Assembly Budget (2025-2026 Regular Session) Budget Subcommittee No. 5 on State Administration

Good afternoon, Good afternoon and welcome back to sub 5. Today our hearing will cover labor and workforce development. We will get an update on Cal OSHA regarding vacancies. Employment Development Department on the status of EDD next.

And the status of Unemployment Insurance loan repayment from the DIR on the subsequent Injuries Benefit Trust Fund and an update from the Agriculture labor relations board on AB 113 and the work increase load. In addition, we have 10 items that are on the agenda for non presentation.

Staff has suggested that the following items do not receive a formal presentation from the Administration in order to focus time on the most substantial proposals. Members of the Committee are free to ask questions on them. Let me or our team know if you would like to speak or ask questions on any of these issues.

Do you have any? Not at this point. A few housekeeping notes. This is an in person hearing with all panelists testifying in person. We will take questions from the Members of the Subcommitee after each issue and public comment will be taken after each issue and will be taken in person. Today's hearing is an informational hearing.

If you are unable to attend this hearing in person, you may submit your comments via email to assemblybudgetm.ca.gov with that, I would like to ask if any or of our Subcommitee Members would like to make any brief remarks. None at this point.

That will have us begin with our issue number one, the division of occup, Occupational Safety and Health or dosh. Cal OSHA. And if you would join us. Hello and welcome. If you will introduce yourself as you speak. Welcome.

Is the MIC working? There we go. Is that better? I'm Jay Sturgess with the Deputy Secretary for Fiscal Policy and Administration with the Labor and Workforce Development Agency. To my left is Josh Iverson. Want to introduce.

Well hi, I'm Josh Iverson. I'm the Chief Financial Officer at the California Department of Industrial Relations.

Did you want me to do a quick overview of the. Okay. As noted in the agenda, Cal OSHA has been challenged with an unusually high vacancy rate for the past past few years.

Addressing the hiring challenges within DIR has been and continues to garner significant attention from the labor agency and DIR Executive leadership all the way down to the first line supervisors. It's been an ongoing issue. We talk about it regularly. I don't think a week goes by where we're not in conversation internally and with the Department.

We're regularly reviewing the status of filled and vacant positions, looking at recruitments in progress, as well as evaluating what recruitment is working, what retention strategies are working, what's working best what could use improvement? In my opinion, DIR really began to turn the corner on this issue about 18 months ago.

We've seen consistent improvement in the vacancy rate since that point in time. Obviously we'd like to see it move faster than it has. So we're continuing to push for that to look for opportunities to increase the rate of hiring. But we feel like DIR is really on a good path.

My records indicate that we're up about 100 positions from where we are were 18 months ago. So that's a net gain of 100 new staff within the division. And if you have any more detailed questions, I think Josh can dive into those.

Good afternoon, Chair Quirk-Silva and Assembly budget Subcommitee number five, as I mentioned, I'm Josh Iverson, DIR's chief financial officer. DIR Director Katie Hagan and Cal OSHA Chief Deborah Lee send their regrets that they could not attend today's hearing. They're in Southern California hosting the Occupational Safety and Health Plan Association meeting, otherwise known as OSHA.

That is an organization of 29 states and territories that have federal OSHA approved state plans. OSHA is the link between between state plans, federal OSHA and Congress. OSHA representatives meet only three times a year to exchange information and address shared concerns. And California is hosting this meeting.

I will do my best to answer your questions, but I respect the Chair and Subcommitee too much to speculate. So if I don't know the answer, I will say so and I will commit to getting you the answer as soon as possible. It is true that Cal OSHA has come a long way over the last 18 months.

18 months ago, Cal OSHA's vacancy rate was around 35% and at the end of December 2024, it was down to about 23%. I kind of expected some applause, but that's okay. I'll just reiterate. Cal OSHA is great. Thank you.

Cal OSHA has dropped their vacancy rate from 35% to 23% over the last 18 months. And we're not going to stop there. We have momentum for the first time in a long time. Cal OSHA Chief Deborah Lee has been with Cal OSHA for around 30 years or so, so she knows CAL OSHA in and out.

We also have momentum with our emergency hire authority that was granted in Assembly Bill 171, and that goes until December 312026. In addition, AB171 calls for Dir to do a classification study, which we've contracted to do along with a workload study, and it calls for DIR to work with CalHR, and it calls for CALHR to work with the State Personnel Board. So we certainly have momentum and heading in the right direction.

The work with our contractor on the workload study and the classification study continues. And in addition, the Joint Legislative Audit Committee had the California State Auditor conduct an audit of a few key areas of Cal Osha. That audit's been ongoing since last calendar year.

The report's not out yet, but I believe the California State Auditor is nearing a draft report of some sort. Haven't seen one, though. So with that, happy to attempt to answer any questions the Subcommitee may have.

Thank you. Appreciate that. Before we move on, we do have our new Member here. We'd like it to open up. Mr. DeMaio, if you have any opening comments.

I'll keep it brief. The Budget Committee is perhaps the most important Committee to be on this year because of our fiscal challenges.

We can either put our head in the sand and continue down the path that we're on, which is not sustainable, or we can try to go through every single Department and ask some basic questions as to whether we are getting a good return on our investment and whether this is the core mission of government when compared with other spending priorities.

And so I think ensuring that we have Members engaging in oversight of our budget is absolutely crucial. As I said at our full Committee hearing, I don't have a whole lot of confidence in this Administration in terms of their inability to manage some of these issues that have been festering.

Nor do I take their representations with a whole lot of weight because we have not been given the truth. And so my hope is that the civil servants will do their best to provide us with facts. It is our duty as the legislative body to ask these tough questions.

And I know that we can't divorce things from politics, but it's important that the public know where their money's going, and it is our duty to ask these tough questions. So with that, thank you very much, Mrs. Chairman.

Thank you, and welcome to the Committee. Next, we're going to move to the Department of Finance. If you have any comments. And our LAO.

Good afternoon. Chas Alamo with the LAO. No specific comments about the informational item. Pointing out that this has been, as Mr. Iverson mentioned, a long standing issue at Cal OSHA.

The two pieces of information that are coming forthcoming, the workload study and the State auditors report to hopefully be seen later this year, should provide quite detailed view as to where Cal OSHA sits.

The point that our office would want to make is that, of course, the focus on vacancies is crucial, but we also need to keep in mind that the Legislature can also assess whether the total number of inspectors at Cal OSHA meets the state's needs with new statewide workplace safety standards. Those can be reconsidered.

They are not set in stone. So, yes, we focus on vacancies, absolutely. But we would also encourage the Legislature to think about the total number, the overall picture of the state's Cal OSHA staffing levels and. And that workload report in particular should help identify any areas where the Legislature will want to focus.

Thank you. Appreciate that. Bringing it back to the Committee. Do we have any of our Members with question? Assemblymember Ward.

I mean, I guess I'll just go right there. So, knowing that this workload study is coming forward and knowing that we have had perennial concern around vacancies, what do you see as far as the ability to resolve investigations on an appropriate timeline?

Do you have any information today as we're starting to be able to consider budgetary decisions even ahead of this workload study that can inform whether or not we're meeting expectations or whether or not investigations are taking too long?

Be happy to take that. I mentioned earlier the progress that Cal OSHA has made over the last 18 months. Months, the vacancy rate has fallen from about 35% to about 23%. This vacancy rate does not prevent Cal OSHA from fulfilling its mission to protect workers.

Our enforcement responsibilities include investigating complaints and accidents, inspecting high hazard industries, issuing citations and orders to take action after investigation of hazards, and issuing permits and licenses in construction and mining. The most immediate of those responsibilities is any hazard to workers, and we evaluate each situation and respond appropriately.

A hazard that could cause immediate harm or injury is given priority and enforcement will visit that site as soon as practicable to open an investigation. A complaint of lesser severity will be dealt with as a lower priority but equally effectively. And as mentioned, Cal OSHA has added potential positions in recent years. The workload study will help inform the appropriate allocation of those positions.

Appreciate the answer. I guess what I was looking for was something, if there was any information to date that was a little bit more specific. For example, we have been able to resolve a complaint or an observation before with the workload that we had in. In an average of 41 days.

And now that we've actually been able to fill some of these vacancies, that that rate is down to resolving issues within 26 days. I'm making up numbers, of course, but what are our outcomes here that we're looking at that I think will help to inform whether or not we should sustain maybe some of these budgeted positions.

Thank you for the clarification. I apologize, I don't have those types of statistics with me today. And I think that is one of the intentions of the workload study is to understand some of those metrics. But I can definitely follow up with some of that information.

Okay, I'll look forward to it. Thank you.

Thank you.

Thank you for that. Any additional question, we also have another new Member to our Committee. You were here last time. All right, do you have any questions? Assemblymember Liz Ortega. We are on OSHA.

No, I don't have any questions. I've already requested an audit about the. Department and so I'm waiting to see the results of that audit.

So it was mentioned that that should be coming fairly soon. The audit results.

We were told by the California State Auditor to expect a report in the summer.

I do have a very question on requirements and qualifications regarding hiring. Who are you looking for and why does it. I mean, we do appreciate going from 35% to 23%. Thank you. But what kind of qualifications do you. Who are you looking for for this type of job?

Well, primarily we're within enforcement. We're looking at the industrial hygienist and the safety engineer classifications of positions. And I mentioned there's a couple studies, the workload study, which we've already discussed, but then there's also a classification study. It's motivated by Assemblyville West 71.

We're looking at the minimum qualifications that are already established for those two classifications to determine if any changes could be made to either attract a broader set of candidates or perhaps just folks with a different type of skill set.

What are the minimum qualifications?

Okay, so I have that here. For the junior safety engineer, there's an education requirement. It says equivalent to graduation from college with a degree in engineering. And then it moves on to the assistant safety engineer. So it's kind of going up the career path there.

So the same education requirement as the junior safety engineer, but then an experience requirement of one year at the junior level. And then it keeps going up the career ladder like associate safety engineer and senior safety engineer with commensurate requirements of experience.

So you're definitely looking at somebody with a higher education degree in engineering.

That's the way that the classification is written today. One of the intentions of the classification study is to determine whether that should continue, whether that's kind of equivalent in the private sector.

All right, thank you. Appreciate that. With that, we will open it up to the public. You have anybody wishing to speak on this item Reminder that our microphone goes up and down so you don't have to bend. You just can move it up and down. There you go. Welcome.

Thank you. Chair Quirk-Silva and Committee Members. I wanted to comment on this issue around calsha staffing. My name is Beth Spitler and I am the field Director for the California Food and Farming Network and I staff the California Farm Worker Coalition. And I'm here as part of a coalition of labor advocates, unions and health and safety professionals and advocates.

We're asking the Committee to allocate $1.25 million from the occupational Safety and Health Fund Fund to establish the Advisory Committee and study laid out in Assemblymember McKinnor's AB694 which will address the chronic understaffing at Cal OSHA that the Committee just discussed.

As you know, Cal OSHA is funded primarily by the Occupational Safety and Health Fund which has had and is projected to have significant reserves created by the unpaid salaries of the positions that that the agency has had a hard time filling.

And the OSH Fund receives its funding in part from a small surcharge on employers workers compensation assessments. And as the Fund has grown, unfortunately employers workers compensation assessments are now being lowered.

So not only are employers not being inspected due to calosha's vacancies, but they are also paying less towards workers health and safety Workers deserve a fully staffed agency in order to protect their health, safety and ability to return whole to their families.

