Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government

All right. Subcommitee four, the Senate Budget and Fiscal Review Committee, will come to order. This is our fourth hearing of the Subcommitee for this budget cycle. We're holding our Committee hearing here in the State capitol in room 113.

Ask all Members of the Subcommitee who are not with us yet to please join us in room 113 so we can establish a quorum. As we proceed through today's agenda, we will be taking public comment both after each departmental agenda set of items as well as at the end of the hearing.

So what that means is, for example, for the military Department, for which we have six budget items, we'll be taking public comments at the end of the six items so that folks have a chance to be heard while we're still on that topic. And we'll do that before we take up our items for vote.

We are awaiting the arrival of our Vice Chair, who I know is in the building. So we will wait to establish a quorum until that moment.

So we will move directly then to item four, which is discussion of the reorganization and structure of the newly proposed Housing and Homeless Agency, Homelessness Agency, and the newly proposed California Consumer Protection Agency.

I'd like to invite up the representatives of the Business, Consumer Services and Housing, Melinda Grant, the undersecretary, and Pedro Galvao, the Strategic Initiatives and Policy Advisor. And I apologize for my slightly crackly voice. This is the start of allergy season in my home region and 35 years later, I'm still experiencing them. So welcome.

Thank you so much. It's a pleasure to be here and I'm glad to be in collaboration with you over your allergies as well, because if you hear cracklies, I am experiencing it. Although I love the flowers. And welcome to the first day of spring.

We all get to sound like the President of Pro Tem of the Senate for a little while during this season. So welcome.

Exactly. No, thank you so much. Melinda Grant, Undersecretary to the Business, Consumer Services and Housing Agency. We are here, as the Chair said, to present the reorganization of our agency with a dividing of it into two entities, which is the California Housing and Homelessness Agency and the California Consumer Protection Agency.

This is a plan that will be submitted to the Little Hoover Commission by the Governor and we are very, very excited about doing so. I am jo by my colleague, Senior Advisor Pedro Gaval, who will also be going through the presentation with me. We're here to provide a high level overview.

There is lots of work that's being done behind the scenes and we are very, very excited about the invitation to Come give you a preview of the structure and the purpose and the why and the intent of this reorganization. But first I thought it would be really important to talk about who we are now.

So right now we are an entity made up of 12 individual ENT spanning from everything from safeguarding civil rights to protecting consumers, to promoting affordable housing and to preventing and ending homelessness.

We do that through a span of a variety of departments, but one I want to call in particular the Department of Consumer affairs who oversees over 36 boards and commissions. That's about 4 million businesses and licensees, 250 different license types. That's everything from your nurses to your doctors to your pharmacist to your acupuncturist to your cosmetologists.

You name it. Is all regulated under one entity under the Department of Consumer Affairs. We also have the interest of preserving the integrity of the California horse racing industry, alcohol regulation and education financial services sector, which includes banks and credit unions.

Regulation of cannabis businesses, from growing of cannabis plants to the transportation sale of cannabis goods, to providing loans and grants to housing developers and setting housing policy to providing first time home buyers with mortgage assistance, to protecting against housing discrimination.

We are comprised of a mosaic of issues that all interconnect in and out of each other every day. But I will say that when I often try to describe our agency, I often describe it as the life agency because it really is our belief that it touches the life of every single person.

I was literally trying to explain to my mother the other day, like, what do you do and how do you do it? And I said, oh, you interact with it every day. So although we're here talking about a reorganization structure, we're also talking about people.

We're talking about people and their access to these services, people and their access to these programs. How do we do it better? How do we do it more efficient? How do we continue to build upon where we currently are? So that's what we're looking forward to talking with you about today.

But I just want to take another little step back and talk about how we got here and go back to the past. So about 10 plus years ago, back in 2012, there was another reorganization that created us.

And since then, over the span of what, 10 now plus years, we have seen a tremendous growth, especially in the issues for which this agency has purview over. One obviously is the housing and homelessness crisis.

The amount of laws that we have collaboratively passed together, the amount of billions of investments that we put into this is one to take note of and it's one that we don't really take lightly at all. But there's been tremendous growth and interest in us wanting to work together to better solve that issue.

Also on the other side of the house is our consumer protection portfolio. Great expansion there, where we've taken on in less than five years the Department of Cannabis Control, which is now regulating the cannabis industry.

And then also there was another reorganization of the Department of Business Oversight, which is now known as the Department of Financial Protection Innovation. This all has really sparred with growth. It looks different, it feels different than it did 10 plus years ago. And when we go back to the basics of like how did we get here?

We really started to center around about three guiding principles. One was starting with operational efficiencies. Why do we do what we do and how do we do it and how are we making sure that at the end of the day we are streamlining our government processes?

Any of the assessments we've done internally, any of the reports or the many, many hearings and bills and et cetera that we have reviewed has gone back to is this creating operational excellence and efficiencies and doing our work the best that we can do. The second piece would be maintaining continuity of operations.

At the end of the day, we don't want to do anything that's going to disrupt the foundation that we've built over the past 10 plus years. The 10 plus years we have built a pretty good doggone solid foundation, right? To really build upon. Really looking at all the wonderful interconnections between housing and consumer.

And it is our intent with this reorganization where we're not going to go backwards, but if anything, we're going to be going forward. The other piece that's really been a guiding principle in the reorganization has been around fiscal prudence.

Really how are we ensuring that the benefits of the reorganization will always outweigh any financial investments that we may put forth? Also maintaining efficient existing resources?

You know, how are we getting creative with what the foundations that we've already built and making sure that those things will still be current, but that we're actually taking advantage of what we've already built.

And the last piece I would say is obviously to the special funded entities that we have on the consumer side is not lost on us.

The journey that they have and being set through a fee schedule, through statutory fee increases or fee limits, I will say where it is our intent to ensure that those, and if there are any additional fees are not going to be the result of this reorganization.

I would also say there is a great deal of focus and prioritization around maintaining the fiscal health of those entities as well as for consumers and businesses.

So with that, I did just at least want to share a little bit of the why and how we got here, obviously the who we are now and really start to break down into where we're trying to go.

So with that, of course, as I said in the beginning, we'll be providing a high level overview and we hope the slides will kind of take you through more of the benefits and the structure that we have planned for. So with that, I will turn it to Pedro.

Good morning, Senators, and thank you, Under Secretary Grant. Can you all hear me? Sorry. Thank you. So I'm going to start off by going through the new California Consumer Protection Agency. So the purpose of this new agency is to really enhance consumer protection for focus of the state.

Our state requires a nimble, focused agency that's able to react to emerging consumer threats. It's also a major focus will also be to increase regulatory efficiency to respond to rapidly evolving issues and industries and strengthen oversight to align regulatory functions with consumer protections and ensure swift actions.

The structure of the agency, as you can see here, it includes the Department of Alcoholic Beverage Control, the Alcoholic Beverage Control and Appeals Board, the Department of Cannabis Control, the Cannabis Control Appeals Panel, the California Horse Racing Board, the Department of Consumer affairs, the Department of Financial Protection Innovation, and the Department of Real Estate.

We really see this work as enhancing consumer protection for Californians, first through providing a greater focus on efficiency in business and professional licensing. This focus is necessary for the agency to truly specialize in regulatory best practices.

It will allow this agency to share best practices across the agency so that staff can become licensing specialists and lead our departments in continually evaluating existing processes. It will also create a faster and more agile response to emerging issues. Now, this Administration is no stranger to responding to emerging issues.

When we created BCSH 13 years ago, there was no legalized cannabis industry. Now we have the Department of Cannabis Control, the Cannabis Control Appeals Panel. Similarly, by creating this dedicated agency to consumer protections, it will enhance the state's ability to respond to new industries that we don't even know about yet.

To move on to the California Housing and Homelessness Agency. So we see the focus of this agency as providing dedicated leadership at the state level around improving coordination of a comprehensive response to the twin crises of housing and homelessness.

It will focus on streamlining funding and compliance to make it easier and faster to build affordable homes in our state. And it will accelerate progress towards meeting our housing goals. Including the target of two and a half million new homes by 2030.

And the departments within this new housing and homelessness agency are the Department of Housing and Community Development, the California Housing Finance Agency, the California Interagency Council on Homelessness, the Civil Rights Department, and two new entities, the Department of Housing Development and Finance, and the Housing Development and Finance Committee.

We see this as advancing our housing solutions by improving efficiency in housing development. So as I said, it will focus on streamlining funding processes and compliance requirements. This will save cost and time for affordable housing developers.

As the California Housing and Homelessness Agency will focus on creating a single application and award process for state affordable housing funding programs to significantly cut down on the time and cost to build affordable housing. It will also focus on creating one set of rules for compliance.

As as you all know, affordable housing development takes multiple sources of funding from multiple entities, each with their own set of regulatory requirements. This agency will focus on creating an aligned process for compliance with with state regulations, but also increase transparency in housing funding by providing a public and transparent process for aligning affordable housing funding sources.

All of this will allow the state to accelerate housing and homelessness solution by consolidating the resources and the expertise within the Housing and Homelessness agency to drive faster policy implementation and more cohesive action on homeless and housing affordability. All of this builds on the partnership that we have built on with you here in the Legislature.

You have passed bills to consolidate funding. I have up here AB434, AB519, one of which consolidates four programs into a single award process and funding application.

The other one is telling us to go bigger and broader and this agency will be empowered to do that as well as around compliance monitoring AB 2006 from 2022 that calls for this aligned process and this agency is going to be explicitly empowered to continue this work.

So with that I'm going to pass it back to my colleague.

Thank you. So where do we go from here at this time? As I mentioned before, given this high level overview, it is our intent to submit a full plan to the Little Hoover Commission which they will then have a hearing.

They will submit a report to the Legislature for which there will be a 30 day review process by the Little Hoover. After the Little Hoover review, the plan will be transmitted to the California Legislature as I mentioned, for a 60 day review and then of course you can vote to approve or reject the proposal.

Again, we look forward to continuing to talk and hear comments about the reorg and looking forward to a full plan when it's it's submitted officially. Thank you so much.

Thank you both. Department of Finance, any comments?

Department of Finance always has my favorite content to commute time ratio. All right. Legislative Analyst Office.

Did you have an LIO or LAO? Yes. Hi, Heather Gonzalez with the LAO. So we were asked to give you an overview of the process of reorganization. And in General, state government reorganizations can happen in a number of different ways. You can have individual bills, packages of bills, budgetary changes.

In this case, the Governor is exercising a formal Executive branch reorganization through what is sometimes known as the Little Hoover process. We use this name because the process incorporates the Little Hoover Commission as part of a legally prescribed set of states. Steps. Some key points about that process.

As I mentioned, it follows a series of steps that are laid out in the state constitution and law. These steps begin with the Governor submitting a plan to leged counsel for drafting. Then 260 day processes begin in partial parallel, in partial succession. First, the plan is sent to Little Hoover, which has 60 days to review it.

