Assembly Budget Subcommittee No. 4 on State Administration

Ready to rock and roll.

Chuck. Okay, good. All right. Good afternoon, everyone, and welcome to our Assembly budgets of four. Committee hearing for Members of this Committee, we are in room 447. This hearing is taking place again in room 447. With a few exceptions, the panelists listed on the agenda are appearing in person. We'll be accepting public comment at the end of this hearing, both in the hearing room and on the phone.

Chuck.

The phone number to connect is on the Committee website and should be displayed on the screen. If you are watching this online, the phone number toll free is 877-692-8957 and the public access code is 131-5447 if you encounter any problems, please contact the Assembly Budget Committee at 916-319-2099 and a staff Member will assist you. We encourage the public to provide written testimony before the hearing. Please send your written testimony to budget four at ASM Ca Gov. And with that o'clock, please.

Assembly Member Korea present Assemblymember Lee Assemblymember Patterson. Here. Assemblymember Reyes Assemblymember Wicks here.

We will begin on the vote only calendar. We have 35 items for consideration which are listed on the agenda for your reference. We will have three motions for the vote only calendar. The first motion is on the following vote only. Issues 159 through 2125-2728-3031-3233 chair recommends adopting the staff recommendations. Can I get a motion? Thank you. Roll call, please.

Curio Aye. Koreo I Lee Patterson. Patterson I Rayes Rayes, aye. Wicks wix, aye.

The second motion is on the following vote only. Issues two to 46 through 822 through 24 and 26. The chair recommends adopting the staff recommendations. Can I get a motion? Thank you. Roll call, please.

Korea Aye. Korea aye. Lee Patterson Patterson no Rayes Rayes. Aye. Wicks, aye. Wicks, aye.

And the final motion is on the following vote only. Issues 29 and 34. The chair recommends adopting the staff recommendations. Can I get a motion? In a second. Thank you. Roll call, please.

Curio.

Courier, aye. Lee Patterson. Patterson not voting. Rayes Rayes. Aye. Wix. Wix, aye.

Aye.

Thank you. We will leave the roll open for additional Members to sign on and we can begin. We have an exciting budget for agenda today. Look at all you beautiful people here in the lovely Capitol in room 447. Let's begin with our first order of business. Issue one, Calaxis replacement system project update. For our first issue, we will hear an update on the state's efforts to replace the Cal access system, our state's campaign disclosure and lobbying financial activity portal.

Very exciting stuff for this update. We are joined by our Secretary of State, Dr. Shirley Weber. Welcome, Madam Secretary, and thank you for joining us. Please, if everybody can take their seats.

Good afternoon, Madam Chair. And those of you here on subject subs Committee four. I'm really honored to be with you today. It's good to see your faces. And so I'm here really, not because my staff couldn't answer all those questions, because they can, but I needed to see you guys. So it's good to be with you today and good to be able to come and update you on cars.

We did a similar program with the Senate earlier this year or last year, so I'm happy to be able to share this with you. So I want to thank you for allowing me to participate. I will try to be brief as much as possible, because I know that you have a long agenda and you have a lot of folks, and I've been on this Committee before, and I know how long it can take, so I'm going to try to be brief.

So I want to thank you for inviting us to be here today to be with you. Let me first make a distinction between cars and cars access, because they are Cal access. They are two different systems. The Cal access system is the California automated lobby activity and campaign contributions and expenditure system known as Cal access. And that's the current system that we have that has been used, submitted.

Most of you go on it to look who's contributed to campaigns, look at lobbyists, are there, those kinds of things. The cars project is that long name system replacement system. And so this is the new effort to try to replace the current system that's there. I draw this distinction because I know when I was here, we'd say cars or cars access, and we didn't really pay attention to the differences that we were making.

But when we think about it, the Cal access is our current system that's being used. Cars is the future system and the efforts to try to improve that system. When I became Secretary of State in January of 2021, the cars system was in the process of trying to update itself and to present a new system to us.

After reviewing, however, we discovered very quickly, after looking at the testing that had been done and the kinds of things that were there for cars, that this was, and then eventually hiring an independent assessor, it was clear that the current cars project was not ready to be revealed in June of 2021, which is when we were supposed to have it go live. It had not been adequately tested. It had not had very good testing in terms of being more than 30% to 40% effective.

And so it was clear that we had to have something else done. We did an independent assessment and it was discovered that this system that we had been put together had been moved from person to person, program to program. Different individuals was not ready to go live and did not have the correct platform to be able to do all the things that the Legislature had requested.

So I had to make a decision either to just let it go and fail, or to basically stop spending the money and find ourselves and right size it to make sure it would function. So we did that. We did the latter. It was the hardest decision I had to make as a Secretary of State to stop the process.

But I discovered after looking at all the things that those who were working on the project agreed that it could not go forward, that it was not prepared, and that we needed a different kind of system that was there. We discovered that and then we had to restructure it. So as a result of that, we now have a new cars project that is underway and being hopefully responsive to the kinds of things that we need. We have done a number of things.

The current project started in July of 12022 and it has implemented a number of guardrails and best practices to ensure that the project can be completed on schedule and avoid the project restart. For one. We made certain that restart project was implemented with the recommendations of the independent assessment report that was given to us, rather than taking it, throwing it aside. We basically decided that we would basically implement the project and the recommendations that were there for those.

We also had deal with our risk assessments and issue management process that included stakeholders from all of the different projects that deal with the California Department of Technology. The project is also recruiting experienced staff Members to avoid over reliance on outside contractors and developing a realistic project schedule based on the formal scheduling best practices and ensuring that data preparedness and testing activities occur as soon as possible. The Secretary of State has also entered into a memorandum of understanding with the California Department of Technology.

I was surprised that we had not done that early on because that was supposed to be the reason why we have a CDT is so that they can oversee projects and they were not involved or engaged in overseeing this. And so this allowed us to engage their expertise and leverage informal reviews approval process during the project lifecycle, the very four stages, and an oversight project during the project execution phase. So the previous version of the project excluded CDT.

We have included CDT as a partner on this project. Additionally, we have required a retired annuitant with decades of state it experience on large and small automated projects to serve as a special project consultant. Finally, the project is completing its acquisition and independent verification resource. The contractor will provide an objective third party analysis on a monthly basis to all project stakeholders that verifies that the requirements are correctly defined and validates. The new system is correctly implementing the required functionalities at each step in the development process.

The current CALS project is on schedule and is operating within its approved budget. The project end date is not yet known and will be determined when a system integrator is acquired and provides an estimated project implementation desk date. The system integrator specializes in implementing, planning, coordinating, scheduling, testing, and improving and sometimes maintaining the it systems based on information contained in the independent assessment that we did. The duration of the project development and implementation activities is estimated at 27 months.

In terms of the project's budget, SOS has requested 12 point 31 million in fiscal 202324 to Fund the remaining planning efforts and the first months of project execution. Of that amount, 6.9 million is new funding and 5.39 million is existing funding because once we stopped the project, we did not continue to expend the money. We kept the money so that we could use it as a new project. The 2023 budget request is under review with the Department of Finance.

Although the project has estimated its planning costs for both fiscal 202223 and fiscal year 2324 the total onetime cost to implement this current iteration of cars solution will not be known until the system integrator is acquired and provides its estimate for the development and implementation activities. Since its last report to the Joint Legislative Budget Committee in January of 2023, the CARS project team continued to make significant progress in a number of areas. It has submitted its final stage two alternative analysis.

We were told by the Department of Technology that there are four phases that we are project approval cycle, and they have identified four phases. We have completed phase one, which is the business analysis, phase two, which is the alternative analysis, and we were looking for approval on that. And then there'll be phase three, which is solution development, page H four, which is the project readiness and approval. The project is currently developing the formal request for proposal documents needed to acquire the car solution system integrator.

This document is a part of the PALs project stage three, so we're going into stage three. The project is on schedule to complete this stage in November of 2023. The final PAL stage phase four, project readiness and approval, including solicitation, document release, and vendor selection, is scheduled for completion in the fourth quarter of fiscal year 2324. The project is continuing to both recruit state staff and contractors to acquire the expertise needed to ensure that the project is sufficiently staffed.

Since the start of the project in July 2022, the project team has continuously engaged in stakeholders who rely on Cal access to ensure their input is identified and tracked throughout the project's planning and development phase. For example, during the market research phase, the project met regularly with several external stakeholder workgroups to obtain their comments and concerns. This feedback has informed the project's requirements.

Gathering efforts the project is holding regular monthly Cal access replacement system project status meetings designed to improve external stake to provide external stakeholders with project status and a forum for any questions they may have. All feedback gathered from stakeholders, either by written communication or obtained via the outreach meetings, has been documented and is being tracked throughout the planning phase to ensure its consideration during the requirement finalization efforts.

Before closing, I'd like to simply address what would happen in adverse effect if SOS and the state would experience if the decision was made to defer our budget request for at least 12 months. First and foremost, the car's project funding is deferred.

If it's deferred by 12 months, the new implementation effort would be further delayed by an additional six to 12 more months, mainly due to the loss of the project's current expert consultant staff who are drafting the system integrator request for proposal and the necessity of both reacquiring these services and then regaining the momentum of the various project work streams. Also, identifying the right solutions is a lengthy and challenging process. The correct solution provider can mean successful long term outcomes and help to avoid common pitfalls.

Absent this effort, the project would experience unnecessary delays and certain difficulties. Extending the project by an additional 18 to 24 months would increase the project's overall cost by several $1.0 million based on the estimated project budget. Deferring funding would also necessarily extend stakeholders reliance on the legacy Cal access system, which has reached its end of life and cannot be modified to meet the new reporting demands of the Legislature or other stakeholders.

The longer stakeholders must rely on the legacy system, the longer it will remain unresponsive to its campaigns and lobbies, filings and disclosure reporting needs. As mentioned earlier, the current Cal project has made a significant effort to collaborate with stakeholders. An 18 to 24 month delay would undermine their level of confidence in the project, especially considering the history of this project and its two failed prior attempts.

Delaying the project would also stall an effort underway to acquire a prime vendor, which risks undermining potential interest from the vendor community. A 12 month deferment in funding would signal to the vendor community that this project may not be one to consider bidding on, as it appears to be subject to recurrent future delays in times of temporary economic downturns. This message would result in inferior bids once the RFP is finally released to the vendor community in a deferment scenario.

I just want to thank CDT for the role that it's played in this project thus far, and the fact that it's helped us to stay on course and to write the course and to do what is necessary. I want to thank my staff, Secretary of State, because one of the things I discovered when I came into office, and I asked always a critical question, who's responsible for this? No one was. Now they have taken ownership of it.

And one of the things that we've done, of course, is to make sure that our technical individuals are intricately involved and engaged in this project, that it's not outside vendors, it's not people coming from outside who are basically leading us, that we are leading and they're supporting. And that becomes important with many of our it projects here at the Capitol, that they go arrive. Because we rely completely on outside individuals.

We are working to basically acquire and to hire the staff that we need to not only assist with the project, but to maintain the project when it is over. I'm constantly concerned of the fact that we create projects and then we turn them over to other to maintain it for us for 15, $20 million a year. Our folks are not responsible for maintaining it and keeping it running. And as a result, we find ourselves once again in this situation.

We're expending a tremendous amount of money and not getting what we need to grow. So this team has taken the charge of this project that they are responsible for it, and they will tell you that they're responsible for it when something goes wrong. We have the old cars project, and I didn't read all the details on that, but just so you understand, the Cal access project often goes up and down, and it's basically an old system that we're kind of piecing together.

I'm proud of the fact that my staff has decided that they're going to be responsible for that project. So they have a 24/7 team that works around the clock to keep Cal access working for you, so that we don't experience a lot of downtime, we don't do a lot of break time, and they are learning, they're maintaining that system.

They've also created other things that could give us additional technology that can work to make sure when the system goes down, we have some way to store the material to take it back out. And so they have taken responsibility for the system where before no one took responsibility for anything.

And so now this team works as a team across the board, whether it's dealing with our elections, whether it's dealing with all of the kinds of things that happen through election, whether it's funding, whether it's lobbyists, all those projects, they are really responsible for this project.

So I came today not because I'm ultimately responsible and I've committed myself to completing this project, but I also want to make sure that my staff is as well and that they know I'm behind them and that the community is engaged. We have stakeholders that are engaged, that are working very hard on this project. So we are committed to this because this is an extremely important project for California. It should have been done 50 years ago.

We all know the history of how long it's been working on this project, and the ups and downs in the last few years have really been unacceptable. And so we've gotten the confidence now of our community, our stakeholders community believe that it's going to happen. They're working with us to make it happen. Our staff is taking responsibility for it. And the budget now and CDT now is engaged in this project. So this is a major project.

And I just wanted to thank my staff, thank you for hearing us today and thank the state for continuing to support and Fund this project, because it is extremely important for many other pieces of legislation you create that we're not able to implement and have to delay because this project is not ready. Thank you.

Thank you, Madam Secretary. And just a point of personal privilege in your previous role as chair of budget in the Assembly, as well as chair of a couple of the subcommittees. I appreciate your outtake and look towards budget and your respect towards the Legislature. So I just want to say thank you. Thank you for showing up and giving a presentation on such an important issue.

Specifically, how do agencies and departments take back ownership and responsibility of the various different management systems that we have and that we should have better control of. So I truly appreciate that. I'm going to go for comments. Any additional comments from the Department of Finance and the Lao? Do you want to say it on record?

Charles Lasalle, Department of Finance. No additional comments at this time. Nick Schroeder from the Lao. No comments.

Thank you. Any comments from the Dais majority leader?

Thank you, Madam Chair, it's great to have you here. Madam Secretary, always great to see you. You made a few comments. This team works as a team. It takes a great leader to get the team to work as a team. And I appreciate your leadership in that. I wanted to ask some specific questions, if I may. What was the initial budget for the original cars?

This is Tamara Jackson. I have a whole bunch of Tamras and Tamaras in my office. I'm not telling you. I have a lot of them, so I think we're just maybe getting rid of one. But we got more of tomorrow's and Tamara's coming. This is Tamara Johnson. Okay.

Yes, ma'am. Good afternoon. Tamara Johnson, chief financial officer with the Secretary of State's office. So the total expenditures for the prior cars effort was about approximately 39.4 million.

And of the 39.4, there was 11 million, 10 million left, or it was 39 plus the 10.3 that was left over.

So it would be the 39 plus the 10 that was left over, and then repurposing that 10.

So basically cutting our losses with money that was being spent on something that just was not going to work. So the first 10.3 million and then an additional 1 million to get started with the pre planning for the presart for stage two, which is completed in November of this year. Do you already have the funding through November?

We do have the funding in the current year, correct. And so what Secretary Weber mentioned is what our estimated costs are, or the proposal that we have with the Department of Finance of what we would need in the budget year.

So stage three then requires. Do we know how much stage three requires now?

We do not have that cost at this time until the system integrator comes on board, then we would know what that contract would be.

All right. Thank you.

Yes, ma'am.

Thank you.

If there are no additional comments or questions, we will move on to issue number two. Secretary Weber, thank you so much.

Thank you all for coming, and I love seeing you. Thank you. Thank you.

We will be moving on to issue two, covering budget change proposals requested by the office of the Secretary of State. For this panel, we are joined by representatives of the Secretary of State's office, the Department of Finance, and the LaO. Please take a moment to introduce yourself as you begin. Please begin.

Thank you. Thank you, Madam Chair. Once again, Tamara Johnson. The Secretary of State's office. The election staff enhancements. There has been an unprecedented increase in attention to election Administration in recent years, thus requiring an increase in the Secretary of State's ability to effectively respond and provide the most up to date information timely and accurately to a variety of stakeholders, including voters, candidates, campaigns and media.

And in that, every aspect of elections is impacted from access to voter information, ballot creation, polling place information, candidate information, voting systems and the results of the elections. The elections division is responsible for is complex in structure and highly visible to the media and public. Due to extreme workload and required overtime and in person work, there are challenges with maintaining consistent, well trained staff, which is necessary to ensure proper Administration of the elections.

Additional positions will allow the elections division to balance the workload distribution amongst more staff to prevent burnout, excessive overtime and attrition where most other similar civil service jobs are entirely remote or do not require overtime. Approval of this proposal would provide the resources necessary to adequately support California's increased year round election responsibilities and provide accurate and timely information and services to the public to meet the workload. With me today is the chief of our elections division, Jana.

She would be able to provide any additional information you may need. Thank you.

Thank you. And just to be clear, issue two will be presented on four budget change proposals related to election staff audits, notaries and the state match requirements to access federal funds. Did you have something additional to add?

No, ma'am.

Okay, we're going to go with the Department of Finance.

Charles LaSalle, Department of Finance. No additional comments at this time. Lao Nick Schroeder, Lao we have no issues with the proposals.

Okay, one moment.

Just for the purpose of time, and we have a really heavy agenda, can you present on the additional three budget proposals as well? So we have audits, notaries, and the state match requirements.

Yes, ma'am. The next proposal is the Internal Audit Office Staffing Needs. The scope of the Secretary of State's responsibility has grown in recent years, while the capability of the Internal Audit Office have not. The Internal Audit Office currently consists of one senior management auditor and one associate management auditor currently responsible for all workload related to the auditing function at the Secretary of State.

This request will augment the current staff by four positions, which would give us a total of six audit staff, which is within the range of staffing levels for internal audit functions at state entities of comparable size. This request will help address the risks posed by the increased size and complexity of the Secretary of State's operations, expand the scope of the audit function throughout the SOS, and help ensure an effective operation of internal controls and compliance with all applicable laws, regulations, and policies and standards.

This request decreases the probability that the SOS will fall short of its auditing goals and responsibilities, operate without effective internal controls, and fail to prevent or detect fraud, misuse, or abuse of public funds or assets, thus reducing any possibility of negative impact statewide. The next proposal is our Notary Automation Program Replacement Project. The SOS currently utilizes an antiquated legacy notary public system, which is approximately 30 years old. The system stores and maintains notary public commission data.

Current technology has evolved significantly since the current system was created, so integration of the legacy system with current and future technology and possibly third party systems would be challenging. Creating a new system will allow the SOS to streamline business processes and offer more efficient online services to notaries and the public. Updating the system will allow for easier amendments in the future should the notary laws change.

This request will provide planning resources for building a new system which supports all of the functionalities of the legacy notary system and incorporates online application and commission management, a searchable public database and notaries of public, and electronic APIS deals. CDT has approved the stage-gate one business analysis and this request is to continue the stage-gate planning as well as begin data cleanup and readiness.

And finally, we have the Help America Vote Act Election Security Federal Grant award. The SOS received a grant award from the U.S. Election Assistance Commission, authorized under the Consolidated Appropriations Act of 2022 to improve the Administration of Elections for federal office, including to enhance election technology and make election security improvements. To adhere to all federal applicable requirements, we are requesting approximately 6.9 million in 23-24 as follows.

Approximately 5.8 million in Federal Trust Fund authority to accept and expend the grant award and an additional approximately 1.2 million General Fund to meet the 20 percent state match requirement. The state has two years to secure that match until March 2024.

The funding request is to support county implementation of election security safeguards and infrastructure against physical and cyber risk and vulnerabilities, and also will support polling place accessibility through county training on accessibility requirements and mitigations, in addition to providing funding to counties to improve accessibility of polling places. Those are the four proposals that are before you today, and we're happy to answer any questions you may have.

Thank you for that. Any additional comments from Department of Finance?

Charles LaSalle, Department of Finance. No additional comments at this time.

Thank you.

Nick Schroeder. No comments.

Thank you. I want to just give a preface of what I've seen in the last two election cycles. So I'm a naturalized citizen. My parents, my mom loves going to vote. The day of Covid was the first time that the state made an investment in sending a vote by mail card to every registered voter across the State of California.

In LA County specifically, we have gone from the local location that's been in effect for a long time, my elementary school being one of them, to now Regional Centers. And so my concern with naturalized citizens or even voters in general, especially our senior voters, senior population of voters, is that they're used to going to the day of. We've had to change even how we talk about voting, right? The election is not on the Tuesday of that date.

It begins when you get your vote by mail ballot to the day of the actual election. I'm curious if you've thought about the impact to some communities who are not used to voting by mail and what that could potentially look like if we were to invest in a campaign related to voter education and voting by mail. And I say that with also the caveat that every county is different, every ballot is different. And so that also presents a challenge.

But if the goal, especially in the latter portion of your presentation and matching funds from the federal government, what can we put in place that is culturally significant, language significant, and really allows for an opportunity for more people to vote, especially those that are so used to voting the day of, but may not because the centers have changed, et cetera?

Yes, ma'am. So, hi. This is Jana Lean, Secretary of State's Office, Chief of Elections. So I can answer that. I hope. So one thing that we are definitely looking for is to find the commonality between all of the counties, right? So we do have a uniform application of the law, is what we always strive to do.

Even if some counties are going to Regional Centers to vote or if they have the traditional polling location, there are some things that are standard across the board to all voters, and the voters will get the vote by mail ballot. And we suggest that they go ahead and take a look, take their time, read through it, to read through the voter information guide in the county and the state one, and to make themselves as much educated as they can reading through all the materials.

