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

Mic check 1, 2, 1, 2. Mic check 1, 2.

All right. Senate Budget Subcommittee Number 4 is going to start in 60 seconds.

All right. The Senate Committee on Budget and Fiscal Review, Subcommittee Number 4 on State Administration and General Government will come to order. We're holding our Committee meeting here in the State Capitol number 113. Ask all Members of the Subcommittee who are within earshot to please come to Room 113 so we can establish our quorum.

We are going to begin as a Subcommittee. As we proceed through today's agenda, we'll provide two opportunities for public comment. One as part of each department's presentation. So not item by item, but taking it department by department. And then an additional opportunity for public comment at the end of the hearing.

We'll also at the end of the hearing take our votes, and we will have several vote only items. I just want to note, for both vote only and for our other items, we will next week, the budget, the full Budget Committee will be taking up proposals related to Medi-Cal funding and potentially other issues.

And the state of our budget is dramatically different than it was when we began our Subcommittee hearings. And so although we have items up today for approval on vote only and for discussion and approval, just want to note that these are, these are within the context of the January budget frame.

And so please, if you've got a, if your department's here and we have an approve as budgeted item that we're going to vote on, please don't make plans to spend that, spend that money. It's very likely we'll be back on many, many of these items and have to reopen even those that we have already approved based on the budget situation as we get closer to and then just past receipt of the May Revise. Welcome to our Vice Chair, Senator Niello.

We'll wait to call our roll for just a moment until Senator Smallwood-Cuevas has arrived. She's right around the corner. So our focus today is going to be on issues related to the Department of Technology, the California Consumer Protection Agency, the Department of Real Estate, and the Department of General Services.

So we're going to begin with the Department of Technology, so I would ask the representatives of the Department to please come forward. So we'll start with just an overview of the Department's core functions and status report on major programs. And we previously asked that you include a brief update on your progress on state operations and vacant positions goals from the Governor's Office. And so welcome and please proceed.

The update on the reductions?

Yes. And general Department overview.

Well, my name is Jared Johnson. I am the Chief Deputy Director and Deputy State CIO for the Department of Technology. Thank you for the opportunity to present today. I'm going to bring up here with me Miles Burnett. He is our Chief Administrative Officer who can speak to the budget reductions that were accomplished at our Department.

Chairman Cabaldon and Members of the Committee, my name is Miles Burnett. I'm the Chief Administrative Officer for the California Department of Technology. So on the two budget reduction drills, CDT reduced in total 41 positions. Three of those were General Fund positions and the other 38 were positions from our Technology Services Revolving Fund.

So CDT has, if you exclude, and so most of CDT's General Fund is in the MMBI program, which was excluded from this drill. So once you take that off the table, CDT has very little General Fund. In fact, our split between TSRF, Technology Services Revolving Fund, and General Fund is about 95/5. So we reduced the three positions and we hit our target that we worked out with Department of Finance for our General Fund reduction. And in addition to that, we also reduced the 38 positions in the TSRF.

Ryan Bender, we have nothing to add. Thank you.

Brian Metzker, LAO. Nothing to add.

Proceed to item nine, which is the Middle Mile Broadband Initiative oversight. Are you taking up that item as well?

Yes. Thank you. So thank you for the opportunity to speak with you today about the Middle Mile Broadband Initiative. This endeavor represents the largest open access Middle Mile Network in the country, with over 8,100 miles of fiber optic network. The historic investment made by Governor Newsom and the Legislature represents California's commitment to closing the digital divide.

In July of 2021, SB 156 established this ambitious project designed to bring equitable and affordable high speed broadband services services to all Californians. We have heard loud and clear that this is a priority for our state. Through the leadership of Governor Newsom, the Legislature, and the Middle Mile Advisory Committee, CDT is working to develop the enabling Middle Mile Network which will allow California communities, from urban centers to rural communities, to take full advantage of our digital world.

We leveraged a modern request for innovative ideas or RFI squared procurement process and are under contract with more than a dozen partners to construct, lease, and purchase more than 7,300 miles of the network. And we are proud to share that we are currently in construction phase for over 3,000 miles of the network.

These partners include tribal entities, local governments, and private companies. CDT and its partners remain committed to completing the Middle Mile Broadband Network by the December 2026 deadline. Joining me today is Mark Monroe, the Deputy Director of the Middle Mile Broadband Initiative, who is here to answer any questions you may have.

Finance.

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

Brian Metzker, LAO. We would just note for the Committee that there is a forthcoming business plan for the Middle Mile Network that will be provided, I believe, shortly, it's in review. And that business plan will be important for the Subcommittee and the Legislature to evaluate.

It will contain the estimated revenues and expenditures on the Middle Mile Network, which will help the Subcommittee determine whether or not an ongoing General Fund subsidy of some sort will be needed to operate the network once it's fully operational, hopefully by 2026. We would also note that nearly all of the funding for the Middle Mile Network is now General Fund, except for for a small amount of federal funding from an NTIA grant.

And so just keeping that in mind because the initial funding for the network was almost all federal funding. And also noting that there still remains about 540 million in federal funds for Last Mile Project grants, and that's where the bulk of the remaining federal funding is for the broadband infrastructure agreement. Thank you.

All right. So you say it's forthcoming, and this is actually not a question for you, but for the Department. So it's forthcoming, it's due January 30th? This is the business plan, correct?

Yes. The business plan was due by January 31, 2025.

As a matter of statute. It's not a request? It's not contingent on an appropriation. So where is it?

It's in a robust review process. We apologize. We understand it's late, and we're working very hard to get that submitted to the Legislature.

The reason why the statute identified January 30 and not May was, or at least in part, is that it was not the intent of the Legislature in enacting that date that it be used to justify the May Revise. And so I have to say I'm very concerned that the business plan is being held up for the purpose of aligning it with what the May Revise projections are. And I know, I understand the Department's already completed its work on it a while back and it is being held up.

We need to see it immediately, like, stat, immediately. And while it may set goals and timelines and objectives and expectations that are higher than what the May Revise contemplates, that's not the purpose of the business plan to justify the May Revise. And so I can't state in any, any, you know, more uncertain terms.

We this is it's legally mandated, and it's mandated so that we can use that business plan for our purposes as well, as well as the Administration's purposes and all the partners that are involved in this project to be able to move forward.

Recognizing the state's fiscal situation is going to force a lot of tough choices, including with respect to this program. But the, but as I said, the business plan is not it's not a request, it's not advisory, and it's not contingent on appropriation. It is the legal, statutory, legal obligation of the Administration to provide that to us two months ago. Senator Niello, you have any comments on this?

I'd kind of echo it because this is unfortunately not totally unusual. There was an article in I think it was CalMatters recently of a plethora of reports that have been provided that have been required by legislation that have not been forthcoming. And there still are, they still are not forthcoming.

And while not a legislatively mandated report, troublesome nonetheless. The Governor had asked for input relative to what was driving increased in increased energy costs or utility costs, and that report was available at the first of the year and was not released after repeated requests. And then it finally was. But there just seems to be a cavalier attitude or approach by the Administration and the state departments that are under the Administration toward mandated reports, and that's troubling.

Yeah. I mean, it is important in a constitutional system with a rule of law that the executive branch fulfills its obligations under the law just like everyone else. And the executive branch is not above the law either here or in Washington, D.C., and this report is absolutely essential.

The Legislature has also been very accommodating when departments and the Administration have come forward to say, look, this report is not needed. Not this topic, but other reports, they're not needed. They're not used. They're not as important. They are distracting from other work.

And so in those instances where reports need to be extended or they're not needed anymore, there's always been an open, a receptive ear here in the building to achieve that. This isn't one of those and it really is a critical element.

So if other legal means are necessary in order to secure the document that's already been produced based on the Department compliance with the statute, then we'll need to explore them. But I know you said it's coming soon. I truly hope that you're right, Brian, and that executive branch is going to fulfill its legal, constitutional responsibilities to comply with the statute on this matter.

How about this afternoon?

Yeah, yeah, we'll be here for a few hours. And there's no harm in delivering the report that accomplishes the, the business plan. There should be no one that is trying to change it at the last moment. As we said already, the budget is going to, the business plan in its full glory when we see it is not going to, will not be implemented in that form. It can't be.

We're not going to have the resources to do everything that's in the plan. But we cannot make budget decisions without knowing what the optimal plan is and what the trade offs might be. And so right now we're flying blind on a large General Fund item that's in our budget, and we don't have the information that both we need and that has been legally mandated to be provided. Senator Smallwood-Cuevas, welcome. Do you have any questions or comments on this, this item?

Thank you very much, Mr. Chair, and appreciate the concerns that were raised about the plan and the necessity of it for us to make the decisions that need to be made. This is an issue that is critically important to my district.

As you know, for, for years since I've been in the Legislature, we've been trying to really understand these underserved communities in which communities have been left behind since COVID. And, and I think I, I was for I think a year and a half asking for the maps that helped me understand whether or not all of my district received the investments or have the planned investments that were promised, identified, and documented.

And I think we just received, my staff actually had to pull it off the Internet to sort of see that. So I want to say not part of not having this plan is part of a pattern of non-responsiveness that has been a challenge for my office. And so as we look at this request, it's really important that we have all of the information to make the decisions that we need to make, especially given our budget precariousness this, this session, this year.

I did want to know, I have a question about the SB 108 funds. And I'm wondering how much of that funding remains unspent or encumbered and can CDT provide a clear accounting of how those funds have been allocated to date?

Mark Monroe, Deputy Director for the Middle Mile Broadband Initiative. So of the final, as you noted, the SB 108 provided the final tranche of a $250 million in General Fund for the project. To date, 193 million of that it remains unencumbered, and we expect to encumber that within the next month or so in the coming weeks. Yes.

Will we have a sense of what those dollars are encumbered, what they will be spent on?

I can say high level that more than 100 million will be for the huts. So when you develop this network, you have to have these repeater huts every 50 miles to repeat signal. So for installation of those huts, that's going to be the majority of it. And then the remainder of it is for several joint build partnerships that we're still just finalizing. And I think most of them are in the Los Angeles area.

Okay. And you said in the Los Angeles area. Do you know where your focus is in Los Angeles?

So the largest piece is in the, I think the remaining tranche is with Gateway Cities

Okay. And maybe we could get more detail. You said in a week those dollars will be encumbered and there'll be more detail in terms of where those allocations are?

Yes, we can, we should be able to within the next week provide you. I don't know that all of it will be encumbered within the next week. And then in the next couple of... Within three or four weeks we should have it all encumbered. I just can't say, you know, how much when the final contract dates are going to be signed.

I look forward to that and would love to see where those allocations are being made. My other question is what are CDT's current projections for operating and maintaining the Middle Mile Network after construction is completed? I know that is a critical piece of the puzzle. We don't want to make these investments and then not have the resources for operating. Will the state need to continue to subsidize the network? What are we projecting those costs will look like?

So those that that information is what's going to be included in the business plan that is being finalized. So I can't speak to that currently until, you know, until it comes out.

And would those be with General Fund resources or is there a sense that there... Will you be coming to us for General funds for that plan implementation or is there a sense that there are other revenue streams that you've identified for that?

Conceptually, from the beginning the intent was that a subsidy would not be required. Big picture, that's always been the goal for the network is that as Last Mile providers connect to the Middle Mile and pay for that access, that that should cover those costs until. We're in the process of securing an operator now. And that is a long, a long process. But so we, we will have more Information, you know, later on that. But at this point, that's been our long term goal is to not require an operating subsidy.

I don't know. Do we get to the question about when the plan is coming back to us? I did, I might, I think I might have missed that as I was coming in. Because I think that's, you know, like the $64,000 question. But we do want to know when is that plan due to us and will we be able to get it in advance before we even come to Committee so we can have some time to digest it?

