Senate Standing Committee on Budget and Fiscal Review

And so we're hearing three bills today related to the budget, AB 107, which is the Budget Act of 2024 AB 154 around education, finance and Prop 98 suspension and AB 167, regarding taxation under the California Constitution.

We're required to pass a balanced budget no later than June 15, and we will do so via the budget that we are considering today. The budget builds on the governor's January proposal and may revision proposal, and the budget includes significant input from the Senate.

We had 54 Senate Subcommitee hearings and three full Committee hearings before today, and the package before us represents the combined actions of each of our Budget Subcommittees. I want to publicly thank our five budget Subcommitee chairs who worked incredibly hard over the course of this process.

AB 107 represents a budget plan that includes approximately $293 billion in total spending, 211.3 billion of which is from the General Fund. It's a budget that is balanced both in fiscal year 2024-25 and fiscal year 2025-26.

It includes $46.9 billion in solutions in the 2024-25 fiscal year and 29.8 billion in solutions in the 25-26 fiscal years. In order to close those budget gaps, the budget maintains $23.2 billion in combined total reserves so that we can continue to have that safety net in future uncertain times.

I want to just stress, despite having to address a large budget deficit this year, I want to just for those who I know, remember very acutely what happened the last time we had large budget deficits during the Great Recession, and we had no budget reserves and the state was paying, quote unquote, paying employees with IOUs, and we were forced to make cuts that were truly nightmarish.

And so I say we, the Legislature was, and you fast forward to today where, because of responsible actions over the years by Governor Brown, Governor Newsom and by the Legislature, we now have a very sizable budget Reserve and we have stabilized our finances in a number of ways. It's not to say that there are no issues.

We still have a lot of work to do in California, but we're in a much better place now. And this process, I think, has been much smoother because of the smart decisions that the two governors and the Legislature have made over the years.

The two trailer bills before us, AB 154 and 167, are also key to our balanced budget. The suspension of Prop 98 will allow us to to move forward with education funding and not reduce k through 14 funding. We are. It was a huge priority for our, for our Senators and I know for the Governor. I know for the Assembly to protect public education funding.

We've made progress in recent years in terms of funding our public schools, and we need to maintain that progressive we also in the trailer bills are seeing revenue changes, including adoption of the net operating loss suspension, the business credit limitation, both of which will commence in the 2024 tax year. The Legislature and the Governor share many priorities, and I look forward to having a full agreement with the Administration soon.

I also want to thank in addition to our budget Subcommitee chairs, I want to thank our budget staff, both the staff on this Committee and in the pro Tem's office, who have been working incredibly hard to get us to this point and are going to continue to work incredibly hard as we move forward. And with that, Vice Chair Neilo, would you like to make any comments?

Thank you very much, Mister chair, and sorry for being, excuse me, a little bit late.

I was late too. So. Well, bipartisan.

Great coincidence. First of all, I will start out by thanking our budget staff and the great work that the LAO does and also advising us. It does take a lot of time and they have to, in terms of our staff, they have to work over the weekends sometimes, and that's not the easiest thing. And they provide very valuable input to myself and our colleagues in our caucus.

And so relative to this budget, I appreciate the comments that the chair made that we're in a better place. I would agree with that. We're in a better place than we were with regard to the January proposal by the Governor. But we have lots of challenges with this budget. I would agree it is balanced, nominally, it is not sustainable, and I look forward to getting into discussion as to why I believe it is not sustainable. And I think this budget is setting us up for very serious built in deficits to be dealt with with the governor's January 25 proposal.

And with regard to trailer bills, the Proposition 98 suspension is one thing, but my understanding is that the governor's maneuver relative to the 2023... 22-23 budget on Proposition 98 is still part of the budget. Correct me if I'm wrong, but if it is, that sets us up for further issues down the road also, and as far as the taxation is concerned, just about every one of those proposals is fundamentally flawed, one of which is unquestionably an absolute tax increase, which the Governor said we would not have. Having said that, as I said, I look forward to the discussion as we get into more of those details.

Okay. Thank you very much, Mister Vice Chair. We will now begin with Gabe Pettic from the Legislative Analyst's office. I want to also thank the LAO for. For its work. He will provide a brief overview of AB 107, AB 154 and AB 167.

Great. Well, good morning, Mister chair Wiener and Mister Vice Chair Niello and Members. Gabe Petek, Legislative Analyst. Yes. The Committee staff asked our office, I'm sorry.

Could we increase the volume a little bit?

Is it a little. oh, I can move closer. Sorry. Yes. Committee staff asked our office to briefly describe the items on today's agenda. And so, as I do that, I will try in particular to highlight how the Joint Legislative budget plan differs from the Governor's proposal. I'll start actually with AB 167, which is the Bill that allows for the main structural difference in the legislative package by providing for an estimated $5 billion in additional revenue across the budget window.

This additional capacity enables the legislative plan to spend more on schools and to reject some of the governor's proposed reductions to various human service, health and housing programs. The main way that the Bill does this is by starting the limitations on the businesses use of net operating loss deductions and tax credits in the 2024 tax year, which is one year earlier than what the Governor has proposed.

AB 167 also includes some of the governor's proposals, such as the elimination of tax expenditures available to certain lenders and oil companies, and provides for an expansion of the Director of Finances Authority to postpone state tax deadlines in response to disaster declarations. Moving to AB 107.

This is the Bill that authorizes General Fund expenditures in the overall budget package. Some of the main or major, I should say, spending differences between the legislative package and the May revision include that it provides 1 billion in round six funding for the homeless housing Assistance and prevention program.

It provides about 800 million to undo reductions to the middle class scholarship program and then also 600 million to undo a delay in the implementation of the DDS service provider rate reform. And there are numerous other smaller changes across a variety of programs. Also included turning to budget reserves.

As the chair already said, the legislative budget package would end with about 23 billion in total reserves, which is 317 million more than the May revision. However, there are some differences within the categories of reserves. Specifically, the legislative package has 22 billion in General purpose reserves, or 815 million less than the May revision.

This is because the legislative package uses a bit more from the budget stabilization account, although it uses 450 million less from the safety net Reserve. However, the legislative package also would maintain about 1 billion in the Proposition 98 Reserve, whereas the May revision would deplete this Reserve by 202425 or the end of that fiscal year and then just continuing with education.

In broad strokes, the legislative plan for schools and community colleges does adopt the Proposition 98 changes announced in the governor's May 28 agreement with the education groups. And this includes the suspension of the minimum guarantee, which is the action effectuated in AB 154 on today's hearing agenda.

The plan also funds many specific spending proposals included in the May revision, including the 1.07% cost of living adjustment. That said, it does differ from the governor's framework in two notable ways. First, the legislative plan has 3 billion more in Proposition 98 funding available from two reasons.

The first is that by adopting the higher revenues provided by the earlier start to the knoll and tax credit limitations that adds revenue. And then secondly, the legislative plan rejects a few specific spending proposals, the largest of which is about 815 million in grants for electric school buses.

And so with this additional funding, the legislative plan uses those resources to reduce the state's reliance on payment deferrals. And then, as I mentioned, it does save nearly 1.1 billion in the Proposition 98 Reserve. So that I'll stop there and happy to answer questions along with some of my staff that are here with us.

Okay, thank you very much. Next we'll hear from Erika Li from the Department of Finance. And I want to thank the Department of Finance for always working closely with us on the budget.

Thank you. Erika Li with the Department of Finance. Good morning. Chair Wiener, Vice Chair Niello, Members of the Budget Committee, I'll keep my comments brief. I just wanted to note that the bills, the two trailer bills before us are largely consistent with the administration's proposals both at the Governor's Budget and at the May revision. And at this time, we continue to work with the Legislature toward a three party plan. Thank you.

Thank you very much, Miss Li. Okay, we will now open up to discussion and questions from Members of the Committee. I know, Senator Laird, did you express you wanted to say something? Senator Laird?

Thank you, Mister chair. And I know others might talk about the Habitat conservation Fund reduction, and I'm not excited about that reduction and let others talk about it, but I wanted to talk about the education, a part of this as the chair of the education Committee and globally, we started out this whole budget discussion with a debate about whether the deficit was 58 billion or 73 billion, and we have in front of us a balanced budget that restores many of the proposed cuts in the May revise.

That is very significant. I think it is one of the bigger changes from a may revise in a positive way since I've been involved in this over 20 years and in education. The significant thing, and it was alluded to by the chair, the significant thing is that all along the way, there were potential cuts to k-14 education, and this budget does not do that. And it is very significant in a downtime that we continue to move ahead.

Since 2017, there's been a 40% increase in the basic Proposition 98, k through 14 funding, and it has moved us way out of the bottom of poor student funding in California. And this budget avoids stepping back from that. That's very significant. But I think one of the other significant things is the debate until this budget about the University of California or the California State University system is, do we give a zero increase and defer the may revise, actually proposed a substantial cut to both.

And this budget figures out a way that we stick with the amounts in the compacts and we do the increases moving ahead. And we are aware that the fiscal challenges to the two higher education segments are actually greater than even what we can do with the restoration, given inflation, deferred maintenance, salary contracts.

It is a challenge, but this really is an excellent step forward in a tough budget, to move them ahead of any place that they have been in any proposal that's been up to the budget that is in front of us today. And so while I think there's going to be the debates that happened in the opening statements, this is remarkable, given everything that has been to this point. And there were some statements about how this budget was aired.

Let me just tell you, in the extensive hearings of the education budget Subcommitee, we had a discussion about anything that's on the table for education in this budget, whether it was UC, CSU, Proposition 98, the scholarships, and this significantly brings back the middle class scholarship right at the time that parents and students are making decisions about what colleges to go to and whether they have the financial resources to go to certain public education, higher education institutions in California.

This really helps. And so, as depressed as I was in January, and as bad as some of the cuts still are that are included in this budget, in education, I think we have been able to step ahead with this budget. And I'm going to be pleased to support the education pieces of this as well as the entire budget.

Thank you, Senator Seyarto And then Senator Blakespear,

Thank you very much. And I want to preface this by saying to the finance staff and everybody, you guys do a terrific job of trying to meld together what it is that we give you and understand any criticisms or. Sounds like criticism is not directed at you at all.

It's directed at us as legislators or the Administration itself in the directions that we give you. And so please don't ever think that I don't appreciate what you do. I want to start with the prison system here. The CDCR. We have an unallocated cut of about $500 million to CDCR's budget.

And the language exempt specifically exempts reentry and rehabilitative programs, which is where there's a lot of spending, which makes me a little concerned. Are we kind of setting ourselves up for more early release? In other words, is that the only place they're going to be able to cut? Have you had those conversations with CDCR about where they're going to make these $500 million of unallocated cuts?

Erika Li with the Department of Finance, and I would defer to the Committee on that Plan. That was not part of our May revision.

Okay, well, I'm happy to respond to that, then, if you could. Yeah, no, absolutely. So, yeah, I think, you know, reentry and rehabilitation are incredibly important, and we don't. And when we don't invest in rehabilitation and we don't help people transition from prison into the community, then what we see is higher rates of recidivism.

And our bloated, overly large prison system then gets even bigger. And for so many years, we've spent more on our prison system than on UC and CSU, which is a statement of values. And it got to the point where our prison system was so bloated that the federal courts decided that our prison system was like a walking, rambling violation of the US Constitution as we couldn't provide effective healthcare with that level of overcrowding in our prisons.

So, yeah, we definitely have a real focus on reentry and rehabilitation, and we are spending way, way, way too much on our prison system. And I can't say I speak for all of my Democratic colleagues, but I think I speak for many of them, that we spend too much on our prison system, and we need to be smarter about the way we run our prison system and not just keep throwing money at it, which is what we have historically done in an escalating way. I really want us to spend more on UC, CSU than on prisons. So that's the chair's response.

Well, thank you for that. I kind of disagree a little bit with the assertion that the prisons are essentially not needed.

I didn't say that. I said they were too big, and we spend too much money on them.

So we're going to divest in our prison system instead of fixing it and creating a system that works for all of us, we're going to divest and divest. And right now, we just. You guys just. We rolled out a crime Bill package to address the issue of too many people running out there and rising crime. And so my concern is this is just going to exacerbate that while now we finally recognize that there's a crime issue and that we got to go the other way, this is going to clash. In other words, this is going to create problems in the future, and it's going to be more costs for all of us.

So my next question, the minimum health care or the minimum wage for healthcare workers? We passed that last year, and it's got a $2 billion price tag to it, and yet we're going to go ahead July 1 with that. But this budget only adds $100 million in state funds to pay for this bill's implementation cost. Is that correct?

I'm sorry, could you repeat that question?

So there's a $2 billion price tag for the minimum wage, health care, that's going into effect on July 1 because we have not deferred that. And so there's no trailer Bill coming that says, you know, that addresses this, but the budget adds only $100 million to cover this implementation. Do we anticipate that there's going to be a large Bill at the end of this when it does get implemented?

Thank you for that question. Again, this two party plan does include funding for SB 525, the $25 minimum wage. And we continue to have conversations with both the Legislature and stakeholder as we march towards that deadline. So at this point, I would say that the funding that is included in there differs from the Department of Finance's costing for that first year, and we continue to have discussions about that.

Okay, is that the $100 million that you've included in the budget?

I believe there is. It is 100 million growing to 300 or 350 million over multiple years, but, yes, that is the amount.

Okay. So it has a bigger price tag than that. I think that's what the concern is on that. The MCO tax. Last year, when we passed this MCO tax, I remember not getting necessarily ridiculed, but that I did not understand how this tax would be used, because my concern was that we're going to pass a tax, we're going to wind up in the General Fund and the Medi Cal reimbursement, part of it would not happen in the manner that we are staying.

