Assembly Budget Subcommittee No. 3 on Education Finance

Good morning everybody. Call the meeting to order. This is our Budget Subcommitee number three on Education Finance in the Assembly. I am Chair Alvarez and I welcome you all to today's committee hearing, which is our final hearing of the proposed budget before we have the May revise in the next week or so.

Today's discussion is primarily focused on the three segments, capital outlay and building maintenance. This is for our UC, CSU and college campuses.

While we have spent most of the spring talking about access and student success in the context of the ongoing funding to pay for faculty and staff and various important student programs, we also know that facilities and infrastructure play a very significant role in ensuring that our campuses are ready and prepared for our students and that we have modern classrooms, labs and facilities to allow for learning for the 21st century.

We know that segments and campuses are struggling to support capital programs. Many buildings are old. We'll hear about the length of and the percentage, but many more than 25 years old, 55 years old in many cases and more. We have not had state backed university bond in 20 years. I'm sure you're all familiar with that.

And while UC and CSU have had authority for more than 10 years to issue their own bonds for capital projects using the General Fund to pay for the debt service, we should be thinking about a stronger partnership between the state and the segments to better support construction and renovation.

All three segments have billions of needed projects and we'll hear about those lists today. Deferred maintenance backlogs for all of them are also in the billions. And so we look forward to hearing from the LAO who's making some recommendations on how to develop a plan for the long term strategy.

Also, all three segments are very interested in expanding student housing, something that they've been doing a lot more over the last several years. The state has made many efforts in this regard. This is important because housing is now the highest expense a student faces, regardless of the segment at UC, at CSU and community college.

So today I hope we can develop a better understanding of how the segments plan for capital projects, how they are funding the projects today, and how we can do a better job of that going into the future.

We have a solution we believe to be part of the solution anyway through the policy process with Assembly Bill 48, which has made it out of Mr. Fong's Higher Education Committee. And so we are hoping that in 2026 we can go forward to the voters with a bond.

And I think today's discussions will help inform what that looks like and how more appropriately we can address the needs of our state. We will begin with some public comment. If you have any public comment on agenda items and you want to get yourself out of here in and out quickly.

We'll give you 30 seconds now to get your comments in. Otherwise we will take you at the end of the today's hearing. I see some someone interested in a shorter comment. Welcome. Thank you for taking advantage of this early opportunity and please go ahead.

Thank you Mr. Chair. Members, Kathy Van Osten, I'm representing John Burton Advocates for Youth. We're here to request a technical amendment, not an appropriation, but a technical amendment on the Cal Kids program.

After discussions with the Treasurer's Office, we've come to an agreement to seek clarifying language that just gives them the authority to disperse the funds according to AB 2508, which was passed last year. So it's not a new- new funding request, it's just a technical amendment asking for authority.

Thank you very much. Thank you. Public comment 30 seconds. Welcome.

Hi. I want to thank the committee for their support and time. I'm Sharon Furtak. I'm chair and Professor of Psychology at Sacramento State. I've talked a few times before this committee already.

Due to the projected shortfall of the CSU by the proposed 8% reduction, I've had to cut sections and seats, while asked to grow due to the compact, I now find myself in a position of whether to accept students for fall when I can't offer them seats.

So I asked the committee to ponder what I have had to. Is it morally permissible to accept students when I can only offer them one psychology class? Please fight for our funding. Thank you.

Thank you very much. Anyone else want to take advantage of this early public comment opportunity? Seeing none, those who have not spoken will have- will have time at the end of today's agenda. And I did forget to mention, in addition to the facilities discussions, we do have Cal Kids update as well. So appreciate the comments on that.

And with that we will go on to our first issue on today's agenda. If I could please ask the Legislative Analysts Office to please come forward, we're going to dive a little deep on this issue exclusively with the Legislative Analyst Office and then we'll have a follow up panel including others.

So we will discuss the higher education facilities issues, the capital outlay and deferred maintenance process and the funding need and needs and ideas for better addressing issues.

And I appreciate the work that's put been put in to this already, both in this year's report from the Legislative Analyst Office, but also the January 2023 report, which I hope you all had a chance to see where some of those details are outlined. Welcome. Please begin.

Good morning, Mr. Chair and Members. Ian Klein with the LAO. Today we'll be discussing our recently published report on higher education facilities and we've been asked to present some highlights from today's report for this hearing. You should have that report in front of you now.

I'll begin by walking through the growth in California's public higher education system, which of course includes UC, CSU and the colleges.

As the top figure on page four shows, the number of campuses increased substantially from the 1950s to the 1970s due in part to population growth over this period. While the growth in the number of campuses has slowed since then,

the bottom two figures on that page shows that the number of buildings and gross square footage has continued to grow, with the latter increasing by nearly 70% since the year 2000. Moving to page five. While UC and CSU's gross square footage has grown, an increasing share of that space is identified as self supportable.

These types of spaces are covered by user charges and generally include student housing, dining facilities, parking structures, bookstores, and student unions, to name a few of these types of facilities.

Page 6 shows the types of state supportable spaces at UC and CSU and the types of spaces at the colleges as the bottom slices of each bar on the top two figures show classrooms and instructional lab spaces comprise a relatively small share of total space, 10% at UC and 25% at CSU.

More than half of space is designated as offices or other types of spaces for all of the segments. The next few pages look at UC, CSU and the college's student housing for each segment, there is now a growing number of beds available to students.

A key issue here concerns the Legislature recently providing ongoing state support to finance various student housing facilities at all three segments. We note the Legislature likely will want to monitor the outcomes of these projects to ensure that state objectives are being met and that the budgetary trade offs are worthwhile. I'll next talk about facility utilization.

Page 10 shows the facility utilization rates at UC, CSU and the colleges, directing your attention to the most recent data, the 2022 data. Each of the segments classroom and instructional lab utilization rates are below legislative standards. If you look at the community colleges, this data is skewed as it looks at total enrollment rather than in person enrollment.

This means that these levels are artificially high and that this figure is not comparable to the UC and CSU figures right above. The colleges currently estimate that about 60% of its instruction is actually taught in person. The next few pages concern the segment's deferred maintenance costs, facility conditions and seismic needs.

As the figure on the top of page 11 shows, many of the segment's facilities were constructed several decades ago. The bottom two figures on that page shows each segment identifying growing deferred maintenance backlogs for their state supportable facilities. As page 12 shows, most CSU campuses and a majority of UC campuses have poor facility conditions.

While the segments have poor facility conditions, they currently do not track their capital renewal spending across all fund sources and without this information, the Legislature cannot measure the gap between the segments, emerging capital needs and their current spending. So we recommend collecting more granular spending data moving forward.

Additionally, neither the state nor the segments have plans in place to fund capital renewal projects as they emerge. Our office, as previously mentioned, produced a report a few years ago that recommended the state work with the segments to develop these plans, and without these plans, it's very likely that these capital renewal backlogs will further grow.

Pages 14 and 15 identify how facilities are financed outside of one time General Fund support. Historically, the state paid for construction and renovation of academic facilities at the segment through state issued general obligation bonds that were approved by voters and statewide propositions. The figure on the top of page 14 shows these results going back to 1996.

In 2013-14 and 2014-15, UC and CSU respectively were given authority to issue university bonds for their facility projects and make associated debt service payments from their main state General Fund appropriations. Since this authority has been provided, the state has given UC authority to finance 4 billion in projects and UC 4.8 billion.

Turning to page 15 in addition to state GO bonds, the community colleges have authority to issue local bonds for their facilities with voter approval. Typically, the local bonds cover half of the project costs, with the state covering the remainder. Page 15 shows the majority of these bonds, when brought to the voters have passed.

Skipping ahead to the bottom of page 17, this figure shows UC's and CSU's debt service percentage in relation to its annual General Fund support. State law sets caps for UC and CSU, which allows UC to spend up to 15% of its General Fund budget on debt service, while CSU is allowed to spend up to 12%.

A key issue for the Legislature is to continue to monitor these debt loads to ensure that they remain manageable and that state objectives are being met. And finally, as the top of page 18 shows, construction costs have grown more quickly than inflation, particularly over the past five years.

So I'll pause my comments here, but my colleague and I are happy to answer questions as needed.

Is that it? Okay. I would- I know we didn't you have a report, this report, which graphically and visually is- Thank you- It's very easy to follow along and understand. I wanted to get a little bit into the report that I know has now been two years that you produced in 2023.

But I thought it was important to this conversation and I was- I'm trying to think back. I was on this committee, but not chair of this committee. And so I'm not sure if this was heard in this committee or not, but there's quite a few issues you raise in that.

And the reason I'm looking here is that I took notes and I have them on my tablet here.

So excuse me for a second, but I'm curious about the- the data- the system wide data concern that you raised in the- in the report back then and how much UC and CSU are spending annually for their from their base budgets on capital renewal projects. I guess that wasn't being tracked back then. Do you know if that has changed today?

Jennifer Pacella, Legislative Analyst Office in putting together the 2023 report and then in putting together the 2025 report and I think as you know, we did a series so we looked at enrollments, college affordability, student outcomes, facilities was by far the most difficult area to collect data that was useful, comprehensive could help you.

So the data on spe- on capital renewal spending hasn't improved much over the last two years. We did note in the 2023 report that UC and CFU have made improvements when it comes to doing facility condition assessments. So that data is a little bit better today. Now, having said that, that data still isn't regularly reported to you.

We had to ask them special to give us each campus's facility condition index. So in this environment where the state budget is tight, there are still certain things that the Legislature could consider by just improving the facilities data. One of it would be telling you what facility conditions are across the campus on an annual or biannual basis.

One would be telling you current replacement values so you could get a sense of what does it cost and how is that changing over time.

When it comes to the spending data, we recognize this is a complex area because universities are using bond funds, campus reserves, ongoing core funds, whether it would be ongoing General Fund or tuition revenue. They're using some special investment earnings. But it's not impossible just to collect that information.

Other areas of the state budget and the Sigmund's budget are complicated as well. But because the Legislature isn't requiring them to report comprehensively their capital renewal spending by fund source. It is hard, I think, for the Legislature to get a full picture, a full accurate picture of the facility landscape.

Okay, maybe with that we set the sort of table for panel two to come up and then we'll hear from panel two, which is the actual segments, and then we could all ask questions with everybody at the table altogether. So ask the LAO to certainly join us.

You can join us up here, but stick around because I'm sure we'll have questions. So we'll ask the University of California Office of the President to please come forward, the California State University Chancellor's Office and the Community College Chancellor's Office to please come forward to present some opening remarks related to this, this issue.

And once again, once we hear from you, we will probably have questions for- for all of you both on the 2025 report and the 2023 report. So why don't we start with the order list on the agenda, which is University California.

Thank you Chair Alvarez, and good morning to members of the committee. I am Nathan Brostrom.

I'm the Chief Financial Officer for the University of California System and very pleased to be here with you today to discuss the university's infrastructure and fiscal plan and how we can work together to ensure that our students, patients and communities continue to live and work in safe, affordable and welcoming spaces.

