Senate Standing Committee on Judiciary

The Senate Committee on Judiciary will come to order. Good afternoon. We're holding this Committee hearing in room 2100 of the O Street building. I ask that all Members of the Committee be present in room 2100 so we can establish our quorum and begin our hearing. Before we begin presentations on today's Bill, we still need one more Member. One more Member. I want to announce that file item number 10, SB 1124, by Senator Menjavar, has been pulled by the author.

I also want to note that I will be presenting item number seven, SB 1366, by Senator Tahoe. And that will probably be the very last Bill that's presented here today. For those of you waiting, let me now announce the bills that are on the consent calendar. The following bills are on the consent calendar today. [Consent calendar].

[Consent calendar]. All right, I see that we have Senator. I see we have Senator Becker. Several people are pointing to you, Senator Becker. So let us.

Let us take up Senator Becker, since he is the only author here. SB 1095, Senator Becker. We're going to commence as a Subcommitee here.

Good afternoon, Chair Umberg and Members, I would like to start by saying I will accept the amendments to better align implementation dates for this Bill. And due to our amendments taken in Senate housing, we believe there's no longer any opposition to the measure. SB 1095, the Cozy Homes Cleanup act, will make it easier for homeowners to convert from gas to electric appliances, making it easier for California to achieve our emissions reduction goals.

Right now, there are legal ambiguities or delays in approval of installation from a common interest development, such as a homeowner Association. That can add time or cost the process of allowing residents to make the switch from gas to electric appliances. This is particularly burdensome in cases of appliances at the end of life, where a family will not wait and take cold showers for three to six months for their HOA to approve replacement water heater installations.

There are code ambiguities at the Department of Housing and Community Development that make it challenging for manufactured home residents. Also, to convert from gas to electric. SB 1095 will clear up code ambiguities and make it easier to transition by, number one, avoiding any policies within a common interest development that prevent the replacement of fuel gas burning appliances with an electric appliance. And number two, requires the Department of Housing Community Development to update the guidelines to facilitate the transition from gas to electric appliances.

With me today, I have Alan Abs of the Bay Air Quality Management District and Sam Samuelson on behalf of the Building Decarbonization Coalition. A lot of alliteration in our witnesses today. Thank you.

The ground rules. Thank you, Erika. Let me announce the ground rules here. That will apply to all bills unless I say otherwise. So we will have two primary witnesses in support and two primary witnesses in opposition. On each Bill. Each primary witness will have two minutes to speak. After primary support, I'll invite other supporters to state their name, their affiliation, their position. We refer this as me, too testimony. Just to be clear, that's all we'll permit is your name, your affiliation, your position.

The same will apply to the opposition. They'll have two primary witnesses. Each will have two minutes after we hear from support and opposition. Then we'll turn to comments from Committee Members. If you wish to provide us further information on your position on any Bill, you may submit a letter to the Committee. You should refer to the Committee's website for the instructions as to how to submit. We now have. I think we have a quorum, so why don't we. Senator Nielo left. All right. Okay.

We were very. We were very close. We were very, very close. All right. Thank you for your patience, Senator Becker. We'll go ahead with your first witness.

Thank you. Good afternoon, Chair Umberg and Members of the Committee. My name is Alan Abbs, with the Bay Area Air Quality Management District, which is the local air regulatory agency for the seven and a half million people of the nine county Bay Area region and the sponsor of Senate Bill 1095.

SB 1095 seeks to eliminate barriers to homeowners wanting to transition from natural gas to electric appliances, which will assist California in its goal of having 6 million heat pumps deployed by the year 2030, providing benefits to public health. SB 1095 does this in two ways. The first, by ensuring that homeowners associations and common interest developments can't prohibit or unduly delay the installation of electric heating devices in place of natural gas appliances.

Given that even delaying an approval can cause a homeowner to cancel the installation and instead install a similar natural gas appliance, locking in the emissions and health disk benefits for the life of that replacement. The second is by directing the State Housing and Community Development Department to update guidelines for appliance installations and permitting at manufactured homes and mobile homes to give the same discretion to electric appliances as currently exist for natural gas appliances.

Ensuring access not just to single family houses in Non HoA communities, but to all homes, including manufactured and mobile homes, is key for equitable decarbonization across the state. The Bay Area AQMD strongly supports this goal and plans to be involved in this issue for years to come. In closing, I'd like to thank Senator Becker for his leadership on this issue, and I'm here to answer any questions that you have. And I'd also like to add that staff has done a great job capturing this issue in their analysis. And with that, I respectfully ask for your aye vote.

Thank you very much. Before we move on to our next witness, why don't we establish a quorum? Madam Secretary, if you would call the roll for of establishing a quorum.

[Roll Call]

We have a quorum. All right, great. Thank you. Your next witness, Senator Becker.

Good afternoon. Chair Umberg and Members of the Committee. My name is Samantha Samuelson on behalf of the Building Decarbonization Coalition, otherwise known as BDC, in support of Senate Bill 1095. BDC is an Association of manufacturers, utilities, local governments, and environmental nonprofits, all focused on eliminating pollution from buildings to improve people's health, prioritize high road jobs, and ensure that our communities are more resilient to the impacts of climate change.

We thank Senator Becker for his leadership in authoring SB 1095, which will clean up outdated building and safety code language inhibiting or delaying building and home electrification. SB 1095 brings California closer to meeting our state's goal of 6 million heat pumps deployed by 2030 by preventing the prohibition or unduly delay of electric heating device installation and updating guidelines for appliance installations to include equitable discretion for both electric and gas, excuse me, appliances. BDCs Members find real benefit to this legislation.

Sean Armstrong of Redwood Energy reports that most manufactured homes built before 1980 and many built since then have multiple barriers to installing heat pump units inside the building. Covenants that restrict insulation can leave occupants without access to the cooling benefits of heat pumps, frequently existing water heater closets can only accommodate 30 to 40 gallon units, limiting the ability of home occupants to take advantage of demand response programs that improve affordability of the unit to the occupant and the grid.

BDC has also heard from an existing mobile home occupant who cites an existing HOA limitation keeping their park from allowing external installation in mobile homes. As buildings are responsible for roughly two thirds as much NOx pollution as the state's 16 million passenger cars, we must reduce barriers to electrification and encourage equitable building decarbonization to ensure our state's most vulnerable communities are not left behind. Thank you, Senator Becker, chair Umberg, and Committee Members for the opportunity to testify in support of SB 1095. I respectfully ask for your aye vote.

Thank you very much. All right, now for those of you who wish to testify as to your name, affiliation, in your position, please approach the microphone.

Mister chair Members. Brendan Twohig, on behalf of the California Air Pollution Control Officers Association, representing the air pollution control officers from all 35 local air districts in support.

Thank you.

Good afternoon. Jennifer Tannehill with Aaron Read and Associates on behalf of the Silicon Valley Clean Energy, also in support.

Thank you.

Megan Shumway, representing Sacramento 350 and Climate Action California in support.

Thank you.

Good afternoon. Lillian Marvis with MCE, California's first community choice aggregator, here in support.

This is an appropriate time. The California. Geoff Neill represented the California Manufactured Housing Institute, neutral on the Bill as Senator Becker. Our opposition was removed thanks to the amendments.

Thank you. All right, anyone else in support, please approach.

Good afternoon, Kris Rosa, on behalf of the NRDC Action Fund and Silicon Valley Leadership Group, both in support.

Thank you. All right, seeing no one else approached the microphone, let's now turn to the opposition. If you're opposed, please approach.

Thank you, Mister chair Members. Chris Wysocki with WMA and we want to thank the author for accepting the amendments, especially as they relate to outside water, outside appliance installation, and grid system upgrade requirements. We have removed our opposition.

Thank you very much. Anyone else? Any other opposed? Tweeners seeing no one else approach the microphone, let's bring it to Committee questions by Committee Members. Senator Laird.

Thank you, Mister chair. I just have a comment, and I'm doing a very similar Bill this year because it turns out that in mobile home parks where people have individual meters, some have been denied the right to have solar and install solar. And so where they're individual meters, I think that is something that should be extended as a right, and you are doing this with this in another venue and it meets our climate goals, and it allows individual homeowners to make their own choice. I think this is the right thing, and at the appropriate time, I will move the Bill.

All right. I think it's the appropriate time Senator Laird moves the Bill. All right. Other questions? Comments? Senator Caballero.

Thank you, Mister chair. I just wanted to ask, and I apologize if I missed it somewhere. Senator, does this Bill. The date has been changed, and so with the real short date, I was assuming you were doing emergency. Having HCD do emergency regulations with the date change? That may not be necessary. And so is it explained in the Bill that you are not following the APA, or have you anticipated doing emergency regs?

I may ask one of my witnesses to comment with that change. I believe that means that with that change, we're not doing emergency regs, but I'll give a comment.

Yes, Senator. So this wouldn't be emergency regulations. We had talked with HCD staff and asked what their normal timeline was for development, and we were told about 18 months. And so this reflects that.

Thank you very much. I appreciate that. So I don't have any further questions. Thank you.

All right, any further questions? No, seeing none. Senator Laird has moved the Bill. Would you like to close Senator Becker?

Respectfully asked for an aye vote.

All right, thank you. Madam Secretary, if you would call the roll.

[Roll Call]

All right, 8-0. We'll put that on call. I see Senator Bradford's here. Senator Bradford, SB 924. zero, yes. Good idea. Thank you, Mister Vice Chair. Let's go ahead. Is there a motion on the consent calendar? Senator Caballero moves the consent calendar. Madam Secretary, if you would call the roll.

On the consent calendar. [Roll call].

All right, 8-0. We will put that on call. Senator Bradford, thank you for your patience. SB 924.

Thank you, Mister Chairman and Members. SB 924 simply removes the sunset of January 1, I mean July 1 2025 from the Bill I authored, SB 1157 in 2020, which requires landlords of assisted housing development to offer tenants to option of having their rental payments reported to a consumer reporting agency, effectively making this a permanent program. And according to the Census American Community Survey, over 44% of Californians rent their housing.

Yet at this present time, although failure to pay one's rent has a negative impact on one's credit, most Californians who make their rent on time have very little to show for and never receive any benefits to their credit for making those payments in a timely manner. Rent reporting helps individuals who lack credit scores establish those scores, and helps individuals when non prime credit improve their credit scores. And we've already heard dozens of stories since 1157 has passed.

This Bill builds on the success of 1157 and continues to provide a tool for Low income renters in California to improve their credit scores. These renters are still responsible for paying their portion of their rent in a timely manner and pay the fees associated with that. And with that, I respect. That's where I vote.

Thank you, Senator Bradford. Witnesses in support, please approach the microphone. Seeing no one approach to the microphone. All right, any witnesses who wish to provide just me, too. Testimonies in support? Seeing no one approached the microphone. Let's turn to the opposition. You're opposed to SB 924? Please approach, saying no one approach. All right, let's bring it back to Committee Members. Questions by Committee Members. Senator Min has moved the Bill. Would you like to close?

I respectfully ask for your aye vote.

All right. Thank you, Senator Bradford. All right, Madam Secretary, please call the roll.

This is file item number four, SB 924. The motion is do pass to the Senate appropriations. [Roll call].

Put that on call. Thank you. Thank you.

Thank you, Mister Chairman.

Let me just go over the batting order here. So next up, ordinarily would be Senator Eggman with SB 1017. After that, as I mentioned, SB 1366 by Senator Hurtado. I'm going to present that, but at the very end of the hearing, I see Senator Eggman coming in. Next would be Senator Limon on item number eight, SB 1061. And then, as we announce, Senator Menjivar's Bill, SB 1124, has been pulled. So if you're here for SB 1124, that Bill has been pulled. All right, so, Senator Eggman, SB 1017.

Thank you very much. And I don't think this Bill will be a surprise to anybody. We've done it quite a few years now. I was talking to a reporter today who said she never expects this one to not get through.

But we're coming back again one more time. This we're talking about, as people know, right when people come into a facility with some kind of mental health, substance abuse disorder, oftentimes their first point of contact is the emergency room, and then there's a determination about where that person should be placed and then a transfer needs to occur.

Oftentimes it takes hours, days, a long time to be able to find a place, because most of the time, the place or the social worker is calling different facilities to see if they have a bed, how far that bed is, if they can accept this client or that client. Anyway, so we have been working for quite a few years now, and now the Department has agreed with us and are in support.

And we're not calling it a bed registry, we're calling it a bed solution because it may need to be creative with how we do it, because we understand this is difficult to do, but to be able to have a solution that has a database of all the places that have beds, what the criteria is for those beds, if there's an opening or not, so that somebody can be much more expediently sent to either a higher or a lower level of care as their condition requires. That's basically the onus of what this does.

The attempt is to streamline, to make things easier, to get people to a level of care. When I presented this in health, people said, well, will people have to accept patients? No. A facility always has to agree to accept a client before a client is transferred. They're not just dumping people. They would still have to have that, but at least they would know where there's an opening and where there's an appropriate opening. Another question always comes: Will we have to accept people from out of our area?

Like, if we've done a good job of developing our beds, would we have to? You don't know. You never have to. But this would also serve then, as a data tool. So then we'd know, zero, this county doesn't seem to have any adolescent locked units, and they have to go 200 miles to another county. All of that is information on discharge, on placement, all of that. So it makes sense to have a solution that incorporates all of this.

You'll hear some concern from the behavioral health directors because there is a fine if people don't update it, because, as we all know, there's a lot of databases that we're trying to do that with our health records and every system doesn't come on in the same amount of time and are resistant to oftentimes sharing that data.

So there is, of course, we don't want to attach a fine, but sometimes if we know if there's no fine, then it just becomes a suggestion versus an enforceable law. So there will always be an attempt to not have a fine. But you may hear that at some point. So I will ask for your aye at the appropriate time. Again, this is something you've all heard me talk a lot about.

A bed registry, a bed option process to have all the data in one place, to be able to understand where there's openings, where there is not, and how do we move clients most effectively through the system. With me here in support today I have Randall Hagar, legislative advocate with the Psychiatric Physicians Alliance, as well as Danny Offer with the National Alliance on Mental Health.

Thank you, sir. Mr. Chairman, Members of the Committee, Randall Hagar, representing the Psychiatric Physicians Alliance of California. My guys work in hospitals, they work in emergency rooms, they work in a lot of different kind of spaces. And when they find a patient and that patient has an acute need and that facility at that time cannot meet that need, they need to find it.

And right now the expedient that we are called on to use is to download a paper PDF off the DHCS website and go through it and cold call. That can be a very tedious and long process. We need to do better by patients. This offers us a solution. Senator Eggman described it very, very well and we urge this to your support. Thank you.

Thank you. Alright.

