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

Good morning. Subcommitee number four, the Senate budget and fiscal review Committee will come to order. We're holding our hearing today in the state capitol in room 113. All Members of the Subcommitee are present and we do have a quorum, so why don't we begin by calling the roll.

[Roll Call]

All right. Thank you. Yes, all Members are present. We have established a quorum. We will be providing opportunity for public comment as we do each week following the conclusion of the discussion item list. Order of business today is we'll be taking up the items for discussion on our agenda.

First, we also have a list of items which will be public comment and vote only at the conclusion of the items for discussion. Discussion will take public comment prior to taking the Subcommittee's vote. And at the end, we'll take votes on the items of discussion and the items noted on our agenda for vote only.

For each of the departments and agencies that are with us today, we're going to begin with a General overview and status report and then delve into specific budget questions and issues. We're going to start with the Department of Food and Agriculture, if you would please come forward.

So if you would begin with an overview of your core functions and the status report on your major programs. And if you would include in that, please, your progress on the state operations and vacant positions goals for state agencies. And welcome.

Thank you. Good morning, chair and Members of the Committee, I'm Arma Cozina, Deputy secretary for Administration and finance at the California Department of Food and Agriculture. Thank you so much for the opportunity to discuss CDFA's proposed budget for 25-26.

So as you know, CDFA's mission is really to safeguard a resilient food system and promote an equitable marketplace, cultivating a California grown food supply that is globally recognized for innovation, quality and sustainability.

In furtherance of that mission, we support a broad range of functions, some of them you might think of, like protecting plants and animals from invasive pests and diseases, protecting food safety, maintaining inspection standards, and it ranges all the way to functions that you might not expect.

Overseeing marketing orders and agreements, overseeing the network of California fairs, including their pivotal role in emergency services, and overseeing the state's weights and measures standards, which we like to think of as the backbone of commerce in California. The fiscal year 25-26 Governor's Budget proposes approximately 775 million and 2,075.2 positions for the support of the Department.

This includes 183.4 million in General Fund, 203.9 million in industry funds, 127.2 million in federal funds, 169.3 million in bond funds and 91.2 million in other funds.

The budget also includes six budget change proposals which we're happy to discuss today, including 2.5 million for security and infrastructure remediation, 1.6 million in current year and 3.3 million ongoing for operational support at our new Turlock Animal Health Laboratory 242,000 for preliminary labs related to repairs or replacement of our Meadowview lab facility Provisional language to permit CDFA to fully expand the dairy marketing and milk pooling branch.

Remaining assessments 24.9 million to advance the state's farm to School initiative and a proposal to appropriate 131.8 million in fiscal year 25-26 for nine programs identified in the Climate Ban Climate Bond Proposition 4. That's five existing programs and four new programs.

I understand that you're looking for an overview and I want to make sure that I address the questions that you might have. And so I'm happy to take kind of overall questions about CDFA and our budget now or dive into any of the budget proposal budget change proposals that we have.

The department's actions with respect to the vacant positions, targets and other state operation reductions from the Administration.

Sure. I will defer to my partners at Finance about the details of that. Certainly we are impacted. The only piece of our budget that was not impacted by that 8% reduction, operational reduction and the vacancy sweeps was our animal health functions which are currently responding to Avian influenza at the moment.

Okay. We don't need to detail all of them. I think we're more curious as to whether the Department is on track and making its appropriate contributions to the targets and what if they're and what if any are the consequences that the Legislature should be aware of?

Aaron Carson, Department of Finance the Administration doesn't have any updates to the efficiency drills at this time. Those details should be forthcoming on the specifics to each Department and program.

Are there questions from Member of the Subcommitee about the overview? Just have one question and that is you led off with the important work of the Department and its partners on food safety given what you know, the uncertainty at the federal level with our federal partners at USDA around their both authorities and their staffing capability to assure to fulfill their part of the responsibility in the food safety arena.

Are you is the Department monitoring and preparing for contingencies in that space as well, in case California has to step in here in order to give an ironclad guarantee to the people of the state and producers and exporters about the safety of our food supply.

Absolutely. And if you don't mind, I can answer kind of a little bit more broadly even than that on all of our federal funds. But certainly food safety I'll touch on is a big part of that and our implementation of the Food Safety Modernization Act.

So just broadly, the amount of funding that CDFA receives from the Federal Government kind of fluctuates year to year based on a lot of factors. Our needs for federally mandated activities, the needs of other states for those federally mandated activities. You know, we're fighting for that same pool of funding.

And then the volume of emergency response activities for those federal requirements for the for fiscal year 25-26 federal funds will make up about 20% of CDFA's overall budget. It's a little bit hard with the ongoing emergency to estimate the exact proportion. Most of that funding, about 100 million, comes in the form of cooperative agreements.

That's what you're talking about when we're talking about the implementation of the Food Safety Modernization Act. The cooperative agreement with the FDA. The California or CDFA's cooperative agreements are funded kind of primarily by the USDA and then also by the Fda.

And we don't anticipate potential cuts for the current federal fiscal year or sequestration in the current year. However, specific details and amounts for future funding haven't been provided. So our contracts that start in September, we have some early indications of reductions, as you alluded to. FDA has publicly announced kind of reductions for the next federal budget year.

So CDFA's Produce Safety Program, which is funded by FDA, will receive approximately a 10% reduction in the federal fiscal year. Per the cooperative agreement. CDFA is required to inspect 20% of known verified produce farms covered under the federal law.

And as we kind of implement that program, there are a lot of gaps in terms of education and extension to make sure that farmers, particularly small farmers or farmers from disadvantaged communities, are able to comply with that law.

We are working with our federal partners to understand, you know, with a reduction in budget, what is going to be left off the table in terms of the scope. So right now we don't anticipate with just a 10% reduction, a need to kind of step in at the state level. We're looking more at a reduction in scope.

But as we get more information, certainly that'll be a conversation with our federal partners, with our legislative partners with the rest of the Administration. I would also just mention I'm so sorry to take up more of your time, but we do receive approximately 167.4 million in total grants, grant funding from the Federal Government.

USDA has been clear for those grant programs that the priority for current year contracts are any programs that pass through those dollars to producers. And we do qualify for that. Over 80% of the funds that we receive are passed on directly to producers. And so we aren't anticipating any reductions in those programs at this time.

All right. So. Maybe it's to relate back to the secretary. And one of the reasons why I tried to emphasize to the secretaries and the Department directors it's useful when they are here because we're in a period of pretty substantial uncertainty and contingency planning and policy work in addition to the BCPs themselves.

So my question is not so much about the federal cuts to the Department, although that to the agency, which those are very important and we have to be attentive to them, but in the same way that we will be called so this is more for the leadership of the Department and for the Department of Finance and Administration, which is in the same way with UC Research, for example, which is being cut.

But that's not a, it's not, it's not a hit to the state government directly. But we will not our Committee, but a different Subcommitee will have to examine look, if we have 10 research trials underway and they've been underway, we've been following a cohort of cancer patients for 11 years and we're one step away from curing this pernicious form of cancer.

Does the state need to step in if the Federal Government steps away from its own activities and its responsibilities, even if they didn't cut our budget directly?

And so that's the question, I think, in the food safety arena as well, in addition to potentially eroding our own capacity through cuts and grants, is if the Federal Government steps away from particular functions in that chain of assuring safety, California will have to look at what our appropriate rules are.

And that is, of course, that is beyond just the budget section within the agency.

But I'm hopeful that the May Revision and the Governor will be providing us with at least indications about how they might and then how we might also be evaluating the many, many, many issues that we will face in addition to federal funding cuts, but also from federal spending reductions and other areas that aren't directly hitting us, but that there will be significant pressure and often worthwhile and important pressure for us to step in.

So appreciate that. All right, let's move on then to item 12, which is the security and infrastructure remediation proposal.

Sure. Just a brief overview. So the budget includes an increase of 2.4, well, 2,478,000 in General Fund in fiscal year 25-26 and five permanent positions to manage, implement and maintain remediation efforts aimed at addressing real time and critical security vulnerabilities, and to provide urgent and ongoing management and monitoring of new critical security services.

The budget also includes an increase of 4.1 million in fiscal year 26-27 and 3.6 million in 27-28 and ongoing. This is in response to a March 2024 incident in which one of CDFA's public websites experienced a cyber security incident that resulted in a private data breach by an unknown and unauthorized external entity.

In response to this incident, CDFA collaborated with the California Department of Technology to identify the root cause of the issue and develop a temporary solution to prevent further attacks. But it's important to note that the identified solution really is only temporary. And so the requested funding is aimed to implement a permanent solution that addresses the identified vulnerabilities.

So that includes upgrading CDFA's applications to newer platforms, conducting comprehensive security application assessments, and evaluating the criticality of CDFA applications in the event an attacker compromises application integrity or damages CDFA data. Without this funding, CDFA is at risk of its vulnerabilities being exploited, resulting in significant impacts on CDFA being able to meet its core mission.

All right, thank you, Department of Finance.

Aaron Carson, Department of Finance. Nothing to add,

Frank Jimenez with the Legislative Analyst Office. The proposal raised no concerns for us, but happy to answer any questions.

Right, thank you, Members of the Subcommitee. Questions or comments? Senator Niello

A comment, because this is a big deal and it's not just your Department. It is, I think, a countywide, excuse me, going into ancient history, but it probably is a countywide as well as statewide challenge for us.

We were talking about this with staff the other day and one of our staff people said there are hundreds of people knocking on our doors every day and the state has significant challenges when it comes to computer applications and IT processes.

And so I think we need to look at this as certainly a challenge for cdfa, but more broadly a challenge for probably every Department in the state. And this is a. To hire people for this is.

It's a very specialized area where pay rates are a bit high and are we going to be able to compete to hire the people that we need Are we upgrading our hardware to be able to effectively handle whatever software upgrades we need? Those are questions. Just to see what your thoughts are on that. But.

But the point that I'm emphasizing is this isn't just CDFA and it is a huge deal.

Thank you. Yes, I would agree with that. I would also say that CDFA is at a slightly higher technological deficit than maybe some of our other sister agencies and departments. We are, I believe, the only agency. I don't wanna overstate this, but that has a cap on our indirect. That is actually enshrined in code.

And it caps the amount of funding that can go to all of our indirect functions, including it. And so that has made it a little bit difficult over the years to transition. Luckily, we have a really phenomenal IT team, and we've had a really great partnership with the Administration and with the Legislature in the past.

And so we are, to your point, able to address some of those hardware inadequacies based on past funding that the Department has received for IT security infrastructure.

And so we feel like we're in a position now with the hardware upgrades where we can implement all of the recommendations that CDT has made to address the kind of current IT security inadequacies.

You said something that at least I wasn't aware of. It is in statute, relative to your allowance for. For indirect.

IT is. It is in Food and Ag code.

Really? And not for any other Department that you're aware of?

Not that we're aware of, no.

I learn something every day.

That was an Assembly Niello Bill from 2000.

Well, it's been quite a while, so I don't believe.

Going back to ancient history again.

All right. Senator Nielolo raises a very, very important point. I mean, this is a relatively small agency compared to some of our larger ones, and the exposure is substantially, even if even. Even when this one has a bigger technological deficit.