No sooner than halfway through that 60 days, the Governor will then formally submit it to the Legislature, which then starts its own 60 day clock.

During its 60 days with the plan, Little Hoover will hold at least one hearing, collect testimony, and they will assess the plan based on the Commission's broad mandate to promote economy efficiency and improve service.

And then they will produce a report containing non binding recommendations during the Legislature 60 Days it will review and assess through the regular Committee process in both houses. And once the policy committees report, the plan goes to the floor for an up or down majority vote.

If neither house rejects during the Legislature 60 days, it goes into effect on the 61st day. Three points that we want to make that fall into the category of for all practical purposes.

Number one, although Little Hoover technically gets the plan 30 days before it's formally submitted to the Legislature, you're likely to see it fairly soon after they get it because they are a public body and they are subject to open records.

Number two, although you can't amend the plan when it's on the floor or in Committee, you can introduce separate legislation to make changes after it takes effect. And then number three, based on conversations we've had with the Administration, Budget Committee Members in particular could see one or more BCPs related to the proposed reorganization during May revise.

And we are recommending that the Legislature refrain from making those decisions until after it's finished its own review.

All right, thank you. And I would just note both Senator Nanilo and I represent the Senate on the Little Hoover Commission. So we'll be hearing this in both, in both processes with slightly different fiduciary responsibilities. At each institution. But I know we're both looking forward to the deep dive on this as well.

I know we're just like we've been together since 1998 or something like that. And here we go. All right. Questions or comments from Members of the Subcommitee? Senator Smallowood-Cuevas.

Thank you, Mr. Chair, and thank you for the presentation. I've always had a great interest in civil rights protection and in particular, how little we invest in civil rights protections here in the state. You know, this is particularly concerned about the backlog that this agency has had for quite some time under staffing, overburdened.

And as we see the federal infrastructure, dismantling the eeoc, the Departments of Civil rights, and really putting tremendous pressures on our state civil rights infrastructure. I'm curious about moving the Civil Rights Department into the rubric of housing. I certainly understand housing discrimination, and that is a major issue in my county.

And we know that leads to many communities, particularly underserved communities, with wrongful evictions and tenant rights abuses that we need to address. But at the same time, our employment discrimination numbers, our accommodation complaints.

I was instrumental in establishing a local civil rights office in Los Angeles because of just the sheer volume of complaints that were not being moved at the state level. And we know there are more and more cities that have taken that enforcement under their own purview because of the need.

So I want to understand how, by positioning the Civil Rights Department in all of the protections, you know, from pay discrimination to, you know, sexual harassment to race discrimination, language discrimination, how will it all of its authority be prioritized?

Is there a focus on ensuring that there's deeper investments in this agency as it is now, solely in the ecosystem of housing only? It really concerns me, and I want to understand how will we ensure, particularly in this time of civil rights attack, in this time of dismantling of protections for.

For federal workers in California, they are seeking support. We are hearing at the local levels, too. How will the Department in this reorganization lift up, elevate and concretize our ability to hold the line on civil rights enforcement?

Now, I always questioned why this agency was in, why this Department was under the umbrella of Consumer affairs, given the enforcement strength of other agencies and focus. So just wanted to see if you could speak to that.

And what confidence can I have that we're going to be able to meet the moment, especially when we're sort of putting it in a very narrow sort of scope in terms of the housing context.

Thank you so much, Senator, for the question. Really appreciate the breakdown of everything that you described. And we don't take it lightly whatsoever. We've had a lot of deep discussions about this topic as well.

And at the end of the day, I will first answer the question by saying the connections that we have built with the Civil Rights Department. As well as all the things within it, those will not be broken.

It is our intent to where those connections between consumer protection, between employment, and all the interagency work that we do will remain. One of the ways that we've learned from the last reorganization. Especially when transportation was moved outside and separated from housing, Is that we had various steering committees.

And were actually able to narrow in on the linkages between housing and transportation. Even a greater granular level, to some extent. And so it is our intent that where those connections have been established. And where we see a lot of synergy, that those won't be broken. If anything, they will continue on the housing piece.

As it relates to the work that they're doing in housing. Discrimination and being placed in the housing agency. You know, we really, really feel that at the end of the day, the nestle of the art of discrimination. And the protected classes that exist within it. And its connection to housing is not something that we often talk about.

Although there's been some great progress in the laws that we've had, as you mentioned before. But we also see that it's also about the integration of the entire housing system. Because the entire housing system, which you'll hear about a little bit more from PE When I pass it to him about his interconnections into housing finance.

That also connects back to the consumer side. And the work that we've been doing on the consumer financial protection side of things. And so we do see the full circle of where it's not lost in housing. If anything, it gains a greater connection within housing. And then also interconnected still to all the many tentacles that you described.

But I will pass it on to Pedro if he has anything additional to add.

The only more technical addition I have to this Is that at the federal level, fair housing is embedded within HUD. And so within California, when we were creating the housing. In thinking about the creation of this housing and homelessness agency, we saw housing discrimination affirmatively furthering fair housing as a core tenant of that.

And so we wanted to maintain that structure for the state as well.

And I appreciate the nexus of discrimination in housing. And that is partly my concern. Is that it is such an intensive nexus. That it could appear that the other authorities that this Department has to enforce. And I know housing is a critical piece of it.

But as you know, with DEI right now, there are individuals, for example, who are working in certain programs who are being targeted for discrimination and need to have their rights and have a remedy based on their employment discrimination and bias and having to fight to keep their jobs.

We also are seeing coworker, an increase in coworker tension and some discrimination on the work sites as folks become emboldened by the lack of federal infrastructure for enforcement. And the EEOC used to take the lion's share of employment discrimination cases, I think somewhat of 70%.

Without that federal infrastructure, individuals are gonna be seeking that support in the State of California more and more. And so, you know, I understand the nexus.

I just want to have a deeper understanding of how will we ensure that the Department has the ability to enforce on all aspects of its authority and have connections with, for example, the Labor Commissioner's office around some of the pay discrimination that we see rising also in work sites. Forgive me.

As Labor Chair, I come to this Committee recognizing that it's beyond housing. And in fact, as we're getting in this particular federal moment, the employment discrimination, particularly employment in particular types of programs, workers are being targeted. So I understand the reorganization.

I'm glad that we're streamlining, because this is an agency that has tremendous scope on very important issue areas that are growing in the state.

But in a 2025 Trump Administration where we see all of the civil rights being dismantled, I think it is very important for us to strengthen the ability for this agency to be in deep collaborative relationship around the housing issues.

But how do we intentionally focus on some of the needs that we know are growing because more and more Members, LGBTQ community, for example, are being targeted.

Spanish language and immigrants in particular, are being targeted, not just in the housing context, but in accommodation and service delivery in a number of areas that workers, and particularly black workers, who have still, you know, filed the majority of discrimination complaints in the state, but have a half of a percent chance of ever seeing their cases come to a remedy that supports those.

Those workers.

So I just want to stress how important it is through this reorganization to not lose sight of the broader scope and the urgent need that our civil Rights Department will need beyond the housing context, and certainly the housing context is an enormous response, responsibility, but these other areas are growing more and more and more important by the day.

Thank you so much for the comments.

All right, thank you, Vice Chair Niello.

And I just want to say, and if you could just share with me how that's going to be done, I appreciate the comment, but I want to know what is the way we're going to ensure the collaborative relationship between CRD and some of the other agencies that it has to collaborate around the housing, the accommodation and language and LGBTQ sexual harassment?

No apologies, Senator. I'll go into a little more detail. So a lot of that is building off what we currently do now. And then obviously, with. When we talk about coordination, especially with the other entities, coordination is obviously, is very broad in some ways, but it's also very direct and intentional.

And part of it is really ensuring that the interconnections of all the things that you mentioned that go outside of housing discrimination continue. Those relationships have to be built at the leadership level, the management level, and then below and all, all the way up from the top and the bottom and across.

And so I think it's about the intentionality of ensuring that just because it's in housing agency, that everything gets lost. It doesn't get lost now. Right.

The things that are very purposeful, even the expansion of the Commission on the State of Hate, even the expansion of the authorities around hate violence and what the Civil Rights Department has been doing on those things, those are all things about getting the word out. Right?

The outreach efforts, the conciliation efforts that they've been doing, all of those things don't stop. If anything, it's about enhancing and ensuring that people know where to go, people know where to go and where to find them. So part of it is always uplifting the work.

So when you talk about crd, it won't just be in the housing context, it's always about the larger context.

And so you have our commitment that that is a, not only a priority of BCSH as it stands now, it's actually pillar as part of our strategic plan of making sure we're safeguarding the civil rights and have, you know, quite a bit of actions there.

But I think that's part of also the foundation of the principles I had brought up earlier around. At the end of the day, when we're thinking about the reorg, does it actually streamline, does it actually create better efficiencies? Because it can become very bureaucratic in how you find the web.

And so from our perspective, by putting it in the housing agency and then also enhancing all the interconnections purposely and intentionally, rather it will be through a variety of steering committees, rather be through a variety of working groups, rather it would be through, you know, different exploration opportunities and legislation. There is a variety of different things.

But our commitment still hasn't wavered on any of those things. If anything, we just see more progress to come as long as, and we commit to uplifting all those issues continuously in collaboration with the housing discrimination pieces and the fair housing pieces that Pedro has set forth. We're happy to continue.

I appreciate that and I do. And I hope that this does lead to efficiencies and a way for us to maximize our capacity to enforce these laws. I say this because in the other, before the reorganization, we did have a multi year backlog in discrimination complaints.

We did not see any significant investment in CRD as we saw an escalation in a rise in the number of complaints that were coming to the state and to our local jurisdictions under the Trump 2016 Administration. So.

And since I've been in the Legislature, I have not seen a real significant increase in the budget of crd, you know, in spite of all of the indicators that show that that need is great. So I want to see those efficiencies.

I'm not absolutely sure that I agree that they are there because we are still seeing a tremendous backlog and lack of investment, investment in that agency as we've seen investments in homelessness and in other areas. So I just want to say I look forward to it.

I want to talk more about what those efficiencies are and hope that we can in this moment ensure that this agency is ready for the task at hand.

Very good. Thank you so much.

Let's put an even finer point on it.

So if and when a BCP is brought forward or a recommendation to the Subcommitee and to the Legislature on, on the reorg and funding it, I think that we will want to know, we want to have a better sense of what are the state, what the considerations behind homeless and housing and homelessness versus labor and workforce development or some other.

So be prepared to address the deeper question of what are the alternatives that we looked at and here's why we landed here. Second is the formal assurances that we can have the committees and the, the informal relationships and all those, those are very important. But we can't. We in the public cannot hold the Administration accountable for delivery.

When everything is well, we have our, here's our org chart and then here's how we really do our work.

So it's really essential while we're doing a reorg that we, that we get a sense of how, not just that we have the commitment of the, of the two new secretaries or the three secretaries involved, but really see how that those lines of accountability are happening.

