Assembly Budget Subcommittee No. 5 on State Administration

Good afternoon and welcome to the Assembly Budget Subcommitee 5 on State Administration hearing today. Today our hearing will focus on a number of of budget issues for the Department of Veterans Affairs, Cannabis Control and Consumer Affairs. Also California Commission on the Status of Women and Girls and the California Arts Council.

In addition, there are four items that are on the agenda for non presentation. These items do not receive a formal presentation from the Administration in order to focus time on on the most substantial proposals. However, Members of the Committee are free to ask questions about them. This is an in person hearing with all panelists testifying in person.

We will take questions from Members of this Subcommitee after each panel. Public comment will be taken at the end of the hearing and will be limited to 30 seconds and under. Today's hearing is an informational hearing. We will not be taking any votes.

If you are unable to attend this hearing in person, you may submit your comments via email to the [email protected] we are going to be beginning with item number one, Department of Veterans Affairs. And if you are a panelist, please join us.

Good afternoon and welcome to the Committee. And if you can please introduce yourself when you make your comments and if you can give us a broad overview of the mission goal of the California Department of Veterans.

Good afternoon, Chairmembers. My name is John Spangler. I'm the Legislative Deputy Secretary for the California Department of Veterans Affairs. Pleased to give you a overview.

Wait, is that mic working? Yeah, move it up a little. There you go. Yes, go ahead, try it again.

Testing, testing. Test, test. Now.

Better, Better.

Okay, I'll begin again. John Spangler, Deputy Secretary for Legislation at the California Department of Veterans Affairs. Really pleased to be here today and I'll be giving you the overview. I've got Roberto Herrera to my right and Coby Petersen to my left. They'll introduce themselves. They are also with CalVet.

CalVet, the California Department of Veterans Affairs, serves California veterans and their families with nearly 1.4 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 they have earned.

CalVet works to serve veterans and their families with dignity, compassion and respect, and tries to help them achieve the highest quality of life. In short, our goal is to make sure that California veterans are the most connected, protected and respected in the nation. At Cal Vet, we view transition from military to veteran as an ongoing program process.

Not only one that happens when veterans when service Members leave the active duty and transition to veteran status. CalVet supports veterans with programs that are there at the moments that matter from leaving service to seeking employment and education, connecting them with benefits, housing and home purchases, long term care and even when veterans pass with cemetery benefits.

I'll briefly touch on some of these programs and their moments so when veterans leave service we support them in particular with our unique California Transition assistance program or CalTAP.

This program connects with veterans coming to or staying in California while they are still in uniform to establish the connection and let them know all about what California does for veterans, the County Veterans Service Officers or CVSOs.

CalVet supports the work of these county employees throughout the state by helping Fund their work and through grants to the counties to support veterans in each county. CalVet has staff located regionally throughout the state which we call Local Interagency Network Coordinators.

Their job is to know their region's veterans communities and to serve them and help veterans in the community based and the community based organizations connect and strengthen a lot of acronyms.

Today, California State Approving Agency for Veterans Education or CSave couplet contains C Save, which approves programs of higher education across the state so that veterans can use their education benefits such as the GI Bill and csabe also helps ensure that these programs deliver quality instruction in the homelessness and housing arena.

CalVet has an important part both in the Veterans Housing and Homelessness Prevention Program which has helped construct thousands of units for veterans of permanent and supportive housing.

CalVet also has a role in the New Home Key plus program resulting from the Behavioral Health Services act which provides $1.0 billion in housing grants for veterans with behavioral health and substance abuse challenges. CalVet has a home loan program. The CalVet Home Loan Program helps veterans purchase market rate homes and is over 100 years old.

A unique aspect of this program is that unlike a conventional mortgage lender, CalVet does not sell any of its loans. We hold them for the entire life of the loan. All our loans are underwritten and subsequently subsequent subsequently serviced in house by people, not algorithms. As veterans age, many of them need long term care.

Cabot operates an 8 long term care facilities from as far north as Reading to as far south as Chula Vista. The homes differ in the levels of care that they offer, but system wide. These range from independent living to to skilled nursing and memory care and finally when veterans pass, Calbet is there.

We operate three state veteran cemeteries in the north, near Reading, in the Central coast near Monterey and in the Napa Valley in Youtville. We appreciate this opportunity to see you today, I'd like to turn over and I'd like to end and turn it over to the next items on your 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 deserves dignity and respect.

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

Thank you. Assemblymember Wallis. Any questions? Thank you for that overview and I appreciate it because when we're up here, we assume everybody knows everything about each agency or Department. And even your overview gave me some background. I served as chair of Veterans for one brief year and then of course have been up here for 11 years.

And you even mentioned some program programs that I didn't know about, although some of them I know quite a bit about. So first we want to thank our veterans, our military service Members, men and women, because we do know what they do that goes above and beyond. And certainly these programs relate to the care of veterans.

And this is incredibly important. One of the questions as I had the opportunity to tour the Los Angeles CalVet home and when we look at our aging veterans from the Vietnam veteran population and look at their long term care over the next years, what will the California veterans Homes be capable of handling in the future? Or do we have thoughts about that?

I'd be happy to answer that. My name is ​Coby Petersen. I'm the Deputy Secretary for the Veterans Homes. Been with CalVet for 11 years. That's a great question because one of the things that we identified out of the master plan in 2020 and subsequently 2025 is the changing demographics of our veterans.

Ultimately, what we're seeing and what we've, we've been predicting is that there'll be far less in independent living veterans wanting to come to our homes in the future and a greater demand for skilled nursing and assisted living.

So obviously Our World War II and Korean War veterans are, there's few and far between, unfortunately, sadly, 50, almost 50% of our current veterans are Vietnam War veterans. And we are taking a hard look at, at the differences between an independent level of care need for a veteran and a skilled nursing care need.

What we're finding in many of our skilled nursing veterans that come to us, they come to us with more ailments, a lot more challenges, physical challenges, some mental health challenges, some behavioral health challenges.

So those are the things that were identified in the master plans both in 2020 and 2025 that we are taking a hard look at to make sure that we're prepared and we're ready for them when they do come to us to include. Now, hopefully that answers your question.

It does. I know that when we visited just I think two weeks ago that there were some concerns with the skilled nursing beds in the sense that it's been hard to recruit some of the nurses that we need there for a variety of reasons. Los Angeles happens to be a very high rent area.

Of course, the fires make it even probably much harder to find a place. So if you're working at the LA campus, finding a place to live and work is costly. I know there's some thoughts about what we can do. Is there any thoughts about how do we recruit, I guess, and retain?

I know that one of the issues that was expressed was of the cost, not the cost, the salaries, that they're not as competitive as with other nursing. And that could be a reason.

One of the biggest challenges in West La, for example, has been historically its location because there's quite a demand for nursing in and around that area from the Federal Va, which is just down the street from us, from the UCLA Medical Center, Cedars Sinai Medical center and I think Kaiser, all within three miles of one another.

So we compete for the same population and many of the entry level nurses, regardless of one of those facilities they work at, have to travel a great distance. So we conduct monthly job fairs. We're working incredibly hard getting the social media network out. We just had a job fair last week in West LA.

Last year alone we did 30 job fairs across CalVet at all of our facilities. We're partners partnering with community job fairs. So we're not just expecting folks to come to us. We have made some progress in the area of paying them with the bargaining unit and we feel really encouraged.

Covid had an effect on all nurses across the entire country, not just Cal Vet. I will mention though that the nurses that we do have are tremendous. We were able to maintain 4 and 5 star ratings all throughout Covid, so. So the quality of people that we're getting is amazing. It's a beautiful campus in West La.

We're working really hard to fill those every day. We're working really hard at the retention program so that folks see an opportunity for movement up, not just come work for us, but you can move up the ladder in the nursing profession as well. So we're encouraged with what we're seeing.

Many of our homes are seeing their numbers going back to where they were pre Covid or very close to where they were pre Covid. So we're continuing to work that really hard. It's something we talk about all the time.

I appreciate that. And again, to reflect the campus, the Los Angeles CalVet home is really well done. I've now been up there twice, once about a decade ago and then just a few weeks ago.

And I'm really happy to see the care that the military men and women, more men, but definitely if some women there are getting and the levels of care we were able to go to the memory care and different parts. So that's good news.

So I really appreciate that and I appreciate your efforts on the recruiting because I know that's not easy. Jobs with traveling nurses, all of these things. There's definitely opportunities out there and so I appreciate that. Any comments? Let's go ahead. And any comments from our Department of Finance.

Nick Schroeder from the lao. I have no prepared remarks, but happy to answer any questions.

Jesse Romine, Department of Finance no further comment.