The plan was due January 31st of 2025, and it is still in a review process. So we apologize, regret that it was not submitted timely, but we are working very hard to have that submitted to the Legislature as soon as possible.

So there isn't a D-day? Very soon as possible and it's already four months out.

CDT has completed its portion of the plan. It's in a review process. So we are working to get that submitted as soon as possible. I don't have an exact date at this time. I'm sorry.

It will be hard to support implementation of that plan without seeing it. And seeing it, you know, sometime in June would not be helpful. I think this is a long time coming. I don't know if you remember, but my district was part of a community that was prioritized for the Middle Mile.

And then we learned in the LA Times it actually had not received the infrastructure funding. In fact, those dollars were diverted to reliability away from South Central over to Beverly Hills. And so we spent a lot of time in that conversation trying to understand why that happened.

The Administration committed to ensuring that those communities would be made whole. As I said, we had been asking for updated maps and have not received them. And we did look on the website, and we saw sort of a very broad stroke map, but it doesn't give us any granular details. And here we are. About January, we'd have something substantive to at least work back from, and we still don't have that.

So I just want to say how important it is for the 28th district and so many others to be able to understand what is being done, where it's being done, and what it will cost to ensure that we can ensure this digital divide is bridged in California for our most vulnerable families. So I guess we will just continue to call your office to get information. Unfortunately, it hasn't been successful in the past, but I do hope that we have more information to look at as we come forward in the next few months, weeks before we get to June.

Thank you for that. Your comments as well as Chair's comments and other Members are noted and we will take that seriously and try to get that report submitted as soon as possible.

All right. Or in the next two hours, since we're still here. Senator Niello.

I have a long fuse. I don't get irritated about things very often. And my staff and I joke about when things happen that are a little bit off, we joke around. Well, now we need to work up our outrage and we have a good time joking about that. But I have to say this is outrageous. Absolutely outrageous.

We are over two months past the due date of this report. And right now, two months late, you're saying you don't know when you're going to be able to produce it. That's outrageous. So I have to ask you, and I want an answer. Give me a no later than date now.

I'm sorry, sir, I don't have a no later than date for you today, but we will work to get it to you as soon as possible.

That's outrageous and completely unacceptable.

All right. Let's just say I agree, and now I'd like to dive into some of the details and maybe some of our knowledge from working on this plan will emerge through this process. So the first question I have is the you have the ability to come back to request an additional, up to an additional $250 million through the JLBC process. Do you anticipate making that, making a request for some or all of that of those funds?

At this time, we don't anticipate needing additional General Fund to complete the project.

All right. At an earlier session of I think the Middle Mile Advisory Committee, maybe here. I think it was the Department that indicated that one of the significant barriers on the Caltrans portions of this. So the direct installations were permits from counties.

And I know at least one Senator asked for a list of the counties so that we could be of assistance in helping that move forward and didn't receive any. And so I'm can, can you let it, explain. And looking at the, at the map and where we are in terms of standalone construction at 779 miles of the Caltrans construction miles compared to the projection, the Governor's 2024 budget of 4,000, so five times as much.

And it was in response to that, the issue of, well, it's not, you know, it's because counties aren't issuing permits. Was that a misstatement at that time. Is that the truth? And if so, can we, can you give us some, can you shed some light on where we are experiencing those and what we're doing about the permitting issue, or are there other reasons why the Caltrans number in terms of direct construction here is so much less than what the Governor's Budget in 2024 anticipated?

Yeah, sure. In terms of the total miles, and when you look at the, you've mentioned the 4,000 miles, that was part of the budget request that was made last year as part of the 24 budget. Ultimately, it wasn't funded. This is a $1.5 billion budget request. And so the majority, the vast majority of the reduction to the Caltrans miles is relative to the miles that weren't funded with the additional funding. So we're still able to do the full 8,000 miles.

And then the other reason for the reduction for the Caltrans miles is that we have a number of partnerships where we're able to construct more of the network. Same location, same accessibility, but for shared costs. So it actually allows us to be able to have a more robust, a larger network to reach more communities.

So in terms of the, the, you mentioned the county permitting. So for the, the agenda notes the 779 miles that's on Caltrans right of way. So they have, they have, they kind of control, they control the access to that. So I, and in terms of their permitting and design, all their work, I believe as of last week all but 26 miles was complete in terms of what they were doing all of their pre-construction work. So I don't think county permits would come into play for Caltrans.

Okay. LAO, you?

All of that is correct. Just would note for the Committee, again, the $1.5 billion ask from last year was responsible for that increase to 4,000 miles of Caltrans potential construction. However, because that proposal was rejected at May Revise, there was also some reporting language as well that was satisfied by November that showed what the impact of a lower amount of funding would be on the number of miles that were to be constructed by Caltrans, and that's where we get to the 780 miles or so.

All right, maybe could I ask both of you to tell me. I'm just, I'm brand new here, I'm a small town mayor. This is all, these are all big numbers to me. So the theory here on the, on the Last Mile providers covering the cost of the system and obviously this would be a critical part of a business plan is understanding our, our evolving knowledge about whether or not that's going to, whether or not or how that will actually pan out. But I'm just, I'm trying to understand so, because leases are the, the largest number of miles here and, are those leases principally from folks who are, you know, providers who, who do last mile themselves or?

No, so great, great question. No, our leases are from other Middle Mile providers. So we, they, they have a lot of the conduit already in the ground. They're pulling new fiber for us. But no, those are generally, those are broadly speaking not Last Mile providers. They're just Middle Mile providers.

So a Last Mile provider would, before this initiative would be paying those Middle Mile providers for the right to access those miles, right?

Yes. So if there is existing capacity, if there's existing fiber and if it's affordable, yes, the Last Mile providers in those communities, either new or existing, would pay for access to whatever Middle Mile existed. And a lot of the state, and that was really the genesis of this project. In a lot of the state, there wasn't access at all. There was a lot of places that just didn't have Middle Miles.

So if you had a company that came in and wanted to build Last Mile, there was no Middle Mile for them to connect to. So that was a big part of it. And then there are some communities where if you only have one provider, then you know, there's a, it can be expensive for, you know, for that community. So building in some competition is also important for driving the costs down.

Okay, so the leases are a quarter of the total. So. Right, they're, so they're, they're not insignificant. So if, I don't know if, if like let's just say AT&T or Comcast or somebody, they are, they would purchase from a Middle Mile provider access for, I, I don't know, a Sonoma Valley community in my district, and they provide Last Mile to that. And then we enter into a lease with the Middle Mile provider and then anticipate that the Last Mile provider will purchase or at least access from us. Is that...

Correct. Yes.

And so are, but are we, then, are we adding broadband access, and what is the impact on pricing then? If what if there's now another middle person in the transaction, which is us, how does that, how does that, what does that do for the pricing that the Last Mile provider and therefore the customer is ultimately facing?

Yeah, so because, first of all, there's more, you know, when there's, generally speaking there's more competition, it drives prices down. And so that's from a policy perspective, one of the reasons we wanted that there's value in building this network is that if there's more than one Middle Mile provider, in this case the state's, you know, providing part of that. And in the, in the state's case, we are committed to making ours affordable. One of the, I can dive a little deep here, but a little deeper here.

But if you, when you look at a Middle Mile provider or anybody who's building infrastructure for broadband, they will try to make back their capital costs within the next three, you know, two to four years, and then that's kind of establishes what their rate is that they're charging. We don't have to make back our capital costs. And so because of that we expect to be able to provide an affordable service that is that, that really drives down the cost throughout the, throughout the state, anywhere where the state is going because we will have an affordable alternative.

But if the, but for the, but for the leases, we don't know, I mean we don't have, there's no capital cost. I'm just trying to, if we lease, if we, if we lease, you know, the middle, from Brian's Middle Mile company or whatever. We lease that Brian's Middle Mile company was already, is it, they had an exclusive arrangement with AT&T or just with Comcast and we're going to open ours up and that's how we're going to achieve cost reductions through that competition, or where's the competition happening if all we're doing is paying the existing provider and then selling to the existing providers' existing customer and maybe a few others?

I'm just, I'm really, this is not my, it's not my field, so I'm trying to understand the economics of how this is, how this is supposed to work. Obviously the business plan should help us understand more and each iteration how will it really work. But I'm just trying to understand the mechanics of how we anticipate the lease side, where we're not making any capital investments at all, how that is supposed to work financially if all we're adding is another middle person into the middle person into the Middle Mile.

Yeah, and that's... So in terms of, you know, you noted that the leases are not, we're not having capital costs. The long term leases, normally in the market they're about 20 years. I think ours are between 40 and 120 years. We've been able to negotiate some really long leases, but those are considered capital capitalized leases where you lease, they cost about the same as constructing, and then you end up with the infrastructure that you can buy and that you can sell and lease and use from that. So it really is considered a capital cost even though we use the term lease. I don't know if that helps.

Yeah. Okay. Finance or LAO, do you have anything to add?

Nothing to add from Department of Finance.

Brian Metzker, LAO. Nothing to add.

Okay. Okay, I'll keep learning. I mean, because leases are such a big part of this, and so in terms of adding broadband, I mean there's two. There's multiple objectives here, but one of them is adding access. This is an area I'm really trying to understand well.

Because if the lease is itself not adding new core trunk line or not, sorry, Middle Mile access to service, but it is, has the potential to make it more affordable. That's an important goal, but it's also why the business plan is important to understand as we get farther along the track.

Is that, is that theory panning out. And it may be. And I'm trying to prompt you to give me answers that hopefully are in this business at least, at least some of the answers and questions on the business plan just don't. I know. I mean, from my understanding of the program, we just keep cycling from enormous promises and then budget cuts. Enormous promise, budget cut, enormous promise, budget cut. It's very hard to get a handle on it, especially without the plan. Let's see if I had other questions.

All right, any other questions for Members of the Subcommitee? Okay, thanks very much. Appreciate you. Appreciate you being here. We'll be here for a little while if you want to drop something off. And don't worry, we know you finished on time.

All right, so now we're proceed to agenda item 10, which is the BCP for the digital ID statewide service.

Okay. Thank you for letting us discuss our budget proposals today. The California Department of Technology is tasked with securing statewide information assets, developing technology policy, overseeing IT projects and procurements, and are an innovator of IT services and solutions. We have two BCPs in front of you, one labeled for presentation.

The goals of these proposals are support the state's Digital Identification Program to maintain and scale product offerings to additional state agencies and departments, and then strengthen California's cybersecurity by supporting the Office of Information Security's Advisory Services Virtual Chief Information Security Officer program.

I'm joined today by the Chief Administrative Officer at CDT, Miles Burnett, who will now provide a summary of our Digital ID proposal. And Members of the Executive leadership team are here today to answer your questions.

Chairman Cabaldon and Members of the Committee. My name is Miles Burnett, Chief Administrative Officer for California Department of Technology. CDT requests $972,000 in General Fund support for fiscal year 25-26 and 26-27 and $472,000 in General Fund for 27-28 and ongoing to support existing positions and maintain and scale product offerings to additional state agencies and departments.

CDT's digital ID program was initially established in fiscal year 21-22 to deploy a digital ID ecosystem for an initial subset of state services that would provide a consistent, secure, privacy enabled, reliable and consent based method to authenticate and verify the identity and eligibility of California residents when they sought access to the subset of state services.

CDT received two positions and $1.1 million in 21-22 and 22-23 to fund this pilot program.

In 23-24, CDT received permanent position authority for the existing two positions and a temporary extension of funding for these positions of $1.2 million in 23-24 and 24-25 to continue development, execution and maintenance of the digital ID ecosystem for a subset of state services.

So in essence, the BCP is really to provide ongoing General Fund support for those positions in the program. And with that, if we have any questions, I'm here to answer those. And we also have Jonathan Porat, who's a Chief Technology Office for California Department of Technology.