However, I think it's really important that we do get the message out, not only in English, but to languages and to make sure that we look at all the diversity of California and translate and send those messages not just in a postcard or in printed material, but through the media. I think that was one of the biggest things that assisted in 2020, was to get that information out to media markets, all media markets, not just English media markets.

And I think that's the best way to do it. One is to educate folks that you not only have that time in which you get your vote by mail, everybody has an opportunity to go in person. And with those voting centers, they have an opportunity to go in person for many more days than just election day.

So getting that message out to going not just and putting in the media box, but going to community groups, getting in front of trusted sources, right, in front of churches, in front of community groups, and to make sure that they're involved. And so I think one of the big investment that we could do is to provide that kind of funding so that we do have--not just with the state, but the county, so that we can actually get information and money down to them--but what we do at the state is that we develop the structure for that.

So we do a standardized messaging, and then we've come up with toolkits is what we've done in the past election cycles, translate them and get them to counties and say, 'will you please magnify what we're sending out?' So it's a trusted message coming from the state and the counties that people can understand. This is what you need to listen to, and here's where you need to go to vote.

It sounds incredibly challenging to be able to pivot an entire state to vote by mail, especially with communities that haven't done that before. I traditionally vote by mail, and even that is very daunting. I think my last ballot was 17 pages long, going page by page, trying to read each several things, and I decided to go vote in person for the first time and had junior high, high school PTSD trauma with a scantron. Like, I wanted to make sure I was filling it right.

And I had somebody--I literally didn't know how to put it in through the machine and had to have someone come help me. And I'm like, 'how do I do this,' right? So I can imagine that it's very intimidating to folks that are not technically savvy and how do we do that? So again, thank you for the response, but we're hoping to figure out a way that makes just voting easier. Thank you. We're going to move on to Issue Number Three.

So we're going to keep this item open for now. We're going to move on to Political Reform Education Program. We will now move on to Issue Number Three. For our third issue, we will hear a presentation on the Political Reform Education Program. Let's see. Wait, hold on. Oh, for this panel, we are joined by Loressa Hon, the Chief Administration at the FPPC, Galena West, Executive Director at the FPPC, as well as the representatives of Department of Finance and LAO. Let's begin. And when you are at the mic, please introduce yourself.

Good afternoon. My name is Loressa Hon, Chief Administration of the FPPC, and to my right is our Executive Director, Galena West. I'm going to begin. Is this better? Okay.

The Political Reform Act governs governmental ethic, including the areas of campaign finance, conflict of interest, lobbying disclosure, post-governmental employment, and gifts. The act provides the Commission broad authority to administer and implement the act and the responsibility to educate officials on their duties and to enforce the act.

As part of its duty to educate, the FPPC have developed various programs, materials, resources to help officials comply with their duties, including in-person and online training, detailed campaign manual fact sheets, other educational material, as well as email and phone advice service. To continue and to improve, the Commission works in educating officials and enforce of the act. The Commission launched a pilot program known as the Political Reform Education Program or as you call PREP.

The program combines the Commission duty to enforce educate by offering a training and education option in lieu of enforcement action and monetary penalties for individual who committed lower crime violation and have less experience with the Political Reform Act. For the past few years, the enforcement division workload has increased exponentially, so transferring those lower level violation to the PREP cases can be handled more effectively and efficiently and it will free up time for the enforcement staff to resolve the more serious violations.

In its current limited pilot program form, the program includes one course. It's on statement of economic interests, also known as Form 700. The program has so far been very successful. Since June of last year, 51 individual have completed the program and 16 are currently enrolled.

The budget request is for 455,000 in fiscal year 2023 and 2024 and 421,000 in the subsequent budget year, which included three permanent positions which would enable the Commission to make PREP an ongoing program and to extend--to expand--sorry--the program for additional subject that we wanted to do education on. And this concludes my presentation.

Thank you. Additional comments from Department of Finance and LAO?

Charles LaSalle, Department of Finance. No additional comments at this time.

Nick Schroeder, LAO. We have no issues with the proposal.

Thank you. Just one question for me. When does the FPPC anticipate launching additional courses through the program?

Sure. Galena West, Executive Director. We anticipate hopefully August for local campaigns and then at the end of the year expanding out to state campaigns and then next year adding advertising. So that's the calendar we're going to try to follow when we get fully staffed on this.

Does that provide sufficient time for the 2024 early March primary?

It does. We should be able to have campaign already in effect, so then that way, as referrals come in for the semiannuals, then we'll be able to push them into the program and take care of that whole batch of referrals before the primary.

Excellent. Thank you. Exciting. Things are moving up in California. Thank you. We're going to keep this item open. Thank you so much. We're going to now move on to Issue Number Four: Workforce Development Programs, Reductions, and Funding Pauses. This four panel will be discussing funding reductions and funding pauses impacting workforce development programs.

It's moving on to our labor issues. Last year, the 2022 Budget included significant investments in workforce development. These investments aim to support various trades and industries across a diverse range of demographics. The Governor's proposed budget includes several proposed cuts and funding pauses to these programs. For this panel, we are asking our presenters to outline these proposed reductions for discussion and consideration. We are joined by Andrew March and Patrick Toppin from the Department of Finance. Chas Alamo from LAO.

Thank you, Chair.

Let's begin.

Yes. Thank you, Chair. We're also joined by members of the departments if there are any programmatic questions that you guys may have. As an overview of the solutions that are being proposed as part of the Governor's Budget, there are five in this area.

For the targeted emergency medical technician training at the EDD, we are proposing a reduction of ten million in 2023 and 2024 and 2024 and 25, ten million as well for the California Youth Leadership Corps Earn and Learn Pathway allocations in 2023-24 and 24 and 25, a reduction of 20 million dollars in both the budget year and budget year plus one for the Apprenticeship Innovation Funding Program at the Department of Industrial Relations, and a pause next year and the following year for the Women In Construction Program at DIR.

To highlight those proposals, there's also a reduction next year of the Covid-19 Workplace Outreach Project at DIR, again, 25 million dollars to solve the budget problem. That's a brief overview. Happy to answer any questions about those reductions, and again joined by departmental staff as needed.

Thank you. This room has a weird echo, so sometimes it's difficult to hear you on this end. So just for all the future folks presenting, try to speak as closely as you can to the microphone. You were fine, but there's a little bit of an echo. Any additional comments from the LAO?

Good afternoon. Chas Alamo with the LAO. No comments on this item. Thank you.

Okay. I have some specific questions. Is there a particular reason why the Administration selected these specific programs for reductions in funding profits?

Thank you. Again, Patrick Toppin, Department of Finance. So, as mentioned sort of throughout the Governor's Budget documents, these proposed solutions are part of a balanced plan to reduce the recent one-time and limited term investments, preserve core departmental programs without touching the state's budget reserves. And in this workforce space particularly, our goal was to methodically spread out the reductions to make sure that these programs can keep serving Californians.

One that's incredibly alarming that I'm going to ask you specifically on is the Covid-19 Worker Outreach, originally 25 million in 2023, now cut entirely.

Excuse me, Chair. Is there a question in there or--?

The question is why was the Covid-19 Worker Outreach Plan completely eliminated from the Governor's proposals?

Again, sort of going back to the previous answer, it really is sort of just about taking a sort of balanced approach. Given the amount of funding last year as well as this year, we feel that that's a reasonable, but also happy to engage in conversations about these reductions if they're a concern for the Legislature.

Well, we'll get into it a little bit more in detail, but it just seems that after the past two and a half years of what the state has grappled with and what we faced really across the world, that when we talk about worker outreach and the impact that Covid-19 had on certain folks, like having it been a priority to the Legislature at 25 million, just now, to seeing it cut entirely, for me personally, it just gives me a lot of pause as to how things were prioritized.

Several of the impacted programs are subject to a trigger. Does the Administration have a specific threshold or target number that, if met, will guarantee restoring funding?

At this time--sorry--Patrick Toppin, Department of Finance. At this time, we do not have a number for the trigger, given that, as per the control section, relies on a lot of calculations that will be determined throughout the budget development process, the enrollment caseload and population adjustments, other baseline budget adjustments that are done throughout the summer and the fall. And so not at this time. We do not have a number.

Okay. Again, just something for you to consider in your report back, one of the programs also cut is Women In Construction, which was a priority, again, 15 million per year. Now it's completely paused until we have more funding. With a housing crisis, homelessness crisis, our ability, and all the issues being implemented, all the policy being moved forward to create more housing, opportunities for Women In Construction are a priority to a lot of us, and so seeing that be cut, again, something for us to consider as well. Any additional questions? Madam Majority leader?

Thank you, Madam Chair. I want to lend my voice to your concerns. This is of great concern. Also the Youth Leadership Program, 20 million dollar reduction, ten million in both this year, 23-24 and 24-25. That is of great concern. The Apprenticeship Innovation Fund, the EMT Training Fund, these are all things that many of our colleagues fought very hard for to get them into the budget.

And to now have them paused or reduced is of grave concern for many of us because these were opportunities that were going to be provided. We talk about having a workforce that is diverse. The very programs we're cutting, our young people, our women, are the very programs that we should not be cutting. So I lend my voice to the concern voiced by our Chair.

Thank you.

Thank you.

Thank you, Madam Majority Leader. I will note that another high priority was a joint hearing that we had with Budget Sub Two? Sub Two? Sub One? Sub One. Budget Sub One on Health and Human Resources with Assembly Member Arambula, where the Legislature also prioritized emergency medical technician training, so EMT training more health care workers, originally 60 million, now cut to 40 million. So Apprenticeship Innovation Programs. I think the question related to what will trigger potential reinstatement of these funds would be important to answer moving forward.

We're going to keep these items open and move on to Issue Number Five. Again, thank you, gentlemen. Issue Five on EDD, Employment Development Department. For this next panel, we are joined by EDD Director Nancy Farias and her team to provide an update on EDD operations. Director Farias.

The goal of this panel is to assess EDD's readiness in the event that a recession would put pressure on the state's safety net programs once again and see if lessons learned from the pandemic have been incorporated into the Department's operations. For this update, we are asking EDD to present their Recession Plan, provide an update on EDD fraud prevention activities, and outline their recent work to improve language access at the Department. Let's begin.

Good afternoon, Madam Chair, Members of the Committee, Patrick Christian. Good to see everybody. Good afternoon. Thank you for inviting us here today. For the record, my name is Nancy Farias, the Director of the Employment Development Department. I know there's a lot on the agenda, so I'm just going to give a very high level overview of a few of the issues that were in the agenda, including improvements to customer service, the multilingual resources, fraud prevention, and how we are preparing for a possible recession.

I'm going to start with recession planning. So there were 20 million claims for unemployment benefits during the pandemic, compared with 3.8 million during the Great Recession, and I know I repeat that at every hearing, but it's a very important point to make. We learned many lessons from that extreme demand level and emerged better prepared for future recessions.

EDD completed more than 200 information technology projects during the pandemic, basically automating things that were not automated pre-pandemic, and which caused delays during the very beginning of the pandemic. That work puts us in a good position to weather a future economic downturn. By implementing Senator Laird's SB 390, we documented those key lessons learned and developed a strong plan for any future recessions. We also established an Unemployment Insurance Command Center to help forecast workload volumes, customer service demands, and staffing levels.

Under our new recession plan, EDD takes action based on three potential phases of activities that trigger depending on the state's unemployment rate and other factors. The first phase begins by increasing staff levels when unemployment reaches six percent. Overtime levels increase, training schedules shift, and preparations begin for potential phase two actions. The second phase begins when unemployment hits eight percent. This triggers more staffing increases by borrowing workers from other branches or agencies, more hiring, retired annuity, recruitment, and preparation for possible and potential vendor support.

Phase three begins at 12 percent unemployment, which triggers a potential need for vendor staffing where the Department would release a request for proposal and execute a contract for temporary vendor staffing resources to address the increase in workload. Despite layoffs in tech and other industries, California's unemployment rate remains very low at 4.3 percent, down from the peak of 16 percent during the pandemic. Nevertheless, we continue to proactively monitor conditions and remain prepared to respond should conditions change.

For example, in preparation for the seasonal workload increases and the need to have skilled, trained staff ready to respond to initial increases in claims that may be attributed to signs of a recession, EDD hired approximately 300 permanent intermittent employees. These employees began training in mid-February. EDD continues to closely monitor the national economy and economic indicators such as U.S. job numbers, inflation rates, our own unemployment rate here in California, and new claims filed and objective economic forecasts to assess the need to recruit additional staff.

Touch on fraud. During the pandemic, every state in the country experienced an unprecedented surge of fraud attempts, particularly in the new federal pandemic benefit programs passed under the Trump Administration. Those emergency federal programs lacked the safeguards present in traditional state Unemployment Insurance, and California responded by developing and implementing a strategic plan to detect and prevent fraud, investigate and prosecute criminals, recover lost funds, and help identify theft victims.

We continue to use successful fraud fighting tools such as ID.me and Thomson Reuters to ensure legitimate claimants are receiving their benefits while protecting the system from fraudulent schemes and the fraudulent schemes are still out there. As such, we encourage Californians to remain vigilant and safeguard financial and personal information to help prevent fraud, including identity theft. We have valuable information on our Help Fight Fraud website, as well as information about EDD's response to fraud, including details about our efforts to hold criminals accountable.

I'm going to touch on the call center and EDD next. Calls to the UI branch are down. Nearly ten million Unemployment Insurance calls arrived the second week of January 2021. Last week it was 60,000. Repeat call attempts have nearly ended and EDD has been able to answer the incoming calls. Based on what we learned during the pandemic, including the extreme level of demand, we are investing in new systems to handle future emergencies. We continue to move forward with EDD next.

We are making incremental improvements every day, prioritizing those improvements that have the greatest impact on the public. For example, we are implementing a new shared customer portal in June of this year. This will make the process of applying for benefits online much simpler. At the same time, we are modernizing our contact center to improve the customer experience. The public should have their calls answered more quickly and be automatically routed to the right support person.

For example, most claimants use the UI Online claim status tracker, which was created last year, but for those that do not have access to online service, they should still be able to get the status of their claims and get that done quickly over the phone. The new contact center will be integrated with our shared customer portal to make it easier for claimants to get the help they need.

We've submitted our roadmap on EDDNext, our expenditure plan, and quarterly report to the Legislature showing each of the work streams, the timeframes, and their percentage of completion and costs. We heard the Legislature and we heard the public and intend that EDDNext is a completely transparent process. EDD began overhauling its benefit system and designing and testing these systems based on customer feedback. EDD is now one of the only state departments with a team dedicated to human-centered design for usability.

Through the EDDNext project, we began partnering with usability experts to transform the customer experience across unemployment, disability, and paid family leave programs. In 2022, we continued to improve the call center, expand multilingual resources, and redesign forms and applications. Our expanded callback feature includes scheduled callbacks for UI customers, and we added customer satisfaction surveys to the call center. We also implemented a call topic coding process to better categorize claimant calls and pave the way for technology enhancements. We are putting the customer first at EDD.

We are preparing to launch text message service capabilities for the paid family leave and disability insurance programs, and improved online security using multi-factor authentication for the new shared customer portal, which we are calling myEDD. EDD's multilingual resources continue to grow. EDD now has claimant resources translated into the nine most commonly spoken languages in California. We also offer no-cost language interpretation services for all customers in over 150 languages.

We are currently working with community organizations to establish a Multilingual Access Advisory Committee, which will help provide direct input and community review of EDD's multilingual services. We remain on track to add simplified and traditional Chinese, Korean, Vietnamese, and Armenian online applications by next year. We're happy to continue to update the Legislature on the status of the projects, including our next quarterly legislative update that's due next month. I appreciate the partnership. Your support has helped us put EDD on a new path forward for sure. Thanks for your time. We're prepared to answer any questions. Thank you.

Thank you, Director Farias. You jumped ahead to Issue Number Six, so it's combined.

I did. I didn't mean it. Sorry.

It's a combined EDD operations as well as EDD modernization efforts, which was Issue Number Six, but I'm glad you got into it. So, last year, the budget provided 136 million to begin the first phase of EDDNext, and the Department of Finance is requesting 197 million in 2023 to launch the second phase of this modernization effort. Because we've combined both five and six, I'm just going to ask Department of Finance and the LAO to respond, please.

Department of Finance, Patrick Toppin. No additional comments right now.

LAO?

Chas Alamo with the LAO. Only general comments related to EDDNext. Have to do with reporting language that was passed as part of the Budget Act last year. The Department of Finance and the Department are sharing information both with our office and with the Committee on a regular, ongoing basis. It's helped us stay more connected to the EDDNext project going forward as we otherwise would be. So just kind of an update. Thanks.

Thank you. I just want to give just a thank you to Director Farias. I know it has been challenging to work with antiquated systems while it felt like the world was collapsing around us. And so there are thousands of Californians who were delayed in receiving assistance, but even more so, thousands of which did receive support from our staff in the district, who were managing incredible high loads of casework related to unemployment benefits, disability, et cetera, amid Covid.

So I know things are shifting, and it's under your leadership that that's been able to happen and the support of your staff and your team. So getting into some of the next phase of EDDNext, can you share with us how you manage or prioritize the language access needs? That was a huge complication amid Covid. So curious as to how that's being implemented.

Yeah. I mean, basically, I kid you not when I say lessons learned from the pandemic, and we learned that it was that five percent that couldn't get through that were probably the most needy that really needed to get through to EDD. And with our customer user experience branch that we have now, as well as we meet with stakeholders constantly, we had a bill from last year, I believe, or the year before, AB 138, that was supported by you and this Committee, and we prioritize the customer first. So, languages: the way that we deal with language access is we look to the top languages spoken in California, and those are the ones that we work on first.

Can you repeat what those were again? How many of those?

There were, I believe, either eight or nine, and it is Traditional Chinese--I'm just going to--oh. Ron Hughes.

Can we make sure his microphone is on? One moment.

Sorry. Ron Hughes from EDD. So the eight languages are English, Spanish, Traditional Chinese, Simplified Chinese, Vietnamese, Korean, Armenian, and Tagalog.

And these languages are available--how is it being divvied up in terms of what's available when folks call and what's available online?

So those languages will be online in the shared customer portal. They are currently not online right now, but we are in the process of translating documents that are online. There is the--what do you call it--the language access line, where there's access to over 150 languages. So if you call EDD, there's a language access line and we can transfer--we work with a third party that translates over into 150 languages.

Thank you. Just an update on--related to the EDD operations, according to your call center data, the call center wait times are, on average, 40 to 45 minutes, and percentage of calls answered between 30 to 46. For folks calling about Disability Insurance and paid family leave programs, what are the factors causing the long wait lines and the low percentage of calls answered by--related to the issues?

I'm going to hand it over to Melissa, who runs our DI branch.

Good afternoon. My name is Melissa Stone, Deputy Director for the Disability Insurance Branch. So following the pandemic, EDD did unfortunately experience a fraud attack on the Disability Insurance program. So end of 2021 into 2022, we saw a very large surge of claims come into our branch that we had to stop to take the time to sort through to determine which were imposter claims, which were fraudulent, as well as paying the legitimate claims. Unfortunately, that did put us behind in our processing in 2022.

We got our arms around it quickly, and we're working to--had been working to get on the other side of that, and then our holiday surge hit, which is typical for Paid Family Leave claims, Disability Insurance as well. There are individuals who prioritize taking their claims at a certain time of year so that they can spend time with their family.

And so while we normally can absorb that holiday surge because we were on the heels of the fraud, it did put us into a bad place coming into 2023. We have been working really hard in 2023, redirecting resources, working overtime to address the underlying issue, which is the backlogged claims. That's why people are calling the call center.

So we have been working that, getting very close to being back within our first pay time lapse, which is our commitment to the public on how quickly we pay claims. And so we're seeing call center numbers come down significantly as we get closer and closer to that number.

Thank you. I appreciate that.

Thank you.

I don't have any additional questions or comments related to both Issue Five or Six, but we're going to keep this item open and move on to Issue Number Seven. Thank you. Issue Seven related to repaying the federal Unemployment Insurance Loan received during the Covid-19 pandemic. California owes approximately 18 billion in debt that was borrowed from the federal government to help shore up our Unemployment Insurance Program during the pandemic.

Last year, the budget included one billion to begin paying down this federal debt. An additional 500 million was earmarked to support small businesses and offset increased federal unemployment tax rates. The Governor's Budget is proposing to withdraw 750 million that was allocated to pay off the debt. The budget also eliminates the 500 million in small business support. For this panel, we are joined by Andrew March and Patrick Toppin from Department of Finance, as well as Chas Alamo from the LAO to discuss the proposed cuts. Let's begin.

Thank you, Chair yeah, as you said. Patrick Toppin, Department of Finance. As you said, the 2023 governor's budget proposes to withdraw the $750,000,000 general fund payment in 2023-24 and the $500 million for UI tax relief in 2024-25 as part of the way of solving the budget gap.

Chas Alamo with LAO. No specific comments about the administration's proposal here in the governor's budget. I did want to perhaps address one of the questions in the agenda having to do with the projected timeline for full repayment of the loans. The last time our office assessed, sort of the time period under which we thought it probable that businesses would ultimately repay the outstanding federal loan.

