Joint Legislative Budget

Joint Legislative Budget Committee will come to order. We are here in the Swing Space, 1021 O Street, room 1200. Again, we'll ask Members to come down. We are one Assembly Member short of a full quorum.

We will hear testimony today from our Legislative Analyst participating in person and then public comment will happen after all items have been presented. Just to wait for one. Great. Okay, we'll defer establishing in quorum. I want to welcome everyone to today's first hearing of the Joint Legislative Budget Committee.

The first goal of our hearing today is to organize a Committee by adopting our Committee rules and electing a chair and Vice Chair under our protocols. The chair is from the Senate, Vice Chair from the Assembly.

And after we do that, or perhaps before if we don't, and establish a quorum before then, I'll provide a brief overview of the JLBC's responsibilities. Sometimes people confuse the JLBC with the budget conference Committee, but they are different things. It's also not jlac. So we are our own thing. These are three distinct entities.

So skip over the adoption of the rules until we have a quorum. Okay. I'm going to talk a little bit about the role of the JLBC, since that does not require a quorum. So the JLBC was established in 1941 at the same time that the LAO was created.

And that was at a time when California had a surplus for the first time after a decade of deficits. The first responsibility of the JLBC is to review on behalf of the Legislature changes or other actions that the Administration proposes related to the budget that has been enacted.

We receive approximately 200 to 250 of those notifications each year. Okay, we have a quorum. So we're going to go back and conduct some of our business. We're first going to adopt the Committee rules. The last rules were adopted in 2023. We're in a new legislative session, so we need to readopt them.

There are no changes to the previously adopted 2023 rules. Is there a motion? zero, I'm sorry. My apologies. We have to establish a quorum. Could you please call the roll? Senator Wiener.

[Roll call]

You have a quorum.

Okay, we have a quorum. So do I have a Motion to adopt the Committee's rules. A motion by Assembly Member Quirk-Silva. Second and a second by. We. We don't do. Yeah, in this. In the Assembly, they do. So you do. Okay, so we have a Second by. By Mr. Gabriel. And is there any discussion? Okay, we'll call.

You can do it by unanimous consent if there's no objection.

Okay. Is there any objection to the rules? Okay, then without objection, the rules are adopted. We now will need to elect our chair and Vice Chair. As I mentioned before, by tradition, the chair is Senate and the Vice Chair is from the Assembly. That's in contrast to the opposite order and the Joint Rules Committee.

So is there a motion to elect me as chair and Assemblymember Gabriel as Vice Chair? A motion by Senator Richardson. Seconded by Senator Cabaldon. And can we do that by. Is there an objection to that motion? Okay. And actually, you know, going back on, we're on the rules, and now on this, we're going to.

There's no objection on both the rules and on this, we're going to keep the roll open so that Members who are not here yet are able to add on at the end. Okay. So subject to the role being open, it has sufficient votes.

So, as I was mentioning, we get requests from the Administration for adjustments to the budget between 200 and 250 every year. The LAO reviews these notices in addition to our budget staff and provides a written analysis, and all Members of the Committee receive a copy.

In most instances, the jail, we typically, if we have an issue, we will express that issue to the Administration. If not, then we will accept the administration's request. If necessary, we can convene the Committee to hear that request, but that typically is not necessary. Those are typically very small requests.

The second responsibility of this Committee that I want to highlight is that we receive and review several hundred reports from agencies and departments each year. These are distributed to all Members of the Committee and are made public.

And the final responsibility is that we select our Legislative Analyst who joins us here today, and he is the sixth person to hold this role. So before we move into the second part of the hearing, Members, are there any questions or comments about the role of the jlbc? Okay, I just have one question.

Yes? How does I assume our staff inform us of all of these letters and which ones they identify as ones that they think they should call to our attention?

So they are distributed to all offices.

This is Hans Heyman, the principal consultant with the Joint Legislative Budget Committee. So all of the notifications are sent out to the JLBC membership.

And then I work closely with the budget consultants in both the Assembly and the Senate, in both houses, and when there's an issue with them, those issues are brought to the attention of the Members.

We share the draft letters that I draft in consultation with the LAO with the budget consultants and with the relevant Subcommitee chair staff, and then we publish our response or send out our response after that. Thank you.

Any other questions or comments? Okay, so I'll now turn it over to Mr. Puddick to give us an update about the work of the LAO.

Excellent. Thank you. Good afternoon and thank you, Mr. Chair, Mr. Vice Chair and Members of the Committee, thank you for holding today's hearing about the lao. My name is Gabe Puddick. I am the Legislative Analyst, and I appreciate the opportunity to speak with you today about our office.

