Assembly Budget Subcommittee No. 5 on State Administration

Good afternoon and welcome to the Assembly Budget Subcommitee 5 on State Administration hearing today. Today our hearing will focus on the Governor's Office of Business and Economic Development and the Department of Financial Protection and Innovation. We meet today at a time of great uncertainty.

Across California, across the country and across the globe, families and businesses are feeling the weight of economic forces beyond their control. Rising costs, shifting supply chains, tariffs, inflation are not abstract ideas. There are pressures felt every day at the kitchen table, in the grocery store, in small businesses that are fighting to survive.

California is not immune to these challenges. Our ports, our trade relationships, our, our innovation economy, all of these tie us to events that can feel distant, but whose impacts land close to home.

One of the things that has been important to me in this Committee has been to really talk to people everyday Californians and I have a brother in law who works down in the ports in Long Beach and worked really hard, long long hours of overtime to finally get that dream job of being a longshore man.

And now is quite worried as he left another job to take. This highly coveted job is now already talks of less hours and so forth. And this directly impacts the them as they just bought their first condo in Orange County. So this is real.

What happens not only here in California, but throughout the United States and the world, we know impacts our hard working Californian. We know these issues cannot be examined in a silo. Every dollar that is put in one place in the budget means more cuts in other areas.

We also know everything that happens at the Federal Government in fact can and will if actually applied, will affect our California State budgets. Everything from student aid to University funding to research funding, housing funding, Section 8 vouchers.

We have had an estimate of $450 billion of federal impacts if they are all moved Forward and another $50 billion of disaster relief that by the way has not been agreed upon or brought down to the state. So we're talking about close to $500 billion of impacts and that's why these oversight hearings are so important.

What gives me hope is that California has never shied away from hard, tough problems and issues. We know that behind every program and budget line is the opportunity to make California stronger, more inclusive and more prepared for the challenges ahead.

We also know in this particular hearing today we're going to be hearing about the economic efforts that are focus on our entrepreneurs, focus on bringing funding into California. And with that we will begin and housekeeping. This is an in person hearing with all panelists testifying in person.

We will take questions from Members of the Subcommitee after Each panel and public comment will be taken at the end of each issue.

If you are unable to attend this hearing, you may submit your comments via email to assemblybudgetsembly or asm.ca.gov with that, we'd like to invite our first panel up, which is the Governor's Office of Business and Economic Development. Or can I say, in short, Go Biz. And this would be.

We will allow you to introduce yourself as you make comments. We want to welcome our esteemed guest here from Go Biz. I know you'll introduce yourself, but Deedee Myers and friends and you are welcome to be on. Derek did you live in Fullerton before We began to know each other when I was on the council. City Council in Fullerton.

Great. Well, thank you so much, Chair Quirk-Silva, for having us here today. And thank you for your opening remarks framing both the precarious moment that we face geopolitically and economically and the stakes for everyday Californians as we make decisions about their lives and livelihoods going forward. So really appreciate the opportunity to be with you.

I'm Dee Dee Myers and I'm the Director of the Governor's Office of Business and Economic Development, or Go Biz, as the chair reminded. And like the Governor, I really believe deeply in the promise of our state. I know that everybody in this room does too, in the spirit of innovation.

The spirit of innovation is core to our brand and it's the foundation of both our culture and our economy. We're always looking ahead because the future happens here first, as the Governor is very fond of saying, says it often.

And it's what makes California such an exciting place to live and to work and to plan and to innovate and to create. It's why I think we all remain bullish on the future of our great state.

And it's also why the Go Biz team works hard every day to help maintain a robust economic climate that will provide opportunity, continue to inspire entrepreneurship, create good paying jobs, and importantly, anchor our communities. Businesses are the anchors of our communities. As you all know, Go Biz serves as the state's leader for job growth and economic development.

We support 4.2 million small businesses here in the state. We help ensure the future of clean transportation. We bolster foreign direct investment which is incredibly challenging now. And we work on things like growing Hollywood's iconic film and television industry and a lot more.

We also provide everyday services to business owners to help them start, grow, invest in California. And that includes things like site selection, permit streamlining, navigating regulatory hurdles, identifying Incentives and so much more.

At the same time, we're doing everything we can to help develop the workforce of the future through avenues such as training and entrepreneurship programs, apprenticeship programs, and partnerships between higher education and industry, including the Master Plan for Career Education, which I know you've all been discussing.

That work focuses both on existing sectors, but also on the emerging sectors that will give rise to the next Google or Apple or Netflix here in California. And we'll have more to say about that later. So to sum it up, Go Biz represents California's economic interests, which are wide ranging and growing every year.

And we take the work really seriously. We know how important it is that our state's economic future be guided by a consistent set of values. California values sustainability, inclusivity, innovation and competitiveness. Because as a global powerhouse, we are so keenly aware that what happens in California reverberates around the world. People follow our lead.

We can set the path, and we often do. So just consider some of the facts. As you've all heard the Governor say many times, California is the fifth largest economy in the world. We have a $3.9 trillion GDP. That's right. Trillion with a T is very big. We account for more than 14% of the US GDP.

So we out, you know, we punch above our weight in that regard, and we're bigger. More than 50% bigger than the next largest state, a state that considers itself the biggest at everything, which is Texas, which they're not. We also have the highest quality, most diverse workforce in the nation.

We are proud to say we have more engineers, more scientists, more researchers, more patents, and more Nobel laureates than any place in the country and probably any place on Earth. We're really proud of that and it's not an accident. Meantime, we continue to lead the world in the tech business, right? We dominate the IPO pipeline.

We have from 2011-25 to 2025, for example, more than 1300 IPOs were completed here, and that was more than double Texas and two and a half times Florida. So there's no place that even comes close. We also have, and we know how important it is the key ingredient to our ongoing success.

And that is the world's best system of higher education. That is the foundation of the economy that we need to sustain. So from top to bottom, California innovates in industry leading businesses. In 2024, Time published, you may remember a list of the 100 most influential companies in the world.

In the world, 24 of them were based in California, were headquartered here, and another six were global companies that had their US headquarters in California. No place else on earth competes with that.

So the opportunity is here for us, both as a team and as an Administration, to build the future again based on our values, not just here in California, but around the country and around the world. And so how can we do that?

We can do that by consistently competing to advance the state's interests, knowing that the rest of the country and the rest of the world are now competing for what we have. They're going after the world that we built. So we need to be heads up about that.

We'll do that by collaborating with you, our legislative partners, with other stakeholders, helping to connect individuals and businesses and organizations to the resources they need, from tax credits, grants and loans to assistance, technical assistance and workplace training support things that we are very important to us and that will help them bring their innovative ideas to life and sustain those paths for growth.

And we'll do it by helping to provide space for conversation in our communities, working with the people on the ground, understanding that these kinds of two way dialogues will result in a more inclusive and a more equitable economy, which is again, one of our fundamental values that we're unwilling to sacrifice.

So to that end, I'd like to next highlight California Jobs first, which I hope you've all heard about. It's been an area of particular focus for our team over the past few years and a great example of how we can put these principles into practice in support of the people of our great state.

California Jobs first, formally known as the Community Economic Resilience Fund, or CERF we renamed it, as you know, was the product of the Governor and the Legislature's collaboration and thoughtful effort in 2021 to accelerate post pandemic recovery across California.

Our team's been on the ground in communities over the last four years building this plan and program focused on creating bottom up economic development that will serve the state over the next 10 years. So well past the life of this Administration, but obviously ongoing in its importance.

In February we published the California Jobs First Economic Blueprint, which was a compilation of that work and the state's first statewide economic development strategy in 20 years. So definitely ripe time for moving forward on that. And so I'm really excited as we move just in the last couple weeks from the planning phase into the implementation phase.

And this is something we're going to focus on. We're dedicating resources to and we will see it through for as long as we're here. So with that, let me turn it over to Derek Kirk, who's led our efforts on this program and will do so going forward.

Thanks so much Director Myers, Madam Chair and Members, I'm Derek Kirk. I serve as the Senior advisor for Economic Policy at the Governor's Office of Business and Economic Development and have had the privilege of working on the California Jobs first work since the Legislature passed the authorizing legislation in 2021 and the Governor signed it into law.

There's a deck in front of you and I promise I won't go into detail on all of the slides, but I want to quickly note for for you that this work for us is really about ensuring that we're building a community led climate forward economy.

California Jobs first is about ensuring that we're building capacity and understanding the vision of local communities, not the vision of me in an ivory tower or Director Myers or the Governor in our ivory towers here in Sacramento. It's about what does Orange County need? It's about what does San Diego need?

It's about what does the Central Valley where I grew up need? An understanding how do we make strategic investments in core sectors to drive California's economy moving forward?

You may remember in 2022 we divided the state into 13 different economic regions, again recognizing the importance of and the differences between each of the distinct and unique economies in California. To the note at the top, I have lived and worked in the Central San Joaquin, the Southern border, Orange County, the Central coast and the Capital Region.

I and our team are distinctly aware of the realities that what works in Fullerton is probably different than what works in Porterville, where I was born and raised. We have to do better about understanding what those differences look like.

And we have over the last several years we've spent time and we'll get to this, engaging over 10,000 Californians and understanding what type of jobs do they want to have in the future. What types of jobs do they want their kids to have in the future?

What are the pain points that they're experiencing and not expecting them to suddenly become experts in the economy and economic development overnight, but understanding that sentiment and lifting it up, leaning on experts in our state to drive the economy forward. So I'm going to skip a couple of slides as a reminder.