And that appears to be what's happening in this budget is there's $2.7 million that's supposed to go to Medi Cal reimbursement, which is supposed to help serve the people that are being added onto the program. If we're not doing that, how are we going to continue adding people to a program where there's going to be less people to serve them because they can't get the reimbursement they need to stay afloat?

And just to clarify, the May revision recognized that the cost of the MCO package was not sustainable. So the governors may revision withdrew the MCO proposal. The two party plan includes the MCO proposal and the distinction between the two plans.

And I would say that in regards to the use of the medi Cal revenue, in the past, we have, the state has used those revenues to backfill General Fontaine, and this package was the first time it would have been used towards increasing provider rates. And so the two party plan before you under discussion today does include those.

MCO Dollars, the MCO Dollars that are going to reimburse the Medi Cal rate or to raise the Medi Cal rate so that we can get.

There are funds in there and I defer to the LAO for particular.

Yeah. My understanding is that the legislative plan does provide those increases for rates, but starting later than originally envisioned in 2026. But in the budget year, it's mostly to offset the budget problem.

Alright. So between now and then, we're going to have providers that are trying to provide to more customers without the MCO tax that was specifically given to us to address these issues in the hospital care system.

Okay, Senator, we have a quorum. So I'd like to establish right ahead before we lose it. So. And then you can proceed. Let's establish quorum.

[Roll Call]

We have a quorum, Senator Seyarto, you may continue.

Thank you. I'm just going to ask one more and then let other people ask questions. This one's kind of an interesting one. We have the Office of Tax Appeals and part of the $18 billion of tax hikes for our businesses includes 1.9 million or $1.9 billion of that. There was a judgment that the Office of Tax Appeals made in favor of a company that was challenging a portion of their taxable income. And the ruling by both this body and a subsequent appeal was that the company was right.

But in this budget, we're just declaring that the OTA ruling was that what the arguments were that the OTA ruled against were not really valid and that they were going to go ahead and just use the $1.9 billion to take it from the company. Did that happen? Are we taking $1.9 billion from a company that should not be paying this tax because we don't want to listen to the board that we set up to do specifically this job?

Thank you for that question. I'll start at a high level, and then I'll turn it over to my colleague for details. But this Bill does not overturn any prior OTA decisions, and those cases are final and refunds were issued. We believe it's simply clarifying the intent of existing law. So I'll put that out there and I will turn to my colleague for any additions.

Thank you. Colby White, Department of Finance. So with regard to your question, there have been two rulings that OTA has made on these cases. One was Minnesota sugar beet for a small couple $1.0 million. And then there was the Microsoft case, which was $91 million in refunds, and that refund has gone out.

So there's no, as my colleague said, there's no overturning of those existing decisions. As far as the proposal here, that's part of the two party agreement and was also proposed as part of the May revision. This is. We are a declaratory of existing law.

This has been a longstanding principle as to that Franchise Tax Board, as to how they have administered the tax. And this is with regard to how companies apportion their profits to California for taxation. This is for multinational and multistate corporations. So the question in play here is really, how do they apportion that business activity?

And what we're providing here, or what the two party agreement has is it's a clarification of existing law that. When. You create that or calculate that apportionment factor, that you don't include non taxable income in the denominator.

And that principle is consistent with long standing practice, longstanding constitutional principles, as far as establishing equitable taxation for multi state and multinational corporations. But again, the OTA decision is final. There's no, there's no overturning that decision. Future cases that go before the OTA, they can take this into consideration if it becomes part of the budget.

So there is not $1.9 billion as part of that $18 billion that we're getting from additional taxes.

So what I think you're referring to is the potential for refunds to go out for other companies that were potentially in similar situations that had repatriated foreign dividends. And so the budget assumes, I'm sorry, the two party agreement assumes that those refunds will not go out.

Okay. So one of my concerns with our approach with taxation is after saying we're not going to raise taxes. We have raised taxes. We're raising taxes on businesses that aren't as visible. And those in turn wind up. We pay more. So we are getting our taxes raised to the tune of some $18 billion to help take care of the deficit that we've been told is 45. But then we also are hearing that it could be as much as 62, somewhere between 62 and $70 billion.

And so, and I understand that, hey, we have to get revenue from somewhere. That somewhere should be on building an economy that supports all the spending that people want to do without taxing the heck out of everybody. And we're not doing that very well. And so, you know, this budget kind of reflects that.

And the one comment I would piggyback on the Chair's comment about the recession, the great recession, and how they haven't had to deal with a budget like this since then. We're not in a great recession. We're not even in a recession. And if we're dealing with this, a budget like this, and as you know, I'm glad you guys were able to cobble something together for us. But there's something drastically wrong with our approach to state spending and budgeting.

And that's something that we need to get together as a Legislature and maybe listen a little harder when other people bring up like two years ago that maybe we shouldn't be spending all this and maybe we should be paying off our UI debt, our unemployment debt, so we don't have a half $1.0 billion interest payment to make because we could make, there's a lot of things being cut that we could have used that money for.

With that, I will turn it back to the Chair and have others who would like to ask questions.

Specifically to Senator Seyarto's point. Could we have the LAO's perspective on the apportionment factor proposal?

Sure. I'm going to turn to my colleague who can speak to this. Brian Uhler.

Yes. Thank you, Senator. Uhler. Brian Uhler. Sorry, excuse me.

Happens to me all the time.

Sorry. I'm just a little emotional. No, I'm just kidding. Senator Nielo. So there's a couple of sort of discussion points on this item, right. One is whether or not this action potentially in some way jeopardizes the Independence of OTA or reverses the rulings there.

And I think the job of OTA is to enforce the rules that the Legislature creates about, you know, the Administration of taxes in the state and to interpret the statutes as they exist. And so what those rulings were about were about their interpretation of the existing statutes. And if the Legislature and the Administration, thank you.

Feel that interpretation was not consistent with the policy that they would like to see put in place, it's, you know, fully within the Legislature's prerogative to make a change or clarify those policies going forward.

So that's on that point, I think, on the General policy question, I think we are also generally in agreement with the Administration that the purpose of apportionment is to determine what share of a business's sort of taxable activities are within the state, and therefore what portion of their profits should be taxed for California purposes.

Sort of consistent with that General principle would be excluding non taxable sources of income from that apportionment calculation, which is what this proposal is generally suggesting to do.

Okay, thank you. So we have a number of Members who have indicated they would like to speak. We'll start with Senator Blakespear.

Thank you. So I spoke about this in budget sub two, but because it remains an issue, I wanted to raise it again today. I remain very concerned that AB 107 reverts 45 million of already appropriated General funds from the Habitat Conservation Fund, which voters passed in 1990.

So the Habitat conservation Fund is what protects our rapidly disappearing wildlife habitat, and we have 40 conservation organizations that rely on this money, and it is the only consistent, ongoing, flexible funding that is specifically for habitat conservation. We've already protected a million acres with this money.

And as Senator Dahle said in our budget Subcommitee, which I thought was an excellent point, there are three to four times as much in private money that is drawn into habitat conservation because of this public money.

The habitat conservation is really important for species protection and also for many of our efforts at the state Legislature to have nature based solutions to climate change. And I think there's an increasing recognition that that is a really important part of reducing our carbon emissions and sucking carbon that already exists out of our atmosphere.

So I strongly urge us to fix this in the budget that will be adopted at the end of June. If there's a need for a reference to the section, it is 36004498. That's where you can find the specific part.

But it's important to note that in 1990, when the voters passed this, Prop 117 explicitly prohibited re appropriating already appropriated funds. And so I do expect, and it has been suggested that this will lead to litigation which the state could avoid by not making this move in our budget. So thank you, chair, for giving me the opportunity to speak.

Thank you very much, Senator. Next we have Senator Padilla.

Thank you, Mister Chairman. Primarily, I have comments, so I'll Reserve. Until post public testimony.

Okay, thank you. Next we have Senator Skinner.

Thank you, Mister chair. Appreciate it and appreciate our Laos comments as always. And Department of Finance, your comments. Additionally, I just wanted to speak to some of the particulars in this budget, being very cognizant that we are in a real deficit.

So we are not in the luxury that I was very fortunate to be able to be budgetary during when we were not facing such deficits. So we need to be very wise in how we construct the budget. And I know that the Administration was in what they put forward. And clearly I feel that the Legislature's response, and that is the natural.

It is the Governor, of course, has the 100% right, as is mandated in the constitution, to present us a budget in January and then to in the may revise, make those adjustments and present it to us just as we have the legitimate role to then make, as we are doing today, our recommended adjustments to that.

And so that's what we have before for us, and I wanted to speak to a couple of them. So first and foremost, that the Legislature's budget that we are going to be asked to vote on today and that we have before us that this hearing is about is balanced. So that is our constitutional obligation.

It does not make the deficit worse. It addresses the deficit, and it does it in a variety of creative ways. Now, of course, the Administration also did, but there were clearly a few things that, and I will speak to those, the ones I particularly not necessarily care about, but just want to highlight that I think is our smart ways that we are responding to the Governor's Budget.

And I really want to thank our chair and our Subcommitee chairs and all the hearings for, you know, coming up with these things. So a couple of them, our education chair already spoke to I'm very, very pleased that we, in this budget, we include the increases. They're modest that we had promised to both UC and CSU because we know that their actions, they take multirange budgetary actions just as we do, and to pull back on those commitments that we made would put them in a difficult circumstance and put our students in a difficult circumstance.

So I wanted to just highlight that in the energy and the utilities and air quality section of our budget we are providing, the Administration had pulled back on some of the funds for demand side grid support. And I think we're all suffering from maybe we sometimes have over 100 degrees in June, but I think most of us really don't expect the over 100 degrees til July or August. And yet here we have the last couple of days, over 100 degrees here in Sacramento.

And we know that that increases the demand on our electrical grid. People need to use their air conditioning and that we are trying to, not trying. We have a commitment to electrify this state. So how do we do it? How do we do it smartly? How do we do it most? Cost effectively.

Part of that is what we call demand side grid support. So I was really happy to see that the Legislature's budget includes funding for that because it's really important. Nega Watts are the most effective form of delivery of electricity. The less we use, then the less it costs us and the less than demand on the grid, and we can achieve negawatts. And that's what demand side is through very effective ways. And our state has proven that again and again. So I really was appreciative that that funding remains in there.

Another section I wanted to kind of highlight. There's a lot to say in the health and human services side. And, of course, I'm sure other of my colleagues will talk about mental health aspects, Medi Cal aspects, various things like that. But I wanted to bring up particularly the investments in song Brown and song Brown for those who may not be familiar. That is the funding that the state provides. It supports residency.

So if you are a med student here in California, if you don't get a residency in California and you go out of state, you probably don't come back to our state. And we have a physician shortage. So Song-Brown funding that. And we now also have a Song-Brown nursing program.

So in other words, the supporting for nurses who have gone to school here to stay here. And those are really effective investments that help us deal with our healthcare provider shortages in a very effective way. So I wanted to. It's a small amount in the budget, but I just wanted to give kudos for the Legislature, including it.

And then, of course, Chair, I am Chair of the Women's Caucus. We have made the investments in child care our priority for over a decade. And I was happy to see that the Legislature's budget includes that commitment to the slots. Slots being, you know, people laugh like, what are you talking about, slots?

And that's what we're talking about there is that we, what we are trying to do as a state with child care is make it accessible and affordable. And we do that by a couple ways. Number one, by addressing the workforce. If you don't pay the workforce well enough, then you don't have childcare workers, which means then you don't have childcare. And then for the families who need it, for those who really can't afford it.

And, you know, if you tried to make child care free unless you completely subsidized it, you wouldn't have any money to pay the workers. So what we do is we try to create that happy balance where there are legitimate rates for child care, but those families that can't afford it, we subsidize. And those are what is called the slots. So we had made a big commitment last year for the last couple of years to really increase those.

And legitimately, the Administration, in trying to look at how to deal with this deficit, pulled back on some, but the Legislature kind of, you know, did a little, this budget doesn't quite commit to all the slots that we had hoped to, does a little better than what the administration's budget did. And then another area that I've been following for a long time, I was a budget chair in the Assembly, also is the issue of the rates paid to our providers for the services for our developmentally disabled.

Now, as we know, much of this budget is providing support to those who are in the, in the least ability to really support themselves, whether that's our babies, whether that's our seniors, whether that's our very, very low income people. But if we take our population of developmentally disabled folks, children and adults, they need care.

And for them to get that care, we need to pay the people who provide them that care a decent wage. And back in the first, the horrible recession, it is one of the places that in order to get a balanced budget, we whacked really hard. In other words, the state way cut back on that and we have not really adjusted it back.

If we just take inflation and the number of years since that time and we, yes, we've made adjustments, not like we've ignored it, but if we compare, excuse me, if we compare to the other things that we had to cut back in that recession and what we've, you know, in effect, done much better by the rates for developmentally disabled, still not gotten the type of priority.

And so I was really appreciative that the Legislature's budget does not delay the rate adjustments for our developmentally disabled service providers. And then I was also very, very appreciative that our legislative budget includes a 6th round of funding for the Homeless Housing Assistance and Prevention.

And of course, even with the efforts we've made, and they are significant and they have prevented a good deal of people from becoming homeless. But unfortunately, we still are seeing the numbers that we are and we continue to have an increase in the numbers of homeless.

We would have far more if the state had not made the investments in things like Project Home Key and others of these projects that the Governor initiated, we would have far more homeless. But we need to stem the tide of that increase. And those hap funds will help us do it.