And then Third is to at least have an under, even if you're not bringing a budget proposal for more money, at least to give us, give us a sense that you've looked at the landscape of the EEOC changes and what's happening in Washington, D.C.

as to whether or not what the cost pressures are, whether or not we can meet.

You think we can meet them, but at least so that, so that the Senate is able to assess what is the, what is the challenge here and look at it against our other priorities, but also understand your thinking in the proposal that you're making.

Thank you, Mr. Chair. Usually with a reorganization, it's because perhaps not always, but perhaps something is being left behind. Perhaps in the existing overall organization there are certain entities within the organization that it's believed are not being paid as much attention to as, as they should. And so we reorganize it to provide a different focus.

Is that the case here?

No. No. I think if anything, Senator, we're actually looking at the status quo and actually assessing like, you know, we're doing pretty good, but looking at the long game, looking long term.

We're seeing the growth and we're seeing the capacity that the agency has and how broad it is and thinking about our approach to it from a General perspective and then also our approach to a specialized perspective and all the different benefits that we see that will come out of specializing in these individual areas, specializing in single focused housing, specializing single focused consumer.

I think we're also trying to ensure that we're not trying to pick a single thing. We're actually looking at the crisis in General, the affordability crisis.

It was enough to convince us that the affordability crisis from the perspective on the consumer and workforce and making sure that the barriers to licensure are limited, ensuring that the unlicensed activity that is occurring, how do we get more folks licensed that's good for both businesses and consumers and same thing on the housing side.

And all of this complexities that we've been doing and trying to find out how to build housing better and faster. You know, we've been also listening to all of you.

We've been in the legislative hearings, we've been in the budget hearings, we've looked at reports, we looked at audits, we looked at assessments, and then doing our own internal gut check with staff and folks who are actually operationalizing it and just saying this just makes sense.

And so at the end of the day, I just wanted to say it's not one singular piece of something that happened. It's been an Assessment as to how we're functioning and the structure and how we need to realign the governance to get greater outcomes that we foresee for the future, only right now, but for.

The future, the individual agencies and organizations that are within each of the overall agencies, are they individually being changed in any significant way?

On the consumer protection side, I'll say there nothing is being proposed as new except for the departments that are being singleized in the consumer protection agency.

What you heard on the housing side was the development or the proposal of two new entities to enhance the housing finance system to help with the coordination around the continuum of housing in General. Everything starting from homelessness all the way up to home ownership and everything in between.

And so we have, you Know2030 goals, you know, a lot of variety of different measures that we're doing to kind of track our progress with the statewide housing plan.

And at the end of the day we had to go down to really zero in on like if we're going to build, what is it going to take and what are we missing? So on that side we did a different type of nimble approach and there are two new entities that we are proposing.

The emphasis recently with regard to homelessness has sort of moved away from the 30 plus states designed programs to focusing more on county efforts and funding counties for flexible funding to counties. But what happens to those 30 plus programs that were designed at the state level to be implemented by counties as designed. What happens with those programs?

I'll pass it to Pedro.

Thank you Senator for that question. County level programs will remain administered by counties. This reorg doesn't contemplate taking, taking any funding, existing funding away from counties.

With regard to the 30 plus programs though that were designed at the state level for counties to implement as designed by the state, what happens with those programs?

We're not contemplating changing any homelessness related programs that are administered by counties that were designed by the state. Just one big limitation we have with this reorg is it has to do with any existing powers and authorities. That's all we can, that's all that we can touch with this reorg.

So we can relocate departments, we can relocate a program, but anything around program design, who administers a program, who's eligible for a program, we cannot do through this process. And so all of the eligibility criteria, who administers, et cetera, will not change.

And with regard to the housing solutions, what at least at this point is your thinking relative to specific plans, details and expected outcomes.

Thank you for that. So we have two major plans that guide statewide Housing and homelessness policy. We have the statewide housing plan and we have the statewide Action Plan for Homelessness. And both of those plans guide or provide a statewide framework for how we take a full approach to addressing the twin crises.

We, we see the creation of this agency as really creating a better and more coordinated and focused approach to act on those plans. And so, for instance, on the housing front, the state has an ambitious target of two and a half million new homes planned for by 2030.

So the creation of this housing and homelessness agency will focus on streamlining the funding that the state controls, the affordable housing funding, to make it easier, easier and faster for developers to access. On acting on the statewide action Plan to address homelessness, the California Interagency Council on Homelessness will maintain its leadership role around gathering data, measuring outcomes.

None of that will change, but will in fact get elevated through the housing agency to identify any issues that come up so that way the state can quickly identify and act on these issues in a more focused way.

In the contemplation of the reorganization and better focus on these things. Are there any particular plans relative to reducing the costs of affordable housing? There have been projects that cost more per unit than market based housing.

Are there specific plans to significantly bring down the cost of affordable housing, therefore making it, at the risk of being redundant, more affordable?

Senator, completely agree with you that the cost to build affordable housing in the state is too high. And a huge motivator of doing this reorganization is to remove barriers at the state level that are contributing to this cost. And so one of the bills that we had up here, actually two, but really I'll focus on one. AB519.

It calls for a study to look at affordable housing funding across the state and to create a single process for applying for those funds and a single awards process to make it a lot easier and faster for developers to get access to this funding.

Because every single one of these sources, depending on which study you look at, adds between 6,400 to 15,800 per unit just to apply for the funding. And so in creating this agency, we're giving it an explicit mandate, and that's the funding Committee.

We're giving it an explicit mandate to look across all affordable housing funding Committee sources in state government and to see how can we harmonize these sources better, how can we create a more predictable process that developers can apply for the funding, have a calendar that's also predictable for when they'll get the funding and seeing their project built to remove the cost that the state itself is imposing on building affordable housing, and there are a lot of other factors to the go into the cost of affordable housing.

But for the things that we the state control, we're trying to act on that as aggressively as possible through this. What's your timeline on this? So this reorganization will take place over several years, and the reason for that is, as the undersecretary said, we don't want to see any disruptions to existing funding programs.

We want to maintain what's working, working until we can move over programs, move over departments in a responsible way. We'll have more details on the specifics of that when you get the Little Hoover when you get the plan that will be submitted to the Little Hoover Commission in a few weeks.

But our intent is to move forward as much as we can during this Administration and and recognizing that the whole work will take time.

So it will extend beyond the current governor's term.

I would say the programs that exist will extend beyond the current governor's term. Organizational the reorg is going to happen over several years, and we'll have more details with the Little Hoover plan. But the goal is to create the agencies, move the departments within the existing Administration.

Is there any thought, just from a contingency standpoint, of what would be done if a new Governor came in and disagreed with the reorganization?

Plan. By that point, the agencies will well, provided that the Legislature approves and the plan is adopted, then the agencies will have been created and the departments will have been moved, at which point it is up to that next Administration to decide what they want to do and their prerogative. But we see those core parts of.

The plan as having been effectuated at that point.

Senator, if I could just expound on that as well, I think our thinking also has been around what is long standing, obviously well past a year or two or three. Yes. When we talk about implementation, it's a phased in year, you know, three year approach.

When we really start looking at results and things that are to become from benchmarks and milestones years extends well into the future. Right.

So I think it is our belief that housing and the housing crisis and affordability and the streamlining things that we're proposing here as part of the reorg are going to be themes that will continue to live further.

And if anything, it is our hope that regardless of the Administration, that this sets a different type of framework and foundation to continue to build upon versus break apart. So we have been very thoughtful about that. Like, you know, does this make sense?

And when we go back to the drawing board and go back to streamlining bureaucracies and looking at what the core reason and function for doing this, it comes back to function.

How do we actually create a system that works better, faster and more importantly more efficient for everyone who's involved, not only the Legislature and us and the staff in between. So just wanted to say that in context to compliment Pedro's comments as well.

Yeah, my comment is somewhat rhetorical because of the process that we're in and particularly these areas, especially homelessness and housing. If we were to look back five years and then to now, there have been significant changes and lots of disappointments. And I'm not so sure that that dynamic is necessarily going to change.

So that's why I say contingently. But I understand your point and appreciate that. Last question I'd have is with regard to costs with two separate organizations, then you have two separate administrative efforts. With regard to human resources and other issues, do you have any idea as. To. How this will affect overall General. Fund costs at this time?

Sir, we're still assessing obviously the plan and thinking about simultaneously budget impacts. We know that there will be likely some associated costs, but we're being very nimble, if you will, and very strategic and thinking about how we're leveraging existing resources and building upon those foundations.

And once we identify if there is any budget impacts that need to be addressed, we'll be right back here through the budget process to do so.

And hopefully I don't see how there couldn't be increase in cost. But that's just my preliminary view based on what I'm looking at here. But with regard to increased costs, it will be imperative to relate that to the value of resultant benefits of the reorganization.

I'm sure I'm not telling you anything you're not thinking about, but that will be very important in terms of the budget deliberation process.

We wholeheartedly agree and hope that you'll agree once you hear it.

Thanks. First thing, my colleagues asked virtually every question I wanted to ask, but I've been looking forward to the details and I appreciate the additional snapshot that we're getting of the proposal.

I teach public Administration at the University and in fact quite a few folks in the building, and I would give this back with a lot of red marks.

I'm very skeptical about where we are with this process for some of the reasons that Senator Ninilo mentioned, partly in the context of just the overall funding environment, with essentially nothing proposed in the budget for housing or homelessness in the real world, that the amount of attention and potentially budget requests that we're going to be getting for reorganization, it's not the right priority.

When I'm trying to work with the community to get a housing project built or solve homelessness on their streets, it is not in their top 100 list of things that the state could do to help them to think about changing the lines on the org chart.

So I think we should be putting just as much energy into the dollars that we need in order to build roofs and shelter and supports as we are here. So the test is pretty high. But I also took the opportunity I'm old enough to remember the last three reorganizations.

And so I went back and read them again and each one of them makes the same promises over and over and over again.

Back when Consumer affairs, when it was state and Consumer Services, when housing was with Transportation and then when they were back married again before that and whenever the dating with other we've moved these around the dance of the secretaries we do constantly, always with grand ambitions about what's about to happen.

And so I want to encourage, as this moves forward to Little Hoover and back to the Subcommitee that that we get the mechanics of what's really going to happen to deliver on those objectives. Simply saying that it's going to cause more focus, that it will be streamlining, that it will cause leadership level action. But how?

What is actually going to happen here? I'm a huge fan of Secretary Moss, so I'm not going to accept any supposition that it's because her detention is divided. I think she's doing a great job. So what else is going to happen in how these agencies report to each other, how they're held accountable?

And then both from your perspective, but also from somebody trying to put together an affordable housing project, how is their life going to be different? And I see that here in the intention, which the intention is all correct. It's just, it's not translated like it's a good undergraduate paper, but it's not yet ready to be executed because.

So we're going to streamline and we're going to create a one stop shop, which we absolutely need. There's too many funding sources that are all inadequate, but too many funding sources for affordable housing that we have. They're all over the map. We need to either consolidate them or make it much easier to navigate.

