Assembly Budget Subcommittee No. 5 on State Administration

Good afternoon and welcome to our Assembly budget Subcommitee five hearing. This hearing will cover local government financing as well as nine issues under five various departments. The hearing agenda is available on our community website, and physical copies are available outside of the hearing room. Few housekeeping notes this is an in person hearing with all panelists testifying in person. After each panel, we will take questions from Members.

So I'm going to say that again, we'll take questions from Members on that item right after and then accept public comment for that specific issue. If you're unable to attend this hearing in person, you may submit your comments via email to asmbudget@asm.ca.gov. With that, we are we need to do roll call.

We'll wait till we just to let you know, we only have three Members on this Committee, and our Assembly colleague, Assembly Member Joe Patterson, has three committees at the same time, so he doesn't often get to come in and out. And then we have Assembly Member Chris Ward, who is presenting a Bill and will be in and out as well. And I was just completed a Bill in privacy, which is why we're starting a little bit late.

So with that, we're going to go ahead and begin with our first issue related to local government financing, and our first panel, we will review the Education Revenue Augmentation Fund, or ERAF. Thank you for joining us. And we would we have panelists Ellen Schope from the Department of Finance, Chris Hill, Department of Finance and Edgar Cabral, legislative analysis officer. And we're going to go ahead and welcome you and ask you to make your remarks.

Thank you, Madam Chair Member Patterson. Alex Shoap with the Department of Finance. So I'm going to cover the excess Erath issue. So beginning in 1992, the Educational Revenue Augmentation Fund ERAF shifted property tax revenues from cities, counties and special districts to k to 14 schools. So ERAF is distributed within each county on a per average daily attendance Ada basis to all non basic age school districts with, with the intent of directing proportionally more ERAF towards districts with less property tax revenues on a per ADA basis.

So community colleges and special education local plan areas also receive an ERAF allocation, ERAF that cannot be absorbed by basic age school districts which are statutorily ineligible to receive ERAF. This is termed excess ERAF in return to the local agencies from which it was generated. So charter schools were established in the state in 1992 almost concurrently with the ERAF statutes. However, charter schools are not explicitly identified within existing ERAF distribution statutes.

So to explicitly address charter schools and their interaction with existing ERAF distribution statutes the Governor's Budget proposal can be understood as having three main components. So the first, it clarifies the county superintendents of schools must include ADA for each charter school that is sponsored by leas within the school district for the purpose of calculating ERAF allocations beginning 24-25.

2nd, it requires the county, the county Auditor to adjust ERAF allocations based on the calculation that includes charter school Ada beginning in 2025-26 and then third, it requires the county Auditor to ensure compliance with the inclusion of charter school Ada within the ERAF calculation before allocating funds also beginning in 25-26. So, as noted in the agenda, additional details for this proposal are still forthcoming in trailer Bill Language. Otherwise, that concludes my remarks and happy to take any questions.

Chris Hill, Department of Finance I'd be happy to address the excess ERAF issue if that community's pleasure so excess ERAF, as my colleague mentioned, the vehicle license fee was reduced from 2% to 0.65% in 2003, and as a consequence that resulted in revenue losses for cities and counties.

So the agreement reached in the legislation that was enacted to address that says that that lost revenue shall be backfilled for the cities and counties by giving them back the property tax money they put into the Educational Revenue Augmentation Fund.

The eras and just to give a highly simplistic illustration of the situation with excess ERAF, let's pretend we have a county that has $100 in the ERAF and just by happenstance, dollar 100 is how much is needed to backfill the vehicle license fee revenue loss so that dollar 100 goes back to the cities and the counties. But let's pretend that dollar 25 of that $100 was in the ERAF because it could not be absorbed by basic aid schools.

So that $25 does not count towards the $100 vehicle license fee backfill. Instead, the County Auditor Comptroller takes $25 from the non basic aid schools in the county and gives that to the cities in the county with the net result being they get $125. And also in test two and test three years of Proposition 98, that results in $25 cost to the state to backfill that lost revenue.

Now, if there are not, if there are so many basic aid schools in the county that you can't take that $25 from them because you can't take property tax from basic aid schools and give it to the cities in the county, then there's an insufficiency. And that insufficiency is the root of the problem. That is we're seeking that lies before us today. And I will just note that the Administration did propose trailer Bill two years ago. I believe it was to address this issue.

And essentially that trailer Bill would have held that $25. They would have still gotten the $25. It just would have been capped in future growth, would not be grown anymore. They would have been fully backfilled for their lost vehicle license fee revenues. They would have gotten that extra money, but the growth would have been capped and that proposal did not, was not supported by the impacted local agencies.

Thank you.

Good afternoon, Madam Chair Members. Edgar Cabral with the Legislative Analyst Office. So I know in your agenda there's two issues that are specifically referenced insufficient ERAF. There's no specific governor's proposal there, so we don't have any comments there in terms of the access ERAF and the Prop and the proposed trail language to change the calculation to include charter schools. We do recommend adopting that proposal. Just stepping back a little for context.

The original purpose of these accounts was to increase the amount of property tax revenue that would go towards schools and community colleges in a few counties, specifically. Those with very high levels of property tax revenue per capita.

A portion of that ERAF revenue is actually allocated back to the cities, counties and special districts, and that's what we call excess ERAF. One key variable in the calculation is the total amount of students in each county, the total amount of funding that students in each county generate from the Local Control Funding Formula, which is schools primary funding formula. And in General, the more students that there are in the calculation, the greater the proportion of ERAF revenue is going to go to schools versus going back to local governments.

Up until a few years ago, most counties were administering these calculations in ways that fully accounted for students enrolled in charter schools. Subsequently, however, they adopted a different methodology that only partially accounts for charter school students. And so this new approach has resulted in less property tax revenue overall going to school districts, charter schools and community colleges, and more revenue going to other local governments.

The trailer Bill Language has not been released yet, but we understand that the intent is specifically to ensure that counties are fully accounting for charter school students in the calculation, and that's why we recommend approving it. We think this is, this reflects the original intent of the statute. The law it issued specifically refers to school districts only. But when this law was passed in the early 1990s, we think it would have been understood that that would include charter charter schools that are authorized by those school districts.

The other benefit of adopting the proposal is that the governor's proposal could eliminate some odd fiscal outcomes under the current methodology. So right now, if a student leaves a school district and attends a charter school instead, that actually would result in lower amount of property tax revenue going to education and more going to local governments. And we don't think that was the initial intent when the Legislature adopted the proposal. So that completes my comments. I'm happy to answer any questions.

Any other comments? So the scenario here is that if you have a higher attendance in charter schools, as the county I live in, Orange County, does, this is to try to rectify the school, the public school funding in relationship to the student populations that you have. But the last note that you made was on if you have a public school student and then they move to a charter school, when is that accounting taking place? Does it take place when they move or does it take place at the calendar year?

The calculations are based on average daily attendance, so it's specific to the amount of Ada that's coming to students. One thing I would just note is this specific issue of excess ERAF really applies to five counties that are relatively high property taxes.

Could you name those counties?

They are all in the Bay Area. So it's the three biggest in terms of revenue is San Francisco, San Mateo and Santa Clara. I believe San Francisco and Santa Clara have the highest of the amount. I believe Napa and Marin are the others. Again, this is when there are. When the amount of property taxes is relatively high on a per capita basis. Where this issue pops up for all. Of the other counties in the state, this is not an issue.

And I'm sorry they are listed in the notes on page, page three. When we're talking about which counties these are, I am surprised that Orange County is not listed in there. But all right, with that, we'll go ahead and open it up for public comments. And public comments will be 1 minute or less.

Madam Chair, Toni Triguero, on behalf of the California Teachers Association here today representing Katie Hardiman, who's usually our budget lobbyist, and as well as CSBA's Chris Rebus, who neither one could be here today, but both organizations are supportive of the governor's intent to include charter schools, and we urge the Committee to adopt that language when the times have brought. Thank you. Thank you. Good afternoon.

Audrey Ritaiczek from Cruz Strategies on behalf of San Mateo County, and we're here to request support for adding the Inlu BLF shortfall for our county. It's $70 million this year, and that's a huge impact to our budget and also our cities. Our local governments rely on these funds to deliver critical services to their residents, and their costs are continuing to rise. The state ensures that every other county and city in California receives their full VLF amount, regardless of the amount.

So San Mateo and its cities should not be singled out to suffer a loss of essential funding by declining to reimburse the shortfall. It's a core funding source for us, and it's approximately 18% of the county's General Fund budget, and from some of our cities who are here today, that's an even higher number for their General Fund budget. It would also be contrary to the 2004 budget compromise in which these payments were guaranteed by law. So we respectfully request that the $70 million be included. Thank you.

Thank you.

Good afternoon, Madam Chair. David Campos, on behalf of the County of Santa Clara and we submitted a letter objecting to what we believe, respectfully, is a false narrative that tries to pit excess Eraf counties against charter schools. The fact is that the law has been very clear and the arguments that have been made by the Department of Finance have been rejected by the excess Eraf counties are not against charter schools. Charter schools legally under the law, are not allowed to get excess era funds.

There's a different way to Fund them and we hope that you can address this issue because what, the impact of what the Governor is proposing is close to $40 million taken away from counties like Santa Clara that serves some of the most vulnerable residents of our county. Thank you very much.

Thank you, Madam Chair. Jean Hurst, on behalf today, on two items on behalf of the Urban Counties of California, the Rural County Representatives of California, the county boards of supervisors of Alpine and Mono county here in support of the request for funding for the insufficient Eraf amounts in Alpine, Mono and San Mateo. You've heard the comments of my colleague from San Mateo, but I just put out that particularly in Alpine and Mono counties.

These are tiny counties, not high property tax, high wealth counties, and their small amounts of insufficient Eraf are meaningful when it comes to their budget that they're trying to manage at the local level. Also, on behalf of the urban counties of California and the Rural County Representatives of California and the charter school language presented by the Department of Finance, we are in opposition and in a coalition with they affected counties as well.

We have concerns about the implications of the proposal when it comes to Proposition one a from 2004 and that agreement that protected excess Erap in that time. Obviously, we're open to additional conversations. I think this has been a frustrating and challenging issue for us all over the years, but we do have some strong concerns about the approach that's proposed, even though language isn't yet available. Thank you.

Good afternoon. Chair Martin Radosevich, representing Santa Clara Valley Water District. This provides flood protection and environmental stewardship to the 2 million residents of Santa Clara County. I'd like to align my comments with Santa Clara County as well. We receive excess ERAF funds to Fund these crucial services for our residents, and especially in these tough budget times, it would be really difficult for our residents. So thank you.

Thank you. Good afternoon, Madam Chair. Karen Lange, on behalf of the boards of supervisors and San Francisco, the mayor of San Francisco and the boards of supervisors in Marin and Napa County in opposition to the excess ERAF proposal. That's before you. When San Francisco became an excess Eref County a couple of years ago, they went through extensive verification with both the comptroller's office and the Department of Finance that they had done their calculations correctly. Those were upheld. Then the Legislature proposed language.

It was eventually sent to the comptroller's office. The comptroller's office sided with the local governments, went to court. The court sided with the local government. This is not clarification. This is overturning case law. We're opposed to it. Secondly, in San Francisco's case, they have a charter school that has enrollment from all over the state.

So if this were to pass, it would mean that San Francisco property taxpayers are funding the public education of children sitting in counties all over the state, which is a redirection of Proposition one a, which is a violation of the Constitution, and it would probably be litigated nearly immediately. So we'd ask for you to reject it. Thank you. Thank you. Alyssa Silhouette. On behalf of the cities of Belmont, Redwood City, Hillsboro, and there's one more. zero, foster City.

To give the city perspective, we echo the comments made by my colleagues from San Mateo county. But the, these funds are relied upon for essential funding of local services. The operating revenues of these General Fund budgets, they're not large. For Redwood City, it's a $3.3 million loss. That's 20% of their firefighters. For Belmont, it's used to Fund public safety, fire critical infrastructure such as stormwater drainage, for flood protection. For Foster City, it's 7.5% of their General Fund operating revenues.