And clearly strengthening the oversight, which the budget also does, will help us there to make sure that the money is used effectively. And then I would imagine, and maybe my Chair already spoke to this, the parts around the transit funding, which, you know, transit really suffered during the pandemic, it has not fully come back, but I think all of us, we trust that it will. Sure, we have to look at the long, we have to take the long view.

We cannot allow transit funding to be compromised even though we don't have the ridership today, because then we are doing a self fulfilling negative prophecy and we are hurting the ridership growth. So we have to continue the investment. And the riders, you know, over time they will come.

So I was very, very happy to see that the Legislature's budget addressed that. And I know that, I know that it was many people, and I can really thank our chair for that one. And then finally, on our CDCR, that's our California Department of Corrections.

You know, most of our, the budget we're going to adopt today is not discretionary funding. So we're talking about a lot of things, but much of this is stuff that we pretty much have to do. Okay? So there's only so many areas that are discretionary and our corrections budget is one of those now.

It is very, very important. Absolutely. Public safety must come first. But when we look at the reduction in the number of incarcerated individuals in our state facilities, and yet we look at the dollar amount we are budgeting for CDCR, you know, one could say, hmm, you know, there's a bit of a disconnect there.

We've cut the prison population in more than half in a course of about maybe eight years, maybe 10 years. And yet the, the amount that the Corrections Department has is much higher. Now, that doesn't mean that we just willy nilly and, you know, one of my colleagues here today tried to comment like that.

We're somehow trying to unnecessarily cut corrections. But I think what we are trying to be is smart about it. So if we have yards open, for example, in our prison facilities, if we staff those yards and there's two people perhaps in that yard, that's not a very cost effective expenditure of your funds.

We are better to consolidate yards and staff fully, Halve Yards full, and then staff those yards. So those are some of the ways that we can achieve some of the reductions that we're trying to achieve in the corrections budget and still put public safety first.

Another way, and the Legislature's budget has this, is that we have a really excellent program that is part of the Corrections Department that has got a funny acronym, MCRP. And it is a program where folks who are close to the time of their release would be put in a community facility. They are still under the custodian.

They are still within the. What's the word? They're still residents of CDCR in effect, but they are in these community facilities where they are able to get far more training and supports that will allow them to be successful at home. And what our budget today does is enhance some of those so that we provide the supports, for example, medical and other supports that can continue after the person does go home, so that there things like their sobriety if they were addicted.

And we know a good number of people in our prison facilities have substance use disorder, that they can continue their medical supports and hopefully stay, you know, within their sobriety, which will allow them to be successful at home.

So there are some investments here that I think the legislative, that are very wise, but also get us some of the savings that we need. And so I just wanted to point those out. And I'm very appreciative of the work that the budget staff and the budget Members and of course, everyone has done on this. And thank you, Mister Chair, for allowing me to make those comments.

Thank you very much, Senator. Next is Senator Menjivar.

Thank you so much. I. Mister chair, I'd like to leave my comments towards the end. If we can do a second round. I just have one question, actually, to what Senator Seyarto had brought up. So I don't know if the gentleman would like to come back up on AB 167, Section 41.

And maybe both Department of Finance and LAO can answer this. I just want to get. Because I'm getting a little pushback from my district. So this is where the personal inquiry is coming from.

Just if we can speak a little bit to the impact that this could have on employers that actually physically are in California versus those that have no workforce or facility in the state, is there going to be a difference? If someone can explain that to me.

Colby White, Department of Finance. You referenced Section 41. Is that related to the apportionment?

Okay, so for companies that are located in California that don't do business outside of California, there would be no impact at all because states that are located in California are taxed within California for all their activities within California. So what we're talking about here is apportionment factors for multistate and multinational corporations.

Yes, please.

Whether or not they're located in California generally doesn't affect how their profits are apportioned to California for taxation. And that's because California voters passed Proposition 39 in 2013. And the way profits are generally apportioned to California is by sales. So it has to do with company sales in California versus their sales in the US. If they're electing to pay on a water's edge basis.

Do they see an increase then? So they wouldn't see an increase if they're physically in?

No.

Okay.

No. And the issue at hand that OTA decided on was for multinational corporations that are bringing foreign dividends back from other jurisdictions back to their main subsidiary.

Okay. Is there anything you'd like to add to that, aleo?

No, I don't think we have anything to add to that explanation.

Okay. Thank you so much.

Thank you, Senator. Now go to Senator Durazo.

Thank you. I just want to make short comments on several issues. One is I am grateful to the Senate and the Assembly, including funding to make sure that we move forward with the healthcare minimum wage. The law was passed last year. It was meant to address the healthcare shortage. Workforce shortage. That was the point of it.

And in order to do that, we had to raise wages for almost 500,000 workers. Remember, 75% of these people are women and people of color. And I want to thank already several employers who have already recognized the value of the workforce and they implemented, went ahead and implemented the wage increase for California's counting on this increase.

They tell me how it is giving them hope that they are not forgotten since we got through the pandemic and that when we call them heroes, we actually mean it. So I wanted. I don't know that there necessarily has to be a comment back, but I want to make that point very clear.

Second is on job quality and equity for the workforce and economic development items that are in this budget. We need trailer Bill Language that addresses job quality and equity. This was our commitment with SB 150 signed last year as part of the infrastructure package.

Despite the Biden administration's very clear guidance that the federal dollars that we are receiving are meant to impact jobs, the economy, and poverty. And despite that, many of our programs and investments are missing these, still missing these elements.

So again, we need job quality metrics, and we need metrics for economic equity, meaning everybody will have an opportunity at getting a good job. There must also be a mechanism for monitoring and enforcing these standards. We've had many meetings with SB 150 stakeholders. Members of the California Workforce Development Board themselves have provided recommendations along those lines.

And last year I proposed trailer Bill Language for this. So as we continue to face the highest supplemental poverty rate in the country, in the country. I have that language on hand to finally implement proven standards before it's too late. We find ourselves investing on the after end of our Californians, helping them after they face the poverty, after they can't pay the rent, afterwards. This is about addressing those issues before they face poverty, before they face the fact that they can't pay the rent and put food on their table.

The next issue is about best value procurement for our fleets. California's investments with our public dollars should be used to create the most public good, not to reward businesses that have shown to violate labor standards with contracts paid by our taxpayer dollars. In sub five, we adopted reporting language for the fleet replacement budget change proposal.

We need trailer Bill Language that requires a best value procurement framework for fleet purchases. This method has been used across the state on large scale procurements for many years, and it works. In the coming years, we can expect cities, counties, state agencies, other public entities to be procuring electric vehicles in bulk as they electrify their fleets.

Our current state and local policies are not enough to ensure that these new fleet vehicles are made by workers who receive fair wages and benefits. We've seen that many ZEVs are made by companies that violate the values that we stand for here in California. The best value procurement is important for job creation, pay and benefits, price, environmental issues, quality products, et cetera, et cetera. And it's been used to incentivize local and targeted hire.

With major fleet procurements happening now across the state, it is so important that we do not let companies that ignore California's values receive California's money with that. Thank you very much, Mister Chair.

Thank you so much, Senator. Colleagues. Any additional, Senator Wahab? Yeah, followed by Senator Dahle. Y Sorry if I missed you before, Senator.

No, of course. You got a big long list. She's been over here doing her homework.

You know, she's very, very. Senator Wahab is very organized.

Well, I appreciate it. I would like to ask some questions regarding CDCR. And, you know, as chair of budget sub five, I just want to highlight a couple of things so I'll allow folks to make their way. So I do just want to highlight, again, as was echoed on the Committee here, genuinely thank all of the staff that has been working on the budget.

I know it's a long process and especially when we're facing a deficit, it's not as fun because we're not talking about funding more programs and projects and so forth, but we're talking about cuts and these are deeply effective, affecting people's lives both in a positive or a negative way. So I do just want to highlight that.

I also want to just highlight budget sub five. This particular year, I will say, has been very much focused on cutting bloat, number one, and number two, redundant services, services that when we hear the testimony, largely we hear it and have far more questions. So I do just want to highlight a couple of things. Do we have a population estimate in our Department of Corrections?

Kimberly Harbison, Department of Finance, it is approximately 90,000, but if you give me a moment, I can look it up.

Okay. It's fine. Roughly 90,000 is solid. And I want to highlight how many prisons do we have across the State of California? We currently have 32. Okay. And we are looking to reduce a number of beds, correct? And the trend prior to Covid as well as now has been a decline in the population in prisons, correct? Okay.

And many people say that, you know, the argument is that we're letting folks out, but that is also not necessarily, necessarily the case considering the realignment where we are housing individuals at their local counties in jails. Correct? Okay.

And typically, you know, I will say when people say behind bars, you know, most people don't understand the difference between county and prison. Right. So county jails versus prison. And oftentimes, historically, if you were to go to prison, it was because you were 100% committed the crime and you tried and you were convicted, correct?

Okay. And now convicted individuals can stay in county jails in some circumstances.

Yes.

Yes. Okay. And I highlight this because there's a lot of talk about Prop 47, a lot of talk about the funding cuts and much more. And I wanted to highlight roughly how much is the spending for the State of California for roughly CDCR this year and this past year.

Yes.

At the Governor's Budget, it was projected to be 14.1 billion.

Okay, so roughly 14.

And then. Sorry, excuse me. And at may revision, it was 13.9 billion.

Okay. So roughly 14. And I've seen even 14.5, it was mentioned earlier today, 14.5. So almost about 15 billion, depending on who you ask. Right. And so $15 billion in the State of California's budget is serving roughly.

I'm even round up 100,000 individuals. Right. And yet we have 27.3% of the population in the State of California under the age of 18 at roughly about 10 to 11 million people. Right. And we have in regards to the people over the age of 65 in California is roughly about 10.7%, which equates to about 4.2 million people.

Right. The services that we are trying to prioritize in the Legislature, and I just want to make sure that it's very clear, is to ensure that we protect those services for the majority of people. And this budget in particular does that in budget sub five. I do just want to highlight a couple of things.

We are not touching the 2011 funding structure on realignment. So there's no significant cuts in the state spending for the Board of State and Community Corrections. No significant cuts. Correct. Which is where we're seeing more and more people housed at the local county jails. Right. Okay.

I do want to highlight we are also as much as possible, trying to protect the judicial branch. So, for example, this budget is protecting trial courts, interpreters, family law, and we're even building, you know, the new criminal courthouse in Santa Rosa. Correct. Can you.

Drew Soderborg, Legislative Analyst Office. That's correct.

Definitely. And then for the Office of Emergency Services, you know, we are prioritizing seismic retrofits because of natural disasters and much more. We're also protecting survivors of crime and Victims of crime act, the federal funding that was removed, correct?

That is correct.

Okay. And we are also investing in cybersecurity, which we're seeing a growing concern for local jurisdictions.

That's correct.

Okay. And for the most part, we have tried to protect as much as possible the Department of Justice and much more. Right? Okay. And then for CDCR, you know, we are trying to trim our way around the bloated funds and duplicative services that we have seen.

I will say again, I think that it was stated in Committee hearing in the Subcommitee that there's roughly, roughly 12 contractors for different services and 700 subcontractors with a little bit of a lack of oversight, in my personal opinion. And I think that's something that we can definitely target moving forward. But we are protecting jobs for the officers in a lot of these facilities, correct?

That is correct. There are some position reductions but, that's correct.

Okay. And then as far as protecting rehabilitation and reentry programs, that is also a priority in this budget, correct?

Correct.

Okay. So we're protecting a lot of the oversight programs such as staff misconduct, expansion, the sexual assault behind bars working group and much more. Correct? All right. And then as far as the Board of State and Community Corrections, you already stated that we're pretty much not doing anything to really affect that just yet because, so I highlight all of this because when I speak to community Members just largely in the public, their focus is largely social services, education, k-12, as well as higher education, health and housing, which we for the most part are trying to protect as much as possible.

And when you take a look at dollar per dollar and the ratio of what we're spending based on populations that we're serving, it is important to cut as much bloat as possible, which we are doing in areas that we can.

So with that said, I just want to say that my concern largely in regards to budgets and funding utilized by governments, both at the local level when I served on City Council as well as at this level, there is a mentality in government where they identify the saying of use it or lose it. Right.

They are trying to spend as much money to be able to ask for more or potentially keep their funding. I think that this is a deep concern I have in regards to being fiscally responsible. And for me, that responsibility is the larger public in areas that they care about the most. I personally very much support this budget.

I do appreciate a lot of the work that you guys have done. And I can genuinely say that in our budget sub five Committee, we have been putting a lot of effort in just doing the right thing for the most amount of people. So thank you.

Thank you, Senator Wahab, Senator Dahle.

I may not have the extensive notes as my colleague does, but I got a lot right here that I want to talk about for a second. So first off, I want to something we haven't talked about at all, and this is a question the chair started talking about what it was like before, during the time that our Vice Chair was in the Assembly and they were, you know, working all night during a real 2008 crisis. We're just missing out on that front.

So because we have done some things in California a lot different since then, we do have a Reserve and, but I want to talk about the overall, I have some questions of why we're here. The stock market is hitting all time highs. NASDAQ broke the record this last week, 17,000. I think it was.

So the economy in the United States is doing wonderful. Actually, it's doing so well. There's so much inflation that they're trying to slow it down by raising interest rates. So why is California in a budget deficit? How did we get from $100 billion in extra money, basically 100 billion to whatever the number is?

We've been arguing about the number for, since January, but the number somewhere around 50, at least $50 to $55 billion. So how did we go from 100 billion? What happened in our tax structure? What did we do different so we can start looking at, because this is looking to the future.