All right, seeing nobody else from the public. Anybody wish to comment on this item? All right, not seeing anybody. We will move to item number two. We talked a little bit about it, but the Veterans Home of California, Yountville.

Yes, ma'am. So in this proposal we're asking for a reappropriation of the $38,756,000 for the construction phase of the steam project on our Yountville campus. This project will replace the existing steam distribution center that was put in place in the 1950s. So it's 70 year old pipes that are being replaced, renovated.

It provides domestic hot water and heating throughout the campus. So in 2021 we replaced the boilers and the chillers in the central plant which produced the heating and the cooling. And then 23 we replaced the chilling pipes. So this is the third phase of the three legged stool to get the the steam pipes replaced.

The good news is that the drawings are now at 85% complete. We expect the drawings to be done by August at the latest and the project out to bid this fall with hopefully construction as early as November. Subject your questions?

No, we appreciate that. I hope to get out to visit Yountville.

Yes, ma'am.

Sooner than later. And Assemblymember? No questions. And just related to the Federal Government because I know a lot of our funding is either matched from the Federal Government. And given the Federal Government's pause in providing grants, is there a risk that the state may not receive this federal reimbursement.

So right now, the project was approved, and it's in the process where it gets placed on the Federal Government VA's grant construction project priority list. Typically, how these work is that we will keep them abreast of the situation of the construction.

And at the completion of the construction, we will submit the Invoice of the 424 document that pretty much lists all of the items that we're requesting VA reimbursement on. The VA has agreed to reimburse 65% of the project, and we'll know a lot better then than we do now.

Obviously, we haven't heard any indications that it's not going to be supported. They've been very positive with us so far, so we feel pretty comfortable with this project.

And again, just the age of Yountville, I know it's aging gracefully.

So Yountville is 140. What did I say? 141 years old.

141. All right. Can we call her her? Good for Yountville. Aging gracefully.

I'm very proud of that campus. It's beautiful campus.

All right, any remarks? Remarks. All right. And then not on this. But I would be remiss If I asked, Mr. Spangler, can you remind me of the state's veteran cemeteries?

Zero, yes, ma'am. So the northernmost one is in a town called Igoe, but it's relatively near reading. There's one at the Yountville Veterans Home. And there's one. We call it the Central Coast State Veterans Cemetery. This is in Roberto's Lane, but it's in Seaside, California, which is adjacent to Monterey.

And those are all in Northern California?

Those are all the ones we have, yes.

So I'd be remiss if I didn't mention that we have been working for a decade on a Southern California veteran cemetery. We'll just put that there. And I feel like this is the time. I need one of those little, like, cheerleading things to show and do a little cheer for that. But again, gentlemen, thank you.

Excellent work and really proud of the work that you do. And I've been able to interface with Mr. Spangler for well over a decade. We'll move to our county Veterans Service Officers issue number three.

Thank you, Madam Chair, Members of the Committee, I'm Roberto Herrera. I'm the Deputy Secretary for Veteran Services at CalVet. Of course, CalVet and the County Veterans Service Officers have a very close relationship.

You know, we train and accredit all county Veterans Service Officers across the state to the tune of almost 400 accredited reps with CalVet Holding CalVet being able to represent veterans before the VA.

Under CalVet power of attorney, the majority of those 400 are within are represented in our county veteran service officers with others being of course in our district office locations co located with VA regional offices in Oakland, Louisiana, San Diego.

So in our, in our outreach infrastructure at CalVet, we place the county veterans service officer at the center, what we call the community based system of care. And they are really there as the initial point of contact for veterans on many different issues.

Whether that could be, of course, filing disability claims in front of va, but also, you know, connection to housing resources, employment resources, education benefits such as the CalVet college tuition fee waiver among many others. So it's a relationship we're very proud of.

We hold three training conferences with them every year and yeah, happy to answer any questions you may have regarding CVSOs.

And on this issue I've also met with the CVSOs on a handful of time and I do know some of the work they do, which is incredibly important. I think one of the things that I wanted to know is when Cal Vets return, sometimes they're returning from another state, is that correct? Absolutely.

So they did their service in another state and now they're coming to California before they actually exit service. Is there a way to link them to the CVSOs before they even get back? Because the concern I guess is do we lose some of them along the way where they're not actually like say 100% connecting to the CVSOs?

Sure. I mean that's definitely, you know, top of mind when we talk about transition from military to civilian life.

And through our California Transition Assistance Program over the years we've made great strides in having a presence in every military installation in the State of California, making sure that veterans who are or service Members who are going to become newly minted as veterans are well aware of the infrastructure of services within the state.

What you bring up is a tough nut to crack. There's been recent work with DoD regarding data sharing on a specific form called a DD2468.

Can you repeat that? What is that?

Sure, it's a DD2468. Very recently we've been receiving this data and what it is is when a veteran enrolls for their federally mandated TAP program. So this is the one that's ran by DOD and dollar that, you know, puts a flag on, on this veteran's, you know, status as being soon to be separating.

We now receive have started receiving that information from DoD and that could mean that they are anywhere in the world.

So we're very excited about this because one of the issues with the DD214 document, which is the you are now a separated service Member, you know, now veteran alumni, if you will, that document, it has an address that, you know, could be when the veteran just got in.

It's very hit or miss with that, with that home address for that veteran. Some DD214s do also include email. However, oftentimes that is a.mil and that veteran is now separated on the DD2468. These are individuals who are still active duty duty. So they have a.mill, but it is actively being used.

So the strategy around that, of course is to use our California Transition Assistance Program and get them connected to what Cal Vet is what we offer and prepare them for their return to the State of California.

So that is also within that data that we receive on regarding the 2416 that is for folks have indicated that they are about to separate. So they've enrolled in the federal TAP program and their home of record is in California.

So there still may be folks that, you know, decide that they want to start their transition in another state. But it definitely is a step in the right direction towards, towards this, this goal of getting as many service Members aware of the State of California as possible. The benefits that we offer.

And I'll make some remarks on that, but I did forget on the last item, which was item number two to do public comments. So we'll do all that together. Item number two on Yountville.

So going back to the veterans leaving service and now trying to connect with their benefits, what could the state do to protect veterans from being preyed upon by third parties that in some cases can charge a percentage of their benefits to actually assist them? And I guess a follow up question is how big of a problem is that?

Yeah, I mean this is one of the things that, you know, I mean this is an issue that's been around since the Civil War, unfortunately. You know, Civil War veterans, of course at the time, you know, rates of illiteracy in the nation were a lot higher.

So you had a lot of bad actors going and connecting with Civil War veterans and signing them up for say I can help you with your benefits. And then they end up being fleeced in the end because they didn't, you know, weren't aware of what they were signing up for.

That still today it remains illegal to, to charge a veteran on an initial claim. And that's the preparation presentation or prosecution of any claim unless it's done through a congressionally recognized organization. These are your American Legions, your VFWs, your source of plowshares, or through a state.

Every state is granted the ability to represent veterans in their state before the va. There's also an avenue there regarding accredited claims agents. These are folks that, they take a written exam with va. They have to show that they're of good moral fortitude. They have to, you know, do continuing education.

This stands for both accredited agents and attorneys that wish to engage in this. Again, illegal to charge a fee on initial claim. So despite all these available avenues for accreditation, many of these organizations that participate in this, in this illegal activity remain unaccredited.

I mean, they're lured, veterans are lured to them because they make claims that, you know, are, you know, I can get you, I get you, you know, 100% in 30 days. You know, I can, I have the magic sauce to get your claim through the VA snake faster, which of course is not possible.

So, you know, I mean, those marketing ploys, how, how widespread is the issue? I could definitely share with the circle back with the Committee and get real specifics regarding operators that we know in the State of California.

However, you know, I would say personally as a veteran, I can't go onto social media for more than five minutes without seeing an ad for one of these groups. So it's, you know, it's, it's pretty rampant as, and you know, the claims that they're making.

Of course I'm very concerned and you know, 0 to 100% in 30 days. But on the CalVet side, you know, I mean, we stand committed to ensuring access to quality claims representation before the VA through county Veterans Service Officers. You know, we've trained more accredited reps than ever before.

Last year we trained 113 through our vet rep academy. That is an all time record. And CVSOs, you know, they're doing the amazing work every day. 580 million in payments to veterans and their families last year.

You know, and that's, you know, that's going to be annualized every year going into the pockets of veterans in the State of California for the rest of their life. And that was at the tune of about over 300,000 claims filed.

You know, and another component with these, we can call them unaccredited reps, you know, they don't, I can't imagine them being, you know, connected into, you know, any broader community based system of care for that veteran.

I mean, and you go to a county veteran service Officer, you know, they're going to file your claim and of course, if that's what you want, or whatever, help you access whatever benefit it is.

