it have the resources and the staff and the expertise to be able to review these plans to indicate to the Legislature that these plans are sufficient? This information is good and provides the state some assurance that long-term stability is on the horizon.

Anybody else? Yes.

Rachel Ehlers with the LAO. Just to add, I think one of the key issues before you is that, as my colleague noted, the state hasn't played a huge role in transit historically. I mean, the state's given money for capital, but we don't have kind of a state transit agency that does a lot of intense oversight, nor are we the primary funder. And so this is a question for you as you're thinking about the future of transit.

Is that state-local relationship, is that something you want to change and rethink? And does the state want to play a much larger funding role, kind of on an ongoing basis or not? Do we want to play a larger oversight direction, policy guidance role, or do we still want it to be kind of locally based?

So as you're being asked to provide additional funding potentially for a prolonged period of time, I think that's really a key question for you to grapple with is what do we want the state's role to be, particularly if the state is going to be a bigger financial player?

Do we want to have kind of a larger role in policy direction as well, also, given our really important climate goals as a state and the role we're expecting transit to play, but we don't really have the kind of statewide infrastructure and governance in place at this point right now for that. So I think that's a key question for you, is how long-term do you want this to be? What role do you want the state to do and then what agency or entity is going to play that role? We don't really, as my colleague mentioned, have kind of an obvious choice at this point right now.

Yes, sir.

To Ms. Ehlers, you've raised a really interesting point, and I think it's obvious, especially given this conversation, that the state is going to play some role, given the systemic challenges faced by transit across the state. So my question for you is, are there other, I presume, large states that do have in place a statewide framework for either managing or supporting transit in the way you've just described?

I will defer to my colleague from CTA who probably has a better national picture. My guess is that states use different models.

I would say that we actually don't have strong visibility into what the other states have done on these spaces. But what I would highlight is that primarily when it comes to transit operations, this is something that's supported by local measures in rural areas with federal support. And that is a distinction from what I've been highlighting with regards to the urbanized areas. And so there hasn't been necessarily as outsized of a role in transit operations in other states.

Now all that said, I have seen some recent analysis that's talked about other states playing a larger role than California, but it's unclear to me at this stage on how much of that larger role also includes oversight, not simply a pass-through of funds. And so that's something we can take back and certainly perhaps pursue with our colleagues at the American Public Transportation Association, see if they have anything of a synthesis that can be provided for some guidance.

Again, I think it's a really important point. I think that would be truly interesting not just to this committee, but to other relevant policy committees. Thank you.

And I'll just clarify. I don't want it to be taken as a suggestion that the LAO is saying that this should play a larger role. But I think I just want to really highlight that this has been primarily locally funded and locally governed. Right? And so as the state is providing additional funding, are we still?

We're at an inflection point where given the challenges faced by local agencies, the state, especially in the absence of additional federal funds or windfall funds, the state is going to have to play a role. Right? I appreciate you bringing it up. I'm not construing that as direction, but I happily accept your offer to give us some more insight about how other jurisdictions are looking at this.

Well, either we play a role on an ongoing basis or we just give the relief temporarily and then move away from it. I'm just saying is I think you're right in making that. Mr. Quant or Mr. Edison, any comments, reaction to who should be the new agency to oversee this?

I think there's a lot of room for dialogue here about the best way to do this.

And you don't want to do it here.

So I will leave it at that for now. But I think that there are a number of potential roles that the state could provide benefit in, and we should have a discussion about the best way to do that, given the nature of the kind of help we're talking about providing.

Well, I would urge you to have that conversation so we could get some serious input and recommendations along those lines. Because I think you're absolutely right, is we're dealing with this on too much of a short-term basis, and if we're going to be serious about this one, we get the information, we're serious about responding and not just giving a lot of money as relief. If the information shows us that there's something way beyond the next two or three years, then we should be thinking about that right now. Mr. Seyarto?

Yeah. So my quick thoughts on that subject is the state absolutely does have a role, and that's to enable various regions to be successful, and they know their regions the best. And so identifying the tools and concluding the financial resources needed, I think that is a state role, as long as we kind of stay in our lane and don't try to create a new bureaucracy to try to deal with things, because I've seen the state overstepping their role in that respect, and it slows everything down and it makes it less, more cumbersome, and it decreases the ability of agencies to actually get their jobs done anyway. I think it's a little combination of both, but we don't want to become a new state agency to do that.

There you go.

And I would concur that a targeted role would be what would be best if the state were to take on additional responsibilities here.

Okay. Thank you so much. This has been very helpful. And I'd urge you all to keep stirring the pot here so we could come up with the best direction and short-term and long-term solutions. Thank you. Thank you all very much. Okay, we're going to move on to issues 21 through 23 with the Department of Transportation. Issue 21 is the indirect cost recover worry. So we're going to hear from Mr. Steve Keck from Caltrans and then Mr. Jimenez. Oh, that's right. I keep, sorry.

And then Mr. Moore as well. That was, by the way, especially helpful. The LOA's information is really helpful. Thank you. Okay, Mr. Keck.

Good morning Senator. Steven Keck with Caltrans. I'm gonna describe to you a little bit about the indirect cost rate proposal. So the indirect cost rate, or sometimes called ICRP, is how government agencies, including Caltrans, assign indirect costs that are not attributable to a specific project. Indirect costs are those kinds of costs that are general in nature, can't be pinned to a specific project, like equipment, like training, management, supervision. And we do this for two reasons.

One is so that we can accurately report on the cost of a project, and two, so that we can recover these costs from other entities when we perform work for those entities, and that is required under state policy. Our ICRP rate is calculated based on federal regulations and is subject to approval by the State Department of Finance and also the Federal Highway Administration.

The ICRP rate itself is a percentage of direct labor on a capital project, and it's applied to those payroll costs when it's billed out to reimbursing agencies or reimbursing governments. Our rate is broken down into two individual components. The first is what we call the functional ICRP rate. This rate reflects the indirect costs of Caltran's project delivery program in managing the delivery of individual projects. So that includes, again, like, general equipment that's used, training of the engineers who work on projects, their management, and their supervision.

The second piece of the ICRP rate is what we call the administrative rate. That includes Caltran's administrative functions, like myself, human resources, building leases, building operations, accounting, procurement, and all the way up those kinds of administrative costs. So ICRP reimbursements, taken together, are charged to outside entities only to defray the portion of Caltrans administrative work that applies to that project. So we're not distributing all of our overhead, just the portion that applies to that project.

And again, this is part of full cost recovery that's required by state policy under the state administrative manual. Starting in 2018-19 and sunsetting in December of 2022, state statute limited our administrative overhead to 10%, which is about a third, roughly, of our administrative overhead rate. And that applied to reimbursements from self help counties. The amount of reimbursements that we would have collected over that four and a half year period would be about $20.7 million.

And what we did collect under the reduced rate was $7.6 million over those four and a half years. So that's an impact of about $13 million to state funds that would have otherwise gone to our own projects over that four and a half year period. And with that, I'll end and be happy to take any questions.

Mr. Jimenez.

We'd just like to note that this wasn't a proposal in the Governor's Budget, so we have no direct comments or reports at this time, but happy to answer any questions that the Committee may have on this issue.

Thank you. Mr. Moore.

James Moore with Department of Finance, just echoing Mr. Jimenez. The cap expired on January 1. We haven't proposed to reinstate the cap. So happy to answer any questions.

Okay, so I just have a couple of questions. So what's the rationale? If you could zero in on this for ending the 10% cap on the indirect cost rate for self help companies?

Yeah. So it's my understanding, when that cap was put into place, to use that period of time to gather information on what the cost was to the state and enable the Legislature to make a decision in the future whether to continue that cap.

So there's certain work Caltrans performs for other partners, like high speed rail, some STIP projects, and the Department only charges the direct rate. So could you explain why you want to charge the full direct rate to self help counties compared to the other partners?

Yeah, that's a good question. So in all of those instances, there are specific statutory exclusions for us to do that. High-Speed Rail has a specific statute that we only require. I'm sorry. We only seek reimbursement for the project direct overhead. The PID program, which I don't know if you mentioned, has a similar thing. PIDS funded by local agencies are not assessed that administrative rate.

So absent a statute that exempts us from charging that rate, the state administrative manual, which is the state's policy, requires us to assess full cost recovery, which includes the admin rate.

Okay, Senator Seyarto or Senator Newman.

I assume we're going to hear from Self Help Counties as part of public comment or part of this? Part of public comment. I see. We'll get there. But the original cap was part of a Budget Trailer Bill a couple of years ago, is that correct?

Yes, it was part of the 2018-19 budget.

So in effect, I guess, at that time, to your point, it wasn't known exactly what the true costs were.

But in any event, looking back, that represented a subsidy of some kind, Caltrans to. I mean, effectively.

That is correct. So they end up being either costs to the local agency reimbursing us or costs to Caltrans. It's worth noting as I'm sure my respected colleague Mr. Dunbeck there will point out.

Who is pacing like a caged animal right now.

These are funds that are invested on the state system from the funds that are controlled by local agencies. So there is a consideration there that I will leave up to the Legislature.

I appreciate you. I'm sure we'll hear from Mr. Dunbeck soon.

So when you're looking at the difference between this 10% versus a 27.4% cap. Right, so that money that's in there that the counties don't wind up paying, they actually invest in projects.

Yes, just like we would.

So essentially, if they don't have that, then they have to get the money from somewhere.

Yes.

So they'll be knocking on Caltrans door saying we need additional funds or our door, which then we have to give to Caltrans.

Yeah, exactly. And that's kind of my point. It's a net sum zero. It's either we pay for it or they pay for it.

Right.

Somebody's going to pay for it.

Right. But at the local level, when you're sitting on RCTC and you have the money there, no disrespect to Caltrans at all, because I've had great success working with you guys early in the 2000s, building a gazillion bridges over Myriada. But it's kind of a struggle to get local projects done. That's why we have RCTC. That's why we did a local taxing agency, so that we could.

Obviously, I was part of RCTC at one time, just for a year, but I understand that system very well and I pay taxes towards it so we can do roads. So I think it's better for us to have the control, frankly, so that we can invest into the road system because otherwise, and also because right now the escalation of costs for these things goes on and on and on.

We have a $27 billion project that turned into a $47 billion project while it's going through the process. So it's kind of like somewhere we have to stop the bleeding. That bleeding has to be stopped by the state, in my opinion, and I hope some of my colleagues someday join me on that opinion. It's all a shell game to me, and I'd rather have people that are local steering those dollars into the most effective place to steer them. And I think that's from a local level.

So anyway, yeah. Understand the issue pretty well now, and I appreciate you guys helping us understand it.

Certainly.

Okay, no more questions. Okay, thank you very much on that. We'll now move to issue 22, best value procurement. Mr. Keck.

Thank you again. Steven Keck with Caltrans. So, best value procurement is separate and distinct from the conventional low bid procurement that you would normally be talking about, in that these contracts are awarded based on objective criteria that are set up before the advertisement of a contract that includes the price, features, function, and lifecycle costs of heavy equipment. In this case, we're talking about specifically heavy equipment.

In 2014, Assembly Bill 1857 allowed Caltrans to pilot a best value procurement program with the Department of General Services. That pilot extended through December of 2021, and during that time, we were able to purchase, through 50 purchase orders, almost $75 million of heavy equipment through this best value procurement method. As part of that pilot, in conjunction with Department of General Services, were required to submit a report and our recommendation of whether this should be made permanent.

We felt that there was very great value in this type of procurement, and we recommended it be continued. Thankfully, and thank all of you, it was as part of the 2022 Budget Act, Trailer Bill AB 157 included this permanently. So as we move forward, the language is very similar to what we had in the prior pilot. So we're already moving quickly with Department of General Services to implement this.

As an example, in the current year, the best value procurement was already used to purchase- is it 18 motor graders, which are a very specialized piece of heavy equipment that we use. And that was based on not only the price, but the cost of the extended warranties, the long term cost of maintaining this equipment, how accessible the repair shops were to where we would be using this equipment and all kind of part of the is it a really good value, not just what it cost us.

So, as we move forward, we look forward to continuing to work with DGS and utilizing this tool in future years.

Okay, that's great. Mr. Pollock.

Would just note, as hinted in the title, does add value and cost savings.

Thank you for pointing that out. So, with the example that you gave Mr. Keck, that you bought these 18 motor graders, it gives me an idea that you're already using the best value and your future. More procurements?

Oh, absolutely. Yeah. This is excellent for this type of specialized heavy equipment. Motor graders are sort of specialized, but there's a lot of stuff out there that is new that we're just getting into the type of equipment that can be safer for our employees out on the roadway and do things that we haven't done before, like automatically clean some of the bike paths that are next to our highways, things like that. Those are things we haven't done before.

