Assembly Standing Committee on Budget

Good afternoon. Welcome to the Assembly Budget Committee. We are honored to have our first meeting of the year. We're going to be hearing from Department of Finance, from Ms. Erika Li, who will be presenting the Governor's budget proposal. Then we have Mr. Petek, our Legislative Analyst, who will be offering his perspective. After that, we're happy to take questions from the dais and have any Members ask any questions regarding the presentation or anything in the budget presentation. After that, we will be taking public comment.

For those of you who are calling in, just a reminder, the call in number is 877-692-8957 and the access code is 18501100. So 877-692-8957. Access code is 18501100. Any problems, please call the Assembly Budget Committee at 916-319-2099. Just to set a little bit of perspective on the Governor's proposal plus the situation here, we obviously have the LAO's analysis of our fiscal situation. We have the Governor's January budget proposal. I think they both tell us that we are currently in uncertain times.

We have a fiscal situation that we haven't faced in quite a while where we're not really sure exactly the direction of the economy, exactly where we're going, whether we are facing a slowdown or whether we will be hopefully having a rebound. Having said that, obviously only time will tell.

One of the trickier situations with obviously the emergency extension of allowing taxpayers to file by May 15th will create even greater uncertainty as we go into the budget that we pass on June 15th because it will mean a May Revise that will not be fully informed by our tax collections. Having said that, the Governor's budget problem was estimated to be about 22 and a half billion in 23-24. Having said that, current revenues reflect something lower to about 29 and a half billion.

Well, sorry--the Governor's budget reflects 29 and a half billion lower than the Budget Act. Having said that, I think we're in a very strong fiscal situation. We have approximately 35 billion dollars in reserves, something we've been planning for for quite a while.

We have been very focused on any surpluses, using most of the surpluses on one-time expenditures, expenditures that we can turn off or on being very careful about what we commit to, and ongoing expenditures with the idea that we want to make sure that even if we were into a downturn, even when we're in a situation where revenues were going down, that we can be able to commit to those, whether that's in education, whether that's in health care, whether that is in human services, any variety of ongoing commitments; I think that's very important.

We saw what happened during the 2008 Recession. We had a downturn and we had a situation where we had a downturn and obviously that led to some very, very devastating cuts in our social safety net. We obviously don't want to see that happen. What happened in 2008, 2009, 2010. So today, I think we begin the beginning of our budget process. As a reminder, this is the beginning, not the end. We have many, many Subcommittee hearings planned between now and mid-May.

At that point, obviously, this is not the last time the public will have to comment on the budget. This is merely the first time. Obviously, they will have numerous opportunities within each of the Subcommittee hearings in each of the items that will be discussed at the budget level. So with that, let me turn it over and start with Ms. Erika Li. I know our Vice Chair is on his way and obviously when he comes, he's allowed to make any kind of opening comments. I do want to see if there are any other comments from the dais before we go to Ms. Li. Okay. Seeing no comments, we'll go to Ms. Li. Thank you.

Good afternoon, Chair Ting, Members of the Committee. Erika Li with the Department of Finance, and I'm here to present the Governor's 2023 Budget. California enters 2023 in a very different fiscal position when compared to the last two budgets. As the Chair was saying at the top of the hearing, the last two budgets included significant General Fund surpluses, each about 100 billion dollars. This year, the Governor's budget, which includes 297 billion in expenditures, forecasts revenue declines of 29.5 billion over the three-year budget window, and that's the prior year, the current year, and the budget year.

After transfers and adjustments, we are facing a 22.5 billion dollar budget deficit. Now, California is used to the ups and downs caused by our very progressive tax structure with a reliance on personal income taxes of very high-income earners as well as capital gains revenues. Not surprisingly, most of the downward revision we are forecasting in the Governor's budget when compared to the Budget Act is due to a 25 billion dollar--

Ms. Li, I apologize. For once--I'm going to interrupt you for one second because I'm going to ask our secretary to take roll so we can establish quorum, and then we can dispense with one item and then we'll go on with your presentation. Sorry about that. So, Madam Secretary, could you call the roll, please?

[Roll Call]. A quorom is present.

Thank you, Madam Secretary. So, given that the only vote for today is to dispense with, which is the adoption of our rules, the rules are all in your packets. They're also identical to the rules that were unanimously passed last session. Can I get a motion to adopt the rules? Second. I got a motion and a second. Madam Secretary, can we take the roll, please, to adopt the rules?

[Roll Call]. Ayes: 22.

Thank you. Ms. Li, you may continue. Thank you. Sorry about that.

So California is used to the ups and downs caused by the progressive nature of our tax structure, with its reliance on the personal income taxes of high-income earners as well as capital gains revenues. And not surprisingly, most of the downward revision that we are forecasting does come from 25 billion dollar reduction in the forecast for personal income taxes. So while we are up against declining revenues, it really is more of a moderation when compared to the significant growth we've seen recently, although it may not seem like that, may not feel like that.

Despite the revenue decreases, we are actually now in a better position than we ever have been to address this slowdown. Through Proposition 2, which the voters passed in 2014, California now annually sets aside 1.5 percent of General Fund revenues and transfers, as well as all capital gain revenues in excess of eight percent of General Fund tax proceeds. Additionally, over the last two budgets, we have built in budget resilience measures.

As mentioned by Mr. Ting, we built strong reserves, we made supplemental deposits to the Rainy Day Fund, as well as the Safety Net Reserve Fund. We included inflationary adjustments to deal with future price increases. We paid cash to reduce long-term bond liability. And again, very importantly, much of the one-time discretionary funds that we saw in our surplus we used on one-time programming rather than ongoing commitments.

And all of these measures are important because they do help to mitigate the need for major cuts, particularly to our safety net programs, which were deeply cut during the Great Recession, and they also help to protect the priorities that we've invested in over the last two budgets. So, solving for the budget problem: the Governor's budget solves for the 22.5 billion dollar budget problem through a balanced mix of approaches, and I'll start with the first bucket is funding delays.

About 7.4 billion of funding delays are in the Governor's budget, and what this does is it does not cut or reduce the total amount per program. It does spread it out across the multiyear. And so in some cases, programs will begin later than they were originally intended to or may take longer to implement. Another bucket is reductions or pullbacks, which is about 5.7 billion.

And again, just referencing the budget resilience that we built in the last two budgets where we did spend the surplus on one-time expenditures, we are pulling back 5.7 billion, the largest of that being three billion in our inflationary adjustment set aside that was planned for the budget year. A second one is a 750 million Unemployment Trust Fund payment that was also supposed to go out in 23-24. The third bucket is fund shifts, about 4.3 billion.

Some examples of the fund shifts are the CSU capital outlay projects that we are moving from cash to CSU-issued debt, and so the Governor's budget includes 27 million ongoing to pay that debt versus paying cash for those capital projects. We are also reverting certain bonds to cash projects from the 2022 Budget Act back to bonds, and then we are shifting certain zero-emission vehicle commitments from the General Fund to the Greenhouse Gas Reduction Fund.

The fourth bucket is our trigger reductions, which totals about 3.9 billion. The budget reduces funding for certain items in the 2021 through the 23-24 fiscal years and places them in this trigger, and the trigger would be restored in one year. The determination would take place in a year at the next Governor's budget. If revenue should come in to meet the needs of our basic programming as well as to fund these proposals, then the trigger would be turned off.

What makes up the 3.9 billion is largely climate and transportation. We have 3.1 billion in that bucket. Housing is another 600 million, parks about 100 million, and workforce training about 50 million. Our fifth and final bucket is limited borrowing and revenue generation. The majority of the funds in this category are derived from loans from special funds to the General Fund and the proposal to renew the managed care organization tax, also known as the MCO tax.

While we have used many of the budget resilience measures that I just mentioned to reduce the overall need for reductions in the Governor's budget, we are actually not proposing a withdrawal from the reserves at this time.

And this is important because it does give us more flexibility in the spring should the fiscal conditions continue to worsen. And as mentioned earlier, we have total reserves of 35.6 billion dollars in the Governor's budget, 22.4 is in our Budget Stabilization Account, and we have 8.5 billion in the Public School Stabilization Account, 900 million in the Safety Net Reserve, and 3.8 billion in what we call the state's operating reserve or checking account.

So we have not touched any of the 35.6 billion in the Governor's budget, again, giving us flexibility to move forward in the spring. The Governor's budget also does not forecast a recession. However, we do recognize that there are risks on the horizon, namely higher inflation and further tightening of monetary policy or further rate increases by the Federal Reserve. Should things get worse, we do acknowledge that we could slip into a mild recession, which could lead to anywhere between a 20 to 40 billion dollar General Fund reduction.

That's on top of this 22.5 billion. Or if there is a more severe, moderate to severe recession, we could be looking at something over 60 billion in reduced General Fund revenues. Again, not drawing from the reserves now helps us make decisions going forward and helps to mitigate cuts to important core programs. So what are we protecting in this budget? The revenue declines only moderately reduce the Proposition 98 guarantee, so we are safeguarding our public education system. Proposition 98 funding remains at close to 109 billion dollars.

And just in terms of per-pupil spending, that's over 17,500 General Fund per-pupil spending. If you throw in all funds, that's over 23,700 per-pupil spending. And what are some of the other programs that we are continuing to protect? We have Universal Transitional Kindergarten for all four-year-olds, Universal School Meals, the statutory COLA to schools of 8.13 percent, an equity multiplier to support our highest needs schools and our students, continued investments for arts and cultural enrichment, along with an additional 940 million through Proposition 28.

In higher education, we are maintaining the higher education compacts with the CSU and UC systems, as well as the roadmap with the community colleges. We further support increased resident undergraduate enrollment at three UCs, and we support financial aid programs to continue to reduce the overall cost of attendance of higher education. In health and human services, the budget is full steam ahead on health care access to all eligible Californians, no matter their immigration status.

We continue to support CalAIM, which will include over ten billion dollars when fully implemented. We continue to support the Behavioral Health Continuum with over eight billion in commitments, as well as maintaining our public health infrastructure, supporting grant increases to our SSI SSP programs, as well as a 2.9 percent increase to our CalWORKs grants. On public safety, the General Fund continues to provide supports for creating safer communities by supporting positive policing strategies, reducing organized retail theft, gun violence, illegal drugs, and other crimes.

On housing and homelessness, we maintain investments in our homelessness supports which trailer bill is out to connect that to local accountability measures, local accountability plans. We continue to provide funding and technical assistance to support local entities as they build their fair share of housing, including affordable units as we work towards building the 2.5 million units that California needs. On climate, the budget continues, importantly, to include 48 billion dollars of the 54 billion that was included in the past two budgets.

That's 89 percent that is being protected of those investments, and we continue to prioritize equity and investments in priority populations, generally those which face disproportionate harm from pollution and the climate crisis. So in conclusion, despite a significant turn in revenues, this budget is able to protect and sustain all the programs that I mentioned and many more. And this is in no small part due to a lot of wise planning from the past and building a strong fiscal foundation.

We look forward to discussions with Legislature throughout this legislative process throughout the spring, and happy to respond to any questions later on from the Committee. Thank you.

Thank you, Ms. Li. Mr. Petek?

Okay. Thank you, Chair Ting, Mr. Vice Chair Fong, and Members for inviting our office to participate in today's hearing. I think you have a handout that I would like to walk through if possible, and the handout is available on our website, and so I think a lot of what I will cover in my remarks will show that there's a fair amount of overlap, actually.

We see some of the fiscal situation and the state's budget picture from an architectural standpoint, somewhat similarly to how Ms. Li just described it from Finance, but we do have some differences in how we characterize some of it, and we would like to focus as we go forward in the budget process on the ways in which the Legislature could make its own choices around the solutions that my colleague talked about in the proposal.

So on the first page, moving to page one, basically, if I could spend a moment on just the problem definition, as my colleague said, the Governor's budget documents refer to a 22 and a half billion dollar budget problem. We would say that the solutions in the proposal really add up to about 18 billion. So there's a little bit of a difference there. The difference is mainly in two areas.

One: it was described that there was three billion put into the Budget Plan in 2022 to accommodate the higher costs of inflation, and also a recognition of about one and a half billion of costs to cash fund certain capital projects instead of using lease revenue bonds. And while those were put into the--kind of scored in the multiyear outlook, they weren't associated with any budget legislation. In other words, the Legislature did not appropriate or make an official decision on those.

And so we do not recognize those as part of the spending base going into this, and we would not include those in the baseline. So when you take those out, we see it more like an 18 billion dollar problem. That said, the Governor also has about two billion of new discretionary spending in the proposal, and any new discretionary spending that is put forward, of course, when you're facing a budget problem, requires a commensurate amount of solutions to offset the cost of those new spending proposals.

So, moving to page two, the way we view the proposed solutions, basically, we share the view, as was described, that a lot of the focus here is on making adjustments to spending, the spending plan on the state. In fact, three quarters of the solutions that the Governor is putting forward are spending side adjustments. The other 25 percent really are in the cost shift area, as was described. Of the three quarters spending side solutions, that comes to about 13.6 billion.

Of that, 7.1 billion are in various forms of delayed spending. So the way we think of that, it's when you move spending outside of the budget window, but it still would occur within the forecast period, which goes through 2026-27. And the main areas where this is happening is in higher education, health care, and broadband.

Moving to page three, a little bit more into the breakdown of the solutions, we sum up that there's about 3.8 billion of spending side reductions that are subject to a trigger restoration, as was described. So if we get about halfway through the fiscal year, and it seems that the Department of Finance determines that there are sufficient resources, this spending would be triggered back on. The areas where this is occurring in the proposal is in natural resources, transportation, and then housing and homelessness proposals.

There is 2.6 billion in just outright reductions. It was noted, but the largest of these is a 750 million dollar withdrawal of the previously planned optional payment toward the state's principal debt on its UI, Unemployment Insurance loan from the Federal Government. And then there are 4.3 billion in what we call cost shifts.

And these cost shifts are particularly in the areas of one and a half billion, shifting the cost of certain zero-emission vehicle initiatives that have been undertaken, but shifting the cost of those from the General Fund to the Greenhouse Gas Reduction Fund. 850 million in loans to the General Fund from various special funds, 500 million in transportation costs would be funded out of the Transportation Fund, whereas they had been planned to be paid for out of the General Fund, and then a 300 or so 330 million dollar temporary use of money held in the Health Care Affordability Fund that would be replaced in a couple of years.

So all of these shifts would benefit the General Fund in the budget year. And then there is a smaller revenue side proposed solution which is to recommendation or proposal for the state to seek the reauthorization of a managed care organization tax. This MCO tax is something we have had.

It expired at the end of 2022, and it would require federal approval and it would generate around 300 million in General Fund benefit in the budget year. Although that amount would grow as it's fully implemented, it would grow to benefiting the General Fund by about two billion by 2024-25. Moving to the next page, here is really an image showing the General Fund condition over the budget window.

And what I would note here is, as was said, the Governor is not declaring a budget emergency and does not propose any withdrawals at this time from the state's reserves from the state's Budget Stabilization Account or Rainy Day Fund. You can see on the slide that at the end of the budget year, the state, under its assumptions, under the Administration's assumptions, would end with 3.8 billion in the Special Fund for economic uncertainty, the discretionary operating balance that was mentioned.

It's not shown here, but I would like to mention that after this budget window, the three subsequent years of the forecast period, the Administration is showing in its multiyear outlook annual deficits of nine billion, nine billion and 4 billion in the three subsequent years. And so that's just something else that I can talk about in a moment.

For the benefit of the audience, is it possible to have the PowerPoints up on the screen if people are trying to follow along with PowerPoints? I'm going to ask--the sergeants are shaking their head, I guess. Not possible. Sorry about that. But for anybody, again, the publications are available online and for anybody watching at home, they can pull up on the LAO website. But thank you.