Great. Thank you. Department of Finance.

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

LAO.

Brian Metzker, LAO. We would just note for the Subcommitee that this proposal has a relationship with the proposal from the Privacy Protection Agency for the drop platform, that the identity gateway for the digital ID has some relationship with that platform being developed.

So just, you know, the Subcommitee may wish to ask in the next item how the two relate to one another, and also to note that given the changes at the federal level, the Subcommitee may want to, as the staff notes, you know, discuss some of the privacy considerations around the digital ID service offering, given some of the partners that are a part of that service offering are partners such as login.gov thank you.

Questions from Members or comments from Members of the Subcommitee.

Senator Smallwood-Cuevas

That really is where my line of questioning is in terms of sensitive personal information, especially now, where we know some of this information can be used in particular to our undocumented community that could lead to devastating impacts on those individuals and their families.

So I'm curious, you know, how securely protected are is the personal information and is it possible for it to be accessed or misused, particularly by the federal immigration authorities who might be able to easily access this information?

We know we have a lot of privacy issues in general with all of our digital information online, but this is really identifying people in a particular way that gives me concern. So just wanted to know what we're doing about that. Has that been thought about? What are the ways we can protect that info?

I'm going to invite Jonathan Porat up to answer that question.

Thank you, Senator. I'm Jonathan Porat. I'm the state's chief technology officer.

And I'm really excited that you asked that question and really appreciate it because to give you a short answer, and then I'll try to be as brief as I can to be respectful of your time, we believe that using digital identification, a lot of services can be provided more securely than they can in an analog way or through paper.

And we've taken pains, both in the design of the program and the execution of the program, to make sure that Californians are at no additional risk when it comes to a federal law enforcement action or something like that. So just add a little bit of context.

More briefly, what the digital identification program does is it connects service providers at the state or with local governments to identity and eligibility verification providers.

Identity verification, which is largely login.gov in the situation that you're talking about, is that way to prove that a Californian is who they say they are when they're requesting a service and eligibility verification Is that ability for a Californian to prove that they're entitled to the service that they're requesting.

So just a couple of days ago, we launched, working with the the California Department of Transportation tap to ride within the City of Sacramento.

And as a part of that, if you're able to register through the application that we built up, if you are a veteran, if you're above a certain age, if you have a certain disability status, you're automatically eligible to receive a 50% discount on your fare when you have a payment system that's registered with that application.

So just using that as an example for the eligible or for the login verification, the login.gov, which is that identity verification, the way that works is it's just like any other website or application, an account, so you have a username or an email or a password.

In some cases, Californians may already have a login.gov account because it's a service that's used by the Federal Government for a bunch of different things, like getting a passport.

In the event that you may need to create a new account and you need to provide some more sensitive information, let's say a selfie or some personal information about yourself, we have a commitment from login.gov that they are to immediately destroy those data. So it's not like they're sitting on the personal data that you receive.

And then when you use that account to log in or to use the application, all it looks at is the information needed to verify that account, which would be the username and the password.

So for that identity piece, you don't need to provide anything beyond maybe some personal information to make sure that someone isn't trying to make an account on your behalf for the eligibility side.

So, for example, if I'm a veteran who's now able to get that veterans discount in Sacramento, the way that we've built that, our eligibility verification is, it's built on, and Miles brought this up very briefly, affirmative consent.

So for a veteran, what we do is we collect your name, your birth date, and your address, and we have an agreement with the federal VA to only send that information over to validate that you have a veteran status that is eligible for the discount.

So what happens is, if you're a veteran and you want to be validated against that to use the discount, we actually tell you before any data is sent, these are the data that we're sharing, those three items. And you have to actively say, I'm comfortable with sharing that before it moves forward.

If you say no, it is not shared. And of course, there are other methods to get that discount as well. So if you're not comfortable using a digital identification service, you have some other options.

But when you do say yes, and why we really love a program like this is because only those pieces of information are shared on the back end with a database that has the veterans information, and then the service provider only sees whether you're eligible for that benefit or not.

So unlike having to hand a driver's license or an an ID card that has your picture and all of this information that can easily be stolen or spoofed or duplicated, this is a way that you control all of your personal data.

The only information that's going to the Federal Government is both that login information to validate your account and then initially some of that high level basic information to make sure that we have the right record for you. And none of that is being shared with the service provider itself.

So in addition to all of those, and you know, I could talk about this for the rest of the session, but we also have a lot of significant privacy and security controls on our back end. We have statewide privacy policies.

We work with departments to make sure that their policies and security are up to standard if not exceeding those standards.

So we feel very strongly that we've not only built a secure and a private system, but one that actually has superior privacy and security to, you know, an analog example of me having to go and physically apply and pick up a discounted bus pass and have to hand that to a bus driver every single time I'm trying to get the benefit that I'm entitled to.

Okay, so, so the purse, the eligibility information is there and I'm assuming name and address and location and that that information that, that identifies just the username, password and the eligibility. There's no other information that would actually give specifics about the individual that's accessible through the system.

Yeah, I'm really glad you're asking this because you're right that for probably like 99% of the applications on your phone, you sign these very opaque terms and conditions, and if you actually read through them, you realize they can look at your location at any time, they can get your location off of other people's devices.

And all these things that are questionable. The only information that's shared is the literal login information. So that username and password and the information that you consent to giving to whatever that system is to do the validation, they're not all with the Federal Government. So in the case of the veteran.

It's literally only your name, your address and your birthday. We're not tracking your location through location services. No one has access to, you know, what specific bus are you using your wireless payment on, or anything like that. There may be particular things built into Sacramento's transit system and their payment system.

And so far as what we share as part of the digital identification piece, it is really only the information that you actively say we can share. And we're really proud of the level of transparency and the level of control that you have.

And I want to make sure that we're being clear that going one step further, when we talk about sharing that information, you're sharing that information from your device and your account.

So it's not like the state is keeping some massive database of every single veteran or CDT has every single person who's logged into the system's information that all lives on your phone. So we take a little bit of information from your phone, put it into our system, and that's where we do the validation.

So it's not direct transfer.

Well, I appreciate that and I appreciate that it, you know, this is not information that we store that then we could have to reveal or share with any other federal entity.

But I do, I think there is particularly now a very deep, deep concern and unfortunately skepticism of these kinds of digital information gathering tools, particularly for vulnerable communities who really need the application.

So I'm hoping that in this process you are deeply educating and folks know their rights, they know how to use the system, and they know what they can and can't share and are clear about that, because this is very helpful technology for this population.

But it's also very dangerous depending on how folks get access to that information. Particularly now as so many, I just had some constituents who were picked up at a taco truck, workers who were actually helping to do some of the wildfire removal.

And so we want to make sure that we are being very clear about what these tools are and how people are being located and disappeared from our communities by federal entities in this moment. The other question I had is about language. A lot of our.

A lot of our community digital divide we just talked about that have very limited skills in terms of how to adequately use this technology. And then you also have the language barrier.

Can you talk a little bit about what is the primary language or what are the languages and how do folks who will really need to depend on this be able to access it, given what language they speak?

Yeah. So first off, I really appreciate your previous point, really Sorry to hear. Definitely not the first time that we've heard of some of those situations.

We're glad that we are not contributing to that work, but we are trying to be really cognizant of those impacts, both because, as you mentioned, that privacy and security is the utmost important to us, but also because we don't want Californians to miss out on the benefits from this technology because they may not be as fully informed as they could be. In terms of language.

The service is provided in a variety of different languages. We primarily provide services in English and Spanish. But I think one thing to really appreciate is a lot of this work just requires you to sign up once and then it just works.

So, for example, with the transit discounts that we're talking about, those are tied to a wireless payment method. It's not tied to the application. So you don't need to log on to your app every single time that you want to use that service.

You just pay with a credit card or a phone or some way virtually, and you get access to that discount automatically. For other programs where we've worked on, we use a similar method.

So thankfully, while we're trying to make sure that that information around that informative consent is available in as many languages as as possible through our partners, and in most cases, we can make that available in the most commonly spoken languages outside of English as well.

The best part is we can kind of design around that because you don't need to, you know, log into an app and say yes every single time. You just get validated and then it's tied to your account through the payment system. So you just use it and it works.

Senator Niello.

After we adopt the 25-26 budget, we have the good fortune of having to look for somewhere between $20 and $30 billion out of the next budget, which frankly, we need to start doing now. Next fall is going to be too late. But this is going in exactly the other direction.

We're adding additional expenses to the, to those out years. Not huge numbers, admittedly, but it certainly goes away from the fundamental task that we're going to be looking at come July 1st.

Can I just add something to that quickly? And of course, we appreciate that feedback and we'll take that into account. Ultimately, if this technology is applied correctly, it could lead to cost savings in terms of fraud prevention as well as in terms of smoother benefits delivery.

So that isn't something that we focused on as much because this is a pilot.

But part of the reason why we're looking to see how can we scale this out, how can we bring on more partners, as Brian suggested, is because this is an opportunity for the state to become more efficient and more secure and utilize some of these platforms, platforms coming from the state itself that might lead some departments to not need to come back to you later and say we need more money for a fraud prevention solution or for a digital benefits delivery system or identity management system or something like that.

Right. I know you said you could talk about this all day and I, for a moment I thought about shall we do a, shall we do a digital ID filibuster until we get, until we get the middle mile of business plan to arrive in here.

We are not leaving this room until we get that when we get that business plan. So to drill far more into the login.gov partnership, it's arrangement. So I have an account but I don't just because it was required to do my passport. So what exactly is login.gov? Who runs it?

Because this is the core of our identity, the identity verification of the eligibility verification. So who is it, who controls it and what does it have other than my account ID and password?

So really login.gov is just a single sign on tool for the Federal Government. So basically means you only need the one account to access a bunch of different services. So you mentioned for example like signing up for a password, there's a bunch of different things.

It obviates a need for you to then if you're looking for that service have to set up a different account with each of those departments or agencies federally. And because it's opened up we can tie into that as well.

So instead of having to go and set up a unique account with each of those individual transit agencies, for example, you can use that login.gov account, it's run through a group in the Federal Government's General Services Administration. So that is a largely like operational based Department.

Probably the closest analog would be some combination between CDT and the Department of General Services within the state. And it's also run by a group of completely career technologists called TTS which is like the Government's Technology Services branch. The good thing, and there's I guess two good things here that we want to highlight.

The first is that we've signed a memorandum of understanding with that group to make sure that to those very valid concerns around data sharing and law enforcement use that we have that agreement on what how are we going to have this partnership and that the state won't be contributing to anything that goes against the state's values the other part is it is a completely technical program and kind of, to the other point that we heard, it's something that the Administration is actually looking to invest more in because they view it as an opportunity to be more efficient and to receive cost savings.

There are definitely a lot of rumblings when the Administration changed because this is such a positively viewed group of technologists, that maybe they would be negatively affected by some of the decisions coming in from the new Administration, the new President.

And we've been pleasantly surprised to see that, even though some things have not gone the way that we would expect them to. This is a group that has been supported and it's literally the same people that we're working with.

With now are the people who were there under the Biden Administration and have been our partners for the same time in terms of the information that they have. Insofar as the state works with login.gov, like we said, we're only using it as that account piece.

There is an element of login.gov where they do like eligibility verification and some more complex work. The state does not utilize that aspect of the service.

So I can't speak to like, some of the specifics there, but you can know that if you're hearing concerns around, you know, I heard a report around false positives, for example, around doing identity verification for eligibility for FEMA benefits, for example. That type of technology is not the technology that we are using.

We are literally only using that account piece. So the only information that the state is working with login.gov on is making sure that you have a valid username and password. And like you just mentioned, if you already have that login.gov account, then you don't have to do anything new. It's all the same account across the board.

