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

The Senate Budget Subcommitee number five on corrections, public safety, judiciary, labor and transportation will come to order. Good afternoon or good evening, almost. The Senate continues to welcome the public in person and via the teleconference service. For individuals wishing to provide public comment, today's participant number is 877-226-8163 and the access code is 694-8930. We are holding our committee hearings here in the O Street building. I ask all members of the Subcommitee be present in room 2200 so we can establish our quorum and begin our hearing.

Today is the first subcommitee hearing on labor and workforce development issues for 2023. We will discuss governor's, the Governor's Budget proposals as well as hold informational and oversight panels for a variety of issues. We have representatives from the Employment Development Department, the Department of Industrial Relations, Workforce Development Board, Department of Human Resources, Department of Finance and Legislative Analyst Office, as well as guest speakers from the community as our panelists for today.

Before we hear the first presentation on the issues, I want to note that we will not hear issue three c today and instead hold that panel in our May 4 Subcommitee number five hearing. And wait. We'll wait for members to appear. Yeah. Okay. Now let's establish quorum. Will the consult. Mr. Consultant, please call the role.

[Roll Call] We have a quorum.

Thank you. We now have a quorum. And let's begin with issue number one. We have, issue number one is the governor's proposed reductions and shifts. Part one. Mr. Toppin, Department of Finance. Mr. I'm sorry. Andrew March, okay, from Department of Finance, and Chas Alamo Legislative Analyst Office. And we will have available for questions in detail. Javier Romero, Employment Development Department. Adele Burns, Department of Industrial Relations, Division of Apprenticeship standards via Zoom and Jay Sturges, labor and Workforce Development Agency. So go ahead, I think. Yes, Mr. Toppin. Okay, go ahead.

Thank you, Senator. So the issue before us is the two reductions to the EDD's Emergency Medical Technician training program and the DIR Apprenticeship Innovation Fund. The budget included 60 million General Fund over three years for EDD to conduct emergency medical technician training programs. The Governor's Budget proposes to reduce that by 10 million in 23-24 and 24-25 for the women in construction or not women in construction. For the Apprenticeship Innovation Fund, the budget act committed 175,000,000 over three years, and the solutions proposed by the Governor's Budget would reduce that by 20 million in the budget year and the budget year plus one. Both of these are in the quote unquote trigger, which would restore the funding for these programs if revenues were to return to a sufficient level.

Okay, Mr. March?

Andrew March, Department of Finance. Nothing further to add.

Thank you. And Mr. Alamo.

Chas Alamo at the Legislative Analyst Office. Informational item. Happy to answer questions, but no formal comment to make. Thank you.

Okay, great. I have a few questions for the programs described in this item. Has funding in 22-23 been appropriated, and if so, how much? And will the 22-23 funding be dispersed by June of 23?

For the emergency medical technician training, the funds were appropriated in 22-23 but are not expected to be dispersed until early 23-24. And for apprenticeship innovation funding, applications for the funding are projected to open in March and hopefully close in late April. And then DA expects to disperse the funding in late current year and very early in the next year. I also have representatives from the program here available to answer more specific questions. If there's anything that you'd like to add.

I have a few more questions and then you could let me know who would be best. So today, what steps have the departments taken to implement the agreements? And what data, if any, have the departments collected about them? And do you have participation data for these initiatives?

Yeah. So for the first one, the emergency medical technician training, ED has begun the RFP process and announced the availability of grant funds and got applications in January 17, around January 17 of 2023, and is currently underway vetting and scoring those proposals. Because the dollars had not been dispersed yet, there's no available data. And for the apprenticeship innovation funding, DS has been working on draft guidance and as well as going through the RFP and solicitation process. And again, because the funding has not been dispersed yet, we're not aware of any data that has been collected.

It's not enough to know what challenges there might be yet. Is that too soon to know if there's any particular challenges that they might encounter?

The departments haven't encountered any challenges that they've flagged for us, but certainly underway, and we'll flag them as they come arise.

And the proposed triggers by the administration, will that impact the program's planned activities going forward? And how would that be?

So I'll defer to departments on the precise impacts of sort of how the reductions are going to impact their programs. But inevitably, by reducing the amount of dollars available in future years, we'll reduce the number of people served to some extent.

Okay, so can somebody else answer a little bit more?

Yeah, in front of Adele and Javier, if you'd come up.

Okay, Mr. Romero.

Basically what this will result in is a reduction of the program by a third. So last year, when we talked about the budget, we were planning on 12 to 15, or 10 to 15 sites. About now we're looking about six to 10 sites instead of up to 15. And so a third, we were looking, we'll probably serve up to about 1200 people as a result. So it's a third in the site, but there'll be 10 locations at a minimum, around the state.

Okay. And you already have set up which sites where the sites are?

No, actually, we just released, as Patrick mentioned, the solicitation for the planning phase. And we just recently announced an award to agency that will help identify the 10 sites around the state. Once awarded, they'll be engaged in planning process. And then next year, we expect around February of next year, we'll actually start implementing the program. This is a novel program. We're looking for local emergency service agencies to be the driver. So this first phase is to bring them to a level in which they could actually develop the programs.

Okay. They're not programs that exist. And then you're just going to plug in or.

No, we're developing. We will allow for an expansion should one come through. But primarily the goal here is to seed new programs where they don't exist.

Okay. Any questions?

Do you feel this is going to hurt the need that there is a shortage of EMTs and paramedics in some counties? And do you think these reductions is going to hurt the ability for us to provide more training for EMTs to come out and obtain employment? Because if there's an employment field out there for them, I would hope that we're not jeopardizing the ability to get people employed.

There will be as fewer sites. So we anticipate it'll be about approximately 400 fewer participants. Approximately. So we're still looking about 1200. That would be the impact.

Andrew March with Department of Finance just note that this is a new program, so any funding for this program would help to staff emergency medical technicians across the state. So this is a new program, new funding. So any amount of dollars going out would help address that need.

Great. Okay, make sure. Ms. Burns, can you hear us okay?

Yes.

Hello, okay. If you have any information or response to those kinds of questions. Did you hear them?

Unfortunately, I did not. So if you could repeat them, that would be wonderful.

Well, we can go back to these over here. Yeah. The Apprenticeship Innovation Fund. Ms. Burns, what steps have the department taken to implement? What data, if any, do you have, or have you collected, participation data? And lastly, how do the proposed trigger reductions impact the activities going forward?

Absolutely happy to answer that. So, I am Adele Burns. I'm the deputy chief at the Division of Apprenticeship Standards. And just to orient you, the apprenticeship innovation funding, it's really aimed at expanding apprenticeship programs across all sectors of our economy, outside of the building and fire trades. And this area is really overseen by the Interagency Advisory Committee on Apprenticeships. So IACA is the acronym. So, IACA, apprenticeships.

And so the progress that we've made, to answer your question, we have drafted the mechanics of how we deploy the funding, and we issued that in the fall for public comment, and we got some very helpful public comment and used that to finalize the submission process for that and set up all the operations. And we have actually just opened up the first round of submissions for the apprenticeship innovation funding that opened on March 16 and is currently open right now.

And the deadline for submissions is May 11. And so we are in the process of getting submissions now. And there's two categories of funding, so there's support funding that really covers the cost of running the apprenticeship program. And then the other category is training funding, which, like it sounds like, is to cover the cost of training apprentices. So the support funding that's being offered is $3,500 per apprentice per year, plus a $1,000 completion bonus.

And the training funding is benchmarked to the RSI rate, which is $8.82 per training hour. And all eligible apprentices for apprenticeship innovation funding must meet the new higher wage standard as set forth by the employment training panel. So that's one way that we're ensuring job quality and really consistently applying that across different workforce development agencies. So this is a reimbursement model, and so program sponsors and educational partners that are eligible will be reimbursed for the costs of supporting and training apprentices.

And it's really looking back at the apprentices served in 2022 and reimbursing those costs. So the idea is that programs would submit for this annually. Right now. This is funded for three years. We're in the first year of it, so submissions are due next month. So on May 11. And, of course, then we will have a better idea for you in terms of how many organizations and educational partners have submitted for this first round of the AIF funding. And the AIF funding mechanism, I will say, of course, since it was created in the last budget cycle, we've been communicating about it with the apprenticeship ecosystem. And some data that I can share for you in terms of the impact on it is looking at IACA apprenticeships specifically, and I'm happy to report that at the end of 2022, we saw that IACA apprenticeships had grown by new registrations, had grown by 36% year over year, and that active IACA apprentices had grown by 18%.

And more than half of that growth was since July of 2022, when this funding was announced, so we really see that momentum building. And on our road to serving 500,000 apprentices, so far, we are 127,000 apprentices into that journey, which is, we're slightly overperforming what we projected a year ago in terms of where we would be on that road. So we're projecting anywhere from 40 to 55 million worth of requests for AIF funding in this current submission window that's open.

And we're maximizing the AIF funding by leveraging resources such as really building upon the high road training partnership funding, the employment training panel funding, and of course, federal funding available to increase apprenticeships as well. We hope that we can weather this slightly tighter budget year with the slight reduction, but we also know that the need for talent has not reduced and we see continued job growth, which could mean more apprenticeship growth as well.

We will certainly keep you well informed on the outcome of this current AIF submission window, as well as our continued growth of apprenticeship. And we appreciate your investment into creating more high quality earn and learn pathways into careers. And I'm happy to answer any other questions.