Okay. On page five, I'd just like to spend a moment here on the Proposition 98 budget, which we think of as the budget within the budget. So compared with the enacted budget--it was already mentioned--but primarily because revenues are coming in lower than the Budget Act assumed, the minimum guarantee under Proposition 98 will decline by about 3.4 billion in the current year relative to the Budget Act--in the Budget Act from June of 2022, and then another one and a half billion compared to that same time frame in the upcoming budget year.

So as a result, we would go from 110.4 billion, which is the minimum guarantee in the enacted budget, down to 107 billion in the current year on a revised basis, and then back up to 108.8 billion in the budget year.

But even with this lower funding level, as we see it, there's approximately six billion available for new commitments that can be made. And this is primarily because there are lower than expected costs in certain programs in the Local Control Funding Formula, and also because there was a fair amount of one-time spending in recent budgets, that is, as one-time spending comes to an end, and so it frees up ongoing capacity. So even with those declines, this helps provide spending capacity within Proposition 98.

In dollar terms, the most significant of the Governor's proposals within the Prop 98 budget is to fund a statutory COLA of 8.13 percent, which is the highest statutory COLA since the early 1980s and would come at a cost of about 5.5 billion. He also has 920 million of proposed expenditures to extend certain ongoing programs. Because of these proposals, as we look at the proposal, the new spending does rely on the use of about 1.4 billion in one-time spending to help cover these additional ongoing costs.

It's affordable in the budget year, but it does lead to some deficits in the future years or under the assumptions there would be a deficit in the future unless there are higher than expected resources available under Prop 98 in future years. Then just going on to here, bring it to conclusion on page five and six--six and seven, rather--on page six really is our LAO comments on this overall package.

And the first thing to say really is that we think it is prudent that the Governor has emphasized very much identifying solutions on the spending side and making adjustments to spending that was planned or anticipated, and not as a first response going to tap into reserves. We do note, however, that the proposed additional new discretionary spending, as I mentioned before, adds to the need to find or identify additional solutions.

Also, we would recommend that the Legislature consider identifying solutions to a somewhat larger problem than what the Governor is proposing. Doing so would be consistent with our view of the economic and revenue picture. The revenues, according to our estimates, would be somewhat lower than what the Governor is showing in his proposal, and so that would translate to a larger budget problem. And in our view, we think you should be prepared for that.

It's more likely that that will happen than you will get an upside to the revenues. And in that vein, we think you should during this time, continue to identify solutions to the resulting problem that are adjustments to spending or other changes that you can make before going into the reserves. The reason for that is partly just practical. You have more time at this part of the year. You have hearings. You have the opportunity to deliberate and negotiate and identify solutions now.

And holding on to the reserves as a flexible option for later in the process seems prudent to us. And then when it comes to the multiyear picture, we do have a couple of observations. The first is that when you look across the full six-year fiscal picture, the budget window, the three-year budget window, plus the future years, our office and the Department of Finance have very similar revenues in total.

In fact, we're really only off by seven billion dollars across those six years, which amounts to something like 0.57 percent difference. So it's very similar. The difference really is in the timing. We see lower revenues happening now in the budget period, and then in the subsequent years, we expect the revenues will begin to recover back to more historical trends, whereas the Administration sees somewhat higher revenues right now and then kind of anticipates a more stagnant performance in the future years on revenues.

So that's how they differ. And as I mentioned, that the Administration's multiyear outlook shows that the state would have deficits in the future years. We really recommend for the Legislature to consider making adjustments now to try and adopt a budget that would not put the state on a path to have future year deficits. As Ms. Li said, the Administration is not assuming a recession. We are not assuming a recession.

And so if that's the case, we don't think it's prudent to have deficits in your multiyear outlook. As you go through, on the final page, as you go through this, one thing we would just leave you with is that we think the Governor's overall approach from an architectural standpoint is prudent, and there's a lot to be said for it, but it really reflects his priorities. And you have obviously the prerogative to make your own choices when it comes to the specific solutions.

And to that end, we did put together in our document--our budget overview document--a set of criteria that you could hopefully use to consider other alternatives to solving this budget problem that might help you identify solutions that align with your priorities. Not to say the Governor's proposals are misaligned with them, but I just want to assert the Legislature's prerogative in this situation. So with that, I'll stop.

Thank you, Mr. Petek. I think it's clear, obviously, that the Governor's proposal is out there. You have your forecast, and it's clear that we're in unknown territory, but if revenues were to continue to deteriorate come May, obviously, as you said, it would make sense to look at more budget solutions this year so we don't pass the pain on to next year and potentially have to take even larger, more painful action.

I'm going to ask Mr. Griffith to call any absent Members to add on to the motion approving the rules. So again, we had a motion, a second to adopt the rules. We're just going to call any absent Members to add on.

[Roll Call].

Thank you. With that, we'll go to our Vice Chair.

Thank you, Mr. Chair. I apologize for being a little late. Also, welcome to our new Members. I'll do a quick opening and then I'll dive into my questions. So last week was Groundhog Day and ironic timing because it feels like we continue to deal with the same challenges and crises to the frustration of Californians, despite the budget going unsustainably, something I and others on the Committee have warned about.

We have our work cut out for us this year. From a nearly 100 billion dollar surplus last year to a significant deficit this year that could grow worse, our job on this Committee demands restraint and careful prioritization of taxpayer dollars. The future is uncertain. The state may face multiyear deficits on the horizon as the LAO has warned.

Simply delaying and shifting funding just isn't going to cut it. This budget continues to overspend with little accountability. We must make the hard choices now to rein in spending. A penny saved is a penny earned, as the long saying goes. We've hit a period of diminishing returns. Government spending has shot up over 150 percent over the last decade, while the cost of living pushes residents to more affordable states.

Our roads are crumbling, the energy grid cannot keep up with demand, and water becomes an even scarcer resource as trillions of gallons flow out to the ocean. This budget still fails to protect the basic needs of all Californians. And so Californians are demanding real results, not more political headlines, and so I look forward to the questions I'm about to ask, and I look forward to working with the Chair on this upcoming budget cycle. Let's talk the big issues.

First, the budget here assumes a windfall profits tax. If I could ask Ms. Li, are there any details you can share on what this proposal is--what the Governor's proposal is going to look like?

Thank you, Mr. Fong, for that question. The Windfall Profit Tax is on a different trajectory, is outside of the Budget Committee. So that's on a policy route so I really have no details to share.

Okay. So this budget doesn't assume any revenue from any Windfall Profits Tax?

That's correct.

Okay. In terms of gas prices and the gas tax, does this budget assume an increase in the state's gas tax in the summer?

There is no assumption in regards to the gas tax.

So under SB 1, there is an adjustment in the summer?

Oh, I'm sorry. So current law remains. There are no changes to that, to SB 1.

So under this budget, there is an assumption by the Governor that the gas tax will go up in the summer?

That is correct.

And so while the Governor talks about gas prices being high, he's going to let the gas tax go up in the summer?

There is no proposal on gas tax.

Okay. Now, in last budget, there was a suspension of the sales tax on diesel for one year. So when does that expire?

I will have to defer to one of my colleagues on the line for the date.

This is from the Department of Finance. So the expense, the pause on the diesel sales tax is going to expire in October 1st of 2023.

So October 2nd of 2023, diesel prices are going to go up 23 cents? Is that correct?

Currently, there is no additional proposal than what we've included in the past budget, so current law will persist. So any scheduled increase will increase. Yes.

Okay. So the Governor is going to let the diesel tax expire under this proposal or there's no proposal by the Governor to extend the suspension?

Yes. There is no proposal to extend that extension.

Okay. I just want to make clear to folks, it is ironic that the Governor is willing to suspend the sales tax on diesel, but not suspend the gas tax on gasoline in which motorists use. In terms of water, this is an ongoing discussion I've had with you, Ms. Li, and your staff and the Governor. There is a 500 million dollar inflation, 500 million dollars for inflationary effects for water storage projects in 25-26.

So setting aside that, because we don't know if that's going to exist in the future, is there any additional money for water storage on top of the water bond?

I'll speak to about 202 million for flood investments.

That's flood investment. I'm talking about water storage.

I will defer to a colleague on the line.

Good afternoon. This is Michele Perrault with Department of Finance. So, as you mentioned, there's 500 million dollars that's been maintained in the budget for water storage projects in 25-26, and this builds on the funding that we've talked about previously, the 2.7 billion dollars in Proposition 1 funding available. But I would also point to the Administration continues to emphasize kind of the comprehensive approach to water resiliency.

So while that funding is specifically for water storage projects, it's also important to note that there's significant funding investments also in groundwater recharge capacity. So when we're talking about underground water storage, there's also investments in stormwater capture and permitting, streamlining, as well as modernizing water conveyance. So again, this is all kind of part of a comprehensive approach.

This really feels like Groundhog Day. How much money on top of the water bond is in this year's budget for water storage? Water storage. Aboveground water storage.

If you're talking specifically about aboveground water storage, the 500 million in 25-26--

This year. This budget year. This budget year. Not 25-26. This year. The budget we're debating right now. There are 0 dollars. There are no money. There's no money in this budget for aboveground water storage. Is that correct?

If you're talking about for this fiscal year for aboveground storage, that is correct.

And so I'm asking the Administration, imagine if we had sites reservoir, if we had done subsidence work on Kern Friant Canal, if we had improved, raised certain reservoirs, expanded capacity, addressed the subsidence issues in a number of conveyance facilities, imagine how much water we would have stored if we had done that. But at least in the seven years, six years now, seven years in the Legislature, we have not been able to get the Governor to move on any of those projects.

And now you're talking about streamlining. So you indicated that in your answer. Are any of the permits going to get approved for sites reservoir and any of the Prop 1 water storage projects because you seem to always highlight the Prop 1 water storage projects? How many of those projects are in construction or being even closer construction?

Yeah. So I would just say in terms of the Prop 1 funding, it's not necessarily--there's a process that's sort of laid out in Proposition 1. So these are really locally-driven projects, and so the pace at which those are moving are really driven by the individual set of circumstances and challenges around planning, designing, permitting, financing, really at the local level.

I get it. I hate to apologize, but I want to make sure I maximize my time. But even the Governor's Water Portfolio Plan, he's calling for more water storage. He's created strike teams to somehow fast track these permits. So this water bond that we're debating right now, the funding that's currently languishing, it was passed in 2014, and none of these projects have been completed. None of them are even in construction.

So if there is a strike team in place by the Administration, when are these permits going to get approved for these projects under Prop 1? You've outlined streamlining. So I'm asking you, where's the streamlining?

Yeah. Again, these are locally-driven projects, so there's only so much that's sort of within the control of the Administration in terms of moving those projects forward.

But the permits are not locally-driven. The permits are within your Administration.

That's correct. So when they come to the Administration for actual review, that's kind of the purpose, and as you mentioned, the water supply strategy directed the Resources Agency to establish that interagency strike team that you're talking about to facilitate the state permitting process and support completion of these projects.

But to the extent that those locally led projects, again, are not at a place where it's a permit before the Administration, that's where sort of, I think, the hang up is that you're talking about, which is really outside of the Administration's sort of purview.

I find it very interesting that you're blaming the local folks when the Governor's own plan calls for more water storage. And these are the projects that the voters of California approved in 2014. So since we all agree that these projects are necessary, I think we all need to come together to figure out, a: how we can streamline these projects, and b: how we can put the money, an additional money to finish these projects.

I think that's actually pretty common sense, and I think that's a very frustrating conversation I continue to have with the Administration. Moving on to the UI loan, the UI debt and what we currently as a state owe the federal government, this budget seeks to cut funding that was dedicated to the repayment. Is that correct, Ms. Li?

Yes. One billion was dedicated towards that payment. 250 million went out in the current year. We're proposing pulling back the 750 million in budget year.

So what is the Administration's plan to pay down this debt?

Well, I think we continue to lobby at the federal level to speak with the federal government in regards to forgiveness. We are also engaging the Legislature in regards to the full budget, inclusive of that proposal.

But if there's no action by the Administration, right, the costs get passed on and borne by businesses in California?

That's correct. Employers would be paying this tax.

So is there some sense of urgency to pay down this debt?

There is. We also are trying to address a 22.5 billion dollar budget deficit, and this is one of many proposals to do so that is good.

Sure, but budgets reflect priorities. So, yes. We have a 20 plus billion dollar deficit, but we have a budget of 297 billion dollars. So of that 297 billion dollars that currently is in this framework, you're telling me that there's not any money or to pay down the debt we owe the federal government?

As you mentioned earlier, we do have a balance in the Federal Trust Fund. It is about 18.5 billion dollars. Unless we pay off the full amount, that 18.5 billion dollars, the FUTA, the federal tax, the credit will continue to decline, and so that's something that we took into account as we put this proposal on the table.

The LAO wants to add anything?

Well, Mr. Fong, I understand the interest in it. One thing I would just note is that the tax would go up until the principal is paid off entirely, and so, in other words, even if we made this payment in the budget year, the tax would still remain elevated. It probably would allow us to pay off the full 18 billion if everything went according to plan a year or two early. So at that point, there would be some relief for the taxpayers.

That being said, it does imply that if the Legislature wanted to make this optional payment a couple of years down the road, it probably wouldn't have a material difference for those paying the tax. So it's just another way to look at it.

But it depends on how much we pay down.

That's true.

So if we put even more down, then there would be more savings on the back end? On the front end? Sooner.

It would be sooner.

It would be sooner.

It wouldn't be in the front end--

It'd be sooner. It'd be like paying off your mortgage early, right?

Correct. That's right.

So if I could ask you, Mr. Petek, what is the current amount the state owes the federal government in the UI level?

Well, I believe it's in the 18 billion dollar range. Yeah.

Okay. So 18 billion dollars, but there was a payment to be made, and now that's being paused. Or cut.

Part of that payment. Correct.

Okay. In terms of the Governor's budget proposal to recapture the 92 million dollars from the Small Business Covid-19 Relief Grant Program, what was the justification there? Why wouldn't we use the 92 million dollars and give more relief to small businesses or even use that to pay down the UI debt?

Sure. We have proposed and put out over four billion dollars for that program, and so in many cases where we could find funds, we attempted to sweep those again, trying to look everywhere for budget solutions.

But that assumes, though, that businesses were applying for the grant. That wasn't a wide--it's based on people applying for the grant based on the criteria that's there.

Correct, and we have had over four billion available for that.

Okay. In terms of--if I can jump to Public Safety, what are the proposed prison closures--or correctional facilities that are slated to be closed--what is the timeline on those closures?

Yes, and I'll turn to a colleague for the specific details of the dates.

And how are communities consulted before these decisions are made? Are they consulted before these decisions are made?

So CDCR takes into account a number of factors, including the community, and they're trying to find ways to minimize the impacts to both staff, the incarcerated. And they do look at the community as well.

Right. But I guess the crux of my question is, are the communities affected consulted? I understand there's a criteria, but are the communities themselves who are affected by these closures, are they consulted?

No, we don't consult the communities.

And so now that these announcements are made, what is being done to communicate with the communities?

We'd have to get back to you on that.

Okay. I don't seem to think that that is an appropriate answer, but I will move on to my next question. Jumping back to energy. Certainly, ratepayers throughout California have seen a significant increase in the cost of natural gas. What resources, if any, does the PUC or this budget have to kind of help alleviate this or make some investments in energy infrastructure to allow more supply? Is there anything in this budget that addresses that?

Yes. Can I ask a colleague for some details on the energy proposal?

Yeah. Hi, good afternoon. Eamon Nalband, Department of Finance. So this current budget proposes, on top of the investments in the 22 Budget Act, an additional $1 billion from the Clean Energy Reliability investment plan included in SB 846. That plan is currently with the CEC and will be submitted to the Legislature by March 1. And that plan will contemplate additional infrastructure investments and affordability proposals in order to support the energy kind of situation within the state.

So what does the plan say?

So CEC is still developing it and will be putting it out for public, but so it has not been finalized yet, and they will be taking in public comment in order to inform it. And that'll be kind of presented to the Legislature March 1, at which point it will be flushed out in order for the Legislature to review.