And so the proposal here is, and you laid it out when you said the new secretary will be doing that and they will be creating a single application and all that. Okay, and then let's move on to the next part and we're going to be carving out housing finance, housing development and finance.

And what is it going to do? It's going to, you know, consolidate the process so affordable housing can, you know, have a single, a single point of contact and a single application. And then we're going to create a new Committee, bring the secretaries together, secretaries of departments that really do anything with housing.

They're going to come together and they're going to help us integrate it so that the world of affordable housing developers and other housing folks can, can experience a one stop shop. So One Stop Shops can be a really great way to, to make government work better. But 31 stop Shops are two too many.

And so I really would urge you to go back to the drawing board on exactly how we're solving that problem. And more collaboration, more connections, more interagency stuff isn't the answer. That's the problem that we're in now.

And so my personal view is the secretary, you know, if we're creating a new agency with this focus, and the secretary's sole focuses are housing and homelessness, that the secretary should be able to do that. But if it's not, then it's one answer, not three. Second is on the HCD Housing Development and Finance Committee split.

I worry about the psychological, cultural and Compliance norms that we are feeding here. And I'll give you a separate. I'm also from local government Center.

Neil often talks about time on the supervisors, but I served as a mayor and this will sound like a tangent because it probably is, but my friends in the nonprofit community are always going to create these like these participatory processes for like how to allocate money for new parks and for childcare.

Let's bring together people and create a separate process, separate from the city to figure out where to make investments in what I would call sort of the babies, bunnies and unicorns stuff, the stuff everybody wants, all the good stuff.

And then not realizing that then the City Council is only dealing with where does the toxic dump go, where's the sewer plant going to be? Only the bad decisions. The long run effect of that is a deep erosion in the trust and the belief of government because you're only making the bad decisions.

And there's no connection between the positive and the challenging, between the give and the take. And so when we say HCD is now going to be mainly they're going to be left with compliance functions, with enforcement functions. And the good stuff that we ought that communities want is going to be in the housing development and finance entity.

I'm not opposed to the idea, but I do think I really want to see the administrative organizational analysis without the words focus, collaboration or leadership.

But really like how is this going to work in a way that does not make HCD compliance even harder to get behind locally, at least right now if I gotta get my housing element approved by hcd, which I do, I tell people we have to do that because these are the same people that are gonna be approving our application for $20 million for this housing project or for this affordable housing and sustainable communities park or transit center.

When you split them up, you are setting HCD up, I worry to be only a bad guy. And that's problematic from an organizational, cultural perspective. I don't know what the answers are to any of these pieces, but I think this is what happens when you solve the same problem three times, is you create two new problems.

And that's what I'm seeing here. So I'm hoping to learn more about this. You also mentioned in the time frame that you were trying to be careful not to disrupt anything. And I think we need disruption on stuff and particularly on the homelessness side.

We spent five hours here last week on this topic and I think it's very, it's disappointing not to see more creative, any creative Ideas here on the homelessness side, there's not much here.

On the housing side, there's this one idea which is really, really, really important around streamlining and consolidating, but there's really nothing at all on the homelessness side.

And I think if we're going to devote the time and the energy and potential, potentially the BCP for an additional additional secretary, additional undersecretary, additional Secretary of Public affairs, an additional legislative sector, all of that that we, that we're going to have to.

While at the same time being asked to not approve any additional money for the key for the multifamily housing program. Anything that really matter on the ground that we're going to need to, we're going to need, we need to have better, more profound ideas here.

Then I guess the last piece I want to just highlight is on both the housing and the homelessness side. I was struck by the lack of connection to what these topic areas in other agencies. It felt almost like the Administration said, hey, business services in housing, you, without bothering anybody else, go figure out how to reorganize yourself.

Which is a different question than you go figure out what is the best way to organizing how we do housing and how we do homelessness in California and how we do consumer protection. And I say that because I don't see like TTAC is not, not in, Is not in here.

And I recognize that there are some organizational political challenges because it's in the treasurer's office, but it's in a major source of funding for affordable housing in California. So why would we not want that in the same agency?

The, the clearer relationships or maybe the individual responsibility for the Affordable Housing and Sustainable Communities program, the homelessness programs that are in behavioral health and in corrections and all over the rest of the budget.

My personal pet peeve, but we'll go absolutely no road, I'll say it anyway, which is that when we declare excess properties should be managed, especially from Caltrans because they're the main owner, and we also declared that they should mostly be for affordable housing, and yet we still have that whole process managed by the transportation agency, like, why can't that be brought into the portfolio of what this agency is managing?

So I'm not proposing that, but I do think, you know, taking a look at these two sectors or these three kind of consumer protection with an eye towards what are we trying to do here? What is the breakthrough innovation and efficiency that we're going to achieve both for ourselves but.

But also for the people that we serve needs to be at the. It needs to be at the center. So I would give this one so far AB minus, which would get us through undergrad, but it would not get us a grad degree.

So luckily we have two new processes in order to get that up because I do think it's important work. And I'm looking forward both to the conclusion, the Little Hoover process and then returning later here because it seems unimaginable, as Senator and Nila said, that we won't have a BCP proposal.

So thanks so much for being with us today. Mr. Chair.

Can I just say, please do really appreciate the comments, really appreciate the feedback from Committee Senator on all of your questions around housing discrimination and the civil rights pieces not lost on us.

And we really look forward to sharing more with the plan around the outside and share to your points around saying more than just the focus, but pieces and streamlining and all those other wonderful, powerful statewide words. We hear you and we see you. And that is why we cannot wait to see the plan.

It is our hope that our B minus goes to an A.

And it is also our hope that seeing the full picture right of all the things and all the thinking that we've done behind the scenes around some of the issues we brought up today are ones that you can see, see are ones that have been very thoughtful and ones that we haven't done singly on our own.

We have been talking to quite a few folks as well as the agencies that we work with. So without saying too much more, just wanted to say the additional details you're looking for. We look forward and we'll invite all of those great questions once the plan is submitted and before the Little Hoover Commission.

So thank you so much.

Thank you. All right, we'll now turn to the Department of Cannabis Control. So will our representatives from the Department please come forward? I'm sorry, before we proceed, you can come to the table, but before we actually proceed to the Department, we're going to take public comment on the BCNH proposal that was just. Was just laid out.

So do any Members of the public wish to provide testimony on the introductory overview of the proposed reorganization? Please come forward to the microphone.

Good morning. Natalie Spivak with Housing California. It isn't often that an external shock to government institutions creates and opportunity for real structural change. But this can be one of those moments. Housing and homelessness deserve the focus of a dedicated state agency, but it's important.

That the creation of a new agency not just be a reshuffling of agency functions, but an opportunity to reimagine a more effective and efficient state government.

On the production side, the key goal should be to save time and money by streamlining the provision of state funding resources so that they can be accessed through a single rating and ranking process or One stop Shop. Here we should build on what works. TCAC and SIDLAC's infrastructure, including its transparency and governance, are effective and well liked.

By affordable housing developers. A new system should build off rather. Than replace TCAC and SIDLAX infrastructure by ensuring that state funding awards under a new agency be incorporated into TCAC and SIDLAX competitions rather than the other way around. There should also be only one state. Regulatory agreement with one state agency so monitoring and compliance are not duplicative.

This agency is also an opportunity to reimagine how the state serves its unhoused residents. We ask that this agency have the authority and ability to coordinate with external. Departments and that oversee other homelessness programs. Such as the Department of Healthcare Services and Department of Social Services to allow. For greater alignment and streamlining of services.

We also ask that the agency be. Given policymaking authority to shape local implementation of homelessness policies and programs. Additionally, we believe that homelessness programs under. The Office of Emergency Services, Department of. Transportation, Board of State and Community Corrections, and Department of Corrections and Rehabilitation would. Be better served under this new agency.

To improve programmatic Administration and coordination and urge their inclusion. As Senator Cabaldon mentioned, just reorganization won't. Be successful without funding, but funding does. Funding plus streamlining agency functions can be. A powerful way to create a virtuous. Cycle of effective governance and trust in institutions.

We look forward to working with the Legislature and the Administration to help make this a success. Thank you.

Hello, I'm Nevada Merriman, Vice President with Mid Penn Housing, and I'm here today to express support and concept for the administration's proposal. MidPen's capital stack on new construction projects includes an average of 18% from various state sources.

I was here just a couple weeks ago and shared to this effect, but creating a predictable, well funded way to finance affordable housing is in our opinion one of the most important things that that could be done right now.

Of the various programs that we use, every single one has its own public policy priority, its own cycle and sometimes we spend two to three years after entitlement to navigate this labyrinth of programs and patching it together from several different pots of money. Programs are often oversubscribed seven to one.

If you are unlucky in one application, you may have to wait an entire year to come back we have an example in East Palo Alto where the project was entitled and received local funding. It took four years to secure all the state funding that was needed.

We applied to multiple sources with mixed results and finally we had a breakthrough. But this delay is costly to the public system. It's also costly to society because these entitled homes are not being brought online. And this, the need is very great. We offer this example to.

We offer this example as a proof point to why agency reform is needed. Thank you.

Good afternoon. Mark Stivers with the California Housing Partnership. And I wanted to start by saying we strongly support the creation of a housing and homelessness agency. We do think that having an agency and a secretary focused on housing and homelessness will provide not just greater focus, but greater access with, with this and future governors.

We also think a focused agency can be more proactive in its housing and homelessness, addressing housing and homelessness. We're also appreciative of the effort of trying to increase transparency, public participation through the Committee. Hopefully, hopefully that will occur.

But again, for us, the real thing we're trying to achieve here, as Natalie Spivak spoke about, is the One Stop Shop. The developers spend way too much time. Each source that they go to at the state level adds $15,800 per unit per sour. So you think about a development that has two or three different state sources.

We're talking about $47,000 per unit in extra costs. We do think a One Stop Shop needs to include the tax credit and the bond system. Those are the systems that every development uses. They have the most buy in in terms of their scoring, rating and ranking criteria. They have staff that is very high performing.

So we would encourage the state. Ultimately, we hope this program will move us towards the One Stop Stop Shop. But ultimately it needs to include again the tax credit system and we would base it off the TCAC staff. Generally who governs that system is a little bit less of our issue.

But we do think that there are benefits to having maintaining the current balance of power across constitutional officers in that it will probably ease the transition into a new system as opposed to creating a lot of conflict within the affordable housing community. So for those, we appreciate your consideration. Thank you.

Good afternoon. Marina Espinoza with the California Housing Consortium and I was also asked to register. Comments on behalf of the California Council for Affordable Housing. CHC and CCH appreciate the administration's interest. In creating a more integrated framework. Integrated framework to address the housing crisis. There are opportunities to do that.

However, we're a bit concerned about simply Rearranging state entities without addressing the core issues that exist within these agencies. If the Administration and the Legislature plan. To move forward with this proposal, we. Strongly urge you to consider making meaningful. Changes that will focus on promoting the production of affordable housing.