At our current funding levels, UC cannot fulfill all the construction needs at the pace necessary to meet both enrollment demands across the system and to address aging buildings and infrastructure. Without additional resources like general obligation bonds and deferred maintenance funding, our students, faculty and staff and the communities surrounding UC locations will be more and more impacted.

We have- As the LAO mentioned, we have developed many creative financing approaches at both the campus and system wide level to fund our medical centers, our housing and new buildings to support enrollment growth. However, maintaining and renewing our existing buildings and infrastructure requires public financing.

As the Chair mentioned, the UC system once received regular infusions of bond proceeds, but we haven't had a general obligation bond in nearly 20 years, nor lease revenue bond since 2011.

So combined the University's Capital Program, both our education buildings, our auxiliary enterprises like housing and parking and medical centers, encompasses nearly 6,000 buildings and 163 million square feet of space, with a presence in every single county in the state. Each location develops a long range development plan that typically covers a planning period of 10 to 15 years.

These LRDPs guide campus land use plans, infrastructure development and building sites. These proposed projects are then evaluated for alignment with our strategic plans and then projects that fit are placed in the annual system wide Capital Financial Plan that is reviewed and approved by the regents every fall.

Our current CFP, the Capital Financial Plan, which covers the next five years through 2030, totals over $30 billion. Our medical centers account for $12 billion of this or 40% of the total as they expand clinical services and rebuild hospitals around the state to address seismic requirements and meet the growing health care demands across California.

Student housing, as the chair mentioned, represents $10 billion, which would add over 14,000 new beds in the next five years. The cost of housing around our campuses represents one of the most significant barriers to students cost of education.

So we have made a concerted effort to build our own housing where we can ensure affordability for both undergraduate and graduate students. We have built over 25,000 beds in the past five years and two of our campuses, UCLA and UC San Diego, can now offer a four year housing guarantee for all students.

The balance of the CFP, over $8 billion represents our efforts to upgrade aging buildings and infrastructure across our campuses, addressing their seismic safety as well as failed building systems. The first two areas, medical centers and housing, have dedicated revenue streams that can support we can leverage and support debt service.

This latter area, which supports our basic education research mission, is critical, but has no incremental revenue source to support this debt. As Eli mentioned, we have taken significant efforts over the past five years to more thoroughly document our needs in both deferred maintenance and seismic safety.

Our deferred maintenance program was developed to analyze the magnitude of the issues, assess the risks posed to operations, and prioritize mitigation and funding strategies to address the need. In the fall of 2024, this process cataloged $8.5 billion in deferred maintenance projects across the campuses, auxiliaries and medical centers. But the deferred maintenance backlog continues to grow.

More than half of our facilities are more than 30 years old, and while campuses fund some repairs each year, the state General Fund allocation can't meet the needs of this aging infrastructure. In addition, in 2018, the University launched an initiative to reevaluate and rate the inventory of over 6,000 of our buildings for their seismic safety.

This evaluation revealed nearly $13 billion in needed seismic renovations across the 10 UC campuses. We have been proactive in addressing these risks. The university's total amount of debt has grown from about $10 billion in 2010 to $34 billion currently.

Again, much of this to support the medical centers and housing, but a fair amount has been used to upgrade our educational and research buildings. Again, because these education and research buildings do not have dedicated revenue streams.

When we finance these, it represents a trade off in our operating budget funds that could be used to support enrollment growth or adding faculty and graduate students and which instead we direct to debt service on these bonds.

This is the area where a state higher education general obligation bond would be critically important to the University and our campuses. We are grateful for past legislative efforts such as AB 94, which authorized the university to issue bonds backed by a portion of our annual State General Fund appropriation.

The debt service on these bonds, along with older debt that the state transferred onto the university's books together accounts for $665 million in annual State General Fund expenditures, or nearly 14% of our annual appropriation.

And the extent of that commitment is readily apparent in this budget year since the debt service is a hardened expense which has to be paid regardless of the state appropriation. So this amount of debt service magnifies the severity of potential cuts to the rest of our operations.

We greatly appreciate your consideration of including the university in a higher education GO bond in the upcoming year and can commit that we can use this funding effectively to both renew and restore our most critical educational buildings. I'm happy to take any questions you may have and thank you for your time and your consideration.

Thank you. Let's hear from the California State University.

Thank you. Good morning Chair Alvarez and members of the committee. My name is Paul Gannoe and I serve as Assistant Vice Chancellor of Capital Planning, Design and Construction in the Chancellor's Office. Appreciate the opportunity to appear this morning and talk to you a little bit about our capital program.

For many years, state debt was the primary source of capital funding for the CSU delivered through general obligation bonds and lease revenue bonds. This support was substantial. From 2001 through 2008, the CSU received approximately $2.8 billion for projects, or about $330 million per year over that time frame from the state.

Between 2008 and 2014, total state funding dropped sharply to approximately 440 million for projects averaging only about 62 million per year over that time period, primarily from lease revenue bonds. That sharp decline is because no new voter approved general obligation bonds have been approved for CSU projects over the past 19 years. Since 2006.

In 2014, the Legislature shifted responsibility for all capital funding from the state to the CSU. Since that time, the CSU has relied on several less predictable funding sources to meet its capital needs.

These include direct state Appropriations to support CSU's own issuance of new debt, operating revenues to support CSU's own issuance of debt, restructuring of existing state lease revenue bond debt, one time state funds, one time funds from CSU's investment earnings and philanthropic contributions for select projects.

In total, over the past 11 years the CSU has secured approximately 5.6 billion in capital funding from these sources. Importantly, 63% of that, about 3.5 billion, came from state related resources that are not available on a recurring basis, such as debt restructuring and one time appropriations.

These funding mechanisms have been valuable, but none of them individually or collectively match the scale, certainty and impact of the previous bond funding. As a result, we are falling- falling further behind in addressing our critical infrastructure and capital renewal needs. The demand within the CSU Capital Program is significant.

Our current five year plan identifies nearly $31 billion in project needs, including $5 billion in projects for the 25-26 fiscal year alone. In addition, our total deferred maintenance backlog now exceeds $8 billion. As I mentioned a moment ago, between 2014 and 2025 the CSU funded $5.6 billion in projects. So over that 11 year span, $5.6 billion.

And that's just slightly more than the need in the first year of our current Capital Outlay Plan. Aging facilities are a major concern. Currently, 31% of our academic buildings, including nearly 20% of science buildings, are over 60 years old and 52% of our buildings are over 50 years old.

Limited funding has left us unable to keep pace with required building renewal while escalating construction costs compound that challenge. So the development of the CSU Five Year Plan is an iterative process.

Each campus submits project requests for deferred maintenance and capital outlay projects which are reviewed and refined by staff in the Chancellor's Office to ensure alignment with system wide priorities and needs.

We use several tools to assess and prioritize these projects, including the CSU Seismic Priority List, facility condition assessments, campus and lab capacity data, classroom and lab utilization reports, and critical infrastructure assessments. Our five year plan includes critical projects across all campuses prioritized according to criteria established by the Board of Trustees.

The CSU Capital Program emphasizes three categories in the following order: First, critical infrastructure deficiencies. Second, renovations and replacements. And third, growth projects. Our top priority remains addressing system wide infrastructure improvement needs. The 25-26 plan includes approximately 740 million in infrastructure projects.

These tend to be smaller scale efforts that focus on upgrading building systems, improving accessibility, enhancing fire protection and increasing campus resiliency. Priority projects in our 25-26 plan include four seismic retrofit projects, 10 projects to support STEM learning environments and renovation or replacement of buildings with an average age of 58 years, the oldest of those being 65 years.

While the scale of the need is immense, it can be addressed with coordinated investments such as general obligation bond financing. Even with significant investments, each campus faces practical limits based on the capacity of project management staff and physical constraints on how many projects can proceed concurrently.

To effectively manage our capital program, the CSU requires incremental and predictable funding. Inconsistent funding makes long term planning extremely difficult. Even when projects are identified and brought close to being shovel ready. Delays caused by funding uncertainty can result in shifting priorities, outdated designs or changes to building codes that require redesign.

A consistent multi year funding plan is essential to addressing CSU's capital needs effectively. Thank you for your time and I would be pleased to answer any questions.

Thank you. We'll hear from the Community Colleges.

Good morning Chair Alvarez. Chris Ferguson, Executive Vice Chancellor with the California Community College Chancellor Office. As a system, the California Community Colleges have unmet facilities needs totaling around $33.5 billion in our latest five year capital outlay plan that supports both modernization and growth types of projects, with growth types enabling campuses to serve additional students on their particular campus.

The community college system is aging and more than 57% of our facilities are over 25 years old and more than 47% of our facilities are more than 40 years old and are in need of renovation or modernization.

The types of projects that are generally reflected in our request stem from career technical education facilities to classroom space that serves STEM business, vocational education, performing arts, music and physical education programs. The facilities are needed to run the gambit of instructional courses on our campuses.

The types of projects that we generally put forward for consideration when there are bond resources, state bond resources available, focus on fire life safety in both the modernization and growth types of projects. And again, those projects can run the gambit in terms of the academic use. If there is no funding available from the state,

districts generally have two options. The first is to support a project locally by requesting their voters consider approving local general obligation bonds that could then be used to address their facilities needs.

Or if that is not an available option for a district, they can continue to resubmit a project to the state in hopes that there would be a future state bond available to help support that project. We are fortunate that Proposition 2 is providing 1.5 billion to support California community college bond projects.

Prop 51 Provided 2 billion and Prop 1d a little over 1.5 billion. So we've been very fortunate that the voters have looked upon our facilities needs favorably and have been able- and the state has been able to partner with our districts to support those facilities. Thanks.

Thank you. Okay, so now we'll go to committee questions and comments. Let me kick this off with. Want to sort of get some facts correct. UC stated 665 million in debt service per year. Is that a correct figure? No?

No, that's just from the state appropriation. Our overall outstanding debt is 34 billion spread between housing, medical centers and general campus debt. Three different liens.

But you are using obviously both general fund support and other revenue, student fees and other student tuition and others to pay for that.

Yeah, AB- AB 94.

So what's the debt service?

All told on that, I'd have to get back to on the- on the exact. On the overall $34 billion. But the- the- the General Fund debt is the one that's the 665 million.

Okay, and then what is the figure for the CSU?

Our. We provide a report each year to show our 12% cap limit. And our most recent report, we show about 298 million a year. Now that's- That's just what counts toward our 12% cap. We also have another 159 million in general obligation bond payments that we handle and lease revenue bond payments.

That we handle. So those are our totals. And that doesn't count any self support. I don't have self support numbers with me.

Okay. And I think the LAO's perspective, I think that was one of the recommendations in the 2023 report to better understand what is funding what to be more specific about that. Okay. I heard, I think, CSU talk about utilization of space. That came up.

I think the LAO mentioned in the 2025 report on the page 10 graphics. And I think I must have misheard the comment in the testimony. Only 60% of instruction, I think is what Legislative Analysts Office said, is in person. That doesn't sound correct. I think I misunderstood that. Can you clarify what you were saying, to the LAO, in your comments?

