Assembly Budget Subcommittee No. 5 on State Administration

Good afternoon and welcome to our Assembly Budget Subcommittee 5 hearing. Today marks our last Subcommittee hearing and will provide one final opportunity for Members to provide input, make comments, or ask questions on the 2024 state budget. Since the Governor released his initial budget this past January, this Subcommittee held 10 Subcommittee hearings with an additional three oversight hearings in collaboration with Subcommittee seven, for a total of 13 hearings. Some of you have been with us the entire time. Thank you.

Our hearings have covered every aspect of state government, from housing and homelessness, taxation, consumer protection, broadband procurement, information technology, and much more. I want to thank Members of our Subcommittee, Assembly Member Ward, Assembly Member Patterson, for their continued feedback throughout these proceedings.

I also want to thank all of the departments that have presented in front of us, including the LAO and DOF. We know that this is agonizing for all who have worked with these line items to try to get to a place that we can present a budget. In addition, your feedback has been very valuable, and without that, we will make other comments, but let's go ahead and see if we have Assembly Member Ward or any of our Committee Members who would like to make comments. Yeah, there will be other times.

Okay, we have invited today, all Members of the Assembly have been invited to attend this hearing, and they are also allowed and able to ask any questions. I can see a new friend here, Assembly Member Papan, and welcome. And we may in fact have other Members coming in and out to accommodate the wide range of potential topics that may be covered. Panelists are testifying both in person and remotely via Webex.

Today's agenda also includes a summary of some of the key topics covered throughout our hearings in January, and we will first take questions and comments from Members. We will then open the room for public comment. Public comment is limited to 30 seconds for each person testifying and will be taken in person. If you are unable to attend this hearing in person, you may submit your comments via email to asmbudget@asm.ca.gov. With that, let's do the roll call.

[Roll Call].

All right, so this would be the time if you are on the dais and you'd like to ask any questions or make comments, and you can do this as we move along. Otherwise we are going to open this up to the public for any comments. All right, so we will invite the public up for any comments that you would like to make on any of the topics under Budget Sub 5. As you come up, remember that it is 30 seconds comment when you are using the microphone you can move the microphone up and down and speak closely into the microphone. Welcome.

Thank you. Good morning, Chair and Members of the Committee. I'm Johnnise Foster-Downs, representing the California Asian Chamber. We strongly oppose the 50% cut to the technical assistance program. The Cal Asian Chamber manages three minority business development agency centers, with two additional centers being in San Jose and Los Angeles, which is, is a total of five, which serves over 2000 small and disadvantaged businesses. These cuts will really go to the heart of the support for these businesses.

Hang on. I'm not sure if your mic is completely on. Or scoot up a little and let's try it again.

You want me to start from the top?

Yes.

All right. Good morning. I'm Johnise Foster-Downs with the California Asian Chamber of Commerce, representing the 754,000 AAPI owned businesses throughout the state. The California Asian Chamber strongly opposes the 50% cut to the small Business Technical Assistance Program.

We manage five, excuse me, three minority business development agencies centers, with two additional centers being in Los Angeles and San Jose, which is a total of five centers. We have a rural program. We have our business center. We have a technical assistance and capital program, and this serves over 2,000 small and disadvantaged businesses.

And these cuts really go to the heart of the support and resources for these businesses and would severely and disproportionately impact small minority and women owned businesses. So we ask that you oppose these proposed cuts. Thank you.

Good afternoon, Madam Chair and Members. Laurie Camerer, representing the National Association of Women Business Owners, California chapter, representing the 1.4 million women business owners, many and most of whom have benefited by the technical assistance program to start their business, to get their business up and running and in line. So we are opposed to that 50% cut.

Those funds are so desperately needed for the small businesses community. Thank you.

Good afternoon. My name is SiewYee Lee-Alex, I am the Director of Sacramento Valley Small Business Development center. My program serves four counties, Sacramento, Yolo, Yuba and Sutter. 95% of the three counties that I serve, Yolo, Yuba and Sutter, is still considered rural.

And the TAP Funding has allowed us to host office hours in those counties, as well as to bring about one on one technical assistance and advising to the community that needs the assistance the most. In 20, last year, we helped 79 entrepreneurs start their business in our region.

And being able to do that is fundamental, and it's so important to those entrepreneurs, especially those who are underserved, that would benefit from our program. So I urge you to not cut the TAP Funding by 50%. Thank you.

Thank you. And if you can just hang on one second here. We do have a Member who has joined us coming from another subcommittee. So just to set the stage, there are, I believe, three other subcommittees happening at this moment, and Members will be going from Committee to Committee.

So I'm going to offer the opportunity for Assembly Member Alex Lee to make some comments. And again, anybody can interject on the dais and we'll go back and forth.

Thank you, Madam Chair. And I apologize to the public. I'll make it very brief. We're conducting another budget sub hearing simultaneously. I believe, of course, that I support the chair and this Committee in preserving as much money for housing and homeless as possible. This is a top concern of all Californians right now.

We need to be doubling down our efforts to produce more housing. And at the same time, we have so many tough choices to make in this budget cycle that some of them to balance the books is getting real difficult. We're in sub two right now talking about how to preserve programs for the poorest of the poor Californians.

And even though as, even though as representative for one of the districts with the most manufacturing. Are we good now? Okay. I think we're okay.

So with the most manufacturing jobs, I still believe, and I understand there's a push to reject the governor's net operating loss and the limits of R and D, but I still believe that these are common sense measures because the Governor has put in the trigger mechanism that should the economy benefit or should the economy improve in time that these things have repealed.

I think it's a very common sense measure, especially as we try to stabilize our economy right now and focus on the poorest of the poor Californians. And at the same time, you know, a lot of our tax expenditures and tax benefits have gone unscrutinized for a long time.

And we have to acknowledge that this is socialized research on public tax for a dime. And we ought to look back and say, is this working just as we do with every other expenditure in the budget, to say, is this working for the public benefit?

So in future hearings and future time, we should probably take a deeper dive and say, is this meriting the social, entrepreneurial, commercial, and biological and scientific researches a benefit that we had hoped for? And so I support a lot of the work of this chair and I really appreciate being invited to here. Thank you.

Thank you.

Thank you. Madam Chair, I may want to ask the Department of Finance a couple questions, so I'll wait until public comment. Thank you so much.

Welcome.

Thank you. Good afternoon, Madam Chair and Committee. I'm Tim Murrell, I'm with the Small Business Development Center covering Solano and Napa counties. And I strongly urge you to not allow the 50% cut on TAP Funding that allows us to provide technical assistance. In our two counties alone, we serve over 2,000 small businesses.

Just so far this year, we've helped 32 new businesses get started. We've created 125 new jobs, all that create tax revenue. So we want to be able to continue that and not turn down those entrepreneurs who are coming to us for the valuable technical assistance that we provide.

So thank you very much for the opportunity to be heard.

Thank you.

Hello, I'm Kristin Johnson, I'm representing Cal Poly Humboldt. I am involved with the Small Business Development Center Program as well as the VBOC and the Apex Accelerator. We strongly urge you to not take the 50% cut to the Technical Assistance Program. The Technical Assistance Program has changed lives.

It creates legacy, it creates generational wealth, and I've seen that firsthand. We serve some of the poorest people in the state. All 58 counties have access to our services and we've created a significant impact through job creation as well as tax revenue. Thank you.

Thank you.

Kim Lewis, representing the California Coalition for Youth and CENIC and just want to elevate our disappointment that the May Revise failed to include additional round six for HAP Funding. It has a set aside for our young people experiencing homelessness of at least 10% and without resources we will continue to ignore

our most visible, invisible population experiencing homelessness are young people, which is disproportionately BIPOC and LGBTQ plus young people. And so ask for you to continue some additional funding for HAP and our young people and that we can have transitional housing being built for them as well and reject the cuts of the Housing Navigation Maintenance Program. Thank you.

Thank you.

Honorable Chair and Committee Members, Niccolo De Luca here on behalf of a handful of cities such as Oakland, Berkeley, San Leandro, San Gabriel Valley COG, respectfully request that the proposed cuts to the REAP program do not move forward. As our previous speaker said, any no cuts to the HAP round six program. Appreciate all the work that you're doing.

So thank you.

Thank you.

Julie Baker California Arts Advocates in opposition to the disproportionate cuts to arts funding and total of 58%. California Arts Council funding is below the 2000 funding level while the General Fund is more than doubled. More than 50% of grant applications were rejected last cycle due to limited funding.