Mr. Chair and Members, Danny Offer with the National Alliance on Mental Illness, also known as NAMI California. NAMI California is the statewide affiliate of the largest mental health advocacy organization in the nation. We have over 110,000 active advocates and 58 affiliates, including many people who are living with a serious mental illness as well as their loved ones. Just briefly on length of stay, patients who are experiencing a behavioral health crisis can expect some of the longest lengths of stay in emergency rooms.

A nationwide survey of over 6000 hospital emergency rooms reported that out of those, more than 70% reported holding psychiatric patients for hours or days. I think we can all agree that any trip to a chaotic emergency room is a vulnerable position to be in, but we'd argue it's especially so for someone in a behavioral health crisis. You've got the glaring lights, the noise, about as much privacy as a train station, and all of these conditions can exacerbate an already crisis level set of symptoms. You're frightened.

You may be paranoid. You may be hearing voices telling you to harm yourself or others. In cases like these, our loved ones truly don't have a minute to spare. We're lucky as a state that we do actually have more beds coming online, thanks to the Behavioral Health Continuum Infrastructure program and Proposition 1 from our good Senator over here.

So we'll be adding capacity around the state, and it'll be even more important to track this capacity to make it easy and effective and efficient to place people where they need to be in order to protect their health. Thank you.

Thank you, Marty. Thank you. Others in support, please approach microphone.

Tara Gamboa-Eastman with the Steinberg Institute in support.

Thank you.

Good afternoon, Mr. Chair and Members. Usha Mutschler, on behalf of the California State Sheriffs Association, in support.

Thank you.

Good afternoon. Betsy Montiel with the League of California Cities in support.

Thank you.

Mr. Chair and Members. Paul Yoder, on behalf of the California State Association of Psychiatrists, the other co sponsor on the Bill, urge your aye vote. Thank you.

Thank you. All right, seeing no one else approach the microphone, let's turn now to the opposition. If you're opposed to SB 1017, please approach.

Thank you, Chair and Senators, for your time here today. My name is Amer Rashid and I'm here on behalf of the County Behavioral Health Directors Association of California, the leaders of the public behavioral health agencies that serve the mental health and substance use disorder needs of the Medi-Cal, uninsured, and underinsured populations. We respectfully have an opposed, unless amended, position on this bill.

While CBHDA commends the author for seeking to address the delays that those in psychiatric crisis too frequently experience when attempting to access vital services, particularly as the state undertakes important new facility construction with the passage of the Behavioral Health Services Act, we believe that any of the approaches taken must be feasible, workable, and guided by partnerships rather than punitive approaches.

CBHDA appreciates the approach outlined in SB 1017, which includes conferring with stakeholders to inform the development of this database, recognizing how critical stakeholder buy in is for ensuring effectiveness of a registry as the bed registry successes in other states have shown. As the leaders of the public behavioral health agencies in California, we recommend an amendment which includes county behavioral health as a part of the stakeholder buy-in, as well as was included in last year's version of the bill.

However, CBHDA is concerned with the punitive provisions in SB 1017, which ultimately allow DHCS to assess a plan of correction or penalties against a facility for failing to submit data in a timely manner when the scope of this database has yet to be developed.

We understand that DHCS is already exploring options to track the availability of inpatient and crisis stabilization beds on a statewide basis as part of the BH Connect Demonstration Project, and CBHDA does believe our state could benefit from a more thorough inventory of available inpatient beds. But the parameters of that approach must be feasible and realistic, especially when it requires frequent manual updating by staff. And as previously stated, we believe that approach should be guided by partnerships rather than premature punitive approaches. Thank you, and we look forward to continuing conversations as the state undertakes important new investments in behavioral health facilities.

Alrighty. Thank you very much. Others opposed to SB 1017, please approach. Seeing no one else approaching the microphone, let's turn to the Committee. Questions, comments by Committee Members? I'm sorry, I heard somebody say something. Senator Stern has moved the bill. All right. Senator, close.

Thank you very much. Thank you for your time today, and we will continue to work with all the stakeholders. We don't want to be punitive, we just want things to work. Thank you very much for your aye vote.

All right. Thank you, Senator Eggman. Before we call the roll, next up will be Senator Limon, then Senator Skinner. I know Senator Skinner is chairing another Committee. Then Senator Wiener, then Senator Allen. Looks like we're moving too fast. Words never been said here in Senate Judiciary Committee, never been uttered. All right, so let's go ahead and call the roll, Madam Secretary.

Okay, this is file item number six, SB 1017. The motion is do pass to Senate Appropriations. [Roll Call]

All right, we're gonna put that bill on call. Nine to zero. We're gonna put it on call. Senator Allen has moved with great alacrity to the podium. Thank you very much, Senator Allen. Go ahead, Senator Allen. SB 1441.

Well, good afternoon. With great alacrity, I'd like to accept the. The Committee's amendments and thank Amanda and the Chair for all their work. As you may know, when an election petition receives insufficient signatures to qualify for the ballot, state law provides proponents with the opportunity to examine the petition in reasons for the signature rejections. And if a proponent then seeks to examine or review the petition, the examination must commence with within 21 days of the certification of insufficiency, as it's called.

So while the law establishes a timeline for the initiation of the review process, it's absolutely silent as to the timeline for concluding the examination. And this is enabled in a few cases, but rare but significant, some petition proponents to exploit their access to public resources by employing an indefinite time period for a review that poses significant impacts on county elections, department staff, time, resources, and ultimately, and most importantly, taxpayer dollars. So, to be clear, petition reviews typically occur over the course of only a few days.

Most will last only about one or two weeks. But there was one recent case in LA County where petition and proponents initiated a process to review tens of thousands of signatures that literally lasted 14 months. The review overlaps with the 2022 general election. It taxed the county staff time for conducting the election. And this one review, which ultimately, you know, didn't find any problems that made a change in the result it cost the county.

This one review cost the county $1.5 million alone to provide proponents dedicated office space, computers, temporary staff to accommodate their requests. These were all costs that the county was absolutely unable to recover, which meant that direct impacts on the county's General Fund and ability to provide critical services to their constituents was compromised. We, of course, enacted the Voters Choice Act in 2016.

It was followed by a greater shift to mail ballot elections since the COVID pandemic, and as a result, elections have become somewhat more complex and officials have the duty to ensure that our elections are fair, transparent, and lawful. This duty extends to all aspects of the election process and requires that election activities, including review of failed petitions, are managed effectively and efficiently.

And this is oftentimes difficult when you've got a couple actors out there that may be exploiting the indefinite time to examine failed petitions, and they have no obligation at all to reimburse the county's costs. And so this is untenable for our counties. And this bill addresses this critical gap in statute in two ways. First of all, it establishes a 60 day limit for proponents to examine a failed petition.

This mirrors existing timeline that county registrars have to examine a statewide petition if the random sampling results require a full examination and verification of all petition signatures. Secondly, it enables county elections officials to recover the costs associated with the additional personnel and resources used to conduct these examinations. These are costs in excess of the general operating cost of running the county elections office. This mirrors the existing cost recovery mechanism employed in voter initiated recount efforts.

With the statutory timeline, our officials will be able to better determine the impact that petition reviews have on their operations and allocate resources accordingly. And a cost recovery mechanism will help to encourage all parties to use resources efficiently. And with me today to testify and support is Audilia Lozada, who's division manager at LA County Registrar Recorder's Office.

Thank you.

Good afternoon, Chair Umberg and Members of the Committee. My name is Audilia Lozada and I am a division manager for the Los Angeles County Registrar Recorder County Clerk's Office. Thank you to Senator Allen for this opportunity to speak to the honorable Members of the Committee. Los Angeles County is proud to sponsor SB 1441. As Senator Allen stated, this bill does two things.

First, it establishes a 60 day period for petition proponents to complete their examination of disqualified signatures on petitions that fail to qualify for the ballot. This 60 day period, as Senator Allen mentioned, is aligned with the timeframes that elections officials have to initially review those same signatures. Second, thanks to the clarifying amendment, this bill allows elections officials to recover the actual costs of inspecting disqualified signatures when those costs exceed the office's normal operating budget.

The cost recovery provisions of SB 1441 help to ensure that additional public funds are not used when proponents of a failed petition request to inspect disqualified signatures. Currently, existing law does not address how long petition proponents may examine disqualified signatures, nor does it address who pays for those costs to securely and present petition documents for public inspection. By addressing this gap in law, SB 1441 significantly improves elections officials ability to manage the examination of failed petitions efficiently and responsibly. I respectfully request the Committee's aye vote on SB 1441, and I'm happy to answer questions you may have. Thank you.

Thank you very much. Other witnesses in support of SB 1441?

Good afternoon. Larissa Mercado, on behalf of the California Association of Clerks Election Officials, proud co-sponsor and in support. Thank you.

Thank you.

Good afternoon. I'm Eric Lawyer speaking on behalf of the California State Association of Counties, representing all 58 counties in support. Thank you.

Thank you. Others in support? Seeing no one else approach the microphone, let's turn to the opposition. If you're opposed to SB 1441, please approach the microphone. Seeing no one approach the microphone. All right, let's bring it back to Committee. Questions? Comments? Senator Min I think moved the bill. You were first up. All right. Senator Min has moved the bill. Senator Allen, would you like to close? Senator Durazo. I'm sorry.

Yes. Just a simple question. Could you review again what the costs are that somebody would be responsible for reimbursing?

So, yeah, so basically, the bill, it's reasonable costs associated. They go in excess of a typical, and you can probably give a better answer here, but it's reasonable costs to go in excess of the normal course of business of the review. Is that right?

Sure. So one example of the particular costs that would have been recoverable if SB 1441 were to be passed were to say, for example, set up public viewing access terminals to support more representatives reviewing those petitions than the office normally would keep. So traditionally, elections officials have one to two public viewing access terminals. In the case that Senator Allen referenced, Los Angeles County set up nearly 20 of those public viewing access terminals.

Staff time to operate the election management system to show the proponents the information that they're allowed to inspect while also maintaining voter privacy is an example of the costs that could now be recoverable if 1441 was passed.

And is there a sense of, if somebody says, I want this, make the request for this to be done, is there a sense in advance of what an estimate that would be given, or is it just like whatever it is? Here's the bill. You know, if I did that, what would you tell me as far as the potential cost?

The cost recovery mechanism in this bill is very much modeled after voter requested recounts, for example. And so in these particular cases, I would anticipate that a requester would come to the elections official and say one of two things. I would like to review the disqualified signatures in this order, or I would like to review the disqualified signatures, and I'm not quite sure what the order is.

And the election local election administrator could provide some guidance on how to efficiently manage that process. The local elections official will be responsible for assessing the costs to do that, and then the proponents of the failed petition would be asked to give a daily deposit so that each day that we were to support the petition examination process, those costs are paid upfront.

The day's work continues, and therefore, the continued effort would be funded by the proponents of the failed examination as opposed to the public funds, as Senator Allen noted.

Thank you, Senator Durazo. Other questions? Seeing no other questions or comments, I believe Senator Min has already moved the bill. All right, Senator Allen, would you like to close?

Respectfully ask for your aye vote.

Thank you. All right, Madam Secretary, please call the roll.

This is file item number 18, SB 1441. The motion is do pass as amended to Senate Elections and Constitutional Amendments. [Roll Call] Eight to one, with Members missing.

8-1. We'll put that on call. All right. I see that Senator Limon is not here. I see that Senator Skinner is not here. So next up would be Senator Wiener, an alumnus of the committee. Thank you, Senator Wiener. Senator Wiener, assume you're going to first present SB 957. All right, I see you've got refreshment with you. You think you're going to be here a while?

Just a little coffee. All right. Thank you, Mr. Chair. It's good to be back. Thank you, colleagues. Colleagues, SB 957 is a bill to help address a significant gap in our healthcare system, specifically the collection, or, frankly, lack thereof, of health data related to sexual orientation and gender identity. For far too long, frankly, forever, efforts to collect LGBTQ data have been dramatically undermined by institutionalized erasure under the guise of potential privacy concerns.

Basically very antiquated attitude that if you're gay or lesbian or bi or trans, it's somehow a dirty secret, and we shouldn't be asking people any questions about that. As a result, we lack, dramatically lack information and basic data about health impacts and health status within the LGBTQ community. We routinely on health forms, and we've all seen it. It's very, very common when you're filling out a health form that I will ask you. Your age, your gender, your race.

You don't have to answer those questions, but most people do. And that's why, for example, at the beginning of the COVID-19 pandemic, when we very quickly saw that older people were at greater risk of serious illness and death, that Latino people were getting sick at much higher rates, that Black people were dying at much higher rates, and so on and so forth, the only reason we knew that is because we asked people to answer those demographic questions when they filled out health forms.

When it comes to LGBTQ people, we traditionally have not done that. And so we were flying blind. We had no idea what was happening. We had a sense that there were disparities, but we didn't know for sure. Our former colleague, Assemblymember Chu had authored a bill almost a decade ago to require better data collection. Then I authored a bill that was signed into law in 2020 to require Department of Public Health to do more. Unfortunately, more was not done for the most part.

And so we requested an audit through JLAC a few years ago of CDPH's implementation of requirements to collect this data. And what that audit showed was that the Department may have been doing the very, very bare minimum, perhaps, but that on the vast majority of health forms, the questions were not being asked. And so this bill implements the auditor's recommendations.

It will require that CDPH collect this data from third party entities, including local health jurisdictions, on any forms or electronic data systems, allow voluntarily provided data relating to sexual orientation and gender identity to be included in the statewide immunization registry, and lastly, require the Department to provide an annual report on its efforts to do this data collection. I respectfully ask for an aye vote.

And with me today to testify is Isaias Guzman, the manager of programs with the California Health and Human Services Network, and Eva Banas, the advocacy and training lead with the Sacramento LGBT center.

Go ahead. Floor is yours.

Good afternoon, Chair Umberg and Members of the Committee. My name is Isaias Guzman, and I'm representing the California LGBTQ Health and Human Services Network. I'm here today to share with you about the importance of demographic data collection to understanding and addressing the unique health needs among the diverse communities in California. Without demographic data information, we cannot know where the disparities exist among underserved populations on how to create effective public health interventions to address those health gaps.

The network has actively supported efforts to improve the uniform collection and reporting of SOGI data over the last decade. In 2015, as mentioned earlier, we worked alongside a coalition of LGBTQ statewide partners to support AB 959 by Assemblymember David Chu, which required California health departments, including CDPH, to collect voluntary SOGI information and report those findings to the public.

In the years since its enactment, we've seen very uneven implementation of this bill, and despite the existing laws in place, we still do not have accurate or consistent stochastic data in our state health programs. This has negatively impacted how public health programs and local community organizations respond to the unique health needs of LGBTQ communities, and this deficiency was made extremely clear in 2020 during the greatest public health crisis in a generation where we learned that COVID-19 was having devastating impacts on disadvantaged populations.

