Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government

Good morning. How's the mic? My apologies to everyone, but when the pro tem calls you into a meeting, you generally don't point to your subcommittee hearing that is waiting. You sort of do that. So my apologies to everyone. For purposes of preparation, the Budget Subcommittee #4 on State Administration will officially convene in 60 seconds.

So it's. All right. The Committee will be in order and we'll establish a quorum consultant. Please call the roll. Senators.

[Roll Call]. Thank you. We have a quorum. Today we will take up for discussion all items docketed for discussion and then follow with public comment and then take up the items for vote. We'll begin with government operations agency Gov Ops. All the representatives representing this item please come forward. Make yourselves welcome and comfortable. Item six is Cradle to Career E-Transcript California practical tools reappropriation. Please state your name for the record and proceed when ready.

Good morning, Mr. Chair and Members. My name is Marianne Bates and I'm the Executive Director of the California Cradle to Career Data System. With me is Eric Flores, Deputy Director for legislative affairs. I want to open with a brief introduction on Cradle to Career, launched by the state Legislature in 2021. State policymakers recognized California faced a tough challenge. Our information on early education K-12 schools, colleges, social services, and employment were kept in silos and disconnected.

This makes evidencebased planning and decision making across our state's efforts in education and job training exceptionally difficult without a statewide entity connecting trusted information together. Cradle to Career is a statewide longitudinal data system that provides tools to help students reach their goals and delivers information on education, economic and health outcomes. The Cradle to Career Data System connects individuals and organizations with trusted information and resources.

Our office is developing tools to provide insights into critical milestones in the pipeline from early care to K-12 to higher education skills training and employment. The data system empowers individuals to reach their full potential and fosters evidence-based decision making to help California build a more equitable future. Before C2C creation, California was one of fewer than 10 states without an education focused longitudinal data system.

Our office is working hard to link state information on education and jobs to serve as a neutral source of information for students, families, and policymakers. We're doing this work in three ways. First, through analytical tools designed to allow the public and decision makers to interact with secure, deidentified data through dashboards, query builders, and a data request process for researchers. Second, we're working to scale practical tools to help students and families succeed in their transition into college and careers.

And third, through extensive community engagement, we're first listening to communities and practitioners about what they need and the questions they need answered, and that's informing the design of the system. We're proud of the work our office has done since we last spoke at this committee in 2023. We've led 18 community events designed to engage the public in the design of our data system, and we've been growing the team and have filled nine of the 10 new positions authorized in the last budget.

Last October, we reached a milestone unprecedented in California. The data system ingested over a billion data points in collaboration with eight of our data partners. Part of our ongoing work is directly related to Governor Newsom's Executive order on career education, which gives Cradle to Career a role in the creation of a master plan for career education.

Cradle to Career is working to develop and support tools that empower students to get credit for their learning and for workers to articulate the value of their skills and enable them to build on those skill sets. We're doing that in two ways. First, we're working with partners to revamp e-transcript California. Inconsistencies in how community colleges format, deliver and charge students for transcripts can delay admissions decisions and may result in students not receiving credit for classes they have completed.

Second, we're exploring possibilities for what Governor Newsom called the California Career passport to support skills based hiring by documenting qualifications such as certificates and badges. Because Cradle to Career's authorizing legislation tasks our office with expanding access to e transcript California, the office is strategically placed to facilitate cross cutting consensus around scope, functionality and user needs. For this tool to be responsive to our statutory obligations and the governor's Executive order.

Our office has launched a task force running from January to June of this year that will provide recommendations for the master plan on how revamping e transcript and building a California career passport can reduce burden on students, job seekers and educators. Thank you and I look forward to your questions.

Thank you very much. Are there comments from LAO on DOF?

Natalie Griswold, Department of Finance funding for this proposal is necessary to meet one of C2C's statutory requirements. This is a reappropriation of C2C's current year funding and repurposes funding for e transcript related resources. This is an efficient use of funding given the General Fund condition and we are available for any additional questions. Thank you.

Thank you.

Thank you, Mr. Chair and Members Ross Brown with the Legislative Analyst Office. We're recommending the Legislature reject the proposed reappropriation we view this as a discretionary expenditure that's being proposed by the Administration. These are unused funds that would otherwise revert to the General Fund and can be used to help address the state's broader budget problem. For several reasons, we don't think there's adequate justification for funding this proposal at this time.

First, while the funds would be used to contract with outside consultants for planning and stakeholder engagement, the specific activities that would be funded are still unknown to the Administration, and it doesn't anticipate having a clear plan for using the funds until at least later this summer. In addition, a reimagined and expanded e transcript is still in the early conceptual stages, with significant questions about its scope, cost, functionality and user need.

And finally, the Administration has also not substantiated why the Cradle to Career office rather than some other agency. For example, the community college's chancellor's office, which is the lead on e transcript, should oversee these activities. And so for these reasons, and given the state's budget situation, we recommend the Legislature reject the proposal and revert the unspent funds to the General Fund.

All right. Thank you. The requested reappropriation for implementation is based on a scope yet not yet determined. Did we want to address that further?

I'd be happy to. Thank you for that question. For the activities that are planned, I would like to refer you to the staff memo for this item, which lists a number of bullet points around the project management and coordination across all of the higher education segments that we plan to do.

And these are largely around convening the higher education segments and stakeholders to support alignment and consensus on the best ways to collaboratively solve the issues that currently exist and the barriers that students face in transferring their transcripts.

Thank you. Other questions from Members of the Committee? Vice Chair Niello, no questions.

A comment. First of all, I'm supportive of the Cradle to Career efforts, but I'm going to make an overall point not having to do specifically to this. This is the first item out of the chute for this Committee. We have a very serious budget deficit, and it's getting worse, and especially because, in my opinion, the Administration continues to seem to maintain that the problem is not that big.

We're still dealing with a $38 billion deficit from the Administration standpoint, whereas the LAO has increased the estimate to 72 billion because of revenue declines, which are more likely to continue declining as opposed to improving in the short term. We have a huge mountain to climb. Now.

This is only $600,000, not even budget dust, but I think we've got to make the point that we're not going to be able to solve this deficit unless we seriously take a look at reducing expenditures, one time expenditures, unspent money from the current year, as well as serious issues with regard to the 2425 year, keeping in mind that even when we balance that budget, we have continued deficits in the next three budget years.

So this has to be a rejection of an expenditure, no matter how small, because of the huge hill that we have to climb.

Senator Smallwood-Cuevas.

Thank you so much, Mr. Chair.

And I wanted to just clarify, so this is part of the 10 positions. You said nine have been filled. This is a position that has already been budgeted. We've already identified needs to be resourced to start this work.

Thank you for that question. This request does not have any positions associated with it. It's a one time expenditure.

The resources that have been allocated in terms of the budget, this isn't new money. This is money that has already been given to the Department for this purpose.

Do you want to answer that?

Natalie Griswold, Department of Finance. Yes. So this is a reappropriation of CTC's current year funding. CTC has experienced some salary savings this year because they were authorized for 10 new positions at the beginning of the fiscal year and were not able to fill all of those positions on July 1. So they have some additional savings available. So we're proposing to make this funding available for an additional year and repurposing it for this etranscript California purpose. Thank you.

That's helpful. And I understand the Senators concerns about our budget deficit, but I want to say that we have to invest money where we see there's going to be a multiplied return. And investing in c two C to me is an opportunity for us to do the work that we're doing. We will get federal funds to build out our climate resilient future, and we need to make sure we have the workforce that's ready to step into the gap as we move forward.

So with that, I will be supporting this item and happy to move the motion when the time is right.