CSE is already in a cut position and should be spared. And should this cut go through, California would be 45th in United States for arts funding. For the $12.5 million Equitable Payroll Fund, these funds are left over from COVID relief in order to help the nonprofit live events industry recover and sustain.

We are deeply concerned that the State of California is sending a signal to communities and to our youth that creativity doesn't matter. In an age where we are trying to fight back the impact of AI and continued automation, this is not the time to disinvest in creativity. Please restore these proposed funding cuts. Thank you.

Thank you.

Madam Chair and Members, Dean Grafilo with Capitol Advocacy, here on behalf of CASE. CASE is a union that represents the thousands of attorneys, administrative law judges and hearing officers across the state. Here are to comment on two items. Firstly, CASE in opposition of the administration's proposal to eliminate telework stipends.

As the Committee's analysis points out, the Legislature has rarely modified or interfered with agreed upon labor agreements. Further, CASE appreciates this Subcommittee's concerns expressed during the May 16 hearing. The proposed trailer Bill would effectively override side letter agreements negotiated between the Administration and the 17 bargaining units receiving telework stipends.

In particular, bargain unit two, which is the CASE membership. The second item CASE in opposition to the administration's proposal to permanently eliminate 10,000 positions.

As noted in the analysis, CASE appreciates this Subcommittee's expressing concerns with the proposal as it relates to state departments who already have a high vacancy rate and historically had issues with staff recruitment, hiring and retention. This is absolutely the situation for job classifications for CASE membership. For these reasons, we ask you to reject this proposal. Thank you.

Thank you.

Good afternoon. My name is Anne Brown. I'm the Executive Director of the Auburn Symphony. I live and work in Auburn, which is in Joe Patterson's district. Thank you for being here. I also raise my voice in support of the arts.

The cuts to both the California Arts Council and SB 1116 are very impactful for us. As the Auburn Symphony we participated in a national study called the Arts and Economic Impact Study, proving the economic impact that the arts has in our communities where we live and work. It's vital to the health of our communities. Please support the arts.

Thank you.

Thank you.

Hello. My name is Claudia Viek, and I'm the State Advocate representing 21 Women's Business Centers throughout California. And I'm here to beg you not to accept the cuts to the TAP program.

That program is more of an investment program than a grant program, and it leverages another 35 million in federal funding and one example is, and particularly from Orange County, we've had tremendous success in stimulating and growing new childcare businesses.

The loss of this Fund will basically eviscerate that program, which created 3,700 new slots, lots of childcare last year. So I hope you can consider opposing those cuts. Thank you.

Thank you.

Good afternoon, Chair, Members of the Committee, David Nelson here representing the National Small Business Advocacy Council. Great to see you again. Thank you for taking up this issue. Last year, the TAP network supported 2.3 billion in taxable sales growth for the State of California. That's obviously a net positive to the state.

Chair Quirk-Silva's district, 1,317 of your constituents were served by our network, Member Ward 2,658 and Member Patterson 1,211 constituents were actively served in growing the economy in all of your districts, and we ask that you oppose these cuts. Thank you.

Thank you.

Good afternoon to the Chair and Members of the Committee. My name is Lewis Brown, I'm with the Corporation for Supportive Housing. I'm here to strongly encourage you to consider investing at least $1 billion in HAP. We know the governors proposed budget did not include any new funding for HAP round six.

HAP has been a critical tool for local communities in their fight to address homelessness.

Grantees have used HAP to create over 15,000 shelter beds, provide tens of thousands of rental and housing subsidies, and provide innumerable services to help people obtain and sustain housing without new funding, we've heard from COC's, from mayors, and from counties that progress will come to a halt.

And so we strongly encourage you to invest additional funding in round six of HAP. We also like to say that Prop 1 is not a substitute for HAP, for loss of HAP funding. And we also like to encourage the Committee, as you are looking to preserve programs, think about other areas where there can be cuts.

The LAO has indicated that five prisons, additional five prisons could be closed, and there's significant funding potentially there. Thank you.

Thank you.

Hi, my name is Toni Simons, and I'm here representing the American Indian Chamber of Commerce of California. The chamber represents tribes, tribal enterprises, and American Indian, Alaska Native and Hawaiian native entrepreneurs across the state. We respectfully oppose the $13 million cut to the small business Technical Assistance Program. We operate, the Native American Apex accelerator.

It's been very valuable. We think the overall program has one of the few statewide working networks that does all 58 counties, as well as serving with trusted partners like our organization to reach out.

The second item is that there are proposed cuts to the California First Program, and we respectfully ask that you retain if cuts are made that you retain the tribal set aside. Pipe money has gone out to the regions for planning grants. They've gone out for pilot grants, they've gone out for pre development grants.

The tribal communities have waited patiently and we respectfully ask that the Legislature protect the tribal set aside within the California Jobs First Initiative.

Thank you.

Good afternoon. Bruce Stenslie, President and CEO of Economic Development Collaborative. Among other programs, we serve as the host for the Small Business Development Center, Ventura, Santa Barbara and also into LA counties here to oppose the cuts as proposed to the Small Business Technical Assistance Program. Just to add two comments to that.

One, please understand this is all direct service money that leverages federal dollars and allows us to really expand our program. Two, this program was really launched coming through the various disasters, Covid, etcetera, and has allowed us to expand our program in our region alone to some 2,500 firms every year.

This cut would cut that number by a third at least. That's an enormous impact. We beg you to support the continuing investment in this program.

Thank you.

Simone Tureck Lee with John Burton Advocates for Youth I'm here on behalf of a coalition of more than 100 public agencies and organizations that are requesting that you reject the the governor's proposed elimination of the $13.7 million Housing Navigation and Maintenance Program. This is a small state investment that helps our state leverage access

$22.6 million of federal housing vouchers for youth leaving the foster care system. Losing the state funding would reverse significant progress to date. And I also just want to say I appreciate the Subcommittee's vocal opinions on this program to date, and the Assembly as a whole supported this program consistently.

And lastly, we are also a Member of the Bring California Home Coalition. John Burton Advocates for Youth is, and we support prioritizing HAP in the budget. It has made progress for young people who are not systems involved, and we also need funding to create that safety net. Thank you.

Good afternoon, everyone. My name is Katie Robb. I'm with a community based organization called Mutual Assistance Network. We focus on social and economic development specifically for the North Sacramento communities.

For many of you know, North Sacramento is less than five miles away from this building as we speak, and I'm here to urge you to fully fund REAP for this budget year. Funds from this REAP program have already been allocated for sewer projects for North Sacramento.

We know that the goal for REAP is to provide additional housing units, but for a community like North Sacramento that has been historically disinvested, our infrastructure needs severe improvement before we can even begin to get developers out there and get the housing units developed. So I urge you to keep REAP into the budget this year. Thank you.

Hello and good afternoon. My name is Stephen Walton. I'm a local realtor and but I stand before you as a North Sac resident advocating to keep REAP funding in the budget as well.

My family is from the area of North Sacramento and in the area where the REAP funding, we would benefit from the REAP funding and the infrastructure repairs. We haven't seen proper development in over 30 plus years, so it's mandatory that we get these funds.

It's going to help us to develop the housing that we desperately need for the area and help to revitalize this special corridor just not far from here. Thank you.

Thank you.

Hello. Thank you for inviting us to speak. I have a stutter, so please bear with me. My name is Amanda Sanchez and I'm here to oppose the $10 million budget cut to the California Arts Council.

As the Co-Director of Capital Creative Alliance, a small arts nonprofit organization that supports creative professionals in the Sacramento region, we rely on the California Arts Council to not only support our programming, but to also pay our staff like me. Thank you.

Thank you.

Hi, Justin Garrett with the California State Association of Counties here to reiterate our continued opposition to the $260 million cut to HAPP that's proposed, as well as our support for ongoing HAPP funding, I really want to thank the Chair and the Subcommittee for your leadership on this issue, understanding the critical importance of this funding to local homeless efforts and the negative impacts that would occur should it end. Thank you.

Thank you.

Hi, Chair and Members. Beverly Yu on behalf of Toyota Motor North America that provides lending services as a auto captive financial company. We are in respectful opposition to the Governor's proposal to eliminate the bad debt deduction, and we urge the Subcommittee to adopt an alternative deferral proposal that offers a more balanced approach.

The bad debt deduction is crucial for ensuring tax fairness by allowing retailers and lenders to claim refunds or deductions for sales tax on finance sales where customers default on payments. This deduction ensures taxes are levied only on the actual amount paid. Recognize the challenging budget year ahead of us and you appreciate your efforts to address the shortfall.

