Senate Extraordinary Committee on Budget and Fiscal Review

The Senate Committee on Budget and Fiscal Review will come to order. We're holding our Committee hearing at 10:21:03 room 1200. Any Members who are not here, we ask that you come down. Public comment will be heard after both of the agenda items have been presented. Okay.

This is the first full regular session Senate Budget Committee hearing for the year. There will be additional full Committee oversight hearings. We'll have several more. And there will be numerous Subcommittee hearings in the coming months. More in depth discussions regarding the Governor's proposals will take place in both the Full Budget Committee and Budget Subcommittees.

Budget Subcommitee hearings will begin at the end of February and run through May. This year's budget proposal from the Governor reflects the responsible actions taken in last year's budget that balanced a huge budget deficit last year and have had benefits going into this year and put us in a strong starting position as we start out the year.

Despite the stable budget picture as of now, we know that that could change as we monitor tax receipts in the coming months. We know that we have significant responsibilities to help our brothers and sisters in LA recover from the wildfire. We took action on that last week, but that was just the start.

And we'll no doubt step up in additional ways to help LA recover. We also know that something akin to a wildfire has broken out in Washington D.C. which creates additional risk for our budget.

We saw the chaos that happened this week when the President of the United States decided to essentially unilaterally shut down much of the government and issued an executive order unlike any that I've ever seen. And that would have had unbelievable negative budget impacts, not just on California, but on every state in the country.

Fortunately, the President was brushed back and rescinded that horrible order. But that is a preview of the chaos that we could be confronting over the course of this year. We also know that LA County will not be filing tax returns until October due to the disaster.

And so there are uncertainties this year, but we will navigate them as we always do. We have with us today the Department of Finance and the Legislative Analyst's Office to provide an overview of the Governor's Budget. The second item on the agenda will be an update on implementation of Senate Bill 253 from the California Air Resources Board.

So with that, Vice Chair Niello, do you have any. Oh, he's not here. Sorry. The Vice Chair's not here. I'll give him an opportunity when he arrives. So with that, we will begin and I will turn it over to. This is on item one. I'll turn it over to. Oh, excuse me.

I guess we've defined it as part A. To Erika Li from the Department of Finance.

Thank you. Good morning, Chair Wiener and Members of the Committee. Erika Li, with the Department of Finance here to provide you an overview of the '25-'26 Governor's Budget. The economy is doing better than projected, and after two difficult budget years, this year's Governor's Budget is balanced without the need for further solutions.

We've seen stronger than anticipated performance of the economy, stock market and cash receipts, and this is in comparison to where we were at the 2025, '26. Sorry, 2024 Budget Act, leading to an upgraded revenue forecast.

We now project $16.5 billion higher revenues over the budget window, and that's the prior year, the current year, and next year's budget year. When compared to the '24 Budget Act. A lot of credit goes to the agreement made with the Legislature, as the chair spoke about earlier, for the current budget.

That solves an over $45 billion budget deficit for this fiscal year and importantly addressed some of the problems for next year, which is now, budget year. And this has never been done before, but that has helped put us on good fiscal footing.

We did have to make some tough decisions last year, including reductions, delays, some borrowing, some deferrals, though core programs were largely spared. Yet again, as the Chair mentioned, we are not out of the woods.

As the LAO noted in its November outlook, our baseline expenditure growth is outpacing our revenues, and we must continue to assess this matter to ensure our state's continued fiscal stability. And again, we must absolutely be mindful of the risks that lay on the horizon.

Stock market volatility, reemerging inflation, the latest fires and related delays in income tax filing. The deadline from moved from April 15 to October 15 will have an impact on our revenue projections.

And perhaps the biggest risk at this point lies around federal policy changes that could lead to significant decreases in funding, labor shortages, impact population growth here in California, all resulting in severe and substantial impacts to our state's economy, both in the short term and the long term.

That said, the Governor's Budget is balanced with no cuts and with very limited new investments. It includes a total spending of $322 billion in total funds, of which $229 billion of that is General Fund.

This budget maintains the framework from the '24 Budget Act, which includes $7.1 billion withdrawal from the budget stabilization account or our rainy day fund. Again, that was planned as part of the 2024 budget agreement. It does leave us with reserves of $17 billion, of which $4.5 billion is in the State Fund for Economic Uncertainties.

That's a billion more than we had in this current budget and generally about a billion more than we normally have. And that is to really account for some of that uncertainty and risk that I mentioned earlier.

This budget system sustains and protects progress in core programs, including celebrating the full implementation of many years of hard work, particularly in the education program. We see things like Universal TK fully implemented, the before, after and summer school programs fully implemented. And this year we will be serving a billion school meals; just to name a few milestones.

And lastly, I would like to reiterate the Governor's proposal for Proposition 2 reform. Proposition 2 requires the state to set aside funds during good fiscal year so that we can draw upon them in bad. And this is to reflect some of that volatility in our revenue streams.

However, there are constraints on how much revenue the state can set aside, which reduces the amount of funds that we can store away for a rainy day.

And this is largely because of the interaction of Proposition 2 has a cap on mandatory deposits of 10% of General Fund revenues and that interacting with the Proposition for state appropriation limit, has effectively put a cap on how much money we can suck away, again for a rainy day.

Our proposal seeks to raise that mandatory cap from 10% to 20% and exempt deposits that go into these revenue funds into the BSA, in particular from the appropriations limit.

As the Governor mentioned several weeks ago during the budget presentation, this is just a starting point and obviously a lot has happened since the release of this budget, including the devastating fires in Los Angeles and the rollout of certain federal policies that have impacted or have the potential to impact California's revenues.

And we have obviously a lot to consider alongside the Legislature. And we look forward to working with you throughout the spring to develop a plan that ensures California's fiscal footing now and into the future. Thank you.

Thank you very much. We'll now hear from the LAO.

Great. Thank you. Mr. Chair Wiener, good morning. And good morning Vice Chair Niello and other Members. My name is Gabe Petek, Legislative Analyst. And so I'm here with some of my colleagues from the office. I'll give our over kind of a brief review of our overview of the Governor's Budget proposal.

Hopefully you have the handout from our office. But on the if you turn to the first page, you know, just briefly to recap some of what Ms. Li said.

That the current landscape is really defined by the fact that the Legislature did take proactive action and took steps back in June to address both the budget deficit that was estimated for the current fiscal year that we're in, but also for the upcoming budget year. And that is very atypical to our understanding.

And those actions totaled about $28 billion at the time. Since then, what we've seen is stronger revenue performance than what the Budget Act assumed. And that has led to the upgraded revenue estimates that were just referenced. And our office would agree in the directional nature of those upgraded revenue estimates.

And then of course, though, with the higher revenues comes higher spending, particularly on schools and community colleges under Proposition 98. But also our office found in our November fiscal outlook that spending across the rest of the budget was also higher than expected.

So, long story short, if you turn to page two, basically the budget in our characterization is roughly balanced, largely thanks to those actions taken back in June. But the higher revenue and higher spending now is somewhat of a wash. So it kind of leaves us with the same balanced position.

That is to say, we're not describing there as being either a surplus or a deficit at this time.

Although, you know, technically speaking, when you look into it, under the administration's assumptions, our best estimate is that the budget would end with about a $3 billion positive balance in the ending SFEU balance before taking account of the Governor's proposals in this budget.

Whereas in November our office estimated that there would be a relatively small $2 billion deficit for the upcoming budget year. I could briefly crosswalk that and just say, you know, the Administration has $9 billion in higher revenue estimates than we did for this through this budget year.

But with that comes $5 billion in higher spending on Prop 98. But then they also have about $600 million in lower spending across the rest of the budget. $600 million in the whole scope of the budget is relatively small number.

That number, though, is sort of the net of larger differences underneath it, like in Medi-Cal and other programs. I could be happy to speak to those after this if you have questions.

When we turn to the out year, though, out years rather, both our office, on page three, both our office and the Administration take a multi year estimate of the state's budget condition looking three years after the upcoming budget year. And both our offices do show quite significant operating deficits in those future years.

You must take these with a grain of salt, of course, because the further out we look, the more uncertainty there is. And of course, revenues in California are difficult to forecast because of the correlation with the stock market and hard to predict factors like that.

But the Fact is both of our offices do see this structural budget problem. In these out years the Administration is estimating annual deficits of $13 to $19 billion, whereas we see somewhat larger $20 billion growing to $30 billion. Again, I could explain the difference in why we have these slightly different estimates.

But the main thing is that there is this structural pressure that would be sort of the main point we would wish to convey. Turning to page four, we have a couple of notes here about the Governor's discretionary proposals in the budget. We put them in three categories.

The first are those proposals which create budget capacity, savings and other actions. The second category are those proposals that would use budget capacity, i.e., spending or tax expenditure change increases. And then third is the Discretionary Reserve that was already referenced.

But on the savings proposals, the largest one that I could mention is that under the Governor's proposals he would delay the full funding of Proposition 98 by about $1.6 billion until waiting to see until we have final revenue estimates for 2024-'25 and then if the revenues meet or exceed the administration's estimates, there would be a settle up obligation in the future related to that.

In addition, he has a proposal to change the methodology for taxing the profits of financial institutions called a single sales factor methodology that would generate about $300 million in revenue. And then he would shift about $300 million in planned General Fund spending to using the Prop 4 bond to create savings in the General Fund.

On the spending side there, it's true, there as was mentioned, there is a relatively limited set of spending dollar amount of new spending proposed. We see there's about $570 million in new discretionary General Fund spending. This would subside to about $300 million on an ongoing basis. And it's a range of smaller items the context of the budget.

But for example it includes like $60 million in additional Cal Competes Grants. And then there's some tax expenditure proposals including those for the expanded film tax credit and to exempt some retired military personnel income from taxation.

The Discretionary Reserve balance that the Governor proposes would be a bit higher than in preference prior years at $4.5 billion as Ms. Li said. I was just going to quickly mention, on this page, also the Prop 98 budget, it's up the minimum guarantee under the constitution is up by about $7.1 billion due to the higher revenues.

And accordingly there's a provision for about $1.5 billion in the Prop 98 Reserve associated with that higher guarantee and revenue level. The proposed budget would spend about $2 billion of ongoing to Fund one time activities which creates a cushion in the event that the guarantee winds up being lower due to lower revenues.

That provides somewhat of a cushion for ongoing programs. And then there's some other, it funds a COLA of 2.43% and includes funding for the completion of the transitional kindergarten initiative that was begun a few years ago. Moving to page five. This just shows the budget condition under the governor's proposals, taking all of them into account.

At the end of the budget year the state would still have $15.4 billion in general-purpose reserves. And then in addition not shown here, but we do note the $1.5 billion in the Prop 98 Reserve, which is available for schools and community colleges.

Finally, I'll just close with a couple of comments on our assessment of the proposal, which we have some bullet points listed. I will not address all of these in the interest of time, but just to note a couple of them. First of all, the administration's revenues are increased by 16 billion through the budget year.

Our increase back in November was $7 billion. So there's our $9 billion higher, but we think it's a reasonable revenue estimate. There were better than expected collections in the months since our November outlook.

But we would really caution that much of the gains here are being fueled by the stock market and valuations, particularly in the high tech firms. And there's just inherent volatility associated with that. In our judgment, the actual the broader economy is still rather lackluster. We're seeing weaker trends in consumer and job growth outside of government and healthcare.

And so we would suggest to not put too much stock in these revenues until we see some of the improvement in the broader economy. Also, you know, we do think that the state does face additional cost pressures that are not reflected in this proposal, including those for the wildfires, of course, which came after the proposal was developed.

And then that settle up obligation that I mentioned would be $1.6 billion that if the revenues meet or exceed the governor's assumption would have to be funded here in the future.

The other one really important message our office would have is that, we do think that the Legislature should maintain the momentum that it created in addressing those deficits from last June because of the continue that momentum into the future out years that I was talking about a couple of minutes ago. And it's, the key thing here is that the state has, many times, we've projected that there would be deficits in the out years as has the Administration.

So that part is not new. What is new is that we think it could be more challenging, this time around, than in prior cycles. The reason is, there are three reasons, really. The first is that revenues have not come caught up to expenditures even in the current year.

And so there's still a gap, and that's why we're still relying on the Reserve withdrawal and those type of actions. Secondly, and really importantly, when we look ahead in our forecast, expenditures are growing at a faster rate than revenues. And that's somewhat different than we've seen in the past. And so that represents sort of a structural challenge.

And it means that the the deficits that we're showing probably won't be solved on the natural, if you will.

And then, third, when we look back in June, many of the actions that were taken to solve the deficits that were estimated at that time were, one time in nature using reserves, temporarily increasing the corporation tax and then pulling back some of that temporary spending that was allocated over several years when the state had large surpluses.

So we've taken those actions, meaning that the choices before us now start to become more difficult and could require changes to programs.

And that is why the other bullet point I wanted to mention here, one of our recommendations is to use this time now to undertake program review and ensure that the various initiatives that the state is doing align with the Legislature's priorities. And, you know, just that will be important if we have to prioritize.