Our best projection at the time, which was about a year ago, was that it would take at least 10 years to repay the outstanding $18 billion. We pointed that number out at the time as an illustration of a likely outcome. But given the uncertainty about the trajectory of the economy and other factors, including federal interest rates, that number could change dramatically. So we're not tied to 10 years, but did want to provide it for context.

Thank you. I'll pivot back to the Department of Finance then, on the similar approach. What is the administration's anticipated timeline to repay the UI federal debt without the $750 million principal payment?

Thank you, Chair. Patrick Toppin, Department of Finance. I sort of said earlier the administration does not have a projected date in the repayment of the UI debt due to sort of the aforementioned uncertainty around the economy, interest rates, the rate of employment, employer contributions to the UI fund, and other factors that contribute to the economic health of the state. The 10 years that they brought up was mentioned last time around and during the budget process.

And we always bring up the borrowing during the great recession, which peaked at 11 billion in 2011, that took until 2018 to pay off, sort of his context, but we don't have a date.

Are there any efforts to work with the federal Administration to determine if any alternative solutions are possible at this time?

Patrick Toppin, Department of Finance, we've certainly been in contact with that, and I can defer to EDD on the efforts with NASWA and things like that.

Nancy Farias, I mean, I would say that we obviously are closely monitoring the president's bill that he has on basically reforming unemployment insurance throughout the country. There is some money in there. So that would be something that we're obviously keeping our eye on. And as Patrick mentioned, we do work with NASWA, which is the National Association of State Workforce Agencies, and all the states sort of have come together on this issue because it's an issue in every state.

Any response from LAO?

No specific responses. I will note that several states have, since the direct pandemic unemployment insurance aid programs ended, have used either state resources or federal COVID relief resources to pay down a portion of their debt. But obviously, California's outstanding loan balance was the largest in the country. That's no surprise with the state's largest economy. So many of the other states who have taken those steps, the amount that they pay down was much smaller than what California is facing.

One final question and just point of priorities. The legislature allocated $500 million to support small businesses amid the pandemic, hugely important and critical for economic opportunities for those hit the hardest yet, the Administration is eliminating the 500 million in support of small businesses. What is the administration's alternative to support small businesses or provide relief amid increased insurance tax rates?

Thank you Patrick Toppin, Department of Finance I think the administration has put a lot of money towards previous budget investments towards supporting small businesses, and a lot of those remain in the proposed budget this year. And the $4 million for the small business COVID-19 relief grant program, the small business credit initiative, that was $1.1 million as well as significant dollars for the COVID-19 supplemental paid sick leave grants for small businesses. And so while not necessarily tax rates, the support for small businesses has been there.

Right. But all of that adds up to a much smaller percentage than the 500 million allocated by the Legislature to support small businesses. So curious as to how that wealth is spread out when that number is so little. Based on what you just described the.

The $4 billion for- can you repeat the question? I'm not sure I understand.

No, I'm saying we prioritized $500 million, right. And it was highly celebrated. And in this budget, we're seeing the elimination of $500 million. So as small businesses try to recover, I'm curious as to the administration's approach to not having that funding available.

Andrew March, Department of Finance I think I would just note that.

Can you speak closer to the list, please?

Yes, Andrew March, Department of Finance. I would just note that exactly how the $500 million was anticipated to be spent and the program, therefore, it hasn't been agreed to yet. So exactly how far the $500 million would go, how many businesses it would help is unknown at this time. So given the budget problem that the state is facing and the significant sort of previous investments to assist small businesses, the administration thought it'd be prudent to eliminate this funding in budget year plus one.

Any additional comments? Okay, no additional comments from the dais, we will move on to issue number eight. Thank you very much. We're going to hold this item open at the moment. Let's move on to our next issue. Our next panel will cover two budget change proposals on a trailer bill requested by EDD. In addition to the Department of Finance and LAO, we are joined by Caleb Horel, with the chief financial officer at EDD, and Melissa Stone, disability insurance deputy director at EDD.

Please present on the two budget change proposals on the requested trailer bill. Let's begin.

Good afternoon, Madam Chair and Members of the Committee. I am Caleb Horel, chief financial officer for the Employment Development Department. Thank you for inviting me here today to talk about several department's budget requests included in the governor's budget. The first proposal, as you mentioned, was for the accounting and business services resources. This proposal requests $5.1 million in 23-24 and 24-25 then $3 million ongoing beginning in 25-26 split equally between the Unemployment Compensation Disability Fund and the EDD Contingent Fund.

This request will provide important staff resources to support cash management, accounts receivable and payable general ledger financial reporting, procurement and bank reconciliation operations at EDD. These resources are needed to address the permanent ongoing workload associated with the department's transition from its legacy accounting systems to the statewide financial information system for California, otherwise known as FISCAL, the resources will continue to allow the EDD to comply with statewide and federal accounting policies and procedures, as well as allow staff to perform critical daily accounting and business operation functions.

Lastly, I should mention these resources are a continuation of temporary funding received in past budget cycles, including $6.9 million in 18-19 and 19-20, and $3 million from 2021 through the current fiscal year. The second proposal, which is Senate Bill 951, state disability insurance contribution rates, requests $4.2 million in 23-24 and 24-25 from the Unemployment Compensation Disability Fund to implement the changes required by Chapter 878, statutes of 2022 or SB 951.

SB 951 extended the current 60 and 70 percent wage replacement rates in the disability insurance and paid flaming leave programs until December 31, 2024. Effective January 1, 2025, the wage replacement rates for DI and PFL increase permanently to either 70 percent or 90 percent depending upon an individual's wages.

It also lowers the minimum amount of wages needed to receive a $50 minimum weekly benefit payment, in addition to removing the taxable wage ceiling that is subject to SDI contributions, effective January 1, 2024. Funding will support staffing and contract services to implement the necessary system and business process changes as a result of the chapter legislation. Abd I will defer to my colleagues at Department of Finance to give a brief overview on the trailer bill language.

Thank you. Hi Patrick Toppin, Department of Finance. The trailer bill language to align the Unemployment Insurance and Disability Insurance Fund report released with the budget timeline changes the existing law, which requires the EDD to publish its fund forecasts in October and May of each year to January and May. This would align sort of the fall-winter release with the other report of budget documents that is done in areas like corrections and HHS.

LAO, Chas Alamo, we have no issues with any of the three proposals.

Thank you. I just have a couple of questions. Disability insurance and paid family leave are available to individuals regardless of immigration status, including undocumented workers. How is EDD addressing the unique challenges of immigrant and undocumented workers wishing to apply for DI or PSL benefits? For example, how can an individual without a Social Security number apply for the benefits?

Good afternoon. Melissa Stone, disability insurance director again. So disability insurance currently supports undocumented workers. Immigration status has no bearing on their qualifications into the program. Like all other applicants, they need to have worked and paid into the program, as well as have a qualifying life event. So we work with them right now through a paper application process because our online system does currently require a Social Security number, something we are working to address through EDD next to increase accessibility for all claimants. So we work with them.

They help them verify that they have wages, that they were contributing wages into the program, and then they go through the normal application process that any other claimant would.

And you verify them through an ITIN or what's the verification process?

Their verification is actually related to their wages. So we're looking at that they have wages that contributed into the program, as well as that they have the medical certification to support the qualifying event.

And given the number of third party vendors integrated into EDD systems, how does EdD communicate to applicants that sensitive personal information, such as their immigration status, is kept confidential?

So we do have language on our website, as well as in some of our forms where we do clarify for them that immigration status does not play a factor in their eligibility. Similar to personal health information as well as personally identifiable information, EDD does respect the confidentiality of our claimants and works to keep all that information confidential. So we have that same expectation of every vendor that interacts with us, that they uphold the same standards.

So just so that I'm clear, if you are an undocumented worker and you qualify for DI or PFL benefits, you're able to go to the website, grab the form, printed I imagine, but not submitted online. And yet all the information relevant to their privacy is also available online.

Currently paid family leave is not available online to the same degree, and they wouldn't have an online account if they're applying via paper. So at the current time, they're not able to access their information through online. So we would just work back and forth with them through the mail or phone call if we needed more information.

I guess I'm just trying to picture the process. So if you work at a restaurant and you qualify for DI benefits, how do I apply? How do I get it? Do I go to the website and download a form, or do I go to an EDD office? It seems like the access is a little bit more challenging or limited.

So currently they can either order an application through the website by calling our call center. There's an interactive menu that they can select and request one without speaking to someone. Oftentimes they get them from their Doctor's offices as well. We do actively do outreach with Doctor's offices as well as with employers, so that they often keep them on hand.

So they do have access through a number of different channels as well as they can come into any EDD office, regardless of which branch it is, and have access to an application there as well.

So they would go online and request it, and then it's mailed to them.

It's mailed to them within 48 hours. Correct.

Got it. Is that easier than just having it available online to print, or is there a particular reason why it's mailed?

Yeah, it's a system limitation right now because the form has to be read by our OCR, which, I apologize, I'm not going to know, do you know the acronym?

Yeah, optical character recognition.

Thank you. So it is a red form currently that has. Our system has to be able to read it, our scanning system. We are looking to modernize a lot of things with our forms through EDD next. So I'm sure that will be looked at as part of that process.

Okay. I'm just thinking in terms of process, what makes it easier for somebody to receive benefits, like a safety net opportunity versus the barriers or challenges currently integrated in systems that are outdated. So there's an opportunity there, I would love to discuss that more. Yeah.

Thank you for the suggestion. It's absolutely something that we're looking at through EDD. Next is we want to have the same accessibility to all of our climate groups.

Excellent. If there are no additional comments or questions from Members of the dais. No, seeing none. We're going to hold this item open. Thank you very much. And we're going to move on to issue number nine. Our next panel will provide an overview of the Unemployment Insurance Program in California and examine opportunities to expand it to workers who have historically been excluded from it. The COVID-19 pandemic highlighted- let me begin again.

The COVID-19 pandemic highlighted the critical importance of unemployment insurance for our economy as businesses shut down and workers lost their jobs. Safety net programs like unemployment insurance allowed individuals to pay rent, feed their families, repay loans, and weather one of the worst global crisis of our time. But the pandemic also highlighted how some of our most vulnerable workers are shut out from unemployment insurance programs. Today, undocumented immigrants, self-employed workers, and independent contractors continue to be ineligible for UI despite their extensive contributions to our economy.

To address this exclusion, several states have taken steps to create programs to provide Unemployment Insurance benefits to traditionally excluded workers, including New York and Colorado. Our next panel will provide an overview on how UI works in California, what other states have done to expand eligibility of their program, and explore various policy options available to Californians. We are joined by the LAO as well as Kim Yulette from legal aid at work.

We are also joined by EDD in the Department of Finance, who are available to answer technical questions. Let's begin.

Thank you, Madam Chair Members. Again, Chas Alamo with the Legislative Analyst Office. The Committee asked us today to sort of set up this issue related to Unemployment Insurance and the possibility of extending it to currently excluded workers. So I have a brief overview. We've prepared a handout that I hope you have in front of you. The handout is available on our website and as well as with the Committee agenda materials.

The agenda itself is rather detailed regarding this topic, so I'll be brief before moving forward with the rest of your panel. As you all know, the state's unemployment insurance program is a state-federal partnership that provides temporary wage relief to unemployed workers who qualify for the program. A few quick sort of details about the program. It offers benefits for up to 26 weeks. The current state maximum weekly benefit is $450 a week.

The intention of the program is to replace half of a worker's typical wages while they're unemployed. But because of the cap, something about around 40 percent of currently unemployed workers are eligible to receive the cap, whereas if they were to receive half of their normal wages, their weekly UI Benefit would be greater than the cap. So the cap sort of is limiting in that regard. For almost half of workers in the state, the average weekly benefit in recent years has been about $330 a week.

And the UI program is funded by payroll taxes paid by employers. There's a state portion and a federal portion. The average state portion right now is 3.6 percent of the first $7,000 in wages, which comes out to about $250 a year per worker. The federal portion is smaller and is collected by the federal government and then redistributed to states to cover the cost of administering the program.

Sort of moving on to eligibility most, but not all, of the state's workers are eligible under the state's current unemployment insurance program. We calculate that about 82 percent of workers in the state are covered. The remainder, primarily independent contractors, self-employed workers, informal workers, and the state's 1.6 million undocumented workers are not currently eligible for unemployment insurance. And to go into the sort of the background of why this is the case, as I mentioned earlier, the program is a state-federal partnership.

The federal government provides oversight and some administrative funding and also sets the broad guidelines for how the UI program is to work. And one of the requirements for eligibility under federal law is that an unemployed worker is able and available to take a job if it were to come up. And because unauthorized workers are not legally able and available to work without federal work authorization, undocumented workers don't meet this federal eligibility requirement and are therefore ineligible for the state's program.

Moving through to sort of recent years and sort of the backdrop of today's panel as you all know, the federal government stepped in during the pandemic to expand UI to workers who are typically excluded from the program. And this is in the form of the program PUA, the Pandemic Unemployment Assistance, which provided flat weekly benefits to primarily self-employed workers who wouldn't otherwise be eligible for UI. That program ended in 2021.

But even though the federal program expanded UI access to self employed workers, it did not expand Unemployment Insurance to undocumented workers for the same reasons I mentioned earlier about this sort of root eligibility issue, of being able to work without federal work authorization. At the same time that the federal government expanded the PUA program for self-employed workers, several states took opportunities to expand and set up state-run programs similar to UI, but specifically for undocumented workers.

At most recent count, 12 states enacted some form of assistance or relief for unemployed undocumented workers during the pandemic. The largest of those programs was a program run out of New York state. The second largest was Washington state's, and the third largest was California's. A bit about California's program,specifically, it was the Disaster Relief Assistance for Immigrants program, DRAI that provided $12 million in one-time $500 grants for undocumented workers who had been affected by the pandemic.

And that program was run out of the Department of Social Services. So DSS, and not the state's EDD. DRAI provided those benefits to about 150,000 undocumented workers. I did want to point out, though, that this overall program was $125 million so relatively small compared to the magnitude of other pandemic relief efforts. But, the state did include ITIN filers. So undocumented workers who file taxes in the state as eligible recipients of both the first and second rounds of the Golden State stimulus.

The most recent fiscal estimates provided by theaAdministration show us that about $950 million went out in those stimulus payments to undocumented taxpayers. These are again ITIN tax filers who make up about half of the state's undocumented workforce. The vast majority of the state-run programs for undocumented workers during the pandemic have ended. So they were one-time in nature, with the exception of a program that's been started in Colorado. The Colorado program is called the Benefit Recovery Fund.

It is a UI like benefit available to undocumented workers. The program is capped at $30 million a year, and Colorado officials estimate that under that cap they would be able to provide UI like benefits to about 2500 undocumented workers each year. So it's relatively small in scope. The program is ongoing in nature and is funded by an existing surcharge on employers UI payroll taxes that had previously funded some workforce development programs.

And I think important context to provide here for the Committee is that the ongoing Colorado program was enacted as part of a series of other changes which included the state of Colorado contributing $600 million toward the state's outstanding federal UI loan. And this has the effect of relieving Colorado employers from higher payroll taxes to repay that $600 million.

So this is a package, in essence, that was agreed to in Colorado to repay a portion of the state's outstanding federal UI loan and also create an ongoing funding source for a relatively small UI like program for undocumented workers. I'm happy to stay on the panel, answer any questions that you might have for our office or work with Members of the Committee or the chair on questions going forward. Thank you.

Thank you so much. Mr. Alamo. We're going to hear from Kim Ouillette with Legal Aid at Work and also part of the Coalition Safety Net for All, which has just earlier today this process and this potential peace moving forward as a Latino caucus priority. So please go ahead.

Thank you so much. My name is Kim Ouillette. I'm an attorney at Legal Aid at work. Legal Aid at Work is a nonprofit organization based in San Francisco that advocates on behalf of low wage workers across California. So I'd like to start by just very briefly sharing a recent story from a worker that I think illustrates the real life impacts of this problem that we're facing. So this individual's name is Mario.

He immigrated to the United States in the 1980s from Mexico, and he spent over 30 years working in the fields in California. Today, he lives in Madera. And about towards the end of last year, he unfortunately was laid off from his job picking and packing kiwis. He has tried hard to find work again. He's been looking for jobs, but he's been unsuccessful. So far, many farms have not had work available due to the persistent rains over the last several months.

Mario is not eligible to receive unemployment benefits because he is undocumented. He is the primary provider for his wife, who's unable to work due to a serious medical condition. And so both of them have gone without income since last year. So, Mario's struggling. He's taken out loans to pay his rent and electricity bills, and he has no idea how he's going to be able to pay them back. And he says he's living day to day.

He's able to have food only when he can find some going to food banks and charities for assistance. So despite having spent over 30 years growing and harvesting the produce that feeds families across the country, today, faced with unemployment, Mario can't feed his own family. And this is the product of policy decisions that have left many workers excluded from our state's safety net. Mario's story is not unique.

As has been mentioned, it's mentioned that it is estimated that there's over 1 million undocumented individuals performing work as employees in California. And undocumented workers make up over 6 percent of the total workforce in California. Certain industries rely more heavily on undocumented workers than others. So, just as one example, agriculture is one area where it's most heavily concentrated. 59 percent of agricultural workers are estimated to be undocumented in California. Other industries that have heavy concentrations of these workers include caregiving, hospitality, manufacturing, warehousing and construction.

All industries that are critical to the California economy and the future of work in the state. In times of crisis and economic downturns, undocumented workers and the industries where they're concentrated are also disproportionately impacted by unemployment. So just one example. During the height of the pandemic, the demographic group that faced the highest rates of unemployment in California was non-citizen women, who in 2020 were unemployed at a rate of 36 percent.

Additionally, in the face of natural disasters like fires, droughts, and floods, we know that immigrant workers are significantly impacted. So, for instance, the storms that we've been experiencing over the last month have flooded huge areas of farmland across California, damaging crops, and put many farm workers out of work. We know towns like Planada and Pajaro had to be completely evacuated due to flooding, and both of those towns have significant undocumented populations.

So these are individuals that are now without homes, without jobs, and have no source of financial support. Climate change will only increase the frequency and intensity of these storms, and so we know that it will increase the frequency of job loss as well. I want to make sure and emphasize that these workers and their employers are contributing to the existing system. So taxes on the labor of undocumented workers here in California contribute an estimated $485 million every year to the UI system.

However, these workers can never see a cent of the benefits. So essentially, these workers and their employers, who are concentrated in some of the lower wage industries in the state, are subsidizing the system for everyone else. As was mentioned, due to federal restrictions, California can't expand our existing UI infrastructure to include these workers. However, California can create a separate state fund to provide a similar benefit to these workers who are experiencing job loss but who cannot access regular UI due to their status.

As has been mentioned already, several states have provided financial benefits directly to undocumented workers, and so we know this is something that can work. There are, of course, some unique circumstances that have to be accounted for in designing a program for undocumented workers. For instance, in order to access benefits, workers would be required to submit documentation to provide their identity, their residency, and their work history. Work history can be proved using a number of different ways.

For example, many workers who have individual taxpayer identification numbers or ITIN numbers can apply using their tax documentation, which is easily and quickly verifiable. Other workers who don't have that could use pay stubs, time records, or a combination of other documents that can be cross-referenced to establish their work history here in the state. A state investment in unemployment benefits for excluded workers would help to prevent individuals and families from going into debt, experiencing homelessness and suffering from food insecurity when they lose their job.

But it also would help to stabilize critical industries impacted by job loss, by ensuring that the workers are still here when businesses are able to rehire. And we also know that for every dollar spent on UI benefits, it generates approximately a dollar and sixty-one cents in the economy because workers are then spending that money in their local communities.

As a state that is heavily reliant on the labor of undocumented workers, ending this exclusion from unemployment insurance is a necessary step towards ensuring economic resilience for the state and equal protection for all workers. Thanks for the opportunity to present and I'm happy to try and answer any questions.

Thank you for the presentation. I want to just make a note that it is untraditional to have panel discussions like the ones we're having now. It is up to the privilege of the chair as to what we put on the agenda. And I say that because last year amid pandemic, I myself had to translate from Spanish speaking callers into English so that they were recorded onto our conversation.

For individuals that were immigrant, undocumented, excluded workers that were not receiving any additional support amid the COVID-19 pandemic, and who were calling in, asking to be seen and recognized, and ensuring that every Californian, regardless of immigration status, is represented in the people's house. And so the Safety Net Coalition, both in collaboration with the Assembly and the Senate, are open to those conversations and in Assembly budgets of four, we wanted to include this conversation as part of the record within our California State budget conversation.

So thank you for the presentation. I'm going to open it up to members of the Committee if they have questions, but a few comments and questions on my own. I'm very curious as to how other states are putting forward a program to support excluded workers. Wondering if maybe the LAO or yourself can talk about how is the eligibility being verified in states that currently have a program that's looking to include excluded workers.

Sure. Yeah. So I can talk about New York as just a comparable example because they did have the largest program. So in New York, to prove residency, there was a number of different documents that could be used. New York, similar to California, undocumented residents are able to access the state driver's license. So the driver's license was used. New York also has a nondriving ID card. Tax returns and utility and bank bills were all used.

FOr both identity and work history, what New York used was they developed a point system where certain documents, like tax returns, where the state can receive, and easily verify that information. A single document was sufficient to satisfy that category, to prove work history. But we also know that some workers don't have those documents, and so what they did is created other options that if you produced a number of documents, they would add up to a sufficient points to show that you had established that category.