Great. Thank you. Just one clarification. This is all great news. Thank you very much. Of the 127,000 that you said, of the 500,000 goal, is that trained or enrolled or where are those 127,000?

Sure. So the goal is to serve 500,000 apprentices by 2029. So the 127,000 right now, in this moment, there are a little over 90,000 active apprentices. So quick math. If you subtract 90,000 from the 127,000, the balance of that is those that have already completed and exited their apprenticeship. So we have a number that are currently active and about 37K, roughly that have already completed. And there's a variety in terms of apprenticeship. Some apprenticeships are a year long, some are four years long. So there's variety in terms of when people will complete, but that's how that number breaks down right now.

Great. And do you have goals by industry sector?

So we have goals. So, as you know, we separate the apprenticeship world into IACA apprenticeships and California Apprenticeship Council, so CAC apprenticeships, which are building and fire trades. So we have separate goals for the IACA apprenticeships versus the CAC apprenticeships. CAC apprenticeships, we really see that the building and fire trades have a very mature system of apprenticeships. So we are projecting some growth in that area, much due to the infrastructure investments that are being made nationally and of course in the state as well.

So we see some growth in that. But really, the majority of the growth that we see is on the IACA side, where right now there's about 20,000 active IACA apprentices. And we really see that by 2029 it could be as many IACA apprentices as CAC apprentices. So we are projecting in that way, but we don't have more detailed sector by sector. But we can certainly share analysis of where we are, sector by sector, if that's something that you're interested in.

Yeah, that would be good. In other words, are we matching up the apprenticeship programs with the various needs, I guess, is where we want to end up, right?

Yes, absolutely. And I can share anec.ally that we have a big focus area on healthcare, on public sector. Those are two certainly big areas, and areas that we saw big apprenticeship growth in the past year were also in early care and education and transportation. So these are all areas that we're seeing significant growth and making some really thoughtful investments. And we work very proactively with our fellow workforce development colleagues to try to really build off of each other. So, for example, the high road training partnerships work and the ETP work, and the investments that have been made in those groups, we're really working to leverage those, to create these earn and learn pathways out of those programs.

Okay, great. And as we're moving forward with so many of our investments in climate and green economy, to get a sense of how are we meeting those, what would it take for an apprentice to learn whatever additional skills or knowledge that they need to be ready for those kinds of jobs? I don't think fundamentally they're exactly new in every way, but I'm sure there are some differences that have to be learned. Okay. All right. I think that's it for issue one. We'll move on now. Thank you very much. We'll move on now to issue two again, Mr. Toppin and Mr. March. Okay.

Thank you chair. This is an informational item for two investments made at the California Workforce Development Board in the previous two budgets, the first program being the statewide reentry employment grant program, which was included in the 2022 budget act that included $50,000,000 one time in 22-23 for a statewide reentry grant program. And the 2021 Budget act included $20,000,000 one time for the prison to Employment Initiative to build off the program that was originally included in the 2018 budget act with 37 million. It's an informational item, so I'll defer the rest of the information to my colleague from the California Workforce Development Board.

Thank you, Madam Chair Curtis Notsinneh with the California Workforce Development Board. I'll start with an update first on our prison to employment program. As Mr. Toppin mentioned, I included 20 million in the 21-22 budget. So the prison to employment, or P to E, is really focused on building pipelines to high road jobs for justice involved Californians. These grants are awarded to workforce regions and are often subcontracted to partner organizations, and they cover every region of the state.

P to E provides job training and placement with a heavy emphasis on supportive services. We provide the most flexibility under the law with regard to supportive services to help meet participants basic needs. These can include things like food, shelter and transportation, but can also include things like childcare, court costs or substance abuse treatment. And these services are less easily provided with traditional workforce programs like federal WIOA funds. To date, we have round one outcomes that I'm happy to share today.

Our round two funds are just getting started with services out in the field, but for round one, prison to employment has served 5886 justice involved Californians. The original target for the round one grants was 3500, and of those 5,886 individuals served, 56.9% were employed in the second quarter after exit with a median quarterly wage of $8,761 and 44.4% were employed four quarters after exit with the median quarterly wage of 9000.

This 9000 median wage is higher than title one participants whose median quarterly wage was 7791 and higher than we owe a title one what the Federal Government classifies as ex offenders whose median quarterly wage was $7,068. So overall, the data suggests that P to E is outperforming traditional workforce programs like we owe a title one.

And the CWDB has contracted with the Presley center of Crime and Justice Statistics at UC Riverside to evaluate round one of this grant program and the research really centers around the causal impacts of P to E on reducing recidivism, improving employment rates, and raising wages. We are expecting that report to be finalized by UC Riverside later this year.

Going forward, P to E is going to streamline its administration and increase efficiency by consolidating all funding into a single grant program and transitioning participant data reporting into an easier to use, cloud based platform that we've been working on in partnership with other departments under the labor agency. So that's it with P to E. I don't know if you had questions on that specifically or if you wanted to move me to move to the second item.

Yes, go ahead to the second item.

Okay, so the second item is the $50 million that was included in the 22-23 budget. It's for us to develop and implement a new competitive grant program for community based organizations and nonprofit reentry service providers to reskill upskill, train, and provide supportive services for formerly incarcerated justice involved individuals.

These grants will be available to CBOs and other nonprofit organizations that specialize in serving the reentry population and demonstrate relationships with employers that hire individuals with a criminal record and a history of developing training programs with feedback from the reentry population. The official solicitation for this round of funds is set to be released on May 15, so coming up in a few weeks.

To date, our reentry team has convened a variety of stakeholder meetings with reentry CBOs to collectively brainstorm how to best structure this grant program. Many of these CBOs do not traditionally apply for state workforce funds, so we wanted to learn from the field how to best craft this. We learned a number of things about CBO capacity and the ability to maintain and administer state workforce grants. We heard from our local workforce boards.

We wanted to make sure that the funds that were available were addressing issues that CBOs raised with us, like stipends or cash assistance to provide to reentry participants while they're going through the programs and also looking at the data points that we collected and learned from in our first round of prison to employment. We've met recently and we're actually planning to do a hub and spoke model for our CBOs.

We learned that there are kind of smaller CBOs with less administrative capacity, larger CBOs who have administrative capacity. So we're hoping that they can partner in the field in the solicitation. So that's something new that we'll be trying with this grant. I think I'll wrap it up there and just mention that we've done a lot of work and outreach with this community to make sure that we're serving the population and working with the CBOs who serve this population.

Great. Thank you. So this has been a really important cross cutting issue that our subcommitee here has covered over many years on the delivery of services to our formerly incarcerated so that they are ready for that post release. We know that means that resources, they need the resources, as you mentioned, could be childcare, could be a number of things, housing. We want to make sure that there's a good paying job available to them and remove those barriers when they return home.

We know that when they have resources that we can reduce, and we do reduce recidivism. California releases almost 40,000 people from our prisons each year, many of whom have received in prison job training services such as our career technical education or programs operated by the California Prison Industry Authority. And we manage the federal, I know you mentioned the WIOAs. We have invested in programs as the Statewide Reentry Employment Grant Program. So it's important that all of these programs work in tandem.

So the update that you give us gives us insight on how we can further support these and other initiatives to make sure that the formerly incarcerated individuals have the outcomes that they're looking for. So we appreciate Curtis, thanks very much. I have one last question. What challenges of any has the CWDB encountered as it implements these initiatives? Are there any statutory changes or funding challenges that the legislature should consider to help support these initiatives?

Sure. Thank you for the question, Madam Chair. We haven't really encountered many statutory challenges. There have been some program challenges that our grantees, especially that we learned in round one of P to E that we're applying both to round two and to the higher initiative. For instance, we put out, for instance, in round one with prison to employment, we put out separate grants for supportive services and for direct services. So in this round, we combine those to create some efficiency in the reporting and the administration of those grants. We also listen very carefully to our partners in the field and for hire.

That's why I mentioned we came up with the hub and spoke model so that the smaller CBOs who don't have a large administrative staff but who are very good at the program work and who are closest to the communities who are trying to work with, can partner with larger CBOs and share in some of that administrative work that's necessary to have a state grant. There's been a lot of lessons learned, but it's primarily been at the program level.

On the funding level, obviously, ongoing support is always welcome, especially for our grantees as we build out kind of this network of CBOs to target the formerly incarcerated justice involved community is always appreciated.

Yeah. Just one more question along the lines of where the CBOs are in the state, is that not a challenge? Are they functioning in the parts of the state that need them the most, or how does that work in terms of geographically being there and available to our formerly incarcerated?

Yeah, that's a great question. In round one of P to E, we actually worked with CDCR to look at the release data to see where the density is, and we shaped as much as we could some of our funding to target those areas where there is the highest. But there know there is a density in urban areas. And what we found of CBOs and we found correspond to the releases with CDCR.

So we feel like we're addressing that there is need in rural areas, and we are, I would say, a continuous learning project with P to E. And we're looking forward to the evaluation on that with the density in rural areas of California. But that funding in round one of P to E and round two is going statewide. So it is covering those with the higher initiative. It's a competitive grant systems. I mean, it's a competitive grant program. So I think we'll see when we get those applications following the solicitation, what that density looks like, and we'll be happy to report back.