Thank you very much for this, as always, the focus center small credit these items we're taking today, just for discussion. This item won't be held, but will come back to us for action. And I appreciate that. Thank you very much. We'll take item issue number seven, which is various reductions in Govops. Thank you both for musical chairs. And this time, some of the commenters are the presenters. Welcome. State your name for the record and proceed when ready. Thank you very much.

Natalie Griswold, Department of Finance, and I'm here with my colleague Danielle Brendan from the Department of Finance. Good morning, Mr. Chair and Members. Today I will present a brief overview of the government operations agency, or GovOps. Govops is responsible for coordinating and overseeing the departments that manage the state's operations and business operations, including procurement, information technology and human resources.

GovOps oversees several departments, including the Department of General Services, which manages a variety of issues, including procurement, real estate and building management the Department of Physical, which operates the state's financial information system for California the Department of Technology, which oversees state technology and information security.

Govops also oversees several additional departments, including the Franchise Tax Board, the Department of Tax and Fee Administration, the Office of Data and Innovation, the Department of Human Resources, the California Public Employees Retirement System, the California State Teachers Retirement System, the State Personnel Board and the Victim Compensation Board, the Office of Administrative Law, as well as administering the Office of Cradle to Career Data System, which we just heard from GovOp's ongoing annual budget is $22.5 million, including 18.7 million General Fund, and this supports 55 positions.

GoVOps mission is to advance effectiveness, efficiency and equity in state operations. GoVOps is one of 11 cabinet level agencies that reports to the Governor. It oversees and supports the work of 13 departments, boards and offices with more than 22,000 employees and an annual budget of over 67 million. Within all of those departments, the Governor's Budget proposes three reversions of onetime funding previously appropriated to GoVOps from the GoVOps budget to help address the projected General Fund shortfall. This first proposal reverts about $2.19 million.

General Fund the 2019 Budget act appropriated 87.9 million General Fund for census related workload. This workload has been completed and so funding is no longer needed for this purpose. The second proposal reverts about $4.6 million General Fund appropriate in 2022 for a language access pilot program. While several efforts have been made to identify language access strategies for public meetings, GoVOps has not completed procurement for these language access systems, so these funds are available for reversion and this third proposal reverts $500,000.

General Fund appropriated in the 2023 Budget act for leadership initiatives the 2023 Budget act appropriated 2 million for leadership initiatives, and it has been determined a portion of this funding is no longer needed for the purpose it was appropriated. Collectively, these three proposals represent available one time funding and are appropriate for reversion to the General Fund. Given the General Fund condition, we are available for any questions. Thank you.

Thank you very much, Oleo.

No issues to raise here.

Can't imagine why not. Thank you. Questions or comments from Members of the Subcommitee hearing?

This item is held open. We'll move to item. To the governor's office of Planning and Research. Take up issues, starting with issue eight on departmental reorganization. Make yourselves comfortable. State your name and please proceed when ready.

None.

Good morning.

Good morning. Chair Padilla and Committee Members, I am Sam Asafa, the Director of the Governance Office of Planning and Research. I'm joined here by Natalie Kuffel, who is the program manager for OPR's judicial streamlining process. Thank you for the opportunity to present OPR's 202425 budget. My remarks will cover all of the budget items that are on the agenda this morning. I just want to spare you from each of my staff making introductory remarks.

So this year, OPR continued its critical work on land use and planning, climate adaptation and resiliency, sustainable community and economic development, and its long range research portfolio. This year's governance budget proposes changes to the organizational structure of OPR, given the significant growth the office experienced over recent years.

In recognition of this growth and the number of programs and initiatives within the Department, the 2023 budget began transitioning OPR to a more traditional Department that relies on state civil service structure and classification and to further streamline efforts and enable OPR to focus on its core responsibilities. We are currently evaluating some of the programs housed in our office to determine if other state departments are better suited to administer those programs.

The intent of this effort is to return OPR to its core mission as identified in the Governor's Budget. One major component of our proposal is moving the existing California Volunteers program to an independent Department where it can continue its focus on service, volunteerism, and the promotion of community engagement through its various programs, including its Hallmark College Corpse program. We look forward to coming back to you with more detail on that proposal during the May revision.

While acknowledging the leaner fiscal environment it is operating in, OPR continues implementing the priorities of the Governor and Legislature. An important piece of this effort is the Environmental Leadership development project program. This program allows for large infrastructure projects to be certified by the Governor and receive expedited judicial review under the California Environmental Quality act.

For Cequa, we understand the Lao and legislative consultants have asked the Administration if it will pursue the proposed reorganization, which I will note includes maintaining all existing programs, but may relocate some to other departments through the Little Hoover Commission process. The Administration does not intend to use this process and will instead propose statutory changes through the budget process similar to other recent reorganizations.

One example I'll give sort of most akin to this is a 2023 TBL that moved the California Housing Finance Agency out of Housing and Community Development to its own entity. I can cite a a number list of other examples, but I'll spare you of that now, but happy to share that if you have any questions. Additionally, the governance budget proposes budget solutions to six of OPR's programs.

This budget solutions will continue to contribute to balancing the state's budget while ensuring that OPR's core commitments are maintained and robust. This proposed budget solutions impact the work of strategic Growth Council, state planning and policy development, California volunteers, and the Office of Community Partnerships and Strategic Communications, all under OPR's umbrella. I am proud of the important work that OPR's programs are engaging in and look forward to continuing that work with the funding proposed in this budget.

With that, my team and I are happy to answer any questions you may have. Thank you.

Very much. Director, DOF.

Henry Ng, Department of Finance nothing to add?

Luke Kushmaro with the Legislative Analyst Office on issue seven, the reorganization we note that a reorganization could have merit given OPR's increased responsibilities and substantial budget growth over recent years. Notably, in 201617 the budget was only 54 million, but the proposed budget for 2425 is 1.1 billion, which is about a 2000% increase. In addition, reassigning certain responsibilities to established state departments with appointed directors that are confirmed by the Senate as well as staffed by civil service could improve transparency and accountability.

However, presenting a major reorganization at the mayor revise would give the Legislature little time to review the proposal to weigh its merits. This is particularly important because OPR's responsibilities include many key legislative priorities, such as climate change and sequoia implementation. Given these concerns, we recommend the Legislature defer any major decisions about changes to OPR and the delivery of state services until it has sufficient time to review the proposal and consider all potential options and ramifications. Would the chair like me to continue on to issue eight?

I believe we yeah, please address the directors addressed testimony to most of the issues before us, so let's go ahead and do that symmetrically so that we don't lose, folks. Thank you.

So while OPR likely will need some additional resources to implement SB 149 for judicial streamlining, the extent of the new workload remains unclear. Only a handful of applications have gone through this process, and none have gone through SBA 149's expanded provisions in future years. Some amount of this workload also could be supported by revenues from fees that OPR is currently in the process of implementing for these applications.

In addition, we note that the administration's proposal to Fund this workload is inconsistent with the approach to other recently chaptered legislation. Specifically, with the exception of this one proposal, the Administration is deferring the consideration of resource requests associated with the delivery of other recently chaptered legislation.

Until the mayor revision we recommend that given the uncertainty around workload and the level of General Fund support that would be needed, that the Legislature consider authorizing the funding and positions for a Shorter time period than the 10 years proposed by the Administration.

For example, the Legislature could approve funding for three years or different amount of time, which would give the Legislature and the Administration time to determine what level of support is needed for this workload, both in terms of resources as well as General Fund support. In addition, we think it makes sense to consider this proposal as part of a larger overall approach and plan to implementing other recently chaptered legislation.

That way, the Legislature can consider, with the limited resources available to it, what priorities it wants to Fund in the budget. Thank you.