So how does that provide any relief to Californians who are dealing with the increases and the supply challenges? Now, since this plan is kind of being developed.

So I can't speak to immediate investments, I do know that the CPUC is actively contemplating ways to address affordability, including advancing the climate credits, as well to help Californians with their bills. But specific actions within the plan to address affordability will have to wait until it comes out.

That doesn't seem like a very adequate answer either. Let me jump to high-speed rail, another topic of attention or of interest of myself. Last year, this committee created an inspector general for the high-speed rail authority. Can you tell the committee whether that position has been filled? What can we expect them to present in sub three when we have that hearing again?

I'll need to turn to a colleague on the line for the details for that question.

Hello, Steve Wells, Department of Finance. So the inspector general position is. The governor will appoint that position based on a nomination from the Legislature. My understanding is the Legislature has posted the position, and I think the statute requires a 60-day period and then requires a review period. And at that point, the Legislature can provide a list to the governor of candidates from which the governor will choose. So I'm not sure where the Legislature stands on that list, but I know that it was posted. I believe we're probably right at the end of the 60-day term since it's been posted.

Thank you very much. I only have three more questions. Mr. Chair, I appreciate the patience. In terms of the Department of Finance, the middle-class tax rebate delivery is my understanding that it has been hit with about $90 million worth of fraud. Is that an acceptable amount to the administration and what is in the contract specifically, when it comes to addressing fraudulent payments?

Sure. The money network is the vendor, and there is the contract threshold, and despite any kind of fraud, would seem unacceptable. But there is obviously, this is a large program, over $9 billion, and they are within the threshold that they agreed to within that contract.

So it's the position of administration that $90 million worth of fraud is.

It is not, as I said, we would like to see zero fraud. But in regard to the contract itself, it is less than 1% that we have seen.

So just to be clear, under the contract, 1% of fraud is allowed.

There is in the contract a threshold that is allowed. It is less than that. I don't know the exact percent that's been found or the exact percent, but it is less than 1% in terms of the fraud.

Would you be able to send me the contract?

We will be able to send you what we can.

And then I guess the next question is, what can be done in future contracts to prevent such fraud?

Sure. And I think we always look for ways in which to mitigate fraud on the front end rather than catching it on the back end. So there are a lot of front-end technologies in regards to ID verification and identification at the front end. So we continue to try to maximize those types of tools at the front end.

Thank you. My last question in terms of, in the healthcare discussion during the pandemic, the Federal Government increased its medical match to 56.2% to California when the state couldn't redetermine the Medi-Cal roles. Now that we're emerging from the pandemic, the Medi-Cal match will start to go back down to 50%. In terms of looking for additional savings, does the state plan to redetermine Medi-Cal roles and look at ineligible recipients?

I'll have to turn to my colleague for some details on that, but we do have included in the budget the assumption that those redeterminations will begin again July 1.

Guadalupe Manriquez with the Department of Finance. So effective this summer, we are going to begin redetermining Medi-Cal recipients, and the enhanced federal match will be phasing down starting this summer as well. So that will be updated for the May revision.

Okay. And my last question to the Department of Finance. When it comes to the assistance of small businesses to reimburse for costs coming out of the pandemic, the governor rescinds the $500 million in rebates that the Legislature agreed to include in the 202324 budget to reimburse small businesses for increased federal payroll taxes. How did you come to that conclusion to rescind the $500 million?

Again, it was many things. We looked at many different options and proposals. I just like to state that the governor's budget is always the beginning of a conversation, and this is something that we continue to want to have a conversation about with the Legislature this spring.

Okay. And my very last question is, of what was appropriated in the budget, how much funding is still unallocated? Do you have that number? Like, what's left that hasn't been allocated?

So, because this is a deficit budget and not a surplus, we have allocated all the funds, and we've actually had to pull back, and we've put things in the trigger and had to look for cost shifts or shifts in funds. So all the dollars that are in this budget are allocated. There are some contingency dollars. I'm not sure if that's exactly what you're asking about for water, for example, but we have allocated all the dollars towards.

I thought there were some unencumbered dollars that hasn't been allocated yet out of what was appropriate. But if that is incorrect, please let me know.

Sure.

I appreciate it. Thank you, Mr. Chair. Thank you, members.

Thank you, Mr. Vice Chair. We're going to go with Mr. Alvarez and then Mr. Bennett.

Thank you, Mr. Chair, and I want to thank Department of Finance for being here and appreciate you answering questions. I would first like to state that this is clearly not a budget with gimmicks or with rosy projections. It's a real budget.

But regardless of that, I think, as the LAO pointed out for us in the Legislature, it is now the time and appropriate for us to try to identify the places where perhaps priorities don't align between the administration and the Legislature. And so with that in mind is what some of my questions are coming. First, one hopefully easy answer for anyone who wants to answer this. The Special Fund for Economic Uncertainties, when did that start, and why is that not placed in reserves?

Thank you for that question, Mr. Alvarez. I'm not exactly sure when it started. I think the point behind having what we call the SFEU is to allow for things that are unplanned for to be taken care of. And we actually do count that as part of the total reserve. So the $35.6 billion that I mentioned during my presentation does include the SFEU.

So none of the, I think it's $3.8 billion, none of that is actually appropriated through this budget.

Correct. And perhaps that is what Mr. Fong was getting at with his question as well. So our 3.8 billion is slightly higher than I believe it was a 3.4 billion SFEU at the 2022 Budget Act, in part because we recognize that there are more unknowns and more risks going into this budget. And so that's slightly higher.

Okay. Thank you. Appreciate that answer. On the Greenhouse Gas Reduction Fund, the shifting of $1.5 billion from that fund to the general fund. I asked this earlier today, and I think I just want confirmation. That means that there's no more funds left in the Greenhouse Gas Reduction Fund as a result of this action.

I don't believe that to be true, but I'm going to turn to a colleague for more specifics.

Christian Beltran with the Department of Finance. Assembly Member, would you mind just repeating that question one last time?

Thank you. There's a shift of $1.5 billion for zero emission vehicles from the General Fund from the Greenhouse Gas Reduction Fund. Is that Fund now basically zeroed out?

No. Well, to be clear, and, sorry, this is Christian Beltran with the Department of Finance. So, to be clear, the way that cap and trade, or GGRF, is structured is that we have about 35% of the annual auction proceeds come in that is discretionary.

So, given the current assumptions and projections for the 23-24 budget year, we built in Fund shifts for the zero emission vehicle package, as well as building in about $250,000,000 for AB 617 programs, all of which account for that discretionary amount of funds. So, in essence, we are accounting for the full 35% of projections. But those projections will change in the May revision, so we could assume to potentially see more or even less, depending on where projections lie. So, as of Governor's Budget, this use of discretionary funds takes up the majority of it.

Thank you. I appreciate that. To the LAO, in figure four of the purple report is the one I'm referring to. Prior year Fund balances in 21-22, 22-23, 23-24 those are funds not expended in the prior year, I'm assuming. Am I reading that correctly? Is that what that number refers to?

Apologies. Let me go to this.

It's on page six of that report.

I'm sorry. And so you're asking about which?

Prior year Fund balance in each of those three years? It varies. Is that funds not expended in the prior fiscal year? Is it as simple as that?

Yeah, basically, that's carrying forward. So there's an assumption that would--so when we adopt the budget, we have an assumption that we would spend 3.8 billion, or we would be left with 3.8 billion in this special Fund for economic uncertainty. If revenues came in much higher than what we're assuming, for example, and our expenditures were what we assume, then our prior year balance in the next year would be higher.

Okay, my next set of questions are regarding appendices 3 and 4 in the LAO's report. Maybe we'll start with three. And these are new expenditures, as has been described by the LAO's office. And I think Department of Finance could help answer. Are these programs all new programs, and do these amounts being allocated to all of these programs fully fund these programs, or are they initiation of new programs that we should expect long term commitments to?

These are new spending proposals. But I don't know if I can answer the second part of your question.

Sure. And again, just to clarify, is this Appendix three?

Appendix three in the LAO's.

Okay. So the new discretionary spending, and would.

You agree that it's a $2 billion?

Well, so in many cases, I would say that we do not have significant new investments in this Governor's Budget. Many of these are capital outlay programs that have been planned. So not necessarily new programs. We do have some new program and new investments that trying to focus on areas where we could draw down more federal funding. So, for example, putting in some General Fund dollars to draw down some more federal fund dollars.

And in some cases, where there have been shifts since the 22 Budget Act in regards to some priorities of the Administration, we have included some of those investments here. But I would say that it is a mix of current programs.

I think Appendix four refers to what you just mentioned, which is 2022-23 programs that are also receiving potentially allocation in 23-24. So I'm just curious of all these proposed new programs, sort of which ones are long term commitments? That's maybe an answer for another time, because if you do add up all these tables, it hits the $2 billion mark, and just interested to see how those priorities were determined.

Mr. Alvarez, I generally concur with Ms. Lee's characterization, I would say, but there's some details with some of these, like, for example, on Appendix three, figure one. The very first item is for the DGS Department of General Services for a capital project, Sacramento region, new Richards Boulevard office complex. That's for 402,000,000. So I mentioned during my remarks that some of the previously planned, there was a plan to issue bonds.

There was a plan then to switch to use cash funding out of the General Fund to pay for that. This is actually going in the reverse. Here, the proposal is to use cash to pay for this capital project. A reasonable question would be, well, couldn't you issue bonds and save the cash to help with the budget year problem?

As I look into this one, what I found out is that for some technical reasons, this project is not eligible for tax exempt financing in the municipal bond market, for example. So the state would have to issue taxable bonds. Some of these have technical explanations, I think, and our office would be happy to work with you or the Members to go through any particular items on the list if you wanted to look into them further.

Or it would be really helpful if we can identify what those barriers are to doing a bond financing on these rather than cash. And then also which ones are we're drawing and we're matching funds. Obviously, we don't want to jeopardize any funds that we can get from the Federal Government.

Sure. And I would just underscore what Mr. Petek mentioned. Part of the solution does include moving from a cash to bond and back to bonds. And in cases where we could not, such as this example where it was either too risky or for whatever technical reasons, we did not convert those. But for the most part, these are more one time expenditures than ongoing.

Okay. Thank you. And then lastly on appendix four, that one also talks about new funding for some of the more recent additions to the budget that have now become multi-year and potentially ongoing. And I think the same question. So we don't go over it here and save us time, just which ones are going to be continued, ongoing versus this is really one-time and it's done.

Does this funding complete that project, or should we expect more funding requests in the future, and then which ones actually help us draw down federal dollars? I think the same questions as it relates to Appendix three for me, I have for Appendix four. If you could help us get answers for those, that would be very appreciated. The last thing I'll say is I want to thank the LAO for the messaging throughout the report.

Which is we really need to develop, I'm just now quoting, a larger set of potential budget solutions now so that the Legislature can do this deliberately rather than under the pressure of the May revision, and then also the out years, which certainly for a new Member is a concern. We want to make sure that that doesn't continue to be a burden on us so that we can provide the services to Californians as they expect.

And then the other concept that is very interesting to me and I want to thank the LAO for, is the idea of adding trigger reductions as opposed to trigger additions. I think that's something we should really take a look at from the Legislature's perspective and see what things we might want to reduce if the funds don't come in, as opposed to add. That's a different way of looking at it. But again, thank you to both. Again, thanks to the work of the Department of Finance. I know this takes months to get here, and I appreciate all your help in answering the questions.

Okay. Mr. Bennett and then Mr. Muratsuchi.

Thank you very much, Mr. Chair. My questions are for Ms. Li, but certainly appreciate Mr. Petek weighing in, if he has any other thoughts on that. My first question is we moved significant General Funding from EV purchasing to the Greenhouse Gas Fund, as you mentioned. What I'd like to understand is last year, what did we use that Greenhouse Gas funding for?

So what is not now going to be done, or what was shifted someplace else that allows a Greenhouse Gas Fund, or is this growth in Greenhouse Gas Fund expenditures? I can't imagine it's all growth in Greenhouse Gas expenditures, but could you help me with that, please?

Sure. And actually, I will turn to a colleague on the line for the details of the GGRF plan.

Yeah. Thank you, Assembly Member Bennett, this is Christian Beltran with the Department of Finance. Again, just wanted to reemphasize what I expressed earlier for Assembly Member Alvarez. As you're probably well aware of the specific cap and trade amounts that come in, the revenues that come in from cap and trade that are deposited into GGRF, around 35% is left for discretionary spending.

So of that 35% discretionary spending, 1.4, 1.5, approximately $1.0 billion is being shifted to prioritize those previous ZEB investments that the Administration agreed to with the Legislature in the last couple of years. Ultimately, the discretionary amount of funds that are generally used from budget year to budget year is determined through those negotiations between the Administration and the Legislature. So, historically speaking, we've used the discretionary funds to invest in many different programs, including AB 617 programs, which there is an appropriation for in this year's budget.

But there are quite a few different programs that we've invested in previously as well. And we're happy to share some of that information with your staff to let you know some of the other historical programs that we funded before.

Well, my question is not historically, what did we fund of those historical programs that we funded? What is not being funded? So I want to be specific in the question, if you'll identify which of those historical programs that were funded last year are not being funded as a result of this shift.

Right. I do have that information, not entirely in front of me, but some of the things that do come to mind. I believe that there was a number of investments related to methane reduction. There were some agricultural focused investments as well that GDRF was used for. But I would have to look back on my documents to make sure that I'm giving you the proper information, and I'm happy to share that with your staff at a future date as well.

I appreciate that. Secondly, the Governor's Budget proposes cuts in transit funding, and that transit funding was negotiated with the Legislature in exchange for high speed rail bond allocation. It's explained that that's partially justified because there's so much federal funding that has come in that is available. Can the Department identify what federal pots will fund the TIRCP projects in the pipeline that we have right now? And is there a comprehensive list of the projects in the pipeline?

Yes. And Mr. Bennett, I would just like to say that at this point we are looking to federal funds to help backfill. So the transit funds, the 2 billion reduction in the transit funds, we are looking for federal funds to backfill that and looking both at the Inflation Reduction Act as well as the Investment Infrastructure and Jobs Act as well. To date, California should expect us to receive about 48 billion between those two.

So just to give a sense of scale, some of that is space programming, some of that is additional programming. And we continue to wait to see for additional funding specifically that will be coming to the state. In regards to the projects, and your more specific question on programs, I will defer to one of my colleagues who has more details on that.

Thank you.

Hello again. Steve Wells, Department of Finance. So I just want to say on the TRCP funding. So when we were looking at, essentially looking at where we were going to be able to find a solution to the ongoing situation, we looked at the TRCP because we looked at programs to try to make sure that we fully funded what we had promised. So we had already promised $3.7 billion and we had a call for projects on those.

And I believe just recently, in the last week or so, we allocated about two and a half billion of that 3.7 to many projects with a higher emphasis on projects that were leveraging federal funds. So we're going to continue to do that. I believe the next round will be another $1.4 billion out of that funding.

In addition to that funding, the IJA just announced that their formula funding for the second year of the transit formula funding that goes directly to transit agencies, they've announced that there's going to be $2 billion in the State of California. That's a $600 million increase over the previous Fast Act, federal act, and it's $100 million more than last year's IJA, which was 500 million more annually than that.

So we're hoping that because that formula funding has gone up by 30%, that that can help fill the gap. The largest programmatic impact under the IJA is in the Capital Investment Grants through the Transit Administration. That was a program that was 2.3 billion annually under Fast Act. Now under IJA, it's a 4.6 billion annual allocation. California historically does very well with those grants. We managed to get 20% to 30% of that funding.

So that's a potential on the low end of 500 million per year or maybe more. And then in addition to that overall competitive funding under the IJA and through transit, bus and rail programs, the annual amount available nationally has gone from 6 billion to about 18 billion. So that's another area where we don't have as much money forecast or planned for TRCP, we still have a significant investment of the $5.7 billion just for TRCP in the governor's plan proposal.