Except how COVID-19 was affecting LGBT communities during this time, CDPH created a dashboard that illustrated the disparities by race and ethnicity and many other demographic factors which allowed public health departments to tailor interventions towards the most impacted populations. However, there was never complete data on LGBTQ communities, and we know from the data that we do have, and from the stories of our partners across the state that COVID-19 disproportionately affected LGBTQ Californians.

But unfortunately, because of the lack of existing SOGI data collection standards, we will never know the true toll of the pandemic had on our communities. This lack of SOGI data prevents state and local programs from being able to adequately allocate resources to respond to the greatest need, because we don't know where that need is.

That is why SB 957 will make sure that LGBTQ communities are visible and can receive equitable care and services, and why the network respectfully asks members of this committee for an aye vote. Thank you.

Thank you very much. All right, others in support.

Good afternoon, Mr. Chair and Members. My name is Eve Banas with the Sacramento LGBT Community Center. Happy to be here today to speak in support of Senate Bill 957. At the LGBT Center, we often hear firsthand accounts about the lack of affirming healthcare and social services available to LGBT community members. LGBT people are often left to rely on each other for support, information and care to make up for the lack of available resources.

This lack of support can be attributed to many issues, including pervasive stigma, misinformation, and an incomplete understanding of what community members need. LGBT people should not have to fill in these gaps by themselves, and one important way to address these issues is by prioritizing better sexual orientation and gender identity data. The LGBT community experiences extensive health disparities, including heightened rates of depression, anxiety, suicidality, certain types of cancer, STI, substance use, cardiovascular disease, and disability. Overall to reduce these health disparities.

We need to understand community members unique experiences and needs, particularly those who have multiple marginalized identities. To do this, we need complete SOGI data. If we do not prioritize this type of data collection, we risk perpetuating the same problems that LGBT community members have been navigating for generations. Queer and Trans folks need us to do better, and we believe that Senate Bill 957 is a much needed solution to reduce existing health disparities.

Given all this, the Sacramento LGBT Community center strongly recommends Senate Bill 957, and we urge you to support this important legislation. Thank you.

Thank you. All right, others in support, your name, your affiliation and your position.

Craig Pulsipher for Equality California co sponsor and strong support.

Thank you.

Donita Stromgren, member of California AARP on behalf of the 3.2 million members in California in strong support.

Thank you.

On behalf of APLA Health and the San Francisco AIDS foundation in support.

Thank you.

Good afternoon. Linda Way with Western Center on Law and Poverty in support.

Thank you.

Katie Van Deynes with Health Access California and support. Thank you.

Nicole Morales on behalf of Children Now in support.

Thank you. Seeing no one else approaching the microphone in support of SB 957, let's turn the opposition. If you're opposed SB 957, please approach.

Good afternoon. Erin Friday, Democrat, Our Duty. I voted for same sex marriage. SB 957 requires schools, health providers, and a multitude of entities, including schools to out Californians to the Department of Public Health. The intent of this bill is the same exhausting trope that the LGBTQ community is so marginalized that they need an endless stream of government services and rights. Name one right. A gay person is lacking as compared to a straight person. But this is not about gay rights.

Tethering the LGB to the TQ plus is another way to trick people that no one is or that one is born Trans, as opposed to transition medicine being used to sterilize a generation of gay and autistic kids by telling them that they were born wrong. This is the same marginalized group that forces people to call a man a woman. The group that is erasing the word woman from our laws. The group that permits men with penises to watch little girls undress, shower and use our bathrooms.

The marginalized rapists, murderers, and baby killers who can choose which prison to serve their times as well as their cellmate. The same group that forces insurance to pay for body contouring, hair removal, facial surgeries, and a whole host of other cosmetic surgeries. This group has 145 days a year dedicated to their recognition, while detransitioners are told that the harms perpetrated against their bodies were just part of their gender journeys. Suck it up, Buttercup. Where is the data that is tracking all the murdering Trans people?

Rivers, Moseley, Aldrich, Mckinley, Marcelon, Hale. Where is the data keeping for all of the males who are masquerading as females, taking female trophies, places on teams and scholarships? This bill is a money grab. It's a way to pour more unnecessary dollars into funding all things Trans. You and your cronies are raking in millions on commoditizing self loathing, aka gender disorder and ein godophilic fetishes. Vote no.

All right, next witness.

Good afternoon. My name is Nicole Young, and in the State of California, we have been data mining based off race for as long as I can remember, with the explanation being it will be used to close the health gap, education and employment disparities. What has actually happened is we have not seen an improvement in health outcomes, and we have dumbed down education, taking away opportunities for the very people we were told it would help.

It is most evident in Senator Wiener's district in San Francisco, where they removed higher level mathematics, and they are now bringing it back. These measures created more division, more segregation, and more discrimination. We poured money into programs that did not create a flourishing California. As our state faces an unprecedented budget deficit, we should not be pouring more money into programs based off identity politics. We should not be doing more data mining in the name of equity and creating another area of segregation in California. For these reasons, I'm asking for a no vote on SB 957. Thank you.

All right, other witnesses in opposition, please approach the microphone. Give us your name, your affiliation, and your position.

Greg Burt with the California Family Council, in opposition.

Thank you. All right.

Yvette Corcoran, registered nurse, San Francisco resident. I oppose this bill.

Next witness. Seeing no one else, approaches the microphone, let's turn to Committee Members. Questions by Committee Members. Comments? Senator? Senator Lair, did you. All right, Senator Stern has moved the Bill. All right. Senator Wiener, would you like to close?

Respectfully asked. Respectfully, I ask for an aye vote.

All right. Madam Secretary, please call the roll.

This is file item number 15, SB 957. The motion is due. Pass the Senate appropriations. [Roll Call]. Eight to two every. Wait a minute. No, not everyone is here. Eight to two. One Member missing eight to two.

All right, thank you. We'll put that Bill on calls, eight to two. All right. Senator Wiener, SB 1047. Before we begin on SB 1047, just a couple of comments. First off, all bills are important. This Bill is among the most important bills that I think we're going to consider this year. And I am fully aware, as is the author, that whatever we do here in California sets the metrics, sets the guidelines, sets the law, the regulation for the United States, and maybe even beyond.

I know that sounds like a bit of hubris, but it is not intended to be such. I think it is the reality. There's a number of folks here in the audience who I know wish to testify. I'm sure that there's a number of folks who are watching us in their homes and offices. We don't need to know that. We know that. We know the implications of whatever we do here in California. We are going to have been asked about expanding the opportunity for testimony.

For those of you who are not familiar with the process, is that this is assuming the Bill gets out of Committee. I think it will. This is a first step in a very long journey through the Legislature. So there are many opportunities and we welcome written materials. I've encouraged folks to provide us written materials because this is, I think, as Senator Wiener will attest, this is a work in progress. And we do want to make sure that we get this as right as we possibly can.

There's a tension between making sure that we encourage entrepreneurial development of artificial intelligence, but we also, we protect against those harms that are, are attendant to artificial intelligence. So having said that, we're going to maintain the usual protocol here in Senate Judiciary with two witnesses in support, two witnesses in opposition, and as many as those are physically present in the room may testify in me too testimony. Having said that, thank you, Senator Wiener, for your work on this. The floor is yours.

Thank you very much, Mister Chairman. And I will start by saying that I strongly believe that good safety absolutely enhances innovation. And so we very appreciative of you agendizing the Bill today. And I want to thank personally thank you and your staff for spending a lot of time working with us, even, I think, before we introduce the Bill, and as you and I have discussed, we'll continue that engagement moving forward. And I appreciate that.

I am happy to accept the amendments that the Committee is requesting, which are changing a drafting error in the definition of covered models, adjusting definition of AI to make it consistent with other bills, adding some co-authors and again, we will continue to engage throughout the legislative process. So, colleagues, I'm here to present SB 1047. The legislation has two main goals. First is promoting the responsible development of so called frontier artificial intelligence models. And by frontier, we mean very, very large, powerful models.

Powerful beyond what we even probably could have imagined not that long ago. So these are the frontier of size and power. And second, supporting competition and promoting innovation in the artificial intelligence field. We know that California has become a vibrant hub for artificial intelligence. And I don't want to brag too much on my city, but San Francisco, I am very proud of the AI innovation that is happening in our city. AI has enormous potential to benefit our state, our nation, and the world.

Every week, we are hearing about new, incredible things that are being created via AI, whether a model that is an AI model that's discovering a new antibiotic that happened recently, or decoding ancient manuscripts that physically can't be opened because they're so old and they would fall apart. But AI was able to actually decode them. We're strengthening our clean energy supply chains.

California must be in the lead and support and invest in the development of this technology in government, in business, in civil society, to ensure that our state remains on the cutting edge. And that is something that I am deeply, deeply committed to. At the same time that we are innovating and helping this technology make the world a better place.

We know that scientists, engineers, business leaders, including scientists who help create artificial intelligence, including two of the most cited machine learning researchers on the planet, researchers who, by the way, have officially endorsed this legislation. They have repeatedly warned policymakers that failure to take appropriate precautions could have severe safety consequences for our state and for the planet in the future. The most powerful AI models could pose serious dangers to public safety and national security if they are developed recklessly.

These dangers include risks to critical infrastructure and the threat of novel biological weapons and cyber attacks. For any new technology to succeed in being adopted and accepted widely, as I believe this technology should be, potential users have to trust that it is both safe and compatible with their needs and values. AI developers in California have already taken important first steps in pioneering the safe development of this technology. But we cannot afford to be complacent.

With Congress paralyzed and the future of the Biden administration's Executive order in doubt. Legally, California has an indispensable role to play in ensuring that we develop this technology responsibly. I will note, I'm sure you will hear today, this is something that should be handled by Congress. Well, that would be great, but I would ask the folks who are making those statements, how many laws has Congress passed around social media and data privacy?

And that answers the question, whatever we think should happen at the federal level, it's not happening. SB 1047 builds on the foundation of important measures already taken by Governor Newsom in his Executive order relating to government agencies. SB 1047 complements these efforts. It sets out clear standards for developers of these extremely powerful AI models, systems that meet the bill's threshold of 10 to the 26th flop, which is a technical term that you will hear about. It means really, really big and powerful.

And that would typically cost more than $100 million to train and would be substantially more powerful than any system that exists today. So this Bill only regulates systems that don't even exist yet today. They will soon, and they are extremely powerful. SB 1047 clarifies that developers of these models must take basic safety precautions, such as pre-deployment safety testing and cybersecurity protections. These responsibilities, again, only apply to the largest models. We know that. If we know that. Sorry, my apologies.

And again, this is going to help us remain in the lead on innovation. The Bill also creates a new advisory council to advocate for and support safe open source AI development. Open source is incredibly important in fostering innovation. We also need to make sure that it is done in a safe and responsible way.

SB 1047 creates whistleblower protections for employees of frontier laboratories and requires companies that provide cloud compute for these very large models to institute a know your customer policy to prevent the dangerous misuse of AI systems. So I just want to stress, as we said at the beginning, this Bill, this is the first stop on what is a long journey for this Bill.

I know that we've done enormous work over the last year on this Bill with a wide array of stakeholders, including people who love the Bill and people who don't love the Bill. And we have had an open door, and we'll continue to have an open door. And it is a growing coalition with a lot of startups that are supporting it, people who have founded companies and understand what the risks are.

And I am really optimistic that we will be able to produce a very, very strong law for California. So I respectfully ask for your aye vote. And with me today to testify are Nathan Calvin, who is the senior policy counselor at the Center for AI Safety Action Fund, one of our sponsors, and Sneha Revanur, the President of Encode Justice, also one of our sponsors.

And I also want to note that Chris Painter, the Policy Director at the Model Evaluation Threat Research Meter, is here for technical questions. Meter is heavily relied on by large labs for safety evaluation purposes. Thank you.

Alrighty, thank you. First witness, please.

Chair Umberg, and, Members, I'm honored to testify here today in support of SB 1047. My name is Sneha Revanur, and I'm the 19 year old leader of Encode Justice, a global youth movement for safe, equitable AI. We're one of three co-sponsors of this critical legislation. I created Encode Justice in 2020 as a teen growing up in San Jose.

Since then, this movement has expanded far beyond California, but our state, home to the top tech giants, is still front and center in the global fight for AI guardrails. Put simply, all of humanity will benefit from urgent action within this chamber, starting with young Californians like me. Our society has already failed to rein in exploitative social media platforms. In turn, I've seen my peers grow addicted to screens and be nudged to suicide. Now we face an even more transformative AI.

Earlier this year, OpenAI unveiled Sora, a model that can generate hyper realistic video based on just a short text prompt. Just days ago, OpenAI unveiled voice engine, a model that can mimic anyone's voice realistically based on just a short clip. I want to live in a world where AI benefits all of us. But as frontier AI grows exponentially more capable, I'm scared that the risks of severe harm could be compounding, too.

Without our knowledge or consent, a handful of AI companies are slowly and quietly reshaping our future, the future that my generation will soon inherit. As Congress stalls, the moral responsibility of AI oversight falls on California. We must urgently pass SB 1047, which would set common sense AI safety standards and establish Cal Compute so we can protect our young people and elevate our young innovators to give them a chance to compete. All eyes are on California.

For our sake, I hope leaders like you will take notice and take action. My generation will thank you for it. Thank you.

Thank you very much. All right, next witness, please.

Chair Emberg and Members of the Committee, thank you for the opportunity to provide testimony in support of SB 1047. I am Nathan Calvin, senior policy counsel at the Center for AI Safety Action Fund, one of three co-sponsors of this legislation. The Center for AI Safety Action Fund is a policy advocacy organization affiliated with the Center for AI Safety, a technical research organization based in San Francisco that works to shape the safe and secure development of AI systems. The pace of AI progress is astounding.

Four years ago, generative AI systems like OpenAI's GPT series struggled to count to 10. Today, they can write software compose music, and steer robots. AI is already being used to accelerate drug discovery, optimize wildfire response, and uncover rare earth elements for clean energy. However, there are also real risks.

Just this past month, we've seen urgent warnings from the SEC chair about AI's potential to trigger financial meltdowns, new calls from eminent scientists for red lines around risky AI development, and demonstrations of increasingly powerful AI agents autonomously writing code and taking independent actions at scale. In a 2023 Executive Order, the Biden Administration outlined concern that the next generation of large AI models could be capable of enabling novel cyberattacks on critical infrastructure or facilitate the development of novel biological, chemical, or nuclear weapons.

As Senator Wiener mentioned, two of the scientists who have warned about the potential for increasingly capable systems to cause potentially catastrophic harm include Doctor Jeffrey Hinton and Doctor Yoshua Bengio, winners of the computer science equivalent of the Nobel Prize and so called godfathers of AI, who pioneered the development of deep neural networks decades ago. Techniques which underpin recent advances in AI, like chat, GPT.

Both of those scientists have publicly endorsed SB 1047's approach as an important and sensible step forward in addressing emerging risks from the largest AI systems. As a global technology leader, California can ensure the biggest AI systems conform with basic safeguards. California has a critical window to establish a governance framework that promotes responsible development. Requires common sense guardrails.