But we're, but we're doing that. I mean, we want to make sure you have a valid account because we are relying on the underlying identity, identity verification that login.gov does, which they, they can only do if they have. If we provide some verification of identity.

I don't remember when I sent my account, like how I did it, but it's got, I mean, if for it to verify my identity in a way that the Federal Government and you can trust, something had to have been provided.

And so just curious, is that something, you know, picture of my driver's license, my SS, the account creation is validated, it all goes away.

Or so annoyingly, it does depend. So for Example, for the FEMA benefits, you do need a login.gov account, but there are different levels of security and verification. So for those benefits you literally only need a active email address. So it literally is just an email and a password.

You're correct that if you're using that account to get a passport you need to provide some more information. So you may need to provide, like you said, a selfie and a picture of a driver's license.

But we have a commitment from login.gov that that information is destroyed immediately after it's used to verify your account because they don't need that information every time to know that your account is your account. Once they've set that up the first time, then they just use username, email, password.

So what we use, if it, what we use is just can be validated with any email account, then how is it actual identity verification for purposes of public programs or other things? Ultimately, since logging. You said logging.gov was our, our proxy for verifying that.

That I'm who I am and therefore that the state, state and local entities can rely on that as opposed to having to ask for my driver's license and other and other stuff. How can they do that if, if I'm not at some point validating to login.gov that I am. That I'm me.

So you are. But once you provide the information that's sufficient upfront, you don't need to keep providing that information.

I thought you said that was only if I was doing a passport that otherwise as long as I had a valid email address I could set up a login to account.

That's right.

Without, without any further identity identity verification. Because the flip side of the, of the issue, because I agree, I'm glad Senator Smallwood-Cuevas went right into the issue.

The flip side of it is, you know, we are experiencing in the community colleges, for example, you know, I forget what the latest estimates are, but it's, it's an enormous number of, of people that don't exist that are signing up and getting, you know, apply and trying to, trying to bother scam financial aid out of the state and Federal Government as well as, and then inadvertently take slots and we end up hiring faculty that we don't need.

It's a huge problem. So we're, you know, this, this, this needle that we're trying to thread of protecting the underlying, the fundamental security and rights that, that Senator Smallwood-Cuevas has absolutely necessarily shined the spotlight on is, is that's, that's our job one. But very close.

Job two is also, you know, we cannot allow, you know, bots from other countries or others to be, to be creating false people that are, that are, that are drawing resources away from, from California's that need them. So how, how. That's the balance I'm trying to understand.

So I'm not trying to get you to give me an answer that's like, don't worry, you don't, you don't, you'll never have to verify identity. But really understand what, what's the, how can, how can I. If we're using this for the actual delivery programs, how do we know that that's the, the person.

No, my answer would be the opposite. You should always worry about that. You should always be very vigilant about how your identity is being used and making sure that people are misusing that. So there are two pieces, as we mentioned. One is that identity and one is the eligibility.

I think a lot of the focus there is on the eligibility piece. So the identity is just saying you're able to make that request on your behalf, the eligibility piece. And that's why it's much more complicated is actually making sure are you actually entitled to that benefit that you're supposed to get?

So when we're talking about like veterans benefits, anyone can sign up for a login.gov account and in fact, you know, I am, I am not a veteran.

I can sign up for that veterans discount if I want to, but when I actually try to use it, they're going to check my, I'm going to check my information within our digital identity gateway and it's going to say, you don't meet the benefit for that and I'm not going to get the discount.

So that's where that prevention piece really comes into play is on the eligibility side. And the way that we're building that out is we're connecting departments to different vendors who provide those services.

But we're really working directly with each of the departments who are providing the benefit to make sure that we're providing the right level of eligibility verification. So for something like a veterans discount on, for bus fare, that may be less than significant than, you know, something related to like a food or health assistance program.

And that's why they may need to work with multiple vendors to make sure that you have income verification or that you're using that money correctly or it's going into the right account or something like that. So there's multiple pieces to this.

This is really trying to build a platform by which we can Build off all of those different elements, but there's not going to be a one size fits all solution.

So again, you're right to be worried and be vigilant, but we're there to give people a way to onboard them securely so that everyone is not going in a completely different direction and there's no way to centralize that work.

I'm worried and vigilant but, but mostly excited about the project and I think we do need to be doing it. I mean people, you know, my, my constituents, especially the younger ones who are, are increasingly frustrated with, you know, for every little thing and.

Okay, now fill out all of your, I know you just gave us your address and every other detail. Really, why does this agency need to know that anyway? They're not providing anything that's place based, but you do that over and over and over again.

So you know, designing a system that is, that makes it as easy and as touchless and as, and as private for the user is a very big benefit for them.

But also as you've indicated, potentially for the efficiency of public programs both at the state and local level on a very large scale if we get it pretty close to right. So I'm a fan.

It reminds me a lot of stuff that I know is going on at the Office of Data and Innovation as well, which is, I'm a fan of too.

But one last question about it and that is so when we all had to go to get Regional Transit bus passes, you know, across the street and we go in and we give our check or maybe our credit card if the system was working in the end though, Regional Transit then had all this information.

It didn't really need to deliver the direct service, but it also had information that, that it, that was valuable for it and for community groups and government to say where are the rider? Like where are we?

You know, how is bus transfer pass usage different between these neighborhoods and these neighborhoods or, or you know, young and old like so, so this is not really a question for you at the moment, but, but I am curious as we, as you proceed with these and other similar projects, which are the right thing to do.

I mean, I don't, I don't want to ask people all this data over and over again just for evaluation and planning and equity purposes.

But you know, what is our theory about how we will be able to continue to learn and evaluate what we're doing if we don't have, if every, if each agency doesn't have this information about place and person to be able to then say not just are our programs working, but for whom and under what conditions.

So we'll look forward to learning more about it.

Yeah, we'll definitely consider that more in the future as well.

I don't think that utilizing the system prohibits the collection of some of those data, but I think to the point and the theme of what we've been speaking about today, I would hope that if transit agencies, if other organizations are collecting information about Californians, that they're transparent about this is the information that we're collecting and they're only collecting the information they need and not just like you said, taking in more than they need to.

So I can't speak towards each of the individual tap to pay soc and implementations. There may be ways to collect information or store data that's different than what the state is doing. I can only speak to what we're doing with our specific partners.

But we definitely encourage, you know, using data and analytics, but doing it in a way that's transparent and safe.

All right, well, it'll be an important exercise to think about because those transit agencies are required by state law to report on many of these things for which they have the data, whether it was with the informed consent or not through these other proxies. And so as usual, there's more Russian dolls to, to uncover here.

But appreciate the, the work. Thanks for being with us today. All right, so we're and, and we're going to take up some similar issues in privacy data in just a moment and we'll take public comment on the, the Department of Technology issues. But first let's establish a quorum. So please call the roll.

[Roll Call]

All right, now we're going to invite public testimony on the items related to the Department of Technology. So if you please, thank you for. Thank you for role modeling and we'd ask you to keep the comments to a minute or so and then after that we will move to the privacy protection initiative.

Thank you, Mr. Chairman, Members. Oracio Gonzalez, on behalf of the California alliance for Digital Equity, really appreciated the conversation around pricing. Our Members continue to be concerned with the lack of understanding for how the Middle Mile broadband network will be priced.

Ultimately, we want to make sure that last mile grantees are able to participate in that network and, and that they're not priced out. To that end, we would urge you to request the Department provide you with written answers to a couple items.

First, how will rates for accessing the network differ from private sector alternatives and do that regionally. We really need to understand that second, what affirmative steps is CDT taking to ensure that municipalities, NGOs, small providers are not priced out of being able to access that network?

And third how does CDT plan to use terms of use in particular differential pricing to ensure that projects that traditional ISPs have deemed to not be economic to ensure that those projects are ultimately viable? We need to understand that information to ultimately ensure that folks are going to be able to access that network.

So definitely look forward to helping you review it once that information is provided. And again thank you for the great discussion.

Thank you. Any any other public comment on the Department of Information Technology budget items? All right seeing none then we're going to proceed to the Privacy Protection Agency.

So begin with a brief overview from the a from the agency and again asking for an overview of core functions and staff's report on major programs including a brief report on progress towards the state's goals on state operations and vacant positions.

Welcome.

Thank you. Good morning. My name is Von Chitambira. I'm the Deputy Director of Administration for CPPA. And joining me is Maureen Mahoney, who is our Deputy Director of Policy and Legislation to help answer any policy questions. The agency's mission is to protect the privacy of Californians.

We're tasked with the implementation and enforcement of the nation's first comprehensive consumer privacy law, the California Privacy Act. The agency is governed by a five Member board that consists of experts in privacy, technology and consumer rights. They are appointed by the Governor, the Legislature, and the Attorney General.

Now moving on to our budget request for that item that is open for discussion, the Data Broker Deletion Request Opt out platform. The agency is requesting 2.4 million from the Data Broker Registry Fund in 2526, and 2.3 million in 2627, and 2 positions face over a two year period to meet the agency's responsibilities under the California Delete Act.

The Delete Act, adopted in 2023, transferred the responsibility of Data Broker Registry from the Department of Justice, to the agency. And further required the agency to establish an accessible deletion mechanism to allow consumers to request deletion of personal information that is maintained by registered data brokers beginning January 1, 2026.

In accordance with the Delete Act, the agency is developing this accessible deletion mechanism and the system will strengthen the privacy rights and enhance consumer control over their personal information across the state. Thank you and we welcome any questions.

All right, finance?

Taylor McGrow, Department of Finance. We have no comments at this time.

LAO?

Brian Metzger, LAO. We would just note for the subcommittee that this platform is required by statute by January 1, 2026. However, we would also note that the Department of Technology delegated this project back to the agency. This is the first project that the agency is developing and implementing, and so it is a bit unusual that it was initially delegated back to the agency.

However, after that delegation, the Department of Technology and the agency entered into an interagency agreement; where the Department of Technology would actually help with building the platform, using its project management capabilities, as well as some of the folks at its Office of Digital Services. The Privacy Protection Agency is tasked with overseeing the effort.

And so that arrangement, while it has been done in the past, is not normally how we proceed with IT projects. Typically, CDT is in the oversight role, and so it would be important for the Subcommitee to clarify how oversight of this project will work, and whether potentially some reporting requirements could be considered to make sure that it's completed by its Statutory deadline.

The Department have any response? -Or the agency, sorry.

The agency did receive delegation from CDT, and CDT does delegate projects back to departments. There are at least 89 projects that have been delegated down to departments. CPPA is responsible for the governance, risk management, as well as execution of the project.

The way the interagency we have with CDT is tailored, allows us to to have ongoing meetings with CDT. So we do meet with CDT staff once a week, and then leadership is also meeting on a monthly basis. In addition to that, we do have clear delegation of responsibilities within our interagency agreements.

We have an option to cancel the contract if the work is not being done on time with notice. But based on the work that has been done so far, we are on target to meet the January 1, 2026 implementation date.

So we do have controls in place to ensure that we can meet the requirements to produce this project on time.

Thank you. Questions from Members of the Subcommittee? Senator Niello.

I'd just point out that this item, if approved, continues to add to the significant deficit that we're looking at in out years. Because this includes an allocation to the 2627 budget year. So we're heaping more problems upon our task after we adopt the budget that we're entertaining now.

The project is being funded through the Data Broker Fund. And this fund is a special fund where data brokers who are practicing in the state, are paying for the project. So there is no responsibility to the taxpayers.

Thank you for that clarification.

Thank you.

I think the Department of Technology is still here as well. Maybe we could ask Mr. Porat to come up to the table, or to the side. If you wouldn't mind joining us. You can grab a seat, please.

So I'm just trying to get my arms around the relationship between the Department of Technology and the agencies and departments. Because we've heard so far today that both approaches can be done. The Department of Technology can be in the build role or the oversight role, not both, maybe?