So this kind of best value procurement allows us to get into that area that we haven't done.

It's great. And have you found any issues that would hinder the use of best value.

At this point? No. We're really eager to continue using this. And again, I should point out, and I think I was remiss, this only applies to heavy equipment and specialty equipment for Caltrans. It's not all of our contracting or even all of our equipment contracting.

And then just one more question. There was an update on a report on high road reporting in the best value procurement method. Do you have an update?

Yeah. No, that's a good point. In fact, I skipped over that part in my talking points. So there is a requirement for us to report on that. I believe that report is due in March of next year. And at that time, we will be reporting on the high road job information such as investment in job quality, access for unrepresented communities, meeting the skills and needs of the employers, the economic, social, and environmental needs of the community as well. So that'll all be included in that report.

Given that we're not too far on this already. I don't have an update on what will be in that report, but that report will be coming.

Okay. Any questions, Senators? Yeah. Okay. Well, we look forward to that report, and if there's anything before March of next year, you can pass it on to us.

Absolutely.

Okay. Thank you very much. We're done with issue 22. Move on to issue 23, implementation of SB 674. Again, Mr. Keck.

Thank you. So, as noted in your agenda, Senate Bell 674 established the high roads job in transportation related public contracts and grants pilot program. I'm very proud to have said that without stumbling. It's a very important program, though. And what it does is it really supports the creation of equitable, high quality transportation jobs and jobs in the related manufacturing and infrastructure areas.

The law, which was passed, I believe, in September of last year, requires a public contract awarded by Department of General Services, or DGS, or by Caltrans for the acquisition of zero emission transit vehicles or electric vehicle supply equipment valued at $10 million or more, must incorporate these high road jobs goals. The bill also requires that contractors awarded any one of these contracts must report annually all the information necessary to demonstrate their compliance with these high road jobs requirements.

And it also authorizes DGS to implement additional requirements or substitute requirements to ensure that we are getting that reporting from the contractor. Since enactment of this law, Caltrans and DGS have been working together with the Workforce Development Agency to develop and publish policies, procedures, and requirements applicable to any covered contracts. So I want to be clear and say we haven't awarded a contract yet.

We're still working through those guidelines and working very collaboratively with Department of General Services, and we're committed to continue our efforts to implement fully Senate Bill 684 in future acquisitions.

So right now, you're in the guidelines.

We're in the guidelines phase, correct.

What's the timeline that you're expecting before you actually begin to implement?

That's a really good question to which I do not have an answer. I know we may have a representative from Department of General Services She's over here. You beat me to it. I'll defer to General Services.

Great. Thank you.

Good morning. Angela Shell. I am the Deputy Director for the procurement division and the state's Chief Procurement Officer at the Department of General Services. So thank you for having us today. So, yes, as Mr. Keck said, we have been collaborating both with Labor and Workforce Development Agency and Caltrans. We at DGS currently have a budget request before the Legislature, and we are hoping to have approval of that once that is done.

That will be for the next budget year, and we will begin starting in July with developing our processes, our practices, and getting a more robust set of requirements out for these contracts that are coming up.

And what is the budget request for?

It's for some resources. So I believe it's two positions. To be able to assist us with the policy and procedure part and then the contract compliance and basically contract implementation.

And those positions in order for you to get started when?

Those would be for July 1.

Okay. So we don't have the procedures yet. So it's all relying on getting the resources for the two positions.

In terms of being able. Yes, in terms of being able to put our procedures in place and get guidance out for both Caltrans and DGS. We do need those positions. We have gotten started on our contract language based on high roads jobs, language that we already had implemented as a result of COVID emergency contracts. So we, again, have made some progress. We're just not at the point. We need the resources to be able to do the procedures beyond that.

Okay. So with respect to the labor peace agreement, anything that you have done?

All of that will be a part of the procedures when we put that together. But the high roads jobs language already includes the labor peace agreement requirement.

Okay. Well, we're looking forward to it. Senator Seyarto.

Okay. So we're trying to buy equipment, and we have to go through this process before we can buy equipment to make sure that the vendors are compliant in all of this stuff.

Oh, go ahead. Okay, so we will have contract language that will go into all of these contracts that are applicable to the bill. And that contract language will. In the solicitation, the advertisement of the contract will notify contractors that they must comply. And then the compliance piece, it'll go into the awarded contract, and then the compliance piece will come after that, where contractors will have to demonstrate to the state that they are in compliance with those contract requirements.

And this is for the zero emission conversion over to.

These would be for contracts that. Yes.

Get the equipment we need to convert over so we can stop polluting. We have to go through all of that part because the equipment is meant for helping build roads. Well, not anymore, but clean roads and things like that. Yeah. This one's for the transit.

This is for transit vehicles or the charging equipment in excess of 10 million.

Yes.

Right. Not the best value equipment that we've talked about previously.

Right. Okay.

They talked about previously.

That seems to be a lot of stuff going on to accomplish something that's going to get accomplished at the end anyway. And also, doesn't that narrow the pool of applicants.

Which means we have less competition for what's a good contract and what's in costs? In other words, if you have two people bidding on equipment or to supply equipment and projects, as opposed to 20, those two people are going to charge the taxpayers a lot more. So I think that's why I voted no on this bill. I think it was.

We'll stop right there. I've made my point. Thank you.

Okay. All right. I think that's it with SB 674. Thank you all very much. We appreciate all your information. Look forward to the implementation. 674. And again, thank you all. All your hard work. Okay, we're moving now to public comment. So as a reminder, today's participant number is 877-226-8163 and the access code is 694-8930 please keep your public comment to 30 seconds or less.

We are taking public comment on part an items in this hearing. That's just the transportation issues. We have a hard stop for public comment at 12:50. If you're not able to testify today, please submit your comments or suggestions in writing to the Budget Fiscal Review Committee. So again, I just want to emphasize that the length of time that we have available to us. We'll begin with witnesses here in room 2200. Go ahead.

Thank you, Madam Chair. Keith Dunn, Executive Director of the Self-Help Counties Coalition. I would just add in speaking to the indirect cost rate that those indirect costs exist for Caltrans, whether or not self help counties have the pleasure of building Caltrans system. As the previous panel indicated with Mr. Pimintel's comments, we're going to pass a local self help measure to help backfill that happened with the highway system decades ago. And we have been working on and partnering with Caltrans and building the project.

Those indirect costs exist absent our participation in building their system. This is an effort that we have worked with Caltrans to try and encourage additional opportunities to work with Caltrans engineers to build those programs and put a cap on just as the funding partners with high speed rail and others. Thank you for your time. Happy to answer any additional questions.

Thank you very much.

Thank you, Madam Chair and Members. Steve Baker with Aaron Read and Associates for the professional Engineers in California government. We join with the self help counties in asking this Committee to reinstate that statutory provision on the indirect cost recovery program similar to what the High-Speed Rail Authority enjoys. Prior to 30 years ago, there were no self help counties. There wasn't enough revenue. They had to go out and raise money to do it.

As it's essentially state work, we don't think it's appropriate for them to overpay for those overhead costs and should revert and put back into the statute that program. Thank you.

Thank you. Thank you very much. Any more witnesses here in room 2200 that want to speak up? Okay. Moderator if you would, please prompt the individuals waiting to provide public comment, we will begin.

Thank you, Madam Chair. For those who wish to comment, please press one, then zero at this time.

We're first going to go to line 42.

Good morning, Chair Durazo and Members. Kate Breen, Director of Government Affairs for the SFMTA in San Francisco under issue 20. Appreciate the Committee's ongoing interest in this issue and the discussion today and your request for the LAO report.

We continue to urge your support for short term relief funds for transit operations to ensure continued sustainable transit service throughout California and would commend to you the specific proposals now on the table and urge you to consider all options, recognizing that it will take a creative package of revenue ideas to address the fiscal cliff problems for agencies across the state. Thank you for your leadership and support today.

Thank you. Moderator could you tell me how many people are waiting to testify.

Madam Chair. In total, we have seven people who signaled they wish to speak, and there will be no more.

Okay, thank you very much. Go ahead.

Line 46, your line is open.

Madam Chair and Members. Sara Flocks of the California Labor Federation. I would like to speak on issue 23, the implementation of SB 674, a bill we supported. And we would urge DGS and Caltrans and the Labor Workforce Development Agency to work together to develop strong and adopt strong implementation policies that ensure the creation of high road jobs with good wages and benefits that rebuild our middle class while transitioning to zero emissions vehicles. Thank you so much.

Thank you. Next.

Line 37, your line is open.

Good afternoon, Madam Chair and Members. My name is Emily Gartenberg with Jobs to Move America. I'm calling to request that DGS and Caltrans establish a robust plan for implementing SB 674 to the fullest extent possible. On average, the wages and benefits of clean energy jobs in California lag significantly behind those in combustion based industries. SB 674 addresses this by supporting high quality job creation while also protecting the state's interest in cutting emissions quickly and efficiently.

We respectfully request that you take the recommendations provided to you from JMA and the coalition of labor, environmental justice and community groups into strong consideration. Thank you.

Line 11, your line is now open.

My comment is on issue 20, transit operations. Good afternoon, Senators. My name is Michelle Overmeyer and I'm with Monterey-Salinas Transit. We're located along the state Central Coast and we're a Member of the California Transit Association. I want to thank you for your work on the recent budget plan that was released and protecting the full balance of the previously approved funding for Transit and Intercity Rail Capital Program.

I appreciate your acknowledgment that public transit is vital to the state's economy, and I would hope that you continue to work with the California Transit Association. At our organization, we're seeing a slow and steady increase in ridership, but we're still facing a $6.1 million deficit in the upcoming fiscal year. I would encourage you to continue your work with the CTA and thank you for your support of public transit.

Thank you for calling.

Line 45, your line is now open.

Good afternoon. Steven Jones from AC Transit in Oakland, commenting on issue number 20. Just want to echo the calls from our transit agency partners and the California Transit Association to deliver much needed operations support to the transit industry across California. At AC Transit, we're facing a $143,000,000 deficit over the next several years. The cost of delivering our service continues to increase and in fact, the cost of bus has just shot up more than 30%.

So we sincerely appreciate that capital funding was provided in last year's budget, but operations funding is what we need to recover from the pandemic, keep our essential public service on the road. Thank you so much for your time.

Thank you for calling.

Line 47, your line is now open.

Hi, my name is ..., and I'm the Environmental Justice Organizer with West Wayne, California. I'm calling to urge EGS and Caltrans to commit to the strong implementation policies outlined by Jobs to Move America, my organization, as well as other leading labor and climate groups across California to implement Senate Bill 674. As we transition to zero emission transit vehicles, it's essential that workers are not left behind.

EGS and Caltrans have been presented with a critical opportunity to support the creation of jobs, quality wages and benefits for workers across California by committing to the robust implementation policies that we've outlined. We respectfully request that you take the recommendations provided to you into strong consideration as you develop your plans. Thank you again for your time.

Thank you.

Line 19, your line is now open.

Good afternoon, Madam Chair and Committee Members. Zak Accuardi at NRDC regarding issue 20, fiscal clip for transit operations is one of many hard problems in this budget season. But historically, high federal funding points toward at least one relatively easy solution. Roughly $25 billion infusion to the state highway account from federal funds over the five year duration of the bipartisan infrastructure law should make the state highway account a clear priority for finding the roughly $5 billion needed to help transit survive and ultimately, to thrive.

Thank you for your time and attention on this critically important issue.

Thank you.

Line 44, your line is now open. Line 44, your line is open.

Good afternoon, Madam Chair and Subcommitee Members. My name is Chris Markuson. I'm the Western States Director for the BlueGreen Alliance. We unite labor unions and environmental organizations to solve today's environmental challenges in ways that create and maintain quality jobs and build a clean, thriving, equitable economy. I'm also calling to echo others, encouraging DGS and Caltrans to commit to strong implementation policies outlined by Jobs to Move America, BlueGreen Alliance and others.

We recognize that as we transition to zero emission vehicles, it's imperative that workers aren't left behind. And so we respectfully request that you take the recommendations provided in the strong consideration as you develop your plan.

Thank you.

Madam Chair. We had additional people join the queue. We now have six left. Line 49, your line is now open.

Okay.

Good afternoon, Madam Chair and Members. Jim Lights on behalf of the San Francisco Bay Area Rapid Transit District. Mr. Pimentel's comments, especially in response to some of your questions, very strongly outlined a lot of the challenges that BART is facing in trying to bring back ridership in a region where work at home has taken hold. San Francisco vacant office space is at 22% and expected to grow, and I think another illustrative fact of the challenges for ridership in the Bay Area.