Calvin, thank you. Wrap it up. Thank you.

Sorry, just my last sentence. Thank you so much for all of your time on this, and we urge your support on SB 1047. Thank you so much.

All right, others in support, please approach the microphone.

Thank you, Mister chair. Members of the Committee, Teri Olle with Economic Security, California action, one of the co-sponsors of the Bill, in strong support.

Thank you.

Good afternoon. Landon Klein from the Future of Life Institute in support.

Thank you. Anyone else in support? That's it. Okay, let's turn to opposition.

Thank you, Chair and Members. Ronak Daylami with CalChamber, respectfully in opposition to SB 1047. Excuse my voice today. We thank the author and his staff for all the work that has clearly gone into this bill. And to be clear, we very much share the goal of ensuring the safe and responsible development of AI. However, we do have some concerns over issues that would preclude us from getting there in a manner that still fosters innovation. Fundamentally, our primary concerns boil down to workability issues and consequences thereof.

We're concerned that the bill dictates compliance with a number of vague and impractical, if not technically infeasible, requirements as drafted. As described in further detail in our letter, these include, for example, terms and standards around positive safety determinations and hazardous capability, all of which lend to incredible uncertainty for businesses and lie at the core of this framework in SB 1047.

We're also concerned that the bill's almost exclusive focus on developer liability for failing to block any and all conceivably harmful uses of a model, even in scenarios where a third party effectively jailbreaks the model, is problematic. With such uncertainty, the high cost of compliance and significant liability exposure, as well as other issues in our letter around open source development and computer cluster requirements, we are concerned that this inevitably discourages technological innovation and our economy.

By hamstringing businesses from developing the very AI technologies that could protect Californians from dangerous models developed in territories beyond our control, SB 1047 risks only making Californians more vulnerable, excuse me. Ultimately, again, to succeed, I think we have to make sure that we have consistency nationally and refrain from adding more confusion to an already fragmenting AI regulatory landscape. With that, we just respectfully oppose and look forward to working with the author. Thank you.

Thank you. Others in opposition?

Good afternoon, Chair Umberg and Members of the Committee. I'm Jess Meyers. I'm a computer scientist and adjunct law professor, and I'm here today as Senior Counsel on behalf of Chamber of Progress, where we advocate for technological innovations to benefit Americans. Today we address our significant concerns with Senate Bill 1047. This legislation threatens to stifle competition and slow innovation in a state known for its technological leadership. Rather than fostering California's tech ecosystem, SB 1047 represents a regressive move for the state's economy.

The bill, while raising legitimate concerns about AI development, particularly with recent advancements in generative AI, misguidedly focuses on regulating model developers. And instead of tackling the problematic use of specific applications of AI. SB 1047 introduces certification requirements that are overly broad and unrealistic for practical application. Before any development and even model training commences, the bill demands that AI developers preemptively tackle a vast array of potential hazards, including those indirectly related to their models, through hypothetical third party misuse.

This means developers are experiencing expected to anticipate risks at a point when the scope of a model's capabilities and vulnerabilities is yet to be determined. A common adage in cybersecurity is if you build it, they will hack it. And it aptly applies to AI. Given the complexity and evolving nature of AI systems, it's impossible to create a system devoid of potential hazards.

But especially unique to AI is the fact that some technical aspects of the decision making process remain unknown, even to the developers that created it. This inherent transparency barrier makes it nearly impossible to adequately ensure a model remains under the hazard threshold prescribed. SB 1047 stifles innovation by unfairly favoring established tech giants over emerging startups. The bill also creates an unjustifiable divide between so called derivative and non derivative AI models without considering the inherent risks of AI technologies generally.

This distinction acts as a regulatory moat around incumbent firms, contradicting persistent efforts by this Legislature to reduce, quote, big tech's influence and, ironically, bolstering. Thank you.

Thank you. All right, others in opposition, please approach microphone.

Dylan Hoffman, on behalf of Technet, respectfully opposed. Thanks.

All right, others.

Nicole Young. Oppose.

Thank you.

Neowe Pajona, on behalf of the Computer and Communications Industry Association, in opposition.

Thank you. All right, others in opposition. Seeing no one else in opposition, let's bring it back to Committee. Yes, Senator Min.

I want to thank the Senator for bringing this forward. I mean, it's clearly an important bill and an important topic to address. And we have seen AI up in traditional models, whether it's academia, whether it's Internet banking, cybersecurity, et cetera. And it's clear we need a regulatory framework moving forward. I'll just note some thoughts here. I think this is an incredibly complicated area for the law to address. Some of the challenges that AI raises I think are probably best covered by adaptations to existing law.

Some of them clearly require new laws and new structures and new agencies. I guess my concern here, and I'm going to ask a question with the long run up, is around regulatory competency, because this is such a complicated area to address, and I don't pretend to understand. I watched Terminator two back in the day, so I have some familiarity with AI, but. Sorry, bad joke. Kids watch the movie. Terrible CGI, but pretty good plot.

But I came from a banking background and some of the challenges in regulating banking in a federal and state level are similar to the challenges that I could see arising in AI. With banking, particularly these days with very complicated conglomerates doing lots of different activities, you have a lot of different types of very complex risks. Regulators are asked to both gauge mutable risks that are constantly changing and evolving and trying to enforce those compliance with those risk enforcement or risk measures that they're dealing with.

And states are often seen as problematic in this effort because state regulators and state agencies are not seen as competent as the federal regulators. Without editorializing too much, I think we even see that in our state. I don't think anyone was pleased with how California state banking regulators handled the Silicon Valley bank collapse. And that's in part because we don't pay our regulators as much. They're not at the top of the heap.

And when we look at the Federal Reserve and the banking regulators at the federal level, we pay them a lot of money. We try to recruit the best and brightest. And it strikes me that we're going to need to do the same in AI. If we really want to wrap our hands around this, we're going to need people that are smart, that really understand this in ways that I don't pretend to.

And I worry that if we try to handle this with limited resources at the state level, we are setting ourselves up to just be like a checkmark for that. Different firms get to check off and say, hey, we complied with California's framework here and that will obviate and perhaps make it more difficult for other states or the Federal Government to try to regulate this in a way that would make sense.

And so I guess I'm saying I see a lot of sense in what you're doing, but I do just want to raise the challenges that the state's going to have, particularly with enforcement, particularly with gauging risks and understanding those risks well, with limited resources in a constrained budget environment. So I guess I just ask you to respond to that and then I have a follow up.

Sure, and thank you for that. First of all, as with all, there are certainly, if you look at the Federal Government regulators, there are also hits and miss. There's no government anywhere on the planet that perfectly does regulation all the time. And we could find intense critics of every single federal or state regulatory agency. I will say that there are plenty of times when I think California does get it right. I think we're all very proud of the UC.

It's not a regulator, but it's a public body that I think is on the cutting edge. And so I think we are capable of doing it when we put our mind to it. And I do agree that you have to have that focus and you have to have the resources. One thing I do want to say about this bill, though, this is not a bill where we're asking a regulator to get in and micromanage AI.

There are some who think we should include a licensure requirement in this bill. We have not. There are some who think that we should be requiring government pre clearance before you either train or publish a model. We are not doing that.

Our goal here is not to have the state be micromanaging that, but rather to have clear rules in place for what you have to do to responsibly test for safety so that you're not putting something out in the world that's going to shut down the grid for six months, for example, or do some other problematic, harmful thing. And if you don't do it, then the Attorney General can sue you.

And so I think the approach we've taken, I'm not saying it's not going to require, we, of course, want the Department of Technology, et cetera, to be able to do a really good job on this. But it is not the same as, for example, bank regulation, which is much more intrusive and intensive. I do want to say, with respect to your remark about whether this will preclude other states or the Federal Government, I can't speak to other states in terms of the Federal Government.

Congress, if we pass this into law, Congress at any moment in time can occupy the field and pass a regulation and preempt state laws. They can do that. They've not done it with social media, despite professing bipartisan support. They've not done it with data privacy, despite professing bipartisan support. And I'm not blaming one party or the other. I'm blaming both parties for failing on those issues. And so we have had to step in and we've done it on climate and on various other issues, and I think we should do it here.

And so just to follow up, I appreciate that response. And I hear you. There's a chicken and egg question here, obviously, with the dysfunctional Congress on, you know, when will Congress act? And maybe it's never right. And so that's a very salient point you raise.

And the only point I would respond with is there is a real concern that many of the lobbyists that are in the room today that oppose your bill or may end up, if they like it and they feel like it's the weaker bill than what's being proposed at the federal level or compliance is not seen as something that's particularly difficult to comply with.

A lot of workarounds, for example, that they may end up making that argument to the Federal Government that we, California already has a strong law. This should be a state matter, and we've seen that argument get made. That all being said, I also recognize the fast moving pace with which AI is moving. And by this time next year, if we don't pass something this year, AI will have taken massive leaps and bounds and I think we are racing against the clock.

So I am going to vote aye but I just would encourage you to really think about what the state's core competencies are and what we can do well. And I suspect that a lot of this is going to have to get pared down anyways because you're the budget chair and you know how bad the budget situation is better than anyone. So I guess I just, you know, encourage you to think about a strip down version of like, what can the state actually do well as a really positive first steps here.

And I know that's how a lot of the thinking behind this bill went, but I just, I just really want to caution that we're getting ahead of our skis if we think we can do this really well. I think, and that's my main concern with this bill. But I will be voting aye today.

Thank you, Senator Min. I think the Federal Government is waiting for Senator, then Congressman Min to get there and then we'll see.

I'm just going to copy.

If I may, one thing I will note in 2018, for those who was here, Mr. Wilk was here, Mr. Allen. You guys were here when I authored our net neutrality law, SB 822, which is a huge meltdown fight in the Legislature. And we were also told by some lobbyists, let Congress do it. And I always said, hey, if Congress preempts us with a good net neutrality law, I will be happy to pack up shop and go home. We're now six years later and Congress has never acted.

All right, first Senator Niello, then Senator Wahab, then Senator Durazo.

Thank you, Mr. Chair. Senator Wiener, you have tackled a big issue here and a complicated issue, and I actually compliment you for that. It is nonetheless, as the Chair indicated at the outset, it is a work in process. I can't support it as it is, but I don't oppose it because I respect the effort. A couple of points with regard to the dangers of AI.

This is fundamentally different than regulations in other areas where people might have said, wait for Congress and you didn't wait for Congress. But the controls are relevant and can work within our state. But the fundamental reason for having guardrails with regard to AI is to try to work against those negative effects. We could pass whatever regulation we want here and we wouldn't stop those negative effects as long as nobody else is going to act. And by the way, another movie was mentioned by Senator Min.

What I would urge is for people to watch a Space Oddity 2001, and in particular, pay attention to the scene where Hal says, I'm sorry, Dave, I can't do that. Watch the movie and you'll see what I mean by the meaning of that statement. It encapsulates what a danger of AI. And it seemed fanciful then, but it's real. And basically he was killing the astronauts. But with regard to those dangerous effects, as I said, we can pass what we want here.

But if nobody else does anything around the other 49 states around the world, we're going to have a tough time preventing those negative remarks. However, one of your witnesses did say an important thing. She said, all eyes are on California, and that may be true. So perhaps we could pass something that would guide others. And that's why I'm not going to vote no. But again, it is so much of a work in process with so many things that I question that I can't, I'm not quite at. I haven't gotten to yes yet.

In an ideal world, we'd have Congress and then China and all the big countries in particular have a treaty that would be great. We'll see if that ever happens. But I do think that California is well situated to address this because of the critical mass of AI innovation happening here and our role in technology in the country and on the planet. And we are seeing, you know, there are things happening at the federal level. I commend President Biden.

The US and the UK signed an MOU just yesterday, I believe, about working on different safety issues. So there's a lot of momentum here, but at some point it has to go into law. And I think we should start here in California.

All right. Thank you. Senator Wahhab.

Thank you. Just because my two colleagues mentioned AI and films, I will mention that there's an AI named Aisha. So I just want to highlight that. But specifically, I wanted to highlight that a lot of the arguments here have been kind of cautionary tales. This is too big. We don't know things like that. The reality is, and as a person with a tech background that has worked in technology for a number of years, I often see that policy doesn't catch up to technology.

We are actually far behind on a lot of different fronts, whether we're talking about social media and safety and cybersecurity and much more. And to be quite frank, when we're talking about ransomware and hacking and data leaks and security and privacy and much more, every single government is behind the times in California as well as across the nation. We cannot compete with the private sector at all, right? That's the honest truth.

We cannot, local governments cannot find the most talented staff because of budget restraints and much more. Many cities and jurisdictions across the board, including in the Bay Area, have been ransomwared and much more. And there are data leaks and things like that. So I say all of this because we have to make an investment in emerging technologies. We have to start from somewhere. This isn't, and I know, Senator, you've stated, you know, this isn't the end all be all, right.

This is a starting point, and it does not cover all of the concerns that everybody has, but what bill does, right? And I specifically want to highlight the fact that when we talk about artificial intelligence and we are competing with other nations, we are competing with technology that is very much open to the public where people can tinker and we have little scientists and engineers that can go above and beyond in their own backyard and garage and so forth.

So I think that for me, I think that this is incredibly important to at least say this is a framework we can start with. This is a framework that we can see what we are trying to prioritize, specifically even the damages, half a billion dollars is a very high threshold. We have seen, I will say, significant concerns in regards to our infrastructure. Our infrastructure is not just buildings, but it's also the technology we utilize.

For example, if OneCloud computing server or location from one of the top tech companies is down, that is a concern for not just one company, but literally everybody that depends on it. And I don't think that we do enough in regards to technology as a policy. Right. You know, it's funny, because I think that some of the comments that we've heard is that it's, we're going to identify a positive safety determination and things like that about this bill.

And some don't think that we have the capacity to. At a local level, when we talk about policy, we talk about equity impacts, we talk about environmental impact reports. We talk about a lot of other impact reports that we're still building on, even at a local level, on things like pure development, right. Housing, things like that. So I really want to highlight that. To me, this bill is a starting point. It very much is something that is needed.

The fact that we see technology move at the speed of light because of artificial intelligence, other things are impacted. So I just want to highlight all of those concerns. I really appreciate the proponents of this bill as well as the opposition of this bill, because this is just the first of many conversations that need to be done and had to continue to improve and invest. I will say OES is there, but we also know that we need to go above and beyond some of these things. So I will say that I fully support this effort and I will move the bill when appropriate. And thank you for your time on this.

Thank you. Senator Durazo.

Thank you for raising this issue, for having the courage to put something together that everybody could then jump out and say, why didn't you cover this? Why don't you cover that? As if we knew what we were talking about. But I do want your first witness. Speaker one talked a lot about and was very articulate about we're going to make sure we all do this together, that it covers every something about equity.