In response, we propose deferring bad debt deductions and refunds until the state fiscal health improves with a trigger, as seen in other budget provisions. The proposal here fully defers all refund claims that were filed before January 1, 2024, immediately stops all deductions on returns starting January 1, 2025.

This alternative proposal provides immediate savings to the state and substantial positive revenues. This also addresses the three year backlog of refund claims that Department of Finance is facing. We look forward to working with your Committee. Thank you so much.

Thank you.

Good afternoon. Chair and Members of the Committee, Preet Ahluwalia, on the behalf of Northern California Small Business Development Center. We strongly oppose the Governor's proposed 50% cut to the Small Business Technical Assistance Program.

This cut could lead to a 75% reduction in services for the most underserved and rural communities and in some cases stop all services. Just to share some of the stats for our success with our businesses in these services.

We've been able to assist the businesses for around 1.3 billion in sales growth and over 1.6 billion in securing loan and equity for their capital and also assisted in new businesses starting for about 3000 small businesses. We strongly encourage you to reconsider these cuts and stand with the small businesses of California. Thank you.

Hello there. My name is Richard Falcon. I am here representing.

You can pull the mic all the way up. There you go.

Pull it up there. That better? Thank you. Richard Falcon. I am here to speak about the proposed cutting of the $12.5 million Performing Arts Equitable Payroll Fund budget as a owner and Executive Director of Teatro Nagual which is a Latino based performing arts company here in Sacramento.

This would decimate a lot of the progress we have been able to make as a result of all the impact that we saw as a performing arts organization in trying to keep us going forward. Additionally, I also am here to also encourage you to please do not do the $10 million of cuts to the California Arts Council.

I can tell you that as a city employee right now I am administering the grant opportunity through the Capital Region Creative Corps for Senate Bill 628.

And I can tell you that those dollars have been super impactful as well as the work for the California Arts Council to put hundreds of artists back to work bringing forward messaging on cross sector issues that impact the entire state.

If not for the work of the California Arts Council, if not for Senate Bill 628, we would not be able to bring forward much of these needed artists, keep them employed, and help to reach those quartile one communities who are the ones who desperately need to hear the messages of what is needed in their communities. And the arts does that.

I consider myself a second responder. I was the one that was here providing hope along with my artist people during COVID We are the ones you came to for your music, for your arts, for your zoom things in there to keep you moving forward.

I ask you, do not reduce the progress that has been made in the arts. Do not reduce the California Arts Council and do not reduce the funding for the Performing Arts Equitable Payroll Fund. Thank you.

Thank you. Just reminding everybody. 30 seconds. If you see me do this, it means we're going to start to wrap it up.

Sounds good. Can you hear me?

Yes.

Hi, my name is Ember Deboer. I'm a resident artist at the City of Sacramento. I'm a California creative core artist. I am employed by that opportunity. I'm here to oppose the 10 million in cuts to the California Arts Council. I'm personally employed by that funding.

And I also know hundreds, if not thousands of other artists across local regions across the state that will be impacted by those budget cuts. Artists have done a lot of the cultural healing, a lot of the cultural work, and also a lot of economic development. I'm a part of the Office of Innovation and Economic Development, excuse me.

Where I'm stationed at the City of Sacramento and I have seen the massive amount of impacts artists have had in the last couple of years in our cultures, in our communities, and in those quartile one communities specifically where I've been asked to work, and we can't go without this.

I would argue that it will put California behind in the future to not fund artists. Thank you.

Thank you.

Hello, Marissa Brown on behalf of the City of Citrus Heights. The Sunrise Tomorrow Specific Plan, which is a recipient of REAP funding, would Bill 2,200 transit oriented mixed-use housing for our community. The City of Citrus Heights does request that you reject these funding cuts. Thank you.

Thank you.

Hello, I'm Anna Young. I'm the Director of the Sonoma SBDC. And I'm here to say that SBDCs are a critical success factor for everything from the taqueria to the tech startup. My colleague already shared the statistics. They're phenomenal. That being said, equity is really hard to gain.

We can all look around the room here and see the diversity and ask ourselves what's important about building an equitable society. And that's really what's at stake here. So, equity is hard to gain, but easily won through entrepreneurship. It just is. It's a game changer and it's a leveler of the playing field, and it's for everyone.

And SBDCs are a critical part of that. If you do not oppose the proposed budget cuts, the cost will be too high for California. So, I'm simply here to ask you to consider and ask yourselves, what is the cost of doing nothing? Thank you.

Thank you.

Good afternoon. Chair Quirk-Silva and Members of the Committee. My name is Scott Rogowski. And on behalf of Northern California SBDC, covering 36 counties, most of them are rural, and tens of thousands of businesses that we serve, 50% being women and BIPOC owned, we strongly oppose 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, and access money to build capacity. Without SBDC TAP funding, these businesses will not grow, get access to the resources and guidance they need, and possibly close their doors.

We urge you to preserve the core services of the small business tap and reject these proposed cuts. Thank you.

Thank you.

Madam Chair, Members of the Committee, good afternoon. My name is Oscar Garcia. I'm a Senior Vice President of the California Hispanic Chambers of Commerce. And on behalf of those hundreds of thousands of small business comprised of small minorities, Asian, African Americans, we implore you, we just not ask, we implore you to not cut the funding.

And the reason why, because these businesses, it's their life. And we, the network of SBDCs, we were the first responders when Covid hit these businesses. We were able to help them and save their businesses. Now, cutting the funding is going to mean that they might go revert to COVID-19 status.

Mind you, small businesses are stimulating the local economy. Those are your constituents. Those are the businesses in your local community, regional, and the statewide. So, we ask that you please reconsider cutting this funding and keep us the full funding to support these businesses. Thank you.

Thank you. Before we go to our next speaker, I am going to, can we find out how many people we have outside? 15. So, I'm going to open it up. If you want to make comments now and ask your question, that way we can get that in. And so those who are waiting in line, we promise you will all get a chance, go ahead.

Thank you, Madam Chair and Department of Finance coming forward, I won't be too terribly long, I promise. So I'm going to give a statement and then I'll have a question following the statement. Good morning. I mean, good afternoon. Where are we? Room 444.

Okay, so, as you probably know, I come from San Mateo County and I'm here to request support for San Mateo County's vehicle and lieu fee coming back to the county. It is not an insignificant sum. It is $72 million and comprises 18% of the county's budget that I come from.

Every other county in the state gets their VLF money back. My county, excuse me, and two other counties, Alpine and Mono, also don't get theirs. And I guess my.

My concern is that my county gets singled out and they don't get, or it does not look like at this moment in time that this money will be a line item in the budget or provided in the budget in any way, shape or form. And it is, as I said, not an immaterial sum.

And without it, public safety, health, housing, and other critical services will be at risk in my county. And it would be contrary to the 2004 Budget Compromise in which these payments were guaranteed by law in exchange for substantial financial contributions by local governments.

Failure to provide the full payment would be devastating to the local budgets in my community and services that depend on these funds.

So, with that, I guess my question to you, and thank you for being here, and thank you for taking my question deals with how and what is the legal basis by which three counties don't get the same treatment as other counties. And this is not are you provided for in the budget kind of stuff.

This is everybody else gets it but for three counties. So, thank you, and if you would indulge me.

Good afternoon. Chris Silva, Department of Finance this has its roots back in 2004 when this whole mechanism was set up, when. Each county has an Educational Revenue Augmentation Fund, and cities, counties, and special districts pay property tax into that that goes to the schools.

One important thing to bear in mind is that ERAF cannot go to basic aid schools, which are funded to the revenue limits, the Local Control Funding Formula limits with property tax. So, that property tax that the basic aid schools cannot absorb goes back to the cities and the counties and the special districts who donated it.

Just so you know, I'm aware of all that. I'm aware of the calculations imaginations.

And so, what it comes down to is, as the Department of Finance understands it, these cities and counties who are impacted are being fully backfilled for their vehicle license fee loss, revenue losses.

What they're not being backfilled for is the fact that the excess ERAF that the basic age schools cannot absorb, when that spills back to the cities and the counties, it does not count as an offset to their vehicle license fee revenue backfill, they're owed. Instead, the.

Nor should it be. But every other county.

But the statutes that were drafted did not encompass that. So, this is not a statutorily required payment. And in consequence of that fact, the Administration, in view of the overall budget situation, does not believe this discretionary expenditure is something that's absorbable within our spending plan. So, the Administration was not proposing to fund this.