My plan has been to walk through this handout, which hopefully you have before you. And for anybody viewing the proceedings remotely, it is available on our [email protected] and so with that, I'll just go into the first page, which covers a brief history of the office, describes our mission, and then our accountability. Our history is interesting.

We can trace the origins of the office back to the 1930s, when the state budget and the economy were becoming more complex and the Legislature at the time was growing increasingly concerned about the balance of power between it and the Executive branch and sought to establish an analytical unit that served it the way that the Department of Finance serves the Governor.

So in 1941, the Legislature did pass a statute establishing the office, but the Governor at the time, Colbert Olson, vetoed the Bill.

And so but nevertheless, the Legislature proceeded and established the office through a joint rule of the Assembly and the Senate and funded our office out of the Legislature's own budget by making a transfer that was shared evenly between the Senate and the Assembly.

And I think that brief bit of history remains relevant because that continues to be how our office is funded today. And it does provide the office with a very tangible sense that we are a legislative entity and that we are independent from the Administration. And so that informs the way we approach our work.

Our mission is spelled out in our in the joint rule, but basically it is to ascertain facts and make recommendations pertaining to the state budget, revenues and expenditures of the state, and also the functions and organizations of state government, its departments, agencies and subdivisions.

So from that you can see we have a fairly broad but fiscally oriented mandate. And as far as our accountability goes, we are accountable to the Jlbc. As was mentioned, I was appointed by the JLBC and serve at the pleasure of the Jlbc.

But in practice, our staff and I view ourselves as accountable to the Legislature as a whole and that we work for all the Members of the Legislature and adhere very much to a non partisan ethos in the way we do our work. So moving to the second page, brief description of our main responsibilities.

And here I'll just begin with our budget responsibilities, which as you're probably familiar, we do revenue and expenditure estimates. These estimates inform our assessment of the state budget condition, but we also independently rerun or calculate the state funding formulas such as for Prop 98 and Proposition 2 for the state budget stabilization account.

Those can be complex and so that serves as a double check on the administration's own calculations. We also of course assess the Governor's Budget proposals that are put before you and we, you know, critique them, offer up options alternatives, and then sometimes also make recommendations related to those proposals.

Somewhat, maybe somewhat lesser known, we support the Committee staff in the preparation for the various hearings and Subcommitee hearings, building out in many cases the agendas that you will use in the hearings.

Also lesser known, but has been talked about here today is that we do review those requests from the Administration for changes to the budget or spending proposals that come in after the budget has been adopted and as a part of the control sections of the state statutes or budget act.

And so in that sense we are assisting the Legislature. The way we look at it is we're assisting the Legislature with its budget control function and then moving on to some of our other legislative responsibilities.

Of course we respond to Member requests and that's where we're doing confidential work on an individual basis for the Members when asked by them to do that. So we're essentially research staff for you and helping do policy research, collecting data, doing cost estimates, that sort of thing.

In addition, I would they're listed here, but I'll just mention we also do provide the fiscal assessments of the memorandums of understanding between the Governor and the state employee unions when those agreements are reached. And then third, the big category, other big category on this page are our ballot related responsibilities.

This was assigned to us in the Political Reform act of 1974 and we are here assigned to provide an impartial assessment, analysis and fiscal estimates of what the impact on state and local and local government finances would be if a proposed measure were adopted by the voters.

And we also have a role in providing these fiscal estimates even at the petition stage for voter backed initiatives before they're circulated to get signatures so that's a responsibility that we take seriously. But I should, you know, it's very important for me to note we don't weigh in on the merits of these.

We don't make recommendations about how people should vote. And you know, we approach the work with a very strong sense of impartiality. Moving to the third page of the of the handout here you see before you a table. This table summarizes our quantifiable and written work products over the last several years.

Just to get a sense of the number of each type, what I wanted to mention here is what the Chair was referencing at the opening, which is the budget notification letters. These relate to when it is appropriate for the Administration to seek changes or spending proposals to the budget outside of the regular budget.

So through the control sections of the Budget Act and state statute. Normally this would be because the state has received unanticipated federal funds or there's been some event that caused there to be a need to take some kind of budget action mid year.

It's very important I think here though to note that these represent a delegation of legislative authority. They are meant to help the state be flexible, to be nimble and responsive to dynamic changing world.

But they are not meant to be a venue for the Administration to put through spending changes or proposals that don't go through the regular review process. That is not what they are intended to be there for.

So as the Chair said, we will typically in a normal year see anywhere from 100 to 200 of these notification letters come through through. We will actually write up an analysis of it.

Of these, in a smaller subset of cases, there are two main categories of reasons for when we would write up an analysis that then does get delivered to you.

The first category is that we've identified some kind of issue or problem with the request and the type of problem it would be is that it's not not consistent with previous legislative action. So we will flag that for you. Secondly, we may have a concern about the timing.