And I mean, obviously our bigger challenge right now is just the General Fund exposure, the General Fund gap that we're anticipating. So any $10 million is not. It's not small change in that. In that regard.

And I hope we're also sort of value engineering this, looking at if there are particular applications in the website or what have you that are not essential. There were also, you know, at a point like this, maybe pause. It may not be true for cdfa, but pause them.

Like, we'll come back to those if it's not essential for public access and transparency or for the processing of applications, but it's just a Nice to have. And it's adding incremental cost itself, then we obviously need to look at that separately, given the General Fund conditions.

But we also need to protect ourselves and our people against these kind of cyber threats.

Absolutely. And we did that assessment as part of that CDT analysis.

Okay. All right, so we're going to hold this item open simply because of the substantial General Fund cost to move to item 13, which is regarding the Turlock Animal Welfare Hospital.

Absolutely. So the budget includes a General Fund increase of 1.61 million in fiscal year 25-26 and 3.3 million in fiscal year 26-27 and ongoing to Fund the increased operational costs associated with the new Turlock North Valley Animal Health Library, which is scheduled for completion December 2025.

And this is in line with the operational estimates that were provided when. When the lab was built. The new facility is larger and significantly more complex than the current facility. It will encompass 41,000 square feet compared to the existing facilities, 5,100 square feet.

The new laboratory includes State of the art labs equipped with advanced biological containment and heating, ventilation and air. Besides all the technical pieces, I think the really important part to hone in on here is this adds whole new capacity in terms of our ability to deal with large mammal mortality.

So at a time when we're experiencing bird flu in our dairies, this is an essential function to be able to do animal necropsies for cows in our largest dairy producing region in the state. So it will allow that addition of a million services and the expansion of testing capabilities, which right now are purely around birds.

For example, currently the Turlock facility is limited to avian services. And so samples have to be sent to either the Tulare facility, which was damaged by flooding, or to the University of California, Davis facilities. So this has led to delays in receiving sampling results. We're really, really excited to have this facility online. And so.

So these are just the operational support costs that go with that new facility.

All right, Department of Finance.

Aaron Carson, Department of Finance. Nothing to add,

no concerns with the proposal, but again, happy to answer any questions.

All right, Members of the Subcommitee, Senator Niello

What I see the increases, and obviously they're, they're large, but you mentioned the increase in the footprint, which is impressive. What's the current costs in the existing facility?

Right now, that is a wonderful question. The operational cost. I've got nothing but one facility. And you know what? I don't have that number off the top of my head. And I'm wondering if someone from our animal health division is here today. Okay. So the CAHPS facilities.

Call a friend. Didn't work. Now we're.

I know. Never inviting her. No, I'm kidding. So we. So our CAHPS facilities, the lab facilities are run by our UC partners. And so we provide the budget to the CAHPS laboratories and then they divide it amongst the lab facilities, which is probably why we're having a little bit of trouble kind of dividing it out.

But we're happy to get that number for you. In terms of the current operational numbers for just the Avian side of the house.

That would be good. There are times when I might intentionally ask questions when I know that the testifier doesn't know the answer. This is not one of those. I apologize for that. It would be good in terms of assessing the. The budget request increase. Absolutely.

All right. I did also have a chance to check in with Senator Alvarado-Gil on the, on the press. This is in her district. But the, the question I wanted to follow up on our. The staff report notes that the Department believes because this has. This facility operates in benefit to the.

To General public health, the Department believes it cannot use its special Fund perhaps at all and that therefore 100% General Fund is needed. So I want to follow up on that. We're not talking. I mean this facility does not exist.

It doesn't exist for wild cows or you know, I mean it is very specifically related to the industry. So what's the reasoning for why this item can't be funded through the Department Special Fund or, you know, in part or in whole?

Absolutely. So it's not a candidate, we believe, for Ag Fund General Fund split because Food and ag code section 221a, that.

Niello Bill again.

No, Food and Ag code. It restricts AG Fund expenses to be used for any activity outside of which the funds were collected. So just as it stands now, CDFA doesn't have the authority to use ag funds for these new purposes.

In terms of putting in place a future fee structure, there's no practical fee structure that equitably distributes the financial burden to producers. Given that, as you mentioned, the benefits are primarily for public health.

And unlike diseases that are managed by farms and their veterinarians, these are outbreaks that are largely caused by wild animals and illegal importance that are beyond the farmers control.

Just taking into account, you know, bird flu as it stands now, this is a disease that's endemic in wild birds and we're getting infections that are coming from the really amazing fact that California is a huge flyway for birds, which is phenomenal, but that's also posing a massive risk that can't be mitigated by our, by our producers.

And so the jet we feel that making. Since this is beyond the farmer's control and this is something that benefits statewide public health, making General Fund available to cover the cost would be the most appropriate funding source for this program.

I mean, given the General Fund environment. I hope the Department and Department of Finance takes a second look. I mean, I don't pretend to know what the answer is, but you know, that argument we can make in a lot of domains where if something goes wrong either by or foreign industry, then public health is threatened.

That does not in and of itself mean that it is entirely solely a public benefit. You know, when we insist on drug trials to make sure that people don't die from a drug, we don't, we don't charge the General taxpayer for that just because they're the ones not dying.

And so the principal beneficiaries here, yes, are the public, but the public through their consumption and purchase of agricultural products here. And so there is a nexus with the industry. And the reason we have trailer bills is to make sure that we're able to adapt statute over time, particularly in a budget like this.

So I don't, as I said, I don't pretend to have the answer. I'm not proposing anything specific, but I would hope the Department and the Department of Finance would take a second look at this, given the General Fund environment, because we're going to.

This will be very challenging in the coming weeks after the May revision to make these kind of expenditures. So appreciate it. So we're going to hold that item open as well and proceed to item four, which is the farm to school program request.

Absolutely. So just a little bit of background on CDFA's Farm to School program because we are quite proud of this initiative. It was initiated in 2021 to create equitable access to locally grown Climate Smart foods and hands on educational opportunities to all California students.

With just three rounds of funding since then, the California Farm to School program has been able to reach 49% of California's school children, scale up the Farm to School Network and develop the Farm to School Roadmap to the largest component of this program and of the budget change proposal in front of you is the Farm to School Incubator Grant program which provides competitive awards to projects that cultivate equity, nurture students, build climate resilience and create scalable and sustainable change.

The grant program has four tracks to create change across the school food system. The first is our TK through 12 procurement and education track which funds individual schools or districts in California to establish new or existing Farm to School programs. I'm going to skip to track three because it's basically like track one except for even littler kids.

Track two, the Farm to School Technical Assistance Track which funds technical assistance to help California school food authorities and food producers implement resilient and sustainable Farm to School Programming.

And then track for the Farm to School Producer and Food Hub track which funds California producers and public serving aggregation distribution enterprises to increase producer production, processing or distribution capacity in that Farm to School system.

We are requesting 24.9 million in General Fund in fiscal year 25-26 to continue this program and address some of the gaps and next steps identified in the Farm to School Roadmap to success.

This funding would be used to sustain proven economic, environmental and equity benefits of California's Farm to school programming, including $20 million for the California Farm to School Incubator Grant Program Fund those projects across the four tracks. I just mentioned $3 million for the California or for Climate Smart Agricultural Technical assistance.

This will address kind of one of two main barriers in ensuring that there are producers that are in the pipeline and eligible for these for these Farm to school markets and 1.9 million for the California Farm to School Network programming to support capacity building and networks between school nutrition providers.

Great. Thank you. I know we'll come back in a moment after hearing some LAO's comments, but Department of Finance first.

Erin Carson, Department of Finance. Just wanted to respond to the LAO's recommendation on the usage of Prop 98 funds for this proposal. So Farm to School could be an eligible use of Prop 98 if all funds were to go directly to schools.

However, this would need to be included in the overall Prop 98 package which is already fully allocated for the 25-26 Governor's Budget. This proposal would also require would necessitate changes to the Governor's Budget Farm to school BCP.

Thank you, LAO.

So, as the Department mentioned, The proposal includes $22 million from the general fund to support additional grants from the Farm to School incubator grant program, continue an existing program evaluation and support additional statewide outreach.

Overall, we find that these activities align with the state's recent efforts in this arena and would likely expand farm to school practices across the state. However, given general fund constraints and the uncertain budget context, we recommend that the Legislature weigh this spending against its other priorities.

If the Legislature determines that these activities are a high priority, it could explore shifting some of these activities to Proposition 98 school funding, which has more capacity to support discretionary activities.

While likely not all of the proposed activities would be eligible be supported by Proposition 98 funding, the Legislature could explore this option for certain components of the proposal. The proposal also includes $3 million for Climate Smart technical assistance grants. We recommend that the Legislature reject this portion of funding for a few reasons.

First, the grants would not directly support the expansion of farm to school practices such as supporting schools and procuring locally grown food or assisting producers in scaling up their capacity to supply food to schools.

Instead, the grants would support producers in adop broad array of climate smart practices regardless of the producers current or planned involvement in supporting farm to school initiatives. Second, we find that the scope of the technical assistance grants and activities that they support are broad and that makes it difficult to determine the specific benefits that they may yield.

We find that these distinctions are especially important in a budget environment where the state does have limited general fund dollars and wants to be targeted in how it uses its dollars. The Legislature could instead use this funding to bolster core programs that are at risk or support other high priority activities. Happy to answer any questions.

All right, thank you. Are there questions or comments from Members of the Subcommitee? Senator Niello.

Department of Finance, you mentioned that in talking about the Prop 98 issue that I think you said Prop 98 is fully allocated for 25-26. What did you mean by that?

Just Erin Carson, Department of Finance, clarifying my comment, purely saying that the 25-26 Governor's Budget reflects the administration's priorities for Prop 98 funds in that way.

I figured that's what you meant. I just would like to stress that we will be adopting a budget that may not be exactly the Same that the Governor the may revise that we'll be looking at probably won't be the same as the January introduction. But I would just submit.

I don't think that this not to be critical, but I don't think that's a particularly good reason not to entertain the proposal because it's an open question right now.

Budget Subcommitee 1 has left the building. They're not meeting. So we're the only ones in town on the item. So Senator Smallwood-Cuevas.

Thank you and appreciate the conversation on this important issue, especially for those inner city urban campuses where, you know, you think, well, where do tomatoes come from? You know, they don't just come and show up at the grocery store. No, they don't.

I think it's really important for us to center these kinds of programs and I'm curious about the outcomes in terms of the funding and. And is there. The other thing we have an issue with is just the lack of really fresh foods in a lot of our schools.

And some of these are the only meals that students are getting. And so I'm curious what the supply chain looks like in terms of how we get those goods and those foods, particularly vegetables and fruit, into our schools.

Are there intentional partnerships between those kinds of schools where we have those kinds of needs and the farmers that are helping to provide?

Absolutely. And I think that's a great question and one that I believe if I called up someone from farm to school they could talk about for the rest of the day.

We were able to hire, as a result of the ongoing funding allocated in 2022. 16 regional leads as part of the California Farm to School Network to support schools. And I mention that because those regional leads are really focused on those issues that are helping us.

We were able to reach 49% of our school kids, which is amazing. But certainly that's not equitably distributed or it's not completely homogenously distributed across the state. I know that we have our own equity goals.