And like the, they're facing a structural deficit, so they're facing really significant decisions to be made and it would really jeopardize very vital community services. So we ask for the Legislature to reinstate and to Fund the BLF shortfall for the cities that are in San Mateo county. And would just like to note that these communities are also leaders in solving the housing crisis, in climate resiliency plans, and in preparing for emergency response and disaster preparedness in some high fire hazard zones. And we would like them to be able to use their budgets for those shared priorities. Thank you.

Good afternoon. Cammie Martin on behalf of the cities of South San Francisco and Half Moon Bay, we respectfully request that the in lieu vehicle license fee shortfall for San Mateo county and its cities be included in this year's state budget. South San Francisco and Half Moon Bay rely on their share of these funds to look critical services to their residents. Thank you.

Good afternoon. I'm Eric Lawyer, speaking on behalf of the California State Association of Counties representing all 58 counties in the state. We echo the concerns shared by some of our county partners in the urban counties of California and point out that the proposal regarding excess Erap will have significant impacts on revenue used at the local level to support core communities services regarding insufficient Eraf. We urge the state to hold counties harmless and include the backfill for insufficient ERAF amounts for Alpine, Mono and San Mateo counties.

Thank you.

Thank you. Good afternoon. On IOCA meetings on behalf of Los Angeles Unified School District, we strongly support the governor's proposal to clarify the ERAF calculations to include charter schools. This change will clarify what we believe is the Legislature's original intent and, and free up funding to help address the state's ongoing budget deficits. Thank you.

Thank you. All right. Seeing no one else, we will then go ahead and go to item number two, government. We will go to item number two, government operations agency, and we will begin with update on the state's efforts to evaluate and deploy generative artificial intelligence intelligent technologies. We are asking the Administration to present on its recent efforts to pilot various projects to procure AI technology for use in government services. And I see some friendly faces from my last role on CNC with the Middle Mile. And we'd like to welcome agency Secretary Tong, Department of Technology Director Bailey Kremens, and also data and innovation Director Marino and Department of DGS Director Lasso. Welcome, and you all are welcome to make your remarks.

All right, well, good afternoon. Chair and Members of the Committee, thank you for the opportunity for us, the entire team of directors, and from Govop to be here to provide you an update of the administration's approach in implementing genitive AI. I was asked to provide an overview, and then also I'll be joined by my colleague later on on the various sections of the presentation. But I have to say, in looking at the agenda that was recently opposed, your staff did an outstanding job in laying out the overview of the Executive order as well as implementation. So with that said, I will save some time and try to keep my opening remarks fairly short.

And as I mentioned, there was a great agenda that was put out with lots of detail. So Gavop agency, under the governor's Executive order, is leading the implementation efforts in partnership with California Department of Technology, California Department of Human Resources, Department of General Services, Office of Data Innovation, the state's Cybersecurity Integration Center, Gobiz, and the state's labor and workforce development agency. Governor Newsom is committed to continuing California's leadership in the emerging technology world, and this Executive order is another example of that commitment.

Our goal is to capture Genai's benefits to better serve the needs of our residents, but also to protect against its potential harm. While implementing this Executive order, one of our primary goal has been to study the development, use, and risk of Genai throughout the state, recognizing the importance of evaluating this technology from the start.

Our first deliverable was to report that was released in November on the benefit and risk of Genai, followed recently by a report that was published on March 20 on guidelines for procurement, use and training, as well as a toolkit for Department which Director Marina will speak to in a little bit.

While evaluating the impact of Genai, we're also developing a deliberate and responsive process for the deployment of this technology within the state government by evaluating the feasibility of a few pilots, and to that specifically to do it in a safe manner. The EO directs the Department of Technology to create a secure testing environment for Genai pilots known as the sandbox, which Director Liana Bailey Cremen will go into more details, followed by Director Lasso, who is leading the procurement effort for these pilots.

We're going to an overview, a brief overview of each of these particular pilots. The procurement mechanism, also known as request for innovative idea RFI Square, was specifically chosen because of its building flexibility that we could modify and iterate on the procurement approach as we learn more about this.

Knowing that none of us are an expert in Genai, we do need to treat this proof of concept, or we call it a pilot, as a learning process before we make any further or longer term commitment for the state. The EO also established a formal partnership with UC Berkeley and Stanford High to consider and evaluate the impact of Genai on Californians and discuss what effort the state should undertake to advance its leadership in the industry. In the implementation of all Executive order deliverables.

We are carrying out multiple levels of engagement within the state, including state subject matter expert, a legal team, our program team, our privacy and security team participate in community of practice as well as Gen AI leads from more than 100 departments.

In addition to the teams we consulted with governments, we undertake extensive external engagement as well as speaking with approximately 70 separate entities, over 140 unique individuals for academic leave centers, local and federal officials, community based organization as well as the state labor leaders to make sure that we are keeping our workforce and a community we serve at the forefront of why are we evaluating solutions.

The Executive order specifically also calls out training and support to the state workforce as the first step to prepare for state workforce of this Gen AI. Dialogue and engagement will guide the design of a training and materials and for the goal of developing individuals in gaining General education as well as specific education in the potential legal, labor and privacy risk. Identifying while addressing this technology by July 20242 more deliverables are coming.

One, the Administration will develop the training for the state workers in conjunction with the labor and provide further knowledge of the Genai tools. Second, that the EO also requires guidelines for state agency and departments to analyze the impact of adopting Genai tools may have on the vulnerable communities, including criteria to evaluate equitable outcomes in the development implementation of Genai. In closing, I just wanted to say that we sincerely appreciate the partnership and the oversight from the Legislature.

Since November of 2023, there has been at least 17 engagement with staff and Members in both houses and I know we always could do more. And with that in mind, as we move forward to this engagement of Genai into a proof of a concept or pilot phase, with only the exception of the actual procurement negotiation, the Administration continued to make publicly available the procurement itself contract once it's signed, and once we begin the pilot phase.

Our intent is to engage our labor, our employee, as well as the Legislature as we go through this journey together. Thank you. And with that overview, I'm going to hand it to Director Marino, who's going to give you a brief overview of the two deliverables.

Good afternoon, Madam Chair and Committee Members. My name is Jeffrey Marino. I am the Director of the Office of Data and Innovation, and it's my pleasure today to share with you an overview of the first two deliverables of the generative AI Executive order. Those are the benefits and risks of generative artificial intelligence report, as well as the GenAI guidelines for public sector procurement use and training.

The initial report and the guidelines are both excellent examples of the deliberate, iterative approach we are taking to shape the future of ethical, transparent, and trustworthy AI in California State government. The report on the potential benefits and risks of using GenAI in state government was delivered by Govops and our partners to the Governor in November of 2023.

The report was a collective effort between experts within the California State government, industry leaders, our academic partners, and community groups representing many unique and diverse points of view from across the state. The report begins by answering one practical question. What is the difference between regular AI and generative AI? Conventional AI, which has been used for many years, now understands patterns in a data set and is able to predict likely outcomes or anticipate and respond to an input based upon a predefined set of rules.

Genai is noteworthy because it generates entirely new content that is not present in the underlying dataset used to train the model. This innovation brings with it many potential benefits. With this technology, we can tailor our services to address the unique needs of the population we are serving, whether through on the fly translation, real time closed captioning, and countless other uses that promote diversity, equity, inclusion, and accessibility. GenaI is also ushering in a new era of data driven decision making in state government.

The ability to query a database and produce an analytical insight is now as simple as knowing the right question to ask. Of course, with these benefits come some risks. The use of Genaii can result in biased outputs that amplify existing societal biases, which is a critical consideration in cases that may impact the delivery of public services. Genai may create harmful or inappropriate materials, such as deepfakes or convincing recommendations that may lead to taking dangerous actions.

These are just a few examples from the detailed report, which lays out an extensive landscape of the benefits and risks that come with using Genai in the public sector. As with many of the deliverables, we will continue to iterate and improve upon the report as we learn more. After developing the baseline understanding of the benefits and risks of Genai, the collective team developed the Genai guidelines for public sector procurement, uses and training, which were issued just last month.

The guidelines were developed by the Department of General Services, the California Department of Technology, the California Department of Human Resources, and the California Cybersecurity Integration center to provide best practices and parameters to safely and effectively use Genai. The guidelines start from the context of two main use cases of genai an incidental purchase and an intentional purchase. We anticipate the majority of departments, at least in the near term, are not actively seeking to procure a standalone genai tool.

However, many tools have already begun to include genai enabled features and enhancements. We define a procurement of this sort as an incidental purchase. Beyond system feature upgrades, some state entities may be interested in procuring a standalone tool. This is known as an intentional purchase. The guidelines include a sequence of steps that address each of these scenarios, which include responsibilities such as establishing a gini lead within the Department all the way to conducting a detailed risk assessment of the tool and its intended use.

In addition to the risk assessment process, which includes a consultation with CDT in the event of a moderate or high risk implementation, the guidelines also provide a roadmap for future genai trainings and establish new procurement requirements, such as mandatory disclosure language to be included in all solicitations, as well as a Genai disclosure and fact sheet to be submitted by a vendor. With state staff in mind.

ODI played a leading role in developing a toolkit that presents all of this information included in the guidelines in a plain language and user friendly format. Through this human centered approach toward issuing procurement and technology guidance, we aim to empower the state workforce to leverage this transformative technology to improve services for all Californians. Thank you, and with that, I will hand it over to Director Bailey Crimmons of CDT.

Thank you, Director Marino good afternoon, Madam Chair. Good to see you today, and thank you for the opportunity to speak with you today about the generative AI sandbox. I am Liana Bailey-Crimmins, California State chief information officer and the Director of the Department of Technology. On behalf of the Administration, CDT proudly delivers tier three data center services to both state and local departments and has a responsibility of protecting the state's most vital data assets.

As with any emerging technology, Department of Technology is always looking at, you know, testing that out if it be blockchain machine learning or virtual disaster recovery, or in this case, generative AI. CDT's standard business model is to work with departments and manage test environments, build them up, stand them up, and then leverage our CDT's 24 by seven security operations center and our technology operations for proofs of sets, pilots and building production systems.

Over the past decade, the state, thanks to the Administration and the Legislature, has benefited from, as Director Marino said, Traditional Artificial Intelligence we have chatbots business intelligence predictive analytics for example, CAL FIRE's artificial intelligence Alert of California was recognized by time to be 2023 Invention of the year. Within four months of deploying artificial intelligence with their cameras, artificial intelligence is able to detect 77 wildfires before any 911 calls came in. This type of technology saves precious lives and our natural resources.

In support of the governor's Generative AI Executive order, CDT was specifically requested to build a safe place to test generative AI, also known as our sandbox. CDT uses our existing cloud service provider contracts, which is best in industry technology, security standards and controls, and allows for optimal protection of California State data. As of today, the state has issued five proof of concepts or requests for innovative ideas, and Director Lasso will go into more detail on that during her open remarks.

I take cybersecurity seriously, and protecting the data is of my highest priority. People first security, always the Department of Technology sandbox is monitored 24 by seven by the state's top security experts and is isolated from any other state systems. The five generative AI proof of concepts will only use publicly available data, widely accessible and distributed to Californians. It will not interact with any other state system or data. This means that personal and confidential information is prohibited, even though only publicly available data is used.

During the proof of concept phase, CDT used the highest level of security, highest walls, deepest moats, and some of the things that we put from safeguards are FeDRamp certification. This is the highest level of FeDRamp for DoD and any type of federal cloud service providers. We use this also within the state. It has the highest level of compliance, highest level of data, confidentiality, integrity, data encryption, and data at rest.

The state also will retain unconditional ownership and control of all this data and has ongoing visibility on how that data is stored and secured. If a vendor is interested in participating, they must comply with the state's cloud security guide, which requires all vendors to classify, sequester and protect state data continuously and monitor for any potential warning signs or security or privacy incident. The five proof of concepts. For the.