So even though you provide it to every other county, but for three, you're classifying this as discretionary spending as it relates to my county. And these are fundamental payments that go to every county.

Every other county is not funded by the state for this. Every other county is funded by property tax revenue. The property tax revenue for every other county and city in the state is sufficient to pay for the vehicle license fee swap.

But in this case, the way the formulas work out is that again, the excess era that the schools cannot absorb, that does not count to offset the vehicle license fee revenue for the cities and for the counties.

So, the county auditor-controller takes property tax from the schools, but there are not enough non-basic aid schools in the counties from which to take them.

I'm well aware of that.

So as a consequence.

What you're telling my county is you pay the property tax, but we ain't going to give it back to you.

No. The root of the matter is Finance understands that the cities and the counties are being fully backfilled for their lost vehicle license fee revenue.

What they're not being backfilled for is the fact that the excess ERAF that they would otherwise be able to take a like amount of from the non-basic aid schools, there's not enough of it. And so that's why they have to come to the state with a request for a budget augmentation.

But I mean, as we understand it, again, just want to reemphasize that as we understand it, the cities and the counties are being fully backfilled for every dollar of lost vehicle license fee revenue.

Not my county.

And we've, and we'd be happy to engage in further conversations with them and we have asked them for additional information as well. And if they share additional information that proves that our, our belief is misfounded, we'd certainly, that'd be certainly additional risk for conversation and for consideration. But we haven't seen that to this point.

So the county is entitled to their property taxes. Can we, can we admit to that?

Oh, there's, yes, they are entitled to be fully backfilled for their lost vehicle license fee revenue. The Administration.

Not through property taxes. Because that's where the rubber meets the road right?

And we understand that they are being backfilled for the lost vehicle license fee revenue. It's just that that excess ERAF that the basic aid schools can't absorb is counting towards backfilling that lost vehicle license fee revenue.

And normally what they would do is a county auditor comptroller would take a like amount from the non-basic eight schools and give it to the cities and the counties as an augmentation to so. But there are not enough non-basic aid schools in the county to do that.

As a consequence, because you can't take property tax revenue from non-basic, eight schools from basic aid schools. Excuse me, basic aid schools.

And because there are so many basic aid schools, but again, the money from the ERAF and from the non-basic aid schools, as finance understands it, is enough to pay for every dollar of lost vehicle license fee revenue.

All right. I appreciate this conversation. Believe it or not, I've been around so long that way back in 2012, Orange County did have a similar issue. So it is very complex. But I'm glad you're able to get your answers here. And thank you for.

I don't know about that, but I thank you for the time.

At least a conversation. So, with that, we have about 30 individuals that would like to speak on their items. Please come up. I'll just, again, if you see me doing this, it means you got to wrap up 30 seconds or less and move the microphone up or down. Welcome.

Great. Thank you, Madam Chair. And thank you, Members of the Committee. I know you know, I appreciate all the service that you do to the community and the State of California, and your task is a very difficult one. My name's Les Vong. I'm Director of the Small Business Development Center for San Joaquin, Amador, Calaveras, and Alpine counties.

So, it's very small, small counties. And I'm asking you, actually, pleading with you, please do not cut our budget. We serve the most underserved communities.

And every dollar that you put into us, I mean, it's very efficient use of your money, because we only pay our advisors for work that they actually do and the work that we do do. And a prime example is we're doing minority business certifications.

Just in the last three months, utilizing our TAP funding, we got 44 businesses certified as either small minority, women-owned SBA 8a and that's turning into to actual jobs. So, I plead with you, please do not cut our budget. Thank you.

Thank you.

Good afternoon, Chair and Members, Allison Ramey here today, on behalf of the Metropolitan Transportation Commission, MTC and ABAG oppose the proposed RAAP and HAPP cuts, as well as the elimination of the Multifamily Housing Program and Foreclosure Intervention Prevention Program. Our REAP grant will build up to 1600 apartments affordable to low-income households.

It will also pay for Bay Area wide transit improvements estimated to increase ridership by 30,000 a day. Finally, we want to appreciate and acknowledge the Committee analysis highlighting the widespread support for maintaining funding for REAP and MHP on page eight. Thank you.

Thank you.

Good afternoon. McKinley Thompson-Morley, on behalf of the City of Sacramento, we urge the Legislature to maintain the 600 million in funding for REAP 2.0. This program is critical to Sacramento County's Green Means Go Program, which accelerates infill housing development and makes desperately needed updates to city infrastructure.

It's vital to a more sustainable, resilient and inclusive future, and we urge you to protect this critical investment. Thanks.

Good afternoon. My name is Michelle Hillen Neufer. I am a board member of the Sacramento Alliance for Regional Arts and Executive Director of NorCal School of the Arts.

And I just want to thank you for your past funding for the arts, which was so critical after the pandemic, and ask that you reconsider cutting funds to the California Arts Council. The arts and culture sector is a huge contributor to California's creative economy, and the California Arts Council elevates the sector in our state.

I'd also ask that you not cut the equitable payroll Fund as it is so important to smaller nonprofit arts organizations like myself who employ artists and teaching artists. Thank you so much for your consideration.

Thank you.

Good afternoon. Jennifer Roe on behalf of the California Statewide Law Enforcement Association, State Bargaining Unit Seven, and union for over 7,000 public safety professionals in the state, we wanted to bring to the Committee's attention an issue before the Legislature that we believe is best left up to this Committee's jurisdiction to be scrutinized because of the budget implications that.

But more than that, the issue is best left at the collective bargaining process. AB 2872 would create a parity formula between the CDI investigators and special agents at DOJ. First, we oppose linking the two together and believe it will actually have a detrimental impact on both. Second, we believe that these two classifications should be bargained separately.

Lastly, to our knowledge, the DOI has not submitted a BCP to this Committee, so we're perplexed how this proposal would actually be funded. While we fully support the DOI investigators getting more in wages, the parity formula is a nonstarter for us and this issue should ideally be bargained. Thank you.

Thank you.

Madam Chair and Members, Amy Brown, on behalf of the City of West Sacramento, also opposed to the REAP 2.0 proposed cuts by the Governor.

Not going to repeat what the representative from the City of Sacramento has said, but I will say in West Sac in particular, we have already matched about 4 million in Green Means Go funding with 1 million of city funds with two critical projects that are ready to go. Thank you.

Thank you.

Good afternoon. Kirk Blackburn here on behalf of the San Diego Association of Governments, or SANDAG. SANDAG remains deeply concerned with the proposed cuts to REAP 2.0, as doing so will only exacerbate the state's housing and climate crises.

SANDAG has already awarded over $12 million in REAP 2.0 funding to local jurisdictions for 15 housing projects, both for planning and capital, and had planned additionally use REAP funds for various other housing programs, including to collaborate with tribes and to provide over 600 homes to disadvantaged communities in South County.

All said, SANDAG had planned to use these REAP funds to leverage over 22 million in non-state funding, so strongly encourage the Legislature to reject the proposed cuts. Thank you.

Thank you. Could you ask anybody else who's going to speak out there to come on in.

Good afternoon. Natalie Spivak with Housing California. We are deeply concerned about the proposed cuts to the state's affordable housing and homelessness programs. In particular, we urge you to approve the Governor's proposal to include $500 million for the State Low-Income Housing Tax Credit Program in the budget.

This program has been successful in building 25,000 affordable homes over the last four years and very efficiently leverages federal funding, which is important at the time of state deficit. In addition, we urge you to restore the cuts to the multifamily housing program.

This program is incredibly important to ensure that our state funding is able to build units for the lowest income families. And finally, we urge you to restore the cuts to round five of the HAPP program and maintain level funding for round six.

The program is extremely important for local jurisdictions to provide housing and services to homeless individuals and families, and without that money, we will see homelessness increase. We know that there are about 47,000 affordable units in the pipeline that just need state funding to move forward. So, this funding will be incredibly important. Thank you.

Thank you. Again, comments under 30 seconds. If you see me doing this, that means you got to wrap it up. Thank you. You may lift the map mic all the way up. There you go.

Chair and Members, good afternoon. Francisco Barajas with the Southern California Association of Governments. We remain deeply concerned over the continued cut to REAP 2.0. This will have a devastating impact on local and regional efforts to address the housing crisis.

Here at SCAG, we've already awarded funding to 100 transformative projects, which are themselves using the funding to collectively leverage an additional $192 million in federal, state and local sources to support the building of 66,000 housing units across all income levels throughout our six-county region.