And so I don't want to say that it's not equitably distributed, but it's not uniform across the state that 49% of kids in every district have been able to receive farm to school foods and products.

And what I would say is that that's why we have these, we're building these kind of communities of practice and connecting those nutrition programs at each school because each district is going to have different kind of access requirements. And that's also why we have some of the tracks that we do in the farm to School program.

For example, the track 4 around the farm to School Producer and Food Hub track specifically addresses some of those logistical barriers that may not be within the school themselves, but maybe around cold storage or getting foods from farms to geographically remote or areas that don't have that kind of distribution network for these fresh foods and produce.

There's also a lot around that Farm to School technical assistance track, which. So I think I mentioned there are kind of two barriers, Right. With getting these foods from a farm to a school.

One being that one of the goals, stated goals of the program is to ensure that our California school children have access to nutritious, local, and sustainably grown produce. So we need to make sure that there are producers that are in those regions that are producing foods that meet those standards.

And then there's that second barrier, and that's where this Farm to School technical assistance comes in that funds those next steps. So they're being sustainably produced. They're now eligible to go into that pipeline for farm to school. Well, how do you meet those Farm to school requirements?

How do you teach school nutrition providers how to cook those foods? How do you make sure that they have the infrastructure to cook those foods? There are just so many steps that get them from the farm to the school. And that's that second barrier that we're looking to address.

And that's where that funding may not be going directly to schools, but it is absolutely integral in getting the food from there to the schools that you're talking about.

And on the sort of the point of origin, thinking about the farms and the farmers, is there a diversity of farmers? Are we working with black farmers? Are we working with Latinx farmers?

And is it because I think it's also the other part that's important about this education is also those communities that we are serving, particularly young students, to understand that we all can do this work. And we all have a history of being tied and connected to the land in this way.

So I'm just curious what that pool of farmers looks like. Absolutely. And it's particularly important because a lot of these programs are around connecting farmers and these students so that they understand the whole supply chain, they understand where their food comes from.

And you want to make sure that those farmers that they're receiving food from, they can see themselves reflected in that community. I don't have the specific numbers around the demographics of our producers or kind of where we're seeing the most adoption of Farm to school right now, but I can absolutely follow up with a list of that.

Okay, well, Looking for. I have one more question and this is just more of a technical one. With the 499 applicants and the 195 awards in the last round for the incubator, can you all share just how many of those unfunded applicants came from urban communities?

We can absolutely follow up with that. And I believe that I actually have someone at the risk of them talking all day about Farm to School because they will, I do have some will.

Say there's no risk of that, that will not be happening.

We'll set up a time to go deeper. But at least just answer that question.

Yeah. Hi Members, Chair, Members of the Committee, Rachel Ryan.

I'm the deputy Secretary of Legislative affairs and I'm also our Executive office liaison on our office of Farm to Fork which houses farm to School. And so just a couple of stats that I think it's helpful to share.

So 80% of schools served by the program, and this is in our most recent funding cycle, are Title 1 schools. 77% of the food producer grantees are small to mid sized producers. 100% of the food producers use or plan to use climate smart agricultural practices.

83% of the school grantees and 76% of the early care and education grantees stated that their project will increase procurement of whole or minimally processed foods for school meals. And those were prioritized for California producers.

And then 90% of school grantees and 76% of the early care education grantees stated that they intend to procure from producers who use climate smart agricultural practices.

Got it, Got it. So on the 80% title one, is there a mix, how significant is that for like an LA County, for example, what's that percentage in that 80% in that specific?

I don't have that level of detail, but that's something that we can follow up on. Specific to just your district or just the LA?

LA County? I'm just curious because it is once you.

There are some parts of our county where we have rural pockets. Right. But it's, you know, we are the highest density in terms of population and I'm just curious how those kinds of schools fit into this program.

Right.

Thank you.

We'll follow up. Thank you.

All right, thank you. I think this is also an example when we get to the item on the climate bond, the criticality of their urban agricultural program because it is about also it's about producers and as you say, it's about the whole chain.

I'm a big fan of the program and the efforts both for all the reasons that the center of small lod cuevas mentioned even in suburban and areas next to rural communities, which I represent a lot of them, it's still the case that a lot of folks don't exactly know how this stuff magically appears in the aisle or how to distinguish or how to choose or what organic means and doesn't mean.

The food experience gets more and more complicated as it becomes more and more corporatized. And so these programs are essential in that way, but also in supporting farmers, many of whom are not intergenerational farmers but are entering the field for the first time.

And our career pathways, our capital, our access to capital pathways have always been built on generational transfer of farming. And so even in rural communities these are very important programs.

In Winters, I know in my district they were serving all highly processed and canned food only in the states, in the heart of the state's agricultural breadbasket up until they started their farm to school program as well. And it is now the hub of a lot of innovation efforts in the community.

So these are extremely important programs, not just in Winters or Davis or Vacaville or Sonoma or the places that I represent. But you know, LA has been one of the top grantees LAUSD every single year of the program. And so it really is a.

It's been deployed in a way that really does acknowledge and understand and see the different but very similar in a lot of ways needs across the state. The General Fund issues are big, obviously, so that's a key caveat. But I'm very supportive of the program.

When I was looking it up just to make sure that LA was getting its share, I noticed on the side of the Internet side and maybe it had been subject to a cyber attack and it was all wrong. There were a lot of positions being hired in what's a relatively small program.

So what does staffing and turnover and vacant positions and that sort of thing look like Specifically in the farm to school program? You mentioned the appropriation that was made, I think in 2021 or 2022 to allow the network expansion. But there does seem to be. Maybe you just got an extra amount of money that I don't know.

But what's up with the State of hiring and staffing in the program?

Absolutely. I will defer to our division Director to provide an update on that.

Looks like a flash mob. At some point everybody's going to comment.

I don't want to misspeak.

Bring samples. That's the other next time.

Good morning, Chair Members of the Committee. Natalie Kraut Greenberg, Division Director for the Division of Inspection Services which houses the office of Farm to Fork. So you ask an excellent question. And we have 16 regional leads and we continue to hire for those.

We were nearly fully staffed a year ago and then we had two promotions from within that actually promoted to supervising our regions and our staff. So those individuals that did cover those regions now are recruiting to fill those three additional individuals to round out the full team of 16 again.

Okay, thank you. All right. There's no further questions. We are because of the General Fund impact here we're going to hold this item open as well and proceed next to item 15 which is the climate bond expenditure plan for the Department of Food and Agricultural.

Note, Budget Subcommitee number two has primary responsibility for the climate bond but the expenditure plan for the Department of Food and Agriculture is with our Subcommitee as well given the Department scope here. So welcome.

Thank you Back Arma Cozina, Department of Food and Agriculture. Thank you so much for the opportunity to talk about Prop 4. It gives us the opportunity to talk about the amazing work that we've done to date and then I will let you know kind of what our appropriation proposal is for those Prop 4 funding.

So CDFA with the support and leadership of this Administration and the Legislature has been able to make landmark investments to partner with farmers and advance climate smart agriculture across the state. To date these investments have funded nearly 3,000 projects across 300,000 acres resulting in the reduction of approximately 27.7 million metric tons of CO2 equivalents.

That's the equivalent of taking 6.4 million cars off the road and saving 1.5 million acre feet of water. Not to mention the compounding community benefits that improve overall resilience of our food system, reduce the long term costs of production and improve access to local nutritious foods as we been talking about, which is incredibly important.

So the budget includes 131.8 million in fiscal year 25-26 for the nine CDFA programs identified for further investment. There's eight of those in the Climate Smart Agriculture section of Prop 4 and then one in the Extreme Heat section. This leaves 83.2 million remaining to be requested in the appropriation for fiscal year 26-27.

I'm realizing now that's the 131.8 million in that climate Smart Ag section. There's an additional 36.9 million from the extreme heat that addresses our fairgrounds improvements. Apologies. So we propose kind of three funding timelines for these programs.

First, immediate implementation of our existing popular program to an accelerated implementation timeline for new programs where we have existing capacity and stakeholder engagement and then the third timeline really being implementation in fiscal year 26-27 for new programs that will require more thoughtful development, engagement and implementation.

So 5 of the CDFA programs identified in the bond Fund fall into that first category, four for immediate implementation, four of those in the Climate Smart Agriculture section and one in the Extreme Heat section, which is our fairground resiliency program.

For those programs, we propose spending funds largely in the budget year as we can award the funding with minimal modification of our existing programs and capacity.

Those are 37.6 million for the State Water Efficiency and Enhancement Program sweep, which promotes the improvement of irrigation systems on farms and ranches with the goal of conserving water and minimizing emissions associated with pumping. SWEEP is CDFA's longest running climate smart agriculture program, allocating 208 million in funding since 2013.

These solicitations have all been about 232 to 400% oversubscribed. There's also second would be 35.9 million for the healthy Soils Program. This program supports practices that sequester carbon and reduce emissions by improving soil health on farms and ranches. The Healthy Soils program has awarded 206 million since 2016.

These solutions have been 122 to 900% oversupplied, subscribed and we request the remaining 25 million in authorized grant funding. In 26-27 we talked about the importance of the Urban Agriculture grant program.

We would we would request 18.8 million to be appropriated in 26-27 to support programs and projects aimed at enhancing the viability of urban agriculture and improved food access throughout the state. In 2023, the first round of this program received 68 million in applications for $12 million in funding.

We also request $19.9 million to Fund projects that prevent or respond to invasive species that threaten California's agriculture, natural resources and unique biodiversity.

As with the $5 million of projects funded in 2122, these projects are solicited by and prioritized with input from the Interagency Invasive Species Council of California, the ISCC and their Scientific Advisory Body, which helps to prioritize the threats of invasive species.

And the fifth and final program, as I mentioned as part of that Extreme Heat piece is around fairground resiliency to implement infrastructure improvements at our fairgrounds across the state, prioritizing the fairgrounds that are really acting as community centers in the event of emergency and in the event of extreme heat.

So all of the Infrastructure that would be needed to improve the fairgrounds to act as community hubs. CDFA has proposed an accelerated implementation for two of the new programs in Prop 4, per our. Sorry, it sounds like I'm running a marathon because I'm very very pregnant. I'm sorry, just one moment. Somebody's speaking.

They really, really like the certified farmers markets programs. Fairgrounds and the fairgrounds, yeah. So per our proposal, these programs would receive approximately half of the funding in fiscal year 25-26. So 9.3 million each and the remainder 9.2 million each in fiscal year 26-27.

So those two programs are the year round Certified Farmers Market program and this is for grants to support year round certified farmers markets markets, fisherman's markets and tribal farmers markets. And then the Certified Mobile Farmers Market Grant program which will provide grants to support the necessary infrastructure for certified mobile farmers markets.

While CDFA has certified year round farmers markets for some time, we're currently developing a certification process for mobile farmers markets consistent with Assembly Bill 2786 which passed in fall of 2024.

So we anticipate we'll be able to accelerate implementation for those two new grant programs programs because our certification program already has a strong nexus to these stakeholders and we have much of the capacity in place as we operate similar infrastructure focused grant programs.