But if there's more that you need, if you need access to CalFresh, if you need housing assistance, if you need whatever it may be, that person is going to be there, that organization is going to be there, the CVSO to help you through that.

And that's one of these things that these unaccredited reps simply, that's just not part of their gamut. You know, they just want to get the claim done as quick as they can and, you know, wave goodbye.

And I think one of the examples of this that really shows the importance of the CVSO is what they can do is our driver's license program that was established in 2017. You know, this is the just getting veteran on your driver's license.

I know one of the items that came up and still comes up to this day occasionally, is the fact that the veteran has to go into the county Veteran Service office for to get their veteran status verified. Well, that was very intentional.

And the reason why is out of the 336,000 veterans who are now an owner of a DL that says veteran, over 155,000 of them filed a claim when they went in to do that. So with that, that's 227 million in retro payments on that specific program alone.

This is something we track very closely, and 380 million annualized payments to veterans again over the course of their lives. So this is, you know, an example of the type of impact that the county Burns Service Officer can have. I'm, you know, if I'm getting long winded here, just let me know.

But one of the other items too, you know, when it comes to this is, you know, we work very closely with our CVSOs on the training side. And not only that, but we QC their claims that are submitted to VA for before submission.

So claims that are filed under CalVet power of attorney at the CVSO, they get routed to one of our CalVet district offices and QC on that claim is performed.

What this means is that the processing time for that claim is lower because there's less back and forth between the VA and the CVSO or the VA and the district office. You know, here in the state, we have one of the lower average days to completion as reported by the Veterans Benefits Administration.

And not to say that, you know, that this is by any means short, still four and a half months, but we're around 130 days, average days of completion in the State of California. Most states run around 145. And we credit that to the quality of the fully developed claims that are being submitted by county Veterans Service Officers.

So, you know, how do we fight these unaccredited reps on this issue? We just keep doubling down and ensuring access to county Veterans Service Officers that at Cal Vet that we're constantly evaluating our training and making sure it's the highest quality it could be and the most relevant.

And of course, making sure through our outreach efforts that we are staying attuned to the emerging and emergent needs of veterans through a community based system of care.

Thank you, Department of Finance or Lao assemblymember. Right. Well, I certainly appreciate the work you're doing for the outreach and to combat some of these unaccredited and I do think that it really is plain and simple preying on veterans. And they're not doing it because they're so caring about the veterans.

They're doing it because they get a percentage. And you know, my hope is that the more outreach that they'll start to become aware that this is taking actually dollars out of their pockets. But we appreciate all the hard work. Anybody from the public who wants to speak on Yountville or on our CVSOs. Well, that's it, gentlemen.

We appreciate all your hard work and your service. I know some of you or all of you have. All three of you have served. Thank you. Thank you very much.

We're going to switch gears here now and we're going to welcome Ms. Dempsey and to the Committee, we will be now talking about issue number four, which is the Department of Cannabis Control. And it.

Again, please make sure you introduce yourself and provide the Committee with a broad overview of the department's role in licensing, regulating and protecting the licensed cannabis industry in the state. Welcome.

Thank you. Good afternoon, Chair and Members of the Committee. My name is Christina Dempsey. I'm the Deputy Director of Government affairs for the Department of Cannabis Control. I'd like to begin by thanking the Committee. We greatly appreciate the opportunity to talk about the issues that have been agendized today. We are here for two agenda items.

The first item, issue four on the agenda is an overview of the Department and our role in regulating the cannabis supply chain. We have some brief remarks and then can answer any questions that you have. The second item, issue number five, is a presentation of the California Cannabis Market report that the Department recently released.

So we have our economist here with us today to present the findings of that report and answer questions of the Committee. First, I want to share a little bit of background for both of those agenda items.

California was the first state to legalize cannabis for medical use through a 1996 ballot initiative, Props Prop 215, which was largely driven by patients and advocates who who used cannabis to alleviate the devastating symptoms of HIV and AIDS through medical use.

Though medical use of cannabis was legalized in 1996, the cannabis market was not comprehensively regulated by the state until 2018, more than two decades later, when adult use sales began. This has created a unique environment for implementation, even as compared to other states that have legalized cannabis.

At the start of regulation, we were not standing up the framework for a new market. We were shifting an existing large, mostly unregulated market into a complex and geographically restrictive regulatory system. The state began its work of implementing regulatory oversight with three programs.

The manufacturing program was placed within the Department of Public Health, where it could draw on expertise from the Food and Drug branch. The cultivation program was placed within the Department of Food and Ag alongside other farm based programs. And the remaining licensing programs were placed within the Department of Consumer affairs, which licenses various professions and business activities.

But these three programs were housed within three different departments in different agencies. And in a short span of time, it became clear that dividing these functions was creating gaps, making the effort more challenging. In 2020, Governor Newsom announced a proposal to merge the three programs.

The enforcement team, which was under the Department of Consumer affairs, and the Cannabis Testing Lab, which was under the Department of Public Health, into a new Standalone Department of Cannabis Control. We worked closely with the Legislature through the budget process, and on July 122021 the Department was formed.

I will now pass the microphone to my colleague, Natalie Sheeran, who will share additional information about how the Department functions.

Good afternoon. My name is Natalie Sheeran and I serve as the Budget Officer for the Department of Cannabis Control. The Department of Cannabis Control is the state's primary regulatory body for the commercial cannabis activity. 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 serves three core function, oversight activities for licensed businesses, including licensing and compliance addressing illegal cannabis activities through a law enforcement division and as co chair of the state's Unified Cannabis Enforcement Task Force task force and administrative and operational support, including divisions focused on equity and inclusion, policy development and research and constituent engagement.

The Department's primary source of funding is a special Fund called the Cannabis Control Fund. The Cannabis Control Fund collects revenue through fees charged to licensed businesses, primarily annual licensing fees. The Department has one budgetary request before the Committee for Resources to support 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 cannabis called a Combined Activities License, which would allow licensees to conduct multiple activities on the same premises.

Specifically, the Department is requesting one position which has an estimated cost to the Cannabis control Fund of 154,000 in fiscal year 25-26 and 146,000 ongoing beginning in fiscal year 26-27. This position would be part of the Department's Cannabis Track and Trace Field Support Unit.

This unit is responsible for monitoring and reviewing market data to, among other things, identify cases of non compliance and protect the consumer health and protect consumer health and safety. Thank you for your time and we're available to address any questions the Committee may have.

Thank you. Department of Finance Any comments?

Arthur Gonzalez, Odalio no concerns.

Everybody's so quiet today. I think we all got talked out this morning. Assemblymember Wallis.

Thank you, Madam Chair. I want to focus a little bit. On on the illegal cannabis market. The Committee analysis says 11.4 million pounds of illicit cannabis is produced in California each year, and law enforcement sources have told me repeatedly that there's cartels operating in the deserts and mountains in my district.

According to the analysis, the DCC's enforcement division has roughly 80 peace officers with a number of vacancies. So how many agents are in the field working on the illicit market?

Our vacancy rate within our Enforcement division is about 15%, which is consistent with the rest of the Department, which is about 13%. Most of those 87 positions are peace officers that are stationed throughout the State of California.

Okay, so would that mean there's about 50 agents, give or take, in the field right now?

Give or take.

Okay. And do we think that's enough to tackle the illegal market in our state?

We have a paradox in our. In our illicit cannabis enforcement, which is that the funding for that enforcement is drawn from licensees. So while we could benefit from greater support for enforcement, it would come from increased fees to licensees.

And so in looking at the license market, that presents this paradox where you are increasing licensee fees, making it harder to operate as a licensed business in order to address the illicit market, which will create shifts between those two markets.

Okay, and how many. How many work in compliance? On that side of it, we have.

Just over 200 compliant staff.

Okay. And so when the licensed cannabis market's struggling like it is, to compete with the illicit market, do you think that's the right balance that we have in the agency right now?

I think that's a tough question to answer. I mean, so with any state agency, it's always a question of could you do more with more resources? Absolutely. But resources cost money. And so could we do more with more enforcement resources? Absolutely.

We're doing a lot with the resources in both the compliance side and our enforcement side as it is. And so really trying to maximize every single person. Person that we have, every single piece of technology that we have to get the most out of those resources right now.

Okay, great. And then just one last question. Not sure who to address it to, but can you tell me, was a BCP submitted asking for more enforcement staff?

There's not a BCP pending right now.

Okay, thank you. I just want to emphasize. I don't think I can emphasize enough that the illicit market's crushing the legal market in our state. I think we need to make sure that we're doing everything in our power to get more law enforcement in the field to stop the illegal activities.

Not only is it important for our legal market, but it's critical to our communities because the illegal activities have many additional impacts that impact them negatively as well. Thank you for being here today.

Thank you.