You know, you want to make sure that the programs that are of highest priority to the Legislature are those that are protected and adjustments made elsewhere. And then on the Governor's Reserve proposal, we think there's a lot of merit to what those enhancements that are proposed in the budget include.

The one thing we would note is that increasing the cap or exclud, excluding the deposits from the state appropriations limit would allow for more a larger balance in the Reserve, but it doesn't do anything to actually create it.

And so we would suggest that you also take a look at the formulas of how much revenue actually is set aside, if you really wanted to increase those balances. Because our analysis looking over time is that under the current formulas, it's unclear if we would ever actually reach those new thresholds that are included in the proposal.

So I'll stop there. And thank you.

Thank you to both of you. Before we go to questions for Members, which we'll start with Senator Laird in a moment, I just want to ask you to comment generally on the federal uncertainty that we face. And we know that it's we don't know exactly what's going to happen. We know what we know what Project 2025 says.

We know about some of the items and some of the Executive orders, including the rescinded one. But there are a few areas I'd like you to I'm going to list out. If you could just give me an overview about, like, what you think. So, first, we know that there could be impacts on Medi-Cal.

We know that, that President Trump and his Administration and Republicans in Congress are targeting Medicaid throughout the country. They are looking to scale back Medicaid, blow a hole in it, which would throw millions and potentially tens of millions of Americans off of health care.

And we know that 40% of Californians, in both red and blue districts, are on Medi-Cal. And so I would like your sense of what some of the impacts could be on Medi-Cal if President Trump is successful in blowing a hole in Medi-Cal and dramatically scaling it back.

Second, if we see mass deportation or even just the fear of mass deportation, and we know that there will be impacts on the workforce.

And so how do you see that playing out in the budget if all of a sudden farm workers aren't going to work or janitors aren't going to work and so forth, then we also know there's a threat of eliminating matching funds for infrastructure projects.

We know that under President Biden, we had, frankly, partially bipartisan work to dramatically expand federal investment in infrastructure, and it's often as matching funds. And President Trump has indicated a desire to get rid of that infrastructure investment. So want to know what the impacts could be there?

And then finally, President Trump has talked extensively about putting large tariffs on trading partners, including Mexico, China and Canada. I'll put aside the use of tariff threats, like with Colombia, some of our major trading partners, Mexico, China and Canada, talking about tariffs on pharmaceuticals, on semiconductor chips, on steel, on raw materials.

If those tariffs are enacted, what will those impacts be on our budget if it, for example, if it collapses the construction industry or has impacts on the tech sector? So I know that's a lot, and I know there are enormous uncertainties. And I know this Administration has been like a fire hose.

And we don't always know what they're going to do, and we don't know what Congress will do because the President doesn't have the power that he thinks he has to just sort of issue edicts.

But if you could give me a sense for what, how the Administration is thinking about this and how the LAO is thinking about it.

Yeah, those are weighty questions. I think I would say, generally speaking, that I wrote down the four issues that you mentioned, and each of them could have significant impacts on the state budget as well as on local jurisdictions because the money flows through the state, sometimes down to locals and sometimes directly to locals.

And we heard from many of them over the period of this week, in regards to Medi-Cal, we received billions of dollars from the Federal Government and billions and billions of dollars. I think our spend is between $11 to $15 billion a month on Medi-Cal. And so a large portion of that is Federal Government portion 60%.

So, imagine we're reductions in Medi-Cal support from the Federal Government that could easily blow a hole in the budget. Deportation would absolutely impact our workforce. And so there would be some, there would be contraction in the workforce that would impact the economy, local economy and state's economy. In regards to infrastructure.

Obviously those IIJA and and IRA dollars are gone. Many of those projects would have to stop. A lot of state and local funding by itself can't backfill. And then of course on tariffs even, you know, we cite in our A pages, in our budget summary, that even domestic businesses sometimes have to purchase things that are imported.

And those costs, if those costs go up, they couldn't bear those costs. Those costs would be shared with consumers and prices could go up. So not only would our budget be impacted, but personal, the cost for personal individuals as well as families could potentially go up as well. So these are things we are talking about.

We understand they have significant impacts again on state budgets, local budgets, personal family spend. And it's important that we maintain conversations with the federal Administration and to the extent that we can work with them, because there's no way that the state can backfill these lost billions and billions of federal dollars.

And so I don't have any numbers per se, but there is. We receive over 100 billion just the state alone from the Federal Government in a fiscal year.

So we could be in a situation, if Trump and Republican leadership and Congress follow through on their threats to slash infrastructure and Medicaid and to Deport a lot of the, a significant chunk of the workforce and to put big tariffs on our trading partners, we could see a big potential reduction in public services, not just in California, but other states.

In addition to these moves fueling inflation and increasing the cost of living for people.

That is correct.

Okay, thank you, Mr. Petek.

Thank you. Well, I think that Ms. Li's description was very, very good. So, you know, I will say there's so much uncertainty around what's been coming out.

And the recent memo from OMB, I will tell you that we are following these developments very closely, but a couple of ways that we're thinking about it. One is to distinguish, in our minds, the difference between administrative actions and those that would require statutory change by Congress.

And so that's a framework that we're trying to think about as far as looking at some of these proposals or orders that come out.

Another consideration when you mentioned the farm workers, is the potential chill factor that it could have on people pursuing or enrolling in some of the states programs that are intended to provide assistance to them. And so that's a consideration to be aware of.

And then when it comes to things like the tariffs, most economists do say that it could lead to higher inflation. And so the risk of inflation, which is already mentioned is kind of ticking up again, does introduce the possibility of market volatility.

And of course, as both of us have said that the state's tax revenues are linked to stock market. And so, you know, to the extent there is volatility in the, in the markets, that could have adverse impacts on our revenue trends. So those are some immediate thoughts.

I will tell you we are trying to track this as closely as possible, but we're also trying to be careful not to speculate too much without having substantive proposals to go by.

Yeah, without speculating. Just preparing. Okay, thank you very much. We'll now go to Senator Laird followed by Senator Blakespear.

Thank you very much, Mr. Chair. I have two questions on education. And the first one. Let's start with the Finance Department. The Proposition 98 guarantee appears to be under appropriated by $1.6 billion. Why is that? Why didn't you just do what the full appropriation would be in the, in the Jan.10 budget? Somebody's walking up.

I'll start and then I'll hand it over for any further details from my colleagues. But the current year guarantee would be $119.2 billion. As calculated, we are proposing a level of funding of about $1.6 billion less.

And I'll note that last year at this time we were dealing with a big change in revenues and in regards to how much Prop 98 would receive. And we didn't have the flexibility to make changes at that point.

So even though the revenues had gone down, we had provided an additional over $8 billion to schools and didn't have the flexibility to make any changes. What we're trying to do is safeguard that from happening and mitigate the risk of those revenue changes. And we are not proposing to underfund the Prop 98 guarantee.

What we are proposing is to wait and see what the revenues actually become later in this year and at the time of certification, we will either pay the remainder or have a certification or create a statutory allowable schedule for payment.

Thank you. Let me try to understand that because I think actually those situations are slightly different. The $8 billion underfunding was due to the fact that we had that delayed tax and it was sort of discovered or determined outside the budget year. And there was a big debate and a settlement last year.

This just seems to me to be the current year. And we know what we know. And maybe I'm wrong. I'm not understanding the risk of sort of budgeting it where it is now.

Do you believe the risk is, is that the revenues come in lower by May and somehow we're obligated to what we said in January, if we budget exactly where the revenues show us now.

I've mentioned a couple times about the volatility of our revenues, and I think that that is driving this proposal. And we do want to wait.

And I'm not arguing with the volatility of the proposals. Obviously that was debt demonstrated by the past. But it seems like we're having a discussion about one budget year way before the year starts and that you do your best effort of where it is in the moment.

And in the moment it appears to be 1.6 billion higher than than was in the January 10 budget. The minimum guarantee.

Yes. And by May revision, it will be different again.

Everything, everything will be different. The universe will be different. We will know the answer to all of Senator Weiner's questions by then. But it's like the universe is where it is now and we're not budgeting where it is now. Okay, point made. I have a feeling we would just continue to go round and round.

No question.

So let's just acknowledge the point is made. The other question I have is about the University of California and the California State University system. And the budget proposes, and I know it was proposed last year and we rescued the universe last year by taking out the cut and doing the compact in the budget in June.

But here we are with a proposal that would basically be a 7.95 or something percent reduction for the University of California and CSU. And if you add in the fact that they have labor contracts and there's inflation, that cut has to be over 10% and won't speculate. But even more, how is it reasonable to assume?

You see, because our big concern is enrollment. What we talk about all time is enrollment at higher education. This will just completely ditch any higher enrollment and may well lead for cuts. I'm just trying to understand why this is a reasonable proposal.

Sure. Understand where that question is coming from. And the Administration is completely open to discussions in regards to the funding proposal for both the UC and the CSU.

I guess I'm open to discussing it too, but it would have been really nice if you'd started without a massive reduction as a way to set the table, because I'm not sure that's the way to do it. And we're seeing that Sonoma State just in the last few days has made these just significant reductions.

And if this were to hold, that is the first of what we will see at every Cal State University campus across. And they already have, are behind in salaries, have extensive deferred maintenance, and are trying to respond to us in having additional enrollment.

And so it just seems unreasonable and an unreasonable starting point because when you talk about having some kind of extra money at the end of this, which was in the opening presentation, it makes no sense not to have at least fully funded.

And I think the other piece of this that we haven't mentioned is that there's a deferral of the compact to next year. It is 5%, and we defer it. We say there will be a 5% increase next year, and then the 5% increase that's supposed to happen next year in.

In the compact is now deferred to the year after. And we can't commit, nor can the Governor, future budgets.

And so we're saying take a 7.95 or whatever it is percent cut this year and bet on the hope that there'll be a 5% increase next year and the universities could theoretically bond against it and then find out we don't give it to them next year.

So, it just, appreciate that you're open to discussion, and I would actually fault you if you weren't with such a proposal like that. So we. I think we have to completely reverse it. And that is what my goal as chair of the Education Budget Subcommittee would be over the next five months. Thank you, Mr. Chair.

Thank you, Senator Laird. Next, Senator Blakespear.

Yes, thank you. Well, thank you for being here today. And I want to also thank our budget chair for the introduction. It's really important that we are framing this first budget hearing in the terms of the tremendous uncertainty we face.

And I think that, to use that vernacular that has been used today, that we would be blowing a hole in potentially the major budgets for what we do in the State of California. Schools, infrastructure, medical care. And I think our budget chair summarized it as a big reduction in public services.

So, recognizing that that might be something that we're facing if the Federal Government follows through on its many threats, that is very scary and very worrying. And I recognize and hope that you are doing alternative budgeting to try to figure out what things can be preserved and what it would mean.

We know that even as the fifth largest economy, we can't backfill the Federal Government's tremendous amounts of money that come back to California that taxpayers have paid to the Federal Government. So I also want to recognize that it actually is our money that we sent to the Federal Government that they are sending back to us.

So all of that being said, it sounds like there's not any additional analysis or information you wanted to provide to us, because our budget chair asked that question, and I heard you basically essentially repeat the question and state that there are these very worrying things.

But I just want to give you the opportunity to say, is there anything else that's being planned that you could share with the Legislature about some of these potential eventualities?

So after the OMB memo came out this week, we did have to do some run some drills to look at the potential impacts to our programs. Should federal funding be withheld, even temporarily, something that we, you know, had been considering prior to that, but became more real this week.

I would say that I and I just would reiterate what you said. We can't backfill the Federal Government as a state even with the fifth largest economy. So we have to look at our programs, as you mentioned, and prioritize.

And obviously we would have to work with the Legislature to potentially make some hard decisions in regards to reductions of services and or other programs.

And that at this point is the extent to what we have been doing is to look at the impacts based on the EOs that have been issued, some of the messaging and risks that are coming that we're hearing coming out from D.C. obviously, as Mr. Pettic said, we don't want to move until there are things that are certain.

And obviously we had a special session last week that helps position the state to litigate should we need to. And I think that was something in response to federal overreach, impacts to California laws, impacts to Californians rights.

That is one of the things that obviously we discussed last week and something that we would have to consider going forward depending on what comes out of this federal Administration.

Okay, thank you. So all that being said, I recognize that we're essentially setting that aside as potential futures that could be quite different from what we're talking about. But we do have the Governor's Budget that was introduced.

And so I have a couple questions I just wanted to ask going back to that framing of what we're currently facing. So one of the things that I was very excited to see was the creation of a housing and homelessness agency and a separate consumer protection agency.

And both of those being the children that come from the business, consumer services and housing agency, right now they're all together under one. So I do see that homelessness is one of our biggest problems that we are not making a meaningful dent in.

And I don't see anything on the horizon that's proposed that would actually reduce the trends of rising homelessness every month in the State of California, which is something that I think needs urgent attention. And I noticed that the Governor,the budget is not envisioning any cuts or additions to the budget in this area.