Finally, there are two new programs for which CDFA requests $200,000 each in fiscal year 25-26 to establish each program and engage in thoughtful development of the programs. Development will really require identifying program priorities, engaging in a public comment period, outreach to stakeholders, developing solicit documents and identifying opportunities for technical assistance.

So these programs are the Tribal Food Sovereignty Program which is aimed at enhancing tribes food sovereignty through projects that focus on irrigation and water infrastructure, utility and power infrastructure, and food processing infrastructure, and then the Regional Farm Equipment Sharing Program designed to facilitate equipment sharing among small farmers and ranchers.

We would request that an additional 14.7 million be appropriated for each of these programs in 26-27 as we anticipate awarding grants for these programs between winter of 2026 and spring of 2027. There's a lot in there for ag.

Thank you.

Department of Finance Erin Carson Department of Finance, nothing to add.

Overall, we find that the proposed spending plan is reasonable for CDFA programs under Proposition 4. As the Department mentioned, several funding categories will be administered through existing program. We find that the programs selected by the Administration generally align well with the statutory language included in Proposition 4.

Additionally, using existing programs allows the state to more efficiently distribute funds. The Governor also proposes to provide funding for certain bond categories through new programs. As the Department mentioned, some programs receive funding for planning and project awards in the budget year, while others take a more phased in approach.

The Administration indicates that the approach taken for each program was based on the Department's existing role in specific funding areas. For example, CDFA proposes an accelerated approach for the two farmers market funding categories, given that it has an established role in overseeing farmers markets.

In contrast, a phased in approach is proposed for the regional Farm Sharing equipment funding category as it involves activities outside the Department's existing programs requiring additional planning efforts. We find this to be a reasonable approach that balances sufficient planning in new areas while enabling the Department to proceed in areas where it has programmatic expertise.

While this approach overall appears reasonable, the Legislature may want to provide statutory guidance for programs, particularly new ones, to ensure that they align with legislative priorities. Happy to answer any questions.

Just to lead off one which Obviously our focus has been with the CDFA portion of the expenditure plan, but the elements that are proposed for no funding in the budget year for conservation, community services and development, Vanpool and CDE in the Climate Smart Ag portion of the bond, they're mostly proposed for basically nothing in the year after the budget year, and then basically nothing the year after that too, with their entire balance reserved for the future.

And the I wasn't in the I was. Unlike my colleagues, I wasn't here for the negotiations. So I don't quite understand. I'm sure there's a lot of this I don't understand, but these are. These are the programs for disadvantaged farmers, for farm workers, for Vanpools.

At least my recollection was these are largely also in the farm worker space. The equity of this allocation plan. I understand. I thought you said at the beginning, Part one of our considerations was the popularity of the programs. That's not my favorite way to make these budget allocations of the bond. But.

But which ones can we roll out immediately? That one I get. But for some of these other programs to not have anything in them or Nothing more than 100k, not just for this year, but for the year after that too.

I know they're new, but I also read every year in January when the Governor's Budget comes out with some new initiatives and new ideas that are to be implemented in that very same budget year, it seems like two years is enough to start to get going.

So with that, with that and with the, as I said, the qualifier that I wasn't here, I don't know all the details of this. Can you provide some background on the rationale for the programs that are not, are not being funded in either the budget year or the year following?

Certainly. Good morning. Lizzie Erie, Department of Finance so we've identified these programs as pending allocation for a couple of reasons. Either we believe that additional work products may better inform allocation of that funding in future years, or we're really seeking legislative guidance on those. Many of them are new programs.

As you know, the Administration was not engaged in the negotiations for the bond. So we want to make sure that the Administration is delivering on the legislative intent for these allocations.

All right. Senator Shmuel Cuevas.

Zero no, that was, that was helpful because I was unclear on that as well. And then once that, once that analysis is done, is there also a little bit of, of some an impact assessment for those items that may remain at zero? And you know, I'm also looking at the Tribal Food Sovereignty Program and others.

Just how will we know what the impact of not funding those line items will mean?

Sure. So I would just note that we do anticipate this bond to be rolled out over many years and with discussions with the Legislature. So I think it kind of depends on which program allocation you're specifically looking to.

But generally our approach is to ensure that we have discussions with the Legislature before then coming back to the Legislature requesting that funding in future fiscal years.

Helpful. So I have another question and this is about how CDFA is engaging community based organizations. We have a lot of emerging and pretty experienced urban farming group in my district in particular. And the challenge that we have is the technical assistance.

It's like a world of distance between Los Angeles and those farmers and Sacramento and your agency. And navigating it is really challenging. So I'm curious, how do you help shape and apply for that certified mobile farmers market program and the year round farmers market grant? What does technical assistance look like?

How are you making it accessible and particularly for those disadvantaged urban farmers who are trying to figure figure it all out. But also for those emerging sort of micro farmers who are becoming really important to our ecology down in Los Angeles when it comes to accessing fresh and healthy vegetables and fruits.

So if you could share the technical assistance support.

Absolutely. And I will call up my colleague Natalie again to speak to that technical assistance. But while she comes up, I would just mention that, you know, for existing programs, when we're talking about equity as a whole, CDFA has established grant models where a percentage of funding is targeted for disadvantaged communities.

Specifically, at least 25% of Prop 68 funding was awarded to disadvantaged areas. And we've maintained that as a policy for all of our grant programs moving forward.

And we typically utilize technical assistance providers for all of our, all of our grant programs, particularly our Climate Smart Agriculture programs, to assist in the application process, which has been really beneficial, as you've mentioned, in assisting vulnerable populations in accessing CDFA's grants and also filling in some of those technical gaps.

But I believe that my colleague can speak more to specifically the farmers market system and where there might be some gaps there for those infrastructure programs.

Good morning again, Chair Members of the Committee. Natalie Kraut Greenberg California Department of Food and Agriculture Director of Inspection Services so specifically getting to technical assistance and this will get down into the weeds, but we do have nine different advisory boards that report to our division of which one of them is a certified Farmers Market Board.

We also have a group formed based on the food Hubs. So I mentioned earlier those 16 regional educators, those are really important nexus points in our region specifically because they are that conduit.

They help with technical assistance, but they also help funnel individuals into the pipeline when we hold informational sessions and office hours that are open that help folks really understand the landscape of how to apply for an application, but also how to navigate the system as a whole. So it's that Q and A open door session.

So that's one way we're able to do it. I mentioned the certified farmers market program. That is a long standing, well established program and an Advisory Committee.

So we do work closely with many different Members of that Advisory Committee that help us guide and navigate what you called to light as far as individuals and organizations already embedded in the community that can help us reach into the depths of those communities as well.

You say those 16 because we have 11 million people in LA County. So I just want to say what, what's that capacity look like? And I would, you know, we probably have more, a few thousand micro farmers folks who are trying to build and establish a farming farmers market network, particularly in some of our urban areas.

So what does that look like for 16 people across the state and a county?

Like it's a start, you know, the individuals that cover that region. It's a start. But I can tell you just based on, you know, the food safety hat that I wear, we have 20,000 farms that are covered under the food safety laws and we have, you know, three times that amount in the state.

So yes, there is a lot of work that continues to need to be done, but this is an excellent start and a framework and many of the things that you see in the proposal for Farm to School will only help enhance and further the roadmap that was put in place.

And I would be remiss if I didn't also mention that we also have a BIPOC Farmers Advisory Committee and a Small Farm Small Farm Advisory Committee and they have both been very active on providing feedback for our grant programs, particularly for our Climate Smart act programs, but also for our Urban Ag program during, during the, the one solicitation.

And we have a pretty robust process for developing those requests for a proposal that includes public comment. And we make sure that we try to, we engage with our equity advisor and try to make sure that we have robust public comment in the development of those programs so that they work as well as possible.

But that's why we proposed two kind of years of funding for those two new programs is we're not going to do it perfectly the first time and we're going to need that feedback to make sure that, that we're reaching all of the communities that might be impacted. And that's why we have that second round of funding.

And that BIPOC or these nine boards you mentioned, is that a geographical, is it sort of required that there's geographical representation there?

There is, okay, yes, in the statute for many of those boards.

But with regards to the BIPOC board, there is that consultation that, you know, there's that open dialogue between the program and then the Members of that Committee.

And then just final on the 16 leads, how many cover my region?

Two. We have two. Okay, thanks.

I've got good backup today only only.

Five Senate districts each. There is an opening for a farm to school manager in Southern California if anybody's interested in helping out.

Senator Niello, thank you. First of all, referencing the little interruption a few minutes ago. When is that little guy or gal's debut date?

Eviction date on the 18th.

What's that?

Eviction date on the 18th.

Well, it's time for it to start kicking, so get used to it. I've been through that vicariously with my wife five times. So I was around when the climate bond was negotiated, but I had nothing to do with it, so I might as well not have been here.

I was not a fan of that proposal, at least partially because Senator Eggman and I authored a Bill for. A. Bond for very valuable flood control spending which deals with mitigation, the effects of climate control that I'll come back to in a moment. But that was combined with the climate bond and basically eviscerated.

It might as well not even be in there. That was very disappointing. But the point that I'm going to make is for all of the resources that we dedicate to climate control, to the reduction of greenhouse gases, the higher gasoline prices, higher utility prices, the money that the state spends is to absolutely no effect.

That's what frustrates me about this. We have done a very good job of reducing greenhouse gas emissions, but we have had absolutely no impact on the concentration of greenhouse gases in the atmosphere.

And I don't know how many people who buy gas and pay utility bills that really realize that they're paying all that money to have no impact on climate change.

Because California accounts for less than 1% of global greenhouse gas emissions, China, just by virtue of its coal powered energy plants, emits more greenhouse gas emissions than the entire world. Now, when I bring that up in frustration, I'm told, well, we need to show the rest of the world how.

But the problem is we're not looking in the rear view mirror. There's nobody back there. And I'm not saying that we shouldn't do anything. But what I am saying is what we're doing is having no impact. And we need to spend a lot of time thinking about how do we mitigate the impacts.

And so the point that I just made about all of the resources that we're spending to reduce greenhouse gas emissions without any impact on the air, most people don't know that. A lot of us in here, I suspect, know that, but most people don't. And I find that very frustrating.

All right. I wanted to return to the specific proposal if I can, and get weedy again. I found LAO's argument or case or findings about the Farm to School Program, the Climate Smart Technical Assistance, pretty compelling, especially in the context of the General Fund.

But despite its title as Climate Smart Technical Assistance, it's not in this matrix of allocation. Is there a reason why that particular element was seen as a high General Fund priority, but not eligible for any of the categories in the Climate Smart Agriculture part of the bond?

So we selected programs for the Climate Smart Agriculture section of the bond as they aligned most closely with what we saw as the kind of the legislative intent of the program and kind of how quickly we could deploy those funds. And so that's how we made the selections for those programs.

Technical assistance is obviously an essential part in accessing each of those programs. The Climate Smart Agriculture Technical Assistance has no standalone proposal for funding. It was not specifically called out in the bond language. And so we were trying to align as closely as we could with legislative intent.

And that standalone allocation for farm to school would help kind of fill in those gaps to keep producers in the pipeline for that farm to school, for that farm to school purchasing program, if that makes sense. So this is kind of two separate intents for those.