Since 2021, the original investment that the Legislature made was $600 million into this effort in 2021. I'll note that that number through budget reductions last year was reduced down to $450 million, still the single largest investment that the list that any Legislature and Governor in California have made into economic development.

We've invested $286 million to date, including $65 million into the regional planning process across the 13 regions. About $40 million into pilot projects across the state. Through those investments We've engaged with 10,000 Californians.

We followed up the planning investments with pre development investments of $14 million per region, recognizing that many communities as they're beginning to implement their plans don't have the money to start prepping projects. No one wants to Fund CEQA and NEPA and feasibility studies.

And yet it's a critical need in California to continue growing our economy and partnering with tradable sector industries. So after all of the planning phase, we got to what we call our placemat. This really fun document. You've got hopefully a big copy in front of you.

This is a representation of all the sectors that are different regions across California lifted up through their planning process. There is not one single sector on this place mat that we came up with that a region did not.

But what this sector this placement is a representation of is the reality that we have industries at every stage of the life cycle in California. We have industries that we need to strengthen, that we are historically dominant in.

We have industries that we need to lean in to accelerate that are at the precipice of near term good paying job creation. And we have industries that we need to make strategic bets on to drive the conversation and ensure that the future indeed does continue to happen in California.

And none of that tradable sector growth can happen without strategic and connected investments in our anchor local serving sectors. Things like child care, healthcare, housing, education and a skilled workforce and our infrastructure. I will end on slide 10 and just note how are we implementing this moving forward?

Our teams have already begun navigating through with all eight agencies, including our co chair agency, the labor and Workforce Development Agency on the implementation of this plan. For us, this work is about helping to create, attract and increase access to good paying jobs for Californians. Full stop.

We imagine doing that by achieving the four goals that you'll note in the the dark blue Supporting sustainable and equitable growth across our regions and populations. Investing in the workforce for the sectors of the future. Creating an environment for and with job creators and strengthening California's innovation economy and entrepreneurial culture.

There's a series of initiatives under each of those goals that we're already beginning to work to implement. Some of those are administrative policy. Some of those will be future budget asks. Not for this hearing or for this budget cycle. This is a 10 year strategy for us.

It's looking strategically about how do we cast out and understanding the ways in which we can imagine our economy? I should have said I'll end on this slide because I do want to just note quickly, California's economy is too big for us to suddenly embrace efforts around all 10 macro tradable sectors in California and to do it well.

So the Administration has honed in on ag tech and farm equipment, life sciences, semiconductors and microelectronics, and the space, defense and satellites industry with a particular emphasis on advanced and precision manufacturing in those four tradable sectors.

Imagining how we can roll out an all of government and replicable model to engaging with these tradable sector industries to support the creation of good paying jobs in Californians.

It's been an incredible privilege to work on this program, to engage with so many Californians across the state and to drive opportunity really for the first time in a very long time in California's history to thinking about how we can invest in economic growth. I look forward to your questions.

Thank you. We'll go to Department of Finance.

Charles LaSalle, Department of Finance Nothing further to add.

Nothing. Rowan? Assembly Member? Well, I want to thank you. We definitely have a lot of thoughts, but so I have a few questions. Kind of more macro but obviously in the last two weeks things have dramatically changed in the economy from the Federal Government.

As noted, that does not just impact the it's going to impact California quite a bit. So if you have any thoughts on that. Number one would be one of the questions. Number two, I do like this. I am a classroom teacher so I. Like these kinds of things. Do you understand the placement?

What I'd like you to do even more is like laminate it for a place mat and then I could like set it at the table and actually engage in conversation with this. No, I'm joking, but not really. You don't know how much I like laminated little mats. Yeah.

The fact that it is Cal State Fullerton colors was not a brag or an opportunity to sway you in any way.

So. Yes. But on this place, Matt, obviously we had the Standalone Committee on the film and tax credit. Film tax credit. But I do see tourism and outdoor recreation here which if you could just speak to that because I'm wanting to know more about what what the concern is because it says to straighten or add on.

So I guess the two big questions is how do you see what's happening on the Federal Government, particularly the tariffs, but other actions related to California economy. And then speaking about the tourism and outdoor recreation.

Well, so thank you for those questions, Chairman. First, I mean obviously we're tracking the Federal Government's processes, decision making actions very, very closely. As you noted at the top of this hearing, they have outsized impact on California.

And so we're doing what we can every day, as I know your teams and staffs are to track those decisions, to do what we can to provide information for, to try to preserve the programs that we have to make clear the benefits to our state and to the rest of the country as we move forward.

That is going to be an ongoing process. It is one that again, we are deeply engaged in at all levels of the Administration, tracking very closely through the agencies and departments and of course led by the governor's office. So, you know, happy to keep you abreast of that as we move forward is going to be, it's going to be challenging.

Has there been any thought to convening? Because I know you interface with them quite a bit. Kind of our chamber of Commerces, those type of advocacy groups that often interface with us at the state, but in essence having an emergency delegation to go to Washington.

I know the Governor is working on this full time and others, but we really need our partners, whether it's the small business associations, all of these organizations that have advocacy roles to convene and to almost shout out nicely that this is a major concern for California.

Yeah, no, that's a very good point. And we're in regular conversation with them. And I'll give you an example about just one strategic area. As you noted, the Governor put forth a proposal for 30, $39 billion in disaster supplemental for Congress.

And we have been engaging both bipartisan Members of our House delegation, as well as our Senators as well as chambers, local business organizations, advocates to make sure that they understand what's in that request and why it's important and how it would work and that they in their processes, you know, they make regular trips to Washington.

In fact, some of our friends are there now doing their Washington D.C. weeks and making their rounds on the Hill and making sure that they're armed with as much information about programs that we think are currently, you know, under scrutiny, as it were, or need support like the disaster supplemental. So that is an ongoing process.

I don't think we can ever do too much of it, but I think there's a coordinated effort to make sure we're using our resources and our partners and stakeholders to advocate.

You know, another example is you may have seen stories that the hydrogen hub was under threat and so we really, you know, really rallied some of our supporters and troops and have been working very hard, including getting a bipartisan letter to the Secretary of Energy and one from Arches to support that program.

And we will continue to marshal the more than 400 Members of our Arches coalition to advocate for the ongoing support and funding of that program.

Definitely appreciate that. And then any comments on the tourism and outdoor recreation?

Yeah, I mean, that's obviously a huge sector for us in California. It's. We have the biggest. We are the biggest tourist destination in America. And not only do we get a lot of tourists from around the country, we get a lot of tourists from around the world. That's a huge part of our. Of our economy.

So, you know, it's one where we need to continue to work. The people are coming for us on that. So we have to be competitive. I think. I don't think there's anything wrong. I think particularly Visit California, which, you know, is part of Go Biz does an outstanding job.

If you haven't take a minute to look at the marketing campaigns that they put together. Their ad campaigns are fantastic and they run campaigns in countries around the world. They are concerned, however, that things that are happening in the world are, you know, decreasing the desirability of. Of California, of the United States as a tourist destination.

So we will do everything, working through Visit California and other avenues to make sure people understand international visitors are welcome here. We welcome people to our state. We think that's part of what makes us so vibrant and innovative and interesting. We will invest in marketing campaigns where it makes sense and when it makes sense.

I think some of this stuff, we just have to see how it plays out a little bit. But we are very much on it and we'll continue to support it both through, you know, the ongoing excise tax that funds it.

And the Governor has periodically, when we've needed to provide additional stimulus funds to make sure that we're reaching our possible tourists around the world. You know, we're just. I think this year we were expected to see, I guess Last year, 2024, tourism kind of refinely returned to.

To pre pandemic levels and we were going to see an increase for the first time this year. We'll see what that looks like as the year goes on, but happy to report back as we move forward on that.

Thank you for the presentation. Really appreciated. A very thorough overview of the work that you're doing. Go Biz. And through this blueprint effort. Couple of thoughts, and thank you for acknowledging. Yes, in fact, the San Diego Chamber is in Washington D.C. this week, so getting some updates from them about the work that they're trying to do.

We have our own special consideration considerations being a border community that also run right into some of the issues that intersect that are being played out in Washington as well.

And then so it's all hands on deck, I think, to be able to make sure that we're using every resource to get the message right so that California businesses are in a position where they can grow and thrive.

I, you know, did want to acknowledge, especially maybe in the context of some other conversations that came of light in recent months, months, the abundance related conversation.

I really appreciate the, you know, the blueprint here and sort of thinking about and laying out and, you know, kind of where our strategic efforts need to point towards just to make sure that the work that you're doing isn't necessarily over planning or taking. I know you said you're going from planning to implementation. I hope that we are an iterative process, also implementing at the same time that we're continuing to develop this.

And I'm sure this is, is a great work plan that, you know, probably is not unlike something we would have seen three years ago as far as identifying what those key sectors are and where our investments need to go, but something that will live, you know, as a living document going forward that we continue to look back and update while we are continuing to be able to implement this vision through the budget actions, through the investments that we're making here together.

I, you know, would acknowledge too that, you know, sort of laying this all out here is exactly what we are, you know, challenged with that.

You know, we see all these, you know, kind of core anchor segments or other areas that we need to strengthen and we're not giving them, I think, their fair shake in this budget conversation when we're looking at, you know, manufacturing as being a core area.

Yet we've not, you know, last year we certainly, you know, were not able to restore that R and D tax credit. And it's not on the deck yet on this one.

But it's something that many of us want to be able to see at least come up to again, proportional to the challenge that we have across our entire state budget. You know, I hope that we're not leaving any of these sectors, you know, disproportionately behind.