This must be done by improving the customer service experience of those who interact with the state's housing agencies, promoting program transparency and improving the culture that exists within these departments. We look forward to learning more about the reorganization plan when additional details are available. Thank you.

Good morning, Chair Members.

Carly Shelby on behalf of all homes sharing our support of the administration's proposal to create the California Housing and Homelessness Agency, I want to echo the comments of other speakers on the importance of of this change in bringing a greater focus to homelessness and housing and state government, enabling more efficiency and coordination across programs and speeding the delivery of housing and services.

In particular, this change builds on the important work done to create the California Interagency Council on Homelessness and coordinate state agencies efforts to prevent and end homelessness. Homelessness funding is spread among half dozen departments with a patch work of authorities and responsibilities.

In order to make sustained progress at scale, the state needs to establish clear enforceable goals, set policies and drive local implementation. This proposal could be an important step in that direction. So we thank you for this hearing today.

Afternoon. Good afternoon, Mr. Chair. Holly from the Lighthouse Public Affairs. On behalf of spur, I thank TINK in the Bay Area who if you missed it, last January 2024, they published a report structured for success in Reforming Housing Governance in California and the Bay Area.

And of their 11 recommendations, number one was to create a standalone agency at the state level to improve efficiency and effectiveness in housing policies throughout the state.

We believe this will be more than just rearranging the junk chairs, and we look forward to the details that we'll see when the formal preparation presentation is presented next, hopefully in the next week or so. But we do believe that the consolidation will result in more money, more units and housing, more people.

And we think that increase in transparency and accountability and reporting requirements will not only build your trust, the legislators trust everybody in this room's trust, but the public trust in the system. So we look forward to seeing the details and urge your support.

Good afternoon Mr. Chair and Members. Gracia La Castillo Krings here on behalf of Enterprise Community Partners in support in concept to the administration's proposal. Enterprise Community Partners is a national nonprofit organization that offers financing, asset management and project development support and expertise to the goals of increasing housing supply and advancing racial equity.

Enterprise has been conducting focus groups across the state. And what it has been hearing wide and loudly is that the status quo does not work work. And we are looking at the uncoordinated mix of agencies and approaches that are just increasing the cost for production. The type of organizing and just coordination does not really exist.

And we are hoping that this proposal in front of you can actually ease that burden and create a more coordinated approach. However, just to elevate kind of what. The chair has said, without any additional financing, rearranging, kind of how the coordination works will not be sufficient.

And we really hope to see that in the may revise that there's going. To be additional support for funding of housing.

And just to kind of echo what my other colleagues have said in our system, what we need is a coordination between tax and bond authority so that we can actually move it in one direction and it can be a coordinated package of financing options. Thank you so much and we look forward to additional conversations on this.

All right, thanks to everyone who shared their perspectives and comments on this. We'll be looking forward to the next steps. Now I'll turn to the Department of Cannabis Control. So welcome. zero, and I'm going to interrupt you one more time because we have a quorum and in this building you never not establish a quorum when you can't.

So would you mind calling the roll Senators? Cabaldin. Here. Niello. Niello. Present. Smallwood. Cuevas. Small. Cuevas. Present. All right, we have a quorum. Okay, now for real this time. Welcome.

All right. Good afternoon, Chair and Members of the Committee. My name is Christina Dempsey and I serve as the Deputy Director of Government affairs for the Department of Cannabis Control. The Department is the state's primary regulatory body for commercial cannabis activity within the state.

We license and regulate activities in the cannabis marketplace from seed to sale, including cultivation, distribution, manufacturing, testing, retail and special events. Operationally, the Department has 12 divisions that serve three core functional areas. The first is licensing and compliance for licensed businesses.

The second is addressing illegal cannabis activity through a law enforcement division and under that, serving as co chair of the state's Unified Cannabis Enforcement Task Force. The third is administrative and operational support. The department's primary source of funding is a special Fund called the Cannabis Control Fund.

The Cannabis Control Fund is funded by fees charged to licensed businesses, primarily annual licensing fees. The Department is before the Committee today requesting resources to support the the implementation of Senate Bill 1064, which was signed into law last year.

This law requires the Department to establish a new license type called a Combined Activities License, which would allow licensees to conduct multiple activities at the same premises. Specifically, the Department is requesting one position which has an estimated cost to the Cannabis control Fund of $154,000 in facility year 2025-26 and $146,000 ongoing beginning in fiscal year 2026-27.

This position would be part of the Department's Cannabis Track and Trace Field Support Unit. The unit is responsible for monitoring and reviewing market data to among other things identify cases of non compliance and protect consumer health and safety. Thank you for your time and I'm available to address any questions questions the Committee may have.

All right, thank you. And let me note also where the where the Committee is aware of the legislation that has been introduced I think believe in the other House regarding the excise tax issue. So we are following that as well. But today's focus is this, this topic.

Are there Department of Finance LAO Members of the Subcommitee?

Thank you Mr. Chair, thank you for that that brief overview. I just had a couple questions about the request. So you're requesting one additional analyst position and I'm curious, will this be sufficient to handle the increased workload? Because it seems like you're consolidating but those the number and sheer scale is still fairly large.

So I'm curious, how did you come up with the one analyst position then? My other question is we have a lot of small cannabis business owners in our district and particularly from underrepresented communities, and there's tremendous delays and some regulatory barriers for the Cal license.

So could you also talk a little bit about how this process will assist and support those small business owners who are coming from represented areas?

Yes. Thank you for those questions. To address your first question, yes, we believe that this one position is sufficient to address the need. The way that the combined activities license works is that instead of having multiple licenses held for a single location, you would be able to get one license for all of the activities that are held.

So we're not anticipating impacts to our licensing distance division related to that. It's a shift from multiple licenses into one larger license and so the tracking and some of the related work will shift, but it's more a shift from existing workload. Where we do anticipate workload increases is with our Track and Trace support team.

So the Track and Trace Seed to Sale tracking system is set up so that licensees are entering data about the movement of cannabis throughout the supply chain. And for most licenses or the way that licenses are structured now, they are entering this information under an account that is associated with each of Their licenses separately.

Under this combined activities license, one business might be entering information in multiple areas related to the supply chain. So we're expecting some of the complexity of that data to increase.

And so this position would be dedicated to analyzing the track and trace data that is specifically related to these licenses and providing that extra level of support for our field staff.

In some cases, this person might also go out into the field with our inspection staff to do some of that verification of the information that's entered into the track and trace system versus what is happening on the license premise.

How many are processed? I'm just trying to. I'm still struggling that even with now the track and trace and the analysis that needs to happen, how would one individual be able to manage that? Going from. I'm assuming there were multiple people during licenses through the process when folks would get have to get one for each activity.

So it seems to me that means that you would need that capacity to be able to process.

Even in a one license system, even among our existing staff, some of their workload will shift. Instead of processing multiple licenses, they may be dedicated to this in some ways that might be absorbable in the way that our license population shifts. I should note that this license type needs to be adopted into regulation as well. And so.

And so our effectuation of this license type has not yet begun for underrepresented.

Would you mind restating that? So my question was there are a lot of delays now in the licensing process, particularly for business, small business owners who are coming from underrepresented areas. As we're consolidating and streamlining, will that affect the barriers and the delays? Will it help to expedite? How will this shift better serve those business owners?

Yeah, one of the advantages that we do foresee with this combined activities license is that it will make licensure simpler for some of these premises. So for example, even for a business, they might see streamlining.

For them, one way that that might happen for a business is in a way that it is also increasing workload for us is related to track and trace.

So instead of having to go in and enter into several separate accounts information about activities that are happening maybe on like one site, but in different areas of that site, they can all be entered into one account.

On a license premise, the way that it functionally works now is that because a license is issued for each separate premise and the premises need to be separate from each other, you have sort of these sometimes barriers between licenses that are walls between licenses, and sometimes it's more of like an invisible barrier between where one premises ends and one premise begins.

And there are rules around how cannabis can be moved from one premise to another. So specifically, there's a rule that says that movement between premises must be conducted by a distributor.

So if you're moving cannabis from one license that you operate to another, even if it's on the same premises, you have to manifest that in the system and essentially enact a transfer between those two licenses. So we expect for businesses, some of their functional responsibilities day to day will become a little bit easier with this license type.

For us, we also anticipate that instead of managing four different licenses that might have, or let's even make it simpler, two different licenses that have the same set of owners, we would be managing one license that has the same set of owners. So there are some areas in which that might be advantageous.

So, like the owner reviews that we are required to conduct. We don't have to go into our system and notate over across several licenses. And so there's some ways in which this might functionally make it easier, both for us and businesses.

And the more we can license one specific site for certain authorized activities rather than issuing multiple licenses, it just makes the system a little bit simpler.

Yeah.

Thank you. So as this trend is happening. Well, first, let me say, are the regulations on schedule from what the. From the enactment of the legislation?

At this point, we don't expect any issues with implementation.

Okay, great, thank you. And then is the underlying system the right system for these kinds of. This kind of scope of licenses?

You're talking about the licensing system.

Yeah, since, you know, it's still relatively young, our approach and our systems, and as we're learning more and the policies are changing, what have you, our budget processes and everything else can encourage us to sometimes keep trying to build on top of and try to do a quick.

Some duct tape over here in order to make it work. And then suddenly we find out five years later, all the licensees are a call, and we built a system for these single ones. So what's your sense of the system's future, and should we be looking at that more fundamentally too?

It's a very fair question, and it's actually more complicated than even the question that you're asking. The licensing systems were built in 2017, for the most part, before the state launched adult use sales and started to bring businesses into them.

And when the three cannabis programs that existed at that time were consolidated form the Department of Cannabis Control, what we had was three different licensing systems. So a few years ago, the Department came and had a budget proposal that was approved for funding to explore the combination of the licensing system.

So we're nearing the end of that process. One of those systems which was housed within the Department of Public Health and addressed the licensees that had been in the Department of Public Health has already been sunset and those licensees transferred to one of the other two systems.

But we are still operating with two systems right now and there are challenges because they were constructed certainly in a different time at this point, but it is something that we're evaluating.

Great. Then if there are no other questions. This is our only cannabis item. Is there any Members of the public that wish to be heard on the item and finance and LAO nothing after the. Okay, wonderful. All right, then this, this one's recommended to be approved as budgeted. So we will.

We'll be break breaking in a little bit in order to take some votes. We'll take it out this up at that time. Thank you very much.

Thank you.

We're going to put over items 6. The Government Operations agency, the California Education Learning Lab, will take that up at the same hearing that we take up the rest of the education related items for action. Not at the Joint Hearing with sub one, but when we take up the other govops actions that are education related.

That hearing is just for time only. So apologize to folks that came just for that item, but we'll be taking that up at a future hearing. So that will then bring us to item seven, which is a Department of Veterans Affairs.

All right. Welcome. Morning.