So I want to have that answer because they're not having these same problems in Nevada, Texas, Idaho as we are here in California. So something's happening in California that typically hasn't happened, at least in the recent future, in the last 12 years that I've been here. Could you answer that, please?

I will attempt to Erika Li with the Department of Finance, and I will sort of start with a global picture, things that we've said in the past over the last couple of budgets, and then turn it to my colleague for perhaps more detail. But as you know, you mentioned the 100 billion in surplus, and we were looking at 2020-2021 revenues were much higher than we anticipated. If you look at the trend, we hit a spike. And I would say that California was not the only state in the nation to do that.

A lot of that was an aftermath of COVID and increased dollars from the Feds coming in. But also the stock market was doing well. And as we know in California, our revenues benefit. When stock market does well, we have high income earners, capital realization, capital gains realizations increased.

But I would also say that at that point, we forecast, the forecast was based on both looking at the past, but we had that humongous spike right in 2021. And as we've been mentioning the last couple of budget hearings, our tax receipts were delayed.

And as a result, we didn't have the information that was necessary that we normally have at last year's May revision and Budget act. And as we were building the Governor's Budget this year, those tax receipts were coming in late. So a lot of the forecast was based on information that we generally have but didn't have.

And so we weren't sure how quickly revenues, because when they go up, they come down. We weren't sure how quickly they would come down, when they would quickly come down and how much they would come down. So we use the best information at hand to forecast that. And as we saw across the nation.

And again, California was not the only one, but our revenues were beginning to normalize. And that's the word that we've been using, is if you look at those two years of spikes and kind of cut them out of that picture, we are back to the normal 5%, about 5% growth in revenues.

And so I would just say that's sort of the trajectory that we've been following over the past few years, down to a normalization. And other states in the country have experienced that as well. They did not have the high, high, such a significant high increase in revenues as the State of California.

And so there's some difference in that. But we also have a very volatile tax structure, and that is the result of that, is that we were seeing very high increases in revenues. And again, the forecast was based on incomplete information. We have more information. We have been able to rightsize and normalize forecast going out. But I will turn to my colleague Colby for any additional details.

No further comments on that. So it's safe to say then that the stock market is still doing well. So they're still going to have capital gains payments, but we're not realizing those here in California right now.

Colby White, Department of Finance so the way the state realizes payments from capital gains is in different ways. So one way is it's not actually capital gain, but one way. If you look at the personal income tax withholding receipts, we get what's called payments from restricted stock unit compensation that a lot of large technology companies pay their employees. And so you see for the first four months through April, for example, you see 9% year over year growth, which is above average growth.

So that's evidence of how California is benefiting currently from that. Now, with regard to capital gains realizations themselves, they're very lagged. So for tax year 2023, taxpayers will make payments throughout the year to some degree what they expect. But a lot of their payments will come later in January, after the year is over, and then in April, once they're trueing up their final tax returns.

And I think what we saw with regard to 2023, even though the market recovered from very, from the downturn in 2022, you also have what are called capital loss carryovers from the prior year. So there can be a netting out, and there can be some hangovers, for lack of a better word, related to older years.

So we know over the longer run that when the stock market does well, California will do well. The capital gains realizations will come in. That's what you saw in 2021. You saw 349 billion, over 11% of personal income, higher than any other state. And so the stock market's doing well right now.

We're in 2024, and our forecast incorporates a solid stock market forecast, so those payments will start to come in. But you might not see the true until, like, January, when the year's over, and then in the following April, when the tax returns are where the extensions are being filed.

Thank you. I appreciate that. So is there any risk of high wage earners leaving? We know that some are leaving the state. We've seen folks move their headquarters out of California. Does that have a factor in the budget cycle as well? High-wage income earners leaving the state?

I think you see churn in all aspects. So, for example, when you look at the top 30 technology companies by market cap, California has a much disproportionate share of those companies. So we have some very large companies here. We have. For most years, California gets a disproportionate amount of venture capital funding.

So a lot of the younger companies that are investing, you see California get its share. It varies from year to year. Some years are not good, some years are good. But on average, California gets more than its share.

So there's always this churn where people are leaving and people are going, and there can be a lot of headlines to that effect. But in the aggregate and over the longer run, California economy has remained very resilient, as noted here.

I appreciate that. So, like, when Elon Musk leaves California, it's not that big a deal. Seems like it would be to me, the richest person in the world. One of our colleagues said, get the f out of here, was on a Twitter post, like, we didn't need him. But does that impact California?

Certainly, to some extent. Tesla and Elon have a lot of business activity still in California. A lot of income still gets sourced to California, but we're not privy to his tax returns, so I can't comment.

All right, well, now on to the second part. I want to just also say that, you know, this is a two party agreement we're talking about here, and it takes a three party agreement to get things done. It used to be a four party agreement, but the Republicans are left out of that now. So I know this is just a two part. So I do have some questions I want to talk about. I have a question about the Diablo Canyon loan, $400 million that was supposed to go, and I know it's not in the budget.

There was a promise made to PG&E that they were going to or not loan. Yeah. Loan is the 1.1 billion from the Federal Government on the. Is it, is it, is it in jeopardy because of the $400 million that California is not living up to their end of the agreement?

Yes, sir. ..., Department of Finance. So the two party agreement does not include that additional $400 million that the Administration proposed, which was part of the agreement with SB 846. And that does put at jeopardy the extension of Diablo Canyon. And in terms of the 1.1 billion, which was a maximum amount that was identified in that federal award.

So to the extent the extension does not go through, then PG&E would not be able to obtain those dollars from the Federal Government, which puts that jeopardy being able to repay back the $1 billion that has already been loaned from the state to PG&E as part of the agreement in SB 846 .

Thank you.

Senator, if I may. Rachel Ehlers with the Legislative Analysts Office. Just want to highlight there's a significant lack of clarity around this issue and the agreement that PG&E has made with the Federal Government, what the terms are, how the funds will be repaid, how the funds are being used.

So I think we don't have a definitive answer for you on this question, but I think we would probably be less definitive than the Administration in terms of what level of jeopardy this decision is around, in part because we've struggled to get some of the information that we've asked for from the Department and PG&E.

Well, thank you for that. First, I wanted to say, I should have started out saying I really appreciate all the hard work. I've been on the Budget Committee since I've been in the Senate, and I really appreciate all of you folks working hard to give us this information. I think the frustrating part for me is that we're asked to vote on things. I mean, this is a two party budget. We haven't been part of it. So we get, this is our opportunity to point out some things that are real. I think problems.

I mean, at the end of the day, is the $1.1 billion at jeopardy. Sounds like it is. And there's going to be a negotiation that's going to take place between, I think, the chair of the pro-tem, the speaker, and the budget chairs. And I think that's unfortunate for Californians when we're trying to do, you know, good budgeting here. And we have, you know, a lot of money that's not there that we had in the past. It's a lot simpler when there's money around. But this year it's going to be a little bit different. So I appreciate that.

Thank you for identifying that that is at risk if we don't do something different. The other question I had is for the LAOs offices on AB 167 on the apportionment. Some corporations do, don't do it on a yearly, January 1 is not when they finish their. Do their taxes.

They do it on a fiscal or June or a different timeframe. So the clawback that you're talking about on the apportionment is that. Is there some legal. Would the state be on the hook for. Legally for those corporations that may have those losses that can go back to. You're going to retroactively go back to January.

So as it stands right now there aren't any additional taxpayers. Our understanding is there are any additional taxpayers that are currently entitled to receive additional refunds. Goodness. Sorry. So the OTA decision applies just to Microsoft at this point it hasn't been made prejudicial.

I'm talking about the club. So your net loss. Net operating loss.I'm sorry. I said, I meant net operating loss. Sorry. So corporations that do their taxes not on a fiscal year but on a budget year, they are going to be required to claw back, go back and do change their taxes from right now to January. So is the state legally there could be challenges to that right now the law allows them to do a net operating loss over three year period.

So it would be our understanding that there aren't any. There haven't been any payments that have been made for any corporations with respect to tax year 24 yet.

Payment. Well, they get to balance it out. If they have a year they pay a lot of taxes and the year they have a loss, they get to reach back. And so if you stop that, you're stopped. They're saying that they're not going to be able to do that. Ability to reach back.

Right, so an important thing to keep in mind with the effective date of the net operating loss suspension is that it applies to the taxpayer's ability to claim those net operating losses on, on their tax return and reduce their tax payments that will be made sometime in 2025.

It doesn't change anything about their ability to accrue net operating losses for activities that are occurring in tax year 24 right now. So if a business incurs a loss during its current fiscal year that it's in, it gets to accrue that net operating loss and carry it forward on its books.

So there's anything about the suspension that eliminates or limits the business's ability to, to earn in a sense, those net operating losses for the current fiscal year, for those businesses. It's just about their ability to use prior accrued net operating losses on their tax returns for the next three years.

Okay. Thank you. And then the last thing I have is just a comment on the Medi Cal, Medicaid MCO tax.

I think it's interesting to think that health plans, which is where the MCO tax comes from, it's people that pay the health plans are subsidizing our General Fund and that it's not really going to health except for what comes out of the General Fund, which is basically mainly focused on docs and those folks that will be receiving that.

That's just a comment that I have. So thank you Mister chair.

Thank you very much. Okay. The Vice Chair.

Thank you Mister chair.

I guess under the heading of "I told you so", I wasn't going to bring this up, but for Senator Daly's questioning, if we had passed the initiative that we negotiated as part of the 2009, yes, I'm going back into ancient history, the initiative that was negotiated as part of that budget package to limit the growth of spending.

When there is a spike in spending for that two or three year period where we experienced that unsustainable spike, all of that money wouldn't have been able to be spent. We would have a significantly greater reserve now and we would be in nowhere near the trouble we are now. But that's just so much history at this point.

I have a couple of questions and comments. First of all, with regard to the unallocated expenditure reductions that's being required of all of the agencies, which was part of the governor's revise.

And my understanding is, as part of this budget also, and this has happened before, my recollection and experience with this is that when an unallocated request or even demand is made as part of the budget, it never turns out exactly as hoped. That is to say, the full 8% is unlikely to be realized from the LAO.

I appreciate your perspective on this, given the success or lack of success of such a budget provision resulting in the actual expected savings.

Well, Senator Niello, in our review of the May revision, it was a caveat or a concern that we did raise, that there could be some risk that not all of the savings assumed in that provision would be, would materialize. And to the extent that they don't, it would then contribute to whatever.

If we have a problem next year, year in the budget, it would roll into that year's budget. But I don't know if my colleague that covers this area, Ginny Bella, would like to add anything.

Thank you. Jenny Bella with the Legislative Analyst Office. The only thing I would add is that the package before you does include some language to sort of get at that issue, some oversight and accountability language so that we can have a better sense of keeping track of where we are at achieving those savings levels.

So it does adopt the governor's proposal, but then add that oversight and accountability.

Language, accountability, just to see how successful or unsuccessful we are from an experiential standpoint, on historical basis, this has been done before with not less than totally satisfactory results. Do you have information on that?

Not before me right now, but I can go back and check on sort of the historical, as you're speaking to, and whether we have any information we can share on that.

That would be good to know. As the three parties work toward their final budget discussions, I will not be part of, but as an admonishment, would be good for the budget riders to know with regard to the MCO tax.

Now, this is a maneuver that, as Senator Laird pointed out on the floor some time ago, this was done back in 2009, and it's been done at other times. It's been done enough times that the medical community has grown leery of it.

And so they have qualified an initiative on the ballot that if passed, my understanding is would draw about $2.7 billion in 2025. Now that would, that would straddle two different budget years, but nonetheless, it is serious money and we really don't have any allowance. I realize it's a contingency.

I have to think that that initiative probably stands a reasonable chance of success. And would it not make sense to have some contingency in this budget relative to that possibility, either LAO or Department of Finance?

And I want to, I just want to point out before we respond with the MCO, one of the things the Governor proposed using both years of MCO tax to sweep into the General Fund. We have scaled that back. So it's the first year will go back into General Fund. The second year would not.

So in terms of any potential risk, we've significantly reduced that in terms of our proposal. And obviously, it's an open conversation with the Governor to resolve that. But I'm sorry, go ahead.

Carolyn Chu, Legislative Analyst's office yes, the chair and Vice Chair, you are both correct in that relative to the mayor vision, given that the Legislature's plan enacts the rate increases in 2026, there is less, there's somewhat of a mitigated General Fund risk, generally speaking.

What I might offer is that this particular solution, given the measure that is to go to the voters in November, does create some fiscal risk in terms of what the state's ultimate position will be, and that the Legislature, if the measure were to pass, would need to identify additional solutions to balance the budget in the future.

Thank you. The last two points are really comments on my part, since I won't be part of the budget discussion, but I'd be glad to join you guys.

I'm happy to talk to you whenever you want to talk.

First of all, with regard to the tax issues, just to have my horse to beat it a little bit on the apportionment issue, my understanding is that the Microsoft case involved the Franchise Tax Board requiring that Microsoft include foreign dividends in their taxable income, which they appealed to the Office of Tax Appeals.

And OTA ruled against FTB on that, I think maybe twice. And so therefore, Microsoft did not have to include that in there taxable income.

But what the budget does is clarifies that, in fact, the FTB's position on that is the correct position, so that we will have in code, as a result of the budget, a clarification of the handling of such taxable income contrary to what OTA had decided. Do I understand that correctly, LAO?

Yes, Senator Niello, I think that's the correct factual description of it. Yeah.

Yeah. So we'll wait for your colleague to clear his throat, which I have to do as well.

For the record that happens to me all the time.