Five proof of concepts. The state will not be creating a large language model. Instead, the vendor will use an existing model which will be used in process mode only. That means that safeguards will be validated and tested before, during and after the model usage. As a vendor's model processes and generates content, it will not be permitted to store or retain any of our data inputs, including interactions with the model and even the created new information or intellectual property.

This will be the ownership of the state, the state maintains control and any data that is stored will be done in a state managed sandbox throughout the proof of concept and after. As with any new emerging technology, the RFI square process allows us to test drive before actually buying the car, allows us to engage with the vendor community and see if any potential viable solutions exist. And the initial Generative AI pilot vendor will only charge no more than a dollar.

This will allow the vendor to community to showcase their technology while providing the state with valuable insight. Now, in addition to the generative AI vendor, state departments will incur a monthly usage charge from the cloud service providers. So for specific cloud storage or compute during the proof of concept, this is what they do today when they move workloads to the cloud it's built into the contract. CDT estimates these charges to be about up to $50,000 per month per pilot.

Depending on the size and complexity of each of those data sets. It could be 1 tb, it could be four terabytes. It really depends on each of those proof of concepts. The participating agencies and departments will pay using their existing budgetary funds. I look forward to further engaging with the Legislature to discuss these key aspects and additional emerging technologies that are right around the corner. That completes my opening remarks and I'm happy to go ahead and answer any questions before turning it over to Director Ana Lasso.

Thank you.

Good afternoon, Madam Chair and Members of the Committee. My name is Ana Lasso, and I'm the Director of the Department of General Services, as Secretary Tong has mentioned. My two colleagues, the directors of ODI and CDT, and I are all working together to support this very innovative process. The role of DGS is to uphold a very innovative procurement process. The request for innovative ideas is known as RFI two, and I will briefly describe the problem or problem challenges.

Challenge sets, actually that we put out for procurement Calsta Caltrans, that is the vulnerable road user VRU protection. The challenge based solution there is to investigate near misses of injuries and fatalities to identify risky areas on our roads. Another Calstick Health Trans challenge based solution is traffic management traffic operations. It's a process and interpret the complex data to improve traffic pattern analysis, address bottlenecks, and enhance overall traffic management.

Next is another challenge-based question from the CTFA team productivity to improve call center operations, reduce call times, improve customer service, and increase taxpayer compliance. Finally, the last two are from Calhs agency language access to ensure that Californians with limited English proficiency have timely access to information about public benefits and can navigate public programs with ease without confusion.

And then finally from CDPH healthcare facility inspections, leverage tools to expeditiously document the facts or findings seen by a surveyor during healthcare facility inspections to develop a concrete set of outcomes or citations that match state and federal requirements. And as Director Bailey Crimmons mentioned this portion of the procurement in the sandbox, the vendors will only charge $1.

Anything outside of that, once we are through the proof of concept phase, there will be a proposal for a scaled up contract and at that point I do want to say the Legislature will weigh in on the funding process. So we are really in a proof of concept phase. We are learning together and some of the outcomes.

So before I get to the outcomes of this procurement, I do want to mention that the state is currently engaged in the active procurement, so I know there are questions about these contracts. To maintain the fair competition, the information is limited to what was publicly shared in the solicitation. But once those contracts are signed, as secretary Tong mentioned, we will be happy to share those of course, redacted information on anything that has to do with security.

But while we're not able to provide that information just yet, it is while we are in this active procurement. Our respective departments are here to answer questions to your staff and continue that collaborative face. Some of the proof of concept outcomes we hope to gain are beyond the specific outcomes that each Department is assessing.

The five concepts that I mentioned, the state more broadly will evaluate these proof of concepts collectively against business and end user needs to ensure human centered approach to future Gen AI usage, associated costs and overall guidance to state entities. The proofs of concepts will inform how the state intends to address Gen AI contract terms and conditions requirements for data when using GenAi project processes, training, longer term sandbox environments and IT infrastructure needs, energy usage associated with using Genai and short and long term costs. So that concludes my presentation. If there are any questions, be happy to answer them. Thank you.

Thank you very much. Would you like to make some comments?

Brian Metzker, LAO no comments at the time.

Well, thank you for those very informative presentations. Yes, this is all kind of the new frontier when we think about AI. First you know, it's just the AI that's been moving forward kind of at a sleddy and then it's just gone like I bet you if I ask people to raise their hands, you can if you want. How many of you knew about AI even two years ago? And now we're talking about generative AI. That's how fast it's moved. How many of you were interfacing?

See, like a few hands, right. So people who are working with this of course understand it, but for the public and of course state workers who haven't interfaced with this, it is going to be pretty dramatic as far as how they interface. As you mentioned, the safeguards, the security. But one of the things is as this was an Executive order for pilot programs and it was mentioned that there have been engagements with the legislative body.

How do you see that the, if you want to say the Legislator body will interface with, with this in the future, obviously in budget decisions. But do you, if you'd like to speak to that,

Yes, I'm happy to take that question. Chair. So as we mentioned, that we are really looking for anybody who's willing to spend the time and engage in this.

We welcome all of their input because as we said, this is such a fast, rapid, evolving topic and, you know, and it's very different than perhaps potentially some of the new NIC technology that was introduced from, you know, early on. With that said, having a checks and balance approach in evaluating is something that we are very, very welcome in terms of Legislature's role. As I mentioned, with the exception of the actual contract negotiation, we intend to be, you know, engage as much as you like.

When you're looking at especially the evaluation of the, these output coming out of the proof of concept, is it actually helping our business to be better? Is it creating new risk that we are not aware of? If so, how do we address it? And then beyond the proof of concept as new ideas come up to do, for example, further piloting, we want to make sure the Legislature is aware of that.

And welcome to take your input as well as specifically on the security, the privacy, the monitoring, the costs, you know, to be, it's a very practical situation that we're in given the budget situation. As Director Ana Lasso mentioned, we're looking for various opportunities to leverage the resource available. And that is a good gate to check before any of these technology can be scaled up.

Because I know right below us, privacy is happening with the field room with quite a, quite a number of bills related to AI.

I think the most that we've ever had some very similar, but many. So this is going to continue to be a topic that legislators want to be engaged with. And as the pilots have been put forward, I think in the future, maybe working groups, something like that then can really engage the legislative body. I mean, obviously, I'm getting this report here. Very informative, but it's only two of us, so others. But with that. Any questions?

Thank you, Madam Chair. Thank you for the presentation. I was down in privacy on AI related Bill. There's a few more yet to debate this afternoon, and I think Department leads probably know I have to play pleasure of authoring Assembly Bill 302 last year, which asked our Department of Technology to be able to create an up to date inventory of all procurements that are using ADT with AI decision making as well.

And I was very grateful that we were able to accommodate a very aggressive turnaround and timeline of January 1 of next year to be able to kind of get at least a snapshot in time of where we're at. How might some of the, how is that going? And how might some of the outputs of that inventory update interlace, I guess, with, you know, the directions that you're working on under the Executive order here.

Thank you very much, Member Ward. So one of the things, as we were going looking at the Executive order, and obviously, as we're looking at some of the Bill throughout, two, we did do a cursory inventory of artificial intelligence and generative AI in order for us to see if there was any high risk usage. So we have been working with each of the departments, and then we are establishing a baseline, and anything that is being considered or new will be added.

But I know with AB 302, it's looking at high risk decision making. So that actually even goes a little farther than just generative AI. And so we are working in partnership with all of the state agencies to make sure that we are being compliant with that.

Where do you see generative AI being useful? I guess in the work that we do as a state.

Go ahead. First. I'll jump in.

So as we were talking about, artificial intelligence in itself has been used over the last decade. And what we were mentioning was CAL FIRE. It was able to detect wildfires 77 times faster. It was 77 calls or 77 fires before any 911 calls came in. Miles, the chatbot at DMV is artificial intelligence continuing learning.

As we're looking at generative AI, we are just at the cusp, as Director Marino had talked about, there are many benefits that can be looking at taking large volumes of data we still in the state live by spreadsheets sometimes. And so how we can pull all sorts of data, data sets, and be able to make good decisions, policy decisions, program decisions on behalf of the constituents.

But one of the things that the Governor looked at is not only just the benefits, but to ensure that it also balances out the safeguards. And so what the Executive order is touted across the nation is even looking at vulnerable communities, seeing what, as we look at this, most of you know, I chair the Middle Mile Advisory Committee and the California Broadband Council. We look at digital dividend.

Last thing we want is that technology be a means by amplifying or creating more of a divide out there. And so we have to take steps forward, but we have to take them cautiously. And that's what the public, that's what you, that is what the Administration looks to us as leaders to. We cannot take that trust lightly and we need to do everything right. So the proof of concepts really is the opportunity to test.

There may be things that come out of it and say that's not what generative AI we should have used it for. Maybe traditional would have been a more appropriate, but you have to test drive it in a safe environment in order to determine that. And I know the secretary has some thoughts about that as well.

I was just going to go into a little bit more specific on give you two specific examples about the use. And I'll build on the five proof of concept that is already on the street that are being solicited for innovative idea, specifically as an example of the tool coming out of Caltrans.

We all know, and this is actually something that we've been talking for a while, that there's tons of data and video, images and graphics and information, although all publicly available already. So nothing confidential about that, about what is creating these traffic congestions and whether these traffic congestion was naturally occurring because of certain time of the day or is it due to other incident that took place, whether it's natural cross or accident happened on the railway.

But typically what we're dealing with right now is we are aware of the congestion, but there's not a very robust route to suggest how people can avoid this construction and welded alternative. And somebody can say, well, this is what waze would do, Google maps, they can just tell you a different route. That's correct. But once you find out the pattern, you can do a lot more preemptive measure to even reduce or minimize the likelihood of those congestion for happening if there's a natural pattern.

Second of all, tying that up into a traffic management system. If you are diverting traffic to local street, last thing you want is the local signal are not cooperating. So you create another conjecture. And this is the type of simulation, if you would, is what we're looking at, the genitive AI. It could be more of an AI as a machine learning to look for, say, can we do more simulation? Can we do more of a predictive. And that's just a small example of what we use in generative AI on State use .

On that particular example, because it's a great example of how it can help not only the current operations, but long term good governance. Having that information upfront could help departments prioritize how they Fund project improvements on the road or how they line up which public work projects they have to prioritize to due to non operational issues. Perhaps the roadway is too narrow, or the volume of traffic has become so congested at a certain intersection that it has to be widened. So the long term impact could be a good guidance on how to spend our dollars judiciously.

Thank you. Any other last comments? Sorry? Any other last comments? All right, then we're going to go ahead and open it up for public comment. And I think what we're going to do is say 30 seconds, just because we have a very long agenda and we want to start moving through this a little bit. But we thank you to our presenters. Welcome.

Hi. Good afternoon. Daniel Schoorl, on behalf of SEIU Local 1000, just wanted to thank the presenters for the thoughtful discussion session. Detailed reports and comments from staff, in particular around impacts on state workers. We really appreciate the cautious approach, in particular around CDPH with the health facility inspection tool.

And just again, appreciate given not just this budget landscape, but the approach as far as input to workers and knowing that we have persistently high vacancy rates with our health facility evaluator nurses, we're really looking to to multiple opportunities to engage, whether it's through the budget process or in bargaining. So again, thank you.

Thank you. Thank you. All right, we're going to move to issue number three, language access pilot program. We will welcome our panel. We will be inviting GovOps, the Department of Finance and LAO for this presentation. And please introduce yourself.

Hi, Madam Chair. Justyn Howard, Deputy Secretary for Fiscal Policy Administration at the Government Operations Agency. I'll be speaking on behalf of GovOps today. Unfortunately, my colleague cannot attend today, so it'll just be me along with finance.

Natalie Griswold, Department of Finance.

Brian from the Lao.

Welcome.