Please proceed. Thanks. Good morning, Chair and Members. My name is John Spangler. I'm the Legislative Deputy Secretary for California Department of Veterans Affairs, CalVet. I have with me Kobe Peterson. He's our Homes Division Deputy Secretary for the Veteran Homes, and Roberto Herrera, who is our Veteran Services Division Deputy Secretary. We're here to answer your questions. Just briefly.

Calvet serves all California veterans and their families. We have nearly 1.41.5 million veterans living in the state. Calvet strives to ensure that its veterans of every era and their families get the state and federal benefits and services to which they've earned.

Calvet works to strike to serve veterans and their families with dignity and compassion and to help them achieve their highest quality of life. In short, our goal is to make California veterans the most connected, protected and respected veterans in the nation.

At Calvet, we view transition from the military to veteran as an ongoing process, not one which only happens when veterans leave service. There's not time today to go into all of what we do at Calvet.

But in summary, Calvet supports veterans with programs that are there at the moments that matter in their lives, from leaving service to seeking employment and education. Connecting veterans with benefits, housing and home purchases, long term care, and even when veterans pass with veterans cemeteries.

I'd like to end and turn it over to your questions and items on the agenda with one last thing. At Calvet, we believe in a California for all. Calvet welcomes and strives to serve all veterans. It is a core belief with us that every veteran should be treated with dignity and respect. Every veteran.

Calvet's team is committed to ensuring veterans from all walks of life are not only seen and heard and celebrated, but they also have access to all of the benefits and services they've earned. Thank you.

All right, thank you. Does Department of Finance wish to comment?

Isaac Arias, Department of Finance no comment at this time. Lao.

All right, questions for comments from Members of the Subcommitee, Senators from all the way to cuevas.

Thank you, Mr. Chair, and thank you for the presentation. I know we have a number of items to get through for Veteran affairs, so I'm going to ask sort of a blanket question that applies to some, some of the other items here, but just for sake of time, raise it here.

I noticed there is an investment in infrastructure and maintenance in a number of our veterans facilities and programs. My question is, how do we typically do that work? Is that work done by active duty military personnel when those kinds of infrastructure capital projects are done? How? And if not, if it's Done through State of California.

Curious if we use some of our same policies in terms of workforce equity and labor standards. As chair of Labor, I often say when we are investing and certainly we know that our veteran facilities need a lot of help and housing and repair. But you know, when we make these investments, how are we seeing these as multipliers?

And by that I mean, you know, if we're going to, you know, do H Vac repair, if we're going to do maintenance on some of our housing and facilities, are we using as an opportunity to create apprenticeship opportunities, are we instituting things like local hire so local residents can get an opportunity to participate so that we're, we're improving the infrastructure, but we're also creating some good jobs and some good pathways from, for people who need it in the communities that are supporting our various facilities.

So I'm curious how you all do this work. Is it in partnership with unions, is it in partnership with local communities? Because we just need to make sure every dollar we're investing, we're seeing it as a multiplier that lifts up Californians. So curious about the response.

Thank you, Senator. And I'll turn part of this over to Kobe Peterson because he has the homes division. But I will say the disabled veteran business enterprise contracting goal is a very big thing at Calvet. I mean, it's a statewide goal, but you know, the 3% of state contracting go to disabled veteran owned business enterprises.

And that's something we observe. And my understanding is that we use the typical state contracting process in partnership with DGS for most of our any, any kind of significant infrastructure project. Kobe, good afternoon.

Kobe Peterson, Deputy Secretary for the Veterans Homes I agree with John. We follow the state contracting manual for all of our capital ally projects and our construction projects also utilize the DBE program and those are scrutinized very heavily.

So we make sure that we're trying to be fair and equitable to all the bidders, but we don't specifically use the military. I'm trying to remember a time when we did that other than an emergency crisis. Right.

I appreciate that. And I'm curious how many veterans, particularly those at risk of homelessness, have been employed in your maintenance and construction projects. Do you set aside those jobs for those individuals?

Mean when you're using the state process, are you looking at things like local hire, things like criteria that would say, you know, our veterans who are in most need, that they could actually do work and actually get a career pathway to, you know, take them out of homelessness by helping to repair or maintain or build our veteran and military facilities in the State of California.

This is not one. I know off the top of my head, I, I know that some, that there are things built into the state contracting process about, you know, the use of union labor, etc.

But I don't know a great deal at the level of whether it gets down to are we hiring people from the local community or not. I don't know if finance has anything to offer on that, but if it's, it's a great question.

And so if it's not something that we can answer for you today, I'll take it back and we will return and give you an answer.

Thank you. I would like to see that. I think that we're, we're talking about the needs of our vets and my mother is a veteran and we know one of, at least in my area, we see our homelessness, we see a lot of veterans sleeping and dying, unfortunately, on the streets of LA County.

And so where we are, whether it's building a cemetery, whether it's building, fixing a maintenance, whatever it is, you know, how is the State of California again showing that we can multiply these funds by building that infrastructure, but also getting our veterans into opportunities that help take them out of precarious and dangerous economic situations.

So I would look forward to seeing how many veterans we've employed by retrofitting, repairing and building our military and veteran infrastructure in the state.

Senator, if I may, you know, with, you know, just listening to your question and comments, you know, going back a little bit to the DBE program at Calvet, we do implement a DBBE first policy at the Department of Veteran Affairs.

So every opportunity for contracting that goes out, our procurement staff do look at and try to find DVBEs and of course, certified small businesses as well for participation in those contracting opportunities.

You know, getting you an exact number on the number of veterans that have been employed that were some of those that are hardest to serve, that's something we can look into and try and get a number for the Committee.

I will say though, that, you know, we're around a little over 11 years since the implementation of Prop 41 and the Veteran Housing and Homelessness Prevention Program. That program was 600 million in redirected home loan money from the Department to build permanent supportive housing for veterans throughout the state.

That program did have a 5% DVBE goal, or excuse me, with VHP, it was actually a 5% DVB requirement. So there has been millions of dollars in investment to disabled veteran business Enterprises through the VHHP program. And that program in particular, the DVBEs that participated had to show evidence of employment of veterans as well in that construction.

And again, to the Members of the Committee, I'd love to follow up on that, get you more details if you'd like, please.

That would be great.

And then one final comment from the veterans homes perspective. We're proud to state that for the last several years about 20% of our admits are homeless veterans. So that's a large number. We've never turned away a homeless veteran that has been sent to us from the community.

We fight really hard to try to find places for those folks, appropriate locations. In some cases they're not in the exact spot that they currently are at because we don't have a vacancy. But we work really hard to make sure we prioritize those folks.

I am appreciating that. I think there's more we can do and I'm curious to see how our numbers are bearing out in terms of how many of our veterans, particularly those most at risk of homelessness, in need, are getting opportunities.

I think the business enterprise is one way, but certainly building workforce because that's where you get the numbers, the number of workers. Right. Who are coming in. I think it's important for us to know that those opportunities are reaching our most vulnerable business owners, but also the potential workforce. But thank you.

Vanessa, do you have more to add? Sure. Randy Katz, Department of Finance I just wanted to add that while your questions are great and valid, I think it might be directed for the Department of General Services that there are public contracts to experts and they will have more.

They would have the most details related to veteran services, small businesses, local businesses.

And I know DGS is sort of doing most of the procurement, of course, but I am talking about the, in my view, this getting our veterans off the street, getting our veterans into homes, getting our facilities for veterans in the best standard possible. My sense is that would also mean the human infrastructure. Right.

And making sure that those most needy veterans have the greatest, you know, opportunity. So, you know, as you're asking for additional resources, $38 million, for example, for the construction phase of the steam distribution system and renovation.

I think it's appropriate to ask that question in this hearing where these dollars are being requested, that we also understand what is the strategy and priority of our agencies in ensuring that our most vulnerable veterans have opportunity.

But certainly we'll put that question to dgs and I'm certainly the data will likely come from this Department, but through partnership with DGS as well. So thank you for that.

All right. With that then we'll. Since Senator Smallwood-Cuevas already gave us a segue, we'll move to item seven, which is the Veterans home of California. No, no. In Younville. The steam distribution system Renovation Reappropriation.

Okay, thank you very much. The this proposal, we're asking for a reappropriation of the $38,756,000 for the construction phase. We're well on our way through this process. We're at about 85%, close to 9% working drawings completion hopefully within by July.

So what we're asking for is to shift in time the appropriation so that we can begin we can begin construction in the October, November time frame. So this project replaces a antiquated system that I that was I think last addressed in the 1950s. It provides domestic hot water to the main campus.

The main campus uses that hot water for showers, heating and the like. It's been experiencing some failures over the years just by leaking those types of things.

It's part of the three pronged approach to renovate the campus central plant, which we've already done with new boilers, the chilled water loop with new chillers and then this is the third part with the steam pipes. So subject your questions. Finance.

Isaac Arias, Department of Finance. Yeah, I would just note also that this was an approved project in 2022. So we're just seeking a reappropriation due to some delays with getting that construction started. So we expect to be started later this year.

Thank you. And LAO. Nick Schroeder at the LAO. We raise no concerns with the proposal. All right. You know, is a core part of my district. It's also the largest of the of the system here and it's also incredibly old as you've as you've noted and hinted. I'm certainly supportive of doing this.

I'm concerned about the, the delays that have occurred and we have the Legislature has appropriated funds for this project, for the theater, for other elements and we need to get those on track, all of them.

And it's one of the reasons when we get to item nine on the deferred maintenance budget, I think we're going to be recommending today holding that open so we can continue to get additional detail. This is a site where the laundry room is completely unusable. The hospital floor continues to flood, there's no electricity.

Parts of the and it's not pg. It's the on site work. The chapel is unusable. The cemetery is not irrigated and we were showing more, more respect to the gophers than to the men and women, men and women who are interred there.

And probably the biggest challenge that we're facing at the home and in the General communities that the Yonva Vladimir Bridge home, as you know, is the operator of the of the dam and the reservoir there that provides water not only for the home, but is the main water supply for the town of Yountville nearby, both of which have been incapable of being able to of maintaining that at a level of service and safety and public health that is needed.

So we continue to have major challenges at the home. The steam distribution is an important step.

But I'm looking forward to understanding more clearly as we take up the other item in the coming, coming weeks exactly how it is that we're going to make the necessary progress in order to do right by the veterans that make Hantville their home.

I just would say we would invite you, chair, and any of the Members of the Committee or of the Legislature generally to come see Yountville because it is really unique. It's 114 years, 14 years old and it's a jewel, but it, it does there are things to be done. So there's nothing quite like seeing it.

And we're happy to do that at any time that's convenient for y'all. All right.

Be happy to host the rather Subcommitee Members and Yonville as well. Okay. So the recommendation on this item though is approve as budget as it is reappropriation of funds that were approved in the 2002 Budget Act. So.

Well, we are about to go to votes and so if we can take one more item up and then we'll go on. So thank you. Now let's move to item 8, which is the administrative services staffing issue.

I can speak to this briefly. In short, the two most recent veteran homes, Reading and Fresno, were opened. And in addition, the Department, particularly our Veterans Services division, has grown significantly over time without commensurate increase in our, in our administrative staffing folks.