Yes. Yes. So the community colleges, unlike UC and CSU, which look at in person utilization rates, the community colleges look at total enrollment. So this would include like online offerings and things of that nature.

Oh, I see. You're only referring to community colleges. So in this graph, at least for the UC and CSU, you are looking at utilization based on...

Yeah, in person enrollment at the actual facilities.

Okay. So in some cases, like CSU's 2022 data, shows utilization of only 60% of classrooms space.

Yeah, they're utilizing that space at 60% of the legislative standard capacity. So below legislative standard capacity.

What does that actually mean practically, like at a campus? So is our classroom sitting vacant or? And then I'll give CSU a chance to respond as well.

That's essentially right. So these utilization rates are based off of expected space usage for classrooms. And then it's also broken down by station usage for the actual desks associated with that classroom space. So these, currently, right now, CSU and UC are both utilizing those facilities below legislative capacity standards.

Let me first ask CSU about that. Are there specific reasons why the utilization rate, particularly in classrooms, is lower? Are there buildings that are being underutilized because of their condition? Can you give me more understanding about why that rate is what it is?

Sure. We do have, you know, our utilization varies campus to campus, of course. San Marcos is using well over 110% classroom utilization. Other campuses are under under utilizing their space. Some of that...

Is this, some of this decline enrollment in some campuses?

Some of that is due to decline in enrollment. Also, we track our utilization by room size, so by seat count. And when we get over 50 seats in a room, we see a drop off on utilization. So our larger classrooms are less used. Some of that is due to online instruction. Some of those larger courses where they have a hybrid model, students choose to take online instruction. And some of that is our efforts to make the class size smaller, supporting our graduation initiatives. So our, I just, I have the numbers in front of me. Our 50 and under classroom sizes are much better utilized than our larger classroom sizes. A lot of these larger classrooms are legacy. They're...

Lecture halls is what you're talking about.

Right. Or just larger classrooms that were built in the 60s maybe when these older buildings. We're not really building that many big classrooms right now because they're not well utilized. So that's part of the issue.

Okay. Can I get a better understanding at UC on the also lower utilization?

Yeah. Some of the similar trends, though we have not had any declines in enrollment. So our enrollment continues very strong. The utilization data does not capture all of the uses in a, in a classroom. For example teaching labs. It just has a schedule for the section that would be in that teaching lab.

And oftentimes both professors and the students are expected to do additional times using the benches, you know, in off hours. We also don't have a lot of like general conference rooms and things. So you find some of the smaller classrooms are being used for department meetings and other meetings by different student groups on campus.

You know, I dare say if you come to one of our campuses, you'll find almost every classroom is being used, though not necessarily in a scheduled environment. I was at UC Merced for a year and every single classroom was used as a study space in the evening by students. So that would not be captured in the utilization data.

Thank you. But do you use utilization as part of one of your metrics when determining?

Absolutely.

How many projects... I heard the phrase, which we often like to hear when we talk about impact investing in infrastructure, are shovel ready from your, let's, from your five year plan? To both of the systems, UC and CSU. Out of the 5 billion and... Yeah. The numbers you shared. How many are actually ready to... Would all those be considered shovel ready? Is that why they're in the five year plan or those are... I mean because some of them, given their funding, you're realistically, given today's prospects, will not get built in the five years.

Yeah. These, especially the renewal projects, the deferred maintenance ones. One of the things we did in this ICAMP process, which is the integrated capital asset management process, is that we've also triaged and prioritized when we need to do projects.

And so we know that over the next five years we'll need to do a certain number of roof repairs or elevators or things like that, so we can actually map out when we need the funding. So we don't need the whole $8.5 billion now, nor would we have the bandwidth to even implement that. So this ICAMP process, which we do include in our capital financial plan, and I apologize to the LAO that we don't regularly submit that. It lays out the, you know, the cadence of when we would, when we would need that.

So it sounds like, and I'll let CSU also respond, but it sounds like we have a list of identified needs through your processes that you each use. But it's not really what we should expect to happen in the next five years, especially given the limitations that you're under.

Yeah. And campuses are always looking at other possibilities. For example, one of the most seismically vulnerable buildings at the Berkeley campus is Evans Hall, which also has the highest, what's called equivalent continuous occupancy. Lots of students and faculty in there.

The new buildings that they're building, they're using to decant a lot of Evans Halls, and eventually they will just tear it down instead of, instead of trying to seismically rehabilitate that. So even though you would see Evans Hall as a project in the capital financial plan, it's more likely to be, you know, the departments, you know, put into new teaching and learning buildings.

I think it's a good moment to just maybe for all of us to think about what we're sharing with the public versus... Like that. That's a great example, actually, of something that probably will not be pursuing, yet it's on the list, and so it adds to the deferred list. So it makes it sound.

And not that the problem isn't significant, but it amplifies the problem in a way that perhaps is not as accurate. And so I would ask, as we have further conversations about our needs, that we try to figure out how to more accurately depict that. I'm not saying that we're, that you're, it's not being honest or truthful. I just think like that, that nuance is really important because that's a likely several tens of millions of dollar expense that's really not going to materialize. And so...

The only caveat, Chair Alvarez, is that oftentimes a new building will cost us more to build, but it does give us more opportunities for, for example, a lot of the, a lot of the departments in Evans Hall are being moved to the new Data Science building. And they got, you know, significant $500 million of philanthropy towards that, which we hadn't anticipated. That's where piecing all these together is the...

But I think my point is from what we need to do to actually support all of you and the infrastructure and what it's gonna take to get us there, to help us really map that out would be helpful. Does CSU have any comments on any of those issues?

Yes. Thank you, Chair Alvarez. I wanna go back to the utilization question real quickly. I think just our utilization rates are ticking up a little. So I looked. I think the numbers that are in the report are from fall of 23. We report sort of a year behind. And I have our fall 24 numbers.

They're just slightly up. But just as a comment there. In our sort of our priority list of our large academic projects, every project that gets on that list and gets ranked in our priority order has to have a feasibility study. So we do have, as far as shovel ready, with our current delivery method, which is typically design build, where it's a collaborative development of the plans with the contractor and the design team.

We don't really develop a set of plans and specifications like we used to with design bid build, but we do have feasibility studies. And several of the projects have gone into schematic design. Once you're in schematics or through schematics, it's probably nine to 12 months before you are shovel ready. So the feasibility study is a good start. To get into the list means the sort of the project makes sense. There's some, generally some massing, some site orientation and things like that, which lets you get very quickly into design and construction. So I think...

And then in addition to that, our sort of our infrastructure improvement on our deferred maintenance list, those smaller projects, those are pretty easy to get designed and in construction. So of our, of our 5 billion in the first year, there is a significant amount of that that's not shovel ready, but could be. Could be undertaken and start, and start breaking ground within 18 months to two years.

You reminded us about the authority. You have a cap of 12% of debt. So to get financing to build projects. What's the cap at UC? Is there a cap?

It's 15%, but we're nowhere close to that.

Oh, you're nowhere. Okay. And I asked that because of the different methodologies that we have available to you to build lease revenue bonds. Used to be something that I recall was utilized quite a bit. I don't know the history. Maybe some of you, all of you have lots of history. So maybe you can help us, any one of you, as to why that's not a methodology or a financing tool that gets used. Is it something that went away with the Brown Administration? I'm trying to understand why that's not used anymore.

I think lease revenue bonds are a great tool and we use them quite extensively. Was about an equal amount of lease revenue bonds and GO bonds. They're rated slightly lower than the general obligation bond, but, you know, with the cost of capital, it's not that significant an issue.

The only issue with lease revenue bonds for deferred maintenance projects, which might be widespread, are you have to actually do a real property transfer, so it's actually a lease. So it works really well for a new building where we actually transfer the title to the state and then the state issues the bonds that build the building and then the Legislature annually appropriates the debt.

So it has to be new construction.

Not necessarily, but it's, you know, we could give a title of the whole campus, I guess. But it works, where they work really effectively is for new buildings.

Okay. Do you have, anybody else have some history?

Yes. If I could be helpful here. I think the theory of change under the Brown Administration was that UC and CSU would consider the totality of their costs in offering, you know, higher education opportunities. So by shifting both lease revenue debt service and general obligation debt service into their budgets, as well as looking at a capped percentage of their overall General Fund appropriations. The theory being at that point that UC and CSU would consider, you know, the mix of their needs from within their own budgets and then use a percentage to address their facilities needs. If that's helpful.

Yeah, that is helpful. Anything you want to add to that?

I think the only thing I would add is the university bonds today effectively function as the equivalent to leased revenue bonds. And because CSU and UC are rather sophisticated organizations, I think the thought was that, even though they wouldn't go through state public works board review like a traditional lease revenue project, there still would be system oversight that would be rigorous. Two other factors just to consider.

Very helpful, all of you. Thank you. I want to go over and get response from the segments. This is where I'll end for this item. Although it's going to be a little bit of a lengthy exchange here. But the Legislative Analyst Office report in 2023 identified sort of process improvement, I'll call it.

Things that we can do better. Things like setting sort of targets. And I'm curious, have the segments instituted any of those as practice already? Like, for example, one of the first recommendations is the Legislature should consider setting annual ongoing funding target based on the CRV of each segment's facilities.

According to LAO, a best practice is campuses should allocate an amount equal to 2 to 4% annually for capital renewal and routine maintenance. Is that something that is set aside in policy by any of the segments? And I know community colleges are different because each of the districts. But maybe start with CSU.

We don't have a specific policy that requires the universities to set aside a certain amount of deferred maintenance based on the CRV of their portfolio. We do have a policy that, you know, presidents who have responsibility for the built environment on their campus adequately fund their deferred maintenance needs. That's been challenging with, you know, budget constraints. Oftentimes the facility area, whether it's operating and with custodial and landscape and maintenance technicians or deferred maintenance or deferred renewal investment.

So it sounds like it's a general policy, but not a metric. There's no metric used to measure that.

There is. We don't specifically measure that.

Okay, what about UC?

We advocate as a best practice setting aside the amount of depreciation, which is also another way of looking at the amount of deferred maintenance. And we've tried to identify tools that the campuses can use to do that. One of them, as I think Paul had mentioned, was using our working capital investment, any surplus there, as one time monies for deferred maintenance. But we also run into issues. We also have strong metrics on our debt service, positive margins, debt service coverage, overall campus coverage that often serve as a constraint on that. So while I'd say that every campus is addressing it, I do also think that this is often considered part of the operating budget. And so when there are budget cuts, it does not get as much commitment or attention as we'd often like.

In your professional opinions though, wouldn't it be a good practice to do that, given how this problem just grows and grows and grows?

To set aside a certain amount? Yes, absolutely.

And then, I know districts are different, but you want to share community college perspective?

Yeah, certainly. So we have a deferred maintenance backlog of around $2 billion for districts statewide. However, we do have education code that directs districts to spend a percentage of their General Fund to support ongoing maintenance on their campuses. I believe the minimum requirement is at least a half percent of their General Fund. It's an education code. Section 84660, if you were interested in reading.