The office a couple of items. First, with respect to issue 10, I know that the agenda that was posted lists some feedback and questions on the staff level. You might want to take a moment, Director, and address yourself too, and also issue 11 addresses in the documentation for today's docket about other potential avenues of savings, and thought I'd provide an opportunity for you to address that in the hearing as well.

You want me to jump to issue 10?

Yes, sir.

We have. So I'll ask Yumi Sera, Executive Director of the Office of Community Partnerships and Strategic Communications. She could provide you more details.

You're welcome.

Good morning. Thank you, Mr. Chair. Senator Niello? Senator Smallwood-Cuevas. Good morning. My name is Yumi Sera. I'm the Executive Director of the Office of Community Partnerships and Strategic Communications, one of the offices under Office of Planning and Research. I think we met last year as well. Very pleased to be here with you today. I was also worked for the state service for the census 2020, a very successful campaign and our Vaccinate All 58 campaign. Do you want me to just go through the questions?

Is that good? So there were questions around the way that our office was structured and around the budget. The first question was around the breakdown of the budget. According to the campaigns, the way our office is structured is really the funding is for the core infrastructure. It's not by campaign. So that's one thing. The core infrastructure consists of mainly of our trusted messengers who are our community based organizations, and they are the ones who are the ones who are going out into the field.

They are our grassroots campaigners who are implementing the campaigns, whether it be for extreme heat and telling folks to be careful and letting them know what to do in case of extreme heat. Working on our save our water campaign and also working on our iten, the individual taxpayer ID number and just raising the awareness of these campaigns.

I appreciate that and appreciate you verbally addressing it in the hearing. All right, we'll bring it to the sub-director. Are there particular factors we should be aware of with respect to the overall reorganization and the plan to bring detail back? It may revise that have prohibited the Department from providing detail at this point in the budget process sufficient for the Legislature to have some ability to adequately analyze it.

Yeah, so to be Frank, we know some of the ones that we know that I mentioned California volunteers. So we worked on that and propose relocating that independently. And the significant amount of focus over 2023 has been on the conversion to civil service classification. That is a significant part of that change. Now we're delving into the different programs as we are preparing to the reorg. We're on one hand identifying.

So how do we get back to our core mission of land use CEQA, conducting research, and part of the challenge with the number of programs that were added, we have expanded significantly in multiple areas. That discussion is underway. Other than that, we're considering a number of office programs and then looking to see which departments are best suited to house those. So we'll definitely have that detail for you by the May revision.

And again, this is similar process that we have done over the last 67 we, meaning the state, through the budget process.

I think I appreciate that, Director. I just want to highlight the fact that that process is not new. Right. And it was anticipated in the General scoping for the original appropriation, and they had that conversation last year. And I think that there's ample time to be in a position to provide a framework that the Legislature can review in a timely fashion. That's my only point.

And I like to again emphasize that these are the governor's staff and the same programs would stay. It's just looking at the best way to move those. There's no significant implication.

I also want to just briefly ask with respect to support for dealing with SB 149 and SQL reform, and I get the ubiquitous nature of how SQL is applied, and it's sort of unique. But the Administration has taken a position to hold support for any allocation with regard to recently chaptered legislation, and that's pretty universal except for here. Did you want to address that?

Yes, I'll ask my judicial streamlining program manager to give you more details, but it's important to note the unique aspect of this judicial streamlining. The reason it is pretty important to do it now is we are in the midst of, as you know, significant, unprecedented investments in infrastructure from federal and state.

This is once in a lifetime opportunity and the Governor has been very adamant throughout the state agencies in terms of expediting our permitting process and finding ways to streamline without compromising the core environmental review process. And this is a very important program. As a result of that, as we speak today, the Governor had a press release, the fourth and central project in Los Angeles, more than 1500 units of housing, about 215 affordable housing, $2 billion investment, 10,000 jobs.

That's the reason why this is important and a priority for the Governor.

To be clear, I am appreciative and a fan of many of the strengthening that's been done with the scope here for a long time and often to great benefit, I think. That said, I'll ask other Members of the sub that have additional questions or comment. Senator Niello.

Moving backward, first of all, with regard to the community partnerships and strategic communications, the reversion still leaves a substantial amount of money for media and outreach campaigns. And somehow that just doesn't seem to me to rise to the level of mission critical efforts in the face of such a huge deficit that we're facing. So perhaps a little bit more analysis as to those expenditures is relevant.

But you mentioned going back to the reorganization issue, that you will not be going through the review by the Little Hoover Commission. That which is required by government code Section 8523 which would go to the Little Hoover for an analysis, would, as I understand it, I think, be preceded by a drafting of proposed legislation by Ledge Council and would be a more deliberative process toward that reorganization. And I think you said you were choosing not to go through that. And how do you justify that?

So I'll have Department of Finance, who's had experience in the past, but what I noted is this is not any different from a number of similar reorganizations that were done previously through the budget process. And there are a number of examples. And one, and then number two, I'll reemphasize again, these are Governor staff and programs within the office that are being moved to different places without budgetary impact from that perspective.

So we felt that it is appropriate to go through the TBL process, but I can have DOF speak to sort of the history and experience of similar processes.

Good morning. Amy Jarvis with Department of Finance and Mr. Sefa already spoke to. We have done this through, excuse me. Historically, some reorganizations have been achieved through policy bills or prior trailer bills. And while he mentioned the California Housing Finance Agency, a couple of others were the creation of the Office of Youth and Community Restoration in 2021, as well as the Board of Environmental Safety, the Department of Cannabis Control also similarly consolidated, created the Department and then consolidated programs from three different departments.

And then another one is the Office of Digital Innovation, and then subsequently the creation of the Office of Data and Innovation just this last year. We recognize the Legislature's concerns, but it is intentional. I think there is some concern about the may revision process and not having a lot of time. I think our intent is to not. It's a net zero proposal at this point. Anything we move should not generate new costs.

Our intent with the creating the California volunteers as a separate Department is to continue to rely on OPR's administrative structure with maybe some slight modifications. So we're not intending this to be a cost increase proposal. At the mayor revision.

I'm not so much addressing the issue of whether it be a cost increase. It's the appropriate way of going about a reorganization. And to the extent that the justification is we've done it this way in the past, I'm not sure that wins the day in my mind, perhaps the Legislature should have pushed back a little bit more before. So I questioned that procedure, and also in the context of a very difficult budget.

But I have another sort of more basic question, and that is, historically, OPR has been the Executive branch's think tank, if you will, and not a particularly large organization. It's gone through a significant metamorphosis in the last few years. One would say it is already a De facto reorganization. But I digress. But the basic question is, this think tank within the Executive branch that was OPR won't exist anymore. Does that mean that you don't see a need for that more specialized, smaller function?

No, that's not actually, the core purpose is to really focus on its core function and core mission, which is around charting the future from land use climate research perspectives. One of the core function also includes CEQA, and writing guidelines around CEQA, maintaining the clearinghouse for CEQA. So a lot of the core functions around conducting research and really charting the future and advising relevant agencies, the Legislature and the Governor would continue.

And our proposal is to actually focus back to its core function and mission versus, as you noted, number of programs that were added over the last few years. I think you heard the Lao notes from 54 to 1.1 billion that came through the legislative process over the last few years in terms of that increase. But I'll assure you the intent is to actually, those are not going to go away. In fact, we want to elevate that. I have my own bias.

I come from a land use perspective, and I want OPR to be. I'm the first Director with a land use background for an office since 1970 was established to be the state's comprehensive planning agency. So what we're doing is trying to get it back to that sort of core, core function. But I'll assure you that that is not going to go away.