And I want to get to that second in a second about how we can maybe make smarter decisions around those investments and in particular our anchor segments, you know, when we're thinking about childcare, when we're thinking about housing. I hope that we're backing that up with budget direction as well, too.

And I just, you know, I'm really disheartened about what I've seen so far in this, this year's budget process. I'm hoping a lot of that is rescued because I do believe that those anchor quality of life needs that we have here are pivotal for any of these additional upcoming economic sectors to be able to thrive.

And so that's something that is hard. It comes down to money and we're thinner on that today than we were last year. But I want that to be able to somehow reflect as well, well, this commitment that you've been able to outline here on the blueprint.

I'm curious how you might be looking as you're analyzing some of these investments that we've made in past years and hopefully on a going forward basis and reporting back on the outcomes from some of those tax credits, grant programs or other ways that we're making some of these sectoral incentives. What do you see?

Or are you able to really tease out and analyze what otherwise might have been organic, organic growth in a given sector that it didn't necessarily maybe need? We decided, okay, we're going to put $100 million towards working lands and water innovation. Right.

But maybe the time was right that, you know, those businesses were able to stand on their own two legs as it is. And in essence like that one might have been free money that could have been better used somewhere else.

Are you able to sort of analyze and tease out where something was induced growth that we actually had a hand in playing because we made that seed investment that that business otherwise would not have gotten off of the ground versus what where you're seeing the organic growth because the conditions are already right for that sector to thrive?

Yeah. And that's an important question. Assemblyman. And so let me give you a couple examples and I'll make some comments and then I will turn it over to Derek to talk about how the Jobs first process works to be additive, because I do think that that is the goal here, to be additive, not to pay people to do what they would have done anyway.

So I'll give a couple examples. Jobs first. I mean, not Jobs first. Cal competes. Right. One of the criteria, the most important criteria for that program is that those are jobs that would not have come to California but for okay, now that's you never be 100% sure.

But we look at did they get offers, incentives from other states? Do they have headquarters in other places Are there. Is there real concrete evidence that those jobs would not have come to California? And again, that's the number one criteria for that program.

Similarly with the film tax credit, for example, we've tracked how many of those projects go to other states when they don't get credits, and it's significant. There's a couple of different numbers. It looks like it's about 70% that go other places that would not have come to California.

And then on top of that, there are many projects that don't even apply because the credits have not been competitive enough. So we don't even know how many jobs were lost through the absence of a competitive tax credit program. So those are two examples.

And then I'll turn it over to Derek, because with the jobs first, I think we're trying to create a model that both helps businesses to create new entities, but also that floods in private capital. Because that is something that we know is critical because of all the reasons that you just suggested.

We're not going to be able to do this with just government, a lot of it with just government money. We need to create incentives for companies to invest. We need to create an environment that's supportive so that we'll get those private dollars. And with that. Let me turn it over to Derek.

Yeah, thank you, Director Myers. It's a great question. Assemblymember. I think for us, first and foremost, we have to kind of internally acknowledge California does not have that many tools in the toolbox in terms of attracting companies to our states.

For example, not to call out any states in the south, but there are several that will offer 100200300, $400 million incentives to private companies to relocate or to locate their manufacturing in their states. Cash check, cold hard in a briefcase in a parking garage with no criteria on them. And they just get to move forward.

California, really. We have the California COMPETES tax credit and over the last several years, the grant program, the full sales and use tax program at the treasurer's office, and the economic development rate program through the Public Utilities Commission and in partnership with our IOUS.

All of those programs have very intense criteria around ensuring that we are using taxpayer dollars effectively. Offline, we can get you some data.

We worked with some partners on the development of the blueprint that shows California pays less per dollar, but for jobs and per dollar of capex investment via our incentives than any other state in the country. We're good stewards of the dollars and we don't have a whole lot of them.

There are some programs that the Legislature and the Governor have supported over the last couple of years, particularly programs like the California Battery Manufacturing Pilot line Grant program at the Energy Commission that just closed last week that are intended to invest in kind of the early the sectors that are in the bet and maybe just came over into Accelerate.

I just finished Abundance myself. I think arguably they would call that push funding forcing the industry to invest and think about new ways to invest in those technologies. I think our goal here is recognizing that the representation of need throughout the blueprint.

I wouldn't even want to quantify it for you in dollars Assembly Member because it's an ungodly number that I would never want attached to me or to any of you. And the reality is we have to get out of the mindset that the State of California has to be the only investor in those opportunities.

We can partner with venture capitalists, we can partner with local governments, we can partner with the Federal Government when things shift a little bit and they're more eager to do that.

We can partner with CDFIs and with philanthropic organizations to build capital stacks and which is what we're hopeful to do with our remaining $150 million to make it 200.

$250 million via co investments and real partnerships on those opportunities so that we can invest in push funding, we can invest in pool funding, we can think strategically about the infrastructure that's need to be made in this space.

And then most importantly, I'll note given your comments on the anchor sectors, you know this is not the Jobs First Council taking on any of these responsibilities, but there are really unique opportunities for us. I think about Cottage Hospital in Santa Barbara.

They've invested a significant amount of their own money in workforce housing that they built this incredible model they've kind of tucked away in Santa Barbara where condos that would on average go for market rate of 1.2 million are being resold to Cottage Hospital employees for like $400,000. That's the state we haven't actually invested any money in that.

It's a private entity that was able to think strategically and innovatively about driving the conversation forward. That's what this work is about for us. Thinking about being innovative with our funding and build capital stacks with.

I really appreciate that and I do always welcome more information especially as our decision making time is coming up and we've got to think very critically about the right decisions here.

You know, I would, you know, acknowledge as well too that you know, we've got some natural advantages here that you know, when you say we don't have as many tools in the toolbox. And I just don't think it's always about a big, you know, suitcase of cash that's out here too, because we have our talented workforce.

But that's been generational investments that I would say from the dais, you know, that we are maybe starting to conscientiously look away from.

And if we're not supporting our higher education institutions, we're losing that, you know, really core competency that we have here in California to be the place where the talented workforce is and is ready to be able to take on these innovative economy jobs and really, you know, help to, you know, accelerate them into the future.

Likewise, you know, when you see housing costs that are for six figure biotech employees, you know, the number one drivers to decide whether or not they're going to come here and take a job here in California as opposed to a job in High Point, North Carolina, like that is a real life decision because they want to start families too. And you know, even $120,000 starting salary isn't enough to cut it.

So we do have to work on a lot of these core issues here that I think is going to be it's all tied together and it's not always, you know, just very, I think, conclusive math to be able to figure out whether or not, you know, certain investments and certain assumptions are always accurate and everything.

But I want to make it our best effort to try to be able to have all those inputs as we're making some of those decisions. And the last thing that I'll mention too, as you mentioned, Neil, about being a partner with this, fully agree.

And that's where I think we're trying to be conscientious, that these aren't always just necessarily giveaways, but we are expecting those kind of outcomes. We're right to point towards California competes where I think going to hear that in the next issue.

But I also would just kind of throw out there for maybe kind of ongoing thinking as we're approaching some of these incentives and what our expectations are. Because one of my frustrations is that we could make these investments really seed Fund a sector or an individual business.

It really takes off and does well and congratulations and kudos to them and a lot of that's because of the talent from that sector. But then they really take off.

One business comes to mind as well who recently sort of integrated into White House affairs and all of that equity that California got started is now compromised in the form of labor standards being reduced or workplace issues moving headquarters and moving jobs allegedly out even though they didn't really move out of the city state.

And so if we're thinking about these seed investments I hope we're also thinking about long term agreements so when business succeeds that we know that California's success will be shared and a part of that as well too.

I don't know what forms that could take but I hope we're using some of these experiences where California taxpayers really get put in a place where they're basically starting off a lot of these future successes and then getting left holding the bag over time and that seems, you know deeply unfair to our California taxpayers as well.

It's something I want to look forward to. As you know we're thinking about the next generation of investments and what our expectations are coming back to California over that same time period. So thank you for the presentation today. Thank you. Thank you.

With that we'll ask the public if we have any support.

Seeing none, definitely. Thank you for joining us. I know you have a packed schedule. My final comment would be, I. I do really appreciate this. I think it's a good, great graphic. But my colleague, we haven't seen the investment on the R and D. You know, this is, again, in the Federal Government that all of a sudden now we're going to be manufacturing.

But we know, in fact, during those manufacturing jobs, the infrastructure has to be there and available.

I think something some have kind of said, it's that it's so swift that we can be manufacturing in a few months when we know, in fact, it would take a very long time to set up not only with the local government as far as permits and all the things that need to happen, but investments as well.

So if California is going to really want to, in essence, focus back on bringing back manufacturing, which I know we already are doing quite a lot, but adding to that, then looking at that tax credit, the government would be important. Not sure that that's going to happen again in this budget, but in the future it's really important.

But also. Not everybody had to hear all that. That's okay. But I would definitely concur about the anchor. I mean, we know particularly for women in the workforce, childcare is not only imperative, but. But it definitely has shrunk since the pandemic.

And it's not only less opportunities for childcare, but it's more expensive, which is reducing many times women's options as far as getting back into the workforce. And then, of course, you've heard me talk endlessly about housing, so I will leave it there. And we appreciate so much your attendance. Nice to see you. In a decade, He.

He's just gonna be, Be. Be our next Governor here, I think. All right, thank you so much. All right, I am going to be handing this over. Assemblymember, if you don't mind, because I got to go to issue number two. Okay. Just have to sign it.