And also I'll note, unfortunately, the budget does not propose to include any money for HAP, which is really important for our cities to be able to manage the homelessness crisis that's on the streets of our cities. So I wanted to just ask about that.

What is the vision for what the Housing and Homelessness Agency is or does, how it's structured, what will it do? And do you anticipate having to ask for additional money or cuts in the future?

Sure. The one thing I'll point out is that that reorganization of the current agency that has both the housing homelessness as well as consumer services will be going through the Little Hoover process, so not through the budget process. And the Administration is working on a plan to provide to the Little Hoover Commission this spring.

So we don't have that plan yet, but it will include the division of those housing homelessness commitments, obligations, responsibilities into a single agency so that we can better focus on on those issues as well as create more accountability. Billions of dollars have been allocated and spent at the local level to address the homelessness issue.

And so this Governor has said, and I believe this body would also want to see more oversight of those funds and outcome measures. On the business services side, that is going to be a separate entity as well. And again, also through the Little Hoover process. So that is happening this spring.

There's a timeline involved with that process, but that is sort of the structural framework of the reorganization of that existing agency. And you're correct, there's no additional dollars for homelessness. I would point out that we have not proposed any cuts, which is saying something considering the last two budgets.

And so I just want to highlight the importance of this. It's still a priority for this Administration. There are additional funds that have come through Proposition 1 and on the health and human services side to address some of the overall homelessness issues that the state faces and that locals face.

But we will continue to work with the Legislature in regard to your priorities this spring over and above what is included in this current proposal.

And I recognize somebody new joined. Did you want to add anything about this?

No.

Okay. Okay. So I appreciate that information and I look forward to more information about that. And I just want to say, again, I am glad to see that. I think we need better accountability, better oversight, and also a clear person in charge and a single focus on this top problem in the state. So thank you for that.

I just have two other questions. So the administration's budget proposes moving $273 million of climate programs that were in the General Fund over to the Prop 4 climate bond. And to me, it's worth noting that funding the General Fund through a bond process is much more expensive.

And I don't think is in line with what the voters were voting for. I think they think that they are voting for a bond that will pay for new projects and new investments.

So I wanted to just understand, I know we're in an extraordinary time, et cetera, et cetera, but do we, do you expect or does the Administration expect to continue to off to shift things that are in the General Fund over to this climate bond as part of the proposal or is this seen as a one off?

And can you add any more context to that?

Sure. I'll go a little bit back in time when there was no General Fund in this policy space. And then in 2021-2022 when we had expectations of a lot of General Fund coming in, we did build billions of dollars of General Fund allocated to climate related programs.

And so the opportunity now to shift some of those back to bond funds was something that obviously you see that proposal in this Governor's Budget, which is going back a little bit to the way it used to be, where there were bond funds that funded these programs versus General funds. I think you're seeing some of that happen.

I don't know if my colleague has anything else to add.

Lizzie Urie, Department of Finance. I would just note that given the multi year nature of our previous climate investments, we have largely wound those down as we've come to the end of those multi year investments.

So I wouldn't want to say that this is more of a trend given that we have largely come to the end of those General Fund packages. And as Ms. Li stated, we're really excited about the opportunity for this climate bond to provide an infusion of funding into the natural resources area again.

Okay. Okay. Thank you. And then my final point before I yield the floor back to my colleagues in the chair is I think it is very important that we continue to maintain a focus and improve our focus on doing the core things that government is supposed to be doing.

One of them, I believe, is to keep our roadways in good repair and clean and free of graffiti and free of homeless encampments. So the Clean California initiative, there's still 25 million left in the budget from the initial funding four years ago.

And I am wondering if there is an effort by the Administration to reauthorize this program or to increase Caltrans' budget in such a way that we're able to continue to maintain a commitment to keep our freeways clean and to get them cleaner.

Because I do think people perceive our state when they're driving on the freeways by what they see. So when we have trash filled on and off ramps and homeless encampments and things. It's really. It's just not, I think what we want our state to be. So remaining committed to that is really important.

Yes. We have had over $1.0 billion invested in the Clean California initiative and another 25 million now being proposed. There's no. Outside of those dollars. There's no additional dollars specifically for this program. But I'll turn to my colleague to see if there's any additional information.

Sure. I would just like to point out that Caltrans has an existing litter cleanup budget in tens of millions, and that is in addition to the 25 million local grant program that is proposed in the budget.

Okay. Yeah. I mean, I hope that we're not going to have this expire and then tell Caltrans to cut 15% of their maintenance workers or something, because to me, it seems like we should remain committed to what we have here. So I'll just leave that as a comment. Thank you very much. And thank you, Chair.

Thank you very much, Senator Blakespear. Okay, next, Senator Richardson, followed by Senator Searto, Senator Durazo.

Thank you, Mr. Chair. Interesting that Senator Blakespear from the cities of somewhere up north. I know I'm supposed to say the cities. Not in Committee. Zero, good. Not in Committee. There we go. All right. Interesting. The last comments by the Senator. That's an inside joke because that's actually my first question.

I'm the Subcommitee chair of sub 5, which includes transportation. And one of my questions was Clean California. How does this apply to Caltrans? And if, as the Governor asked for more accountability regarding the housing funds, it might be helpful not. It might be. It would be helpful for us to.

To receive some accountability and reference to where these highways are being cleaned. Because I can tell you in the Los Angeles County area, it's filthy. And a lot of homelessness is also gathering in these areas. So I would concur with my colleague that these funds need to be continued, that this should be hopefully identified as a priority.

And if the Administration could provide us with more information of what is Caltrans, in addition to their allocated funds, which the gentleman mentioned, how will these funds be used? Who identifies the areas? How often are they done?

A little more accountability and information would be helpful because it has become and I think has continued to be a significant problem.

And we can get that information to you from Caltrans.

Okay. And noted that this is a continued concern that we'd like to see as a priority given the two Senators, comments? Yes, thank you. All right, my second question falls Under K through 12. I'm sorry? No, it doesn't. It's under again. California Department of Corrections and Rehabilitation, which is an area that I work in.

In the budget it says that in 2025 and 26 it is still projected to decline. You're projecting that the incarcerated individuals would decline in the long term. I'm curious how that statement is made in light of Prop 36 and how we anticipate more individuals might be incarcerated.

So I'm curious how the Administration would have an assumption of a decline when on the flip side where everyone says we're anticipating an increase. Good morning.

Good morning. Justin Adelman, Department of Finance. We are anticipating an increase due to Prop 36. However, it is a very preliminary estimate of about 3,300 increased population in budget year and ongoing. We do do population adjustments twice year yearly though. So we will be monitoring the overall prison population going forward.

But right now, again, it's kind of an ongoing increase that levels out and plateaus, but the overall trend is still a downward decline in population.

Yes.

Drew Soderborg, Legislative Analyst Office I would only add that the Department of Finance estimate of the impact on CDCR of Prop 36 is consistent with what we thought the impact could be. At this point, we're still reviewing the details of the projection to assess how likely they are.

One thing we would note is that their projection does suggest that the impact will occur relatively rapidly. We're still trying to understand what's driving that, but in the out years it is within the range of what we estimated would be the impact when we put together the Voter Information Guide.

So it's my understanding that we're going to be having a follow up meeting. But as I've been told, the impacts of Prop 47, those funds may ultimately go down, which are the programs to help people to avoid incarceration and get other maybe more relevant treatment.

And then we have on the flip side, Prop 36 that potentially is going to increase people. That means you would have to have a pretty big delta of how you project a people of your declining number.

So I look forward to maybe a little more fine tuning as you're getting a grip on these impacts of not only Prop 36 but also Prop 47 as well, so that we can really in fact project that in 25 -26 we're going to see a decline and also through 27 to 28. Okay, thank you.

All right, my next question has to to do with housing and homelessness. According to the proposed budget, it includes 100 million, a one time allocation for Encampment Resolution Fund. And I wanted to clarify, does the Administration include that encampments would include RVs in addition to physical individual encampments?

Hi, good morning. Teresa Calvert, Department of Finance that is, the 100 million you're referring to is a continuation from previously committed funds. And so it's planned for expenditure. As far as the detail of what types of entities are covered.

We'll have to get back to you after working with the agency a bit more to see if RVs are included in that.

Okay. I would like to share that in my district again in Los Angeles County, and I'm understanding it's happening more in Sacramento and other communities as well. RV encampments are becoming the next thing of temporary housing for individuals. And so we desperately need to be able to use this funding for RV encampments.

Many of the RVs are inoperable. You have people coming out and taking their showers, you know, on the sidewalks, kids can't walk to school. So some of the same issues we have with traditional homeless encampments, we're seeing the same with RV encampments. Okay, thank you.

My next questions have to do with the Wildfire and Forest Resilience package specifically related to the community hardening through staff and everyone working real hard. I've been told that actually These funds, the 74 million, has traditionally through applications only been eligible to Lake County, San Diego County, Shasta County and Sisiqu County.

And so my question is, number one, is my understanding correct? And number two, is there a reason why other counties haven't been included? Do you anticipate the Administration would have issues with maybe extending this broader, maybe not county specific, but due to acreage and vegetation and other issues?

Because certainly with what we experienced in Pasadena and in Palisades just in the last few weeks, LA County is desperately going to need to be on this list. And I think many communities a real different look at community hardening.

Stephen Benson, Department of Finance so this program is a pilot program that's been going for about three years now, and it relies heavily on participation through the Hazard Mitigation Grant program that's run through FEMA. And so part of the construct is based around that project application on the federal side.

And so it is true that we have been doing it on sort of a county by county basis, because that's sort of the organization behind the Hazard Mitigation Grant programs is it's sort of administered on a county by county basis as we try to leverage the federal dollars to make the state dollars go further.

So so far the counties you listed are the ones that have been involved in sort of this pilot program getting it started. Those counties were identified based on risk. So as they look at the high fire severity zones and things like that, they, they've gone through risk assessments.

And then OES and CAL FIRE, who jointly created a JPA through the legislation to set it up, is sort of administering the program. And so they evaluate risk levels and which communities to work with. And of course the communities have to be interested in doing it.

And so there's absolutely an effort underway to expand it to other counties. Shasta County is one that's sort of in line to be done next. One of the biggest, again, hurdles going back to how the program is set up is that it relies on the federal hazard mitigation grant program.

And so you don't always know how much funding is going to be available through that program. Very far out. And then there's a process where you have to create project applications for each of them that then go through the federal approval process. So, and that can take some time to get done.

So absolutely, there's an interest in sort of expanding it to other parts of the state. It is still a pilot program.

And so there's some, they're working out some of the kinks in terms of the timeline and working with the Federal Government, but hoping to be able to move some of the projects forward a little more quickly than were initially done in the first couple of years.

So according to the data I have, Shasta County is already included. So if you could share with this body what steps we would need to take to include LA County, since LA County represents, I don't know the specific number, but I would think close to 50% of the population.

So I think unfortunately through what has happened there is a greater awareness that maybe some non traditional communities. Just because LA County might be perceived to be dense does not mean it has some very risk prone communities.

Sure, there absolutely are some very risk prone areas in all parts of the state. And so, yeah, we can follow up with CAL FIRE and Cal OES to examine sort of how they're going about identifying which areas to go into next.

It's my understanding in order to get these funds you have to apply by application. And the only communities that can apply by application are the four counties that I mentioned. So what would have to happen would be a change in including additional counties for them to be considered.

Sure, yeah. As I mentioned, it was started as A pilot program. So it wasn't launched statewide as you tried to get it set up and run and how the coordination worked. The Federal Government, I think there was an attempt early on to focus.

So absolutely can talk with CAL FIRE and Cal OEs in terms of plans for expanding that and completely agree it is an application process how the local communities express their interest in participating. But we'll follow up and get back to you on the expansion of that.

And then I understand there's a second funding source in the budget, 13 million for home hardening from the General Fund to the climate bond. Can you tell me how these funds would be different from the pilot program?

So actually those are the funds that are going into the pilot program. So that same program had a couple of different Fund sources. There was some initial General Fund provided in, I think it was the 22 budget.

And then through part of the climate packages that we did, we had included this program that got some one time appropriations. And so all of those different appropriations are going into the same program, I guess is the short answer to that.

Okay, lastly, if you could provide us follow up information because I know other Members have questions as well. There's a landscaping fund under the Wildfire and Forest resilience package. There's 1 billion allocated for resources, resilient forests and landscapes. Could we maybe get a further definition of what's included in landscapes ? Then you have sea level rise adaption projects.

Under this program, the Administration is proposing 261 million for sea level rise adaptation projects. Where are those? If you could provide us more detailed information. And then under SB, SB1 implementation, the Coastal Resilience Package, the Administration is proposing 77 million for SB1 implementation. Can you elaborate on this funding and the projects associated with it?

So the reference to the landscape in the Wildfire Package is talking about sort of the magnitude of the area coverage. So it's landscape level projects.

So if you think about a lot of the, the smaller forest health projects and things they do that may be in the 10-20 maybe 100 acre type of thing, when they focus on landscape level, they're talking about sort of watersheds where they may be looking at like 50,000 acre areas where they're planning sort of these big regional projects.