Great. Thank you very much. Okay. Thank you very much on that issue. Appreciate your presentation and answers. We'll move on to issue three b. Sorry, three a. Skipped. Okay. Three-A, EDD next. Mr. Toppin, Mr. March with Finance. Mr. Alamo with LAO. Ms. Farias, Director of EDD. Ron Hughes, special consultant on technology employment development, EDD. And I understand Gracia Statin may be available. Okay, great. Okay. Do you want to get started?

Certainly. Thank you. Patrick Toppin, Department of Finance. The proposal in front of us is the governance budget proposal that includes $198,000,000 one time in 2023-24, 99 of that being General Fund to continue the planning and development of EDD Next, which is for the second year of the EDD's five year modernization effort. Happy to answer any questions and joined by departmental staff for their expertise.

That's fine. Chas Alamo with the Leg Analyst Office. Again, this is an informational item, but to sort of position a bit for the rest of the conversation. EDDNext is sort of in the early phases now after having been restarted during the pandemic. Former project was the benefit system modernization, which the state had been undertaking for some years. It is slated by the department's estimates now to be a very large IT project, likely to be lengthy, many years in the undertaking.

Our office has worked closely with both the Department and with CDT. We have a technology analyst and that analyst and I have been covering EDDNext, we'll continue to do so. Happy to answer questions either here or at a later date, working with your staff on this process as it develops.

Okay, do have some questions. I'm sorry, you jumped right over.

I didn't have any prepared remarks for today, but I did want to just correct one thing that Mr. Alamo said, that it's not just an IT project, it's a modernization of EDD. It is a five year, it's a very expensive IT, the part of it, but it is a modernization of IT, but it's of EDD itself. So we can change the IT but if we don't change the processes and the procedures, it's sort of for not. So that's part of what we're doing here with EDDNext.

So since you mentioned, it's $1.1 billion now? Over five years?

It's actually 1.258 which is an increase from what the original estimate. And the reason for that is our approach to EDDNext has been to implement the projects that have the biggest impact on the public first. And so obviously, during the pandemic, there were challenges with the online system, there were challenges with the contact center. So we've actually developed a new shared customer portal. We're rolling out a year ahead of schedule.

That's how the public will apply for claims, check on the status of a claim, or check on the payment date for the claim. So that's being rolled out a year ahead of schedule. We're also modernizing the contact.

What year is that?

That will actually be rolled out in June of this year. So that'll be this fiscal year. Then we're also modernizing the contact center two years ahead of schedule. So as a result, we've got software licensing costs and MNO costs that are accelerated from where they were originally estimated. So, we anticipated them further back in the project when they did the original estimate and that's the reason for the cost increase.

And do you expect that's where it's going to stay?

We do. We don't anticipate anymore for more changes. We don't anticipate any more changes. The project is on schedule.

Okay. And what challenges have the departments encountered?

You know, like Nancy said, it's more than just a technology project. And so it's changing the way the whole organization operates, the way we interact with the public, the customer experience. That's probably the most challenging part of it. We spent over 5,000 hours interviewing the public to find out what they like about EDD, what they don't like, how we could improve it and so that's probably the most challenging part of it.

The technology, we're pretty comfortable with the technology, but it's the organizational change management that's a challenging part.

Is that all connected to the technology, or is much of what you're talking about the modernization, the internal culture or the internal.

It's everything. It's all connected. But let me give you an example. So we did a major forms redesign effort, and what we found was we're asking for the same information on five to 10 different forms. We already have that information. We don't need it. Some of these forms haven't been changed in 30 years. So we're going through and we're modernizing those to make it easier for the public to apply for benefits or to reapply for benefits.

So it's things like that that we're doing to help modernize the way EDD does business.

Okay. The April 1st proposal requests an extended encumbrance date.

Yeah. The reappropriation.

Why is that? And how much funding is expected?

So we spent 62 million of, I think, 136 million. And we're asking to re-encumber the balance, and that's to give us time to complete our procurements. So we did some market, additional market research we hadn't planned on. We actually reached out to the vendor community and asked what they would do to solve these problems. That added three to four months to the time frame. So instead of completing our procurements in the May-June time frame, we're now looking at completing them in August-September timeframe.

So it added about three to four months to the time. And that's the reason for the reappropriation BCP.

Okay. And can you talk about the phone systems and the call center?

I can. I will tell you from the EDDNext project point of view, we're modernizing the technology in the contact center. Some of the challenges, obviously, we had during the pandemic were with the contact center. So it all goes hand in hand. It's an integrated solution. So we're rolling out this new shared customer portal that will be integrated with the modernized contact center. So when clients call in, we'll be using voice recognition.

Well, first of all, recognize their phone number and bring up all the information on their claim. We'll also use voice recognition and chat-bots so that if it's a simple question, we can get it answered without them even having to talk to an operator. And then they will always have an opportunity to hit zero and talk to a live person. So we're basically using technology to solve all the problems we saw during the pandemic.

Anything else? And what activities has the Department funded with fraud prevention funding that was included and what else may be included in the Governor's Budget?

So we have a few things regarding fraud prevention. We continue to use Thompson Reuters and ID.me. Those were budget proposals from last year. We currently have a vendor that is making recommendations on how we can move forward with our fraud because we know that fraud is a sort of ever evolving aspect to eligibility programs. And the criminals, I suppose, are getting sneakier and sneakier. And so we have to stay on top of that. So we do have a vendor doing that.

We do have a cybersecurity BCP that is current or coming out and basically just to help EDD with cybersecurity issues because now realizing that that's also an issue. Last year we had a BCP for our legal team to help with restitution and recovery. So they're coming up with a process on how, because EDD is one of the victims and we get restitution by the courts.

And so one of the things that our legal team did was put together how we get that money back, because it's large sums of money. And we continue to engage with McGregor Scott, who is our fraud special counsel. He's still working on, working with the DA's, with the Cal OES, the task force that the Governor put together now going on two years, three years ago, I guess, now. And again, with restitution, working with the DA's, we had a grant program from last year.

We have a grant program from this year or a fund from this year to help the DA's to reimburse the District Attorneys for the cases that they're working on when they do collect restitution and work on these cases because they are long and arduous cases.

Great. Okay, thank you. Anything else on that that you want to add? No. Okay, we're going to move to issue 3B, California's current, improving California's current Unemployment Insurance Program during transition to EDD, next. Okay, Mr. Alamo, you're going to start.

Still getting the hang of the new microphones. Again, Chas Alamo with the Leg Analyst Office. Last summer, our office released a report on the state's UI program called Improving California's Unemployment Insurance Program. And in essence, we took some of the weaknesses that were exposed during the crisis to look forward at what type of UI program the state could have in the future. In it, we identified sort of some practical challenges that claimants have had claiming UI benefits.

But fundamentally, it was our attempt to drill down to why the challenges that we faced during the pandemic occurred in the first place. And to sort of summarize very briefly, we believe that the basic structure of the state's UI system tends to lead the Department to orient itself toward sort of serving the business community and to reducing fraud and state costs in the UI system. And I'll explain a bit by what we mean by the basic structure.

In essence, because employers are the funder of UI benefits and EDD's main sort of ongoing client, because they're remitting payroll taxes each quarter, those relationships are ongoing. Whereas for a worker you may apply for UI benefits once or twice or perhaps never in your working career, so you don't have the same ongoing relationship.

And because of the state's, what's known as an experience rating system, where employers who have higher than average unemployment claims by their former workers pay higher payroll taxes to cover some of that experience, the employers themselves have an incentive built into the basic design to minimize their UI costs. And so as a result of this, the sort of orientation of the program is to minimize costs for businesses,

the natural incentive of the basic structure of the system, and to prevent fraud. And layered over all of this, is the sort of state's longstanding historical issue with the UI Trust Fund and it being not as well financed as many other states funds are. Both during the Great Recession and as you know, during the pandemic, the state quickly turned to the Federal Government for emergency federal loans to continue paying UI benefits.

If the program were operated somewhat differently, it could be the case that the current long standing benefits and tax structure wouldn't pencil out on a year to year basis to keep the Trust Fund solvent going forward, even in good times. So there's this sort of overarching stress on the system that state leaders and policymakers, including the Legislature, feel to preserve the solvency of the UI Trust Fund. In the report, we made a series of recommendations, about 12 of them in sort of three broad categories.

They're included in the agenda, so I won't go into too much detail, but the first category would be for the state to take steps to limit improper denials. EDD denied several million claims during the pandemic. A large portion of those denials that were ultimately appealed by the workers were overturned at the Appeals Board. In fact, the overturn rate in California at the Appeals Board level was about twice as high as it is in other states throughout the country.

We know little about why that is, and we encourage the Legislature to look more closely at some of the trends or what policies and practices are leading to such a large number of denials being overturned at the appeals level. We also made recommendations related to minimizing delays, as was frequently seen during the pandemic and also during the Great Recession, the long delays for UI claimants to receive benefits, and finally, a series of recommendations related to simplifying the application.

Now, this report came out nine or 10 months ago. Now, the Department and the Administration have been working during that time on launching EDDNext. And as the Director corrected me earlier, EDDNext does incorporate policy and programmatic changes into the state's UI program, many of which are consistent with some of the recommendations that we made in our report.

I think going forward, our role as sort of your advisors will be to ensure that all of the recommendations in our report are either met as part of EDDNext, or we'll bring those to your attention if we believe they warrant sort of continued oversight by the Legislature. The challenge, as was mentioned earlier, will be with organizational change management. The technology solutions are likely more straightforward than reorienting a Department after decades of working under this basic structure. That's setting the stage for our report.

