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

For purposes of establishing a quorum. [Roll Call] Mister Chair, you have a quorum.

Thank you very much. First to note, I'll take a moment of personal privilege. Colleagues, if I might do something a little bit atypical, but probably should be done more often. Alyssa Wynn, Timothy Griffiths and Diego Lopez are outstanding professional budget staffers, and they don't often get the recognition that they deserve for the hard work that they do.

And we would not be able to conduct the state's business on these important matters if they did not have them and their talent. I want to issue also here an apology. It's a little embarrassing, but I think it's appropriate that I mention it.

I rarely ask anything of staff on a weekend, and because of not feeling so great, you might remember last hearing, I could hardly speak. I asked if we were able to have a briefing over the weekend. Because of an internal miscommunication in my office.

Yours truly was not present at that briefing, and this was a time that some of our fine staff had moved their personal schedules around to accommodate me. So I want to apologize to you all for that. And I want to just ask this audience to maybe help me show them some recognition.

We couldn't do it without them, so I appreciate them very much. And with that, we will get down to work. As you can see from the docket, issues one through eight will be later for vote only items.

Items for discussion beginning with the Governor's Office of Business and Economic Development, GO-Biz will be issues taken one at a time. Issues 9 through 14. So please come forward along with the Department and ledge, I guess we're cramming everyone at the same table these days, so I'm told.

So make yourselves comfortable, and, of course, as always, state your name and title for the record and proceed when ready. Welcome.

Thank you, Chair Padilla. Colby White, Department of Finance. So the first issue before you today is the Cal Competes grant program. The Governor's budget proposed 50 million in one time funding, plus 10 million carried over from the prior year for fiscal year 24-5 on a one time basis.

This follows three fiscal years where the program has received 120 million in one time funding each year. The May Revision proposes to withdraw that 50 million in funding, including the 10 million that's carried over from the prior year, and to revert that 10 million to the general fund. Thank you.

LAO have a comment?

Brian Uhler, LAO. This action is consistent with our earlier recommendation on this item, so we recommend approving.

All right, I'll bring it to the Subcommitee. Senator Niello.

Thank you, Chair. Has there been any outreach to local economic development organizations like the one here, the Greater Sacramento Economic Council, to find out how effective these tax credits are? These local entities are largely dealing with out of state companies to locate locally here and would have a unique perspective on the effectiveness as a tool for their efforts.

Sure. Lauren Greenwood, Deputy Director of Legislation for GO-Biz. Yes, our Cal Competes unit as well as our California Business Investment Services unit interfaces very frequently with businesses, trade organizations to ensure that they're putting forward the most attractive resources and incentives to attract those businesses to locate in California. So we definitely can continue that outreach.

Happy to take feedback on other ways that we can work with these stakeholders to ensure that our state is packaging the most attractive resources as we can.

Do they generally relate these programs as helpful to their efforts?

Yes, I would say so.

Thank you. I have a question in terms of with this State Trade Expansion Program, STEP, how much is focused on attracting and growing green sector industry here in the State of California? Can you talk about how our climate goals are prioritized through these federal dollars?

Lauren Greenwood, Deputy Director of Legislation. You know, I believe that might be with our international unit, and so I don't have the details on exactly which sectors they're targeting. So I'd be happy to get back to you on that.

Just to reiterate some earlier sort of thoughts. I mean, as we look at incredibly constrained scenarios, there are often no good choices. But here I've spoken before of my personal philosophy that we need to be thinking about protecting strategic investments and the types of expenditures that I would characterize as strategic.

In other words, I have some reasonable probability of being able to leverage long term returns on critical things like developing evolving industries that are ripe for attraction of investment and new jobs, things that are linked or directly relevant to critical emerging opportunities for the state, for example, like Lithium Valley.

And I know that sounds like a district only concern. I've argued here many times in other places. This is a statewide issue that has some tremendous return on investment capability here. So I always think about when we are being constrained, are we also being strategic? And I'm not so sure that this is that move.

I wanted to make that known as well. So if there aren't any further discussion or comment, I thank you. This item will be held. We'll move to item 10, which is to reduce the proposal to recapitalize Infrastructure State Revolving Funds. See if we have new presenters on that. Again, welcome, and please proceed when ready.

Hi. Charles Lasalle, Department of Finance. The May Revision includes a number of general fund solutions. That's what this first one is here. The Governor's Budget included $50,000,000 one time for the general fund to recapitalize this fund to support low interest financing loans specifically for local governments, public infrastructure projects.

This solution reduces this investment by 20 million to maintain the fund solvency and continue offering low interest loans for 24-25. Are we talking about the ISRF right now?

LAO, did you have additional comment?

Notwithstanding potential merits of an allocation in this area, our position continues to be that you should reject the funding entirely.

Charles Lasalle, Department of Finance. The 2022 Budget Act included $6 million general fund in 22-23 to bolster the Technical Assistance Expansion program and support increased demand. And then that also included 23 million annually thereafter to provide services to underserved business groups and businesses in low wealth, rural and disaster-impacted communities.

This solution reduces the program to $10 million for the next two years and then restores it to $23 million in 26-27 and then ongoing.

LAO?

We would just point out that since the allocation of the additional 6 million per year was made in the 2022 Budget Act, the state has received 25 million in federal funds to provide similar, although not entirely the same, type of technical assistance for small businesses in obtaining loans.

So that amount is roughly about the same as the amount of funding that is being proposed to be cut under this proposal.

All right. So the architecture of the program is to focus on underserved small businesses that typically don't have equity when it comes to access. How does this align with that?

Sure. We are fortunate-- Lauren Greenwood, Deputy Director of Legislation for GO-Biz. We are fortunate that the Office of the Small Business Advocate is receiving federal dollars at $25.3 million over five years, and that is also focused on supporting capital readiness for socially economically disadvantaged individuals, very small businesses, and small micro enterprises, small businesses.

So there is some overlap with the Technical Assistance Fund. So we'd be hopeful that those communities would still be assisted, although not as greatly as with the technical assistance program currently.

Charles Lasalle, Department of Finance. I'll also add that recognizing the importance of this, which is one of the main reasons we maintain the $10 million and then restore it to $23 million and 26-27.

All right, to the sub. Senator Niello.

So presumably the intent of this is really fundamentally economic development, improving the competency of small businesses, job creation, ultimately additional tax revenues. Do you have any data on that sort of return?

Yes, I don't have that at this moment, but I'm happy to get back to you with some of the types of businesses that our current technical assistance program supports.

Senator Smallwood-Cuevas?

I just want to follow up on that. Can you say a little bit more about technical assistance? And then what would be the impact of the state pulling back this $10 million and then restoring it? Is there a sense of what support would be disrupted with the gap in the funding?

Sure. Lauren Greenwood, GO-Biz. So technical assistance is a very broad term, and it can mean a lot of things. So under the federal guidelines, specifically, the technical assistance will focus on accounting, financial, legal, technical assistance services.

And then, however, the current technical assistance program with the Office of the Small Business supports a wider scope of technical assistance, and that includes providing a diverse suite of services which enables businesses to reach more markets within the state and not only limited to legal financial accounting services.

So it'd be like marketing, helping develop a business plan, business development, potentially supporting some human resources' questions. One on one counseling and training support, enabling them to grow and scale and further support their business plan. So under the current program, there's a bit more latitude of services that can be offered.

Just with the federal program, it is more limited, and that's because it's specifically supporting the $1.2 billion in federal funds we have that is given for capital loans. So the Small Business Loans program with the iBank, the treasurer's office also gets some of those federal dollars.

So the current federal dollars are really focused on helping small businesses and businesses access those loan products through the federal guidelines.

Just noting how the technical assistance a lot is core service and that accounting and legal support, so many small businesses do rely on that, and then the ability to scale. So it seems like the state provides a series of supports that the federal dollars do not, and that would leave small businesses vulnerable with those funds.

And do you have a sense of how many businesses access the state investments that are proposed to be cut?

I do. I'd have to get back to your office on that. Thank you.

Are there any other comments or questions from the sub? We'll move to-- That item will be held. We'll move to issue 12, additional delays to the City of Fresno infrastructure plan funding. Please proceed.

Charles Lasalle, Department of Finance. The 2023 Budget Act included $250 million to support the City of Fresno's public infrastructure development plan. GO-Biz has allocated $50 million in 23-24 to the City of Fresno. This proposed delay pushes the funding out to- the full 200 million, out to 26-27.

All right. LAO?

No issues to raise on this item.

All right. Any comments or other questions from-- Senator Niello?

A significant part of the spending is the high speed rail station, right? Somebody doesn't like that. What is the projection of the time by which that station would be needed?

Sorry, the question was at what time would the project be completed for the high speed rail?

No, what time will it-- By what time will the station be needed for the operation of high speed rail, which we've known by recent reports back to the Legislature, is, shall we say, somewhat challenged. So what's the projected time by which that station will be needed?

We're going to have to get back to you on that. I don't have that information with us right now. I would suggest then that the spending might be a little bit challenged if we don't even know when the benefit of it is needed, because it is on a critical line.

I would suggest then that the spending might be a little bit challenged if we don't even know when the benefit of it is needed, because it is on a critical line. If you built it now, it would be sitting there an unused asset. So that's an important question.

I think the Senator's point is, have we looked at trying to quantify additional incremental or other costs that might be incurred by, resulting from the delay?

Lauren Greenwood with GO-Biz. I think some of the potential costs for delay that we previewed earlier in a previous hearing just would be typical cost of inflation, you know, extensions of contracts and ensuring that there's a workforce available to provide the construction and services needed to complete the job.

All right. Any additional? All right. That item will be held open. Issue 13, which is a sweep of Performing Arts Equitable Payroll Fund. Please proceed.

Charles Lasalle, Department of Finance. The 2023 Budget Act transferred the remaining funding, totaling $12.5 million, from two programs to support the Performing Arts Equitable Payroll Fund. This fund was established pursuant to SB 1116 of 2022 and was intended to support small performing arts organizations to hire and retain employees.

This is a general fund solution that would revert the 12.5 million back to the general fund.

Thank you. LAO? No comment to the sub? If none, then I will hold that item open. We'll move to 14, which is the savings from Small Agricultural Business Drought Relief Grant Program. Oh, I'm sorry, Senator. Smallwood-Cuevas.

No worries. Thank you. I was just curious about, in our district, there's quite a bit of industry around the performing arts space, and not just the performance space itself, but all of the surrounding restaurants and service providers in and around these centers.

I'm curious, is there a sense of how many workers would be impacted by these cuts of 12.5 million in terms of job loss if the administration were to take this funding back? Because typically when you stop the theater production, it affects a certain group of workers, but it has a ripple effect.