And we humbly request that the Committee allocate just $1.25 million of the OSH Fund reserves for AB694, the Strengthening California's Health and Safety Enforcement workforce Bill. Thank you.

Madam Chair Members Mike Monaghan on behalf of the State Building Trades. I'm not new to Cal OSHA. 40 years ago I was a labor Member of the Cal OSHA Appeals Board. Discussions 40 years ago, top line were understaffing issues. So to say that this is kind of a lingering issue.

It's been around almost since the inception of the program. Not having enough inspectors creates an unsafe workplace which harms the 450,000 men and women of the construction industry. We believe strongly that we should take a more aggressive approach to staffing and make sure that we can create safer environments for our workers. Thank you.

Thank you. Bringing it back to Committee. We have remarks or question by Assembly Member DeMaio.

Yeah, I just learned that Cal OSHA won't be here for item six. So this would be a time to talk about the Domestic Workers SB 1350 implementation. So it's not being presented. But since I have OSHA here, can. I. Oh, I see what you say. Do you have a response to that?

So, and it does tie in with staffing. This is what I'm talking about. In terms of a tight budget environment and the need to set strategic priorities, what do taxpayers want to see us get accomplished with their limited tax dollars? Where are some of the occupational safety hazards? How do we prioritize strategically our workforce and our focus?

But we have Senate Bill 1350, and I didn't even know that this thing even existed. In fact, I had to ask my staff, is this a joke? Did you slide this in to make me laugh?

Apparently we're sending Cal OSHA inspectors into people's backyards to see if the landscaper might be exposed to hazards and we're sending them into their kitchen. I know when I'm cooking, it's a hazard.

How can you justify allocating staff to this when there are so many other more high risk inspections that perhaps are not getting done because of the vacant positions? Does Cal OSHA have a view on this Bill, this 1350, given your staffing limitations?

Well, the Bill was sent to the Governor and the Governor signed it into law. So as a part of the governor's Administration, we are implementing that Bill as it is law. Now, I'm not extremely familiar with the Bill or the effects of the Bill Cal OSHA.

You're going to hire four and a half positions and spend $1.2 million to go into people's backyards to make sure that the gardener, the landscaper, isn't exposed to any hazardous risks or people's kitchens and bathrooms and in their homes to make sure the housekeeper is not exposed to risks.

I mean, this is one of those gut check moments. You have vacant positions in perhaps some more mission critical areas, and yet you're coming here before this Committee to ask for an increase in FTE of 4.5 $1.2 million.

It would just seem to me that maybe we can punt on the landscaper housekeeper backyard home inspection role for OSHA while we refocused on the mission. These are the sorts of things that again, the Governor signed this into law.

I guess some people in the Legislature thought it was a good idea to pass it, but in lean budget times when we have vacant positions, I think this is time for leadership.

And if you need this Legislature to kind of give you some input on this issue to reprioritize, I guess it's on our backs to do that because the Governor seems to think we're gonna be able to find four and a half positions or staff to fill these positions versus some of the others.

So again, that's just the process this Committee's gonna have to go through. That's the process I would encourage civil servants in the Department to go through. Because you know your Department much better than the Governor. Far better than the Governor. You're trying to get the mission done. You're trying to shield it from politics.

Please come to this Committee and say this is where our strategic workforce plan is going, given the highest risks to workers in our state. Thank you.

Thank you. All right. We appreciate your comments and we will be moving to issue number two, Regional Coordination for Career Education and Training Budget Change Proposal, or better known as cte. Again, please introduce yourself and you may go ahead and begin.

I'm Abby Snay. I'm the Deputy Secretary of Workforce Strategy at the Workforce California Labor and Workforce Development Agency and really appreciate being here today to talk to you about the regional coordination component of the Master Plan for career education.

In August 2023, the Governor called for a new Master Plan for career Education through the Freedom to Succeed Executive order. He urged a state agency and institutions of higher education to increase equitable access to well paid jobs by creating and strengthening education and training pathways that respond to the emerging needs of the economy.

The Governor announced the framework for the Master Plan in December with regional coordination as a core component. The plan calls for assessing regional assets as well as challenges related to regional collaboration. It aims to strengthen employer engagement to identify critical skills for the workplace and expand opportunities for work based learning such as paid internships and apprenticeships.

This component of the Master Plan has two overarching goals. Preparing people for in demand jobs and meeting employers needs as well as improving efficiency and reducing redundancy in regional coordination.

In a dynamic and quickly changing economy, education and training partners have to work closely with businesses at the regional level to anticipate their talent needs and build training pipelines to meet those needs and prepare students for good jobs and career pathway advancement.

Regional coordination varies greatly across the state and we want to understand the structures and partnerships that work, why they work and how successes can be adapted and replicated in other regions. Aligned with the State Economic Blueprint. Sorry. The State Economic Blueprint and Regional Plans.

We want to learn the systems barriers that impede coordination among community colleges, workforce boards and other education and training providers and identifies solutions that reduce redundancy and enhance efficiency and effectiveness. All toward the goal of strengthening education and employment outcomes for young people and also for working adults.

The 4 million in requested one time General funds will enable the labor agency to contract for the evaluation of current regional structures and recommendations for streamlining systems and processes and improving education and employment outcomes as called for in the Master Plan.

We want to identify how regional coordination models can be adapted to create sustainable forums where educators, workforce training providers and most importantly, employers can work together to align education and workforce with employer needs.

The recommendations from the proposed research that would inform state policy would go to the proposed State Coordinating Council so that state policy changes would affect education and workforce stakeholders across systems and lead to better aligned planning, streamlined funding and strong program outcomes.

The research conducted through the regional coordination component of of the Master Plan will give the proposed State Council the information it needs to develop state policy and structures in support of regional coordination.

The research findings and recommendations will also drive changes within LWDA and the workforce departments on regional strategies that lead to better jobs for individuals and a skilled workforce for regional employers. Thank you for hearing me. I'm happy to respond to any questions you may have.

Thank you. We will next go to the Department of Finance. Any additional comments and then to the LAO.

Okay, thank you Members. Chair Alexander Bentz, LAO first, we do concur that regional coordination in this area and CT workforce development has some promise. However, we recommend that the Legislature when evaluating proposal, focus on how any findings will lead to better policy and coordination in the future.

So two points of context I just want to make sure come through here. As the Department mentions, workforce development and career education programs are spread across many departments and in many different agencies. However, this is because these programs are intended to serve many different populations who have many different needs and many looking for different services. Second point of context is that many recent state initiatives do focus on regional coordination.

A couple examples California Jobs First EDD and the Strong Workforce Program California Community Colleges and so we just note that different models have been used in these different initiatives and so it could be useful, as this proposal suggests, to understand the best models for doing so.

So our recommendation when for evaluating this proposal is to have the Department identify specific ways in which state policy can influence all these different actors at the regional level to understand what policies can the findings can lead to in the future and then to focus on how the evaluation can be used can be designed to meet those goals.

So thank you, thank you. Bringing it back to Members Questions.

So let me understand this. We've been in workforce development in this country for decades, if not more than several hundred years. We have workforce investment boards. We have colleges and universities, we have business groups, we have employers, we have local agencies, we have state agencies.

And you're here today to ask for $4 million in a tight budget environment to do a study on how to enhance regional collaboration. How is this not duplicative of the role of your Department?

Mr. DeMaio, I think you're getting to the heart of. Of why we need to do this research. We do have multiple systems, as my colleague at the LIO just described, that often work in silos. There is redundancy, there is a lack of coordination. And I would.

Inefficiencies. You would. You would say, waste. Is there wasteful spending, you think?

I think we want to ask the hard questions.

You think we're offering programs that may not be meeting the needs of employers in some of the regions?

We have to ask the hard questions and we have to ask.

So have we not been asking those questions for the last 7080 years that we've had a workforce investment system? I mean, we've had workforce investment boards, workforce partnerships for decades. Why is this suddenly occurring to the Department that we have to suddenly have a big study on this? You.

You're using all the buzzwords that usually get me really excited, and I'm a budget geek, so it's hard to get me excited. Have you selected a contractor to do this work? It looks like you're not asking to do this within your own Department to the tune of $4 million. You say that you're going to hire a contractor.

Do you have a contractor in mind? Have you already selected your contractor to do all this analysis and auditing and research?

Pending approval of this request, we would go through a contract competitive procurement process.

Okay, I have an idea. I'm not going to support this, but I would support it on one condition. I want to see if you, as the head of the Department, the contracting officer, because you would ultimately review the bidding and decide what vendor would be best.

Will you commit today to hiring the Federal Department of Government Efficiency that was just created in Washington by the Trump Administration to do all this work? I mean, who better to ferret out waste, fraud and abuse, duplication, fragmentation, mission overlap, lack of coordination?

You just used all the buzzwords that that Department at the federal level has been talking about. And you know what the beautiful thing is? There are a variety of interagency contracting vehicles that you could utilize.

The GSA MOBIS system in the Federal Government, a state government can actually contract with the Federal Government and vice versa to do various services. And of course, there wouldn't be a profit motive involved because we're hiring a fellow government agency, and we all know how government agencies are. Great. So can you make that commitment?

Because I'm looking at this request and I'm gonna have to vote on your budget. And right now I can't justify in our tight budget environment spending $4 million on some more research unless I know that we have a high likelihood of getting a pretty big bang for the buck. And so far with DOGE, we're getting a bang for the buck buck. Take me up on that offer.

I think we would have to do a competitive procurement process.

All right, I'll let the folks in Washington know. I think they might be interested in bidding on the work. I would be interested to see if they would be interested to kick the tires here in California. I think they might be.

Thank you for those questions. We're going to keep it to state discussion. I understand your excitement about the do what? DOGE. We don't all share that, as you probably know. But that being said, I don't discount your questions.

One of the things that I think is coming up with cte, and I did ask for some of this before the hearing was, is that over many years, funding has been pushed down from the state into different areas. So whether it's community colleges, at some point it was higher ed.

And I believe we have the high school Strong Workforce program, we have the Strong Workforce program, we have the adult education program, we have apprentices, we have economic workforce development, even nursing support in different areas. And this is not unique to cte.

When there are that many organizations that are getting various funding streams, what happens is everybody stays, as you said, in their silos, and we don't get this regional cooperation. It happens in housing, it happens in the arts. It happens really across the board. People fight for funding, they get it, and then we're asking for more funding.

So I do think it's definitely credible to ask about now we're going to ask for an additional $4 million to do much of what should be happening. And I have been on some of these collaboratives over the years.

I'm an educator and have seen whether it's the community colleges, others trying to figure out not only the best pathways, but the most important is how do we make sure our students, whether they're high school adults or even returning students, to get them trained in a pathway that's going to be productive.

So I am going to continue to ask questions about this 4 million, because there is so many places that the money has been put in. Do we need another umbrella organization for this? But does the Department of Finance. Can you give us a little idea of why the Governor did put this into the budget?

Teresa Calvert, Department of Finance it's very consistent with what Ms. Snay relayed and looking at the regional differences and seeing what works best for the different regions and having that coordination come from the state, state led efforts.

All right. Well, I will just open it up to the public. If we have anybody from the public here not.

Good afternoon chair Members. My name is Anallely Martin and I'm here on behalf of the California Immigrant Policy Center. I'm here today to urge your support for the economic Mobility for all Coalition's budget requests to Fund a third round of grants for Social Entrepreneurs for Economic Development or SEED initiative.