And I was impressed by that because to this day, we still have millions of Californians who have no simple Internet connectivity. And that's about as behind as any part of the world could get. And so I would like you to look into the issue of equity in a much more specific way if we're going to have guiding principles in General about AI. What about equity to people like Californians who are supposed to be way ahead of other parts of the world, not providing connectivity?

There's something pretty shameful about that. And so to think that now we're in this new era of AI, and it's not the beginning of it, but certainly we're all now more aware of it than ever before. If we don't have a deliberate inclusion, not just for all Californians in this case, but, you know, people all over the world will be left out and the power of the AI will continue to rest in the hands of a few people, just like the Internet, you know, broadband connectivity.

And what does that mean? A continuation of not having access to information, not having access to education, not having access to the healthcare? There's so many things that we will continue to have those big gaps if we are not explicitly deliberate about not moving in the most fair and just way, so I wish I had a specific suggestion other than ask all the experts around you to be much more deliberate and intentional about what and how are we going to handle that everybody does move forward together on this.

Go ahead, Senator Wiener.

Yeah, no, that's a really important point, Senator Durazo, and I really appreciate it. A couple of things I want to note. Of course, while I'm very flattered of the Chair's characterization of this bill at the beginning, and I think it is an important bill, but there are other important AI's bills moving in the Legislature.

For example, assemblymember Bauer-Kahan has a bill which she lost last year and is trying again on algorithmic discrimination, making sure that AI is not making some of the huge inequities in our society even worse. That's a very important bill. There are other important bills, too. We do have, I think, some equity or field leveling aspects of the bill. CalCompute, which we touched on briefly, is another piece of this bill.

It sets up a public cloud system so that we have more access for the ability of people to create these larger models, not just the big tech companies. We have a pricing transparency provision in the bill so that some of the big tech companies can't monopolize that and play favorites. We have whistleblower protection so that our frontline technologists who are not in the C suite are able to come forward to say there's a safety issue here and not have ramifications.

And one thing I will say, and I know this isn't exactly what you're talking about, but in terms of equity, I do want to just address the Chamber of Progress got up there in Chamber of Progress, some of their members include Google and Meta and Amazon and Uber and some of the biggest tech companies on the planet. And yet they got up there and said this is going to favor, this is going to lock in the big tech companies. Well, they represent the big tech companies.

And the reality is, if you look at who's supporting this bill, it's an awful lot of startups. It is these small companies that are startups that they know that this is important. So I appreciate the point and we'll keep working on that.

Thank you. I'm going to have to leave, unfortunately, but I want to raise a few points with you, Senator Wiener, before I leave. Thank you, Senator Durazo. There are a number of areas of concern that you and I talked about, and I just want to go over some of them so that we are clear on the record. And one is, this is a heavy lift.

And in terms of the phase, in whether or not January 1 of 2025, everything becomes operational, I have a concern about everything becoming operational that we can, in this current budget situation and the current situation, even with our own internal technology, that we can become functional by January 1, 2025. I wanted you to respond to potential phase in.

Yeah. So in terms of a phase-in, and we're open to that as long as we are distinguishing between different parts of the bill. And in particular, I do think it's really important for the actual safety requirements in terms of the safety evaluations that companies need to do. That needs, to me, go into effect very quickly. But there are some aspects of the bill that I think can be phased in, and we're happy to work with you on that. Distinguishment. That's not a word, but I'll make up a word.

I think this is distinction. Distinction. All right. This is critical. And you've always dealt in good faith, and I believe that we will be able to work something out. But it is critical, I think that we do work something out in terms of phasing. I just simply don't believe that we can, on January 1, operationalize all the components.

I agree. And that also, given some of the budget constraints, that could be helpful in that respect, too.

The other issue, among others, is the difference. The bill talks about covered models, who's covered and covered guidance, what needs to be done. Given how fast this technology is moving, he bill is a bit vague, and maybe intentionally so, to be able to be flexible as the out years are upon us. What are your thoughts on how we craft sufficient flexibility? Same thing with metrics. With the flops. I am told that that's an outcome that will soon be an outdated metric.

Yeah. So a couple of things. In terms of the size, the 10 to the 26 flop, it's also for models that are created that effectively, that might not meet that threshold in the future, but have the same power. They will be covered. And in terms of harms, it is. We've delineated cybercrime, causing 500 million or more in damage. Harm to critical infrastructure, 500 million or more in damage. And I know we can have a debate. Should that be a higher number or a lower number?

That's fair topic of discussion. Biological, chemical, et cetera, weapons. And then we have a category for or equivalent harms. And so we do build flexibility, and some are going to criticize that by saying it's not precise enough. But if we're too precise, then we lock ourselves in.

What about delegating to the frontier model division, the ability to change the metrics? I guess in terms of being flexible.

I am happy to have that conversation. We've not really contemplated that, but I think that that certainly worthy of a discussion.

Here's my concern. Everything I expressed, it is if we lock in today, in 2024, just as we would not have been able to envision the power and the breadth of AI 10 years ago, we may not be able to understand the orders of magnitude and what metrics are appropriate. So I'd ask you, and we will continue to have a conversation about that. Since we're Judiciary Committee, I have some judiciary questions for you, lawyer to lawyer.

What is a reasonable cause to believe that a person is violating the law? What's reasonable cause? Is that probable cause? Is that reasonable suspicion? I mean, there are defined terms in the law.

And you and I have talked about this, and I appreciate you raising it, and I think it's something that we are going to need to clarify. So typically, when the Attorney General would decide, you violated the law, I'm suing you. They don't have to meet a particular legal threshold. They just decide. And as long as they're doing it in good faith and not frivolously, they can file the lawsuit. And then ultimately the court decides whether there was a violation or not.

And we could do that here. We put reasonable cause in just to put some sort of threshold, you pointed out, and you are correct, that that is not a defined term. So I think that we would either need to define it or take it out and have the Attorney General enforce in the way that he normally enforced.

Or substitute, or substitute a defined term, whether it's reasonable suspicion, probable cause, whatever it may be, as a threshold. In any event, I think that that's another issue that must be resolved here because we don't want the court, you know, our mission is to create clarity. We don't want the courts having to struggle with this for a while.

I agree with you.

There are other provisions that provide for joint and several liability, and that is also of concern that clearly that the covered models, if they are not complying with the law, if they fail to provide the adequate safety measures, they should be liable. And then in terms of joint and several liability, how far down the chain should that go? Should the $10 million company be responsible for the $100 billion company's failure, if that $100 billion company doesn't exist? That's another concern that you and I have talked about. And how do we resolve that concern?

Yeah. And we're happy to work with you on that. Our goal here is to make sure that people are not inflicting great harm, and then because there was someone else who was determined by a jury to have been responsible for 80%, but they're, say, overseas, and you're able to basically be off the hook. So we structured it, we think, in a reasonable way, but there may very well be other reasonable ways, and we're happy to work with you on that.

I'm worried about the congressional, where someone is 1% liable in the United States and someone's 99% liable overseas, and that 1% liability, then that entity is responsible for 100% of the damages.

We're happy to work with you on guardrails to make sure that extreme situations don't occur.

All right, good. The bill provides for safe harbor, for good faith errors, but then later on says that that reliance on unreasonable positive safety determinations does not relieve a developer. I think we need to figure that out also, because there seems to be a tension between those two terms. What's a good faith error versus if you rely on the positive safety determination and you're wrong, it seems that that might be a good faith error.

Yeah, we agree that some massaging and harmonization would be helpful, and we're happy to work with you on that.

All right. We also talk about jury instructions. I think you've said that we're going to figure out who should be developed. Typically, the Judicial Council develops jury instructions, not an agency, and we'll figure that out.

I would never want to step on their toes.

Neither would I.

Even though we often do in Legislation. Here, I'm not going to step on their toes.

Shh. Don't say that, Senator Wiener. They don't know that we're trying to slide that by. All right. Punitive damages. There's no provision for punitive damages. Your thoughts on that?

I think that any appropriate remedy should be allowed. And if someone goes in and intentionally builds a model with the intent that it's going to shut off the water systems for the entire United States of America, if, God, we ever get something capable of that, and that's their intent in doing it, then we know that in our civil law system that that's an option.

But it's not an option in statutory, in essence, in statutory harms unless we put it in there. So I expect or suspect that that's something you'd want to add.

Yeah, we'll work with you. We're happy to work with you on that.

Right. The other comment, in terms of the opponent. We've only gotten two letters in opposition. I've gotten a bazillion phone calls in opposition. But I would encourage those who, as you point out, the opposition says this favors the big entities versus the small entities. And I'd be interested as to how that, how you come to that conclusion. Maybe I could ask one of the opponents to give us some insight as to how this favors the big entities over the small entities, because it only is--I'll ask the author--I think it only covers some of the very biggest entities that exist.

And it tends to be the big entities who are saying this is going to favor the big entities. So query.

I'm sorry, say again?

It tends to be the big companies that are making that argument. It's the big tech companies that are saying this is unfair because it favors us. So it's just query.

Thank you, Senator. All right.

Yeah, so we don't have to make any assumptions about this. It's in the bill itself. So the bill regulates non derivative models. And the way that the bill defines derivative models is an existing model, a model that's pretty much already in the marketplace. Non derivative models is going to be a new model, a new market entrant that comes in independently trains, independently built. And that's where we're kind of getting this regulatory moat.

So anybody new who comes in, and yes, you mentioned that the 10 to the 26, it's for very powerful models. Well, for now, according to Moore's Law, we will see advancements in every two years when it comes to advancements in technology, especially in AI. So for now, that might be a very large computing power just for the big tech companies. But the next two years, that could hit any new market entrance, folks who are just now building new models.

That's a legitimate concern. And I welcome language, actual language, that will help us to make sure that we accomplish the intent of Senator Wiener. And my intent is that we not stymie innovation. And so to the extent that you have language, not a concept, but language that will make sure that we don't stymie that kind of innovation from startups and those who are farther down the food chain, I absolutely welcome that language. As we've discussed ad nauseam, this is a work in progress.

And while I expect it's going to pass out this Committee, Senator Wiener has committed to me that we will resolve some of these--we will resolve all these things, actually,

And I have. But I want to also stress we fundamentally disagree with that assertion. And so I disagree with the premise that this in any way advantages big companies over small. And in fact, as the guy who represents perhaps the largest concentration of startup AI companies on the planet, that is not something I would ever do. I would be happy to have Mr. Calvin come up to respond to that, because we really don't agree.

I don't think we need to respond right now. I think that when we get their language, we'll take a look at their language, and figure out whether or not it accomplishes our goals. I think.

But I just do want to make clear that we fundamentally premise. So we're not agreeing that we're going to make amendments based on that, because we don't think it's true.

And I thank the Members of the Committee for their indulgence. I have to leave. I'm going to turn it over to Senator Allen, or no, Senator Caballero sitting next closer to me. Senator Wilk is here. Senator Wilk is here. Okay, here comes Senator Wilk. I'm going to turn it over to Senator Wilk here for the remaining comments and questions. I'll be back. Thank you.

Just move the bill. I moved the bill already, but like, let's just wrap it up with a vote.

All right. Senator Wahab moves the bill. Is there voting? Can you. Yeah. Well, we need closing.

I respectfully asked for an aye vote.

Okay with that, let's call the vote.

This is file item number 16, SB 1047, by Senator Wiener. The motion is do pass as amended to Senate Governmental Organization. [Roll Call] Eight to zero with Members missing.

Okay, that bill has enough votes to be out. We'll leave the roll open for the Chair.

Thank you very much, colleagues and others.

Thank you, Senator Wiener. I know. Okay, up next is file item eight SB four, Senator Limon. You have to wait because no one has given me a script.

Oh, no worries.

There is no script. What's the recommendation on this bill? We have protocols here. I know. Okay. I don't know what the recommendation is because I don't see it on here. So Senator Limon, we'll go ahead and let you present.

Thanks, Members. Um. Thanks.

Well, I know that there's opposition here, so I feel like she should. To the best of your ability. I mean, I'll defer to you. You can do whatever you like.

So let me just ask my witnesses to come up. Yes, I'll ask the witnesses. But I do want to just talk about this is medical debt, and I can answer questions. So I'm going to ask Eleanor Blume from the office of Attorney General Rob Bonda and Sonya Hayden to please come up. Sorry, this is not in the script. I didn't cover it. Senator Min's gonna read what I was gonna say.

Okay. On behalf of Senator Limon, she presents SB 1061, which would remove medical debt from consumer credit reports and improve our understanding of medical debt collection litigation. Our need for healthcare is usually out of our control, and our health insurance system does not cover all of our needs. Too often, medical debt that is reported to credit agencies is inaccurate. When a consumer discovers medical debt on their credit report, they may not know why it is there or who to contact to verify its accuracy.

On top of these challenges, medical debt is not a great predictor of credit risk, which has led some lenders and credit scoring models to remove medical debt from their calculations. For these reasons, this Bill would remove medical debts from credit reports. It would also require hospitals to keep track of debt collection litigation that debt collectors and debt buyers pursue against their patients.

This Bill does not solve all the problems with medical debt, as we are not saying that the debt is uncollectible, but it does give consumers a chance to rebuild their financial health while they are taking care of their physical health. Senator Limon is fortunate to work with a great group of co sponsors on this Bill.

Testifying in support today is Eleanor Bloom from the office of Attorney General Rob Bonta, as well as Sonia Hayden, a consumer who will share her experience with medical debt showing up on her credit report.

Thank you, Senator Min. And before we start, Committee rules. Two speakers, two minutes each. So whenever you're ready, go ahead.

Okay. Hello, Chair and Members. Thank you for letting me tell you about my experience with medical debt. In October 2021, I was involved in a major car accident while driving on I-80 from Sacramento to Oakland. The accident happened around 10:00 p.m. In the evening, and I was taken by ambulance to the ER airfield.

Excuse me. For whatever reason, that's not loud enough. So, yeah, why don't you go ahead and start over, and we'll restart the clock.

Can you hear me better now?

Okay, perfect.

Yeah.

Thank you.

In October 2021, I was involved in a major car accident while driving on I-80 from Sacramento to Oakland. The accident happened around 10:00 p.m in the evening, and I was taken by ambulance to the ER in Fairfield. Luckily, I was okay, but they kept me there quite a while to run some tests and make sure everything was fine. As a state worker, I have full insurance coverage through work, so that was at least one less thing that I had to worry about.

Fast forward a few years later to the summer of 2023. My partner and I made the decision to try and buy our first home while applying for a loan. I was surprised to discover my credit score had gone down significantly due to an unpaid mystery bill. I called the collections company listed and discovered that the hospital that I was taken to after the accident had correctly billed my insurance for everything except for for one very expensive test that they had done.