So I'm curious, just at the point of the deepest impact, we have a sense of what jobs would be lost through this cut.

Sure. Lauren Greenwood with GO-Biz. So the Performing Arts Equitable Payroll Fund was established in or signed into law in 2022, and so it just received its first appropriation last year.

Our team was working with stakeholders, including those representing the arts communities, to help, you know, the programs in statute, but still needs to be further fleshed out to create a program so folks could apply and get that money back to their businesses and support their employees.

So at this point, they are still in discussions on how to formulate the program and how many, what size of grants would make sense for the program. Those conversations were ongoing with stakeholders, so we don't have a sense yet of how many businesses this would support and therefore how many employees.

So, but definitely something that we can continue the conversation with stakeholders. And as this program potentially could receive a future appropriation.

So this money has not actually been let out yet. So there are no payroll debts on this funding at this point. Okay. Thank you.

Thank you, Senator. Any other questions or comments? If not, we'll move to the next issue. That item will be held, Small Agricultural Business Drought Relief Grant Program. Please proceed.

Charles Lasalle, Department of Finance. The 2022 Budget act included $75,000,000 one-time general fund to provide direct assistance to other eligible grant-- Sorry, to provide direct assistance to eligible agricultural related businesses affected by severe drought conditions. This solution reverts $5 million from this program back to the general fund as there are resources remaining in this program.

LAO?

On this item and the next one, we think that reverting unused funds from one-time allocations in the last few years is a good starting point for looking for budget solutions because those types of reversions tend to have potentially fewer impacts than if we were to make cuts into ongoing spending.

Fair point. Back to the sub, however, to follow on that. The other side of that is why are there remaining unallocated funds and are there applications that have been submitted that could have been awarded and haven't or could be? I mean, given that it is a one-time.

Sure. Lauren Greenwood with GO-Biz. So there are two components to the Ag Drought and Flood Program, one being the $20 million for flood and the second being the $75 million for drought. We've seen significant demand for the flood product.

That program was actually fully subscribed, and there's, I think, almost $20 million of excess demand that our office just wasn't able to fill due to the limitation of funds. For the drought program, that there is pretty strict criteria in being having to demonstrate lost revenues, and you have to have been in business prior to 2020.

And so there are a number of things that make it more difficult to access those funds. And because of that, and our team has worked extensively with stakeholders on outreach and meetings and trying to spread the word about access to these funds.

Despite that, there is still not enough eligible applicants that were interested in applying for the drought program, and therefore that's the reason for the excess funds.

Other questions or comments on this issue? Senator Smallwood-Cuevas.

--oversubscription? So was their funding diverted to address the 20 million shortfall and the flooding, or is this just to pull back all the 5 million in the drought funds? I'm just trying to understand how that, how the oversubscription was addressed, given the weather and the climate change.

Sure. Lauren Greenwood with GO-BIZ. Unfortunately, statute is pretty strict on how much of the funds are available to put into each category. So we weren't able to serve those that were requesting assistance for flood and not excess because the money is very-- It's dedicated to drought.

Yeah, it just seems that those folks were turned away and this funding was just untapped.

Any questions or comments? If not, we'll move to the next issue. That issue will be held open. Issue 15 is local government budget sustainability fund. Please proceed.

Charles Lasalle, Department of Finance. 2023 Budget Act included $50 million to support the Local Government Budget Sustainability Fund, which provide grants to counties facing significant challenges to near term budget sustainability. This solution reverts the entire $50 million back to the general fund.

LAO?

No additional comments.

All right, to the Subcommitee. Are there questions, comments? Seeing none, we'll hold that item and we'll move to OPR. Thank you very much. Issue 16 is department reorganization. We'll give folks a couple minutes here to reshuffle it. All right.

Please state your name for the record and proceed when ready.

Good morning, Chair Padilla, members of the Committee. My name is Russ Fong. I'm the chief deputy director for the Governor's Office of Planning and Research. And I do have in the audience Anthony Chavez, operations director for California Volunteers if we have any questions for him.

Well, first of all, I want to thank you for the opportunity to present to you today, the May revise changes in impact for 24 and 25. This quick presentation I'll give really covers items issues number 16, 17 and 18.

First, the May revise is impacting the Governor's Office of Planning Research in two main areas which I would like to highlight today. The first is the realignment of the office. This year's budget envisions the movement of a number of our programs under the OPR umbrella to other state entities and a rebranding of OPR's name.

The second is the creation of a new office separate from OPR, which will house the state's critical outreach and volunteer efforts in a more focused and cohesive way. This realignment will see the following programs within OPR reassigned to existing agencies which are better aligned with their policy objectives and subject matters.

First, the California Jobs First will move over to the Governor's Office of Business and Economic Development. Zero emissions transit roadmap will also move to the Governor's Office of Business and Economic Development and then finally, the California Initiative to Precision Medicine will move to the Health and Human Services Agency.

As part of the realignment, the governor's Office of Planning Research is proposing a name change to the Governor's Office of Climate and Land Use Innovation.

This renaming, along with a larger restructuring, captures the nature of the office's focus on delivering thoughtful policy recommendations and operating as an agile think tank focused on creating the best possible future for all Californians.

This effort is meant to realign OPRs with its core function and mission of fostering California's climate and infrastructure growth through informed and equitable land use decisions.

This effort also follows OPR's traditional role as an incubator of cutting edge programs, ideas and policy efforts within the state, with the ultimate goal of placing successful programs within agencies and departments that align with those policy objectives.

Along with this realignment, the OPR is creating the creation of a new agency called again the Governor's Office of Service and Community Engagement. This will comprise of California Volunteers, the Office of Community Partnership and Strategic Communication and the Youth Empowerment Commission.

This office will reserve the critical investments the state has made in outreach and volunteer capacity while providing a vehicle to enhance these efforts. This realignment represents not just a reshuffling of programs and offices, but a strategic initiative aimed at enhancing effectiveness, accountability and service delivery for the administration of these programs.

And then lastly, the May revise proposes general fund solutions that impact OPR, but we want to emphasize that the governor's proposed budget solutions will preserve the programs that OPR is making. Our effort will continue providing lasting benefits to communities throughout California while also contributing to a better fiscal outlook for the state.

We are excited about this next page in OPR's evolution, and with that, I'd like to turn over to Department of Finance for the budget solution. Thank you.

Good morning, Henry and Department of Finance. Just to clarify, did you want us to present these solutions to the Department, or would you like for us to remain at this issue? Regarding the reorg?

And I just had a question for DOF. I mean, we're getting some of the articulation of some of the detail here in maybe revise, and I'm trying to understand the sense of urgency. Also, I want some comment from Lao following that on the rationale. Maybe I'm getting ahead of myself on putting zero emission vehicle into Gobiz.

Feel free.

Thank you. Luke Koushmaro with the Legislative Analyst Office we recommend the Legislature reject the proposed reorganization. As the chair mentioned, it may revise may not be the appropriate time for doing a reorganization. We do note that a reorganization could have merit.

OPR has expanded considerably in recent years due to new responsibilities provided to it, including issuing grants, implementing legislation and administering programs that are more in line with the traditional state Department.

As such, reorganizing OPR could have merit in the longer term and can improve transparency and accountability by having leaders who are confirmed by the Senate and staffed by civil service employees. In addition, a reorganization could better align functions with agencies that might have more relevant subject expertise, as the Administration has stated.

But the mayor revise provides little time to review the proposal. Notably, there's little time to evaluate the potential costs and trade offs involved in the reorganization, as well as alternative ways of approaching it. And this is particularly important with OPR as they touch on many key priorities of the Legislature, including climate change and CEQA implementation.

But while we haven't had time to provide an in depth review of the potential costs of the proposal, we know the Administration has stated that it would be cost neutral.

However, typically, reorganizations have resulted in increased costs related to issues such as realigning staff and responsibilities, establishing a new leadership team, relocating staff, purchasing equipment, and covering administrative functions.

Conducting such an analysis of these costs is particularly important so the Legislature can determine whether or not the organization makes sense for their priorities in the current budget situation, where we do not have enough General Fund to cover existing state priorities. As such, we recommend the Legislature reject the proposal without prejudice.

If the Legislature does want to visit the reorganization in the future, they could consider directing the Administration to go through the Little Hoover process, which is established in the state constitution.

Or it could direct the Administration to come forward with the proposal either through the policy process with a legislative sponsor or through the budget process in January of next year. Thank you. I'm happy to answer any questions you have.

Okay, we'll bring it to the sub, Senator Niello. Senator.

Thank you, Mister chair. With regard to this item and the following two, I frankly don't even know where to start. As I read through this, I had to smile with a bit of, I guess, comic entertainment. Excuse me for that.

The Office of Planning and Research, when I left the Assembly, was a relatively small Department dedicated to providing service to the Executive branch relative to planning and research. General mission based upon the needs of the time.

And since then, and I guess really in the last six years or so, the Department has exploded with specific initiatives within the Department based upon, frankly, I'm not entirely sure what. And now we're proposing to shrink the Department down, presumably to more what it was like before, but we're changing its name. That completely betrays that.

As I said, it was a provided General services of planning and research analysis to the Executive branch, and now we're calling it the Office of Climate and Land Use innovation, meaning it's just going to advise or think about issues with regard to climate change and land use issues.

I have to say this whole thing makes absolutely no sense to me. And the explosion of the Department has happened incrementally at different times, seemingly none of them coordinated in any thought of in any coordinated fashion.

And it would seem to me not only reject this, but take a look at what has happened, why it has happened, and should it have happened in the first place?

This happened in rather flush budget years, to which I have suggested that one of the ways to figure out how to cut back for the current budget year and the next few is to go back to the year, to the budget years, where we had huge surpluses and asked two questions.

One is, what would we have not done had we had a more even revenue stream? And then aside from that, what has been the result of new spending, either new spending on existing programs or new programs that were established during that time? What have they actually accomplished?

And through those questions, we've probably come up with many more program reductions than currently exist in the May revise. But maybe there are questions in there, maybe you can address what I've said. It just seems to me to be uncoordinated, untruly thought through from an overall standpoint.

And we have completely perverted that which was originally a useful service to the Executive branch and have, as I said, totally perverted that model.

So, Senator Niello, I just, first of all, I want to make sure I was clear. OPR is still around. The OPR. That institution was going to be named the Office of Climate and Land Use Innovation what we're also proposing is a realignment of an existing program within three programs within OPR to a new entity.

So we'll have the OPR, which will be the governor's Office of Climate and Land use innovation, and then we'll have a new entity called the governor's Office of Service and Community Engagement, which we took our core functions that are better basically focusing on community alignments and making sure that those community alignment programs statewide are all working cohesively together.