Administered by the Employment Training Panel, SEED provides Michael grants and entrepreneurial training for immigrant and limited English proficient individuals, helping them start businesses or join worker owned Cooperatives to support themselves and their families. This successful program has already helped hundreds of entrepreneurs create jobs and build resilience, especially during the pandemic.

Immigrants contribute over 26 billion to California's economy and seed ensures it can continue to thrive. Investing in seed strengthens our communities and supports an inclusive, resilient economy. Thank you. Thank you.

With that seeing no other any additional comments, we will be moving to items number three. Thank you so much for coming and any of our presenters, please move your mics up a little bit. We are getting information that we're not able to hear you on the telecast.

Next we have issue number three, California Workplace Outreach Program, CWOP this we welcome you.

Welcome.

Hello again. I'm Josh Iverson, Chief Financial Officer at the California Department of Industrial Relations.

Hi, good afternoon. My name is Sebastian Sanchez. I am the Deputy Secretary for Immigrant and Agriculture Workforce at the labor and Workforce Development Agency.

Who's going to begin.

Sure. The California Workplace Outreach Project, formerly known as the Covid 19 Workplace Outreach Project, has been in effect since 2021. We launched this program in response to Covid 19, thinking about how we can better reach high risk workers in industries that were particularly impacted by Covid.

Ensuring that they get the information they need and that they understand the information and the laws that protect them, as well as ensuring that employers understand what their obligations are under California law.

This program, from our point of view, has been quite successful and we've been able to reach over a million and a half workers in deep conversations, one on one conversations, phone calls, direct outreach, not just handing out flyers, but actually having extended conversations with workers. We are now entering the fifth and sixth iteration of this program.

We have decided to, for these upcoming iterations, Fund it as a two year program rather than a 12 month program as it was in the third and fourth iteration. It was a six month program in the first and second iteration.

This program is also, as of the fifth iteration, will allow us to do outreach beyond topics that are not specifically connected to Covid 19. So we will be able to identify other priority topics and issues for California workers that these organizations will be able to do outreach on.

We've been able to do outreach in over 25 languages to California immigrant populations.

One of the things that we've really focused in, in terms of developing our trusted messengers is developing their capacity and have done over 100 trainings between state staff and UC staff to make sure that the CBOs that we are funding, their staff properly understand the laws on which they are doing outreach. These workers are.

These organizations are also providing direct support to workers in terms of navigating the claim process and understanding the timeline, understanding what they need to bring to each to to ensure that whenever there are actual complaints, they're efficiently processed. I have shared with you all three documents. One is the campaign report for the last iteration of CWOP.

This is a report that was done by one of our technical assistance providers that just really details for you the numbers that we have as well as the type of activities that the organizations were engaged in. And then I've also shared with you a report and the Executive summary of the report from the Possibility Lab.

The Possibility Lab is an entity within UC Berkeley that did an independently funded study on the last iteration of CWOP. And this report is being released to the public on Thursday, but they allowed me to come and share it with you all today.

This report really demonstrates and is able to finally provide us with data that demonstrates that workers that have been engaged through CWOP have a higher understanding on the topics on which we are focusing on. So we're really thrilled to finally have a report that really evaluates rigorously and again independently the impact that CWOP has on workers.

I'll pause there if there are any questions.

All right. We will then go to our Department of Finance and our LAO after that. No comments. Alright LAO.

Chaz Alamo with the Legislative Analyst Office. No specific comments about the informational item. But happy to take questions if there are any.

All right, Members of our Committee, Assembly Member Ortega.

Thank you for coming today and sharing with us the success of this program. One quick question I have. Is that the current funding levels or the current funding is through 2029, is that correct?

That is correct.

And with that being the the length of the funding, do you think you have enough or will you need additional resources for this program?

We are currently completing the funding proposals for this current iteration. We have the money that the Legislature and the Governor have provided to us and we feel that we'll be able to run the program. As you can see, we had 25 million for the last iteration for 12 month program.

We have $49.5 million for the fifth and sixth iterations.

The other question I had is as it relates to your work with supporting osha, can you give me an example of how you've been able to support the work of OSHA given their vacancies?

It's no secret that I've had a lot of concerns with the way OSHA has managed the vacancies and the work that it has not completed. And so I wanted to hear from you. How are you complementing that work?

Absolutely. I can give you a concrete example connected to the LA wildfires.

In response to the wildfires, of course, we're trying to figure out how do we ensure that workers that are going to be going in to do some of the cleanup work, truly hazardous work that some domestic workers may be doing and some day laborers may be doing.

Because of the relationships that we have built through CWOP, Chief Lee was able to meet directly with the coalition that is working in Los Angeles with the regional lead, Sokal Koch, to meet with organizations that are engaging those workers directly and talk about what are the strategies that we're going to engage in to collaborate in terms of ensuring that workers are aware of their rights, how do we train them, and then also ensuring that employers are aware of their obligations so these types of opportunities don't come up without having devoted time to developing the relationships to ensure there's trust on both sides that the organizations understand the law and that Cal OSHA understands that they can use this to expand their outreach and expand the impact that their own outreach staff have to be able to reach all the workers that might be at risk.

Right. Assembly Member Demaio.

So again, I thought the staff were playing a joke on me this morning when they said you're going to have the Covid 19 Workplace Outreach Project come before your Committee today and ask for $25 million of funding that's going to go all the way through 2029. I said, what next?

Are we going to get a black and white tube TV regulatory program coming before us asking to regulate that long gone product?

I cannot believe that in 2025 with a multibillion dollar state deficit where you're raising taxes and cutting citizen services, that anyone would have the audacity to come before us and ask for $25 million for funding till 2029 for a Covid 19 out outreach project. I mean, I'm looking at your annual report glossy.

During the last 12 months, funds were allocated to 76 community based organizations to reach communities disproportionately impacted by Covid 19. The fact that we have a Covid 19 outreach program surviving past 2021 is a problem. Most Californians would probably look at this saying Covid 19, that's like so yesterday. Thank goodness it's so yesterday.

But not up here in Sacramento where we're pumping limited taxpayer money into this program. These 76 community based organizations.

I looked at each of the organizations, I had my staff pull their IRS filings, go examine their websites and it is clear that most of these organizations do not have the qualifications, the performance criteria for labor relations or workplace safety or workplace outreach. Many of them are unions. Okay.

I would say, okay, arguably they would claim that they have the ability to do that. But I would say that they perhaps are a partisan organization with 1.0 of view, a special interest, getting funding from the taxpayers.

But how can taxpayers not conclude anything other than the fact that this is a slush Fund to Fund left wing organizations. Let me read some of these organizations that you're giving money to. And again, you're asking for millions of dollars in a tight budget environment.

Organizations like Congregations Organized for Prophetic Engagement which is engaged in Ballot harvesting during elections. Why are we funding that organization in the name of Covid 19 workplace safety? When they're engaging in harvesting of ballots, is the funding going to politics? How about Ring to Democracy? We looked at Ring to Democracy, Empowering youth through civic engagement.

Have a whole program that they Fund on voter engagement and empowerment campaigns. They're not Covid 19 or health care experts. They're not workforce safety experts. They're a political organization. And nothing is wrong with them being a political organization. They have First Amendment rights with their own money, not with taxpayer money.

Another organization, Alianza Coachella Valley, which holds political candidate forums. They lobby on legislation. Or ACCE alliance for Californians for Community Empowerment, a rent control group or a Center for community Advocacy. They do community organizing and political forums with various populations. Or the CRLA foundation or the Misteco Indigenous Community Organizing Project. Sorry.

All these organizations usually have something about community organizing in their name. Both organizations, which Fund illegal immigrants to fight the Federal Government to stay into this country. We just gave them a pot of money a few weeks ago and now they're getting more money in the name of workplace safety.

And Covid 19 or united respect Education Fund, which organizes protests in front of Amazon and Walmart. Again, the fact that this was a Covid 19 program should have been the warning sign. But when we dug deep to the people, you're giving money to, the organizations.

These 76 community based organizations that you say are expert in reaching out to workers and understanding workplace safety and workplace regulations. They're political groups. You can respond.

But I don't see in this tight budget environment it being appropriate to allocate $25 million which would carry us all the way through June 30, 2029 and I assume it's 5 million in this year's budget. 5 million here, 6 million there.

Soon it adds up for a political slush Fund to Fund groups that have nothing to do with the stated purpose of the program. I would like you to provide my Office with all 76 organizations and the actual funding from the State of California provided. The 76 organizations, can you commit to doing that through this program?

Yes, we can commit to providing those to you. We've provided all 76 organizations in the report.

I want to know what each of them got from the taxpayer since the inception of this program. How many millions of dollars? Hundreds of thousands of dollars for these 76 programs through state funded budget accounts. Thank you.

We can commit to doing that. Point of clarification. The governor's January 10th fiscal year 2025, 2026 budget does not include any type of a proposal for CWOP. The funds date from fiscal year 2023-24 and also 2024-25.

And if I could just note, it's the California Workplace Outreach Project. It's no longer linked to Covid 19 as I stated at the beginning of my presentation.

Thank you. All right, we're going to move on. Do we have any of our Members wanting to make comments? Then we will go to the public.

Rosenberger with Service Employees International Union. One thing I appreciate about California is that we learned from Covid 19. And what we learned is that CWOP was incredibly necessary to push back on worker intimidation and give workers a voice. And for those reasons, we support this.

Hi there. My name is Rachel Deutch. I'm with the California Coalition for Worker Power. Thank you so much, Chair, for opening comment and for your past support of CWOP. CWOP is a vital program, especially right now. We see a lot of attacks on immigrant workers and it's incredibly important to continue reaching folks with information in 46 languages.

This program reached over 4 million workers from September 2023 to 2024. Just want to clarify a quick point in response to your question, Assemblymember Ortega.

Although $55 million over two years was allocated and 45 million is planning to be spent, so we're already seeing a reduction right now for the coming two years over the previous scale of the program. And there will not be money after 2027 to continue the program at this current scale.

So we would like to see additional money allocated to scale up the program. It is essential to reach every worker in California during these perilous times.

And we know that these community partners have reach in communities where workers are subject to wage theft, are experiencing unsafe conditions, are trying to respond to climate disasters that impact their safety at work. Thank you so much.

Good afternoon, Madam Chair. And good afternoon to the Committee. My name is Matt Cusick. I'm the Community Impact Director at the Sacramento Central Labor Council. First of all, I want to thank you to the Chair and to the Committee for your past support of CWOP.

I could list the numbers of people that we have directly engaged through this program in our organization as regional leads in this project since the beginning. But I fear that that would under represent the impact that the this project has because every worker that we directly engage goes back to their workplace and impacts countless other workers.

Simply put, CWOP is the most efficient and impactful program and investment in your agency's goals in California that the state could make organized, educated and empowered workers serve as the frontline investigators and enforcers for a wide range of state agency programs, providing real, real time analysis and specific contextual knowledge inside the workplace, without which the agencies cannot effectively function.

Workers trained in their rights are the first line of defense for occupational safety and health, which we talked about already. Preventing poor health outcomes, accidents at work, unsafe workplaces so that the burden can be reduced on our state agencies.

They are the first line of defense in preventing wage theft, in preventing discrimination, in preventing harassment and other violations of labor law. Workers who are informed of their rights and empowered to defend them reduce poverty and economic inequality. They can prevent economic devastation, economic environmental disasters that can improve public health access and public health outcomes.