And just to note, we will be focusing on the cannabis sales tax, but not to. Today, we will be looking to see what happens in the may revise and then definitely bringing that back. We know that as we speak, there is some legislation going through, so there's a lot happening.

But I do concur with my colleague on the enforcement. We've talked about that more than a few times, and again, I do like to get out in the field. So I was pleased to go out with you, actually, in Fullerton, where I live.

I think I mentioned this before Valentine's Day a year ago, and we saw a ton of illicit product in three different locations just in little Fullerton. And I'm going to. I think we said maybe well over $1.0 million with the combined. So the enforcement part of this equation is really serious.

We also, without getting too far into this, I do think, as we talked about earlier with recruiting nurses into expensive places to live, we also have the recruitment of cannabis officers in the sense that we know this can be a very dangerous job. Not that other law enforcement isn't, not that isn't. So make sure they're all.

But we also know that the salaries for people to try to get into that part of the enforcement may need to be looked at at some point. So with that, any other comments from here, then we will go ahead and take it to the item number four, cannabis.

Good afternoon. Shane Levine, on behalf of the California Statewide Law Enforcement Association, I would just say with an illicit market that is about 12 times the size of the legal market and run by organized crime, we should be kidding, committing a lot more resources to enforcement.

We have about 50 agents, as was testified in the field, that's wholly inadequate. And we would highly, highly recommend and be supportive of additional funding and resources for more agents and more enforcement. And we would be committed to supporting that. Thank you.

Thank you.

Jared Kylo with the United Cannabis Business Association. What's cheaper than the war on drugs is actually just having a price that's comparable to the illicit industry. So we have actually competition currently. Right now in the City of Los Angeles, there's an additional tax for 46.29% on top of the retail price.

So As a consumer, $100 purchase turns into $146. I think price is what we should be seeking. And a reduction in tax and costs would help that.

Thank you.

Good afternoon. Kristin Heidelbach here on behalf of UFCW Western States Council. We represent between 5 to 6,000 cannabis workers under a contract here in the state. Appreciate Assemblymember Wallace, your comments on enforcement. It's a huge issue for us. We're competing with illicit hemp products. Taxes are high. And so when these businesses fail, we're.

Not only losing a business, we're losing. Jobs that support communities and families. So appreciate your comments and thank you.

All right, seeing nobody else. Any last comments on issue number four? All right, then we will move to issue number five. And this is related to the 2024 cannabis market report. And if you can give us a briefing on.

Okay. So again, my name is Christina Dempsey, and I serve as the Deputy Director of Government affairs for the Department of Cannabis Control. The Department recently published a legislatively requested report on the condition and health of the cannabis industry in California.

At the core of this report is a comprehensive and thorough data analysis compiled by the Department's economist, Duncan McEwen of ERA Economics. So Duncan is here today to share that data and findings of the report and to answer questions from the Committee. So without further ado, I will turn it over to Duncan.

Thank you, Christina. Good afternoon, Chair and Committee Members, Duncan McEwen with ERA Economics. And yeah, as Christina mentioned, we were asked to take a look at what's going on in the market and kind of look at the data, what's driving things. So we've. I guess we can advance this to the next slide.

We've sliced this up into five topic areas. First thing is what's going on in the market. You know, there's a lot of conflicting information out there. We read the news articles every day, and there's some good reporting on some of the pressures for individual businesses.

And there's a lot of confusion about what the size of the market is, both in California and across states that have. That have legalized licensed markets. So what does the data tell us?

And when we look at that, we're going to break it down into supply, demand, put those two pieces together and look at what the market outlook is. And then I'll talk a little bit about some of the headwinds and opportunities, again, just based on what we see in the data in the market.

So if you go to the next slide and the one after that, and if you can click through this, this will populate with a number of headlines that we see in the news articles. And so if you look through these carefully, there's inconsistent information on even what the size of the market is in California and other states.

So if we lack that baseline data, we don't have a really good way of assessing where the market's heading. And that's kind of the fundamental problem. The other thing that you see in the headline news articles as you continue to click through these, is that there is some very significant pressures for individual businesses. Right.

So when we're talking about trends in the overall market, we're zoomed out and looking at, you know, how is the market doing? Is it growing? Is it contracting? What are prices doing? And within that, you've Got individual businesses that are dealing with other conditions and I'll highlight some of those as I go through our analysis here.

So if you go to the next slide, you know, what does the data tell us? That's the fundamental question. And this gives us kind of the headline summary findings of the report and I'll step through these and kind of the analysis that builds up to these conclusions.

So active licenses are down year over year and they've been decreasing most years. That's due to some businesses leaving the industry. It's also due to some consolidation and some of the market pressures that I'm going to talk about.

Licensed cannabis production is up and it's been growing by double digit percentage, percentage year over year pretty much since the licensed market was introduced in 2018. And so between 2023 and 2024 it was up about 12%, 11.8% total units sold at retail.

So that's, you know, production at the farm, if we go all the way up through final retail units sold were up about 5% in 2024. However, and you see this in the headline news articles that we, we were just clicking through, the retail value of the industry is down, right?

And so the tax revenue is also down because the gross retail value of the industry is down. How does that happen? Quantity produced is up, prices are down and prices unit prices are down more. So the total value of the industry has contracted.

So that's kind of the headline story and I'll step through the pieces that make up those conclusions. So, so if you go to the next slide, we're economists, so we think about the market in terms of supply and demand. Those are the things that interact to tell us how much is produced and what unit prices are.

When I'm talking about production, most of what is in this report is in a dry flower equivalent weight at the farm. So if you thought of conventional agriculture, think about the farm cape. And then we'll also be clear when we're talking about the other end of the supply chain, which is final retail to the consumer.

So those are two important measures of total production. And we have different prices at those points in the supply chain. And then on the consumption side or the demand side, that's how much is actually being consumed, both within California and then what's being produced in California but leaving the state.

And so I'll talk about both of those and if you go to the next slide, we'll dive into the supply side of the market. And if you go one more slide. So everything that we're talking about here is on a dry flower equivalent basis.

When we're looking at the headlines in the news, there's inconsistency in how that's reported sometimes. So we need to make sure that we're reporting the value and the weight of the industry on a consistent basis.

And then I will talk about exports, which really is just anything that's being produced in California, in the illicit market that's not being consumed within the state.

So if you go to the next slide, when we're looking at the size of the total production in California, first thing we need to understand is what's coming through the license market that we have pretty good data on, because we see what's ultimately taxed and reported at the state level, and we see what's produced through the Department of Cannabis Control's track and trace system.

The illicit market is, is a big blind spot. And so over the years that we've been working on these programs for the Department and its predecessor Department, the Department of Food and Agriculture, we've been working with the information that we can get to characterize the illicit market. And that's information on eradications, local law enforcement information.

It's also limited geospatial data. There's an example of that up on the slide that's on the screen right now where there's been some attempts at mapping illicit grow sites across the state and using that in a big statistical analysis to come up with an estimate of how big the illicit market is in California.

And you'll notice in the report and what I present today that, you know, we have a point estimate for how big that market is, but there's also a pretty big variation around that. There's a big uncertainty around that, and that reflects some of the data gaps that we have for estimating the size of this market.

So if you go to the next slide, just quick trends in. So this shows over the last 15 years or so, trends in eradications by agencies. So when we're compiling this data, enforcement actions are not done just typically just by one agency. Right. There might be local, state, federal law enforcement involved.

And so these are showing those trends over time with local, state and federal agencies and the different programs that, that the state has funded over the years. These aren't additive. You can't add up those lines and calculate the total number of eradications. These are.

You need to put these together to come up with a single estimate of what's actually being eradicated in California. In General, eradications have been increasing in the last Few years really since the introduction of the illicit market. So if you go to the next slide, what does. So that's the illicit, the illegal side of the market.

And I'll come back to what that means for total quantity produced in value. But if we look at the licensed side of the market, how has that been changing over time? And that's what's shown here.

So as I mentioned at the beginning, since the start of the licensed market, production has been increasing by double digit percent year over year going back to about 2018 and it was about 11.8% increase between 2023 and 2024.

So more, more cannabis in the licensed market being produced within the licensed supply chain, making its way all the way to retail and consumption within California. And So as of 2024, it's about 1.4, a little over 1.4 million pounds of licensed cannabis produced at the farm. Dry flower weight equivalent at the farm in California. Next slide.

So if we put these pieces together, we have licensed market, that's that first row,£1.4 million point estimate for the unlicensed or the illicit market,£11.4 million. But I want to emphasize the statistical uncertainty under that. Right. So it's a 7 to 16 million pound range. That's a wide error bar.