And so this request is in line with that to help us handle the new and increased workload that we have.

Thank you, Nance. Members of the Subcommitee. All right.

I'll just take a quick moment to gratuitously note that and to pick up on a comment that Senator Smallbone Cuevas made about an earlier item on cannabis control where there was a single Associate Governmental Program Analyst, which is the Level 2 entry level position in state government, trying to manage that entire new effort here in headquarters.

There's A single person in the same cLassification manning the budgets for three veterans homes in La. I mean, these for folks who are not confident in the work that are state employees are doing and their efficiency and what they've been tasked with, I think these are a couple of examples.

It's not to say that we don't need to be looking over this with a fine tune CO for five hours every week. We do. But these are folks in state service that are doing outstanding work and also doing a lot of it. So appreciate that. Are there any questions from the Members of the Committee? Okay, then.

I know Senator Smallacuevas is going to get on an airplane in a little bit. She's doing her best to line the schedule up at Southwest Airlines, in addition to charging for bags and everything else, is not aligning their schedule with our Subcommitee hearings for some reason. We're working on it.

So we're going to at least take some of our votes today right now, before Senator Smolencry has to leave. And so before we do so, we're going to take public comment both on the Veterans affairs items other than deferred maintenance. So let's do them all. So item one, item seven, item eight, and item nine on Veterans Affairs.

And then for the military Department, item two, and item three, which is the active duty pay adjustment and task force Rattlesnake. Those were the items that were up for vote only. So are there any Members of the public that wish to be heard on item 112378 or 9? All right. Seeing any?

Seeing none. Are there any comments for Members of the Subcommitee on those items or a motion? Let me first invite a motion. Items 1235 and 7 is.

So move.

135. And.

Yes.

What'S that?

12357.

123 5and 7. Yeah. Okay. All right, so that is the motion. Would you please call the roll on.

Items 1235 and Senate 7? Senator Cabaldon? Aye. Cabaldon, Aye. Senator Niello. Aye. Niello, Aye. Senator Smallo Cuevas. Aye. Smolid Cuevas? Aye.

All right, then on item 8. And item 8 is the administrative services item we just heard. Is there a motion on that item?

So moved.

All right, any further discussion? Seeing none. Let's call the roll.

[Roll call]

All right, that motion carries. Thank you. All right, now we're gonna proceed to item nine, which is the Veterans Homes. Veterans homes. Deferred maintenance.

In light of the Airline delays. I'll make sure that we go through this really quickly. So in this budget proposal we have, we're asking for $819,000 annually to be added to our deferred maintenance program and our eight veterans homes. The Department currently has a deferred maintenance budget, $681,000.

And this increase will bring our deferred maintenance budget to $1.5 million, which is a significant increase, as you all are, for the most part, well aware that we're dealing with some aging infrastructures, especially in our older three veterans homes.

The Alba Veteran Home was founded in 1884, and some of the majority of the buildings that are on that campus were built between the 40s and the 50s. I think we've had one building, with the exception of the theater that was built since then.

But as you can imagine, we're dealing with older infrastructure, older equipment, as witnessed by the STEAM project that we talked about. And we. It's an amazing facility. It's breathtaking, but yet it comes at a cost as well. We also have our two older homes, the Barstow and Chula Vista. Barstow is almost 30 years old.

Chula Vista is coming up on 2627 years old. So they're starting to experience system issues and maintenance issues and repair items that are reaching their useful life as well.

So this increase in funding will significantly allow us to do a better job of dealing with these critical infrastructure repairs and ultimately making a more safe and better well being for our veterans in their care. So, subject to questions.

Finance first. LAO Members of the Subcommitee. Senator Niello.

The total deferred maintenance is estimated to be 43 million. Do I understand that correctly? Yes, sir. And the allocation being requested is 800,000.

Yeah. Combined to the 681,000, which will give us 1.5 million to use annually going forward. Okay. Yes, sir. That'll take you about 26 years.

Yes, sir. Right. It's a bit of a challenge.

Yeah. I think for me, the ancillary challenge there is that I just want to be. I want to be clear that we're not creating incentives to only deal with the tiny deferred maintenance items, which can be the case if both finance and this Subcommitee later.

Why are you asking for $20 million for this necessary maintenance improvement when we've already budgeted you? We gave you a 50% increase in deferred maintenance. And of course, course, then you're only focused on the smallest items, and the small items definitely matter.

Many of the ones I mentioned were, you know, the laundry room could probably be done for this allocation as an example. But I do think we want to make sure that we're not creating the expectation that this alone is going to meet the deferred maintenance needs.

But then similarly, and this is the point I was raising before, so I do think we will want the role of the Legislature and the Department of Finance in assuring accountability and progress and delivery. That's going to be the main question that we take up between now and the hearing when we take action on this.

So your finger was at the ready for a bit. Did you have anything to add? Okay. All right. Okay. So we'll hold that item open and move on to item so. Thank you. To Veterans Affairs. Thank you very much, sir. And we now turn to the military Department. So we'll. Representative of the Department, please come forward.

Good afternoon already.

Good afternoon. Welcome.

Thank you. You ready? Yes. Great. So, Mr. Chair and Members, I am Matt Beavers. I'm the Adjutant General of California. It's great to be with you today. Appreciate the opportunity to walk through our key budget items that are before you. I think I'll start out with a very brief overview of the military Department.

I think the chair has not heard this pitch yet. You guys have. So I have the absolute distinct pleasure of commanding about 18,000 of the finest sons and daughters of California. They're organized across four different business units, if you will. In the military Department, we have the Army National Guard of California, the Air National Guard of California.

We have a small volunteer auxiliary which we call the California State Guard, which is different than the National Guard. And then we have a Youth and Community Programs Task force. And I'll start from the last. And we're back. The Youth and Community Programs Task Force manages and runs three distinct in resident.

Last chance, if you will, charter schools, three across the state, fully subscribed, two to 300 per class, two classes a year. So across those three organizations, we're also responsible for a program called Starbase that serves about 3,600 students a year across four different campuses.

And that is essentially an after school STEM program that is wildly oversubscribed and hugely popular. Our California State Guard really does kind of all the work that we don't, can't or won't do. So I talk about that. They are true volunteers.

They get unpaid and they manage a lot of the back end processes for us and they are extraordinary in every respect. In our Air National Guard, we're responsible for the air defense of the southwest United States and the 144th Fighter Wing in Fresno ensures that our adversaries do not approach our borders from the air.

We also have a rescue wing which is responsible for rescuing sailors at sea, sometimes as far as 1,000 miles off the coast of California. And they are exceptional in every respect. We also have a C130J wing down in Channel Islands, which we refer to as a Hollywood Guard.

And we also have an attack wing that's an MQ9 reaper equipped wing and it's currently in service across Southwest Asia. They fly every day. They fly those drones every day from their trailers in Riverside. That equipment is launched and recovered in theater and is flown by California Air National Guardsmen.

And then finally, as I mentioned before, the 144th Fighter Wing. And then lastly, we have an Intelligence Surveillance and Reconnaissance Wing at Beale Air Force Base. And they manage a lot of the space work that we do. We provide offensive defensive space control, we manage the MILSTAR satellite system.

And that all occurs in the California Air National Guard. In the Army National Guard of California, the 40th Infantry Division headquarters, we have the 79th Infantry Brigade Combat Team, the 224 Sustainment Brigade. And I can go on and on. About 12,500 great soldiers that in any given day, in any given day are deployed overseas.

They're deployed in LA as we speak. 432 soldiers are still deployed in LA supporting our law enforcement partners both in Altadena and down in Pacific Palisade. So we're extraordinarily grateful that those young people signed up to serve. And I tell people that my sole responsibility is to make their lives better for having served.

And that is the sole mission that I think about when I wake up in the morning and when I think about when I go to bed at night. I could go on, but I think that's probably a lot.

If you'd like, I can talk a little bit about I saw on the agenda kind of what we did in the LA fires. We can talk very briefly about that if you'd like. So an extraordinary deployment for our Army National Guard folks.

We put 200 soldiers on the ground in LA in less than 12 hours, 400 in less than 24. At the high point, we had about 2,500 soldiers and airmen on the ground in LA. And that was probably less than 72 hours. So extraordinarily elegant. I would characterize that deployment.

And we're very, very happy how that went and our ability to serve our interagency partners, be it LA County Sheriffs, Los Angeles PD, CA Highway Patrol, LA Water Power, all those Folks, it was exceptional deployment in every respect and we're hoping to slowly migrate out of that operation as conditions on the ground continue to dramatically improve.

I think you guys also want to talk briefly about some cost reduction measures that the department's gone through over the last year or so. Through a couple of budget drills and in concert with the California Department of Finance, we were able to reduce our budget by about 972,000 and reduce five unneeded positions.

But that's really just one part of a, of a broader strategy that I implemented three years ago or so when I took over to really take a look top down and bottom up in the organization and look through it through the prism really of organizational discipline and accountability and then governance.

So how do we govern the Department better? How do we ensure that we are efficient and effective? It's easy to make that case when we compare ourselves to our active component counterparts. We're 3 to 5% or 3 to 5 times cheaper to deliver the same amount of readiness. That's not an issue.

So nobody's going to come and doge us per se, but we have a duty and responsibility that we're spending the people of the State of California's money more effectively. And we took a hard look at that and I think we've got a long way, we've gone a long way in doing that.

And then lastly, just to give you a sense of the turmoil that occurs in Washington D.C. and how that affects the California national guard. We're about 7/8 funded by the Federal Government, 3/4 to 7/8 depending on the year. So things that occur in the Federal Government have an absolute effect on the California National Guard. Without question.

However, I don't see a significant change in the federal budget as it relates to the Calgary. What I continue to see year over year is the Federal Government's inability to pass a budget. The National Defense Authorization act has to be passed every year. It's not, there's no two year money, three year money.

So we have to fight for a budget every year. And when we have continuing resolutions that now go on for a year, a year long continuing resolution, that has a deleterious effect on our ability not to secure the funds but to expend them appropriately.

You go to a cr, that's the previous year's budget divided by the number of days, minus 1%. So there's no new starts, there's no new money. You're living off of last year's funds and that continues. It's going to go all the Way through in the end of the federal fiscal year.

And what happens is we wind up cutting contracts at the very end. It's not an effective way to spend the people's money at all. And it makes it very, very hard for us to do the right things at the right time to deserve to deliver the effects really, that we're looking for.

So with that, I can take in those questions and then we can move on to the budget items, if you'd like.

Questions? The issue of the budgeting in Washington, D.C. just to clarify, that's not a new issue.

No, it's not. Absolutely not. It happens every year to the point where we start to budget, assuming CRS are going to occur, we start to schedule our training events on those specific windows when we expect the Federal Government to not Fund us anymore. Yeah, absolutely, Senator.

Not new. I would agree. That's no way to run a railroad up.