We very much look forward to working with this Committee and the Legislature and the Administration to address operating funding going forward. Thank you very much.

Thank you. Next.

Line 48, your line is now open.

Julia Tuer with the San Diego Metropolitan Transit System speaking under item 20. We'd like to first thank the Senate for proposing to protect the full balance of previously approved funding for the TRRCP, and we also appreciate the Senate acknowledging the need to address Transit Agency's operating deficits. MTS, among its peer agencies, is committed to continuing the important work with CTA to secure vital operations funding for public transit and urge your support in this effort. Thank you for your consideration.

Thank you. Next.

Line 52, your line is now open.

Hi, this is Holly Fraumeni De Jesus with Lighthouse Public Affairs calling on behalf and representing SPUR, the San Francisco Bay Area Planning and Urban Research Association as part of an advocacy coalition working to secure the needed one time relief funding for California's public transit systems. We appreciate and acknowledge the critical issue and how this has been prioritized in the state, democrats protect our progress budget plan released just yesterday and the ongoing commitment of the state to help our transit system survive and thrive.

California's poorest and most vulnerable residents rely on transit and the state cannot achieve its ambitious climate goals without a robust and healthy transit system. We won't get there if our most productive transit operators go over a fiscal cliff. And to avoid this outcome, we need a multi year commitment of one time funds from the state as the budget process advances. We encourage you again-again we thank you for your support and hope that the budget will continue this as we move forward.

Line 53, your line is now open.

Thank you. My name is Jonathan Matz. I'm calling from the Safe Routes Partnership. I wanted to echo previous comments and thank you for making the efforts to restore funding to critical transportation programs. I wanted to particularly highlight the active transportation program and really stress the importance of ensuring that after the largest cycle ever last year, we don't actually go backwards and go back to a situation which is only enough funding to support 20 or fewer projects for biking and walking throughout the State of California.

It's critical that we put our money towards actually implementing the changes we've committed to in the state in reducing VMT and increasing accessibility for walking and biking. So wanted to express support for those proposals in the Senate budget yesterday. Thank you.

Line 43, your line is now open.

Good afternoon, Chair Durazo and Members of this Subcommitee. My name is Omer Sohail. I'm with the quarter million members of the United Auto Workers Region 6. I'm speaking on item 23. I'm just calling to urge that DGS and Caltrans commit to the strong implementation policies outlined by our union, as well as Jobs to Move America and others. Thank you.

Line 51, your line is now open.

Good afternoon, my name is Ian Griffiths with Seamless Bay Area, a nonprofit that advocates for an integrated, world class public transit system in the San Francisco Bay Area and wanting to first thank you and the Senate for releasing its draft budget framework with some acknowledgement of the operations funding need and the fiscal crisis facing transit agencies. Spend with our other partners and transit agencies in advocating for multi year operations funding to get us through the next couple of years.

And here in the Bay Area, we are keenly focused on passing a major ballot measure, but we need more time. We need to make sure that that is set up for success. We're in the midst of investigating revenue sources. We're identifying the policies that can lead to a transformed, improved, seamless system for riders, but that does require that we have funding to carry us through the next few years in order to be able to have the conditions for a successful measure in 2026 or 2028.

And that's why the multi year funding from the state, the state is uniquely positioned to help the Bay Area get to that point.

Thank you.

pass the transformative ballot measure.

Thank you. Thank you very much. Next.

Line 40, your line is now open.

Good afternoon. Emily Loper with Bay Area Council. We're representing over 300 major employers across Bay Area and we urge your support for a multiyear funding commitment to ensure that transit survives this crisis so that it can thrive moving forward. Public transit has long been the lifeblood of our economy and it remains today. Despite the rise of remote work, residents of all income levels still depend on transit systems across the state to access their jobs.

And if these service cuts make it so difficult for people to commute, we risk losing our workforce and the economic engine with them. Severe service cuts would also really increase traffic and make it harder for everyone to move around. As you noted in the discussion, there's certainly fewer commuters riding transit these days, but we have extensive data that shows there's still a great opportunity to attract commuters back to the systems if we implement key improvements, including making them safer, cleaner and more memorable. But we can't make those improvements if the systems fall apart. Thanks very much.

Next, please.

Pardon me, Madam Chair, we have one more person who's queued up to ask a question. Just a moment.

Thank you.

And for that person, please press one, then zero. Pardon me Madam Chair, just another moment, please. Line 55.

Hello and good afternoon. I'm Joe Taxpayer from San Diego County. I think there should be a centralized agency to manage public transportation in the same manner that there is centralized agencies to manage state highways. Yeah, thats about it.

Madam Chair, pardon me, we do have one final person. Line 54, your line is open.

Thank you. Good afternoon, Senators. This is Devon Ryan, Government Affairs Officer at Caltrain. We echo the comments of the California Transit Association, want to thank the Senate for proposing to protect the full balance of previously approved funding for the Transit and Intercity Rail Capital Program. We appreciate the Senate for acknowledging the need to address transit agencies'operating deficits and want to urge you to continue to work with CTA to address this fiscal crisis for transit agencies in the state. Thank you so much.

And, Madam Chair, there is no one else.

Okay, thank you very much. We're going to move now to the vote only calendar. We've been asked to split the votes, take up the issues in two groups. So we're going to have two votes, two groups of votes, and I would ask for a motion on a vote only. Issues 3, 6, 8, 9, 11 through 19. If could I have a motion to move those issues. Senator Seyarto moves that. Consultant, please call the role.

[Roll Call]

Okay, the motion is approved. Thank you very much. We now move to. And I ask for a motion on the vote only. Issues 1, 2, 4, 5, 7 and 10. Moved by Senator Newman. Consultant, please call the role.

[Roll Call]

Okay, motion approved. And that's it on the motions. Okay, thank you to everyone who participated in the public testimony. If you did not testify, you can submit your comments in writing to the Budget and Fiscal Review Committee or visit our website. Thank you. We appreciate everyone's participation. We've concluded the agenda for part A of today's hearing. We will now move on to part B. We're going to take a five minute break to stretch out. Thank you.

We're going to move to Part B of the agenda covering several key issues in the Judicial Branch and the Department of Justice. All action items will be held open so there will not be any more votes today. We will take public comment on all items at the end. So let's begin with Part B, item one, which is Eviction Filings and Access to Legal Services. First, we will hear from Leah Rose-Goodwin from the Judicial Counsel.

Thank you. Thank you. Appreciate it. I am Leah Rose-Goodwin. I'm the Judicial Branch's Chief Data and Analytics Officer, and I'm here to give an update on filings trends in unlawful detainer matters through the Covid-19 pandemic. I'll be referring to some pieces of data that are posted on the public website as well as available outside for anybody watching. So just as a quick overview, I'm going to talk about statewide trends in these matters.

But we do have these trends available for individual jurisdictions, and I invite all of you to use our public dashboards. They are available at the link courts.ca.gov/dashboard. On those dashboards, again, you can view individual jurisdiction trends. So overall, our statewide annual filings in unlawful detainer have markedly changed as a result of the pandemic.

In the two years prior to the pandemic, annual unlawful detainer filings hovered around the 130,000 filings mark. When the emergency orders were first put into play in the spring of 2020, we saw an immediate decrease in this filings type, and in the fiscal year 2020/2021 filings in this matter dropped to their lowest point, 35,000. We're seeing some signs of an increase again in filings.

The filings for fiscal year 21/22 were right around 70,000, so twice as high as the prior year, but still about half of what was filed in the pre pandemic period. Moving on to slide five for those who are following along in the handout. If we take a look at that last year of filings data and look at the data on a monthly basis, filings in the latter months of the 21/22 fiscal year appear to be approaching or reaching pre pandemic levels.

We've looked at data from June 2022 to a more current month, but we don't have complete data from all courts. We only have some preliminary and unvalidated data from a number of courts, including some of our largest courts like Los Angeles. So we can get a sense of the trend, even though we don't have validated data to display yet. What we see when we look at some more current months is that UD filings appear to be staying consistent with the trend seen in May and June.

So again, matching pre pandemic levels. But we are not seeing these filings exceed or reach or approach anything like a tsunami of filings where they exceed pre pandemic levels. Moving to slide six, I was also asked to speak about the impact of these filings on other filings types. I polled several jurisdictions, several large courts, and asked them to see if they could triangulate impact of UD filings on other matters such as small claims or debt collections.

Only one jurisdiction noted some increases, some minor increases in those adjacent filings types, but also noted that the filings in those case types have been lower than pre pandemic levels. Another area that I want to speak about is about clearance and backlog. So the judicial branch monitors caseload clearance as a way of understanding any sort of workload factors or backlogs in this case type. I have a table showing unlawful detainer matters as they compare to total case types.

So to read the table from left to right, unlawful detainer matters before the pandemic averaged about 10,000 a month, whereas all case types about just over half a million. The clearance rate before the pandemic. So clearance is taking your dispositions over filings. It's a measure of workflow. Clearance in these case types was right around 100%. Compared to all other case types, that clearance rate was 86%. During the pandemic, the number of average filings in unlawful detainer dropped.

The clearance rate for those for unlawful detainer filings was right around 89%, which compares favorably to all other case types, which is also 86%, also matching the pre pandemic rate. So courts are clearing all cases at the same rate as they were prior to the pandemic. When we average across all case types, unlawful detainer matters are clearing favorably, although it appears that they're clearing less - at a rate that's slightly lower than before the pandemic.

We would expect to see a little bit of that as courts have restored hearings and matters in this case type, and we continue to monitor this data quarterly. I next want to speak about getting assistance in these case types. I want to mention that the judicial branch does provide extensive information to parties that need assistance. We do that for all case types, including unlawful detainer matters.

And I have a screenshot here of the self help website where litigants can go to get information where even people before they file a matter or involved in the case can get information about some of the different processes available in California courts. And we do some analytics on the website visit and website traffic on this site. And we do show that there has been robust information seeking from parties in this type of matter and UD matters.

But to contextualize that a bit, I'll let you know that the number one matter for which Californians seek assistance continues to be divorce matters. And what we see is for every 10 people that seek information on divorce, there are five that seek information on eviction or UD matters. So there is robust interest, but it's still much lower than some of our most common website requests.

So just to recap the information provided, we are not seeing what we would call a tsunami of cases where the cases are exceeding the pre pandemic levels. We do continue to monitor workload in this area. There are a couple of jurisdictions that have recently lifted moratoriums in this area, and I am happy to answer any questions.

Great. Thank you very much. Oh, yeah. But I just thought if there were some particular questions. Okay. All right. Thank you very much. And if you would stay here with us. Okay, wonderful. Okay. I want to introduce the rest of the panel that is with us here today. Okay. Anita Lee from the Legislative Analyst Office, Julie Rogado from Legal Services of Northern California, Adam Murray, Inner City Law Center, Nicklas Akers from the Senior Assistant Attorney General Public Rights Division of the DOJ. And is Mr. Theodorovich here? You're here. Needed. Okay. I'm so sorry. Say it for me. Theodorovich. Oh, that sounds much better. Theodorovich. Thank you. Okay, who's going to start first? Ms. Lee? Thank you.

Anita Lee with the Legislative Analyst Office. So the Committee asked us to compile information on state funding provided to support legal assistance for housing and evictions. Committee Members, I believe you have a copy of the handout in front of you. For those who are following along, it is available on both the Senate budget as well as the LAO website. If you turn to page one of your handout. The handout, as well as our comments are really kind of grouped in three areas.

We're first going to be talking about the legal assistance supported with state funding provided through the Equal Access Fund program as well as the Shriver program. We'll then turn our attention to the 11 legal aid organizations that are supported by some of the state funding but also receive federal funding. And then we'll conclude our comments with some insights into the trial court's self help centers. So if you turn to page two of your handout, we're first going to focus on the Equal Access Fund program.

This program generally supports the provision of legal services and assistance to indigent and selfrepresented people in civil cases, which does include eviction and housing cases. If you look at the table before you on this page on the left hand side, you'll see that various fund sources support this program. Looking at the top half of the program, you'll see that tens of millions are provided for general use across civil matters - just generally. The bottom half of the table shows that in recent years the Legislature has appropriate funding for very particular purposes, which has included in some years specifically for housing and eviction.

If you turn to page three of your handout, for the funds that are appropriated for general use broadly, state law does require that the funding be allocated in a particular way. So at least 90% is distributed as formula grants to nonprofit legal services providers for the provision of free civil legal services and assistance to both indigent and underserved people. So about 100 providers are currently supported by this type of funding.