Okay, thank you. The second. Did you want to...

The only thing I would add is the idea we had to have these funding targets that would be a total cost of ownership model. So if a new building went online, the state and the segments would be thinking about how much is it going to take to operate it, to do routine maintenance, to do eventual capital renewal.

That would all be planned at the beginning. You actually would be given a capital outlay budget change proposal that would have all of that forethought presented to you. The segments already do this for their self support programs, for their housing programs, for example. They go through this exercise, they build a business model that's sustainable. So we're not actually recommending anything novel. It would just be to translate that over onto the academic side. Now, the resources are more limited. They're coming from the state General Fund, but we think it's still good practice.

Yeah, and I know you mentioned that in the report as well, that especially for new facilities, Legislature requiring that we identify funding for future capital renewal and operating maintenance would be a best practice as well. Let me ask all three of you now about the second item here, which is identifying the cost share between state and the segments.

And also, so after setting a target, the Legislature providing ongoing General Fund augmentations to cover some certain share of the target that can give you more realistic or expectations about what you need to cover versus what the state's going to cover. You have a challenging job.

From year to year, you don't know whether you're getting any funds specifically for this. There was a couple of years where you did, but now for the last several years and going forward, it doesn't look like it unless there's some other revenue source or something like a bond. But I'm sure you would appreciate having that certainty. Quick comment from all of you.

Yeah, I would start, Chair Alvarez. We do not need state support for either our medical centers or auxiliaries. We have very strong programs there and the, and the revenue that we get. We were very appreciative of the state housing grant program. That enabled us to reduce the cost of housing. But you know, we have a central bank that can basically finance those. The, you know, the main place we need it is in our, you know, education and research buildings. You know, I guess the example that I would point to is UC Merced.

UC Merced was built without, you know, the first buildings had state support, but the doubling of the campus, Merced 2020 was built entirely on our own balance sheet. And that has left quite a bit of debt that we share system wide with the campus. But does inhibit their ability to invest in graduate students or additional faculty. So the partnership with the state, especially on education and research buildings, is critical for us in terms of our growth.

Okay, any additional comments?

I want to back up to the other, if I could really quickly. We did take that into consideration, the recommendation to add deferred maintenance component to our new space dollars. And we actually presented that, the LAO's recommendation, presented that to the trustees last, in the last board meeting, and it got positive response.

So we're going to look into doing that sort of at least internally formalizing that. I would just say the same thing. You know, we do view our custody of our buildings and as a partnership with the state. You know, there are state assets that we occupy and, and have stewardship of.

The proposal that I think came out in the 23 report. You know, as we face budget cuts and some budget uncertainty in our General Fund, it's difficult for us to set aside with other competing priorities like salaries and healthcare costs and, you know, the rising cost of benefits. It's hard for us to allocate sort of our share. But it's certainly an exciting prospect if we can come up with our portion to have the state sort of consistently fund that as a partnership.

My last question, thank you all for all your responses, is on the, the FCI, Facilities Conditions Index, and using that as a driving factor for decisions. To the previous discussion I had with, here with UC about identifying which projects, even though they may be at some condition index, and I know there's industry standards, just being more clear about whether that specific building actually needs, what the real need is, whether it's replacement, remodernization, or modernization.

I think I'm trying to better understand, as we go forward and we mutually commit to supporting the infrastructure needs of our segments, how do we do that in a way that's data driven as opposed to just at the moment, everybody seems to do things a little bit differently. And that makes it difficult also for us to explain to the public these are the needs. And I think I'm not in any way casting any blame as to perhaps why we haven't been successful with bonds.

But I think we need to do a better job of determining why this is such an important asset for Californians and what the true needs are and what we're going to be resolving if we were to fund more, as I think we should. So any final comments on index and on prioritization and how that should really, in your opinion, professional opinions, how that should be looked at. And I'd like to get here from actually everybody at the table.

We do, we do use that as a tool, Facility Condition Index. We have a really robust program to identify our deferred renewal need. Each campus gets an on site inspection every five years, and then we update that with just data on the years between. So we rotate through. So that in a five year period, every campus gets an on site inspection by a third party engineering firm. And we tend to focus a little bit on the total backlog in a building.

So our facility condition assessment, almost all our COBCPs indicate if it's a renovation or replacement, the amount of deferred renewal that's been evaluated through that facility condition assessment. We do have an FCI also because it's just that divided by the CRV. It's just not something that we have typically used to communicate, and we could certainly use both. I think it's, I agree, it's a very useful tool.

Thank you.

I would agree with Paul. I mean, our ICAMP program has given us much more usable data. Every building is tagged and so we can go back and renew it very, very frequently. I also think it's important, like when we're looking at doing an HVAC replacement. Not only doing the HVAC, but also doing the lighting that may be, or elevators or other electrification projects at the same time. So looking at it in a comprehensive way.

But I do think the ICAMP gives us a lot of valuable data that we could share more readily with, you know, with both the Legislature, but also with the public on the, on the conditions. I also think we sort of mirror CSU's practice on the Seismic Advisory Board. And that gives us, you know, very actionable data, not only on the condition of each building, but also on, you know, when we would prioritize replacing or renewing that building.

Okay, thank you.

And then for the community colleges, we do have a system called FUSION that's associated with tracking all of the different projects from the system, whether they're growth, whether they're modernization, as well as deferred maintenance needs. And we do use a scoring matrix to evaluate where those projects would land in terms of what we would ask the state to fund first. And we do that. We develop that matrix through our consultative process, so we worked with the districts and our stakeholders before we put that into place. The most recent iteration was put into place in 2020, and it'll be discussed in the next item as well.

Thank you. Anything the LAO wants to add to this conversation? Okay, thank you. Those are all my questions. I'll turn it over now to Mr. Fong first.

Thank you so much, Mr. Chair. And thank you for really setting the foundation for elevating facilities needs in our three systems of public higher education here in California. And when we look at the report, the $20 billion in deferred maintenance projects on page six of the agenda, and we know as a state, since 2015-2016, the state has provided General Fund for UC, CSU, and community colleges. 689 million for the UC, 784 for the CSU, and 904 for the community colleges.

I know there's a lot of need out there and in our community colleges, so I'll start with the community colleges. And you just mentioned a few seconds ago the modernization projects also percentage for growth. And when reading the report under the scoring system, as you just mentioned, in 2020, can you explain the rationale in terms of the 65% number for modernization and 35% for growth, how that was determined? Is that a fixed formula or can it be based on, adjusted based on projected need?

Yeah, that is generally fixed at the moment. We did work with both Finance and our system stakeholders with the intent that we could tell in our data at the point in time in which that was selected, there was a much greater need for modernization of our existing facilities and lesser need for growth or additional academic space.

When the matrix was updated, it was updated on the basis that we had the Vision for Success that had just come out. And we were trying to make sure that our matrix was not only easy to use for campuses, we reduced the number of categories and the number of different scoring criteria, but also made sure that it was well aligned with the Vision for Success.

Okay, thank you for that context. And then on page 16 of the report, the LAO has also mentioned a large number of gymnasium projects that are in the works. We know gyms are important. I just want to uplift that as well. But is that considered one of the higher priorities in terms of academic facilities? Why the large number being proposed for gymnasiums at this time?

Yeah, so there's actually a very interesting dynamic, and that is because in prior allocations the number of gym projects that could be funded from statewide bonds was limited, it actually resulted in more need being rolled forward. So we're seeing just based on that same scoring matrix, you have additional gymnasium projects, partially because prior bonds were not able to fund them at the same level that they would be funded today. So previously the maximum, I believe, was 15% of the total bond could be used toward gym projects. Today, the gym projects are within that 65, 35 split. So it's basically, we funded fewer gym projects in the past, which meant that that need continued to remain and has rolled forward, causing the need to be higher.

I think from our perspective, we don't necessarily differentiate between the type of academic programming being served in those facilities, but it still has to be academic in nature. So certainly appreciate the concern around the number of gyms. But you know, we just reiterate that there are academic programs, kinesiology programs, physical education programs that are being conducted in those facilities.

Thank you so much. And to our CSU and UC systems, as the Chair has mentioned, it's a tremendous need, amount of need in, in both of the California State University and University of California systems. In terms of the debt service since 2013, did the state cover it through the state's General Fund? Wanted to get some additional clarification on that.

On the AB 94? Yeah. So the state enables us to pledge a portion of our General Fund appropriation towards a debt service. Right now, we have about $135 million of that going towards debt service. I should clarify though that there was not an increase in the state appropriation to make up for that. It was really giving us a trade off between, you know, other operational needs and the debt service.

Thank you.

I believe we're in the same circumstance. We do fund debt with our General Fund. You know, as a most recent example, we had some one, which was our General Fund appropriation. There were one time funded projects in I think 21-22. That funding I think is mentioned in the report. That funding was reverted from one time funding to ongoing General Fund support. So there's an example of how we're covering debt service with General Fund support.

Okay, thank you. And to all three segments, really appreciate the context around student housing in the report as well. It's really, all three segments are continuing to elevate that. And we know we have a tremendous need for student housing at all three segments, and really anything that we can do around that space to continue to push on those on that.

Up to really increase the number of units to provide those opportunities for students is so, so critical. So, really appreciate the Chair for uplifting facility needs here in California's higher education Systems. Thank you, Mr. Chair.

Thank you. Dr. Patel.

Clearly, there's a huge need for facilities improvements in our UC, CSU, and community college systems. I've seen it firsthand at our Palomar College, with the expansion that Palomar is going through. The San Marco State, oh my goodness. The number of students that we're now housing in our school facilities is incredible.

And UCSD, we've seen construction nonstop over the past decade, I think. So, it's going and it's robust and you're meeting the needs of our students or you're at least trying to.

Having served on a school board for many years, I'm intimately familiar with what it takes on a small scale to put together a facilities master plan and a condition assessment. I worked on that myself as Board President. We hadn't had one in our school district for years and very keenly interested in best practices going forward.

Total cost of building construction, maintenance going forward, I think is a brilliant idea, as proposed from the LAO's office. So, with that in mind, a few questions. Most of them will be pretty tight. Knowing that approval of bonds is on the whim of the voters, right?

We know that. They have to be convinced that it's fiscally responsible, that the need is there, that the return on investment is worth their, their efforts. What is our plan, going forward, to ensure that we do account for maintenance and shifting use needs, maybe reuse construction projects, things like that?

What is our plan going forward, so that we can tell our taxpayers that yes, we're going to ask you for your support on these facilities, but we're going to do a much better job making sure we maintain them when they need to be maintained? Deferred maintenance is much more costly than on-time maintenance.

Yeah.

One by one, whoever wants to go first.

Well, I'd say, I would say that our ICAM process gives us a pretty good roadmap of what we need to spend and then, we can hold campuses accountable for doing that. I also agree with the LAO.