Thank you. So I think the proposal before you is essentially a reversion of unspent funds that was allocated to govops a couple years ago for a language access pilot program. The Governor's Budget proposed ending the program due to the state's fiscal situation because the procurement process that we were running had not finalized. This funding is available for sweeping for purposes of generating savings to the state.

Natalie Griswold, Department of Finance. Nothing further to add at this time.

We also have no comments at this time.

We're going to keep this simple. I have no comments. And with that, we appreciate you coming. Any comments from the public on this topic? Any public comments? All right, seeing none. Thank you so much. We appreciate you being here. All right. We are now moving to issue number four budget change proposals. Department of Technology welcome back and if you'd introduce yourselves as you make your comments. Thank you.

Good afternoon, Madam Chair and Members. Leanna Bailey Crimmons, California State Chief information officer and the Director of Department of Technology. Thank you for the opportunity today to discuss three internal budget proposals submitted by my Department. California Department of Technology has approximately 1000 staff. We are tasked with securing statewide information assets, serving as a custodian of public data and our innovator of it services and solutions. In addition, we oversee technology policy development, ensure effective IT project management procurement through our control agency functions.

The three internal bcps in front of you today will go through each of them, of course, individually. The goal of these proposals is to strength the cybersecurity posture and to also optimize our department's ability to effectively administer our statutorily mandated programs. I'm joined today by Chief Administrative Officer Miles Burnett, who will now provide a brief summary on our proposals and call up any of the Executive Member leaderships today to be ready to answer any and all of your questions.

Madam Chair, Members of the Committee, my name is Miles Burnett, Chief Administrative Officer for California Department of Technology. Issue well, first, BCB Information Security compliance. CDT requests a one time $250,000 General Fund budget augmentation in fiscal year 24-25 to remediate the department's security compliance deficiencies. Addressing these deficiencies will reduce CDT's risk of potential vulnerabilities remaining undetected and unremediated, and it will improve the security risk posture of the Department and maintain compliance with the California Secure roadmap.

CDT will use external security consultants to reduce the current backlog of internal vulnerabilities. These consultants will develop and document, and, where needed, execute the missing processes and procedures. Contractors will also be used to perform consistent oversight of departmental vulnerability remediation efforts, and with that, we are here to take any questions you may have.

Is that on all three of the items or just the first one?

That is just the first one, Madam Chair.

All right, do you have any comments on?

Brian Metzker LAO we have no concerns with the first BCP.

Department of Finance.

Courtney Massengale of Department of Finance nothing to add. Thank you.

All right. I have nothing to add. You move to item number two.

Item number two, intrusion detection and prevention system replacement. CDT requests 809,000 in General Fund in 24-25, 374,000 in fiscal year 25-26 and 393,000 in fiscal year 26-27 and ongoing to replace data center intrusion detection systems and intrusion prevention systems hardware that will be reaching its end of supportable life. CDT submitted a BCP in fiscal year 23-24 to replace end of life IDS IPS infrastructure and support the protection requirements of the California governmental Enterprise Network.

However, these previously approved IDS IPS infrastructure replacement efforts only enhance the IDS IPS infrastructure supporting north south inspection and protection, which specifically pertains to securing or security monitoring protection that takes place on the outer edge where all departments interconnect to both CGEN and the Internet at large. The IDS IPS devices currently protecting the data centers maintained by OTEC and also reaching their end of life are now in need to be replaced.

These specific IDS IPS devices monitor and protect the internal perimeters between the various networks inside both of OTECs respective data centers. These include internal database zones, crucial web servers, mainframe and other mission critical services that reside within both of CDT's data centers. These ids IPS devices provide vital East West inspection and protection by providing support against potential attacks that may move laterally between the internal hosting environments. With that, we are here to answer any questions.

Thank you. Any comments?

Brian Metzker, LAO we have no concerns with this second proposal.

Courtney Massengale, Department of Finance nothing to add.

Thank you. No questions if you want to move to item number three.

Item number three statewide technology services CDT requests the inclusion of provisional language to allow the conversion of up to 10 million from the technology services revolving Fund to the General Fund for fiscal year 24-25 to support statewide technology services. CDT is responsible for developing, implementing and maintaining several statewide programs and functions that do not lend themselves to a cost recovery model because there are not specific customers that can be billed for the services provided.

Three offices programs to perform statewide functions at CDT strategic initiatives develop and implement statewide IT and digital Strategies Office of Digital Services statewide web hosting and Cloud Modernization Office of Enterprise Architecture the Statewide Enterprise Architecture program and with that, we are here to answer any questions.

Brian Metzker, LAO we recommend the Legislature reject the proposed provisional budget Bill Language in this BCP. The fiscal pressure facing the state does not support a potential request from CDT for additional General funding to mitigate increases in statewide technology service costs.

The Department can continue to recover the cost of these services through its revolving Fund, and furthermore, the Department can complete its three year rate reassessment process by the end of the next fiscal year and, pursuant to state law, report back to the Legislature on how it plans to provide these services in a cost effective, efficient and strategic manner.

Thank you.

Courtney Massengale, Department of Finance, nothing to add, but happy to answer any questions.

I think, given some of the points. Raised here, I would like to see staff maybe perform a little more analysis. On this and get it back to Committee.

Thank you. And in relationship to your comment, is CDT on the path to becoming sustainable with its rates?

Brian Metzker, LAO based on their latest rate reassessment report that was just filed, it appears that the forecasted revenues and expenditures for the state data center are trending towards being balanced. In 24-25 it showed that there was a 3.3 billion or billion, excuse me, $3.3 million positive net between revenues and expenditures. So it appears they're on track to get there. However, there are a number of uncertainties about certain services that they may make mandatory or that may be removed from their catalog. So there are a number of factors that can still move, but right now, it looks like they're trending towards a more sustainable business model.

All right, any last comments? All right, we will open it up to the public. Anybody would like to speak in on this item? Seen none. We thank you, and I think we'll be seeing you remain up here. Middle mile. I like middle mile. It just is a very complex project. All right, we are going to be reviewing the administration's request for $1.5 billion to complete the estimated 10,500 miles of middle mile network. If you'd like to introduce yourselves again and speak to this.

Good afternoon, Madam Chair and Members. Thank you for the opportunity to speak with you today about the state's middle mile broadband initiative. I'm Liana Bailey-Crimmins, the California State chief information officer and the Director of the California Department of Technology. Co presenting with me today is Mister Mark Moreau, the Deputy Director of the Middle Mile Broadband Initiative.

In July 2021, thanks to Governor Gavin Newsom and the Legislature, Senate Bill 156 created an open access middle mile network, bringing equitable, high speed broadband services to all Californians California Department of Technology has a very key responsibility when it comes to delivery of broadband for all. We oversee the development and operation of the California open access middle mile broadband network of over 10,000 miles, which is the largest in the nation. We are pleased to report significant accomplishments.

You can hear more about them from Mark Monroe, but this includes the signing of contracts to construct, lease and purchase, which is approximately 83% of the planned network mileage in partnership with Caltrans. We've also continued to lead the way when it comes to federal state partnerships with actually reducing permitting timelines. We were recognized by the Federal Government for our accomplishments and the Administration obviously is committed to building the complete 10,000 miles network.

Regrettably, due to supply and demand and supply chain changes, post pandemic construction costs increased by 40%/mile over the past two years. CDT has implemented cost containment strategies which include private and public partnerships, government to government, tribal partnerships, each with the intention to maximize the reach to urban and rural communities, your constituents that have historically not been served by the broadband industry. CDT's budget request is for $1.5 billion over two fiscal years to construct approximately 2200 miles and complete the middle Mile broadband network by December 2026.

Our collective mission is to address the digital divide and see that that network provides the vital services to Californians which we have heard loud and clear our priorities for all of our communities, your constituents, from urban centers to rural communities. That concludes my opening remarks and Mister Mark Monroe will now provide additional information and go over a short presentation for you. Thank you.

Good afternoon, Madam Chair and Members. Mark Monroe, Deputy Director for the Middle Mile Broadband Initiative at CDT. I've been asked to provide a brief update on the progress of the MMBI project as it relates to CDT's budget request. As noted in the agenda, a total of $3.87 billion has been appropriated to CDT to develop a 10,000 plus mile network of middle mile broadband infrastructure to serve as a backbone to connect the state's unserved communities.

Currently, about $2.4 billion of this is federal SFRF funding from the American Rescue Plan act, or ARPA, and with most of the remainder being General Fund. The federal funds must be under contract by the end of calendar year 2024, with associated work completed by the end of calendar year 2026. Per SB 156.

CDT worked with CPUC and its third party administrator, Golden State net, to identify the communities with unserved populations throughout the state and map the network to reach these locations with a resilient industry standard network. This initial map was presented in May of 2022 and CDT had Caltrans immediately began pre construction activities such as permitting the design on all 10,000 miles in order to meet the federal 2024 and 2026 deadlines.

CDT also signed contracts early in 2022 to purchase fiber and associated materials to mitigate future supply chain risks. The state also went out to bid for both construction and partnerships at the same time. The date to date are there more than 6500 miles of partnerships for leases, joint builds and purchases? Purchase agreements have been signed. CDT has signed contracts for these partnerships. It had Caltrans immediately stop the pre construction work that is no longer needed on these segments.

Currently, CDT anticipates having Caltrans construct the approximately 4000 remaining miles of the network and Caltrans anticipates finalizing all pre construction on this 4000 miles by the end of the calendar year. Given the success in finding partners in the first RFI squared solicitation, CDT went out for another solicitation for additional partners and is currently evaluating more than 50 proposals to that were received. I'm going to be briefly referencing the handout that I think that you've been provided. First, we have a timeline for the project.

It reflects the fact that first of all, the federal deadlines I referenced of 2024 and 2026 for having liquidated the contracts. We're also taking steps to accelerate the project and you can see CDT is ahead of schedule due to early state and federal permit streamlighting materials purchases and the simultaneous bid solicitations for construction and partnerships. Because leases and purchases use existing infrastructure, these agreements will allow for potential early activation of some segments of the network as early as 2025 and 2026 ahead of the federal deadline.

On the next page you can see the some details on the partnerships the state is using in developing the network. The early solicitations allowed Caltrans to sign master agreements for construction of approximately 1800 miles of the network and Caltrans is currently moving to construction in more than a dozen locations across the state on a total of more than 160 miles.

As I've noted, the RFI squared partnership solicitations also allowed CDT to secure 10 partnerships for approximately 6500 miles, including almost 3500 miles of leases, 2600 miles of joint build partnerships and 435 miles of purchases.

And construction on these segments began this last December and by the end of this, let's see, by the end of last quarter, rather five locations were totally in, 106 miles were under construction with another 670 miles starting this quarter in the next handout, you can see reflects the CDT's expenditure of funding on the project. Of the 3.5 billion appropriated to CDT to date, 2.9 billion is already under contract for these partnerships and equipment and Caltrans construction.

And then CDT has issued work authorizations for Caltrans to start construction on the 16060 miles of the total 1800 I had mentioned earlier. On the next page you can see that CDT is requesting a $1.5 billion General Fund over two years to Fund construction or development of the final 2200 miles of the network. CDC's current plan is to continue moving to construction as segments become ready per Caltrans rollout schedule for the full 4000 miles this calendar year.

And at the same time, CDT is evaluating the new RFI squared partnership proposals for additional public private partnerships, since these opportunities are often faster and reduce the state's expenses by splitting the cost of construction. And then lastly you can see a map there of the full 10,000 miles and overlaid on that is the in blue there are the FFA grant applications that were submitted to the Public Utilities Commission.

We meet regularly with the Public Utilities Commission to ensure that we understand where they're going and their website site's ours and our website site's there, so we're very in step with them. And with that I'm happy to take any questions you have.

Like to hear from the LAO and the DOF.

Brian Metzger LAO we find that the proposal derives from an approach that was presented by the Department in July of last year to implement the Middle Mile network in two phases.