This is the sort of thing There is not one agency in the state whose goals are not advanced by empowering our workers with knowledge of their rights and how to defend them. Thank you.

Good afternoon, Madam Chair. My name is Laura. I'm with the Center for Workers Rights. I'm here to voice my support for the California Worker Outreach Program which has helped our organization reach thousands of workers in the Sacramento region with critical information about their workers rights. Thanks to qop, we launched a wage claim clinic last year.

Not only that did not only help file wage complaints through the Labor Commissioner, but also helped empower them with the knowledge of what the Labor Commissioner process is and ensure that they advocate for themselves in the future.

The program is essential and we urge the Committee to scale up co op so organizations like ours can continue to support our vulnerable workers. Thank you.

Good afternoon Committee. My name is Jose Mezquita with the nonprofit the Ring of Democracy. I'm here today to voice my support for the California Workplace Outreach Project which has allowed our organization to reach over 6,000 workers in the Sacramento region to provide critical information about their workplace rights.

Specifically, we have connected young workers in the region to this critical information to better understand their rights as they enter the workforce. From helping them understand their rights to an uninterrupted lunch break to working during the school week as a high schooler, we have helped them prevent and stop workplace rights violations.

Not just themselves, but like their friends in school. Right. That's why CWOP is so important and why we are asking this Committee to consider scaling up CWOP so that organizations like ours can put more resources into helping workers who need support. Thank you.

Good afternoon, Madam Chair. My name is George. I represent Valley Voices, a community based organization serving Kings County. I want to express my Support today for CWOP which enabled our organization to reach 15,000 workers last year, providing them with critical information about their workplace rights.

With the spread of the Avian flu Valley Voices has worked closely with dairy workers to provide vaccines, PPE and educational material covering everything from identifying symptoms to staying safe at work and understanding their rights. We hosted workshops in collaboration with state agencies on workplace issues including wage theft, health and safety, among other issues.

The workers we hear from today are witnessing a rise in unlawful discrimination and threats against immigrant workers, especially those in non union jobs across industries like agriculture, packing houses, dairy farms and meat processing facilities. This is why CWOP is so vital.

We urge this Committee to consider expanding CWOP funding so organizations like ours can continue to provide these workers with support. Thank you.

Hello, my name is Tia Kunz. I'm a researcher at the UCLA labor center, proud to be here to support CWOP.

Covid Is Going Happen Again so whether or not it's the Covid Worker Outreach Project or the California Worker Outreach Project as it's been renamed, I was glad that my brother George was here to talk to you guys about the critical work he's doing around educating workers on the Avian flu. Right? This is going to happen again.

The infrastructure is there and it's been amazing to watch the growth and development of Covid. CWOPS infrastructure. My colleague Rachel spoke about 4 million people having been reached in the 03 or 2324 calendar year.

The 24-25 calendar year has reached 5 million people, 76 organizations in 48 languages throughout the state and well over half of those workers said they didn't even know they had paid sick days. Laws don't enforce themselves, so I'm thrilled to see the support and the continued funding for the California Worker Outreach Project. Thank you.

Good afternoon, Madam Chair. My name is Vanessa Martinez and I am a community educator with Universada Popular. I am here today to voice my support for CWOP. We host weekly year round classes called Cultivando Liderazco or Cultivating Leadership, under which we collaborate with state agencies throughout the year to provide training sessions and workers rights presentations.

This last year, six community trainings took place with the Department of Internal Relations, Labor Commissioner's Office. In addition to the collaborative training sessions and presentations, we have been teaching community Members how to file claims, empowering them to exercise their labor rights.

We empower workers to develop their advocacy skills, enabling them to report incidents, including some that may have gone unreported due to immigration concerns. The continual exploitation of young, elderly and immigrant workers does not align with California's value of dignity and respect Making CWOP crucial in these times. We urge you to continue supporting our communities through cwop.

Thank you.

Good evening. Good afternoon, Madam Chair and Committee Members. My name is Flower Alvarez Lopez and I am the Co-Director of Universidad Popular, based in San Diego. We are proudly one of the 76 organizations in CWOP.

Our organization works directly with hard to reach, hard to count, hard to engage community Members, some of the most vulnerable and marginalized in our region. Every and all Californians mattered. We were on the front lines for Covid response efforts. We serve as trusted messengers because we belong to these communities and we understand their unique challenges.

I am here today to express my strong support for CWOP. This initiative has allowed meaningful engagement with workers in our region, ensuring they receive critical information, resources and protections. When we talk about community care and investment, funding programs like CWOP is exactly what we mean. Your support, your past support has made real impact.

Thank you for your continued commitment. We urge you continuing to support and uplift our communities through cwop, a tangible investment that delivers real, lasting impact. And we're hoping to see CWOP a permanent program. Thank you.

Thank you. Okay, I am going to make some final comments on this. And as was stated, as Chair of this Committee, I do support the California Workplace Outreach program. Whether this investment started through Covid and continues now, it's essential.

We don't always agree up here, and I'm sitting right next to a colleague, and I think we absolutely disagree. We can do that agreeably, but we certainly can't shrink.

And we can't shrink when we are not going to stand up for dignity in the workplace, for fair wages, when we are not going to stand up for safety in our workplace. We have the obligation as California to create safe places. And we, in fact, are going to use trusted messengers.

We are going to use those people in the community that the community trusts. Because we are seeing attacks on our community as we speak. We are seeing that people are being targeted. And we are seeing that they do need our state support. Because why? Because they are the backbone of our economy.

These people are working in over 100 degrees in the farm fields of California. They are bringing food to your table, to my table, to your neighbor's table. They are making the beds and cleaning the fabrics in our hotels.

For our great tourist society, which, by the way, is across the California State from San Diego all the way up to the northern border. We rely on tourism. They work in the back restaurants. They feed our children. They take care of our children. They work as gardeners. And we have the right, yes, to talk to domestic workers.

I will stand up all day, I will vote all day to support our communities because they are driving our California economy. And if you think for one minute that their work does not mean something, let's see what it's like without their work.

Because every one of us sitting on this dais out there has benefited from the labor of some of our most hardworking individuals. I do support this fully. Thank you. Moving to Unemployment Insurance Program, EDD.

All right, we will move it to the DOF and then the LAO comments.

Chas Alamo with the LAO. Just want to add a bit of context to the administration's proposal here. As Mr. Horel mentioned, the Governor's Budget includes $634 million for this year's interest payment on the state's outstanding federal UI loan. The federal UI loan this morning I checked is $21.8 billion. And one of the budgetary wrinkles that I just want to flag for the subcommittee is that, as part of the May Revision, the governor will update the estimate for this interest payment.

That interest payment is likely to go up as part of the May Revision for the final budget package, as the interest rate estimates are updated to match federal law. Taking a step back from this specific budget proposal, our office published an in depth analysis of the state's UI program in December of last year.

The title of our report is simply Fixing Unemployment Insurance. A couple major findings I want to lay out, but can obviously go into more detail as needed. First, the state's UI program is now chronically insolvent. And that means it is taking in less in employer contributions to fund the program than it is paying out in UI benefits.

And that's happened in the past during recessions, but this is the first time that the program has been insolvent in a period of relative prosperity. As a result, the annual or the outstanding federal loan for the next several years is set to increase rather than decrease. Because each year that we have an insolvency, we in essence continue borrowing from the federal government, so that outstanding loan will set to grow over the next few years.

This system means that federal loans for our Unemployment Insurance benefits will become a regular practice, a regular part of the state's Unemployment Insurance Program. That was never the design under federal law or under state law, but it will be the practical implication if no changes are made to the state's UI program.

And the final point that we want to raise about the state's UI program at this time is that when we are in this position, the state will be unable to build reserves ahead of the next recession. We had something like $3 billion in reserves going into the pandemic. That was clearly not a sufficient amount of reserves.

But so long as the state has an outstanding federal loan, it by definition cannot be building reserves to pay UI benefits during a downturn. So we wouldn't expect the state to be in a position to have any buffer should unemployment claims increase during a a recession to come.

Our office put forth four specific recommendations to fix the state's Unemployment Insurance Program. This is obviously a budget item for one specific component of sort of this larger paradigm, so I don't want to go into all those details. But happy to take questions or to talk with Members and staff, sort of off the hearing time. Thank you.

Thank you. Any questions from... Assembly Member Ward.

Thank you for coming back. Obviously, this is something that's going to be multi-year in nature for our conversation and having reviewed this item last year as well in this Budget Subcommittee, I think some of our, you know, kind of concerns and questions, you know, still are ongoing.

Some of the issues around this arising, you know, during a very unprecedented time that we never could plan for, given the kind of ongoing management of how we approached UI and dealing with the circumstances of the pandemic and fraud that was committed upon us and the state that again was outside of our control that we also need to reflect on and respond to and tighten up at ultimately somebody bearing the cost of making a system whole and dealing with the federal government, as we've had to for the time being, to be able to kind of close that gap.

And so what I'm wondering is this, as we're approaching EDD next, and I'm not sure if that's a part of this item, or I know that's coming up next as well, but I want to Madam Chair, if I can just sort of, you know, kind of connect the two and knowing that we are improving our technology to be able to manage a system better that I think also would integrate better fraud protections.

That, that is, that is an expensive component to be able to swallow. And as a part of that, and I was learning about a lot of the background for some of these improvements, investments that we're making around this. You know, I'm aware that for such an expensive investment system that, that we're kind of building from the ground up, unique that it is, that we need to require a lot of technological contract and security enhancement and others. We'll talk more, I think, in the next item about that as well too.

But I've come to learn as well a lot of this is contingent upon federal requirements upon us to be able to manage unemployment claims and criteria that goes into determining both how the system is set up, how recipients can be eligible for to receive payment. Given I think some of that requirement on us.

But we're fully responsible along with employers too to be able to make unemployment systems balance out. What might be, have we investigated any strategies as the state as well to try to require the federal government to share cost in that as well, given that we need to meet federal requirements?

So the feds unfortunately, so we have a UI administrative grant from the federal government that funds our claim processing for UI claims. We're unfortunately underfunded from the feds from that perspective. They do offer instances of additional grant opportunities, and some of those may be in the realm of modernization.

However, unfortunately, Congress just isn't appropriate enough at the federal level to make that money available for states to truly modernize. Which is why the state is having to invest so much money to modernize, not only again our UI system, but DI and Paid Family Leave system too.

Right. So I would encourage that we, you know, might not be much in the grand scheme of a $20 billion solution, but that we're looking for other opportunities as well to try to argue and qualify for additional support there to offset at least some of that. And I might have a future question, but I'll open up to other Committee Members as well.

Okay, so there's so much about this that's troubling that we are basically accepting, it seems with no plan being presented by the governor's office, the tenuous position of billions and billions and billions of dollars of federal loans as far as the eye can see, to continue operating a mission critical program, we have to have Unemployment Insurance.

And it looks like through no fault of taxpayers or workers, we are now in this ditch. $30 billion during COVID 19 in fraudulent claims. I know the Newsom Administration likes to say, oh, it wasn't that much. A billion dollars in fraudulent claims is unacceptable.

And so because this administration, the Newsom Administration mismanaged this department... And all of our offices up here. I wasn't here at the time, but I heard horror stories from Democrat colleagues and Republican colleagues. They weren't getting any sort of support or help from EDD. It was chaos. It was a nightmare. And everyone out there who lost their job through order of the governor got the run around. And then we find out there's all this debt. And then the employers who again, they're not at fault here.