It is a great practice when you build a new building to actually have an escrow account where you are planning for the roof that will need to be replaced in 20 years and the, you know, the ongoing maintenance. That, you know, we've tried to do it on several projects.

It's hard to do because you get cost overruns and you know, the contingency is gone and then, it eats into that. But I do think that on new projects that is a very good practice.

You know, our, and again, as they said that both our housing and our medical centers, the ability to use reserves there, now those were somewhat hit by the Pandemic, when we had to spend down reserves when the dorms were empty and the medical centers didn't have the patient revenue that they did.

But you know, going forward, that should just be a standard part of our practice. But I do think having the data will give us a much better, you know, lens into what the campuses should be doing.

Thank you.

Thanks for that question. You know, we're looking at several strategies. I do want to say, I think our maintenance teams are doing a really good job keeping buildings running, right? The day-to-day preventive maintenance, which is partly why some of our systems are so old.

Because they've been able, you know, our teams have worked really hard to keep them running. We're looking at a couple strategies to address our, our deferred renewal need. We have recently, I mean, within the past four or five years, we've set up a total return portfolio.

So, CSU investments and the interest earnings from those investments, we turn those around annually and send those to the universities, pro rata share, sort of. And those are to be used primarily for deferred renewal and capital. And we've been able to provide $313 million, over the past several years. It's not a lot. It's a—but it's working toward that.

Our, our board has encouraged us to look at public private partnerships. We've met with some energy public private partnership providers to look at possibilities there. So, we, we are looking at a number of strategies to address that problem. It is a challenge.

Thank you.

Yeah, and certainly we'll continue to encourage our districts to invest more than just the bare minimum required by law, to support their deferred maintenance needs. But I think for us, the bigger, the bigger focus in convincing and supporting and getting our communities to continue to support our campuses, is achieving the Vision 2030 goals.

If we can convey to our campuses that we're serving you well, that we're serving—meeting your needs—that we're getting our students good jobs, that we're offering the types of programs that provide them with the skills needed to be successful in their endeavors, that is ultimately the biggest way that, you know, from my perspective, we can show the public that this is a great investment for them.

So, I have a follow up question. In your Report, you showed on Page 18 the cost of construction dramatically outpacing the cost of inflation, and that's even without the tariffs put into the calculations. So, when we're looking at building a plan for our facilities, funding maintenance, etc., all of it is impacted by tariffs.

I can't imagine many components being exempt from that. How are we taking that into consideration in our, in our budgeting? I can imagine this is a very taxing endeavor right now.

No pun intended.

Yeah.

No. And we have several very, very large projects underway. You know, we're doing a complete rebuild of the Parnassus Hospital at UCSF. Just here in town, UC Davis is building the California Tower. Chair Alvarez, the Hillcrest Hospital is going to be completely rebuilt, and that is where we are, you know, we're very, very concerned about the cost of construction.

Just as a, you know, as a metric, we bought a lot of hospitals around the state. We bought eight hospitals last year alone, four in Orange County. And the average cost of buying the hospital, buying the beds, was about half a million dollars a bed.

Now, we're going to have to invest some in size and modernization, but, you know, at Parnassus, we're looking at costs that could be between 5 and 6 million dollars a new bed.

And so, it's, you know, coming up with some kind of blend between what we do, in terms of acquisition by underutilized community hospitals, and what we do, in terms of new building, is a big focus on the medical center side. We don't have that luxury on the, uh, on the general campus side.

And we are seeing, you know, we have a Regents meeting next week, and there are a lot of budget augmentations that are coming, primarily driven by—and it's not only the cost of materials.

I think we're also going to see some, you know, some labor bottlenecks because of the fires, you know, Pasadena and the Eaton Fire and the Palisades Fire, that are going to affect the labor markets in some of our construction projects. So, it's something we're, you know, acutely aware of and really trying to build into our planning.

I wish you the best of luck trying to get that budgeting. I can't even imagine what that's like right now, especially as we look to go to our taxpayers for a bond. That's going to be so tricky. What kind of project list do we come up with that we can actually fulfill?

So, I'm pleased to know that there are some great minds working on this problem.

And one of the things that we have done that’s been very, very helpful is, a few years ago, we instituted a central bank where I manage all of our debt centrally, and so we can give campuses one guaranteed borrowing rate, and they are not subject to, you know, the vagaries of the bond market on their cost.

So, 4.25% for 30 years. They know that going in and they can plan accordingly. And you know, the cost of capital is just as important as the cost of construction. So, that's one way we mitigate that.

Thank you.

Really good question on the tariffs. We have, sort of, two—we're in two situations. We have projects that are in construction, or you know, we've bid already, early design, construction phase, where we're seeing contractors come to us and say, hey, how are we going to mitigate the impact of tariffs?

We're working with our Office of General Counsel to develop a system wide strategy so we're treating all the contractors the same. The other is, as you mentioned, sort of the planning process and we do carry contingencies, particularly early on.

We have a larger number for contingency and some escalation built in there and we'll work with our university partners to probably add a little in there. It's interesting.

We went through COVID, and we had a lot of upward pressure on projects from COVID and we, we had, have looked at some resources to manage the COVID escalation and we'll have to do the same for tariffs, you know, if and when they start to—when, not if—when they start to impact construction projects.

So, it will be tricky to manage, but we'll work closely with our university partners to make sure we have a cushion in there.

Thank you.

Yeah, certainly we'll work with the colleges to do what we can to address inflation. One of the biggest things that we work with them on is value engineering and trying to push them toward, you know, being as efficient and as effective as you possibly can in a project.

Are there particular aspects of that project that could be done a different way, removed, added? The other piece is just contingencies in your contracting. If you know that a project is upcoming and you put that into, you know, a contingency, saying it's contingent on the funding being approved, but here's what we're doing, sometimes you can get a contractor to say, at this cost, it's an absolute that we move forward.

Of course, those contingencies are often impacted when change orders come through. But you know, those are some of the strategies that I've seen work and work well. It's not going to be easy—that's, I think that's the bottom line.

Yea, thank you. Thank you for bringing this forward and your testimony today. It's given me a lot to think about and I'm excited about it.

Thank you. Thank you very much to all of you for being part of this conversation. We are going to move to Issue Number 2, which is a more detailed conversation with our community college system, related to Prop 2 and Prop 51 proposals that are in the Governor's Budget.

So, I'd ask the Panel of Finance to come forward, the Legislative Analyst Office, and also, the Community College Chancellor's Office. As we know, the election in 2024 had a Proposition 2, which was approved by the voters, and that allows for some funding for K-12 and community college projects.

And so, we will hear from the community college—about the community college projects being proposed in this year's budget. So, we'll hear from the Department of Finance first. Welcome.

Good morning, Chair Alvarez and Members. Alexandra Waldman with the Department of Finance. Proposition 2 was approved by voters in the November Election and provided $1.5 billion for the community colleges. The selection process at the Department of Finance was aligned with the Board of Governors Capital Outlay Priority Criteria, which is a comprehensive point-based categorization system.

The framework prioritizes capital outlay projects based on criteria including fire, life, and seismic safety, facility condition, and programmatic needs, among others. Safety projects are the highest priority, followed by modernization and growth.

The Governor's Budget proposes 29 projects for the Proposition 2 funding, with a budget year state cost of $51.5 million and a total state cost of $728.8 million over the lifetime of the projects. The Chancellor's Office plans to consult with the districts and submit future proposals for the remainder of the Prop 2 funds. The Governor's Budget also includes two continuing projects for Prop 51 funds with a total combined cost of $29 million. Happy to take questions and comments at the appropriate time.

Thank you. From the Legislative Analyst Office, please.

Good morning. Lisa King with the Legislative Analyst's Office. The Capital Outlay Projects included in the Governor's Budget were selected using a scoring system developed by the Chancellor's Office. And because Proposition 2 is the first influx of new funding since that scoring system was adopted back in 2020, we took a closer look at the system this year.

We think there are several positive aspects of this scoring system, including that it places the highest priority in Life Safety Projects, as the Department of Finance has noted, and that it uses a consistent set of metrics to select among all other projects.

That said, in our analysis, we identified a few issues related to the scoring system that we think the Legislature may wish to further examine. Several of these issues came up in the previous issue, so I'll use my comments to provide a bit more detail on our Office's perspective here.

The first of these issues relates to the split of funds between Modernization Projects and Growth Projects. Currently, after the Chancellor's Office designates funds for Life Safety Projects, it allocates 65% of the remaining funds for Modernization Projects and 35% for Growth Projects.

We think there's a case here for increasing the share of funding that goes toward modernization, to address those issues with aging facilities and facility conditions, discussed in our previous Item.

When we look at the community college system's most recent five-year Capital Outlay Plan, we see that about 80% of their identified needs are related to modernization and only 20% are related to growth. And furthermore, with the recent increase we've seen in online education, we would expect colleges to have less need for growth projects, moving forward.

The second issue we raise is that nearly one third of the proposed projects in the Governor's Budget for the colleges are gymnasiums, and this is an unusually high share compared to what we saw under the previous facilities' bond, Proposition 51.

As Mr. Ferguson noted in the previous issue, the shift seems to be related to a change in the scoring system. Under the old scoring system used for the bulk of the Prop 51 funds, gymnasiums were in a separate funding category, eligible for only 15% of funds allocated in any given year, whereas under the new scoring system, gymnasiums are effectively treated the same as all other academic space.

This for us largely raises the question of prioritization. Given there is a limited amount of Proposition 2 funding available, there are tradeoffs between funding more gymnasiums versus funding more other instructional space, including classrooms and labs.

The last issue we raise in our analysis relates to a few of the specific scoring metrics used in the scoring system. Most of the metrics used in the scoring system are, in our view, reasonable, but there were a couple of metrics for which the justification was less clear to us.

One of these metrics gives priority to projects at larger campuses versus smaller campuses, and another one of these metrics gives priority to projects located in four specific regions of the state. In general, across these issues, our recommendation is to direct the Chancellor's Office to further explain the rationale for these various aspects of its school scoring system, and if any of these issues raise notable concerns for the Legislature, you could then direct the Chancellor's Office to adjust its scoring system accordingly and use that to select a revised set of projects.

Thank you. Happy to take any questions.

Thank you. Does the community college have anything to add?

Yeah, I think from our perspective—once again, Chris Ferguson, Executive Vice Chancellor at California Community Colleges—I think from our perspective, the one thing that we would add is it is a—we do operate under a participatory governance structure and we did work with our stakeholders to develop the matrix and the criteria that we use consistently across the system.

So, to the extent changes were sought, or the Legislature would ask us to revisit those criteria, that could be a one to two-year process to work with our stakeholders to update and understand how it would impact their districts, their specific projects, and the loading order of those projects.

So, would just, you know, caution that it is a timely process to work with all of our interest holders, but beyond that, we are highly supportive of Proposition 2 funding and supporting an additional 27 projects in our system, as well as two continuing projects. We think, you know, that funding is just critical to our system.

Thank you. Thank you all. Let me ask some pretty basic questions that I was not able to capture from the Report. The 27 projects listed, then utilize the new—this is to the community college system—the new ranking system. Is that accurate?