And so that's really what it's referring to when it talks about the landscape level projects there. In terms of the sea level rise. I would defer to one of my colleagues that has a bit more detail probably on what those sea level prize projects are that we specifically have been funding through the Climate Package.

Thank you with that. Thank you for it can be followed up to the Committee. Yeah. Thank you for your time. I know this is takes a lot of work leading up to this and you just finished one and then you're starting the next.

So thank you for all your time and efforts and look forward to working with you.

Thank you, Senator Seyarto, followed by Senator Durazo.

Thank you very much. And I have four points I'm going to talk about really quickly. Back to Medi Cal. How much does Medicaid federal reimburse Medi Cal, our program, for our undocumented worker Medi Cal for All program because that comes in at about $8 billion.

Does the Federal Government have a reimbursement policy for that or do they not reimburse if we do not have citizenship.

That is fully generally funded. So that $8 billion is General Fund, not federal Fund.

So in other words, they don't reimburse us anything for our for that program. So that $8 billion is entirely on the taxpayers of California.

Laura Ayala, Department of Finance. To clarify, the 8 billion is the portion of the General Fund, but the Federal Government does reimburse provide federal funding for individuals with unsatisfactory immigration status for emergency and pregnancy related services.

Right, yeah, I understand that part of it. But for the most part the program is not reimbursed by Medicaid. So if we were depending on the Federal Government to step up to pay for that, they haven't in the past either that's current Administration or the past administration's policy that was carried on from other policies, other administrations as well.

So. So and that has increased by how much this year? Because we're going from $35 billion total spending in Medi Cal to $43 billion. And part of it is 525. I understand that. But this part here, what is the increase for our program, our MediCal for All Program for our undocumented citizens?

Laura Ayala again, the increase for a General Fund for individuals with unsatisfactory immigration status in 24/25 compared to the 24 budget act is approximately 2.5 billion.

Okay, thank you very much. So are we hoping for increased Federal reimbursement for SB525 funding, which comes in at about $6 billion, I understand. Is that correct? Is that like we're just we're wishing and hoping that they will reimburse us for that also?

On 525, I would say that the last time we spoke of 525 and potential cost impacts was prior to Learning of an infusion of about $9 billion for hospital direct payments. And so those payments have been factored into the actuarial evaluations that have come out with our managed care rates.

And so that's been, that has been mixed in with that. And Those are the 9 billion is from the Federal Government and again is part of our new managed care rate.

So we use that to cover the cost for this new managed care rate?

They're directed payments to hospitals and so hospitals could otherwise have increased costs, so yes.

Okay, so we have, we have, we've created another program that is very costly and we would like somebody else, the Federal Government, to send some of our taxpayer dollars back to pay for it is kind of how I characterize our 525 spending. I want to move on because I don't have that much time.

Our revenue streams depend a lot on sales tax. Correct. And income tax. So are we anticipating large sales tax collection increases in the next year or two?

Our revenues are largely reliant on income tax and corporate tax and some on sales tax. As I mentioned at the top of today's hearing, we have a projection of about 16.5 billion additional revenue in the budget window compared to the 24 Budget Act.

I think we have forecast in the out years more slow and steady revenue increases, not any of the big jumps that we saw in the past. We are not modeling a recession. But again, as I stated earlier, there are a lot of risks that we are that are on the horizon.

I mean rephrase my question. Is sales tax going up or down collection wise?

I will defer to my colleagues.

That kind of gives you an indication whether people are spending money out there.

Colby White Department of Finance so the sales tax forecast was upgraded slightly at the, at the most recent forecast. The growth, the year over year growth in sales tax has been relatively flat in recent quarters and we do expect it to pick up. One thing when you're considering using that as a barometer for the overall economy.

Our sales tax base is on tangible goods. So it's and we don't tax services. We don't tax many, many consumption items that comprise the economy. So as Ms. Li mentioned, the broader economy is still is growing and we have slow and steady growth forecasted in, in our forecast.

Yeah. What percentage sales tax growth are we looking at.

For which time period?

The year over year growth?

What are we forecasting for the next budget cycle? When you, when you have a category. So sales tax, this is what we think we're going to get. Where are we at?

Just what are we forecasting for the next budget cycle?

Yeah, just 1 second, I'll look it up.

In the meanwhile, how about our income tax? We're expecting higher collections from income tax, but how much is that outside of our capital gains that we're getting a lot of because the stock market has gone up? If we took away capital gains, would we be expecting more income tax?

In other words, are more people working and are more people paying into the system?

So job growth is increasing, more people are paying into the system. With regard to capital gains, it is highly volatile from year to year. And so what it comprises of total receipts varies significantly. So for example, in 2021 it comprised, on a tax weighted basis, it comprised roughly one quarter of total personal income tax receipts.

And that number in 2022, when the stock market declined, we had a decline in revenues was significantly lower percentage. So, yeah, okay.

No new funding for Prop 36. We have very little funding for the prison side of it. But for the treatment side and our court side, we don't seem to be funding Prop 36 very well. While we are funding Prop 1 that barely passed Prop 36 passed with the 70% in every county. Where's the funding for that?

Because we need to implement that. And whether it's 200 million or 300 million, there should be money in there for people to implement that, including our courts and including the treatment. Because the treatment part of it will probably allay some of the issues with needing to do Prop 1 as well.

Yes. And as was stated earlier, we have estimates of the population, the incarcerated population, growing to about 3,300 in budget year and then up to 3,600 in the following years thereafter.

That number with the overall decline in population and the resources behind Prop 36, essentially the Department is absorbing those costs of those additional inmates and the program resources that are available will be addressing the same programs for these incarcerated individuals.

So I would expect that when we have a mandate from our citizens in the form of a Prop 36 at 70% that we would be funding everything we need to implement it. And I don't know that that is in here. The last couple of things, fire prevention needs versus our spending priorities.

I think people have a heightened sense that we need to spend more. I agree with my. The good Senator from LA who is talking about, you know, increasing our attention to these fire prevention issues that have been longstanding standing in the state. And now we're seeing we're paying the price for that.

And then the last thing I wanted to say is that again, for the third year in a row, we are not paying down our unemployment debt and we are paying about a $636 million interest payment.

But worse than that, the, the growing amount of cost to repay that the principal is being absorbed into by our businesses that are rapidly being priced right out of our state. And that's a concern to me because that goes right back to what our budget forecasts are for increased revenue.

So I wish I could stay longer if I don't get going now. You don't have to answer on the last two questions. More of a comment.

Right. Thank you. Thank you.

Okay. I do want to say that on the sales tax, we do have growth of 2.3% and then followed by 3% in the current year and budget year.

Thank you. Senator Durazo.

I understand that undocumented contribute about $8.5 billion in taxes to the state and to the local. So I think we owe them maybe $6 billion. Keep that in mind. A couple of questions. One is on. I want to go back and reinforce the comments about the AHAPP and very concerned about the.

I understand there's no cuts and no additions, but the real question is how much money is left in there. If we don't refill the amount that was put in last year, then we're basically cutting because they can't, you know, the cities can't come up with the funding. So what was the rationale?

I'm concerned that we're starting out with zero or, I don't know, whatever amount of money is left in there, we're starting with that for this year. And that sends the message that somehow we're not, we don't have to be concerned about housing or homelessness if we don't put the replace the $1.0 billion that was put in.

So can you comment on that? We're really concerned in Los Angeles and I think in most cities across the state that money was not replenished.

Yes. I just wanted to point out to the billions of dollars that we have allocated to locals over the past, I believe that there is a sizable amount of the last HAPP Round six that is still available for allocating. And I'll turn to my colleague for the exact number on that.

One thing is the HAPP funding that was allocated last year still has yet to be awarded. My understanding is the Department of Housing and Community Development is still in the process of awarding funding from the 2023-24 budget. So even the recently funded HAPP allocations have not yet been awarded. From the most recent $1.0 billion from the prior budget.

From the most recent $1.0 billion from the prior budget.

Okay, but you don't know how much is left from that $1.0 billion?

Well, from the 2024/25 HAPP funding, the most recent award, none of it has been awarded yet. The Department is still in the process of awarding the 2023/24. So a prior year's. How much of that prior years is still outstanding?

I'd have to get back to you, but the billion that was most recently awarded or allocated has not been awarded yet.

But is that funding that the cities are counting on?

Right. That has been the $1.0 billion was appropriated, just not yet awarded.

Okay. Okay. We'd like to keep doing that. That's a big priority for us in Los Angeles and other parts of the state. Question on the TK penalties. This is having a big impact on Los Angeles and I'm sure other areas. We've been given the option to enroll our four year old children in these. In these programs.

I'm concerned that the penalties assessed in prior years are so stringent for schools that exceeded the class size or ratios for reasons beyond their control. So how do you plan to address the issue of the penalties to make them more fair and limit them to schools that were out of compliance?

So I believe you're asking about the penalties. Yes. In relation to TK? Yes. Okay.

Because there were new. There were new stricter requirements and penalties attached to those requirements.

Sorry. Brittany Thompson, Department of Finance. What's your specific question? If. If you don't mind repeating it? Yeah.

How do you plan to address the issue of the penalties to make them more fair and limit them to the specific schools that were found out of compliance? The way that the rules are being applied makes it very unfair in terms of the penalties that end up being given. And also, can we do can we resolve this retroactively?

Can we resolve this retroactively?

We don't currently have any proposals that will alter the TK penalties at this moment.

I know you may not have proposals. I'm asking how would you. I need you to look at how those penalties are being assessed. And it looks like they're very unfair. Yeah. Very disproportionate. And so anyway, the way that they're calculated, it's very disproportionate impact on the schools overall.

Yes. And we look forward to having discussions with the Legislature through the spring to discuss those penalties and potential changes.

Okay. Okay. And then finally, I noticed that there's maintaining. On the Middle Mile Broadband initiative, you're maintaining the level of investment on the infrastructure side of it. And I notice that it's infrastructure in the unserved and underserved. But we also have the issue of the cost of Internet to Low income families.

So how are we really addressing Low income families access to Internet for themselves, for their kids going to school?

Hello. Natalie Griswold, Department of Finance. Construction for the Middle-Mile Broadband Network is ongoing, and I understand that costs and, you know, costs for low-income families are part of the considerations in building this network. Currently there are 3,090 miles in the installation phase and an additional 5,028 miles in the pre-construction phase, and we understand that income and the cost of this Internet is part of the considerations in how the network is getting developed currently.

Right. There's about three million people who can't afford the Internet and many of them children, so I greatly appreciate, I greatly appreciate that the infrastructure is being built out, but I also want to see that as it gets built out that people can actually afford the Internet--this will be--that will be provided when the infrastructure is built out and that's not happening right now. So, you know, please take that up. Thank you. That's it. Thank you.

Thank you, Senator Durazo. Next is Senator Cabaldon, followed by Senator Menjivar and Senator Wahab.

Yeah, thank you, Mr. Chairman. At first, just on the question of the Housing and Homeless Agency and consumer protection, just to remind us that it is the Little Hoover Commission process, but it does end here in the Legislature. Once the commission is done with its work, it is fully within the authority of the Legislature to reject the proposal.

So we will be paying attention to it both in the Budget Subcommitee, I know, and the Local Government Housing and Business Professions and Economic Development Committee as well, to make sure that what Senator Blakespear described as the hope has the best possible chance of becoming the reality.

I did want to amplify first the Chair's line of questions around sort of the fundamentals that we're facing and the idea that we--that May Revise will have the answers to some of these issues. I'll note--I don't have a question for him, but Mr. Adelman from the Department of Finance was my--I was his graduate thesis advisor, his award-winning thesis, and one of the things that we emphasize is that in the budget profession, we can overly obsess about the idea that we will achieve certainty.

And often in an environment where we're being flooded with requests for new money, it is a, a useful tool to filter it out, to like make sense of and filter out all the requests. Wait till we know the answers. That makes sense; certainly what we did in City Hall when I was mayor as well.

In this situation though, the uncertainties are not that uncertain in some respects and they are very much overlapping in the ways that the Chair identified, and so we can't--like if someone issues an executive order on Tuesday, rescinds it on Wednesday, we can't put that back into the uncertainty category. We know it's coming.

It's coming in a form that may withstand legal challenges in the way that the Tuesday order didn't, but we cannot simply say, 'well, let's see what happens.' And that's true along all of the, all of the lines that the Chair noted and we won't know. The May Revise will not be a magic date.

I think Ms. Li has emphasized this as well. We won't have all the answers. We won't have the tax revenues in because of the delay from the fire and all the actions that we're expecting on the Trump side. I don't have any ownership of last year's budget deal, but it was a positive step forward, but it's an illusion for 2025.

We don't have a balanced budget even today. So we've got the Prop 98 issue that Senator Laird described, we're pulling money out of the Rainy Day Reserve; even though it was a deal, we're pulling out in a year with so far, all we have is heavy fog when we know that the storms are coming, and we're drawing a significant amount out of that reserve in order to create the illusion that this is a balanced budget. It is technically balanced, but it's balanced by both of these, which are borrowing.