And it's a function of the analysis that goes into that and the limitations that we have in that data. If you were to ask me just kind of my opinion, I don't think it's, it's kind of a normal distribution, even distribution around that estimate.

I'd guess that it's on the lower side because we have better information on the licensed market for production practices and yields. And we're applying some of that to estimate illicit production. In practice, it's probably that some of those illicit operations are going to be lower production.

So I would guess that, you know, we're on the lower end of this distribution uncertainty that we have for the illicit market. And if we, obviously, if we add the two up, that's about£12.5 million produced within the state, dry flower equivalent basis every year.

If you go to the next slide, we'll switch gears and talk about demand. So that's the production side, what's coming off the farm and ultimately making its way through final retail. And then we'll switch gears and talk about the demand side, what's actually being consumed in the state.

So how has California, we estimate the total amount of consumption in the state based on survey data. So we have information on the share of the population that consumes cannabis, how frequently they're consuming, and estimates of what different use rates are. And those are being put together to estimate the total amount of consumption consumption within California.

This graphic here shows you how that prevalence within California and other states with licensed markets has been changing over time, over about the last 20 years. And there's a couple of things to note here.

First is that California is above the US Average, but below that of other states with licensed markets that have been introduced prior to California. The second thing is that you can kind of see it with your eyes and you can do it statistically as well.

Well, if you look over time, there is an increasing trend in prevalence of use, but no change in that trend when the licensed market was introduced. So there's nothing in the data that we have for California that's showing that consumption in total went up when the licensed market was introduced.

What's happening is there's people shifting from the illicit market to consumption within the licensed market. If you go to the next slide. So if we put the. We have an estimate of what's being consumed within California, we know what's being produced in the licensed market. The residual is what's coming from the illicit market.

And this graphic shows what those trends are over time. So if we go back to 2020, about 33%, about a third of the cannabis consumed in California was coming from the license plate market and the rest from the illicit market as of 2024. I say it's about.

And again, there's an uncertainty range on these estimates, but it's about 40% of consumption is coming from the illicit market. So 60% still coming from illicit production, 40% from licensed production. Those trends, you know, over time it's been increasing.

If we go back a little bit FARTHER to like 20182019 it was, is in the 20% high 20s is what our estimates show. If you go to the next slide. So if we put these two pieces together, what does that mean for the market?

And again, when I'm talking here and what we have in this report is looking at the overall cannabis market. We can drill down and look at an individual business and some of the business cost pressures that underlie that market. But we're focused on kind of the bigger trends here.

So first thing is we look at the wholesale price. So start at the farm. Wholesale prices in California, similar to other states that had licensed markets, were either strong or increasing a little bit after the licensed market was introduced. And then there was a glut in supply eventually and prices started to fall. Pretty dramatically.

So through 2021 and 2022, you can see that prices were falling pretty much year over year by double digit percent. Since 23 and 24, that decrease has stabilized and it's been, you know, a single digit percent decrease in wholesale cannabis prices and a little bit flatter.

And actually if you look at quarter 3 to quarter 4 at the end of 2024, the wholesale price was up just a little bit, about 5% at the end of the year. And that's kind of the first time we've seen that quarter over quarter in the data. So a little bit of stability in prices.

And then if you zoom out from California and you look at what happened in the wholesale prices for other states that have licensed markets a few years ahead of us, you see a similar trend where prices go up. It's kind of a rush of interest and money that comes into the industry.

Glutton supply prices fall and then stabilize a little bit with some adjustments, as you'd expect with a new industry that's coming into A. Yep. So the second piece on the analysis of prices is to look at market integration. So is the illicit market an issue and connecting and affecting prices? And the answer to that is yes.

You can see this graphically here. If we had no illicit market, you would not expect any connection between California prices and other states, or maybe a small connection, but not really. We look at that data and can show that the illicit market is the connection between California and other states.

So this does affect prices for licensed cannabis in California and it's affecting prices across the U.S. if you go to the next slide, we can look at retail price trends down, but not as much as wholesale prices. And again, similar trend as wholesale prices where those have stabilized in the last couple of years.

And so how is the overall value of the industry down with production of the industry up, it's that those unit prices are down more than the increase in the production is. And so if you go to the next slide, the retail sales trends show that example.

And what we've had is a shift away from flower and change in the product mix into things that we would call more value added products at retail. There's more of that being sold through the market, but at a lower unit price. So the gross value of the industry has been decreasing.

And if you go to the last slide in this section, the retail quantity trends show that story. So again, wholesale prices down, retail prices down, retail quantity production is up through the end of 2024. And if you go to last section here, headwinds to opportunities. We'll make these few points and then move on.

So on the so market opportunities again. Market is growing, production's growing, unit prices are down and you know there is California is still below other states in total consumption or consumption per capita and just a little bit above the US average. So there's some opportunities for growth within the licensed market.

The illicit market still is still about 60% of consumption within the state. So there's again opportunities for the licensed market to take up more of that share. How do we do that? Lower costs for the licensed industry, more enforcement and higher costs for the illicit industry. From an economic perspective that's kind of the fundamental story.

And then we've seen some market expansion, continued innovation and shifts into some of these value added products. Again something that you'd expect to see with a market that's starting to mature. And just the wrap the last two points. Here are two slides on the headwind side. I think the big issues are higher taxes and fees.

You know we've heard this in a few different comments already. You know, higher costs, higher taxes on the license market make it difficult to compete with the illicit market. And so that is definitely a headwind going into 2025 and beyond. The illicit market continues to operate in the state.

It's been here for many decades and it competes because it's lower cost to produce in that market. Policies and regulatory changes we've got actually in yellow. It's not all bad. There's you know some of the regulations that are being implemented help the industry in the long run, help stabilize the market.

But those always come with Shorter term regulatory costs that are going to affect the licensed industry. And then the last thing I've mentioned this a few times is we're very much focused on the overall market.

There are individual business pressures, ability to borrow and local taxes fees that increase the effective tax rate in the local communities across the state.

So if you go to last slide and just click through this a few times to get it to come up, it's you know, kind of the conclusion is that the data show the licensed market is increasing, production is up, wholesale prices have stabilized a little bit. Retail prices similarly have stabilized a little bit.

However, the ability for the license market to grow means more enforcement in the illicit market, put pressure and cost on that end of so that there's less competition between the two and keeping business costs and acknowledging the business environment that folks in the licensed industry are dealing with. Thank you.

That was a little bit longer than you wanted me to go but it's hard to go through this.

Well done. Thank you. All right, we're going to move to our next panelist. I think one person from there might have to move. And we're going to ask Ms. Amy Jenkins to provide the industry's perspective of the report.

Thank you, Madam Chair and Members. My name is Amy O'Gorman Jenkins, and I'm here on behalf of the California Cannabis Operators Association, the largest cannabis trade association in California. We represent hundreds of licensed operators across the supply chain, serving over half the state's population. Our members are farmers, manufacturers, retailers, and distributors.

They are job creators, union employers, community leaders, and they are barely hanging on. I'm here today to set the record straight. The legal cannabis industry in California is not growing or thriving.

And unless we take urgent corrective action, starting with halting the excise tax increase, and I appreciate that you will have a hearing on that later in the year, we risk watching industry collapse altogether. Let me be clear. I do appreciate some of the recommendations provided in the Report.

However, we would argue that it is a very optimistic view. It talks about increased biomass and wholesale prices, and yet it glosses over the harsh realities facing individual businesses. Let me give you some numbers. Since 2021, we legal cannabis sales have dropped by more than 1.1 billion, a 19% decline.

Excise tax revenue has fallen nearly 13%, or $88 million. 12,600 cannabis jobs were lost in 2022, followed by another 5,000 in 2023, and we are awaiting data on 2024. Over 7,100 cultivation licenses have vanished. 60% of manufacturing licenses, approximately 1,000 licenses, which were brands that once fueled product innovation and patient and consumer choice, have vanished.

21% of cannabis storefronts have abandoned their licenses, leaving just 1,200 licensed shops, many of which are teetering on the edge of insolvency.

And if some of you read the San Francisco Chronicle today, you would also know that the state's oldest dispensary chain, pulling in $100 million a year in revenue, went into receivership today, raising the question, if a company of that scale and history can't survive, can anyone? This is not about market consolidation. It is about market failure.

And now, despite all of this, we're staring down a more than 25% scheduled tax increase. This isn't just bad timing. It's policy malpractice. Even a modest 10% drop in legal sales, meaning consumers would leave the legal market due to an increase, would result in a net revenue loss to the state, of more than $13 million.

Raising taxes on a declining industry is both economically reckless and morally indefensible. When Michigan, a state with one quarter of our population, is now outstanding selling California in its regulated market, it is not because they grow better weed. It's because they've embraced sensible tax policy, broad legal retail access, and an enforcement scheme that is well-funded and works.