These projects are designed to accelerate housing production in a thoughtful, strategic and sustainable manner. And we strongly urge the Legislature and Governor to find a way to restore REAP 2.0 funding. Thank you so much for your time.

Thank you.

Thank you, Madam Chair. Eduardo Martinez here today on behalf of Actors' Equity Association. We are a national union of theater actors and stage managers in the live arts, here to speak against the $10 million cut to the Arts Council, as well as the $12.5 million cut to the Equitable Payroll Fund, which results in a zeroing out of that fund.

We were one of the chief sponsors of that legislation that created that fund, which is really meant to fund arts workers. So much of arts funding goes to fund spaces and buildings and things, but this funding was really geared toward creating more opportunities for a good career.

And so, we're really urging the Committee to really look closely at that and consider other alternatives. We think this is going to hurt primarily people of color, marginalized communities, and theaters can't wait this long. So, it's going to be hard to restore this money back, even if good budget times come for us later on.

So really encourage you to support us on that. Thank you.

Good afternoon, Madam Chair, Members of the Committee. John Moffat, on behalf of the Alliance for Automotive Innovation here in opposition to the bad debt deduction elimination, it's important to note what that is.

That is a refund of the overpayment of sales tax. When a vehicle is sold for $50,000 and then only 25,000 gets spent or gets paid back. That means there's two times the amount of tax was paid that should have been paid on the ultimate purchase price.

This has significant impacts when you're talking about a 10% sales tax rate in the State of California and will impact transactions moving forward. We think there are alternatives that we have put forward that would actually get savings in the budget year.

More savings in the budget year versus the out year has been proposed, and we just like to encourage the consideration of those alternatives. Thank you.

Madam Chair and Members, Cliff Costa, on behalf of General Motors, also here in opposition to the bad debt deduction, and encourage the Committee to reject the Governor's proposal and instead consider one of the alternatives that is being proposed by the industry.

We fundamentally believe that there is a backlog of money now that is being considered for bad debt and that is not actually a budget score in this budget year.

So, we would consider, and ask you to consider alternatives that would look at actually getting a realized score for this bad budget year and continue to allow this return of sales tax in future years. Thank you.

Good afternoon. Rene Diverioki here on behalf of the City of Placerville, the City of Auburn, the Sacramento Hispanic Chamber of Commerce, and Mutual Housing California requesting you to protect the REAP 2.0 funding. This is a critical pot of money that we rely on for the Green Means Go Program. It unlocks desperately needed infill housing in the Sacramento region. Thank you.

Thank you.

Good afternoon, Chair. Bless Sheppard on behalf of the 19 mayors from the Sacramento region urging you to protect funding for REAP 2.0. Mayors from the following cities include Citrus Heights, Marysville, Winters, Davis, Placerville, Woodland, Elk Grove, Rancho Cordova, Yuba City, Folsom, Rocklin, Galt, Roseville, Alton, Sacramento, Lincoln, and West Sacramento. Thank you.

Thank you.

Good afternoon. Melissa Werner on behalf of Honda, also in opposition to the elimination of the bad debt deduction, and we would align our comments with Mister Moffat in terms of considering adopting an alternative proposal. Thank you.

Thank you.

Madam Chair, Members, Sarah Flocks, California Labor Federation and while we appreciate that there are not furloughs in the Governor's proposal, we are opposed to a permanent elimination of state jobs. This is not a freeze, it is a permanent elimination. We have major concerns about that, especially in departments that have vacancies, are revenue generated, or special funded.

We also continue to advocate to preserve the High Road Training Partnership Program of high-quality training programs and hope money could be repurposed from Surf California Jobs First to continue that and oppose elimination of the Women in Construction. That's an important program. Thank you.

Thank you.

Good afternoon, Madam Chair and Members. Graciela Castillo-Krings here on behalf of All Home, CH, the California Housing Consortium, and Enterprise Community Partners. Wanted to just say thank you so much for the advocacy that the Legislature has done to make sure that the Governor included the tax credits. That is incredibly helpful.

But as the analysis by your staff points out, in order for us to really fulfill the promise and ensure that more people do not fall into homelessness, we really need to restore MHP dollars. That is such a.

It's a very unwise cut, and I'm surprised that the Governor actually is the one putting it forth, but would like to make sure that we restore that. And the last thing would be restoration of HAPP five round for the round five. Thank you.

Good afternoon. My name is Justina Martino. I am an artist, a small business owner, and a Sacramento Arts Commissioner. I oppose the $10 million budget cut to the California Arts Council. I invite you to reflect on an art experience that helped you feel connected, uplifted, moved or inspired.

The artists and arts organizations supported with arts console funds, create these impactful experiences for people and communities throughout California. Art is essential. Let's act like it.

Thank you.

Good afternoon. Rebecca Marcus, speaking on behalf of Leading Age California. While we greatly appreciate the availability of the $500 million for credit funds to create more LIHTC housing, we ask you to reject the other actions proposed in the May Revise specifically targeting the housing needs of older adults and people with disabilities.

As you know, California has experienced an alarming spike in older adult housing, and almost half of unhoused adults are now aged 50 and older. The May Revision proposes cuts to Home Safe and the Housing and Disability Advocacy Program, two of the only programs focused on preventing older adult homelessness.

When paired with the severe reductions in HAPP, the Behavioral Health Continuum Infrastructure Program, the Behavioral Health Bridge Program, and MHP, we will have a few resources left to help older and disabled adults to get and stay housed. Thank you.

Thank you.

Mark Stivers speaking for the California Housing Partnership and the Southern California Association of Nonprofit Housing. Affordable housing is a basic human need. It's also the only solution to homelessness and voters' greatest concerns.

Already, with bond funds drying up, we've seen a 38% reduction in affordable housing production in one year, and that's going to plummet further under the current proposed budget. We urge you to approve the state low-income housing tax credits. Thank you very much for that.

And restore as much of the multifamily housing program budget as possible, unless there's a housing bond placed on the ballot. Thank you very much.

Thank you.

Good afternoon, Madam Chair. Gus Corey, on behalf of several transportation planning agencies in the San Joaquin Valley and Central Coast, asking for you to consider restoring funding to REAP 2.0. Failure to do so is going to result in exposing local jurisdictions to litigation because they already have agreements signed with developers. That's one.

Secondly, by failing to produce more affordable housing, we are also exposing ourselves to losing transportation funding because we're required by the Air Resources Board to put together sustainable community strategies. So we ask for your reconsideration.

We think there's other funding sources, maybe even deferring the funding instead of just cutting the funding outright, since this was a reimbursement program and we've been depending on this funding for three years. So thank you for your consideration.

Thank you.

Madam Chair, Members, Martha.

Hang on one second. Can we find out, are there other people outside just so we can get? I'm trying to. There's seven more people. Let me ask Assembly Member Ortega, do you want to wait for the people to all do their comments or do you? You're okay on time? All right. All right. Thank you.

Madam Chair, Members, Martha Guerrero, representing the Los Angeles County Board of Supervisors, in opposition to the cut to the Housing Navigation and Maintenance Program, given that it does allow for youth to have access to federal vouchers with the additional support. Also urging the continued funding 1 billion for the HAPP program, 329 million goes to Los Angeles County for housing supports and also for the REAP program. Thank you so much.

Thank you.

Honorable Chair and Members, Amy Hines-Shaikh, on behalf of the California Community Land Trust Network, speaking in favor of the Foreclosure Intervention Housing Preservation Program. As your thoughtful analysis mentions, the foreclosure rates exceed pre-pandemic levels currently. In 2023 alone, 31,136 properties in California received a foreclosure notice.

Those buildings are home to approximately 100,500 Californians, excluding, including thousands of renters whose housing is at risk. The Governor's May Revise to the state budget proposed a 100% cut to FIHPP. We are requesting that, at a minimum, the state should maintain the Governor's January proposal of $237.5 million for the program.

And we thank you very much for your consideration.

Thank you.

Good afternoon, Madam Chair and Members. Margaret Gladstein Kiplopsey here on behalf of the California Retailers Association. We oppose the elimination of the bad debt deduction, which would essentially mean a retailer's lending partner cannot get a refund of sales tax paid to the state but not actually paid by the purchaser.

While the administration's proposed language restores the bad debt benefit for retailers, that doesn't help because retailers now partner with lenders rather than providing the financing themselves. These reasons, we urge you to reject this proposal. Thank you.