So, for example, for work history, higher points were given to wage statements, letters from employers, tax returns, or tax documents. And then lesser points were available for communications between a worker and an employer, establishing the relationship and the work history, commute records, payment transaction logs or bank records. So that's sort of one of the ways that New York struck that balance. And the vast majority of applicants used sort of those simpler methods. Right? Like using the tax documents.

But they still were able to make sure that the fund was broadly inclusive of all workers.

Did you want to add something?

I think, again, Chas Alamo, with the LAO, just a bit of context that maybe I should have emphasized more heavily. The 12 states, including California, who initiated temporary programs during the pandemic tended to model the federal PUA program. And by that, I mean that the benefits were flat amounts per week for anyone who was deemed eligible. It didn't have a close nexus, or it wasn't related to how much you had earned sort of over the past 12 or 16 months in the way that the state's UI program is for those states and for contemplating a program going forward, that element of simplicity greatly reduces the amount of information you need to collect from workers and verify, especially if those workers, as in many cases here, have sort of atypical working relationships with their employer, given their undocumented status. So just pointing out that a simple program is easier to verify, and that's what all states did during the pandemic.

The DREA program was 125,000,000, partly through the state budget, if I remember correctly, the general fund, and partly in addition to philanthropy and organizations that put money in the pot; that funding then was directed to on-the-ground nonprofits to connect with individuals that could potentially qualify. The thing that I flagged when we were having these original conversations was that individuals have to be connected to a nonprofit to even begin the conversations about potentially being eligible. Right?

So if you are not connected, if you're simply going about and living your life and just trying to provide for your family, and you're not a part of a nonprofit that was selected to be a part of the DREA program, then you're also essentially left out. So those are just some of the things that I think about when thinking about ideas about how to establish something new and looking at what other states have done, is what is the connection with the nonprofits on the ground?

How do we expand that potential access if there are also potentially 1 million undocumented and excluded workers in the State of California? If I remember correctly from last session and another budget hearing, out of the 1 million undocumented workers, there's only about 60,000 of which have an ITIN number. So part of what we were hoping to be able to achieve was how do we expand access to ITIN recipients.

And also, this idea is that you can trust the State of California with an ITIN, and you can trust the State of California, and what we discussed in the previous panel, which was privacy and confidentiality of immigration status. If you can, share what some of those conversations are like with the coalition in general in terms of what worked in that program and what can be done differently.

Sure. So, California's program was actually quite unique in requiring contact. I'm referring to the disaster relief assistance for immigrants program, which was actually quite unique in requiring contact through a CBOs. And that created quite a bottleneck where so many workers had urgent need at that time, and I think it was only 13 CBOs, community-based organizations that were distributing the benefits. And so that created a real bottleneck.

In most other states, how they've done it is it's been an online application; for instance, in New York, you could apply on a phone or a computer. The vast majority of applicants did it that way. But there was also a CBO component where, especially for know, we have some workers who are illiterate. Right.

It's going to be more difficult for them to apply using that method. You could go through trusted CBOs to do the application. So it sort of provided both options. And I think that's been seen as very successful. Right. Where it's easier for the vast majority of applicants. They are going to be able to do it online. But there are these other ways for workers to do that.

On the ITIN comment, I will just note that one of the interesting, the New York program was implemented in 2021, and there's been a lot of interesting research about the impact of the program. And one of the things that workers could do at that time was to apply with, I think they had only submitted their application for an Itin, but that actually helped encourage, what studies showed is that actually helped encourage people to apply for ITINs and to be more integrated.

So, the program itself actually helped build trust in government institutions. And you saw that with sort of the interviews from workers who participated in the program.

I'm going to open that up to the dais. Majority leader.

Thank you. I appreciated the comment that you made earlier. That seems like the best way to do this would be to put together a separate state fund for those who can't access the regular fund. And you've given us some ideas on the kind of identification that can be used. Madam Chair, would it be possible to ask our EDD Director to join us for just a second?

Absolutely. They're here to answer any technical questions. Director Farias?

May or may not be able to answer it, so I may have to call Grecia up.

All right, Madam Director, here's my question. This is an issue that has, it is a Latino caucus priority. It is a priority for some of our other caucuses. There have been attempts, and as we talked about, the disaster relief program. I'm not saying it was a disaster, but it wasn't the best way to do it. And the money ran out very quickly. Many people couldn't get through the lines.

And now, hearing about what New York has done with this online application and the CBO component, my question is, should the budget include the amount - the amount being requested was, I saw it somewhere, 297...$356 billion one-time general fund. Should that be included in the budget? Does EDD have the capacity now to put together a separate state fund for those who can't access the regular fund?

So we would have to build that out because the federal regulations. You can't co-mingle. Right. The UI has to be for UI. So we would have to build that, yes.

But it is something that EDD - should be in the budget EDD prepared to implement this.

Well, we haven't actually looked at all of the details of what this actually looks like, but it would cost time, resources, people. And time is probably the biggest factor because we do have EDD next that we're doing as well, which is a big IT project.

They often say where there is a will, there is a way. I'm asking if there is a will to implement this program. Should it be included in the budget?

I don't think I could answer that right now.

You are the director of EDD, and I'm asking you in your capacity, if the legislature were to include this in the budget, asking that we provide benefits to excluded workers, and if the legislature, and signed by the governor, if it includes these benefits for excluded workers, saying they should be included, they have been paying into the system, the employers have been paying their part of it. The number that was given, $485 million, contributed annually to this program. Yet none of those workers receive any of the benefits.

I see.

So my question to you is if this is included in the budget, and we say we need to include these excluded workers, is EDD prepared to put together a program that will allow these excluded workers to receive the benefits once and for all?

Thank you. Yes.

So, I would say that if we had the time, the resources, the staff, and the money, we would be able to do it. Sure.

Just like we've done with the federal pandemic program or another program.

My mother often says that if something is just, it is correct. And if it is correct, it is just. If we have workers who have been paying into a system and during this pandemic had to beg for the small benefit of $500 per person, maximum 1000 maximum per family. And yet they have been paying almost half $1.0 billion annually into a program; it is just that they receive benefits because it is the correct thing to do.

I thank you for your commitment to make sure that if it is included in the budget, that we will make every effort to make sure that those excluded workers receive their benefits. Thank you.

Thank you, Majority Leader. Any other comments or questions from the dais? Mr. Alamo, did you want to respond too?

No, I will close out this panel by saying that even the fact that we're having this conversation related to excluded workers, that it's part of the agenda, that it's part of our priorities, that just this morning, it was announced as a Latino caucus priority for this legislative cycle in terms of what this could potentially look like and that we're having these conversations and budget shows a commitment from the Legislature on figuring this out.

There's been too many times, often with this program and others, where the conversation has been that's not possible. It's not what we've done in the past. We're not sure that we can move it forward. But if I learned anything from the COVID-19 pandemic, it is that the legislature will make the impossible possible.

And there is a commitment to ensure that our most vulnerable communities, farm workers in the Central Valley who not only had to work wearing masks amid Covid to feed America and so that most of us could stay home and be safe and quarantine, they also did it amid wildfires.

And there's an incredible photo by an Associated Press photographer where there was farm workers in the Central Valley with masks separated at a distance, even outside, while there was a massive wildfire raging in the back, and the air was smoky and dark and black, and many people complained about not being able to breathe properly. This is happening in California.

And so if we can figure out a way that we can be committed to our most vulnerable communities and ensure that we have an opportunity to create programs that make it possible, that's where we want to be. That's where we want to get at. And I think that's the ultimate goal now, the challenges within Federal Government regulations and what other states are doing, that's very real. Right. And I hear you, Director Ferrier said, you need the resources to be able to make the programs possible.

That includes staff, technology, and everything else in between. And as we go into our previous issue area, which was EDD next, and ensuring that we have cultural competency, language access forms available online over the phone and everywhere in between. This is essential part of the conversation as well, and we get to figure that out together. So I thank you for your time. This item remains open. We're going to go into issue number 10. Thank you very much. Thank you.

Thank you.

We're going to move on to the Department of Industrial Relations. Our next issue will cover language access at the Labor Commissioner's office in Cal OSHA. Language access continues to be a priority for this subcommittee to ensure that all Californians, regardless of the language spoken, can access critical government services. This panel is an opportunity to examine language access capabilities at two of the most critical divisions dealing with worker rights and workplace health and safety.

For this panel, we are joined remotely by our labor commissioner, Lilia Garcia-Brower, as well as Jeff Killip, Chief at Cal OSHA. We are also joined by Deanna Ping, Chief Deputy Director of the Department of Industrial Relations. Let's begin. Hold on one moment. 1 second. I've lost my page here. Okay. To provide additional perspectives on how to improve language access for California workers, we are joined by Daniela Urban, Executive Director for the Center for Workers Rights, and Jora Trang, Chief of Staff and Equity at Worksafe.

Let's start with the Labor Commissioner's Office. Commissioner Garcia should be online. We are hoping you could provide the subcommittee with an overview of the Labor Commissioner's Office language access capabilities, including the number of bilingual staff, an overview of translated materials available, and ways that non-English speakers can interact with your office. Is the Commissioner ready?

Yes. Good afternoon, Madam Chair. Can you hear me?

Yes. Please begin.

Great. Good afternoon, Madam Chair and members of the committee. I'm actually in Santa Maria today for our monthly wage theft workshop that we are doing to impact 30,000 indigenous farm worker families within a 1-mile radius of a community partner we're working with at St. Peter's Episcopal Church. So, I'm joining you remotely for that reason. My office has approximately 61 bilingually certified professionals, 59 of whom are certified in Spanish, one in Cantonese, and one in Korean.

In 2021, we received over 2600 requests for interpretation services statewide. Prior to the pandemic, between 2018 and 2021, we received over 19,000 requests. The top languages were Spanish, Mandarin, and Cantonese. In 2021, we also handled more than 19,000 calls on our public information line in non-English languages. These were overwhelmingly followed by Mandarin, Cantonese, and Korean. In 2022, we conducted an analysis of language needs and staffing capabilities, which identified a decrease in seven bilingual professionals from 2018 to 2022.

Given this decrease in bilingually certified staff and the request for interpreter services and public contacts in non-English languages. We are prioritizing Spanish language skills in all offices, in particular Redding, San Francisco, San Jose, Santa Barbara, and Santa Rosa, which all have zero non-English language capability. We have bilingual recruitments in process to increase our capacity. In addition, given the results of the 2018 language survey conducted by the department, we are also increasing bilingual recruitment in El Centro, Fresno, Los Angeles, Long Beach, Santana, and San Bernardino.

Data also demonstrates the need to hire Mandarin speakers in San Francisco and San Jose and in seven offices in Southern California. In addition, we're looking to hire a Punjabi speaker in Fresno and Korean and Vietnamese, and Southern California offices with Vietnamese specifically for our Santa Ana office. My office has several educational materials available in various languages, including Spanish, Korean, Tagalog, Chinese, Mandarin, Punjabi, Russian, and Armenian. We have claim forms available in Spanish, Vietnamese, Korean, Cantonese, Mandarin and Tagalog.

Lastly, we provided over 235 outreach events last year, most of them were in Spanish. We provide Know Your Rights workshops. As I mentioned, I'm today in Santa Maria. We're here every month to conduct a know your rights workshop in Mixteco. We also do our farm worker caravans as you know that we have a digital truck that communicates in Mixteco, Triqui, Sapote, and Perupeche.

In addition to our staff capacity and working with our community partners, we have 19 unique contracts language services when we don't capability. Now, I'm available to answer any questions.

Thank you, Commissioner. Why don't we go to the stakeholders to provide some perspective? Ms. Urban, can you outline what you've seen on the ground and how you could improve language access at the Labor Commissioner's Office?

Yes. Thank you, Madam Chair. My name is Daniela Urban, Executive Director of the Center for Workers' Rights. We represent low-wage workers and support them through their wage claims, mostly at the Sacramento Labor Commissioner's Office as well as Redding and Stockton. The Labor Commissioner's Office has made significant efforts to provide language access services to those that it serves. It continually asks claimants their preferred language and ensures that they are able to get interpretation services as needed.

Staff is generally aware and use the phone interpretation systems and the contracts that the commissioner just described. It is infrequent that we receive reports from claimants that they are unable to connect in language over the phone on their first attempt. This early identification of language needs is really what sets the labor commissioner apart from many of the other agencies that we support workers in their claims process.

It is on the initial claim form that they need an interpreter, and that information is transferred throughout the period of their claim so that their claim is assigned as needed to bilingual staff. The location of bilingual staff is available in the offices, as the commissioner described. We see in Sacramento that even when the front desk is staffed by a non bilingual staff member, the staff does know who those bilingual staff members are to call upon their needs when requested by claimants in the office.

The English and Spanish availability of information is seamless through the labor commissioner, so there's almost no difference between the access needs for public information based on English and Spanish, and we see most, if not all publications offered in both languages.

In addition, hearing officers, as well as all staff in the wage claims process, are trained not to allow hearings to proceed without a qualified interpreter, ensuring the due process rights of the claimants and having their day to claim the wages that they are seeking throughout the claims process. Now, where the labor commissioner can continue to improve on its language access services, this includes the hearing interpreters. We would recommend that there be additional screening and quality control on these interpreters, including the opportunity for variant matches.

We often see interpreters that are called in for a general language like Tagalog or Spanish without any reference to their regional dialect, causing confusion on the ground. We recently had a labor commissioner case where our client was a Chilean speaker. The interpreter was Mexican, and there was a word that continued to be translated inappropriately and caused considerable confusion until that was addressed. The lack of proper interpreters also exacerbated the delay issue on the hearings.

So, as you'll hear on the next agenda item, there are significant delays at the labor commissioner already, and the inability to access qualified interpreters quickly provides continued delay. We had a hearing with two Spanish-speaking clients scheduled for a hearing in January, but when the interpreters did not show, there wasn't the immediate ability to have backup interpreters provided, and so that hearing has been continued, and we still are waiting for a new hearing date.

So we propose that local offices, in addition to having their own resources to get the hearing interpreters, that they also be provided support from a broader interpreter tracking system which will continue to screen for good interpreters and allow dedicated staff to be funded in order to provide this screening and variant check process. Another way that the labor commissioner can improve is that they overuse their current bilingual staff.

This has to do with the severe shortage of bilingual staff and staffing in general at the labor commissioner that we continue to see.

So, as I mentioned, for example, when a staff member is working the front desk and they are not bilingual, they will interrupt a bilingual staff member's day in order to have them come and provide those language assistance, and while we think that language assistance is important, it's unfair to our bilingual staff members, to the labor commissioner's bilingual staff members to have to serve two roles at one time, often taxing their strained time and not allowing them to complete as much of their individualized work as needed.

In addition, bilingual staff are not trained interpreters, so although they're not usually scheduled for hearings, sometimes they'll be called on to interpret in situations that are inappropriate. And though they might be, bilingual interpretation is its own set skill, and trained staff, and interpreters staff should be used for that purpose. In addition, we see that there are significant barriers to adding new bilingual staff.

I myself have recommended several people to apply to the Labor Commissioner's Office as bilingual staff members, and they have not been able to pass through the screening system required of those staff members, and that significantly impacts the ability of the Labor Commissioner's Office to respond on the broad, diverse needs of our language access communities. The third way we can see where the Labor Commissioner's Office can improve its work is with its consistent policies regarding written notices.

So, while Spanish and English are published relatively smoothly in all languages, the dissemination of that information in language is not always consistent. Some hearing officers or deputies will send information partially in Spanish and partially in English. Due to the translation systems that are used, some offices will not send in Spanish and only send in English. In addition, languages other than Spanish and English are not able to be provided in writing.

So, though a claimant can submit their claim form in other languages as established in the report, they then get materials only in English back. So this is another way that automated systems and static translated documents can be provided in languages other than English and Spanish to expand the language access of the Labor Commissioner's Office. We know that the Labor Commissioner's Office is committed to these improvements and working with the community, partners, and stakeholders to identify areas of improvement.

We meet with their office regularly to discuss the areas of improvement that can allow claimants to better access the labor commissioner's resources, and I'm available for any questions.

Thank you. I appreciate that in-depth perspective related to language access. Before we move on to the next presenter, I do want to say how important interpretation is. Interpretation, to your point, is a skill on its own. I've worked for the past few years on recognizing women and individuals who were forcibly or unknowingly sterilized in state institutions, in particular at LA County, USC General Hospital in my district, a grave injustice that happened to mostly immigrant Mexican Latina women in the late 1960s to the early 1970s.

There was one word that was translated and interpreted wrong. And that was sterilization. The actual word sterilization in Spanish, "esterilización," or "sterilización," can also mean to clean. So if you are a Spanish speaker, immigrant woman, right, and someone asked if you wanted something cleaned or sterilized, the answer was yes. They did not know that they were potentially being asked to be sterilized and have a hysterectomy performed on them.

That is a grave injustice that, in my community, we have been fighting for decades to make a right, especially as the hospital was practicing under California eugenics laws established in the early 19th hundreds that were about actually monitoring reproduction across various different communities. And so it's something that we've discussed in budget. It's something language access, and clearly interpretation can lead to various different circumstances and outcomes.

And so this is an important piece that I just simply wanted to share, just based on decades-long past injustice that we're trying to work towards and how do we establish parity when it comes to language. So thank you for that. We're going to move on to Cal OSHA. Chief Killip, can you provide the same oversight and overview of language access capabilities at Cal OSHA, including the number of bilingual inspectors, availability of translated materials, and ways that non-English speakers can interact with your office?

Absolutely. Madam Chair. Yeah. Being able to reach workers to promote workplace safety and health is a priority for Cal OSHA. We need to reach workers, especially vulnerable workers, with important workplace safety and health information to prevent workplace injuries and illnesses. Currently, Cal OSHA has 48 certified bilingual employees divisionwide. 45 of those are certified bilingual: Spanish, Cantonese, Mandarin, and Vietnamese. And we need to get more bilingual professionals on our team.

We're expanding our recruitment efforts to attract bilingual candidates to offer these resources to workers in more languages so they can access this important information. Cal OSHA is seeking to expand internal multi-language access capacity to include additional languages, such as Spanish and Chinese, which includes traditional and simplified Korean, Vietnamese, Punjabi, and various indigenous languages, such as Mixteco and Triqui, among others.

In February of this year, we sent several education and training materials to a vendor to translate them into multiple languages, and we have since posted 14 of these documents on our website for worker safety and health. The Department of Industrial Relations has contracts in place now to allow for real-time translation in the field when an inspector shows up in the field to ensure the site is safe and healthy for the worker and to translate educational training materials into multiple languages.

In January of this year, Cal OSHA developed a survey for all internal staff to take and learn that we have many internal bilingual staff who are fluent in several different languages, and they want to learn about becoming certified and provide translation assistance. And so we're encouraging and trying to leverage that resource already that's on our team. Cal OSHA has an outreach coordination program with bilingual field staff and is hiring.

We have two bilingual community engagement liaisons, BCELs, and we want to hire four more in addition to a statewide manager for that team. And they will be strategically located throughout the state to partner with community based organizations to reach workers who need vulnerable workers who need our assistance most.

And these staff members are dedicated to working directly with community-based organizations and labor advocacy groups, consulates, and workers. In April of 2021, Cal OSHA established a resource call center, and we recently expanded the hours from 09:00 a.m. to 07:00 p.m. And those people that are monitoring those calls are bilingual. We also want to expand that team to be able to speak languages other than just English and Spanish.

Cal OSHA's alliance program is also focusing its efforts on developing and leveraging community partnerships in order to share our resources. And in addition to being able to translate our resources and trainings into other languages, especially for vulnerable workers, and our ability to enhance and bridge this language access challenge remains a priority for Cal OSHA. And so we can reach as many workers as possible, especially vulnerable workers, and we invite suggestions and opportunities to expand on what we're already trying to do with the resources that we have.

But this is a big priority for us, and it's very important, and we invite ways that we can do this better. Thank you for allowing me to share this important information, and I'm happy to take questions that you may have.

Thank you. Mr. Killip, we're going to go to your colleague remotely, Ms. Jora Trang, who should be on the website. Would you be able to provide some of your perspective to improve the language access at Cal OSHA? Ms. Trang?

Yes, and can you hear me okay?

Yes. Please continue.

I must be on another screen because I can see the labor commissioner but not me. All right, so let me tell you a little bit about me. I am the Chief of Staff and Equity at Worksafe, and we provide assistance and legal support services to multilingual and monolingual workers with Cal OSHA and also with the Labor Commissioner's Office because they handle retaliation in occupational safety and health cases. So I'm going to talk about both offices.

Worksafe has specifically helped monolingual Vietnamese, Cantonese, Spanish, Burmese, Hmong, and Farsi workers. So we have a direct experience with this. Now, I listened to Daniela Urban's presentation and she laid out a lot of issues that we also experienced with Cal OSHA. So I don't want to repeat them. I do want to amplify what Daniela said, and also I want to focus more on what Chief Killp said. The very last one, the alliance. This is so key.