Color me skeptical.

Senator Lola Smallwood-Cuevas I appreciate.

The overview and looking forward to the report to come. One of the things that strikes me in our state government as a new Legislature, and this is my first budget sub hearing to participate in. I'm very excited about this. But one of the things that strikes me is just how so often our work can be siloed right where we don't learn from the other sort of partners that are looking at different aspects of one thing and have channels to share that information.

So the innovation and the conversation continues. As you're thinking about this restructuring, what are the things that are going to be embedded so that land use can inform the climate work, so that the climate work can inform the campaigns? I think a way to address our resource question is how do we actually streamline and create a synergy where we're not replicating and duplicating, but we're sharing and advancing? So I'm just curious how you'll do that.

And then on the point that was mentioned about the work that is happening on the outreach and campaigns, I want to say how important it is and coming from communities that are vulnerable, representing south central Los Angeles, our people need to know that the state is doing work. They need to see us. They need to hear us.

And unfortunately, with so much happening in the average residents life, it's hard for folks to actually go and find that information when they might be working three jobs, for example, or they're trying to take care of their kids. This program to cut that program limits their access to their own government.

And I have concerns about that and I hope to hear more about how that will be addressed and how do we make sure that we preserve the vehicles and the channels for our residents to know that their government is working for them.

Thank you, Senator. Both good questions. On the first one. I want to note in addition to your question, Senator, as well, one of the core function that grew was in the creation of the Strategic Growth Council. This is a body that has seven state agency secretaries that make up the council OPR Director and I've been the chair of that.

That has been one of the most effective function in which cross agency collaboration and breaking down silos in state government in how we deliver service and address priority issues from affordable housing through equity issue technical assistance focused on climate and climate resiliency. That function would stay within OPR. So that will continue to be there, to continue that service.

That actually enhances the core mission of the OPR from its original statute, which is require the office to be the conduits to all state agencies to make sure that climate, economic development, high road jobs, policies relevant to that are well coordinated across state agencies. I can't think of any better example than the SGC structure nationally that actually does that.

And the Governor has been pushing us to in that end, not only to look at breaking down silos across agencies, but to really think holistically about every single policy initiative. Housing is not just about housing. It's about climate, it's about equity, it's about access to opportunity, it's about supporting jobs. So that's the kind of coordination that we engage in through that body. On the second one, on the office of Community Partnerships and Strategic Communications, the Governor's Budget is not really significantly cutting that back.

Our proposal is not. Those functions will and the bulk of the work around community engagements and as the Executive Director mentioned, trusted messengers. There is not a single example in the country where community based organizations have a table, are at the table now as part of an ongoing engagement with government.

More than 40 languages are used through that process so that we and the Legislature and the Governor could advance the state's priority issues through that mechanism where people on the ground who actually deal with the issues, whether it's climate change, flood heat, are the right people who can actually communicate those issues on the ground. So those functions on the governor's proposed budget are not significantly reduced.

Thank you, Senators. Any more on this item? Director, do you have any additional presentation? I didn't mean to cut you off earlier when I moved you ahead. We feel you've had the opportunity to adequately address it. Thank you very much, both with respect to issue eight and issue 11. Those are information only items. The other items will be held open. I will take us to the Department of Cannabis control.

We are having some attendees exit the hearing room, so bear with us for just a minute, and then when you get settled and ready. All right. Please state your name for the record. Proceed when ready.

Thank you, Mr. Chair and honorable Members of the Committee. My name is Angela Hill, and I serve as Deputy Director of government affairs for the Department of Cannabis Control. Legislation formed the Department in July 2021 by consolidating California's three cannabis licensing programs into a single regulatory body to centralize and streamline commercial oversight. The Department is tasked with licensing and regulating cannabis businesses and enforcing against the illegal market.

The Department also oversees compliance with important product safety requirements in the commercial cannabis market and is broken up into 12 divisions with 639 authorized positions. The Department has one budget proposal before you today for consideration, which requests ongoing resources to support five positions within the laboratory service division and two positions within the legal affairs division.

The proposal has an estimated cost of 8.2 million in fiscal year 202420258.1 million in fiscal year 20252026 and 1.3 million ongoing beginning in fiscal year 20272028 I will first discuss the critical need for the five requested positions within the Laboratory services division. The Laboratory Services Division is responsible for the regulatory oversight and compliance of California's license testing laboratories. The Laboratory Services division reviews license applications for laboratory licenses, conducts routine inspections, investigates complaints, takes enforcement actions, and conducts investigative sample analyses.

These responsibilities are critical in our efforts to protect consumer safety, and the five requested laboratory positions will better equip the Department to build the capacity of our state lab to test for all types of products and identify contaminants across the supply chain, scaling our investigative capabilities to support more comprehensive product and lab oversight. In addition to the resources necessary to support the core functions of the laboratory division, the Department is also requesting resources for its legal affairs division.

The Legal Affairs Division is responsible for providing critical legal services for the department's 12 divisions and Executive office. These legal services include building enforcement cases, providing legal counsel, drafting and reviewing legal documents, representing the Department in administrative actions and appeals, and responding to PRA requests, just to name a few.

The two requested positions for the Legal Affairs Division will enhance the department's capacity for enforcement cases, allow for proper supervision of attorneys, and dedicate a support staff to manage administrative duties that are currently being absorbed by our attorneys. Due to insufficient resources, the laboratory and legal divisions are experiencing delays in their work, such as testing method development, performing sample testing, processing legal documents, and building enforcement cases.

Absent approval for these seven requested positions, the Department will fall short in its mandated obligations in a timely and effective manner, which can ultimately impact our ability to protect consumer health and safety. In addition to these requested positions, the Department requests three year limited term litigation and hearing funding through fiscal year 20262027. This funding includes 2.7 million for litigation expenses with the Office of the Attorney General and 4.1 million for anticipated costs with the Office of the Administrative hearings.

This funding directly supports the department's ability to take critical compliance and licensing actions, which are essential to our core mission of protecting consumers and upholding the integrity of the licensed market. This fiscal year, the Department has significantly increased its compliance actions and will continue this trajectory into the next fiscal year, which will increase our administrative hearing costs. Additionally, the Department is involved in ongoing civil litigation and without adequate initial funding for the DOJ, the Department may be required to delay taking critical enforcement actions.

Even with the funding we are requesting, we believe our projected funds may underestimate our actual costs for DOJ engagement and administrative hearings. To be adequately prepared for this scenario, we have included provisional language to allow us to return to the Legislature within this three year period and request an expenditure increase in the event that our litigation and hearing costs outpace our projections. Thank you for your attention and consideration of the department's request.

I'm joined by the Deputy Director of the Legal Affairs Division, Tamar Colson, to answer any questions the Committee may have.

Thank you very much. Department of Finance.

Andrew Huang, Department of Finance. I want to echo the comments the department's made, and I also want to provide comment on the LAO's analysis that's provided in the agenda as it's related to the department's request for authority to cover legal services costs.

So, due to the unknown nature and complexity of legal work in the cannabis space, the department is requesting to continue its appropriation of 2.7 million for litigation expenses, which was authorized through 23-24 and was previously provided to departments former to the department's former legacy departments. The department acknowledges that potential OEH workload has been less than previously projected and therefore is requesting an augmentation of 4.1 million for OEH expenses, which is a reduction from the previously appropriated 8.6 million.

Although the department is requesting provisional language that would allow it to request a midyear augmentation to meet its legal services costs. The provisional language as proposed is intended to provide the department a pathway to address DOJ and OH related workload in the case expenses exceed the department's estimated costs and requested budget authority.

Thank you, LAO.