Okay. I think, I mean, one of the reasons it may not be called out in the bond, you know, I see the value, but I also don't hear the demand for it, at least in the six rural counties that I represent.

That that's, you know, for producers and for others in this, in the chain and in the agricultural economic ecosystem, that that's, that's a high priority compared to sustaining some of the specific programs. The other elements of the farm to school program as Laos as analysis. So that's on the prior item.

But I didn't, I hadn't mentioned it because we had focused on the other elements of it. But to me, that portion as a General Fund priority, that one I think Lao makes a good point with respect to the technical assistance element.

So on this and I very much appreciate the department's comments and the administration's comments about the choices here, it makes sense overall and I don't have any other questions about it.

I think with respect to Senator Nilo's comments about the overall State of climate change change in California and in the planet, I don't want to get into, I don't agree, but there's no point in getting into a big battle over that here because most of these are, most of these allocations are in the domain of resilience and adaptation and to some extent mitigation.

But there are also smart investments that we know are necessary to allow to promote folks being able to get food locally more cheaply healthier, for example, through the farmers markets, the Urban Ag, and to make that sector more effective and more affordable, as well as contributing to our climate solutions across the range.

So I think these are an appropriate set. It sounds like the Legislature has some work to do as well on some of the components. But appreciate this initial overview and we're going to hold this item them open as well for obvious reasons because it's quite significant and continue our work on it. So thank you very much.

Thank you.

All right. So now thank you. Just one quick thing. As we conclude the CDFA presentation, let me just say I am a big fan of your Boss, Secretary Ross, who is one of the best Department heads to work with in the whole state organization. Is she your constituent? No, she's not. At least I don't think she is.

But I've known her a long time. She's great to work with. She's fantastic. Give her my regards.

And we're happy to also. I absolutely will. She was very disappointed that she wasn't able to attend today. She's actually not in Sacramento. And I will pass that along. And I'm also happy to provide more context around the demand that we have for Climate Smart ag. Ta.

Thank you again, Rachel, Bryan, that we do have follow up meetings, the secretary and I, with each of you that I think that have been scheduled. And apologies that she couldn't be here today.

Okay, great.

Appreciate it. Thank you very much. All right. With that, we're going to turn to the Department of Financial Protection and Innovation.

Okay. All right. Okay. So welcome to the Department. And if you would please give a brief overview of core programs and a status report on major programs and on the efficiency drills as they've applied to the Department as well.

Okay.

All right. Please proceed.

All right. Good morning. Thank you, Chair and Members. My name is Suzanne Martindale. I am the Chief Deputy Commissioner for the Department of Financial Protection and Innovation. To my left, I have my colleague, Sophia Smith. She's the Deputy Commissioner for Administration. Also in the audience, the Fiscal Management Chief, Sarah Hamilton, available to answer any questions.

I will provide a brief overview to start, correct? All right. At the DFPI, we are focused on protecting consumers, fostering responsible innovation, and ensuring stability in the financial marketplace. We regulate a wide range of financial services, products and professionals, just to name a few.

We regulate banks, credit unions, a whole host of lenders, investment advisors, franchise sales, debt collectors and student loan servicers. In the past several years, the Legislature has entrusted us with additional regulatory authorities, adding new licensing categories and providing authority to protect consumers outside of older traditional licensing categories.

Some of these laws include the Digital Financial Assets Law, the California Consumer Financial Protection Law, the Debt Collection Licensing act, the Student Loan Servicing act, and Student Borrow Bill of Rights. Our Department is special funded. Primarily. Our regulatory activities are paid for by our licensees.

We only have General Fund dollars for specific grant programs, but again, we are a special Fund Department in terms of our regulatory responsibilities. To that end, assessments and fees in each program offset the cost of regulation, ensuring a healthy and trusted financial marketplace here in California.

By licensing and regulating these entities, the DFPI upholds California laws and values to protect vulnerable consumers and communities from predatory practices. As California's premier financial regulator, the DFPI champions accountability, transparency and consumer empowerment, fostering a resilient and secure financial marketplace for all stakeholders. Now, before I present, Mr. Chair, would you like to hear about, you said vacancies?

The state operations efficiency drills, yes.

Okay. Our vacancy rate as of. I'm sorry, my name is Sophia Smith, Deputy Commissioner of Administration. Our vacancy rate as of April is 8%. We have 861 authorized positions.

And I'll defer to my colleague in Finance regarding efficiency drills.

Taylor McGrow, Department of Finance. So currently for the Section 4.05 drill, DFPI will be reducing $861,000 for 24-25 and 25-26 for the 4.12 drill, that will be eight positions and 1.166 million.

Thank you. All right, before we proceed to the specific items, are there any questions or comments from Members of the Subcommittee about the overview or the Department. All right, then we're going to proceed to item 16, which is the trailer bill language with respect to programmatic fee and assessment adjustments.

All right, thank you, Mr. Chair. The DFPI plays a critical role in regulating and overseeing a broad range of institutions to ensure consumer protection and market stability. However, many of the Department's statutory fees have remained unchanged for decades despite significant shifts in the regulatory landscape and rising operational costs.

Some fees, if you can believe it, date back to 1959, while most recent fee adjustments for some programs were made in 2013, which is already more than a decade ago. When coupled with annual increases in Department and program operating costs due to a variety of factors, inflation, rising costs, expanded responsibilities.

These factors have caused sharp increases to our overall program costs which have exacerbated program fiscal deficits. Now, in order to address these challenges, the Department engaged an independent firm, Crow LLP, in January 2024 to conduct a comprehensive financial analysis which was finalized in November of 2024.

This analysis reviewed historical and projected data, examined revenue and expenditure trends, and addressed the long term sustainability of our existing statutory fee structures. The study found that existing licensing programs had insufficient fee structures to support each program. That is our goal. We want each program to support itself.

Further, if current fee structures remain unchanged in statute, the Department does risk insolvency by the 2025-2026 fiscal year and the Department must now to right size several programs funding models.

As the Department takes these steps, it remains committed, very committed to efficiency, long term planning and aligning costs with the services provided so that DFPI can continue to fulfill its statutory mandates and service levels effectively.

The proposed trailer Bill includes targeted fee adjustments for key programs based on the recommendations of that fee study we commissioned with Crow, including the Broker-Dealer Investment Advisors Franchise, CA resident, residential mortgage lender and escrow programs to reflect current regulatory demands and operational costs in 2025.

The proposed trailer bill language also adjusts the Commissioner's existing authority to set hourly examination rates based on estimated average costs, including overhead, to allow for annual adjustments to maintain consistency across programs. It is important both for consumers and our licensees for the Department and its licensing programs to have financial stability and predictability.

This proposal will ensure our Department is appropriately supported to meet its statutory requirements and to best protect consumers and the marketplace. It also provides a level of predictability to our licensees, knowing this proposal will adequately support the Department and enable us to maintain the quality of services we provide without needing to utilize unexpected measures to maintain solvency. That's my close.

Thank you Finance?

Hello, the Department of Financial Protection Innovation's 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 2027-28.

DFPI's proposed statutory changes to increase fees across 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's fee increases 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 only 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'd 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 have not kept up with rising operational costs. DFPI will monitor and evaluate its revenue and expenditure needs annually across its programs to sustain the health of the Financial Protection Fund.

Thank you, Legislative Analyst.

Hi, Heather Gonzalez with the Legislative Analyst Office.

As you may have guessed, we have some concerns with this proposal and we recommend 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 biggest fee increases in the Bill.

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

As you'll note from your background documentations and from our analysis, the Fund that provides the majority of revenues for the Department is projected to reach insolvency in 25-26. The independent evaluation of the Department's finances from November of last year indicated that it needs almost 200 million more through 27-28 in order to stay solvent.

Of this amount, the Department needs about 112 million for new programs and about 80 million or so for existing programs again through 27-28 in order to maintain the currently authorized program and service levels.

Now, according to the independent evaluation, the Department has a structural deficit that stems from a mix of costs such as annual salary adjustments, agency wide and startup costs associated with the launch of the new programs, as well as insufficient revenue from both new and existing programs.

And to address this deficit, the Administration has sought trailer Bill Language that would allow it to increase fees in some, but not all of the existing programs. The programs for which the Administration seeks fee increases are listed in our analysis.

But as I stated at the outset, we recommended that the Legislature approve the fee increases for these, but on a limited term basis. And this will give you time to gather two key pieces of information.

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

If the Department also produces the market condition reports that we recommend, then combined, we think these data points should give you a deeper view of the trade-offs, which you can then use to determine how you want to set rates thereafter.

In addition to our recommendation that you approve the fee increases with the conditions described above, we have a second recommendation. And for our second recommendation, we encourage the Legislature to direct the Department to produce detailed revenue plans for the programs that in the proposed trailer Bill.

Now, as stated previously, we're looking at about 200 million that they need to raise, but the trailer Bill only addresses about 50 million of this shortfall. There's about 30 million in needed revenue for existing programs and 112 million in need of revenue for new programs that aren't in the Bill.

Now, we understand from the Department that they believe they have statutory authority, sufficient statutory authority to increase fees to fund these existing programs and that the new programs will become self-sufficient without a fee increase when they are fully implemented.

However, we recommend that you direct the Department to provide you with detailed plans on exactly how that math will work out. We recommend that the details include specifics about what additional fees they will raise, how much they'll be raised, how much they expect to gain in revenue as a result.

And we believe that, that this will allow you to ensure that any Department led changes that might be necessary if they aren't able to raise enough funds are consistent with your priorities.

Thank you. Are there? Well, actually, I want to start. How do we get here? The Department gave some, you know, some initial comments about this, but both within the dynamics of the programs, you know, how did this happen?

Both directly going from in some of these programs of significant surplus to deficit in total, as you're describing the hundreds of millions of dollars. So both the dynamics of that, but then also just from a budgeting, accountability and oversight perspective, how are we this far down the line and just now tackling this as an issue here?

I'm wondering if one of the if either Finance or the Department is welcome to weigh in too. But this is new to me. I've been following these agencies, this agency and its predecessor agency for a long time. So I was surprised this far into the process that this is the situation we're in.

And so can you give us a sense, give a little bit more detail about operationally how this has been happening and then secondarily principally for the control agencies.

And I'd love to hear Aleah's perspective on this as well, how we could get to this stage where we're contemplating a 200% increase in fees and charges and what have you. For lots of folks that work in the financial services sector.

Easy answer. No, just kidding. There's no one size fits all answer here, but confluence of factors have hit this Department in the last several years. Dramatic expansion in regulatory responsibilities, our staff in the last five years, I believe we've grown by about 15% overall as a Department.

As I pointed to in our introduction, we've received several new unfunded mandates. We are not supported by the General Fund to do our work, having had to bring on vastly expanded responsibilities to protect consumers in newer areas of financial services. New licensing laws and requirements.

When a licensing law passes and is signed by the Governor, we need to hire a team to build out that program and we need to provide we need to update our IT infrastructure. The overhead costs associated with expanded responsibilities are definitely a factor here as well as I pointed to previously, salary increases and inflation.

Also, I think it's important to note the increasing complexity of being a financial regulator in the digital economy. This level of sophistication, the workload hours, updating examinations and procedures has been a challenge for our Department as well as financial regulators around the country.