And then it's balanced by sort of ignoring the fact that with DeepSeek and the other changes that are affecting some of the reasons why we have the revenue increases in the first place, that those fundamentals are very much in jeopardy, not just reversing them, but potentially making them even worse than they were before.

And so I certainly don't think we should--everyone in state government--should be staying up all night worrying and speculating, as you said, Mr. Petak, but as our Chair said, you know, I do hope that someone in each agency is preparing for these, for these overlapping issues, because we also face the multiplier effects on these, you know, we've been grappling with the, you know, what are the challenges for Medi-Cal and can we backfill and no, we can't, and what does that mean for Medi-Cal clients?

But also if you are, if you are using, if you depend on the services of a family physician in Dixon or American Canyon, California, and your family physician's payment mix is 60% Medi-Cal, your physician may be out of business tomorrow. Your clinic will be gone. The impacts throughout the--and the sandwich shop, that depends on that clinic, the impacts go far far, far beyond just making sure that we protect the folks who are the subject of the actions, but also beyond the rest of the economy as well.

And those inflation impacts that you have hinted at or you've described with the fire, with the labor costs, with tariffs, and then with all of these corollary impacts, the impact on our revenues from the general economy, not just capital gains, and then the demands on all the services that we're facing, not just by undocumented residents, not just by Medi-Cal users, but that sandwich shop owner that no longer has, you know, is now needing public assistance rather than contributing to the tax rules, what we have to be contemplating is a existential threat to the fundamentals of California's economy and our budget, partly so we're able to protect all of our citizens, but also so that we're still in business to be able to provide those basic services.

And so, again, I don't want to suggest that we walk around hysterical all day, but some, some significant level of ongoing preparation with our eyes wide open and not depending and waiting for certainty to come, I think is absolutely essential in this situation.

Of course, the good news there is that other states, almost all the other states will be in the same position, and so this, most of these attacks are not specifically on California, the threats, and so in addition to working with the White House, our potential to work with other states is also stronger. A couple of specific questions.

So today--Senator Laird raised this--but today, there is a town hall at Sonoma State University for which a larger number of people signed up than the entire enrollment of Sonoma State University and its faculty. The sense of outrage and betrayal is real, and it's severe, and as Senator Laird mentioned, it's only the window on what's coming for the rest of the system.

I do want to emphasize, though, that the Legislature, through these annual discussions with the Governor and the department, has restored many of these cuts in the past that what's happening at Sonoma is in large measure the failure to recruit, to market, to plan, to reorganize those academic programs and then to consult locally.

And so I don't want to create the impression here that the Legislature alone is responsible for rescuing Sonoma State. We have a clear mission to make sure that we don't make the damage worse by making a 10% real cut, for sure, but we also need to continue to hold accountable the university for making sure that it's doing its job to tool up the universities across the state to draw students, to attract them, and then to place them in sectors that are relevant. It matters for them.

Career Pathways--the Governor, the budget document describes, you know, the importance through the Career Master Plan and the Career Passport and also College and Career Pathways--I didn't see and maybe you can, so I'm wondering, or my question is, are there dollars in the budget for College and Career Pathways? Are we talking about simply the deployment of the dollars that were already allocated before for the Golden State Pathways that those dollars would finally hit the ground?

As to part of your question, we do have 100,000,000 one-time Prop 98 for the Career Education Master Plan, which includes funding to create the infrastructure for that Career Passport. So that is new money that's included in this proposal, and I'll turn to my colleague for particulars about Pathways.

Good morning. Amber Alexander with the Department of Finance. To your question about if there are any dollars associated with Career Pathways, there's the Golden State Pathways Program of the multiyear investment that you referred to.

There are also other ongoing investments on the K12 side that I can speak to, including the Career Technical Education Incentive Grant and the K12 Strong Workforce Program, both of which have emphasis on Pathways programs and could be utilized for those purposes.

Okay. All right. Thanks, Ms. Alexander. For the Delta Conveyance Project, you know, it's, Senator McNerney and I both represent the vast majority of the, of the delta and obviously deep concern about the Conveyance Project, which is not to be litigated here in the Budget Committee, but I, but is, are there, can we be assured that the trailer bill and the other elements don't have any shortcuts in it with respect to that project?

I guess my question is, does it need, do we need to be prepared for discussion or for consideration or for questions and inquiry about the budget with respect to the acceleration or the completion of that project?

I'll have to get back to you on what is--

No one's coming to help you.

I don't have particulars on the Delta Conveyance, so we'll have to circle back with you.

Okay, thank you. And then, both HHAP, but also the Multifamily Housing Program, sort of two dimensions of the coin, have no additional funding, and I just want to preview because this will be in Sub Four as well. It seems very unsatisfactory to say we don't need new money.

We're not going to allocate new money because we, HCD, have not gotten the money out from, from two years ago completely. So I get that, but that's, that's, that's more on us, like what are we--how are we making sure that we're getting, we are deploying the precious resources that the Legislature and the Governor have allocated to make sure that's out? It doesn't, it doesn't defer the need on the ground that these--that the cities are facing.

So I think we should--I hope we will have a deeper conversation with you over the coming weeks and months about HF and its importance and not simply determine that--we don't need new money because we haven't yet sent the checks to people for the last one; that's on us. It's not a reflection that the problem itself has been deferred or solved. It has been said by so many of my colleagues.

Yes, and Senator, I would say that that is not necessarily the reason that there was no additional funding. I think part of it, again, is there is overlap and other pots of funding that are available in past budgets as well as in this budget that have not been cut.

And again, I really want to underscore the fact that a reduction meant--not having a reduction means something in this budget because we are coming off of two budgets where we had to cut over $80 billion worth of funds. So I just want to underscore that it is a top priority for this administration addressing homelessness issues.

We believe that there is funding. Of course, it's never adequate. There's never enough funding to deal with all the issues, and--but we do want to have those conversations with the Legislature through the spring to see what your priorities are in regards to additions to what we have proposed here.

All right. Thank you. And thank you, Mr. Chairman.

Thank you, Senator Cabaldon. I do want to note one thing. The second item on the agenda around the California Air Resources Board, we are removing that from the agenda. We will re-agendize it for next week; just, these are scheduling issues, so I apologize for anyone who's been waiting for public comment for that. That will be heard next week. So with that, we'll now go to Senator Menjivar.

It's because Senators like to talk too much, taking up so much space.

No, that's totally untrue.

I want to start off with some positive notes. Really excited, you know, given the past year, the lack of cuts in the human services side, so I didn't come into this committee with a heart attack, so I'm very grateful for the Administration and not seeing the drastic cuts there.

I'm also very excited that we've made headway in no longer being the last state that taxes our Veterans Pension. It's a good movement forward for the military retirement income inclusion. It's the first step, but I'm really glad to see that there's movement there, and the following things are just going to echoing some of the things that my colleagues have shared just to show that we really are united on the issues around housing.

And I know programs like the HHAPP or the HAPP Program have been brought up, the Low-Income Housing Tax Credit, the lack of investment or further investment in them; there's two other programs that perhaps fly under the radar and that's under the human services section and that's the Home Safe and the Bringing Families Home Programs that I recognize were one-time investments, but these are two programs that actually have data you can turn to have accounting accountability and transparency in where the money is going and how many families actually get housed and how many of those families maintained being housed moving forward.

And while I do see that there are no cuts when we invest, like we did last year, $150 million for the homeless encampment, and we don't further invest into housing, I just feel like that's we're never going to achieve our goal for only doing the preliminary of cleaning. They're going to come back right up.

I think, you know you've heard from us is that the housing part is going to be a huge priority for the Senate at least of the Legislature to ensure that we're continuing to show Californians that we're taking on this affordability crisis strong and that while we do invest in one-time pilot programs, if they're successful, we should maintain them just like the two programs that I brought up.

So I know you're probably going to say we look forward to having conversations with us throughout the process so I won't ask if there's conversations on two programs. I just wanted to elevate those issues. And I know on the Prop 1, these are not permanent solution housing dollars for housing. These are temporary treatment-centered based dollars, and I don't think we should be grouping in Prop 1 dollars when we talk about the housing crisis in California. For the Medi-Cal numbers caseloads, I read some of the things that were attributed to as to why Medi-Cal cases have increased.

What the Administration anticipated is the numbers that came in higher, and some things that were included was the undocumented population, so forth--what I didn't see is that the senior asset limit removal, that plays a big role as to why we have a bigger case.

What I just don't want to see is that we continue to pinpoint to the undocumented population as the key driver for some of our increases in cases, and I'd want to know if this--am I assuming correctly that the removal of the senior asset limit test is also a correlation into the number of increased Medi-Cal cases?

Laura Ayala, Department of Finance. We believe that it is correlated. The increase in the senior population is correlated with the removal of the asset test. However, because there are other programmatic changes, the continuing, the unwinding of the public health emergency associated with COVID and eligibility renewals, it's hard to really tease out how much is impacted by which programmatic change, but we do believe that the asset test limit has increased that caseload.

I guess I would challenge us to just be more mindful of how we're writing these briefings up and just not pinpointing or at least writing a sentence or two that could show whoever reads this that there's other variables at play here. My second question is regarding under the HCBS planning and the IHSS Career Pathways Program--past two years, very vocal on these two issues, and we were always worried that the money was not going to go out.

But now we have the opposite scenario where we potentially have overspent $80M on this this and you know, we only had a set amount of federal funding on this and now what I didn't see in the budget was how--are we offsetting this from General Fund or is this--are we going to see a plan or a solution for this in the May Revise?

There we go.

Thank you. You have the magic touch. Lourdes Morales with the Department of Finance. So you're referring to the IHS Career Pathways Program. The programs that it did sort of pause back in September given sort of program trends. The department is in the midst of assessing all the claims that were received as of December.

They're sort of estimating that sort of on the high end, funding used sort of beyond the HCBS allocation could be around $90M, but again, this is sort of the high-end estimate at this point and sort of claims are still being processed, and so given that assessment is still being at the administration--at the department level, we will sort of continue to assess and then respond back to the Legislature as we have sort of a clearer picture of the sort of true demand for that program.

Potentially coming out of the General Fund, right? Because there's no other avenue we can turn to.

The department has used all their HCBS dollars. The administration also sort of evaluated sort of all HCBS dollars and sort of was able to sort of redirect additional dollars from other departments to help sort of offset this, but again, the calculation, sort of bottom-line impact, is still being assessed.

My next comment--I'm glad my seatmate is gone; I think it would have given him a heart attack--given that we might potentially have to allocate approximately $90M because we overspent, the Career Pathway Program was so instrumental in maintaining a level where we're nowhere near where we want to be on the IHSS workers, but if we see that these are retaining the current level that we have, potentially looking at maintaining an investment of that level, 80 to 90 or whatever, just to continue these programs that we've seen that are successful. So thank you so much for your response there.

On the Prop 47 savings, I read that 88.3 million are potential savings from Prop 47. Are those dollars then going to cover the SUD treatment or other kind of treatments that are not covered under Prop 36 or is that going to be swept into just the whole General Fund?

Are you referring to the Prop 47 savings kind of decreasing because of Prop 36? So those existing dollars go to the kind of framework from Prop 47 anyway. I believe about 65% go to the Board of State and Community Corrections for your local grants. Another quarter goes to the Department of Education for, I think, truancy prevention programs and then a final 10% goes to California Victims Compensation Board and they fund trauma recovery centers through grants. So those funds are already kind of distributed out based on the Prop 47 schedule to provide for community resources.

So just to confirm, the savings are going to go back, are going to go into meeting the demands of Prop 36?

In the out-years, yes. So for 25-26 right now, we're projecting 88 million going into those Prop 47 grants. As kind of Proposition 36 impacts realize over the next several years, those Prop 47 dollars will decrease and there will be in theory more money available in the General Fund to pay for incarcerated people coming into prison because of Prop 36.

So we can't put that back--so we can't put that into covering the lack of investment we now will have on the treatment side, is what I'm--am I hearing that correctly?

It would be up to the Legislature or other kind of avenues to dedicate money from the General Fund.

Got it. Okay. I just wanted to make sure it wasn't like we had to put this into--

No, the Prop 36 doesn't specify a funding amount going to communities.

Great, thank you. And then just one final comment; already has been uplifted, which I appreciate, is the Cleanup California Program. Really instrumental program. These are actual deliverables for Californians that can physically see, and as we continue to hopefully invest in this program, that it be equitable across California so that once you cross county lines, it's not different from LA to OC and so forth. I would really hope that we continue to fund these programs. Thank you.

Thank you. We'll now go to Senator Wahab followed by Senator Niello and Senator Perez.

Thank you. I just specifically wanted to highlight this. I've said it, you know, probably a million times now, you know, when we're talking about the budget as a whole, there's a lot of concerns, especially, again, around, you know, duplicative services, right, and just making sure that we are streamlining exactly what we're doing.

The departments especially, you know, even for housing, for example, three separate departments that, you know, touches different things and some of it overlaps, some of it, you know, the departments don't have transparency in each other's work.