They're now being told they have to have a payroll tax increase on every single job, existing job and any job they're thinking about creating, which makes us less attractive as a state for investment in job creation. So it says the Governor's Budget includes 634 million. How much are we putting in in the form of higher taxes, the payroll tax to that payment. Do we have a figure there?

Our latest figure was that employers are paying about $63 per employee per year. Our estimate was, in total, employers paid approximately 770 million in calendar year 2024.

That's the increase tax? I thought the increased tax was $23. Or is it...

That's attributable to the debt. The payment attributable to the debt.

Okay, so it's It's how much again, total? For the total tax increase is what, for the payroll?

63 per employee per year.

Which adds up to what? Let's give people the big number, the bottom line number.

Our estimate was, in total, employers paid an additional 770 million in calendar year 2024.

770 million. Okay, so, but next year it gets worse. But instead of, you know, it gets better when you get infomercial commercial in the middle of the night. But it gets worse because next year we're going to increase it by $23, and then the year after that by $23.

Goes up $21.

$21. Okay.

And the 63 million is inclusive of that $21 increment.

The 63?

Correct. Its was $42 million... Or $42 per employee per year. So 63 includes that $21.

So by next year, we'll be above a billion in payroll taxes for trying to retire this loan, which, by the way, is actually getting higher and higher every year because we haven't dealt with the issue. So I just have to ask the question, particularly because of all the people who are paying for the price of mismanagement and, frankly, incompetence. The governor's term, the Governor's Administration caused this crisis. It happened on his watch. The buck stops with him. Julie Su was in charge. She dropped the ball. Nothing has happened.

And yet we sit here today with a tax increase, more money, but where is the plan to actually fix the problem? And I don't think fixing the problem is this. I think people who are employers, people who are workers will want to know that we have a plan to retire the debt and then reduce those payroll taxes. What is the plan? Is one forthcoming from the governor's office? He's got two years left in his term.

Right. The 25-26 Governor's Budget doesn't include that, but we are happy to discuss the proposals with the Legislature. I know the LAO put forward a number of proposals, which are would require lots of changes to statute and would, in some of the instances, cause changes to the tax base.

Okay, I'm a part of the business world. When the CEO screws up, he comes before the board. He says, I screwed up, but here's my plan to fix it. For you to sit here on behalf of the governor and say, well, the LAO has some items, that's dereliction of duty.

If you could carry back a message to your boss, maybe one less national campaign stop and one more stop here at this committee with a plan to fix this problem. I can't think of a more pressing issue in terms of making our state less attractive to job creation than increasing the payroll tax. And it's on autopilot.

I mean, businesses are going to sit there and say, okay, well, I can hire in this other state or I can hire in California, but here would be the cost for payroll and all these other items. So it happened on his watch. He needs to fix it on his watch. So please, I know you don't have a response, it's not your job, but please convey that desire back to the governor that we'd like to see a plan.

Thank you. Next. Mr...

Thank you. Just a couple of quick thoughts to add on. First of all, I just wanted to respond as well because I was here when we were going through a lot of challenges with our district offices and EDD's responsiveness to be able to meet some of these claims. Again, unprecedented time.

We all were frustrated and had a lot of tension, but ultimately we were just carrying the load of the fear and frustration that our constituents were feeling and their inability to make rent or be able to get through those days and volume that we had as well. That said, I do have to commend because I was also here when there was a turnaround and there was a front burner attitude by our administration to be able to prioritize improvements, supplement with additional support to be able to reduce that caseload.

And you know, it was uncomfortable, but we got through a very unprecedented time for our state to be able to assist our constituents. And I do again want to thank the administration for their efforts to meet the Legislature's needs and provide that additional support during that time.

It begs the question, how are we preparing for another eventuality of an unprecedented uptick in workload for some unforeseen circumstances? Have you thought about uses of special funds or other resources that might be available to us that from a fiscal perspective might be a little bit more cost effective to be able to satisfy the debt management that we have right now?

Right. The most recent or the closest we had was we did have a component of special fund budgeted for some of the interest payment. So we used the Employment Training Fund and we had 50 million that was assumed last year that would be in this year's budget.

But given the condition of that special fund, we weren't able to use the 50 million, which is why the interest payment is $634 million from the General Fund. If there are other allowable special funds, happy to look into that. Happy to examine that option. That was one that was used because of an allowable use of the fund. But we don't have any other proposals or any other special funds right now that are part of a proposal to address that.

Definitely encourage all of us, all hands on deck, to sort of leave no stone unturned about maybe some of those opportunities. And I wonder why don't you sort of did address the question as well about some of the LAO's proposals and want to thank you for considering some of those. If that requires statutory support as well.

I think our committee would be, you know, open to ideas about how to make that work and between, I think these three parties, you know, trying to see if that's something we can include with budget policy work that would be coming up in trailer bills. LAO, did you have any further response to your recommendations?

Maybe first a quick comment about the employment training panel. As you mentioned, those funds were used last year and have historically been used when the state has an outstanding loan to help augment costs for the, for the interest payment. There's a statutory provision that says this much. These funds can be used.

Our understanding is that the 50 million was removed from this year's budget cycle because it would have been committed to the program. It wasn't a leftover or excess surplus funds as had been previously the case. The Legislature can still make a decision to use those ETP funds in place of General Funds for part of this interest payment.

It would mean that the ETP grants that go to employers to fund incumbent worker training would not occur for a year. That's a difficult decision to make. But you also, we think, can weigh that determination against the use of that General Fund in some other area of the state budget, and that's entirely in your sort of realm of discussion. So I encourage you not to set the ETP idea aside. And that's in part because our office estimates that the interest payments will likely be about a billion dollars a year for potentially the next 10 years.

So this is a large ongoing fiscal component of the state's budget architecture. That's worth thinking deeply about now. We do have specific recommendations, Mr. Ward. I only want to bring up one of them. It has to do with the state and federal cost share for over for administration of Unemployment Insurance that you brought up earlier.

Until about 10 years ago, the federal government supported all of EDD's operations related with UI. That is the model for states and the federal government. And it's supported by a small federal payroll tax that employers pay alongside their state payroll tax.

So it's our money, it goes to the federal government, it comes back, it helps support administration and operations. That funding allocation has slowly declined while state costs to administer programs, of course, have increased with cost of living and inflation. And so the Legislature has made an ongoing commitment to add a portion on top of the federal allocation. The reason I'm bringing up now is it ties to one of our recommendations.

We think there's a way to simplify much of EDD's work in managing employer accounts within Unemployment Insurance that might allow the Legislature to free up some of that money or for EDD to use that surplus money it has been using for operations for other purposes, perhaps for EDDNext supplementation. I only bring it up because it's another area where funding could be redirected if the states takes decisions to otherwise improve the UI program.

Thank you. I think that is incredibly worth studying a little bit deeper, and I appreciate your creative overview of all the opportunities that might be there that we're not thinking about. You know, mindful as well, a very difficult decision that you mentioned sort of on that first option as well, that I appreciate what the trade off there would be. But leaving all options on the table, I think given the magnitude of what we're working with here, I think is prudent.

You know, the last observation that I would just have too is, you know, just sort of on the initial kind of amounts itself with that period sort of behind us and the magnitude of fraud that we have that we're still reconciling with and going to be paying for for some time. Where are we on, you know, to the best of any of our ability, you know, resolving the and recovering some of that fraud activity with again, every tool in our toolbox? Because we're just in a very unfair situation. It was not the fault of the public.

It was not the fault of business owners, of other payers in the system. You know, the federal government is not taking responsibility to, you know, share, I think, any of the costs because that's the way the system is now set up, largely for us to be able to manage. And the state is on the hook, and it's unfair, but that's just what we're facing in front of us. So is there any other things that we're not thinking about right now to be able to reduce our liability?

I can point out. So to date, the department has seized or recovered, working with, you know, local district attorneys, almost $6 billion, which I think by far across this nation is the most that's been seized or recovered tied to fraudulent overpayments. And I know with some of the tools that EDDNext is putting in place, the fraud analytics tools, that our fraud position is much stronger than what it was obviously at the height of the pandemic. And so as we continue to modernize EDDNext, I think that just places us in a much better position to be able to deal with this in the future.

I see that coming as well, too. And that's why I think where we all want to get to. Is it the kind of understanding right now that several years into this, we basically recovered all that we can recover? For all the other known fraud activity out there, there's nothing left to go after because it's just. It's not available. Those potential fraudulent actors are insolvent or it's just, it's just not recoverable. Is that our understanding?

I mean, I know that there are still active investigations going on related to fraud. As to dollar amounts, I can't speak to that. I don't have those figures in front of me. But I know that where things can be pursued, it is being pursued.

Thank you all very much.

Thank you. Let's invite the public up if we have anybody who wants to speak on this item. Seeing none. I, as a Chair of this Committee, do agree that we should be looking at options presented by the LAO. Kind of go back in time as some of us were serving and some weren't during the pandemic. I was here as a State Assembly Member.

This was a once in a generation, hopefully, pandemic, that it was not just California that had to pivot and adjust and move with all the policies that were put forward, not just by California, but also throughout the United States. Different policies for different areas, and we did see some chaos.

I think we can all go back and look at narratives of who responded better, who, which states were more impacted. And certainly there are stories to tell about employment, unemployment. I will say firsthand, many of our district offices became case managers for unemployment.

And so, again, to disagree respectfully, there was a lot of work done to help people navigate through these unemployment and working through EDD side by side, step by step, we were assigned our offices a liaison to help us navigate, which in many cases were hundreds of unemployment cases. And in fact, our teams became very expert at these.

But it certainly was something we were all throwing into. And the navigating and pivoting and working under a challenging scenario remains with us. So that's one under that umbrella. As far as the debt that we have, we still have work. So I would give the direction that we do look at some of these ways that we can work with the LAO suggestion. I would ask the governor's office to seriously look at that. And with that, we will move to our next panel. Thank you so much.

Luckily, it's still us.

I'm sorry. You guys are still here. You guys are still here. All right, we have now EDDNext, and we will hear about this. And if you can just give a context because I think, when we do these hearings, people just get a snippet of it, and if there are new listeners or viewers, they don't always understand what EDDNext is. So just give us a context and timelines as we present these items.

Absolutely. Thank you, Madam Chair. My name is Ajit Girn, and I'm here to talk about the cybersecurity BCP as well as the EDDNext initiative. I'm gonna quickly talk about the cybersecurity BCP, what that is, what that means for this committee, and then we'll get into the EDDNext.

For cybersecurity, as you know, EDD collects over 40% of General Fund, which equates to over $100 billion annually. And we pay out roughly $20 billion annually to administer the unemployment, disability, and paid family leave programs. So EDD is on the target for cybercriminals. It's the number one target as far as the criminal activity is concerned.

Keeping those numbers in mind, I can share that just last year alone, we got over 25 million emails where cyber criminals were trying to do phishing attacks on EDD. So we have to stay in front of them. We have to stay ahead of them to stop and protect our systems. In addition to that, in a monthly basis, we get close to 10,000 incidents. That's where hackers are trying to hack into our systems. Over 77 million logins on our myEDD benefit portals. Over 5 million employer logins on our benefit portals.

So if we take a backseat, if we do not make this investment in cybersecurity, we will be in trouble. So our request is for $13.8 million ongoing and 29 positions to fund the continuation of cybersecurity staffing, security, audit logging, and data security tools. That's about cybersecurity. Now moving into EDDNext.