Maybe the request is coming in at such a time that, well really it seems like this could just go through the regular budget process with the regular review and we will point that out if we think that's the case.

The other category of times when we will write up an analysis is if the Administration is requesting a waiver from the standard 20 or 30 day review period because these letters normally come with a 20 or 30 day review period. Normally they will be requesting that because of some kind of urgency situation.

So below the table here there are also some other forms of support that we provide to the Legislature that are mentioned. We continue to monitor the budget throughout the year. We provide technical assistance. But I also wanted to point out we do meet with other interested parties.

We speak at conferences, we distribute our analysis, and we think of this as a way of supporting the Legislature in an indirect manner.

And so sometimes you'll see news coverage of our analysis reported and we will respond to reporters providing answers if they're seeking to understand something about the analysis or speaking, as I mentioned, speaking at conferences, talking on podcasts.

That's the newer form of communication that we have started to do in recent years, but we will do some of that as well. Moving to the fourth page here you see basically a summary of the organizational structure or how the office is arranged. We have about 40 analysts, including our management team, and 10 support staff.

You can see that our analytical staff are organized into analytical units that correspond with the main areas of the state budget, and there are eight of those. And each of our analysts are assigned to be responsible for becoming subject matter experts within their assignment area.

And so I don't expect the size of our office to change in the foreseeable future unless something else changed.

But that's because we, given that we receive our funding from the Legislature's budget and that the Legislature is subject to a spending limit that was put in place by the voters with Proposition 140 in 1990, we are also subject to that, therefore. And so I don't go along anticipating this to change.

And so this is kind of our the way our structure has been since that time, for the most part. And then on the final page, what we have here is just listed out some of our notable recent analytical products.

You know, these include some that were more taken on by us on a discretionary basis, some were more required. But. But they're the examples of the type of work products that we do. And I'm sure you're familiar with some of them. And all of these are always available on our website.

And also in many cases, they're available in printed format as well. But with that I can stop and be happy to respond to any questions that you may have. Great colleagues.

Any questions for the LAO or comments. Senator Niello.

No question. Just a comment. I have worked with Liz Hill and Mac Taylor when I was in the Assembly, was part of the Committee that hired Mac. So I've been intimately familiar with the LAO over the years. And you folks do outstanding work. You are absolutely right.

You are completely unbiased, which is why you should Write title and submit summary statements too. But I digress. But I just want to state that when people, if anybody asks me about state government, I send them to their website. It is a huge wealth of information and you folks do very good work.

Thank you, Senator.

Senator Cabaldon. Yeah, thank you. Mr. Patek.

With the chart that you provided us, there was one area I wanted to query you about and that is the, I think it's the Budget Committee or Subcommitee handouts, which is an innocuous sounding topic, but in some sense it can be a proxy for how much we're deep diving into complicated topics that only LIO can help us navigate.

And so I don't know if 2021 was an off year or if we've been seeing less of your offices responsibilities being directed towards the Budget Committee and the Budget Subcommittees with respect to the handout portion, not the blog post and the folks more public facing.

Can you give just a sense of this, you know, the role of the, of your team in our Subcommitee hearings and budget developments that changed in any or is it changing in any way or is that just 2021 as a outlier?

Yes, Senator, I don't have a, a great explanation at the moment for why that number stands out as being a little bit lower.

But in General we are, our staff are, you know, constantly interacting with the Subcommitee staff and reaching out and coordinating and discussing how we can assist getting ready for hearings and attending the pre hearing meetings.

And so you know, it's a very, that's a very important, significant part of what we're doing at this time of year, year frankly. So and I looking back, I think that maybe the number does reflect the effects of the pandemic as well.

Maybe there were some, there may have been some reduced role for the handouts at that time because of the pandemic, but I can also look into that and see what the explanation is.

Any other questions? Comments? Okay, thank you very much to the Lao. So that concludes the substance of the hearing in terms of voting. Everyone who was here when we adopted the rules and the electing the chair and Vice Chair without objection is already recorded.

So but we also now have some Member Jackson is here, Senator Ochoa Bogue is here. And so how any so we in terms of adopting rules and electing me as chair, Mr. Gabriel as Vice Chair, any objection to that? Okay. Any objection? Great. So we're now while we're waiting for Senator Laird. Yeah.

So everyone else, you're welcome to stay if you really want to, but you don't have to. The voting is done. I will wait for Senator Laird to add on. And then? And then we'll adjourn.

At that point, you.

Yeah, we'll briefly.

Senator Allen is not here. Senator Allen, any objection to the rules or to the election of the chair and Vice Chair have you know, not enough to express. Okay, good. That Objection will add Mr. Allen on to both of those votes. And we'll recess again waiting for Senator Laird.

Okay. Some remember.