Welcome. We'd like to go ahead and invite our panelists to begin with issue number two. If you want to introduce yourself and begin your presentation at your leisure.

Great. Good afternoon, Acting chair Members. My name is Scott Dosick. I have the honor of serving as the Deputy Director of the California Competes program here at Go Biz Governor's Office of Business and Economic Development.

We had some questions that we'd received in advance we were able to discuss with staff, so we thought a very brief PowerPoint might be helpful to kind of set the stage. As a reminder, we're here today because building off of the success of the California COMPETES Tax tax credit.

The Governor's proposed budget this year includes a $60 million item to bring back the California COMPETES Grant program.

The tax credit has been recognized by the ppic, a UC Irvine study and others as being one of the most effective tax credit or incentive programs out there for bringing businesses to the State of California, for keeping them here and putting Californians to work in high quality full time jobs.

The one biggest limitation of the tax credit is a non refundable state income tax credit credit which means if a business does not have state income tax liability payable to the Franchise Tax Board, it can is unable to monetize the non refundable tax credit and which means without the grant program we have no vehicle for reaching out to those types of businesses to recruit them to California or to incentivize them to stay here and put more Californians back to work.

So with that I will jump into the again a brief PowerPoint. I will go very quickly, but if I go too fast, you have questions. By all means, please. So already addressed the first slide and so as we go on to the second slide. zero, do we have a clicker? Outstanding. Maybe.

Okay, so as I'll go over so I've already talked about the non refundability aspect of this. Every company that is awarded a California COMPETES award, be it a tax credit or grant and for this presentation I'm going to use those terms somewhat interchangeably. They're not, but the way they operate is the same.

So every company that's awarded a credit or a grant signs a five year contract that clearly lays out how much credit they get over the five year period if they achieve their milestones as they laid them out in their application. While the credit is non refundable, it does have a six year carry forward period.

So if they earn the credit but can't utilize all of it due to limited income tax, it does carry forward for six additional years. I'm not going to go over all the evaluation criteria. They're here for your reference.

But I think most importantly and Director Myers alluded to this a minute ago, the overarching principle behind California Competes and this is language that was added to our statute when the program was first renewed in collaboration working with the Legislature and large responsibility.

Response to the feedback we received from LAO about how do we ensure it's only tradable jobs that are truly getting incentivized. So this clause really is the overarching guiding principle behind California competes.

How do we make sure that this credit or grant is truly a material factor in the business decision making process to come to California or stay here and put Californians to work in high quality full time jobs that would otherwise not exist, that would not be created in the state.

But also ensuring that these jobs that incentivizing this business would not give it an unfair competitive advantage over other local businesses that provide the same products or services. And we do see a lot of those types of applications from gas stations, nail salons, local retail and retail service sector jobs.

And we refer them to other programs within the state, especially through our Office of a Small Business Advocate. As I mentioned earlier, every company that's awarded a credit or grant signs a five year contract that clearly lays out how much credit or grant they get each year if they achieve their milestones.

And so the example we have here from the fictitious business Widget manufacturing shows that they're proposing to grow from 48 to 88 employees over their five years if they create all those jobs, if they pay their new employees the wages that they committed to, if they make the capital investments that they said, then over the course of the five years they'll be able to earn a $1.1 million tax credit.

But what happens if they don't achieve all of their milestones? For example, and I have a number of different scenarios, but let's just pretend that they never get above 70 employees in that situation.

They would have and they but let's assume they met all their other milestones, their wage milestones, their capital investments, so they achieve their milestones for the first three years they earn that credit or grant, they don't achieve the milestones for years 4 and 5, they're unable to receive those funds, so they get to keep the money that they earned, the credit that they earned, or the grant that they earned for the first three years, but they basically then forfeit the remaining roughly $605,000 that they otherwise potentially could have earned if it was in the tax credit.

The those funds get recaptured and then cycled back into the program. If they're grant funds, they basically go back into the General Fund.

Once a company is approved for a credit or a grant, we publish all the information on the website, including a link to their agreement that shows the number of jobs that they committed to create their industry, where they're located, the wages that they committed to capital investments, all the stuff you saw on that milestone chart on the previous slide.

And the Franchise Tax Board for both the tax credit and the grant has the oversight responsibility. They will provide, conduct a books and Records Review, which is basically a slightly limited scope audit of every awardee at least once and usually more than once to validate the information that they provided.

And in the event that the company did not achieve the milestones or FTB discovers any form of malfeasance, they have the same tools in their arsenal for both the grant and the credit to recapture those funds to recoup those funds from the businesses.

The next slide just shows you all the different resources that we have on our website. We constantly, every day are referring businesses. Please look at the faq, look at the application guide, sign up for a webinar, watch the recorded webinar. We have lots of resources.

Please avail yourselves of them and I'm very proud of the fact that I've been with Cal Compete since since the program started 11 years ago. I started two days before Cal Compete's launched.

We have responded to every phone call and every email within one business day and it's our ongoing commitment to every business that reaches out to us. We will get back to you within one business day if we don't answer the phones right on the spot. And with that, I'm available for any questions you might have. Thank you.

Nick Thomas, Department of Finance no comments. At this time, but happy to answer any questions.

Thank you. Rowan Isaaks, LAO so I'll just start by giving a brief summary of our perspective on CalCompetes more broadly. I'll bring up a couple of items related to fiscal oversight and the 30% cap that's in the trailable language, and then finally just give our recommendations on this item.

So we concur that the grant does address a valid limitation of the tax credit, being that some proposed business expansions might be competitive for a tax credit but are not eligible because of their lack of tax liability and so won't be incentivized to expand in the state.

The evidence for the tax credit is relatively good and compares pretty favorably both to other tax credits in the state, but also compared to other tax credits throughout the country as well.

Conceptually and I think Scott did speak to some of these as well, but there are specific features of the credit, such as the milestones and the strong recapture provision that really, in our perspective, reduce the downside risk to the State of making awards in the case they don't work out.

In addition, rather than simply allocating credits until the funding for the year has been exhausted, Gobiz only really makes agreements for proposals that they determine will provide a net benefit to the state economy. All of this evidence is about the tax credit program and the grant has not been separately evaluated.

There could be differences between the two stemming from the fact that the grant is likely to have a very different pool of applicants to the tax credit. But because the evaluation that Gobiz does is essentially identical for both the tax credit and the grant, we're fairly optimistic that the grant could be similarly effective as the tax credit.

One thing we want to bring up related to fiscal oversight is that the rationale for the grant rests on the inability of an applicant to use a tax credit. And in the statute, the only explicit requirement for this is that the applicant has not sought a tax credit for this proposed investment.

Now, the CalCompete staff makes the judgment of eligibility or ineligibility for the tax credit along with their usual evaluation of applications. And we don't have any reason to think that CalCompete's team is not doing a good job of this. But from an oversight perspective, the lack of an explicit criteria for the grant does.

Does make it difficult for the Legislature and for us to externally evaluate whether the grant applicants truly are not able to utilize a tax credit. Finally, for the trailer Bill language about the 30% cap on awards.

You know, there are various trade offs involved with having a cap on awards, but since the proposal is $60 million for this round of grants compared to 120 million for previous rounds of the grant program, this generates more of an argument to either relax or eliminate the cap in this current round.

Just because of the reduced size of the program. The cap would be more restrictive for Gobiz. So finally, just for our General recommendations for this item, given the good track record of the tax credit funding, an additional round of the grant could create jobs at a time when private job growth in the state has been relatively sluggish.

However, we recommend weighing the priority of what we view as supplementing already well functioning program relative to funding other budget items. Especially given the year to year nature in which the grant program has been funded in the past.

We think both for this proposal, for this additional year of grants and going forward, we think working with Gobiz to develop a way of incorporating more explicit requirements for grant eligibility that can be observed by the Legislature and by us would definitely help with oversight. Thank you very much.

Thank you. Did we. You were just responding to the initial. Okay. All right, welcome. So we will then see if we. Do you have any questions? Assemblymember? No. All right, I do. On.

Can you the Department explain how the recapture process works for the tax credit and Grant program and what are the reasons for recapture related to our tax credits being recaptured or just a portion?

Certainly if you look back at the PowerPoint, there's one of the slides has the milestone chart on it. I think it's about halfway through. And one of the great things about California Competes is every company that is awarded, and again I'll use the terms grant or credit interchangeably for contractual purposes.

Any company that's awarded a credit signs a five year contract agreement that lays out, here's how much credit you can claim if you do what you said you were going to do for each of those five years. If a company and a company has all five years of the agreement to play catch up.

Because we all know when we look in our crystal balls, they get a little murky 1 and 2 years out, let alone five years out. And so it provides that flexibility. But the example I used with widget manufacturing where they were proposing to add about 40 jobs. What if they only get about halfway through there?

Something changes at the end, they find some efficiencies or demand for their product decreases. They only achieve half of their milestones. In that situation, they're only going to be able to earn about half of their credit. The half that they did not earn, they never got in the first place.

That amount would be recaptured and go back into the, to the recycled back into the tax credit Fund. In the case of the grant, it would simply be returned to the General Fund and that would be the end of it.

And then I know that there are many applicants and the process is very selective. Can you kind of go through how you end up selecting and then if there are obviously many that are not selected, how do you communicate back to them?

In the essence, if they wanted to apply again, you know, as far as an application, is there something that they missed or so forth?

Certainly. So again, one of the overarching evaluation criteria for Cal Competes is ensuring that this credit or grant will truly be a material factor in the business decision making process. It's more than simply stating California might be more expensive than other states that they're looking at. We take an incredible.