Thank you, Mr. Chair. Jared Sippel with the LAO for this proposal, we're recommending that the Legislature approve the requested resources for the legal affairs and laboratory services divisions, as well as the proposed provisional language for the litigation and administrative hearing costs. We are, however, recommending that the Legislature reduce the governor's proposal for administrative hearing cost and attorney general cost. Specifically, we're recommending reducing the Attorney General cost from 2.7 million to 1.2 million and the Administrative Hearing cost from 4.1 million to 23,000.

In our assessment, we found that the department's proposal was significantly higher than past expenditures and our recommended amounts would more closely align with past expenditures while also allowing some buffer to account for potential growth in the future. We believe that these reduced amounts would reduce the potential that there's excess expenditure authority that could be unspent and redirected without legislative oversight.

And ultimately we do acknowledge that these costs may increase, and they are uncertain, which is why we are recommending approving the provisional language because that would allow the department some flexibility should additional costs materialize above and beyond these lower recommended amounts. And I'm happy to answer any questions.

Thank you very much. And with respect to the Office of Administrative Hearing, that's a little bit of a delta, and I appreciate the flexible language, but can the department expound a little bit on how you formulate or assess future potential workload and expenditures, particularly on the legal services and particularly with respect to the Office of Administrative Hearings?

We think we'll be taking in terms of a compliance action and what percentage of those we think would actually be challenged such that they would go to a hearing. This year, one of the ways that we did that, because we had more real numbers than in some of our past years due to the newness of the Department.

We looked at the number of notices to comply that we issued, and those are essentially notices that say, get into compliance or we will move forward with another action, and estimated a certain percentage of those would go to hearing, would request a hearing.

And then we then went to OAH, and we determined what percentage we thought would actually go to full hearing at OAH, which is a significant number of hours, as well as those that we thought would be filed with the OAH but potentially settled and not go to a full hearing. Therefore, they would be spending much lower numbers of hours on those cases. And so that was the methodology that we used. We also looked at our pipeline.

As many of you know, we are in the next year or two, we are phasing out the provisional licenses that are in the code right now, which means the annual licenses will increase, as well as our denials for annual licenses as we're working our way through those remaining applications. And so we took a percentage, consistent with the percentage we used last year to project the number of denials that we believed would be going over to Oah. And again, the same way we did with compliance actions.

We determined the percentage based on experience in other state government entities, what we thought would be the percentage that would actually go to a full hearing and those that would have a shorter stay at OAH. And then, of course, we times that by the number of what they charge us per hour and got to our finals there. So that is how we calculated that.

Are there other questions from Members of the Committee? Thank you.

Thank you.

All right, issue 12 will be held open. That brings us to ABC, Department of Alcohol Beverage Control, for issue 13, IT maintenance and operations and file conversion. Welcome, and please state your name for the record and proceed when ready.

Good morning, Mr. Chair and Members of the Committee. My name is Joseph McCullough, and I am the Director of the Department of Alcoholic Beverage Control. Thank you for the opportunity to present to you today. I'll start by providing a brief overview of the Department, and then I will turn it over to Randy Deems, who is the chief of Administration at ABC, to give a summary of our proposal. The Department of Alcoholic Beverage Control was established in 1955 by constitutional amendment.

The constitutional amendment transferred the duty of regulating alcoholic beverages from the State Board of Equalization to the newly established Department. In doing so, ABC assumed responsibility for administrating and the provisions of the Alcoholic Beverage Control Act in accordance with the laws enacted by the Legislature. These laws are based on tight house principles which separate the industry into three tiers, manufacturers, wholesalers, and retailers.

Under tight house laws, licensees are generally restricted from operating in multiple tiers of the system and are prohibited from giving money or a thing of value to retailers. These antitrust laws are intended to protect consumers, from predatory business practices and promote fair and orderly marketplace. These laws have served to protect the public since the end of prohibition, and have ensured the alcohol industry operates in a manner that is beneficial to the public's health, welfare, and safety.

Today, the department's operations are divided into three functions, Administration, licensing, and compliance. There are now more than 95,000 ABC-licensed businesses, with approximately 70,000 of those possessing retail sales privileges. ABC also issues approximately 36,000 temporary permits each year for events such as street fairs, festivals, carnivals, and nonprofit events. Customer service is extremely important to us at ABC and we service the public through 22 field offices throughout the state.

With that, I will turn it over to Mr. Deems and afterwards, we're happy to answer any questions you might have.

Good morning. Randy Deems, Chief of Administration. The item on the agenda for discussion is a proposal related to ABC's modernization efforts. The proposal has two components totaling 2.3 million from the ABC Fund in 2024-25 dropping to 1.3 million in 2025-26. The first component is related to an existing IT project which is winding down, which is called the Business Modernization and Responsible Beverage Service Project.

The project was initiated in 2019-20 and created two online portals, the RBS portal to implement the Responsible Beverage Service Training Program Act of 2017, and a licensing services portal, which we call LSP, to provide basic online licensing services to applicants and the public. Development costs for the effort have been budgeted incrementally. I believe this is the fifth budget change proposal we have submitted for this project, hopefully is the last one.

There is currently no ongoing budget for support of the RBS and LSP portals when the current development contract ends in March 2025. This request would establish that ongoing budget for maintenance and operations of the portals. The proposal reflects ABC's plan to reduce contracted support from four contractors down to two and add one state staff position. This creates a net reduction in annual costs of approximately $250,000 compared to the current annual contract cost of $1 million for the four contractors.

This shift from contractors to state staff decreases the cost of ongoing support and further reduces ABC's dependence on contractors to support the portals by developing expertise in house. The funding for the ongoing support and maintenance of our RBS and LSP portals is essential to ensuring these online services that have been built remain secure and available to the public. The second component of this request is for an effort that is complementary to the first, which we are calling e-records.

It is simply the conversion of ABC's paper licensing files to electronic files and the purchase of a document management system to store and manage them. With ABC's shift to online services and online application in particular, this is the right time to convert our existing paper licensing files so all files can be stored in a similar manner, simplifying operations and addressing various risks inherent with paper files.

Specifically, this request includes 1.3 million in 24-25 and $260,000 ongoing for the scanning and document management of all licensing files. It includes one 2 year limited-term position to provide project and organizational change management, and then one position to serve as a system administrator for the document management system and scanning operation on an ongoing basis. This is a fairly simple, straightforward project of limited scope. The objective is to create an electronic file room rather than maintaining 23 paper-based file rooms spread across the state.

This is expected to improve consistency of file storage and availability, security of documents, the availability of the files to all appropriate parties within the Department, including program personnel in the field or working remotely, and increased responsiveness to Public Records Act requests. We appreciate your consideration of this request and we're available to answer any questions you may have.

Thank you very much for the presentation. DOF

Amy Asencio, Department of Finance, no comment.

Thank you. LAO

Eric Sepul with the LAO. No comments.Thank you.

All right, Members of the sub, do we have questions or comments? Thank you very much for the presentation Gentlemen, that item will be held open. That'll bring us to DRE, Department of Real Estate, for issue 14, workload costs and Fund solvency, real estate fee increase, trailer Bill language.

Sounds pretty rowdy out there. Train or something. Anyway. Welcome and thank you. State your name for the record. Please proceed.

Thank you. My name is Chica Sunquist. I'm the real estate Commissioner for the California Department of Real Estate. Chair Padilla and Senators, thank you for inviting us here today to speak to you about the budget change proposal that we've put forth for the California Department of Real Estate. Again, my name is Chica Sunquist. I'm the real estate Commissioner and in my role, I oversee the operations for the Department. With me today is Assistant Commissioner Sonia Palladino, she is our assistant Commissioner of Legislation for the Department.