So, I'm going to be referencing two examples of excellent partnership programs between Cal OSHA and the Labor Commissioner's office and community-based organizations that ensured inclusivity and true accessibility, and language justice for workers in California. And they did this while also supporting and amplifying the state agency's efforts to enforce the laws in California to protect California workers. We need to work together, right? As they say, it takes a community. So, let me highlight those two programs because I'm going to be referencing them.

So I want you to know what they are. The first is the domestic worker and employer education and outreach pilot project with the Labor Commissioner's Office, and the second is the California COVID-19 workplace outreach project with Cal OSHA. Now, earlier today, I think it was item number four.

It was discussed that the latter program, which we referred to as CWAP, will be cut significantly, the COVID-19 project and I don't quite know if that also includes the domestic worker and employment education outreach title project, but I hope not because these projects are really key and they don't have to be applied just to COVID-19. They can be expanded.

The first project was a partnership between the labor commissioner and 14 community based organizations to create over 60 different domestic worker rights and employer responsibility materials in six or more languages. This included one pagers, social media graphics, pocket guides.

We've lost her audio. One moment, Ms. Trang. We seem to have lost your audio. Just tell us what you had for breakfast until we figure this out so that we can hear you. When I used to work in radio for many years, we would do audio checks, and we just ask people what they had for breakfast until we heard them at the right level.

Bagels, coffees, donuts, omelets. Someone working on her audio.

Can you hear me?

Yes. Please continue.

Okay. All right. I apologize. What was the last thing you heard?

All right. It allowed for basically massive, multilingual, peer to peer education and outreach efforts in language training opportunities, and in language one on one support for workers to self advocate, it reached tens and thousands of domestic workers and employers across California. This is a partnership project with Cal/OSHA, with the LSE, with the Labor Commissioner. You can't do it by yourself. That's part of the problem. Right? The estate agencies are underresourced. You need your community partners. The same with CWAP.

That was a project with over 100 partners. That was the California Covid Workplace Outreach Project. And we at WorkSafe were the Bay Area regional lead for that project, we partnered with the California labor and Workforce Development Agency and over 100 community based organizations. Some of you are on this call right now. I can see you spiritually. Thank you for joining and supporting this. We were able to create workplace rights in 46 languages through that partnership. It's amazing.

And we really use the community organization's linguistic and cultural expertise. Worksafe, in particular, produced materials in African language, Swahili, Amharic, Tigrinya, Haish and Koreo, Igbo and French. And those are on a very special site. I believe it's a safe at work site, which is a part of the state agency's DIR that can be accessible in the future for anybody. CWAP represents the best way to address language capacity limitations, both short term and long term.

So in the short term, because you're ensuring workers'rights that they're receiving valuable information from trusted messengers to support them, and those messengers are aligned with and partnering with Cal/OSHA and GLSC, and you also have long term support by creating a pipeline of community organizers who have expertise in enforcing workers'rights so we built this incredible integrated network, both of these programs. California has so much linguistic and ethnic diversity, and our agencies just are not fully resourced to adequately meet the language needs of our workforce.

It's just a reality. But the work that we did during the pandemic really allowed us through these two programs to create a really strong infrastructure that we can expand on. So now that I've told you the great things, let me kind of go into some of the issues that advocates have and how CBO's and programs like the ones I've told you can highlight that.

So the first one with Cal/OSHA, that's very challenging is, and all of this actually depends on having someone bilingual who's an advocate to help you, because there's no one at Cal/OSHA who can do it. So a community based partnership, I mean, a community based organization like Worksafe, for example, is essential. Like they just can't do it without us. So the first is a lack of access to a multilingual helpline. When I call Cal/OSHA, I always talk to an English speaking person first.

I can press two to get to Spanish. You all know this, but I'll tell you anyway. After I listen to English for a while, then they'll say, press two for Spanish, but there's nothing else. And if I call Cal/OSHA and speak to a duty person or somebody directly, I have to be able to say, can I speak to a Vietnamese person or a Vietnamese interpreter?

If I cannot say that in English, then I don't quite know how the worker is able to talk to somebody at Cal/OSHA. So it's really critical, again, to have those partnerships so that the advocates can serve as a liaison. Secondly, the website has a plethora of multilingual materials. You can go on the website, you click a button, you go to a Spanish index. So the Spanish index is great, but it's an index, it's not the same as information. So the website is not fully multilingual.

So again, falling back upon the importance of having advocates or an alliance partnership as chief killer mentioned. In addition, if I wanted to get multi language materials, I have to know how to read what I want in English first, because then it'll say, for example, health and safety, parentheses, Spanish, parentheses, tagalogs, parentheses, Vietnamese. Right? So if I don't understand the English, I can't get to the Vietnamese. And so again, critical to have a community based organization.

Thirdly, Cal/OSHA doesn't have what the Department of Workers Compensation has, something similar to English and Spanish workshops, the information assistance kind of process. And so if a worker wants to call into Cal/OSHA to file complaint, they do have to speak to a duty line person. And again, all those language problems that I've listed come up. Lastly, the increasing funding for bilingual staff that's amazing. I think that's great. But also really resourcing and building and amplifying on what I was just talking about is critical.

Let me give you an example of an experience that I had with Cal/OSHA that was very positive. I once represented a Farsi worker, a worker who spoke Farsi. I don't speak Farsi, but the worker was able to communicate partially with me in English. So I met with Cal/OSHA and an inspector, and we were able to have a full inspection, I mean, an interview with a multilingual translator on the phone.

And it was really helpful to my client because it made them feel more comfortable to speak in their language. I felt like the process of calling the multilingual line was very easy, efficient, and it helped the inspector also relate with my client. So I really appreciate that experience. And I would encourage more of a build out of some kind of system like that that's a bit more robust than just at the inspection phase.

It somehow starts when a person first calls into Cal/OSHA, like an actual multilingual line. So I think I've talked a lot. I'd like to conclude by saying we support the state agencies. The amazing work that the Labor Commissioner is doing, Cal/OSHA is doing to increase language access. The LWDA project and the Domestic Worker Project I talked about were just amazing collaborations that should continue.

And I would encourage expanding upon these programs to help resource Cal/OSHA and build a partnership that really ensures true language accessibility and justice for workers across a range of issues.

Thank you, Ms. Shrang. Appreciate your in depth knowledge and perspective on this issue. Department of Finance,

Patrick Toppin. Department of Finance. Nothing. No further comments at this time.

Thank you. LAO. No comment from the LAO. Thank you. Okay, just a couple questions from me and just for some, what's it called? Maintenance. Like, just subcommitee maintenance. I should be in Health Committee right now, but I'm not because I'm chairing this also. So to my colleagues and Health Committee, I'm not ignoring you. I'm here in budget but unable to go. And I hear that it's also raining really hard and it's in the other building. So we're going to continue on.

We will have to recess around 4:20 for about 30 minutes, but we're going to try to get through this panel and the next and a couple of items before we have to recess for about 30 minutes. Question for this panel. Does the Labor Commissioner's Office and Cal/OSHA have a long term language access plan in place? Commissioner, you're welcome to kick it off.

Yes. Thank you, Madam Chair. In my comments, I identified the offices that we are prioritizing to regain the staffing levels that we had pre pandemic in 2018. And then we've also identified additional offices through our analysis of 2022 data where we need to go beyond those 2018 numbers. So that is our initial plan to get us through for this year.

Yes. Thank you, Madam Chair. We have a long term language access plan, and that includes really focusing on adding more people to our team that are bilingual, in addition to leveraging those that have indicated through a recent survey that they're bilingual, who are interested in expanding that into a certified bilingual capacity, which would really help us.

And we're also increasing our ability to translate our materials through the alliance program partnerships that I mentioned for indigenous language translation and also contracting with vendors who can provide translation services for field staff that are conducting inspections in real time, and for our written education and training materials for workers and for employers.

Madam Chair, could I add.

Yes, please.

Deanna Ping, Chief Deputy Director for DIR. I just thought it'd be helpful to talk about some department wide initiatives related to language access that dovetail into what Labor Commissioner Garcia Brower, as well as Cal/OSHA Chief Jeff Killip mentioned. I also just want to say thank you to our community partners, Daniela and Jora, for speaking today. So thank you for being here.

So last year, we actually kicked off a DIR language access workgroup, and we actually have already some initiatives that we've been able to put forward there because we want to make sure that whether it's in the field or in the office, that our team has access to the resources that they need, as well as workers are able to communicate in a language that they feel comfortable communicating in.

And so in that work, we actually did a complete evaluation of all of our language and translation contracts which were referenced here. And in that, we saw that there was a need for some type of department wide interpretation and bilingual services contract, which we're actually in the final stages of implementing. And so that's going to include in person telephonic as well as virtual translation, both simultaneous as well as some of the resources that were referenced and getting those translated in more languages.

And in addition to that, we're actually reviewing our top 20 publications across all of our divisions. And so that includes Cal/OSHA, the Labor Commissioner's Office, The Division of Workers' Comp, as well as the Division of Apprenticeship Standards. And so we're reviewing the top 20 most popular publications. We're looking to see what languages that are translated in, if that's accurate, as well as identifying opportunities for what languages to have those translated and posted in as well.

And in addition, just looking department wide at how we can be really thoughtful about recruiting more bilingual talent. And so I just wanted to mention and echo that, that we are thinking of this really in the short term, what can we do to see quick results, and also what can we do more long term to really build it into our operations?

Thank you for that. One follow up question that I had and related to a point that was brought up earlier, I think, by you, Ms. Urban, and that is the individuals that are not able to test into becoming potential interpreters. Spanish, and I'll just speak on the Spanish language. Spanish language that is spoken by everyday people, including my own family, may or may not be related to the actual exam that is currently in Spanish and how people speak.

And so I'm just curious if there are challenges based on what that qualification could potentially look like. And I say this only as I'm thinking back on taking AP Spanish in high school. The AP Spanish exam was very different than the Spanish that I spoke at home. And so I'm curious as to if there are challenges just based on what those exams look like and the entryway of folks being able to come in.

Diana Ping, DIR. I'm happy to take the lead on that and then if my colleagues have anything that they would like to add. So, as you mentioned, Madam Chair, there is a requirement for CalHR for someone to test in to be able to occupy a bilingual position. And so to what you mentioned, there's a written component as well as a verbal component. And so, like you mentioned, it could be their variation depending on the language relative to certain terminology.

But also happy to circle back to get more details on the specifics of the exam, if that'd be helpful.

Did you want to add something? Ok, that would be great. So, for example, just in basic reading comprehension, the LA Times and La Opinión use 8th grade reading as the tier of interpretation on their readership. And so I'm curious as to the type of exams that we in the state have, whether it's in alignment or parallel, or whether it's just a completely different language spoken altogether, to the point that was made earlier about, I think it was Chile in Spanish versus Mexican Spanish. Right.

Not all Spanish is the same, so I'm curious as to what that looks like, but that's for a later conversation.

Happy to circle back with your team.

If there are no additional comments or questions, we are going to jump out of order at the moment. Do we have time? We're going to go to issue number 14. Thank you very much. And we're doing this because this requires a vote. Do you have to leave? Okay, let me read through this and then we'll continue on with the motion. So we're going to move on to issue 14 that requires a vote. This is related to the Agricultural Labor Relations Board.

For our next issue, we will review the clarifying language agreed upon by the Governor and stakeholders to make changes to AB 2183 the bill that provides additional pathway to farm workers to select a union representative in the interest of implementing the provisions of the bill quickly and enacting those clarifying changes. The agreement language is a candidate for budget early action. It requires a motion and a second.

Thank you. Do we go for a vote? We can go for a vote then.

[Roll Call]

Thank you, ladies. It's challenging, isn't it? We're in two different buildings. There's all kinds of stuff happening at the same time. And so I'm just going to ask, because we do have to recess in about 10 minutes, if we can condense the presentation, please. And we are joined by Victoria Hassid, Chair of the Agricultural Labor Relations Board, and Julia Montgomery, General Counsel for the Agricultural Labor Relations Board. We are also joined by Danielle Brendan and Courtney Massengale.

Massengale.

Massengale. Apologies for the Department of Finance and Chas Alamo with LAO. We are asking our panelists to present the agreement language as well as two budget change proposals related to the bill's implementation and farm worker outreach. For members of the public, please note that the agreement language is available as an amendment to addendum apologies to today's agenda and can be viewed on the Assembly Subcommitee website. Let's begin.

Okay. Thank you, Madam Chair and Members of the Committee for the opportunity to present here today. I will be quickly discussing the changes presented by the RN in a truncated fashion. To give an overview of AB 2183 there were three primary components. One component changing the election process for elections under the Agricultural Labor Relations Act. The other was to establish an appeal bond for various matters, and the other was to create new civil penalties under our act.

Under the new RN language that clarifies some of these provisions. The civil penalty provision was untouched, and the changes are with again the election process and the appeal bond. In regards to the election process, AB 2183 created a new additional framework for how to think of elections.

So it offered employers the ability to become a labor peace agreement, enter a labor peace compact established by statute, and if they did so, they were committing to certain requirements, essentially to not get involved or speak out against any union activity or any particular union, and in exchange there would be a secret ballot election, as was the law prior to AB 2183, with the option to allow mail in voting.

If an employer did not sign on to a labor peace compact, then workers under certain conditions could pursue a mail ballot, essentially a car check type process. It also established a process where, when employers appealed matters determined by the board to the Court of Appeal or other higher courts, they had to put up a bond for the value of the judgment that the board or the remedy that the board had asserted. The most significant changes in the RN language are to the election process.

It eliminates the labor peace agreement framework that AB 2183 established, as well as the mail in ballot option, and instead adopts a new car check procedure that's largely based on the one in AB 2183 but with some technical changes regarding who may use this provision. It is available only to certain unions. It is set to sunset in 2028 and it caps the number of card check certifications at 75 from the time the RN were to be effective through the sunset date.

The appeal bond language is also further clarified that the appeal bond applies to employers for appeals of both unfair labor practice cases as well as MMC cases. It maintains that compliance proceedings are being completed within one year and that the ALRB issues the decision setting the amount of back pay or other monetary award, and the employer must then post a bond in the amount of the monetary award as a condition of seeking judicial review of both liability and back pay findings. And that concludes. That's the lightning overview of the RN changes.

Thank you, appreciate that. Department of Finance.

Courtney Massengale, Department of Finance. We have nothing to add at this time.

Chas Alamo LAO, nothing to add. Thanks.

LAO.

Just a question before we go on a quick recess. Does the ALRB anticipate needing different or additional resources provided in the AB 2183 budget change proposal should the agreement be enacted?

No, we do not. We believe the request made in the budget change proposal will adequately allow us to implement the changes proposed in the RN.

Thank you. Easy peasy, right? Get it all done. Since we did take a motion, the motion was to adapt the placeholder trailer bill Language to implement the proposed changes to AB 2183 and approve the budget change proposals for AB 2183 implementation on farm worker outreach. We will leave the role open to members to sign on as soon as we reconvene. Thank you. We are in recess for the next 30 minutes. Thank you.

We are back from recess, back to budgets Sub four, and we will continue with our issues. We're going to start with issue 11. Thank you again for all of your patience. This issue is related to wage claim adjudication. Wage claim adjudication timelines have a long standing problem at the Labor Commissioner's office. This is a critical process to adjudicate claims on behalf of workers who file claims for nonpayment of wages, overtime, or vacation pay.

Under state law, wage claim cases are to be adjudicated within 120 days. But in 2018, the average claim took almost 400 days. By the end of 2022, the average wait time was 803 days, well over two years. Our next panel will provide an update on what has been done to date to reduce these timelines. We will also review a budget chain proposal included in the Governor's Budget to allocate resources dedicated to decreasing wage claim adjudication case processing time.

For this panel, we are joined remotely by the Labor Commissioner, Ms. Lilia Garcia-Brower, and in person by Andrew March and Patrick Toppin from the Department of Finance and Chaz Alamo from the LAO. Let's begin. Commissioner?

Good afternoon. Good evening, Madam Chair. Thank you for this opportunity to brief you on our wage claim adjudication process and our budget change proposal specifically. So just as background, I just want to acknowledge that the 98 A Berman process was established statutorily in 1976, when the labor code was significantly, quite simple. And the labor code stayed pretty simple until about 2012.

The Legislature then started to pursue other theories of liability, and we started to see more complex labor code statutes be enacted, those statutes of individual liability of the chain liability, which we completely agree with, and see that they're necessary to hold predatory employers accountable, especially in low wage industries.

But it is important to set that as the backdrop of this issue that we're struggling with as our backlog in our wage claim adjudication program is informed by these cumulative factors that have to do with in addition to vacancies and also the impact of the pandemic. So, specifically, this year's BCP, I request additional staffing to address a backlog that was created by incomplete claims being filed in the online wage claim program.

In November of 2021, we launched an online wage claim program with the intention of creating access to all members of the public, including those who may have low computer literacy.

Unfortunately, what ended up happening is most of the workers who filed claims with us chose to file it with very limited information, and that meant that they were rendering a claim that cannot move forward in the process which created a new backlog for us. And to date, 75% of the claims being filed every day since the launch of the online wage claim process are being filed online.

So in this BCP, we request 32 industrial relations representatives who will focus on addressing the backlog created by this new online system. These 32 IRRs will focus on contacting claimants quickly upon filing to collect any missing information and advance the claim forward. To improve hiring outcomes, this BCP requests two associated governmental policy analysts for my office's hiring unit, which we are just newly creating, in addition to one AGPA and one staff services manager for DIR's HR unit that will focus specifically on my office's hiring needs.

While we prioritize filing vacancies, we are also making a couple of one-time requests to establish a community navigator and educational enhancement programs. Both of these programs leverage community resources to provide tailored support for low wage earners, to perfect wage claim filings, and prepare to advocate for themselves throughout the process. This BCP requests one-time funding to obtain a vendor to conduct a business process review of the wage claim process.

The goal is to critically examine the process and identify additional deficiencies and to further improve the wage claim process. Lastly, we request one-time funding to automate the production of the order decision award and the judgment interest calculator. The automation of the ODA will standardize the preparation of ODAs to handle volume and facilitate writing complex decisions. The second automation project is in an IT improvement contract to design and develop a judgment interest calculator.

This project will facilitate entry of judgments with the Superior Court and calculate interest on outstanding balances. The goal of this BCP is to reduce wait times by at least 200 days in the first year after implementation of these items, with additional reductions every year thereafter. I'm available for questions.

Thank you Commissioner, Department of Finance and followed by the LAO.

Patrick Toppin, Department of Finance. No additional comments at this time, but happy to answer any questions on the proposal.

Drew Soderborg, Legislative Analyst Office. No comments on the proposal.

Thank you. Just a couple of questions from me. Does the Department have projections about how much the adjudication processing times would decline should the 32 positions be provided?

We estimate that the 32 IRRs will be able to reduce delays by 200 days in the first initial year.

Commissioner, would you mind going through the timeline on that? So initially in my comments, it was said that it should take no more than 120 days. However, in 2018, there was almost 400 days and as of last year it was close to well over two years. So what is the introduction of potentially these new positions. I'm sorry, what is the length of time that you think how fast that caseload would be reduced?

That's difficult for me to say with more detail than what I just shared. I can come back to you with more information. We are currently now hiring onto the blanket industrial relations representatives for this purpose because we have seen the effective outcomes when we have early engagement with claimants to perfect claims. So in general, as you know, hiring takes us a significant amount of time.

Which is why now with the recruitments that we're running on our current vacancies, we are looking to hire industrial relations representatives onto the blanket so that we can start this new strategy to relieve backlog as quickly as possible, and we expect them to be able to decrease days by 200.

Thank you, Commissioner. That actually leads to my follow up question. The request includes a dedicated human resources position. How will this position improve the existing hiring processes at the Labor Commissioner's office? To begin with, question one, and then the second fold to that question. What are some of the challenges that you've seen in terms of hiring?

Like we've discussed in conversations and in this hearing, any challenges related to what that application process looks like and what can be done to expedite hiring and improve the hiring process?

Absolutely. Thank you very much, Madam Chair. As we've discussed previously, we as an employer face similar barriers than all employers are facing right now with competitive wages and benefits and also with competition of the delays in hiring, losing viable candidates because of that lapse in time.

So these HR professionals that we're requesting are going to create a hiring unit within my headquarters unit to be able to focus working with our hiring managers to perfect packages and work with DIR in being able to move those packages more quickly so that we can get back to candidates more quickly and hoping that will help us solidify more job offers. We're also asking for two positions for the Department for their hiring unit. As you can imagine, the Department serves several divisions.

We are just one of a couple of them. However, we have very complex job classifications, and it takes a lot of attention and time to ensure that we're compliant. So these two professionals that we're bringing on for DIR are going to be able to focus on the labor Commissioner's packages, and they're going to be able to work quickly with our hiring team within the labor Commissioner's office to expedite hiring.

I do want to note for the Chair that we do not currently have a fully operating hiring team within the labor Commissioner's office. We've actually haven't had, enjoyed that luxury. I redirected seven enforcement professionals to be able to oversee hiring for their specific programs. So what these additional positions are doing is they're building our capacity to be able to be consistently hiring and develop that expertise of the state regulations and also the DIR protocols.

Can you share a bit related to the individuals that could potentially be hired in terms of language access, cultural proficiency when it comes to the wage claim claimants in particular, what is the challenge related to? Let's say you have someone that speaks an indigenous language that wants to file a claim. How quickly can you find interpretation services? Or what does your Department need to be successful on the language front?