And again, this is the statutory criteria of evaluating the extent to which the credit or grant will influence the applicant's ability or willingness to create new full time jobs that would otherwise not be created in the state. We take a very deep dive. We're looking at what kind of site selection data have they provided.

Our experience has been companies don't usually wake up on a Tuesday afternoon or Tuesday morning and say, hmm, we should look at expanding in Arizona next week. It's generally a more well thought out process, something that takes months and months.

And when they get to that point where they're doing their cost benefit analysis, they're doing their site selection, our question to them is, and this is a conversation we have with them, when we're talking to them throughout the process, we want to feel like we're in the room with you, with your CEO, your cfo, your board of directors, whoever's making the decision.

What are all the factors you're looking at? Some of them are quantitative. We know that costs, of course, are a driving factor. But where do your raw materials come from? Are they coming in from the ports? Where are your customers or your end users located? Where are your customers and clients located? Are there industry clusters?

What are your sources for your employees? And are these truly transferable jobs that could go anywhere versus those that have to be in certain areas to be in proximity to certain. California is very desirable. Right. We have the best educated, best trained workforce in the nation.

Not all of those jobs are going to be replicable in another neighboring state. So those are the kinds of really deep dives that we're taking to make sure that the company. And this is the exact conversation that we have with companies when they're applying.

Show us your quantifiable evidence and your qualitative data that shows why this credit will truly be a material factor when you're making your decision.

Thank you. That, that's helpful. And for those who are not selected, is there any type of process to communicate back to them on?

We invite them to reach out to us and they can talk to myself or they talk to one of the analysts, whoever that was primarily responsible. Every company is assigned a specific analyst during the evaluation process that guides them, walks them through the process.

I remember being here at this Committee, I think it was two years ago, where I mentioned there's a big difference between a strong applicant, a strong application.

We want to make sure that every company that applies has a strong application where all the information is accurate and complete so we can truly evaluate it on the merits of the case that they're trying to make. So we make it very clear.

We provide the last slide on the PowerPoint was the phone number and the email address. They're always welcome to reach out to us. Most do solicit that kind of feedback and we're able to talk to them, walk them through the evaluation criteria.

You know, we're not going to sit here and tell them specifically, like, here are the keys to the castle. But we show them exactly the type of information that we're looking for in order to truly understand their business decision making process.

And oftentimes that results in them either submitting a more competitive application or acknowledging that this program might not be the best fit because maybe the decision's already been made or they've, you know, they, yes, it would influence the creation of new jobs, but they compete with other local businesses that provide the same services and they understand we can't give them an unfair competitive advantage.

That wouldn't really be net new jobs. That would just be a shell game with the jobs moving them around.

Appreciate that. I think that that's really important to your applicants. And thank you. Any other questions? Anybody from the public would like to speak on this.

Hello. Thank you very much. Chair and Members, Ryan McCarthy with Weideman Group. We have various clients who have benefited from the state's economic development programs in the past who have leveraged them to help make their investments and grow in California.

We very much appreciate Go Biz's efforts and the Cal Competes program and the rationale behind the grant program. Appreciate the conversation today, discussion about refundability, discussion about challenges for smaller emerging startup companies, those without tax liabilities.

We hope that the Committee will consider alongside the grant program additional changes like adding refundability or transferability provisions to the Cal Compete tax credit program. As it considers the grant program.

We think that's an important part to make sure that the long term durable program is available to the widest array of businesses in California, including some of those small startup businesses that might be very promising but don't yet have tax liabilities. So thank you very much.

Thank you. All right, thank you. We appreciate it. And we're going to move to issue number three, CHIPS funding. Welcome back. Please introduce yourself.

Thank you. Chair Derek Kirk, Senior Advisor for Economic Policy at the Governor's Office of Business and Economic Development. So the proposal before you is in support of the semiconductor and microelectronics sector is noted on the placemat that we shared earlier.

It includes $25 million for Natcast, the operator of the National Semiconductor Technology center, to build out the design and collaboration facility that was announced at the end of last year to be located in Sunnyvale.

The proposal would require natcast, on behalf of the Department of Commerce, to front any costs and would allow them to submit for reimbursement on capital expenditures up to $25 million. Our office has formed a deep partnership with NATCast, the Department of Commerce as well as the UC Office of the President and Dr.

Teresa Maldonado on the siting of this facility and on broader support for the semiconductor industry, including the businesses and their workers. I look forward to your questions.

Thank you. Department of Finance

Charles LaSalle, Department of Finance no additional comments.

Seth Kerstein, LAO I think the agenda lays out our analysis on this item in a fair amount of detail, so I'll just hit some high points. Quick summary so we do have three significant concerns with this proposal, and on the basis those concerns, we do recommend rejecting the proposal.

So our first concern is the proposal's heavy dependence on federal funding and the extent to which that could make its prospects uncertain. Our second concern is that simply due to the state's precarious budget condition, the bar for new spending outside of the state's areas of core responsibility should be quite high.

And as Director Myers and Assemblymember Ward indicated, with the example of higher education, those core responsibilities themselves play a critical role in the state's economic development. And then third, if expanding General Fund support for commercial activities is a high priority for the Legislature, other programs, such as the aforementioned California Competes, in our view, provide more promising opportunities.

Thank you. Assemblymember. Can you speak to the federal... Obviously this is a big issue right now.

Yeah. So natcast was established after the passing of the federal Chips and Science act as part part of the Bill, and ultimately the Department of Commerce opted, rather than managing it as they would, a national lab with federal employees to set up this separate nonprofit to manage the National Semiconductor Technology Center.

Within the Chips and Science act, there was approximately $6.3 billion dedicated to funding the National Semiconductor Technology center through NatCast. NatCast has received that funding via a signed and completed award agreement between the Department of Commerce and the new nonprofit organization.

And while we are certainly aware of the potential for a cut to happen and the other cuts that are happening in our conversations and in the partnership that we built with NatCast and with the Department of Commerce, we've been reassured that the research and development funding and that $6.3 billion has never been on the table for consideration.

However, the proposal does outline that that the investments would be only if they were to upfront the capital expenditures we would, would and could reimburse them for funding. And so we're consistently looking to watch that and ensure that there's some accountability included.

Because I think unless we have that commitment, it definitely has to have some guardrails. . So please make sure you update us if you hear anything.

Absolutely Madam Chair

You may hear something before we hear something. But with that, no other questions. Do we have anybody from the public?

Hello, I'm Vivek Prasad. I'm VP of Design Enablement at natcast. And like it was stated, it's a private organization, created, purpose built, finest gc. And my other job is I'm a school board Member in the City of Fremont. So to me, education and workforce development and our effort from Natcast do work very well together.

So as Natcast, like it was mentioned, we have about $6.3 billion allocated to us and we have selected three facilities towards that. One of which is the design collaboration facility that we are targeting to be set up in Sunnyvale, California. And an essential factor for that decision was the $25 million.

And there were many states vying for that and actually offering much more than $25 million. But the whole macroeconomic and the workforce that's available here made us select Sunnyvale as the site.

But this $25 million I would see as a tip of the spear, or the engine of a freight train, if you will, that is pulling a bunch of dollars. And the last 2 items, we talked a lot about how to leverage the dollars.

So just this center will actually spend over $2 billion in the Bay Area in California. So that's a good multiplier for 25 million. And the checks and balances are there in the proposal. So if we spend the money, we'll ask for reimbursement. So with that, I'll say just one more thing.

In my role, I have spent many years supporting China, supporting India, supporting Europe with their chips act type efforts that started much before us did. And you can see the growth that happened. And 40 years, 50 years ago, we sent our manufacturing out and now we are sending our R and D out.

So while we are trying to bring back manufacturing, this is the effort to actually keep R and D here. And offshoring is a corporate strategy everywhere. So that's why my sincere ask is for you to keep this 25 million so that we don't reopen the location discussion again with Department of Commerce. Thank you.

Thank you. We appreciate you being here.

Chairman Nick Romo on behalf of Stanford University in support of the $25 million to establish the headquarters and facilities right here in Silicon Valley as a premier research institution. We are excited about the synergies that this project will bring to the state. Certainly, as the previous speaker mentioned, will catalyze jobs and economic investment and return. So thank you so much.

Thank you. Definitely want to see that. I think we had one last question.

Yes, and I apologize if you already answered this, but again, I have concerns about just where we are as a state and our current budget crisis and how we're trying to allocate different funds. So I want to ask again your concerns about the federal investments and what happens if those are not fulfilled?

Where, where does that leave us as a state in terms of the contribution that you're asking us to make?

Assemblymembre I appreciate the question, and I think it is. There's a lot of different ways to answer it, particularly because there's a couple of scenarios that could be played out.

One, in which all of the CHIPS and Science act funding is frozen across the country, at which point other countries are eagerly lining up to take the semiconductor industry away from the United States and taking as much of it away from California as possible.

California has received to date just over 1% of the more than $57 billion appropriated for incentives and R&D in the Chips and Science Act.

And so I don't believe our companies would be directly impacted at a super significant level if the CHIPS and Science act were to go away, although there certainly are a few deals that could be significantly hindered by that ability for us if the money was frozen and then the site was relocated or the site selection was reopened. Other states were offering upwards of $100 million to site this facility.

And ultimately, what we view this facility as is an opportunity to keep the students that are coming out of the engineering programs across California in this state, ensuring they have a more accessible and affordable dry lab and networking facility with other semiconductor professionals from small entrepreneurial companies, from large companies like Applied Materials and LAM Research and others.