Yeah, that would be accurate.

Okay, and then, what is the split in the 27 projects? Is it the 65% to 35% of modernization versus growth, is that what the split comes down to?

Yeah, that's generally what we intend the split to be. Yes. So, I think in this case, 17 projects were modernization projects, eight were growth, and four were life safety projects.

Say it again, sorry. 17 modernization?

Eight growth and then four are fire life safety projects. So, you know, there, they can be either a modernization or a replacement, depending upon, you know, the condition that's being addressed.

Going forward, is there a way, and maybe you do this, and it's just not in our backup material, to identify whether it's a modernization, growth, or fire safety project that's listed here, because I—or is it, how can I better understand what kinds of projects these are by what's available publicly?

Our Office does have that information available and would be happy to follow up with Committee staff.

It might be good just in future reports to identify growth, modernization, fire safety, just to understand. Okay, and so the LAO brought up a point of, in this case, it's, or I think it's the community college Chancellor's new policy or the Board of Governors, maybe a new policy, that the split is 65-35.

Is that a new policy? Is that the existing policy?

That's the policy associated with our current matrix.

With this matrix, is there a policy like going—so this is basically committing half of the bond proceeds? 759 million?

Yeah.

Okay.

That's right.

So, then, what should the expectation be for the share, going forward?

From our perspective, it would be roughly 6,535 modernization to new construction. With, of course, the final decision being made by the Legislature and Administration.

Sure. Let me ask about the point though being risen—raised—that 80% of your plan is in modernization and only 20% is in growth. And so, there's a discrepancy into this, the allocation you're seeking, versus what your plan has identified as needs.

Yeah, I think what's happening there is the very first piece is to pull life safety projects and to fund those first, as those are the most critically important on our campuses. To the extent that there are variances in that overall percentage, it is based on that same scoring criteria and matrix.

So, it is possible you could have, just on the dollars, you could have that, or the projects, you could see a variance. I think with the, if I recall the LAO's comment correctly, it's that we should shift to an 80-20 split because that's roughly what they are projecting for the system today.

Oh, I understood that. Let me—let's ask the LAO. I understood that from the community colleges facilities' needs going forward, the needs are 80% in modernization, 20% in growth. Is that not what you stated? Did I misunderstand that?

No, that is correct. That's based on the five-year Capital Outlay submitted last fall and reflects their needs identified over the next five-year period.

Okay, so I understood that correctly. So, maybe I'm not asking the question correctly. Why, why do we not utilize that as the split for the projects that got selected?

Yeah, I can certainly take that back, I think. The 65-35 was at the point in time in which the matrix was updated, which actually tracks back. Its original origin started in 2018 and was finalized in 2020, which of course is pre-Pandemic.

Oh, I see. So, when you created the metrics, it just so happened that those metrics gave that percentage of projects the highest scores?

Yeah, that's right. At the time, that was the rough estimate.

I guess I would just ask, and I don't know that we can decide this today, but if we do have needs that are more 80-20, should we not be a little bit closer to reflecting that in projects that we fund, going forward? Any initial thoughts on that?

Yeah, I can certainly take that back and ask my team to look at that. I think the one thing I would add there is, we do know based on where growth is in the state, it's uneven. So, we'll certainly look at that from that context as well.

Okay. There is one specific metric I suggest, maybe as you are either revisiting this, and you said it's a lengthy process to determine this, but certainly for the next round, I'd be interested in, and it's around growth projects and more focused. We've had conversations in this Committee about identifying new ways of intersegmental opportunities.

And so, funding projects that are bringing together community colleges, our UC, our CSU, and opportunities for those types of creative projects, I think, merits some consideration and metrics going forward, because it's a better utilization of tax dollars, along with dollars from other systems, in order to deliver ultimately what we want—which is student access—which I know is certainly what you're focused on.

So, I'd ask for that to be a consideration potentially, likely, most likely in the growth projects, but potentially even in modernization as a, as a component, and be interested in hearing back feedback from you all as you take it back, as to why they—that may not be a good idea.

But I do think again, as we've discussed here before, we need to figure out how to do more with less. And so, identifying opportunities and partnering should be rewarded. And that's not one of the current metrics, at least the way I'm reading them. And so, I'd appreciate that consideration as we go forward.

So, with that, those are my comments and questions. We have any other comments and questions? Hadwick, please.

I had the opportunity to tour Lake Tahoe Community College on Friday, and I just want to say how important the modernization funds are. They had some from local too, but they're finishing a housing facility with 100 beds, which is huge.

And I think it's just so important to focus so that they can keep attracting students to get that, that modernization. So, I like the 80-20 model better. And he answered—he asked all my questions. So, I just wanted to comment on that.

All right, Mr. Fong.

Thank you so much, Mr. Chair, and thank you everyone for the context here. Again, really appreciate it. And as we've seen with Prop 2 and our prior Prop 51, there's just so much demand for the usage of these funds. So, we're grateful to everyone and voters for really approving these opportunities.

And as we look forward, this just continues to elevate the need for our higher education institutions to really receive—to really continue to modernize and upgrade our facilities. And then, also looking at growth as well. One quick question I had as well.

Just want to—just a quick question on this is, when we look at Page 15 of the Report, says that rationale for scoring metrics, one of the ones is on the larger campuses. Is there a reason, as a rationale, as to why larger campuses might receive additional points?

It almost feels like we're favoring the larger campuses, versus some of the smaller campuses.

Yeah. The rationale, at the time, working with our stakeholders, was that those campuses were serving more students, so that facility would be available to serve additional students. So, it was a capacity metric.

But it almost seems like you're rewarding—larger campuses can be even larger and then versus makes it a little bit tougher for smaller campuses like that's—just want to put that caveat in there as well. But just—but appreciate the context. Thank you. Mr. Chair.

Yes, Ms. Hadwick.

I just want to echo what he said, cause I represent a lot of those small schools, and they are in dire, dire need. It should almost get some priority, I would hope, but.

The other metric I would provide—I'm sorry, you were going to respond.

If I may, I would just add that for some districts in the state there is additional priority and it was a historic look at educational attainment in those areas.

I appreciate that. I would—this reminded me also a term that we've been using here a bit and that's on college deserts. And so, I appreciate the specific calling out, of your response just now, on the regions and appreciate what, what is needed in some of these areas.

I think there's overlap between that and to the LAO, sort of feedback on this. I think there's overlap on what the intent was, which is that I think your intent was to target funding toward regions that have historically had lower educational attainment rates, which is, I think, a important goal.

That's also the case though, in places where we may have, again, lack of access to colleges. And so, acknowledging that—we heard that from multiple regions that there's lack of access to higher education.

And so, as a, as a metric, I would also say—suggest that as you revisit what those should be for the next round, that is something we'd be interested in hearing feedback around. Thank you. And Dr. Patel.

In, in that vein, listening to what my Chair has brought forward and considering all the conversations around utilization that we just talked about, also looking at the weighting that's given to region versus campus size, perhaps there is a way to—instead of focusing on campus size, look at utilization and whether there needs to be shift in the way we're using those larger classrooms versus smaller classrooms and maybe give different weight—weighting—to regional needs versus you know, just reinforcing that our large campuses grow larger.

Yeah, we're happy to look at that. If I could just add one closing comment to your, your earlier notes. You know, certainly facilities, student housing, affordable student housing, you know, additional funding for those projects does help stimulate the economy. It does mean putting Californians to work and shovel ready projects is absolutely a way to do that.

So, strongly supportive of, you know, student housing projects, of additional facilities, projects in the system, and recognize that they are impactful to our economy.

Thank you. Thank you all. Appreciate you being here. We will hold this issue open, and we'd ask now move on to Issue Number 3. Ask that the panelists for this item please come forward. We will discuss the California Kids or CalKIDS Investment Development Savings Program.

This is the Governor's Budget proposal to add three positions to the Program and charitable language requiring tax preparation software providers to notify qualified taxpayers about the CalKIDS program. We have the Department of Finance, the Legislative Analyst Office, and the Executive Director of the ScholarShare Investment Board here to present.

So, we will kick it off with the proposal from the Department of Finance. Welcome.

Good morning, Chair and Members. I'm Aman Singh from the Department of Finance and I'll provide a brief overview of the Governor's Budget proposal for CalKIDS. The Governor's Budget approved a budget change proposal for CalKIDS and it was titled CalKIDS Program Administration and Implementation Funding. The CalKIDS program is administered by the ScholarShare Investment Board.

This budget change proposal is in the amount of $566,000 ongoing General Fund and will support three permanent positions. I'll be happy to take any follow up questions.

Good morning, Chair Alvarez and Members of the Subcommitee. Natalie Gonzalez with the Legislative Analyst Office. We recommend approving the two staff positions to help ScholarShare Investment Board address existing workload challenges, primarily in areas related to customer service, outreach, and data management.

We recognize that the state has projected budget deficits in the out years and other agencies could be subject to reductions in their staffing levels, but the information that ScholarShare Investment Board has provided us shows that there are notable workload challenges, related to the CalKIDS program, that could impact the program if left unaddressed.

We recommend rejecting the Manager position at this time. Our main concern with this position is that it's primarily focused on CalKIDS marketing and outreach efforts but ScholarShare's largest CalKIDS marketing effort is already underway. Specifically, the Department is currently spending $7.5 million on a two year CalKIDS marketing campaign with an external marketing firm.

Due to this, we recommend revisiting the need for this position after these marketing efforts have been completed and ScholarShare has analyzed the marketing efforts to better understand what is the most cost-effective way to increase CalKIDS program participation.

This new information will help inform the Legislature about what workload gaps, related to marketing, still exist and if an additional employee position, possibly a manager position, is warranted. Thank you and happy to take any questions.

Thank you. Hear now from the ScholarShare Investment Board.

Thank you. Good morning, Mr. Chair and Members of the Subcommitee. My name is Cassandra DiBenedetto and I'm the new Executive Director of the ScholarShare Investment Board, which administers the CalKIDS program. Thank you for the opportunity to appear before you today.

I'm here to respectfully request your support for the Governor's Budget proposals to increase staff resources and expand outreaching efforts for CalKIDS, a vital and growing program dedicated to helping California's children access higher education. Launched in 2022, CalKIDS is California's landmark initiative to help families save for college and career training.

The program automatically provides college savings accounts to two primary groups, all newborns born in the state after July 1, 2022, and low-income public-school students, ranging from first graders to current college students.

To date, over 5 million children have been enrolled in the CalKIDS program, over 1.1 million newborns and nearly 4 million public school students. Since our launch, nearly 600,000 students and families have claimed their CalKIDS scholarship.

We've distributed more than $45 million to over 86,000 college age students, $41 million of that have gone has gone directly to UC, CSU, and community colleges here in California.

These dollars have helped cover the cost of tuition, books, and other educated—education-related—expenses and nearly 50,000 families have taken the next step linking their CalKIDS Accounts to Personal ScholarShare 529 College savings accounts, allowing them to achieve additional funds for the future.