I might also defer the Administration a little on this, but I think our understanding it's maybe a little bit more complicated than the way you described in terms of it isn't.

I like to simplify that.

It isn't specifically about the treatment for the taxation of repatriated dividends.

It's actually about how they are treated for the calculation of the taxpayer's apportionment factor.

And so FTB's sort of, I guess, long standing position has been that if income of a taxpayer is not taxable, then it should not be considered as part of the calculation of their apportionment factor, which is again meant to try to represent what share of their taxable business activity is occurring within the state.

And so the question before OTA was whether or not the repatriated dividends, which are deductible against income and therefore not taxable income, should be included in the apportionment calculation or not. And so FTB's position, again dating back to a legal ruling from 2006, is that those should not be included.

OTA said that the statutes don't essentially don't give them the authority to make that legal ruling. And so the proposal here is to align the statutes with FTB's legal position on that issue.

And the result is that if the Microsoft came up after this budget passed with that language, they would be paying more tax.

That's correct.

So the point I'm making is this is a tax increase. Now, the other tax issues are deferrals and wouldn't qualify as an actual tax increase, but this is an actual tax increase.

Now, it requires a two thirds majority of this budget, will likely be passed that way in any case. So that requirement is academic. I just want to make the case clear. This is an absolute tax increase.

So moving on to a couple of the others, all of these tax moves when the Governor said he wasn't going to increase taxes. Nonetheless, in my opinion, and I think the LAO in some cases has concurred with this, that these are just not, from a strategic standpoint, not wise moves.

The tax credits, particularly the R and D credit, is a way of providing a positive environment for businesses, particularly tech companies and growth businesses to exist in California. Credits like this exist in other states. It would just be just another reason for companies to migrate.

With regard to the net operating loss, there's two things about this that is troubling. One is I akin this to kicking companies while they're down.

That is to say, they come out of a loss year and they start, which is a depletion of their capital, and then they start making some money, which is a recovery of a depleted capital. And the purpose of the net operating loss carryover is to provide the company that time to recover, particularly small and developing companies.

And this eliminates that opportunity for a few years. And the interesting point there is this is passing a known deficit onto a future Administration. We will have a different Administration when this Bill comes due.

For the state to allow the net operating loss to be claimed by businesses for whom it qualifies and for the reasons of being fair to companies that lose money and are coming out of it, and to be fair to future administrations and not passing known deficits on it's bad policy. So those are my comments on the taxes.

I have one other comment, and I think. Were you putting your finger up?

Well, just slightly, Senator Niello, just to clarify just slightly what you said that we did indicate that in our analysis of these, that the tax credits themselves should, it is appropriate for the Legislature to think about them as a way, sort of the same way you think about spending decisions, only it's just going through the tax code now when it comes to the net operating losses.

And so with those, there could be some, you know, whether or not your, the Legislature is generating the benefits for the state that it wants from those is sometimes not totally clear.

Now, when it comes to the net operating losses, we have registered the caveats that you mentioned about the cyclicality and how some firms that participate in cyclical and up and down industries are disadvantaged relative to the ones that are in more stable sectors.

And so, you know, this is a thing that we have done in basically half of the years now since 2008. If you look ahead to 2027. And so how much can they depend on the fact that this provision will be available to them is a question that, you know, is valid, you know, valid caveat.

So, and I appreciate that I unfortunately led to the implication that you had opined negatively on all of these. I didn't mean that it was specifically on the net operating loss. And thank you very much for the work that you do now, as I said before at the opening, this budget is balanced, nominally.

The challenge is it is not sustainable. Let me just summarize a few things relative to what's in this budget and what's not in this budget. The health care minimum wage, as we discussed.

Currently the cost of that is not included in this budget and somehow needs to be addressed when the other two parties get together and hammer that out, that's about $2 billion. The MCO initiative, through the full year of 2025, which, as I said, straddles budget years.

And I understand what the chair said on that, but the total exposure there is about $2.7 billion. Also, the Governor's Budget may revise estimates, $7 billion in revenue in excess of what the LAO estimates.

Now, I have stated repeatedly that I'm always more willing to give deference to the estimates of the budget advisor as opposed to the budget writer. There are different pressures involved in coming up with the finished product.

And I would point out that the administration's budget is $7 billion higher in revenue and the Legislature's budget is another $4 billion higher than that. So this budget has in it $11 billion in additional revenue assumed, by the way,

parenthetically, I've also always said one of the easiest ways to balance a public sector budget is just to assume more revenue, and you don't have to deal with that until the year is over or close to over. So we have $11 billion in additional revenue beyond the advice of our budget advisor.

Then we have the Proposition 98 maintenance factor of the maneuver with regard to the 2324 year. We have also the obligation as a result of the governor's 2223 maneuver with regard to education funding. Then we have the doubtful realization of the 8% across the board unallocated cuts.

I don't know how much those amounts are, but the ones that I stated previously are anywhere from 12 to $16 billion. Those are very likely deficits that will have to be dealt with in the January 25 proposal. In addition to the deficit that we already know exists, in the subsequent budget year, it was 30 billion.

Now it's only 10. But with that contingency, it's back up to 30. So, as I said, the budget is balanced nominally, but it is not sustainable. So with that Mister chair, I appreciate the opportunity to make my comments.

Thank you very much, Mister Vice Chair. Before you go to public comment, I just want to say a few things, because a number of statements have been made today. First of all, I'm really proud of this budget.

And even though we're going to continue to do some work with the Administration to achieve that three party deal, this is not just. This is not a quote unquote nominally balanced budget. It's an actually balanced budget. And it's a budget that I think we can all be proud of.

A budget that deeply protects our investment in k-12 public education. We are going to continue to be there for the children of California who deserve a good education. This budget protects investment in housing, which is one of the greatest crises facing our state, as well as homelessness.

It protects funding for public transportation, for healthcare, and so on and so forth. I'm proud of this budget. There were some comments made about our prison budget. I want to be clear. The proposed budget for CDCR in this budget act that we're acting on today is $14 billion for our prison system. $14 billion. $14 billion.

Nearly 10% of the General Fund. That is not a defunding of prisons or shutting down the entire prison system. It's $14 billion. That is higher than what we spent on prisons when our prison population was 50% higher than it is today. Our prison system is long overdue for a deep restructuring.

It is absolutely absurd that we have reduced our prison population by 50% and yet we're spending more on prisons. That is a huge red flag.

I also, you know, we can, we can have accountability for committing crimes without going back to mass incarceration and packing our prison full of people, particularly people who are addicted to drugs, which is what we used to do. And so the two are not mutually inconsistent.

I also want to note, yes, we're protecting rehabilitation and reentry funding of CDCR's $14 billion budget. 4% goes to rehabilitation. 4%. And so, yeah, we are pretty protecting that. That number needs to be higher, not lower. I also just want to address the issues that have been raised around the NOL and the tax credit deferrals.

And by the way, as indicated, corporations will be able to recoup those credits in the future. So I think we need to be very clear about what we're doing here. But I also think we need to recognize, in terms of this whole narrative around corporate taxation, that in 2017, corporations in this country received a 40% tax cut.

In the Trump tax cuts, the federal corporate tax rate went from 35% to 21% in one fell swoop, a 40% tax cut. We know that a significant number of Fortune 100 companies are paying either no federal taxes or very little in federal taxes.

Some of the largest corporations in this country, essentially, or actually don't pay any federal taxes.

And so the notion that this proposal that we have with the NOL and tax credits, that because they won't be able to take it now, but they'll be able to recoup it in the future, that that's somehow going to destroy corporations, just to be honest, absurd. They have received huge tax cuts in recent years.

And we know from the stock market these corporations are doing quite well. And so this is a very, very reasonable proposal.

And in the end, if I have a choice between having corporations take their tax credits over time in the future instead of right now, if I have a choice between that and having less fewer services for people living with developmental disabilities or fewer in home health support services for our seniors, or taking away healthcare, taking away the ability to get like dentures for farm workers who are actually cultivating the food that we eat, I'm going to go with the people with developmental disabilities and the seniors who need in home support and the farm workers who deserve basic healthcare and basic human dignity every day of the week.

So our tax proposal is completely reasonable, and I stand firmly behind it. So with that, I want to open it up for public comment. We'll ask public commenters to keep your comment within a minute, and so we appreciate it.

Let's go ahead, Mister Chair and members, Chris McKayley, on behalf of the Los Angeles Area Chamber of Commerce, two items regarding the tax trailer Bill. The first is we're the home of industries like tech, biotech, aerospace, yet the NOL suspension and R and D in particular. But the tax credit limitation particularly adversely impacts those industries.

To make the problem worse, we just did that in 2021. And so as those credits and nols are becoming available, we are taking them once again.

The other point is, is that it is being done almost midway through the tax year, because as opposed to the administration's proposal, which is prospective, this is retroactive to the first of the year. The second item on the apportionment formula, I think the language in Section 41 is quite clear. It has retroactive impact.

It applies to past years. We respectfully think that it will effectively overturn the OTA decision. And that's why that $1.3 billion in refund claims is being put in jeopardy and will be precluded under the language of this measure. Thank you.

Hi, Tiffany Mock on behalf of CFT, a union of educators and classified professionals. Thank you to the Chair and members for all their time, hard work, and particularly also to the staff.

We wanted to just stand to support the Proposition 98 work that has been done to address the deficit, the removal of the labor center cuts from this budget, UC funding of the compact, and we advocate for the inclusion of part time office hours for faculty to help all our students succeed. Thank you so much.

Good morning. I'm Dr. Jun Bando, Executive Director of the California Native Plant Society. We're a nonprofit conservation organization with about 13,000 Members across the state. I'm here to oppose the reversion of $45 million from the Habitat conservation Fund thank you, Senators Blakesfier and Laird, for raising this concern.

This budget action is in direct contravention of Proposition 117, which was enacted by voters in 1990. The Habitat Conservation Fund has been highly successful protecting more than 1 million acres of land since its inception. This Fund is one of the few reliable and ongoing Fund sources for the state's climate change plan and its 30 by 30 initiative.

I would like to highlight just two of the hundreds of HCF funded conservation projects from the Wildlife Conservation Board over the years. Through $2.2 million in funding to the mountain's recreation and conservation authority, the Chatsworth Reservoir Connector project is protecting important wetland and riparian habitat in northern Los Angeles County.

Nearly $2 million in funding to the Native American land Conservancy has supported an important ancestral land return project that protects land and Big Morongo Canyon in San Bernardino county with cultural, historic and habitat value. We strongly urge the Legislature to rescind this reversion in the final budget deal. Thank you.

Good morning. Chair and Vice Chair. There you are. Lori Kammerer with the National Association of Women Business Owners, California chapter, and on behalf of the 1.4 million women business owners, many of whom are small business owners, we thank you for funding the technical assistance program for the small business development centers at 100%. Thank you very much.

Good afternoon, Senators. My name is Pat Nye. I represent the Los Angeles Regional Small Business Development Center Network as well as the Veterans Business Outreach Center Network. I am also a veteran and a small business owner. I just wanted to thank the Committee, the staff for supporting 100% funding funding for the technical assistance program.

With special thanks to Senators Padilla, Niello and Smallwood, Cervantes. Thank you.

Good morning. David Nelson with the National Small Business Advocacy Council and echoing, you'll hear more of our colleagues really appreciate the attention and support of full funding for the small business technical assistance program. A special thanks to Senate sub four Chair Padilla, Senator Niello, Senator Smallwood-Cuevas for being so attentive and listening to the concern.

We all agree, and we're thankful to see that the two-house agreement agrees, that the budget shouldn't be balanced on cutting services, core services to small businesses. Really appreciate that, especially to Timothy Griffiths, who was very attentive to, to absorbing and asking those very critical questions to fully understand how this program has delivered for the state.

Last year alone, $2.3 billion in taxable revenue. So thank you again for your support.

Thank you. I represent the Small Business Development Centers. I'm the Director of Sonoma SBDC. I hope I don't get emotional, he said it we helped create $2.3 billion worth of taxable revenue just last year. That's just last year.

And as I was listening and so impressed by how you all approached your different perspectives, when we think about what's important to all of us, we can really get behind the fact that we all like our jobs. We like having places to go shop and eat and do things.

And what you might not know is that $2.3 billion came from just 145,000, not just, excuse me, 145,000 small businesses that we helped. That number of $2.3 billion is representative of only a 5% response to our surveys.

So imagine how much more taxable revenue that the SBDCs are providing to your community and the communities we serve, all the way from San Diego to the Oregon border. And on behalf of all of those people who have a dream and a desire to be and do something bigger than themselves. Thank you. Thank you.

Preet Ahluwalia with Norcal SBDC applaud and thank you to the Senate leadership and the Members of the Budget Committee for restoring the tap funding. SBDCs are the backbone of our state's entrepreneurial ecosystem. We provide critical services to help small businesses navigate challenges, drive innovation, and create jobs.

These funds will continue to help us to service the rural and underserved small businesses. We urge you to maintain this full, full funding for tap into final negotiations with the governor's office. Stand with the small businesses of California. Thank you.

Good afternoon, chair, Vice Chair and Members of the Committee, Johnnise Foster-Downs with the California Asian Chamber. On behalf of our members and AAPI businesses throughout the state and as well as our minority business development centers.

We like to thank the Committee for maintaining the technical assistance program funding with a special acknowledgement and thanks to the leadership of Senator Niello, Senators Padilla and Smallwood-Cuevas for hearing our concerns and for protecting this very essential funding and keeping it whole and protecting the core services and essential services for our small and disadvantaged businesses. Thank you.