The first phase would have implemented 8300 of the now 10,500 miles of middle mile network using the $3.87 billion that is currently or planned to be appropriated, and the second phase would have implemented the remaining miles using alternate funding sources such as design efficiencies and savings from the first phase, as well as last mile project funding for middle mile infrastructure that's deep, deemed essential to connect.

In response to negative feedback from some Members and stakeholders, including some that were concerned about whether the Middle Mile network would be available for last mile projects, the Department changed that approach and committed to presenting the proposal that's now before the Legislature. Since last year, however, it has become clear that the state is facing a serious budget problem in 2024-25 as well as significant budget deficits in future fiscal years.

The department's proposal for an additional 1.5 billion General Fund for the middle mile network is not sustainable under current revenue and expenditure projections. Furthermore, the proposal does not provide critical information for the Legislature to oversee the implementation of the middle mile network. For example, the proposal would Fund standalone construction projects, but due to ongoing pre construction work, does not identify where those projects would be, how much of each of them would cost, in what order they would be constructed, and when they would be activated.

This information is important for legislative oversight because of the first come, first served approach that CDT expects to take with these projects. That is, primarily funding projects as they complete pre construction, not based on their availability for approved last mile projects or overall cohesion and viability of the network.

Other critical information about the need for Caltrans to construct all of these miles, about the proposed last mile projects that might connect to the Middle Mile network, and about the plan to maintain and operate the network going forward. Caution against moving forward with additional funding in the absence of some language that requires this information be presented to the Legislature. Our recommendation is to approve the 250 million of General Fund that was already planned to be appropriated in 24-25.

That's part of that 3.87 billion that was mentioned earlier, but also include budget and or trailer Bill Language that requires detailed information about current and future plans for this network. However, we also recommend the Legislature reject the department's proposal for an additional 1.5 billion General Fund.

The fiscal pressure facing the state does not support a General Fund investment of this magnitude, particularly given there are significant number of miles that can still be delivered and there are possible alternate funding sources that could be evaluated potentially as a part of that language. And happy to answer any questions.

Thank you.

Courtney Massengale of Department of Finance we just want to highlight that this proposal is essential to the construction of the middle mile broadband network and if not fully funded, difficult decisions are going to be need to be made on which sections of the network are not funded or constructed.

This is a very one of the trickiest budget items we have. As anybody has been watching our budget hearings, we are making or being encouraged to make very deep cuts under everything from foster care to housing programs. Pretty much everything is on the table. So to have the Administration put forward an increase of 1.5 billion is a little bit of an outlier when you look at the entire Governor's Budget, because if you've kind of peered through it, you'll see that there's almost no increases in budget.

I understand if this isn't these dollars aren't awarded, that these miles won't be completed. So could you restate why the 10,000 miles that are kind of the goal of this program? So we're short about, what, 2500 miles. And this 1.5 would pay for that completion. But in the end, even just say that the Administration does get the support to move this 1.5 forward. Will we in fact have broadband access for all?

So, yes, to be clear, the 1.5 billion would get us the final 2200 miles of the network. And what that does is, as provided for an SB 156, it links up those communities that are unserved. And so right now, and historically, you know, the Public Utilities Commission has administered grants to provide last mile funding to projects.

But the real challenge was that there wasn't really a point in applying if there was no middle mile to connect to, unless you're prepared to also build our own separate middle. Your own separate middle mile. So the 10,000, the funding for the full 10,000 is needed so that we can create that framework.

Because going forward, not only is the CPUC reviewing, I think, more than $4 billion in applications for FFA grants, but they have an annual allocation, I think, of the CASF grants in the range of 150 million that also go to these last mile projects, as well as the state will be receiving $1.86 billion in bead funding, again, for more of these last mile projects. So the state really needs this framework so that all of those last mile projects can. Can connect to the state's middle mile.

And that really is what closes it. One of the things we remind people is that the middle mile, in and of itself, doesn't provide that connection to the home. Those last mile connections and those projects that are being funded by the Public Utilities Commission, that's really where that connection is provided. But without a middle mile to connect to, it doesn't work.

Madam Chair, can I elaborate a little? When we think of broadband for all? Obviously, accessibility in the Middle Mile is a big part of that last mile. But as you're keenly aware and as other Members are aware, it's one of the elements of broadband for all. It's not only accessibility, it's also working with last mile providers to provide affordability. Because some people may have broadband sitting, but they can't afford to actually utilize it or to sign up.

They may have to choose between groceries or their broadband Bill. And then there's also the opportunity to make sure, as we're still seeing, many households cannot afford a device, they're still using mobile phones in order to. And there's an equity issue there that they. That's the only way that they're communicating, is via phone. They can't actually afford devices. And if you've ever tried to apply for a job on a phone or try to do some of your telehealth, it's very difficult.

And there's also digital literacy, making sure that when people do have the devices, they have the connectivity and it's affordable, that they know how to leverage it to the fullest extent. So I just want to make sure when we talk about broadband for all, this is a pivotal part, but it's not the only part.

I understand that as I sat on the Middle Mile, I think some of the concerns that remain as we continue to talk about the vulnerable communities that won't be served, in essence, without this additional investment. And yet part of, I think, the mandate was to use the maps in order to map out where those most vulnerable communities were. And I would have hoped by now those would have been the first communities served.

So I don't want to have a big discussion about how the maps were chosen. But I know being on the Committee, those questions have been raised many times. Also the partner with the CPUC, there has been some very frustrating times where it seems as if they're not moving forward in a timely manner in order to move forward with some of these grants that have been talked about. And so with that, I understand the administration's interest in completing, if you want to say, a project.

But I still do have remaining questions. I mean, even when you look at the Golden State network as a whole, I know when I was on middle mile, we asked, or I asked about how is this going to be sustained in the future, what kind of workforce, if we're actually calling it the Golden State network, we're doing a lot of contracting, not out. Will there be state employees to actually sustain it in the future? So I think there's still quite a few questions.

We will continue to look at this item, but in a difficult budget, as you know, it's a really difficult because you're right that people have to weigh on the broadband access. There are a lot of the providers out there that offer different care packages, and yet we have found that many people don't access those, even though they are available by some of the providers. So it's always that kind of chicken and egg who should be working to help connect them.

Obviously, you would think of their students, school districts and so forth would have a role in that. But we don't always see those connections made in a way that makes it easy for families to say, all right, I have a package that's going to work for my family. But we saw some huge pitfalls during the pandemic, of course, with the remote working.

And there's still quite a bit of issues with connectivity, but in the most vulnerable areas, that was part of the issues that we were talking about. And I think that's where we might have stumbled a little bit because we think of equality across California. But the problem is there are some places that had no access, and then there were the doughnut holes where there were some access. And my hope was we were going to get to the places that had no access first.

And that, by the way, that providers weren't interested in trying to go through. And we know they're the most difficult places, going through mountains, if you want to say very rural areas. I know that you're very well acquainted, acquainted with, with Assemblymember Jim Wood and Assemblymember Jim Patterson, who have been saying, in the end of this project, are the people in my communities, the more rural Californias, Ukiah, way up north, are they going to have access?

But I think we tried to kind of deliver across the State of California, and we may very well still be if this funding doesn't come through where we haven't created that access. But I understand, you know, it's a big project. You try to move forward. You estimated the costs with pandemic, with other delays on products coming in, all of that. It, I'm sure, has escalated the price.

I just would hope that it would have been more seamless so that we wouldn't be asking for a budget increase at this point. And if it was in a different year, I don't think there would be a lot of discussion other than we have such critical kind of human services that we know under that umbrella that we're going to have to be weighing back and forth between CalWORKS, between all of these healthcare, these type of issues.

So it certainly is not a criticism of the Department, Department of Technology, Middle Mile. It's just, what do you do with limited dollars? But with that, we appreciate all that you have done, and we will continue to stay in conversation. Any public comments on this item? Middle mile.

Hello. Sarah Brennan with Weideman Group on behalf of NextGen policy. NextGen policy strongly supports the $1.5 billion investment for completion of the Middle Mile Broadband initiative without approving the governor's proposed investment that would be akin to building half of bridges. The state aims to get all of California connected. Thank you.

Hi, everyone. Georgia Savage with Oakland undivided. I was here with 25 other organizations last week. We were all supporting this $1.5 billion for MMBI. We also have sign ons as part of the California alliance for Digital Equity by over 85 organizations also supporting this. This is invaluable infrastructure which will connect millions of Californians, foster competition and improve affordability. Assemblymember Quirk-Silva we definitely hear your concerns and share some of your concerns that we need to ensure we're serving our least connected communities first. So that being said, we do urge the Legislature to require transparency from CDT by requiring that they publish a clear criteria for selecting segments prior to additional segments being funded. Thank you.

Thank you.

Hello, I'm Shayna Englin. I'm here with the California Community Foundation and the California alliance for Digital Equity in strong support of the governor's $1.5 billion request. We also, as you well know, share your concerns about how these maps have been developed, what communities were initially supposed to be first in line and are now last in line and fighting for dollars, and about the transparency and community engagement around how this process has happened. So while we share those concerns, would absolutely support additional provisions around transparency, we do support and believe this is a vital, one time, once in a generation investment.

Thank you.

Good afternoon. Amanda Guelderrama with Cal Broadband we agree with the LAO's recommendation to reject the proposed additional $1.5 billion for the state's middle mile. To note to date, the Department of Technology has not presented the Legislature with a business plan or revenue model to demonstrate successful operation and maintenance of the state middle mile without the need for additional General Fund moving forward.

Considering the condition of the General Fund throughout the budget forecasting window, Cal broadband recommends the Legislature delay the unspent funds to the out year and adopt the budget Bill Language requiring Department of Technology to provide the Legislature with a business plan for operating, maintaining and innovating the state's middle mile infrastructure. Thank you.

Thank you. You can pull the mic up and scoot. There you go.

Hello. Good afternoon, council. My name is Javier. I'm with Alliance Fair Better Communities. I am from the underserved communities you are talking about, and I am for the full support of the governor's legislation with the full budget intact. Thank you.

Thank you.

Hello. Oscar Magaña with Everyone On, also in strong support of MMBI. Also here representing those communities that you're talking about. It doesn't matter where those communities are, whether they're in Southern California or Northern California rural areas. Everyone needs access to the Internet, equitable access to the Internet at that. Studies show that folks also who have the digital skills, foundational digital skills, to be competitive in the 21st century economy, are going to make, on average, $8,000 more a year. That all goes back into our communities. But it's not enough for us to teach digital skills to people if they don't have the access. So please complete the Middle Mile. Thank you.

Thank you. And any last comments? All right, I want to thank you for presenting. All right, we are moving to issue number six, privacy protection agency. I'm going to go ahead and have each panelist introduce yourself, and then we'll go ahead and begin comments.

Good afternoon, Madam Chair. I'm Von Chitambira, Deputy Director of Administration.

Chair, my name is Maureen Mahoney. I'm the Deputy Director of Policy and Legislation at the Privacy Agency.

Charlene Manning, Department of Finance.

Taylor McRho, Department of Finance.

Brian Metzker, LAO.

Thank you and welcome. And you may go ahead and begin.

I will be presenting the BCP and Maureen Mahoney will be presenting rulemaking activities with respect to automated decision making and risk assessments. The CPPA's mission is to protect the privacy of Californians. Is that better? The CPPAS mission is to protect the privacy of Californians.

We are tasked with the implementation and enforcement of the nation's first comprehensive consumer privacy law, the California Consumer Privacy act. The CPPA is an independent agency created after California voters approved Proposition 24, the California Privacy Rights Act of 2020, which amends and extends the California Privacy act of 2018. The agency is governed by a five Member board who are experts in privacy, technology and consumer rights. They are appointed by the Governor, the Legislature and the Attorney General. Now, moving on to our budget.

CPPA is requesting $177,000 from the General Fund and one position in fiscal year 2425 and ongoing. This is associated with a cost of living adjustment outlined in Civil Code 1798199.95 to implement and enforce the California Privacy act of 2018. The request also includes budget Bill Language outlining the process for operationalizing the caller adjustment.