The Department of Real Estate is the regulatory agency that oversees and regulates the real estate law, said provided Lands Act, and the Timeshare and Vacation Ownership Act. Our mission is to safeguard and promote the public interests in real estate matters through licensure regulation, education, and enforcement. Consumer protection is our highest priority. We review qualifications for licensure and issue licenses to real estate agents, mortgage brokers, and property managers who act as fiduciaries for consumers who are selling and buying homes, renting homes, and getting a mortgage.

We monitor those licensees for compliance with the real estate law, investigate complaints received from consumers, and pursue disciplinary action against licenses when egregious violations are identified. Part of our mission is to educate consumers and licensees in furtherment of that consumer protection mission. We do this through speaking engagements, consumer outreach, publications, advisories, and other means of communication. With consumers, we want to ensure that they have the knowledge they need when they're going through what is typically the biggest financial decision in their lives.

With licensees, we want to ensure that they have the knowledge they need to be compliant with the law and treat consumers fairly in these real estate transactions. We're also responsible for the review of disclosures called public reports, provided to consumers who are interested in purchasing homes and subdivisions. We oversee the licensure of approximately 434,000 licensees and review more than 2,500 public reports for those interested in selling homes to California consumers. The Department of Real Estate has 380 positions and five office locations throughout the state.

We are solely funded by the Real Estate Fund. Fees charged for real estate exams and licenses, public report applications, and various other permits we issued are deposited into the real estate Fund. We do not receive General Fund Dollars, In this budget change proposal, we request an increase of $3.23 million in budget expenditure authority in fiscal years 24-25 and 25-26 and 2.45 million ongoing.

The proposal will match the expenditure authority with current costs, allowing us to successfully operate and fulfill our mission of consumer protection effectively. Due to high levels of staff retention, increased costs for contracted services, and increased rent costs, the Department has identified gaps in authorized expenditures necessary to Fund the cost for us to operate.

Some areas where we have identified gaps in funding are our call center staff, which are positions with limited-term funding that's expiring this year. Attorney General and Office of Administrative Hearings, for which we pay to prosecute egregious real estate law violations. Our exam proctoring contract, which provides increased access to exams throughout the state. IT equipment. A San Diego office rent increase which was due to a move caused by the sale of a state building we were occupying, and gap funding for long-term staff salaries.

We also request trailer Bill Language to implement a new fee schedule that better aligns our revenues with expenditures and addresses a structural Fund imbalance in the real estate Fund. We last adjusted fees statutorily in 1997, more than 27 years ago, and during that time we have taken a prudent approach by using reserves in the real estate Fund to offset the recent trend of yearly expenditures exceeding our revenues, prior to seeking this fee increase.

Changes to the fee schedule are needed now because expenses have slowly increased over time. We have been prudently spending down our Reserve, and we're now at a point where expenditures are exceeding our revenues from fees. It's prudent to raise fees to allow the Department to continue to operate effectively. This proposal will allow us to both meet current costs and raise fees so we can equalize revenues with expenditures while maintaining a reasonable reserve.

For example, we're proposing an increase of our salesperson license and renewals fees from $245 to $350. And the license is a four-year license, so this would be a $26 and 25 cent increase per year. In addition to setting new fee levels, we propose continuing the historical practice of setting statutory fee caps, that allow DRE to slowly raise fees over time to keep up with inflationary costs.

In DRE's history, we've shown that we are responsible stewards for maintaining reasonable fee levels. The current fee caps were set statutorily in 1997, as I said, but we did not reach maximum levels until 12 years later in 2009, and we've been operating at those fee levels for the past 15 years, we expect the proposed fee caps in this proposal will operate in a similar fashion.

For example, if revenues remain stable, and then costs rise approximately three and a half percent annually, and fees are adjusted to match that growth, it will take over a decade to reach the statutory maximums. Stabilizing the real estate fund as proposed in this budget change proposal will provide us with long-term stability, to ensure that we have the resources to continue to effectively regulate the real estate industry and protect consumers.

Thank you for your consideration of this proposal, and we're happy to answer any questions you may have.

Thank you, Commissioner. I appreciate the presentation. Department of Finance.

Taylor McGrow, the Department of Finance. We have nothing to add at this time.

Thank you, LAO.

Jared Sippel with the LAO. We have no comments at this time. Thank you.

Thank you. Can you expand a little bit just on sort of stakeholder engagement? When looking at the proposed ongoing framework of fee structure.

Certainly, well we've enjoyed opportunities to engage with our stakeholder groups and engage with the Legislature. For example, in 2022, we had their opportunity to present a few budget change proposals. And at that time, as part of the inquiries, were discussions of our declining reserves. In addition to a need for a fee study, which would then lead to a fee increase over the upcoming years, we've also had wonderful stakeholder groups.

And for example, in 2022, when we initiated this fee study, our Commissioner at the time, Commissioner McCauley would meet monthly with the leader of the largest stakeholder group and have monthly discussions about DRE ongoings, industry ongoings. And part of that was discussions of our fee study. In 2023, for example, we were part of a presentation for our largest stakeholder group in which we presented the outcome of the fee study, which did show that our revenues were exceeding our expenditures.

Excuse me, our expenditures were exceeding our revenues, that's why we're here. And since January 10, since we have had the opportunity to speak to our budget change proposal, I've had meetings with leadership of our largest stakeholder groups. For example, the California Association of Realtors, California Association of Mortgage Professionals, California Mortgage Association, California Building Industry Association, and American Resort Developers Association.

And then also the DRE leadership, have met with their counterparts at those industry groups to ensure that we are explaining the budget change proposal, explaining the fee study, excuse me, explaining the proposed fee schedules, and then obviously get their feedback, answer any questions that they have. And we've enjoyed those conversations up until recently, this week as well, and we look forward to those continued conversations. We've also done outreach to education providers to ensure that they have the same opportunity to understand our budget change proposal.

Thank you very much, Commissioner. Questions from the Sub-committee Members on this. Senator Niello.

With regard to the stakeholder outreach, particularly those that are paying the increased fees, have they expressed an opinion on it?

Many have expressed to us that they are in support of our proposal, and then for those that we've had further discussions with others and can look forward to continued discussions with them about any concerns that they might have.

We did receive a letter yesterday from this California Association of realtors outlining some of their concerns.

Okay. You'll share that letter with us, I presume?

I believe the Committee does have it.

Okay.

Senator Smallwood Cuevas.

Thank you, Mr. Chair. My question is along those lines. Given the State of our real estate market right now, the interest rates, the sort of chilling effect that we're in, how does that factor into these increases and when would this take effect?

Certainly, the general increases would take into effect upon signing of the trailer Bill Language. There are certain fees that would not go into effect because they're part of our regulations and we need to go through that process of implementing regulations.

And I missed the beginning part of your question. I apologize.

I was just wondering how much does where the market is affect when these rates go into effect? Given that a lot, at least in my district, there's been a chilling effect with the higher interest rates and inflation. Just how does that play into this increase?

Certainly. Thank you. And we definitely took that into consideration when we were reviewing our fee proposal to ensure that the fees were reasonable and certainly share the belief that the fees should be reasonable and still allow for entry into the profession. So we looked at our costs to perform our services. We also looked at increases in the consumer price index. We looked at index, we looked at how much of a percentage our fees were increasing, and took all of those into consideration.

And again with the salesperson license, for example, which is the most commonly charged fee for the Department, that is increasing by $105 over a four year period. So that's $26.25 a year for our real estate salespersons.

Thank you. All right. Thank you very much for the presentation, Commissioner. No further questions, sight and be held open. All right. Very patient, sirs. Now to the military Department for issues 15 through 17. Welcome, General.