Good afternoon, Chair and members. Jennifer Fearing, on behalf of the National Wildlife Federation and the Project Wildlife part of San Diego Humane Society, I'll just echo the remarks around the Habitat Conservation Fund made by Senator Blakespear, Senator Laird and my colleague with CNPS, and also extend gratitude to Chair Becker, Senator Allen and Senator Dawley, who raised similar concerns during the sub two discussion of this item.

We deeply appreciate the Legislature's rejection of the Habitat Conservation Fund Trailer Bill, but believe strongly that the reversion that's in AB 107 of $45 million violates the language of Proposition 117, and we urge you to correct that in the final budget. Thank you.

Mister chair and members Michael Pimentel here on behalf of the California Transit Association, representing 220 Member organizations nationwide and 85 transit and rail agencies here in the State of California. I just want to show my thanks and support to you all here in the Legislature for maintaining in this two party agreement the $5.1 billion approved last year for public transit services and major capital projects.

Last year you heard our calls for support in ensuring that we could continue to provide basic core public transit services while also building for the future. And as you enter into those three party negotiations with the Governor, of course, governors may revise has proposed to maintain that funding also.

We would just ask that there not be any backsliding and that that funding be maintained. In the final budget agreement, monies have already been requested by the regional entities, transit agencies in the state. We're now just expecting the release of those funds so those monies can be put to work. Thank you.

Alchemy Graham on behalf of the California City Transportation Initiative with comments on AB 107, we'd like to express our sincere thanks and support to the Legislature for rejecting the governor's proposal to cut $600 million from the active transportation program and for proposing additional supportive placeholder Trailer Bill Language.

This program quite literally saves lives, and we're very grateful to see it maintain its funding. Thank you.

Good afternoon. Rebecca Gonzalez with the Western Center on Law and Poverty. We want to thank the Legislature and staff's work to protect key safety net programs, including CalWORKS foster care programs, nutrition benefit and maintaining IHSS for undocumented Californians, and urge the three party agreement maintain these protections.

In addition, we appreciate a small percentage of the MCO tax revenue is authorized for Medi Cal investment and urge a portion of this go to share of cost reform implementations so that senior and persons with disabilities are not forced to live off dollar 600 a month to access Medi Cal. Thank you.

Good afternoon Mister Chair of Vice Chair and Committee Members Malik Bynum with UDW/AFSCME Local 3930 representing over 171,000 home care and child care providers across the state. On behalf of CCPU, you know we're appreciative of the Legislature's commitment to the 11,000 slots that we were allotted in spring 2024.

And while we're looking at a new timeline of 2028, we would urge the Legislature and the Administration to explore how we can fulfill these slots even earlier while retaining our progress towards a true cost of care rate reform.

As it relates to home care, we're grateful for the Legislature's support in rejecting the cuts to IHSS, specifically the expansion to undocumented individuals and the proposed elimination of the provider backup system.

We do, however, continue to urge the Senate to adopt trailer Bill Language relating to the state participation cap in San Diego and Riverside because without this lane, without this language, home care providers in these counties will not receive their pay increase on January 1 of 2025 and this will be devastating for them.

So we appreciate your time today. Appreciate your words, Mister Chair and Senator Skinner, as it relates to our workers and would urge you all to continue to stand with home care and child care throughout the final budget. Thank you.

Good afternoon. Tracy Ryan from Rural County Representatives of California. We are in opposition to the elimination of the Broadband Loan Loss Reserve program. This was originally a $750 million program. It has now been eliminated in AB 107.

We have $433 million worth of awards waiting at the CPUC for this program to have projects deployed in 37 locations throughout the state. We understand this is very hard budget times.

We are not asking for full restoration, we are simply asking for a $50 million restoration for our pilot project so that we can do some of those 37 projects in these underserved areas. Thank you.

Hi there. Good morning. My name is Bianca Blomquist. I'm California Director for Small Business Majority. I want to thank the Chair and the Vice Chair, members of the Subcommitee for their support in the technical assistance program provisions. These technical assistance programs are extremely important for the small business owners that we represent.

We also encourage you in the third party agreement to continue working to spend on the Healthcare Affordability Reserve Fund as healthcare is incredibly important to small business owners and we're very glad that we're maintaining those childcare slots.

But we would ask you to continue to work in the third party agreement to reach the true cost of care for childcare and small business owners. Thank you.

Thank you Mister Chair and members. I'm Dominique Donette on behalf of Ed Voice and 20 other organizations, we want to thank you all for prioritizing children from low income communities by rejecting proposed funding cuts to the Golden State teacher grant program. And we ask that the Legislature reject trailer Bill Language and maintain the program as is.

Proposed changes, excuse me, to the program disincentivize teachers to teach in priority schools. The program is working as is and in a budget shortfall. It's important to continue to encourage stability in the lives of children from low income communities as they may be experiencing instability elsewhere. Thank you so much.

Good afternoon, I'm Eric Lehr on behalf of the California State Association of Counties. First, CSAC is grateful to the Legislature for numerous budget actions that preserve the safety net and core services and programs that counties deliver to all Californians.

This includes rejection of cuts to the public health infrastructure, CalWORKS, child welfare, and APS providing 1 billion in funding for round six of the HAPP program, restoring ReAP 2.0 funding and appropriating 500 million for the low income housing tax credits.

We also appreciate the backfilling of 100 million to the Victims of Crime act and rejecting cuts to the public defense pilot program. And finally, I appreciate the actions on the two ERAF items that preserve revenues for core services for impacted counties.

Finally, CSAC is reviewing the impact that the proposal to shift the active transportation program to the state highway account could have for counties. Appreciate your time. Thank you.

Good afternoon. My name is Juliette Terry. I'm here on behalf of the Child Care Resource Center. We are proud Members of the ECE Coalition.

I first want to start by expressing our gratitude to the Legislature, and in particular the Legislative Women's Caucus, for their firm commitment to seeing through the promise of 200,000 child care slots and removing that indefinite pause on those spaces, as well as the commitment to not draw back any funding that was already awarded for General child care 11,000 spaces.

We are really encouraging the Legislature as you work on the trailer Bill Language for the adoption of the alternative methodology for child care provider rates, that it includes a very clear timeline for the full implementation rates so that there is absolutely no chance for a drop in rates that will effectively reduce provider rates by 25% to 30% and push them to rates that are based on a decade old market rate survey. Thank you very much.

Hello. Buenas tardes. Maria Romo with Child Care Resource Center. I want to echo my colleague Juliet's sentiments, but I also want to express an enthusiastic thank you for reverting the 34.8 million unspent emergency child care bridge funding and re appropriating the last year's 30 million unspent funding and rolling it over this fiscal year.

The Emergency Child Care Bridge program is one of the state's most critically needed programs that closes a timing and services gap for foster and their families. Last year alone, the bridge program was able to provide help for 2,934 families, and they represented and brought with them 3,936 children.

This is in addition to the over 9,000 children that this program already services. We want to thank you very kindly for protecting the bridge program and for your committed support.

Good afternoon. My name is Kim Delfino and I'm representing California Audubon Defenders of Wildlife, California Trout, Trout Unlimited, Mojave Desert Land Trust, Sonoma Land Trust, and the Power and Nature Coalition that is 300 organizations around the state dedicated to the 30 by 30 effort.

I just want to say thank you to Senator Blakespear and Senator Laird for flagging the Habitat conservation Fund. Also, Senator Dahle in sub two, your comments were well noted. On a personal note, 34 years ago, I started my conservation career gathering signatures for Proposition 117 as an intern for the Mountain lion foundation.

And over the 30 years, I've watched the Habitat Conservation Fund protect thousands and thousands of acres, wetlands in the central valley, lands up in the Sierra Nevada, coastal projects, the desert. There's no part of this state that has not been touched by the Habitat Conservation Fund through those 30 years.

The Habitat Conservation Fund has provided steady, dedicated and reliable funding for natural resource projects through uptimes in the economy and downtimes. It is unprecedented to be pulling $45 million of General Fund out of the HCF, and it is inconsistent with the terms of Proposition 117. And so we urge you.

We understand this is a tough budget year, but we do believe this action is inconsistent with 117 and deprives the state from a critical funding source. And we would urge in the final budget that you rescind this action. Thank you very much.

Good afternoon. Christine Smith with Health Access California. Health Access appreciates the Legislature's rejection of the administration's unjust elimination of IHSS benefits targeted at undocumented Californians, continuing the goal for all to have access to this essential care. We also appreciate the Legislature's continued commitment to protect the individual mandate penalty funds collected from the uninsured.

We support the Legislature's rejection of the ongoing sweeping of 109 million annually in favor of a one time loan. Funds collected from those who are uninsured should be preserved to make coverage more affordable and accessible for all, including the over half a million uninsured undocumented who are excluded from the Covered California marketplace. Thank you.

Good afternoon. Tasha Newman, on behalf of the California Council of Land Trusts, representing land trusts throughout California, we are here today in opposition to the proposed cut of $45 million to the Habitat Conservation Fund, which we believe requires a 45 vote pursuant to Prop 117, which was passed by voters in 1990.

Funding is critical as many people have already spoken to before me, this funding is critical for land trust work across the state. It's critical for achieving 30 by 30 and our climate resilience goals. So we would really strongly like to push back on the reversion and hope that this funding can be protected in the final budget.

Thank you.

Mister Chair and Senators. Terry Brennand, on behalf of SEIU California. The Chairman did a really good job of explaining the balance trying to be struck with this budget of temporary inconvenience for some of the wealthiest corporations in California in order to protect the most vulnerable.

And we applaud those efforts and encourage you to stay strong in your negotiations to come. And thank you very much for your time. It includes protecting the $25 an hour for the healthcare workers that you adopted a year ago, protecting home care workers, protecting the contracts with the childcare workers and your public employees throughout the state. And for that, we thank you.

Mister Chair and Members, Tim Madden, representing the California chapter of the American College of Emergency Physicians. We're appreciative of the Legislature's actions around the MCO tax, looking specifically at the remaining actions around the 24-25 year, which is the $200 million, we would request that emergency physicians be included in that $200 million.

When we look at the not only the delays in the MCO tax, but also some other cuts in the healthcare space, we're worried that there will be an increased traffic coming into the emergency Department.

And as a reminder, emergency physicians see all patients coming into the emergency Department regardless of their ability to pay or their insurance status, and it also impacts all Californians. Thank you for your time.

Hi, Katie Hardeman with the California Teachers Association. Just want to thank the Committee for listening to the concerns around Proposition 98. We support a package that protects the integrity of Prop 98 and prevents cuts to the classroom and long term funding for Prop 98. So thank you for your work.

Good afternoon, Chair Members. Elmer Lazarda here with the California Labor Federation. We want to thank you all for your work on the budget proposal this year. Especially want to highlight a few key items that are of high import to us.

We want to thank you for the inclusion of budget language for healthcare for striking workers, as well as language on the expedited hiring at the labor Commissioner's office to ensure adequate labor law enforcement. We also want to highlight the restoration of funds for UC labor centers, as well as the UCLA Latino Politics and Policy Institutions Institute.

We want to thank you as well for the restoring of the proposed cuts to high road training partnerships, which are incredibly important. And finally, we want to thank you for working to protect public health, our public health workforce, and fighting against the cuts that were proposed there.

So thank you for your work there, and we thank you for valuing worker voices as you continue your negotiations. Thank you.

Good afternoon. Michelle Underwood on behalf of the Coalition for Adequate Funding for Special Education, the Los Angeles County Office of Education, and more than 40 districts and county offices of education who are awaiting receipt of this year's inclusive early education expansion program. Those grants are being proposed to be clawed back to backfill the rainy day Fund.

As a small example of some of the districts and county offices that are awaiting these funds, county offices such as Alameda, Monterey, Orange, San Diego, San Francisco, San Luis Obispo, San Mateo, Santa Clara, Santa Cruz, Stanislaus, and some of the larger districts like West Covina and Stockton Unified, for less than $200 million.

These districts and county offices, these grantees, will be able to create inclusive preschool environments so preschoolers with disabilities can learn and play and grow alongside their typical peers. These are inclusive settings. These grants are awaiting awardees. So we want to.

As the state suspends Proposition 98 and has the various maneuvers to keep cuts away from the classroom, we want to make sure that these inclusive preschool settings are also maintained and these preschoolers with disabilities are not harmed. Thank you.

Good afternoon, Mister Chair, Vice Chair, Members of the Budget Committee and finance Committee. My name is Oscar Garcia, Vice President of the California Hispanic Chambers of Commerce, and I'm here today to thank you on behalf of the hundreds of thousands of small businesses throughout California.

As you know, this tap assistance, the technical assistance program through the SBDC network, assists small businesses to thrive, to support their families, to create jobs, to bring revenue to the stage, to the municipalities and the communities. These businesses really need this help.

And I encourage you and I will bring with you that to continue the funding for this program. This program is essential. The small businesses is the small engine of the State of California for our community and for economy. So thank you very much on behalf of those hundreds of thousands of businesses in California. Thank you.

Committee Members. I'm Jordan Lindsay with the Arc of California and The Arc United Cerebral Palsy California Collaboration and the Lanterman Coalition.

And we just want to say thank you and extend our gratitude to the work that has been done and what is in this agreement in protecting investments for Californians with developmental disabilities and their families and their workforce. We have felt unwavering support.

This community has felt unwavering support over the last few years from the Legislature, both houses, sides, and we want to say thank you for that. Senator Skinner, thank you for your comments today on behalf of the developmental disability community.

Senator Menjivar, thank you for the incredible work and Members of that Subcommitee, for the incredible work that you've done this year. Thank you.