I think it was a simple mistake. They had simply forgotten to add my insurance information to it and billed me instead. But I somehow never received the bill. This was incredibly stressful at the time because my credit score negatively affected our mortgage rate at a time when rates were already at an all time high. I've spent hours on the phone trying to get this fixed to no avail. Representatives at the insurance company have tried to help and as has the collections company.

As of now, this is still showing on my credit score, and there appears to be be not much I can do about it. Again, thank you for letting me speak in front of you today.

Thank you. And whenever you're ready, go ahead.

Thank you. Good afternoon, Mr. Chair and Committee Members. My name is Eleanor Blume and I'm the special assistant Attorney General for economic justice in the California Attorney General's Office. Attorney General Bonta is pleased to co sponsor Senate Bill 1061 to bring an end to putting medical debt on consumer credit reports.

On behalf of the Attorney General, I want to thank Senator Limon and our coalition of consumer and health advocacy organizations for leading on this important legislation to protect Californians from the harmful impacts of medical debt and burdening consumer credit reports, especially the low income and marginalized communities that are most impacted by this pervasive problem. Medical debt appearing on consumer credit reports can destroy creditworthiness, burdening consumers throughout their financial lives.

The Consumer Financial Protection Bureau found that medical debt is not a good predictor of a consumers likelihood of paying a debt as was previously believed. And nonetheless, consumer reporting companies are providing credit reports with this information, needlessly diminishing the ability of people with medical debt to carry out the rest of their financial lives.

Medical debt often comes from unexpected, unplanned, and unavoidable circumstances unrelated to general financial well being and can happen unexpectedly to anyone, as illustrated by the testimony of the previous witness, when medical debt is reported to a credit reporting company, it can unfairly prevent a consumer from getting approved for a loan, renting an apartment, or being selected for a job. Medical debt can also create barriers to finding employment, as employers often use credit reports as a basis for hiring decisions.

Finally, we know from data that increasing numbers of people are delaying or skipping essential medical treatment out of fear of accumulating medical debt, not an unreasonable fear given the high cost of health care. Skipping health care, of course, only leads to worse health outcomes and can exacerbate health inequalities that already exist. California families should not be forced to suffer from the harmful and unnecessary impacts resulting from medical debt damaging their credit.

SB 1061 enacts a very straightforward solution to this problem by prohibiting medical debt from being reported to consumer credit reporting companies. If SB 1061 is enacted, California would join Colorado and New York, states that have already passed laws to prohibit medical debt from appearing on credit reports and together help to lead the country to a more rational and just approach to addressing medical debt.

Attorney General Bonta is pleased to stand with the broad coalition of Consumer and health advocacy groups that are co sponsoring SB 1061 and urges you to approve this much needed legislation. I am here along with my colleague Anthony Loom to answer any questions you may have.

Great, thank you. We have any other people who want to testify? This is now me too territory. So name, organization, and that you support the Bill.

Katie Van Deynze with Health Access California, one of the co sponsors of the Bill. Thank you.

Thank you.

Good afternoon, Mr. Vice Chair and Members, Robert Herrell, Executive Director of the Consumer Federation of California, another co sponsor of this measure. Urge your aye vote.

Thank you.

Donita Stromgren, a volunteer at California AARP, representing 3.2 million members in support.

Thank you.

Maxine Mantell on behalf of the National Multiple Sclerosis Society in support.

Thank you.

Good afternoon. Linda Nguy with Western Center on Law and Poverty and support.

Thank you.

Dani Kando-Kaiser, on behalf of two of the co sponsors of the Bill, National Consumer Law Center and the California Low Income Consumer Coalition, urging your aye vote.

Thank you.

Rebecca Marcus on behalf of one of the co sponsors, CALPIRG, support as well as the Consumer Protection Policy Center at the University of San Diego Law School. Thank you.

Good afternoon. John Shaban, California Nurses Association proud to sponsor. urge your aye vote. Thank you.

Thank you.

Albert Lazari, on behalf of the California Labor Federation in support.

Good afternoon. Vice Chair and Members. Bryant Miramontes with AFSCME California, in support.

Thank you.

Savannah Jorgensen with the Lutheran Office of Public Policy, California, in support.

Sarah Brennan with the Weideman Group on behalf of NextGen California in support.

Marvin Pineda on behalf of the Leukemia and Lymphoma Society in support.

Thank you. Okay with that. Do we have opposition speakers? I believe we have a couple.

Thank you, Mr. Chairman. Cliff Berg here on behalf of the California Association of Collectors. We did submit a letter of opposition unless amended to the Committee when we first saw the Bill. Our concerns are in the details of the language of the Bill. For example, the definition of medical debt. We are concerned it includes not the kinds of medical debt that we hear talked about here today, but things like elective and cosmetic surgery.

We're concerned about the provision that basically says if you violate this law, all the underlying debt, even if it's undisputed and legitimate, is voided as a penalty for violating the Bill. There are other ambiguous provisions within the Bill. However, I am pleased to tell the Committee that we much appreciate the Chair and the author adding language.

We understand the author is taking knowingly to the Bill, which I think is an important clarification on the voiding issue, and we are working with the author and her staff on the other issues. I think those conversations are going well. So while we are still opposed at this point, we would like to get to a place where we think the Bill is operationally workable and therefore look forward to continuing working with the author. Thank you.

Thank you, Mister Berg. Do you all agree that this is the other primary? Because you guys were all kind of running up there at the same time. You're fine with him. Okay, whenever you're ready.

Thank you. Chair Wilk and Members of the Judiciary Committee, my name is David Reid and I serve as General Counsel to the Receivables Management Association International. RMAI is a national nonprofit trade association which represents banks, credit unions, collection agencies, debt buying companies, and collection law firms. While RMAI appreciates the bill's intent, RMAI is here today in opposition to SB 1061 is currently drafted.

RMAI's primary concern is related to the overly broad definition of medical debt and how it interrelates with the bill's prohibition on reporting medical debt to credit bureaus and the potential expungement of the debt. While the Bill exempts general-purpose credit cards from the definition of medical debt due to the impossibility of knowing what goods and services being purchased are medically related, a number of other lending products will be unintentionally pulled into the definition.

As drafted, home equity loans and banking lines of credit could be defined as medical debt based on consumer action. For example, if a consumer were to take out $100,000 home equity loan and use 70,000 on home improvements, $20,000 to vacation in Spain, and use the final 10,000 for liposuction, that home equity loan would now be classified as medical debt and subject to the credit reporting ban. Furthermore, it pulls into the definition of medical debt.

Especially health-based credit cards that are issued to consumers with prime credit ratings of 660 and above that can be used to purchase hair implants, tummy tucks, face lifts, not to mention spa treatments, jewelry, flowers, pet insurance and Bowflex athletic equipment. RMAI understands that medical debt is a unique type of debt and should be treated as such because patients do not choose to get sick or to be in an accident.

But we need to be careful not to conflate hair implants, spa treatments, and athletic equipment with being admitted into an emergency room or having an appointment with your primary care physician. We have had several positive conversations with staff and hope these issues will be addressed in forthcoming amendments. Thank you.

Thank you. Good to know that liposuction is only $10,000. I'm going to put that back on my to-do list. Anybody else who wants to be a me-too at this time?

Members of the Committee, Randy Pollack on behalf of the Consumer Data Industry Association. We are here in opposition, but later this week we will be meeting with the Senator's staff. Thank you.

Thank you.

Good afternoon, Chair and Members of the Committee. We're actually in a concerned position. I was hoping if I had just a brief moment to describe that nuance.

Chair's not here, so we're going to go.

I appreciate that. Rony Berdugo here on behalf of the California Hospital Association. First of all, I want to thank the author and the sponsors for willing to have a conversation with us to discuss our ongoing concerns with the Bill. I think we can find common ground on the common crux or on the main crux of the Bill, which would be to not have these debts reported to the three main credit reporting agencies.

Our concerns center mainly around the requirement in the Bill for hospitals to maintain a database for litigation, which would be, at a minimum, administratively burdensome, we think is inconsistent with our core mission of providing healthcare, would pull limited resources away from patient care, and we see little to no benefit to actual patients.

And so we would really like to see that language eventually removed from the Bill or would like to work with the author and the sponsors to address that chief concern to see if there's another way of working on that. And so anyway, with that, we appreciate the amendments taken so far and we look forward to continuing that work with the author and the sponsor. So thank you for allowing me.

That was more than a little bit, but you're welcome. All right, I see Melanie there.

Good afternoon. Melanie Cuevas with the California Bankers Association, also in a position of concern. Appreciate the willingness to look at the issue of voiding a debt and look forward to working with the author and her staff on the rest of our concerns. Thank you.

For those of you watching at home, that's how you do it. All right, so we're going to pull it back to the Committee and I'm going to return the gavel to our Chair.

Thank you, Senator Wilk. I was fully anticipating that you'd be finished, but apparently, you've moved more slowly once I left. All right, so questions by Committee? Yes. Oh, let me ask questions. Senator Limone, there was a suggested amendment considering knowing violations. You don't need to say, Aye just hold your thumb up.

Vincent, I also just want to clarify that we were not able to get the definition of medical debt cleared up, but we are going to work on it. It's intended to be medically necessary. So the examples that were given with time should actually not apply to this Bill because we do believe that it needs to be clarified. So we're working with the opposition on that.

So I figured someone's going to ask that I might as well address it right away, that the intention is medically necessary and cosmetic surgery would not fall into that. So we want to work with them to clarify it and narrow it.

Could you expound upon that? Give us a different. Okay. All right, all right, all right, all right, all right. Okay. Senator Ashby?

Yeah, Senator Limon, I, this question is for Senator Caballero because she had to step out to another Committee hearing and wanted me to ask this on her behalf, but also to let you know that she plans on supporting it when she comes back, but would like to ask you to address this issue with the Bill as you move through the process. And that is the issue of the hospitals having to post, that you heard discussed here by one of the opposition.

She is concerned about that issue and also would like to see that maybe come out of the Bill at a future point as you're working on your negotiations, as this goes through the process.

We'll have that discussion. This, you know, the database is intended to be just a simple excel sheet. It's not intended to be anything more, but just an awareness of what the lawsuits have been. So we're happy to have that conversation.

Okay.

Other questions, other comments? Is there? Yes, Senator Niello.

Thank you, Mr. Chair. I see two sort of fundamental flaws that concern me. One is while the existence of medical debt may not be an indication of the person's credit worthiness, the existence of medical debt is potentially, depending on the size, a substantial draw on the debtors' resources and therefore most definitely has an effect on the ability to pay. That's the first one.

The second one is once we start eliminating certain classes of debt from consumer reports, we begin to depreciate the utilization, the user utility of consumer reports, consumer credit reports. And if we pass this Bill, then the credit community knows that any potential debtor might have medical debt, substantial medical debt debt. And they have no way from the credit reporting agency to know what that might be. And so they will seek other ways to potentially find that out.

Because while, as your report says, perhaps it's not an indicator of the creditworthiness, it is potentially a substantial draw on potential resources and any creditor would be very concerned about that and they have no way to tell. And if this becomes a strategy to eliminate debt that we, as policymakers might think is not fair to go on a credit report, if that's a road we're going to go down, it would completely eliminate the utility of credit reports altogether.

Well, I just want to speak to the fact that medical debt is not the same. There are more inconsistencies and more errors and more time is needed in medical debt. Than any other kind of debt. So this isn't like a, you know, an accurate credit card purchase, right? This is, you have to go back and forth with your insurance and, you know, bless you if you've never had to do that. But for those that have, that takes time.

And so this is why we feel it's necessary, because as you heard in the example given by the witness, didn't even know it, never got to her attention until it was too late. And her ability to pay and to finance a mortgage actually would have been different had that error been caught and had there been time to do this. So I think that this is not your average type of debt.

This is a type of debt that creates more, that needs more time to settle, and also time to actually create the inaccuracies. And your many, many constituents that have the ability to have, you know, insurance and know the coverage and know that coding matters. And if the, ER got the coding wrong, they have to go back and forth, will tell you that if this goes, you know, after a few weeks or months, it's not enough time to actually get it sorted out.

So I think that this is why we're moving this forward.

Thank you. Other questions? Comments? Is there a motion? Senator Stern has moved the Bill. All right, I'm sorry, Senator Wilk, did you have a question? Oh, would you? Oh. All right. Thank you. Senator Limone, would you like to close? A head nod would work. You would like to close. Okay. That's your close. Okay. Two thumbs up is a close. Good. All right, Madam Secretary, if you would call the roll. It was made by Senator Stern.

This is file item number eight, SB 1061. The motion is do pass as amended to Senate Rules. [Roll call] Seven to two with Members missing.

7-2. We'll put that on call. Thank you, Senator Limone.

Thank you.

Get well. All right, next. Senator Skinner. Senator Skinner. Item number 14, SB 1144. Senator Skinner means business. She's taken off her coat.

Well.

The Committee room I was chairing in was 65 degrees.

Well, welcome to 85 degrees.

Yeah, I was going to say, it's pretty warm in here, so.

Thank you. Senator Skinner, I appreciate your patience. As I mentioned just a moment ago, your patience cubed, both for Senate Judiciary as well as the Committee you Chair. Senate housing. All right, the floor is yours. SB 1144.

This thing is funny. All right. Thank you. Please present SB 1144, which deals with the problem of organized retail theft and how the fact that much of these goods that are stolen are being sold online. And before I go further into explaining the Bill, I want to indicate that I am accepting the Committee amendments to clarify the notice to consumers.

And I'm also taking author amendments that add civil enforcement authority to district attorneys, city attorneys and City Council to further target these fencing operations, and that adding that online marketplaces must verify to consumers that high volume third party sellers have complied with our existing requirements. This is a protection measure so that as a consumer, you are not inadvertently purchasing stolen items. So those are the amendments. Now, this Bill.

So in 2022, you all passed a Bill that I authored that was signed into law, that created regulations for these online marketplaces because we had found that pretty makes sense. Most of us buy goods online we're not using. Not that we do not use brick and mortar anymore, but most sales are done online. And so it made sense then that if somebody's fencing goods, especially entities that are doing these high volume, that are. Have set up a whole ring.

You may have saw in the paper just last week that a or maybe it was two weeks ago that a couple in San Diego was busted. They were basically paying, paying not much, but to people to raid Sephora stores, Targets other stores, stealing makeup. And then this couple was basically selling it through various online marketplaces. So we have ample evidence. The AG's office, for example, has a task force on this.

They have already busted a number of large, organized retail theft rings who are unfortunately still primarily using online marketplaces. Now, that Bill created regulations for high volume third party sellers, and it required online marketplaces to get ID and bank info from these sellers that would verify that they're legitimate business entities making these sales.

Now, how some of these organized retail theft entities have gotten around this is they are increasingly using those marketplaces where the actual pay transaction doesn't occur on the site, and there's a number of those in that. And so they avoid making the pay transaction. And so thus they don't have to turn in any of that info. So the AG's office is increasingly seeing that stolen goods are being sold this way.