Happy to answer any questions. This is obviously a long term issue that will be many years in the doing. Thank you.

Thank you. Okay. Ms. Gerry?

Yes? Hi, can you hear me?

Oh, you're up there. Okay. Yes, we can hear you.

Thank you. Good evening, Chair. My name is Jenna Gerry. I'm a Senior Staff Attorney at the National Employment Law Project, a leading advocacy organization with the mission to build a just and inclusive economy where all workers have expansive rights and thrive in good jobs. So, as you know, Unemployment Insurance was a lifeline for millions of Californians during the pandemic.

But the pandemic also really highlighted the long standing systemic issues with the system that exasperate racial and economic inequity and undermine its purpose and its potential to support California's workers, their families, and the broader economy.

Although workers at the EDD made herculean efforts to process and pay out the unprecedented surgeon claims, as we've heard already, years of administrative underfunding, restrictive eligibility requirements, outdated and neglected technology systems, a long standing culture that prioritizes business priorities, over worker access, and overly burdensome application processes meant the UI system failed far too many workers during the pandemic and continues to fail workers today. So currently, only about 44% of unemployed Californians are receiving UI benefits, leaving over half of California's jobless workers with no economic support.

This is even more concerning when you consider that black and Latinx workers are far less likely to access UI than their white counterparts. And due to systemic racism in the labor market, black workers have higher unemployment rates and face longer periods of unemployment than white workers. In fact, the unemployment rate for black workers in California is currently twice as high as the rate for white workers, and this is consistent with rates for over the last 30 years.

Self employed workers, gig workers, many who are misclassified as independent contractors and undocumented workers, continue to be entirely excluded from the program. Low wage workers and workers of color are overrepresented in these groups, which means that excluding these groups directly exacerbates racial and economic inequities.

For example, for the over 1 million undocumented employees in California who work in essential sectors of the economy and whose employers contribute hundreds of millions of dollars each year in taxes to the unemployment system, they never see a cent of UI benefits. This meant that during the pandemic, undocumented workers received a mere fraction of relief that many workers received to support themselves and their families. For workers who are eligible for UI benefits, they face a complicated bureaucracy that was not created to serve them.

Language, literacy, and technology barriers are persistent throughout the UI process, leading many to abandon the process altogether or face long delays in getting benefits. As we already heard, one particularly concerning thing at the moment is the fact that too many claims are being wrongly denied and workers are facing extreme delays in the appeals process. Over half the claims EDD initially denies are overturned on appeal, yet workers are currently waiting over 28 weeks to get an appeal hearing.

This is simply unacceptable as bills and rent continue to be due for these workers. When workers are able to successfully get benefits, they still struggle to support themselves and their families due to low replacement rates. On average, California's UI benefits replace only 33% of a worker's prior wages. This is particularly problematic for workers paid low wages who tend to rely on their entire paycheck to meet their basic needs.

High inflation, like we've been experiencing over the last year also reduces the real value of UI benefits and makes it even harder for jobless workers to pay for food or rent. While UI payments should rise as inflation and wages grow, California's maximum weekly benefit amount has not changed since 2005. The insufficiency of UI benefits to meet the needs of California's workers is connected to California's outdated and regressive Unemployment Insurance tax structure, which we briefly heard about.

Since 1982, federal law has required states to assess employer taxes on the first 7000 wages per employee, and California remains only one of three states that has failed to raise their taxable wage cap and remains at the lowest allowed by federal law. This current regressive tax structure imposes higher costs on low wage workers and small businesses. It slows hiring and it all but ensures the system will go insolvent during recessionary periods, causing the state to have to borrow from the Federal Government.

So now really is the time to truly reform the UI system so it works for all workers at all times. As we've heard, EDDNext is an essential step forward in this process. But modernization of the UI system must go beyond modernizing technology. The technology, UI policy, and entire claim experience must center the needs of workers, particularly black, immigrant and underpaid workers who face the largest barriers to access.

The Legislature must also nax systemic reform that expands eligibility, such as creating a program for undocumented workers, increasing benefit amounts, and ensure the system is properly funded. These systemic reforms must go hand in hand with the current investments in EDDNext so that the new technology system being developed does not continue to exclude significant portions of the workforce. Thank you for the opportunity to speak and I'm happy to answer any questions.

Thank you, Ms. Gerry, appreciate. Ms. Farias?

Sorry, I didn't have any prepared remarks, but we are happy to answer questions.

Okay. Same thing for Ms. Staton, correct?

Same.

Okay, thank you. Okay. I do have a couple of questions and thank you very much, Ms. Gerry. Appreciate all that you said about the issues facing certain particular groups of workers. And I know on the safety net, for all the impact on undocument, we'll be taking it up on May 4th, we'll be taking it up on May 4th with a lot more details.

So I'm not glossing over that in particular, but such a huge issue, especially recently with the floods and the loss of jobs faced by farm workers. Just a couple of questions. Can you describe how EDD is currently smoothing processes in the UI program as the Department transitions away from its legacy system?

Absolutely. So we have continued to identify efficiencies and improvements as we work towards the EDDNext project. During the course of the pandemic, we did release about 200 IT projects. Not just the technology, though. We've referenced the organizational change need as well to help and assist gaining efficiencies through the processes.

And for example, one of the items that we've looked at that we implemented during the pandemic and improved it ever so slightly to continue it as a sustainable, repeatable process is to review the claim filing processes to ensure and allow technology to. We've reviewed coding and the measures necessary to ensure we can eliminate as much employee intervention and allow automation in the system to process the claim as efficiently as possible.

We continue to look at expanded ways to find efficiencies and effectiveness in how we're operating, and a lot of that is certainly pointed towards the EDDNext project.

Is the automation simply to get people, give them a response? But not really, no. Sometimes automation leads you to another bucket. I'm sure we've all had that experience. And then there's automation systems that really get you to where you need to be and where you need to get to answer the questions.

Absolutely. And so, no, this specific, even this example I've provided, it actually allows for what we had before. And what was identified is it was a mini automation that ended you in a bucket to where employees would review the information and then continue the processing of the claim. We've removed or eliminated bottlenecks to allow for the automation to streamline. So unless there is anything that absolutely requires an employee to review that provides kind of a barrier that needs an employee intervention, the system will allow.

It was an unnecessary, if you will, bottleneck that was identified during the pandemic. We created an emergency procedure and then we established the process. So it's a sustainable and ongoing automation that allows the Claimant to go from point A to point B with the claim filed.

Okay. And the ability to get a real person?

Well, yeah, the system itself is for the claim filing, but absolutely. Much of the call center and the contact enhancements that we've also done that are part of the 200 IT projects include the ability to get an agent, dedicated phone lines, recently released Armenian, Tagoloan, Korean. And so we've continued to expand not just the automation on the claim filing, but also the ability to reach an agent in language.

Okay, and what are your responses to the LAO's recommendations for improvements?

So I will just say, and Grecia can fill in if I've missed something. But as Mr. Alamo pointed out, the pandemic was a lesson learned for EDD. It exposed its weaknesses, there's no question. And we did start to work on those when we found out about them. I mean, when you find out about a problem, your job is to fix it to the best of your ability. And that's what I think we have done.

So we have incorporated a lot of the recommendations, shortening the application, the appeals. I know the appeals is a big issue that has been brought up, and we work to the extent that we can with the board. It's an independent board, but we do work with the board to figure out where is there a spot where the appeals are really held up, if there's one issue where they're really held up. And that's all I can think of off the top of my head.

I could certainly give an example. So one of the items that were references, like a higher appeal reversal rate, one of the things in reviewing, Mr. Alamo and the report's recommendation in assessing the analysis of these reversals is we did identify the way in which the board is required to report the reversals. So there may be one specific issue. Let's say it's a wages issue where an individual didn't report their earnings in a certain week. That may come with two additional issues associated with that main issue.

So you'll have your wages, you'll have a potential false statement, and then you'll have an overpayment penalty. The board allows or provides modifications of, say, the false statement. So that's one of the three issues. Or they can eliminate a penalty altogether. And so you'll still have the individual disqualified on the underlying issue, but the false statement and the overpayment can be modified or reversed.

And that appears as a reversal in the method in which the board is required to report those issues to Department of Labor and the Federal Government. And so looking at those, however, still allows us to see what can we do to focus in on maybe the false statement itself or looking at any other specific issues that have a high reversal, even if they're connected with three other items.

And so we are looking to pilot an opportunity to have our representatives at the hearings to better identify what we can capture on the in person hearings and what the claimants are providing to the board and allow us to provide our information of what we've gathered but then that'll also provide us insight that may have not been available if maybe they weren't available during their interview, or maybe that's information they didn't provide to the board or provide to EDD when they submitted their appeal.

But it's available at the time of hearing. So we're looking to see if we can expand awareness as to what's being provided at the hearing itself and then allow us to better identify our processes and procedures from there.

Have you decided to adopt all of the LAO's recommendations? Some of them? I mean, how are you treating the recommendations? It's advisory. Maybe you don't have to. How are you looking at all the recommendations?

So I'll set up the response by saying we have completed all of the audit recommendations and the strike team recommendations. There were 100. I think we're at 85, and there's maybe seven of them that are in EDDNext, and the rest are going to be completed in the next couple of months. As the LAO recommendations, I mean, we certainly take them seriously. We have a great relationship with the LAO, although he's mad at me now because I corrected him.