Mister Chair, Mister Vice Chair, Members of the Committee, Jim Frazier, Arc of California and United Cerebral Palsy collaborative, outstanding work. Thank you. I can't thank you enough for your support. The spice partisan support for a population is so dependent on you for your support.

You cannot believe after years of rate freezes, cuts, Senator Skinner had mentioned the detriment that has done to many people. We lost over 7,000 providers from 2012 to 2019. 7,000 providers. We lost DSPs, the direct service professionals who provide the day to day services that our people are so dependent on.

SB One of the things that I ask, and again, I thank you so very much for rejecting the governor's proposal, but that we work towards a sustainable funding mechanism so we don't have this continual roller coaster, somewhat like what we did with 1.

The only one that really didn't like SB 1 was Mister Newman, I'm not trying to be flip, but we need to have a sustainable funding mechanism in place to be able to support this population on a regular basis and be able to make sure that we provide the services.

The Lanterman act was enacted in 1969 and was guaranteeing the care of these individuals. We just didn't say how. Well, let's improve on that. Thank you.

I'm short. Good afternoon, Vice Chair Members of the Subcommitee, my good friend, Senator Eggman. Thank you for all that you do to support this great State of ours. My name is Les Fong. I'm Director of the Small Business Development Center for San Joaquin, Amador, Calaveras and Alpine counties. Very rural counties.

And I wanted to thank you for keeping that tap budget in place, because you're going to find that it's a tremendous return on your investment. Prime examples. One of our small programs that we did, we actually certified 71 small businesses as either minority, disadvantaged, women owned, veteran owned businesses.

And this is in a four month period utilizing our advising loans. Two of them, or actually eight of them, actually got the SBA. Eight. A certification, which is the holy grail of certifications. One of them got a contract with the port of Stockton, another one with the Sacramento airport.

And again, it's because of programs like the technical assistance program that were able to help small businesses actually achieve their dreams. And of these 70 odd companies in this last four months, 51 are brand new startups. So anyway, thank you. Thank you for your commitment to the state and we appreciate all that you do.

Good afternoon. SiewYee Lee-Alix, Director of Sacramento Valley Small Business Development Center, SBDC my colleagues have said it all, tap program works for every dollar of tap successful businesses. Put back two to 10 times the amount of dollars into the state's economy. This isn't a budget item. TAP funding is a way to build equitable economy.

TAP funding also allows us to expand our ability to create pathway for equitable opportunity and wealth creation through entrepreneurship for the very unseen population. And by that I mean the formerly incarcerated, the refugees and the non citizens. Because of TAP funding, we're able to do that.

Thank you to Senate leadership and the Members of Budget Subcommitee for their support to restore full funding of the TAP program. Special thanks goes out to Senator Badia, Senator Niello and Senator Smallwood-Cuevas for believing in this program. Thank you.

Hi, I'm Dara Dado with Cameo Network, a network made up of 400 mission driven business service organizations that provide very small businesses with loans and business coaching. Thanks to the entire Legislature for their investment in the small business ecosystem that makes up cameos membership.

The $23 million for Office of the Business Advocates TAP program is used to help businesses start and grow. The investments result in jobs and economic activity and helps families build wealth. This in turn creates sales tax and personal income tax revenue for the State of California. The TAP program is a net positive in California's bottom line.

Thank you all for taking the action to support small businesses.

Hi, I'm Claudia Viek and I represent the now 21 Women's Business Centers throughout California. I want to thank the Budget Subcommittees, Senator Wiener, and I particularly want to thank Senator Nancy Skinner and all of the women in the Women's Ledge caucus that have supported the restoration of our Tap funding.

So thank you so much for realizing that women are leading the economic recovery of California and that the Tap funds, as small as they were only 13 million for all of the small business assistance programs that you've heard from earlier, have really made a huge difference. One of those differences has been in creating more childcare businesses.

And you're going to be hearing from some of my colleagues very shortly on that. Thank you again.

Good afternoon, everyone. Thank you. Chair and to the committees of the Members of the Committee here. My name is Sophia Kanaan and I'm the Director for the Women's Business Center here in Sacramento. And I'm just coming here to thank all of you for your 100% support for tap funding.

I can't tell you how crucial it is to small business owners, especially women owned business owners. The TAP funding allows us to not only maintain technical assistance programs, but it also allows us to maintain specialized programs such as child, child care entrepreneurship programs, which many.

We have graduated over 40 students and we have opened up over 300 childcare slots in the past year. And so again, thank you so much for your support for tap funding, and we look forward to showing you all the great things that we're doing with it.

Good afternoon, Chair, Vice Chair, Members and staff, my name is Danielle Marshall. I'm a consultant with the Women's Business Center and a small business owner myself.

Just ask here to say thank you for maintaining those tap funds just a little bit about some of the programs that we have been able to sustain, and hopefully we'll move forward with this funding being maintained. We have assisted, actually with over 350 families with having adequate quality, licensed childcare.

So over 350 families who are able to go to work in school as necessary. We have assisted with creating over 70 small and micro businesses who have either started from scratch or expanded their operations. We've created sustainable jobs and educational resources for small businesses in urban, rural and suburban communities.

And last, but certainly not least, as an Air force veteran myself, we have made significant impact in the military microcosms in assisting spouses and veteran women with starting their own childcare organizations, as well to provide quality care for those who have served or currently serving and those who are subject to go into the theater at any given time.

So thank you so much.

Thank you. And before we get to the next speaker, I just want to note we have 13 out of our 19 Members are here for all staff in the building.

If you could start identifying where your Members are and assisting them and coming down to the hearing room to vote, I suspect we'll be voting within 10 or 15 minutes. Thank you.

Good afternoon. Thank you for this opportunity. And I would like to thank Scott Wiener for always being supportive of childcare. My name is June Bug, and I am a parent leader with Parent Voices, San Francisco chapter.

I am also a Member of our early care and Education coalition, and we just really are grateful to have a budget that will minimize cuts to our families and our ECE providers. I'm a parent who relies on childcare. Without childcare, I wouldn't even be here today.

I have a child with cerebral palsy who also not only depends on childcare, but also depends on IHSS. Without childcare, I would not be here today. I'm going to say that again. I would not be able to be here today to advocate for other children.

I would not be here today to ask that you keep the promise of the 200,000 ECE spaces. I wouldn't be here today to say that we need to support our providers to make sure that they have not just a living wage, but a wage where they can thrive and have an economic stability in their life.

When I was a provider, I ended up homeless because I couldn't make enough money as a parent. Without childcare, I wouldn't be able to work as a community health worker in the field that I do, where I'm helping try to prevent overdoses and help people with housing and help people with harm reduction.

This 200,000 ECE spaces could provide that child who's homeless that I have to see in the stroller whether a parent is asking for harm reduction supplies. So I think of that child. I think of the child who has special needs, who really needs this childcare.

I think of all the children that are falling through the cracks because they're waiting for childcare. We really can't wait anymore in the field I work in, I see children who are going without the basic needs. They need to have a foundation so they can succeed. Child care is an investment in our society. We need these funds.

We need these spaces. Our children cannot wait anymore. Child care keeps California working. Childcare keeps our children in California safe. Thank you.

Okay. Hello, Senate Committee. My name is Elia Fernandez, and I'm a mother and a grandmother of six grandkids, and one of them is autistic. And he just received for the entire year an award for excellence in academic in his graduation.

And also, please, if you could keep the promise of the $200,000 for all for the EEC and to keep, like Jujumba said earlier, to keep them all safe and with child care. Thank you.

Hi, my name is Noah Shahid from Parent Voices San Francisco. And please keep your promise of the 200,000 slots for childcare.

Good afternoon. My name is Mohamed Shahid. I am a Parent Voices leader, Parent Voices California. I'm also here to support that. We ask that you reject the administration's indefinite pause and instead enact a two year pause with the trailer Bill specifying the plan to reach over 200,000 new subsidized slots by 2028. Thank you.

Hi, my name is Arzeh Shahid from parent voice in San Francisco. Please keep your promise.

Hi, my name is April and I'm from Parent Voices San Francisco. I just want to thank everybody, especially Nancy Skinner and Scott Wiener, for always making childcare your top priority. I know, Skinner, you were there yesterday with us on those steps at night when it was really hot, but you always support us. You're always on our side.

And please just keep the promise for the 200,000 slots for childcare. Thank you.

Hello. I am from San Francisco, California. Parent Voices. Please keep your promise of. Wait, you're doing great. I'm Donnie Mckinley. And for 200,000 slots, and thank you, Nancy Skinner and Scott Wiener.

Thank you. And go giants. Go Giants.

Hi, my name is Eduardo. I'm with Parent Voices San Francisco. Please keep your promise.

Thank you. Hi, my name is Jorge Korona. I'm an engineer and a Member of Parent Voices. And I'm here to let you know that please keep your promise.

And childcare really has helped me, my family be able to not being a financial burden, and I think it helps other families not be in that situation where you have to decide or your family or not to have your kid in childcare. So please keep your promise.

Hi, good afternoon. My name is Maria Jandres. Jorge and Eduardo. Jorge is my partner and Eduardo is my son. I am a business owner thanks to childcare because I was able to get to higher education. I am also a Member of Parent Voices San Francisco.

We thank you, Senator winner, for all your support and for also representatives in San Francisco. Nancy Skinner, thank you so much for talking yesterday with us.

And speaking regarding childcare is not only necessary, but it's essential, essential for parents like me that now we're able to give back to our community, but also to bring and uplift the economy of this country. We need to stop the narrative regarding families, and we need to provide providers.

I had amazing providers believing and accepting my subsidy because they wanted me to succeed. We should not be putting this budget under the, we should not be accepting more cuts for these. Childcare is essential for us. Thank you so much.

Good afternoon, chair. My name is Elvia Mckinley and I am a parent leader. I have two jobs to provide for my family. I live in San Francisco and one of the jobs I start at 04:00 a.m. so childcare is essential for me and my family to survive.

I want to ask, can you please keep the promise of 200,000 ECE spaces, ensure providers are paid for the actual cost of care, improve access to ECE now, and ensure funds budgeted for ECE stay in ECE. Thank you.

Good afternoon, Committee, and especially the chair of the budget, Senator Scott Wiener, and the Legislative Women's Caucus, and also Senator Menjivar, who's heard all of us before. We really appreciate you minimizing the impact of this budget deficit to families and trying to make it work and especially protecting the most in need.

And like the children said, we really appreciate keeping the promise, and we hope that when you negotiate with the Governor, that the budget that you work so hard on will be the one that we will see. Childcare keeps California working. It's really valuable even.

I've been an organizer of Parent Voices for the last 28 years, and we've seen the different fights, and we really appreciate all the work that you do. Thank you very much.

Kim Rothschild with the California Association of Public Authorities for in home supportive services, grateful for the rejection of the elimination of the IHSS, services for the undocumented folks, and very appreciative for the restoration of the backup provider program.

This is a life saving program in place for many of those who caregivers do not show up or are leaving a hospital and need some short term care.

Thank you so much, Chair and Members. Alex Torres here, on behalf of the New California Coalition, which counts over 700 ethnic, local, regional, chambers of commerce and economic development organizations across the state as partner orgs.

Also on behalf of the Bay Area Council, quickly want to align our comments with some of our colleagues in the business community on the net operating loss provisions, but look forward to engagement on the business tax credits language. Also want to express support for the tap provisions as well for small businesses.

Also want to call attention to Senator Wiener. You noted the responsible budgeting done to mitigate the scope and quantity of the tough decisions in this budget.

So want to make sure I express support for the raising of the cap on the rainy day funds from 10% to 20% and the exclusion of deposits into the rainy day Fund from the state appropriations limit so that the state's not constitutionally disincentivized from increasing its reserves to or protect against future downturns.

So thank you so much and amen to that.

Mister Chair, Vice Chair of Toni Simons. I'm representing the American Indian Chamber of Commerce, an organization that's dedicated to serving tribes, tribal enterprises and entrepreneurs of American Indian, Alaska Native and Hawaiian Native. We want to thank you first for rejecting the governor's proposal to cut the small business technical assistance program.

It's a program that we use in order for our apex accelerator. It's the only American Indian focused accelerator helping small businesses access government contracting. We would also ask, however, as you look at trailer bills and you consider how you would be looking at the funding for the California jobs first. We recognize it's a very tough budget year.

We want to raise the issue that tribal communities have been waiting for their shareholders. The California jobs first funding there's been three prior funding rounds for funding that has gone statewide, a pilot, a planning grant and an implementation Fund for pre development. But none of those funds have been dedicated for tribal communities.

Tribal communities have been told to get ready, get ready to apply, and we ask that you consider that. And that as we look at how we implement the cuts that are necessary, we recognize that, that you don't take them from one of the most disadvantaged communities. Thank you.

Monica Kirkland, state policy Director for Senior Services Coalition of Alameda County we just wanted to thank on behalf of the 39 organizations and the 89,000 older adults that we service, we want to thank Senator Wiener and the entire budget, staff and Committee for your hard work and just specifically for your rejections and the cuts to home safe and to also AP's IHSS cuts for undocumented and also for the Career Pathways program as well as for the older California act modernization for as it relates to nutrition.

So we just wanted to thank you for that and also wanted to thank Senator Minjabar and the sub three Committee for your attention to detail your care and just protecting the multiple population. Thank you so much.

Good afternoon. My name is Erin Woley. I'm here representing Sierra Club California. I want to first thank the Members of this Committee and sub two for your comments and support of the Habitat Conservation Fund.

We are really concerned about the reversion of $45 million that's in this budget from the Habitat Conservation Fund, which has provided a reliable source of funding over the past 30 years to do conservation across California.