Moving down the page, up to 10% can be distributed as competitive partnership grants for projects that are collaborations between a legal services provider as well as the court to provide legal assistance to self represented individuals. And so about 20 to 30 providers operating about 30 to 50 projects are supported by this type of funding.

If you turn to page four of your handout, we're now going to provide some insights into the funding that was appropriated to the Equal Access Fund program specifically for eviction and housing purposes. The last four most recent Budgets 2019/20 through 2022/23 has included funding specifically for these purposes. There has also been accompanying provisional Budget Bill Language as well as Trailer Bill Language directing how each of those appropriations were to be allocated. Specifically, the 2020/23 amount was to be allocated as competitive grants.

While the prior three years were allocated in kind of two buckets, the first bucket was that 75% of the funding was to be distributed kind of on a prorata basis to legal services providers that already did work in this space and that were eligible for some of those general use Equal Access Fund program grants. The remaining 25% was distributed as competitive grants to providers that effectively would provide services that weren't being met by that first allocation of funding.

So if you turn to page five of your handout, this page provides a summary of those appropriations. So specifically, as part of the 2022/23 Budget, 30 million in General Fund was made available. As part of the 2021/22 Budget, 80 million in Federal Funds was appropriated over three years. As part of the 2021 Budget, 31 million from the National Mortgage Special Deposit Fund was made available. And then finally, as part of the 2019/20 Budget, 20 million General Fund was made available.

On this page, you'll see a status update of those allocations. I'm not going to go through each one. It's here for you as a resource. But just as a quick example, if you look at the second bullet, of the 80 million in Federal Funds that was included as part of the 2021/22 Budget, about 78 million is expected to be awarded to 77 legal providers. That consists of 58.5 million in prorata grants to 75 providers and 19.5 million in competitive grants to 23 providers.

And so the rest of the bullets just kind of similarly provide that type of information for the rest of the funds. Turning to pages 6 and 7 of your handout, we're going to talk a little bit about the Shriver program, which was created in 2011/12. The program provides competitive grants to projects that provide legal representation for low income individuals in civil matters, generally in areas that are affecting basic human needs. So that does include housing, but also includes things like child custody matters. Yes.

Just one question on the previous page. The funding specifically for eviction housing, is there more Federal Funding? Or you can answer that somewhere else. Is there more Federal Funding coming up that we're likely to get?

So not necessarily that we're aware of. I mean, that's certainly something that we can look into. I do want to be clear that this is money specifically for legal assistance and legal aid. So, for example, the other portion of National Mortgage Settlement Dollars, there's money in other places, for example, through Housing and Community Development. So, like sub four might be having conversations. And to the extent that you're interested in that, I'm happy to follow up with my colleague at the LAO who covers those items and circle back with you.

Yeah, I was just wondering if there were other than State Funds, are there?

So when we get to the Legal Services Corporation and you have someone who very appropriately can talk about that relationship as well, it is supplemented by some federal dollars, which we'll kind of get to shortly.

Sorry. Thank you.

Yes, not a problem. So, redirecting your attention to pages 6 and 7 of your handout, we started talking a little bit about the Shriver program. So this program is funded by a share of certain civil filing fees related to post judgment activities. So if you look at the table before you, and specifically at the last line, I would just say that in 2022/23 about 12.4 million was awarded to support 13 projects. That represents the participation of 10 courts as well as 12 service providers.

Of those 13 projects, five are housing specific projects, and then an additional three projects have a housing related component. It's usually partnered with something else. So if you turn to page eight of your handout, I think, Madam Chair, this is maybe where you were thinking as well. We're going to provide some comments related to the 11 legal aid organizations that receive some of the State Funding, but they are also supported by the Legal Services Corporation, or LSC.

So the LSC is a national, independent, nonprofit entity that allocates federal funding to legal services providers across the nation through a competitive grant process for the provision of legal aid in civil issue areas, including housing. About 90% to 95% of that funding is generally provided specifically for the direct delivery of legal assistance, while the remaining funding is targeted sometimes for particular purposes.

We would note for you that as a condition of receiving LSC funding, those Federal dollars, Federal Law does prohibit legal services providers from engaging in certain activities or representing certain clients. And what is interesting about that is those restrictions sometimes not only apply to the LSC, the Federal Funding, it actually applies to other sources of funding that they receive, for example, State Funding or like private donation type funding. And so that's just something that we wanted to flag for the Committee.

You mean the specific amount is not the only thing restricted?

Yeah.

Any other amount they get is also similarly restricted.

In different ways. So their whole list of kind of conditions, and I think your next presenter, who is going to be well equipped to kind of talk about those distinctions related, but it is something for the Committee when they're thinking about allocations of funding, that for these particular providers, there is kind of this federal condition that they do need to comply with.

So if you turn to page nine of your handout, this page summarizes kind of the funding levels that go to the 11 legal services providers in California. So if you look at the table before you, you'll see on the top half that these providers receive anywhere between, in recent years, 44 to just under 50 million from the LSC, from Federal Funds. Then you will also see towards the bottom another line that summarizes that they do get additional funding from other sources that does include the state.

So, for example, from the Equal Access Fund program, but also other places. For example, private donations. In 2021, California's 11 legal service providers reported closing 61,226 cases, of which about half were related to housing. If you turn to page 10 of your handout, the Committee was interested in what portion of that state funding that I talked about from the Equal Access Fund, as well as the Shriver program that were specifically awarded to the legal aid organizations, and this page summarizes that.

The table at the top summarizes the amount of funding that comes from those general use allocations. And so you can see in 2021/22 that was about $24 million. The second bullet on the page provides a summary of those specific allocations related to eviction and housing dollars that were set aside.

The amounts awarded kind of varied, but for example, of the money that was made available as part of the 2022/23 budget, the legal aid providers received about 17% of that, and that, in contrast, as part of the monies made available as part of the 2019/20 budget, they received about 45% of them. Moving to the very last bullet on this page, five of the legal aid service providers currently participate in Shriver programs.

Four are in housing specific projects and one in a housing and child custody project. And so that kind of summarizes their involvement. Turning to the final page of your handout, page 11, I'm going to conclude our comments by highlighting the trial court self help centers. So every trial court has a self help center that serves as a central nexus for self represented individuals to come and educate themselves, but also to seek assistance for navigating court processes, predominantly in civil areas. But that does include housing.

The services are provided by attorneys and trained personnel in a variety of ways. They can range from one on one assistance to workshops. The Budgets in recent years have included funding to support these self help centers, specifically in 2023. As part of the Budget, there is inclusion of about 30.3 million, 19.1 million from the General Fund and 11.2 million from two judicial branch special funds. So we'll conclude our comments there, but are happy to answer questions at the appropriate time. Thank you.

Thank you. Ms. Lee. Yes. Ms. Rogado.

Good afternoon. My name is Julia Aguilar Rogado, and I'm an Attorney and Deputy Director of Legal Services of Northern California, and we are the legal aid program for 23 Northern California counties. We are an LSC grantee, one of the 11 in California. We also receive funding from the Equal Access Fund as well as IOLTA funds through the state bar, and we have also benefited from the specialized housing funds that have been allocated from the state and have helped us to address the very urgent housing issues of our clients throughout our service area. We have eight field offices operating in that service area, and our 23 counties go from Sacramento east to the Nevada border, north to Oregon, and we also cover the most northern part of the coast.

We serve about 10,000 individual clients per year. That varies up and down. Certainly during the pandemic, it changed a little bit, but that's generally where we're hovering. And between 2012 and 2022, the proportion of cases that we handle that are centered on housing, and mostly evictions, went from 47% to 67%, a huge leap. And it really tracked the housing crisis in the State of California over these years.

And another very startling issue that we've dealt with is the fact that in eviction matters, where it used to be that our clients would be evicted and move on to other housing, it's now this very urgent and real risk of homelessness that goes along with an eviction. And so that has brought a great urgency to this work. We have been involved in the Shriver project since it was a pilot.

We are one of the five programs that have a housing centered project that we're still operating, and that is in Yolo County. And in Yolo County, just to give some more specific data about kind of a small service area, within our larger service area, they saw a huge leap in evictions between 2021 and 2022, from 208, which is not a lot. It's a small county, Jumping in 2022 to 546. So the demand doubled there, and the expectation is it will double again.

The court that is a partner with us in that project in Yolo County has added an additional court day to hear unlawful detainer matters because of that expected demand. And that calendar is filling. So similarly, in Sacramento county, we saw that doubling between 2021 and 2022. And again, it continues to surge in the first quarter. And so we continue to try to respond to that.

In addition to our Shriver project, we have used the funding that we've received from the state, the enhanced Equal Access Funds, which have been incredibly helpful, as well as the housing specific funds to do some very targeted housing focused work. Mostly, we have been trying to increase our recruitment of attorneys to ensure that we had enough staffing to provide that direct representation. And covering a service area like ours, again, 23 counties, that's 22 courts.

And that is very difficult to do with only about 50 attorneys, which is what we have. We have some special challenges compared with our colleagues that serve more urban areas, we have difficulty recruiting because our bar in these rural areas is much smaller than in urban areas like Los Angeles and the Bay Area. Similarly, law school graduates are less inclined to pack up and move to rural Northern California to do really heavy litigation and eviction defense work.

So we have centered on recruiting and used those funds to hire additional attorneys. We've also created for what for us, is an exception to our generalist model of providing legal services. And we have created an eviction defense project. And in that project we have attorneys who are based in Sacramento and in Vallejo and two of our offices who actually work exclusively in other counties. So they're covering the rural areas where some of those offices only have one or two attorneys and really can't adequately address the demand there. So we see that there are two areas where tenants really need additional help.

One is representation, which the Shriver projects have demonstrated makes a tremendous difference in terms of outcomes, resulting in many more settlements that give people a soft landing, allow them into other housing without an eviction on their record, as well as helping people navigate through the process when they do have strong defenses and to win their cases. But on the other hand, there are important protections like the Tenant Protection Act that has gone into effect.

Certainly the COVID related protections that have now generally expired in the rental assistance that made a tremendous difference for tenants. And we think that both representation and those tenant protections are going to be vital. And the tenant protections are really only worthwhile if there are attorneys to enforce them in providing direct representation to clients.

And we've seen in our rural areas, especially, where we can go and represent a tenant and bring up issues like, for example, no fault reason evictions that are permitted under the TPA but are sometimes not legitimate, where we can challenge those and provide counsel, there we get a good outcome.

We educate the bench and unrepresented litigants who are coming behind those we can't help are benefiting from that education of the bench where the judges are understanding the Tenant Protection Act, what it was intended to accomplish, and are applying the law correctly for those unrepresented folks that we just don't have the capacity to assist. I thank you for your attention to this matter. I'm very happy to answer any questions that you have about being a legal services corporation grantee or anything related to the state funding, which we've appreciated so much.

Just a quick question on the evictions and remaining on someone's record. At what point does that go on your record? The first step of getting evicted, or if it's successful, how do you so.

With an initial filing, there's a masking period. And so when a landlord files an eviction, it isn't immediately going on the tenant's record. They have an opportunity to go through the process and answer the eviction or otherwise file a responsive pleading. And until a judgment is entered, it will not appear officially on their record. There are some backdoor ways that reporting agencies find to learn about that information, but generally it's sealed until that point.

So settlements are incredibly valuable where an attorney can work with our clients and the opposing party's counsel. And usually that will result in a move out, which is unfortunate, not ideal for the tenant, but it can provide them an opportunity to save funds, to put down a security deposit in a new place and also to not have that eviction on their record as they make applications for other housing.

And at this time, where affordable housing is so rare to find, if you have an eviction on your record, it's really nearly impossible to lease up again. So that is incredibly vital to be able to do those kind of settlements to protect that credit rating and that report that landlords are going to be looking at as people make applications.

Thank you very much for your work, too.

First, I'll just say, 'here here.' That was wonderful. My name is Adam Murray. I am the Executive--sorry--I'm the Chief Executive Officer at Inner City Law Center, which is located in the Skid Row neighborhood in Los Angeles. For the past 40 years, we have been providing free legal services to people throughout LA County. We have 130 staff, including 67 attorneys, hundreds of volunteers, and all of our work focus is on housing and homelessness.

Before I say a few particular words about our specific work, I do just want to note that while homelessness is a very complex, obviously a multifaceted issue, as you all know very well, at its root, it is quite simple. We have a homeless crisis in California because we have a housing affordability crisis in California. In the County of Los Angeles, the median rent in the last 15 years has increased by 54 percent and the median renter income has only increased by 16 percent.

That disconnect between rents going up and incomes not going up nearly as quickly, more than any other reason, more than every other reason put together, is why we have a homeless crisis in this state. And if we are going to solve our homeless crisis, we have to attack that problem from both ends. We have to both increase incomes, and we have to work on housing affordability.