Both are important, and the Department has expertise in both. But what's your theory of action for how you determine that, in this particular case, you'd prefer to be in a building role and have an agency that doesn't have any expertise or experience in overseeing technology projects.

Overseeing you, versus, the you know, more traditional approach of an agency that may also not have experience building, with you in the oversight role. How do you think that through?

Yeah, thank you for that question. So it is a little awkward, because in this case, CDT is both fulfilling its project management responsibility statewide, but also CDT is a service provider, in this case, and is essentially the vendor for the project.

So we went through our normal process for when we would delegate an IT project, and went through all of the same questions we would ask for any.

And as you heard, this is not the only project that we have delegated out, but we decided that this met the requirements that were needed for us to decide that it could be delegated back to the department that is managing the project.

I think it is important to understand though, that that doesn't mean that the Department just has free rein and that CDT just stands back. CDT still has regular reporting requirements. We're still going to engage in our regular responsibilities as it relates to statewide project management. We are just not providing direct oversight.

And I think that fits in better, given that CDT is also the service provider for this particular project. So we're still able to report and share information, but then there isn't a conflict of interest either over us delivering and being able to make sure that we're meeting the requirements that we've set out in the interagency agreement.

With us also looking at that and making sure that we're delivering on time, on schedule, and getting you all the information you need. As I keep mentioning, as through the normal statewide project management requirements we have.

But for the individual departments, typically, and especially this one, because it's brand new, don't have any expertise in project oversight. And if they're like any other human organizations, they obsess about requirements ,and requirements, and requirements, and requirements, and requirements, and requirements, and requirements, and can't act agilely, you know, in an agile way.

So, I mean, there's a reason why we expect CDT to do this oversight in a broader way. So how does that relationship work? I mean, you're both the typical oversight agency and now you're building under the oversight of an agency that doesn't do either.

What is, I mean, How does that actually work in practice?

So as part of that interagency agreement, we are providing-, and is a different group than the group that is building part of that solution. But -we are providing project management capabilities through the interagency agreement.

So as we discussed, we have certain requirements, metrics, outcomes, however you want to frame it, built into the IAA, based around the requirements that our partners need. And if we don't successfully fulfill those requirements, then there's language in the IA that allow recourse and correcting whatever that relationship would be.

But we know that, of course, CPPA does not have the same level of project management capacity that CDT does. And same thing with building technology and building identity management services and things like that. So that's why we have that agreement in place.

But as we discussed before, we went through the process to be able to appropriately delegate that authority back, and that doesn't exempt CPPA or us, from still reporting out on the progress of the report.

But we feel like we have an agreement, and that's documented in the IAA around what those necessary requirements are, and what the necessary outcomes are that we need to be able to meet together to be able to deliver on the project on time.

Brian metzger, LAO, I would just note for the subcommittee, that typically with IT projects, we receive monthly independent project oversight reports from CDT that are very useful because they track whether or not a project is, you know, going to be completed on time and within budget.

And in this situation, because it's been delegated back to the agency, there are reports that are being provided between the agency and CDT, that provide that status update, but there is nothing for the Legislature to look at.

And so what we are considering, or what we are, you know, considering with this particular project is whether reporting requirements akin to those monthly reports, need to be provided, especially because there is a statutory deadline that needs to be met by January of 2026. So hopefully that clarifies the kind of reporting requirements currently.

I just want to clarify so that's a policy problem. Is this a Bill that's needed to require those? Or what, or is it just it happens or it doesn't happen?

So the through the-, apologies, didn't mean to interrupt you.

Through the typical process, when a project goes through the project approval life cycle, which is how we approve IT projects, typically; once it's approved, CDT provides oversight of that project and they provide monthly oversight reports that the Legislature has access to, as well as the General public has access to.

Because this project was delegated back to the agency out of the Powell process, we're not going to get those reports. And so that's not a problem, if typically, you know, it's a smaller project and it's a project that we think the Department can handle.

But because this is the first one for the agency, and it has this specific statutory deadline, the Legislature could consider provisional budget Bill Language, or something akin to that, that says we would like monthly reports indicating whether this is on track to complete by January 1st.

I think that's an important point to raise and I wasn't going to comment on this item other than to say how important this role is. And as we're moving into this phase of the 21st century, with the ways in which data is shared and misused, it's critically important that we get it right.

So I appreciate ways to strengthen our transparency, to see that we're on track, but also, recognizing that this is the beginning of a long relationship with making sure the privacy of our residents is protected and that the State of California is going to do it in a robust and vibrant way.

So thank you for this and thank you for that clarification.

Thank you. I'm looking forward to watching this as it proceeds. I agree. I think there should be some rational system for how we get the information that we need, and understand better how these choices are being made. I'm personally skeptical of agencies directly managing technology projects. Both because they're our record, but it's not us, it's that agency.

I was Deputy Director of a state agency, and-, with the technology assignment, -and it's the program staff, especially the attorney, the general counsel, you know; it's always about the requirement. That's why I said this "the requirement after requirement after requirement" that the thing must do.

And it's very rarely centered around the ultimate user. It's rare. You rarely use it as a process to learn when it's all being driven by the general counsel and the Deputy Program Director, or what have you. And both are needed. But ultimately the product has to work. So we don't put departments in charge of their own payroll distribution.

We have a controller for that. So I'm looking forward to how this proceeds, and others in the space to get a better handle about [how], what we're learning about this, because it is so important; this is so important, the timeline is brief, but it has to ultimately work for people.

And simply looking at the regulations, or what was in the legislation, saying that's exactly what it must look like, is rarely in an entirely new area of law that we hadn't dealt with before, is unlikely to be the ultimate working outcome.

And what we need is for the design and development process, that we have in the Executive branch, to inform learning as well and to be unafraid to say, look, we're putting this together as technologists, and as user UX/ UI designers, and others. We're putting this together. Here's the conflict we've run into, which sometimes the agencies don't identify.

Instead they're like, no, we must implement the exact statute as though Senator Niello and Senator Cabaldon, Senator Smallwood-Cuevas, when they introduced a Bill together five years ago, were saying do exactly this, like that. Like that we were omniscient and we knew everything. We knew there was a problem, we knew there was a potential solution.

But we need to learn from these processes. And the Department structures are often not optimized towards that in the development cycle. It's not about this agency in particular. This one is brand new, has no record of any trouble.

But I think, this is an opportunity for us to learn and I hope you are learning too; and sharing with us how we can improve not just our oversight, but the design in which we're doing these kind of technology projects and making sure that they deliver on their promise. So, thanks very much.

And now we'll take public comment on the Privacy Protection Agency budget. Does anyone wish to address the Subcommitee on the Privacy Protection Agency budget items? If so, please come forward to the microphone.

Good morning Chair Cabaldon and Members of the Subcommittee. Julian Cañete, California Hispanic Chambers of Commerce. We represent 125 Latino and diverse chambers throughout the state State of California, which ultimately represent the 1.8 million small diverse businesses in California.

Earlier, we submitted a letter to the Subcommittee requesting CPPA's budget remain open, due to proposed regulations, which would irreversibly and severely damage small business here in California. We also agree with the concerns that were pointed out in the Legislative bipartisan letter sent to CPPA back on February 19.

The CPA should be required to be responsive to the following issues as part of the budget and oversight process. First, CPPA has overreached on artificial intelligence and automated decision making technology. CPPA has no authority to include AI in its proposed regulations, but did so, getting ahead of the Governor and the Legislature, in this body.

It also overreached by extending ADMT OPT-Out rights to profiling for behavioral advertising. Although CPPA maintains that compliance with their regulations will not impact small business, we respectively disagree.

CPPA voted to move these regulations forward knowing that it will cost Californians $3.5 billion in the first year of implementation, 1 billion annually, for the next 10 years, and potentially result in the loss of 98,000 jobs. CPPA's proposed regulations are unlikely to help California's economic conditions.

They would add billions to the implementation cost to businesses and drive jobs out of the state. CPPA should consider other alternatives to minimize economic impact on California. We respectfully request that the CPPA budget remain open until these issues are discussed and are resolved and additional oversight hearings on CPPA are scheduled. Thank you for your time.

Good morning, Mr. Chair and Committee Members. My name is Edwin Lombard with ELM Strategies. And today I am representing the California African American Chamber of Commerce and a number of local black chambers and business associations throughout the State of California. Respectfully, I would like to echo the following concerns of the California Privacy Protection Agency.

First, the Senate Budget Subcommitee should hold CPPA's budget open until they remove the costly AI provisions in their proposed regulations. They have no authority to regulate AI under Prop 24 or any law. They instead must work with the Legislature on AI to avoid duplicative and costly regulations for small businesses to comply with.

Many of the small businesses we represent rely on AI to survive. And irresponsible AI regulations could devastate many small businesses in California. Keep in mind that because of the pandemic, most of our small businesses that were traditionally brick and mortar, has moved to online services. Second, CPPA should redraft its regulations to minimize adverse economic impact to Californians.

California businesses cannot afford a total of 13.5 billion of implementation costs to implement the CPPA Regulations. California economy cannot afford to have CPPA regulations that would lead to 100,000 jobs lost and potential companies leaving California. In closing, CPPA needs legislative oversight. And we appreciate your time this morning.

All right, anyone else wish to testify on the CPPA budget? Alright, we are going to hold open the budget item, so appreciate the public comment. And now we're going to move on to our next agency which is the Department of Real Estate. So again, welcome to the Department.

If you would would give us first overview, core functions, and status report on the major programs and a brief report on progress towards the state's goals on state ops and vacant positions as well. And then we'll proceed to to item 12 after that.

Thank you. Mr. Chair and Senators, my name is Sonia Palladino and I am the Assistant Commissioner of Legislation at the Department of Real Estate. I have with me today my colleague Shelly Wilson, the Assistant Commissioner of Administration at the Department.

The Department of Real Estate enforces the real estate law, the Subdivided Lands act, and the Vacation Ownership and Timeshare Act. Consumers Protection is our highest priority. In that work, we review qualifications for licensure and issue licenses to real estate agents, mortgage brokers, and property managers.

We monitor those licensees for compliance with the real estate law, investigate complaints, and pursue disciplinary action against licensees. We are also responsible for the review of disclosures, called public reports, provided to consumers who are interested in purchasing homes in a subdivision.

We oversee approximately 434,000 licensees, as well as a review of more than 2,500 public reports for subdivisions, hoping to sell units to Californians each year. The Department of Real Estate has 383 positions and five office locations throughout the state. The Department is solely funded by the real estate Fund. The Department does not receive General Fund Dollars.

The Department has before you today two budget change proposals, one for presentation. Thank you.

Good morning. My name is Shelly Wilson, and as Sonya mentioned, I'm the Assistant Commissioner of Administrative Services at the Department of Real Estate. The Department requests an increase in expenditure authority of 2.644 million from the real estate Fund in 2025/26, for an increase in facility rent at the May Lee State Office complex.

This is part of a BCP request for five tenant departments. And I will note with regards to the question about the vacancy and state operation reductions required for this fiscal year, the Department reduced its position authority by 12 positions and reduced costs by 1.696 million. These reductions will become permanent with the enactment of the 25/26 budget. We're happy to take any questions the Committee may have.

First, Finance, any comments?

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

All right. Legislative Analyst Office? Heather Gonzalez with the.

Heather Gonzalez with the Lao. We do have some concerns about the Department's fiscal condition. In particular, we're concerned about the solvency of the state real estate Fund.

And we are recommending that the Legislature direct DRE to report it may revise on the number of applications the Department has receive, as well as related revenues; and on action it might take to either increase revenue or reduce costs, if their application rates remain lower than ideal. And our reasoning for this is as follows.

Despite a recent fee increase, the Department has been spending down its reserves. And and while DRE expects to remain solvent in 25/26 through cost cutting, it's unclear how much they can save through these means or for how much longer.