And without really memorizing all 12 off the top of my head, I can tell you that we have looked at what Grecia just mentioned, at least a few of them, and maybe Grecia, if you have more information than that. I mean, the answer is yes, we take them seriously and we will certainly implement the ones, that you know are appropriate, if we haven't already.

If I may, Madam Chair, the strike team and State Auditor report recommendations that the directors just mentioned were recommendations specific and granular to issues that occurred during the pandemic. Our report came out after those reports and was intended to focus a bit more globally on the basic structure of the system. As I mentioned, the pressures that I laid out earlier having to do with businesses intending to limit their costs and how those pressures might influence the Department.

Those are long standing and won't change under the State Federal UI partnership. I think the point of our report was to put those pressures out front and center. There are specific sort of minute policy recommendations that we make in the report that might serve as guardrails against some of those pressures, but overall they are going to influence the state's UI system.

So our report is more of a situational landscape setting, if you will, for the UI program, so that the Legislature is mindful of these pressures as it reviews EDDNext or other policy changes, budget change proposals going forward, sort of under this umbrella of how the UI system is structured and the incentives that are built into it by design.

Those bigger issues that I just identified, the pressures, they don't need to be resolved in order to address the recommendations that you made. How are you making the distinction in terms of do you really need to do the larger if you're going to have an impact when it comes to the working people or how do they fit in together here?

We were in essence working on this report from when the pandemic began, so about two years in the making, and I mentioned that only to sort of impress upon you the approach that we took was one a recognition that smaller changes, much like those we recommend in this report, or those that are being built into EDDNext across many issues, could fundamentally improve the program for workers in the state.

We stopped short and in fact said that the program doesn't necessarily need fundamental reform that might change all these incentives in order to be improved for workers. And that's in part because the state federal partnership, the state, operates the UI program under some relatively strict parameters set by the Federal Government. So the opportunities for said fundamental reform are pretty limited.

But ultimately in the report, and a position we still hold, is that great changes and improvements could be made with relatively small changes to the program, much like those we included in our report, some that also the State Auditor or the strike team included, and those included in EDDNext. And it's a matter of following the many moving pieces at this point and ensuring that they do establish sort of guardrails against some of these inherent pressures in the UI program.

Okay, if I can just add one thing. One of the biggest things that I think we've done is created. And I think we're only, maybe the only state Department that has it is a customer user experience branch, basically. And we've invited Mr. Alamo, we've given him a presentation, and I think you're impressed with what we have done. And so we're soliciting feedback from claimants, stakeholders, users, whoever it is, to make sure that what we're doing is right, because we can get lots of recommendations.

And if it doesn't fit what the customer actually needs or wants, it's sort of for nothing, just because I think it's the right thing to do or whatever. So I think that's been probably, and I know that Ron mentioned this with EDD about the 5000 hours that we've spent doing that. I think that's been probably the most exciting piece of this because it is where you can actually see what customers are thinking. I think I know what customers think. And I'm kind of right.

I think that's been actually really one of the great things that we've done. I think so. Just want to add that.

Okay, well, this is great. Appreciate come a long way here, especially with all the crisis during the pandemic and EDD was on the front page, headlines all the time. But really appreciate you just digging in and don't give up and keep moving it. But at some point, I do want to revisit this issue of the pressures and what that does as far as serving the working people. Okay. Thank you very much. Thank you very much.

I think we're moving on to issue four, and that's the addressing the UI debt. It. Oh, here. Mr. March.

Okay. Mr. March or Mr. Toppin?

Hi, Patrick Toppin, Department of Finance. This is issue four addressing the UI debt. There's three sort of parts of this agenda item that are listed here. It is the Governor's Budget includes $279,000,000 in one time General Fund to pay the annual interest payment on the state's UI loan balance, as well as proposes two solutions.

It proposes to remove $500 million of one time General Fund committed for 24, 25 to offset anticipated rising federal Unemployment Insurance tax rates resulting from UI Trust Fund insolvency, as well as to withdraw the $750,000,000.01 time General Fund payment next year. Happy to answer any questions about those.

Okay. Ms. Alamo, did you have any comments?

No specific comments, Senator. Maybe a bit of just context related to the interest payment itself. Customarily, it has been the state's responsibility to make annual interest payments on the outstanding federal loans, while the employer community, under federal law, repays the principal amount of those loans over a number of years. That's what the state did during the great Recession. It is not set in stone that that's what the state must do, but it has been the customary practice.

So the proposal last year for the state to make a principal payment was a sort of divergence from the norm. And so I'll just set that context for the rest of the panel.

Okay. There's, I guess one question is why these withdrawals are part of the governor's proposed budget and how this fits the state's long term goals to repay the UI debt.

Yes. Thank you. As mentioned, sort of throughout the Governor's Budget documents, we made proposed budget solutions as part of to reduce one time and limited term investments that preserved core departmental programs and services without touching the state's budget reserves. And so in this case, we needed to balance the budget and we had to make tough decisions, and these were areas that we thought made sense for savings.

And is there any particular attention being paid to small businesses and also paying down the, what's the plan to pay down the UI debt?

Certainly, yeah. The Administration and the Legislature in the previous couple of budgets have made a number of investments that are really intended to support small businesses. There's the $41.0 billion billion 1.0 with AB. They got that wrong.

On the Assembly Committee for the Small Business Covid-19 Relief grant program, 1.1 billion for the Small business credit initiative and 800 million recent investments that include 250,000,000 for small businesses, for Covid-19 supplemental paid sick leave grants, $150,000,000 for the California Venues grant and 80 million for the California Dream Fund. So we remain committed to supporting small businesses.

And as for paying down the UI debt, the existing mechanism under the FUDA federal Unemployment Tax act, credit reduction, which reduces the credit that employers get on their federal unemployment taxes by 0.3% a year, is the only mechanism under existing law to pay down that debt.

So is there an advantage for California to only pay I think Mr. Alamo mentioned something about this. Is there an advantage for California by only paying the annual interest payment on the state's UI loan balance instead of paying the principal?

Mean in the broadest terms? The main advantage would be that the state could use those funds to support other interests of the Legislature as part of the budget proposal and the Budget act this year. There would be an advantage in terms of reducing the amount of time that employers are required to pay these higher federal payroll taxes, potentially by about a year. But largely it comes down to an issue of legislative priorities and negotiations with the Governor about the use of those funds.

And along the lines of paying back debt. What about repaying the debt to the Federal Government?

Clarify chair are you asking for the timeline to repay it?

Yes.

Administration we don't currently have a projected date to complete that repayment of the UI debt. We have a lot of uncertainty in any inherent projection since it is based heavily on the rate of employment, the number of employer contributions, the economic health of the state. We always give the timeline for the previous debt repayment. During the Great Recession, the UI Fund debt hit a peak of $11 billion in 2011 and was not paid off until 2018.

And so the current debt is about $19 billion, and so we'd expect it to take longer than the seven years last time. But the LAO has usually had some comments about projecting in time frame.

Pass it on to you, Senator Durazo. The last time our office put together these projections, under the uncertainty that Mr. Toppins mentioned, we thought our best estimate would be somewhere around 10 years for the employer community to repay the principal on the outstanding federal loans. Now, that analysis was done more than a year ago, and obviously the economic climate has changed in that time, and any deterioration in the economy, the state's economy would tend to lengthen the duration of that repayment period.

As you know, if the state's unemployment rate were to increase and additional claims be drawn on the UI Trust Fund, the state would probably quickly turn to the Federal Government again for cash loans. And every time we do that, we would push back the repayment period for the initial loans that the state took out in the summer of 2020.

So back when you said 2011, that took seven years. Seven years from 2011 to 2018.

We had only recently made the last interest payment when the pandemic began.

Okay, got it. All right. I don't have any more questions on that. Okay. We'll go on to issue five, the wage claim adjudication unit resources. Again, Mr. Toppin.

I'll give a brief overview and then turn it over again to the Department for Programmatic Information and any sort of specific questions you may have. So the Governor's Budget includes $11.7 million in 23,24 and 6.5 million ongoing, 42 positions for the Department of Industrial Relations to decrease statewide wage claim wait times. These resources will enable the Division of Labor Standards Enforcement wage claim adjudication unit to expand its outreach and investigation work, including supporting community resources, and to automate and improve existing processes.

D.R. Continues to make a number of programmatic changes to improve their efficiencies, including some of the ones that were detailed in the BC mass wage claim conferences, voluntary overtime hours, and others. So happy to take any questions. And joined by Members of the Department and the labor Commissioner.

Thank you, Mr. March. You don't have any? Okay.

Mr. Alamo, Chas Alamo with the LAO. No comments on the proposal specifically, but happy to answer any questions.

Okay, great. I think we're going to move via Zoom to state labor Commissioner Lilia Garcia Brower.

Yes. Good afternoon.

Hello, labor Commissioner.

Good afternoon, Madam Chair. Can you hear me?

Yes. Perfect.

Wonderful. Good evening. Thank you for sticking through today and allowing me to join today. I want to provide a brief update on our wage claim adjudication program and our hiring efforts. I'd like to share that in 2022, we recovered 62% of ODA's issued, totaling about $47 million. And, Madam Chair, you may recall the hollow victories report that was published back in 2012 by UCLA, where they found that there was about 17% recovery rate by the state.