So what this Bill does is ensure that all high volume third party sellers, and when I say high volume, and I really want to make an emphasis on this, this is they're selling more than 200 transactions in a given year. So it's not just someone who's selling, say, 10 times on a site, it's over 200 transactions on a given year.

And it's then requiring those third party sellers to have complying with the law and requiring the marketplace to be able to attract them and get that verified information from them and to take action, the online marketplace to take action against sellers who sell stolen goods and informing the consumers that the sellers, these high volume sellers, have complied with the law, again with that protection to consumers. So let me have my witnesses in support.

Christine Soto DeBerry from the Prosecutors Alliance of California and Kim Stone from the District Attorneys Association.

Good morning, Chair, or good afternoon. I've been here a long time. Good afternoon, Chair and Committee Members. Pleasure to be here with you today. Christine Soto DeBerry, I'm the Executive Director of the Prosecutors alliance. We represent over 4000 Members in the State of both line prosecutors, victim advocates and community members committed to safe communities through smart strategies. We're here in strong support of Senator Skinner's Bill. As you just heard her explain, this offers some important improvements to SB 301, which we also supported in 2022.

We have learned from that legislation coming into effect that we can do more to improve on the information collected and shared to shut down the kinds of retail theft rings that we are seeing around our state and unfortunately, around this country. In the current moment, as the Senator mentioned, there are some important improvements to provide more information to consumers. Currently, when you or I go onto Amazon or any other platform.

We do not have much information about who we are buying goods from, and we are making decisions based maybe on price point or delivery date. But many of us would prioritize working with a seller that we knew was legitimate.

We have been speaking before all of the retail task forces that have been formed by this body and others, urging that we have the equivalent of a blue check mark, as you can have on social media, so that consumers can be informed and make smart decisions with their dollars. This Bill will help improve that opportunity for consumers. Likewise, it will improve information sharing to law enforcement so that they can take action. The Senator mentioned several big retail theft rings that have been busted recently.

That is because we have information on who those sellers are and where their goods are going. Without that information, we're unable to act. Law enforcement is in a much harder situation trying to identify where those goods came from and pursue those cases. So why are we supporting this as prosecutors? Because we know retail theft is an issue, and this Legislature in many various committees is grappling with how we get ahead of the current of situation. This is a smart approach.

This will get us a leapfrog approach over many of the other strategies that have been put before you because we are evolving in our economy. We no longer are looking at swap meets.

And thank you, if you could wrap it up.

Absolutely for these kinds of where these goods are going. And we will not solve it entirely through police and prosecution. So we hope that you all will help us in urging businesses in this state and in this country to join us as law enforcement and prosecutors in urging you all to give your strong support.

All right. Thank you very much. Thank you very much, Miss Stone.

Good afternoon. Kim Stone, Stone Advocacy on behalf of the California District Attorneys Association, also the San Diego District Attorney supports, but I'm making comments on behalf of the Association. This Bill requires online marketplaces to tell consumers that they're trying to follow the rules and not sell stolen goods. Tell law enforcement if they reasonably believe that their platform is being used to sell stolen goods and prohibit a seller from selling on the platform if they believe that they are selling stolen goods.

We all know retail theft is a problem. Part of that problem is how easy it is to sell stolen goods online. The District Attorneys Association believe that online marketplaces that don't want to act as fences for stolen goods should be supportive of this legislation. Now, my client does not believe that this Bill is the be all and end all for retail theft, or this is the only solution by any means.

But we do believe that this is part of a comprehensive and common sense solution and urge your aye vote.

Thank you. Others in support, please approach the microphone.

Good afternoon. Glenn Backes for the Ella Baker Center for Human Rights in support.

Good Afternoon, Devin Anderson on behalf of the Home Depot in support

Brandon Epp on behalf of La County Sheriff Robert Luna in support.

Good afternoon. Larissa Sespides on behalf of the Toy Association in support. We've also had conversations with the author staff about the possible expansion of this Bill to counterfeit goods, but we appreciate this Bill and the leadership she's shown. Thank you.

Thank you.

Margaret Gladstone on behalf of the California Retailers Association in support thank you.

Natalia with crew strategies on behalf of California Business Properties Association in support.

All right, great. Thank you. Opposition anyone in opposition, please approach the microphone.

Thank you, Mister Chair. And Members Dylan Hoffman, on behalf of Technet I'm the Executive Director for California and we are respectfully opposed to SB 1144. And while we appreciate the previous amendments and are reviewing the Committee suggested and authors amendments, they don't impact our main concern with this Bill, which is that it creates a separate and burdensome requirements for businesses hoping to sell in California and takes the California Inform act out of alignment with the rest of the country.

Tech net and our online marketplace Members take the issue of organized retail crime incredibly seriously. We've participated through a robust stakeholder process through the Attorney General's Office and have testified at informational hearings in the past year to provide additional information on the work that our companies are doing. We're also part of the national negotiations in 2022 on the Federal Inform A==ct. We participated here in California on the California Inform act. We did not oppose that Bill.

We agree with a lot of the regulations and requirements in that Bill, and both laws went into effect during the summer of just last year. However, since that time, we're not aware of any data or evidence to justify the changes in this Bill to the definition of a high volume seller. That definition was the subject of very careful negotiations here and in Congress, and it was a deliberate policy choice, not a loophole, to exclude off platform sales.

This is because it is impossible for certain online marketplaces to know which sales are completed off platform or in person. And without this exclusion, marketplaces will have to consider all all sellers as high volume sellers in order to comply with this law. Furthermore, this balance was struck to protect small sellers and their private information.

Inform requires high volume sellers to provide their name, contact information such as telephone number or email address, taxpayer identification number, which for an individual is their Social Security number, and their physical address to an online marketplace. And there's very little reason for someone selling a good online should have to provide the sensitive person information just to do so. The current threshold and definition captures when sellers reach a level hidden rapidity.

Thank you.

And warrants that privacy trade off. For these reasons, we respectfully oppose SB 1144.

Thank you. Others in opposition.

Good afternoon. I'm Brenda Bass with the California Chamber of Commerce, and we are currently in opposition to SB 1144. You know, we take the issue of, or the task of combating retail theft really seriously, but we don't want to unintentionally harm lawful businesses. So after the March 19 amendments and the Committee amendments, we kind of see three outstanding issues that we'd like to work through on this Bill.

The first one, as my colleague Dylan brought up, we have real concerns about the viability of tracking off platform transactions. We want to make sure that this is workable and achievable, and we don't really want to set platforms and the small businesses that use platforms to reach their customers up for failure. Relatedly, as was mentioned, we have concerns about the definition of high volume third party seller.

We appreciate the Committee's work done here, trying to address a potential reading that this would require aggregation across other platforms, not just the platform that a particular company operates. And so that's something that we're hoping we can continue working on refining the language to kind of reduce some of this concern that you would have to look at sales across platforms, and that's what would end up leading you into treating every seller as potentially high volume. Right, and then thirdly, we think the verification section has improved.

But, you know, we were really concerned that this would be confusing to consumers if small businesses don't have a verification. You know, maybe it makes a consumer think that a small business isn't legitimate on a platform if they don't have something like a blue check mark.

So that's something we would be interested in exploring, you know, potential alternatives to kind of address this concern and make sure that everything's easy for small businesses to comply with, easy for the platforms to administer, and therefore not clogging up what is, as the author mentioned, an increasingly important form of commerce. So I look forward to continuing these conversations, but right now, we're in opposition.

Robert Singleton, also with Chamber of Progress, respectfully opposed. Thank you.

All right, thank you very much. Others in opposition, please approach the microphone.

Good afternoon. Naomi Padron, on behalf of the Computer and Communications Industry Association, in opposition.

Thank you.

Thank you, Chair, Members Jonathan Erenbalm, on behalf of OfferUp in opposition.

Thank you. All right, questions by Committee Members. Bill's been moved. Other questions? No, I'm going to support the Bill, and the reason I'm going to support the Bill is because Senator Skinner always operates in good faith. But I still have, as I've expressed to Senator Skinner, grave, grave, grave concerns. And I want to ask the proponents, I want to ask the district attorneys, those representing district attorneys, is that we make policy choices here.

And as I see the Bill as crafted right now, it basically puts a platform like Craigslist either out of business or such, that they've got to modify their business model so dramatically that it's a complete revision. So the question for me is, has retail theft reached a level of concern? What we need is a policy to basically put Craigslist out of business. Is that where we are now?

So my Legislative Committee makes the decisions that I get to speak on. And I personally outfitted, like my new house off of Facebook Marketplace, and I decorated my previous house off of Craigslist. So I hope and don't believe that my client believes that they should go out of business.

I do think that they articulated in their letter and when the deputy district attorneys looked at it, they do believe that it is far too easy to sell stolen goods online and that there are insufficient motivations for the online sellers to work in conjunction with law enforcement to stop that. And that's why they decided to take a support position on the Bill. After the most recent amendments. There was kind of a lot of thinking that went into it.

We were late, we didn't get our letter in until yesterday. And they did look at it pretty carefully and I'm sure would be happy to continue to work with you and the Committee and the author.

It so fundamentally alters their business model. Predicated. The question is, has retail theft reached a level that we need as a policy, basically to say, look, I mean, we could put all of them out of business if we wanted to, so there would be no online sales, and that would eliminate the ability to have those who steal sell online? I don't think we've reached that point yet, but there are certain models that we would probably, if not put out of business, dramatically hinder.

Is that where we are on retail theft?

No, I don't think anybody is advocating for that. Everybody in this room, I'm sure, shops online. What we're targeting and what the center has crafted, legislation that's smart regulations on the largest industry. Amazon is the third largest company on the globe.

And the other platforms that operate similar to craigslist?

Yes, I'd love to answer that, Senator. So, similarly, we regulate brick and mortar pawn shops, much smaller industry, many small operators, with much more onerous regulations than what we're proposing here for online brokers. So I'm confident that the Senator, working with industry, as she has been and we all have been, will find a regulation that balances, as you are urging, the need for commerce and the need for the community safety. But it is an important, it is a pressing issue.

I am sure your district is talking to you about it. We are all hearing about it. And it is incumbent upon us to be responsive to that. With 2021 solutions. We need to provide solutions that are modern.

How do we work this? That is what I am really focused upon, for example, on Ebay. How does ebay track those who contact the seller or the buyer independent of Ebay? How do they contact them? I mean, not contact. How do they keep track of that?

Would you like me to answer?

So, every platform is slightly different, but there are two primary mechanisms. Either you're in contract as a seller on the platform, or are you using the platform's payment processor. Those are the two main ways that they can identify, easily identify who is using their platform and their tools to, to conduct commerce.

And so I think that the efforts around amendments and the conversations are around focusing on the effort here is to shut down the online resale, not individuals that are on Craigslist and say, I'd like to sell you a car seat or a baby stroller. Nobody is seeking to regulate that behavior. What we're talking about is people running into a store and taking 300 pairs of jeans, and tomorrow they're on Amazon or Craigslist or Offerup. That is a very real problem we are having.

The CHP will tell you, the Attorney General's Office will tell you. These two prosecutor groups are telling you, it is a real problem that we cannot solve with law enforcement resources alone. We will never catch it. We are chasing a dragon, and we need business to step in and work with us. Fortunately, many have, and I think more will as they continue to understand that we're being reasonable about this, but that we need their partnership. We cannot solve this with the criminal justice system alone.

Commerce has to lean in. They have to be a good partner with us on this. And I believe most of them want that. They want to be the kinds of platforms that consumers can trust.

So how do we do that? I mean, back to my original point, the way we can eliminate any sales of pilfered goods online is to eliminate all online sales. I take your point. We don't want to do that. But there are certain platforms where they don't track and they link the seller and the buyer independent of the platform.

And if they have to go through the platform for payment, that so fundamentally alters their business model that in essence, it either impedes them or puts them out of business. So just how do we do that?

So I'm confident that they have enough information, and if they don't, they can require additional information from those sellers to confirm when they hit a high volume threshold. Again, remember, Senator, we're not talking about one off sales. We're not talking about me getting a new sofa and wanting to get rid of the old one. Right? We're talking about somebody that's making 200 transactions in a year. That's a job.

If you've ever sold something and had the person come to your house to pick it up or try to drop something off, it's an endeavor that requires your attention. And so we're talking about those individuals, and yes, we are asking the platforms, they may have to make some modifications to their business to accommodate that. We will be reasonable, I'm sure the Senator will be very reasonable, what those accommodations are, but they are necessary accommodations to protect the safeties of our communities.

Mister Chair, if I can add. So it won't necessarily have to require that the payment transaction occurs. So I think that's one of the concerns of some of the online places that have indicated. But all of these entities do have tracking systems. And again, I think the point that Mister Barry made that is, which I made in my opening, is that we are only talking about high volume third party sellers.

They are only needing to add verification information on those entities that are having 200 or more above 200 transactions on their site. Not 10, 20, 199 but more than 200.

No, I understand the tracking itself, though. So, for example, what happens if there's sellers and buyers that basically meet online, in essence, and then subvert the system to avoid the fee or to avoid the Commission by talking to one another? I'm not sure how they capture it, but the fundamental question is retail theft. It sounds like retail is retail theft increased dramatically in the last year.

So we've certainly had increases around the United States, particularly in big cities. It is on the decline, and hopefully it will continue to decline. Nonetheless, we are in a new universe with e-commerce. That is that, you know, crime moves where there's opportunity. This is a place of big opportunity that we would like to regulate so that we can shut down that opportunity.

Does Miss W. Agree that retail theft is down?

No.

Oh, okay.

If you don't mind, let me make a couple of additional points that I think are very relevant to the discussion. So those entities that are, and again, my intention is not necessarily to require in all situations, the payment done through the site. And that is something we'll continue to walk, excuse me, talk to stakeholders, but those entities that do not. We are losing that sales tax.

If you recall, when online sales began and increased and increased and were competing with all brick and mortar stores who were collecting sales tax, it took us a few years, but we were, and it was my Bill we were finally able to, and it was primarily oriented at Amazon, but it affected all of these sellers, that they collect the sales tax and then impart it to the State of California versus leaving it to each of us to report on our use tax circumstance. Right.

Well, now, any of these online sellers that are not doing that, we are losing that sales tax. And given the amount of shift from brick and mortar sales to online sales, that is, and given our revenue situation, we should not be. So that's another benefit of the Bill.

But additionally, I think the point that was made about the type of, when pawn shops, for example, were one of the main entities that somebody used to sell stolen goods, we put a great deal of regulations on pawn shops and that, you know, I'm sure pawn shops would, if they were standing here, would say, yeah, that was, we're onerous on us. Right.

And when, for example, during the Great Recession, we saw, and it's interesting that we're not doing this again, but it may be that it's already in place because we now see a lot of heavy metal theft. That's what's driving catalytic converter theft is in order to reduce, to remove those rare metals. But we basically put all kinds of restrictions or regulations on the entities that would buy different metals. And basically, we wouldn't let them pay you if you came and sold.