Thank you, Chair. My name is Matt Beavers. I'm the Adjutant General in the State of California. I want to go through items one by one, Chair?

Feel free to address it comprehensively, sir, that's perfectly fine.

Okay. Yeah. So first item, item 15. That's in the Governor's Budget for $15 million for budget year 24-25. Another 15 million for budget year 25-26. And what that does is that bolsters the federal appropriation that the Department receives to provide extraordinarily capable and competent services to law enforcement agencies, not only nationally, locally, tribally, and across the state, also including cities and counties. I want to make sure everybody understands that, it's very clear. Over the last two years, the state has seen an extraordinary return on its investment.

I think over 1000% increase in Calguard supported fentanyl seizures, and almost a billion in fentanyl taken off the streets and out of the hands of cartel bosses. And that's the pitch for 15.

Item 16 is the emergency state active duty management system. That ask is 280,000 ongoing. That's a very essential system that we've taken part in developing over the last 10 or 15 years. It manages all our unique military Department operations missions.

It also manages the emergency state active duty system, and it also really fits in with CAL FIRE OES, FEMA, their ability to transfer money reimbursement. So it's very equitable system. It also ensures that we maintain very rapid reimbursements as well as paying our invoices. That's 16.

And finally, item 17, state active duty compensation adjustment and the deputy adjunct General rank adjustment trailer Bill Language. So the state active duty compensation adjustment that generally occurs every year under statute, our state active duty pay is pegged to the federal schedule. So when federal pay goes up commensurately, our state active duty workforce salaries and compensation goes up. And finally, the deputy adjunct General rank adjustment, that's really kind of correcting the record back when SB 807 was passed and we amended government code or section code in the military and veterans because 161, it ensured that our deputy is responsible to only the Governor and myself. He's currently being paid at what his subordinates are being paid.

So we believe to ensure that it's appropriate and that we can maintain a good talent in that position that be upgraded and the costs are absorbable within the Department. And I'll take any of your questions. Thank you.

Sir. DOF

William Flores Jones, Department of Finance. The Administration would just like to reiterate the importance of issue number 15, the provision providing continued support to the counter-drug task force through 25-26. The initial investment of $30 million in the 2022 Budget Act to the counter-drug task force provided additional service Members that were able to provide support to the state's high intensity drug trafficking areas as stated by the Department to assist federal, state, and local law enforcement with the seizures of nearly of approximately $1 billion worth of illicit narcotics in 2022-23. As these resources would provide continued support for the counter-drug task force, the Administration is seeking to sustain the military department's drug interdiction efforts. We are open for any questions.

Thank you, sir. LAO.

Jared Sippel with the LAO. We just have some comments on issue 15, the counter-drug interdiction efforts. For this proposal, our General recommendation is that the Legislature weigh this new General Fund proposal against its other priorities as it tries works to address the budget problem. On the one hand, as General beavers as well as finance have pointed out, there has been an increase in fentanyl and methamphetamine seizures since the state initially provided this funding a couple of years ago. Assuming this increase in seizures is tied to this new state funding, this proposal could have merit. If it does in fact, reduce the likelihood that drug users get access to these dangerous drugs.

On the other hand, we would note that if effective, counter drug efforts can reduce supply and which can result in increased prices, higher prices can have unintended effects depending on how drug traffickers as well as drug users react to these higher prices. Moreover, we would note that, again, that the state is facing a budget problem, and this would add new General Fund pressure for the next two years.

So we think the Legislature will want to apply a higher bar in its review of these proposals, especially as this one could be considered discretionary, as the state could continue to rely on the federally funded efforts in the near term. So with that, we just present these factors for consideration. As you weigh this against your other priorities, we would note that if the Legislature does choose to approve this proposal, it would define offsetting reductions elsewhere in the budget. So happy to answer any questions you may have.

Thank you. Other questions from Committee Members. Senator Smallwood-Cuevas.

I just wanted to follow up on the LAO. Are you saying that in your analysis, there wasn't data that tied the increased seizure that our National Guard laid out in this presentation? There's no data that shows the direct correlation between the investment of this work to keep this work going and the actual ability to get involved in stopping the drug trafficking and the trafficking of fentanyl into the State of California. There's no data that makes that connection analysis.

In our analysis, what we would say is that the Department has provided data that shows that there has been an increase in fentanyl and methamphetamine seizures since the state initially provided that funding. It is difficult to tie the increase directly to this seizures. There are any number of other factors that could be in there that just make it difficult to know what exactly. Was it a difference in drug trafficking patterns? Was it a difference in the supply of drugs being brought on? So it is just difficult to like. There's just not data that directly ties it as closely. And so that's why we just caveat that statement as we did.

Thank you for clarifying.

Thank you, General. Did you have any closing comment or want to respond?

No, sir.

All right, Sir. These items that. Thank you, sir, for your patience. These items will be held open. That'll take us to issue 18. The Department of Veterans Affairs. CalVet. Welcome. And state your names for the record and proceed when ready.

Hi. Good morning. My name is Beth Muszynski and I'm assistant deputy secretary of veterans homes for Calvet.

And I am Thomas Martin. I am chief of future operations and planning for the Veterans homes. So before you, we have a BCP regarding our Yonville Veterans homes, but my understanding is there was a request for us to do a quick overview of our Department. So if I may. So CalVet is a cabinet-level Department. We have a secretary, Lindsay Sin. She's a veteran sailor. Go Navy. We have three main arms within CalVet for program functions.

So the first is the home loan program, which does what it says on the tin. It provides competitive rates for home loans for veterans. So any veterans looking for a home loan should really call us first. The second program that we have is our unit, the veterans homes. The veterans homes offer long term care for aged and disabled veterans and their spouses. We have eight homes in the state and they provide care for up to about roughly 2000 veterans and their spouses. That's our capacity.

In a little bit, we're going to talk about the Yountville Veterans home, which is the biggest, and the baddest, and the oldest in the US, and is in need of a final stage of our ramp up process. The third program that CalVet has is a pretty all encompassing safety net. That's our Veteran Services Division. There's quite a few functions that they have and programs that they administer, but effectively, they try to connect veterans with everything that exists.

Any federal, state, local, nonprofit benefits that they could take advantage of. They try to get them connected to that. So by way example, they administer education grants for education waivers for veterans dependence. That's how I went to college. They help veterans with disability claims through the VA, getting disability payments, a wide range of services they provide. So a pretty big catch all. So those are the three main program functions. They provide a lot of, they're advocacy arms in and of themselves.

But we also have two specific advocacy programs targeting women veterans and minority and underrepresented veterans. And besides that, we have a slew of support and operational administrative programs that support the main function. So any questions on. And that was very quick and that was a lot, but any questions on CalVet? And how it works?

For the presentation. Always look forward to hear what's going on in Yountville's SNF. All right, DOF.

William Flores Jones, Department of Finance. No other comments at this time.

LAO

Nick Schroeder with the LAO. We have no comments.

Thank you, sir. Any comments or questions from Members of Subcommittee? Don't see any. Thank you both very much for your patience and presentation. Finish something. God, I'm in a hurry to rush you guys out of here. Aren't I?

We can go.

No, really. Actually, you should have taken your moment. You think I'm falling asleep up here? You guys should have said, Thanks a lot. Mr. Chairman. Right here. Please proceed with your content. Apologies.

Oh that's okay. So, yeah, that was just the Department in a nutshell.

It was very thorough I will say. Please proceed.

So before you, we have a budget change proposal for the Yountville home specifically. So like I mentioned at the top, the Yountville home is the oldest in the U.S. It has beds for up to 876 veterans and their spouses. A whole range of programs that are offered.