A rise in digital frauds and scams, how many scammy text messages do you get in a given day? The workload hours associated with being a financial regulator simply have grown.

But that said, what we're here today to address is the fact that we are limited in statute to charge the fees we need to charge to support the programs that are part of this trailer Bill Language.

Some of these fees have not been changed for decades and we're here today not going to speak to what Predecessors could or should have done. But we commissioned this independent study. We've socialized it with stakeholders.

Our stakeholders understand that it is more expensive to do business in 2025 than it was in 2013, the year 2000, and certainly 1959.

Finance.

No further comment. But we'd just like to echo the Department comments about the need for a statutory increase and the fact that many of these fees have not seen an increase in years or decades.

So that's the fee side. But I'm talking about lines going in the wrong direction, revenue being flat or down and expenses being up. And from the charts and information that we've been provided just didn't just happen fall of 2024. This has been. This has been both happening and then the deepening of this problem has been.

It seems like it has been predictable. So how, the question is more at a Finance Department level, like, how do we get to a point where we have to do this?

Because, you know, in every other sector of society, whether it's rent controls or the way that we do tuition for colleges, like, we insist that everybody pay attention to what the impact of their fees are.

And if, and if the landlord says, well, you know, it's just been accruing over time in many places, we'll still say, okay, but it's still wrong to be increasing somebody's rent by 40%. Just because you didn't increase it by 2% a year doesn't mean that you got that wrong or we got that wrong.

And so should it be the individual escrow agent and franchisee and, you know, others that are grappling with this, that have to grapple with the. You emphasize the importance of predictability. And this is basically the exact opposite where we come and say we did not do our job, which was to regularly update our fees.

And we're seeing it now, but guess what? You're going to bear that entire cost all at once. In an economy with so much uncertainty and cost already and some of these folks.

So it matters, like how we at the macro level, and this isn't a hit on the Department, just at the macro level, how do we, early warning, give ourselves an early warning. So we could have deployed large, but at least maybe not tripling of fees in one year.

If we had scheduled this out starting a couple of years ago when it started to become clear that this was a challenge, or am I misdiagnosing what's happened?

Charlene Manning, Department of Finance. A couple of things. The past few, several years ago, there was a few large settlements that sort of allowed DFPI to sustain their current fee levels and, you know, they will utilize those settlements, but it also allowed them to, you know, gather more information through the fee study to really, at a detailed level, look at their needs and see, you know, how much do they really need.

And things sort of have come to a head. And of course, you could have argued, yeah, this should have been done before, but with those settlements, they were able to sort of have a longer sort of plane to make these decisions, informed decisions, and understand where they needed to go.

But at this point, we have come to a head and I think the Department can speak to this a little bit more. But the plan going forward is to yearly review their expenditures and revenues so that in the future there isn't these large jumps in fees happening. And so it becomes more of an incremental approach moving forward.

I get it. I get the settlement piece of it. And good on us and the sectors here. Perhaps they're violating the law less, and that means less settlement revenue. But in the broader picture, that's better.

But I still think that sort of the mechanisms by which we do this, and I understand there was probably a predecessor of mine sitting in the same chair saying, how could you contemplate a 2% fee increase when we just got a $200 million settlement? What's wrong with you? So I get it.

I understand the dynamics that you're facing and that we're part of that as well. But Senator Smallwood-Cuevas?

Appreciate the conversation and that explanation, and I wanted to just hear a little bit more moving forward the plan. I thought every department reviews its budget and revenue and expenditures every year. So I want to know specifically, how will you address really tracking and monitoring this moving forward, should this allocation be made?

The other question I had was I think the Crow report identified $193 million shortfall for 27-28, but the proposal only addresses part of the gap. So I'm curious, what is the plan on this other 30 million, if I'm correct on that shortfall, and I know you mentioned fees, but I'm unclear if that is going to cover.

Will that. How quickly do you collect those and will that actually be in time to fill whatever the gap is? I have one other question, but we'll start there.

Good morning. Sophia Smith, Deputy Commissioner of Administration. So the Department is planning on doing annual reviews of all its programs on the fees and assessments, revenues, expenditures, and to see what that gap is so we can make sure we stay on top of it so this doesn't happen in the future.

We also do want to address that $30 million gap that has come up. If you can imagine three buckets, there's 193 million. There's a bucket that's 45.8 million. That is why we are here today, which addresses the trailer bill language, which we as the Department do not have the authority for.

There's another existing program deficit of 34.5 million that's currently in our Commissioner's existing authority. So we don't need to add it in the trailer bill language. So that's something we're able to recoup. So there isn't a $34 million gap.

The other 112 million is based on the new programs that we have implemented, which is the California Consumer Financial Protection Law, the Debt Collector Licensing act, and as well as the Digital Financial Assets Law.

You want to respond to.

I just wanted to clarify that we're not claiming that they don't have the authority. Our recommendation is that they give you information about how they're going to fill the gap, the specific math.

And so, just as a clarification for that, so you mentioned looking at the existing revenues and costs. What about projections? Are you able to project what these will cost? And again, does this fee sort of scenario help? Does it get us ahead of the curve or does it just us get us to the balance?

How are you thinking about that in terms of projections? Because I mean these. And I'm really concerned because I represent, you know, communities where predatory practices are pervasive, where, you know, we saw a lack of oversight in some of these protections, costs people their homes, which is fueling our homelessness crisis.

LA Times did a story about one block of families whose earlier generation lost the home and their children are all living together under one bridge in Los Angeles. Multiple homes who have experienced this.

So when we talk about how predatory practices impact, you know, not just one or two families, but the whole community has to share the burden of trying to repair the harm. This is critically important. And unfortunately, we don't have a national framework right now.

And my sense is that many of these practices are going to become very acute and vicious on certain communities. And so projecting what the cost will be to make sure that we, you know, adequately fund, you know, a debt collector's assistance that we, the consumer protection program, to me, is really is critically important.

So wanted to know more about those projections and how we will be able to meet this moving forward. Last thing, are we still winning settlements? Have we impacted our ability to win settlements? To go after these bad actors and to recoup those funds.

I think, you know, it's great to have programs, but it's also those are band aids. The real work is hitting people where it counts so that some of these practices change and maybe that's it, it's working. And so we don't have as many settlements because people are doing better.

But just curious about how your mandate and your mission fits into this sort of financial sustainability.

So our projections go out five years and we're also including the salary increases that we expect to see over those five years as well as continued costs in inflation on our overhead that we have. So we're accounting for all that every year. We're also looking at each program every month.

I mean we're, by a fine tooth comb, we're looking at every single program, what is the revenue they're generating, what are their costs. So our budgets department is really taking a strong emphasis on monitoring it very closely. And then do you want to speak to the settlement piece?

Yes. It's great when you can bring in settlement money. Right. You just can't budget around it because enforcement actions investigations can take years.

What built up in the prior fund that we were able to leverage to sustain our programs up to this point, it built up due to years long investigations, major, you know, massive, in many cases multi state investigations. And so it can take years.

And so you never know in a given budget year whether an enforcement settlement's going to hit your checkbook. Right. So that is the challenge. What we want to do is provide a balance here of course for the regulated industries. They don't like regulation by enforcement.

They would like predictability in knowing here's what you're going to assess me every year and in return I'm going to get high quality service levels from you as the regulator. Because we don't want to wait until someone's already been harmed, until someone's already broken the law and then go knocking on their door after the fact.

That is the not particularly maybe fun topic of supervision. But what we do is primarily supervision.

We are examining our licensees, we are getting data from them every year and through our, most of it's confidential, but through our routine licensing, examination, supervision work we seek to provide consistency, stability, compliance with the law so that we don't have to take an enforcement action. And so the fee increases.

The statutory authority we are requesting through this trailer Bill will enable us to bring in the revenue we need to sustain our service level. So we're not worried about do we have the dollars to send an examiner out to go examine this licensee. That's what we're talking about here.

If we can't go out in the field and ensure that our licensees are safe and sound and complying with the law, then we're failing our consumers and we're failing on a consumer protection mission. Yeah.

Senator Niello.

Thank you, Mr. Chair. There are lessons learned here. I think it's important to point out when it's been mentioned that there's been a long time since fees are adjusted and some reasons why and the like, and I won't go over that again.

But, but in the avoidance of adjusting fees for a service, whether it be in the case of departments here or any other area where an entity has to charge a fee for a service that's provided and they hesitate to do it because increasing fees irritates people.

And so you put it off because you don't want to irritate people and then you end up up really irritating them because you have to take it so high. That's one lesson. But there's another one here and we have to look in the mirror.

You mentioned the term unfunded mandate, and it's not an unfunded mandate in the sense that we foist upon local governments all so frequently and actually never fund them anyway. But because you, what it does is imposes upon you to have to reassess your fees and the appropriation.

I have been a victim of legislation dying on the suspense file and appropriations that don't have any fiscal impacts. But this is a situation where a piece of legislation would not have fiscal impacts because it doesn't affect the General Fund. And so we foist that upon you to solve that problem.

I sense just a glimmer of frustration in your voice and you would be well justified to express even more frustration with that.

I think we should do a better job when we pass legislation that imposes additional responsibilities on departments that have to charge a fee for a service type of existence and give a little bit more thought to the impact of that legislation relative to the cost of its enforcement and management.

And I'm not sure that we do that adequately here. So lessons learned. And they're really I think it's again, I think it's really important for us to acknowledge the latter. The former is obvious because we've talked about it. The other thing is that it all assumes that costs are appropriately controlled and are of an appropriate level.

And of course, we don't know that here. That's your job, your department's job to make sure that costs are appropriately controlled. But that's a piece of the equation that I don't think we've really talked about here. Not to be critical, but that's an important piece of it also.

I first want to agree 100% with both of my colleagues. I think Senator Smallwood-Cuevas is underscoring how critical the Department is and even more so, and that's why we were spending this much time on it, because we can't have an insolvent agency at this point in time or ever. So it is really important.

And I think Senator Niello's comments about our approach to budgeting here and oversight and within the Administration are also right on point. So just a couple of other quick questions. So one, is it the Crown Report. Or Crow report?

So you know, we were here last week or the week before with the Department of Real Estate which implemented, you know, similarly scaled fee increase and then maybe or maybe not related the number of their licensees fees took a precipitous drop. Did the Crow report look at the elasticity of fees?

I mean elasticity of fees, particularly in the context of an increase of this scale. Did it analyze any anticipated impacts in the market, the demand for licenses and other approvals from the Department in these domains? Or do we expect every single person will still apply again, pay the tripled fee and we'll just go on?

Is that the assumption in the proposal that we won't lose any escrow agents or mortgage brokers or any of the other licensees in this process? Do you want to take a moment while LAO gives its perspective?

I actually have the Crow report with me right now. It's my reading of this, although there may be information that was part of the discussions that the Crow report used a historical it was I believe, a three year analysis as part of their projections.

I don't know to the extent to which they anticipated market changes or other things. I would leave it to the Department to determine that. But based on my reading of the Report, that's what I.

Sarah Hamilton, Department of Financial Protection and Innovation so when CROW came on board, we got them up to speed with all of our different divisions and units to talk about the future, to talk about from a subject matter expert perspective what they thought might happen in the future if fees were increased.