And so for us, this is, you know, a $25 million investment from the state, to Mr. Prasad's point, could lead to several $1.0 billion of investment in the continuing growth of the semiconductor industry.

If, if that, if this facility were to go away or be relocated, we run the risk of that, that, that investment going other, other places, places like Austin, Austin, Texas, or other communities across the country that are quite eagerly waiting for us to try to slip in this industry and for them to pick up those jobs.

And Lauren Greenwood with Go Biz as well, I think we do want to share confidence in the Federal Administration's investment in these macroeconomic conditions that you all heard about. They're committed to supporting national security. They want to see Made in America manufacturing. And so the CHIPS funding is just hits home in those areas.

And then with the DCF investment, California would have about 2% of the total amount available for the CHiPs funding.

Thank you. We heard from the public in that. We appreciate you being here. Thanks so much. We are going to move to item number four. Regional initiative for social enterprises rise.

Welcome. Hi, how are you?

I'm well, thank you. Good afternoon, Chair Quirk Silva and Members of the Committee. It is an honor to present the work of California's Office of the Small Business Advocate.

I am Tara Lynn Gray, Director of the office which is housed within Go Biz and CalOSBA, currently manages nine active programs representing more than $141 million in appropriations, including 25 million for CA Rise. We are here to consider $17 million in additional funding to continue CA Rise.

The renewed funding will support direct funding for employment, social enterprises and customized technical assistance to build the capacity at individual organizations. The current CA Rise program provides financial and technical assistance to ESCs for purposes of accelerating economic mobility and inclusion for individuals that experience employment barriers.

We know that CA RISE is the nation's first statewide capital and capacity building investment of this kind. I look forward to your questions.

Thank you. Appreciate that. Any comments from the Department of Finance?

Charles Lasalle? No comments at this time, but here for questions.

All right. And our friends from the LAO.

Thank you, Chair. Member Alexander Bentz, Legislative Analyst Office we do recognize the need for effective programs in this area, but given the available evidence, we believe this program is unlikely to be effective.

We suggest that the Legislature consider rejecting the proposal, but we also do provide some suggestions for modification if the Legislature would like to make it a priority. So CA RISE supports organizations and businesses that in addition to their business or their nonprofit mission, provide employment and training to individuals.

And so that's the ultimate goal of the program, to lead to long term stable employment for the participants. This program was modeled on a similar program in LA County which is called LA rise. It had similar goals, supported many of the same organizations, many of the same populations, and it was supported by the same technical assistance provider.

And so we have very little information about CA rise, the first round of CA RISE grants in particular, but we do have more information on LA rise. So I'm going to base a lot of my analysis here on La Rise.

Unfortunately, La Rise, which was evaluated by an external evaluator between 2015 and 2018, did not lead to long term higher long term employment among participants. Participants, while they were in the program, while they were receiving subsidized employment, had higher employment and earnings, but no higher employment after they left the program program.

And so based on this, we recommend that the Legislature consider rejecting this program. However, if you do, if the Legislature would like to prioritize it, we suggest requiring a rigorous third party evaluation. It could be that some of the models of the organizations being supported have more promise than others and are more effective than others.

And by having a rigorous evaluation we can learn that. We also have a couple other recommendations that are on a post on our website. I'm happy to go into more detail on those, but I'll leave it at that for now. Thank you.

Thank you. Assemblymember

Yes, well, that's concerning. Can you talk to me a little bit more about the how successful this program has been and how many people are actually employed?

Sure. If I may, Assemblymember, just first address the similarity and the correlation I think that LAO is making between LA Rise and CA Rise. I would like to note that the programs are distinctly different.

The La Rise program is based on subsidy to support headcount at individual organizations and it is more about a very specific job job placement. Whereas CA Rise is a statewide program that makes a programmatic investment in the capacity building for the grant recipients and so is supported and calculated differently than La Rise.

So we currently have a headcount over 13,000 among the 61 ESCs that are grant recipients in the first iteration of the program.

Can you repeat that number one more time?

Sure. We have over 13,000 headcount for employees of the 61 current ESC grant recipients.

Okay. And those that number, the first number, those are people that have been served through the program who have gotten employment and are now permanently employed.

So many of the ESCs are long term programs and the headcount, unlike a traditional workforce development program, is not for a fixed period of time. These folks are being trained and experiencing longer term employment at these ESCs.

Okay.

If I may also share that there are metrics for specific reporting that the grantees will report on. We are expecting the midterm survey assessment which is currently in progress and data to be analyzed by mid April.

Further interviews of the high barrier employees that are being served through the program is also underway and will be completed by mid month.

There will be a final evaluation at the conclusion of the program in September 2025 and the metrics that will demonstrate the impact that I think you're asking about will be the number of people employed by esc' the ESE earned revenue or diversity of revenue sources, greater integration with public sector and the number of ESE business lines. No problem.

So you'll have more of a report that measures the success of your program through this process? Process, yes. Okay, got it. But is that going to be out? And before we we vote on this item, what's the timeline for that?

So the conclusion of the program is. And the final report is September 2025, that's its due date. We will have a midterm evaluation that will be before the end of of the process. But the final report is not until September 2025.

So we were expected to vote on this pretty soon without having the report that talks about measuring the success of the program.

Lauren Greenwood with GoBiz yes, the timing is a little bit difficult, but we do note that when Calospa worked with the program administrator, redf, there was significant over subscription in dollars request. So we do know that there's a significant demand. This is a vulnerable population and so we don't want to wait on helping these individuals.

I'm chair of labor, so I'm aware of the importance of making sure that folks who need a job are placed into employment. But I'm also concerned in making sure that we're not just counting hats, that they're actually getting full time employment that's actually permanent and that these dollars are going to serve that purpose.

And so, you know, it's frustrating when I come in here, we're asked time and time again to vote on millions of dollars and when we ask simple questions like what is the what are you using to measure the program success so that I can evaluate whether or not the money is going where it's supposed to go and it's fulfilling its purpose.

So to hear that the report is not going to be out before we're asked to vote is concerning. But I will leave it at that. And thank you. We will now have public comment.

Assemblymember thank you. My name is Darby Kernan. I represent REDF who is working on the Cal Rise program. REDF is a nonprofit that invests, supports and provides technical assistance and support to employment social enterprises, a third of which the grantees are in the Bay Area. We support the governor's January budget and disagree wholeheartedly with the lao.

There is a lot of evidence and data that shows the work that REDF is doing is successful. Mathematica has done work in this area and ESCs are evidence based.

The data shows people working at an ESC experience an average of seven years of income growth, job sustainability over 253%, increase of housing stability and a 66% decrease in usage of government benefits as individuals become more economically self sufficient.

And I think just the last thing to point out is that the people that the employment social enterprises are hiring are people who are formerly incarcerated, formerly homeless, disadvantaged communities.

And as the economy gets worse, we know those are the people who get pushed out of the economy more and so having the state make sure that the businesses as well as the employees are getting the services and the help they need to continue and grow and be sustainable, that's what our budget should be used for. We support the Governor's Budget. Thank you.

Good afternoon, Committee. My name is Gregory Nottage, and I'm a proud representative of Downtown Streets Team, one of many organizations empowered by CA Rise. We have programs in 16 cities throughout six Bay Area counties. I'm here to strongly urge your support for the governor's proposed $17 million investment in CA Rise. Because of this program.

This program's investment in capacity building, our social Enterprise has hired 306 Californians in 2024 alone, producing $2.7 million in taxable payroll. These are not just jobs. They're opportunities for people overcoming homelessness, incarceration, and behavioral health challenges to reclaim their lives and contribute to our community. CA RISE is more than a budget line.

It's a proven strategy for building stronger, more inclusive California. When you invest in CA Rise, you invest in equity, workforce innovation, and the resilience that defines. Defines our great state. Thank you for helping build an economy that works for everyone.

Good afternoon. Abigail Smet, representing the San Gabriel Valley Conservation and Service Corps, the Conservation Corps of Long Beach, Conservation Corps, North Bay, and the San Jose Conservation Corps, all strongly in support of the Governor's January proposal for CA RISE funding. Thank you.

Good afternoon. Madam Chair and Jennifer Roe, on behalf of Capital advocacy with the Association of California Goodwills. Four of the Goodwills throughout the state are CA RISE participants and have seen strong results from the program. So look forward to having further conversations with you about those. Thank you.

Hi, I'm Min Chang and I'm CEO for Homebridge. So we are a nonprofit based in San Francisco. The work that we do is home care, so caregiving in the city. We actually serve the most vulnerable. In San Francisco, it's older adults, adults with disabilities, folks that are on Medi Cal. We're part of the IHSS program.

And the reason that I'm bringing this up is because the caregiver workforce, as you all know across California and also in San Francisco, is one that's really hard to hire for, recruit for, and also to retain. Well, I can tell you that through the funding from CA Rise that we actually have an amazing workforce.

I don't have a shortage of caregivers. We actually recruit onboard and train, and we target the immigrant and refugee population in San Francisco. So we hire folks, we bring them in, teach them English. We actually teach them home care in a 12 week comprehensive program.

So the funding has actually allowed us to build that capacity to actually be able to have a really robust, wonderful caregiver workforce. And we're doing it just now for Homebridge employees. But I fully intend to build that caregiver workforce, not just for Homebridge, but actually for San Francisco as well, because it's really important.

The last thing I want to emphasize is this year we're actually doing shelter care. So we're partnering really closely with Mayor Lurie's agenda because as you know, homelessness is a big issue in San Francisco. We have 20,000 homeless on the streets.