Moreover, as you can see in Figure 1, on page 2, of the handout that I've provided for you, the number of real estate salespersons and broker applications, which are really important because this is where the Department gets most of its money.

They're trending downward overall, but especially in the categories of new licensees, which could have out year impacts. This trend has been happening since 22/23, but it had an especially steep drop in the first 2 quarters of the 24/25 fiscal year. The reasons for the downward trend are unknown, but likely represent a response to real estate market conditions. But they may include other factors such as the fee increase itself.

And because we don't know how much longer these conditions will last or if the lower application rate represents a new normal, and because we want to avoid a situation where the Department has to take emergency measures, that may or may not be consistent with the Legislature's policy or fiscal goals; we are recommending that you monitor the applications and revenue closely and that you encourage the Department essentially to create a backup plan plan now, that is, while they have the time and they are currently solvent, where they can identify what they might do, if they are going to experience a period of reduced revenue.

Department of Finance Sure.

I would just note that DRE is committed to continuing to closely monitor revenues and expenditures in the upcoming months. And they have been implementing cost savings measures already and will continue to be committed to do so in the budget year, you know, as needed as they track revenue trends.

Well, that was my question. Just, what's the long term plan? And I'm also curious, what's restructuring out there that is causing and leading to this?

Senator Smallwood-Cuevas?

I'm wondering if automation, more online sort of real estate brokering happening from out of state entities in California; is that also adding to the reduction in folks actually filing and applying and using application fees in California?

Well, I will defer to kind of the more fiscal questions to my colleague, but in order to practice real estate in California, you have to have a California license. So you cannot be an out of state operator without a California license.

Automation, does that also, if you have a license-? I know there are these brokerages who are working online, and they're selling online and there might be one broker, but a lot of transactions versus maybe other licensees coming online to do those transactions. I'm just curious, do you see technology impacting the industry in any way?

I know that's a concern that's been raised with some of the long term brokers and agents in my area. I'm curious what you all are doing to ensure that we are promoting this, that individuals can apply for their license, and we're seeing a growth versus a contraction in the folks who are actually doing that work.

But what we see is an expansion of what's being sold. So it's sort of like our market is growing, but the folks who are actually practicing and doing that work and living in and working in California seems to be shrinking, based on this data.

Yeah. The California real estate law is structured in a broker supervision model. So in order, even those who receive a salesperson license, they cannot practice in California unless they affiliate themselves with a real estate broker. So when you see brokerages, we have brokerages of various sizes, small ones, large ones.

And so brokerages have a broker and then their salespersons affiliated with that broker, who do a lot of work underneath their license. So we do see the use of technology within the profession.

As new tools are coming online, obviously, it's still the responsibility of the licensee to make sure they are following the real estate law, and their licensing and fiduciary obligations when using technology. I don't know, we don't have any data showing that, you know, the use of technology has reduced the number of licensees.

But we're happy to kind of continue to try to get more information on that as we move forward.

So how are you tracking the reduction in licensing? Like what tools, steps, approaches, analysis,, investment, in sort of understanding what's happening? What are you doing?

So I think on the technology front, we did engage with CSU San Luis Obispo and look at a property technology study to get kind of an initial sense of what's happening with technology in the industry.

As far as licensing numbers, we do look at, we look at renewal rates, and then we also look at new applications. And those combined really help us get a sense for the number of professionals in our kind of licensing world.

I would say, you know, with the real estate licenses, there are a lot of people who are licensed who may not be practicing actively, but still do maintain those licensees.

And I think that's part of our long term plan, is getting people excited about the industry, and getting interest in the industry, and all the opportunities that are available with these types of licenses.

So in addition to the financial aspect, that is another aspect that could be through community engagement, involvement, or just outreach platforms for new graduates, or people coming out of high school. A salesperson license only requires three courses. So it could be done at an entry level into the industry with the supervision of a broker.

And some things we've actively been doing is we've been working-, we have an endowment that was started several decades ago, with the University of California, the California Community Colleges, as well as the CSU system.

And we've been working closely with them to help align their courses, so that it's clear to students when they take those courses, whether they would also qualify in order to take real estate salesperson or brokers exams with us. To help people get into the profession. As well as help professors understand whether the information that's being taught in their courses is things that would be considered relevant for today's real estate profession.

And those say on that and thank you for answering the questions. Those approaches seem long term, but this crisis seems immediate. And so I'm curious just, is it be increased. What is actually on tap to make sure that this does not become an insolvent?

Well, right. As Department of Finance stated, the Department is fully committed to being a responsible, fiscal steward of the real estate Fund. We take that job very seriously.

We monitor our revenues and those come in from various streams of the exam and license applications, the subdivision public report filing fees, renewals for our licensees, in addition to other various permits that we have. In addition to that, we also adjust our expenditures based on the data that comes in on a monthly basis.

Some of the adjustments we're able to make in expenditures, are to non critical functions like training, travel, general office supplies. We also look at the possibility of deferment of hiring, so long as it doesn't impact our consumer protection mission, which is set in statute.

We take those two functions, closely monitoring revenues, making adjustments through expenditures, and ensure the Department operates efficiently and effectively. That is our plan now, that is our long term plan. Obviously there's other mechanisms that are also available, but the Department would take the approach of continuing to make non critical cuts to our expenditure to remain solvent.

So I appreciate LAO's analysis here. With only the one year or the three year chart, it's kind of difficult to tell. Like do we know like what's the 20 or 30 year history of license renewals and applications in relationship, for example, to the real estate market.

So the LAO report says the Department says the cause of the decline is due to fluctuations in the housing market. How do we know that? I mean do we know that from historic data, that there's a tight correspondence between the housing market and applications?

Unfortunately, we are not a Department that has like an economist on staff that can look at long term marketing trends, or housing market trends, or sales trends to really kind of see those correlations between our licensing. When we do projections, I think consistent with state budgeting practices, we do look at the three year history.

Right now, we're trying to look at a longer kind of history as well, to get a better sense of how licensing trends may adjust moving forward.

Well, I can think, just in this region, or just in my own district. There are probably 18 universities with programs. This is an easy student project, you know, to plot data on license applications and renewals against some metric for the market.

I mean so when we say the department's committed to closely monitoring, I know none of us are interested in the Department very, very precisely, monitoring its death spiral. That we have to solve the problem. That means understanding it as well.

So I think it is really important that we understand why, and we don't have-. -Obviously we're not collecting data from people that don't apply. But we need to find other ways to really get at the root of this.

The other thing that surprised me, is no one including the LAO report, no one's mentioned the antitrust decision at the federal level. Which basically changed, at least had the potential to radically change, the economics and the remuneration due to brokers and agents.

And I know there's been further work on that that mutes some of that decision. But there's a decision itself and there's also the market chill that's created when every single news outlet reports that being in real estate is not going to pay off as well.

And so that seems that we should have expected some drop in demand to enter the profession from that. It's not clear to me whether we have seen that already, or if that's coming as a result of that. So, LAO?

We did consider that and I believe the timing of the drop started prior to that decision. It is certainly something to look at in the long run and it's another factor that we would have included in our-. There's various other factors, but the steep drop that started at the beginning of the fiscal year, doesn't time with that decision.

That's especially worrying then, because if we were experiencing this kind of a steep drop, and then the courts change the fundamental economics of what agents and brokers can earn from being licensed, then this might have been a good year for us.

So I just think it is really critical in addition to monitoring, that we are on the task, as Senator Smaller Cuevas had said of solving it, because just nipping and tucking the budget and eliminating training and travel. I've been there in the state to agency too.

Like there's only so much of that you can do and over the long run, we need trained staff who are up on the latest trends, including some of the issues we just talked about. So I think we need-,

I don't want to ask for a January 30 business plan for the Department that we won't see. But it is important that we, that the Department, the Administration, and the Legislature as well, have a strategy for how we're going to grapple with this.

And if these are permanent trends that may accelerate, what is the right size of the Department and what are the essential services?Okay, thank you. So let's then move on to the BCP item, which is the rent increase for the new May Lee State office complex.

That was it, very minor.

You mentioned it. Was that your entire presentation on it?

I don't know if there were additional questions in that.

Okay then, anything on that specifically finance? Anything, LAO? Any comments on that, Senator Smallwood-Cuevas? Any questions on this issue? ... So yeah, I, as of today, I think given the issues that Senator Niello has reinforced, and I mentioned at the beginning of the hearing, that we'll be likely rewriting everything that we approve between now and the may revise, and certainly after that.

I'm supportive of doing this for the reasons that have been outlined. I'm worried about the impact of the Fund condition on the Department with these increases.

When we get to the Department of General Services, I'm new here, but it seems like every other one of our items is a Department or an agency needing more money for rent increase that's being charged by another state agency. And I don't quite understand how all this works. So I'm looking forward to that presentation.

So I feel the pain and sympathy and empathy for the departments that are grappling with this. But, I know this is the Bill that you have and that needs to get paid. So there's further discussion on this one.

We are recommending this one for approve as budgeted for later in the hearing, with the important caveat that we will be coming back to everything that we approve budgeted later in the cycle. Okay.

Thank you.

Thank you. We're now going to move to public comment on the Department of Real Estate. And so would invite any Member of the public that wishes to address the Subcommittee on the department's budget, to please come forward to the stand up microphone.

Your. Your face is saying, I'm coming up, but maybe you are coming up for the next budget item. Okay. Okay. All right. Your face is saying, I comment. Your legs are not so. Okay. All right, then. With that, we're going to move on to the Department of General Services, and the representative departments are on their way up.

So again, we're inviting first a General overview of core programs and then the department's actions with respects to the state operations and vacant positions objectives of the Administration prior to moving on to the. To the. To the BCP itself. The BCPS. Welcome.

Good morning, Mr. Chair, Members. My name is Jennifer Osborne, and I'm the Chief Deputy Director at the Department of General Services. I'll be providing a short overview of the Department today. With me is Chief Financial Officer Heather Carlson, and she will actually walk you through our department's budget change requests after following my presentation.

So, last year, DGS commemorated its 60th anniversary. Our headquarters is just across the river from here in West Sacramento, as you probably know.

But our Department, I think everyone in the world knows because it's every sports game in the ziggurat for the moment.

But our Department has deep roots throughout state government. As the state's Business Services Manager, we provide a variety of services to state agencies, from real estate to insurance to fleet management to procurement. In addition to providing services, DGS also performs a mandated control function in certain areas. DGS is split into the following divisions and offices.

We have the Division of Real Estate, or the Real Estate services division, with 404 employees and an annual budget of over $100 million. RESD as it's known, provides leasing services for state agencies, oversees the construction and renovation of state buildings and offices, and performs construction inspections. The Division of the State Architect is another another function of DGS.

With 319 employees and an annual budget of over 90 million, the Division of the State Architect provides design and construction oversight for K12 schools, community colleges, and other public buildings to ensure that they are compliant with all structural accessibility and fire and life safety codes.

The Facilities management division at DGIS is our largest division with over 2,000 employees and an annual budget exceeding $600 million. These folks are responsible for providing building maintenance, Administration, trades and custodial services for 61 DGs managed buildings, as well as full to partial services for 200 other buildings statewide.

Our Procurement Division oversees procurement of basically all goods and services that the state procures, with some minor exceptions overseen by the Department of Technology. Our Procurement division has over 250 employees, and we oversee the purchasing of an estimated annual spend of $3.2 billion.

Our Office of Administrative Hearings has 217 employees and provides a neutral forum for fair and independent resolution of administrative manners. OAH performs approximately or oversees approximately 17,000 cases annually.

In addition to those kind of items that are more to the forefront, we have our Division of Administration which provides the Internal Administrative Services for our Department, including human resources, budgets, accounting, information technology, as well as we provide external support to some client departments for administrative services, including budgeting, accounting and IT services.