We wouldn't let them pay out in cash. We wouldn't let certain volumes, many, many things, in order to reduce these forms of ability to sell stolen goods. So that is what the purpose of the Bill is. And you have my commitment to continue to work with these stakeholders to make this as fair as possible and still achieve the objectives. And unless other people have questions, I could use that as my close.

Thank you. Thank you for your close. And you could tell from my toning questions that I have some reservations. But I support the concept of the Bill and I support the fact that you work in good faith. So we will continue to hash this out. That retail theft is an issue. And we want to discourage folks from having a mechanism to be able to do it with impunity. So I believe there was a motion by Senator Wahab.

Alright, Madam Chief counsel, if you could call the roll.

Roll Call

Nine to one. We'll put that on call. Thank you, Senator Skinner.

Thank you.

All right, so we have Senator Durraso. Senator Rosso, you're up. Then Senator Laird. Then I'll take up Senator Taro's Bill.

Thank you, Mister Chair. SB 1201 requires corporations and limited liability companies to report information about their beneficial owners when those business entities file with the Secretary of State's office. Currently, there is no required public disclosure of who the real owners of an LLC, or corporation are. Many LLCs are owned in the name of another LLC, which creates additional layers of anonymity and allows owners to abuse LLCs not only to shield their assets but also their identities.

None of this is necessary to achieve the legal and the financial protections afforded by forming an LLC in the first place. The ability of LLCs to abuse the structure to remain anonymous ends up presenting numerous issues and even enables dishonest, and in some cases, illegal practices. Take, for instance, how anonymous LLCs are pervasive among employers that skirt the laws meant to protect workers. Deceitful employers can use LLCs to avoid responsibility for underpaying workers, violating meal and rest, break rules, and ignoring occupational health and safety regulations.

By the time a business is found responsible for violations, the owners often have dissolved the LLC and created a new one, leaving nobody to pay the back wages or address safety issues. In fact, few workers who win wage judgments are able to collect their money.

An analysis of the labor commissioners data by CalMatters revealed that California issued $32.7 million worth of wage judgments to more than 1800 employers in 2017, and five years later, only 9% of those court judgments were recorded as satisfied or paid in full. Three quarters of the workers were recorded as receiving no payment. It can take years for justice departments and labor representatives to connect the dots to show that a single person is responsible for repeated violations.

This allows abuses to continue largely unimpeded, which often happen among the lowest wage industries. The lack of owner transparency also provides an avenue to skirt responsibility for substandard housing when property owners can hide behind the web of LLCs. Tenants and local enforcement officials are often frustrated in their attempts to obtain repairs because they cannot find the true owner responsible for the property.

And when the local enforcement agencies finally close in, these bad actors simply switch LLCs, creating substantial delays in the ability of regulators to compel repairs. SB 1201 is a good governance bill.

Senator Durazo, I'm going to ask you to pause for just a moment. We have to lift calls; I'm sorry. So, madam chief counsel, if you would lift calls.

Yes, on the consent calendar. [Roll Call] That's 11 to 0.

11-0. Consent calendar is confirmed.

Sure. SB. Sorry. This is file item number one, SB 1095. By Senator Becker, do pass as amended, to Senate appropriations. [Roll Call]. That's 11 to 0.

11-0 bills out.

File item number four. SB 924, by Senator Bradford, chair voting aye. [Roll Call]. That's nine to two.

File item number six. SB 1017 by Senator Eggman, with the chair voting aye. [Roll Call]. That's 11 to 0.

Nine-two bill is out.

11-0 bills out.

File item number seven. SB 1366. We haven't done that one yet. Sorry. File item number eight. SB 1061 by Senator Limon, chair voting aye. [Roll Call] That's nine to two.

92 bills out.

File item 10 was pulled. File item 14. This is SB 1144 by Senator Skinner, chair voting aye. Ashby? Ashby, aye. That is 10 to 1.

10-1 bills out.

File item 15 by Senator Wiener. SB 957, chair voting aye. Ashby, Ashby, aye. Nine to two.

Nine-two bills out.

File item number 16. SB 1047 by Senator Wiener, chair hasn't voted yet. [Roll Call]. That's nine to zero.

9-0 bills out.

File item 18 by Senator Allen, chair voting aye. This is SB 1441. Ashby, Ashby, aye. Niello, no. Niello? No. That's nine to two.

Nine-two bills out.

File item number 20. We're on. I think that's every.

All right. Thank you for your consideration, Senator Durazo. Thank you, Senator Durrasso. You may proceed.

Thank you. SB 1201 is a good governance bill. It does not change any of the legal protections afforded to these business entities. It simply requires the disclosure of their beneficial owner. We are just asking for one additional point of information on a form that entities currently fill out without owner transparency.

As policy makers and enforcement agencies and the public lack critical information to make informed policy decisions, SB 1201 will make it easier to enforce existing laws to protect the people who live and work in our communities across the state. It will increase government efficiency and ultimately save taxpayer dollars. Today, I have with me two witnesses in support of the bill, Kim Ouillette at the legal aid at work and Jyotswaroop Bawa from Rise Economy, one of the sponsors of the bill.

Good afternoon, chair Umberg and Members of the Committee. I'm Jyotswaroop Bawa with Rise Economy. Thank you for the opportunity to testify today. The lack of owner transparency is a drain on taxpayer dollars, impedes efforts to enforce existing laws, and frustrates efforts to design policies that are responsive to real world trends and conditions in our communities. For example, without owner information, we cannot assess the extent to which our community's assets are actually owned by a small number of corporate by entities.

This is particularly important in the housing context, given how crucial home ownership is to financial stability and building intergenerational wealth. While there is significant evidence that we are seeing increasing consolidation of housing ownership in corporate hands, it is impossible to know the true extent of the issue and where in the state it is most prevalent without transparency frustrating efforts to develop policy responses. California already has one of the lowest homeownership rates in the country.

Corporate purchases of single family homes exacerbate this because the average home buyer cannot compete with the all cash offers that corporations are able to make. What's worse, as landlords, corporations charge higher rents on average, making it more difficult for people to save for a down payment. Also, large corporate landlords are motivated first and foremost by their need to show quarterly gains, so they invest as little as possible in their buildings. Research shows that living conditions are worse in buildings owned by large corporations than small investors.

As the Legislature grapples with how to increase housing opportunities throughout the state, we also need to ensure that our current housing stock does not fall into decay. Currently, efforts to enforce habitability standards in rental housing are frustrated by a lack of information about who the actual people are behind the LLCs that own properties.

It can take years and significant public resources for local code enforcement departments to determine who to hold accountable for noncompliance with existing habitability laws and to uncover patterns of abuse and neglect over multiple properties. LLCs should not be a shield to avoid responsibility for substandard buildings. Finally, having beneficial owner information readily available would save significant public resources and be a net positive in terms of providing safe, stable housing opportunities across the country.

Thank you very much. We'd wrap it up.

Thank you for your thoughtful consideration. I respectfully ask for an aye vote.

Thank you very much. All right, next witness.

Good afternoon. My name is Kim Ouillette and I'm an attorney at Legal Aid at Work. We're a nonprofit based in San Francisco that advocates on behalf of workers across California. We provide representation to hundreds of workers every year who have been denied access to basic rights like minimum wage, overtime, paid sick leave. One major challenge that workers face in holding employers accountable for violations of their rights is accurately identifying the individuals and businesses that are liable for the violations.

SB 1201 would help address this by requiring public disclosure of the beneficial owners of LLCs and other entities that own and operate businesses. I recently represented four individuals who worked in a sushi restaurant in Hayward. As cooks in this restaurant, they regularly worked over 10 hours a day, six days a week. They were not provided with meal breaks, they did not receive overtime compensation, and they were not paid the minimum wage. The violations were clear, but determining who to hold accountable was not.

During the three years my clients worked at this restaurant, they were employed by three different corporate entities. The workers did not know who actually owned the business or set policies for the business. By the time we got a hearing in this case, all three of the corporate entities had been dissolved. Through time consuming extensive investigation, including detailed searches of yelp reviews and even calling a number of sushi restaurants in Hayward, we were able to identify two individuals who we thought ran these businesses.

But during the hearing, neither individual would admit to owning or setting policies for the business. Even though we won our case and the hearing officer determined that my clients were owed over $200,000 for the violations committed against them, we ultimately were able to recover only a fraction of that amount, in part due to a lack of proof about who actually owned and ran the restaurant.

Unfortunately, this story is just one of so many where, despite speaking up and spending years fighting for stolen wages, workers struggle to hold work employers accountable for violations. SB 1201 will take a very, very important step to prevent corporations from evading responsibility, and for this reason, we urge your support. Thank you.

All right, others in support, please approach the microphone.

Christopher Sanchez with the Mess of Weather Group, on behalf of the Western center on Poverty, Inclusive Action for the city and the Consumer Federation of California in strong support.

Brian Augusta, on behalf of the California Rural Legal Assistance foundation, the Public interest Law Project, the National Housing Law Project, and housing and economic rights advocates in support.

Catherine Charles, on behalf of Housing California in support.

Chair and Members, Beth Malinowski with SEIU California, in support.

Chair Umberg and Members, Brian Miramontes with AFSCME California in support.

Suzanne Dershowitz with Public Advocates, co sponsor of the bill in strong support.

Mark Stivers with the California Housing Partnership in support. Thank you.

Elmer Lizardi with the California Labor Federation in support.

Shanti Singh, on behalf of Tenants Together and our 60 Member organizations across the state, strong support.

Thank you. All right, opposition. If you're opposed to SB 1201, please approach.

Good afternoon, Chair and Members. Thank you for the opportunity to speak in opposition of this bill. My name is Amber Madison. On behalf of the California Apartment Association. We have opposed bills of this nature previously and our opposition to this reincarnation of last year's SB 594 remains the same. Requiring business owners to disclose their identity is unnecessary and a costly requirement with no tangible public benefit.

The bill is attempting, according to the author, to protect consumers from people who willfully break the law. But the problem is that the bill does not, by its own black and white, stop these bad actors from performing these bad acts. Due to this, the bill's absorbent cost, the enactment of the federal CTA, and possible conflict with the bill's requirements and the disclosure laws of other states, as highlighted in the staff analysis. We respectfully request a no vote at the appropriate time. Thank you.

Good afternoon, Mr. Chair and Members. Karim Drissi, on behalf of the California Association of Realtors, in opposition, respectfully request a no vote. Thank you. Thank you.

Good afternoon, Mr. Chair and Members. And I applaud your stamina at this point. Robert Moutrie, California Chamber of Conference in opposition particularly concerned about the personal residence disclosure. Thank you.

Thank you. You think this is stamina? Thank you. Yeah. All right, let's bring it back to Committee. Yes, Senator Wahab.

Thank you. I'm actually going to move this Bill. Specifically, I also want to highlight that some of the witnesses mentioned folks in Hayward. I obviously represented Hayward. We see this across the board. We see violations to specifically folks of lower income status, people who have different backgrounds in their immigrant status, and much more. I think that at a certain point in time, we need to know who owns what.

And last year we, me specifically, I was trying to push a rent registry to actually understand, again, who owns what. Where can this be? You cannot hide behind the shadows. I understand the purpose of an LLC. I fully support protecting assets and, you know, limited liabilities and so forth. I completely, fully support that. However, at a certain point in time when, as was mentioned, violations are made that are completely against the law, it should be easy to figure out, you know, exactly who's liable, number one.

Number two is the fact that some of the commentary of the opposition stated that this is problematic in some ways. More specifically, I do want to highlight that if this doesn't solve the problem, I also just want to give an anecdotal information that in the City of Hayward, we try to identify, you know, and reduce our eviction rate. Our eviction rate.

The moment we had an excel database of who owns the property and stating very clearly that you cannot evict based on, you know, age and discrimination and so forth, our eviction rate went down by double digits within 12 months, purely because we could tell who was doing it. We could identify bad actors and repeat offenders. We could also hold them accountable.

In 12 months, we saw double digit decline in evictions, and the people that were being evicted were the most marginalized, most victimized, most vulnerable community members in our already lower income city. And so we have this conversation here in judiciary, and I specifically asked to join this committee to highlight some of these concerns. And I understand, I'm not a lawyer, I get that.

But it's incredibly important to explain how housing and the laws around rents and corporations and so forth have a negative impact, not necessarily just the financial positive impact in regards to business, which I again support. We have to create safeguards to protect as many people as possible, especially when people are abusing their power. So I really appreciate the Senator, for your work and your consistent commitment to marginalized communities. I respect both opposition and proponents of this bill, and I respectfully, respectfully move this bill when appropriate. Thank you.

All righty. Thank you. Yes. Senator Min?

I want to thank my colleague from Hayward for bringing that, for those comments, and to you, Senator Durazo, for bringing this bill forward. You know, Lewis Brandeis, the former Supreme Court justice, once said, sunlight is the best disinfectant. And that's really what this bill is about. It may or may not solve problems, but by providing transparency in the ways that my colleague from Hayward mentioned, I think it can really illuminate who is problematic, who might be repeat offenders.

And we also know, just from a lot of studies and what we see on the Internet, that anonymity often entitles people to act in bad ways. So having someone to hold accountable, I think, is important, particularly given the dominance of reits and private equity firms that have really begun to dominate California's rental markets. So I've been sympathetic to a lot of the small landlords in a lot of these bills that have gone through this Committee, but this one's an easy one.

So I will be voting aye. And I want to thank you for bringing it forward.

Thank you.

Thank you. Other questions. Comments? Senator Wahab has moved the bill. Senator Durazo, would you like to close?

Thank you all and appreciate the comments and support and ask for your aye vote.

Thank you very much. All right. Senator Min added. Madam Secretary, please call the roll.

This is file item number 20, SB 1201. Motion is do pass the Senate banking and financial institutions. [Roll Call]. Nine to one.

9-1. The bill is out.

Thank you, Members.

All right, Senator Laird, file item 21.

Mister Chair. Senate Bill 1150 will update the title of Chapter Seven, Division Six of the family code, to ensure people, regardless of gender identity, can restore their former surname following a divorce. The chapter's language was updated nearly three years ago to contain gender neutral language, but the chapter's title, restoration of the wife's former name, was left unchanged. This Bill is simply a correction to it. The Bill, supported by the child support Directors Association of California. It has no registered opposition, and I request and aye vote.

All right, thank you very much. Witnesses in support. Seeing no one approach the mic. Oh, I'm sorry. It was too fast. You got to be fast as a Committee once after four, you got to be fast.

He's a me, too after. There's no me.

Craig Pulser for Equality California in support.

All right, thank you. Others in support. Opposition. Seeing no one approaches. Microphone in opposition. Back to the Committee. I see questions? Senator Min has moved the Bill.

Okay, me, too. Go ahead,

Ask for an aye vote.