So OPR is still here. We're going to create a new function that's better aligned on, again, focusing solely on statewide community engagement. And as far as the growth, I completely agree with you. Our budget in 201617 was $54 million. Today it's proposed to be over $800 million. I agree. We've become, we've taken on a lot.

I think that term think tank has popped up and used a lot, which is also why we want to go back to our rebranding effort, which is to really focus on what our key core missions are, which is climate and land use. So partially agree with some of your comments.

And we're trying to get back to what we do really, really well and also realign for success our community engagement efforts with the new office.

So we're trying to address accountability, exactly what you said, to get better at what we do and not just say, just touch every single thing to get back to our increased performance and be able to be accountable for the programs that we have. And that's really the driver behind this reorg right now.

And it's really more of a realignment. We don't plan, we plan on using all existing staff as of today. Things could change, but right now it's all existing staff. We're still in the same building. We don't anticipate much or any additional cost.

It's just really focusing on what our key objectives are and to better realign so that we are able to be more successful and be more accountable. That's exactly what we want to do. So thank you for your time.

So what I heard you say is you're focusing or refocusing the office of planning and research. And you mentioned two organizational names. One is cited here, the climate and land use innovation. You also mentioned a community something.

Yeah. So OPR would be the climate and land use innovation office. The second office is groups, programs with already they're in OPR.

We propose to separate those and create that synergy, which that office would be called the office of service and community engagement and their sole focus would be on community engagement of programs statewide, and they have that same mission and vision, and we think those groups will work better together. However, we still be under the same facility.

Our admin shops, it shops, all those will still be the same. It's just more of a synergy realignment, not necessarily creating a whole new admin team and an operations team. It'll still be the same folks servicing this just in a better alignment, we believe.

How can it be the same focus as it was 10 years ago when OPR had a General focus, depending upon issues that came up, issues, all sorts of issues come up from the Legislature and elsewhere, and the Executive branch needs a capability to analyze that. But you have narrowed it now to just climate and land use innovation.

There seems to be a fondness for that word, innovation, but just climate and land use and then community focused issues. What about all the other issues that can come up?

Those won't be addressed, obviously, we'll address whatever initiative comes our way. But again, I think the driver that we want to do is to be really accountable for those key functions and those core functions that we've always had, the CEQA and land use and climate programs.

So it's not a matter of taking away so much, but really getting back to getting more accountable and more focused on the things that we do really, really well. Create some synergy on community engagement.

And again, if you think about these are realignments or an organization, we're still the same folks, the same people, the same resource, and the same ability to be able to take on new initiatives if that's what we're told to do. So we're not taking away anything.

I think we're getting better and becoming more accountable, which we felt was a little difficult. And the fact that we agree with you, we grew quite a bit in a relatively short period of time.

Well, I guess it's a statement, statement on the administration's behalf, and therefore on behalf of future administrations, that the focus is climate, land use, and then community engagement, which would tend to deprioritize other things that could come up if those are the true focuses.

The other point is that you address the fact that the Department has grown explosively in the last few years, becoming, as the staff report says, a bit of a Frankenstein Department. And so the attempt, I guess, is to demonstraze it and assign those individual functions to departments where they appear to be more relevant.

And one would have to raise the question, why weren't they established there in the first place? And as I said before, it would seem to beg an analysis timeout. Let's assess what we've done, what results they've produced, and whether or not we should even continue any of those.

So it just would not make sense to me to approve this as is, not to mention the rather late nature of the proposal.

Senator Niello, Senator Smallkovis, you have anything on this? All right, I think you get the point. I appreciate your patience and presentation. We will take each issue one at a time. We'll move to staff and budgetary augmentations associated with transition to civil service on issue 17. If you want to have additional presentation, please proceed.

Now, the other two bcps information technology unit foundation is really to continue the department's IT unit support and oversight and Administration of an IT shop. We did rely on a third party entity, and then we obviously outgrew that need. So we now have our own IT Department.

This request is just for dollars only, not positions, just to keep the infrastructure up and running. It's your basic email infrastructure items that we're requesting, the administrative workload. As you know, building a state office, it's like building a house. You need someone that builds the floor, the walls, the roof, everything.

So these are just the minimum requests to create an HR shop. Now that we're moving into a civil service Department, about 41% of our employees now are civil service, and we have to comply with those requirements, which is why we're requesting the administrative positions. Thank you, Elio.

Thank you. The Administration indicates that the proposals for these resources are not related to the reorganization. However, past reorganizations have typically resulted in changes to needs for support services, such as administrative services for examp. And this reorganization could as well.

For example, if certain responsibilities, such as precision medicine, are moved to another existing Department, the receiving entity might need additional resources, while the reconstituted OPR may need less resources. Similarly, creating a new and separate office calserv likely would result in new and additional resource needs.

Given this, we find the proposal premature, and we recommend that the Legislature reject the proposal and whether and when it makes changes in how the department's activities are organized across the state government and a detailed implementation plan has been developed, it may be appropriate to determine what resources are needed at that time. Thank you.

Thank you. I'll bring it to the Subcommitee. Senator Nealo.

In the previous item, it is stated that the finance letter indicates that this will result in net zero impacts on state resources. And yet in the very following item and the one after that, too. But in this one, the request is for about $1.0 million and six new positions. I'm confused by that.

Yeah, that's a good question. Senator Niello, this request is related to the fact that we're transitioning from a traditional or an untraditional Governor type appointing position, as you're familiar with, to a civil service Department. And so regardless of the reorg or if we didn't have that on the table, we would still need these resources.

Again, we have about 41%. Over half of our staff are civil servants. We actually need folks, you know, for in charge transactions. We have to recruit people for recruitment, training and development. We have a payroll transaction unit. We have eeo labor relations.

So these folks are to be able to create that house, that HR shop, that we're able to provide services for civil service employees. And the same goes with the it shop. These are just your basic minimum, nothing fancy, your emails and just things to keep our day to day job going forward.

Again, these two costs would occur regardless of what we do with the reorganization. This is just to keep the date, keep our lights on, as I would say.

You realize, of course, how this creates some confusion.

I completely understand. I'm sorry about that.

It begs the question again, I think to the Senator's point that we're asserting a new net cost even with significant transfer out of Department. And oftentimes those, those costs are assessed based on personnel demand, FTE, particularly when it comes to civil service compliance. So you can see how that seems a little misaligned.

All right, any further comment from the sub? All right, that item be held. Move to issue 18 funding for it. Additional on that. Did you have comment on 18? Additional comment.

For similar reasons as the last issue, we recommend rejecting this proposal.

Thank you. Back to the sub. Questions or comments from Members? I mean, we covered it, but I want to make sure that there's nothing we left outstanding.

Senator Yulo, I guess I'd have the same statement as before. Net zero call on state resources and then two items that are asking for increased funding.

And another question of a bit more General nature, but related to this, the part of the may revise was a elimination of vacant positions and an 8%, roughly across the board reduction in spending to be specified by relevant agencies and departments. Will OPR be participating in both of those actions? To my knowledge, yes.

Do you know what the impact from OPR will be relatively to each of those?

No, we haven't seen the details, but we will have that analysis once we work with Department of Finance to find out specifically what the details are.

Do you have vacant positions?

Yes, we do currently have some vacant positions about how many, I would say, due to transition. So again, I can see the confusion. And I want to first of all apologize to the community Committee. We had planned on transitioning to a state civil service Department completely separate a while ago. So that's been long underway.

The reason the resources are becoming now for the admin, and it is because we now have civil service employees. We never had that before. So that's the urgency to have the funds and the resource, the HR shop and the it infrastructure to support those civil service positions.

And again, that is separate from the realignment and restructuring and reorganizing. So I do apologize for that confusion, but the timing just kind of hit the same time. So I see where the confusion is regarding the vacancy rates.

As we transition, it requires us to put a hold on positions and transition what we normally call exempt positions to civil service positions.

So I want to say our vacancy rate is relatively high right now because of the transition, but we're now in the phase of actually implementing and recruiting for those positions and we're filling them pretty fast. And I'm happy to report we're getting a lot of applications for these type of positions.

So our vacancy rate, I want to say, is relatively high because, because we couldn't fill them or we didn't advertise them, we had to transition them. But now that they're being posted for the first time, we're finding a huge amount of applicants, qualified applicants, and we're happy to report that.

So you have vacant positions that now subsequent to the may revise dictating mandating that vacant positions being eliminated, you're going to fill them.

So until we're told not to, these are positions that we work closely with, finance that we're transitioning. Again, these were going through a transition of being in what we call an exempt position to a civil service position. These were purposely put on hold for that transition.

And now that we've converted them over working with Calhr, we're now able to post those positions, but we're moving forward until we're told otherwise. But yes, we will participate as deeded on whatever the restrictions are going forward.

One would have to wonder not to OPR, but to finance, to what extent similar situations exist in other departments where there are vacant positions and we're going to fill them anyway. I'd be concerned about that.

You indicated that, and this is going back to the prior item, that you've been thinking about the civil service issue for a while and yet you propose it 30 days before the budget's due. Does that make sense?

Yeah. Henry Department of Finance so as OPR touched on, the transition from exempt positions to civil positions actually began in the transition proposed in the 2023 Budget act. So this has been ongoing, and this is something that we're addressing now, and this reorg is now the next step in that process.

Well, I realize one of the natures of government is it moves rather slow, which is not a bad thing. Maybe we ought to do that in this case, too.

I'm curious how, with respect to the tech unit, how are we drawing a distinction, distinction on the demands of this infrastructure? With respect to how does a classified civil service personnel, employee draw a different demand on the technology infrastructure than an unclassified non civil service? Do they have a different demand and then draw a different cost?

I'm not quite understanding that.

Sarah Padilla so in so Padilla, I'm sorry. Not at all. Apologies. Civil service requires a, again, it's like building a house for it and admin. You have to have certain positions to be able to do certain things like process your payroll, do training, development. Those are required to have those positions.

In the past, folks just kind of did what they had to do to keep the lights on. But now that we have a civil service Department, Department were required and to be compliant to have certain positions doing certain things like the EEO officer labor relations.

Those things we didn't have in the past were required to have those now. And that's what you're seeing today for the increase in positions is to be compliant within civil service, but that's not.

Drawing the distinction to it.

So it, we were original services were from another entity that we outgrew. So the decision was made to move it in house to OPR. So this is a brand new it division that's going to support OPR going forward. And so we have basically brought our it shop in house.

Does LAO have some comment just to.

Provide some clarifying comments. In last year's budget package, there was a proposal to separate the technology that support that OPR was receiving from the governor's office to create their own standalone information technology services unit. And this is a continuation of last year's proposal to provide additional resources for additional it needs. That's helpful.