So to give you a little more background about what EDDNext is, we are requesting 124 million for the upcoming fiscal year to continue to improve the services provided by EDD. EDDNext is the top down modernization of all our services. That includes our call centers, our benefit applications, our paper applications, as well as our contact centers.

EDDNext has seven work streams. We are currently in year three of this initiative, and we have achieved hundreds of improvements have been implemented to improve the customer service. I'm going to name quickly some of those improvements what we have done in the last three years which includes we have launched myEDD, which is a secure portal used by all our unemployment and disability and paid family leave customers. We launched electronic questionnaire for unemployment eligibility, a move that saved time, precious time that the claimants don't have to call EDD.

Over 100,000 claimants have leveraged this online tool to get eligible for the benefits quickly. Massive language outreach. We have implemented and translated UI online into eight different languages. We have converted over 35 vital Unemployment Insurance forms into 14 different languages. Upgraded our security. We talk about the fraud that was committed during the pandemic area.

We have implemented solid ID proofing mechanisms in our systems. We have implemented security systems where we allowed 2 million customers to reset their passwords without calling EDD. We moved our disability insurance call centers to Amazon Web Services. 80% of the people who call us today, they give us a thumbs up.

They're happy with the services that are provided by the disability insurance using the new call centers. Chatbot. We implemented a chatbot last November. Until now over 200,000 customers have used the chatbot. Over a million messages have been exchanged, and we receive over 80% of our claimants have rated that chatbot as satisfactory and happy with our services. Integrated Claim Management System. This is the biggest and the most complex piece of EDDNext.

We are in evaluation phase as we speak, and we are reviewing tens and thousands of pages to select a vendor towards the end of this year. We launched direct deposit, implemented text messaging for all our claimants, simplified our Unemployment Insurance applications. Currently 14% faster. That's what claimants are dealing with right now. Those are applications of 14% faster.

We implemented and modernized, I wouldn't say a full modernization, but a semi-modernization of PFL application now that allows our claimants to view their PFL balances, view their claim status online. So EDDNext, like I said, we are in the third year, four more years to go.

This project initiative finishes in June 2029. And we talk about public service. In my 15 years as a public servant, much of that is a rank and file in Employment Development Department, I personally haven't seen the department move this faster. Thanks to this committee, thanks to the support from the Legislature, it would not have been possible. Thanks to the leadership of our director, Nancy Farias, and our Chief Deputy Amy Faulkner, we are making things happen. We are improving the services that we provide. So here I am to answer any questions for this committee.

Thank you. And if you don't mind, could you send us some of that information about the calls, some of the data you just gave us? I think that would be great.

Absolutely, Madam Chair.

Yes, thank you. And any response from the DOF? And from our good friend at the LAO?

Thank you, Madam Chair. Chas Alamo again with the LAO. Our office just this afternoon published a short analysis of the EDDNext proposal. Wish we would have been able to get it to sooner, but we work with the workload that we were given. I want to make a few comments about EDDNext. As the department's mentioned, it is entering its fourth year, and we want to draw attention because now the EDDNext portfolio of projects, that's all the work streams, the different projects that they want. We call that the portfolio. Is it's entering its critical phase, and that's because EDD is set to take on the most costly and most complex portion of the EDDNext project and that is the Integrated Claims Management System.

It is sort of, as I've been told, I'm not a technology expert, it's sort of the hub of the UI, PFL, DI system. And so it is an uptick in complexity relative to the first three years of the program. But we note that with that uptick in complexity, the budget proposes the same group of oversight mechanisms for the Legislature for this project as it has the last couple of years. We also want to point out that the last year of the project has been tricky.

EDD has reallocated some funding provided for EDDNext in 23-24 and has used that funding in 24-25 for a different project than it was originally authorized for. There was also a slight project change, the shared customer portal. The vendor contract was cancelled, and that provision or work stream was folded into the vendor contract for the integrated claims management system, the big, the backbone piece. Neither of these instances are cause for alarm or necessarily concerning. What they do tell us in our assessment is that the project is starting to get tricky.

And with that, we think those two reasons are good justification for the Legislature now to consider kind of ramping up its oversight tools for EDDNext. And so we made four recommendations for additional oversight. I'll go through them very quickly. The first is to remove the extended encumbrances in the EDDNext project, meaning that budget authorizations for this year would allow the department to spend that funding in the budget year, but not in the budget year plus one, as we call it, not in the next year.

And this would allow the Legislature to keep tighter control of budget authority for the project. The second recommendation is to build in a mandatory review for for the Legislature of the final project approval for this big complex piece, the ICMS vendor contract. CDT is reviewing that now.

Final project approval might come at the end of this fiscal year, maybe June, but it might slip into July or August according to what we've heard from the department. If it does slip into July or August, that will mean that this subcommittee and the Legislature is approving a vendor contract plan going forward without having seen the plan.

And so we want to make sure there's a touch point after the plan is approved that the Legislature will get 30 days to review that plan before authorizing it going forward. The third element of oversight that we recommend is a bimonthly update from CDT on the entire portfolio of EDDNext.

The current updates we're getting are on each of the work streams, but what we found is that they've started started to bleed together here in the fourth year of the project. And so we would like CDT to look at full portfolio view and provide that information to the Legislature.

And the last bit of oversight that we would recommend is a quarterly briefing from the department for legislative staff. And that includes our office, your subcommittee staff, policy staff, personal staff. What that tends to do is sort of integrate up to date knowledge between the department and the Legislature that can be really useful for these oversight tools.

That was a long list. What I do want to end this with is that these oversight tools in our experience are what the state generally uses for large IT projects. So this isn't necessarily above and beyond where the Legislature has gone for other critical projects. But now that EDDNext is entering that complex phase, we think it warrants the same attention and level of oversight that the state's other projects do.

Great, thank you. Any additional questions, or we're starting questions. Go ahead.

Thank you. I'm wondering... And thank you for the roadmap. I think this is really summarizes well, I think, where we're at. Actually gives me a little bit of optimism about the road ahead of us. Would you say so, and also your, your clarification as well about how critical the upcoming year is in the overall making the overall roadmap work.

And I could see this here, and hopeful that, you know, we're, you know, should this be approved and we get through FY25-26 that we'll see us get to that time point where things are going to start to click a little bit better. We have a lot work to do on DI and PFL, of course.

What kind of, three general questions. Of the entire cost of the project here, 1.25 billion-ish. What... And with a $128 million allowance, 124 million and change for requested for this year, split between two pots. Where would that put us in the budget for the 1.25 billion? I know we've got four years to go. I see that here in the out years, but how much do we have to go in the full expenditure of the 1.25 billion?

Absolutely, I can answer that question. So out of the 1.24 billion that we have estimated, EDD has been given 661 million in the last three years. So half of that we have already to date spent $290 million. 193 million, which is bulk of the funding, has not been spent because that is contingent on the award of the Integrated Claim Management System, the most complex piece that we're talking about.

Our estimates show us that the Integrated Claim Management System, which is a combination of UI, DI, and PFL, complete overhaul of our benefit system is gonna cost us anywhere close to the tune of 60 to 70% of the total cost of the portfolio. We are doing active evaluations. So by, like Chas pointed out, end of this fiscal year or a month after, we should have a better understanding of what the vendors are asking for to do that overhaul for us. But roughly 60 to 70% of the total cost of what we have requested is about to come up.

Curious, over the last two years, as we have appropriated that but not spent it yet, but given the size of it, have we been sort of parking that in investment funds in the interim? Because it's been a pretty good couple of years of returns.

I will not be able to answer on the investment side.

So as I know Chas will point out, this project's been funded over the years with a split of funding, General Fund and unemployment compensation...

I know where it came from, but if we're not actually paying bills...

So we don't pull that funding down until we actually need to use it. So it's sitting in the respective funds.

Good news. With the Department of Technology and the critical role they have coming up right now. You know, I have been curious, also not being a technology expert, about the size and scale and the cost of a project like this. While it seems like it should be very basic in its purpose about what we want the computer system to be able to do, that is costing as much as it is, mindful that we need very strong state of the art security, security enhancements around that. And I'm wondering where are you as EDD finding the support needed with Department of Technology to be able to ensure that we're satisfactorily managing a project of this scope?

Absolutely. We... Apologize. Absolutely, completely lockstep with California Department of Technology. They are oversight on this one. Not only CDT, NASWA as well, Department of Labor as well. We are looking at how other states are doing modernization. How much money have they spent so far, how much those projects have costed.

So this estimate that you saw really came from the entire study of what is happening in the nation. Because unemployment is not the, California is not the only state to offer it. Everybody else has it. However, we got PFL and DI. Not every other state has it. That's what makes it most complex.

Our partnership with CDT is very close. We have monthly oversight reporting. In this portfolio, there are reportable projects and there are non-reportable projects. CDT has oversight of the entire portfolio right now. However, there are few low risk projects that have been delegated back to the project.

And I think in summary, we are working very closely with CDT, and we are working very closely with national partners, NASWA, working very closely with other states to see how they are doing modernization, how are their programs going on. We are taking lessons learned from them.

And EDDNext being an agile project, we change our direction, our strategy based on the successes that we see in the nation. So much of the money that we saw about reappropriation into other projects, other funds, that happened because we saw that the investment in this is not needed anymore. We need to take that money, invest in a different work stream because we saw another state struggling with that. So I think being agile, being working closely with Department of Finance and CDT, has worked well for this project.

Thank you. And the last question I have is kind of a, kind of a pet peeve usually when it comes to anyone's new development, especially on technology. Are you using, especially maybe in this critical year coming up, are you using... How to characterize... Say a working group or you know, a theoretical group of customers to be able to evaluate the user friendliness of a system? The worst thing that I could see is, well, there's a lot of worse outcomes.

But one thing that would be incredibly frustrating is to have such an expensive and well developed system that bunch of technocrats have gotten around and decided is state of the art and kind of works, and they know how it works because they built the thing. But you actually get to the average Californian trying to be able to navigate a system and it's clunky or it's complicated, it doesn't make sense. What are we doing to make sure that the end product is something that is workable?

Great question. Thank you for asking that. And that, providing the best customer service, depending on what the customers want, is the number one goal of this project. In order to make it happen, we have partnership with our customer groups, partnership with ODI, Office of Digital Innovation, partnership with our customer groups.

Before we release a product, our goal is to come up with a wireframe how the customers will perceive it. What we do is right now in our partnership with Public Affairs Office, we call our customers, what we call it is a focus groups. Before releasing it, we call the customers to have them take a look at it, get their responses and then adapt based on their feedback.

That's what I want to hear is, with all due respect to a lot of really good consultants and institutes out there, we need to hear from actual sort of average composition of users that would be interfacing with this as well. Because that's where I feel like we have a lot of egg on our face when something goes live, and then the calls come into our district office because it's complicated and they're not getting what they want. So thank you for that. I encourage you to stay the course and look for creative ways to be able to help us get through this very, very expensive year. Do you have a follow up?

Thank you. And again, I appreciate your testimony. The items that you presented as far as next steps under the LAO. I think they're very specific and concrete and would encourage us to seriously look into this oversight. And I do concur with my colleague that we want this to be successful. The investment's immense, and we need our regular constituents to just be able to go on and navigate it. And we know these systems seem easy sometimes when you're in the world, but they aren't always for others, including me. I was just navigating a whole other federal system myself for myself, and they're not as easy as they look. So, that being said, do we have any public that would like to speak on this?

Hi. Apologies for missing the workforce public comment, but Carol Gonzalez.