Thank you, Madam Chair, Members of the Committee. Jeremy Smith here on behalf of the State Building and Construction Trades Council, opposing the elimination of the Women in Construction Unit at the Department of Industrial Relations.

As we in the industry work to attract and retain more women to our industry as well as other marginalized groups, this unit has proven effective already and critical in helping us meet that demand. They were instrumental in creating the Equal Representation and Construction Apprenticeship Grant, which is providing stipends to those in registered apprenticeship programs for childcare costs.

This is important. It's important to have a unit specifically for women at DIR. We oppose a cut and urge you to restore it. Thank you.

Thank you.

Hi, I'm Dara Dado of CAMEO Network, an association of more than 400 mission-driven business service providers. In addition to the reasons my colleagues have stated a $13 million TAP cut will seriously undermine the ability to deliver on the SSPCI program.

Because the TAP program builds the pipeline for SSPCI programs and funds around 100 organizations, most are not participating in the SSBCI program. The two programs leverage each other and are not interchangeable. We urge you not to cut the TAP.

Thank you.

Good afternoon. Purva Bhattacharjee with the California Alliance of Child and Family Services. We represent over 160 different community-based organizations that provide services to foster youth. We are in opposition to the cuts to the Housing Navigation and Maintenance Program.

This important program helps provide services for over 1300 former foster youth and is a key reason why homelessness amongst transition-aged youth decreased by 16% in California. Cuts to this program would just increase youth homelessness across California and we believe that this important program should be continued to be funded. Thank you.

Thank you.

Good afternoon, Madam Chair, Committee Members. Thank you for your time this morning. Julien Canete, President and CEO of the California Hispanic Chambers of Commerce here in opposition to the proposed cut to the Technical Assistance Expansion Program.

This program has helped so many businesses, but more importantly, it's been an investment in the state's economy in growing these businesses, creating more jobs, and creating a stronger tax base in our communities throughout California. These programs impact communities from the south border to the Oregon border. So, we urge you to keep the funding in place. Thank you.

Thank you.

Good afternoon, Madam Chair and Members. Karen Lange, on behalf of the boards of supervisors in several counties related to the proposals for Placer County, there's a $3.5 million grant that they have secured through the REAP project that would fund the sewer project that would support 2,000 units of build out and they oppose that cut.

The boards of supervisors in Humboldt and Kern urge you to maintain the funding for Housing Navigation and Maintenance. San Joaquin, Humboldt, Fresno and Madera are in opposition to the cuts to HAPP.

Sonoma is urgently needing funding for the Middle Mile of Broadband and Nevada and Mendocino share the concerns you've already heard regarding the cut to technical assistance at GO-Biz. Thank you.

Thank you.

Good afternoon. Matt Klopfenstein on behalf of Volkswagen Group of America. We are, like the other automakers, opposed to the bad debt proposal that the Governor has put forward. For the sake of time, I'll just align my comments with John Moffat and the Alliance for Automotive Innovation. Thank you.

Thank you.

Alicia Benavidez here on behalf of Golden State Opportunity, strongly urging the Legislature to reject the Governor's proposed $10 million reduction to the Free Tax Preparation Education Outreach Services.

The current funding is helping ensure we have critical communities driven outreach, focused and connecting eligible tax filers to free tax preparation assistance, and educating families about claiming the California Earned Income Tax Credit, Young Child Tax Credit, and the Foster Youth Tax Credit, as well as federal.

These tax credits are recognized as one of California's most effective programs for alleviating poverty, and we strongly urge your preservation.

Thank you.

Hello, Chair and Members, Caroline Grinder, on behalf of the League of California Cities. Cal Cities is deeply concerned about the proposed 260 million in cuts to HAPP bonus funds and the lack of funding for HAPP round six. Failure to fund HAPP for another round would be an existential threat to homelessness services up and down the state.

Cal Cites is urging a minimum of 1 billion in funding for HAPP round six and considering continued conversations around the need for ongoing funding to allow cities to plan long term to address the homelessness crisis. We understand the calls for accountability. A recent ICH report really did show the value of the HAPP program in addressing homelessness.

We look forward to working together to continue to address this crisis in our state. Thank you.

Thank you.

Hello, Sam Wilkinson with Grace End Child Poverty in California and the CalEITC Coalition here to urge your support for the income threshold fixed to align the Young Child Tax Credit and the Foster Youth Tax Credit with the CalEITC, to ask that you reject the Governor's proposal to reduce free tax preparation assistance, education, and outreach funding, and to fully restore that funding at 20 million.

We urge the Legislature to support progressive, equitable revenue proposals such as those outlined by the LAO, to create a fair budget for all Californians and to build on the IRS Direct File pilot toward an integrated, one-stop solution. Thank you so much.

Thank you.

Hi, good afternoon, Chair and Members. My name is Danielle Bautista with United Ways of California and also on behalf of the California Earned Income Tax Credit Coalition here in support of fully restoring the 20 million for Free Tax Preparation Assistance and Education and Outreach Program, and also in support of the trailer bill language to support income threshold alignment with the Foster Youth Tax Credit, Young Child Tax Credit, and California Earned Income Tax Credit. Thank you.

Hello. Good evening, Chair Members. My name is Sophia and I'm the Director for the Women's Business Center here in Sacramento, and I want to urge you to please consider your reduction on the 50% amount funding for TAP.

With TAP, we have been able to bring our Child Entrepreneurship Program to fruition and we have also, we've been able to contribute to closing that childcare desert. And without that, we would not be able to continue the program, nor would we be able to continue to allow families to re-enter the workforce force. Thank you.

Good afternoon, Chair and Members. Chris Lee here on behalf of the Sacramento Area Council of Governments, in opposition to the proposed REAP 2.0 cuts. There's $26 million worth of hard infrastructure projects ready to go in the Sacramento region that will unlock 8,000 units of infill housing, helping to achieve both affordable housing and climate goals.

We thank the Committee for prioritizing that in budget negotiations and urge you to restore as much as possible. Second, on behalf of the Sonoma County Transportation Authority, Regional Climate Protection Authority, echo the comments by MTC and ABAG, also in opposition to the REAP 2.0 cuts. Thank you.

Good afternoon, Madam Chair and Members Kiana Valentine with Politico Group on behalf of several regional agency clients in opposition to the proposed cuts to the REAP 2.0 program. I would like to reiterate my colleagues' gratitude to the Assembly for making this a priority issue for budget negotiations going forward.

On behalf of a few clients wanted to share some of the potential impacts that this would have in regions related to housing, multimodal transportation investments, and ultimately the ability to deliver on climate goals.

In Tulare County, they have already broken ground and in fact, some people are already living in affordable housing infill development that will support families, seniors, and formerly homeless individuals with supportive services. In the Coachella Valley, those funds are intended to support development of 6,200 units of affordable housing, connections to active transportation, and transit opportunities.

And finally, in Merced County, they are planning to use a significant portion of their REAP 2.0 for 100% infill affordable housing development in connection to high speed rail, existing Amtrak, and bus service. Thank you so much.

Thank you.

Holly Fraumeni DeJesus on behalf of Habitat for Humanity California. We're still deeply disappointed that the Governor's May Revision still disproportionately cuts the homeownership programs compared to the rental programs, completely zeroing out the CalHome Program, which is the one and only state program that produces a new yield net for owner-occupied homes for low-income families.

We strongly encourage the Legislature to please restore the 152 million that was cut, that is 2,000 new units that will not be built in future years, and at a minimum, restore something. Zeroing out the CalHome program is really unacceptable.

And second, on behalf of the United Way of Greater Los Angeles, we're hoping that the Legislature will create some funding for La Casa to help bridge the gap right now for the pilot projects that are much needed in the LA County Basin while we're waiting for that newly certified initiative, the ballot initiative that is going to the voters in the fall.

It's going to take a while for those funds to come in, but we're hopeful that the Legislature will restore some funds so that we can get some of those projects funded while we wait for those new revenues to come into the program. So, thank you.

All right, seeing no one else. Last call, public comments. All right, we'll bring it back here to the dais. Assembly Member Patterson, will you allow our guests to speak first? All right. Assembly Member Ortega.

Thank you for your graciousness. I came and asked some questions around the rationale for the Women in Construction Unit and eliminating that. Do we have folks here from the Governor's Office?

If you don't mind introducing yourself.

Good afternoon. Andrew March with the Department of Finance. So, it was specifically to the Women in Construction Unit. The Governor had to make very difficult decisions this year and withdraw priority funding that we previously committed to. And this was one of those difficult decisions that had to be made.