Thank you so much for that important question, Madam Chair. We actually have gained a significant amount of education over the pandemic, as you well know, with our farm worker caravans. We've partnered with community partners who provided interpretation services for us and Mixteco and Triki. As I go out into the community, I'm unable to communicate with these workers. So it's the community leaders who interpret for me and allow us to make that contact.

The Department has actually just recently established a consolidated contract where they are bringing in more languages that we have access to, and they've also increased the type of services that we have. So it's not only for our conferences and hearings, but as I'm out in the field, in meeting with the community, I'm able to, through this contract, solicit support for whatever language services that we have. So we are doing better today, Madam Chair, than we were two years ago.

But by no means we are where we need to be. So we will continue to build that out. With respect to your question around hiring professionals from these impacted communities who have these language skills, I think the previous panel of community leaders spoke quite eloquently about the challenges the state processes present. A lot of what I'm trying to do, as you know, through my collaboration with the University of California, is trying to demystify the state hiring process.

Unfortunately, so many of our communities, especially our communities of color, our immigrant communities, they don't know how to apply for state service, and it is a challenging process. So we are working with the University of California to establish a career pipeline.

We're reaching out to their labor studies programs and other similar programs who reflect our community and who have the language skills that we need to bring inside to help them understand what is the state hiring process and create understanding within these community partners so that they could provide support to potential candidates as they go through that process. I am confident about our partnership with UCLA. We've conducted two job fairs. We're developing curriculum on the process and going to be doing a series of workshops.

We are saturating their networks with exam availability and job bulletins. Once we perfect this model with UCLA, we will provide that throughout the UC system. And as you indicated in a previous conversation, we're interested in getting to the Cal State system as well as the community college system.

Thank you, Commissioner. Everything was going so great until you said UCLA, and as a Trojan, I may have to just reevaluate this entire proposal. But then you said CSU, and as a Cal State LA alumni, you brought me back. So here we go. Out of the percentages of wage claims that you currently have, I'm curious as to how many require language interpretation.

And if you can, or if you know off the top of your head, out of those that require dual language assistance, do you currently have the staff in your Department to manage that? Or how much are you potentially using a third party for? So I'm curious as to how many of them are Spanish, how many of them are Mandarin, Cantonese, or any other language that's necessary. And what are some of the challenges associated with time if staff is not available?

Absolutely, Madam Chair. We have 19 unique contracts for interpretation services. I do not have a number for you right now. Of the requests we receive, we received about 20,000 requests last year. I can go back and look at that data and see if we can break that down further for you in categories and identify of our interpreter services, try and put an amount for each language that we utilize.

Thank you. I'm just trying to paint a picture. If you have 20,000 wage claim requests, and only a small percentage of that are in the language necessary currently available on staff, what are the delays associated not only in the general cases, but cases that need interpretation, and it seems like there's some opportunity there.

Yes, and thank you. Let me clarify. The 20,000 requests we received wasn't just wage claim. That was on public information and interpreter services requests. So I will have to break down that number, and I don't have those categories before me now, but I can come back to you of those 20,000 requests, how many of them were for wage claim adjudication hearings.

Thank you, Madam Commissioner. If there are no other questions or comments from the dais, we are going to move forward to the next issue and we're going to hold this item open. Thank you very much. We're going to go now to issue 12, housing construction workforce. This issue is on the implementation of SB six and AB 2011. Our next panel will review a budget change proposal and a trailer bill related to the housing construction workforce, prevailing wages, and skilled and trained requirements.

In addition to the Department of Finance and the LAO, we are joined by Deanna Ping, Chief Deputy Director at the Department of Industrial Relations, and Ken Lau, Assistant Chief Counsel at the Department of Industrial Relations. And before we begin just a little maintenance, we will be doing issues 23 and 24 with OPR at a later date, at a later future hearing. So with that, let's begin. Thank you.

Thank you, Madam Chair. I want to say apologies. You only have me for DIR, but thank you so much. Good evening. I'm here to talk about our BCP that requests 30 positions and 5.8 million in 2023 through 2024 and 5.4 million in 2024-2025 and ongoing from the state Public Works Enforcement Fund. And these are to fund the implementation of two bills, that's AB 2011 as well as SB six. And so I'm going to be very quick because I know you have a full docket.

And so thank you again for the opportunity. Both of these new laws apply to provisions such as prevailing wage and skilled and trained workforce requirements on specified housing development projects. So these are areas that fall within the jurisdiction of the Labor Commissioner's Office of Public Works. And they are the ones who serve civil wage and penalty assessments when there are prevailing wage or skilled and trained violations.

And so this proposal in front of you provides the labor Commissioner's Office with the additional resources needed to support the enforcement of these new labor standards. And we also have a trailer bill that provides the Department the authority to have these contractors register and pay the applicable registration fee, which funds the unit's enforcement and education efforts.

And so also, just want to note that this registration requirement is also essential for tracking of projects as well as facilitating the submission of electronic payroll records, which is a requirement specifically under AB 2011. And so happy to answer any questions.

Thank you. Department of Finance, followed by LAO.

Patrick Toppin, Department of Finance. No additional comments right now. Happy to answer any questions.

No comments from us.

Do you want to state your name?

Drew Soderborg, Legislative Analyst. No additional comments.

Give us one moment.

I'm ready.

We are going to go back to voting. I'm sorry. Where am I? Roll call, please.

First motion is to adopt staff recommendation on the vote-only calendar for issue 1, 5, 9 through 21, 25, 27, 28, 30, 31, 32, 33, and 35. [Roll call]. Second motion is to adopt staff recommendations on the vote-only calendar for issue 2 through 4, 6 through 8, 22 through 24, and 26. [Roll call].

Third motion is to adopt staff recommendation for vote only a calendar for issue number 29 and 34. [Roll call]. Final motion is to adopt placeholder trailer bill language to implement proposed changes to AB 2183 and approve the budget change proposals for AB 2183 implementation and farm worker outreach. [Roll call].

Thank you, Assembly Member Lee. We're going to continue. Where was I? Okay, here. Just a couple of questions before we move on to the next issue area. The proposed trailer Bill will exempt the contractor registration fee from the rulemaking process. If this change is granted, the Department would have authority to adjust those fees without having to solicit public input. Why does the Administration need this authority?

Happy to take a first pass, and then my colleagues at finance can follow up if they have anything to add. So thank you for that question, Madam Chair. As you'd mentioned, we do exempt the fee from the APA rulemaking process.

And while my colleagues at Department of Finance can give more context as to where this aligns for other departments, I do want to note that the language does set parameters on the allowable fee adjustments. And so it does mention that the fee needs to just remain sufficient to support appropriations that are approved by the Legislature. And so I also want to note that the public engagement process is very important to us, and we recognize the value of transparency.

And so we believe that based off the existing fund balance as well as the proposed Jan 10 budget, we could evaluate if the fee would need to have any adjustments. And that's something we could post on our website. We have a listserv that includes contractors, associations, et cetera, that are in the stakeholder community so that they could be aware if any such changes would be necessary in the future, and then they could engage in the process there.

Thank you for that. Yes.

And just to add from the Department of Finance, we just part of the reason we're proposing this is that it aligns a lot with sort of the other fees throughout the Administration and sort of throughout the government, like the CalGEM per barrel fee and as well as the rest of DIR's employer assessment, which funds their numerous special funds.

Assembly Member Lee, did you have a comment? Question?

I just wanted to clarify on that. So I understand that the reason why you're raising it, but I understand for what purpose? Like, what are you going to be using the expense for that money collecting for?

Yeah. Happy. Thank you for the question. And so the fee is what funds the public works unit's enforcement and education efforts. So that would be one, just the enforcement, like the civil wage and penalty assessments, and also the very hardworking team as well, does a lot of employer education.

But without the increase, that amount was insufficient to carry out that goal. Without the increase, it would not be enough money, is that what you're saying?

Andrew March, Department of Finance. So currently there is no proposed increase to the fee. The way that the trailer Bill is worded, the authority to increase the fee wouldn't begin until 2026. And so at that time, depending on what the Legislature appropriates from this fund, then DIR would do an assessment whether the fee needed to be increased or not.

Okay. All right. Thank you.

Thank you. If there are no additional comments or questions, we are going to hold this item open. Thank you. And we are going to move on to issue number 13, is that right? Yes. The next panel will discuss four budget change proposals requested by the Department of Industrial Relations. Three of them are related to information technology projects, and one of them will implement AB 257 related to food, facilities, and employment.

In addition to the Department of Finance and the LAO, we are joined by Ben Bonte, Chief Information Officer at the Department, Debra Lee, Deputy Chief of Safety at CalOSHA, George Parisotto, Administrative Director for the Division of Workers' Compensation, and Paige Levi Levy, Chief Judge of the Division of Workers' Compensation. If you can, please present all four BCPs before we move on to any questions.

Patrick Toppin, Department of Finance. I'll take the brief overview and then defer to my departmental colleagues. The proposal in front of us, the first, the CalOSHA data modernization. The Administration is proposing 12.6 million in '23 and '24 from the Occupational Safety and Health Fund to start the development of a CalOSHA data management system to improve their efficiencies in enforcing California health and safety law.

The next proposal is the workers' information system, which includes special funding for the division of workers' compensation to update the most recent data layout in accordance with state law, which requires it to be updated to the most recent version outlined by the, and forgive me for this one, International Association of Industrial Accident Boards and Commissions, so known as the IAIABC. Next, the budget includes resources for the next year of funding for the electronic adjudication management system, which is also for the Division of Workers' Compensation.

This is the EAMS Project. Resources were previously provided to start this, and this is the central case management system for the Division of Workers' Compensation and the business side. And then lastly, the budget includes resources to implement. The Governor's Budget included resources to implement AB 257, which was the Fast-Food Council Bill as passed by the Legislature.

Thank you, principal author of AB 257. It's great to see it here. Any additional comments from LAO?

Drew Soderborg, Legislative Analyst Office. No additional comments.

Okay, just a question from me. What are the anticipated timelines for the final implementation of the three modernization projects?

I'll defer the exact timing to the Department.

Hi, good evening. This is Ben Bonte. I'm the Chief Information Officer for the Department of Industrial Relations. And so we are at stage two. We have stage two approval from CDT. We're working on stage three, so we're continuing the planning process. The timelines at stage two for the CalOSHA Project and the EAMS project were both to start in late 2023, early 2024, and to complete in the 26-27 fiscal year.

Again, those are the stage two estimates, and we'll continue to refine the estimates as we go through the PAL process.

Thank you very much. Seeing no additional comments or questions because I'm all by myself, we're going to move on to our next issue. Thank you very much. And since we are already dispensed with issue 14. Have so much paper up here. Okay. Here we go. 23, 24. 15. Okay, we're going to issue 15. The Department of Consumer Affairs. We're still all awake and caffeinated and ready to go. For our next issue, we will review three budget change proposals related to the Department's activities, including IT modernization, regulations, and organizational improvements.

Our panel includes several representatives from the Department of Consumer Affairs, as well as the Department of Finance and the LAO. If you can, please present on the three budget change proposals before we move on to questions. Let's begin.

Sure. Good evening, Chair Carrillo. My name is Taylor Schick and I'm the Chief Fiscal Officer for the Department of Consumer Affairs, and I want to thank you for having us here today. The Department has three proposals before you today, all of which extend existing funding for existing programs.

Our first proposal requests $6 million in budget year and $2.5 million ongoing to continue the business modernization efforts of our Cohort 1 and Cohort 2 programs. The proposal will allow the programs to continue implementing and refining their selected business modernization software, also known as Connect, and would fund eight existing positions within the Department's Office of Information Services to support that platform. This proposal also includes funding for credit card processing fees paid for on behalf of consumers that utilize online credit card payments.

I will note that the ongoing funding is only for Cohort 1, which is in maintenance and operations stage, and the Cohort 2's request is only one year of limited-term funding due to them still being on the project phase. Our second proposal requests 1.8 million in budget year and ongoing to support eight positions permanently and fund the department's regulation unit.

With 36 boards and bureaus, the Department promulgates a significant volume of regulations annually and this unit is vital to continue to process regulations timely and at a higher rate than before the unit was established. This unit also provides program staff with increased training and resources to help develop more comprehensive and quality regulatory packages. And then finally, the Department is requesting 1.2 million in budget year and ongoing to support seven positions and permanently fund the Department's Organizational Improvement Office.

This unit conducts business analytics and organizational change management activities for the department's 36 professional licensing entities and centralized service divisions. The unit has demonstrated significant value working with programs and divisions to document their business processes and find process step improvements. Give me just a second here. Which result in work being completed faster and applicants and consumers receiving quicker responses or actions from programs.

While the Department doesn't have data specific to cost savings resulting from its efforts, there are objective benefits in documenting and streamlining business processes for the Department's boards, bureaus, and centralized services divisions. We want to thank you for your time and consideration of our proposals, and I'm joined with my colleagues here, and are happy to address any questions that you may have. Thank you.

Thank you very much. Department of Finance followed by LAO.

Amy Ascencio, Department of Finance. For the first issue for Bus. Mod, I have no comments. For the second issue about the regulations package, I have no comments. And then the third for the Organizational Improvement Office. I don't want to get ahead of the LAO's comments, but I do have some things to say.

Since 2017, the Organizational Improvement Office within the Department of Consumer Affairs has been a highly utilized resource that has improved licensing processes, enforcement activities, business processes, changes in organizational structure, and acceptance of new IT systems. The seven ongoing requested positions will allow DCA to effectively complete its planned projects, which include business modernization improvements, process improvements and, central service reviews. The Department continues to closely monitor the health of their funds and DCA has taken a proactive approach to address future fund conditions.

While requested sources may contribute to the structural deficit of some of the DCA's special funds, DCA has a combination of projected current-year savings, current fee studies, and anticipated fee studies, as well as the Department plans to increase fees through the regulatory and legislative process to sustain their fund balances. This limited-term funding will be a barrier for DCA to implement their long-term strategic planning goals. And finally, the Organizational Improvement Office has gained institutional knowledge, which may be lost if the limited-term funding ends. Thank you.

Thank you. LAO?

Thank you, Madam Chair. Jared Sippel with the Legislative Analyst Office. So we have no comments on the first two BCPs. We just have a few brief comments on the Organizational Improvement Office BCP. So for this particular proposal, we make a few recommendations for your consideration. First, we recommend that the Legislature reduce the proposed funding and positions to match OIO's current authorized funding levels of 894,005 positions.

In addition, we recommend that the Legislature approve these fundings, reduce our revised level of funding in positions for three years as opposed to ongoing, as proposed by the Governor. And then, finally, we recommend that the OIO report or that the Legislature require OIO to quantify how its work has generated benefits and savings for the boards and bureaus and to report these results to the Legislature by January 10 of 2026. We base these recommendations on just a few things.

In our view, it's unclear if OIO's efforts have led to measurable benefits and savings to the boards and bureaus. So the OIO reports a number of different outcomes as well as anecdotal examples of improved efficiency. However, the OIO has not quantified how its work has led to measurable net benefits or savings to the boards and bureaus.

In addition, the Governor's proposal does represent an increase of $294,000 in two positions from current authorized levels, but it's unclear from the proposal whether this additional resources would result in increased workload outcomes. And so, with those points in mind, we recommend that the Legislature keep the funding at current authorized levels for three years and again require the OIO to report on its measurable net benefits and savings to the boards and bureaus.

We think that with this additional time, it would give the Legislature another opportunity to monitor the OIO's outcomes, as well as the required reporting would give the Legislature insight into whether OIO's benefits outweigh its costs to the boards and bureaus. And with that, I'm happy to answer any questions you may have.

Thank you for that. Has the regulations unit been able to reduce the amount of time it takes for the Department to promulgate regulations?

I think that's a question for me. I'm Ryan Markroft. I'm the Deputy Director of Legal Affairs at the Department of Consumer Affairs. And I think the short answer is yes. I think we see this most poignantly in the rate that regulations have increased over the last three years since the Legislature first approved the unit. And a quick side note. So the Legislature has twice before approved this unit on a limited-term basis.

And we're hoping that based on what we have been able to show over the last three years, that this would be sort of the permanency for that regulations unit. In the year before the Legislature approved the unit, the Department with those existing resources was able to generate 18 regulations. And so the next year, the Legislature first authorized the unit, and that shot up to 60, which means about a 40 regulation difference with existing resources compared to the unit in year one.

In year two, we saw the same outcome. With existing resources, it would have been something like 18, but in reality it was more like close to 60. So in two years now, we've have 80 that were completed that otherwise would not have been, and then in year three, again, the same outcome. This was just last year where again, with those pre-authorized resources, it would have been 18, but instead it was nearly 60.

So total over three years, we have 120 regulations that sitting here today would not have been completed but for the unit. So I do think, in short, we have seen an increase, and we're hoping that we'll just keep, continue carrying this on.

Thank you. I appreciate that. Any response from the LAO?

Jared Sippel with the LAO. No comments. Thank you.

Thank you very much. We're going to hold this item open. Thank you for being patient. We're going to move on to issue number 16.

This will be the Cannabis Control Appeals Panel. We will review one budget change proposal for the Panel presented by Anne Hawley, the Panel's Executive Director. Let's begin. This was on consent previously, so you're welcome to keep your remarks short.

Yes, will do. Thank you, Madam Chair, for allowing me to address you this evening. My name is Anne Hawley, Executive Director of the Cannabis Control Appeals Panel. First, I'd like to provide just a brief overview of the Panel's structure and purpose.

The panel is a quasi-judicial body that was established by the passage of Proposition 64. The five members of the panel act as judges in reviewing appeal cases. Three members of the panel are appointed by the Governor, one by the speaker of the Assembly, and one by Senate Rules. The panel is authorized to review decisions by the Department of Cannabis Control related to adverse actions against an annual license holder or applicant.

The Panel's mission is to ensure fair treatment of both the licensee and the Department, streamline the appeals process, and provide expertise in due process to the review of any licensing decision. California is transitioning from the use of provisional licenses over which we have no jurisdiction to annual licenses over which we do. Further workload levels cannot be known with certainty, but they are likely to increase concurrently as the number of annual licenses increase.

For this reason, the panel requests a three-year extension of funding to support the 11 existing positions to ensure that we have sufficient operational and legal resources to carry out its statutory functions and baseline needs. So thank you for the opportunity to speak to you today, and I will happy to answer any questions.

Thank you. Department of Finance followed by LAO.

Andrew Hoang, Department of Finance. No additional comments.

Jared Sippel with the LAO. No comments. Thank you.

Thank you. No comments or questions on my behalf either. But I will say for the record, if there's any Member of the Budget for Committee that pulls the item off the consent calendar, my expectation as Chair of this Committee is that that Member is present. Okay, thank you very much. Thank you. We're going to move on to our next issue. We're moving along. We're following along. We hope to be here out before 08:00 maybe. Let's do issue number 17? 17.

For our next issue, we'll receive a presentation from the Department of the State's transition from temporary provisional licenses to full annual licenses. Joining us for this panel is Rasha Salama, Chief Deputy Director of the DCC, and Angela Hill, Deputy Director of Governmental Affairs at the DCC. We're also joined by the Department of Finance and the LAO. Let's begin.

Good evening, hair. And tonight, you will just have me from the Department. So good evening, Chair and Members of the Committee.

My name is Rasha Salama, and I serve as the Chief Deputy Director at the Department of Cannabis Control. Thank you for having us here today to talk on this issue. I would like to start with just a short overview of how we got here on our status on provisional licenses. After the passage of Proposition 64 to on-ramp existing legacy operators into the legal market, state licensing entities were authorized.

I'm having a hard time hearing you. Can you speak a little closer to the mic?

Is this any better?

Much better. Thank you.

Okay. Thank you.

The acoustics in this room are not great.

I'll start from the top if that works for you? Okay. After the passage of Proposition 64, to on-ramp existing legacy operators into the legal market, state licensing entities were authorized by state law to start issuing temporary licenses. Temporary licenses were intended to provide operators quick entry into the legal market while also allowing them to gather and submit the approvals and documents necessary to meet annual licensure requirements.

As the temporary sunset deadline of January 1, 2019, approached, it became apparent that the timeline to accomplish annual licensure was unrealistic when transitioning a market the size of California's. The state took swift action to bridge temporary with annual licensure by creating provisional licenses that would be phased out by January 1, 2020. The hope was this interim solution would provide the necessary time for licensing entities, state and local, to process permit applications.

Once again, as that deadline approached, it became clear that more time was needed and the deadline in state law for provisionals was extended two more years to January 1, 2022. Then again on July 12, 2021, Assembly Bill 141, which established the Department, set a sunset date of January 1, 2026 for provisionals. Additionally, the Bill established phase-out deadlines for the issuance and renewal of provisionals and created specific and detailed CEQA benchmarks for each renewal period of a provisional.

So, as you can see, each extension to the provisional licensing process has not just extended the sunset deadline, but also sought to require a higher level of deliverables from licensees. Further complicating the licensing framework. To support phasing out of provisionals, the state invested in the distribution of $100 million to 17 local jurisdictions holding the highest percentage of provisional licenses.