And I will say the larger public as a whole is very concerned whether we're talking about our immigrant population, which again is ten million plus individuals in California--it's basically one out of every four Californians are immigrants--and what is happening there. If there are federal cuts, what does that really actually look like?

And if there is any mapping that can be provided by the department, not only for us to make better informed decisions, but then also assumptions of what could potentially happen, right, especially when it comes to our social services/health/education, right; the core components of what most people are concerned about.

I do want to highlight this as well. We've seen, if you take a look at the, just, even summary, we see a growth in a couple of different departments in expenditures, but it's not very clear exactly of how are we going to recoup or generate revenue through that.

And I will highlight, just, you know, there was a comment made earlier by one of my colleagues regarding Prop 36. In the info hearings on Prop 36, it was very clear by the proponents who put the ballot measure up that there is not a funding mechanism for local county funding for these services. They publicly stated that. This is where the devil is in the details of what is being proposed and it was more of a, you know, a lot of holes. So mandates without actual budgeting, right?

And so I have a lot of concerns in regards to this as a whole just because we have tried very much to, again, cut significant funding on bloated budgets. And that's really what it is. The average person is saying, 'okay, how am I going to pay for my home, how am I going to pay for my education, how am I going to get to my job, how am I going to have more money in my pocket to go further?'

Whether we're talking about the cost of food, the cost of living, all of the fees that everyone has to pay, especially renters, homeownership is down in California compared to many of our counterparts in the rest of the state and much more. I highlight this because at the end of the day, the government is supposed to serve the people. And the feeling is that government has become, you know, this bloated industry without really thinking about, okay, where can we cut duplicative services? Where can we streamline? Where can we do cost savings? Where can we do any of this?

Now last year, in CDCR in particular, we cut a significant portion of their budget, and it did not even really make a dent. As the former Budget Chair for that particular public safety effort, I do just want to highlight, even when I've asked, line item per line item in Excel sheets, let's go back 30 years and see, you know, what did we fund and is it relevant today, a lot of the line items couldn't even be answered as to what is this for, you know, why do we still have it, is it going to be put into something else, and I really stress that because that is the same conversation that needs to be had in the other committees, right, and the departments when it's about health.

Health has grown significantly, right, the expenditure. It is also one of our most expensive, you know, things that we fund for the most part. But the healthcare system doesn't work for the average Californian. It doesn't. Right? Why is that? And if there are suggestions, do you guys have suggestions to cut some of the bloat in every single department?

As you will recall in the 2024 Budget act, we did have as a solution, efficiency reductions, basically, well, efficiency increases. And we had in the Governor's Budget about 1.5 billion growing, 3 billion in savings as a result of working with our departments to try to get rid of, as you call it, some of that bloat.

We continue to work with our Department beyond this proposal to see exactly what you're saying in terms of redundant programs and trying to save tax dollars so we aren't wasting them.

I would also say that the drill that we have started as a result of the OMB memo in regards to potential reduction in federal funds is also a place where we need to and have started to look at our programs for just that, redundancy things that we may, if it comes to it, need to cut and across state government, not just in CDCR and for housing, it is across state government.

And so I would say that that is an exercise that we are absolutely doing in regards to savings, but also in response to some of the concerns that we have that we will not have the full amount of funding that we generally have coming from the Federal Government.

Yes. If I may, if you recall at the beginning of my prepared comments, one of the recommendations we had was that the Legislature focus on program review and assessing how well initiatives are working compared to their Legislature's intentions.

And what we in our office at the LAO are working on right now is the development of a framework, because we work for you, and so we want to assist you with this type of effort. And so we're working on a framework to think through, you know, because there's thousands of programs. Right.

So we, we want to follow your lead, but the framework that we're developing would be to help prioritize which ones to look at, what are the programs, where they have the highest rate of spending growth in recent years, for example, programs where there may be multiple departments providing similar or duplicative type of services or activities, programs that seem to be, you know, apparently lacking outcome results, outcome data or show poor performance, things like this.

And but the framework that we're developing would be to help prioritize which ones to look at, what are the programs, where they have the highest rate of spending growth in recent years, for example, programs where there may be multiple departments providing similar or duplicative type of services or activities, programs that seem to be, you know, apparently lacking outcome results, outcome data or show poor performance, things like this.

So we're kind of developing this framework that hopefully, you know, the Legislature could use, you know, as they undertake this effort to do this type of program review, to think through which ones to prioritize.

Okay. And when would we be able to have that framework?

I mean, we're working on a draft of it as we speak.

I mean, so, okay, so this has. Been something that I've talked about for, you know, a while now. Every single time that you guys show up I apologize for asking the same questions, but the reality is that we do need to have more efficiency in government as a whole.

The one that I'm going to highlight, which I've highlighted in my. My Committee, is EDD next. Okay. It's a small thing, right. EDD next. Another $124 million for the fourth year of modernization effort. Right. That's just one example. What are we doing? Like, how long does it take to modernize, you know, a program, if you will? Right.

That's not the only one. There's multiple other examples when we're talking about the DMV. Right. Nobody is a big, huge fan of the DMV. Right. And the EDD, as well as, like, just overall unemployment, especially with the fires, especially with people in need.

You know, again, how efficient are these programs for the end user, which is a California resident. Right. And I don't necessarily see that effort. I also want to highlight the tax credits. Right. You know, we're talking about generating revenue. Right. It's not just, hey, limiting our spending, but it's also generating revenue. Where are we generating revenue? Right.

And I will say that, you know, manufacturing is very big in my district, in particular, the City of Fremont has 900 manufacturers alone in the city, more than any other city in California. And they have looked consistently for some type of credit for capital investments. Right.

People want to buy the latest and greatest machinery they are willing to spend in California. And yet we have not prioritized that yet we are going to prioritize, you know, and give, you know, a credit to the film industry double what they've even asked. Right. And then we have, you know, conversations about education.

We see significant cuts and again, streamlining. Where is the streamlining on, you know, education and making sure that the programming that for. And I want to highlight this because demographics do matter. The average, the majority of Californians are between the age of 25 and 65. Right.

And there's not enough programming around that in our educational institutions, whether it's community college, all the way up to our UCs, and we are lowering different standards. But we are not just saying, okay, this is how we can get this.

And there are a lot of people that are looking to pivot careers as adults. There are a lot of people looking to go into industries that actually can support them in the cost of living and so forth.

I want to highlight even the workforce, for example, we consistently discuss a lack of teachers and firefighters and police officers and nurses and, you know, pretty much every industry.

To our UCs, and we are lowering different standards. But we are not just saying, okay, this is how we can get this.

And we have not seen Streamlining efforts to make this faster for people to get this. I highlight this because one of the things that I really want to talk about is the cost of living overall is one of the biggest concerns for people. Right? And it's not just build, build, build.

And, you know, my colleagues, you know, will always talk about supply and demand, but it's also curbing and protecting the supply we have. Homelessness was brought up multiple times, and it was brought up in a way where, you know, we need to clean up our streets and, and so forth and so forth.

And, you know, it lacks a little bit of the dignity of who our homeless population is. And many of them are seniors aged out. Many of them are on fixed incomes. Many of them are working people and people who work two to three jobs. Right.

And so, you know, with the budget here, in recent years, each budget has included roughly $500 million in supplement to supplement the state Low income tax credits. Right. The LIHTC funding to help boost affordable housing production. And there is no such allocation that was included in the governor's January budget.

So I just want to understand why wasn't LIHTC funding included and what impact does the Administration think this will have on affordable housing production?

You're correct. 500 million that has been included for LIHTC over the past few years is not included in this current budget. Again, this is a budget, I would say, that is in recovery after two years of major deficits. We are not closed to increasing those credits. It is not currently in the proposal, though.

Okay. And I will highlight this because $500 million is a small fraction of our overall budget and depends on which Department you want to talk to or about. But we have billions and billions of dollars.

And again, we are not prioritizing what most Californians are struggling with, which is housing, housing, housing, affordable housing, not just any type of housing. So do we have any proposal to say, okay, this is, you know, we would like to tackle affordable housing, affordable housing production through any other program.

And again, I would go back to the billions of dollars of actual General Fund as well as tax credits we've offered provided this body as well as Administration over the past few years that are still underway over a multi year expenditure plan while it is not included in this proposed Governor's Budget.

Again, we want to have discussions and obviously we hear some of the priorities of the Legislature even today, and there will be more discussion throughout the spring on homelessness and affordable housing and something that, again, this Administration, it is a priority for this Administration. We feel like we have included billions of dollars in the past.

And some of that is still, as we discussed for HAP, still being allocated.

So you referenced the billions of dollars, you know, in the past. $24 billion. Right. And many people talk about what happened. Where is the impact? Where is the dent in homelessness? Can you elaborate a little bit about that?

I think those numbers are hard to measure. I would say that it's more of the opportunity cost in terms of spending funding on affordable housing as well as on homelessness has stemmed some of the numbers of people who enter into homelessness. And I think that's hard to measure. We only see those that are actually on streets.

And a lot of the programs that we have been supporting have helped those that are on the margin maintain housing, whether it's through rent or mortgage assistance.

But there is no accountability, which is the root cause of. Okay, we have spent money and you're saying that the metrics is hard to measure and so forth. And we're spending $24 billion. Right.

And we're again, one of the number one issues that every single Californian says in almost any polling in most cities will say homelessness and housing. Right. So we can't really track what. What the money did. We have no outcomes, homelessness has grown and we are cutting funding when we're supposed to put more accountability efficiency measures in place.

And accountability is something that this Governor has talked a lot about. And I think we have some trailer Bill that will tighten that on top of some of the accountability measures that this Administration and this Legislature has agreed to in the past. And I would say that I'll yield the floor to my colleague for further details.

But again, some of those dollars are still going out, and some of those dollars have to help locals. And we do want to have that story. Hence more accountability.

Yeah. Teresa Calvert with Finance just noting that the recent rounds of the funding have had those additional requirements, as Ms. Li was referring to.

And can you elaborate what those requirements are?

And the monthly reporting you said includes what the fiscal?

And one of them, including monthly reporting of fiscal and outcome data, which helps the Department evaluate the grantee's progress. So there are things that have recently been done. We're not done looking at accountability measures, but one of the examples that we have is the monthly reporting.

Sure, the fiscal and outcome data. And it helps to evaluate the grantees.

And when you say outcome data, what are you actually measuring the specific outcome data?

We'll have to get back to you on what kind of the fields are on what those reports have. So I don't have that level of detail.

And I would love to share that. I think that it should include how many people were housed and for how long were they housed and were they housed locally? That is one of the biggest concerns.

And we don't put enough pressure on the nonprofits and in what's happening in the shelters and the nonprofits, the homeless, navigation centers and much more both in the Bay Area and I'm sure everywhere else, is that they will house the person and say that we house this many people and it's not identified if they're unique for that year, number one.

Number two, it's also not identified if where are they housed, are they housed locally, where their network is, where their families are, where their doctors are, where their resources and services could be that they're familiar with.

And then later they're housed and shoved somewhere else in Central Valley California because the cost of living is extremely cheap there compared to, let's say, the Bay Area. And then, and then it's out of sight, not our problem anymore.

But the number for California still remains the same because there is no long term plan slash accountability on these nonprofits.

So the little shuffle game that has been happening without any long term accountability, I would like to know a year after that person had shelter, what type of services and what type of advancement have they completed in their life? Did they get a G.E.D.? Are they, you know, going to the doctors for any type of treatment?

Are they in a substance abuse program or are they housed permanently or do they have a job? These accountability measures puts again more of the pressure on the nonprofits that are.

Some of them are making millions and millions of dollars in the black year after year versus actually going to the person that needs the help, which is housing stability. Housing stability. Housing stability.

I highlight this again, and I said this to some of my colleagues, is that when a person moves from home to home to home, and we're talking about renters, we're talking about homeless people, we're talking about seniors and much more, they are not really building within that community. They start to not care about that community.

They don't care if it's trash, if there's public safety issues, things like that, because they know that in a couple months they're going to move somewhere else.

But if the person is housed long term in a community, they will make sure that one, their kid is attached to the school, they know the community, they may attend their City Council meetings, get involved in nonprofits and much more. It's a sense of community So I really highlight that.

I also want to flag that, you know, the governor's January budget does not include any investments in affordable housing apart from Homekey plus projects, some of which will get money from last year's Prop 1 bond funds. How else is the Administration expecting affordable housing project developers to obtain the resources to build?

No, I would just point. Theresa Calvert, again, I would just note that's correct. There's no new General Fund proposed for affordable housing. It really just maintains and doesn't cut into prior allocations.

And the focus, again, as has been noted a number of times, is looking at policy principles that will be coming in the form of later language from the Administration as outlet.

And then I also want to highlight that there is no commitment to fund important programs to address homelessness, such as the Homeless Housing and Assistance Program. Otherwise, the HAPP funding. What impact does the Administration think it would have on our collective effort to address homelessness if this year's budget does not include sustaining support for the HAPP programs?