Now, Senator Durazo, I know you have spent much of your career working on trying to increase incomes for low-income families and workers. At Inner City Law Center, we tackle the same problem, but from a bit different angle. We focus on people who are on the streets, largely, who are struggling with mental health issues, who should be connected with various public benefits programs, and are not. So, Senator Newman, I think, in particular, our work with homeless veterans will probably be of interest to you.

We serve veterans who are mostly struggling with traumatic brain injuries or post-traumatic stress. They have sought to access VA benefits and been denied, and we appeal the denial of those benefits. We win 95 percent of those appeals. Last year, we recovered 3.9 million dollars for our homeless veterans clients, homeless veteran clients. And when you realize that Inner City Law Center's clients, 44 percent of our clients live on household incomes that are 10,000 dollars a year or less.

So every single one of those dollars and that 3.9 million dollars is directly impacting housing stability for our clients. I would be remiss being here in Sacramento--thank you for having me--if I did not also acknowledge that there are some bills that you are looking at this session that also tackle housing affordability from that side of things.

And in particular, I want to call out SB 4 and SB 423 as two bills that Inner City Law Center is strongly supporting and would encourage you to support as well. But I want to focus most of my remarks on the eviction process and the eviction work that we do and what we are seeing in Los Angeles. Unfortunately, as you've already heard, the protections just expired at the end of March in Los Angeles and already evictions are shooting back up.

I think, well, as you've heard, it's correct. We are not yet back quite to prior levels. I think we are going to quickly get there, and the big question mark is whether or not we blow past that and keep going, or whether or not we just get back to the level we were at before. But regardless, what we are going to continue to see, unfortunately, is a huge disconnect between who has representation in those cases and who does not.

So the latest statistics that I'm aware of are that 88 percent of landlords in County of Los Angeles have representation and less than ten percent of tenants who are facing eviction have representation. And that has huge consequences for what happens in those cases because lawyers make a big difference. Pre-Covid--we do at Inner City Law Center, a little over 800 eviction cases a year. Pre-Covid, just over 40 percent of those cases, we were able to stop the eviction and actually keep that family in their homes.

And as you heard just a moment ago from our colleagues in Northern--from our colleague in Northern California, it's often in the cases where we're not stopping the eviction where the homelessness prevention actually occurs just as strongly. If there can be a soft landing for that family, if they have time, if the record can be sealed, waived rent, relocation benefits, all those sorts of things is often really crucial to keeping people in their housing.

Also in the cases, particularly when we're able to keep families in their housing, it really bolsters neighborhood stability, community stability, kids can stay in their schools, parents can continue going to the same jobs. There's a huge upside, and it happens at a stage that is homelessness prevention rather than addressing homelessness once a family has become homeless.

So it's something that I would really encourage you, not just in this conversation, but more generally, Senators, to really be looking out for what can we do to bolster the housing stability of precariously housed families so that they are not becoming homeless in the first place? The more we can do there, it's more humane and it's more cost-effective than dealing with the problem once the family has ended up on the streets.

I want to close my remarks, if I may, and I'm happy, as you've probably already figured out, for me to keep talking forever, but I will be brief here. I want to close my remarks with just a couple of stories of our cases, recent cases that we've had that I think really illustrate the work that we do and the importance of the funding that the Legislature provides for our work.

So the first case involves an elderly couple who were renting for over 20 years, the same unit in Long Beach. They pay a significantly below market rent of 660 dollars a month, and they're on a fixed income, so that's pretty much all they can afford. A new owner came in last November and bought the building, and early this year they received a 60-day notice that they had to move out because the owner said he was going to do substantial renovations to the apartment.

Luckily, that family came to us and we took a look at what the owner was proposing to do. It was very clear that these were not substantial renovations as defined by the Long Beach Municipal Code. We informed the landlord's attorney of that and they agreed to rescind the notice. This is not a case that would even have shown up in the unlawful detainer statistics. An unlawful attainer was never filed because there was a lawyer available to resolve the issue before it got to that stage.

The second case to highlight is another very recent case for us involving a woman who moved in with her sister a little over ten years ago in the Echo Park neighborhood of Los Angeles. And just recently, the owner has decided that because they are paying a below market rent--and I don't know precisely what that rent is, but it's significantly below market--that he wants to evict them, and so he alleged that this sister who moved in is an unauthorized occupant.

This was one we were not able to resolve before trial. We actually had to go to trial on this matter. We had multiple witnesses who clearly testified that the owner knew both sisters were living at the apartment. He had actually received rent from both sisters. He'd been in the apartment with both sisters multiple times, and the jury unanimously agreed that this was not an unauthorized occupant, and that pair of sisters still remains in their home as well.

One last example I'll give you is a case that was referred to us from the Downtown Women's Center, which is one of our great partners in the Skid Row neighborhood where we do a lot of our work, who called us because they had a temporary voucher for a woman who had three kids and was in a two-bedroom apartment that they run here in the neighborhood, and the voucher was expiring, and they had managed to work with her, with the tenant, and with the Housing Authority to get a more permanent voucher.

But the permanent voucher only recognized her as having one child rather than three children, and therefore, she was not eligible for the two-bedroom unit where she was living. And Downtown Women's Center was having trouble trying to figure out what's going on here, and they called us and we got involved.

And what we figured out when we talked to the Housing Authority is that the ex-husband also had a voucher and that he was claiming the two other kids on his voucher, despite the fact that there was a restraining order that required him to go nowhere near those children.

Once we established that for the Housing Authority, they issued a different voucher, and she was able to stay in the Downtown Women's Center apartment, which not only meant that she had an appropriate apartment for her family, but it also meant that the family and the kids and the mom were able to access all the services that Downtown Women's Center provides.

So these are just some examples of the work that the funding of the Legislature makes possible at Inner City Law Center and at other legal services around the state, and so I want to thank you for that support, and I really encourage you to think about when you're thinking about this sort of funding, that this is the sort of housing stability that you make possible. Thank you.

Thank you very much. Appreciate you sharing those stories, but more importantly, actually engaging with those individuals. Thank you. Yes.

Good afternoon, Chair Durazo and Senator Newman. My name is Nick Akers, and I serve as the Senior Assistant Attorney General for the Consumer Protection Section of the California Department of Justice. Our section has a broad mandate to protect Californians against violations of state and federal consumer protection and privacy laws. We do this by investigating and prosecuting enforcement actions in the Attorney General's independent capacity and in the name of the people of the state.

We also do related legal work and policy work, including filing appellate amicus briefs, in order to protect and advance consumer protection laws. Our primary civil enforcement tool is the Unfair Competition Law, which you're familiar with, I'm sure, Section 17200 of our Business and Professions Code, which allows us to pursue unlawful, fraudulent, and unfair business actions and to obtain injunctions to stop misconduct and deter its recurrence, civil penalties, and restitutions for victims. This work is self-funding.

Proposition 64 of 2004 required civil penalties recovered in our actions to be used to self-fund consumer protection work at the state level, and so we have a reliable funding source for this work. While we receive tips and leads from a number of sources, including complaints directly to our office and referrals from sister law enforcement and regulatory agencies, many of our most significant consumer protections have been the result--consumer protection cases have been the result of leads from our partners in the legal aid and advocacy community, including the organizations represented here today.

The tips that they share regarding bad actors, the assistance that they provide in connecting us with victims and witnesses, and the insights that they share regarding emerging consumer protection issues are an essential source of information for our office.

Our enforcement resources are limited, and we therefore try to focus them on cases that involve issues or targets that are of widespread importance, as well as cases involving the protection of vulnerable Californians. This has included enforcement actions against predatory lenders and for-profit colleges, abusive debt collectors, telemarketers that ignore do-not-call laws, retailers that rip off service members in immigrant communities, and companies that have distributed opioids and illegal weapons across our state.

But at present, our work also includes a significant number of ongoing investigations into the violations of the rights of tenants. While we're not in a position to discuss the details of those ongoing investigations, we can confirm that we're currently investigating cases involving pretextual evictions and illegal rent increases under the Tenant Protection Acts, tenant screening issues, habitability issues and failures to repair, and a range of other violations of state tenants' rights laws.

In addition to our investigative work, our office has also issued a bulletin to police and sheriffs across the state providing legal guidance on steps law enforcement officers should take to prevent and respond to unlawful lockouts by landlords and other forms of self-help evictions. We've also issued a series of educational materials, including consumer alerts advising tenants of their rights and protections under the Tenant Protection Act and providing resources for tenants facing utility shutoffs.

I'd also like to highlight two prior actions that our office took relating to tenants' rights. The first, in 2021, our office obtained a 3.5 million dollar judgment against a real estate investment company, Wedgewood, that had unlawfully evicted tenants from homes it purchased at foreclosure auctions. Our lawsuit alleged that Wedgewood deprived tenants of their right to stay in homes under preexisting lease terms, and under statutory protections, that it evicted tenants without cause and rent control jurisdictions, and that it made false statements in court filings.

The judgment also included injunctive terms requiring the company to reform its business practices and to comply with the law. And in 2016, our office obtained a stipulated judgment against Lincoln Military Property Management, which operated privatized military housing in the San Diego area, as well as the law firm Kimball Tirey and St. John, which represented it in unlawful detainer actions.

We allege that the defendants illegally obtained default judgments in eviction cases brought against 18 service members and that they'd violated the privacy rights of military members and their families by illegally including personal information in court filings. We look forward to continuing and expanding our work related to the rights of tenants, and we encourage individuals and organizations that have information regarding violations of tenants' rights to contact our office. Thank you for the opportunity to discuss our section and the work that it does to protect tenants, and I'll be pleased to answer any questions that you might have.

Wonderful. Thank you. On the last note that you just made, in terms of expanding--

Yes, ma'am.

What will it take for you to expand the work? And I'll just give you, if you could refer to those two examples: funding available in your Unfair Competition Law Fund or using money from the Litigation Deposit Fund. Why or why not can't they be used to expand tenant protection?

They can, and so the civil penalties we recover in our consumer protection actions brought under the Unfair Competition Law are unfair competition law funds in terms of the color of money that we're generating. We typically hold those in the Litigation Deposit Fund for administrative purposes, and then as we spend UCL fund money, we disperse those for that purpose. We have significant funds built up in the Litigation Deposit Fund that are Unfair Competition Law funds. We're limited right now by our spending authority in how many attorneys we can hire, how much work we can do. With additional spending authority, we'd be able to do additional work.

And that comes to the Legislature?

Okay. We'll take care of that.

Yes, ma'am.

You'll provide us with a proposed number or at least the workforce you're looking to add?

Yes, sir. We can work with our budget's office to provide that detail.

I think that'd be helpful. Thank you.

And just one more for you: how does the DOJ identify potential cases or other actions related to tenants' protections?

So we use a variety of sources of information that bring us leads and information that help us develop cases, really across our consumer protection work, and particularly in the tenant protection space. A lot of those referrals are coming from our legal aid partners. They're on the ground providing direct legal representation to tenants, and we can never substitute for the work they do. It is absolutely essential.

But part of what they do is that they're identifying cases, they're bringing us leads, they're helping us connect with victims who might not otherwise come to law enforcement, but are comfortable engaging with legal aid, and that's often how we build out our cases. And then we have a variety of investigative tools, including our ability to issue pre-filing investigative subpoenas for testimony and documents, and along with other kind of traditional investigative tools, we use that to build out those cases. But those leads are really essential. That helps us know what rocks to turn over.

Good. Well, that makes a lot of sense. For others, thank you all again, very very much. Truly appreciate this. I have a bill, if anybody's interested on this, along the lines of tenant protections, but here we talk about your work. What would you identify--and you could each say something to this effect--what are the major challenges you face in providing legal assistance in eviction cases?

So we try to be selective about the cases that we do take forward and devote our resources to. So it's a big challenge, the limited resources, both the money resources, the limit of attorneys interested in doing this work which has honestly declined over the years and then from there trying to make those tough decisions. But we are fortunate to have a lot of partners in this work in the State of California, the larger legal aid community where the 11 LSE-funded programs leave off.

There are the other 90 IOTA funded programs in the State of California and they pick up a lot of this work as well as the state's government agencies, Department of Justice doing its part in its various divisions as well. So that's fortunate. But the funding, the staffing, those are the big things for us.

I'd highlight three things. The first, it's very much aligned, but the first is funding for our work and there's some light at the end of that tunnel, at least for the City of LA on this matter measure ULA if it holds up in the courts, which hopefully it will, will provide money for a full right to counsel for Low income tenants in the City of Los Angeles and the funding looks like it is sufficient to do that.