So this past year, we recovered about 62% of the judgment issued by the wage claim adjudication program, and there's about 27 million that is left uncollected. Our most common violations continue to be minimum wage liquidated damages and late penalties. I'd also like to share a little summary and just take a step back from our wage claim adjudication backlog issue and remind the Chair and the Members that this process was created in 1976, where claims were very simple.

It was pretty much just minimum wage that was pursued. And then fast forward to the complex statutes which the Legislature has rightfully pursued. Creating more tools of accountability like up the chain and individual liability, more expansive labor code protections, which again I completely support.

But this has actually contributed to our first group of backlog which was created because of the complex codes that requires additional staffing and investigations which urged this agency to pursue initial BCPs back in 2015 and 2017, that we have been interrupted in being able to fully hire those positions. Our second backlog category was created by the shutdown due to the Covid-19 pandemic and also, as we're continuing to learn post pandemic, the impact on the communities and our operations.

There continued to be a slowdown as we have intentionally incorporated flexibility into our system as I have directed our offices to reopen cases that were closed because of Covid-19. As you well know, many workers were displaced with the pandemic and lost information, lost their correspondence, and we may have wrongfully closed their case. So when these workers communicate with us, we are reopening those cases, or when they make requests to postpone, we are accepting those.

We also, because of the pandemic, we expedited claims involving impacted by the pandemic. So SPSL claims or workers who were fired because of the pandemic, we moved them to the front of the line. So this has also caused a further backlog.

The last category of claims, a backlog that was created, was because, as you know, the Legislature funded an online wage claim program that we launched in November of 2021 to create a contactless way for the public to continue defending themselves when they experience wage theft at work.

And in my interest to not create another barrier for our population that we know is challenged with computer literacy, we made very few fields required not knowing that the public was actually going to go through the entire claim process and not fill in any information that wasn't required.

So unfortunately, where we have 75% of our claims now being filed through this new online wage claim process, unfortunately, these claims are a new set of backlog because they don't have enough information to be able to move forward in the system. And so we need additional staffing that we've requested in this current BCP cycle with the 32 industrial relations representatives who will engage early and perfect these claims and move them forward throughout the process.

So in General, that is a summary of how we got here and the three categories of the types of backlogs that we have. So, as the previous speaker referenced, in addition to filling our vacancies, which is a top priority, we have hired 22 professionals in our wage claim adjudication program, 25 of which are external hires. We currently have 38 active recruitments in our wage claim adjudication program. So aside from continuing to push hiring forward, we have several reforms that we have implemented.

Some of them provide increased training. Some of them provide trauma informed training to help us deal with internal challenges. And so the public could have a more positive and effective experience throughout our processes and others focus on promoting best practices and consistency throughout our offices. So I could highlight a couple of those if you're interested in hearing more of that.

And lastly, I will say that we are, in addition to everything that we're doing on hiring, one of the challenges we have is that our agency didn't have internal to my office. We did not have an administrative unit that focused on hiring. We are in the process of building that unit and we are requesting additional positions in this budget change proposal to do exactly that.

I am happy to announce that we have hired and have in place a staff service manager two and a staff service manager one who are moving our hiring. And our goal is to be able to develop that expertise and build more efficient processes in collaboration with DIR and CalHR so that we can fill all of our hiring and continue to improve our efficiencies.

The last thing I'll say is one of our biggest challenges in hiring is helping the public understand the civil service process, which they do not. So we have initiative with UCLA where we are training their graduate students and understanding the hiring process.

We've done several virtual and in person job chat at UCLA to recruit candidates, and we're actually just completed the second of four series of workshops where students will have the opportunity to create their accounts and to apply for jobs with some guidance through the labor center. So I think it's a combination of all these efforts that we're going to be able to build career pathways for our communities, to be able to regularly consider a career in state service at the labor Commissioner's office.

I'm available if you have any questions.

That's great. Thank you very much. Just go back a little bit here and I appreciate the enormous progress that you've made and we want to help you get to that wage claims. Going back to those wage claims, can you give any more information about the amounts of the awards that go uncollected or unpaid wages, the amount of the kinds of wages I know you gave, a total 42 million collected and 27 million uncollected.

So some idea of what the amounts are and then the industries impacted by these claims?

Absolutely. And I'm going to draw from memory, I don't have that note before me. But I believe in Mr. Alamo's last report there was an amount of about 17,000 that was referenced as the average wage claim that has been filed. I can get you the more updated figures for 2022. And you are correct that for 2022 we have 27 million that is uncollected on order decisions and awards. Our most common violations unfortunately continue to be minimum wage, liquidated damages, late payments and rest rates.

And our highest violating industries continue to be restaurants with about 8000 reported violations. Construction with over 6000 reported violations. Security guard and patrol services with about 5000. Full service restaurants, about four. Home health care services, about 3000. Courier and express delivery, a little over 2000. And truck transportation is right behind that with 2000 as well as employment placement agencies. So these are our top 10.

Okay, what do you see as the potential ways to address the delays in these wage claims?

So obviously, hiring is the number one thing, which is why our team is focused. We've redirected seven professionals to enforcement professionals to focus on hiring. And I just briefed you on our advancement in building our administrative unit. But while we continue to struggle through on hiring, we have about a dozen reforms that we have in place. And I could highlight a couple of them for you. So one of them is a Low wage industry project pilot. I'm sorry.

And this involves Long Beach, Santa Ana, Bakersfield, and Fresno. So here's where we pull these four offices together. We identify Low wage industries and we pull those claims out and we bring them to the front of the line. And that project has been successful in reducing the number of days by 46%.

I'm sorry, why is that? What happened in that process?

Because usually historically this agency handles claims as they are filed first come, first serve, so to speak. So here what we're doing is we're pulling out claims filed in low wage industries and we're putting them to the front of the line.

Got it?

Okay. And we are also sharing resources between offices, which has been a benefit of something we learned from the pandemic of how to have remote operations. Another example, this is a pilot of liability pilots. So as you know, California has been a leader in creating upward new theories of liability, so up the chain by going after the building owner, going after the prime contractor, et cetera, and also individual liability.

However, the challenge with these statutes is the public isn't aware that they have a right to do this. For example, we have strict liability in property services that includes janitorial and also nursing homes. But workers file claims and they just tend to file against the person who didn't pay them, which might be the first line supervisor. So we need to invest in training our team to be able to evaluate cases and make sure that all parties are named.

And you understand that this means we have to invest a lot of hours with the workers, because essentially, we're reconstructing through memory who they engaged with, who were the different entities, and this delays the process. However, in the pilot that we've conducted, we found that in those cases where we were able to name individual liability and up the chain, workers were twice as likely to recover. So that's the right direction we have to go to.

So we have a plan to implement this liability pilot throughout all of our offices. Those are a couple of examples of pilots that we are implementing to not only address the backlog, but to actually improve the outcome from workers in their wage cleaning process.

Great. Thank you. Let's see. Yeah, this last one. Okay. The proposal that's being made is that a reflection of what DIR believes is its total resource need to address this issue? If not, what do you think is the total resource needed?

Yes. Thank you, Madam Chair. So, as I mentioned earlier, we're talking about a backlog problem that we can trace back to 2014, and we're talking about budget change proposals from 2015 and 2020 and 2021 that we have not been able to fully implement given the hiring freeze, given the pandemic for all of these challenges.

So, at this time, we are focused in filling all of these positions and implementing new, innovative strategies to improve our operations, and then we can assess, once we are fully staffed with these budget change proposal resources, do we need more?

Got it. Okay. I think that's it for this issue. Anything else before you leave us?

Well, I would just like to highlight, I don't know if you're aware of. We recovered in our retaliation program for four Mcdonald's workers on Monday. We returned them back to work, and we recovered $113,000 in back wages. And these were four brave workers who were complaining about COVID violations in the height of the pandemic, and their employer responded by firing them. So this is something that we rarely see. Workers want to go back to their employer and the employer being willing to take them back.

So it's definitely a big celebration, and we look forward to collaborating with our community partners to continue to produce such outcomes.

Thank you. And I understand there were some hospitality industry cases as well, that you were involved in settling and helping those workers. So thank you. Thank you for your commitment, and stay on it. Appreciate it. Thank you very much. Okay, we're going to move on to issue six. Two left. Issue six, Mr. Toppin.

Thank you, chair. So this is an oversight item on two investments from the 2022 Budget act. The Committee has requested updates on the California Youth Apprenticeship program that was supported with $20 million in General Fund in 22,23 and 23,24 rising to 25 million in 2024,25. So that would be budget year plus one. Additionally, the expansion of the labor Commissioner's retaliation complaint investigation unit, which was initially funded with a 3.9 million ongoing. Which is.

Sorry, $3.9 million in special funds, growing to $14 million annually, ongoing by 2025,26.

Okay. Mr. March, you don't have anything? Okay, Commissioner, do you want to add anything on here?

Yes, Madam Chair. I'd like to highlight that we continue to experience the same challenges throughout all of our agencies. So, unfortunately, we have not been able to move forward on all of these retaliation complaint investigation positions. However, last year, I did move forward a reorganization of our RCI unit, creating a new assistant chief position to be able to focus on this complex unit, in addition to two additional regional manager positions and four new supervisor positions.

So, in total, these seven leadership positions are going to be critical in building our capacity to not only improve operations and produce better outcomes for the workers of this state, but to actually bring on these 23 positions that we have to hire for this calendar this fiscal year.