Me, too. I agree also. Okay, thank you so much. Appreciate it. So let's move on to item 10 then, which is the governor's proposal related to the staff judge advocate.

Yes, that's correct. As I mentioned before, my open remarks talked about governments governance, talked about operational discipline and accountability. We took a hard look at the Department and recognized that we had some glaring holes in our ability to execute governance within the Department.

SCIF claims that weren't adequately managed from a legal perspective, purchasing and contracting that weren't managed in an adequate perspective. So this request is for 697,000 General Fund and three positions. And again, these positions are really addressed to the increased workload that we determined we needed but didn't know before we did the deep dive.

These are hugely critical for the Department. The Department. And they will ultimately save us money.

Mr. Vice Chair, any questions? So I'm just trying to understand the relationship to the existing base of attorneys. And I think if you've seen our Subcommitee document, you may know the question was raised. There's a single attorney in the or maybe among the judge advocates that are Members of the California Bar.

And that is part of what's at issue here.

Yes. So every attorney that we have that would touch the State of California has to be certified by the bar. We would have attorneys within our formations that would be doing operational law on behalf of the Federal Government, and they would not be required to be certified by the State Bar.

Does it make it more challenging then to shift workload among people?

Well, yeah, and in a certain extent you can't, you know, and you don't want to start crossing federal dollars with state requirements. We need to do the best that we can to wall those things off. And it comes down to expertise, experience. It comes down to understanding how things work within state government.

The folks that we would have in our actual tactical formations, that would be operational law lawyers, would have no understanding, capability or capacity to execute purchasing and contracting, understand what a SCIF claim is, do those things that we need them to do in service of the state.

All right, thank you. There's no further questions on this one. We are going to hold that one open to our next chair of the Department. Next up is item 11, which is deferred maintenance.

Yeah, so this, this budget item chair is 4.8 million General Fund, and that's to replace three dilapidated HVA systems at our armories in Azusa, Okinawa here in Sacramento, and Fresno. Hammer down in Fresno. It also includes provisional language for an additional 6.3 General Fund augmentation if we do not receive matching federal dollars for these projects.

It's important to note that on state facilities, we're going to. We get a 25%. So it's 2575. 25 by the state, 75 by the Federal Government. On federal projects on the state, it's 50. 50, I think. Yeah, it's 50% on Azusa in Okinawa and 25% state match in Fresno.

So if you can imagine, on these projects, the Federal Government in some cases picking up, you know, 75, sometimes picking up 50% of the cost. So it's extraordinarily value. The value Proposition here is exceptional.

But more important than that is our soldiers and airmen deserve to be in quality facilities where they are not sweating to death during the summer. And that's currently, in these three locations is exactly what's happening. It's untenable for them to operate in these conditions. And I'm not saying that they can't do it.

I've deployed people to the Middle East. It's hot. I recognize that. However, they deserve to have a good facility for them and also for folks that want to join the guard. Imagine if you walk in and you went to a recruiting office in one of these facilities and everybody's sweating with their shirt off.

That's not a good look. That's not good curb appeal at all. And granted to Senator Neilo's point earlier, my backlog repair and maintenance is $140 million. Okay, so this is not going to get at that, but this is going to take care of the soldiers that are in those organizations and in those facilities.

And what do you think our prospects are for the federal for the. I think they're good. When would we know?

Yeah, probably later in the spring when the 26th President's budget actually arrives in Congress. That's ongoing now. I was just in D.C. yesterday having this discussion. I believe that facilities FSRM, if they call it. If you want to call it that, will remain untouched.

I think they recognize across the board in DOD that their facilities are hugely challenged. So I don't see a huge issue there at all. So I have a lot of other huge issues, but I don't think facilities funding is going to be one of.

Them later in the spring. When. You mean this coming spring? Yeah, right now. Yeah, next couple months. Which would be before this budget. You think before may revise?

I wish. We'll let you know one way or the other. I know. Yeah.

Well, spring ends on June 22 and the constitutional requirement for. Of the budget, which, by the way, placeholder. But I digress. We just had that discussion is seven. Days before that one would presume that we'd probably know before the budget is the placeholder budget. Yeah, well, we'll let you know.

Yeah, as soon as they tell us, we'll tell you, I promise, Senator.

All right, so that's why we're holding it open. So we will return to that item. Thank you. There's no. Nothing further. Dynamics Finance and LIO. Okay, item 12 then is consolidated headquarters staffing phase four.

Yeah. So this request is for two positions. 351 in 2526 and then 347 ongoing. These positions and personnel will manage some highly sophisticated and relatively new critical facility systems that we have in the Department, or at our headquarters, rather in Rancho Cordova.

We need these positions because it's hugely important that we ensure that we maintain the integrity of these new systems and don't let them degrade. Ensure that they're being well maintained. Ensuring that they're working. Ensuring that we are delivering on the promise of zero net energy building which we have now.

Ensuring that we're maintaining the gold lead platinum standards that we expect to get out of those buildings. And again, to ensure that the facilities are right and appropriate for the soldiers and airmen that work there and our civilian employees.

Does the Senator from Rancho Cordova have any questions?

I guess the only question would be are we done? This has been. We're done. We're done with those two positions. We're done. Okay.

Okay. That's also a hold up open recommendation, but I'm also supportive of it as well. So we will look to approve that Absent other changes to the budget at the next time we take this item up. So item 13 then is Los Alamitos Headquarters Readiness Center.

So that's $750,000 for advanced planning study for a new readiness center at our federal training facility, Joint Forces Training Base Los Alamitas. That will enable us to compete effectively for military construction funding in the out years.

Yeah. Isaac Arias with Department of Finance. I would also note that this request is a Armory Fund. So it's not General Fund and so they'll be using Armory Fund for this. That's all.

So can you share with us what the. What the. This it is, the status of the Armory Fund is and the trends in it.

The army Fund can support this? Yes, absolutely.

Yeah. Okay.

Lao, is that our new. This one? And so the. With plans beginning in 2027. When do you. Sure, it's here. But when do you anticipate construction and completion of the.

It would be contingent on competing and securing federal military construction dollars.

Okay. And how confident are we are we that we would prevail there?

Your guess is as good as mine. The challenge with that, and I hope not, I don't mean to be flippant, but it's important to understand that I'm competing against 54 other states territories in the District of Columbia, Right. On these projects.

And the more elegant and the quicker that we can develop these advanced plans gives us a significantly better chance at securing those federal MILCON dollars. So without this, we're not going to get anything. Be clear on that. But it's a competition. And California is a high cost state and it's a challenge for us, without a doubt. Okay.

I don't want to. Yeah, I don't want to sugarcoat it because that would just be wrong.

Okay. All right. Anything on this? Okay, then. Item 14 is the Starbase classroom building.

As I mentioned before, our Starbase programs are wildly oversubscribed, hugely successful. They deliver improves test scores wherever they are stationed. Starbase program is federally funded from an operational standpoint. However, the program needs facilities and those are provided by the state.

This appropriation of 419,000 a General Fund will enable us to grow the program to primarily serve LA Unified down in Los Alamitos. Additional 900 students a year. Right now the population that we cover is about 3,600 a year. This will be able to increase that by a factor of 900.

Finance? Yeah, finance would just like to note that this is for the working drawings phase. So construction requests would come in a subsequent budget year. So the Legislature would have Time to be part of that discussion.

We have no issue with the program or purpose of the request, but we do have concerns about the out year costs for construction. And since building codes change over time, any drawings that are produced now may not be usable by the time the state is in a position to pay for construction. Moreover, this request would expand services.

It doesn't. Rejecting it doesn't mean they would go away. So we are recommending for now that the Legislature reject.

All right, Senator Danilo.

What sort of measurable outcomes have you experienced from this program or programs?

Yeah, the specifics we can give you, the test scores that I mentioned before. We can provide those numbers specifically, but I can assure you that every class is wildly oversubscribed. So there's significantly more students at each of our locations than we have seats, and for that alone, I think is hugely important.

The program that we started in Porterville. Incredible. So they're getting cad, cam, Rocketry. And this is not just stem, Science, Technology, Engineering, Math. In other places we're doing STEAM now. So we've got in that a. The architecture piece. So Science, technology, Technology, Engineering, architecture and Math. So, yeah, the programs are wildly successful.

We can give you the numbers for sure. Okay, I'd look forward to that. Absolutely.

Okay, great. We are going to hold this one open. I'm supportive of the program. I have looked at the evidence. It's a solid program. I think the question is, are out year commitments on the General Fund. We have to be very careful and prudent about those.

And so really understanding whether or not in a year, if the next year's budget is actually what both LAO and Finance expected to be, would we be likely to find the rest of the money for the project? And if not, then making the investment now for the working drawings might make us feel good, but it's not.

It's not the best. It's not. That's not the most prudent decision. So to me, it's just an opera. It's just a budgeting question as to whether or not this is the right year for working drawings, given what we're looking at at the fiscal climate for next year.

But that's the open question that we want to take a look at when we return for. For this item on vote at the next hearing, at the next hearing that the military department's up. So. And. And we have to actually pass a budget. We do. And today we took some important confidence. Senator, you'll do it. All right.

Okay. General, thank you so much. Thank you. Zero, wait, do we have one more. We do. Sorry. We have item 15, the cyber security reimbursement increase.

One more. Yeah, you're right. One more. So the final budget request here is an increase in our authority to spend. So that's 8.8 million in reimbursement authority. And that supports the work that we do for the California Cybersecurity Integration center and the California Department of Technology State Operations Center.

We had, I think, 4 million in originally and we needed to bring it up to about 12.8. That will maximize our authority, so it will put it at the level where we can actually execute it for a given state year. And it's hugely important, and here's why.

The work that we do in the State Operations Center for the Department of Technologies, we manage that on a daily basis.

We provide a lion's share of the work at the Cybersecurity integration Center for OEs, and we provide the vulnerability assessments and penetration testing along with Department of Technology across all of the Executive branch of state government that is going through and ensuring that our networks are hardened, that they are protected against intrusion, that agencies across state government are doing their level best to ensure that they have the appropriate network hygiene, the appropriate back end solutions to assure their adversaries can get into our networks.

That's why we need that.

Vanessa, the other guy always has something to say. All right, Lao. Senator Neil, so are these services that you provide to OEs and the Department of Technology directly or are they contracted to a third party?

We're an interagency agreement. And so the vulnerability systems, pen testing and that all we do is fee for service. So the agencies are charged and get reimbursed. Hence the reason we need the authorities.

The work is done within the. It's not. The work itself is not contracted out to.

Absolutely. We do it. Soldiers and airmen within the California National Guard are doing that work every day. Absolutely. Okay.

All right, thank you very much. Thank you. So now we'll move to take public comment on the remainder of our items, which are items 9 through 15, the item 9 in the Department of Veteran affairs, and all the remaining items in the Military Department 10 through 15.

Any Member of the public wish to be heard on any of those items? Hearing none, then seeing no further business could come before the Subcommitee. Thanks, everyone. This meeting is adjourned.