We will still need to worry about the rest of the county. But that is a big step in the right direction on the funding side of things. The second piece is hiring the staff that we need to do that work and retaining know an attorney at Inner City Law Center could make a lot more money in private practice and could make more money in government practice as well.

And so they are all choosing to do this work and that's tougher and tougher for folks to do as they're coming out of law school and having student loans in particular. I know you have another matter you can be looking at later today that involves possibly support for legal aid attorneys, student loans. That would be wonderful to have some support in that area.

Another thing which I think you're also looking at later today is the vast majority of our funding is really for specific, as is appropriate specific legal work, right? So somebody will give me money and say hire an attorney to serve this many clients of this sort of work, and that's great, but it doesn't provide a lot of space for more innovative thinking about how we approach our work investing in the infrastructure of the organization. Give you an example.

We launched about 10 months ago now a tenant power toolkit with a group called the Debt Collective. It's a statewide tool that is designed to do two things. One, to diminish the number of tenants who are defaulting in unlawful detainer actions because they can go online and actually use this tool to prepare their answer with all the local rules incorporated. And then secondly, to hopefully, as much as possible, connect those tenants with tenant organizing groups, community groups, legal aid groups in wherever it is they're living.

So in the first nine months, Inner City Law Center handles the filings for that tool. In the County of Los Angeles, we filed over just over 1200 answers through that tool, and that's just in LA County. So it's going to be a huge asset. But that is something that we had to find specific funding to be able to innovate and think about. How do we approach this differently? I think you also have something you're talking about along those lines later today.

Well, I'd heard someone had given this idea, an attorney who does work around evictions, about the training of attorneys, because there are a lot of attorneys and you still have to find the ones that want to do this work, but don't know how and don't have the specialty in that.

And she had suggested that there be hubs around connected to the courts that would actually help train each other, or you get those who have the experience to train each other, but they would be connected to a court or a geographical area. It just comes to mind because there's probably not specific funding to do that, but that would expand the pool of attorneys with the experience and the knowledge to be able to do that.

And at least in Los Angeles we do some of that. We organize ourselves. There's about 10 different organizations in LA that provide these sorts of services in the eviction area, and we very much coordinate with one another and we divvy up the courthouses for who's where. And some of us are in multiple courthouses and we coordinate on that.

One thing that the Access of Justice Commission has funded Inner City Law center to do that we're just at the tail end of is actually preparing a manual to help with this training. So there's a lot of stuff that's pretty basic that we don't have in place because we're so focused on the volume of doing the cases day in and day out.

So anytime we can find funding that helps us think about how we can more creatively, as you just suggest, whether it's hubs, whether it's training additional folks, whatever it might be, having time and space and funding to be able to figure those sorts of things out and develop them is very valuable.

Ms. Rose-Goodwin, is this something that you think the judicial, I mean, does a Judicial Council engage in that, or is that something that you could engage with which is expanding the pool of attorneys doing housing and eviction work?

Yeah I'm going to invite Zlatko Theodorovic here to add some comments to that effect.

You were hiding back there.

Thank you. And we'll have to get back to you with the program. Experts who work in this area aren't here today, but they're listening to the Committee, and we can definitely come back to staff with those questions. But I wouldn't want to speak out of turn and provide you wrong information.

I think these are great ideas in the sense of not the traditional way. We have a crisis, and I very much applaud people like our new mayor in Los Angeles who's trying to approach this in a number of different ways. But the focus, everybody being focused certainly is going to make a big difference. Why don't you pick up? I have a few more, but I'll.

I'll stall for time for you. So I really do appreciate the testimony and the context, and I think each of you has mentioned in some way that this is systemic. Right. And I have an immense amount of, I think, admiration for the work you do, but it's like sweeping the beach. Right. The real question moving forward.

And so I'm really intrigued by the tool you've mentioned that hopefully adds some scalability and standardization around many of these actions because tenants are always going to be at a disadvantage in the face of the system, especially those tenants who find themselves in those situations. So the question is, how do we get out of this problem, especially as we move out of the pandemic, when it's a certainty that the resources that have been provided over the last couple of years will disappear?

And even so, all these problems preceded the pandemic. And somebody mentioned it's really about cost of living, it's about income inequality in California. I agree. That's the problem we need to solve over the long term. But any solution that actually has scalability, replicability to the Senator's point about extending the reach via train the trainer kind of stuff, I think we should invest in those things because otherwise it's just kind of a whack a mole thing.

And again, I'm not sure I could do the work you do because it just never ends. Again, it's because it's systemic. And so I'm glad to look at any solution that actually shows a kind of a leverage return that starts to bring down the number of people who need these services who clearly at a huge disadvantage. And with that, hopefully it bought you some time. Please do.

So. I think you're absolutely right. We're talking about helping individual folks in a really messy situation, a really awful situation, and we need to look more systemically. I think we need to look on a few different dimensions. One is on affordability of housing. We've got to do more to bring down the cost of housing, particularly for low income folks in the State of California. And there's many different ways. That's a more complicated issue, I think, than providing legal services, but we need to do it.

But on the legal services front, I would really encourage you to think about a right to counsel for tenants facing eviction. Places that have instituted, that have found exactly what I think you alluded to, which is New York City, for example. When they did it, they saw a 30% drop in the number of evictions filed simply because they created a right to counsel. And the theory behind that, which I think is absolutely spot on, is that there's a whole bunch of frivolous stuff being filed.

And just having a lawyer present in the process means the landlord is not going to waste their time filing something they know is going to get looked at and getting kicked out of court. So there are huge savings to the eviction process and ultimately to preventing homelessness. If we had a right to counsel and every low income tenant in the state who was facing eviction was not just facing a lawyer on the other side, but they had a lawyer on their side.

And I do appreciate there's some deterrent value there that would offer kind of immense savings, but also help a lot of real people. The question at the end of the day is who pays for right to council, right. Encouraging that LA has figured out a way to do it, statewide, especially in this fiscal environment. It's going to be really hard to do.

But you're on the Budget Committee.

I am but a small cog in a big machine. Yeah, but it's something we should work toward. I agree.

There are numerous studies looking at the cost effectiveness of that model, as well as a recent run by stout. I think looking at Los Angeles and looking at all the cost savings that happen from that. So that doesn't answer your question about how do you fund it, but it does suggest there ought to be a way to Fund it, because in the long run, it's what's cost effective.

Agreed. Thank you.

If I may, I'd just like to add to that that as I mentioned before, increased tenant protections in the unlawful detainer context give us tools that allow us to be effective beyond the individual case in these courts, where we can educate the bench about the rights of tenants using the Tenant Protection act, other possible protections that could come into play. And that also has a deterrent effect on frivolous evictions.

And it has a much more widespread effect than simply trying to work toward that goal of representation for each individual, which is, of course, the ideal, but it also doesn't cost anything. So to the extent that the state can look to those kind of additional protections to try to give tenants a little more leverage than they have right now, we can do a lot with that as advocates.

Well, one other thing that you could help because of your work in the trenches is to tell the real story of who the tenants are and what they're facing. I've heard from Members in the Legislature, repeat over and over that, what are we going to do about those tenants that are destroying their apartment? What are we going to do about those tenants? Well, you don't want to take away our right to get rid of bad tenants because there's a lot of property owners in the Legislature.

I think we really need a way based on the reality of what tenants face every day that what is really going on out there? What's the story of tenants? And we don't get that. We don't get that. And I think that's a really important role that you all could play to help us.

We'd be very happy to do it. We could give you a lot of stores.

Okay, just one other thing in terms of, how about pretrial services? I haven't heard others mention diversion or mediation. What do you think of those? What are your opinions of those?

They're incredibly important, and we do a lot of it. I think you spoke a bit to trying to avoid eviction filings by responding to notices. Of course, we're trying to jump in as early as possible to resolve cases. Our Shriver Project does have a mediation component with the court, and we have a mediator, and that is incredibly successful. Almost every case that goes through there results in an agreement and either a soft landing or a resolution of the issue.

So those are, I think, components of almost every legal aid program that does housing is trying to get to those cases early and use those other tools to try to resolve them. And so we use the funding to do that as well. Really going to trial is our last resort.

You touched on something that I think is always relevant, and you can only help the folks who come to you for help. And that's obviously a pretty small fraction of renters who find themselves in trouble. So how do we think about, we're talking about funds for representation. There's a broader question about how do we educate tenants about the resources available to them.

And it's always, I think, important to take into account you're finding people at the worst moment in their lives to be thoughtful or proactive about finding help. What are your thoughts there? And how can the state invest in ways that educate that population so they come to you sooner rather than later? Because clearly there'd be a benefit to that. And when I say you, I mean, I mean the community of resources.

So I think that's the key is there are community groups out there that are very deeply connected and embedded in every community in the state. And so it's making sure that they have the resources to do the education and partner with legal services organizations as is appropriate in Los Angeles. I think there's been some positive signs in the last few years in that respect. There is a much more active tenant organizing community in Los Angeles than there was three or four years ago.

And a part of that is, I think, tenants being, knowing that their protections they're supposed to be getting and they're not happening automatically and they're frustrated and so they're looking for assistance. And a lot of groups have organized around that. But I think it's the Legislature supporting the community groups that are on the ground in each of these communities with education and with ability to enable them to show up in our offices or connect with us.

I appreciate that. It's easier said than done. I would say.

Does that connect, Ms. Goodwin, with the services of the law libraries or the other tenants services that you have in the courts, or is there a connection?

Well, there certainly is a connection, like everything can be made stronger. Right. So centralized self help services available at the judicial branch website, connecting to local self help centers in each of the 58 counties and then those counties being able to direct folks to additional resources as needed. So there is a network, but always open to new ideas.

Are there more ideas on taking advantage of those resources?

Well, we do work in partnership with our courts and the self help services available there. We certainly direct clients. We are not able to assist directly to the resources that exist online. I can't stress enough how important it is to have resources available online. During the pandemic, we did videos and a number of other kind of communications that we put out through social media as well as on our website to reach people.

I would say that the majority of people who get to us now are finding us by googling help for eviction in whatever county they're in, and they get to us. And so we put a lot of investment into that sort of outreach as well as being an organization that is community lawyering based, which means that we expect our attorneys to be out in the community all the time working with these community based organizations, as many legal aid programs do.

But I would say that reaching people online, having good, accessible resources, both for people who speak languages other than English and people who have other accessibility needs in terms of accessing that online information, is absolutely vital because it's just the reality of how people get their information and how they get to help these days.

Just looking at the last page of the handout that Ms. Goodwin provided on the self help page, I think at the very bottom even says find a free or low cost lawyer. So I think we are connecting even on our Internet page, providing that sort of link as best we can.

I'll just add again, this is kind of truism that the people who are most adept at finding resources, the people you're least likely to see, I think that's true. We talk a lot about, I'm not sure the education, but we talk about curriculum suggestions for financial literacy and some other things.

To the extent that more than half of Californians are going to be renters, we should probably be more deliberate about educating the average Californian, maybe in high school, about how you rent an apartment, what it means to be a tenant, what your rights are, what your obligations are, because there's kind of a knowledge base there that's clearly missing, especially among those who are most challenged. So, food for thought.

So just one more. Speaking of which is what about the work that you do with landlords? How do they fit into this picture of tenant protections and stop unreasonable evictions? Any thoughts? In practice.

We don't represent landlords. That's kind of where we draw the line. We're conflicted out, so we're very cautious about that. However, we have for decades done outreach to the landlord community, and what we do is fair housing presentations is generally how they are framed. But we just had one a week ago and we'll have hundreds of landlords come to these presentations throughout our service area where we talk about the rights and responsibilities of landlords and tenants.

And of course they're getting the legal aid version of this. When they talk to their own counsel, they might get a different story. But we do that outreach in order to make sure that those resources are available, because there are many landlords who are not connected to attorneys who are advising them, and they really are unaware, especially of many of the newer protections for tenants. And many of them actually do wish to be educated about it and they want to be good landlords.

And so we definitely spend our time doing that. And we have the support actually of many localities, many cities and counties will fund that kind of outreach, but we're committed to it. We don't provide that direct representation to landlords, but we sure are happy to try to share that kind of information and educate them.

Let me ask you, if you had a presentation to landlords or somebody did, how would it be? Half hour, 2 hours, hour, what is the typical landlords quite often are just as deficient in their knowledge, right. And I think it's important to realize when somebody hires a lawyer, then you're in kind of a cost benefit situation, right. That's purposeful. Right. So you're already beyond some point of no return there.

So how much by way of briefing would the typical landlord need to be reasonably conversant in their obligations?