So in the short run we're using the IJA to help leverage ourselves through this solution. And that additional TRCP money that we had hoped to have last year is part of the trigger. So if revenue does come through and we have the opportunity, we can restore those funds.

And you do have a comprehensive list of all the projects in the pipeline?

Well, so when we talk about projects in the pipeline, the quest of projects is massive. Far more than the difference between whether we appropriate $1.0 billion or $2 billion next year. I believe just the 20 by 28 projects in LA would need an additional. I don't know. Last I heard it's like $20 billion. So projects in the pipeline are massive and overwhelming. I'm sure that we could compile some lists of things that are in the works through the transportation agency and get back to you on that.

Thank you. We recently had a TIRCP funding allocation round of that go forward. You talked about, I mean, clearly from your answer it was oversubscribed. Can you give us a range? How many projects were funded? How much oversubscription is there out there for the program?

I don't know specifically. When we went out for a call for projects, the call for projects was for. Essentially we had said that there was $3.7 billion available. So to the extent that we received requests for that money, I think that tempers the overall request. I don't think we necessarily see everything scaled up as large as it might possibly be.

Were that number to be bigger, I can tell you conceivably that number could be 3, 4, 5, 6 times as much and we'd probably get still more projects than there is available money. I don't have an exact number on what was asked for. This would be the, I think, round six of the TRCP is what this came from. And I don't know what the exact amount that was requested, but I could certainly let you know.

Thank you very much. Thank you.

You're welcome.

Thank you. We'll go to Mr. Muratsuchi, then, Ms. Cervantes.

Thank you, Mr. Chair. I like to transition to education, specifically TK through 12. I want to start off by thanking the Governor for protecting classroom funding and for protecting and continuing his commitment to many of the priorities that the Legislature and the Governor have committed to in recent years, most specifically to the universal transitional kindergarten goal by 2025. I want to thank the Governor for the ongoing commitment to reach that goal and also to thank the Governor for maintaining the 4 billion in ongoing Prop 98 funding for the expanded learning Opportunity program.

We just heard this morning the Los Angeles County delegation had a meeting with Los Angeles Unified Superintendent Alberto Carvajo, and he cited specifically their summer program as being key to the challenge that we're facing throughout the state in terms of pandemic learning loss and the need for pandemic learning recovery.

Post pandemic learning recovery, although I know we're not still completely out of the woods. What I'm concerned about, it seems like the Governor is continuing to be the champion of early childhood education and universal transitional kindergarten in particular, but that he is proposing a delay in $550,000,000 for the transitional kindergarten, as well as preschool facility funding to the 2024-2025 budget.

The concern I think many of us are hearing about the lack and the need for facilities to be able to accommodate our goal of universal transitional kindergarten and to delay the funding for the facilities even by a year, may interfere or undermine our goal of being able to accommodate all of the kids that are going to be coming into our transitional kindergarten programs throughout the state.

And so I wanted to ask Ms. Li what the thinking was in delaying the TK facility funding, particularly where it seems to be contradictory to his ongoing commitments through the rest of the education budget.

Yes, and thank you for the acknowledgment of the protections that are in place in this budget. I would like to note that there is 100 million that's available for that program already. And again, looking holistically across programs for budget solutions to fill the gap, trying not to eat into programs and not that capital isn't a program, but pushing that forward seemed reasonable because there is already investment in prior budgets for that.

Okay, but what I'm hearing, and I believe many of my colleagues are hearing, is that the need far exceeds the $100 million that you have identified. And so I would urge the Governor to reconsider that, particularly where we are so close to rolling out this goal that we can all be proud of, Democrats and Republicans, I believe, in investing in early childhood education.

I believe, Ms. Li, you also made a comment earlier about how you are looking for opportunities to transition funding, especially for capital expenditures from cash in the General Fund to bond funding. I know that the bond funds for new construction and modernization for school facilities have been exhausted. I believe they have been exhausted. And so is that highlighting the need for a new school construction bond?

I believe the funds are currently being spent. In terms of the timing, we do want to come forward with a new facilities bond.

A new facilities bond?

A new facilities bond, yes.

Okay. Thank you very much.

Thank you. We'll go to Ms. Cervantes and Mr. Fong.

Thank you, Mr. Chair. First, I do want to just acknowledge.

Thank you. Looking at this proposed budget, I see that the Governor's Budget includes a 7 million over five years to continue the cleanup efforts at Stringfellow Superfund Hazardous Waste Site in Herpa Valley in the district that I do represent, and so I am fully in favor of this. However, I do want to pivot to higher education.

The governor's proposed budget includes a one year delay in distributing funding for several capital outlay projects, including 83 million for the facilities expansion at UC Riverside and UC Merced. As you may recall, this funding was part of the Inland Rising Funding request championed by myself or my former Assembly colleagues, Medina and Gray.

And the purpose of this budget ask was to help level the playing field after decades of the state neglecting and underfunding both the Inland Empire and the Central Valley, which manifested with these two UC campuses in these regions. Given that dynamic, it is concerning to me to see funding for our inland regions delayed when the governor's proposed budget does not delay funding for other capital outlay projects at our public institutions of higher educations in other parts of the state. Could you explain the calculus in choosing to delay the distribution of funding for UC Riverside and UC Merced?

Yes, and first, I'd like to acknowledge that it is a delay and it is not part of our reductions, it's not part of our trigger. So I wanted to acknowledge that these continue to be priorities within this budget. And again, looking for budget solutions. The delay is a year. It is one of several, as you have noted, in addition to a UC Berkeley project as well as UCLA project. So again, just looking for solutions and acknowledging that this is a priority. It is in a delay bucket.

Yes, Gabe Petek. I was just going to weigh in and say that we have a forthcoming analysis of the CSU budget proposal in which we would say that this delay may warrant another look by the Legislature because, based on existing space utilization at the different campuses, we're not sure that this one is the best one for delay.

Thank you both for your responses. I do want to end by acknowledging that these delays when we're looking at equity across the State of California, we're continuing to fund projects in more affluent parts of the state on time. And so I just want to close with that. Thank you.

Thank you, Ms. Cervantes. Mr. Fong, Mr. Jackson.

Thank you so much, Mr. Chairman, and thank you so much for the presentations here today. I'd like to focus my comments on the higher education segment and thank you to the Governor. Really generally supportive of all three higher education segments proposals. When we look at the proposed 8.13% increase for COLA for Prop 98, as you mentioned, that's pretty solid. I also appreciate the governor's support and looking at exempting state taxes on student loan debt as discharged by the government.

We're closely tracking that, and we have a bill, Assembly Bill 26 on that as well. In terms of basic needs, I know a number of the community college board members and trustees and leadership came up to Sacramento last week, and as we heard from a number of the community college leadership, really concerned about ongoing issues around enrollment decline. And we will look at basic needs in terms of food, in terms of transportation costs.

Anything that we can do to continue to push for funding for transit passes that will help our students get to school and to stay in school is something that we'll be keenly focused on. And then in terms of workforce development priorities as well, we know that the Governor has proposed $14 million for workforce training grants.

But in conversations with a number of folks in different segments, we know that we need to continue to push hard on mental health counselors, on psychiatric technicians, on a number of areas in the career pathway programs. And leading up a similar question also on facilities and housing that Ms. Cervantes referenced, I'm also very concerned about the proposal to delay funds on funds slated for student housing, the $250,000,000 that's proposed for the third year of grants, and the $900 million in Revolving Loan Fund.

And we know that student housing is critical to really addressing our enrollment declines, especially in our community colleges. And so last year, there were about $3 billion in requests last year, and we know that we're able to fund $1.1 billion. And there's a tremendous need in our college communities to add housing for students, for faculty, or for staff in our communities, and to look at shovel ready projects that can be built in the next year or two. Why did the Administration propose delay funding for student housing for the UC, CSU, and community college system in California?

Thank you, Mr. Fong. Again, just want to start off with stating that we have 1.75 billion out there through this current year for that program, the Higher Education Student Housing Grant program. We are proposing delaying 250,000,000 of what was planned in the budget year. Initially, it was 750,000,000. We are going to keep 500 million and defer or delay 250,000,000. So I just want to acknowledge that there are dollars out there, significant dollars, understand that the need is greater than the dollars that are out there.

In regards to the Revolving Loan Fund, we are pushing that out by a year. Also acknowledging that these are in the delay bucket, these are not in the reduction bucket. So again, highlighting that they remain a priority for the Administration as well.

Thank you so much, Ms. Li. We continue to do the push on funding for student housing for facilities is critical to meet the needs of our segments of higher education here in California. So thank you so much.

Mr. Jackson. Then we'll go to Ms. Bonta.

Thank you very much, Mr. Chairman. I think my first few questions are just in regards to the budget as a whole. And so I think my question is actually for both the Department of Finance and the LAO, and that is when you're thinking about what should be funded, are you thinking about it in terms of priorities, or are you thinking about it in terms of new versus old funding? Right. Continued funding, things we funded in the past as opposed to new things, or is it a combination of the both?

Yes. Thank you for that question. I would say it is a combination of both, but really looking at priorities as a priority. So looking at the former two budgets in particular, where a lot of this multi-year funding took place, and again, going back to my discussion of using the surplus we had for one time funding, and a lot of that was significant funding over multiple years, being able to pull that back if necessary.

And so I think that's what you're seeing is some of those reductions, are those pullbacks in those one time multi-year expenditures. And obviously, things have changed since the Budget Act. And so you are seeing some new investments in here, as I mentioned before, such as a water contingency. There are some Cal Competes funding to draw down federal funds. So there are things that have changed since our priorities in the 22 Budget Act that you are seeing in the Governor's Budget proposal.

Thank you for the question. Gabe Petek, Legislative Analyst Office, and what I would say in response is really to significant extent, we try to follow your lead and think about what your priorities have been and what you've exhibited the Legislature's priorities to be over the years. What I would point out is that in the last two fiscal years before the current one, we saw extraordinary revenue growth, 30% in 2021 and 2022, we saw another 20% growth.

So these were historic rates of revenue growth, putting our revenues at a kind of a historic peak. And prudently, the Governor and the Legislature allocated a very substantial share of that peak revenue, the surpluses that resulted from that peak revenue to one time and temporary purposes. And so as we look at the situation now and think about your core services the core state operations where you're providing key safety net programs and services to people that would be vulnerable in an economic downturn.

For example, one of the reasons we've said to hold off on tapping into the reserves now is that's a possibility. We could have that kind of a downturn where you would be faced with those kind of choices. That's why at least the way we interpret the recent actions by the Legislature, having chosen to put a lot of those surpluses to these one-time purposes, partly for budget resilience purposes, that's the good first place to look in kind of the way we're framing this for you.

But certainly, again, it's really the Legislature's choices to make. But as we kind of interpret the recent choices you've made, the recent fiscal situation and what it is now, that's kind of how we shaped some of our comments that you see in our reports.

Thank you for that. In terms of this proposed budget, how many different corporate tax credits and tax incentives are in this budget?

As I mentioned, there's the Cal Competes extension, which, I'm sorry, that's actually a grant. So we have the film tax credit that is included in is, I will turn to a colleague on the line, but that is the one notable one that I can note.

This is Tanamun and from the Department of Finance. In terms of corporate tax credit, it is the case that the film tax credit is the only one that we have included in this current budget.

Okay, thank you for that. Obviously, we have a large number of technology firms in our state, and they've gone through a lot of different layoffs and things like that. And I know some have been rehired from other corporations, but do you think that this is going to have any type of impact at all on our budget?

There's two things I'll say to that. The first one is that, as I mentioned, our tax structure is reliant, heavily reliant on higher income tax earners in regards to their personal income taxes. And to the extent that there are layoffs at higher level at tech firms where they may be paid higher incomes, then there could be impacts to our revenue. At the same time, the state is looking at this as an opportunity to bring on new talent to the state workforce. So dealing with workforce issues.

So that's the second point. But yes, I think that that is one of the risks that we see in regards to the economy turning. If there are more layoffs, unemployment rate will go up, and potentially our revenues will be impacted.

LAO?

Yes, sure. We do see evidence of this showing up in our withholding tax collections. They were down year over year through December, 6.7%, and then 14% in January compared to the Governor's Budget proposal assumptions. And those withholding tax collections do reflect what's happening in the technology sector in particular. When the tech firms that are going public or issuing initial public offerings, those were down substantially in 2022. Some of those firms were doing the layoffs.

And when those firms do go public, it does generate a lot of withholding tax. And so we suspect that a lot of the underperformance in that particular revenue stream is related to this. And so it's something that we're watching quite closely.

Moving on to health and human services issues here. Of course, we always talk about the overall rainy day fund. Am I correct that there's also a human services rainy day fund as well?

I mentioned the Safety Net Reserve Fund, which is about 900 million.

900 million, okay. And is that as much as statutorily available? Meaning you can't max out more than that?

Right. There's no statutory limit.

Okay. So that's just been what you guys have been willing to put into that Fund.

It has been about 400, 450,000,000 in the past and is now 900 million.

Thank you for that. Obviously, by all metrics, we're also in a mental health crisis, even though we don't talk about it as a crisis. I mean, it's a big deal. And I am concerned about some of the workforce development program in terms of initiatives in the areas of behavioral health and public health, and some of those delays in terms of us being able to meet the current crisis and in terms of meeting future crises in terms of, of course, right after the pandemic, then we had monkey pox, and then these things are going to be happening more frequently.

I would like to work with you all on reevaluating some of those things to make sure California stays prepared in term of these things and to meet the current crisis similar to what we're doing in the housing crisis and the homelessness crisis. We're basically throwing everything, including the kitchen sink, at it, but we're not doing it for mental health. And I say that sometimes it could be even a bigger problem than some of the issues we're already calling a crisis.

And so we'd love to have some future conversations about that and see how we can make sure we're setting ourselves for the future even though we're in lean times. I'm worried about the future here when it comes to some of these targeted delays. I believe these are delays, correct?

That is correct. And I would just like to say that we have over $8 billion in programming for mental behavioral health programs, of which 2.7 billion by the end of this fiscal year will be going out for a couple of those programs, including the Continuum of Care Infrastructure Program and the Behavioral Health Bridge Program. While there are some delays in some of the workforce, health workforce specifically, as you mentioned, there's also quite a bit of new investments.

And realizing that there are cuts to the total amount, there are still sizable investments. And we take you up on your offer to continue to work with you through the spring on this.

I appreciate that. Lastly, in terms of early childhood education, I continuously hear some concerns about it's great that we're expanding TK, but we're not taking a whole family approach when it comes to TK. Primarily, if I'm part of a working family and TK is only half-day, how can I make that stuff kind of happen? Are we looking at making it more full-day as opposed to a one size fits all kind of thing for families?

Yeah, I would say that the Governor is very interested in early education and childcare, and the movement is towards more a full-day programming that is inclusive of our extended day program. There's billions of dollars that have been provided in former budgets that are continuing to be implemented to extend the day both before school and after school to meet some of those concerns, as you mentioned, for childcare and workforce and families going to work.

Can I just reiterate one point here, because I think, Mr. Jackson, you bring up an excellent point of the main inhibitors to full day TK is the issue that our colleague Mr. Muratsuchi brought up, which is facilities. It's been an ongoing issue in sub two, not as much a staffing issue, but a facility issue. So if we don't have the facilities which have been cut in the budget, then we can't move toward full-day, which I think there is an interest, especially for working families. Right.

Appreciate your question. And I would even say an imperative in terms of who's able to access half day. Right. Then we're talking about equity issues, we're talking about income issues, we're talking about single parent versus two parent households, those type of things. Lastly, I know you're proposing to delay close to about 20,000 childcare slots within the budget to delay that. Correct.

It's less of a delay and more of an alignment to the realities on the ground at this point. Over the past couple of budgets, we have over 100,000 slots that have been provided. They have not all been utilized. And so this is a bit of a catch up to allow for that in the budget year, rather than putting out 20,000 new slots to allow for those other slots that have been opened up to be filled.

Have we thought about using that money instead to raise the rates of childcare workers so that we can actually properly staff them?