With your support, we've been able to reach those milestones, but there's more to do. We're now focused on increasing participation and raising awareness among families who may not yet know this opportunity exists.

That's why we have launched a comprehensive paid media campaign this spring using a combination of digital audio and social media strategies and this will be followed by a robust back to school campaign in August.

Additionally, we've partnered directly with schools, community organizations, and programs like CalWORKS and Covered California to meet families where they are, through trusted channels and in multiple languages. These efforts are already working. For example, a recent texting campaign through CalWORKS resulted in 171% increase in website traffic.

We're engaging students directly in LAUSD with a financial literacy program and we've also recently supported a spring Money Festival with San Diego Unified, where more than 150 students claim their scholarships on site. All this progress reflects what we can do when we invest long term in educational opportunity and financial empowerment.

But to keep this momentum going, we, and to reach our goal of 1 million claim scholarships by the end of 2025, we need additional resources and staff to support implementation, outreach, and innovations. These additional resources will help us fulfill the promise of the CalKIDS program, including implementing 25—AB 2508—signed into law last year.

That includes expanding financial support to entering children—to children entering—the foster care system at any stage of their education, not just first grade. Without these additional resources, the implementation of that Bill is just not possible.

I want to thank the Subcommitee for its continued support of CalKIDS and respectfully urge your approval of the Governor's Budget proposal. With that, I'm happy to answer any questions you may have.

Thank you all. Appreciate it. One thing I learned in this Report was that the Administration exempted departments with 20 or fewer positions from any reductions. Just sort of important to note for all of our budgetary discussions. So, this Department did not see that similar 8% that we are struggling with UC and CSU.

Just important to note and also good, good to, to know with other departments of similar size. I am a—I'm a tad bit concerned that Report points out that we will now have more managerial positions or supervisor positions compared to non-supervisor positions. And I will just note, there's some concern to that.

I, I'd give the, the—either finance or the Department, in this case, the board opportunity to respond to the need for a supervisorial—supervisory—position.

So, I can speak to that. We have one SSM1 Managerial and one SSM1 Specialist. The SSM1 Specialist works directly as a Channel Manager with financial literacy and the SSM1 Managerial oversees the employees in the two AGPAs that we currently have. And so, that is the breakdown on that.

So, two more additional AGPAs and an SSM1 Managerial to support marketing would be that. So, the SSM1 Managerial currently on staff, Mr. Noah Lightman, manages our two AGPAs that currently are doing data and outreach.

Thank you. Let me ask you about the—because we discussed this at length a couple years ago or maybe last year—the funding for marketing. What has been the return on the investment? How are we measuring the $14 million that was spent? Roughly half apparently has been spent already and now spending the other half.

How effective has that been, in terms of getting an uptick rate, signup rate? What are we measuring there?

Certainly. We are measuring all kinds of things. But if we are looking at the, let's see, I just want to make sure I get to the right thing.

So, compared to previous year, like when we're looking year to year, the claims in 2024 were 20% more than 2023. As of—for 24 of 25, we were up 130% from the end of 2023. So, we are seeing exponential growth within claim rates due to marketing campaigns, and we've done several overlays of data to show that when things like award letters go out, we see huge spikes.

We're also looking at partnering with other state agency. As I mentioned, we did a texting campaign and saw incredible uptick with that.

Also, through the marketing campaign, we're doing lots of PR, which is getting into ethnic media, which is allowing for contact with a client base that we have been remiss in reaching in the first year of the program.

The program is in its early stages, so, we have early, you know, we're on this early adopter path, where we're hitting, you know, right at where we should be as far as uptake goes. But the marketing campaigns are surely expanding our reach and creating a situation where have more and more students applying or claiming their accounts every day.

I'd be interested in getting more of that data, whether it's, it's accounted for in the marketing. Are your letters part of your marketing campaign? Is your texting part of your marketing campaign?

The letters are not part of the marketing campaign. The letters are a separate allocation.

What about the texting?

The texting is part of a partnership, not our marketing dollars. So, those two—so with the actual marketing dollars, we have the campaign we did last year, which was a back-to-school campaign that allowed us to see incredible uptake on our college age students. We had.

I guess my point, as you look for your data there, is marketing is important and makes people know that the program exists is really important.

I'm just curious whether your other efforts—like I actually attended the events in San Diego Unified and that was a community, very community-focused sort of environment and affair and very grassroots style, which I think is still—wins every day, over dollars being spent on social media.

Not to say that's not important, but that's how people, I think, who are really hard to reach will sign up. And I think the numbers continue to show that the hard-to-reach—what we would expect to be hard-to-reach individuals—are still hard to reach in this program, as is unfortunately the case with many other programs.

And so, I know we're—that's a commitment that's been already made, but I think as we look forward to make sure this is more successful, those are the types of efforts that I think we should really try to figure out how to do more along, including the programs on the data sharing.

I think that's just, why aren't we all doing this? We're serving the same exact kid and having them go through a whole different process to get a benefit that they're all entitled to is challenging.

I have a question, on the students who are already in high school, that that group, so we have the newborns and then we have the others who qualify, are we reaching out to also—do nonpublic school students also qualify—students who are income eligible at private schools?

It's only public-school students.

Only—so if you're income eligible, although you go to a private school, you have a scholarship, you're not eligible for this?

That is correct.

Okay, that answers a question from my wife who works with students, who are all low-income and some of them go to private schools, and they are not being able to access their funds and can answer that questioning. I did my job for the day for her.

Thank you.

That sounds like maybe it might be something we should think about going forward. But with that that'll be, I think—oh, the other, the last question I have is on, of the college age and maybe college enrolled, if you have access to that data, how are we not able to work with like the California Student Aid Commission to make sure they get the same information?

Again, data sharing here seems like pretty common sense, like immediate place to turn to get people to sign up. What are we doing there?

So, I'm happy to report that we recently signed on with Cradle to Career, as a data provider to them. So, we will begin that process and we are in the process of finalizing a data sharing agreement with CSAC, to be able to use that as well.

And just so that—for your information, the actual in-market media began April 1st. So, we're waiting for the metrics from the actual in-market media.

Okay, thank you. Mr. Fong.

Thank you so much, Mr. Chair. Thank you for the presentation here today. I want to also uplift the work and efforts around marketing and around ethnic media. So, you mentioned that there's been targeted outreach around ethnic media.

I think we brought it up last year in the Committee, so wanted to get a better understanding of the marketing efforts with ethnic media. I learned that a lot of immigrant communities, a lot of communities of color, ethnic media is really a trusted source of media.

And a lot of times, ethnic media is eager for content as well. So, I wanted to get your thoughts on those outreach efforts.

Certainly. So, we are currently working with Vizard, who is the public relations firm that's part of our marketing campaign, that's reaching into ethnic medias. We are also working with the office, the acronym escapes me, but with Josh Friday's office, in the—under the—GEO umbrella, to reach out into specific ethnic media outlets.

They have—working very closely with us on a pilot program here in Sacramento and once we see the results of that, we will expand that to other areas of the state as well. And we're looking at not just Hispanic media but also looking into different ethnic medias that are available to us throughout the state.

Thank you. And if there's anything that we can be of assistance with around that, I want help with a—help out with the ethnic media outreach. I work a lot with ethnic media, especially in my district.

In terms of the data sharing, I'm glad to hear that there's been a partnership with the California Student Aid Commission as well. And then, also reading the Report, mentioned that Riverside County had a really, it was like double the average, 16%.

Is there anything that we can share, in terms of best practices, as to what Riverside County is doing versus what we can in the rest of the state?

Absolutely. So, Riverside County is a unique case in that we have a specific data sharing agreement with them, that was created through statute.

And through that data sharing agreement, we've been able to individually identify students within Riverside County that have CalKIDS accounts, match that data through our system. and push out into the classrooms what is—who has an account.

And the classrooms have been assisting with claiming. We have found this to be the most effective way to get accounts claimed. Some Riverside classrooms are at 100% of claims. We, you know, the data sharing part of it was critical to that.

But we—so, we're hoping that through our Cradle to Career partnership and our CSAC partnership, we can expand that statewide, as opposed to doing individual data sharing agreement with each Office of Education, which of course will be cumbersome and take a long time.

So, we're hoping that through our partnership with Cradle to Career and CSAC, we're able to do more data matching in that way.

Thank you. And just lastly, just to uplift the grassroots effort as well—as every Assembly Member here, we attend a number of community events, and I've seen boost around some of the community events I've attended. So, I think that's a—always an effective way to just be on the ground and to do that effective outreach.

I know it might be more labor intensive, but it's another way to really make sure that we're reaching our communities. And with that, anything we can do to continue to increase the claim rates, I think would be critical. So, really appreciate the updates here in the context. Thank you, Mr. Chair.

Thank you. Dr. Patel.

Thank you for providing some insight into what made Riverside stand out. As a former School Board Trustee, I say this over and over again, we did receive letters, our trustees received letters, and we read them out loud during a public board meeting.

But that was kind of just a vague blanketing for those parents who happen to pay attention to a school board meeting.

I think being able to do the data sharing and actually connecting with the kids that actually have the account, like what Riverside is doing, is really the most effective way forward, without having to increase the administrative burden on a program.

The data are pretty clear that it worked really well in Riverside, and I'd love to see that pilot program expanded to other counties. I think we could—between, you know, partnering with CSAC for data sharing as well as our counties—I think we could reach every kid that's in public school. So, thank you for that.

Thank you.

Thank you. Ms. Hadwick.

Thank you. Mr. Chair, I have a few questions. So, who's doing the marketing or comms now in the office?

So, currently we have a vendor, Baru, who is doing the actual marketing and media buying. I am working closely with them, as well as the Program Manager, Noah Lightman, to work with them and some additional resources from our partner at Tia, who is the program administrator.

So, then if we add these two new positions, that consultant would no longer work there? Are we still paying a consultant and adding more positions?

We are not paying a consultant through Tia. It's through the Tia, you know, it's through our arrangement with Tia. It's not an additional cost for the consultant to the program.

Okay, so the Baru, the marketing firm, this amount, you know, their contract is through the next year and a half, and so, they would stay on. The two positions would support that in marketing outreach and efforts.

Okay. And then you had talked about the medias and the media market. I represent 11 very rural counties that don't have a media market. I was just wondering what the focus—what the strategy is with rural communities.

So, in rural communities, we partner well with the local school board. So like Modoc County, we're partnering—we're partnering quite frequently with Modoc County. We also do letters to students, individualized letters. That's part of the letter campaign that comes directly to the home. It has identifying information so that they can go in and sign up immediately.

We also work with like doing outreach through Covered California in those more rural areas. And the texting campaigns as well. Those are also part of the rural outreach.

Okay, and last one. I think it makes me very nervous that the manager to staff is one to one. I feel like we do these programs a lot and then we end up with really admin heavy things and money's not going to kids. And I really want money going to kids.