Well, our Fair Housing presentations are three to 4 hours usually, so they're like a half day. And that is enough to sort of get the information out there, provide some resources and make sure they know where to go to get more information. Of course the state resources are great for that, and that is enough to kind of scratch the surface, right. And of course there is always that question and answer session where people begin to start asking questions that we can't answer.

But three to 4 hours is a good introduction. More education in that way, more resources always help.

And could you make a distinction between sort of class of landlord, like somebody owns a single unit, rents it out, versus somebody owns X to Y or over 100? They probably have different orientations but also different needs by way of knowledge as well, right?

Yeah, I mean, certainly we're really interacting with the ones who have, I'd say fewer than 50 doors or something like that, right. Because the others will have an attorney, because they will be evicting tenants and so they will have an ongoing relationship, likely with a firm or an individual attorney who's going to be advising them on that sort of thing. So generally, we're not getting a lot of property managers who are representing companies there, we're getting individual landlords.

I was just going to add that when we looked at some of the information on visits to our self help services for these types of matters, that, interestingly, most of the pings or requests for information were for the landlord information. So I think that our websites tend to be a source, and there are specific packets devoted to summary of information for landlords noticing rules, process of service.

So I think if you're looking at education, that might be a great place to start looking to put together kind of a packet of things that landlords need to be aware of, and it seems that they are finding those services on the self help website.

So in the spirit of, like, you can lead a horse to water, is there merit in the same way that if I want a boating license in California, I have to take an online boating safety course? Is there merit to creating a resource that says if you're going to rent property in California, you should have to take a landlord safety course or something? At the risk of freaking a bunch of people out who aren't watching this, is there merit to that?

Let me go one step further. Maybe you should also have insurance if you're going to be renting. One of the things Inner City Law Center does a lot is sue slumlords and forces them to fix up their buildings and pay damages. And a lot of those folks really ought to have insurance so that the tenants have some.

Yeah, I would assume there that'd be a municipal, or like by jurisdiction. Well, anyway, true, but again, a lot of these cases are, you meet these people where not only is the tenant in a bad spot, but the landlords at the end of their rope as well. So a lot of this must be preventable if both parties were more conversant.

I agree. And I very much agree also with the idea that there are many landlords who are renting who don't have sufficient resources to be a landlord, to be honest, to maintain habitable premises, and to take care of repairs that come up. And oftentimes in cases when the landlord is unrepresented. And so we are representing a client, we're contacting that landlord to talk with them. They don't have an attorney. They're asking us for information.

They're trying to figure out, usually how to get the notice right, because we've called them to say, or written and said, your notice is deficient, it's unlawful. And they're calling and asking, well, how do I fix it? And I always have to say, I'm sorry, we can't help you with that. Obviously, we have our client, but I think the more education the better. Certainly I don't think that most landlords are intending to take advantage of their tenants, but it's a business.

And so if they are ignorant of the kind of parameters of how they can function as a landlord, they're going to push the envelope, they're going to make mistakes. And so the more that they are educated about how to do things lawfully, the more equipped they are to be landlords. And the more resources they have to be good landlords, the better for tenants.

Food for thought. Certainly.

We could go on for a few more hours. You ready to stay here?

I'm sure they're ready.

Well, we have many more questions, but more than anything, we really appreciate, I think I speak on behalf of all of us that really appreciate what you're doing, how important it is to people out there, and that they shouldn't fear losing their home or their shelter somewhere and ending up on the street. So thank you all very much for taking the time to come here. And we're going to move on to issue two, which is legal aid capacity building.

And we have Catherine Blakemore and Judge Lucy Armendariz from the California Access to Justice Commission. I think we're going to begin with. Ms. Blakemore, welcome.

Thank you. Catherine Blakemore, I'm the Vice Chair of the California Commission on Access to Justice. It's really a pleasure to be here today and thank you for the opportunity. I did want to just start with saying you actually are funding innovation and infrastructure, and it's to the Access Commission through the Judicial Council. And some of the work you heard earlier today was a result of those funds. So you should feel proud of that work with legal aid. And Judge Armendariz is going to speak to that.

I want to speak about another problem that was identified by our very dedicated panelists today, and I'm so proud to have been a legal aid lawyer for 40 years and to see the good work that continues. But that's really the issue of the recruitment and retension crisis and how difficult it is, as both of the panelists indicated, to hire lawyers to do this very important work.

Positions are vacant for six months or more, and a primary reason that is a problem for legal aides and their staff is the significant educational debt that lawyers have, which requires payment each month, particularly once the COVID policy changes and loan repayments begin again. But student debt ranges between 150,000, median to 300,000. And it's significantly more for attorneys of color and attorneys who can speak other languages. That would be very helpful for legal aides to be able to hire.

So the impact of that is that it is harder to meet the legal aid needs, the legal needs of indigent Californians. We have a solution we want to propose to you, and it builds on great work that your Committee recommended last year, which was creating a California loan repayment assistance program for legal aid lawyers. This year, we're proposing two things.

One is to allow legal aid programs to use a portion of their equal access fund grant, and you heard some great presentations about that, to pay for the loan repayment obligations that have, that their lawyers have.

And second, to provide a very modest $250,000 in state funding so the Access Commission can administer a tax free loan repayment assistance program, which means that lawyers benefit because their program will be able to pay for the loan repayment and it will come to them tax free, so that they won't be paying taxes on money that simply went to repay their loan.

And once that's created, it will allow legal aid programs to tell their lawyers, we will make your annual income driven loan repayments on a tax free basis, and at the end of 10 years, your loans will be forgiven under the Federal Public Interest Loan Forgiveness program, a win for both the program and the legal aid lawyer.

But the impact is really to the legal aid clients that are served, who will benefit from increased numbers of staff and more experienced staff who are able to stay and bring their skills to represent some of the most underrepresented individuals in California. So with that, I want to say thank you. I'm happy to answer questions if you have them, and turn it to my co panelist, Judge Lucy Armendariz.

Thank you. Good afternoon, Madam Chair and Senator Newman, and of course, staff. As Madam Chair said, my name is Lucy Armendariz. I am a judge in Los Angeles County. I'm a Member of Judicial Council. But today I'm speaking to you as a Member of the California Access to Justice Commission. If I look familiar, it's because I literally grew up here in the State Senate. I worked as an attorney in the Senate, public safety, also in Assembly, public safety.

And I was Chief of Staff to the Senate majority leader before becoming a judge. And it was here that I learned how to always, I remember before I left, they said, don't ever forget do the right thing and don't ever, ever forget the underserved population. So it's in that vein that I'm proud to report back on our work with the California access to Justice Commission in 2021 and 2022.

You generously provided $5 million from the Equal Access Fund to address the needs of innovation and infrastructure for legal services organization. You prioritize services to rural and underserved populations and also organizations that work with community partners such as foster care organizations. We are very proud to report back that 95 programs have been funded, but the funding requests far exceeded the available funds that you generously appropriated. We learned what we suspected and what you learned here.

Legal aides have starved their infrastructure because they need their money to provide that direct service. These infrastructure and innovation grants that you appropriated allowed them to invest in technology upgrades so that they can be more efficient in their delivery of much needed services to the poor and underserved. For example, some of these legal aid organizations use their infrastructure grants to buy computer hardware, upgrade their software programs.

Another grantee that I'm particularly excited about reporting back to you is a legal aid organization called Kids in Need of Defense, Inc. An organization that provides representation to foster care youth. This is particularly important to me because when I was eight years old, my mother was sentenced to life in prison and I was placed in foster care from the age of eight until I aged out at 18. And back then they just kicked you out on your 18th birthday.

So Kids in Need of Defense, Inc. Use some of their grant monies in a particular innovative way. As you may know, foster care kids get moved around a lot, from individual homes to group homes, sometimes even juvenile facilities. Their lawyers can't keep up with them. They sometimes lose contact with them. So Kids in Need of Defense, Inc. Use some of their innovative grant monies to provide cell phones to these children so they can remain in contact with their clients, and vice versa.

Their clients remain in contact with their attorneys. And if I had more time, I would tell you more about all the amazing and creative ways we provided these grants to these legal aid organizations. You heard Adam Murray from Inner City on how they were able to provide some of that grant money. And it's just great work, and we hope that you continue to fund this innovative and infrastructure grants.

Wow. That all sounds really wonderful. Thank you both so much for representing your organization. Let's see. So the state is relying on legal aid for assistance, including eviction defense. And now the implementation of the care court includes a right to counsel. What do you think is the capacity of legal aid to meet those needs?

So what we know is that it takes time to hire a legal aid lawyer, and there's a shortage of legal aid lawyers. And that's why we're proposing this loan repayment assistance program, so that there is an opportunity for being able to offer loan repayment assistance that the program pays for, but in a tax advantage way.

And we believe that will then allow more attorneys to work in legal aid programs because they will not face the $700 or $800 or more a month that they have to pay in loan repayment.

So how have you seen organizations adopt to the growing demand, even if it's not at the pre pandemic level, but the growing demand, which clearly is happening, as was testified to by the folks on the panel before. So how do you see all of these needs? How are the organizations adapting to them?

So I think you heard some good examples of that from the prior panel as well, where people are looking at creative ways to rethink how they provide, for example, eviction defense. The legal services in Northern California representative talked about having a specific unit that could focus on eviction defense and support each other in that work. I think Adam Murray similarly talked about having some hubs in LA where specific legal aid organizations were providing services in specific courts. I think all of those help.

It's also looking at the array of access to justice tools and using the right people to provide that assistance. So I know at Disability Rights California, where I was the Executive Director, we created a specific group of people who were skilled to provide that initial information and assistance. We created a system by which it wasn't a system of calling people back and forth, but people could have indicate the area that they had a problem in.

A paralegal would speak to them in the language that they preferred and get them the kind of quick advice that they might need while they were waiting to get an appointment with a lawyer so that timelines weren't missed. You also heard about innovations, about trying to provide ways in which people could file answers in eviction cases that Adam talked about in LA.

So I think it's looking at all of those kinds of tools about how we can provide as much access to legal aid as we can and at the same time try and address the needs for innovative thinking infrastructure and address the student debt crisis that legal aid lawyers particularly face.

Because it seems like the connection to the system and the coordination of all the work to look at the system in addition to the individual cases is really needed. I was at the Stanley Mosque court a couple of weeks Judge Armendariz was there and others, and we got a sense of the self, what is it? Self help areas and how people take advantage of that.

But it seems to me it's such. A big, huge, growing issue of the right to counsel that if we don't do it altogether in a much more coordinated way, but more importantly, is the system. What do we have to change at the system? I don't know if you have any thoughts on that.

Well I think, and I'm not speaking as a Member of Judicial Council or the Access to Justice Commission, but I sometimes think like a lot of the lawyers that are in law school, especially the first generation immigrant law students that want to serve their community, they went, their letters say, I want to serve my community, and they just can't. They graduate with $200,000 in debt. They had no family support. They are the perfect.

That's why their debt is larger.

And that's why their debt is larger. And so we lose them to the big firms, and they don't necessarily go where their heart was, which is to go serve their community, especially with their parents saying, you went to law school to go make some money. So in this sense, if we would help Fund some of that loan repayment, we could keep some of these students that definitely went to law school with that sense of serving their community, changing the system so we don't have these systemic problems.

Senator.

Just a quick question for Judge Armendariz. So you talked a little bit about the Kids in Need. Inc. Kind. Inc. Good acronym.

Yeah, KIND.

So we've had conversations over the course of this budget cycle about funding for the CASA program. And the governor's initial proposal was proposed to strip out an additional $40 million that we committed last year. I've been a CASA. We're going to advocate very strongly to retain those funds. I'd make an argument that we should increase those funds materially. But what's the relationship, if any, between the Kids in Need program and the CASA program?

Well, kids in need, definitely. They provide representation for those kids where CASA is more of an advocate, where they are not necessarily representing them, but.

They are representing them in court. They are actually.

But not as an attorney.

Not as attorneys.

These are actual attorneys.

But is there a relationship between CASA is a bunch of programs across the state? Is there a relationship between county CASA programs and the Kids in Need program? Do you know, I'll look into it otherwise.

They definitely work with them. But it's two separate entities. It's a legal aid organization.

Appreciate that. Thanks for your work in that regard.

Thank you.

I don't have any further questions, just give you the final word. You spent a lot of time this afternoon. Want to make sure that we hear whatever you want to share with us.

I'll just say, really, again, thank you for the support you've provided to legal aid over the years. Thank you for the innovation and infrastructure money that I think you can see has made a real difference and really want to encourage the creation of a way in which student loans can be repaid for the very lawyers we need to recruit to work in legal aid programs and creating this really cost effective LWRAP. I mean, the new cost of the state would be $250,000.