And so we leveraged that information along with historical data from 2018-19 through April of 2024 and then projected out through various means of various methodologies, including moving averages, Linear regressions, all these fancy terms in order to come up with the best case or best guesstimate of what we believe revenues would be for the future, including increasing costs for the Department and if implemented, what the impact would be on those stakeholders.

I could also say to the question about licensees, market fluctuations. We've observed market fluctuations, particularly in the last few years, irrespective of the fee question. For example, during the pandemic, a lot of people became mortgage loan originators and we saw the huge spike there that then a few years ago, two large banks went into receivership.

So there's fluctuations. But then we also have a De novo charter pending on a new bank. And in some areas we're also seeing mergers and consolidations where we may have fewer by number licensees, but the market share is actually larger. So we may end up in certain circumstances where there are fewer licensees, but they're larger.

It's also important to note, because I don't believe we've discussed this before, that we primarily recoup costs on a pro rata basis, meaning that larger companies pay more and smaller companies pay less. But my colleague is correct that we, that Crow used various methodologies to project the likely future market impact of these fee increases.

Okay, but could you go into a little. So I used to teach Linear regression or all those other things. Can you go into a little bit more detail?

Because it wasn't clear to me, I didn't hear any magic words that suggested that the analysis of the impact of tripling of the, of the cost would affect demand, which would be a highly unusual situation.

Especially the example of mortgage brokers during the pandemic is a reminder that it, the, you know, the cost, the barriers to entry are not that high, the barriers to exit are not that high for some of the categories.

And so you would expect that if you triple by, you know, if you increase a fee by thousands of dollars, that there might be an impact. So maybe. Or if you've got. And you've indicated, LAO, that you didn't see it, but do you have any other information about whether that is in the methodology that Crow used?

It was all based off of subject matter, expert opinions, you know, taking into account if the fee was to triple, what would based off of their opinion, what did they believe the impact to the license these would be? So it was factored in. I don't have specifics in front of me, but I can, we can circle back.

Okay, maybe I'll review the report as well. But the DRE looms large in my mind from this other issue and the solution that was implemented there is not working. It doesn't appear to be working. It was not necessarily a bad idea. But it's eminently foreseeable.

I'm an economist, if it's not already obvious, but it's eminently foreseeable that you triple the cost of something that there'll be some impact on the demand and you can't always count on recouping anywhere near the full amount of the revenue that you're anticipating just looking at historic trends and applying a new price.

So I'd be interested in following up on that. Additionally on the, so there's a set of fees that the Department believes it has the authority to adjust on its own. And in the package that you're asking for in the the trailer bill language, there's also for the money transmitters program and for the examination fee adjustments.

The request is for the Department of the Authority to basically set the fee based on its own assessment of, you know, what the costs are. So there's not a fixed dollar amount. The fixed dollar amounts that are in the tailor bureau language are not trivial.

So can you give us some some sense or assurance about what the scale and scope and magnitude of all of the fee increases that either are or would become discretionary under the, without detailing each single one. But the Department would have the discretion to assess. Are we looking at those roughly in the same.

You know, I wouldn't be surprised with the tripling, but I would be surprised to see a sextupling of them or no change at all. Do you have some sense about those that would be within your discretion, what those might look like?

So I can talk to, Sarah Hamilton, Department of Finance or sorry, Department of Financial Protection Innovation. The amount specifically for money transmitters would be increasing the exam hourly rate to $120 an hour and that would be consistent for the programs that are within the department's purview.

So this would include escrow, the California Residential Mortgage Lending act program, California Finance Lenders, California Deferred Deposit Transaction, student loan servicing. All of those would be to set a Department wide rate of $120 an hour. And that rate was determined based off of.

You don't need to go into the detail. I'm just trying to get a sense of the ones that we are not reviewing, specifically the dollar amount is the magnitude in the same range or less.

It would be the,

That is less than the magnitude of the ones that we're looking at right now. So. Okay, appreciate that. Then lastly, LAO has recommended the three year limited term basis and you said you didn't concur with that. And I just want to bring that back one last time before we conclude the item.

Can you provide any further background or response to LAO's recommendation in that regard.

We're certainly open to discussion. However, we do have concerns about a potential sunsetting on our statutory authority to charge the fees. We believe we're going to need to sustain the costs to recover the cost of our programs. We're not in the profit making business. We're trying to be revenue neutral and our licensees.

Again, we have socialized all of these proposals with the impacted stakeholders that are the subject of the trailer Bill and they want predictability and certainty to the degree it is possible in today's world. And so to hear, oh, these are going to be the fees for three years and then what I think is a concern.

The Crow study recommended this approach to put us on the path toward long term sustainability which we believe given the responsibilities that we have as a market regulator are just mission critical at this point in time.

Okay. All right. Well, we will hold the item open. We're going to hear public comment later. I will simply say I have not received any communication of protests from any of the folks that are covered by these fees. So that gives me some confidence that your socialization efforts are working.

But of course we may hear later today or in further communication. But up to this point, the one thing that gives me solace here is that there hasn't been so far a large amount of outrage about this.

And so the understanding that the regulated community may have that this is what's necessary in order to sustain the Department which is in their interest as well. That's a positive sign. So thank you. I think we're done with Department of Financial Protection Innovation. We're going to proceed to Department of Consumer Affairs.

Good morning Chair coupled on and fellow Committee Members. My name is Taylor Schick and I'm the Chief Fiscal Officer for the Department of Consumer Affairs and I want to thank you for having us here today. The Department is requesting 2.652 million in 25-26 and ongoing to continue the maintenance and operations for its Business Modernization Cohort 2 programs.

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

Of the amount requested, approximately 231,000 is for funding to cover the cost of credit card processing fees on behalf of consumers and licensees. I'm joined today by the department's Chief Information Officer, Jason Piccione, and we are happy to answer any questions that you may have.

All right, thank you. So if there's no objection from the Committee, we'll just proceed directly into item 17 itself. So are there comments from finance item 17, which is the business modernization cohort that's already been referenced? LAO okay, let's then turn to the Members of the Subcommitee. Any questions or comments on item 17?

I just have one, which is my impression that across state government we have a there's not a consistent policy or practice with respect to credit card fees and what we expect consumers or in this case licensees to pay and what the state covers.

Is there standard framework or is there guidance or document from Finance or elsewhere that gives us some sense of like under what circumstances should it do we charge a fee or not charge a fee for credit card transactions?

Charlene Manning, Department of Finance not to my knowledge that there's a standard approach across state government. I know DCA in particular depends on the boards and bureaus and I'll let them speak to the details regarding this proposal and the impacts of credit card fees.

I see. So how do you when they come to you at Finance, how do you evaluate that question then?

I think we have to look at a number of factors whether or not well, if it's a special fund based type of fee, like can the fund afford covering such a fee on behalf of the licensee or consumer? I think that's probably the number one and there's a variety of things to look at.

Is the credit card fee built into the fee that's being charged to the licensee or not or is it sort of separated out from the fee itself?

Thank you. All right, there are no further questions on this one. We're also going to hold item 17 open but appreciate thank you for your time. The presentation. Now we're going to turn to Exposition Park. I think Senator Niello stepped out for a moment.

This is both in Senator Smallwood-Cuevas district and she serves on the board and I've worked on the on Expedition park myself for decades. So we can probably skip the overview and move directly into item 18.

Good morning. Jeff Rudolph, President of the California Science Center. Thank you. Give as much overview as you want to, but don't. I will respect your time and not say much. We are a science learning institution focused on stimulating curiosity inspiring science learning in everyone.

We see about 2 million guests a year, mostly families with children and school children and we are in the midst of completing our largest project yet. Resulting from our 1993 Master Plan, we built the Science center in three phases. The first two phases are completed the third phase is our Air and Space Center.

I sent up some photos that help you see the scale of it. This is the new building. It almost doubles the size of the Science Center. It is within a couple of months of completion of the building itself. And we're beginning to install artifacts and exhibits.

We're very excited about started, of course, it was with our 1993 master plan that we planned it. But we started actual work on this project in 2011 when space shuttle endeavor was awarded to the Science center after a national compet among 29 museums.

It is now installed in this tall part of the building and protected while we finish the building in launch position. The only place in the world to have a full space shuttle stack, all authentic hardware. And in addition to that, we'll have about 100 other aircraft and spacecraft and 100 exhibits going in. We're very excited about it.

And the proposal in the Governor's Budget is associated with maintenance requirements that we have just to keep the building and the facility maintained. Once it's completed and turned over to the state. It does not yet provide the funding for opening to the public. Happy to answer any questions. All right. Department of Finance.

Natalie Griswold, Department of Finance. Nothing to add at this time. Thanks.

Morning. Rachel Ehlers with the Legislative Analyst's Office. We didn't have any concerns with the proposal before you. We will just flag, as was just noted, there will be another proposal coming at some point in the coming years that will be very significant for the actual operation and opening of the new facility.

And there isn't as of yet an identified funding source for that. So there will be a question before the Legislature of what is the state's role and how to support this. Whether the General Fund will be able to.

The special fund that supports the Science Center and exposition park at this point is already in structural deficit and can't even support the kind of modest operational request before you. So just pointing a flag that that is not a decision before you today, luckily, but it is coming in the coming years.

So we're writing a note to ourselves so that us or our successors won't look back and say how do we get here? Who did this? So we are contributing to it. I just want to start at the beginning because you noted the 1993 master plan.

I was the policy Director for the Assembly Member who represented the district and served on the board, Margarita G. Hudson. And so I'm glad to see all the little notes and policy documents I was writing at the time that were getting there. It took Senator Smallwood-Cuevas to get across the line. So let's. Senator Smallwood-Cuevas.

Thank you and appreciate your early work. It is paying dividends. I just want to say how important this project is not just to Los Angeles but to the state.

I remember I don't know if folks got to see on TV when the shuttle came through the city and everybody from the motorcycle clubs to the Girl Scouts showed up for this, which shows the breadth of this project and who and what kind of visitors we're going to bring to California to participate in this.

And we know for every visitor that comes and you know we already have about 2 million folks who come to the Science Center. We're projecting to have over a million just to come to this exhibit.

And for every one that comes, they spend about 1500 in sales tax and that's a baseline for the region and we know how much of that comes back to the state. So you know, we got to spend money to make money and this is an important endeavor. But and I appreciate the LAO's point on this.

I'm just curious, you know, whether what is being proposed right now is sufficient funding to open the doors because tremendous investment from the LA community to get this infrastructure to get this beautiful facility developed and built. But is this sufficient?

I'll answer two things. First is no, it's not sufficient to open. It will essentially maintain the building as if it's mothballed. We finish it and keep it from degrading once we do that. The building is actually a $450 million project. It's been. The state's put $80 million and the rest is being raised privately.

So we feel not just a need to finish it and get it open, but also an obligation to the private donors that have made it possible. One of the rare public private partnerships that's actually succeeding. But just important to note that that's the case. So this provides maintenance as required in our lease agreements, but not opening and.

Is there and I hear more to come. But how do we get something back from Department of Finance that helps us really know what that what sufficient amount is required so that we can have a decision make a decision that will help us do what we know California needs, which is to attract dollars to our great state.

So curious what your thoughts are on that.