We also have the Office of Risk and Insurance Management which administers the state vehicle insurance program and also the state government claims program.

Our Interagency Support division is comprised it's sort of the catch all division, I call it comprised of several different offices including fleet and asset management, the Office of State Publishing, the Office of Public School Construction, which is currently getting ready to administer the recently enacted school bond, and the two commissions, the Commission on Disability Access and the Building Standards Commission.

This division oversees the state's vehicle fleet. State Publishing publishes all of the legislative bills as well as voter Information guide and we oversee state travel as well. And then we have an Executive office which includes our legal services, audit services, legislative affairs, public affairs and enterprise planning and inclusiveness.

We also have an Office of Sustainability which is responsible for overseeing energy efficiency projects in state buildings as well as installing vehicle electric vehicle chargers throughout the state for both fleet use and employee use. So with that, I'm happy to answer any questions you have. It's a lot. We do a lot of different things.

Sometimes people are surprised to find out some of the things we do, but it's never a dull moment at the Department of General Services. So with that, any questions or I can turn it over to Heather.

I have a lot of questions. Yeah. So we're not moving to the BCP yet. We're sticking over on overview. Any comments from Department of Finance?

The Landman Department of Finance. Nothing to add.

LAO? Any Members of the Subcommitee have questions at this point?

Thank you, Mr. Chair. So, and I very aware of all of the things that you all do. And sometimes I feel like, you know, are we setting you all up for failure given all of the various things that you are responsible for. But I do, you know, want to go back to a couple of things.

One is the K through 12 construction piece and role and then the other is we spent a lot of time my office with your Department last year, year before on looking at standards for how we build and how we make investments and we procure those contracts for investing the People's money into projects that actually multiply opportunity.

And one of the things in the Bill that we were leading with SB150, really wanting to work with DGs, also with LWDA, with the Civil Rights Department and with Caltrans on building into our process, whether it's building schools, whether, you know, building green, greening our schools, greening our climate, resilient future, how do we ensure we have labor standards and community benefits standards embedded in those projects?

I want to know, as you are looking at this work, what are the ways that your agency is ensuring that that's happening?

And can you say more about the capacity that is utilized in budget investments that are utilized to ensure that we are, you know, meeting the moment in terms of, you know, using these dollars in a way, particularly as we look at building 17 new schools in communities like Altadena, where we have some of the most, you know, lost the largest number of affordable housing projects, There are a number of underrepresented populations that want to rebuild, but are in that community and don't have a way to actually rebuild their own communities in that moment.

So I'm just curious, you know, as we look at this budget allocation, you know, what. How are you all prioritizing that?

I know in some of the sort of recommendations that your agency and some of the others put forward, when we, you know, looked at the issue of job quality and how we would ensure what that looks like in terms of, you know, our investments, we didn't have a full recommendation when we looked at community benefit agreements and incentives to ensure that we are creating equitable opportunities.

Again, the report did not include those recommendations. When we looked at, you know, how do we ensure we're building union pathways.

So, in fact, as we're making this investment, we're guaranteeing that these are portable, certified international skills that individuals can gain when they come in through an apprenticeship to be able to come out of poverty and to have a career that could take them anywhere around the world? There was no recommendation for that.

When we said, how do we ensure that women and single parents and formerly incarcerated and emancipated youth who we are trying to pull out of the safety net, which is overburdening all of the budgets of the state by making sure that when we build something, we are pulling folks out of the safety net and into self sufficiency, as the good Senator talks about so often, again, there was no recommendation.

So my question is, as you come before us, and we know how your agency faces so many pressures as the Legislature is moving and adopting these bills.

But when we ask for the recommendations to help us move the needle on some of these conditions, using our procurement and our public school construction and other investments, we don't have any recommendations. So I want to hear, you know, where are we with that and how can we continue to work together on that?

And certainly we know these resources are needed. Will any of these resources be devoted into that area?

Certainly. Thank you for the question. I think I can answer a portion of your question, which in the realm that DGS deals with. And I actually will likely bring up our other Chief Deputy Director who oversees the building kind of our built environment.

But in terms of what DGS builds, I know that there have often been both for the recent buildings that we've constructed in the Sacramento area, those construction projects have included different elements of the types of things that you recommended or that you asked about in terms of labor agreements to bring in underrepresented communities and make sure that there's kind of a path to moving up the career ladder in those trades.

And so with that, I'm going to probably ask Jason Kenny to come up and see if he can maybe expand on that.

He's been chomping at the bit in the seat. Saw me squirming.

Yeah, no, no. All fair questions. And it might maybe help to sort of break out. Our role in oversight does differ a little bit depending on the various work streams you mentioned. So for example, the State Architect, they have oversight of the building standards for K through 12 construction, but they don't actually construct it themselves.

You know, OPSC funds some of those the real estate services division builds on behalf of State Department. So a little bit different roles depending on the subject matter. In terms of the SB150 report, it was, I will say, participated in the process at least.

I will say it was a little difficult to sort of be able to speak to all the different players at the table because like Caltrans is entirely independent from us. They don't work through us. We work separately. And the way they do projects is different than ours. But I'm not throwing anyone in the bus.

It's just sort of the reality of the different work streams and statute. But in our world, as Jen mentioned, for all of our large projects, we have PLAs on all of them. We actually kind of broke the mold in those PLAs working with the state building trades. It included community benefit agreements.

We actually call them community workforce agreements, but same basic term. And then we actually moved away in those deliberately from zip code based analyses. Because these are state dollars. And our targeted worker categories were actually many of the ones you mentioned.

Veterans, women, folks emancipated from the foster care system, folks who came from the criminal justice system and folks who were on public assistance. And so we made sure and track and monitor have reporting to show the compliance with all of our General contractors on meeting and exceeding the apprenticeship requirements for folks in those categories for those projects.

I actually no brag, but I brokered the PLA between the Legislature, the state building trades for the annex project next door with the exact same provisions. And so we do take those seriously and do advance them in our projects.

And there's not a single big thing in Sacramento that we've done in the last since 2016 that doesn't have those provisions in there. I feel like I'm answering a portion of your question. Do you want to maybe help me?

That's important. I'm glad that you mentioned exceeding, mentioned that there's a track record and a history. I think our challenge that we have is that it's hit or miss. It's this project, but not this project. It's that project, but not this project. It's this piece, but not that piece.

And unfortunately, when you have that kind of inconsistent application, we aren't able to measure the impact of what we're trying to do across those groups. And so, you know, I, I'm appreciating, you know, Sacramento might have this, but we don't have it, you know, in Kern. Right. Or we don't have it in these other jurisdictions.

And so, you know, I want to continue to track and to see, you know, where the status is, is of a universal tool that helps us to universally track where you all are overseeing the projects.

And particularly when I think about the 17 schools that are going to be built, that there's a metrics to show that we have moved the needle, particularly when we look at those most disadvantaged, those most impoverished areas, that we're able to say that we are doing our investment and capital infrastructure projects with an anti poverty lens in mind that we can measure and track.

So I appreciate hearing the individual projects, but I know sort of the overarching universal recommendation for those SB150 projects which we are still tracking on, we didn't get that.

And that to me is problematic and it undermines our ability to show the receipts to Californians that when we are making these investments, we are multiplying those dollars consistently and opportunities consistently across the projects that fall under your charge.

If I can add one more point just it might be helpful to note, too, that for the dollar specifically mentioned and earmarked in SB150, because there was General recommendations and then there was some spigot pot of monies, none of that money ran through dgs, none of the projects that we do touched any of those Fund sources.

We were kind of excluded from all of that.

And I think the Governor's request was that we have some overarching standards for those departments where the lion's share of our investments will run through for infrastructure projects.

But I appreciate that point, and I think that's what we have to continue to strive and work toward and appreciate yours experience to help inform that process as we continue to push for a California standard and how we build our community benefits and labor agreements inside of our public investment and particularly in our infrastructure projects.

Sticking with the LA fire rebuild just for a second. We're going to come later to the sustainable schools component, but what can you tell us about progress on DSA and OPC in terms of their role in rapid rebuilding?

I think I have raised concerns earlier this session about the pace of the rebuild of schools in other parts in paradise and Sonoma and elsewhere.

And coming from local government where this, this August body has in its great wisdom, you know, passed lots of things saying you have 90 days to approve things, you have 60 days, you have five minutes to approve things.

Why shouldn't we have the same responsibility to rapidly and especially in the case of a disaster for the state agencies, GSA and OPC in this, OPSC in this, in this instance to, to move immediately or have we.

So do you want. So I'll speak to just the OPSC part and our representative from OPSC isn't here today because her items were being here in a different Subcommitee, basically the Education Subcommitee.

This is a great point. Let me, but, but, but she's involved. Let me start for a point because it's a great, it's a great issue.

I just want to, I just want to highlight for maybe our friends at Department of Finance as I these, these are oversight hearings for the purpose of, of oversight and accountability for state departments and agencies generally during the budget. Our responsibility is to review the whole budget, including implementation and performance, not only to review the governor's bcps.

And so I'm glad they're the, the, the, at least two of the, the key deputies here. But I have, I've been surprised based on my priority service working for the Legislature at the number of Department directors and agency secretaries that don't appear for us to be able to answer, ask and get answers to a lot of the broader oversight and accountability questions.

There's not, we've had great testimony from the deputies and that's very, very important. But there should be an expectation that the entire work of the agency is going to be up during the budget process and not only the specific request for a half $1.0 million here and a half $1.0 million there.

So this is no, this is not at all a commentary on your answer, but you highlight just something that I have noticed throughout this process this year, which surprised me at how many Department directors and agency secretaries have sent their deputies for Administration and finance with an expectation that they would only be asked about the bcps.

That's not our only job here. So luckily we have at least two deputies that are deep in the weeds, can answer a lot of These elements. Sorry for the interruption. Look forward.

Oh no, I think there is a good story to tell on the other side. I was just only getting to the OPSC side, which is that yes, we will definitely make sure to bring the right folks in the future, but we do have at least on the DSA side and then Building Standards Commission as well is here.

I think they can all talk about kind of the efforts to rebuild quickly and how that impacts schools and homes and all of that. So I'm going to defer to Jason and I declare.

Yeah. Behind me and I'll ask her to take my spot in a second. Oh, perfect. So Ida Claire is the State Architect overseeing dsa. And just for clarity, Jen and I as the two chief deputies. The deputies are under us in our respective programs. I have the built environment under which DSA is included.

But yes, the DSA has actually emergency protocols for school rebuilds. But I'll let Ida speak to that.

Good morning. Yeah. So within the timeframe that we were able, our first step in assisting in getting rebuilt is to actually have individuals, structural engineers on the ground doing rapid assessments of the facilities that have been damaged and also destroyed to see where to inform districts as to where they can proceed from that point.

Districts are able to establish interim facilities quickly without DSA involvement at all. In fact, they can get portable buildings to resume in school construction on any site that they have available.

And then we come in after the fact to approve those facilities for however long they need to stay in place for the school district to start the process of determining the size of the facilities they're going to rebuild, how large is it appropriate for their existing enrollment, how they need to proceed.

We offer pre application meetings to offer any assistance in informing those decisions as they move ahead. And then obviously when they're ready to move ahead, they proceed with their design professionals. Their design professionals do the design of the buildings and then they come to DSA for plan approval.

For a typical TK through five school, which is essentially for like lausd, the facilities that were completely destroyed, we've tracked typical brand new school, which is not in an urgency or prioritized fashion. Just in our traditional plan review, it took about seven months to get the approvals. Three months of which was DSA time.

Four months is in the hands of the district and the design professional. So there is a process of our initial plan review which we start within five days typically of submission. And then once those comments are done, the design professionals have those those comments and need to be responsive.