Maintaining this funding now and in the future is important to meeting our climate resiliency and 30 by 30 goals and the commitments that the state has made to biodiversity. We're also concerned that this reversion is contrary to the language in Prop 117. So we urge you to reject this in the final budget. Thank you.

Good afternoon, Chair and Members. Cameron Dimitri with Capital Advocacy on behalf of the California Retailers Association. Just appreciate all the work that you've done and the staff that have done to put together this budget from the retailer's perspective. We're opposed to the elimination of the bad debt deduction.

We believe the amendments that were in AB 167 actually go back and make it more challenging than the initially proposed work in the administration's budget. We think that due to the changes, especially related to the effects, would go into the law in 2028. That actually doesn't reflect the way that retailers do their financing contracts.

And so we ask for this elimination to be, to be reinstated and appreciate your time. Thank you.

Good afternoon, Mister Chair and Members. Rico Mastrodonato with the Trust for Public Land. And I want to align my comments with many of my colleagues who have already spoken about the Habitat Conservation Fund. And I won't repeat anything that they said.

I do want to thank Senator Blakespear and Laird and Senator Dahle, Subcommitee for their support and acknowledgement of the importance of this program. We used to think this was a budget proof program, and we hope that it still is.

It really has been there through thick and thin, and it would be a real blow to biodiversity in the state to see this money disappear. So thank you very much.

Good afternoon Chair, Members. Nicholas Sackett, on behalf of Social Compassion in Legislation and Courtesy for Animal Legal Defense Fund today as well, I just want to echo everyone's comments on the Habitat Conservation Fund reversion, please, you know, oppose that again. Also want to thank Senator Blakespear Senator Dahle, Senator Laird, for standing up for this reversion.

Against this reversion. Thank you.

All right. Good afternoon, chair Members. Janice O'Malley with AFSCME California. Appreciate the leadership of the Committee on trying to find solutions for a bad budget year. Just want to align my comments made by our AFSCME affiliate UDW Local 3930 on IHSS and childcare.

Thank you sub three and Senator Manjavar for your work on supporting the workforce in public health and CalWORKS.

Appreciate the preservation of the UC labor funding and thank you, Senator Wahab, for your bold approach on CDCR and listening to frontline workers in the agency providing medical and mental health care and rehabilitative services by rejecting continued privatization of jobs while also balancing the preservation of rehabilitative programming.

We do have concerns about the elimination of state vacant positions and want to make sure that those decisions are made in consultation with the exclusive bargaining representatives. We appreciate the Legislature rejecting the telework stipend TBL and respecting the collective bargaining process.

Lastly, we appreciate that the Legislature respected the negotiated agreement on the MCO tax and in particular the funding towards ground emergency transportation. Godspeed on negotiations and we hope that these items that you had worked so hard in trying to preserve stay put. Thank you.

Good afternoon, chair, Vice Chair and Senators, thank you for staying here and listening to all of us. We do appreciate it. My name is Kelly Macmillan.

I'm with political solutions and I'm representing maternal and child health access and I'm here to talk about item 118, NAB 107, which is the cut to $18 million cut to support the community based health enrollment navigators. The program's been around since 2019.

It's in 44 counties and it provides Medi Cal underserved communities, vital health access and coverage, and access to services. In fact, the last couple years it's provided over 300,000 services.

The program also has a federal match of 50%, so we're looking at a $36 million hit to the program, which will result in thousands of layoffs of these health navigators throughout the state. So we urge you to restore the million to support the health navigators community based organizations. Thank you so much.

Holly Fraumeni De Jesus with White House public affairs. I'm here on behalf of Habitat for Humanity California expressing extreme disappointment in the complete elimination and zeroing out of the funding for the Cal home program.

It was this house two years ago that gave funding, for the first time ever, General Fund Dollars towards the one and only program in the whole state that produces a new unit for affordable home ownership. And that's Cal home. $350,000,000 2 years ago, it was eliminated by half last year.

And in this budget, unfortunately, $152 million has been completely eliminated. So we're hopeful that maybe these final days or weeks, that even a million, any amount could be restored to that program and not completely eliminated. We're hopeful. And to just understand the impact. The next nofa was due in June. It's on hold. That's on hold indefinitely.

So if the General Fund Dollars are not restored, please work with HCD to ensure that the remaining Prop 1 dollar that are referenced in all your analyses that are left over from a previous bond, please ensure that whatever is remaining does get out and that this program is not on hold indefinitely.

We hope we can maybe work on some trailer language to ensure that the existing dollars that are designated for Cal Home do not get swept and move to another program. There's no guarantee. So please help us ensure that, that NOFA gets out this year in 2024 on behalf of United Way, greater Los Angeles.

And we're hopeful that in the incoming years that we'll see some funding and gap funding for La Casa, the regional housing program that has a, we have a vote going to the voters in November, but we have projects that have been identified in the pipeline that need funding now.

We're hoping that the Legislature will consider some gap funding, as they have for other regional agencies, to ensure that we can get some of those projects funded while we're waiting for that initiative to pass.

And last but not least, on behalf of Fullwell, a pilot program for Calfresh, the supplemental fresh fruits and vegetable program that many of you have pilot programs in your district that were shut off on April 14 because it ran out of money.

We're hoping that in this budget year, future budget years for sure, that this is a really important program that can be turned back on with any amount of money. So again, hopefully some money for that Calfresh program will be restored as well. Thank you.

Thank you very much. Is there any additional public comment? Seeing none, we'll close public comment. I want to thank everyone who took the time to come out today to speak, and we'll bring it back to the Committee. We've had ample discussion before. If there are any final comments, we'll do one.

We're going to do one at a time. So, yes, Senator Cortese.

Mister chair, just a single item, and I was involved with two other committees earlier, so I couldn't make the comment earlier. And I'll be concise. I just want to note, while I know under housing, our budget, this budget under item 228 goes back and deals with recently enacted legislation funding, and I appreciate that very much.

As you know, Mister chair, the year before that, SB 791, which would create a California surplus land unit to facilitate agreements between local agencies and developers on surplus properties, was enacted. And that's been defunded according to page 93 of the joint budget plan. So I'll be, you know, submitting a request to restore that ASAP, whenever ASAP is.

But clearly, in my mind, with the housing crisis, the restoration or the increase in tax credits, much of which would be used by exactly those surplus plus land entities, local school districts and small local governments, it seems to be a real non sequitur to sort of beef up the tax credits, which I assume HCD and Cal FHA have something to do with, and at the same time decreased 12 FTE.

That would help get those tax credits out to those same governments. So just wanted to put that on the record. Obviously, I'm supporting the budget overall, but that was just the one issue I had issue with. Thank you, Mister chair.

Thank you, Senator. And we are looking into that. So thank you for raising it with us. Okay. Seeing no other. Oh, Senator Durazo, my apologies.

Yes. Just very quickly, I want to applaud the restoration of TPS on CSU, immigration legal services, and the IHSS for undocumented. But I want to urge restoring immigrant children representation funding. We need stability. There are enormous threats that are coming down the line, and this is the Latino caucus priorities. Thank you.

Thank you, Senator. Senator Padilla.

Thank you very much, Mister Chairman. I did intentionally Reserve comment after we took public testimony, and so I'll just take a minute. I would first echo the priorities articulated by my esteemed colleague from Los Angeles with regard to the Latino caucus priorities.

And I just want to quickly extend thanks to you for your leadership, certainly again, to our amazing budget staff.

With respect to the overall General framework of two party and where we're at now, I think it's important to just remember, generally speaking, that we work diligently to address the shifting and unique revenue dynamics that we do in this state, which are, shall we say, unique, that greatly over impact our budget, while at the same time trying to seek a more strategic approach to how we order expenditures in a way that reflects a good return on investment, where that with the greatest impact programmatically, often that affects some of the most vulnerable and underinvested communities and least empowered communities.

And I think it's quite an improvement, frankly, as a result of the process. So better aligning those priorities while still finding a way to maintain a healthy Reserve to implement savings and reductions in ways that are less impactful in the ways I described.

Really appreciate the work I think we did in my sub, particularly with pulling back 260 million in cuts to unexpended prior rounds of HAPP, to be able to guarantee around six at a substantially healthy level and not to be forgotten with strings that will substantially strengthen oversight and reporting requirements.

And appreciative of the fact that we were able to reject and restore 325 million in multifamily housing again, a program that disproportionately has an impact strategically on folks who are the least off the same for 250 million in REAP 2.0 grants available to avoid interrupting projects underway again, often in communities that don't have the investment that they should get.

And to echo from a lot of the testimony we heard, certainly technical assistance program tap being able to reject that reduction and hold that back again. Small business, often in communities that don't have a lot of resources available to them. So happy with the direction, happy with the work again of the leadership and of the staff.

And thank you for allowing me to comment.

Senator Menjivar.

I was on the fence, but I'm going to do it. I definitely want to thank the staff and this leadership because we really, in this two party deal, clawed back a majority of the core programs that were proposed for cuts.

My ask here, and I've, you know, to Department of Finance and Administration, is that we should never, ever have advocates continue to fight for their basic rights when we're dealing with deficits, because what we had were people travel from all across the state to literally beg us to not cut for things related to foster care, childcare, like we're making our most vulnerable have to come to us and beg us to not cut those issues.

I don't think we should ever see that moving forward. I think the rich of the rich should be up here begging for us not to cut things for them and not the opposite, my Committee staff Members for this and really the leadership really doubling down against a lot of these cuts.

So I'm so proud of this two party deal. I'm really proud of what the Legislature's plan has moved forward with, and I'm really hopeful that that stays as close to possible, as close to it as possible next week.

My only caveat to what I'm hoping in ongoing conversations will look like with OICR is to really ensure that that data is collected, not just once, more than once, so we can make tweaks.

We're having data come to us such last minute that we're trying to fix things that happened a year ago and now new problems are arising. That would be my only thing. And I know that those conversations are still happening, but really proud of what we were able to preserve in this budget.

Thank you, Senator Wahab.

Thank you. I want to echo some of the comments my colleagues made. Number one, I do want to thank leadership on every single budget sub, as well as our chair and staff who has been working on this. I also want to thank the LAOs office as well as the Department of Finance.

I know many of you guys have been working very, very hard into the night about this budget, but I do want to prioritize a couple of things for me. When I take a look at the budget overall, I am deeply concerned with efficiency.

And I think that when we tout that we are the fourth or the fifth largest economy in the world. And yet I constantly see, especially representing Silicon Valley, inefficient processes across the board, across departments. That is a concern for me. Right.

When we're talking about applications, when we're talking about technology implementation, when we're talking about any of these things to make the job faster and better and more efficient to, again, the end user, which are the residents of California. I keep seeing problems, delays. Number one, overspending and systems that don't, to be honest, aren't user friendly. Right.

We see umbrella programs when we're talking about housing, when we're talking about reentry, when we're talking about a number of different, whether it's social services or anything else, there's so many programs and it's not clear how they even talk to each other. Right. And maybe, and I'm a big fan of consolidation.

I think some things need to be consolidated, websites need to be updated and a huge effort when we're spending billions and billions of dollars, we should also be prioritizing these things. Right. So I'm a big advocate of that. I will also say huge priority for me and it's outside of my budget.

Sub five is again the social services for the most needy and vulnerable community Members. That has to be the priority when we are making a budget. That has to be first, how do we make these individuals whole and then everything else can be negotiated with.

That said, I also think housing, as much as we're talking about, you know, we've spent this much money, we haven't seen a result here. We've just started spending money on housing. Redevelopment has been cut for cities. There's a lot of shovel ready projects that are in limbo just because of ongoing funding and potential impacts there.

I think that that is a disservice to the larger community when we are providing government funds for a lot of these programs, whether it's housing or otherwise. I also believe that we need to put more qualifications and restrictions. For example, affordable housing should be deed restricted regardless of ownership. Right.

It should be continuously and perpetually affordable to residents moving forward. When we're talking about shelter funds, for example, in one of my counties, it's roughly $34 a night. It has not changed for decades. We should be trying to prioritize that adding COLA increases. And, you know, what does it really take to provide these types of services?

So I really want to highlight some of those things. Obviously, it's a longer discussion and far more into the details, but that is very, very important to me. So I do just want to highlight that. I also want to highlight the fact that we keep talking about undocumented residents as a burden to our system.

And yet we don't realize, and many people who talk about this don't realize that they are a part of our community, first and foremost. And we need to start ensuring that we, again, make every resident of California feel whole as much as possible.

They do work and contribute to our society, and we, of course, need to be planning for our entire state moving forward. So I just wanted to highlight that I, again, appreciate all the work you guys do. And I thank you, chair.

Thank you very much. Okay, seeing no other questions or comments. Again, thank you, everyone. And we will now proceed to motions and voting. So we'll start with AB 107, the budget act of 2024. Do I have a motion? Motion by Senator Laird. And we will call the roll. And this is a motion do pass.

To the floor, AB 107. The motion is do pass. [Roll Call]

Okay, the vote is 13 to five, and that motion passes. We'll next go to. To AB 154, which is related to the Prop 98 suspension moved by Senator Laird. And we will call the roll. This is also do pass to the floor.

AB 154. The motion is do pass. [Roll Call]

Thank you. 13 to five. The vote is 13 to five, and that motion passes. And then finally, we'll move to AB 167 relating to taxation. Do I have a motion? Motion by Senator Laird. And that motion is to is do pass to the Senate Floor. Please call the roll.

AB 167. The motion is do pass. [Roll Call]

Okay, that vote is 13 to five. The motion passes. We've now completed all business. Completed all business. I want to thank everyone for today. And with that, we are adjourned.