And there are discussions underway with the Administration and stakeholders in regards to a single allocation for the rates. So that is under discussion, yes.

Definitely there's many of us who would like to continue to have that conversation as well. And then I think, lastly, I would just talk about the homeowners program, California Dream for All, and Cal Home. You are proposing to make cuts to that as well. How significant are those cuts?

There's about a total of 350,000,000 for home ownership program cuts to homeownership programs. And the thinking behind that was to really work less on home ownership and building more units instead.

Okay. And I think that's about it for me, Mr. Chair. Thank you.

Ms. Bonta, if you wouldn't mind one second. Ms. Carrillo has to leave. She was hoping to get in one quick question.

Thank you, Assembly Member, and thank you, Mr. Chair. My question is specific to the only tax credit discussed in the budget, and I want to thank the Governor himself for his commitment towards diversity and equity by creating the first department that's going to be focused on equity and inclusion and diversity within the State of California.

But the Film Tax Credit, in its last reiteration, included components that would allow for below and above the line diversity workforce developments, since we can't mandate diversity, but we certainly can be creative about how we include the people of California in an industry that is from California, specifically a leading industry around the world that is incredibly beneficial to the economy of California. I'm curious what the commitment is from the Governor to continue this program.

One, but two most importantly, ensure that there is diversity measurements and measurements of success within the Film Commission and the Film Tax Credit as we move forward amid this budget.

Yes, the Governor is committed to continuing the discussions around equity in regards to the Film Tax Credit, and we continue to look forward to working with you and others on that language for the trailer bill.

Thank you.

Ms. Bonta.

Thank you, Mr. Chair. It's already been stated that the governor's proposed budget certainly includes some very difficult cuts because we need to be able to address the economic downturn. And while we consider the pullbacks on spending that we must do, I just want to make sure that we are considering the opportunity costs when we make those spending cuts to vital services and programs, particularly to our vulnerable Californians.

With these forced cuts, we're forced to make some very difficult decisions and we should be prioritizing safeguarding our investments and also considering the opportunity costs when we let something go in the short term in terms of what impact it will have on our populations that are most vulnerable over the long term. I want to turn a little bit to public safety now.

With that in mind, I certainly look forward to discussions in Subcommitee five where all of the proposed cuts that the Governor has offered, $340,000,000, are legislative priorities and very few, if any, are reductions to the sub five departments. With that, I'd like to turn some attention to the CDCR specifically and ask if you all can explain with some detail why the cost of state corrections continues to rise year after year when the population has been decreasing for the last decade.

Now, I understand that there are healthcare related costs and staffing, but it is a question for us to ask whether we can justify spending for 60,000 budgeted positions when our prison population is 95,000 people. Can you speak to some of the details related to that?

Yeah, I would just agree with your points in regards to the health care costs as well as some of those fixed costs that are harder to create savings. And obviously there are prison closures that are being proposed that will generate some savings. But in regards to some of the more details of your question, I will turn to a colleague on the line.

This is Cynthia Mendoza, Department of Finance. The Administration remains committed to reducing California's expenditures on prisons while promoting public safety. CDCR's budget has been reduced as a result of prison closures and the changes in average daily population through the annual population adjustment. For example, the closure of Dual Vocational Institution and California Correctional center are estimated to generate annual savings of approximately 293.2 million and a reduction of 1,773 positions.

These reductions have been offset by targeted investments in rehabilitative and healthcare programs such as substance use disorder, psychiatric care, expanded college education, and technology for the incarcerated. And in recent years, we just want to note that a significant portion of the increased spending was associated with the various responses to the Covid-19 pandemic. Another factor that was mentioned are the rising health care costs for the incarcerated population.

And while the population is reducing over the years, the age of the incarcerated population is older, which results in these higher level of health care costs, including additional staff. And just to note, healthcare represents a significant portion of CDCR's budget. It's at 3.8 billion, or just over a quarter of CDCR's total budget. However, we are beginning to see a continual decline in overall costs due to the steadily declining population.

In November 2022, CDCR began the closure of a second prison and expects it to be in warm shutdown by the end of this fiscal year. CDCR has also announced the closure of two additional prisons and the closure of facilities within six prisons over the next two years. So we'll see significant ongoing savings that will be realized upon completion of those endeavors, and then there will also be a commensurate reduction in budgeted positions.

I appreciate that. I do want to just highlight again that the Legislature has put together some specific legislative priorities and solutions to some of the things that we know need to happen within CDCR's purview. And I would definitely like to be able to continue to work with the Administration to ensure that those legislative priorities where we have our legislators going into prisons and understanding from the most impacted people what actually needs to be changed actually can be reflected in our budget. And I'll also give some space for the LAO to respond.

Thank you very much, Assemblywoman. I think this is a really important line of questioning. Our office thinks that the Administration isn't taking full advantage of the population trends that we see over the next, in the near term, there's going to be something around 10,000 empty beds throughout the system, growing to 20,000 beds, which could create the space to close four to five prisons over some period of time over the next several years, which could generate hundreds of millions in savings.

So we do think this is something that the Legislature could consider exploring more concertedly with the Administration. And of course, another cost driver in this area is employee compensation and would be another topic to explore when looking at the costs of CDCR.

Thank you for that. And I would also just like to highlight that clearly one of the cost drivers in CDCR has been the inordinate amount of litigation that has occurred within CDCR because of the violation of a series of laws and the remedial measures that are caused from that. It's taxpayer dollars that are used to be able to support attorneys fees and the ex post remedial measures that we have to put in place in response to that.

It seems like a very reactive programming model that we have in place right now, and I would like to understand whether there have been measures put in place to really understand more fully what kind of corrections need to be so that we actually can be more proactive.

I'd like to turn to somebody on the line for a little more detail on that.

This is Allison Hewitt, Department of Finance. Want to first note that much of the litigation that is being referred to are long-standing class action litigations. For example, the Coleman lawsuit, which deals with mental health, was filed in 1990 over three decades ago, the Armstrong litigation in 1994, and the plotted litigation in 2001. So these are not, strictly speaking, new litigations. As you referenced, it's where the Department has been working through remedial phases for a period of time.

So it's not typically or technically speaking, new litigation. I would note that CDCR is implementing a number of measures to try to assess its operations and policies to ensure compliance. The Governor's Budget includes some targeted resources understanding the fiscal climate, but some targeted resources to further support the department's efforts to work towards durable, sustainable compliance with the remedial measures and leveraging technology based solutions.

So yes, it's something that CDCR and the Administration are constantly looking at, and it's to do as much as possible and trying to be proactive and implement kind of targeted staffing models or other provisions to prevent issues from arising in the current class action litigation, as well as the filing of any new litigation in the future.

I appreciate that and I certainly look forward to the additional conversations that we will have through our hearing process in budget sub five. I did want to just temporarily turn our attention back to early childcare, as my colleague talked about, Mr. Jackson.

We have a situation now where we've engaged in continued destabilization of our early childcare workforce, our entrepreneurs who are in early childcare and have designed essentially a system that is not really meeting the needs of working families right now for children who are in the birth to four category, quite frankly.

Has there been concerted effort by the Administration in this budget or just considerations across the LAO to really think about putting in some measures that would allow us to be able to provide, if nothing else, a just transition and kind of more urgent and emergent support to early childcare providers as we transition to universal TK?

I'll just note some of the past investments in the childcare sphere, over 2 billion in the last couple of years for childcare. The Administration has been working with CCPU as well to address some issues, but I'll turn to somebody online for more details to your question.

Thank you, Member Bonta. Gabby Santora, Department of Finance. Just want to echo Ms. Lee's comments that the Administration looks forward to engaging with CCPU in forthcoming negotiations for bargaining to get to a successor agreement, which presume would include discussions about the issues that you just raised.

I appreciate that and just want to elevate that the women's caucus in particular, continues to prioritize early childcare.

I know that there are many legislators, Mr. Jackson included as the chair of the Health and Human Services, that really wants to kind of dig into the extent to which we are providing the immediate and urgent support that is needed to stabilize our childcare industry in this moment, right now for working families. In a way that actually will allow us to be able to have universal TK that will be used by as many people who actually need it, but also recognizes that we need to do a lot more to be able to ensure that our birth to 3-4 children have the ability to, and families of children in that age group actually have the ability to be sustained amidst the perfect storm of COVID the implementation of universal TK and the current economic realities in the state.

Thank you, Ms. Bonta. Mr. Essayli.

Thank you, Mr. Chair. Just have a few questions here. I'll start with transportation side. On the Diesel Excise Tax, I understand that that brings in about nine and a half billion. Does that sound accurate?

I'll have to turn to somebody on the line for that detail.

Hi, this is Steve Walsh from Department of Finance, again. The diesel excise tax, I think the number you're quoting is more the diesel and the gasoline excise tax together. The diesel excise tax brings in about $1.2 billion a year,1.3. Then the gasoline brings in about seven and a half billion. Billion. Yes.

Okay. So total between the two is around $9 billion.

Correct.

And out of that 9 billion, how much of it is diverted to the General Fund?

None of it.

None of it.

None of it. Oh, I'm sorry. There's a small portion of General Fund on that was related to the. So back when we had, back when we eliminated the sales tax on gasoline and created the increment, the part of the gasoline that is from use that's not on state highway system, the portion that is the base, goes to that Department. So let's say there's an amount based on for boating. So the part that is in the base for boating goes to boating.

The part that's in the increment, which used to be the sales tax that we converted to an excise tax, that part goes to General Fund. So if you added up the sections, the boating sections, the Off Highway Vehicle Trust Fund, several others, it's some number, a little less than 200 million.

But the budget has, if I'm reading it correctly, they're diverting $500 million from road projects to bike lanes and environmental projects. Is that correct?

So what the budget we proposed to take out of the active transportation program, which is a program that has a baseline funding component from the federal funds and from the state highway account, it has a baseline of about $230,000,000 a year. It's a federal program that we provide matching funds to. So that's where we're providing an additional 300 million to fully fund the active transportation program. But it is a transportation program that has been in place, we've had in place for multiple years.

That's just funding to make sure that that program is kept completely whole. Again. we had wanted to augment it in 2022 to provide some additional funds, and we've already gone out as a call for projects on that. So we wanted to make sure that that call for projects that we were still able to fund it. The other 200 million is in the climate adaptation program, which is also a new federal program.

So when we initially did the funding for that, we had the 200 million from the Fed Funding, and then the state match, we were going to state match it with General Fund, but because it's a state highway or a federal highway Fund program, we're going to match it with state highway account funding.

Okay, but I just want to understand what this does, because constituents in my district, when they're paying the gas tax, they think that's going to pay for roads, road repairs and road construction. And the budget originally had the 500 million you just referred to coming out of the General Fund, but now you're proposing to take it out of the Gas Tax Fund. So is that correct?

So these are both programs that are funded out of the Gas Tax. Last year, we had hoped that we had, in having some additional General Fund, we had looked to boost those programs and provide additional one time funding over and above the baseline. And as we've had to make choices on where to find solutions, those two sources, like I said, because they were baseline transportation programs to begin with, were funding them out of their normal funding source.

So yes or no, you're taking 500 million out of the Gas Tax Fund for those projects.

Those funds are being funded out of the Gas Tax Fund along with, as they've always been funded, out of the Gas Tax Fund. For ATP, we've had the ATP program for multiple years, and the feds have guidance for how much of the funds are supposed to be used. It's not all to be used for highways and roads. There's guidance for multimodal uses for those funds. So, like I said, we were looking to bump that, but then as part of the solution, we shifted those funds over.

Okay, thank you. I want to move on to public safety. On the issue of prisons, which we were just discussing, the governor's office estimates that the prison population in the next year is going to decrease by 6% or so. Is that correct, Ms. Li?

Yes. And I'll turn that question to Ms. Hewitt again for the number.

This is Cynthia Mendoza, Department of Finance. Yes, it is projected to decrease.

And what is the basis for that projection? Is that just based on trends or how did you get that 6% number?

It's actually derived from CDCR's Office of Research, and they look at a number of factors, including recent legislation, trends in population, and a variety of other factors that go into that.

Okay. And does the Governor's Office is aware that violent crime has been on the increase in the last few years?

Yes, we are aware, yes.

So while violent crime is increasing, we're planning for a smaller population in the prisons. Is that because you're expecting less crime, or is that because you're expecting to release more prisoners?

Again, these are trends based on what we've seen.

Okay. On the issue of also public safety, I want to discuss judicial appointments. I come from Riverside County. We have a massive shortage of judges. It's estimated that we have 22 fewer judges than needed. And as we're sitting here today, we have cases being dismissed, criminal cases being dismissed in our county, because there's a lack of judges to hear the cases. We've had about 1500 cases be dismissed so far. So I see that there's $2.9 billion being proposed in the budget to support trial courts.

Can you tell me if there's any money for any judgeships in the budget?

Yes. The 2022 budget act did include about 43 million General Fund in the current year, as well as 42.3 million in the budget year for 23 additional Superior Court judgeships. And we are fully funding all of the authorized positions for the courts.

But in this budget for this year, there's no new judgeships being funded? Correct?

There are 23 additional judgeships being funded.

So in this budget, you're going to fund 23 more judges for?

This is a part of the 2022 budget, which was a multi year funding proposal, and there was 43 million in the current year and another 43 million in this year. Sorry. In the budget year.

So the budget before us, you're saying, is 43 million for judges?

That's correct.

And how much of that will go to Riverside County?

I would have to get back to you on the particulars for Riverside County.

Okay, I'll be very interested in that, please. Thank you. Also, Ms. Li, would you agree that reducing gun violence is important to the Governor? Correct?

That is correct.

And you're familiar with the armed prohibited person system? The app system?

Yes.

Okay. And there's about a backlog of 24-25 thousand individuals we know should not have guns, but have a registered gun in their name. Is there any funding being dedicated to reducing that backlog in this budget?

Sure, and I will have to turn to a colleague for specifics on that.

Okay, thank you.

Hi, this is Mark Jimendez, Department of Finance. I'll have to follow up with you and your staff on that question.

Okay. So as you sit here, you're not aware of any funding dedicated to reducing the backlog in the app system, is that correct?

We'll have to follow up with you on that.

Okay. I mean, this is really important, so please get that information to us. And then lastly on this.

Can I add one thing on the apps, Mr. Essayli? I would say that because there was a backlog in apps, it's been long standing through many, many attorney generals. We actually did set up a pilot program to work with certain counties to have some of that repossession of firearms done at the local level. So happy to. We will be talking more about that in sub five, but really do appreciate your line of questioning on that.

Thank you, Mr. Chair, for clarifying that. Yeah, that's important. If we can use locals to help resolve that backlog, we want those guns out of those people's hands that shouldn't have them. On the Unemployment Insurance, there's a debt, you said, of about 18 billion. How did we find ourselves in an $18 billion debt in that Fund?

Sorry about that. The $18 billion trust Fund balance is largely due to the pandemic recession and the high unemployment over the past two years.

What is the estimated fraud that was? How much fraud was there in the EDD program that was handed out in those benefits?

I have to say that specifically, it was in the pandemic unemployment program, or PUA, and that was, I believe, 20 or 30 billion. I want to double check that number, and I can get that to you but in that realm.

Does that number factor, does that go towards the 18 billion?

That does not, it's a different, that is a different program.

Okay. But 20 to 30 billion was lost due to fraud from that pandemic money and ideally, that money could have been used to help pay for the Unemployment Insurance, which is an $18 billion deficit. And if I understood you correctly, the governor's plan to fix this unfunded liability is to ask for forgiveness, is that correct?

No. What I would like to say is that we will be lobbying to the Federal Government for some forgiveness, but it is a large amount. It is something that we understand is on the backs of employers, and again, would like to continue to discuss that with the Legislature. But in regards to the actual benefit of paying down some of that trust Fund, unless we pay down the full amount, we wouldn't necessarily see the benefit to employers. 18.5 or so billion dollars would have to be paid.