It said that your—the cost—for the two AGPA positions were $384,000, but originally it was $566,000, but it doesn't have a cost for the manager. Do you know what the fully loaded rate for the manager is? Or maybe I missed it in all the reading?

Apologies for not.

No, you're good. That's—it's like pop quiz every time you guys come in here.

Oh, help has come. Yes. Okay. Karma, always refer to the experts. That's our, that's our line.

Sorry, sorry. Karma on state trip. Sorry, my back's to you guys here. Ken, let me just turn around this way. Actually, wait, it's not so far back. Sorry about that. So the manager position I just had it here is going to was 104,000. So it'd be like about 100. Let me see, hold on. 154. About 170,000.

So typically on these positions we are very small agency. So so typically what happens is we ask at a certain level because of mid step, we won't ever get the augmentation for any positions later on. So we absorb all their MSAs, and because their budget's so small, we kind of ask for the higher level of the range.

So your managerial position is gonna cost you less than the AGPA positions. Cause 384 divided by two is.

Yes. Because there was one SSM one position being requested. Yes, that's correct. Okay.

And I just want to echo, I think Riverside sounds like a really good model and if you can data share with that. I feel like I repeat myself a lot, that we report all the same data and use 50 million different systems and we're the fourth largest economy in the world.

We should be able to have one reporting system. But that's another project for another day. But I think that Grassroots effort is really how to get to these kids, especially in my district. I would love to help support that and I think even like reaching out to your individual Assembly Members would help.

I feel like everybody's on the same page. We all want kids succeeding and maybe that's a way to tie in to those groups in our communities. But I think that's it. Thank you.

Thank you very much. Thank you all. We will hold the issue open and thank you for being here. And with that, we will go to our final comment public comment period. Ask those of you who are wishing to speak and make public comment, please come forward.

We'll give you a minute and we'll let you know when your minute is up. Please identify yourself and welcome.

Good morning. Mark Fisher, Vice Chancellor for Administration at UC Berkeley. I fully enheartened by the conversation you had this morning around capital and capital needs in the UFC system and just want to emphasize some things about the Berkeley situation, if you will.

So first of all, the cost to address capital renewal, and I like that term better than deferred maintenance because oftentimes it's extent of life, the systems are now beyond their lifespan, and it's really about replacement and facility Modernization is over 13 billion doll for our campus over the next 20 years.

We currently have about a backlog of $2 billion in deferred maintenance on the campus or capital renewal. And this, any state support would be greatly appreciated in terms of being able to deal with that. We continue to expand our student programs and services.

Additional infrastructure will be necessary to meet our strategic goals and support the University's core mission of education, research and public service. A little aside, we're starting to see faculty slippage. Faculty are being recruited by other universities around the country based on the quality of our facilities. Thank you. This is a brain drain for the State of California.

Thank you very much.

Yep. Thank you.

Hello. Rebecca Killeen, on behalf of the Community College Facility Coalition speaking to the Proposition to implementation for community colleges. We support the Governor's Budget for 29 new projects that you discussed today. We really appreciate the conversation. You're asking really good questions. We see how much you understand that capital outlay is important. Facilities are important to student success.

I just want to clarify that colleges are only submitting one application per campus per year. They can't submit more than one. And so it's important for you to understand that those applications were submitted based on the rules that were in place at the time.

So any shifts or changes that you might make to which projects are priorities under Proposition 2, we would ask that that only be prospective and not go back and alter the priorities since those were the rules that were in place at the time.

Thank you.

Hello. Leticia Garcia, on behalf of the Riverside County Superintendent of Schools, we are the pilot program that was being described earlier. So we are in service to our 23 school districts. So it's countywide. We are respectfully asking for an extension of the pilot program so that we can gather additional data to help inform future decisions.

We are also asking for more frequent data sharings at least twice per month so that we can, you know, be more impactful throughout the school year in making sure that the kids are claiming their accounts. So this goes to the proposal from the Governor to increase staff, especially around data management.

We think that that's going to really have huge impact. Some of the most impactful practices that we've seen so far in just year one, especially around elementary schools, is the in classroom lessons. So our kids in first grade learning about financial literacy, about compound interest rates and how their college savings accounts will grow throughout the year.

So we're seeing a lot of success in year one. But we'd like to have additional years. Thank you.

Hello, My name is Jordan Lilia Dove and I'm a second year Data Science and Public Policy student at UC Riverside. Today I represent the 27,000 students at UCR, one of our 18 professional engineers organizations and UCR Katipunan, which is our Filipino cultural organization as well.

I'm here today to advocate for the preservation of funding to food Assistant programs and urge you all to expand funding beyond the $8 million allocated by the Governor's Budget proposal. Assembly Bill 2033 affirms the necessity of adequate food supply and funding for these services is non negotiable.

Aside from my aforementioned commitments, I work two on campus jobs and a third off campus job and despite this, like many other UCR students, I struggle to afford groceries.

I personally found that food assistant programs provided by the state can be inefficient and difficult to navigate, especially for queer students like myself that have undergone name changes and students with inconsistent employment. Defunding these programs or funding them inadequately will only increase the burden of operating them and cause Californians to suffer.

I implore you all to allocate a minimum of $60 million to these programs to adequately support and feed students like myself. Thank you.

Hello, my name is Brianna Trujillo and I'm a current student at UCR studying psychology and public policy. I am here on behalf of the Associated Students at UC Riverside, the UC Student Association and the Counseling and Psychological Services. Today I am here to advocate for CALFO to be funded at an annual $60 million of ongoing basis.

As a student, I understand the struggles that my peers and I go through. The Inland Empire is one of the most food insecure spots here in California and as UCR students we counter various issues specifically regarding lack of basic accessible resources.

The states need to be in store of this budget priority because it's an alarming issue that affects many students across the UC and the State of California. The significant decrease would affect multiple students, including myself, that have relied on basic needs resources.

In addition, as a student who works at the counseling and psychological services, I see how despite the services currently have not been in demand and what students need, students do not have to worry about how to afford their next meal. Thank you.

Hello everyone. My name is Melissa Delgadillo and I'm a fourth year Political Science major student representing over 27,000 students from the University of California, Riverside. I'm here because many college students live in food deserts and lack reliable transportation to access affordable nutritious grocery stores.

As a result they often rely on campus food pantries to meet their basic needs. These pantries are primarily funded by Cal Food, a critical resource that directly supports students facing food insecurity.

We urge you to restore the allocation of 60 million annually to Cal Food to ensure that college students, especially those most vulnerable, do not go hungry while pursuing their education. Food security is student success. Thank you.

Thank you.

Good morning. Chair and Members of the Committee. My name is Maitre Shankara Narayanan and I am a third year transfer student studying business management and international relations. I serve as a Vice President of First Generation Student Association, an incoming transfer student representative and representing my schools at the School of Business.

I'm here to respectfully but firmly urge this Committee to fully Fund the Cal Grant program at no less than $60 million annually on a permanent basis. Over the past three years, Cal Food has received an average of 62.7 million per year. Reducing this critical funding to 8 million not only is unjustifiable, but it is dangerous.

Cal Food enables local food pantries to purchase food affordably and ethically efficiently, providing vital support to low income families, students and runnable populations across California. This program is not optional. It is essential for the infrastructure of food security, public health and educational equity. Divestment now would only have long term consequences for communities that are already stretched.

Then, on behalf of the communities I represent, I ask you to protect and industrialize robust cow food funding as a matter of public responsibility and economic justice. Thank you for your time and consideration.

Thank you.

Good morning. My name is Fatima Garcia and I'm a second year political science major at UC Riverside. I am also part of ASUCR which represents over 27,000 undergraduate students. I am here to urge you to restore Cal funding to 60 million annually on an ongoing basis.

This program allows campus food pantries to provide affordable nutritious food to students and communities who need it the most. As someone who comes from a low income background, I personally experience food insecurity. Many people in our communities are forced to make difficult choices about where to spend their money, either on rent, gas or school.

And that often means they can't afford a full nutritious meal. An estimated 1.3 million college students across the UCCS UNCCC systems are food insecure and it's a reality no one should have to face yet affects so many. This number is not just in a statistic, it represents real people struggling to meet a basic human need.

Please fund the program. Thank you.

Thank you.

Good morning. My name is Eva Raul and I'm a first generation College student at the University of California, Riverside.

Representing over 26,000 undergraduate students, I urge this Committee Fund the Cal Food with at least $60 million annually to ensure that millions of students, myself included, are able to ensure that their access to campus basic food pantry is critical to their basic needs. Whether that be groceries or menstrual or childcare products.

Our campus basic needs pantries are always in high demand. There's always long lines to receive the products that students need. The fluid resources that I'm personally able to get weekly really helped me save time and money and able to help me focus on my own studies.

The Inland, the Inland Empire specifically has over half a million food insecure students.

Food and food insecure individuals, including students without adequate funding to Cal Food food banks and pantries, especially on college campuses, will have less to provide to an increasing number of food insecure students who can't afford to focus on their studies when they're worried about where or when their next meal is going to be.

I urge this Committee Fund Cal Food adequately as they've done in previous years to ensure the success of lower income students and students as a whole. Thank you.

Thank you.

Hello, my name is Heidi Pineda Duarte and I'm a student at the University of California, Riverside. And on behalf of the 27,000 students, we urge you to maintain the Cal food funding at 60 million instead of the 8 million that was proposed by the Governor.

As a full time student with a part time job, I could tell you firsthand that it's not enough. My wages barely cover rent, school expenses and other necessities. And without programs like cow foods, I wouldn't know where my next meal is coming from. Having access to this program would make a real difference in fighting hunger.

There is an estimated 1.3 million food insecure students such as myself across community colleges, CSUs and UCs. This isn't about food. It's about dignity, health and the ability to succeed. We need your support, not just today, but every day to ensure that basic needs like food security is treated as a right and not a privilege. Thank you.

Thank you.

Hello, my name is Lionel Lee and I'm here on behalf of the 27,000 students of UC Riverside. We are asking you to maintain Cal Foods funding at 60 million for this year's state budget. AB 2033 made basic needs, including emergency food a requirement on campus. But without Cal Foods, campus lose their main source of support.

As a fourth year economics student, I can tell you that when students are hungry, it shows in our grades affects our studies and ultimately how long it takes us to graduate, which in the long run will cost California taxpayers even more through delayed graduation and lost economic productivity.

If we want to talk about access and equity in higher education, it starts with making sure that students have their basic needs. Cal food is an extra. It's essential and continued investments show that students success matters. Thank you.

Thank you so much.

Good morning. Andrew Martinez, Community College League of California previously we have advocated for deferred maintenance to be an investment in one time dollars should those be available.

We continue to advocate for those dollars and especially in light of, as Senor Patel pointed out, the possibility that cost may rise for instructional equipment or for materials to build those facilities. It makes sense to make those investments as soon as possible. And we agree with those comments. Thank you. Thank you so much.

Any further public comment? Seeing none. Thank you so much. Colleagues for Chair Alvarez and colleagues for a great budget sub three Committee meeting and really appreciate all the work and efforts on this. With that, this meeting is adjourned.