This is a discretionary General Fund, and given the budget climate, it's not something that we could continue funding in the future.

Is there conversations or thoughts about continuing the program or project, the funding, and, you know, future years when we have a better budget outlook?

So, the proposal at the May Revision is to eliminate the funding, but if the General Fund condition was to change in the future, then it's something that the Administration would be happy to have conversations with the Legislature about restoring that funding.

So, I have the same question for the proposal to reduce 45 million for the High Road Training Partnerships in Health and Human Services. We've spent a lot of time in the Legislature talking about the healthcare shortage, the need for additional trained, you know, people in the healthcare system. So, what is the rationale behind this?

And wouldn't this impact our ability to, you know, increase our revenue by making sure we have more people entering the workforce?

Yeah. So again, with the High Road Training Partnerships for the Health and Human services focus, that funding, again, was it's discretionary General funds.

Given the budget environment, it was a difficult decision that had to be made back at the Governor's Budget. There's additional funding in the health and human services area for healthcare workforce, and then there's additionally direction in Proposition One for healthcare workforce funding.

And there as well, although not substitutes directly for the High Road Training Partnerships, those are additional healthcare workforce funding.

Thank you. That concludes my questions. I just want to thank the Chair for her amazing work, and making sure that we're all informed about what's happening in these cuts and being a voice. Thank you.

Thank you for joining us. All right. Assembly Member Patterson, who has been part of our team here, but has often been away. What are some of the things on your mind today? Assembly Member Patterson.

Well, thank you, Chair. Yes. I'm usually on two committees at the same exact time, including a committee that I'm Vice Chair of. So, I don't make it as much as I like, but this is honestly one of my favorite areas in the budget, and so I'm glad to be on it.

I did have some questions for the Governor's Officer of Finance, if that's possible, and then I'll make a couple other statements.

Where did he go?

That's a good way to duck the questions. There we go. Back.

If you want to tell us the topic, because that way there's different representatives. They'll know.

Yes. The question I'm going to ask about, and then I'll give some, some statements, but I'm going to ask about the bad debt deduction.

I should get the topics all of you guys are here for so I can make sure you all get your steps in today.

Jacob Kirn, Department of Finance. Happy to answer any questions about this proposal.

Great, thank you. Can you explain to me a little bit how that, how that works, the deduction?

Yeah, sure. So our proposal is to eliminate the bad debt deduction for lenders only, not retailers. So how this would work in practice is basically. I'll just give some examples. I think that would actually be easier. So I have a credit card and make a lot of purchases on my credit card.

Some of the purchases that are made on that credit card, some portion of the, you know, each purchase is related to sales tax. And then, so my balance at the end of the month is in part related to sales tax.

You know, I'm paying interest on this card, maybe making some payments, not fully paying it off, and constantly accruing balance, and then somewhere down the line, I default on the loan, I can't pay back the card.

This would allow the lender to then claim a sales tax deduction for the purchase or the portion of the remaining balance that's related to the sales tax. It could also happen on car loans. That's actually the biggest category that's included in this. But we view this as sort of a, an unnecessary subsidy.

So on the retailer side, you could have a situation where a customer gives the retailer a bad check, for instance. In that example, we view it as more fair that the retailer should be able to claim a deduction or refund for the sales tax because they weren't able to collect the sales tax reimbursement from the customer.

This case is a little more tangential because the retailer, who is the person who's ultimately liable for the sales tax and actually is liable for the sales tax, even if they can't collect the reimbursement from the customer, but they're collecting the full amount, including the sales tax balance, from the customer.

The customer has a separate transaction where they're receiving a loan from a loan issuer, and we view those as two separate things. One is the purchase between the retailer and the consumer, and the other one is this loan agreement. And the loan agreement is going to have to be large enough to cover the entire price.

That includes sales tax, sometimes other fees as well that wouldn't be refunded. So that's the rationale behind it a little bit. Yeah. I can answer any other questions as well.

Great. Thanks. Not sure many people use checks, but I get where you're going there. I had to write one today, actually, I forgot how to do it. But when you, I mean, I heard from the retailers today that obviously they maintain relationships with credit companies. I mean, very few of them are lending their own cash.

And they had mentioned that that relationship was pretty important to continue to offer credit services for our retailers. How much money is this exactly? What are the savings that would be realized?

Yeah. So I'll just mention up front the retailers, that portion of the law that we are preserving. That's a very small portion. Less than 10% of claims over the course of a year. Used to be the case that more of the claims were related to retailers, particularly before the deduction and refund was expanded to lenders in 2000.

But the retail market has changed such that there's almost always an affiliate lender, some other party that's making the loan. In this case.

Now the revenue from the deduction is $3 million in General Fund in the first year, $10 million, and that's 24-25 and then $10 million in 25-26, $10 million in 26-27, $30 million in 27-28 and then $50 million in 28-29 and each year thereafter.

And I'll also, and that's because there's a backlog of claims that's roughly three years long with CDTFA, which covers the majority in percentage terms of the claims. There are claims that are individually made for refunds, and then there's some smaller portion of the claims overall that are made on sales tax returns.

So it's from that sales tax return portion that we're getting our revenue gain immediately. And then on the individual claim side, then the backlog needs to be worked through, which is why the revenues sort of phase in.

Also point out that because this is a sales tax deduction and refund, this is also going to generate money for locals who receive the revenues from actually the majority of the total sales tax rate. It's about 4% for the state and about four and a half percent a little more for locals.

So that's going to be about $60 million a year for locals once this backlog is worked through.

Alright, thanks. I'll just in the. I don't have any more questions, but on the interest of time, I'll just make a couple comments and then I know we have 200 bills we got to still get through today so.

we still have other topics we're going to.

Yeah, okay. Alright, great.

If you have other topics, then we'll just call those individuals up.

I'm just going to make general, a couple general comments about the budget in general. I just want to say, you know, this is. It's always interesting being in this for public comment because this is the Governor's Budget, it's not the legislature's.

Eventually, it will become, the Legislature will hopefully approve a budget at a certain point, but right now, this is the Governor's Budget, and the Legislatures obviously were looking at that. But we take sort of the heat for the governor's, some of these proposals.

And I was here actually, as a staff person during, I think, the longest budget holdout in the history of the state. And so I understand there are some hard decisions that have to be made. Just checking off some of the concerns. I'm very concerned about $1.7 billion in cuts to various housing programs.

I mean, I really don't feel like maybe that should come with a waiver of, like, RHNA enforcement or something like that, because there's 0% chance. There are very few policies that have come from the Governor to help local governments meet their housing goals. Most of that has actually come from the Legislature and work that we've done.

There have been some things, but I don't think there's any chance that they're going to meet the housing goals without assistance from the state. And I think $1.7 billion in cuts is kind of a lot. You know, that's a lot of money.

So I think we should really consider the seriousness that the Administration has on meeting our housing obligations because I'm not seeing it reflected into the budget. Just last year, this Legislature approved, I can just name two bills, five to $7 billion in new programs and on two pieces of legislation.

And, you know, the Governor said it's a statement of values. And so, you know, we're not considering those tranches of money. So a lot of concerns about that. We heard a lot on arts. Very concerned about that as well. The research and development tax credit. I got a ton of concerns.

I mean, Boston, I had an opportunity to go to Boston and check out what they're doing over there for biotech, and a lot of the companies are already setting up a presence there. So I get concerned about the long term effects of that.

And I think, finally, just looking at my notes here, you know, obviously, foster care, very concerned about how we're treating foster care, the developmentally disabled as well. That's not really this Committee.

But finally, I want to end with one more thing not relevant to this Committee per se, but the MCO tax and just how that's being restructured to essentially be taken out of healthcare.

I mean, people aren't going to be able to access Medicare- Medi-Cal services if we're just balancing the budget on the backs of Medi-Cal patients. So with that, I yield the remainder of my time. And thank you for giving me a Wednesday tirade. Thank you.

Thank you, Assemblymember Patterson. All right, we have been joined again by Assemblymember Ward, who I know has some comments and questions.

Thank you, Madam Chair. And just kind of also as overview comments and within the purview of this Subcommitee, you know, we've been sitting through our individual departmental hearings and had kind of the overview after the May revise.

And I don't have anything terribly more to add other than, you know, getting, continuing to underscore my just deep frustration and disappointment.