DOF additional comment yeah, Henry and Department. Of Finance, as LAO touched on, the 2023 Budget act provided to position COPR to establish their own IT unit.

And his proposal is to provide them an ongoing baseline it infrastructure so these resources will allow them to address needs in networking, cloud services, licensing, security and hardware as the governor's office is prepared to pull their support.

All right, we'll get to the sub questions or comments? All right, that item will be held. Move to item 19, which is reductions in the California Education Learning lab, and we'll give folks a second to reshuffle. Thank you. Welcome, and please proceed when ready.

Good morning. I'm Amin Singh with the California Department of Finance.

Thank you.

The mayor revision proposes reducing the General Fund allocation to the California Education Learning lab by $5.5 million in 2024 - 25 and 2025 - 26. The learning lab currently has a General Fund allocation of around $8 million per year to operate. This reduction is proposed as a budgetary solution in light of the current fiscal environment.

All right, LAO.

We have not raised concern with this proposal. Thank you.

All right. To the sub questions or comments? All right, we'll hold that item open. We'll move to issue 20, golden state awards. Please proceed.

Amin Singh with the California Department of Finance. As part of the May revision, the Governor proposes reverting $9.9 million from the Golden State awards program back to the General Fund. The 2022 Budget act provided $10 million for this program, and nearly the entire amount of that is proposed to be reverted.

Thank you, LAO. We do not have concerns with this proposal. Thank you.

All right. To the sub questions or comments seeing that US Senator Eladiata. All right, that item will be held. All right, scholars share Investment Fund is up next. Again, please state your name for the record and proceed when ready.

I'm Aman Singh with the California Department of Finance. The May Revision proposes pulling back $5 million in ongoing General Fund support provided to the California Kids Investment and Development Savings program, better known as CalKIDS. These funds were originally provided for financial literacy outreach efforts. CalKIDS is a children's savings account program administered by the ScholarShare Investment Board.

Finance determined that this $5 million reduction would be necessary to help bridge the budget gap.

LAO.

Lisa King with the LAO. The Financial Literacy Outreach program for CalKIDS remains under development, and so discontinuing it at this early stage is one of the less disruptive options the state has for achieving ongoing savings. So, with that in mind, we recommend removing the 5 million ongoing, as the May Revision proposes.

In addition, we recommend reverting any funds provided in previous years that remain unspent. This would add 9.5 million in one-time savings on top of the May Revision. Thank you.

All right, I'll bring it to the Subcommittee. Are there questions? Senator Smallwood-Cuevas,

Just a quick question. Californians have a CalKIDS account, and you mentioned, the, LAO unspent funding. Can you explain why those dollars were not spent?

Noah Lightman with the ScholarShare Investment Board. So, approximately 4 million people throughout the State of California have CalKIDS accounts. There's a newborn component to the program and a student component.

With regards to the non-expenditure of funds, we weren't given position authority to hire someone to work on this financial literacy initiative until the current fiscal year, and it took until November for us to be able to hire a qualified person.

And so just given our limited staff capacity, we've been so focused on the general operations of the CalKIDS program as is, regardless of the financial literacy effort, that now that we have someone in place, our plan is to work on a broader plan to engage people that already have CalKIDS accounts.

All right, additional questions or comments? All right, that item will be held. Thank you. Move to issue 22, Local Jurisdiction Retail Access Grant Program. Welcome. Proceed whenever ready.

Charlene Manning, Department of Finance. To assist in closing the projected shortfall, the May Revision proposes to revert 16,470,2324 for the Cannabis Local Jurisdiction Retail Access program, which was appropriated 20 million in the 2022 Budget Act. This reversion reflects the unobligated balance of the program and will not impact the funding provided to awardees.

Okay. LAO. No comment? All right. To the Subcommittee. Senator Smallwood-Cuevas.

Do we have sense of how this reverting of funds will impact the social equity sector of the cannabis community? We've seen in so many ways how those particular cannabis entrepreneurs are disproportionately impacted and left out of opportunity, and so this looks like this is a deeper cut in that opportunity. Just curious what we think the impact will be.

And also, how many applications have you currently received in this phase two effort?

Thank you for your question. My name is Angela Hill, Deputy Director of Government Affairs for the Department of Cannabis Control. For phase two, I'll start there. We received one application that we've awarded funding to that will not be impacted by this proposal.

On your question comments around equity, we made equity something that if a applicant in phase one or phase two indicated, they'd like to establish an equity program, that there was eligible bonus funding for them. In phase one, we had 12 jurisdictions out of the total 15 that have been awarded funding that opted to do this.

So, this equity funding is available for the local jurisdictions to fold in for fee waivers for developing technical assistance programs at the local level. None of that will be impacted by this proposed reversion.

So, in other words, the awardees that we already have, the 12 out of the 15 from phase one, they all get to keep that equity funding that we've awarded them. And then appreciate your comments, of course, on the state doing more.

But at least under this plan, all of those jurisdictions awarded the equity bonus funding will continue to receive that money from the Department.

Can you explain on phase two why only one applicant? Is it just the timing?

The timing. So, this program was intended to be rolled out and continue to have rolling applications. Phase two is really dependent upon how many retail licenses issued, whereas phase one was standing up the program. It takes a very long time, many jurisdictions experience, to stand up an equity retail program.

So, under phase one, you have to actually have demonstrated that there are equity, not always equity, just retail licenses issued. So, we've only had one eligible jurisdiction thus far pursue that.

I know it's hard to forecast these things, but if in a perfect world, is the sense that the same 12 would have come over into phase two because there would have been an adequate amount of time to integrate those strategies and to be ready for the next installment.

But the sense is that the delay in, and we know there are so many barriers and delays to the retail licensing process, the sense is that now, as the clock continues, those businesses won't have the opportunity to have the support if these dollars are pulled back. Does that make sense?

It does. It does. So, I'd say phase one awardees were not earmarked or guaranteed since it's really dependent on the number of licenses issued.

So, it's hard to say if within the number of years, if this proposal wasn't before us, whether they would ever get to phase two and all of that money from phase one is still given to them to support them in eventually issuing those retail licenses, regardless if they made it to phase two.

And I'd say, I think overall, it's just really hard to determine whether or not they would have been eligible to make it to phase two. So, it's just really too difficult to say. But appreciate your comments that there's a potentially, they could have. Yeah. Under the proposal, the grant will be treated as exhausted.

Thank you. Any other comments or questions? All right, thank you. We'll move to the Department of Tech. Issue 23. Let folks get reshuffled. State your name for the record. Please proceed when ready. When we have everybody up.

All right. Good morning, Chair and Members. Mark Monroe, Deputy Director for the Middle Mile Broadband Initiative at CDT, here to provide an update on the May revision relative to the Middle Mile Broadband Initiative. As I think everybody's aware, starting in 2021, the Legislature has allocated through several budgets a total of $3.873 billion to the project.

And so the, and having looked through that in the subsequent years, we have signed a number of contracts for partnerships, with, for leases, joint builds, for purchases, as well as moving forward with doing the, with Caltrans to partner on the preconceived of approximately as much as 4,000 miles.

So as we went through a lot of those efforts simultaneously this last January, we had identified that we needed, in order to get to the full 10,000 plus miles that we had been targeting, we identified that we would need another $1.5 billion that was included in the January budget.

The May revision removes that understanding that its hard times with, you know, relative to the budget and a lot of difficult budget decisions had to be made. One of those difficult decisions was to remove that $1.5 billion.

However, while that $1.5 billion is removed, there is provisional language included so that the Department of Finance could work with the Legislature to provide an increase at some point in the future here as need is reevaluated. So that's high level where we're at, and I'm happy to answer any questions.

All right, LAO.

Brian Metzger, LAO. We find the elimination of the proposed funding for the Middle Mile Network across the two fiscal years to be reasonable given the serious budget problem in 24-25 and projected budget deficits in future years.

However, we recommend the Legislature reject the revised provisional budget bill language that would allow the Administration approval of an additional 1.5 billion General Fund for the Middle Mile Network in 24-25.

As there is no funding set aside to support the augmentation, there is still incomplete information about the standalone construction projects that would be funded, and there is limited legislative oversight afforded by written notification of the Joint Legislative Budget Committee for such a large request.

Instead, we recommend the Legislature approve provision budget bill language that would, at a minimum, request more detailed information about those standalone construction projects that are funded by the current spending plan, and also request a business plan for the Middle Mile Network that explains how it will be maintained and operated going forward. I'm happy to answer questions.

All right, thank you. Bring it back to the sub. And to that point, there continues to be some frustration with respect to compliance and providing the detailed and transparent information. We had a report due March 1. When does program expect providing that information?

Yeah, no, thank you. So back as I mentioned, starting with SB 156 and subsequent budgets, the Department, including in all of the appropriations that were made for project, have been a number of reporting requirements. And so the way that we have handled those is to build them into our annual report.

And so in terms of the various points that are mentioned in the agenda, I can point Committee Members to which page of the report those are reported on. I can provide some summaries, but I went through again this morning just to make sure everything is there.

One of, and I do want to offer an apology because one of the things, when we mentioned in our annual report, we tried to cite the other, the various pieces of legislation to say that this is intended to meet all of these. And we did neglect to mention AB 102 when we put together the report.

And so the information that's listed here is there, but we neglected to identify it in the introduction. So I certainly want to offer an apology. But from our attempt, we've provided this information. The one piece of information, I think I would note, is that the second to last bullet talks about the enabling Middle Mile funding.

And so some of the members may be tracking that in 2022, the NTIA made $1.0 billion available for additional, for funding Middle Mile projects. And CDT was awarded last year, 73 million. But because we haven't begun to draw it down, we haven't encumbered any of it. It was not included in the report.

And so in the future we will include that, even if it's zero at the time, though, we don't expect it to be next year.

All right, do we have any changes in the demand estimates to complete on mileage?

We don't at this time. You know, we've, the $1.5 billion request was intended to get to what had broadly been our goal of the larger 10,000 mile network. Our approach at this point, given the budget, will be to look at our various priorities.

When we put together the 10,000 miles network, we had made it a priority to get through the disadvantaged community throughout the state, to reach those, to reach the unserved communities that were identified by the Public Utilities Commission.

And as we move forward with the existing funding, our intent with that will be to continue to move towards those priorities. And I think the best tool for that is going to be targeting the Federal Funding Account, or FFA, a grant applications that have been submitted to the Public Utilities Commission.

Some of the members may be tracking that. Almost 500 applications were received this last year for those grant, last mile grant projects. And of those, 107 have indicated the intent to sync to the Middle Mile Broadband or the MMBI network.

And so I think that would be, one of our highest priorities would be to make sure that to the extent that those are funded by the Public Utilities Commission, that we would target our existing resources to reach those.