Meanwhile, here in California, consumers are fleeing the regulated market to unlicensed retailers, online shops, and delivery services offering cheaper, untested, untaxed products. Legal operators are being out competed by the illicit market, which produces an estimated 11.4 million pounds, as noted in the Economic Report.

The Report also indicates that an estimate 9 million pounds of lead illicit cannabis is leaving the state, fueling illegal markets across the country. If priced similarly to licensed cannabis, this would represent a $37 billion shadow market, nearly eight times larger than California's 4.7 billion in legal sales. And it was noted previously, but let me state it again.

It is critically important to mention that the same legal businesses foot the Bill for the entire state regulatory framework, including enforcement through their licensing fees. No General Fund dollars are used and that is not sustainable.

And let's not forget hemp-derived intoxicants, often falsely labeled as legal cannabis, that continue to flood the market at an alarming rate, skirting all safety and tax regulations, while undercutting compliant businesses. We support a legal, well-regulated marketplace. It's essential to public health and safety.

But policies taxing our businesses, while allowing illegal operators to thrive, undermine that vision every day. Let's not forget the will of the voters. Prop 64 wasn't just about legalizing cannabis. It was about displacing the illicit market. The initiative is crystal clear.

The Intents and Purposes section, referenced no fewer than five times, states, "It is the intent of the people, in enacting this act, to take marijuana production and sales out of the hands of the illegal market, to tax the growth and sale of marijuana, in a way that drives out the illicit market, to prevent illegal production and distribution of marijuana, and to prevent the illegal diversion of marijuana from California to other states or countries, or to the illegal market."

We are not achieving that vision. In fact, the opposite is happening. If we want to honor the will of California voters, we need to enact policy that actually draws consumers to the regulated market, not drive them away from it. So, we need three things, and some of it was referenced in the economic report, which we appreciate.

First and foremost, we need the Legislature to pass AB 564, or an iteration of that Bill, which we are proud to co-sponsor. This would repeal the automatic excise tax increase that is scheduled on July 1st. We also must crack down on illicit THC products disguised as hemp. These products are not harmless low-THC hemp alternatives.

Many are high potency intoxicants sold in gas stations, online, and smoke shops, without age verification, testing, or taxes, and they account for as much as 60% of the market, according to the state's own report.

We need aggressive enforcement and clear regulatory authority to remove these products from the unregulated marketplace, and to ensure that any intoxicating THC product, regardless of its source, is treated like cannabis under state law. Last, we must expand retail access to support licensees. Right now, 57% of California cities and counties still ban cannabis retail.

That means millions of consumers have no access to safe, legal cannabis. If we're truly serious about transitioning consumers from the illicit to the legal market, we must increase legal retail access and remove local barriers. At the same time, we must support licensees by reducing operational costs and creating pathways for long-term sustainability.

Madam Chair and Members, we're not asking for a bailout. We're asking for a fighting chance. We all know Prop 64's intent was to create a safe, taxed, and regulated cannabis marketplace that works for California. But today, more than seven years later, that promise remains unfulfilled.

Let's fix the track structure, enforce the law, and restore integrity to the marketplace. And let's make sure California remains the national leader in cannabis, not just in policy, but practice. Thank you for your time and I'm happy to answer any questions you have.

Thank you. Any comments from the Department of Finance?

Charlene Manning, Department of Finance. No comments at this time.

LAO?

A lot of information, and some of this we heard in a Budget Committee as well, and a lot to digest on the expanding retail access. You mentioned 60% of local municipalities have said no to cannabis.

And I have seen that in Orange County, I think there's only maybe two, I'm not sure how many, but out of 34 cities, maybe two or three, that have said yes. What are your ideas on expanding this? Because I know, maybe a few years ago, there was a potential Bill that was brought forward.

Well, it actually wasn't brought forward, but it was discussed about if a municipality had over 51%, I think, of voters that supported Prop 64, that, in essence, they'd be able to move forward without the local council. Is there any thoughts of bringing something like that back? Is there any—what's going on?

Thank you, Madam Chair. We actually, as an industry, are engaging in those discussions. So, that was a team bill, and we were pleased to see that Bill move through the Assembly with a lot of support from Assembly Members.

It did ultimately stall, and it stalled, really at that time, because the local government associations and individual cities and counties said they did not have sufficient time. They needed more time to stand up their retail programs.

Well, I think at that time, and it's been a while, but I want to say we were looking around 40-45% of cities and counties were allowing retail. That has not increased exponentially. We're not seeing additional jurisdictions coming on board. The statistic right now is 57%. And this is many years later.

We're now seven years into the program. So, to your question, yes, the industry is looking very closely at that concept once again, and we are beginning to engage in those discussions with our legislators, you know, keeping close attention to what jurisdiction, or what legislative districts, would be most affected. Because obviously, a bill like that will draw some opposition.

But I think it's certainly something worth explaining and the industry is taking it very seriously.

And for the cities that have said yes to cannabis, some of them, if, am I correct, have added additional taxes onto their own, in addition to the state?

Yes.

So, you've said yes, but now you're adding more and more.

So, that's a great comment—question. What I'll say is a lot of jurisdictions, actually all jurisdictions, apply a tax on retail. It's usually a gross receipts tax.

However, many jurisdictions have actually moved to reduce their local taxes, because they are seeing a reduction in revenues, as I indicated, that significant decline since 2021, which is about 19% in state excise tax. Also applies locally. So, the locals are seeing the impact of their taxes, and so, there are many jurisdictions that have sought to provide relief.

And you're seeing that in all aspects of the supply chain, whether it's cultivation, distribution, manufacturing. But, but you are right, the combined tax rate can be extremely high. The average is about 30-35%.

And then, there's the false narrative that many cities and elected officials are sticking to, which is, if we say no to cannabis in our city, that it doesn't exist, when we clearly see that it is thriving, and that is repeated over and over.

And I've seen it in Fullerton where people literally have said, why don't you have it in your area? And it's actually was, you know, two blocks away. And then when you shut them down, as we know, they pop right back up, because local government cannot spend all day enforcing this, although they do, do some.

All right with that, no questions up here. We'll hear from the public.

Sorry. There you go. Everyone's awake now. Western States Council. Just want to echo Amy's comments. Just a few things. I want to stress that the illicit hemp industry, while we're grateful for the Governor's action there and the emergency rulemaking, so that we—any intoxicating hemp product is really illegal.

But the problem is that a lot of consumers don't quite understand that and we're playing whack a mole. They just look at it as a tax break—oh, this one shop gave me a tax break. And so, there's a consumer disconnect.

But I also think that the enforcement and UFCW, we led on this a few years back, where we tried to get additional funding for the AG's EPIC Program, which is the Eradication and Prevention of Illicit Cannabis. I think that it takes a multiple agency effort and local efforts in order to really combat the problem. So, thank you.

Thank you.

If we can focus for a second on 24% of the market, which is LA City, There are almost 4,000 competitors that sell illicit hemp products. There are 430 available licenses. Only 200 of them are currently active and 200 have given up their licenses. This is not just about access. This is about competition.

There is not lines out people's doors. Let's also be clear that 82% of those LA retailers are behind on their local taxes, and we have $1.6 billion in unpaid state taxes. This is not just about a competition. We actually have to make money to pay off the debt to even get to a sustainable level.

So, we need to really look at how are these businesses not only going to survive, but how are they going to thrive enough to pay back all the debt that they currently owe.

Thank you.

Chair and Members, Alicia Priego, here on behalf of Kiva Brands, which is one of the few remaining manufacturers in California. Just wanted to echo our shared concerns, as presented by Amy Jenkins with CCOA.

Over the past three years, Kiva has had to make employee reductions, in order to stay in the state, and are looking for ways to continue being in the state or homegrown manufacturer here, and really proud to be part of the California cannabis culture. But it's no longer sustainable.

And so, we really want to reinforce the need for urgent action, regarding addressing high taxes, enforcement, regulatory costs and burdens, and also, increasing access to retail. Thank you.

Good afternoon, Madam Chair, Members of the Committee. You know, if you look at the news today, we have a constitutional crisis in DC. We have an economic crisis, and today we're here because we have a cannabis market crisis. It's a great report by the DCC and their economists.

I just want to reemphasize, 60% of the market is illegal, unsolicited and growing. So, whether we have continued production—the illicit market, if we don't do something in this legislative session, will continue to grow. I represent Good Farmers Great Neighbors, which is a trade association, based in Santa Barbara County, of growers and farmers.

And we are 100% behind all the recommendations that are come forth by the Legislature. In particular, I want to bring one point. New York State—the Governor and Legislature just recently passed a state law, and signed by the Governor, that cannabis is now on the list as a crop.