It's on a 615 acre facility with more than 100 buildings and bowling alley and reservoir and a golf course and quite a few other things. So it's basically a town on its own. This proposal is the very last stage for activating a brand new skilled nursing facility for the home. So this is something that's been in the works for quite a few years. And we appreciate the Legislature's support over the years to get it to this last point.

So this final BCP is for the staffing of the facility so that we can, once construction is complete, we can start bringing our veterans over and providing them better services, better care, better accommodations, and really represents. This is very exciting for us. I'm a little excited, but this is the culmination of quite a lot of work, and this is going to be the biggest revamp to the campus, probably 70 years or so. With that said, I know that there's a lot of pieces to it.

It's a pretty complex ramp up process, but ultimately, it would culminate in so ongoing, it'd be 108 positions and a little over $12 million General Fund for the ongoing operation of the new skill nursing facility. So, with that said, appreciate this Legislature's support over the years, and appreciate your support on this proposal, and happy to answer any questions.

Finally, closing in on it now. Okay, now. Department of Finance, if you want to restate.

William Flores Jones, Department of Finance. We have no other comments. Thank you, Lao.

Thank you, LAO.

Nick Schroeder with the LAO. We raise no issues.

I just wanted you to practice saying that earlier. All right, Members of the Subcommittee, any questions or comments? Senator Niello.

Just one difficult question. This is very difficult for the Department of Veteran Affairs, but for Department of Finance, has there been any consideration to delay this for a year or two? To provide budget, breathing room, not to not do it? just Obviously, this is a huge deal, and I can understand the excitement at this point, but we have a $73 billion deficit for the upcoming budget year. Has that been discussed?

Jesse Roma, Department of Finance not at this time. Given the facility is scheduled to open around December. We feel that it's necessary to provide full operational support for that facility commencing in December time when the facility would actually open.

And I think deferred to the Department on this facility is different than the older facility and there is added service levels provided by this facility. So there is a workload need to support the Yountville new facility. Additionally, too, the Department of Finance sees this as a workload request. This is not discretionary. We view this as something that we have to Fund as part of this budget.

I would agree with that. I was just questioning if there's any legitimate question of the timing and given the time frame for rather significant number of positions and the skills involved for both Department of Finance, is this a reasonable timeframe to get this done?

As far as the construction of the facility?

No, the positions.

The positions. Well, as indicated by CalVet in our prior conversations, they would begin advertising for the positions prior to. And the funding in the initial year is only provided for half of the year. So we had hit the ground running with the anticipation that we would be able to implement this BCP right on time.

Okay.

Any comment from LAO on that?

Yeah. So, in General, the state's hiring process takes many months to fill positions, and considering the nature of these positions, the vast majority of them are not positions like nursing staff or the type of position that we have significantly more difficulty filling.

So, given that, the six month kind of assumption seems reasonable, but that being said, there probably will be difficulties hiring some specific positions like any of the nursing type positions.

Thanks,

Thank you, Senator. Thank you, Members. Thank you both for your patience. And that item will be held as well. All right, this will move us to the public comment portion. Are there folks in the hearing room who do wish to provide public comment or testimony? Please line up at the mic, we get an assessment of how many folks we'd like to provide testimony to the Committee. The committee very much welcomes your participation and testimony. When you approach the mic, please state your name for the record and can't really tell how many folks we have that want to testify. If you could keep your comments between 1 and 2 minutes to discretion. Welcome and please proceed.

Thank you. Good afternoon. Raquel Morales. On behalf of Ed Trust West. We want to express our support for the reappropriation of unused funds from the Office of Cradle to Career to expand E-transcript tool. The expansion of this tool will allow for data integration between K through 12 and community colleges and can assist in removing barriers that dually enroll students encounter. This expansion can facilitate a process for dual crediting and dual enrollment courses so that students receive both high school and college credits that count towards high school graduation, meet A-G subject matter requirements, and count towards satisfying a certificate of degree at a community college, CSU or UC system, and is a transfer level credit. We align ourselves with the comments from Senator Smallwood-Cuevas on the importance of continuing the investments for this tool. Thank you.

Hi, good morning. My name is Michelle Velez and I'm the state President for the California Association of the Mortgage Professionals. As a stakeholder, I'm here on behalf of our Association to provide support for the proposed fee increase request from the Department of Real Estate. It is the Association's intent to send in our letter of support as well. CAMP believes that the fee increases will help stabilize the real estate Fund and will ensure that the Department of Real Estate has the resources it needs to work efficiently and to regulate the real estate industry and most importantly, to protect our consumers. Thank you.

Hello. My name is Meg Snyder. Here on behalf of the California Building Industry Association, also in support of item 23-20. We are supportive of the department's budget change proposal and petition to adjust the consumer fee schedule in light of increasing costs and market conditions. We hope to see that the Department adequately funded. Thanks so much.

Hi, good morning. Anna Buck on the behalf of the California Association of Realtors. While we acknowledge the department's position of the need to raise fees at this time, we do have concerns with the breadth of the proposal. We've submitted formal comments to the Subcommittee and we hope that you'll take a moment to read those. And we've been in discussions with the Department and we look forward to continuing those discussions as the budget process unfolds. Thank you.

Greetings, Mr. Chair and Members of the Committee. My name is Tasia Stevens. I'm a legislative advocate with Catalyst California. We're one of the Members of the racial equity coalition co-led by Nexten California. The Racial Equity Coalition represents a strong collective of advocacy groups, researchers, and racial equity practitioners, and policy change agents. We're respectfully requesting that the budget allocate 5 million in ongoing funding to provide the necessary resources to fully implement the functions of the Racial Equity Commission established by the Executive order by the Governor. N-16-22. Last year, the budget allocated $1.4 million for the Racial Equity Commission, and this was over three years for the racial equity framework to be established, as well as providing guidance to local jurisdictions and agencies on racial equity unfortunately, the coalition has concerns about the resources that are being provided to the racial Equity Commission and we are urging not only the Legislature but the governor's Administration to continue fully implementing in order for them to fully implement the work that's ahead.

Because this is a statewide Commission, we really look for the allocation of the 5 million to ensure that the work is completed to the adequate necessity for the state. Thank you.

Mr. Chair and Members, Mike Belote, speaking on behalf of the California Mortgage Association in support of the Department of Real Estate's budget item on a license fee increase. Our Members do mortgage loans. They are just one element of the vast work that the Department of Real Estate does. But it's important these people are getting mortgage loans and consumer protection is critical. The Department, in my view, has engaged with stakeholders, including us, and it has for 30 years that I've represented this group.

They do a great job, in my view, of putting consumer protection first, but also providing service to the licensees who need it to do their jobs. So I think it's a modest increase. We're in support of it and we'd ask that it be included in the budget. Thank you.

I don't see anyone else in the hearing room who like to provide public comment. Thanks to all of you who did. Those that may wish to submit comment in writing can do so to the Committee staff. This time, we'll move to the items for vote. These are composed of issues one through five. We'll segregate these with respect to motions. And first take issue number one and I'll entertain a motion.

So moved.

Thank you. Senator. Smallwood-Cuevas moves. Issue one approved as budgeted. Is there any additional discussion? If not, consultant, please call the roll. [Roll Call]

Thank you. The votes are 21 and that issue item is out. We'll take the balance of the issues two through five and I'll entertain a motion.

So moved.

Thank you. The motion is to approve as budgeted issues two through five. Please call the roll. [Roll Call} Thank you. Those issues are out. Thanks to everyone, staff, and participants for your presentations. This time, the Subcommittee on State Administration Government sojourned.