The caller will be used to find a graduate legal assistant in our legal division, which will provide assistance with a significant amount of the legal division's workload, including reviewing and responding to public comments, researching legal issues pertaining to privacy and technology, and assisting with drafting time sensitive regulations. And now I'll pass over to Maureen.

Thank you, chair Maureen Mahoney with the privacy agency. The Committee suggested that I provide an update on the agency's rulemaking work, so we are preparing to issue regulations related to automated decision making technology and risk assessments pursuant to the California Consumer Privacy act. The CCPA specifically requires the agency to issue regulations to require businesses whose processing of personal information presents a significant risk to consumers privacy or security to submit risk assessments to our agency on a regular basis.

The CCPA also requires us to issue regulations governing access and opt out rights with respect to businesses use of automated decision making technology. We're currently in the pre rulemaking period. We've released draft regulations. We'll be next undertaking a statewide informational tour in May featuring in person meetings, the goals of which are to educate a broader portion of the public about the draft framework and to encourage engagement in our rulemaking process.

So we expect formal rulemaking to begin this summer and the regulations to be wrapped up in 2025. Thank you, and we look forward to answering your questions.

Thank you. Any comments or questions?

Taylor McRho, Department of Finance we have no comments at this time time.

Brian Metzker, LAO we have no concerns with this proposal.

And Assembly Member Quirk Silva. No comments or questions. Thank you for your presentation. Do we have any public comments on this item? Public comments see none. Thank you for your presentation. Thank you. Welcome. Department of General Services we have several of you, so if you'll keep your comments pretty short, that would be great. It's our 7th issue budget change proposals under the Department of General Services, and if you'd like to introduce yourself as you present. Thank you.

Wonderful. Thank you. Good afternoon, Madam Chair and Members of the Committee. Thank you first of all for providing me the opportunity to address the Assembly budget hearing today. My name is Ana Lasso. I'm the Director of the Department of General Services. DGS has worked closely with Govops Agency, the Department of Finance and the governor's office to balance priority services and take a thoughtful, sustainable approach to recent fluctuations in state revenues.

DGS is in accord with the administration's commitment to maintain investments in safety, climate change and sustainability while maximizing the efficiency and use of existing state resources. Accordingly, DGS's budget request includes several proposals consistent with these values. I would like to now introduce Heather Carlson, BGS's chief financial officer, and thank you again for letting me introduce.

Thank you.

Good afternoon, Madam Chair Members. Heather Carlson, chief financial officer with the Department of General Services. The agenda does a good job of laying out the budget proposals for you for Department of General Services, six budget change proposals and one suggested proposed trailer Bill. I'm just going to give a quick summary. The first proposal before you is for $4.2 million from service revolving Fund and 36 positions to manage, operate and maintain the newly renovated Gregson building. I'm sorry, Gregory Bateson building.

Can you, what is the Gregory Bateson building?

It is the, it's the name of a new run, renovated. I do have somebody in the audience. I'm fairly new.

That's okay. That's all right.

Randy Katz, Department of Finance the Gregory Bateson building was completed in the 1970s. It was traditionally was the home of the Department of State Hospitals, Department of DDS, then the new Clifford Allenby building as they've relocated there, and the Bateson will be repurposed for other departments and consolidations.

Thank you again. Heather Carlson, Department of General Services the second proposal before you is for $2.5 million in the budget year, 2.6 million in fiscal years 202526 through 2930 and then $886,000 ongoing from the motor vehicle parking facilities money account. This request is to pay for the statewide increases associated with operational maintenance and repair costs on state owned parking facilities.

The request will ensure that fire life and safety construction improvements to state parking facilities are completed and prevented a backlog of scheduled preventative maintenance and avoid more expensive deferred maintenance projects.

The third proposal in the agenda is a request for 1.2 million from the service revolving Fund for three years to Fund increased vehicle maintenance and repair expenses for the fleet at the state fleet at the vehicle leasing program, maintenance and repair costs have increased by 20% since the 2021 to 22 fiscal year and we DGS leases approximately 4600 vehicles to over 77 departments statewide. The inability to maintain these current service levels could lead to breakdown of vehicles posing safety risks.

The fourth proposal before you is a request of 1.8 million in budget year and $1.6 million ongoing from various DGS funds as well as 14 positions to ensure increasing technology business needs are met and implement the next phase of the governor's Cal secure initiative. The fifth proposal before you is a request of $4 million from the service revolving Fund to support the increased costs and required paper and commodities used by the Office of State Publishing.

Over the last three years, we've seen a 40% increase in the cost of raw materials and paper commodities. The increase does not appear to be short lived, so we're asking for an ongoing augmentation. The final budget change proposal before you was a request for an ongoing $599,000 in the service revolving Fund and 66,000 from various DGS funds and four permanent positions to support increased sustainability contracts and analytical services to better respond to statewide sustainability directives.

The Office of Sustainability has seen a significant increase in their workload over the last few years, most notably since 2019, our clean energy unit has experienced a doubling of the project workload and is experiencing delays in projects. Absent approval of the request, we feel that sustainability projects efforts will be further delayed. The last proposal that is before you for DGS is a change trailer Bill change.

It is to remove a sunset clause from existing statute that authorizes the use of traditional design Bill contracting measures for public works projects. DGS has been authorized and utilizing this design build for its largest project since the 1990s and has utilized this delivery method for approximately $5 billion in projects this since its initial authorization.

These projects have a far better track record with respect to schedule and budget and design bid build, and DGS has never had a claim or labor issue with any of its design build projects. The most recent example of this process is the MeI Lee office complex, the largest project DGS has ever undertaken, which was completed ahead of schedule and significantly under budget. The proposed trailer Bill will ensure that the delivery method can continue to be utilized for not only new projects, but currently existing projects.

With that, there are some subject matter experts in attendance with me today if there's any specific questions on any of the specific proposals. Thank you very much.

Thank you. Questions or comments from Dof and Lao?

Natalie Griswold, Department of Finance nothing to add at this time.

Thank you.

Thank you Madam Chair Jared Sippel with the LAO. We just have comments on one of the proposals, the $4 million in ongoing service revolving Fund for the Office of State Publishing Material Purchase Authority. We're recommending approving this for two years as opposed to ongoing as proposed by the Governor. We find that the ongoing need for additional resources is uncertain because it's unclear how long the current paper supply issues will last.

Relatedly, we think it could also make sense for the Legislature to consider similarly modifying ongoing funding that was provided in last year's budget for a new warehouse lease to store additional paper and related materials, as the Office of State Publishing will be reevaluating the need for this warehouse in two years.

Thus, the timing would align such that the Department could more holistically reassess the ongoing need for both purchasing and storing an increased supply of paper and related materials and submit a request for ongoing resources at that time. Thank you.

Thank you. Any other comments.

I think that covers it all. Thank you. We appreciate you being here. Any comments from the public? All right, issue number eight, emergency sleeping cabins, which would be also called tiny cabins or homes as emergency sleeping cabins. If you would like to introduce yourself.

Absolutely. Jason Kenney, Chief Deputy Director for the Department of General Services, and thank you for the opportunity to present on the I'll call them tiny Homes initiative. They are technically called emergency sleeping cabins. This is by way of background, because they come in a variety of types and configurations, and they are intended to be used on emergency basis, importantly, so that various aspects of the California building code can be waived.

In order to legally install and occupy these cabins, a jurisdiction has to issue a shelter crisis declaration pursuant to existing statute and recognizing the seriousness of the moment and the unhoused crisis in California, this Administration chose to partner with four local jurisdictions who were not only willing had those shelter crisis declarations issued and were serious about housing the unhoused in their community. DGS, given our expertise in real estate, was charged with helping these jurisdictions through this one time program.

We were allocated $80 million from the Behavioral Health Continuum infrastructure program, or beach it, and we began partnering with these four jurisdictions, specifically the City of Los Angeles, the City of San Jose, San Diego, county, and the city and County of Sacramento. In terms of where the effort sits and the steps taken to date. Immediately upon the announcement of the initiative, we began to solicit and issue a slate of contracts for the purchase of the tiny homes themselves. We issued different contracts.

These contracts allow for dozens of different types of tiny homes or sleeping cabins, a variety of configurations to be purchased. They are available not just for this effort, but they exist beyond it, so all jurisdictions in California can use them.

In doing this, we've ensured that the cabin specifications meet existing building code requirements and laws in California, some did not, and because they've been competitively bid, this greatly shortens the time to implement that jurisdictions face in their delivery of sleeping cabin villages or tiny home villages statewide. In addition to doing that, we also have partnered with those four jurisdictions I mentioned in their identification of locally owned property to install cabins.

This was a significant effort, with sites having to be vetted, especially for utilities to minimize cost impacts, and this was concurrent to efforts to identify the what that would be placed on the sites, as you can't merely install the cabins by themselves, they require by law, restrooms, treatment spaces, showers, et cetera.

Unfortunately, selecting sites did necessitate multiple rounds of site identification, but happy to report that while in the end, most, if not all of the sites are not actually going to end up being owned by local partners. They'll be leased, which has required negotiations with property owners, the leases themselves, in some cases federal approvals.

But the good news is that while one jurisdiction is finalizing the last few of their exact sites, all other locations have been selected, vetted as sites have been firmed up, the program concepts have been furthered. Our local partners have identified and approved their funding sources for their portion of the costs. And at present, each jurisdiction has either secured or committed their cost share. In terms of implementation. We've agreed to undertake one site ourselves in partnership with Sacramento.

So 175 beds out of their allocation we are installing for them. Construction is underway with underground utility work beginning this week for all other jurisdictions. We are providing funding based on a pro rata share of the $80 million and their cabin allocation via grant agreements. All of the jurisdictions have their local public works and engineering departments beginning detailed site designs that are required, and we are finalizing those grant agreements at present. But with that, I'm happy to answer any questions you might have.

Thank you.

Jared Sippel with the Lao. No comments to add. Thank you.

Natalie Griswold, Department of Finance. Nothing to add at this time.

Assembly Member Chris Ward. Well, first, I'm kind of excited about this. It's a long time incoming. What I'm interested is when you define tiny homes or as emergency beds, so what would that look like?

Is this an individual that might use this on a temporary basis for a very short amount of time, like a week or two, or is this more of the tiny home model where we've seen in other communities where they actually stay for quite a long time, or has that been defined?

Yeah, it will depend a little bit on each of the jurisdictions. However, I will say that we've all agreed to do this with a housing first principle. So the goal is to not only help folks transition from encampments around the street, but from the tiny homes themselves into more permanent housing because of the funding source as well, we've all agreed that there would be offers of a variety of behavioral health treatment options as well, both on site and offsite.

And so the goal would not be, you know, like, you know, a 30 day stay. The goal would be longer term duration where necessary, but short as needed for folks to be treated and to be able to get into more permanent housing solutions.

And you mentioned $80 million for how many in total?

1200 beds.

And so, doing the math, how much is that on the average.

The allocation we have translates into about 66.7 thousand per unit. The average cost of install with everything that goes along with making a functional village is closer to 100-120,000 depending on the site.

And the matching part comes from the county that is taking these units in.

Yes, yes, yes. And the amount is dependent on kind of their, their design. Each jurisdiction has different operating requirements. So, for example, San Jose likes to do more integrated clusters with ensuite restrooms as opposed to standalone cabins with concentrations of restroom and hygiene units. So different program, different costs, different utility issues. So they're all going to look a little different.

And San Diego is one of the locations for this. Do you have any comments about, about those?

Just, you know, again, thank you for the initiative. Trying to think about, you know, all solutions that, you know, can be able to help us address homelessness in our communities. What are you seeing? You know, it's frustrating. As a representative, an announcement, you know, that's more than a year ago, and here we are. We're still thinking through the mechanics of citing. Sounds like the funding has worked out as they are on both sides, state and local.

But the siting of it, the site preparation to act with emergency is not something that I can confidently take back to my community right now. So what are you seeing as some of the experiences that have sort of teased out some of the barriers and obstacles that you've encountered so that as we're thinking about other solutions that we're trying to Fund and scale up in our community that were not running into the same obstacles time and time again.