Okay, thank you. And Ms. Burns, did you want to add anything? No, not on our Zoom anymore. Okay. And Mr. Iverson.

Good evening, Chair. Josh Iverson, chief financial officer from the Department of Industrial Relations. I can add a few brief comments because Adele Burns dropped off the Zoom call, regarding the California Youth Apprenticeship program. Members are listed on the DAS website and meetings are publicly posted. This Committee is comprised of representatives from youth, youth serving organizations, labor, employers of youth, K-12 schools, community colleges, and the public workforce system. As required in the legislation, CYAC had its first meeting on February 6.

This group will be advising the division of apprenticeship standards on guiding principles on the CYAP. The division is currently working to hire folks to be a part of a youth apprenticeship team within DAS, along with a person to join the DAS funding team focused on this. DAS is on target to meet the stated deadline of completing planning by October 2023 and aims to release the solicitation well before the March 2024 deadline.

Okay, think we have just a few. What steps has DIR taken to implement the initiatives?

Yes, thank you for the question. Some of the things that I just listed were regarding the website and some planning meetings. Okay.

And is there any data that you've collected so far?

I don't want to speculate. I'm not sure of what the correct answer would be, so I don't think so. But I don't want to say that for sure.

There's no wrong answer.

I can definitely check back in with the division and get you that answer.

Yeah, we'll take that back and get you guys response.

Okay. Thank you. And what challenges have you found as you implement these initiatives? And same question I asked earlier is are there any statutory changes or funding challenges that the Legislature should consider?

I'm not aware of any challenges that have been encountered so far, but I believe I should check back in with the division to ensure I give you the right answer.

I'm not going to give you f or anything like that.

Great. Thank you.

No wrong answers here.

I appreciate it.

Okay. Anything else that anybody wants to add with regards to this?

Nothing to add from the Department of Finance. Thank you.

Okay. All right. Thank you very much. Appreciate it. Mr. Iverson, we'll move to our last issue, which is the Governor's Budget proposals and status update. I think we have. Department of Finance. Thank you, everyone. Really appreciate. And you hanging in, Ms. Griswold? Department of Finance. No. Is that.

Right. Department of Finance Natalie Griswold and Danielle Brandon. And then we'll move to the LAO's office. Right. Okay.

Natalie Griswold, Department of Finance. Good evening, Chair and Members. This evening I will present five budget change proposals included in the Governor's Budget for the California Department of Human Sources, or CalHR. So first, for the tribal consultation training budget change proposal. The Governor's Budget includes $100,000 General Fund in fiscal year 2023-24 and 10,000 General Fund in fiscal year 2023-24 and ongoing for CalHR to design, develop, and deliver training as required by Chapter 475 statutes of 2022 by Assemblymember Ramos.

This chapter requires CaLHR to develop training for designated officials regarding government-to-government consultations between the State of California and tribes and tribal organizations in California. Next, we're a dedicated privacy officer within CalHR. The Governor's Budget includes 172,000 in 2023-24 and 165,000 in 2024-25 and ongoing. CalHR's privacy officer will develop and manage the department's policies, procedures, and compliance with California's privacy laws and standards.

Third, the communications office and content management system replacement budget change proposal, included in the Governor's Budget, provides two positions and $1,352,000 in 2023-24 and $563,000 in 2024-25 and ongoing to research and plan for the replacement of the CalHR web content management system and develop an improved communication service to the public, the state, and its employees.

This proposal will provide CalHR resources to modernize its website and improve stakeholder communication outreach, which supports Calhar's strategic goal and plan to attract and maintain a qualified and diverse workforce for the State of California. Next, for CalHR's personnel management division. Strategic workload support the Governor's Budget includes $428,000 in 202324 and $412,000 in 202425 and ongoing to provide PMD with strategic workload support so that CalHR has the workload capacity to better manage its customer service in align with CalHR's strategic plan.

Finally, for psychological screening program administrative support, the Governor's Budget includes reimbursement authority of $116,000 and permanent position authority to transition one limited-term position to a permanent position within CalHR's medical and psychological screening division. This position and associated funding and reimbursement authority will allow CaLHR to continue efficiently processing pre employment psychological screenings for client departments hiring peace officers. Together, these five proposals advance CalHR's mission-critical work. I am here with my CalHR colleagues, available via the camera system and we are available for any questions. Thank you.

Thank you very much. Ms. Brandon, do you want to make any comments?

Danielle Brandon, Department of Finance. Nothing to add, Madam Chair, but also. Available to answer questions.

Thank you, Mr. Schroeder.

Good evening, Madam Chair. Nick Schroeder with the LAO. We don't raise any concerns with the proposals, but I would highlight what the agenda calls out, which is the fact that the Legislature did approve significant position authority in the current year's budget for CalHR, and the Department has had significant difficulties filling those positions. So I think the agenda raises some very valid questions as far as CalHR's ability to fill the positions that they're requesting for the budget year.

Okay, well, we'll come back to that. Mr. Guerrero, are you still on Zoom?

Yes, I am, Madam Chair.

Ok. Anything you want to add?

I'm prepared to answer those questions, although in terms of, I believe that the Committee has two questions regarding staffing, and I'm prepared to answer those questions now or after I present the update on the three items left before the Committee. Whatever your preference is, Madam Chair.

They're from what? The three items from last year? Yeah. Why don't you go ahead with the three items?

Great. Thank you, Madam Chair. So the first item is an update on California leads. As you may know, the Budget Act of 2022 included 43 permanent positions and 7.6 million for 2022-2023 and 6.8 million for 2023-2024 and ongoing. This funding has been used by CalHR to implement recommendations of the California leads as an employer task force. Since the original CalHR January 2023 California leads report to the Legislature.

CalHR has gone from hiring 20% of the California leads positions to having hired 35 of those positions and is actively recruiting 53% of those positions. Many of the efforts of the California leads are underway. For example, CalHR provided its first equal employment opportunity academy class to 60 upward mobility coordinators in February of this year. An additional 60 registrants are receiving training in this month, and the academy classes are underway, including the role of an EEO officer and the workforce analysis for upward mobility oversight.

Two staff have been hired for this program. CalHR is now working on tools and procedures to support departments in hiring people with disabilities, meeting upward mobility plan requirements, and setting goals for persons with disabilities and upward mobility hires for the key data initiative, staff continue to build expertise in the creation of data dashboards and use of tools to analyze data. CalHR recently published its 2021 total compensation report with a dashboard on our public website.

CaLHR continues to analyze other data sets and reports, including the women's earnings and state employee census reports, for possible publication of additional dashboards in the future. That's my update on California leads. Madam Chair, do you want me to continue to the next item, or would you like me to pause?

No, that's okay. Go ahead.

Perfect. So the next item is departmental workload. The Budget Act of 2022 included 22.5 positions and 6.3 million for fiscal year 2022-2023 and 4,777,000 in 2023-2024 and ongoing. These resources were dedicated to address a couple of issues, including staffing issues in the administrative services and information technology divisions, realignment of the legal division funding, obtaining a single legal management system, creating a new department verification unit, and increasing funding for the savings plus program.

To date, CalHR has hired 51% of these positions, which are 11.5, and is working on filling the rest. As additional updates, the workload BCP included funding for a new application to assist with CalHR Legal Division's processing invoice, workload, employee hours, and case tracking. This project was placed on hold due to impacts of Covid-19 and key staff member turnover. Project work has resumed as of January 2023. Last year's BCP also included funding for the creation of a dependent eligibility re-verification unit within CalHR.

This unit would verify the eligibility of employee dependents for continued enrollment in state sponsored healthcare benefits. This unit has been created. Lastly, the budget included funding for savings plus program, the program that allows state employees to supplement retirement benefits through tax deferred and Roth contributions, payroll contributions related to a projected increase in third party administrator costs pending award of the contract. The funding in last year's BCP is being spent for this purpose. That's my update on that one.

The next update is on the California State Payroll system project. CalHR continues to partner with the state controller's office in planning activities for the California State Payroll System project. The project is currently reviewing solution proposals as part of stage four of the project approval lifecycle. With contract award anticipated sometime this summer, the CalHR continues its work to evaluate and update human resources statutes, regulations, and policy necessary to implement the CSP solution.

Communications with bargaining units remain collaborative and supportive of the transition to a modern human resources and payroll solution. The 2022 Budget Act approved 15 positions for the CalHR to support the California State payroll system project efforts. Of the 15 positions, CalHR has made reasonable progress in filling these vacancies. Nine positions have been filled, that's 60%. Five positions are in recruitment, that's 33% and one position is being held awaiting a CSPS contract award. Those are my three updates.

Madam Chair, happy to take any questions from the Committee.

Thank you very much. So can we go back to the issue of the hiring Mr. Schroeder, recruiting for and filling the job vacancy? That's the issue that you mentioned. Yeah.

I don't really have any much more to add beyond what I already said, which is just that the agenda highlights the fact that the Legislature did approve significant number of position authority for CalHR in the prior year or in the current year, excuse me, in 22-23. And as CalHR just indicated, a significant share of those positions are still not filled. While they have made progress, they are not filled.

And so I think that the agenda raises valid questions in terms of the Legislature having confidence that the Administration will be able to fill the positions that they're requesting for this coming year.

Okay, great. Thank you. Ms. Griswold, do you want to respond to that?

Yes, I'll give my colleague Mario the opportunity to respond, but we're also available to respond. Thank you.