Then they come back to DSA for a plan check. Then if there's additional comments because they weren't fully responded, then you know, usually we have that done within two cycles of plan review and comments.

That whole process can be expedited and we just ask that they usually there's a six week registration period so that they let us know that they're coming within six weeks. But the design professionals are able to work on those drawings those six weeks. We can prioritize that to first of the line for a school rebuild.

So you can already cut six weeks off at that point. Also our plan review process, it does, you know, prioritize safety. And so we can add many factors in how we can shorten that plan review time on an emergency process. One of them is to employ overtime for our staff to cut that time Shorter.

Another is to work with the school district. If they wanted to do an incremental project, they can, which means that they can do the site improvements first, they can get building on site improvements while then we do the building improvements in a plan review process subsequently. So we offer many alternatives.

But DSA makes a commitment to prioritize those, those that school construction, that plan review. But typically that charge is led when the district is ready for us to actually intercede.

So speaking of that in the, in the emergency legislation that we passed at the, at the beginning of the session and allocated funds now I can't remember if it was to DSA or to opsc. It was both, both to provide assistance to the districts in that, in that regard. What's the status report on the drawdown of those?

And particularly curious in terms of between Pasadena and Palisades, is it being equitably drawn down and are the districts in the communities using that in a way that is helping them to take advantage then of their ability to expedite their projects through your two offices.

So I can't speak for opsc but I can speak for dsa. Our initial result was getting staff out, out in the fields to the sites to do those rapid assessments. So those costs were expense on that. We also assisted non public school districts in those rapid assessments because we were called out to private schools as well.

So there was our assistance in that realm was to all schools. Right. With the funds that are remaining, we it's going to be on an ask basis. If there's difficulty they can offset plan review fees if they need to as the school districts come to us.

But right now the school districts are planning for what they're going to be doing. So those requests haven't been asked of us yet. So right now it's been on the rapid assessments and getting them the reports they need. After that, it really comes on a first come, first serve basis.

As schools need assistance, we have that availability to provide assistance financially.

So you say first come, first serve, which I get. But I mean, obviously there's. We have a lens on the communities that are involved and the different capacities of their. Of their variety of local governments and other partners.

I mean, I think we'd want to avoid a situation in which, you know, one of the areas that have been hit by the fires just happened to have, you know, their projects all ready to go and exhausted the dollars that we had appropriated. Do you have some mechanism to assure that that doesn't happen?

That both the schools affected by both fires, for example, both have an equitable opportunity to get the assistance that we approved and the Governor signed early in the year?

Yes, we can. Because those, we don't know what those requests are going to be for assistance. We can keep an eye on that and tracking as to how that's going to be. But right now, both school, or both school districts, Pasadena Unified and LA Unified, they're still in the process of determining how they're going to proceed.

I know that with Pali High, it was damaged and they're going to be in hopefully by the end, you know, by the start of the next school year. The others are complete school rebuilds, but they're for charter school facilities, except for one.

So prioritizing how they come to us, we are here to assist at all times, and we will keep an eye on that to make sure that it's evenly distributed.

Okay. I encourage, you know, a policy frame on this as well. So, yes, I want to know if it's. It ends up not being completely evenly distributed, but we should be sure that we're intervening and reserving resources at the beginning.

Senator Perez, on the floor when we passed that Bill, talked about a young man who was just hoping to get back to his school. And she said we were passing the bills so that he would be back. And I think that our fear is that he'll graduate before the school is rebuilt.

And that's not the commitment that we are making. And I know you're committed to it too, but it's just, I, it's, it's.

It's of the utmost importance that we do everything that we can to expedite and that we're doing and that we're expediting with this land storm, making sure that there's equity between the schools affected and the communities and the kids affected in both fires.

I thank you for that. And I. And now that we have dsa, I just had a question, and I'm not sure who it applies to.

One of the things, when we did the tour and we talked with some of the construction and contractor experts, they also talked about the maintenance of these schools and making sure that they are fireproofed. One area they talked about is sort of just the general fire inspections that are done.

But there's not always an inspection of sort of HVAC systems. And in some, there's data showing that in those systems there's a lot of combustionable material that can somehow get into the system and really create, you know, incineration. Incineration. Accelerating incineration. Because they have not been checked.

No one certified has gone up and looked through them and checked and blew the system.

And so I wanted to get a sense of as we are doing this building, how are we also thinking about, about maintenance, the sort of the mitigation, the prevention work that we need to get done to ensure that these investments, this rebuild and the, you know, making sure that they're done on time, but also where we're not ensuring that these things, you know, hopefully will never happen again, where you lose so many schools at once, that that means there was something that we can always do to make sure that those structures are better protected.

So not speaking specifically to the schools that were affected, just in General, the average school building is 45 years old. So when it was built 45 years ago, there were different, obviously building standards at, at that time. The school districts have the responsibility to maintain those facilities and to ensure those facilities are optim. Serviced. We don't.

DSA is not in that. We're in the design and construction oversight. Not necessarily on the maintenance side of things, but local building codes, current building codes, addressing fire resilience, addressing H Vac systems, addressing those transmissions. Right. Those have improved over time.

So when schools undertake those improvements, the most current building codes are applied to address those improvements at that time, whether it's improvements or new construction. So the maintenance component is not something that is in DSA's authority or purview because ours is design and construction oversight.

So the state doesn't set any guidelines for how that maintenance should happen?

No, not DSA specifically. Thank you.

Next question, which I'm. I'm guessing no one will be able to answer, that's here. It's not the built environment. So the regional K14 collaborative program, which was, for reasons that will. Will never be understood by us or, or future historians is in DGS as well.

This is the half $1.0 billion, just about that the Legislature and Governor appropriated three years ago, I think now to support at the regional scale Collaborative work for K14, K14 education, higher education and workforce entities to dramatically improve student outcomes and equity and contributions in the workforce.

And those were one time funds but they are still being deployed and expanded and want, want to know where, where we're at in terms of the accomplishment of the. The plans themselves were all submitted, they were awarded. But where are we on that delivery of the outcomes that were. That were that the grantees had committed to in that process?

I think on that one we're going to definitely need to get back to. We were literally brought in as an administrative entity in that role. As you mentioned, it's almost all spent down.

I think there was a tiny little bit left around the end of the year that the team basically opened up to the existing grantees to see if they wanted to use it to continue their work.

But in terms of the specific outcomes, at this point I'm not sure we're ready to or the right people necessarily to tell you about those.

But we'll definitely go back and, and get you either to the right, to the right folks or maybe I'd love to offer, you know, my team up on the LPSC side for a briefing for any of you because certainly they are not here and would, you know, are really the best ones to answer these questions.

Okay. Yeah, I do want to put a spotlight on it. That's a significant amount of money.

I don't know if it was four, I can't remember if it's four or $500 million and it's relevant but one because when we deployed that amount of resources and the expectations were very, very high and the grants, the applications were ambitious that we know what actually happened in terms of outcomes.

So in addition to was the money expended and where are we encumbrance and all that stuff that's important but also what are we doing here? Most of the grantees, if I recall, really made for example big commitments in dual enrollment and other sorts of things.

The other reason why it matters is that, you know, the governor's proposing to put higher education and workforce coordination between the higher ed and workforce into govops.

So in the same family as dgs with the same theory that in some, I think they said, you know, the advantage is we don't know anything about it and therefore we don't have any biases. But of course, the disadvantage is we don't know anything about it.

And so under, so this is, this is my fear about that proposal is that we, it will get lost because it's not central to the work of these agencies.

And also it's now in our budget Subcommitee and the people who should be asking about it are meeting somewhere down the hall or in the other building in budget sub 1. So yes, I think this is an area that want to follow. Want to follow up on.

Yes, the money's spent, but that's the, the key time for us to. What did we buy for it and what are we learning?

Right.

Okay, maybe. How about excess property? So we, we've considered this a bit in the, in the HCD and housing budgets as well. So the, the Administration had announced big plans in terms of excess property redeployment. And so, you know, with, and the results.

And I'm foggy from, from the hearing that we did on this a couple of weeks ago, but the results weren't spectacular in terms of. I think the Governor, you know, talked about tens of thousands of housing units. There's also options for economic development, what have you.

And I, and I seem to recall the report that we got back was that the. There were 23 projects more units than that, but not tens of thousands or tens of hundreds, maybe tens of tens. Where in terms of the department's role in this whole process or areas where it doesn't have a role.

Where are we in terms of the excess property aspirations that the administration's laid out and that the Legislature has supported?

Yeah, it might be helpful just to define terms at the beginning. So, I mean, definitely difference between units and sites. Right. And so you might have a particular parcel that could have 1,400 units on it versus something that's 150. The Executive order in 2019 created the program.

We redirected our surplus property unit, which was primarily in the process of selling state property that was unneeded, transition that primarily into this housing unit partnered with hcd. The hallmark of that Executive order was really a evaluation of excess property.

So in statute right now, in government code, the way it functions is every Department is essentially tantamount to the owner of the property under their jurisdiction. That's not. Doesn't read that way on title, but in General, that's kind of the statutory scheme.

And so if you are a Department and you've got a field office somewhere and you no longer need that, we have no idea until you tell us you no longer need it.

Once you tell us that it's now excess property and then we are responsible in statute to identify an alternative state use and pre Executive order that alternative state use was defined essentially as does CHP need it? Does DMV need it? Is there another like state building that needs to go there?

Failing that, it would then become surplus property through the Legislature and sold. The Executive order changed that and said number one, affordable housing should be a state reuse consideration. And then second, rather than letting departments self report, why don't we go and we ask them or we'll look at property ourselves.

DGS and HCD identify property that looks like they're not using it and taking those properties and looking at it from a housing perspective, where could you build? Does it make sense to build here? And then asking the departments, you don't seem to be using it, please tell us why you don't need it.

And in which case we'll go ahead and take it and we'll develop for housing. So that was what started in 2019.

There are 22ish developments and there's about 4700 units across those 22 properties in some stage of development, some have completed, some are in construction, some of the developers are still getting financing on, but they're all awarded in some stage. I'm going to talk about Caltrans in a second because it's a really important part of the conversation.

What changed was that Executive order was essentially codified twice. Senator Dodd and Assemblymember Quirk Silva, two different bills, slightly different, but essentially codification the Executive order. It made that inventory happen twice and I'm sorry, every four years. And so we'll be consistently doing that re inventory process.

But it did direct us to try to make more objective the standards that we used used for redevelopment. Whether you're using that property in question is pretty easy. Are you using it or you're not. But whether or not that property is suitable for housing was something that we in 2019 took a reasonable but subjective look at.

And so as we've learned from 2019 to roughly 2024, July is when the the new map was unveiled, we realized that for the most part, you know, this may sound silly, but affordable housing is a essentially can you get subsidy? It's really what it boils down to. And is it cost effective? Can you get subsidy? Sorry.

To be able to build there, the cost of housing is X. If you want to make it affordable, there needs to be something that makes up the gap. And so in that particular case, tax credits is sort of the underlying ubiquitous subsidy mechanism. And most other mechanisms through Chinese HCD are derived from tax credits.

And tax credit financing is largely an adjacency think. And so you can look at a site and essentially easily score it to see if it would qualify for those subsidies. And if it does, then it would qualify for affordable housing.

So we at DGS and HDD spent a better part of six months or so creating an algorithm that automatically uses shapefiles and GIS data to screen a parcel and seconds against those tax credit financing requirements to see if it's, if it's suitable for housing.

So what we did then as part of the two codifications of the Executive order is we took all 44,700 ish state parcels and we screened them all first. We identified the universe of which ones would be suitable for affordable housing, AKA they qualify for subsidy.

And then we went to the Department and said, hey, out of this universe, we look at this parcel and it doesn't look like you're using it, or maybe you are using it, but we don't know that in two years time you're planning on replacing it. Please tell us what your long term plans are for those parcels.