In January 2022, the Department awarded these funds to 17 cities and counties in amounts ranging from $400,000 to $22 million. Later, the Department will provide a more detailed update on the Local Jurisdiction Assistance Grant. Overall, the Department has seen an increase in the number of applications received, license renewals issued, and provisionals transitioning to annuals. We've transitioned nearly 1,600 provisionals to annuals and processed over 4,600 applications. The Department currently has over 11,000 active licenses, 5,100 are annuals and 6,600 are provisionals.

Can you repeat that number again?

Yes, sure. The Department has over 11,000 active licenses, over 5,100 annuals, and a little over 6,600 that are provisionals. I can get exact numbers and I think they're in the briefing document. 57% of those provisionals are located in jurisdictions that have received Local Jurisdiction Grant funds.

So in closing, I just want to say that the Department currently is prioritizing processing new applications, especially for equity applicants, because there's an upcoming statutory deadline and a focus on transitioning provisionals to annuals due to some of the benchmarks that are coming up this summer in statute. And I'm happy to answer any questions you have.

Department of Finance, followed by LAO.

Andrew Hoang, Department of Finance. No additional comments.

Jared Sippel with the LAO. No additional comments.

Thank you. More than half of the cannabis license appear to still be operating under provisional license, and I appreciate you getting into some of those numbers. Does the Department anticipate that these licensees will be able to obtain the annual license before the provisional license are phased out? And if so, what's the timeline?

Thank you for that question. So we can't provide a generalized statement on that because this will vary from jurisdiction to jurisdiction. There are three key components that have to be met for annual licensure.

A complete annual application. All requirements for CEQA or the California Environmental Quality Act have to be met in order for the Department to issue an annual license. And lastly, the operator has to be in compliance with all local rules and regulations in which they're authorized in that jurisdiction. So if they don't meet these three components, the Department cannot issue an annual license. What I can tell you is the one most people struggle with is CEQA.

That's where most of our applicants are struggling or getting held up, which is why it's so critical that we continue to monitor the impacts of the Local Jurisdiction Grant Program.

Thank you. I appreciate that. I know it's a complicated process across the state. So related to CEQA and some challenges that some may face. From what you have seen, have provisional licenses been able to demonstrate the CEQA compliance?

So if the provisional licensee, or if the licensee has not completed CEQA, they have to retain their provisional license. They can't be transitioned into an annual. We have seen licensees who are able to achieve that. Once again, it's going to matter in the jurisdiction that they're in. If that jurisdiction has managed to streamline their process, we find that those licensees tend to move through that process quicker. If they haven't, there's more challenges there.

You identified 17 local jurisdictions. Do you have data as to which of the 17 are moving faster or are more successful than others? And are there measurements of success that can be implemented around the 17 jurisdictions to better assist in the provincial versus annual?

That's a really great question. I will say some of the challenges we've observed are regional. Right. So there are jurisdictions that have made great progress. Humboldt, for example, has been able to streamline their process.

They have a contractor in place that's supporting licensees to move through that process and through the funding that the state has issued to them is supporting licensees to mitigate what the contractors have identified as environmental issues that need to be mitigated. So there are some jurisdictions that are doing this really well, and we're seeing progress, and there are some jurisdictions that are a little slower in their process.

We do have a space where jurisdictions get to meet and work with the Department and share best practices and lessons learned.

I think that would be important. I think if there's any follow-up that we can do on the seven jurisdictions in terms of measurements of success or what could be done differently. I know CEQA is relative to the region, but I think that might be helpful and I'm getting to the goal.

Yeah, I want to just highlight. We do have an annual report on our website that speaks to this, as well as a supplemental report that was provided to the LAO earlier this year.

We're sensitive, and so for about going to websites for information.

And we are happy to provide any information you need.

Thank you. I appreciate that. I don't have any additional comments or questions, so we're going to keep this item open and move on to issue number 18.

Last year, the Legislature made several changes to California's cannabis tax structure, including eliminating the cultivation tax and changing the point of tax collection at retail. Cannabis taxes are an important revenue stream for California as it funds youth programs, environmental initiatives, and childcare slots. The 2022 budget allocated 150 million to backfill any revenues lost and maintain baseline funding for those programs.

Joining us to provide a cannabis tax revenue update is Seth Kerstein from the LAO's office, as well as Colby White and Charlene Manning from the Department of Finance. Let's start with the LAO, who will provide the revenue projections. Let's begin.

Thank you, Madam Chair. Seth Kerstein with the LAO. I think you provided a pretty good amount of background just now. And so, following up on what you covered, maybe just recapping a few of the points you made.

California, for several years, had a statewide cultivation tax and statewide retail excise tax on cannabis. Recent legislation eliminated the cultivation tax effective July 1 of last year. And the same law also set aside 150 million that can be dispersed by the controller at a couple of different points in time coming up in the next couple of fiscal years. So as far as what we've been tracking recently, retail excise tax revenues, which is sort of the one remaining statewide cannabis tax, have been declining for six straight quarters.

The January Governor's Budget estimated that 2022-23 cannabis tax revenues would be 642 million. 23-24 revenues would be 715 million. We published our own forecast a couple of months after that, late February, that incorporated an additional quarter of revenue data that was not very promising. And so our projections at that time, as of about a month ago, were. And still at this point, given that we haven't seen new data, are 484 million for 22-23 and 543 million for 23-24. So happy to answer any questions you have.

Thank you. Department of Finance.

Thank you, Madam Chair. Colby White, Department of Finance. So, Mr. Kerstein noted that our revenue forecast, which was the 642 million in 22-23 and 715,000,000 in 23-24. This forecast was done. We were closing that down around mid-November. And so the Governor's projections accounted for the recent change to the tax law, which eliminated the cultivation tax. So that eliminated about 20% of total tax revenues. And we will be updating our forecast as part of the May revision process.

We'll be completing that in and around late April. And at that time, we will be taking into account the new tax data that Mr. Kerstein referenced, as well as we will also be looking at current pricing data, wholesale pricing data in particular, and also the first two monthly prepayments for the third quarter will be available by that time. And so we'll be looking at all the data that's available, and we will update our projections at that time.

Thank you for that. Just a question. Based on cannabis tax revenue projections, what are the anticipated impacts to Allocation 3 funding entities?

Charlene Manning, Department of Finance. I'm happy to give you an overall summary of how Allocation 3 funding works, and I'll address your question. Proposition 64 specifies the allocation of resources in the Cannabis Tax Fund, which are continuously appropriated. Expenditures are prioritized for regulatory administrative workload necessary to implement, administer, and enforce the Cannabis Act, followed by research and activities related to the legalization of cannabis and the past effects of its criminalization.

Once these priorities have been met, the remaining funds available from the balance of the previous fiscal year are directed to Allocation 3, which focuses on three areas. 60% of Allocation 3 funding is dispersed for the education, prevention, and treatment of youth, substance use disorders, and school retention, which we estimate for 23-24 at 401.8 million. 20% of Allocation 3 is then dispersed for the cleanup, remediation, and enforcement of environmental impacts created by illegal cannabis cultivation.

For 23-24 we estimate 133.9 million, and then the remaining 20% of this funding is dispersed for public safety-related activities, which we also estimate at 133.9 million for 23-24. AB 195 reformed cannabis taxes to simplify the tax structure and remove administrative burdens and costs, which reduces barriers to entry into the legal regulated cannabis market.

AB 195 also requires that Allocation 3 programs are funded at a baseline of 670 million total in 23-24 and 24-25 with 150 million General Fund appropriated to backfill the tax fund to meet the baseline if revenues fall short. To meet this requirement, the budget includes 95.4 million General Fund in 23-24 to backfill the estimated decline in cannabis tax revenues. This results in the funding for Allocation 3 remaining unchanged from amounts distributed in 21-22 and 22-23.

I'll note that the remainder of the 150 million General Fund to backfill the Cannabis Tax Fund, which comes out to be 54.6 million, is available to backfill in 24-25. And I would note that this amount is based on estimates at the Governor's Budget and may be adjusted in the May revision as we update our revenue projections.

Thank you for that. LAO, would you care to respond?

Yes. So, under our forecast. So our understanding is that the 150 million, if that particular amount were to be the actual cannabis tax revenues, the 150 million would not be sufficient in that case to keep funding at the baseline levels, and then at that point, the impacts would vary across the Allocation 3 entities, depending on a variety of circumstances.

The one that I'm most familiar, my colleagues in various program areas are more familiar with the particulars, but the one that has caught my attention a bit is childcare, which receives the largest portion of the Allocation 3 funding. And my understanding is that actually there is quite a bit of funding that childcare slots have received from Allocation 3 already that has not yet been expended.

And so even if the allocation from the Cannabis Tax Fund were to decline below baseline, our understanding is in the near term, there wouldn't be a whole lot of downstream impact in terms of the amount of funding that would be available for slots in 23-24. But that set of circumstances is specific to childcare. Other programs that receive Allocation 3 funding might not be quite so fortunate in that scenario.

Thank you, appreciate that. No additional comments or questions. We're going to leave this item open and move on to issue 19. Update on cannabis grant programs. For our next panel, we will receive an overview of the various cannabis grant programs administered by the Department of Cannabis Control and Go-Biz. We will review the recently announced local Jurisdiction Retail Access Grant Program, which aims to provide local governments with resources to implement cannabis retailer licensing programs.

We will also review the Local Jurisdiction Assistant Grant Program, which aims to assist local governments with the highest amount of provisional licenses to transition to full annual licenses. And finally, we will review the Cannabis Equity Grant Program, which provides funding to local jurisdictions in California that have been disproportionately impacted by cannabis prohibition and the war on drugs.

Our panelists includes William Koch, the Deputy Director of the Community and Local Equity Grants Unit at Go-Biz, Rasha Salama and Angela Hill at the DCC, Andrew Hoang, and Charlene Manning with the Department of Finance and Jared Sippel from the LAO. Let's begin. Let's have DCC start with their grant programs, followed by Go-Biz.

Thank you, Madam Chair. I will start while providing a quick update on the implementation of the cannabis local.

When you start, can you please reintroduce yourself, your name, and your agency, please?

Yes. Good evening, Madam Chair. Rasha Salama, Department of Cannabis Control. I will provide a quick update starting with the Local Jurisdiction Retail Access Grant. This grant was created last year through the 2022 Budget Act that dedicated $20 million in funding for local jurisdictions that do not currently have a local cannabis retail licensing program. As of now, nearly two-thirds of California cities and counties do not allow legal cannabis retailers limiting consumer access to legal, regulated tested products.

As such, this grant program prioritizes funding to jurisdictions that propose to assist cannabis equity businesses or plan to permit cannabis retailers through existing business permitting processes to address gaps in consumer access. To inform the development of the grant requirements and guidelines, the Department consulted with local government associations, solicited input from the Cannabis Advisory Committee, and directly surveyed eligible local governments.

Priority will be given to jurisdictions in which consumption of cannabis and cannabis products exceeds that county's proportional share of legal cannabis retailers, prioritizes equity applicants and jurisdictions who will license retail businesses through existing non-cannabis license processes, and jurisdictions that categorically exempt retail businesses under the California Environmental Protection Act. On March 10, the Department opened the application period, which will close on April 28,, 2023. Grant funds must be expended by June 302026.

The Department will share with the Committee and the Legislature which local jurisdictions were selected and continue to keep you appraised of progress made via the statutorily mandated annual report. Next, I'll speak to the Local Jurisdiction Assistance Grant Program. This grant was enacted during the 21-22 budget cycle and provided $100 million in one-time funding to aid local jurisdictions in more swiftly transitioning provisional licenses into annual licenses.

In January 2022, the Department awarded these 17 cities and counties with the highest number of provisional licenses and amounts ranging from 400,000 to 22 million. To date, this funding has been used to, among many things, help streamline and more effectively administer licensing processes, contracting or hiring CEQA consultants, and help finance licensees for CEQA mitigation requirements.

It has been a little over a year since the funds have been awarded, and we have observed while many jurisdictions have expended grant funds with great success, other jurisdictions have been slower to use this money to move their provisional license pipeline. The Department continues to work closely with grantees to align deliverables with the objectives of the grant. To support steady progress in the transition of provisional licenses. Grant funds must be expended by March 31, 2025.

The Department will keep the Legislature appraised, a progress made via the statutory mandated annual report, and I'm happy to address any questions you have.

Let's hear from the Department of Finance, followed by LAO.

Andrew Hoang, Department of Finance. No additional comments at this time.

Jared Sippel with the LAO. No additional comments. Thank you.

Thank you. Let's have GO-Biz present, please.

Good evening, Madam Chair. My name is Will Koch, and I'm a Deputy Director with the Governor's Office of Business and Economic Development, also known as GO-Biz. My team administers the Cannabis Equity Grants Program for local jurisdictions. I'll provide a brief overview of the program and then be happy to answer any questions that you may have.

The program was statutorily created by the California Cannabis Equity Act to provide funding to local jurisdictions to develop and operate cannabis equity programs that focus on inclusion and support of individuals in California's cannabis industry who are linked to populations or neighborhoods negatively or disproportionately impacted by cannabis criminalization. GO-Biz provides grants, two types of grants, to jurisdictions under this program. The first type, which we commonly refer to as type one grants, are for jurisdictions to conduct a cannabis equity assessment or develop a cannabis equity program.

Each jurisdiction may have their own unique history and circumstances with regard to cannabis prohibition, and the assessment includes things such as historical rates of cannabis arrest and or convictions, impacts of prior cannabis policies that impacted communities and populations within the jurisdiction. And then the idea is that the assessments are then used to inform the jurisdiction's creation of their equity program.

The other type of funding, we refer to type as type two grants, which we provide funds to jurisdictions to provide direct support to their equity applicants and equity licensees through two primary ways. The first of which is providing loans and grants for the equity applicants and equity licensees, startup and ongoing costs for things like rent leases, local and state application licensing, regulatory compliance, testing of cannabis, furniture fixture and other similar costs, and then also to provide direct technical assistance, which refers to support to help cannabis equity applicants and licensees acquire the knowledge and or skills necessary in order to gain entry to and successfully operate in the state's regulated cannabis marketplace.

Direct technical assistance includes things like one on one consulting and training, small business support services, training and education regarding the state's cannabis licensing and regulatory requirements, and so on and so forth. We typically accept grant applications between October and December each year and announce grant awards, generally in late February or March of each year. We have a detailed scoring criteria and funding formula in our grant solicitation that's issued each year, in which we then use to make our funding decisions and award amount determinations. Thank you, and I'd be happy to answer any questions that you may have.

Any comments from Department of Finance or LAO?

Andrew Hoang, Department of Finance. No additional comments at this time.

And Jared Sippel with the LAO. No additional comments. Thank you.

Thank you. One question from me. How was funding primarily used by cities for the Local Jurisdiction Assistance Grant Program? Has there been demonstrated improvements towards meeting CEQA requirements?

Thank you, Madam Chair. There are various utilities for how funds can be used or eligible uses for the grant funds. A key one that we see is for CEQA. So either local jurisdictions will hire a contractor to create their environmental evaluation document for them or utilize funds to resource licensees so that they can mitigate the findings that come out of the environmental evaluation.

They're also frequently used to hire more staff so that they can process applications quicker or provide technical assistance to licensees, especially our equity licensees, to navigate them through the local process and the state process. So those are some of the frequent uses that we've seen through the grant applications.

The second part of the question was the CEQA requirements. Have there been demonstrated improvements towards meeting the CEQA requirements?

Yes. So we have seen, for jurisdictions that have, especially those who have either identified a CEQA pathway in their planning department for these commercial cannabis licensees, they tend to process them quicker through their local permitting process, or they will hire a contractor that will do that. So we've seen progress with those. Where we've seen areas or some jurisdictions that are taking longer is if they started that process later.

And so those licensees tend to be staying in the queue, in the provisional license queue, a little bit longer. And so we're utilizing the grant and meeting with these jurisdictions to support them in moving their pipelines forward so that those licensees can meet the statutory deadlines.

I'll just share that I have an issue in my district, unincorporated East Los Angeles, who has seen very different policies on cannabis than the City of Los Angeles. East LA, like many unincorporated areas, don't have their own local government, so it's reliant on county and state, and we're seeing a lot of unlicensed pop up cannabis shops that don't have or put forward the required documentation.

So even for those that are trying to follow process, they're competing against unlicensed pop up cannabis shops that you have an empty storefront and someone can say, oh, I'm going to make it into x kind of store, but in fact, it ends up being an unlicensed cannabis shop. And it's something that we are hearing a lot from our communities. I only share that to say, like, I recognize some of the challenges, especially those that are trying to follow process and follow CEQA.

And follow all of these. While at the same time, community is seeing it through a different approach. Right. Like a pop up, unlicensed shop right across the street from a junior high school. Not okay.

Yeah.

So those are, I believe, some challenges that you may also see from vendors.

Absolutely. And also, I think what you said is really important because it shows the complexity of the process becomes a factor where people aren't excited about coming into the legal space. So a big conversation we're hoping to have is, how do we begin to streamline this process? How do we make it easier? What are our lessons learned so that we can make the pathway to licensure not so burdensome at both the state and the local level. I think there's an opportunity there.

Every jurisdiction is different.

We're going to leave this item open. Thank you very much. We're going to move on to issue number 20. Okay. Cannabis enforcement and continuation of implementation of the Department of Cannabis Control. For this panel, we will receive an update on enforcement activities at the Department. Oh, this is my question around East LA. And also review a budget change proposal to continue the implementation of the Department of Cannabis Control. For this panel, we are joined by Ms. Rasha Salama and Sean O’Connor from the Department of Cannabis Control, as well as the Department of Finance and the LAO. Let's begin.

Yeah.

All right. Good evening, Madam Chair. My name is Rasha Salama, and I'm here representing the Department of Cannabis Control. Joining me today is Sean O'Connor, Chief Information Officer for the Department. We have three budget proposals in front of you this evening. Our first proposal is a result of the passage of AB 1885 by Assembly Member Kalra. Currently, the Medicinal and Adult Use Cannabis Regulation and Safety Act only addresses cannabis products intended for human consumption. AB 1885 allows pet products to be manufactured and sold within the commercial cannabis market.

It requires the Department to establish species specific product standards for pet products to make certain they are free of substances that are toxic and harmful to animals. To create these standards and these regulations by July 1, 2025, the Department is requesting $155,000 in fiscal year 23-24 and 147 ongoing for one AGPA. I apologize, one associate governmental program analyst. Our second proposal is a result of the passage of SB 1326 by Senator Caballero.

Existing state law prohibits the export of cannabis goods to other states, and this bill created a limited exception to California's existing state law prohibition against exporting cannabis to other states and allows the Governor to enter into an agreement with one or more states authorizing interstate commercial cannabis activity. SB 1326 requires significant preparatory legal work before the Department can begin to work on supporting potential state to state trade agreements.

So the Department is requesting 264,000 in fiscal year 23-24 and 256,000 ongoing for one attorney for position. Lastly, our third and final proposal before you today is for the continued operational implementation of the Department. The Department was established in July 2021 and to create stability and continuity of services to our licensees and stakeholders, in the first year of implementation, we entered into contracts with the Department of Public Health, the Department of Consumer Affairs, and the Department of Food and Agriculture to retain important services such as information technology, facilities, and human resources. Funding for these interagency agreements is authorized through fiscal year 23-24.

At the conclusion of the first year, the Department conducted a baseline assessment of its information technology, operational, programmatic, and administrative needs to identify gaps in necessary resources so that we could independently run and administer the functions of the Department's Information Technology Division post consolidation. We're requesting 11 information technology positions to transition the workload that was conducted by the legacy departments.

These positions will establish a minimum level of technology infrastructure for the Department to administer its programs and have the necessary it security to meet the Department's regulatory mandates. Lastly, in this proposal, we also request 1.6 million in fiscal year 23-24 for one time costs associated with the lease and tenant improvements for the Central California District Field Office. This district office for our law enforcement team will support and enhance the overall efforts and efficacy of the Department in addressing unlicensed activity in the Central California region.

As a Department, we have worked diligently to increase our enforcement efforts to tackle the illegal market, and our success relies on our ability to maintain an enforcement presence throughout the state. Most critically, the establishment of this office will reduce travel costs when conducting field operations and provide the necessary space for storing seized products and strengthen our enforcement partnerships. In this proposal, we also include provisional language.

As a young Department that is still assessing its overall implementation needs while aggressively working towards meeting its mandate and mission, this provisional language will allow us to submit a letter to the Joint Legislative Budget Committee midyear outlining the resource needs for the Department to continue its implementation efforts. This conservative approach allows us to continue our streamlining efforts while affording us a path to request critical resources such as additional enforcement, compliance, or licensing resources. Thank you for your time and happy to address any questions.

Thank you. We'll go with the Department of Finance, followed by the LAO.

Andrew Hoang, Department of Finance. I don't have any comments for the leg proposals that were shared but I do have comments for the continuation of implementation of the Department of Cannabis Control and to respond to some of the comments that the LAO will make on that proposal. The Department of Cannabis Control is a relatively new department that was created in fiscal year 2021 and has made a lot of progress since.