I understand it's a huge debt looming, and I would just ask the governor's office to really prioritize that because I'm hearing from a lot of businesses. They're very concerned about the payments that are going to go up to pay this, their very, very worried about it, and small and large businesses. And then. Mr. Is it Patek? Patek, I wanted to ask you, because you mentioned on the revenue side, increasing revenue, one of the proposals was to renew a tax. Correct?

But I want to ask, are there any other considerations to increasing revenue, like making California more business friendly, to increase the tax base, increase tax revenue by encouraging more businesses to come to California or reducing the regulatory burden? Is there any discussions or conversations on that level?

Well, this might be a question more for the Administration. To my knowledge, the main revenue proposal is the one I mentioned on the Managed Care Organizations, the MCO tax. But I'm not aware of other tax proposals.

There are no other tax proposals. What we have been attempting to do is to support our businesses, both small and large, through various investments over the past couple of years, including that $4 billion in the small business grants. We have fee waivers as well as tax credits that have reduced the net operating loss and the NOL in the past. So again, trying to encourage more business, Cal Competes Programs, the grant as well as the tax credit, and then, of course, the film tax credit.

Okay. I appreciate that it's just a comment. You know, there's two ways to increase revenues. One is to raise taxes, but the other way is to sort of grow the pie and encourage more businesses to be here which generates more tax revenue. So there's a different approach I think that we could look at California because we have a strong economy. It could be even stronger, and then that would result in more tax revenue. So with that, I have no more questions. Thank you, Mr. Chair.

Thank you, Mr. Essayli. We're going to go to Mr. Lackey and then Ms. Sanchez.

Well, thank you. Thank you, Mr. Chair. I have no questions. So you guys can relax. I actually just have two real brief comments. First of all, I want to commend the governor's proposal for not at this point, going after the intellectually and developmentally disabled community at this juncture and keeping them whole. That's a very big deal to that community, who has fought very, very vigorously to get to where they are now. And typically, in budget difficult years, they're the first ones to get cut.

So I want to make sure that the budget does not do that this year, and I will fight with every fiber of my being to maintain that. If I have that ability to fight, I'm certainly going to be the voice, a proud voice, of trying to maintain the services to that community because they are so easily overlooked. And I think that that's disgraceful. And I'm thankful at this point they're still whole. And I hope to make sure that that does not erode through this process.

I'm also a bit frustrated, and I want to express my frustration with AB 130. There's a certain part of AB 130 that is adversely impacting my district. We have a dental program, an internship program, that basically has been damaged and essentially effectively ended because of one of the provisions that require fingerprinting of all people that are associated with these students. Basically, there are 20 students in that classroom, and that means one student to every dental office in the region.

And each office has essentially 8 to 10 employees. And so that means investigations and fingerprinting for approximately 160 to 200 employees. And that's a deal breaker for this career technical education program that I don't think that's the intent. And I look forward and hope that the Committee will work with our office to try to resolve this particular aspect, because I think it's very resolvable, and I look forward to that. And that's really all I've got. So thank you.

Thank you, Mr. Lackey. We're happy to address that issue, especially in the Subcommitee. Thank you. Ms. Sanchez.

I have a few questions, Directed Department of Finance regarding public safety and judgeships. Why are there no new judgeships in the budget, even though Judicial Council has made it clear that current backlogs and wait times indicate that we need at least 98 new judicial officers?

Yes. As I stated, earlier. All the judgeships that are authorized are fully funded in the current year as well as in the budget year. So about 43 million has been added for those judgeships.

And we don't know how many for Riverside County, correct?

We have just found out that there are four.

Four. Okay. I can tell you because in Riverside there is a significant need for more of them. Criminal cases continue to be dismissed at an alarming rate because of this judge shortage. We have over 1500 cases being dismissed. These are felony child of sexual assault cases, illegal firearm charges that are completely dismissed. And as a mother of a 10 year old, this is horrific to me. Does this Administration care about crime victims and making sure that criminals are held accountable?

And do they want California to have safer streets? If they do, I would need to consider funding judgeships, especially in areas like Riverside. And then I also have another health care related question. I saw in this budget that the Governor is cutting 50 million in funding for public health workforce training and development programs. My local hospitals and healthcare facilities are desperate for new healthcare workers. Statewide, we know there are shortages of nurses, doctors and just about every category.

Why then does this budget defund programs that have been proven to help increase our state's healthcare workforce?

And again, I would just like to say we look forward to working with you and the Legislature on what the budget looks like with our shared priorities as we move forward in the spring.

Sure, it's fine that the budget decides to Fund other programs, but we know that these defunded programs actually work. I've had several meetings with healthcare facilities that have said that these programs have worked quite well. It's not acceptable to defund these programs that provide our hospitals with more trained healthcare workers, reduce wait times, and improve the quality of care for our constituents. Thank you. Thank you.

Thank you, Ms. Sanchez. So I have a couple of questions as well. I wanted to go back to our sub five chairs questions around CDCR. So Mr. Petek, can you just remind us again, I know LAO put out a report delineating how many prisons your office estimated we could potentially close.

Yes, Mr. Ting, we estimate in the range of four to five additional prison facilities could be closed.

And how many were proposed in the Governor's Budget?

Sure we have. Let's see, there is DVI obviously in the past, the California Correctional Center in Susanville, California City, and Chuckawala currently, and then six prisons with specified facilities.

In the California City prison. And Mr. Petek, again was four to five on top of the first two you announced. With California City was the reason that you closed that because it's a private prison?

Yes, it's the last privately run prison.

And while I'm supportive of closing private prisons, I think one of the concerns with that particular prison, from a fiscal point of view, is it's overseen by the same staff union that oversees many of the other prisons, and also they're in quite good condition. So we don't have the deferred maintenance issues that we do in some of the other prisons.

So is there a reason, given the huge deferred maintenance costs for many of the other facilities, why that was chosen versus some of the other facilities that have significantly higher costs?

And I have to turn to a colleague on the line for that.

This is Cynthia Mendoza, Department of Finance. CDCR does consider a number of factors, including. And they go by the Penal Code 2067, which includes consideration of costs, facility previous investments, public safety and rehabilitation, and the durability of the state solution to prison overcrowding, and a number of other factors when determining those prisons to close.

No, I understand the penal code. They've recited it in Subcommitee a number of different times. What I don't understand, and they have not been transparent on is the ranking, how they come to that ranking. So do you have any greater illumination on that issue?

I'd have to get more details for you. I don't have anything right now.

Got it. I guess we'll have to see you in sub five. Then, going into that logic, you have six facilities which could have; four or five of which could be closed. What was the logic to look at closing just certain yards, doing a very piecemeal approach rather than closing facilities outright? It seemed, just from a feedback point of view to have created a little bit of chaos within the CDCR staff.

Sure, there are some benefits to deactivating yards within prisons. It provides the Department with long term operational flexibility in housing the incarcerated population and allows the Department to address the changing needs of the population. Additionally, deactivations like this are likely to result in the least amount of disruption to the staff and incarcerated persons because they can move within the facility. And if there are any staffing shortages, this is a potential solution to address those staffing shortages.

Then why when you announced the first two facilities, you closed two facilities. Why wasn't this approach used throughout the system earlier?

Understood there is a process through the annual population adjustment that looks at housing unit conversions and changes. However, this was something decided on because it would allow the Administration to move faster in realizing savings and reducing positions as well as continuing to focus on closing prisons. As I said before, the Administration is committed to reducing California's expenditures on prison and continuing to promote public safety.

What cost savings did we walk away from by not closing the facilities?

Associated with the six facility deactivations?

That's correct.

Upon full implementation, deactivating those six facilities will result in an estimated annual savings of approximately 150.1 million and a reduction of around 860 positions.

But if you had instead closed, let's say, three of those facilities, instead of doing the deactivation, then how much money would have been saved?

It's hard to say. There's a lot of analysis that goes into the costing of a prison closure. But I can say closing the dual vocational institution resulted in a savings of 150.3 million. Closing the CCC will result in approximately 142.9 million in annual savings. This is another solution that CDCR can lean on to just provide more flexibility and address their population needs.

I understand the flexibility, but I guess when you have a budget that has gone up more than $5 billion over the last 10 years, at the same time we've seen, I forget the percentage, but let's say it's 100% or 50% reduction of population, it doesn't quite make fiscal sense to go this approach, especially when our LAO, and I'll let the LAO come in here for a second, I mean, says, hey, we could have closed four to five facilities. Just doing simple math.

Four times 150 million gets you a lot more savings, than you do from doing this nip and tuck approach around a number of different facilities. LAO?

If I may just offer, the way we were looking at this situation is kind of in two ways. One, you have the budget problem out there. Two, you have this long term mismatch of the facility capacity and the declining population in the prisons. Our understanding is that the yard closures that they're talking about yield more immediate savings, but smaller amount of savings, but they can be implemented more quickly.

The trade off, of course, is that to the extent you're not focused on closing the facilities, the overall prisons, those are what generate the larger savings, but maybe take longer time. So I don't know if the Administration would say this, but perhaps the focus right now on the yard closures is in response to the immediate budget problem, but it doesn't really resolve that underlying longer term issue. I feel like that you're focusing on, Mr. Ting.

Well, I think it's a perfect allegory for our current budget situation. As you described in your report, if you don't make the difficult decisions now, we got much more difficult decisions down the road. And that seems to appear to be what the Department decided to do. And over the last number of years, the department's talked about these criteria. We've never seen it. I've never seen it in public. I've never seen any delineation of that criteria.

These closures and these yard closures seem, oftentimes, to just be arbitrary and to somewhat come out of thin air. And at a time when we were moving toward prison closures, now we're moving toward yard closures. I appreciate the explanation from Department of Finance, but frankly, it doesn't quite make much sense to me, especially at a time when you have a $5 billion increase in an office budget. It's the only one that's increased while everything else is decreased. We don't do that for CalWorks.

We don't do that for CalFresh. We don't do it for MediCal. We don't do it for any other program area that we support at a wholesale level. So this is something we're obviously going to be, we're very interested in revisiting in Subcommitee. I'll just say this. I'm very personally disappointed in the Department in this approach. It's not something that I think makes significant amount of sense to me. But I have found this Department fairly puzzling since I've been here.

So I did want to ask, just while we're on CDCR, there's a couple of new augmentations in there on that augmentation list around correctional video surveillance, comprehensive employee health program, San Quentin, Ediscovery, integrated substance use. Is there a reason why these are additions versus none of these could have been funded within the $15 billion appropriation already in last year's budget?

I'll start at a high level and then I'll have to turn it over for some more details. But some of these are, the surveillance is an ongoing cost that's grown from a pilot. So that's something that is above and beyond what's in the base. And then some of the other additions are needs that have been identified since the 2022 Budget Act. But I'll turn to my colleague on the line for some details.

Hi, this is Alison Hewitt. Yes, so the video surveillance continuation is an ongoing project that was initiated by the Administration years ago. And so this represents the final year. And no, those costs could not be absorbed within existing resources. You mentioned the integrated substance use disorder treatment program. The Administration is actually proposing a reduction to that program as a part of the bi-annual population adjustment process to keep the expenditures for that program more in line with the current population trends.

In terms of within CDCR, we took a very thoughtful approach in terms of funding any new projects, and as we did across the budget, tried to avoid committing to discretionary spending as much as is feasible. So the answer is no. None of the proposals for increased funding that are included in the budget would have been possible to absorb within existing resources. I would say the largest area of increased funding in the budget is actually not budget change proposals.

It's related to employee compensation and retirement adjustments that are subject to that annual process and are a part of the memorandums of understanding with the various bargaining units. So it's actually fairly technical in nature. There's not a significant portion of new funding proposed specifically for budget change proposals. Some of it is more technical and related to employee compensation issues, which I think was alluded to earlier.

Got it. I'm just wondering, and I understand the fact that needs arise. Issues have come up, but in a budget year where we're contracting, it just seems odd. And I appreciate look, I'm sure, and again, just looking at all the new augmentations, they all look interesting and important. But in a year when we're contracting, to actually add more to the list seems surprising. LAO?

Yes. May I ask my colleague Drew Soderberg to weigh in here?

Drew Soderborg, Legislative Analyst's office. Just to provide a little bit more context, we do view some of these things that have been proposed, new expenditures for CDCR as things that the Legislature could reconsider.

It is true that the audio video surveillance is a program that has been proposed in past years, but that doesn't mean that the Legislature is committed to continuing to expand it, particularly in an environment where the Legislature may want to look at prison closures and would therefore want to avoid the situation where it might install video surveillance at prisons that will ultimately be closed.

Also, with respect to the integrated substance use disorder treatment, while the overall funding for the program is going down, it is important to note that there are changes to the methodology for how the funding is proposed that is resulting in more funding being provided than would have otherwise been the case. And again, these are things that we will continue to scrutinize and provide input on in the coming weeks.

Thank you. Going back to some of the new augmentations, I believe Ms. Li mentioned a Drought Contingency Fund. Just curious, what is a Drought Contingency Fund? Is that tied to any federal funding?

That's 125 million General Fund that is a set aside for needs that will arise, that may arise in the future.

Is there a reason why you need that to be a separate contingency Fund versus Reserve? Oftentimes we have funds for disasters that come up that are fairly easily withdrawn. I think about how we have money set aside for CAL FIRE inclusive wildfires. Is there a reason why we need a separate contingency fund?

I think it's to highlight the priority that it holds with the Administration. But for further details, I'll turn to a colleague on the line.

Crystal Acierto, Department of Finance. So this is similar to the approach that we took last year where we set aside funding into a 9901 item to basically allow the departments to gather more information on water data as we head into the next several months to inform whether or not there are investments that are needed in the drought area. As you mentioned, there are different mechanisms for how we could provide funding.

I think generally the ones you're talking about, some of them might actually require an emergency declaration. There's a flood contingency appropriation that's built in that we actually had to utilize this year. Again, those are usually around kind of emergency events. So this is just us setting funding aside to account for it as part of the overall General Fund architecture, but allowing us more time determine what the specific needs are once we have additional water data information.

Okay. I just find it just puzzling because there's $125 million in here, but then there was $40 million cut from a study to help deal with groundwater and to help mitigate some of the flooding that happened at the Central Valley. So it's just weird when you cut something that's been in the last two budgets, then you end up adding something where you don't even know what the money is going to go for in a year that we're looking at making some tough choices.

So this item doesn't make a whole lot of sense. What about the urban flood risk reduction?

Sorry, is there a question on that? There is additional funding.

What is it? Yeah, I'm all for urban flood risk reduction. Just wondering what it is.

Yes. So this is 135.5 million General Fund over two years that it would support local agencies to work to reduce urban flood risks in their respect respective areas. So there is several projects that are being funded as part of this proposal that includes the American River Common Features Project that you might be familiar with that we've been funding over the last several years. It includes a West Sacramento project, lower Cash Creek, San Joaquin, Marysville Ring Levee Project.

So there's several projects that are included in here that are largely continuing projects that we have supported in the past as well.

But while all these projects sound, I think, good and important, why is there additional augmentation?

So this is just funding the next sort of phases mostly for these projects. So for a lot of urban flood risk reduction projects, we often kind of provide incremental funding. So it might be the planning phase or we could be moving into construction phase. So these projects are kind of at various stages. So we often will fund them sort of incrementally, as opposed to providing full project costs as sort of one investment to allow for kind of contingencies as they move through the project phases.

No, I understand. I think, again, like I said. Yeah. Mr. Patter.

Not to speak for the Administration, but my understanding is that some of these proposals do leverage federal funds as well. So that might be part of the rationale for including them.

Well, that's fine. I guess that's a question. Does the Urban Flood Risk Reduction Program leverage federal funds, as Ms. Li was talking about?

That's correct.

All 101 million of it?

I would need to go back and verify. I'm not sure if all of it does, but I think the majority does.

Okay. If you could have a breakdown for us, that'd be helpful. Then going back Youth Job Corps, $78 million, I see that expenditure. Is that a leveraging federal funds program as well?