And for us, as a strategy, what's really important is to bring people off the streets into shelter. But shelter care itself is also very intermittent. Eventually when to bring them into permanent support of housing. But housing isn't the only piece that's important. The care that goes with it is super important.

And so for us, it's about that care that wraps around the house, housing and the workforce development piece of actually building that caregiver workforce is really important. So I just want to leave you with that impact that's really important in terms of our community in San Francisco. Thank you.

Thank you. Madam Chair Jason Schmelzer here on behalf of the Center for Employment Opportunities. I want to take a second, just align myself with the comments that have already been made. CEO is a beneficiary of California RISE as well. We provide critical services and immediate employment to people returning from incarceration.

A long time wraparound vocational service that aid participants in the pursuit of quality jobs. We really support the Governor's January proposal and hope you vote. I thank you.

Good afternoon, My name is Shelby Mason. I'm representing Goodwill Central Coast CA RISE grantee in the areas of Santa Cruz, Monterey and San Luis Obispo counties. We request that you do support this proposed 1 time 17 million investment into California Rise.

The CA Rise initiative supported our employment social enterprise specifically in increasing the number of Californians receiving employment, support services and opportunities by 34% in 2024 over 2023, as well as placing 708 Californians into jobs of which over 500 are permanent unsubsidized employment.

Many of these individuals are overcoming challenges like homelessness, reentry and incarceration, mental health issues and lack of education or training. Investing into CA RISE means investing in talented individuals who are often sidelined from the labor market, as well as eses who are well equipped and extremely effective at creating jobs for everyone, especially those with barriers to employment. We genuinely thank you for creating an economy for all Californians. Thank you.

Seeing no other comments, we will move to the next item. Thank you. Okay, so we are moving on to issue number five. Five want to welcome the Department of Financial Protection and Innovation. You can begin whenever you are ready and please introduce yourselves.

Thank you. Good afternoon, Madam Acting Chair and Members. My name is Sophia Smith and I am the Deputy Commissioner of Administration at the Department of Financial Protection and Innovation. With me today I have Sarah Squires, Chief of our Fiscal Management Office, and Suzanne Martindale, C, Senior Deputy Commissioner of Consumer Financial Protection.

Thank you for having us this afternoon. I'm here to provide an overview of our trailer Bill Language and budget change proposals. The Department has two BCPs in the governor's proposed budget and has requested trailer Bill Language to update fees in various programs. Our first BCP is for IT security unit workload.

The governor's proposed budget includes one IT specialist, one. And an increase in expenditure authority of 223,000 in 25-26 and 212,000 in 26-27. And ongoing for the Information Security Unit to strengthen cybersecurity measures, reduce risk exposure, address compliance gaps with state mandated security requirements and remediate security audit findings. Thank you. And we're available for any questions you have.

We can now hear from LAO... Okay. DOF.

Taylor McRho, Department of Finance. We have no comment at this time

and I actually don't have any questions, so. Okay, so we can move on to issue number six, the rent increase.

Thank you. The Governor's proposed budget includes an increase in expenditure authority of 1.1 million in 25-26 and 1.4 million 26, 27 and incremental increases ongoing for costs associated with our Sacramento headquarters rent increase and as we transition to the May lease date office complex. Thank you. And we're available for any questions.

Okay. Do we have Lao or Finance?

Heather Gonzalez with Lao. No comments on this one.

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

Okay. I do not have any questions. We will continue to move on issue number seven.

Okay. And this is our trailer Bill proposal. The DFPI plays a critical role in regulating and overseeing a broad range of financial institutions to ensure consumer protection and market stability. However, many of the department's fees have remained unchanged for decades despite significant shifts in the regulatory landscape and rising operational costs.

Some fees date back to 1959, while the most recent fee adjustments for some programs were made in 2013. When coupled with annual increases in Department and program operating costs due to inflation in the Consumer Price Index, rising medical care costs, and salary increases.

These factors have caused sharp increases to program costs which have exasperated the program fiscal deficits. In addition, recent new laws including the Debt Collection Licensing Act, California Consumer Financial Protection Law, and the Digital Financial Assets Law do not yet generate program sustaining revenues.

These laws have created costs, including startup costs, that the Department has had to absorb within existing resources and without new revenues. Startup costs such as hiring teams, building IT infrastructure, and developing initial regulations for program implementation are incurred before DFPI starts to bring in revenue to support these program operations.

The DFPI has been able to sustain operations despite the fiscal deficits by maintaining optimal program efficiencies and utilizing Fund balance reserves created by enforcement actions. However, Fund balance Reserve have dropped at an alarming rate in recent years as a result of the supporting startup costs for new mandated programs.

To address these fiscal challenges, the Department engaged in independent firm Crow LLP in January 2024 to conduct a comprehensive financial analysis which was finalized in November 2024. This analysis reviewed historical and projected data, examined revenue and expenditure trends, and addressed long term sustainability of existing fee structures.

The study found that if the current fee structures remain unchanged, the Department risks insolvency by 25-26 and that the Department must take steps to right size several programs funding models, including some programmatic fee adjustments. Without appropriate adjustments, the Department will face substantial financial shortfalls jeopardizing its ability to operate effectively.

This financial instability directly threatens the Department's capacity to fulfill its critical mission of protecting consumers from fraud and financial harm. CROWS findings underscore the urgent need for fee adjustments to maintain fiscal stability and ensure that each program is appropriately funded to meet its regulatory obligations.

As the Department takes steps to right size its funding model, it remains committed to efficiency, long term planning and aligning costs with the services provided so that DFPI can continue to fulfill its statutory mandates effectively.

The proposed trailer Bill Language includes targeted fee adjustments for key programs including broker dealer, investment advisors, franchise, California residential mortgage lenders and escrow, reflecting current regulatory demands and operational costs after decades of unchanged fee levels.

The proposed trailer Bill Language also adjusts the Commissioner's existing authority to set hourly examination rates based on on estimated average costs, including overhead, allowing for annual adjustments to maintain consistency across programs with the proposed statutory changes.

Effective July 12025 the Department will align program revenue with operational costs to address the shortfall from fiscal year 2324 through fiscal year 27-28, ensuring long term fiscal stability of the Department and its ability to effectively regulate financial institutions and protect consumers. Thank you and we are available for any questions.

Yeah hi, Heather Gonzalez with the LAO we have a two part recommendation for the Department's proposed trailer Bill. We recommend first that the Legislature approve the proposed fee increases on a three year limited term basis, during which time we recommend that the Department report on actual revenues collected as a result of the new fees and on economic conditions for the franchise, mortgage lending and escrow industries in the state, which are slated to receive some of the larger fee increases in the Bill.

We additionally recommend that the Legislature direct the Department to provide the Legislature with detailed and specific information about how it intends to fully Fund the programs that are not in this proposal. Now, our reasoning for this set of recommendations is as follows.

As you'll note from your agenda, the Fund that provides the majority of revenue for the Department is projected to reach insolvency in 25-26. The independent evaluation, the CROW study that was referenced earlier indicated that the Department needs almost 200 million more between 2324 and 27-28.

Of this amount, the Department needs about 112 million for the new programs that were referenced and about 80 million or so for existing programs, again through 27-28 in order to maintain currently authorized program and service levels. So why are they in this position?

According to the evaluation, the Department has a structural deficit that stems from a mix of costs, such as annual salary adjustments that are agency wide, as well as startup costs associated with the new programs that have been coming online and insufficient revenue from both new and existing programs.

And to address this deficit, the Administration has provided you with the trailer Bill Language that would allow it to increase fees in some, but not all programs. The programs for which the Administration seeks fee increases are listed under issue 7 in your hearing agenda.

And as I stated at the outset, we we do recommend that the legislation approves those, but on a limited term basis, and this will provide you with time to gather what we think are two key pieces of information.

First, it will allow you to see how the industry responds to the new rates and whether the fee result in any harmful consequences to firms or the economy. Second, you'll see how much actual revenue the Department collects under the new rates and be able to adjust if necessary.

We don't have a good sense of how it's going to match up if the Department also produces the market condition reports that we recommend. Then combined, all these data points should give you a deeper view of the trade offs that you're looking at, which you can then use to see how you want to set the fees thereafter.

In addition, our recommendation comes with a second part and and that is that we encourage you to direct the Department to provide detailed revenue plans for the programs that aren't in the proposed Bill. As stated previously, we're looking at about a $200 million gap and we need to understand a little bit more about how to cover the whole cost.

So we understand that the trailer Bill would only address about 50 million of the shortfall, which leaves about 30 million in needed revenue for existing programs and the 112 million for the new programs that aren't that those aren't in the Bill.

We understand from the Department that they believe they have sufficient statutory authority to increase fees to Fund these existing programs and that the new programs will become self sufficient. However, we recommend directing the Department to provide you a detailed plan of how that's going to happen in order to ensure that they remain solvent.

And these details again should give you specifics about what fees they will raise by how much and how much they expect to gain in revenue as a result. And then in addition, we hope that the Department would provide the Legislature with a plan indicating what they will do if revenues continue to come in lower than costs.

This will allow you to ensure that any Department led changes are consistent with legislative priorities.

Taylor McRho, Department of Finance the Department of Financial Protection Innovation Their Financial Protection Fund is headed towards a negative Fund balance of 2.8 million in 2025-26 growing to 37 million in 2026-27 and 74 million in 27-28.

DFPI's proposed statutory changes to increase fees across all of its programs will enable the Financial Protection Fund to maintain solvency and continue to sustain the operations of its programs per the LAO's recommendation.