I would repeat that again we're hearing loud and clear what the priorities of the Legislature are, and we are open to having the discussions in the spring as noted on this and other issues. So in the end, obviously, what will be in the final budget is not everything that is in this Governor's Budget, and he is aware.

Okay. And just since we're talking about priorities, I will be very clear on my priority. Obviously, housing is incredibly important to me. Affordable housing, all of the efforts regarding streamlining has translated into cost savings for the developer, not necessarily cost savings for the home buyer or the renter.

And I want to be very clear when we're talking about building housing, and I do believe and fully support all types of housing, I really want to highlight, if we are not building for the average Californian, we're not really building anything. Right.

And I highlight that as much as possible because we also have to protect our supply, curb the demand, and really ensure that people are housed longer and focus on housing stability, regardless if that's a renter, regardless of that as a homeowner, regardless of whatever the case may be.

Part two, the social services and health and education when it comes to our most vulnerable communities needs to be prioritized across the board. Right. Those are the people that really need the support more so than anybody else.

And government is supposed to be that safety net in so many ways, especially if we have the California dream of making sure that all people belong, all people are seen, all people are heard, and all people are valued.

And so the rhetoric around Homelessness or undocumented individuals or anything like that with our vulnerable communities should not be tolerated. And it should not be tolerated in our budget as well. So I want to flag that. I appreciate your time. And again, I will, you know, emphasize efficiency is very much needed as well as accountability. Thank you.

Thank you, Senator Wahab. I do just want to know, and I agree with a number of the things that you said. I do just want to note that under our last Governor, Governor Brown, big fan of Governor Brown, but one disagreement the Legislature had with him was he was not a huge fan of public investment in housing.

This Governor is Governor Newsom has worked with us and we've dramatically increased state funding for affordable housing. And it's always worthy to evaluate how those programs are going and whether they're being put in the right direction. But at least we have a consensus between the two branches that we should be investing.

I also want to know, and I agree with Senator Hobb, that we should be building every single kind of housing. In terms of streamlining laws, I think the putting aside ADU's, which is a separate streamline thing for multi unit, the biggest beneficiary of our streamlining laws has been 100% affordable housing in San Francisco.

I think we're pushing 4,000 homes that have been built pursuant to SB35, now SB423, for under 80%, under 80% of area median income.

And so the 100% affordable housing and including supportive housing has, have really benefited from our streamlining laws because they no longer have to go through a five to 10 year politicized process where people say, I don't want poor people in my neighborhood, so always more work to do. And I very much appreciate that.

I appreciate that. And I do echo the comments. I will say that this Administration has helped with housing significantly. However, there is significant concerns around accountability. And again, our data clearly shows that it hasn't made a dent. Right.

And so when it comes to, you know, efficiencies and models and so forth, we have to really look back and say, okay, what has really worked? What hasn't worked?

I will say also with median family incomes and area income formulas, it is problematic even in that. For example, the Bay Area, Hayward, largely a minority majority city, significantly poorer than some of the other cities, and yet they have to compete with people in San Jose, San Francisco and Oakland, Tech workers, people who make six figures, and people on single family incomes, you know, fixed incomes and much more, still cannot get by even in rental properties.

And I want to stress homeownership more than renter issues when we're talking about future plans, because people want to be able to purchase a home and not compete in pretty much a very slanted way in the market. And I really want to stress that that has not been touched.

So when I said curb supply, I mean curb demand and really protect supply. That is incredibly important. Thank you.

Okay. Senator Niello, followed by Senator Perez, Senator Smallwood-Cuevas, Senator McNerney, and Senator Allen.

Thank you. Thank you. Mr. Chair. Point of clarification for LAO. zero, you've asked your question. If I heard you correctly, I thought I heard you say that your fall projection for the deficit was a negative 2 billion and the budget is roughly balanced. And then you said, now you have revised that to a $3 billion surplus. Did I hear that right?

Did I hear that right?

Senator Niello, what I was trying to convey is that when we assess the Governor's Budget proposal and remove the effect of the new proposals, just kind of looking at his underlying assumptions. So we're kind of trying to estimate the governor's baseline budget situation.

When we do that, we arrive at a $3 billion estimate of what the Administration would have for the positive SFU balance at the end of that budget year. And I was just saying that it's, you know, relatively close in the big picture to the 2 billion negative that we estimated in November with some changes that I explained.

I'm able to explain, but I think that that was what I was trying to convey, if that helps.

Yeah, but you're, in essence, your fall, November report, whenever that came out, you still stand by that?

Yes. I mean, since then, I think the main thing I would say that could be adjusted is that the revenues that came in after our November outlook was completed have been a little better than what we even would have expected. So that's why they bring along with them higher expenditures. That's right. Correct.

There's been quite a bit of talk about volatility, and it causes great difficulties in settling budgets from year to year. We could fix that volatility by changing the structure of our income tax code, which we are not going to do, but we could also by limiting spending in any budget year to a moving average.

This can be a statement, not a question so much, but by limiting spending in any given budget year to a moving average of the prior three to five years of revenues. And it wouldn't limit spending over a period of time, but it would in any budget year.

So that when we had those huge increases in revenues a few years ago, the three to five year moving average would have limited the amount of that that could have been spent and we wouldn't have anywhere near the problem we do now and in particular the last two budget years. I'd just like to make that point.

I have not prevailed in convincing a majority of my colleagues when I was in the Assembly. But nonetheless I do think it makes good sense now from an overall standpoint. And also again, getting back to the LAO's comments, the budget is nominally balanced or roughly balanced, but it's not sustainable and we all agree on that.

The only difference is that the Administration is forecasting deficits in the out years quite a bit less than what the LAO is. And on that point I would just point out that in the two years that I've been here, and frankly it's consistent with my experience when I was in the Assembly too.

But in these two years with this Administration, the LAO has consistently been more accurate than the Administration relative to deficit projections and revenue projections. But I want to echo the comments of Senator Wahab. She said this before, as have I.

We if last year we did a multi budget, multi year look, this year we're not and given the severity of the problems in the 26/27 budget year and beyond, I don't understand why we're not. It would seem even more relevant this year than it was last year.

And we talked a lot about efficiency, but it's not just efficiency that's important, but it's also effectiveness. Because if we have programs that we're funding that are not working, we can't make them more efficient. We've got to get rid of them. That's where expenditure reductions can come from. Where can we make existing programs more efficient?

But if we have existing programs that are ineffective, we can frankly get bigger savings. I know every time you establish a program, whether it's effective or not, you create a constituency and it's difficult to cut. But we're going to have to face some very severe problems in those out years. I think you want to say something, Mr. Petek.

Petek.

I thought perhaps it could be helpful just to know one thing about the difference between our estimates of those out year deficits and the administrations is that we continue in those out years to assume that the state is depositing, making annual deposits to the budget stabilization account. So that's three to $4.0 billion.

Whereas the Administration is not assuming that which does make some sense. If there are DEFIC deposits, then the state would be allowed to have a declaration of a budget emergency which would suspend those deposits. So those expenditures would therefore Be lower.

Kumbaya.

So if the difference is somewhere between 7 and 9 billion per year, that's 3 to 4 billion of the difference right there. And I just thought for the sake of. I mean, I think in the broad thrust, we have some pretty close agreement, I would say, about the issues that we face as a state.

Well, thank you.

And just two points. The first is I don't see that the LAO is necessarily more accurate than the Department of Finance, but that's the first point. The second point is we do agree that there are structural imbalances in the out years. Said as much at the beginning of this budget hearing.

And it's something that is very concerning that our expenditures are out tripping our revenues. And it is something that we're looking into. And we hope to have some proposals at the May revision, but with the assistance of the Legislature, I think that some of those are tough decisions.

I'll be looking forward to that. Thank you for that clarification. Now, with regard to Proposition 36, Senator Seyrto made points relative to that, as did Senator Wahab. And the point that Senator Wahab made was the point that the Governor continually made during the campaign, that Proposition 36 did not have any funding in it.

Well, that would be ballot box budgeting. And that makes our budgeting process just that much more difficult. When we have propositions that we put forward before the people that structurally change what we can do on our budget, that is not a good thing. Proposition 98 is great for K-14, particularly K-12.

I've always thought it was a mistake to include community colleges in that, but nonetheless, it's great for them. But it makes our budgeting process more difficult, and ballot box budgeting is not the answer.

So I think it was entirely appropriate for Proposition 36 to state the priority of the people and then leave it up to the budget writers to figure out how to meet the priority of the people. And I will quote Senator Wahab. I'm sorry, she's not here, but she said "Government is supposed to serve the people."

I'm going to repeat, everybody's getting tired of hearing this. 70% of the voters approve Proposition 36, and the big funding requirement for that is with regard to drug and mental health treatment. And there is nothing in this budget for Proposition 36 required treatment under the treatment mandated felony for drug offenses. There's nothing here for that.

And significantly more people voted for Proposition 36 than voted for Proposition 1. And we have funding for Proposition 1. I'm not saying we shouldn't. For Proposition 1 that's also the will of the people. It's our job to serve the people. But why not Proposition 36?

I wrote a letter that all of my Republican colleagues also signed to get that funding in the budget that was sent in December. Never had an answer. I guess the answer is the budget, which has no funding. So that's frankly frustrating. Quick point about homelessness.

Senator Wahab also spoke to that made some very good points as to accountability measures, and that's important. A continued point I have is accountability. That is, let's not measure what we do, let's measure what we accomplish. And frankly, in government, I think we don't do that enough.

But the ultimate goal of homelessness, the ultimate goal of any social services program has got to be self sufficiency, stable housing, treatment, getting a ged. All of those things are important, but they are leading to the ultimate objective of self sufficiency.

And I'm not satisfied that we formally accept that as the role of our homelessness programs with regard to, excuse me, fire prevention. In 2020, the state and Federal Government signed a memorandum of understanding to treat 500,000 acres of forest land per year, and we haven't done that yet. I'm wondering what the plans are to satisfy that MOU.

I think that the Wildfire and Forest Resilience Task Force is fairly confident that with the available funding that we can get close to that by the 2025 goal. But I'd have to follow up with you in terms of like where we are exactly.

And then sort of the last year's worth of treatment. And of course that's, you know, for all sort of state responsibility land. So it's not all government. Some of that's going to be, you know, timber companies and things like that that own large shares of the property.

The data that I have. And we could get together and talk about this. But in 2020, we treated just shy of 160,000 acres. In 21-22, it was a little bit less than 140,000 acres. In 22-23 it was about 140,000 acres. And then last year the budget was for just over 100,000 acres.

We're not doing 500,000 acres in a stretch of several years, according to this data. Again, maybe we should get together and talk about that. But this, the importance of this has been heightened by the fires in LA. The shape of the wooded areas proximate to the urban area has had a huge impact on that.

It's not an issue just of global warming or climate change. Uninsulated utility wires contributed to that. The treatment of the wooded areas approximate to the urban land as happened in Santa Rosa, by the way. So we didn't learn that lesson there. That had to do with it.

And the Santa Ana winds in Southern California, not due to climate change. They've existed as long as at least our Western civilization has been here, and I suspect certainly long before that. So it is huge in terms of public safety. But it's also an issue relative to greenhouse gases, which CARB, by the way, never opines on.

They are tasked with reducing greenhouse gas emissions. They're not tasked with reducing it in the atmosphere, which is interesting because the fact of the matter is the atmosphere hasn't changed that much, but they are responsible for reducing greenhouse gas emissions. I realize you're not CARB, but maybe they're listening and they can hear this.

That is a huge source of Greenhouse gas emissions. And I'm not aware that CARB has even ever had that as an agenda. If they have, I will take that back. But they certainly haven't made any recommendations or had any rulings with regard to that. So I see that as a significant budget issue because we're not doing it.

We're not putting the money forth to treat it as a priority. And also as a memorandum of understanding we have with the Federal Government. The one other thing is, with regard to Unemployment Insurance, what plans does the Department have to pay down the principal amount of that debt?

Yes. Acknowledge that that is a large amount of over 20 billion, I believe currently is owed. And the Governor mentioned this at the budget press conference. It is a big problem that we need to tackle with the legislature. As we look at what the issues are.

It's going to take both the Administration and Legislature making hard decisions on that.

Anything to add? While we're not doing anything about it, the amount that employers are paying is going up every year, I think by $21 per employee. And it reaches frankly a huge amount by 2030. And this is a huge burden on our businesses.

And it's not their fault that this debt from the Federal Government happened various reasons, but primarily shutdowns during the pandemic.

So in my view, the state has a significant moral responsibility for helping employers out, who, quite frankly, a lot of them, I don't think they can afford what we're looking at 3-4 years down the road from now. So I'm glad to hear you say that. I think we need to put some urgency on that point.

Those are the questions and comments that I have. Thank you.

Thank you, Mr. Vice Chair. Next, Senator Perez, followed by Senator Smallwood-Cuevas, Senator McNerney, Senator Allen.

Thank you, Mr. Chair. Hi, it's nice to meet you all. I had a couple of questions. I think first and foremost I wanted to dive into the funding piece.