Other Members of the Subcommitee? Senator Smallwood-Cuevas.

So I understand the commitment around disadvantaged communities and underserved communities. And in our hearing in April, I think it was our second hearing, I had asked for detailed information, a list on all the pre construction priorities.

And I think the consultants said that they would get back to the Committee with that information, including the most updated maps. We have not received that information.

And I just want to remind the conversation that we had that cuts were made to the Middle Mile Network that were not equitable, while 17% of the statewide network would be cut. South Central Los Angeles held about 77% of those cuts. Oakland, another 56% of their Middle Mile needs were also cut at the time.

So what exactly where exactly are the investments that you are proposing here being made, and when will we see what areas will be prioritized?

No, thank you. Look, I think the questions that you're referencing are relative to a proposal that, or a plan that CDT had put together about a year ago, almost a year ago, and we had, at the time, not had the information that we now have in terms of being able to reach some of the more specific communities that are participating in the FFA grant locations or FFA grant program.

So we will, I think that's going to be a major difference in our approach, is really being able to target some of those areas relative to some of the areas that you mentioned specifically in the Los Angeles area.

And I think Director Bailey-Crimmins had noted last time that there were, when we put together the map, there was a technical area or problem specifically in that area where some of the Caltrans construction had been left off of the map.

And so there was initial reaction, very understandably frustrating, because those are some of the most disadvantaged communities in the state, and we certainly didn't want to leave those off. And so those had been added back.

In terms of updated maps, the most up to date map is the one that's on our website, and that still reflects the fact that it still reflects the 10,000 plus miles that we have been moving forward with up until this point.

Now that, you know, assuming that we won't be getting the $1.5 billion, we'll have to go back and do some and reevaluate that. We'll have to go back and take a look at that 10,000 miles and see how we, how we allocate those funds.

And again, it will continue to be our goal to be able to get to those disadvantaged communities. We think, within existing funding, we're optimistic we can get to most of them. We're optimistic we can get to most or all of the FFA grant funded locations.

But that's analysis that we're going to have to do now, now that we are no longer expecting the funding.

And one other point I'll make is that in terms of where, in terms of Caltrans progress in moving sections forward to pre construction, they provide an update, and I think I provided an updated version for staff, but they provide updates at the Middle Mile Advisory Committee in terms of the total number of miles in each region by quarter that they would plan to have ready.

But one of the pieces of information that is still being addressed is that we went out with another solicitation for the so called RFI squared, where we go out to look for additional partners to do joint builds and leases.

We found that the first time we did that we were able to, because we were able to share the construction costs, we were able to get many more miles because the costs were reduced.

And to a large extent, when you're looking at the leased areas, we're going to be able to provide service well before the December 2026 deadline. So there's some real benefits to continue to pursue those. So we went out for another one of those and we're currently evaluating approximately 50 proposals.

So that will also change depending on what we're able to find there, what we're able to negotiate and agree to there. That will also change where Caltrans will be doing its construction. So all of this new information continues to provide updates, but we don't have at this time.

I know Caltrans does its estimates based largely and it models it out. And Caltrans, I mean, they build projects. I would say they're fairly accurate. They're pretty good at modeling these things out, but it's not the same thing as having specific miles that are decided.

In other words, the second quarter we're going to have this segment done, or in the third quarter we're going to have this segment done.

And so that's where they're continuing to work on all 4,000 miles currently while we're continuing to explore every opportunity we have for those RFI square deals. So, I'm hoping that the next MMAC meeting is, I believe, July 19.

Friday, July 19 I would love to be able to say that by then we'd be able to have more, I expect to have more information. I would love to be able to say we'd have, be able to provide revised information at that point. But again, we're in negotiations and so we'll have to see where we're at.

But that's what I'll say is in terms of the information we have thus far, what's on our website is as up to date as we have.

So you're saying after the budget is said and done, then we'll know whether or not our communities are either in the Caltrans projects or part of that last mile prioritization or part of all of the colliding factors that you just sort of laid out, but we won't have, you're saying the detail on whether or not, and for me personally in my district, which was the community that was left out, which the Administration confirmed would be prioritized in this round of budgets.

You're saying we won't know if that is the case until after the budget is essentially adopted, and then it's a wait and see, maybe.

Yes. I mean, that's, unfortunately, I think that that's partly the case. It's still our intent to be able to get to those areas. I mean, those are, you know, some of the highest priority areas in the state.

But I, we're not in a place yet where we can say exactly with the reduced funding, how that's going, going to look throughout the state. And we'll work as quickly as we can to get that information.

And what timeframe before our deadline to adopt this budget can we expect detailed information on all of the competing factors that you laid out? That gives us a more exact picture of what projects will be prioritized in what areas.

When it comes to the negotiations, I think we were hoping to be able to get through those by July and August.

It's a little faster than we were able to do it last time, but that's going to be a large determining factor in terms of what we're able to get, where those end up being, and then where we're able to build after that. So I don't anticipate having most of those, you know, reached a definitive point where we're able to sign agreements before July.

Well, if we won't see a map that shows, at least in Los Angeles, where the Middle Mile investments will happen, it will be very difficult for thousands of low income, marginalized communities to be able to go about, what I want to say is daily life. You cannot do your homework.

You cannot apply for jobs, you cannot get medical appointments. You cannot do all of the things that now the Internet is required to do because commitments that were made are being broken. And there's not a clear snapshot in terms of how we are putting our investments where are words were.

Which was that these areas that were left out in the last round would be prioritized in this round. But now we're saying we don't have any clear map or picture or clarity that these communities will, in fact, receive the services that they need.

That is an unacceptable response given how many times we have discussed this issue. I think in the last-I think the LA Times report we talked about in our last hearing, communities such as Beverly Hills were prioritized over South Central Los Angeles.

And it's a situation where we are putting what is the most expedient to do over what is the morally right thing to do, which is communities that have no infrastructure and no service, again, are left on the cutting room floor because it's easier to add on to communities that already have infrastructure.

And this sort of layout of information provided today just reinforces that this has not been an equitable process. This has not been a fair process. And again, our most vulnerable communities are being left behind. And these were the communities where our children were having to do homework at a neighboring Mcdonald's because their neighborhoods don't have Internet.

And here we are 2019-2020, 2022-23, 2024 we are saying they still won't and won't continue to have it because we can't provide an exact timeframe where we can actually see that these communities are prioritized.

It is disappointing to hear, and I hope that we can figure out a way to expedite, given all the great work that is happening with Caltrans, all of the federal application reviews that we can settle on, identifying what communities will be touched by these precious resources that we will need to expend in this budget.

We have to be able to make the right decision on how we invest those funds and that those hardest hit communities are prioritized.

And the Chair will strongly associate himself with the comments from the Senator from Los Angeles. It's to some degree greatly unacceptable and disappointing, and we need to do better. And I do question the methodology that we've used as to how we end up prioritizing it. And it can't be done just from an engineering perspective with that. Senator Niello.

With regard to that point, if I understand correctly, you're asking the Legislature to trust the fact that you'll have this information after the budget's adopted, and trust is fine, but in the words of a former President, trust, but verify.

As regarding a previous point, did I hear you to say that the report back as required by AB 102, you have done?

Yes. So we, SB 156 requires CDT to do an annual report, and so, and then subsequent legislation is added in additional reporting requirements. So we build all of that into our annual report so that we don't end up spending a lot of time doing it.

I don't think we've seen it.

It was released, I'm sorry, it was released in April. We'll be happy to reach out and give you the link, but it was released to the, I believe to the Joint Legislative Budget Committee in April, and so it's certainly out there and we'll be happy to provide a link to your office.

That'd be great. I have not seen it. And so without digesting that information and with regard to the previous questions, I don't see how it makes sense to unconditionally delegate to the Department of Finance the drawing on these funds. So it kind of doesn't make sense to me.

Senator, any other comments? Questions? Thank you. This item is held open. We'll now move to the Department of General Services. Issue 24, capital repairs, funding reduction in the May revision.

And state your name for the record. And please proceed when ready.

Natalie Griswold, Department of Finance. The May Revision proposes reducing the Department of General Services General Fund appropriation by about 7.1 million General Fund in 2024-25 and 2025-26. DGS receives an annual appropriation for capital repairs. Use of this funding is generally directed by the Joint Rules Committee of the Legislature.

Since the capital annex is currently under construction, the May Revision proposes pausing this funding for two fiscal years to address the General Fund deficit. Happy to take any questions.

All right. LAO? No comment. All right. To the Subcommittee. Operational impacts of any kind?

So, currently, this funding is directed generally by Joint Rules. There's currently some funding available for projects that are ongoing, but ultimately it would be up to the Joint Rules Committee's purview to direct the use of this funding.

All right, Senator Smallwood-Cuevas.

So, I'm appreciating this. Do you have any information on the progress of the repairs, and particularly in terms of equity related to that?

There's been concerns about, as we are investing in making our capital repairs, that we don't have evidence that underrepresented populations are being invited to participate in those opportunities, be it the large-scale capital improvement or some of the, you know, less resource intensive improvements.

Can you talk about how accessible the workforce is to engaging and participating in these dollars? And I'm particularly thinking about women and Black workers, etcetera.

Good morning. Heather Carlson, I'm the Chief Financial Officer for DGS. Generally speaking, this money is held in our Architectural Revolving Fund, but the individual contracts for the usage is done through the Joint Rules Committee, so we don't actually hold the contracts.

Having said that, I would say that it is a priority of DGS, and we have small business, disabled veterans, quotas that we try to use as much as possible in selecting contractors that we urge all state agencies.

We have kind of a limit of how much that we want to see go to those small businesses, disabled veterans, those kinds of vendors.

Can you give me a statistic on what percentage of the contracts are held by those groups?

Statewide or specific to this program?

Both, if you have them.

I don't have those at my fingertips, but I'm happy to take that back and get back to you.

It would be helpful to see it. One of the things when I was part of a bill, SB 150, where we're looking at the need to ensure strong labor standards, which I know the state does have in terms of its capital projects, but also that there are community benefits within those.

And by community benefits, we're meaning that there is a fair access and participation, particularly of underserved communities, disadvantaged communities, underrepresented communities in public capital and infrastructure projects. So, it would be good to see how the state is faring in terms of our own capital repairs in that regard.

We're happy to get that information for you.

All right. Any other comments on this item? If not, this item is held open. Issue 25, net zero greenhouse gas emission funding reversion reduction. Please proceed.

Natalie Griswold, Department of Finance the May Revision proposes to revert $2.5 million General Fund in 2023-24 and reduce the Department of General Services General Fund appropriation by 2.5 million in 2024-25 and 2025-26.