Yeah. So I'll answer that in two tranches. So the first one and the. I think it was a kind of a perfect storm of funding and intent, but not necessarily matched with sites that were at the ready. And so the amount of time it took to identify and then vet some of those sites, I won't put any jurisdiction on blast, but, you know, one site crossed two different sanitation districts.

The water line was either you're having to drill through somebody's backyard or you're having to go and replace a decent portion of a city street. And so those sorts of things, you know, do you do that site? Do you pick a different site? You know, what were those cost benefits? Some of those things took time, especially with limited Fund sources. The other piece is, yes, construction in General. There are still some critical pieces of infrastructure that have egregious delivery timeframes.

We have paid a significant premium on the site that we're developing to expedite the electrical aspect of things. We've sourced the transformers from those sites, 12 or 13 different subcontractors. The quotes were 60 to 80 weeks to get those pieces in. It's not a quick thing, unfortunately, depending on where these utilities are at and what needs to be done on a site itself. These villages are also, I think, more complicated than most would imagine.

I think the image of them are essentially, you know, the tiny homes kind of, you know, slapped down on a foundation. But one of the sites that we're working on had some soil issues. So the entirety of the site had to be scraped, lime, treated. They had, there's a federal stormwater requirement that the site was.

Was well suited for on the east side and had nothing on the west side as built, didn't indicate that there was a gas line that ran through the site at one point in time. And so there's a lot that we had to overcome kind of on a jurisdiction by jurisdiction basis, to be honest.

Yeah. It's frustrating for you as it is for us. What. And this was limited to state parcels?

No, no, no. It was, absolutely. We looked at our local jurisdictional partners to bring sites to the table. Some of them did suggest state sites in San Diego. Absolutely. Hamishah Road being a Caltran site in some cases. Other jurisdictions also proposed Caltrans sites. They fell out for some of the reasons I mentioned. And then in other places, like in Sacramento and San Jose, they have. They found either privately owned or quasi governmentally owned own sites and negotiated leases.

So San Jose, for example, it's the Santa Clara Valley Transportation Agency they're working with. Great. Okay, well, thank you for the work on this. I think it. Hopefully we'll have worked through some of the obstacles that they've encountered. Look forward to seeing those in use this year. Thank you.

Thank you. And that clarification really helps on why this took longer than I'm sure you hoped for. All right. Any public comments on this item? All right, we are moving through this. We are on issue number nine, update on state employee telework policies. All right, welcome, everybody. Please introduce yourself as you make your comments. Thank you. Welcome.

Good afternoon, Madam Chair and Members. Katherine Minnich, Deputy Director of Administration for the Department of General Services. As a background to the telework program, it was established pursuit to government code sections 14200 through 14203.

Existing law prior to the pandemic required every state Department to incorporate telecommuting as a work option. The Department of General Services published the current statewide telework policy in the state administrative manual, section 0181, in October of 2021. This policy replaced the the 2010 DGS model and established a new model telework policy for departments to use for their regular business operations. Irrespective of the emergency telework that occurred during the pandemic, the policy applies to all State of California agencies, departments, boards, commissions, and offices.

As I will refer to as departments, the statewide policy does not prescribe a specific specific minimum number of in person or telework days, nor what positions are eligible departments made. This makes this make, excuse me, make this determination the update on the telework and return to office policies initially, the goal of the emergency remote work policies was to keep employees safe from the COVID-19 virus and reduce its spread.

Although at the time the adjustment was not easy, departments transitioned to a model that fought followed existing stay at home protocols. As COVID-19 restrictions were lifted, state departments began assessing a balance of remote work and in person work which laid the foundation for a future workforce and workplace. The statewide telework policy issued in October of 2021 provided an updated framework for departments to develop their own telework programs.

Following on the pandemics, emergency telework, given the state's workforce and the citizens they serve, are incredibly diverse, the statewide policy provides flexibility for departments to sustain a hybrid work model and meet the needs, operations, and necessary services to their clients while nourishing a hybrid human centric workforce. In October of 2022, it was announced that the COVID-19 State of emergency proclamation would end on February 28, 2023 which provided an opportunity for departments to reassess their telework programs.

Taking into consideration the benefits of telework, they learned from the pandemic operations, the impact to their future equitable workplace culture, and the need to support Employee Development and engagement. The existing statewide policy on telework requires Department management to annually review telework agreements to ensure the agreement continues to meet the business needs and endeavor to provide 30 days notice to the employee in the event of a revision or termination of telework agreement. Out of the state workforce. The statewide telework policy does not cover all state employees.

For example, the California State University and University of California employees are excluded by statute as of January 2024. Of those that are subject to the policy, approximately half are eligible to telework based on their work functions as of January 2024. Based on the data from reporting departments, 93% of telework eligible employees telework in some capacity 33% telework five days a week on average 53% of telework eligible employees come into the office two or more days on average each week.

The telework dashboard was originally published data in 2022 as a case study. Given the rapid pace, the state workforce entered a primarily remote environment due to the stay at home orders. As approved by the Legislature, the funding for the DGS telework unit expanded buyers June 302024. The dashboard was always intended to end and followed a natural winding down as departments transitioned from the COVID-19 response to a resilient future. The dashboard displayed data through calendar year 2023 and has sunset.

However, the data remains available on the California Open gov portal, subject to DGS existing record retention policy policies. I turn over to Paul Starkey to speak about the stipend.

Thank you. Good afternoon, Madam Chair and Members. There's two parts to our presentation, so I'm going to take the easy part, which is labor relations, and I'm going to defer to the Department of Finance to give an overview of the Governor's Budget and the telework stipend.

Good afternoon, Madam Chair and Members of the Committee. Ryan Weinberg with the Department of Finance. The Governor's Budget proposes to eliminate the monthly telework stipend offered to state employees under their existing contracts within 17 of the state's 21 bargaining units. The Governor's Budget also includes 51.2 million in expected savings in 2024 to 25, of which 25.6 or half is General Fund in expected savings associated with eliminating the telework stipend.

The state has noticed the relevant unions of its intent to bargain over the election elimination of the tulip stipend, and we're happy to answer any questions you may have on this proposal. Thank you.

And Mister Weinberg stole my thunder. In fact, in terms of labor relations, when the Governor's Budget came out, it was instructed us to notify the unions and to discuss the elimination, which we have notified all the impacted unions.

Would you like to speak about that?

Nick Schroeder with the LAO the agenda lays out our comments in detail, so I won't go into much detail, but I'll give a very high level summary of our thoughts is related to the stipend elimination. We think that eliminating the telework stipend, either through collective bargaining or if it has to be imposed because it can't be achieved at the bargaining table, likely would result in erosion both to labor relations and also to the $26 million General Fund savings that they're assuming.

Thank you

Thank you for this presentation. I'm certainly aware of some of the conversation. It's ginned up recently. And I guess was your point to the Lao that just the act of needing to go through negotiations or would eat into that savings substantially just. Sure. So on the savings front, we think that we've been involved in the collective bargaining process for about two decades now.

And as observers of that process, we've seen that when there are concessions at the bargaining table such as this, there's usually some sort of trade off. And that trade off would erode the savings to some degree. It might not be completely eroded, but it would be eroded to more what is assumed.

So I'm wondering, as we had necessarily transitioned to telework, and then we have been adapting to the experience that workers have had recently, the flexibility that they get to enjoy, certainly monitoring performance and making sure that the work is getting done, but starting to kind of reflect on what that means for the future of the workplace, both in the public sector. Private companies have been wrestling with this as well. We certainly are.

We are probably enjoying some savings as well, too, in the form of energy consumption, potential rent, or the ability to consolidate workspace that we don't need at the same level throughout the course of a week's period. And so has that analysis been done, say, over the last year as we're out of the pandemic, but now kind of in this new timeframe where telework still exists, we are potentially realizing some savings. Have you looked to see what the state is saving from today's experiences?

Jason, do you want to speak? Jason Kenny will speak regarding this space.

Thank you. Yeah. So, for example, on the lease leasing side, since the onset of, we'll just call it more mass telework, we've been able to give up about 13% of the state's overall leased footprint, which is about 2 million. That translates into a savings of about 58.5 million annually. One of the nice things, about a two day a week minimum as well, is that that's actually kind of a sweet spot in terms of still being able to shrink or consolidate or reduce footprints.

And so we wouldn't expect savings to change or grow away because of this. Thank you for that. And I'm sure as this may continue for more permanent, or at least into the near future, as the ability to have. I agree, some in office collaboration is healthy and essential for a good team dynamic, but the ability for both the worker to benefit from not having a commute, to be able to recapture that lost time for their own quality of life.

We're seeing some signs that could increase productivity as well and happiness with what they are enjoying as benefit through their job. And knowing that we were instilling this benefit, the stipend to be able to help families support enhanced infrastructure, the broadband that they would need to be able to do their job was certainly the right thing to do. And now that comes with a price tag. We're noticing a savings over here for a benefit over there.

I think we're still winning, actually, both parties winning the workers and the state. So I would study this a little bit more carefully and I'm sure you're having those conversations. We're about to expend funds. Just entertaining, excuse me, and going into negotiations over this issue, but I would be very thoughtful about appreciating the benefits that we've enjoyed over, say, the last year and whether or not this is a sensible proposal given the savings that we've enjoyed too.

I would just add it's when you talk about how much the state is paying for the stipend, but then how much the state is saving for the leasing of office space, it's pretty close. I do think again, the individuals that are able to who work from home and enjoy that there definitely are benefits for family, everything that was just mentioned, and even in climate as far as people not commutating and so forth.

That being said, how did the Administration identify two days as the return to office standard? Because this week, if I'm not wrong, didn't he just down an Executive order that say, our state employees will return to work at least two days a week?

Katherine Minnich DGS in accordance with the direction provided on April 10, 2024 a mandated minimum of two days in person brings a balanced approach to enhance collaboration, cohesion, communication, better opportunities for mentorship, particularly for workers newer to the workforce, and improved supervision and accountability, balanced with bringing benefits and increased flexibility that telework provides through a hybrid approach.

Do you have any comments on that? Any other comments?

Well, with this item, particularly as was noted, this is going to be moving through the collective bargaining process and we just, I would just encourage the analyzing of the benefits of working from home, even three days a week in this model that I know a lot of people really support, and especially the younger generation, seems to really do well with this model and we've seen it in our own offices and so forth, and that I think we can get to a fair place.

And parents, of course, all of those things really do add to that. Like you mentioned, the happiness index, and more and more people want to be able to get home before it gets dark. All of you know want to be able to take a walk before work if they can, and so forth with that. Any other questions? Remarks? Any public comments?

Hi, good afternoon again. Daniel Schoorl with SEIU Local 1000. Just wanted to thank Madam Chair Quirksilva and assemblymember Ward for the thoughtful discussion. Again, we think that this proposed action through the budget process is misguided. We bargained in good faith our Members bargained in good faith to establish this telework stipend as a side letter in 2022, then continue to bargain in good faith to move that stipend into our main MOU, which includes nine of the impacted bargaining units. And we know telework continues to work.

And we really appreciate again, the discussion, but respectfully ask this Committee and the Legislature to reject this proposal through the budget process. Thank you.

Thank you. With that. Thank you all for being here for your comments. Appreciate it. And that will move us to our last issue, California Arts Council. On this issue, we will review grant funding programs for the outcome art counts on request for a trailer Bill related to the youth poet laureate position. You got to hear about all of the budget items under this Committee here. So informative. Yes, welcome. Please introduce yourself as you make your comments.

Thank you so much, Madam Chair Members. Yeah, my name is Danielle Brazell and I get to be the newly appointed Executive Director of the California Arts Council. I'd like to thank you for inviting our team to present on the agency's funding programs and our commitment to ensuring that our resources are distributed equitably and effectively. I'm joined by my colleague Ayana Kiburi, Deputy Director to my right, and together we look forward to uplifting the work of the council and our shared commitment to advancing the mission of the agency.