You know, I was wondering, I know it was mentioned earlier as Senator Durazo was asking questions, that the $1.0 billion has been awarded or it was appropriated but not awarded quite yet. Is that correct? And is that 100% of the funding or is that's just part of it? And you know, wanted to also gain clarity.

I used to be on the COC for Los Angeles County. From my understanding, this is funding that is requested kind of on a yearly basis, and so is that money that is then reimbursed? So they've already kind of planned and provided services for it?

And so these are commitments that have already been made and they've done planning around it? Just want to kind of understand some of the mechanics of that.

Sure. So the latest round of HAPP, round six, that has not been awarded. So that was the funding that was included in the 24-25 budget. The prior year's money is being awarded right now. Excuse me, HAPP Round 5. And we are working to the question earlier.

We are working on having more specifics that we'll be able to provide as a follow up.

As far as the reimbursement basis, that isn't my understanding, but I want to double-check and make sure with the agency to see if it's like kind of an allocation at the front end, more like a grant versus a reimbursement after the fact. That piece of detail I don't have.

Okay, so it's not awarded, but it is appropriated.

All of the funding has been appropriated in prior fiscal years for the HAPP, and there's no new 1 billion proposed for 25-26 as part of the Governor's Budget. So what we've been referring to are the priorities allocations of the $1.0 billion in HAPP.

Okay. And I ask that because, you know, working and being a part of a COC commission board, you know, I had seen that in many ways, you know, county cities oftentimes go through this reimbursement process and that's typically how they receive funding.

And so a lot of these services may have been, you know, allocated already with these plans in mind that they're going to be receiving funding. And if this is money that they're applying for, then on a yearly basis, then that means that there's going to be major cuts right at the local level.

And that funding is supporting things like shelters and housing and when we're only doing encampment sweeps, but we're not providing any sort of temporary housing for folks to have to be placed in. We end up in a situation where we're just exacerbating the homelessness crisis.

And so do we have any data to show the amount of shelter beds that are being supported by this HAPP Fund and the number of shelter beds that local cities, local counties, and local continuums of cares would lose if we did not provide additional funding this year?

I don't. I know our agency, our Department doesn't have that type of data. We'll go back also in response to Senator Wahab's questions about some of the outcomes and what's included in the monthly reporting data.

So we can also ask and see what kind of level of information it is, such as like whether it's number of beds, but the kind of what would be data. I don't know that that exists. We'll ask the question, but I don't know what would be lost data exist.

I mean, I'm sure that local cities, counties, and COCs could provide us with some of that information if we asked them directly.

I'd be really interested in seeing though who were the, you know, frequent applicants that we had that apply on a yearly basis because that would be an indicator of, you know, who would be directly impacted by a cut like this. And I think it's really necessary that, you know, we take a real look at those numbers.

If we're really serious about resolving our homelessness crisis here in California, then, you know, making sure that we're providing that funding is going to be really crucial. And I think there might be a misunderstanding which is why, you know, HHAP funding continues to be cut.

And so I think maybe taking a look at those numbers and the kind of impact that it would have on reducing shelter beds and increasing the number of people out our streets would be a helpful conversation for us to all have.

I just want to add to and make the point that HHAP is not being cut. We provided it in the past.

The billion that was allocated last year is still yet to go out and it has always been sort of one-time funding because it provides flexibility for the state in regards to the things that we've seen in the past with deficits and being able to pull back on things.

But we haven't cut those dollars and we're again willing to have those conversations with the Legislature in regards to what actually becomes part of budget act.

But so you just said that all of that, all of those dollars have been appropriated though they've not been awarded, but the full billion has been appropriated.

Yeah, and we are not proposing taking that away. But and I would also add that understand the level and the significant it's different but I know local governments also have their General Fund in which they're putting in as well as the state.

And as the chair mentioned prior to this Governor, those dollars didn't exist at the local level. And so just want to again reiterate the fact that we have billions of dollars going to locals.

We do want to build more accountability measures so we can get that data and understand how far that money is going in different areas and ensure both the State Dollars as well as local dollars are having the impact, the intended impact.

So the money was appropriated, but it's not been awarded. And so there's no new money being allocated. So that money's been promised, but it's not been provided to local cities, local counties.

The money has been approved by the Legislature and signed into law by the Governor be provided. Were a little bit in arrears almost because the prior year's billion is still going out and there is no proposal on the table to take away that other $1.0 billion that will go to locals.

But there's no new money being allocated.

There's no additional billion, if that's what you're saying, that's included for next year.

Okay. And so right now there is no commitment to additional funding.

There is nothing that's currently in the Governor's Budget. But again, conversations. We will continue to have those conversations about what we ultimately include in the budget act with you this spring.

Okay. Yeah. Because I don't expect for the homelessness crisis to be resolved, unfortunately in this next year. So I think we'll have to continue to take a look at that.

You know, the other thing that I just wanted to bring up was in regards to, you know, the impacts and the cuts to the CSU system, you know, and the UC system and some of the deferrals that, you know, are being suggested here in the budget, I mean, there's so much. Right. Deferred maintenance. Right.

There's a need to enroll more students. You know, I think about this in connection a lot to our affordability crisis and the need for us, you know, to prepare our students for these high-paying jobs and careers. Right.

I think part of our affordability crisis, you know, is making sure that people are entering into careers and into jobs that are going to be able to allow them to afford to live here in California. Right.

There's a direct connection there and making sure that we're making that investment, you know, in our students, that we have more spots and slots available for them is really, really critical. So I just want to emphasize that I, you know, I remember been talking about this since I was a student at the Cal State Student Association.

And you know, I recognize, you know, unlike the K-12 system, the community college system that has Prop 98, which kind of, you know, protects their portion of the budget, this is something that the CSU system and the UC system are constantly having to negotiate for.

So, you know, I don't want them to be forgotten in this process. And I think as we have these tough conversations around affordability, you know, this piece around wages is really, really critical and Important for us to keep in mind as well. And finally, I just had a quick question around the home hardening program.

You know, if someone could just provide a little bit more information around that, just, you know, eligibility, how to apply. You know, I represent Pasadena Altadena, which has been very harshly impacted by the Eaton Canyon Fire. I know Senator Allen is here, whose district has been impacted, you know, by the Palisades Fire.

So we're definitely going to have to do a lot to promote that program and, you know, just want to make sure that residents and constituents are aware of it, how they can participate and things like that.

Yeah. So as I think I mentioned a little bit earlier, but sort of building off of those comments, that program was started just a couple years ago as a pilot program. And so right now it's set up sort of with that in mind.

When you're trying to build the new program, you start with sort of a smaller scope, and this involves a lot of interaction with FEMA's Hazard Mitigation Grant program. So it's. There's been some work over the last several years in trying to build up that program and get it established.

So we have questions out to Cal Fire and Cal OES who work together on the administration of that program in terms of plans for expanding that scope with existing funding and funding that's available through the Climate Bond.

So I don't have details, unfortunately, right now in terms of what the timeline is for sort of expanding, who can apply and which. And it's because of the way it aligns with the Hazard Mitigation Grant Program, sort of administered on a county basis.

But I'll have to get some more details for you in terms of the plans for expanding, who can apply and when they can apply and how all that will work.

Okay, and you think that'll be ready around what time period? I know you said you have to get together some information around that.

Additional information. Yeah. So we have the question out to the departments now. I assume within the next couple weeks we'll have some responses on that. And then in terms of, like, further build out of the program off to see what. What they give us.

Okay. Yeah. If you could share that information with my office, I think that'll be incredibly, you know, critical in the months and in the years to come. So. Okay, thank you. I'll keep my comments short. Thanks.

Thank you, Senator Perez. Thank you, Senator. Senator Smallwood-Cuevas.

Thank you, Mr. Chair. And can you all hear me? You hear me? All Right. Thank you, Mr. Chair and colleagues for this robust conversation. I have a few questions and I guess I'll go in order of kind of the discussion on the wildfire front.

I wanted to get a sense of what additional funding we think we can expect between now and May revise to assist with some of the wildfire relief and recovery.

And I'm saying this because as I have 1000 acres of urban oil field sitting between about 400 acres of mustard grass-covered conservancy open space and on the other side of that about 6,000 single-family homes. This is all in the Baldwin Hills Viewpark community.

I think it's important for us to really prioritize how we're going to spend on relief and recovery and that we have adequate investments to ensure that we are doing all we can.

Not just to focus right on those, you know, those forested areas which I know we've really prioritized and necessarily, you know, and so important to do so. But also we're thinking about as we look at the devastation in LA, we're also thinking about how we're preventing future catastrophe in some of our urban communities.

So I'm just curious about, you know, what are we thinking about the additional funding that will come in terms of the recovery and the relief in the prevention.

So I don't know that I'm in a position to talk about sort of new proposals that may come out between now and May. But what I can say is that one of the important proposals that's in the Governor's Budget is the implementation of the climate bond.

And that includes a significant amount of funding for the Overall bond, includes 1.5 billion for wildfire and forest resilience. And we've got a proposal in the Governor's Budget to get 325 of that out in 25-26 with some follow-up implementation in 26-27 and then in the out years.

And so part of what has gone into that is taking a look at sort of capacity to get dollars out in terms of existing programs and how they're currently staffed and things like that.

So there are proposals already in the Governor's Budget that is meant to keep the momentum going in terms of very key programs that help address that statewide. So there's funding in there for various regional conservancies.

So Baldwin Hills Conservancy, San Gabriel, Lower Los Angeles Mountains Conservancy, Santa Monica Mountains Conservancy, all of those conservancies have funding in there that are aimed at regional projects that help reduce the wildfire risk in those areas and then there's also statewide programs that some of them are administered as competitive grant programs.

So it could be, you know, any area in the state obviously could compete for those. But there's a significant amount of money for the forest health program, for some regional landscape level programs and projects that way.

So there is a significant amount of money in the Governor's Budget to go towards continuing the momentum that's been built in terms of the one-time packages we've done over the last few years that infused 2.5 billion towards wildfire and forest resilience.

Yeah. And I know the Legislature, you know, very proud of the work that we did on the climate bond and certainly glad to hear that we are, the Administration is looking to see ways to ensure that we are prioritizing our urban corridors as much as possible in this process.

My other question, you know, of course we've had so many briefings and I really give so much respect and I want to just say frankly, love to my colleagues who are dealing with such devastation in their communities and those families.

But I was a part of a briefing where we learned about 37,000 businesses have been affected by the fires in LA and affecting about 200,000 workers. When you think about all of, when you go down into the supply chain of all of the businesses that have been affected, 200,000 workers displaced.

And I did not see much when we looked at the labor agency budget, you know, just how we're addressing the challenge that we have with workforce and the wildfires.

And I'm particularly concerned about how we ensure that workers, and particularly workers and communities that are also directly going to be addressing cleanup, that we're addressing this issue of exploitation and the issue of exclusion. Right.

We want to, we need to ensure there are resources that are going to protect workers who are going to clean up our areas. And we also need to make sure that we can support those workers that are in the hundreds of thousands who have not gone to work now for some time.

So my question is just, you know, how are we ensuring that in our budget? When I look at the labor and agency, labor agencies, the investments, it's unclear, you know, what we're going to do to ensure that workers are made whole, particularly the workers at this scale.

One thing I just want to remind this group, I don't know if it needs reminding, but obviously last week we passed the 2.5 billion, over 2.5 billion package to respond to the devastating fires in Los Angeles. And a lot of that is for recovery and relief in all the efforts that the state is doing in that area.

So I just wanted to kind of put that out there as well as with some of the funding that is being proposed in the Governor's Budget is this body acted immediately, heard it Wednesday, voted Thursday, and over 100 million of that 2.5 billion was actually allocated on Friday. So within three days.

And some of those dollars are available for the response and recovery that you're talking about. In regards to workforce, again, I would go back and obviously this proposal was built before the fires occurred.

So not necessarily envisioning the specific request, the question that you're asking, but we have invested billions of dollars in workforce over the past few years. So I just want to again highlight that both in, in the education world as well as in apprenticeship programs and across labor agency.

In regards to your specific question, I think you know, the Governor has issued EOs to prevent some of the price gouging and other bad things that can occur when people try to take advantage of emergencies. And so I just want to also highlight some of those Executive orders that have gone out as those fires have occurred.

And I think that as the spring comes again, we have further discussions about what the need is in particular for the fires. I think that's going to be important because again, this budget was created prior to these events occurring.

And I think it makes sense to have discussions about what we need to do to address some of the issues that you've brought up.

Okay. And I want to be clear, and I'm having voted on the 2.5 billion, I'm well aware of that investment. I guess my to be more specific, what protections are in place on the funding to ensure that workers and communities are protected from exploitation and exclusion?

We can send money out, but we could also have businesses coming from Arizona, from Nevada, from North Carolina doing work that Californians should be doing to rebuild California. We could also have workers because I've seen the temp, some of the temp worker ads floating around.

We could have a situation where workers could be put in very unhealthy situations in this cleanup, the lithium battery removals, all of the toxic chemicals that need to be handled. If we don't ensure and enforce our health and safety requirements and ensure that contractors are using our dollars well to protect our residents.