This limited term funding was originally appropriated in the 2023 Budget Act to implement Chapter 368, statutes of 2022, also known as SB 1203, which requires net zero greenhouse gas emissions in state agency operations by 2035. This current year, reversion and out year reduction is proposed to address the General Fund deficit. Happy to take any questions.

LAO? All right to the Subcommittee. Questions? Comments? Seeing none. That item is held open and will take us to the Governor's Office of GO-Biz Arts Council, issue 26. And please state your name for the record and proceed when ready.

Charles LaSalle, Department of Finance. We'll go the Arts Council reduction first. The May Revision includes a $10 million ongoing reduction to the arts grants administered by the California Arts Council. Their baseline budget to support these grants total is $24.3 million.

This is a reduction of $10 million to that allocation, bringing the total amount to be allocated by the Arts Council to $14.3 million ongoing. These are funds that are administered by the council that holds votes each year to determine how these grants are allocated.

Thank you. LAO? All right, to the sub. Senator Smallwood-Cuevas.

Just wanted to know, can you give us some examples of what types of grants have been awarded and funded through the program?

Yes. Hi, I'm Ayanna Kiburi. I'm the Deputy Director for the California Arts Council, and thank you for the question. The California Arts Council has been around since almost 50 years.

We've served as a catalyst agency to foster cultural vibrancy and community development, promote access, equity and diversity, and invest in arts education through grant programs, services, and strategic partnerships. We support arts organizations and content development, and our grant programs are varied. We have general operating grant programs that we invest a lot in, almost $10 million every year.

We also have project-based grants programs that are developed with an equity lens. We have a strategic framework that is based in equity. So, we have project-based grants for arts organizations that are intended to serve the communities, developed by the communities, and embracing creativity to have the communities thrive.

And how many grants were awarded?

We have about 870 grants that are awarded annually with the budget. With this reduction, we will see about $4 million go out the door next year.

Thank you, Senator. Any other questions on this item? All right, issues held open bring us to issue 27 trailer bill language to move the Arts Council to GO-Biz. Please proceed.

The May Revision establishes the, sorry. Charles LaSalle, Department of Finance. The May Revision establishes the California Arts Council within the Governor's Office of Business and Economic Development there. This is a net zero adjustment of resources as well as statutory changes to effectuate this transition.

Overall, this transition will allow for greater efficiency in state government as GO-Biz and California Arts Council share common goals around promoting arts and culture through the Creative Economy Working Group, Visit California, and the Office of the Small Business Advocate.

This partnership will create opportunities for broader engagement between the expertise of the California Arts Council and the cultural sector and the leadership of GO-Biz in economic and workforce development. Further, this reorganization will allow the California Arts Council to leverage GO-Biz's administrative support capacities. This will improve the Arts Council's general operations.

This proposal will not disrupt any of the California Arts' programming or activities and will provide increased operational efficiencies, especially within the Administration of the grant-making process. Additionally, this trailer Bill extends the sunset for the Keep Arts in Schools tax check seven years until 2032.

The revenues from this program support the Administration of the K through 12 arts programs.

Thank you. LAO.

Jared Sippel with the LAO we recommend rejecting this proposal without prejudice. The proposal could merit consideration if it resulted in General Fund savings to help address the state's budget problem. However, given that no savings are being proposed, we find little reason for the Legislature to consider this proposal under the compressed timeframes at May Revision.

We believe that such a proposal warrants greater scrutiny from the Legislature through either the policy process or earlier on in the budget process. This would give the Legislature time to ask questions, obtain input from stakeholders and the public, as well as ensure that any savings from operational or administrative efficiencies are identified.

And I'm happy to answer any questions. Thank you.

Thank you. Senator Smallwood-Cuevas.

I just had a question in terms of this transition, and it sounds like it's all the program is moving over. Does that include the staffing, the workers, and will they, how many staff are we talking about and will they all transition? This is not eliminating any positions.

That is. Charles Lasalle, Department of Finance. That is correct. This role does not eliminate any positions. Currently, the California Arts Council is approved for 24.4 authorized positions. All positions will be transitioned to GO-Biz.

All right, any other questions from the Sub, I take the LAO's input. If not, that item will be held open. Thank you very much for your participation and work. That will bring us to the public comment section of the docket. It's an opportunity for anyone to address the Subcommittee on a matter on the agenda.

And we'll take a minute to get folks resettled. Does this look right still the groupings and changes to the groupings? Yeah. That's it. Thanks, sir. 1 and 3, because this is from your updated update. This was the latest version you sent me yesterday afternoon. This is a script from 07:00 last night. So, have these changed?

It has.

Okay. So, these are the ones?

Yep.

All right, good to go. Quite, quite the crew here. All right. If we can kind of maintain order, we try to organize ourselves in line. Thank you so much. We appreciate your input. We know you have a lot of it. It's valuable.

When I recognize you, please state your name for the record and try to limit your comment to one minute. Welcome. Let's check. Sergeants can you check that audio for me? Just give us just a moment. Okay.

Am I live now?

You are.

Thank you, Senator Padilla, Senator Niello. Why am I saying that that way? I'm correcting everybody how to pronounce your name. And thank you, Senator Smallwood-Cuevas, for this hearing today. So I'm Lori Kammerer. I'm representing the National Association of Women Business Owners, California chapter.

And I wanted to let you know that we have 2,017 letters that are sitting right here that are from all different small businesses who are opposed to cutting the funding for the TAP, the technical assistance program for the small business development centers.

We have brought small businesses from all over California to Sacramento today so that you can hear their stories and how important the small business development centers are in their communities. I have letters from all of your districts, hundreds of letters from small businesses who have benefited with the technical assistance and training with the small businesses.

The cuts that are proposed would basically go from $26 million to $13 million, cutting half of the funding of the program, which means that half of the small businesses would receive technical assistance.

Half of your districts would receive, I should say you'd be cut in half as far as the amount of jobs that would be created, as well as the funding that would be coming in terms of tax revenue and everything from these small business starting up. So the program has been very successful.

I will be sharing letters with the Committee staff, but there's too many here to bring up, and so feel free to look through these representatives, small businesses from all of your districts, in these letters. So, thank you. We urge an oppose. Thank you.

Good morning, Chair and Committee Members. My name is Deanna Hurn. I'm a small business owner in Solano County. The name of my company is Miracle Math Coaching. We've been around for 16 years and would not have been around that long without tap.

I do realize that you guys have a really big decisions to make, but the thing that I really want to admonish you is that the time that we're in right now, especially with AI and technology, these funds are critical to make sure that small business owners like myself, underserved, first generation student, went into data science, came out of that, into the field of entrepreneurship, did not know anything.

And this program has really changed my business. I employ 15 different instructors. We go into the school districts, and we've been able to transform education, helping students to close gaps three times at the rate of school districts using brain based learning.

And so I just want to say that this program is absolutely critical, and I would not be where I am today without this program. Thank you very much.

Good morning, Senator Padilla, Senator Niello, Senator Smallwood-Cuevas. My name is Danny Fitzgerald. I'm the Executive Director of the Center for Business Advancement at Southwestern Community College in Chula Vista. I oversee the small business assistance programs that include the SBDC, the Women's Business Center, and our procurement assistance center that serves San Diego and Imperial counties.

We serve thousands and thousands of businesses that represent tens of thousands of jobs. The types of service we provide, in addition to, obviously, capital access, but also with business starts, but also, in particular for procurement assistance as well. We help companies access over $400 million worth of contracts.

These are new, diverse businesses that are able to access things. These are businesses like Imperial Pipe and Supply that are working on Lithium Valley today.

We want to make sure that these are the businesses that are local businesses, not just businesses that are coming into areas like Imperial Valley, but the local folks that are able to own the businesses, as well as hire folks from that area.

It's also businesses like WEPA Construction, which is a veteran owned, diverse business that's doing government contracting throughout the Southern California region. They've significantly grown now, employing well over 50 people, really being able to create that type of economic impact. And so these types of cuts would require me.

To probably cut down my staff of 120 advisors and consultants in half resulting in services that would be severely restricted. These businesses are not going to be able to receive that type of assistance. Thank you very much.

And again, as a courtesy, we welcome your input, but please limit your comments to 1 minute. Thank you.

Good morning ladies and gentlemen. My name is Sonia Morales. I am a small business owner and I operate a company called DirtNurses, which is a commercial janitorial service in Stockton, California. I recently just got certified through the program. I recently just received an award bid in the board of Stockton.

I'm also going up for another bid in June. This program has opened my eyes to opportunities that I never even knew existed, and my business is starting to grow and I see that. And without this program, I would have never known all these opportunities were out there. So I just wanted to let you know that. Thank you.

Good afternoon. My name is Xochitl Paderes. I am a Marine Corps veteran, 100% disabled, and I own a brick-and-mortar in Lodi, California. I also have a consulting firm, and I like to say that one of the biggest challenges post-COVID is actually keeping my doors open.

San Joaquin County was the longest county in the state of California of your 58 counties that kept my business closed. That meant I lost 19 of my employees. My trainers were gone.

So being able to pay my rent, $9,000 a month out of pocket. without having gym membership or any type of resources because I did not qualify for any of the funding that went through Go-BIZ because I did not have a net revenue. So post COVID, all of the requirements that are being set, I do not meet.

I have to supplement to keep my brick-and-mortar open by consulting and having federal contracts. But a lot of the resources and the knowledge that I've gained has been because of SBDC. The ability to certify, the ability to maintain, that is all knowledge base that has been gained through SBDC. Those resources are not available anywhere else.

To cut something like that is significant, but for me right now, I still have to keep my doors open.

Thank you for your testimony.

Good morning Chair and Committee. My name is Kristin Johnson. I'm director of small business programs for the research arm of Humboldt State University, now called Cal Poly. We strongly oppose the governor's 50% cut to TAP, and I want to make the point that SSBCI funds do not replace TAP.

There are different clients at different stages of business than the SSBCI, and they pay for different things. In fact, without TAP funding, it will be nearly impossible to fulfill on the SSBCI program because of the different types of businesses we're working with. I've personally seen the transformation that this funding supports.

You've received over 2000 letters from 58 counties. We ask you to stand with small businesses and reject the budget cut. Thank you.

Good morning, Committee Chair and Committee Members. My name is Kurt Clark. I'm the regional director for the Central California Small Business Development Center program. And our program strongly opposes the proposed cuts to the TAP program.

And just to give you a quick sense of the impact, it will, at a minimum, reduce the amount of services that we provide by 50%. That means at least 10,000 hours will have to be cut from our program. And to answer an earlier question that came up, what is this program returned to the State of California?

Every year, the National Association of SBDCs conducts a third party objective review of the program for the state of California. Every dollar invested returns directly to the treasury, about $1.50. And the multiplier impact to the State of California in terms of economic development is about $4 for every dollar that the state.