My thanks and appreciation to our Department of Finance colleagues Charles LaSalle and Jesse Romine. Thank you for being with us. Your support and guidance continues to be invaluable. Established by the State of California in 1976, the California Arts Council is a state agency with the mission of strengthening arts, culture and creativity as the tools for creative expression and the tools to cultivate a better California for all.

In fact, we are the only public arts grant provider as a California State agency with funding that's accessible to all 58 counties, and as a state agency, we support local arts infrastructure and programming statewide through grants, programs and services. We achieve our mission through the support and partnerships of the Governor and the California Legislature. California artists, nonprofits, local arts agencies. They are our triple bottom line catalytic partners, and they ensure the CAC is able to serve communities throughout the state.

And I want you just to think a little bit about the California Arts Council in terms of providing a web of support. And in some ways, we can go very broad with that netting because some cities and communities have a lot of cultural infrastructure and other communities do not. And so we work in a dynamic multitude of ways to be able to provide that netting to ensure that we reach all of Californians. And I want to recognize the fiscal challenges facing the state's budget this year.

The CAC and its leadership are incredibly grateful to Governor Newsom for recognizing the value Proposition of the California Arts Council by providing level funding for fiscal year 24-25. And again, for context, the California arts and cultural sector is incredibly large, diverse. It is businesses, its workforce, and it's a significant contributor to our state's economy and our identity. We're home to over 11,563 nonprofit arts and cultural organizations, and our creative sector accounts for 18.67 billion in assets and 15.4% of Californians total employment.

And I think you can think about the nonprofit arts and cultural sector as the workforce development program for the creative economy. And like every aspect of our society, the arts sector was deeply impacted by the global pandemic. We were the first to shut down and we were the last to reopen. But we never stopped working. We never stopped working because our arts and cultural workers and communities deal with the emotional impact and the physical impact caused by the pandemic.

And to mitigate that impact, the California Arts Council did receive an infusion of resources for the California creative core and the cultural districts. These programs represent exciting and dynamic new ways of working with local partners. And one example that my colleagues and I were just talking about, because we're getting some data from this that I want to just share with you.

In one of our creative core partners in Kern, county, they were awarded $4 million to hire artists to do work in the community around three critical issues, public health, environment and civic engagement. And they distributed those resources and those opportunities which created over 652 jobs in over 14 other Central Valley communities and counties.

And so I think the way in which we're seeing our potential of working not only as a direct public grant maker, but working with administrating organizations to be able to provide new resources in new ways as them being intermediaries, so they can drill down into deeper, provide deeper resources at the community level. I have a lot more I'd like to share with you.

But I think that I'd like to hold and just take a moment to say thank you for your interest, to remind you and everybody in this room that the California Arts Council is absolutely rooted in a fierce commitment to serving every community in a way that makes sense. We are a catalytic agency, and partnerships in the field with other state agencies are absolutely critical to our work, including the California Department of Corrections and Rehabilitation and state parks.

We believe there's room to grow, and we look forward to working with you and the governor's office, our partners, to do just that in the years to come. Thank you.

Welcome. Thank you so much. Ayanna Kiburi, Deputy Director. Do you have comments as well? No? Okay. Do you have any comments? Well, let me ask comments here.

Jared Sippel with the LAO. No comments at this time.

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

I had a few questions, questions for your grant funding for 2024, what would that be under the Governor's Budget?

The Governor proposed level funding for our agency, and I want to quickly move to my, which would put us. Right, so our agency is 26 million. The direct funding from the state is about 23 million.

And I know one of the things we talked about before we had this in person meeting was one of my kind of focuses on how do we make sure, or do you make sure, I should say, that underserved, vulnerable communities that don't have grant writers that don't have maybe the support, some of the cities that have more of an arts infrastructure are able to receive these grants. And do you keep data on those grants by region, by types of communities and so forth?

It's a fantastic question. And what we did is we took a look of our, our grants that we currently have, our 2023 grant cycle. Over half of our grantees, which we have, a little over 800 grantees, have a total revenue of just $250,000. What that tells us is that that's an indicator that we are reaching small arts organizations with direct funding.

Another way in which we're reaching organizations that are even operating less than that is by working with partner organizations who may not have the ability to apply. They just don't have the capacity to actually apply for state funding. And so these are two strategic ways in which we're doing that.

Another way is that we really go through a great deal of commitment and effort to ensure that our, our application processes are accessible both in terms of multi languages and in terms of being able to access the application in other ways. So those are two ways.

And then we have a vast network of nonprofit partners throughout the state and our state and local partners, where we have, we work with over 54 of our 58 counties that are sharing information about our grant proposals and our grant application deadlines. And then we do a tremendous amount of webinars, technical assistance and office hours to ensure that people can have access to our funding. Would you please? If I can.

Ayanna Kiburi Deputy Director for the CAC I wanted to just also add that the one entrance point to the grant to the grants are through our grants management system. So it's an online grants electronic application portal. And that already, you know, provides some barriers for some communities, as I heard you were talking about cable, you know, and having accessibility through that portal. So what we've been doing is looking at where we're not seeing applications, we're doing some geospatial mapping.

We have a new researcher on board to look at those where we're not seeing any applications throughout the state or in the state and, or those that apply. They started the application but didn't finish the application. So we're using those data to help us determine where in California we need to do more outreach, maybe even going out and working with our partners at the libraries to get into the communities and help them understand how to apply and be successful.

In addition, in our adjudication process, we are looking at not emphasizing the materials and the ways that the grants are written, but what's the, the content of the grant. So we're educating the panelists to make sure that they don't have any implicit bias when they're looking at the applications. And I think that's also helping.

And then do you also keep data on, I mean, because arts encompasses so much, it could be dance or photography or theater or all, you know, just arts painting through disciplines. Yes. Keep track of not only how many grants are going into those disciplines, but like you mentioned, the corrections. How many grants are going into corrections? Nonprofits, smaller theaters, larger theaters. What about multiple grants to either the same organizations over cumulative years? How does keep trying to take that one?

Sure. Ayanna Kiburi again, I think there are, we don't have currently restrictions that limit organizations in applying for, or we are starting, we are seeing more restrictions at the council.

We don't make those policies, but our council is starting to look at floors and ceilings for some of the grant programs so that an organization can't, with a large budget, can't take on more grant or multiple grants, and then not have enough funds for others to get granted so we are looking at, the council is looking at those, and they have implemented some of those floors and ceilings. And I would like to add the data that we provided through DOF.

You'll see that some organizations are getting more resources, and when you see that, they are likely administrating organizations who are actually partnering with us to drill down even deeper. So one way in which you can understand that is by looking at the artist fellowships, where we provide direct resources for established and emerging artists. Those administrating organizations are doing the work of the California Arts Council in making sure that they do the adjudication for those direct resources to artists.

And that model, if I could add that model actually De duplicates the work, but that we have to do at the agency so we can do more outreach to those communities that are under resourced or underserved. So I think that model shows that we have a commitment to being lean and mean in a sense, and really taking the staff work to taking it out into the community to help those applicants or those communities that aren't. We're not seeing any applications. All right.

And I'm not necessarily opposed to an organization getting more than one grant. I just, you know, with limited folk grants, you want to see as many arts organizations have some opportunity. But thank you. This clarifies for me some of the things that you are doing. Any last questions? Any last questions? We appreciate you being here. We know you spent your whole time finding out about all kinds of different things we're doing and the state here. Anybody from the public like to speak? Before we do that, we need to take a roll.

[Roll Call]

Any comments from the public? Please come on up. There's a friend of ours from the Arts Council of Orange County.

Good afternoon, Madam Chair, Members of the Committee. I'm Richard Stein, President and CEO of Arts Orange County. We're the countywide nonprofit Arts council and official state local partner for the County of Orange, designated by our Board of Supervisors. And as you heard, the state local partners is an important program of the California Arts Council. We're proud to serve the district of and be represented by Assemblymember Quirk-Silva.

And I'm here to urge your support for funding the CAC at or above its current level, which is less than it was funded at 20 years ago. California's innovation economy depends on the pipeline of creativity that the arts in our state provide. I just would also like to say that we were an administrator organization for the individual Artists program for Orange, San Diego, San Bernardino, Riverside, and Imperial counties this past year. This reduced the administrative burden on California Arts Council.

It increased the number of artists receiving these fellowships in our region because we know our region intimately, and we worked with our fellow county arts campus councils in those other counties. So let me just, bottom line tell you, you're getting more bang for the buck out of this agency than probably any other state agency. So thank you for your support, and I hope you keep supporting it. Thank you.

Hey, folks, Madam Chair Member Jason Schmelzer here on behalf of California Arts Advocates, want to support everything Rick just said, obviously, but a few more things. CAA is a lobbying organization representing thousands of nonprofit arts organizations in California and close to 850,000 workers. The CAC does an amazing job with very limited resources, as Rick just pointed out. I want to speak to that in a few different ways that were referenced in the analysis, if I could.

So there's obviously a massive demand for funds through the CAC. Roughly 54% of the folks who, who sought grants last year were not awarded grants because of scarcity of resources, not because of what the organization is doing. Public funding is a critical aspect of funding for the arts, and thats because equitable access isnt really possible with only private funding. The bulk of that private funding goes to urban, affluent areas, it does not flow to BIPOC communities, and it does not flow to rural areas.

But the CAC grants are, are substantially more equitably distributed. In the last funding cycle, roughly 30% of the funds went to BIPOC centered organizations, where only 18% of those of all arts organizations are BIPOC centered, and 11% of funds went to rural areas when only 9% of all the arts nonprofits are in rural areas. So we think that they're sort of meeting the challenge that's in front of them, and we support the organization wholeheartedly. Thank you very much.

Thank you.

Good afternoon. My name is Bob Lehman. I'm the Vice Chair of the San Diego County Arts and Culture Commission and the Executive Director of the San Diego Museum Council, which represents over 81 museums in San Diego. county. At a minimum, we urge you to keep the funding as it is for California Arts Council, but just want to say that one example in San Diego with the Museum Council is kids free San Diego.

That we do that reaches tens of thousands of families and makes the museums accessible, especially in underserved neighborhoods like San Diego's promise zone. 12% of the participants are from that zone, which only represents 5% of the population. So it really has impactful.

The funding that we get from the California Arts Council directly affects where we're able to go after those types of neighborhoods in the groups because the grants direct us to do that, and it's a good thing to do and it forces to do that, which is the right thing to do. Thank you.

Thank you. Any last comments? Well, we appreciate you showcasing what you do, and we know that sadly, too often the arts are one of the first things to be cut. So we're happy to see that that's not on the agenda. We. zero, sorry. We have one more person. Yes.

Thank you, Madam Chair, Marcus Detwiler with the California Special Districts Association here speaking with regard to issue number one related to charter schools and the calculation of EraF. I'd like to align our comments with previous speakers, including those from the County of Santa Clara, the urban counties of California, and the Rural County Representatives of California, and similarly urge the Committee to reject the administration's proposal at the appropriate juncture. Thank you.

Thank you. Hello. Sarah Brennan with Weideman Group representing NextGen California, one of the Member organizations in the California Racial Equity Coalition. We respectfully request the 2024-2025 budget allocate 5 million in ongoing funding to provide necessary resources to fully implement the functions of the Racial Equity Commission created by the governor's Executive order. Last year's budget allocated $1.4 million to the California Racial Equity Commission operations per year for three years.

We're concerned that this does not, will not be sufficient in giving the Commission the infrastructure it needs to effectively advance its goals throughout the state. The coalition understands the State of California's but this year's budget, however, the Commission must have financial resources to fill its due to fulfill its duties and develop a racial equity framework for the state. Thank you.

Thank you. Appreciate those comments. So from telework to arts to broadband to middle mild, we have some major issues to grapple with in this very slim budget, but we always appreciate your testimonies and thank you for being here. Thank you, Madam Chair. It.