Would really make a significant difference in being able to increase the number of legal aid lawyers, increase legal aid lawyers in staying in legal aid, which means they can keep the expertise within legal aid and most importantly, then provide the kind of capacity that indigent Californians need to address their legal needs.

Great. Judge.

I was a staffer, so I would say, don't keep it open. Just put it in. Pass it off now. So that was it.

Don't keep it open. Let's fund it today.

Just the two of us. Why not?

Thank you both very much. Really appreciate your time and all of your work. Okay, we're moving on to item three, county law libraries. We will begin with Janice Schmidt, President of the Council of California County Law Librarians and Director of the Stanislas County Law Library. And then we will also hear from Michael Corbett, from the Council of County Law Librarians. Welcome to both of you. You have to press the button.

There we go. Good afternoon, Madam Chair, Senators, thank you for letting me be here and talk about one of the things that I love most in life. My name is Jan Schmidt. I'm the Director of the Stanislaus County Law Library and the Director of the Council of California County Law Librarians. With me is Michael Corbett, our longtime advocate. In 1891, the California Legislature demonstrated its commitment to access to justice by providing all Californians with a means to access reliable, accurate, and timely legal information.

They did that by establishing the county law library, and they were the first in the nation to do so. Free and open to the public, county law libraries have always played a critical role in ensuring access to the tools, the technology, and the personal services that it requires to understand and exercise our legal rights. Every day, county law libraries help low income and moderate means individuals who are facing life altering legal issues, and they're doing it without an attorney and without any means to hire one.

Whether it's to conserve an elderly parent with dementia, to comply with a small business regulation, answer a collection debt lawsuit, fight deportation, file a restraining order to protect themselves at home or at work, or to simply find some relief from the anxiety of not understanding a complex system of laws, in an Internet world filled with misinformation, county law libraries are there to help them.

Unconstrained by income or issue limitations, county law libraries provide access and assistance to anyone with a legal issue, regardless of their education, their socioeconomic status, their income, or the nature of their cause. But without your continued support, the future of that free access is in jeopardy. County law libraries rely on a small portion of civil court filing fees to serve the needs of their patrons. When they were first established, that portion was under the control of local government, and it allowed for periodic increases.

However, in 2008, with the advent of the Uniform Civil Filing Fee Act, local control was transferred to the state, and there was no mechanism there for increases at all. The state did establish a task force to study filing fees, and they charged that task force with making a recommendation for law library funding. After convening in 2007, it issued the following finding without immediate consideration of a filing fee increase or identification of alternative revenue sources, law libraries will not be able to meet their increased operating costs in 2008.

The task force then disbanded without ever making an actionable recommendation. But their finding was indeed correct. Revenues did not keep pace with rising operated costs and in fact, due to increases in fee waivers, expansion of small claims, a diminished number of filings, and a declining economy, law library revenue plummeted by more than 40% over the next decade. Finally, in 2008, many law libraries found themselves on the brink of closure.

This Committee and its Assembly counterpart intervened and recommended a $16.5 million backfill of some of the revenues that county law libraries had lost. Over the last five years, county law libraries have received four allocations in total, three for $16.5 million and one for Covid-relief in the amount of 7 million. These one-time allocations passed unanimously with broad bipartisan support in both budget committees. So that leads us, of course, to the reason that I am here today.

Without supplemental funding, the progress made towards stabilizing our county law libraries will be lost at a time when access is clearly needed most. So on behalf of the more than 500,000 Californians who seek our help every year, we are asking for a $16.5 million appropriation in the 2023-2024 budget. I especially, though, want to thank you for the opportunity to be here, for your past support, and for your clear commitment and concern over access to justice.

Thank you, very much.

Good afternoon. Michael Corbett, Advocate for the Council of California County Law Libraries.

One thing that has happened since 2008 is that law libraries have found themselves in the position of trying to adjust to decreased revenue, and these adjustments have included cutting back on hours, cutting back on the number of employees, cutting back on the materials that are available to the public, so that to some extent, county law libraries have found themselves in a position of being stagnated when the need is even greater as time goes on.

One of the things that the county law libraries have tried to stress is that they are sort of a centerpiece in the access to justice situation. They are the centerpiece, to the extent that they communicate with the courts, they communicate with legal aid of societies, self help groups and all of that. And it seems just a shame that we can't find a way to get permanent funding in a way to keep us up, but we find ourselves asking for supplemental, one-time funding every year.

You've been gracious enough to extend it, but the point is that the 16.5 that was good, that brought us up to where we wanted to be in 2015, does not do it today. So we're actually, even though the Legislature has been appropriating money for us periodically, we're still falling behind. And because of the inflation rate of the day, we're falling behind at an even greater pace.

So we're here to ask you to please extend to us your good graces and fund this one-time appropriation for us once again. Thank you.

Thank you both very much. Just a couple of questions. And first of all, thank you for the work that you do for the people of California. Two questions. Three. How are the law libraries preparing for the implementation of the Care act? Is there anything specific that you all are doing?

There is mostly at the first stages. We're initiating ourselves, we are educating ourselves about the CARE Act, and we're looking toward what family requests are going to be, because if they have a right to counsel for individuals, the biggest need that I see and that I have foreseen is that families will come to ask what their brothers or sisters or husbands rights are. And the family needs won't necessarily be met by the attorney who has been assigned in CARE court.

Okay, so they still have needs, as you've heard, with housing. They still have needs with needing to conserve autistic kids. They still have needs with debt collection that isn't addressed through the CARE court. And so we're getting more and more self help materials. And to the extent that we can, those of us who can hire are hiring. But again, there's great limitations on how far that dollar is stretching.

So $16.5 million took us back up to what we received in 2008, but it accounts not at all for the amount that legal publishers charge and their rate of inflation or the increases in staffing costs.

Good. We just had a large discussion panel, on eviction defense, is that part of or what part of what the libraries provide?

It's a huge part of what we do. And you were talking about educational pieces for landlords and for tenants. We run, most law libraries, run clinics for landlords and how to write a proper lease, what your responsibilities are. We run tenants rights clinics and every law library does it in a little different way. Los Angeles County puts a lot of theirs online so that they can be viewed on demand.

We run ours through our local library, through their adult education program, and through our junior college and their adult education program. And so we try really hard to educate tenants about what they're getting into when they sign a lease. And we try really hard to educate landlords. And most of those who really want the education seek us out. It's those who really want to avoid the information that we have to work on.

And speaking of the funding, I know you mentioned making the request for a one time, but since this has been going on for a number of years, are there any other ideas that you have about how to continue to provide the service, to continue to exist? Because if you're only getting this periodically, at some point it might catch up and you're in a worse situation.

So we've been working with the Legislature since 2008 to try and identify a piece of legislation that we can attach to. Be it part of the judiciary budget and some legislation to include us in the judiciary budget, whether as a supplement or overall funding. But that's the most likely place and so outside of the General Fund, it's difficult because we don't want to increase fees because those impact the people that we serve.

Give me an example of the fees that people have to pay.

So we charge no fees, but when someone files a lawsuit in Superior Court, they pay $437, and when someone files in an answer, they pay $437. In Stanislaus County, we get $27 of that 437 per filing. In some counties, it's more. In some counties, it's less. And that was based on local jurisdiction at the time the funds that were allocated at the time local jurisdiction was transferred, but the average is $29. So we subsist on $58 a lawsuit.

It's like you're thinking, boy, we need some more lawsuits here.

We do and we don't.

Come on, sue.

No, I know.

I know that's not what you want. I'm just kidding. Okay. Well, I appreciate that, Senator. Any comments?

Just thank you.

Thank you very much. Thank you for coming and being with us in person.

Oh, thank you for hearing us.

Stay with us this whole afternoon. And obviously, we will absolutely, seriously look at the need here.

All right, great.

We're moving on to item four, which is criminal fees. And we have Stephanie Campos-Bui, an Assistant Clinical Professor of Law in the Policy Advocacy Clinic at the UC Berkeley School of Law.

Great. Good afternoon. Chair Durazo and Senators Newman and Seyarto. My name is Stephanie Campus-Bui, and I am an Assistant Clinical Professor at UC Berkeley Law, where I co-direct the policy advocacy clinic. Before I begin, I just want to thank the prior panelists and the Subcommitee for the discussion around legal aid and loan repayment programs.

I worked as a legal aid attorney right after law school and am still paying off my law school loans, which are well over $150,000 still and could not be in the position I am today without my own law school's loan repayment assistance program. So really, thank you for putting that on the agenda. But I am here to testify about debt free justice, California's request to eliminate the remaining administrative fees imposed on people by our criminal legal system.

Here in California. Over 40 different criminal administrative fees can still be charged in the state, including fees for counseling programs, record sealing and parole supervision. These fees are not meant to be punitive or to serve any accountability purpose. They're solely intended to cover the costs of programs and services. However, most people who are ordered these fees experience them as another form of punishment, especially since most people who are ordered to pay simply do not have the means.

Over 80% of people in the criminal legal system are indigent and qualify for the services of a public defender. And so, because most people cannot afford to pay, and in light of the resources and staffing that's involved with the assessment and collection of fees, many counties and courts across the state actually receive minimal net revenue from these fees. We also know that fee debt becomes more stale over time.

So in Alameda County, for example, cases that are less than a year old have an 8% collection rate. But once those cases hit 24 months old or two years, they drop to 3%, and once a case hits three years old, the collection rate drops to 0%. Just last week, the US Department of Justice issued a dear colleague letter naming the detrimental impacts of fees and fines, including the escalating debt, loss of employment, housing, and negative impact to credit.

In their letter, they note what is evident from data here in California that fees and fines disproportionately impact low income communities and people of color who are overrepresented in the criminal legal system and who also face economic obstacles arising from discrimination, bias, and systemic inequities. The Department ultimately recommends that jurisdictions across the country consider alternative ways to obtain resources other than through the assessments of fines and fees.

I was fortunate enough to attend a conference last week where this letter was released, and the Director of the Office for the Access to Justice program lifted up California as a leader, a state that has already started down this path of shifting away from fees and fines. Since 2018, California has eliminated all fees for young people in the juvenile system and their families. And thanks to the leadership of Senator Durazo, under Senate Bill 1290, we also discharged $362 million in debt from previously ordered juvenile fees.

Over the last few years, an additional three bills, Assembly Bills 1869, 177, and 199, have eliminated nearly half of the 90 criminal administrative fees that were previously authorized under state law, including fees for representation by counsel, probation supervision, and incarceration. Debt free Justice California has been actively monitoring implementation of these bills to understand compliance, but also to document the relief experienced by Californians across the state.

And based on responses to record act requests, we estimate that these bills have collectively discharged $17 billion in debt, which is, I think, a huge success, but also a sobering realization that this debt has been looming over so many communities for so long. These bills also included reporting requirements. So, first, for the counties to show actual revenue that was lost from fees repealed prior to the bill's enactment.

And second, because these bills were passed through the budget, money was set aside for counties to cover alleged lost revenue from these fees. So for counties to show how that backfill funding was spent, which departments received the money, how much, and what programs or services it went towards. Our understanding from staff is that compliance with these reporting requirements has been mediocre at best. Counties provide data that are either incomplete or inconsistent, and some counties simply just did not meet the reporting deadlines whatsoever.

So the coalition has had to resort to following up on its own through Record Act requests, review of Board of Supervisors agendas, and minutes to understand implementation. I can appreciate the fact that data systems are old and that it takes a long time to gather this information, but the first reporting deadline was nearly a year after the first Bill AB 1869 was enacted.

I think if this revenue stream was that important to county budgets, we would expect to see more detailed accounting or data on amounts collected. And so the inability to meet these requirements, I think, raises question about what additional oversight is needed to ensure that counties meet what is asked of them, or also whether such backflow is necessary going forward.

As California continues its work to unravel its fee and fine scheme, I think we should be continued to be guided by what we know and not make policy decisions around the fear of the exception or the idea of the wealthy person who can pay, but rather around the reality.

And that's the hundreds of thousands of Californians who are predominantly low income and overwhelmingly black and brown, who continue to be over policed and funneled into the system and in turn are forced to bear the costs of our courts and legal system. I thank you again for putting this item on the agenda and continuing to prioritize this issue in California, and I'm happy to answer any questions that you might have. Thank you.

Thank you very much. The last point that you made about the counties not reporting and the follow up that's needed for the oversight, what's the impact of that? They're not getting the money to fill less income from the fees. Is that what's going on here?

So they're still getting the money regardless of whether or not they meet this reporting requirements. So, for example, in AB 1869, $65 million was set aside with a methodology to determine how much each county got based on population and other data. So the reporting requirements is just kind of an informational and educational purpose. The money is not conditioned on whether or not they provide this information.