I will confirm with somebody on the line. I do not believe that is leveraging federal funds. It is something that is taking on another program that was funded in the current year of 25 million. It builds on, basically replaces that with another 78 million ongoing. But can someone on the line confirm whether or not there are any federal funds leveraged there?

Absolutely. This is Emma Jungwirth, Department of Finance. So the Youth Job Corps program, as Ms. Li suggested, does not have any federal funds attached. It's purely a General Fund program. Initially, it was established with ARPA funding, but it's a General Fund program.

And while I love youth job programs, my kids are applying for jobs this summer, so I'm very sensitive to that issue. Why is this in this budget?

I think you'll see that this is a priority for the Administration, a priority for the Governor in particular.

Okay. And it's such a priority that the Administration could not find $78 million from our $230 million General Fund to substitute out.

Again, we look forward to having those conversations the spring just in regards to our priorities.

Well, I guess I've said this earlier, but it was very clear, at least to me, and this is just my perception, that, again, many of the cuts that were made or extensions were legislative priorities. I didn't notice that many of the Administration's priorities that were shelved, and to have that and then to have more expenditure on top of that, I think, doesn't set the best tone, I guess, for a January proposal, especially for coming on the heels where we had a lot of agreement, budget agreements.

So it seems odd that we would have cuts in things that we agreed on and then to have additions.

Understood. And I just would like to say that there was no strategy to cut legislative proposals over administrative proposals, but understood.

It was just coincidence.

I think there are definitely administrative priorities in here, both that have been preserved and some new ones that have been added. That is correct.

Yeah, it was clear that they were preserved. So I think that's the challenge. Great. One last question. CAL FIRE. So again, I'm a big fan of CAL FIRE. I think this is very important, but also, again, not clear after we've added millions and millions of dollars to CAL FIRE's budget, why they needed another 32 million in additional funding.

Can I ask somebody on the line to respond? I'm sorry.

No, no. Excuse me. And just why that wasn't already absorbed into previous appropriation.

Sure. Could somebody on the line please respond to that question?

Hi, Stephen Benson with the Department of Finance. I think you are referring to the proposal for additional trainings that are capacity for CAL FIRE. Yeah. So the reason for that is the significant investments that have been made in the recent years have been to add important critical positions for relief staffing, for fire crews, for things like that. So they're all staffing-related. With the addition of all the additional staffing, there are training needs for each of the firefighters that are then added.

And current capacity in CAL FIRE system doesn't support training center capacity, doesn't support all of that new positions. And so this proposal augments training center capacity. So that we can support all of the new positions added over the last couple of years.

Got it. I guess my recollection wasn't that everything that Calfire got was staffing. So I think we'll have to be going back and double-checking that information and seeing if there couldn't have been some greater efficiency maintained with their budget.

Certainly not everything. There has been one-time investments in like helitankers and other types of fire engines, things like that. But a significant amount of the recent investments has been position augmentations.

Great. Thank you. And again, appreciate. I think Ms. Li did reiterate this at the beginning of discussion, not the end. And we know this is the first of many, many budget hearings, budget subhearings. Very much look forward to this year.

With that, seeing only myself and the Vice Chair left, we will now go to public comment and we're asking folks to.

1 minute.

1 minute, please. Thank you, Mr. Micheli. You're a pro.

Yes, Mr. Chair. Chris Micheli on behalf of the Los Angeles County Metropolitan Transportation Authority. Our board of directors adopted a transit plan based upon the June budget. The deferral potentially places a number of projects in jeopardy as we and other transit agencies face the proverbial transit fiscal cliff.

We want to ensure that transit is viable in this state, especially as we're coming out of the pandemic and want to return our ridership. So we would urge continued funding in that area. Thank you, Mr. Chair.

Thank you.

Thank you, Mr. Chair and Mr. Vice Chair and staff. Mitch Steiger with the California Labor Federation appreciate the opportunity to speak. Largely like to echo the comments of the previous speaker and express concern about the proposed billion dollars and deferrals are cut.

So I would like to define it to transit capital projects. I would also urge Legislature and the Governor to come together and find some sort of a solution to the looming crisis in transit operations funding. As was mentioned, without some sort of significant action, likely state action, we will see lots of different local transit agencies suffer in a big way in the next few years.

The kinds of service cuts that would be necessary would be devastating, could very possibly eventually lead to the end of entire transit agencies, the loss of thousands of living wage jobs, and also leaving us in a spot where it'll be pretty difficult, if not impossible, for us to meet our climate goals if we force that many people back out into single occupancy vehicles. So we urge the Legislature and the Governor to find a solution to both of those issues. Thank you.

Hi, good evening, chairs. Thank you for the discussion, Committee Members, and staff as well. Ryan Morimune here with the California State Association of Counties on behalf of all 58 counties. Given the state's projected budget deficit, CSAC is grateful that the Governor's proposed budget preserves critical investments for homelessness and encampment resolution, support for local public health departments, implementation of the CARE Act, as well as fire prevention, flood protection, and expediting water supply projects. However, CSAC we remain concerned with any cuts to workforce development resilience programs.

We're also in need of additional state support for DJJ realignment and then also concerned with any further delays to broadband expansion. That said, counties, we remain committed to working with Legislature and Administration on addressing our shared challenges and needs and to meet the needs of our communities. In particular, we're committed to working collaboratively on a comprehensive homelessness system where there are clearly defined roles and responsibilities for all levels of government and also conclude sustainable funding. Thank you. Sorry, Christian.

Good evening. Erica Romero on behalf of the California Association of Local Conservation Corps, representing the 14 local corps across the state that engage at youth risk on conservation disaster response projects across the state. Here in strong support of the $5 million for fuels reduction projects across the state, which will help the state meet its climate goals. However, also want to raise concern of the $23.5 million in cuts to the local and tribal nature-based solution corp programs.

If this Legislature enacts the proposal before you, this would force local corps to reduce services and lay off staff that were planning to engage in these projects. So we urge you to reconsider those cuts, which are going to have a disproportionate effect on at-risk youth underserved communities, and of course, the most climate-impacted communities across the state. Thank you.

Thank you Mr. Chair, my name is Grace Digo here on behalf of California Alternative Payment Program Association.

First, we'd like to thank the Governor for honoring the state's promise to build up to 200,000 new childcare slots for families to access. We also appreciate the Governor's emphasis on the connection and impact that availability and access to childcare has to a thriving economy. However, we'd like to raise a few concerns. Aside from the childcare slots, the budget does not include a meaningful investment into increasing the childcare reimbursement rates or resourcing a pipeline of new childcare workers.

Reimbursement rates for childcare providers is the highest priority that must be addressed. Current reimbursement rates fall short of covering the actual cost of providing childcare. In the last three years, California has lost over a third of its licensed family childcare home providers and centers. Also, it's taking them nearly 12 full months to become licensed.

We'd also like to raise concerns during this budget cycle on the timing of when the budget is enacted to when the actual funding from the budget are released to the community partners for enrollment of new childcare slots. The field did not actually begin receiving the allocations for the 2022 to 23 enrollments until late November. Additionally, we would like to make sure during the budget process that the community-based.

Thanks so much.

Okay, thank you.

Good afternoon, Mr. Chair and Mr. Vice Chair. My name is Abby Alvarez with the California Medicine Scholars Program. Medicine Scholars Program is a health workforce pipeline program that supports students from diverse backgrounds from the community college level, through their transfer into a four-year University medical school and eventually the California workforce. The program seeks to address the ongoing physician shortage across California and increase diversity in the medical field.

The program was launched successfully as a pilot after being funded in the 2021 budget, and we're asking that it continues to be funded this year and beyond. Thank you.

Good evening Mr. Chair and Vice Chair. Beth Malinowski with SCIU California. We're happy to see that this budget does maintain key investments given the budget deficit. We would emphasize that it's important to maintain and fund public services now as they are crucial to providing the safety net that is all the more important in times of financial hardship.

We'd be remiss if we did not mention our deep concerns with the Governor's proposal to pull back and eliminate roughly 50 million investments to public health workforce. Anything that we learned over the past few years was how essential it is that we maintain our public health workforce. This is not optional. We would emphasize the need for investments in workforce, especially our schools, social services, and childcare, as crucial to a strong economy.

We've learned from 2008 that cutting and contracting out such essential services are more costly, less beneficial in the long run. Again, we understand that reductions revenue means tough decisions have to be made, and we look forward to working with all of you and the Administration to close the gap and keep our California strong. Thank you.

Good evening Chair Ting and Vice Chair Fong. Mike West on behalf of the state Building and Construction Trades Council. The building trades supports full funding of high-speed rail and those life-changing opportunities for apprentices and journey workers of the building trades.

The Building Trades also opposes cuts in infrastructure spending and supports full funding of that. On wage adjudication, the Building Trades supports streamlining and efforts to improve the efficiency and timely processing of wage and hour claims, and then on drought response and water resilience to your point, Mr. Vice Chair, although not a huge cut, the Building Trades supports spending on water resilience and eventual full funding of Prop 1 water projects.

We look forward to engaging in the Subcommittee process on additional items such as housing, building decarbonization, and other capital improvement projects. Thank you.

Good afternoon, Chair Ting, Vice Chair Fong. Tiffany Fan on behalf of California Court Appointed Special Advocates Association, or Cal CASA. CASA is a nonprofit powered by volunteers which are highly trained and work one-on-one with foster children. CASA volunteers provide in-depth recommendations to judges in dependency court about each child's best interest. CASA would like to thank the Legislature and particularly Members and staff of Budget Subcommittee Five on Public Safety for last year's budget inclusion of 60 million over three years for CASA.

Unfortunately, the Governor's proposed budget zeros out year two and year three of CASA funding. The Governor's proposed elimination of two-thirds of the CASA funding will set California back significantly and result in fewer foster children served by our local CASA programs. The over 80,000 wards of the state, the state's children would greatly benefit from the restoration of this cost of funding. Thank you.

Good evening, Mr. Chair and Vice Chair. Abraham Mendoza on behalf of the Community Water Center. While our organization is glad to see the proposed budget increases to drought contingency funding and the continued investment to critical infrastructure such as levees, we really want to remind both of yourselves that the drought is not over, and neither are the numerous drought-related issues plaguing communities across our state. Last year alone, over 1400 wells went dry in the Central Valley.

This is a backlog that could take well over a decade to address if the current rates of well drilling holds. And while we know the economic forecast is murky for the next several years, the state must proactively plan for continued drought conditions, invest in the necessary infrastructure to address the well backlog, and ensure that we're prioritizing the families and communities who are relying on our state's aquifer for their primary source of drinking water.

And lastly, I want to mention the need for this Committee and the Governor to work on water affordability. Water rates continue to rise faster than inflation, and the Governor identified this problem in his water supply strategy last year, and we hope to look forward to working with all of you to address these issues. Thank you.

Thank you. Any more public comment in the room? Okay, seeing none. Operator, are you there?

Yes.

If you could start with the public comment on the phone.

Ladies and gentlemen, if you wish to queue up for public comments, you may press 1 then 0 at this time. And first, we go to line 16. Please go ahead.

Good evening, this is Chris Chavez with Coalition for Clean Air and the Charge Ahead campaign. While we understand the difficult budgetary conditions facing the state, we urge both the Legislature and the Governor to find an alternative to the massive cuts to clean transportation and transit.

Rather, the state should reallocate funds for programs that work against the state's climate and clean air objectives, such as fossil fuel subsidies and highway expansions. To be clear, clean transportation investments aren't just about rebates for electric cars. Rather, they're funding for cutting funding for transit, clean heavy-duty trucks, and mobility is going to hurt low-income earners and residents of disadvantaged communities the most.

While these cuts undermine California's reputation as a global climate leader, they also move the California even closer or even further away from meeting its obligations to the federal and state air quality standards. Failure to meet these standards will result in more pain, such as the loss of federal highway funding. While this year's proposed budget nominally preserves most of the multiyear clean transportation funding plan, the effects of the cuts will be far greater.

Most of these guaranteed cuts will be realized in the 2023-2024 budget, and there is no guarantee that the ZEV investments in the future budget years will be preserved. Given limited resources, California must prioritize climate investments that maximize air quality benefits and prioritize our most vulnerable Californians. We also need to consider how to end the boom and bust funding cycles for clean transportation, as well as address AB 8 reauthorization. Thank you.

Thank you. Next speaker, please.

Next, we'll go to line 20. Please go ahead.

Good evening, Mr. Chair and Vice Chair. Jared Call with Nourish California. Want to express our appreciation for the Governor's broad approach to this year's budget, which avoids painful cuts to our safety net programs. But we are concerned by the lack of investment in food and nutrition programs at a time when one in five Californians are facing food insecurity.

The lines at our food banks are just as long as they've been throughout the pandemic, and the CalFresh caseload has risen by nearly 1 million individuals since the pandemic started. Specifically, we're deeply disappointed by the proposal to delay the expansion of the California Food Assistance Program, which was funded last budget cycle to expand vital food assistance to Californians aged 55 and over who are ineligible for Calfresh solely due to their immigration status.

Recent research shows that undocumented immigrants in California face food insecurity at more than twice the rate of the general population and nearly two-thirds of undocumented children live in a food insecure household. Undocumented Californians simply can't wait to afford to wait another half decade to be able to access an equitable nutrition safety net.

So we look forward to working with the Committee, the Legislature and Administration to ensure that the California Food Assistance Program is expanded to include California immigrants of all ages, regardless of immigration status, without delay. And we also look forward to working with you to mitigate the unprecedented hunger cliff that households will face in March when those CalFresh emergency allotments, those extra payments that were provided during the pandemic, abruptly expire. State just needs to be using every tool available to boost CalFesh better.

Thank you.

Thanks.

Next we'll go to line 22. Please go ahead.

This is Isabella Argueta with the Health Officers Association of California, which represents the physician health officers in California City and county jurisdictions. The Governor's Budget proposes not a trigger reduction nor a delay, but a cut to one-time funding enacted in last year's budget that would help rebuild the public health workforce.

There is also nothing in this budget that will help the state's public health Department continue doing the work that helps us, such as modeling and projection capacity, maintaining data systems, and creating and staffing a new ongoing branch to address COVID-19. In the past, investments in public health led to a dramatic increase in life expectancy and a leveling off of preventable diseases. However, as the memory of these epidemics faded, public health fell victim to disinvestment and the idea that health is an individual responsibility.

We are seeing history repeat itself as the most recent pandemic already begins to fade into the background and funding is rescinded. We look forward to working with you and ensuring that Californians receive a robust, well-funded public health system that saves lives. Thank you.

Thank you. Next speaker.

Next, we go to line 31. Please go ahead.

Good evening. This is Diana Douglas with Health Access California, the statewide healthcare consumer advocacy coalition. Health Access applauds the continued commitment to implement the Medi-Cal expansion to the remaining 26 to 49-year-old age gap in January of 2024, as included in the Governor's Budget. And we appreciate the Legislature's and the Administration's joint continued commitment to ensure that all can enroll in Medi-Cal, regardless of immigration status, by next year even with the difficult budget decisions ahead. Health Access continues to advocate for both access and affordability.

We're extremely disappointed in the Governor's proposed sweeping of our state's individual mandate penalty revenue into the General Fund. We urge the Legislature to safeguard these funds, which are paid by the uninsured specifically ensure they go towards making coverage more affordable for Covered California enrollees who desperately need help in the face of $5,000 deductibles and almost $50 copays for primary care visits. We can eliminate much of this cost-sharing burden now if we use the penalty revenue as intended. Thank you very much.

Thank you.

Next, we'll go to line 37. Please go ahead.

Is that me?

37? Yes. Line 37 your line is open.

Hello, Chair, Chair Members. My name is Sharina Lodge. I'm calling from Placer County. And so let me get this straight. In this budget, this Governor budget proposal, we don't have any money for or little money for road projects, water storing, we're halting higher education, no adequate daycare workers, no gas tax relief for the workers. So I guess that was a lie from the Governor..