We again strongly oppose the cuts. Thank you.

Good morning, Chair, Members of the Committee, David Nelson, representing the National Small Business Advocacy Council here with the crew today in opposing this cut.

And as you're going to hear their stories about how this cut will, it's really an inequitable cut because as a 50% cut across the board will shrink, services and those who are hardest to reach and hardest to serve will be hit the most.

I appreciate Kurt's comment on the economic impact of technical assistance, but I did want to point out a couple other highlighted facts in Senator Padilla's district last year alone, the SBDC, 1453 of your constituents were served. Senator Niello, 3887 constituents and Senator Smallwood-Cuevas, just last year was 3126 in the SBDC network.

And more detailed parts of those statistics are available through Go-BIZ and the office of Small Business Advocate. Thank you for your time when we oppose this cut.

Thank you. My name is Claudia Viek, and I'm representing the California Women's Business Center Network, which is now 21 women's business centers and just recently acquired three, one in Senator Lola Smallwood-Cuevas's district. We're glad to say. I wanted to, I just want to be blunt.

We are really shooting ourselves in the foot with this tiny cut, which leverages at least another $30, $35 million. And I think other people made the point about the return on investment is. But I want to point out how it affects women in particular, because it was women whose businesses got us out.

Who helped us recover from the pandemic. So let's look at what the impact would be of this cut. We had 12,000 businesses that we started and grew last year, and they created 300 million in revenues. This 13 million cut, which is not, doesn't seem like very much, is going to eviscerate this program.

Already one minute?

Yes, ma'am.

Okay.

It goes quickly, guys. Quicker than we all like. Thank you very much.

Thank you, Chair Padilla, Members of the Committee, my name is Oscar Garcia. I'm the senior vice president for the California Hispanic Chambers of Commerce. On behalf of the hundreds of thousands of small businesses in the state of California, we ask that you please reconsider cutting the funding for this program.

I like to add that the SBDC network were the first respondents when the pandemic hit. We were the ones providing assistance, technical assistance, education and guidance to those businesses that otherwise would have lost their business. All those families were displaced. In turn, we have been able to help them thrive, rebuild their business, create jobs, stimulate the economy.

And thanks to them, I mean, a lot of minorities, Hispanics, African Americans, Asian, Native Americans, they're able to feed their families, they're able to thrive, and they also create jobs and contribute to the community, and not only in your community, regionally and statewide. So I ask that you please reconsider that and keep us funded. Thank you very much.

Thank you.

Good morning. My name is Ray Tatter. I'm long retired from the California Arts Council from its inception, where I worked for 25 years, the Organizational Grants Program. Excuse me. I'm shocked by this proposal to reduce its funds. During the pandemic, many arts organizations have been devastated. You won't see the Sacramento Theater Company anymore.

A half-century of serving the community with brilliant plays, youth education programs closed yesterday. I'm telling you, these cuts are proposed at a time when support funding is needed most. Those local audiences are beginning to return. There's a new crop of Californians that need to be part of the arts to work in the arts and enjoy them.

People from all over the world are starting to visit California again. I believe that they deserve to see theater, dance, literature, museums, and arts or education. Thank you. I think you get the picture.

Thank you.

Good morning, Chair, Vice Chair, Members of the Committee. My name is Tron Shephard, Sr. I'm a U.S. army veteran. I'm a business consultant with the Norcal Veteran Business Outreach Center. The VBOC mission is to support veteran transition members and military spouse that's interested in starting and growing their business.

Out of the 28 VBOCs in the United States, California actually have three. So, we have the NorCal, we have the SoCaL, and we have the Los Angeles Regional VBOC and we all service all 58 counties in California. On behalf of the VBOC, we strongly oppose the government proposed 50% cut to the Small Business TAP Resource Program.

A 50% reduction in funding could result in a loss of over 75% in support services to the veteran community and increase the veteran homelessness in California. We urge you to preserve the core services of tap and reject the government proposed cuts. Thank you for your time. Have a blessed day.

Good morning, Chair, Members of the Committee. I'm Johnnise Foster-Downs on behalf of the California Asian Chamber of Commerce, representing the more than 754,000 AAPI owned businesses throughout the state, we strongly oppose the proposed cuts for 50% of the Technical Assistance Program.

The Cal Asian Chamber manages the Minority Business Development Agency for Sacramento as well as the U.S. Department of Transportation Small Business Transportation Resource Center, which serves over 2,000 small and disadvantaged statewide businesses, which in the last year has resulted in over 150 jobs created, more than 4,000 jobs retained and more than $35 million of increased business capital.

The state's revenue, as well as your districts' really rely on our client's success which was mentioned earlier in one of the comments. Cutting 50% of these services really cuts to the core of providing support and services to small and disadvantaged businesses and will particularly be disproportionately, will disproportionately hurt small, minority, and women-owned businesses. We hope you reject these cuts. Thank you.

Good morning. My name is Maria Valenzuela. I am a C-45 licensed contractor. We've been in this trade for, we built our company, sign company, and we've been in business for 24 years. With SBTC, getting all the certifications just recently has helped our business or my business tremendously. We're getting now bids everywhere.

And I believe that our dream is becoming true, to be at a different level, to do more jobs where everything is just, it's just different for us. This is very wonderful with this certifications with, through SBTC. So please reconsider not cutting this program because it will help.

It's helping my business and it will help other businesses as well. That we know. Thank you.

Thank you.

Good morning. My name is Domingo and someone told me to speak in Spanish because they wanted to say something in Spanish, but I don't know.

I don't see anyone.

We would need to.

Who speak Spanish here.

They don't have a staff translator and I don't want to have to. My grammar is pretty, not that good.

Let me try in English. I came to United States in 1988. I'm a dreamer. And every time there's a challenge, I try to change, change to the best. When I got hit by COVID, let's say everybody got hit by COVID, the businesses went down. I have to change. That was a challenge.

Now I have 30 employees, a volume of $3,000,000. Seven of them are homeless. But I'm taking care of them. So now they came back to the living. If you cut SBDC, that was SBDC told me was like a, the dream that it was going down.

Two months ago, I met SBDC through my daughter came to me and said, SBDC is going to get you to certifications. So, I didn't believe it. I said, no, I'm too busy to go to school. Too busy to go to school. And my wife went to school.

So, I got to see it on the third Saturday and I was what? How come I didn't know this 20 years ago? Everybody holds a small business and need to know this. Small businesses need to be certified so they can open the market. So, they can open the market everywhere.

All the way to sba.gov, all the way to state, county, cities, federal. They need it. Nobody knows this. To me, I didn't know.

Bien. You did well. Thank you. Thank you. for your testimony and your patience. Welcome.

Thank you. Thank you. Good afternoon, ladies and gentlemen. My name is Alex Montoya. I'm a service-disabled veteran and small business owner. I urgently asked you guys reconsider cutting the budget because not only are you severing the budget, but you're also severing the network and the relationships and the community that we have built.

And I see it every time I go to these communities meetings, the cohorts at the Local Office of Education in Stockton, California. And as stated in the discussion on the issue, it will hinder us, and it will leave us vulnerable.

Because without these, this network, this community, that I bet I wouldn't be in the position I am today having the opportunities I am today. So, I urgently ask you guys reconsider that decision. Thank you.

Thank you.

Hi, Heidi. I don't need this. Heidi Pickman from the CAMEO Network. We're a network of 400 mission-driven organizations made up of small business, small business loan providers, as well as a lot of the business assistance programs that are here. We do not benefit from this program, our small businesses do, as you've heard.

California Legislature wisely invested in the infrastructure of small business support during the pandemic and over the last five years. And I call it an investment because you are getting an, a return on your investment, as others have stated.

If this investment is cut, the diverse entrepreneurs that some of them who we've met here will suffer the most. I just want to point out a McKinsey Report said that if Black entrepreneurs were on par with their White counterparts, that would add more than $1 trillion to the economy.

And these are the people, these are the organizations that are helping bring them on par.

Good morning. Chair Padilla, Vice Chair Niello, and Members of the Committee. My name is Scott Rogowski on behalf of Northern California Small Business Development Centers covering 36 counties, most of them rural, and the tens of thousand businesses that we serve, 50% are women and BIPOC owned.

We strongly oppose the 50% cut to Small Business Technical Assistance Program. TAP is a core service and safety net for small businesses to help them launch, create jobs, access money to build capacity. Without the SBDC TAP funding, these businesses will not grow and get access to the resources and guidance they need.

We urge you to preserve the core services Small Business TAP and reject the proposed cuts. Thank you.

Thank you.

Good morning, Committee Members. I'm Mary Ann Petrillo, CEO of West Center in Northern California. We host a women's business center and an SBDC, and we also lead the Blue Economy and Working Land Sector Table for the California Jobs First Initiative in our region. I'm here to express our strong opposition to the proposed cuts.

For 36 years, West Center has been instrumental in helping thousands of rural small businesses launch and grow. When the pandemic hit, 30% of our small businesses closed. In a county where 98% of the economy relies on small businesses, the loss of tax revenue was staggering.

TAP funding has been crucial in rebuilding our tax base, igniting new enterprises, and allowing us to create programs like Central Latino West, which serves hundreds of Hispanic Latino businesses exclusively. A 50% cut in rural communities like ours will feel more like a 70% cut due to the lack of alternative support networks.

Jobs will disappear, tax revenues will plunge. And all of this at a crucial time when Northern California is now poised to advance the growth of wind energy, innovative ocean and aquaculture research, biomass, and hydrogen technologies.

We urge you to reconsider these cuts as the future of our rural communities and the broader economic landscape of California depends on it. Thank you.

Hey there. Thank you, Chairman. Vice Chairman, my name is Bianca Blomquist. I'm the Director for California for Small Business Majority. We're a nonprofit, advocacy, and educational organization. We represent almost 100,000 small business owners. The average size of a business in our network has four employees.

And what this means is these are the businesses that are least likely to have a dedicated HR Department, to have access to sophisticated legal resources, and to access the types of business planning and support services that the SBDCs, Women Business Centers, Apex Accelerators, and VBox provide.

The 50% cut to TAP would be absolutely disastrous for small business owners in California and could not come at a worse time. We would appreciate you rejecting this cut. Thank you.

Hello, everybody. Good morning. My name is Sophia Kannan. I am the Director for the Women's Business Center here in Sacramento. And I am here to ask you all to please reconsider your decision to cut the TAP funding by 50%. We in Sacramento, our Women's Business Center alone serve over 1,000 businesses each year through ongoing counseling and training.

But one of the most significant impacts we have had within our communities and underserved communities is the opportunity to create a license to care childcare training program.