There we go. Okay, sorry, apologies. Meant to do my public comment during the workforce public comment hearing. But Carol Gonzalez on behalf of Inclusive Action for the City. I just want to start by thanking you and the administration for funding the Social Entrepreneurs and Economic Development, SEED, Initiative.

SEED funding was essential for supporting communities during the pandemic and protecting the most vulnerable when the state's infrastructure was strained. Now that we're seeing that again with the fires, and so we really urge you to allocate and expand the budget for a third round of SEED funding.

These funds should, we're hoping, could be accessible to landscapers, street vendors, domestic workers, and other non-traditional industries. This initiative supports community-based organizations that provide micro-grants and entrepreneurial trainings. We've seen this program to be successful in the past and we really urge your continued commitment. Thank you.

Thank you. All right, with that, we are going to conclude that item and we'll be moving to our next item. That is our budget change proposal, Subsequent Injuries Benefit Trust Fund, SIBTF and Workload. I think we are going to change it up here, and we are going to start with our LAO on this.

Thank you, Madam Chair. Chas Alamo again with the Leg Analyst Office. I'm happy to provide a quick overview of the budget change proposal. So this is $2.7 million special funds for 15 positions at the Division of Workers Compensation to handle an influx or heightened workload related to workers compensation claims that are flowing to the state's Subsequent Injury Benefit Trust Fund .

We have no issue with the workload proposal, but we want to use this opportunity to raise a key fiscal issue for the state related to the Subsequent Injury Benefit Trust Fund, which if you'll allow me, I will call SIBTF, otherwise my testimony will take too long.

The state's workers compensation system is built on a sort of no fault grand promise. So if a worker becomes injured at work, their medical costs and temporary pay while they're hurt, and potentially long term pay if they become disabled, is covered by workers compensation insurance. And in exchange, workers are not able to sue their employers for work-related injuries. This is the grand bargain.

But in 1945, when Californian veterans were returning from World War II, some workers voiced a concern that a disabled veteran from a war injury might be a larger worker's compensation liability for the employer. Because if that worker were to get injured working for the employer, they would have two disabilities, the original war related injury and then the work related injury. And the employers voiced a concern that both of those liabilities on their shoulders might be too great. So California, along with many other states, took a step to create these subsequent injury benefit trust funds.

And what the fund is designed to do is to cover any work comp costs associated with a pre-existing injury, such that an employer's compensation would only cover the injury that occurred while that worker was working for the employer. So it's a bit of a backstop. Now, Subsequent Injury Benefit Trust Fund claims are managed by the state.

It is a state fund, it is overseen by state employees, but employers pay into it each year to replenish the amount of the fund. About five or seven years ago, a new trend began with these Subsequent Injury Benefit Trust Fund claims. And what we've seen since that time is that the number of claims and their costs have increased very, very rapidly. 10 years ago, claims on the Subsequent Injury Benefit Trust Fund were 30 to $50 million a year. So a notable program, but not very large. They have increased.

Most recently, the employer assessment for the trust fund is set to be $850 million this year. So the number of claims coming to the fund as well as their average costs have increased in recent years. We think this is likely related to two changes that have taken place in the last five years. The first is that claims coming to the Subsequent Injury Fund, unlike claims in the normal workers compensation system, include injuries that are pre-existing and chronic.

So a worker might claim that a previous injury of diabetes or obesity, hypertension, sleep disorders, is part of their claim to the Subsequent Injury Trust Fund alongside their injury that they experienced on the job. These types of injuries typically are not considered work-related and are often not labor disabling in the normal workers compensation system.

But they can be in the Subsequent Injury Benefit Trust Fund system because there are two separate sets of rules that apply to these claims. The second key issue that we think changed the trajectory of the fund was a precedential decision set by the Workers Compensation Appeals Board, which is the state body that oversees workers compensation law.

And that decision. The name of the decision is Todd v. SIBTF. And in that decision, in essence, it became easier to... I should say the Todd decision allowed injured workers to receive a permanent disability rating of 100% and a greater share of cases. And a 100% permanent disability rating comes with a larger lifetime workers compensation benefit.

And this is part of the reason why the average claim costs to the SIBTF have increased in recent years. The department about a year ago contracted with the RAND Corporation, economic and policy study think tank in Southern California, to review its claims data. And the RAND Corporation recently published a study of these claims.

The department has made that public in the BCP. The one finding I want to point out is that because Subsequent Injury Benefit Trust Fund claims are lifetime claims, they're more like pensions in terms of their fiscal nature than they are in like one time costs like that we think of in budgetary programs.

And so the RAND study estimated that for current claims and those claims that are pending at the fund, employers in the future, over the lifetime of those claims, will ultimately pay assessments to fund $7.9 billion in subsequent injury workers compensation claims.

And that number, I should add, was only through claims that have been received through the halfway or through early 2024, meaning that even in the last year or so with additional claims coming in, which suggests that that outstanding liability number of $7.9 billion is likely somewhat larger today than it was.

I want to circle back to the BCP. This is a relatively small workload proposal. We have no issues with it. But we do think that it's now with the Legislature and the administration to begin asking questions and learning more about Subsequent Injury Benefit Trust Fund and what steps the state can take.

In part because as we think about employer costs in the state, this year, the Subsequent Injury Benefit Trust Fund assessment was larger. It was a larger employer cost than the tax credit reduction that we just talked about for employers to repay their UI loan from the federal government.

And so in terms of magnitude, we want to be mindful and recommend that the Legislature really consider the suite of employer costs in the workforce world to ensure that it's getting the programmatic outcomes that it wants from those employer costs. And that's why we're bringing this up today. Thank you.

Thank you. That's, I think, really important, setting the table for this. Would you like to make some comments either?

Good afternoon. My name is George Parisotto. I'm the administrative director of the Division of Workers Compensation. I would like to thank LAO for such an eloquent explanation of the SIBTF. Rarely have I heard anybody explain it with such lucidity. I am incredibly impressed.

I would like to add that our SIBTF unit is responsible for calendaring, preparation, medical referrals, investigations, liability analysis, the settlement negotiation of all our SIBTF claims. The preparation of each of these cases requires a claims examiner to obtain the entire court file, review the file, look at relevant medical records, look at the factual issues, conduct investigation services.

You know, essentially, we're talking about heavy duty litigation on the part of our claims examiners. In 2019, we had about nine claims examiners and over 9,000 cases. Now we're up to 21 examiners with over 20,000 open cases. And we just don't see this ending unless there's going to be some corrective action that's going to be taken.

The question may be asked, is this going to be enough to cover our needs? Well, we made this ask under the assumption that there is going to be some action taken here to help reform or resolve this program. And we certainly would like to work with the Legislature, one, to determine the necessity of this program.

Is it working for us now? Is this the type of social safety net we want to have our employers be liable for? And if it is, what can we do to put guardrails on the system to make sure it operates functionally and delivers benefits to those who are eligible in an expedient manner?

These cases last a long time. The subsequent injury claim does not really start until the case in chief, the workers compensation case settles. That could be four years until that point, and then the SIBTF claim would probably take another two to three years. It is a very long and extensive process. Our examiners have a lot to do.

Their caseload right now is probably 900 to 1,000 claims each, you know, when the average load in the industry is about 400. And so we think we're making a very modest request here with the understanding that this is a program that needs some action.

DOF? So one of my questions, you did kind of explain it, of some thoughts about why, and we have this graph in front of us that kind of shows the huge increase. Can you speak to why you think there's... You talked about some previous health conditions, but both of you can... Yeah.

I'm sorry, can you repeat the question?

Why we're seeing such a huge increase?

I think there's a few reasons. SB, Senate Bill 899 back in 2004 changed the law of apportionment. And so back prior to that, an employer was liable for the permanent disability that resulted from the occupational injury, but also any type of exacerbation of any pre-existing condition or pre-existing disability. So that changed in 2004.

So an employer now is only liable for that disability which is resulting from the occupational injury. So apportionment changed. And then I think we saw the culture of litigation change afterwards, which resulted in this. One, we've seen a lot more physicians writing medical reports that would find a preexisting condition to be labor disabling.

The statute expressly states that that pre-existing condition must be labor disabling. And, as said, some of these conditions seem to be a product of aging or chronic conditions, but physicians are finding those to be labor disabling, even though that may not have an effect on the job that the person is doing at the time.

Attorneys, seeing the law, and of course it is the law and can be used as a shield and a sword, decided to push these cases forward, got these cases approved by judges, and we've seen now, I think, an onslaught. The Todd decision certainly had a major effect here. Because in a normal worker's compensation case, if any one of them could ever be called normal, what happens is that when there is an injury to multiple body parts, you actually combine disabilities.

So if you have a lower back condition and it's found to be 40% disabled, and then a shoulder condition which is found to be 30% disabled, we combine those. In our guide to disabilities, there's a combined values chart. So those two separate numbers are combined to come up with something that is not essentially the sum of them.

I mean, that accounts for those overlapping disabilities. You know, the ability to lift a box that can be the result of the back or the shoulder, and so they kind of merge those together. But with the Todd decision, the court found that that's not what should happen with SIBTF. It's an addition.

So you could have a case where someone hurts their back and that's determined to be 40% disabled. And then all of a sudden you add things up. Well, there's, there's depression, there's anxiety, you know, there's pain, there's the injury to the knee, there's this. And we can easily find cases at that point tipping over to be 100%.

And there is a huge difference between 99% and 100%. You know, a worker can be 99% disabled, and as we've seen in SIBTF, that pays out about $200,000 in benefits. But once you jump to 100%, then it goes to about 600,000 or more. And now we're seeing about 70% of these cases being rated at 100%, which is paid out over the lifetime of the worker. I hope that answered your question. I may have taken the scenic route.

Yes, Assembly Member Ortega.

Thank you for bringing this forward. So I wanted to ask, going back to your introduction. So can you explain to me one more time why this fund was created?

Absolutely happy to. It took me many, many tries to first understand this program. There was a belief after World War II that veterans returning home with war related injuries might have a hard time finding work. Because an employer, knowing that they would be liable for their workers compensation costs, might fear that that war related injury which gets combined with an injury that might take place later in that worker's career, the combined amount of the rating, so to speak, or the, I think of them as costs for the employer, would be greater than just the injury that worker suffered on the job.

So there's this extra liability associated potentially with the returning veterans. So states around the country set up these funds to basically socialize, in an insurance sense, the costs of those earlier injuries for workers. Every employer pays into the fund.

The fund will cover those, rather than the specific employer who's forced with making a decision about whether to hire that person or not. Obviously that's a very specific policy case from 75 years ago, but the program worked relatively unchanged for decades.

I'm going to interrupt you because I just asked why the project was started. So you gave me that framework. So let me get this right. So we started this fund to spread the risk so employers who wanted to give veterans that were coming back from the war a second chance, correct? True?

So we're talking about patriotic employers who wanted to give back to their country. We saw veterans coming from the war. We wanted to make sure that they were provided with a second chance. But we also didn't want to punish these employers. So everybody started contributing to the fund, Correct?

Okay, so I appreciate that definition or that introduction. Because as you mentioned, we're often asked to vote on budget proposals that come and we don't actually understand the impact that it's going to have, the real life impact. So I just want to make sure that we're talking about this fund as just not an ordinary fund or another workers comp fund. Because it's a very specific fund for veterans. And we still have wartime veterans, correct?

We absolutely do.

Can you tell me in the last 10 years how many California Gulf War veterans we have who have been diagnosed with PTSD?