Yes, Madam Chair, what I would say on behalf of ClLHR is that CalHR is committed to do the work that we put forward to the BSPS. And in order to really fully do that work, we need all of the staff that we've committed to. As I mentioned in my earlier comments, we have made significant progress in hiring staff, and progress continues in filling the remaining positions. So we are confident that moving forward we will be able to fill the positions and continue doing the work that the Department has committed to do.

How will you know that you're actually making progress? I mean, how often or what are the goalposts along the way that give you the confidence that you're actually filling them at the rate that you need to be filling them?

While we fill the positions, some of the work is being done with some of the staff that's already been hired. I mentioned, for example, the two staff that were hired to help departments with upward mobility goals and hiring people with disabilities. And so those two staff have already been hired. They're already working on policies. And so the next step, once those policies are finalized, is to work with the Department.

So the work is moving forward with the staff that we have, and the additional staff will just ensure that we have the full capacity needed to fully progress the programs as they should.

Ms. Griswold, did you want to add anything to mean? I think what we're looking for is not just the promise, but how do you know and how do we know that you're going to do better than what's been done and acknowledging the progress that has been done, but still, there's a lot of catch up to do.

Yeah, I understand. So low unemployment and the changing workforce overall have made recruiting talent difficult for CalHR and for the state overall. California's constitutionally mandated merit-based hiring process also makes hiring for the state different than it is for the private sector. All candidates for positions must meet defined minimum qualifications, a process which takes longer to verify than would be required throughout most of the private sector.

So we believe that CalHR, while it does take time to hire, a lot of CalHR's initiatives are assisting hiring through the state overall as well as for CAlHR specifically. For example, California leads as an employer initiative and the new work for California campaign to increase hiring throughout the state. We think that these initiatives, approved, many approved in the budget last year, are going to assist CALHR in being able to make its hiring goals and positions authorized in the 2022 budget.

And the new positions proposed in the current Governor's Budget are designed to address actual workload needs. So even if CalHR is able to fill all of its authorized positions today, the new positions proposed will still meet our actual workload. Thank you.

Okay. Anything else? Just as we were fresh in our minds from the EDD and some of the issues had to do with also hiring and the DIR, have you thought of reforms that could be implemented that would help? Since you identified some of the things are obviously not in your control, but a lot of things are in your control. Have you thought of going in that direction and adding that to your toolbox?

I think a lot of these programs are designed or included in the California leads as an employer initiative. I think Mario would be able to speak more to the details of those initiatives, but I know that that includes new ways of updating our hiring processes, updates to CalCareers, which is our hiring platform online, and updates of that nature.

If I could just add, I know one of the things mentioned by the Labor Commissioner was that people don't know how to get into the system. So it's not as friendly. And I know just personally friends and family Members who find it very difficult to get into the system. And maybe it's not exactly the state system, but just overall, there's either intimidation or just give up. So those kinds of, just like Ed was saying, they got to become much more friendly and simpler.

Madam Chair, if I may add.

Sure.

One thought I had is the administration's mentioned that there's the labor markets issue and how California State government is experiencing this in other departments, not just calhr. One thing I just want to point out is that this year is a year where a majority of the state workforce is coming due for their bargaining agreements. And so if this is a matter of compensation, this is the year to really be discussing what is necessary for that.

Okay, I'm sorry I didn't call on Brandon Rushman on Zoom, or did we lose him?

I'm here, Madam Chair.

I have nothing further to add. I'm just there to answer questions.

Okay, sorry. I bypassed you.

Okay. All right. I have no further questions. Anybody want to have final remarks before we leave?

No worries.

Madam Chair, this is Mario Guerrero, led structure for CalHR. I just would add that, like the Department of Finance mentioned, the current proposals are also supposed to work well with California leads proposals. So, for example, the communications BCP, we're hoping that that will add additional capacity to allow CalhR to be able to work with departments, to do, for example, campaigns, to highlight, to help hire in places where there are difficulties in hiring these campaigns with the additional staff.

Right now, by the way, CalHR has one communication staff. So if we have additional staff, we can then work with departments in these specific campaigns where there are hard to hire classifications, we can focus a little bit on what their needs are, help them advertise, and hopefully improve their ability to hire. And so I just wanted to mention that that BCP would work well with some of the California leads initiative.

Know, I just want to mention we have a new mayor in Los Angeles, and I've noticed that at different events that have nothing to do with hiring, but somehow she makes a connection back, and she really is pushing out there and people are paying attention to her and she's talking about, we have all these jobs, blah, blah, blah, come and work for the city. You can do this, you can do that.

She just sort of does it spontaneously, but it comes to mind because they're also looking to fill a lot of positions in the city, but somehow we got to get a lot of popular voices talking about this so it doesn't just end up on you. Well, I have no further questions. Thank you, Mr. Guerrero. Appreciate all of your comments and your support. Thank you all for being here. We're going to go on now to public comment. Thank you, everyone. Thank you for hanging in there.

Public comment. Anyone wanting to provide public comment here in the room, say none unless. Mr. Toppin, do you want to give any public comment? Is that why you're waiting here? Okay. Right here? Yes. No one here in the room. So we're going to go on. Just as a reminder, today's participant number is 877-226-8163 and the access code is 694-8930 moderator if you would prompt the individuals waiting to provide public comment.

Sure. Ladies and gentlemen, if you are interested in public comment, it is one, then zero. You'll get a line number. We'll put back into queue, and we'll open up your line. That is one, then zero, for public comment. And we will start with line number 175. Go ahead.

Can you give me the total number of people waiting? Moderator sure.

Yes, we have about three in queue right now.

Thank you.

You're welcome.

Go ahead.

Line number 175.

Nicole Wartelman, on behalf of the Children's Partnership, speaking to issue three c at the Children's Partnership, we believe that providing undocumented immigrants with unemployment benefits is an essential investment to create a resilient, equitable economy that works for everyone and that invests additional resources for the well being of children and immigrant families. Nearly half of California's 9 million children are part of immigrant families, and an estimated 20% of all Californians under 18 live with an undocumented family member or are undocumented themselves.

Despite the fact that undocumented workers play a key role in California's economy, contributing an estimated 3.7 billion in annual state and local tax revenues, they and their families continue facing severe economic instability. The children's partnership urges the Legislature and the administration to create an unemployment benefits program for unemployed workers. Thank you for your consideration.

Thank you for calling.

Next thank you. Next we will go to line number 177. Please go ahead.

Good evening, Madam Chair. Robert Mooch for the California Chamber of Commerce, and I want to first applaud your endurance for this hearing. I want to turn to two budget items on EDD. First, issue three, a and B. I want to say that Chamber of Commerce and our affiliates are glad to see that the EDD Next program is moving forward and glad to see that fraud protection is part of that process. I've personally received a number of fraud attempts in the last two weeks.

I know the issue is still happening. I want to urge DED to continue this effort and keep in mind the importance of fraud prevention. Specifically, we would like to see the federal ial two, verification level for identity protection maintained. Second, I'd like to speak to the budget on the UI debt. This is issue four. We are disappointed to see the removal of the budget items related to the UI Fund Aid, as well as a tax release for small businesses related to the UI taxes. Appreciate the issue being raised in the agenda and the documents. Thank you for your time.

Thank you for calling. Appreciate it. Next, please.

Okay, we have 166, please go ahead.

Yes, good afternoon. Vanessa Teran, Policy Director, calling on behalf of the Mixteco Indigena Community Organizing Project from the Central Coast and here as part of the safety net for all coalition for issue 3d. During the recent storms, we saw California finally get rain that was much needed for the land.

But this was bittersweet because at the same time, many undocumented farmworkers were displaced from being able to work because the fields began to get flooded and Strawberry crops were lost during the peak season of harvesting. Both farmers and farm workers are struggling to get back on their feet, particularly our undocumented farm workers, as they're currently excluded from traditional unemployment benefits and are currently having a hard time being able to pay for the high cost of rent, food and fuel.

And this is causing major stress upon our community's mental health and well being. So with that said, we really want to thank Senator leaders for including safety net for all as part of its key values, and we want to urge you to continue to push to ensure that it is included in the final budget. Thank you so much.

Thank you for calling.

And we do have one more left in queue here, and that would be line number 178. Please go ahead.

Hi, yes. Good evening. My name is Carlos Amador. I am coming from Los Angeles, and I'm part of the Safety Net for All Coalition. Thank you, everyone, for community Members for listing the issue of unemployment benefits and also touching on the point of unemployment benefits for undocumented workers. We know that last year the Governor said that the issue of undocumented workers and unemployment benefits should be considered through the annual budget process.

And so we look forward to engaging more with the Senate on this issue and seeing this proposal, the safety net for all proposal included in the budget for this year. Thank you.

Thank you very much for calling.

All right, we do not have any more in queue. Madam Chair, you may continue.

Thank you. Moderator thank you to all the individuals who participated in public testimony today. If you were not able to testify, please submit your comments or suggestions in writing to the budget and fiscal review Committee or visit our website. Your comments and suggestions are important to us. We want to include your testimony in the official hearing records. Thank you. We appreciate your participation, and thank you, everyone who hung in there with us for your patience and your cooperation. We have now concluded the agenda.

I want to thank the staff very much for all that you do to make this run so smoothly. And our consultant, Dr. Francis, everyone who's helped make this possible. We've concluded the agenda for today's hearing. And it is. Committee number five is now adjourned. Bam.