And Californians, we're going to be dealing with prisoners being let out of a prison and there's going to be higher crime. I don't see anything in this budget that addresses these issues. So as a taxpayer, this is what is important to us here in California. We want better education for our children. We want water storage. We want that now because if we don't have water storage, we will die. So get that straight. California, this is what you voted for. These are the people you voted for.

They do not care about water storage. If we are not able to get water to our agriculture so we can grow our crops, we will not have food. So this needs to be a priority. This needs to be priority number one and we need to address it now. Thank you.

Thank you. Next speaker.

Next, we'll go to line 33. Please go ahead.

Hi, Cindy. Hillary with WelbeHealth. WellbeHealth would like to commend the Administration's additional investment into programs of all-inclusive care for the elderly, or PACE, and encourages the Legislature to maintain that funding in the budget to increase the efficiency of the Administration of, and thus access to PACE for California's frail and elderly. Thank you.

Thank you. Next speaker.

Next, we'll go to line 40. Please go ahead.

Good evening, Chair and I would say Members, but apparently everybody left. I'd like to speak, except for Fong. Thank you, Fong, for staying. We appreciate you. I'd like to speak specifically about page 14, SMARTER Plan implementation. The budget includes General Fund expenditure of 176.6 million to continue to protect, in quotes, the public health against COVID-19. A recent Rasmussen survey found that more than one in four Americans believes that they know someone who likely died as a result of the COVID vaccine.

There has been an alarming spike in deaths of professional athletes in their prime due to stroke and heart attack. Life insurance companies are reporting losses due to a 40% increase in all-cause mortality rates of the employed population since the introduction of the COVID vaccine mandates. The Twitter files reveals that even heavy censorship could not stop this information from reaching the people.

You, the Legislature, and Governor have literally spent billions of our money on vaccines, tracking, testing, tracing, and instead we, the public want to see these funds spent in a way that is consistent with this newly emerging data regarding the devastating injuries and deaths that are irrefutably being caused by the COVID vaccine. So what do you intend to do to help rebuild public trust in American institutions, particularly in the CDC, NIH, and FDA? For instance, in Florida, they

Thank you. If you could wrap up, please.

Convening a grand jury.

Next, we'll go to line 41. Please go ahead.

Good evening, Chair Ting and Members. Janice O'Malley with the American Federation of State, County, and Municipal Employees. Just wanted to note that we appreciate the overall approach of the Governor and how he tried to preserve many of the good investments made by the Legislature last year, but understand that things will likely look drastically different in the next few months. We really want to focus on the issues of understaffing, retention, and recruitment, in a variety of sectors in the workforce.

Look forward to having those conversations with you as well in the next few months. We just urge the state to prioritize workforce stability by providing access to childcare, protecting funding for existing transit operations to ensure that workers have access to reliable and safe transit, and good-paying jobs that can support themselves and their families. Also wanted to note that the Legislature passed and Governor signed AB 2530 last year, which provides timely and affordable access to cover California insurance for workers locked out or on strike.

And due to an oversight, the program was actually not funded in last year's budget. So we're hoping that we can regain the $2 million to support the program for this year. Thank you.

Thank you. Next speaker.

Next, we go to line 46. Please go ahead.

Good evening, Mr. Chair and Members. Nicole Wordelman, on behalf of the Children's Partnership. The Children's Partnership thanks Governor Newsom for recognizing the complexity of families lives and avoiding current and future cuts to safety net programs that hinder children's health and well-being. We support maintaining the expansion of universal health coverage, continuing to provide universal school meals, sustaining funding for supporting the mental health of youth, and funding racial equity and youth empowerment commissions.

In the aftermath of the pandemic and the unwinding of the PHE, there is more work to do in our state's budget to implement and expand policies and programs that support the immediate and long-term health of children of color and keep them connected to supports they need to be healthy and thrive, including expanding the California Food Assistance program to include all ages, including children, supporting the mental health of youth and young children, with an emphasis on moving upstream toward true prevention and early intervention, and valuing community wisdom and leadership in health delivery by not delaying the community health worker workforce certification and training.

If you could please wrap up, please.

We are also concerned about proposed trigger cuts in the areas of climate, transportation and housing and appreciate your attention. Thank you.

Thank you. Next speaker.

Next, we'll go to line 50. Please go ahead.

Thank you. Good evening. My name is Michelle Gibbons. I'm with the County Health Executives Association of California. We represent local health departments across the state, and we respectfully must oppose the Governor's proposal to cut public health workforce development and training programs by roughly $50 million.

Last year, the Legislature showed tremendous leadership in securing funding for these public health workforce development and training programs, which include funding for things like the Public Health Pathways Program, which takes early career professionals from the community and places them in local health departments to gain experience that allows them to qualify for full-time employment, the incumbent worker upskill training that allows our current workforce to continue to advance their skills, get additional training, and allow them growth and promotional opportunities from within the Cal-EIS training, which prepares and trains our epidemiologists, microbiologist training that gives microbiologists hands-on experience to be able to get certification, and our Public Health Lab Aspire Program that allows us to continue to generate new public health lab directors, which is mandated to operate public health laboratories in California.

These programs are needed to sustain and grow our workforce who have been on the. Yes, and we just encourage and ask that you all reject these cuts as well. Thank you.

Thank you. Next.

Next, we'll go to line 45. Please go ahead. One moment.

The San Francisco Bay Area Rapid Transit District or BART. Hi, good afternoon. Chair Ting and Vice Chair Fong. Alex Walker, Legislative Affairs Manager for the Bay Area Rapid Transit District, or BART.

Just want to reiterate some of our colleagues that first of all, we hope to see the restoration of 2 billion in the TIRCP, the TIRCP funding that was cut because these capital dollars are important to deliver projects that will help bring riders back with more reliable service, transit service. And then also these funds are important for leveraging the federal funds that are coming to us for these projects.

And then in addition, we like to thank Sub Chair Bennett, other Members of the Committee, and budget staff for meeting with us when we were in Sacramento last week.

And as we're talking about the fiscal cliff that a lot of agencies will face across the state, we really are at a really great level of coordination with our Bay Area operators and operators across the state through the California Transit Association to show the need for support for transit operations potentially down the line and to show what we are doing to bring riders back. And we understand that, unfortunately, with ridership still lagging for office return in the Bay Area.

If you could please wrap up, please.

Sure. That we are seeing fiscal cliffs getting closer, closer even with responsible stewards of a federal relief fund. So look forward to working with you to support our state transit through this difficult time. Thank you.

Thank you. Next caller.

Next, we'll go to line 51. Please go ahead.

Yes, my name is Krishna Muscle. I'm in Placer County. So many people have already said what I was going to say. I'm concerned about water storage, our streets, all these vaccines, and the trains nowhere really irritates me. And this transition to electric vehicles is asinine.

The COVID vaccines that so many people have died from that you people impose, then making them get them and all these tests and all the illegals that we have to support. My tax money going to that is infuriating, and I wish you would put an end to it. Thank you.

Thank you. Next caller.

Next, we'll go to line 52. Please go ahead.

Thank you, Mr. Chair and Members. Michael Pimentel, Executive Director of the California Transit Association, and I join you today to simply echo the concerns about the proposed cuts to the Transit Inner City Rail Capital Program that were included in the Governor's Budget.

We absolutely understand that the state is facing some difficult budget times, but I do want to recall that the funding for this program was a central component of last year's transportation funding package and will be critical in leveraging federal funds in the coming years.

Now, we would ask that the Legislature and the Administration maintain funding for this program at the previously prescribed levels and in the same breath, of course, want to acknowledge the operations funding shortfalls that many of our agencies are facing, the need to provide targeted support for those purposes. I also wanted just to close in acknowledging that we also would like to see an extension of the statutory relief that was previously provided by the Legislature to transit agencies through fiscal year 2425.

Currently, those statutory relief measures expire at the end of this current fiscal year. So thank you for your time this afternoon.

Next, we'll go to line 53. Please go ahead.

Danica Rodarmel, on behalf of the Transformative In-Prison Work Group. We appreciate the hard work done in the Assembly last year to secure funding to support community-based programs providing essential rehabilitative programs in our state prisons. Currently, these programs receive less than 1% of CDCR's budget, and we look forward to working with you to identify areas in the Governor's proposed budget for CDCR that can be shifted over to ensure continued support for these programs. Thank you.

Thank you. Next caller.

Next, we'll go to line 27. Please go ahead.

Good evening. Woody Hastings with the Climate Center. We understand that the state is facing a potential large budget shortfall this year, but addressing the carbon budget can't wait. The Climate Center respectfully requests that the approximately 6 billion in proposed cuts to high-priority climate and energy reliability and resilience investments be restored.

We believe that if these cuts remain, the state's ability to meet its climate goals and the goals of SB 100 for 100% clean energy and grid reliability will be hindered. The climate center also believes that some of the proposed cuts will disproportionately harm vulnerable communities who are on the front lines of climate impacts.

Specifically, critical climate and energy-related budget cuts that concern the climate center include the 1.1 billion in cuts from zero-emission vehicle programs, 800 million net cut in the clean energy investments, clean energy investments, and 779 million from the nature-based solution initiatives, and 500 million net cut in the extreme heat and community resilience programs. Thank you.

Thank you. Next caller.

Next, we'll go to line 55. Please go ahead.

Evening, Mr. Chair. This is Andrea Amavisca with the California Immigrant Policy Center. We thank the Governor for standing strong for Health for All. But the Governor's proposed budget missed an opportunity to ensure all Californians have access to food assistance and unemployment benefits by delaying implementation for Food for All for all Californians ages 55 and older until 2027 and not including anyone aged below 55, as well as not including funding for the Safety Net for All Workers Act, which would provide unemployment benefits to excluded immigrant workers.

Californians will continue experiencing economic hardships and food insecurity today. Undocumented Californians cannot afford to wait. We hope the Legislature will continue defending Health for All and prioritize food assistance and unemployment benefits for undocumented Californians. We look forward to working with you to make this a reality. Thank you.

Next caller.

Next, we'll go to line 56. Please go ahead.

Thank you, Mr. Chair and Members. Faith Conley with Next Gen California. We strongly supported the passage of the 54 billion climate commitment and want to see the state maintain that commitment. In particular, we're concerned about the proposed cuts to the active transportation program and the lack of funding for transit operations. Lastly, we also echo our colleagues who are seeking support for CalSHAPE, community resilience, and equitable building decarbonization funds that cannot be readily backfilled by other funding sources. Thank you.

Next, we'll go to line 57. Please go ahead.

Good evening. My name is Nataly Escobedo Garcia with Leadership Council for Justice and Accountability. We have serious concerns about the cuts and delays to the Equitable Building Decarbonization Program, Community Resilience Center Program, Transformative Climate, Community Regional Resilience, Active Transportation Program, and the Zero Emissions Mobility Program. These all fund critical services and resources for communities experiencing the brunt of impacts of climate change.

The recent nine atmospheric rivers, which have impacted communities across inland California with flooding, have emphasized the urgent need for programs that provide funds for climate resilience, clean transportation and other critical services that give vulnerable communities the resources they need to deal with the impact of climate change. Thank you for the continued investment in housing. We appreciate the government's commitment to working with the Legislature to develop policies that strengthen state housing law to hold local governments accountable.

We are disappointed the Governor did not allocate additional funding to the Homeless Prevention Fund. This funding has helped legal aid organizations and local CBOs create local rights accounting programs. With housing costs rising, expanding this program to meet the statewide scale of need will help prevent evictions and homelessness. Keeping low-income tenants housed. We strongly urge the Legislature to allocate additional funding to the HPF.

Last we'd like to echo comments given by Community Water Center. Yes, we'd just like to echo the comments given by Community Water Center on water. Thank you.

Next, we'll go to line 54. Please go ahead.

Good evening, Chair TIng and Vice Chair Fong. Carlos Rojas. I represent the Kern County Superintendent of the Schools Office and the 46 Kern school districts that serve 200,000 students, of which 69% are low-income English learners or foster youth. We are grateful for the many ways that the Legislature has recently addressed long-standing inequities in education through the LCFF, special education, and home-to-school transportation.

The current bond system for funding school facilities is also inequitable and has a direct impact on the health, safety, and academic preparation of our students. A recent study by the PPIC reports that there is a wide disparity in school facility funding that is systematically related to low school district property valuation and low-income communities. Low-income communities lack the ability to generate local funds to the same degree as wealthier communities and as a result, 38% of students attend schools that do not meet minimum facility standards.

And between 2015 and 2019, 108 schools closed temporarily due to poor or unsafe facility conditions. We respectfully ask that you consider the restoration of the proposed $550 million delay to the California preschool, TK, and full-day kindergarten facilities grant program. The proposed delay will only add to the already existing backlog of modernization projects needed to prepare classrooms for incoming PK students. Thank you for your time and consideration. We look forward to working with you on this issue over the coming months.

Thank you. Next caller.

Next, we'll go to line 18. Please go ahead.

Good evening, Enrique Huerta, Legislative Director at Climate Resolve. We're a nonprofit organization based in Los Angeles. I'd like to make a few points. First, extreme heat is here. It's getting worse, and the state is not prepared. Extreme heat is causing a public health crisis. It is resulting in preventable deaths, especially for our most vulnerable and marginalized. Second, the proposed $75 million trigger cut to the Extreme Heat and Community Resilience Program represents almost a 50% reduction.

We believe this is a disproportionately larger cut than other areas. Climate Resolve would urge the Assembly Budget Committee to protect already appropriated funds to address extreme heat, and we commit to working with your staff to find other areas for budget savings that will not have such a disproportionate impact on the most vulnerable. We would like to especially call out the Office of Planning and Research's Extreme Heat and Community Resilience Program.

It is vital that this innovative and forward-looking program have the resources needed to advance cutting-edge community cooling projects. Thank you for your time.

Next, we'll go to line 11. Please go ahead.

Hi, my name is Steven King, and I'm the Clean Energy advocate with Environment California. Thank you for your time today. While we all expected a tough budget year, the Governor's recent budget proposal unfortunately assigned some of its biggest cuts to the environment, climate, and zero-emission vehicles.

The proposal would cut a critical $6 billion in investments meant to stave off the worst impacts of the climate crisis in California, including cuts to clean energy programs, zero-emission vehicle incentives, and clean transportation funds. The state has recently passed important climate legislation, but we're concerned that not enough resources have been committed to implement these programs and ultimately achieve our bold climate goals. Investments in climate are now more crucial than ever.

Just in the last several months, we felt extreme weather, including heat waves, intense rain, and flooding. And unless we keep our climate investments strong, these impacts will only escalate in the future. I urge you to sign a more climate-friendly budget that sets us on a brighter path and better reflects the scale of current and future climate impacts. Thank you.

Thank you. Next caller.

Next, we'll go to line 59. Please go ahead.

Hi, is that me? Am I on with the Budget?

You're on. You're on.

Great. I just want to speak a little bit about the SMARTER Plan.

It's clear now that two years after these vaccines were quickly rolled out and injected into a billion people, which was an unprecedented event, we see clearly that these vaccines, which aren't even vaccines, they're mRNA technology, suppress the immune system, which is representative by the recent study of hospital staff at the Cleveland Clinic, revealing that the more vaccines a person receives, the more likely they are to catch COVID. And now it is becoming clear that the ineffectiveness of the vaccine is causing the acceleration of the COVID variant, which has made it impossible to end the situation with COVID. And in the last few years, the mainstream media abandoned investigative journalism altogether to become unquestioning cheerleaders for lockdowns, masks, social distancing, and untested vaccines even though none of these interventions were supported by valid scientific evidence.

Released documents reveal that social media companies, under the direction of the White House, implemented the largest surveillance and censorship program in history. We were promised a new normal, and what we got is a world where children are having

If you could wrap up. Thank you.

Heart attacks. Teachers are falling.

At this time, there's no further comments in queue.

Thank you. Any other public comment here in the room? Okay. Seeing no public comment in the room. Hearing no public comment additional on the phone, we will adjourn. Thank you.