As we all know, after the pandemic, childcare as a whole was really just nonexistent, where we saw even an immense amount of childcare deserts and as has the Women's Business Centers. And not only my own here, but we have 11 other Women's Business Centers throughout the State of California.

There's 21, but 11 of us have created childcare training programs. And we've been able to do that through this TAP funding. And not only at the Women's Business Centers are we trying to serve women entrepreneurs and small businesses as a whole, but we're trying to give back to the economy. We want the economy to grow.

So, by giving women the opportunity to create childcare businesses, you then give families the opportunity to get back into the workforce and to build that workforce. And so, I am here again to ask you all to please reconsider your decision to cut funding. Thank you.

Good morning, Chair and Members of the Committee. Preet Ahluwalia, on behalf of Northern California SBDC. We strongly oppose the Governor's proposed 50% cut to the Small Business Technical Assistance Program. This cut could lead to 75% reduction in services for most underserved and rural communities and in some cases, stop services completely. Stand with small businesses of California. Thank you.

Thank you.

Chair and Members of the Committee, Julie Baker, CEO of California Arts Advocates, representing over 15,000 arts and culture nonprofits in California in opposition to the disproportionate cuts to arts funding.

In total, 58% of program funds, including $10 million in grants, funding to the Arts Council and the $12.5 million the Equitable Payroll Fund through the California Office Small Business Advocate, which is not a new program really. It's repurposed funds from the Live Venues and Nonprofit Performing Arts Grants Program.

And to Senator Smallwood-Cuevas' question to the benefits of the performing arts, for every 100 jobs in the performing arts, there are 156 downtrend benefits, not to mention significant tax revenues. 10 million cut to CAC will put CAC funding below the 1989 90 funding level without adjusting for inflation. While the General Fund is more than doubled.

CAC is already in a cut position and should be spared. Should these cuts go through, I just want Members to understand this would put CAC 45th, put California 45th in the United States for funding for the arts would put us behind Alabama and Florida. Currently, California represents 25% of the United States creative economy.

In California alone, arts and culture represents 80% of the states GDP. Thank you so much. Oppose the cuts. Thanks.

James Norman on behalf of CalBroadband, here on issue 23, the Middle Mile Broadband Initiative. Would associate ourselves with the recommendations of the LAO and rejecting the proposed budget bill language. To the point earlier, you may have received information, but you have yet to receive answers.

Until the Legislature receives actual answers about those investments, unilateral authority doesn't make much sense. Thank you.

Thank you.

Thank you, Mister Chair and Members. Eduardo Martinez here on behalf of Actors' Equity. We're a national union of 51,000 members in the live arts. And we're here to speak against the $10 million cut to the Arts Council, as well as the 12.5 million for the Performing Arts Equitable Payroll Fund.

We were one of the chief sponsors of the Equitable Payroll Fund, which is really meant to fund workers in the live arts, not buildings, not lobbies, but workers. Really want to just piggyback on the comment from Senator Smallwood-Cuevas that the investments in the arts have a ripple effect on our economy.

We know that. We've done the studies. We've done the work. Would really encourage you to reject this cut, which again my colleague mentioned would bring us back to funding levels going back to 1989.

The arts are a really important public benefit, and public funding is particularly important to ensure that arts and cultural experiences are provided to in underserved communities and supporting creative careers. So, we ask for your support on this.

Thank you.

I'm short. Good morning. Chair, the Vice Chair, Committee Members. First of all, thank you for your service for this great state. I mean, what you're doing has got to be very difficult. My name's Les Fong. I'm Director of the SBDC for San Joaquin, Amador, Calaveras, and Alpine counties, rural counties.

And the proposed budget cuts would dramatically impact the amount of service that I can give to the rural counties. And there's a tremendous return on your investment by investing in us. And a prime example is just one of the programs is a certification program.

In the last three months, we got 44 small businesses certified as either small, minority, women-owned, veteran-owned businesses. And of those, we actually have three of them that actually got contracts all within a three-month period. So, can you imagine what we do, what we can do by being able to expand the program?

So I implore you, please don't cut our services, especially in a rural county. We're tremendously impacted. Thank you.

Hello, I'm Deborah Devant from Deborah Devant Consulting. I was a veteran trying to find a job when I started my first business, and I needed some help. I didn't know how to get things started and how to begin to grow. And now I get to provide that kind of help to a whole array of clients as one of the consultants at the SBDC.

So, I see on a daily basis what it means for people from low-income communities to get that help. Business is many of our American dream, and we need that little bit of help that the TAP program can provide. So please don't cut that funding.

Thank you.

Hi, my name is Shira Lane. I'm with Atrium 916. We're a creative innovation center for sustainability. I'm here because our artists create products like this, which is made out of inner tube tires. We have an incubator, and now we have an accelerator. But none of this would have been possible without the Californians for the Arts.

They saw the potential in what we were doing and how we were innovating and helping our local creatives build sustainable products that are tradable products. Now we have an accelerator.

And I just want to say thank you to the Arts Council for seeing the potential in what we were doing when regular economic development programs did not understand what we were doing. The arts are critical, and we see a disproportionate cut towards the California Arts Council. And we please, please consider Californians for the Arts. Thank you so much.

Good morning, Chair Padilla, Vice Chair Niello, and Committee Members. My name is Suyili Alex. I am the Director of Sacramento Valley Small Business Development Center, SBDC. My program serves for County Sacramento, Yolo, Yuba, and Sutter. And as you may know, three of my counties, 95% of the three counties that I serve, is still considered rural.

Through the TAP funding, we're able to host office hours in the individual in the respective counties that we serve. And also, we're able to bring about technical assistance and business training that is so badly needed. And it's three counties that have historically felt that they have been sidelined.

And not to mention that the tap funding is instrumental in enabling us to provide technical assistance to the refugees, to the society who don't have an identity yet in this country. But we're able to serve them with entrepreneurship training and one on one advising through Tep funding. So I implore you to not cut the funding. Thank you.

Mister Chair and Members Darby Kernan, representing GRACE to End Child Poverty in California. We're here to oppose issue 21, the CalKIDS Financial Literacy Outreach. We ask you to reject the Department of Finance proposal, but even more so, the LAOs proposal, which recommends taking more funding.

Those dollars are used to print forms and provide things in various languages so that we can kind of break the gap of people who are getting and accessing the CalKIDS to other areas. So, if nothing else, you've heard they have somebody hired. They can continue this work. Thank you.

Thank you.

Hi. Thank you for inviting us to speak. I have a speech problem, clearly, so please bear with me. My name is Amanda Sanchez, and I am here to oppose issue 26, the 10 million budget cut to the California Arts Council.

As the co Director of Capital Creative Alliance, a small arts nonprofit that supports creative professionals in the Sacramento region, we rely on the California Arts Council to support our programming and to pay our staff. I'm going to go. Thank you.

You're doing fine, Miss Sanchez. Take the time you need. Thank you. Hi.

Nicole Wordelman, on behalf of the Children's Partnership, in opposition to the Governor's proposal to eliminate funding for the Middle Mile Broadband Initiative as well as Broadband for All Initiative. Broadband is a social determinant of health for children, and it's very important that everyone be able to be connected.

Thank you. Miss Sanchez, if you would like to testify. I'll give you the time you need, ma'am. Additionally. If you wanted to finish your comment. All right. I want to make sure we welcome you in your comments. Thank you.

Thank you very much. Thank you.

You're welcome. Next.

Hello, Mister Chair, Members. Stephanie Roberson, representing the Bay Area Regional Health Inequities Initiative, or BARHII. I'm speaking on item not on the agenda, so I appreciate you and Senator Wiener for allowing me to present on an item not on the agenda, so I'll talk real fast. Some of you may have heard this request before.

It was a top agenda item with the Bay Area Caucus some years ago as a budget priority. And Assembly Member Lori Wilson chaired the Black Caucus, carried it a couple years ago with a few tweaks from department-level folks, Governor's Office, budget gurus, and legislative leadership.

I appreciate everyone coming together to kind of strategize around the issue of Black displacement.

So, on behalf of the Black Housing Advisory Task Force, or Black HAT, we are requesting state investment from existing resources that could be from the Affordable Housing and Sustainable Communities Grant Program or the Community Resilience Fund, administered by the Strategic Growth Council to establish a Black Housing Resilience Fund that focuses on about 15 growing cities statewide.

There's been intensive focus on the development of these cities, backed by data and referenced in the Urban Institute Report on changing landscapes, and also intensive localized buy-in from community partners. There's been a lot of work on helping create a partnership between state philanthropic dollars and you all to stop this virtual cycle of displacement with Black Californians.

So, we envision this fund to create a virtual cycle of development to improve the health and economic well-being of Black Californians, which at the end of the day, that supports all of California because we are one California.

And we want to focus on community planning so we can start to envision future projects, especially in parts of regions that there is a growth of a burgeoning Black population.

So, at the end of that, we want to really stress that there has been no state strategy up to this point for the cycle of exclusion, displacement, and disinvestment in these communities.

And we hope that we can partner with you all at the tail end of this to focus on community planning, brick and mortar projects, to realize a thriving, healthy, resilient community for all. Thank you so much. Hope to work with you in the future. Thank you for your indulgence.

Thank you. Toni Simons. And I'm here representing the American Indian Chamber of Commerce of California. They run the Native American Apex here. We are here to oppose the $13 million cut for the Technical Assistance Program.

I think, as you can see from all the people that testified, that TAP has a very unique network of actually reaching all 58 states and having partners that have unique relationships. They're trusted partners within populations that are historically not been included when the state or anyone else is serving small businesses.

In our case, the Apex Accelerator for Native Americans. You saw we have the Hispanic Chamber, there are Hispanic SBDCs, and across the board. Thank you.

Thank you. And thanks to everyone who participated and provided your testimony to the Subcommittee. We'll now move to the items for vote only on the docket. This is comprised of issues one through eight. Recommendations for all issue items are approved as by budgeted. We will take these items in two groups.

First, starting with issues number one and three. Recommendation is to approve as budgeted. I'll entertain a motion.

So moved.

Moved by Senator Niello to approve as budgeted items one and three. Consultant, please call the roll.

[Roll call]

Thank you. The ayes are three, the noes are zero, and those items are out. Secondarily, we will move to issue number two and issues four through eight. Recommendation is to approve as budgeted. I'll entertain a motion. Moved by Senator Smallwood. Cuevas. Recommendation is approved as budgeted. Consultant, please call a roll.

[Roll call]

Thank you. The ayes are two, the noes are one. Those items are out. Thanks, everyone, for your patience. Those that didn't have an opportunity to provide input to the Sub can do so directly to the staff and the website. Thank you all very, very much for your work today. At this time, Subcommittee Number Four Stands Chair.