No, I cannot.

I can tell you. It's 95,000. Over the last 10 years, workers comp has seen a reduction in their annual workers comp. Do you know how much that is?

It's been a substantial reduction.

Do you know how much?

I don't.

I can tell you. It's $13,356. So over the last 10 years, the SIBTF or how did you call it? It is a long name. I actually think once we vote on this budget proposal, we should change the name to Patriotic Second Chance Employer Fund. But nevertheless. So over the last 10 years, how much has the fund increased in terms of assessments?

The employer assessment has increased approximately $800 million in the last 10 years.

Okay. So I kind of narrowed those numbers down to about 176. And I can show you where I got my data. So you can kind of tell where I'm going with this if you haven't already. I really, really hope, and I'm going to do this. I'm actually introducing a bill. Because I don't want to continue to hear this conversation going in the lines of, well, it's just a workers comp fund that doesn't have actual real life impacts. And as I mentioned, we have 95,000 Gulf War veterans who are here in the State of California. Now, from what I understand, in 2019, the Legislature adjusted workers comp for the first for first responders. Is that correct?

That's correct.

Did we... And we adjusted that for PTSD, to include PTSD. Is that correct?

That became a presumption. So if first responder was diagnosed with PTSD, it was presumed to be compensable. Yes.

But we didn't do it for this fund?

No, we did not.

Okay. So I have a question for the LAO. You've obviously spent some time on this. By what amount will you recommend changes to lower the assessments of this plan? How can we lower it?

I'll say first off that our office is not prepared to make specific recommendations about SIBTF. The second point I'll make is that all state workers and not only veterans are eligible for the coverage of this program. It was designed with veterans in mind, but it is open to all state workers. There will be many difficult decisions about how to make changes or whether to make changes to this fund.

Having two separate workers compensation programs, as the state is seeming to now, we have our larger work comp program and subsequent injury, may make sense in certain circumstances. Or the Legislature may find that it wants workers and all employers to work under the same set of rules in that grand bargain.

And we will be here as a resource for you in learning about these questions. It's obviously a complex issue. Working with the department, working with the administration over the next months. This BCP is relatively small. Again, we have no objections to it. But the bigger conversation about the fund is one that we're hoping to engage with you and the administration on.

So again, I just want to ask, so who does the LAO work for?

I work for you, Assembly Member.

Thank you. So I will be working with your office to try to figure this out. As you said, you know, this is a complex issue. How many staff does the Department of Finance have working on the budget?

Well, I'd have to get back to you on specifics. We're broken up into a number of different policy areas, so I'd have to get back with a number. I'd rather look at it rather than guess.

Okay. Well, clearly, you know, I want to continue. I'm glad to hear that you'll be working with my office, and I will be reaching out to you so we can further discuss. Thank you.

Thank you.

Any other questions? Assembly Member Ward? All right. Let's invite the public up if they have any comments. Seeing none. I do appreciate the clarification on that. This is initiated with veterans but now is open. That was a little bit confusing there. And I do think it is important to evaluate all of the programs we have as we go forward, especially when we are looking at a pretty dramatic increase in cases being litigated. That doesn't... I would say for myself, it does not mean any preference either way.

But when you see such a huge amount of cases, since I guess you said the Todd's Todd decision, that it does, I think, I mean necessarily that we need to have some oversight. One of the things that I think is is interesting in this position particularly is this is my 11th year in the State Assembly.

And you know, through those years we've had more funding and less. I do I'll just say this for Members that have many years ahead of them, like you, Madam Assembly Member, it's going to get tougher and tougher, I think, on the budget because we have so many obligations.

And I think working in this particular role on a Budget Committee is really an amazing experience. Difficult, but amazing. Because as we look at our bonds that we're saying we need bonds and we've supported those or we're saying various programs, we want them extended or either made permanent. And we even had our own caucus budget discussion today.

We realized that little by little, much more than in my tenure, people are going to have more slivers of flexible budget opportunities and every decision is going to mean a lot. And then if you get outliers, like this particular budget item, it's going to be where we're going to be fighting over many types of funding elements for whether it's programs to save.

And this is what this committee really does do is it's bringing so many of the state administration forward, and we're starting to analyze. But ultimately we're going to have obligations that we have no say in, whether it's the unemployment, whether it's technology programs. And we've talked about that before that maybe are in their third year and we're still saying why isn't it moving? It's costing more or maybe taking more time. And those all are going to start to get more and more tricky as we have less resources.

But we do appreciate you out there that are in the state admin community. We know it's not always easy, and you're looking at this with fine tuned glasses trying to pull out where we do have flexibility. So we appreciate that. We're going to move to our next item, which is... Where am I? I'm lost. All right, we are issue number seven, budget change proposal. Is that right? Unanticipated workload related to Chapter 7. And we're going to start to speed through these pretty quickly. All right, this is our last presentation here.

Good afternoon. My name is Julia Montgomery, and I am the general counsel of the Agricultural Labor Relations Board. And today we're here to discuss our BCP for additional resources to meet increased workload demands resulting from Assembly Bill 113, which was chaptered in 2023.

And we are proposing seven new positions and roughly 1.9 million from the Labor and Workforce Development Fund to address the implementation and workload generated by this bill. And AB 113 does revise the labor union election process and adds new appellate bonding and civil penalty provisions in the Agricultural Labor Relations Act, which is the law that we enforce.

This legislation removes barriers for farm workers to make it easier for them to elect a union to represent them by signing cards for majority support. Additionally, the bill adds new authority for the ALRB to assess civil penalties for unfair labor practice violations and an appellate bond which provides more teeth to our act. So the bill adopts a majority support petition process, as I mentioned, and this allows certain labor unions to become certified as the exclusive collective bargaining representative of an employer's agricultural workers upon demonstrating proof of support from a majority of those employees.

And ALRB, I mean AB113 does include a sunset date for this provision on January 1, 2028. It also revises the appellate bond provisions and requires employers to post a bond as a condition of seeking appellate review of a board order in unfair labor practice cases involving monetary relief or a board order in a mandatory mediation proceeding where the board has ordered a union contract into effect.

And so AB113 does require the ALRB to investigate unfair labor practice and election objections, determine the validity of majority support petitions within five calendar days, which is an extremely expedited time frame, hold hearings on majority support petition challenges no later than 14 calendar days from the date a petition is filed, calculate appeal bond amounts, which has to be done very quickly because the employer has to post it before they can appeal a case.

And also calculate and enforce civil penalties, which is an entirely new provision in the law, again under very tight timelines. So to implement these requirements in this new law, we're requesting seven positions, seven new positions, and reclassing three existing attorney three positions to be able to meet these obligations.

And so at the ALRB, we have the general counsel program and the board, which are two separate divisions that have the general counsel investigates and prosecutes unfair labor practices and manages the regional offices that are in agricultural regions throughout the state. And the board conducts hearings, I mean, conducts appeals of hearing decisions and serves really as like our appeals court.

And so we need six positions who would be in our general counsel division to help us with these additional responsibilities, to investigate petitions, help determine whether there is majority support when petitions are filed, also investigate related objections and unfair labor practice claims that are filed as a result these petitions.

So each petition that's filed generates a lot more claims and additional work. We also have to interview farm workers and witnesses under these extremely tight timelines and the subsequent cases that follow, review a lot of and analyze a lot of documents. Attorneys need to conduct legal research and analysis, provide legal representation in all of these different proceedings.

And then for our board side, we need a new position and the reclassification of three existing attorney positions. So they work with the five appointed board members to review the case filings, conduct legal research and prepare legal memoranda, and guide the board's deliberations on case matters. Because of the increased casework, we need this additional staff in both of our programs.

Thank you. DOF?

Ryan Bender, Department of Finance. We have nothing to add.

Mr. Alamo? Nope? All right. And I just have a question related to what is happening federally. How is this... What do you... How do you see this federal policy affecting farm farm worker labor relationships?

Well, there is... Sure. There's a couple of different ways in which we can see the federal policy affecting these relationships. One is at our National Labor Relations Board level, there is not a quorum and they don't have enough board members to make a decision. You may have seen in the news that one of their board members was fired upon the new administration taking over. And so that will trickle down to us, I think, at some point, because we do follow their precedent and their decisions that they enact.

And when they do have, if or when they do have sufficient board members to start issuing decisions, we do also anticipate there will be a reversal of a lot of the decisions that came out of the board appointed by the Biden Administration, which also could impact farm workers in California because we are following...

We are currently obligated to follow their precedents. And then, of course, with a lot of the current administration's stance on immigration enforcement, that is clearly impacting the agricultural community at large. Of course there are immigration raids. I'm sure everyone heard about some in Kern County that happened.

And we have a hearing going on in Kern County right now, and there have been witnesses who just haven't shown up, haven't wanted to come participate. So that, that is a real concern. We did see in the prior administration, prior Trump Administration, that there was an increased reluctance among farmworkers to participate in some of the processes.

And so we have really positioned ourselves to, and we've done this since then to the present, to ensure that our messaging, our outreach, whether it be face to face with workers and they come and engage with us, as well as in social media and other presentations that we give and in all of our written materials.

We're very, very clear that immigration status and immigration issues have nothing to do with your ability to enforce your rights under California labor laws, including our law, and that we do not collect any information about status. It is not relevant. It has nothing to do with anything that we're doing.

And we're here for you to enforce your rights if you're a worker in California or farm worker in California and you and you want to talk about what your rights are and how you can enforce them, that we are here and so they are not in danger from us in coming forward. And we will support people whose rights have been violated. And that has nothing to do with any immigration issues.

We appreciate that, although we know there is a huge amount of fear and that is hard to dispel. But thank you for your work. Anybody else from the public wishing to speak on this item? All right. Seeing none. We want to thank you for coming. And no other questions? All right, we are moving to. I shouldn't take papers out of a binder. Thank you.

All right, our next items are what we call non-presentation items to be held open. And we are going to... We have number one item, budget change proposal on new labor agency relocation. And as we're not having presentations, do we have any comments on that? Let's get moving. Get it? All right, where are we next?

All right, our next item, number two is budget change proposal, Division of Workers Compensation, DWC Electronic Adjudication Management System or EAMS. Any comments, anybody from the public? All right. Seeing none. We have item number three, budget change proposed proposal, DWC Audit and Enforcement Unit. Any comments, anybody from the public?

Seeing none. Budget change proposal number four, Division of Occupational Safety and Health, Cal/OSHA modernization project. Any comments? Mr. LAO, any comments? Okay, anybody from the public? All right, moving on. Number five, Cal/OSHA Workplace Violence Prevention Plans in hospitals. Any comments? Any comments from the public? No. And item number six, Cal/OSHA Domestic Workers.

We did talk about that earlier today. We had some comments on that. Any additional comments? LAO or the public? Seeing none. Going to Item number seven, Health and Safety Workers Compensation Injury and Illness Prevention Programs. Comments? Public? Seeing none. Going to item number 8... Why can't I say this?

Occupational Safety and Health Standards Board Rulemaking Support. Comments? Public? Seeing none. 9, Budget change proposal, department-wide admin support. Nope. No public? And 10, department-wide property service worker protection. No comments? Public? I think that moves us through this entire hearing today. What are we doing next week? Oh, next week we are doing the film tax credit.

So please come and join us so we can talk all about that. But again, to all of the state workers that work on these, we know you don't always get cheers or fan mail, but we want to thank you for your hard work and we appreciate it. And that ends our hearing.