This should be our only choices in front of us, the trade offs and the statement of values that we have through this budget that somehow we're not addressing the, the biggest problem that Californians tell us that we have around affordable housing and homelessness is not consistent with the options that are in front of us, and we've got to dig deeper and find other options.

I'm grateful some of those have been afforded through the May revision. You know, all of these are bad trade offs and it's something has to give. And if we're looking at the middle mile broadband, for example, that I very much support and was happy to vote for for in recent years.

But, you know, given the trade off that we have about doing least harm, I suppose, through our ultimate budget that we would adopt this year, you know, these are things that are counterbalanced that I would like to have seen gone back into housing and maybe not disappear somewhere else into the budget through this Subcommitee. No yes.

We've heard a lot about. I'm going to sort of bring together, you know, both our small business resources as well as the Arts Council. Again, these are decisions that we have that are mentioned before, pennywise pound foolish for just seeds of investment that the state can make.

The impact and the influence that this can have for local organizations and for economic activity is incredulous. So I want to make sure that we're being effective with our decisions.

And to that end, too, as well, very supportive of the R&D tax credit that the state has continued to make because we know the amplified economic impact that that has, which, of course, turns around to be able to support the ferry tax base that is the fundamentals of, you know, our base revenues that we have for outgoing years.

But back to housing. You know, there continues to be, in my mind, no progress towards what I want to see in a final budget. I am grateful for the consideration of the, and encouraged for the consideration of the low income housing tax, tax credit restoration. That is important and critical.

But it must be paired with additional support for the multifamily housing program if we're really going to reach some of the deeply affordable units and production that we also need to have in all of our communities.

It's embarrassing that we can't even think about $13.7 million to be able to support the youth programs that have helped measurably more than 1000 formerly foster youth with their stability, so that with all the complications in their lives that they're not falling into homelessness. Again, little investments by the state that matter so much and otherwise, you know, were not those investments there would cause an incredible amount of strain on public resources.

You know, we've got to go back to the table and think about some of these other trade offs that we have either within the purview of the Subcommitee or as the Committee of the whole budget that would be able to be able to replenish some of these resources.

So again, if I had to prioritize, because we had a lot of programs out there and almost all of them are substantially or if not completely eviscerated, we know that REAP and HAP funding matter a lot to our regions and to our big cities, and they're flexible and we are doing a better job.

I appreciate as well, I think, an update in our background here today that we're going to be looking at the housing and homelessness accountability results and partnership.

I think that this is an action that we can take that will do exactly what we've been talking about in recent weeks to increase our accountability of these limited dollars that are out there and improve upon accountability systems.

So I like the direction that that's going as sort of a policy angle, but we're still going to need the budget to be able to back it up and continue to be able to send down to our local communities to put out to good use.

So REAP and HAP and then on the housing side, working on multifamily housing program.

And, you know, if we can look at a couple of the others as well, too, you know, that would be, that would be generous, but I would just kind of start there as, you know, maybe a priority for restoration as we're looking at other ways to be able to move budget dollars over from maybe a program we haven't thought about yet or we haven't reviewed yet to be able to backfill some of these very draconian deep cuts.

So those would be my kind of overarching guiding values as we head into these final weeks.

Thank you, Assemblymember Ward, and thank you to Assemblymember Patterson. Before I make my comments, I do want to thank our Committee consultants here who stay up at night dreaming about how we're going to balance this budget again.

To the DOF and the LAO, I know this is your favorite time of year, and you just dream about all the ways to balance this budget, but seriously, I know it's heart wrenching. I will just make these macro comments, which is concurring with our two committee members here. This indeed is the Governor's Budget.

And through the Senate process, through the Assembly process, we will continue to negotiate till the last moment before we go to print on this. Obviously, for those here that are joining us or any individuals who are watching, there are competing interests.

When you have a slim budget, meaning that for some of you who are attending budget hearings, perhaps for the first time, you're being made aware of housing programs that you may not have ever heard of, foster care programs that maybe you haven't heard of, small business programs that you didn't know existed, investments in California from research and development and so forth, bad debt.

Some of you may not have heard of this or interface.

And again, there were a few times, even when our Assemblymember Papan was here speaking to Department of Finance, I felt like we almost needed some charts and flow charts, and again, also on other items, because these are complex fiscal items that most of us don't deal with in our daily lives.

So bringing it back to what do our constituents, what do we deal with? We deal mostly with what we see. What we see and hear about in California and have had a steady drumbeat now for a good handful of years, is why is California not solving our housing problems and why does homelessness continue to rise?

Now, you have heard me speak about this several times in these Committee hearings, but I guarantee you that those two issues affect everything else that we're talking about.

So if we are talking about investments in the arts, if people want to bring theater and music and all of these goodness to our community, they're gonna have second thoughts if they see homeless people right in front of a theater or a business, if small business wants to set up, whether it's a taqueria or whether it's alterations, whatever the business is, what happens on the streets of California impact business.

If we have tourism in California, which is a very bright spot. Since the pandemic we've been told tourism is back, and yet I represent Disneyland, Knott's Berry Farm in my very own district. And we know that when people come from other states to California or other countries, they're often shocked.

And although they have great experiences from San Diego to Yosemite to our beaches, there is still that lingering item of what is happening here in California that we cannot solve this problem. This brings back to the item of this budget we know can completely decimate the progress we are making. Although slow on housing production, still steps forward.

If we cut these programs, REAP 2.0, HHAP, the multifamily housing dollars, our housing navigators for foster youth, we will be going backwards, backwards by leaps and bounds. And I can tell you everybody who is thinking, but what about my program? We will in fact be impacting your programs by not investing in homelessness and housing.

So we've heard a steady drum here of local cities, counties, regional planning areas saying we need these dollars to continue our investment. So I would say, of course, that is a top priority for me. But there's other areas that we have to look at. We must look at these research and development dollars, our investment, our small businesses.

We must figure out ways to not wipe out and clear programs out. Possibly, of course, do some slowing down of dollars or delaying, but when we wipe out programs, we find that we often never see them return. That does not mean there are some that we cannot retain all of the programs that have been proposed.

I would say, again, there are few issues that come to the top. Again, I see my friend from middle mile here, I know that that's been a little bit of kind of like, well let's take it from middle mile.

I think the reason middle mile continues to come up across the state is there was an infusion of several billions of dollars. And one of the kind of outliers in this budget seems to be that we were initially talking about adding another $1.5 billion.

I know through or since the May revise now they're is a line item that says, well, we think we have the funding that we need for middle mile. But then there is the trigger part that seems a little astonishing. So again, wanting access for all, for Internet, we saw that through the pandemic. It's incredibly important.

On the other hand, weighing those priorities is extremely important. So seeing the $1.5 billion additional dollars to me stands out. And I would say that we need to look at that, because if we end up leaving $1.5 billion in our discretionary fund, that in fact, could be funding other parts of the budget that we so desperately need.

Arts Council, we have so many advocates of arts that have come to talk to us, and we know that those programs really make those differences, whether it's from our, as said, you know, arts, music, theater, museums, all of these types of programs that are in our district, we know they were the first to close down, finally got some infusion into the budget, and now we're saying it's time to slow those down.

We have to weigh, as my colleague said, when we are looking at closing down, are we really taking investment away? We know that people come into our communities to visit museums, to attend performances. They are going to dinner. They're staying at hotels. By pulling those programs back, will we really be limiting investment in California?

So again, Wayne, the investment dollars in California, not pushing people out of our state, which we know we all too often are hearing about the high tax, about gas prices, how do we keep people here in California? Not only to go to our businesses, but to invest and to open businesses. So to our small businesses.

We hear you. We see you. With that I'm going to, I think, wrap it up here. We have a lot in front of us, but it has been a complete honor to chair this Committee this year. Some of you who haven't followed my resume, I believe this is the fifth Committee I've chaired, maybe sixth.

I chair a lot of committees for a short time, but I thoroughly enjoyed this process. I find it fascinating, again, to DOF, LAO. We know the work you do because these two tell me, and I see it line by line. I find your jobs fascinating and I think they deserve a little cheer.

So I'm going to give you a little cheer out there. You will get less cheers as we go along. And I can tell you, us on this Committee, thank you for talking to us. We appreciate it. But we are not the sole vote in what will stay in the budget, what will be moved out of the budget.

It is a joint policy group between Senate, the Assembly and the Governor's team. So please talk to all your counterparts.

But I've seen several of the faces here from the construction programs, and you have come to talk to us, and it means a lot, and I've learned so much on this Committee, and we will do our best to get as far as we can with the dollars we have. Thank you so much for being here.