The Department is continuing its assessment of operational, programmatic, and administrative needs to identify opportunities to streamline, centralize functions, and address resource gaps to more effectively and strategically administer the functions of the Department post consolidation. The Department anticipates there will be gaps in staffing during the next fiscal year, and the provisional language will allow the Department to address those gaps with the midyear fiscal augmentation with notification to the Joint Legislative Budget Committee.

The provisional language also requires that the Department consider the amount of funding available within the Cannabis Control Fund when making a request for augmentation. I'd also like to note that the Joint Legislative Budget Committee will have oversight and the opportunity to raise any questions they have prior to approving the request. Yep. Thank you.

Thank you. LAO.

Thank you, Madam Chair. Jared Sippel with the LAO. We just have a few comments on the specific to the provisional language as part of the continuation BCP. For that particular language, we just recommend that the Department has not provided any additional information in terms of how much funding it may need to access as part of that provisional language or how such funding would be used.

So we recommended to the Legislature that you require the Department to report at this budget hearing or subsequent budget hearings on how that funding, on how much they may need to access and why they would need to access that funding. And to the extent that they have identified specific needs for funding, we would recommend the Legislature direct the Department to submit those proposals as part of the traditional budget process. We acknowledge that the provisional language does include notification to the JLBC. However, the notification process does not provide as much legislative oversight as the traditional process. Thank you.

Thank you. I appreciate that. That goes to my question. Are there circumstances where the need for urgent resources would necessitate circumventing the regular budget process?

Andrew Hoang, Department of Finance. As noted earlier, the Department is relatively new and has made progress towards staffing the Department. The Department expects there will be staffing shortages in areas that will impact the Department's ability to carry out the enhanced implementation of the Medicinal and Adult Use Cannabis Regulation and Safety Act, and for that reason, there are situations that circumvent the regular budget process.

Thank you for that. I don't have any additional comments or questions at this time. We'll leave the item open and move on to our next issue, issue number 21. Thank you very much. All right. For this issue, we are reviewing the state's massive investment in broadband. For this panel, we are joined by Rob Osborn with the California Public Utilities Commission, Jonathan Lakritz, also with the CPUC, Mark Monroe, the California Department of Technology, and the Department of Finance and the LAO. Let's begin. And if you can, please introduce yourselves when you begin.

Can I start? I can go ahead and start. All right. I'm Mark Monroe. I am the deputy director for the Middle Mile Broadband Initiative at the California Department of Technology. And I was going to provide just a brief update on the status of the Middle Mile Project. As I think most people are aware, the legislature has provided, over several years, $3.8 billion to develop this Middle Mile.

The concept largely was to construct as much as possible along the state highway system and kind of use the efficiencies of Caltrans to do so. But because most of the funding is federal funding, it has to be encumbered by 2024 and has to be liquidated by December of 2026. So those are the targets that we are--the deadlines that we're targeting.

In terms of what we've done so far, we've worked with the Public Utilities Commission and our third party administrator to develop a 10,000-mile map that targets the unserved and underserved communities that were identified by the Public Utilities Commission. We've got Caltrans started doing the pre-construction work like permitting and the design work on that 10,000 miles. We've gone out and purchased 3,000 miles or more of fiber to get ahead of any sort of supply chain constraints.

We have developed, for state permitting, worked with Caltrans and the permitting agencies to develop programmatic permitting processes and interagency agreements to fund positions to further accelerate that permitting work from an average of 17 months down to an average of, I think 11 months is what Caltrans is estimating. We have worked with our federal partners, roughly 17% of the network would cross federal lands.

And so we've worked with our federal partners to develop similar interagency agreements that we're working on that would just clarify NEPA roles and, again, accelerate that process. We started construction on one of our 'dig smart' projects. It's a transportation project. We're adding fiber to it--did that last October. And we've gone out to bid on construction contracts for standalone construction, joint build construction and indefeasible rights of use, or IRUs. It's a form of capitalized leases.

And so, just recently Caltrans signed contracts for construction of up to 5,200 miles and then CDT recently signed a joint build contract for construction of 306 miles. And so, in looking forward here, we have the next quarterly Middle Mile Advisory Committee meeting is April 21. That's a great opportunity for the public and for members to get updates on the project. And we're currently evaluating bids for leases and joint builds and expect to roll out, in the months to come, an optimized network architecture. And similarly, Caltrans plans to start rolling out construction as early as this summer on some segments. So we do plan to meet the federal deadlines, the 2024 and 2026 deadlines. And with that, I'm happy to answer any questions you might have.

Thank you. We're going to go with the Department of Finance, followed by LAO.

Yeah, I have nothing to add. Thank you. I would just ask, maybe we want to complete the presentations if the PUC-

Is your mic on? I can barely hear you.

Sorry. Department of Finance, Eamon Nalband, nothing to add, but I would just request potentially PUC possibly present before we go to commenting questions.

You're not done with your presentation?

I'm sorry. So I'm with the California Department of Technology. We do the Middle Mile Project, and my colleague here, Rob Osborn, is with the Public Utilities Commission and they handle that last mile aspect. So he's also going to be prepared to give a presentation.

Thank you. Please continue. And if you can, I'm actually having a hard time hearing a bit because of the echo. If you can just speak directly into the mic, please.

Thank you. Good evening, Madam Chair. I'm Robert Osborn, director of the communications division at the Public Utilities Commission. With me is Jonathan Lacretz, who's the program manager of the Broadband Regional Initiatives branch. Given the full agenda, I'm going to provide a few key updates on the CPUC's last mile broadband programs, and after that we'll be happy to answer any questions.

The CPUC is actively implementing the new broadband grant funding programs, as well as updating existing programs that were enacted with Senate Bill 156, Assembly Bill 14 and Senate Bill 4. These include the Local Agency Technical Assistance Program, the Loan Loss Reserve Grant Program--Loan Loss Reserve Program, excuse me--the Federal Funding Account, and the California Advanced Services Fund. First, I want to provide an update on the Federal Funding Account, broadband mapping.

So the Federal Funding Account program is budgeted for $2 billion for last mile broadband projects for unserved communities as defined by not having access to speeds of at least 25 megabits per second down and three megabits per second up, using reliable wireline technology. Through the Broadband for All proceeding, the CPUC adopted program rules for the Federal Funding Account and has been hiring staff, developing a grant application interface system, an eligibility map and federal and state funding report formats.

The CPUC published a first version of the eligibility map, which showed location and data about potential last mile broadband projects. After publishing a first version of the map, the CPUC began soliciting feedback and input from stakeholders, and in response to this feedback and input, the CPUC is updating and redoing the map. Specifically, we heard from stakeholders that the unserved locations were not appearing correctly on the map.

We also heard that the equity measures needed to be more deeply incorporated into the process and that applicants needed to be able to draw their own projects on the map and that the CPC should provide more data to enable applicants to evaluate areas. So in response, we are now going to be removing the priority areas from the map.

We are updating the underlying data to better reflect the number of unserved locations, and we are adding more socioeconomic indicators to the map to capture measures of poverty, unemployment, educational attainment, linguistic isolation and percent of income spent on housing, as well as criteria set by CalEPA and median household income.

We plan to have the version two of the map available shortly, followed by the applicant tool at the end of April, and we will launch the grant application portal to begin training applicants on how to submit an application for a window opening in June. Something that we did not communicate clearly when we released version one of the map was that the scoring of applications works in the context of the county applications that are stipulated in Senate Bill 156.

So Senate Bill 156 divided the $2 billion evenly among--equally among urban and rural counties, with $5 million allocated to each county and the remainder allocated based on the county's proportionate share of unserved households. So that's specified now in the decision of how much each county is allocated out of that 2 billion. So all unserved locations that appear on the map are deemed eligible for the program.

If the funding requests for a specific county exceed the amount that's in the allocation, then the commission's scoring rubric would prioritize projects based on the various county proposals that come forward. And now I'd like to provide just a quick update on the Broadband Equity Access and Deployment program, otherwise known as the BEAD program. This is a last mile grant program created by the Bipartisan Infrastructure Investment and Jobs Act and administered by the National Telecommunications and Information Administration.

In December last year, the CPUC was awarded 4.9 million in initial planning funds to do planning activities leading up to a five-year action plan. The CPUC is coordinating with the Department of Technology in planning a series of outreach activities and aligning the digital equity planning that's under the CDT's rubric, as well as the BEAD, which is under the PUC's rubric. And so, last month we opened an order instituting rulemaking.

So rulemaking for creating the program rules for the BEAD program to develop the grant funding eligibility criteria and compliance with the various BEAD rules that are set in the federal notice of funding opportunity. The NTIA plans to make their BEAD allocations to each state in June this year, and at that time, we'll know how much money will be available for the last mile grant program. And then finally, on the ARPA liquidation question, we are still on track to make the encumbrance and liquidation deadlines that are established in the relevant budget acts, and we're happy to follow up with any questions that you have. Thank you.

Thank you for that. Now we'll go to the Department of Finance, followed by LAO.

Thank you. Department of Finance Eamon Nalband. I'll just respond to one comment in the LAO's-

Feel free to pull the microphone closer to you.

I'll just respond to one comment from the LAO's recommendations that you'll shortly hear, in that the administration generally prioritizes the drawdown of federal fund and making sure that we're maximizing the use of those federal funds. As a matter of practical implementation, it would be likely that departments--or in actual practice, departments would spend those monies which have the earliest encumbrance dates first, which would be the ARPA funds appropriate in the 2021 Budget Act.

Brian Metzger, LAO. As noted, we recommend that the legislature direct the administration to prioritize the encumbrance and expenditure of the American Rescue Plan fiscal relief funds. And that is, as noted in the agenda, $2.91 billion of the $6.55 billion total for broadband infrastructure funding. Given the federal deadlines that are in the American Rescue Plan of December 31, 2024, for encumbrance and December 31, 2026, for expenditure.

We would also recommend that the legislature request more frequent updates on the encumbrance and expenditure of those funds to make sure that we are on track to actually encumber and expenditure those funds on time. And also, as noted in the agenda, the totals for the general fund and the federal funding have changed since the legislature first adopted the spending plan for broadband infrastructure in 2021.

In 2021, it was $4.3 billion in federal funds, now it's $2.91 billion, and in 2021 it was $1.7 billion general Fund and now it's up to $3.64 billion general fund. And so, because the new spending plan is majority general fund, it's incumbent on the legislature to make sure that its priorities, that it's set in SB 156 are realized using the state's resources.

We know there's additional federal funding from the Infrastructure Investment and Jobs Act that's forthcoming, and so it'll be important to make sure those funds supplement what has already been approved through the spending plan. But again, given the current and projected budget problems that we're facing, it'll be important that the legislature look at its current goals and prioritize available general fund to accomplish these projects and programs.

Thank you for that. I think what we all saw and learned from the past two and a half years of the pandemic, there's one photo that comes to mind that was widely shared. That was two young students sitting in the parking lot of a fast food restaurant as a way for them to access Internet, for them to be able to do their homework.

The inequalities and inequities faced by low-income communities or communities of color in particular, across the state, whether it's urban--I represent a very urban area that still has challenges in accessing broadband to rural areas. You can be driving down anywhere in the Central Valley and if you haven't put your Google Maps on, you're going to easily get lost. And I've been one of those folks that have gotten lost because of a lack of connectivity.

So I think we've learned a lot in the last two and a half years. Broadband and broadband for all was priority to the legislature, and it's incumbent upon us to figure out how do we prioritize the needs and desires of the legislature with the current funding that we have. I want to thank the assemblywoman of Encinitas, who is the chair of communications and conveyance for the Assembly, for being so involved in this particular issue in terms of implementation. And so I do have some questions for you. How well do the PUC and the Department of Technology coordinate our broadband efforts as a state?

I can start, sure. So any middle mile infrastructure that's funded by the California Advanced Services Fund program must be made available on equal and reasonable terms. So it has to be open access. There are requirements for CSF applicants that are seeking funding for Middle Mile to consult with the Department of Technology before they can implement it. So there's a requirement that there's consultation in place before the project can go forward. On top of that, the federal funding account scoring also encourages applicants to connect to the statewide middle mile. And as in the case of the CSF program, there's this requirement to consult with CDT prior to construction.

Yes, and I'll just add to that. I'd mentioned that the state's 10,000-mile map is really developed on that--targeting the unserved and underserved communities that were identified by the Public Utilities Commission as they went through their public process in 2021. So I think there's a very strong linkage between the two to make sure that they do tie up.

One of the biggest critiques that the PUC received following the initial maps and locations were there--actually, communities like Malibu were considered at first rate to not having access to broadband and were prioritized over other communities that clearly have more need than Malibu does. So those maps and that input a lot of us saw as inaccurate. You've mentioned some of the steps that you've taken to address those inequities and those potentially initially wrong maps, for lack of a better word. But I still don't know who's in charge. So out of both departments, whether it's the PUC or the Department of Technology, who is the lead in setting the state's overall broadband strategy? Who takes responsibility?

Within the administration, I would say the California Department of Technology has had that broad policy question or had that broad policy perspective when it comes to the way that we're approaching this solution. It's really been broken into middle mile implementation and last mile implementation. So think of the middle mile. I always think of it as the highway system that connects all of the local areas that are unserved and underserved in terms of implementation. That is what Department of Technology is overseeing.

The communities that we're targeting there, though, were developed specifically--that list and identifying them was based on Public Utility Commission's analysis. So the Public Utilities Commission has that long standing relationship with telecommunications companies and really has been the best source for identifying where the needs are. And then when it comes to Middle Mile, we're targeting those needs with kind of creating that backbone that connects all of them. And then when it comes to funding those last mile projects and identifying, quantifying the need as well as identifying how to allocate those last mile funding, that really falls into the Public Utilities Commission's area.

Madam Chair, you're correct about the map, about the previous version not being accurate in identifying the unserved locations. And as I was saying earlier, we have updated the data sets to be more accurate. We were using an old data set. We've updated that. We've also added a number of socioeconomic indicators so that counties are able to look at the map and figure out where the most underserved communities are, the most underrepresented communities are, the most affected by poverty, and then target those for the higher priority for their applications.

There's been an ongoing effort to try to--so basically, what I'm hearing you say is that the PUC is responsible in figuring out the locations. And the Department of Technology is responsible in the implementation of next steps of what that looks like for that community to be able to receive access. Is that accurate?

I would separate it because when we talk about the Public Utilities Commission--let's go back to the roads analogy. So CDT is developing this middle mile, this backbone. That's kind of your highway system, right? But you take a highway to get to your house, that doesn't mean that you can get to your house. You still need those local roads. That's what actually you're going to use to get there. So we're building that highway system, but the Public Utilities Commission is funding those last mile projects or kind of the local roads for the Internet. They're the ones who actually provide that connectivity. Does that kind of help?

Yes and no. I'm talking in terms of the initial maps that came out that we have found to be problematic. They did not include underserved communities that should have been included. That was a direction by the PUC. That's something that Department in particular did. The Department of Technology is then responsible for the implementation of what the PUC puts together. Is that right? No?

Yeah. So when you think about the implementation, the PUC will be providing grants to broadband providers or counties or local agencies to build that last mile, those local roads. Sort of the road as a metaphor for broadband connectivity. And, as Mark was saying, the CDT function is looking more at the highway part of that. So connecting back to the Internet from those local roads.

Thank you for that. It helps, I think, for me and for others to kind of think about process, but it also still doesn't answer my question as to who's responsible. Like, it seems like there's the roads and the highways, right? But each of them have a responsibility to provide broadband to the communities that has been assessed. So who is responsible if those communities don't receive the broadband that they should receive?

If there is no last mile service, right. Then--I should have stepped back. Largely this has been a private industry until now. And so really, private industry has built some level of backbone, they've built some level of last mile. But when it comes to trying to meet the unmet needs, the legislature has broken it really into those two pieces. Right? So if I can go to the transportation analogy again--Caltrans oversees the highway system. They don't oversee local roads. Right? And so the local roads are overseen by the locals.

So when it comes to these last mile providers, they provide that last mile service that actually connects to homes. And just now, rather than having to build their own duplicate middle mile to get back to the core, they can just use what the state is building and that's going to substantially reduce their cost of investment. And then when it comes to actually funding those last mile projects, some will be funded, continue to be funded by industry, because now they can afford it, because they'll have a last mile--or a middle mile to connect to. But when it comes to using the state funding or the federal funding for last mile projects, those are allocated by the Public Utilities Commission.

Thank you. I think I'm getting a bigger picture in terms of--I still ask the question and I don't think it's been answered, like: who is responsible? So if we were to use your transportation analogy and say we do the highway version, right? What happens when the highway version actually doesn't get to community?

I'm sorry, what happens when the highway version-

You're saying Caltrans is in control of the highways, the freeways, right?

Correct.

And you're putting access on the freeway. It doesn't connect to the smaller roads leading to towns. It's too far, whatever it looks like. Right? So you put the line there, you put the access there, but it actually doesn't get to anyone.

Well, yeah. Right. So when you fund those last mile projects, part of the funding has to be used for that because CDT only has the authority to build along the state highway system. Right? So we're going to create that backbone. But that's absolutely correct. If you have a community that's 25 miles off of the state highways, then as they pursue funding, either through private investment or through applying for the public CASF or other public utilities funds, they would have to include that as part of what their need is to be able to build back to the state system.

What is the role of the PUC in helping that community that's 25 miles away from the highway get access to broadband?

Yes. Thank you for that question, Madame Chair. I think the confusion is: who's responsible? There's not a single responsible party--that it's shared responsibility. And in fact, with CDT being in charge of the middle mile and building that out with Caltrans, the PUC provides funding to last mile providers. Those can be private companies, as has been done in the past. They could also be local agencies or local governments. So there's a third partner in there to connect everybody that's necessary, that the PUC is not in control of it.

We're really putting grant money out and asking applicants to apply. So with that third piece, that missing piece, which is either local agency or a company or some combination like a public private partnership, that then completes the whole project. So you're able to actually connect to people's homes, then connect to the middle mile.

So what happens in a community in a very rural area across California that may not have a full time city council, a full time mayor, they're part of contract cities or legal cities, and they're very small and they don't have access? What is the State of California doing to reach them? And I guess in many ways, assist for them to be able to apply for the grant and get connected in the larger scale?

Thank you for that question, Madam Chair. That's an excellent question. And that's a problem that we've really been, in a large way, trying to solve through the local agency technical assistance program. So we've received grant applications. We have $50 million to award grants to local agencies. It could be counties, it could be municipalities. And that puts them in a position where they can actually hire experts to do the broadband planning, to do the initial work before the construction can start.

And so that's particularly applicable for places like you just mentioned, where they don't have people who can spend full time planning out a broadband project or go find a consultant, it actually gives them the money to go hire those people to do the work for them.

Thank you for that. I'm sorry, did you want to add something?

Your caseworker team?

We could talk about that, too. Yeah.

Did you want to add something?

I was just suggesting to the Director to speak about the PUC's strong caseworker team as well.

So this is something new that we started with. Senate Bill 156 is having locally-assigned caseworkers to regions to actually work with local officials and broadband providers to really bridge the gap. So we provide the technical expertise on how to file an application to follow up with them to help them with the mapping for their local area. Where are the unserved households? What's the issue? Is it a matter of connectivity because people can't afford it or is it they actually don't have access, physical access to the house?

Thank you. I think we've learned a lot in this just conversation in terms of how challenging and difficult it is to get to those communities that are not as close to the highway or don't have the local representation to be able to apply for the grant or be more in touch with what the PUC is doing to go online.

I mean, we're talking about broadband access, and they might not actually have the access to even go online, and I think that's something that we learned in the last two and a half years of pandemic. One final question: does the Administration plan to give the Legislature any chance to give input on the use of the projected one billion in new federal funds for broadband?

Yeah. So Amin Albin, Department of Finance.

Could you speak closer to the mic, please?

Amin Albin, Department of Finance. The request for the use of those federal funds will come to the Legislature ultimately for the required increase in federal authority needed to expend the funds. The process for that is still being determined, however, would likely follow one of the control sections available within the budget, such as Control Section 8.75 or Section 28, both which require JLBC notification.

Thank you for that. Any final comment or response from the LAO? Thank you. We're going to keep this item open. Thank you, gentlemen, and we are moving on to, I think, our last item of the evening. Thank you again. Vehicle License Fee Backfill. For this issue, we will hear from the Department of Finance on the proposal to not backfill counties that do not have the local property taxes to cover the lost revenues from the VLF decrease. Let's begin.

Good evening, Madam Chair. Chris Hill to Department of Finance. I have a presentation that will take about five to ten minutes to go through, some prepared remarks, if that's okay. Okay.

We like the five minute version a bit better.

I'll go as quick as I can. To start my presentation, I'd like to provide a brief overview of the Educational Revenue Augmentation Fund and the 2003 Vehicle License Fee Reduction. Each county has an Educational Revenue Augmentation Fund or an ERAF. They were created by statutes in 1991 and 1992. Each year, according to statutory formulas, property tax revenues are shifted from cities, counties, and special districts and are placed in the ERAF.

The funds in the ERAF are then shifted to K-14 schools, which generally results in Proposition 98 General Fund savings for the state. For our discussion, there are two types of K-14 schools: basic aid and nonbasic aid schools. Basic aid schools are filled to their per-pupil minimum funding level only with their property tax revenue. Basic aid schools receive only a very minimal amount of Proposition 98 General Fund from the state.