Yeah. So while this request does allow the Science center to kind of meet its legal obligations and maintaining the essential operations of the facility and mainten we acknowledge this proposal does not directly facilitate the public opening.

I think we acknowledge that this proposal kind of underscores the state's commitment to the Phase 3 project despite our current challenging fiscal conditions. If a decision is made to open the new air and space center to the public, there may be future budget proposals for that.

But at this point we understand the value and importance of the project, given the concerning and challenging fiscal conditions we're currently in. This is just for kind of that maintenance operation, funding.

Timeline. What's your thoughts on when we'll have more data on this?

Lizzie Erie, Department of Finance we don't want to be premature in committing to a timeline when we may be back. Our goal here is really to strike the balance between, as has been said, maintaining and operating the facility while acknowledging our very challenging General Fund fiscal condition.

Okay, so, you know, I appreciate the points that you made about the investment and the fundraising that's happening in La.

I think for us here, we do have a lot of decisions to make and it would be good to know exactly what it will cost to get the doors open and to make sure that we can adequately operate and meet the needs in every Committee. I want to say the World Cup is coming in 2026.

Millions of folks from around the world are coming, and it's not lost on us the national implications that we have.

California is going to need to show up and show out, and we're going to need to be ready so that we can continue to have investment in the state and show the world this is the place they can come do business and have some leisure.

So it would be great to know what that will look like and to have a better timeline from you all on that.

Certainly. I understand. Just given the current proposal, without additional resources to open the facility, we can safely say that we do not plan on the public opening as part of the 25-26 fiscal year, as that would require additional resources. So we may come forward in 26-27.

But at this point in time, the opening would not take place in the 25-26 fiscal year.

And that is, I want to say, is problematic as we have some pretty amazing visitors coming by the millions into this region, starting even to the super bowl, to the All Star Game and then into the World Cup. So I hope we can continue to work on that to see when a deadline can be more appropriate.

And then there's that little event called the Olympics.

We're talking because, you know, if we want to be really ready, if we want to be really, really ready, we didn't. We're talking about the, what I want to say the dress rehearsal, because it's important for us to have a dress rehearsal. We can't afford to have missteps in 28. And this is about that dress rehearsal.

So I think it is important for us to have and for this sub budget, sub in particular, given all the things that are coming before us to really understand what it will take to open this facility in a time that helps California be prepared for what we know is coming.

So I appreciate the sort of the dance around the resources, but I think we need to get to a more definitive, credible and important timeline on this.

All right, we're going to hold. We're going to hold this item open as well. Given all the issues that have been raised just for equal time, I want to, I just want to emphasize the Dixon Mayfair is in two weeks also.

Let's compare. We know those sales tax and we'll be looking for those. But I think we've got a few bigger fish to fry here.

There will be a fish fry at the Dixon Mayfair. Thank you very much. Thank you very much. All right, now we're going to turn to the Fair Political Practices Commission. Welcome to the Commission. Please begin with the stats report on major programs and the efficiency targets as well.

Good morning, Mr. Chair, Members. My name is Lindsey Nicano. I'm Senior Legislative Counsel with the Fair Political Practices Commission. I'll give a brief overview of our agency and then I'll turn it over to the FPBC's chief of Administration, Dr. Ju Wong, who will present our item.

The Fair Political Practices Commission has jurisdiction over the Political Reform act of 1974 which regulates the areas of campaign finance, lobbying, conflict of interest and government ethics.

The Commission's objectives are to ensure that public officials act in a fair and unbiased manner in governmental decision making processes, to promote transparency in government and to foster public trust in the political system.

The Commission is responsible for the Administration, enforcement and implementation of the Political Reform act and has numerous specific duties and authority including the intake and review of complaints, conducting investigations and administrative enforcement proceedings and providing educational resources and formal and informal advice to individuals and entities regulated under the act, among many other duties.

I'll turn it over now to our Chief of Administration, Dr. Jue Wang.

Good morning everyone. Jue Wang, the Chief admin at FPPC. So FPPC requests 555,000 general fund for 25-26 and ongoing and 3 permanent position to implement recent pass legislation which include AB 2355, AB 2041, SB1156, SB 1111, SB 1181 and SB1243.

AB 2355 requires a disclaimer statement on campaign advertisement with image, audio or video that was generated or substantial order using artificial intelligence. AB 2041 expand authority for candidate and elected officer to use campaign fund to pay for security expense. Require those people person to submit a report to the FPPC that describes and verify the threats.

SB 1156 requires a Member of the Board of Director and Executor of Groundwater Sustainability Agency to file form 700 directly with FPPC. FPPC estimated approximately 2,000 filer from the Groundwater Sustainability Agency which will require increased funding for existing electronic filing system.

SB 1111 creates a new category of remote interesting requiring officials to abstain from participating in a contract decision on the section 1090 when the contract involves official adult child. Last one SB 1181 AB1 narrow scope of section A4308 and makes various exemption from existing law.

Giving these robust changes, the FPPC anticipates a significant workload increase in the Enforcement and Legal Division and additional funding increase for existing Form 700E filing system with proposed PCP. The FPPC will have necessary resource to implement the provisions of AB2355AB2041, SB 1156, SB 1111 and SB 1181.

AB 1234 thank you for your consideration and we are happy to answer any question you may have.

Finance Charles Assal, Department of Finance no additional comments at this time, but happy to answer any questions. Thank you. Legislative Analyst Office Nick Schroeder with Al we have no comments. Thank you. Questions or comments from Members of the Subcommitee.

All right, and this is the metrics here are consistent with the Department's January workload metrics report in the same domain as the workload metrics report that you submitted on in January of this year.

Somewhat. The report doesn't cover the entire workload of the Commission. It doesn't reflect the entire workload. But generally the the metrics report covers our Enforcement and Legal division workload roughly by the numbers.

Yeah, but some workload is not able to capture in the report like the training, the time, the research. So yes, so I think the metrics report is not able to capture all the number.

All right. They seem like a reasonable magnitude given the number of bills that we've been passing in this area. So the main issue here and the reason why we're going to hold it open is simply the general fund situation for 25-26. But appreciate the presentation. Thank you very much.

Thank you.

Okay, now we'll turn to the Commission on the status of women and girls.

Good morning. Good afternoon. Hi, my name is Darcy Totten. I am the Executive Director for the California Commission on the Status of Women and Girls. I am joined by Maxwell Macedo, our Director of Fiscal and Administration Overview. And then I'll kick it over to Max for the weeds. The Commission has been around.

We are celebrating our 60th birthday this year as an independent state agency. So we focus exclusively on women and girls in critical areas such as economic and educational equity, military and veterans issues, access to health care, including reproductive choice, violence against women, representation across the board, media to politics and education.

There's about 19.6 million women and girls in the state, meaning women comprise about half the state's population and we serve all of them and achieve these existing statutory and programmatic mandates for this population.

With 10 permanent positions, we do this by collaborating with every state agency who requests our assistance, including some ongoing working relationships with the Office of the First Partner, the Office of Civil Rights, Labor Commissioner's Office, Calvet, and we also have a pretty robust network of outside partnerships with organizations like the Girl Scouts and all of their regional councils.

A prime function of the Commission is to encourage those outside organizations also to sort of Institute activities at the local level to meet the educational, employment and related needs of California's women and girls. We make regular reports on our activities, findings and recommendations to the Legislature.

We review state laws regarding the civil and political rights of women and strive to act as an information center on pretty much every issue that touches the lives of women and girls, which is a big job. As we have the capacity to do so, we will also sometimes conduct original research.

We will recommend developer coordinate materials, projects or other activities and give technical and consultative advice. Today we are before you with a budget request to address a critical sort of workload demand that are essential to fulfilling our existing statutory obligations and our mission.

And I'm going to kick it to Max to talk a little bit more about bcp.

Thank you, Darcy. Chair and Members of the Committee, Maxwell Macedo. As Darcy stated, Director of Fiscal and Administration here at the Commission. We appreciate your time and consideration today. I'll truly do my best to keep this brief. The proposal before you today does request position authority for three positions.

These three positions are existing, however, they are presently limited. Term and expire at the end of this fiscal year. Two out of three of these positions are supervisory overseeing critical teams which such as the programs team, as well as operations or Administration.

Although our existing obligations are experiencing a growth rate on an average of 198% per calendar year, we do remain committed to fiscal responsibility, especially with our current economic outlook.

This could be witnessed through actions such as accomplishing a 45% reduction in personnel hours allocated to various programs, primarily through efficiency and automation, rather than cutting any services whatsoever to even our realized cost savings, amounting to approximately 3% of our total budget, which was accomplished through renegotiations of various agreements, automation with certain administrative tasks, as well as promoting efficiency in all spaces.

Excuse me. It is imperative for continuity of operations and efficiency that the Commission maintains permanent, ongoing supervision of these key teams in our existing workload. And for that reason, we are before you today asking for this authority. I do believe this concludes our remarks, but we are open to any questions. Thank you. Thank you.

Finance Lao and Hollings, head of the Legislative Analyst Office. We don't have any concerns with the proposal.

Questions for Members of the Subcommitee.

Senator Small Cuevas, thank you and I appreciate the presentation. 19 million is phenomenal. So my, my question is, can you explain what are the specific, specific responsibilities for the three positions? Because 19 million in 10 and then three.

So I just, it seems pretty expansive, but I wanted to just also, and I'm going to make sure I get my question right because I had wanted to get this correct. So the ones that are proposed for the conversion in particular, and if we weren't to Fund them, what does that mean?

So the sort of first, biggest one is this guy right here is one of those positions. The Commission has historically vacillated between having really great operations staff and none at all. And that shows, if you look back at the work, sort of what happens when we don't have somebody with the proper experience in the operations Department.

One of the biggest issues that we have is that we're a client agency, right? Everything is sort of piecemeal through contracts under other organizations.

So the place that we're able to to find money is usually through things like, as Max mentioned, renegotiating those contracts, making sure that we're staying on top of that and that somebody who absolutely understands all of those processes is in that seat.

The other thing that we sometimes are tasked to do by the Legislature is run grant programs where this is super important. So that's this position. It's also one of the ones that would go under it. It's the SSM one, which would be a grants and operations specialist, which would also have.

We sort of have a fun little line item for that, which is they can fundraise because part of our statute as an independent agen means we can also bring in outside dollars so our hope is that the position will help us do that better and be able to kind of offset our costs that way as well.

And then the last one is a programs and partnerships position, which half of that used to be me when I was in a different role at the Commission and is currently unoccupied. That sort of building of those outside collective partnerships with organizations like the Girl Scouts or Mount St. Mary's University.

We work with them on a report on the status of. Or the. We've worked with the California Policy Institute folks that we do a lot of research work with mostly, and then also being able to oversee programs. So things like the equal pay pledge program that we do in partnership with the first Partners office.

One of the things that we had to do because this position was vacant was completely restructure our youth council this year. It used to be sort of deeply invested enrichment program, and we did not have the ability to staff that. So we have remade it and reconfigured it so that we could run it with less staff.

We didn't want to give it up. But there, you know, there's certain specific consequences to not having a dedicated person there. And notably, there's sort of like less strips, fewer speakers, the less of an ability to bring in people to talk to the. To talk to the youth who are serving.

Got it. Thank you.