If DFPI if DFPI's fees increase were only approved for three years, it would create challenges for DFPI to augment its budget for ongoing resources if it cannot secure long term sustainable revenues to support the Fund.

While we can understand the desire to monitor the health of the Financial Protection Fund, this approach would make it difficult for DFPI to be able to address new long term workload needs that may arise in the next few years and the Department may face difficulties with hiring limited term positions.

I would like to emphasize that the fee increase proposal is based on the needs of the Department based on a five year window and impacts fees that may that have not kept up with rising operations costs.

DFPI will monitor and evaluate its revenue and expenditures as needed annually across its programs to sustain the health of the Financial Protection Fund.

Any other comments?

Yes. Madam Chair, if I may respond to the LAO's recommendations? Thank you. While we are open to discussion, we do have concerns with limiting proposed programmatic fee adjustments to three years.

A limited three year fee increase would reduce the ability for the Department to forecast appropriately for cost recovery and limit the Department's ability to provide certainty to licensees at the dfpi. Licensing fees are directly tied to our work. The Department is required to recover its costs.

We commissioned an independent fee study to demonstrate in detail appropriate fee recommendations for each program to achieve appropriate cost recovery. Further, this limited increase proposal also creates uncertainty for our licensees.

We have heard from them that one of the things they value most is certainty so they will be able to adequately future plan and account for regulatory costs.

This is why we have proposed a plan and conducted a five year review of all of our DFPI's programs to identify any and all program deficiencies, both current and projected in the future.

The Department's plan is to utilize its existing authority to resolve deficits beyond those that require statutory changes and will conduct an annual evaluation of fee and assessment levels to ensure they align with actual costs and economic conditions. Any adjustments will be data driven using ongoing analysis of revenues, expenditures and workload demands. Thank you. And we're available for any questions.

Thank you. I apologize, I missed some of the beginning part. I think I've gone up and down these step stairs about 10 times today, so I already have my steps in. So that's good. But as far as your initial remarks as I didn't hear those, but I do have my notes here. There are many.

A list on page 17 of many increased fees. Some of them are $15 and haven't been changed for many years. Others have not been changed since 1989, so quite a long time. So I definitely can see the reasoning behind that. But some of them are quite large, particularly when you look at the mortgage lenders and services. The escrow. I think the escrow looks like it's triple. Can you remark on those?

Yes, I can. Have Senior Deputy Commissioner Greg Young come forward and he is able to answer those questions. Thank you.

Thank you Madam Chair for your question. Again, Greg Young, Senior Deputy Commissioner over the Division of Corporation and Financial Institutions with dfpi. The fee increases for escrow and CRMLA are based on the recommendations from the fee study conducted by crow. The fees for the programs have not been raised since 2000 and 2001 respectively.

Since fees have not historically kept pace with inflation, salary, benefits and other administrative costs, the Increases in fees aim to cover program costs going forward. This process will include annual reviews to monitor programmatic revenues and expenses are appropriately aligned. Furthermore, the increasing cost of regulation goes beyond inflation.

It includes new and improving regulatory standards and the addition of new laws since fees were last increased. This includes changes after the mortgage crisis, pandemic, specific rules and other similar changes.

Thank you, appreciate that. Can you just stay up because we may have another question in a bit, but I do want to go back to the Lao and can you respond to the DFPI?

And now we're speaking internal language because most people don't know what an LAO or what the DFPI is, but concern about the LAO suggestion for a three year limited fee approval.

So our rationale for the three year approval is that because these fees haven't changed in so long and because our economy is undergoing a certain degree of turmoil at this time, that we wanted to make sure that you had the opportunity to revisit that you would get a time period where you could look at how is the industry responding?

What are the economic impacts of that fee? How does you know? Have we seen any changes in the number of firms, the composition of the market, those kinds of things. And then also if it turns out the fees are insufficient or too much money is raised, hallelujah, then you could make some adjustments at that time.

It has been quite a long time since they have adjusted, so a Shorter term would allow you a chance to check in.

Okay. And then let me ask our consultant here, can you remind me, because last year one of these fees came up. Which one was that?

You can answer. Yeah, Genevieve Morales Assembly Budget. Last year, I think this came up because they had done the fees had been proposed to increase. And as a result there was. It wasn't during a budget proposal, but there was discussion about a fee increase.

And so that's why you guys moved over to the study report and the study, as a result of the study is why you have the proposal today. Is that correct? Yes. Yes.

All right, so send. Since last year you completed this study and this is what came out of that?

Yes, Madam Chair.

Well, I'm glad that you did complete the study because it definitely shows some information. I am a little concerned again about the increases, as I know the study suggests. But it is in a time that we have a lot of concerns financially. But I definitely see these dates here of 20001989.

I'm thinking that's 30, almost 36 years. I know that date because my daughter was born in 1989. But the point is definitely see that on those paying the fees, this might be quite nerve wracking for them, especially if they are not noticing these fees and then all of a sudden they get pretty unexpected. Bill.

But that being said, let's hear from the public. Anybody who would like to speak from the public and we're going to keep it to one minute or under.

I can do that, Madam Chair.

All right.

I'm Ron Kingston. I represent the Escrow Institute of California. They, they have serious concerns over the budget. First of all, with regard to the comments that have been made, the CROW study in and of itself said they didn't do an audit of the Department.

The Department has never had an audit and we recommend that an audit be done. The Escrow Institute, they are largely comprised of women owned business, very small. And this is the impact that is being recommended right now. Their annual fee to pay to the State of California is $2800 a year.

They also now are subject to $1000 special assessment which you never ever see any justification. It is just imposed. The fee increase they are recommending can go all the way up to from 2,800 a year to $8,215 a year.

That's remarkable for a business operation that any comparison whether anybody any other industry pays for it for that type of Service. They pay $100 a year for real estate brokers to perform the same service. Land title pays $400 a year, yet we would pay up to $8,215 a year.

We find that to be unjustifiable for a budget that's been identified for 29 people within DFPI to be having a total budget of $7.2 million. That's a quarter of $1.0 million a person per staff. So these are our recommendations as a consequence, number one, as we said, perform an audit of that. We have to do it.

Number two. Okay, we have three recommendations, Madam Chair. Number two is to stop the mandatory audit that they perform on us every four years. We have to turn it in to them once a year. There's no reason for us to have an audit of an audit performed.

And finally, we recommend that the special assessment of $1,000, which you never see the justification we talked about to be eliminated or come back to you and have it justified. That's really, really important. And last but not least, we just want to say the CROW study, they themselves said they didn't do an audit.

So all they did for escrow service is say it's a $7.2 million. The 29. $7.2 million. We're going to wrap it up here.

I think you got three minutes.

Thank you.

Thank you, Madam Chair Indira Mcdonald here on behalf of the California Mortgage Bankers Association. We've been in talks with the Department for over a year about ensuring the California Residential Mortgage Lending act program has adequate funding. And we thank Senior Deputy Commissioner Young and the Department for the Continued Dialogue and the discussion here today.

The trailer Bill Language would triple the annual assessments for independent mortgage banks licensed by the Department and the new expenses in addition to the new audit costs, which were just increased 50% from $80 per hour to $120 per hour charged by the Department when they perform their routine examinations, we remain concerned that their new fees may exceed measurable program costs.

We have also encouraged the Department to consider and implement enhanced efficiency measures in the performance of the Department's regulatory duties, such as incorporating audits conducted by federal regulators and other state regulators in the Department's own regulatory work.

Again, just want to thank you for the opportunity to make these comments today and thank the Department again for the continued dialogue. And we look forward to continued talks about a reasonable budget solution on this item. Thank you.

Thank you. Appreciate that. See nobody else. I will come back here. Again, just looking at the chart on the fee adjustments, it definitely jumps out, particularly the escrow and the mortgage, in some cases doubling or tripling. So I would highlight that as quite a large amount for small agencies or firms to absorb.

Can you respond on the audit part that was mentioned?

Are you referring to the part of the audit every four years? Yes. Okay. That would be Senior Deputy Commissioner Young.

Yes. So the fees reference refers to examination fees as they are charged every four years based on our statutory exam cycle. The dollar amount charged to recover DFPI costs can vary based on the time the examination takes, the size of the firm and the complexity of the portfolio for each escrow licensee.

Most DFPI programs, including independent escrow advisors, undergo an exam cycle and are charged and or are proposed to be charged 120 per hour for an examination. And for clarification based on the proposal in terms of the trailer Bill Language, that annual assessment is not to exceed $7,215 per office location. Thank you.

Thank you. Appreciate that. Would you like to respond?

I just want to provide clarity on the exam hourly fee. The trailer Bill would allow the Department to set it and yes, they have. Look, they're looking at 120. But the authority you would be providing them if you adopted it as they provided it is to allow them to adjust it over time.

And then can you speak to the $1000 that was mentioned as an add on that would take the. The price up to 8,215?

Yeah. Per. Per statute. Currently, per location, it's 2,800 in addition to $1000 that the Commissioner has the discretion if costs are not being covered.

So in fact, it is closer to 8,200.

Yes, but based. Based. Well, no, based on the proposal, based on the recommendation of the fee study that with that new proposed annual assessment of 7215, that the additional 1000 would not have to be applied.

All right, thank you. I think there's some disagreement on that. I'm seeing some faces in the audience, but I would definitely encourage you to keep talking and we will look at this item. We definitely know the intent of. Of what the Department does is worthy, and you need to be able to operate.

On the other hand, we want to keep people in business. So with that, we thank you for being here. And I think that that's ending our budget hearing for today. I want to thank our. My consultants here. They're doing an excellent job. Thank you.