And I think that the economists here in this room, if there's an amendment to the report, what would cannabis look like in California, if it was a crop and not a commodity? With that, thank you, Madam Chair.

Can you state your name?

I'm sorry. I'm Sam Rodriguez.

All right, thank you. Seeing nobody else. Any last questions? Thank you. We appreciate your testimony. We are going to be moving to Item Number 6, Department of Consumer Affairs, and we will be moving through these next items very speedy.

Good afternoon, Madam Chair and fellow Members. My name is Taylor Schick, and I'm the Chief Fiscal Officer for the Department of Consumer Affairs. And we want to thank you for having us today and considering our budget change proposals. The Department has nine proposals up for discussion today, eight in Issue 6, and 1 in Issue 7.

And if you wish, I can provide a summary of each proposal. Additionally, I'm joined by representatives from all of our boards, who are happy to address any questions that you may have.

Unless a Member has question? No. I don't have any question. Any comments? LAO? We see no questions or comments. Do we have anybody from the public that would like to speak on this? All right. That's about as speedy as you're going to get. So, we will move on to Item Number—okay.

If I could—could you just expand a little bit on Issue Number 7. When we get into a $2.6 million range, I'm always curious about the need for throwing more money into ID enhancements. What's, can you maybe underscore some of the necessity of that dollar figure?

Sure, and I am joined today with the Department's Chief Information Officer, and we can help address your questions. So, the Department is requesting $2.6 million in 2025-'26 and ongoing, to continue maintenance and operations of its Business Modernization, Cohort Two, program.

This project addresses business and technology needs that will increase efficiency and accuracy of work activities for five programs, that currently rely on very old legacy technology solutions for their enforcement and licensing systems.

And then, those programs, if you just want to know, are the Structural Pest Control Board, California Architects Board, the Landscape Architects Technical Committee, the Cemetery and Funeral Bureau, and the Bureau of Household Goods and Services.

I will note that the Project has been completed, and we are currently just requesting ongoing resources to fund maintenance and operations of a system that these programs are currently utilizing.

Any additional comments on Item 7? Any public comments, Item 6 or 7? Public comments? All right. With that, thank you. We appreciate it.

Thank you very much.

All right, we will move to Issue Number 8, the overview of the Commission on the Status of Women and Girls.

And if you can make sure you provide us with an overview of the projects that you are working on, and...

Absolutely.

Please introduce yourself.

Good afternoon, Chair, Members of the Committee. My name is Darcy Totten. I'm the Executive Director for the California Commission on the Status of Women and Girls. I am joined by my colleague, Maxwell Macedo, who is our Director of Fiscal and Administration.

The Commission turned 60 this year and serves as an independent state agency that focuses on women and girls, including, but not limited to, critical areas such as economic and educational equity, military and veterans issues, access to health care, including reproductive choice, violence against women, representation in the media and, well, everywhere, and educational equity, among others.

There's about 19.6 million women and girls in the state of California, meaning that women comprise just over half of the state's population. The Commission achieves our statutory and programmatic mandates, for this level of a population, with 10 permanent positions.

We do this by collaborating with any, and all, state agencies who request our assistance and of course, community partners.

A prime function of our work is also to encourage local commissions and other women and girls-serving organizations to, you know, institute what is called local self-help activities, designed to meet the educational, employment, and related needs of California's women and girls.

And with that, we make regular reports on our activities, our findings, and various recommendations to the Legislature. We review state laws, in regard to the civil and political rights of women, and we strive to act as an information clearinghouse, on all issues that affect the lives of women and girls.

And today, we are before you with a budget request to address critical workload demands that are pretty essential to fulfilling our existing obligations and mission. So, we're, we did our best here.

We adhere to the directives not to introduce any new programs, and it does uphold our commitment to fiscal responsibility, by deferring any additional funding requests until '26-'27. With that said, to talk briefly about some of the programs that we're working on now.

The Commission currently leads the oversight efforts for the College Student Right to Access Act, through December 31st of 2026, that supports all 34 public universities throughout the state.

We work with the leadership, the University of California Office of the President, and the California State University Office of the Chancellor, to resolve any ongoing implementation challenges with student health centers, as they arise.

We also are currently supporting and exploring ongoing strategies for improving student awareness of that program, as well as some sustainability efforts, in order to ensure that when the grant sunsets, the program does not. We have an ongoing commitment to the California Budget and Policy Center.

We have produced an update to the Women's Well-Being Index, as well as the Girl Scouts. We have a partnership with all eight regional councils of the Girl Scouts, serving about 130,000 girls and roughly 70,000 volunteers who are adults. We have also established a Youth Advisory Council, which did about two years as sort of a youth enrichment program, and this year, we have shifted its focus to public policy.

They'll be building a Girls Agenda for the State of California. We have also taken on, in celebration of our birthday, a pretty substantial archive project.

We are digitally imaging and archiving about 60 years of historical records of the Commission on the Status of Women and Girls, to better help increase awareness of, and access to, the history of the Commission and its role in advocating for women and girls throughout the state, particularly, since its inception, in this really historical era, and some full circle areas, where progress was made and then perhaps lost, or is more tenuous now.

We are partnering with the California State Library on that and their Digital Concierge Program. And the plan is to digitize thousands of records, including documents, pictures, other ephemera, all through the 80s. There's about a decade's worth of handwritten pleas for help from women up and down the state, and we are scanning all of that.

We also hope, ideally, to create a physical roving exhibit that would be able to move throughout the State of California. As I mentioned, we're only asking for positions, because we do a lot of this work just with personnel. There's no sort of outside assistance. We just roll up our sleeves and do it ourselves.

So, TBD on the roving exhibit part. We also put together convening opportunities for local commissions, state partners, community partners. We continue to work with the Office of the First Partner on the California Equal Pay Pledge and continuity there. The Commission also regularly convenes an Anti-Reproductive Rights Crimes Advisory Group, around AB 1356.

It's comprised of local subject matter experts, providers, the Department of Justice, and it's focused on health clinic safety, really in the areas of data policy and training. The Committee reviews peace officer standards and training, and then assesses the issues related to clinic harassment, violence, intimidation.

We have a report due to the Legislature and the Attorney General at the end of this year, and another in 2029. We're also currently sort of taking into account what's happened at the federal level.

We have an international sort of partnership subcommitee and a long working relationship with Global Ties in the State Department's International Visitor Leadership Program, for folks coming in from other countries who are interested, particularly, in gender equity issues. They are being affected by a federal funding freeze.

So, we've been working with our local Global Ties folks to try and put together community gatherings and there are several others. I could email you later.

Thank you. Appreciate that. DOF?

Jesse Roland, Department of Finance, nothing further.

And LAO?

Anne Hollington, LAO. Nothing to add.

Okay. I don't have any questions. I think I have, more, a few comments. I know there's been several changeovers for the ED.

And how many changeovers has there been for the ED in the last five years?

I am the fourth and I've been there for six years.

That's a lot.

Yeah.

And your budget ask is for an additional?

It's to convert existing limited term positions to permanent. So, one of the challenges that we're currently facing is that, as limited term positions come to a close, these will all expire in June, becomes very hard to keep people in those positions, and then harder still to backfill them.

And the positions that we lost are the supervisory roles, which leads to more turnover.

And I don't have a problem with that, but your list is very lengthy, and I just wonder if you have many, many priorities. Sometimes you have such a long list it's hard to really focus.

And I would say, looking at where we are now, that some of the lists that you named, whether it's archiving photos, I'm not sure that that's a priority at right now when we're looking what's happening with the status of girls in women.

So, whether it's maternity hospitals closing, whether it's menopause, whether it's the relevant issues that women are facing—affordability issues, housing issues—I would just encourage you to take a look at your long list that you mentioned and see if there's a way—we do have policy and research teams here at the Capitol.

We have many, many other commissions that focus on women, and this is not just you, so please don't take this as Quirk-Silva is not supporting women. I've done this work for a very long time, and I know that if you have too long of a List, it's hard to get—I know that you mentioned the Youth Advisory.

What does the Youth Advisory do? How often do they meet? What are they championing? And so, I would say, pare down your list. Choose maybe four or five priorities. And I think this, you know, from research to reporting, we have a huge amount of information coming in.

And so, what is the work that's most essential for women? That, that's, that's my advice. And I do know some of the people who've done the good work for you, and I know it's important work, but it's not just you. We had the GovOps come last week, or the week before, on the Belonging Campaign.

And when we are in these critical budget cycles, we have to look at priorities, and right now, childcare. These type of issues are really relevant, and so, I would just encourage you to look at your list and see if there's some ways to streamline and to take some of these critical issues.

I know last night, Oprah Winfrey did a thing on menopause. So, this, these are the things that women are wanting to talk about, and, but I thank you for your work. I know it's not easy. And again, please don't take this as being critical.

Thank you.

All right. Any other questions from the public?

Seeing none. We thank you for your presentation.

Thank you.

Thank you.

Okay, we will be going to Issue Number 9, the overview.

Wait. Sorry.

Issue Number 9, the California Arts Council. Welcome. Nice to see you, Ms. Brazell.

Nice to see you.

And if you can do us—give us an overview.

I absolutely will. Thank you so much. My name is Danielle Brazell. I'm the Executive Director of the California Arts Council, established by the State of California in 1976. I was 10. I will just say that. And our 50th anniversary is going to happen next year.

But we are California's only statewide funder solely dedicated to supporting arts and culture, and strengthening arts and culture and creative expression, as the tools to cultivate a better California for all.

We have been fervently dedicated to building the networks, providing access to capital, and developing the talent pipeline, with funding that is accessible to everyone in each of our 58 counties. And as a state agency, we support local arts infrastructure programming statewide through grants, programs, and services.

We achieve our mission through the support and partnership of the Governor and the Legislature, California artists, nonprofits, local arts agencies. They are the triple bottom line. They are the catalytic partners, not catalytic converters, by the way. They are the catalytic partners who ensure CAC is able to serve communities throughout the state. And look, we're a big state.

And so is our arts and cultural infrastructure. Its workforce on the creative economy is incredibly significant. And it is a major, major identity piece for the State of California. In fact, California's over home to over 16,000 nonprofit arts organizations. And our state creative sector accounts for 18.67 billion in assets and 15.4% of California's total employment.

And like every aspect of our society, the art sector was deeply impacted by the global pandemic. We were the first to shut down, we're the last to reopen. But I will tell you, we never stopped working. We never stopped working in service of communities.

And to mitigate the impact, CAC did receive significant infusion during the pandemic years, specifically as it relates to creative core and cultural districts. And these two programs, in particular, really surface new and innovative ways in which we can drive resources into communities. And we're really excited to be able to bring present back some of the findings, in the coming months.

We've also been able to backfill some key positions, specifically to advance equity through practices in data. So, a lot of our work is really shifting from kind of a value—not necessarily the values frame. We're really working on building the quantitative data to support the qualitative impact that we all know.

Tomorrow, we are about to open the slate of programs for fiscal year '25-'26. And so, the team is behind me, working fervently to get that open. We are small and mighty, and we always punch above our weight. And later this summer, the Council will vote. They have the policy oversight on our local assistance budget.

They will vote to approve allocations for approved grantees, based on what's made available for the appropriation with the Governor's Budget. So, with this in mind, we really want to thank you for your support.

I know you came to one of our council meetings in Santa Ana, in your community, and I hope that gave you a bit of a perspective on the important work that we do. Thank you.

Yes, excellent work. With that, any comments from LAO or DOF? You guys are so quiet today. Assemblymember? All right.

Thank you for coming here today to present this item, as well, to talk a little bit ahead of time, through about the overview of what you're doing with Arts Council. I'm obviously proud to be your Chair of our Assembly Committee on Arts, Entertainment, Sports, and Tourism.

And I'm wondering, I was also happy to sort of take the temperature of colleagues for restoring some of the cuts that were previously allocated, and I'm happy to lean on that. I think a lot of colleagues, flexibly, are supportive of that.

So, with $5 million in restoration, what would that mean to the operations and the benefit of the Arts Council?

So, a $5 million restoration of the local assistance budget will yield approximately 300 direct grants, and potentially more, if those grants are leveraged, AKA matched at the local level and/or regranted. So, that could result in additional resources at the local level. I would say that, you know, grant-making is a force multiplier.

For every $1 granted, approximately 6 to 8 is regranted or generated. And so, it really does, kind of, generate more economic activity at the local level. I will also say that the Program is unsubscribed. I mean, severely oversubscribed. Yeah, thank you so much.

Yeah, thank you for that. Yeah, bang for buck. I think the contributions that we can help support with the decisions that you're making, that come down to our local communities, you know, make all the sense in the world to me. You know, very important, both economically and culturally and socially.

Outcomes that we want to be able to support across California. What do you see, with some of the state and local partners mentorship grants, that are able to create some of the sort of long-lived jobs and infrastructure, that we want to see for our community?

Yeah. I'm so proud of our State and Local Partners Program. First of all, they are the boots on the ground at the local level, building the cultural infrastructure needed for a community.

And in some of our rural communities, this is where, you know, we fund every—we now have 58 counties we fund directly and there's likely one individual in a small county that's driving the programs, and making sure that arts, culture, and creativity is accessible. And the state and local mentorship Program is really building upon our strengths.

So, we can take a phenomenal leader in San Diego or in Orange County, like Rick Stein, and he then mentors another county, let's say, and you know, we could say Amador or Lake County, and helps them to build the capacity needed to be able to get up and running.

And we've really seen, I mean, again, for the first time, it's taken us some time to get there. We have, we have a state and local partner in every one of our districts—every one of our counties.

Fantastic. Thank you for your presentation today. I don't have any further questions.

Yes, thank you. And I have the list here, and I think we can all see the array of grants that have given—been given out—to small and large communities. I have said this before—access for those smaller communities is really imperative, as many of them don't have a grant writer, or sometimes, even the relationships.

So, having some kind of pathway that they can find success. I can see it on this chart with places that I don't even know. I don't know every city in California, but Kern, five grants, Kings, two grants. Tehama—I don't know where Tehama is—but a grant. So, I appreciate that.

I think it's important that these dollars get stretched across California. And like you say, once one award is given, or grant is given, it fuels that enthusiasm, and one grant, many times, multiplies to other funding sources, as they can list that and use that for future support. So, I appreciate this.

I like the focus on these grants, because it isn't so large that you're trying to do 100 things or 50 things, and I think keeping things narrow, especially in times where the budget is of concern, stays to your focus and your core values. So, with that, any other last questions? Anybody from the public wanting to speak? Welcome.

Good afternoon. Julie Baker with California Arts Advocates. I want to thank the Chair for her ongoing support for arts and culture.

And I'd like to thank the Assemblymember Chris Ward for authoring a letter to introduce the restoration of the 5 million to the CAC's budget, and to the Member Ortega, also, for signing on, and encourage the Committee to really agendize this, going after the May revise, to ensure that these funds are restored to an agency that has not seen an increase in almost—since 2018—and has really not kept up with inflation.

And what the excellent Director didn't mention, specifically, in terms of over subscription, is that there were $56 million in requests to the Agency, with only $21 million to give out. And they're only servicing about, you know, I think it was 12 or 1,400 out of the 16,000 nonprofits.

So, you know, we're really just touching what we could be really expanding upon, in terms of economic and community development.

I don't think I need to convince any of you on the impact and power of what arts can do, and particularly, in this moment in time, how critical it is for our communities, not only from an economic development standpoint, but for a reflection of arts and culture and how much we need that.

So, I appreciate the support you've given us, thus far, in terms of the, the ecosystem. We've sent in about 1,200 letters, so far, in support of that $5 million restoration, that have gone to Members of your Committee, as well as to the Governor. So, I stand here representing those voices as well. Thank you.

Thank you.

Good afternoon. I want to echo everything that Ms. Baker said. My name is Jenny Darlington-Person, and I am the Executive Director of the Arts Council of Placer County, one of your state and local partners for the California Arts Council. I'm also a Board Member of the Association of California Symphony Orchestras.

CAC funding is vital to California communities, especially California's rural communities, and SLPs provide a pathway of funding for rural artists and rural arts organizations. But you've heard the facts and the figures. So, I want to put a face to the impact you have with this funding.

Stephen was lonely and being bullied at school and getting poor grades, until he joined an after-school music program. Fast forward five years when his mother stopped me on the street, which is apt to happen in rural communities, and told me how grateful she was.

She told me that, thanks to the youth orchestra, Stephen was no longer withdrawn and lonely. He had learned to play three instruments, was getting straight A's in high school, and was going on college tours. Thanks to your investment in the arts, there are tens of thousands of students, just like Steven, across this great State of California.

That is the impact that you have the opportunity to make, by restoring this funding. Thank you.

Thank you. And I love that testimony. That's really appreciated, because we don't always get to hear that part of the funding. All right, any last comments on California Arts Council? Thank you. We appreciate your testimony. Thank you so much. Nice to see you.

Nice seeing you as well.

All right, we will wrap this up with the Issue Number 9, the overview and staff resources. These are non-presentation items. Do we have any public comments for the non-presentation items? Any remarks up here from the Department of Finance or LAO? Seeing none. I have no questions or comments. We appreciate you.

Thank you, Department of Finance and LAO, and that will end this budget hearing.