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

All right. Subcommitee 4 of the Senate Budget and Fiscal Review Committee will come to order. We are holding our Committee hearing today at the State Capitol in room 113 and asking all Members of the Subcommittee to please join us in room 113, at which point we will establish our quorum.

We will be providing opportunities for public comment today. Certainly following the full set of the discussion item list, I may invite public comment during individual items as well, solely because we're here considering the May Revise and we have a lot of issues that we've never heard for the first time today.

This is our main overview hearing on the May Revision, but is overview for the purpose of ultimately taking specific actions on the wide range of issues that are before us. We are noticed in the file as well for further Subcommitee hearings. We will meet again between now and the report of the Subcommitee to the full Committee.

But today our focus is entirely on the May Revision. We'll just note that we have many, many, many other open issues from the items in the original January budget that we haven't taken up, as well as the key legislative priorities that we have also signaled throughout this process as well.

And that's why the items that were part of the Governor's Budget in January are not on our agenda. So if they weren't part of the May Revision, then they're not going to be considered today. That does not mean we have forgotten them or that we won't be returning to them.

That will be happening at a subsequent hearing in the next coming weeks. So our order of business today, we'll be taking up the items for discussion on our agenda. We're going to take item six out of order. Then we'll take public comment about each item after it has been presented and discussed.

And then we'll take additional public comment at the very end of the hearing as well. All right, so let's then proceed to item six, which is the resources for the proposed reorganization of the Business, Consumer Services and Housing Agency. I'd like to invite Secretary Moss, any other supportive witnesses to the table. Welcome. You got the presentation up first?

Yes.

All right. Thank you.

Thank you. Well, good morning, Chair and Senators. My name is Tomiquia Moss and I serve as the Secretary of our Business, Consumer Services and Housing Agency. I think we've all been waiting for this day, our time to finally discuss this idea as an entire proposal. We are here requesting support around the 2025 governor's reorganization plan.

I'm really excited about what this plan represents. To me, it really feels like a culmination of years of advocacy, hard work and dedication to a state government that continually reflects, evolves and strives to deliver the service and outcomes that Californians need and deserve from us. I'm really proud of what this agency has accomplished.

Many of my departments are in the audience today and we are navigating overwhelming amount of policy areas with increasing responsibilities and impact. But I think it's time for us to recognize that we have outgrown our current structure.

This proposal makes key structural changes to increase our ability to provide positive impact for Californians across our entire portfolio. Our Business Consumer Services Agency will provide effective and efficient consumer protections and business and professional regulation.

BCSA will also provide a more direct support to our departments, allowing a more quickly-- allowing them to be more adaptive to industry changes, strengthen oversight and better protect Californians.

On the other side of our portfolio, the California Housing and Homelessness Agency will provide clear direction and guidance to address the entire housing continuum from people experiencing homelessness to those renting affordable homes to our first time home buyers.

Combined with the proposed Housing Development and Finance Committee, this proposal builds on a structure that will accelerate our progress toward California's housing goals. The Housing Development and Finance Committee will give California the tools it needs to increase the value of state investments in affordable housing, stretching every dollar a little further to create more affordable homes.

Now more than ever, California deserves the best version of their government and this proposal helps to do just that. Be it a consumer protection or the housing continuum, creating more policy aligned agencies means that each secretary will be able to devote their time to a narrower policy focus, lead more specialized staff and policy expertise.

Strategic planning and analysis can then be dedicated to a single policy area, allowing for deeper coordination and implementation. This reorganization is our opportunity to align state government in a way that meets the urgency of today's challenges and sustains our progress for the long term. I'm happy to answer any questions that you might have.

All right, thank you Secretary Moss. Department of Finance, any-- Any comments, Department of Finance?

Yes, Meagan Tokunaga Block, Department of Finance. I did want to comment on the need for resources in the budget year.

While one option could be deferring decisions about the reorganization until the following year, resources are required in the budget year to effectuate the reorganization and stand up the two new agencies by July 1st of 2026 as proposed in the reorganization plan.

A number of budget year tasks are included in the BCP which include establishing delegation for hiring procurement contracts, et cetera, organizational change management to support the transition of programs and roles across impacted departments and personnel and finally, work by the Housing Development and Finance Committee to stand up a single application process in this one-stop shop that would allow the new funding that is appropriated in the future to be allocated under this new methodology.

Withholding resources beyond the beginning of the fiscal year could delay implementation and hinder the success of the reorganization.

Before we turn to LAO, I neglected to invite the Director of ACT to make his opening remarks as well. Welcome.

Thank you, Chairman. Good morning everyone. My name is Gustavo Velasquez. I am the Director of the California Department of Housing and Community Development.

Under my leadership at HCD for the past five years, this department has provided funding for nearly 60,000 new affordable homes, help local governments plan and accommodate 2.5 million new homes, and enforce California's robust housing laws to create more housing opportunities.

I am immensely proud of the work that HCD has accomplished and believe that creating the California Housing and Homelessness Agency will provide the right structure to our momentum and our progress towards housing and homelessness.

Creating this agency will provide dedicated leadership and focused on housing and homelessness at the cabinet level, which will reinforce the administration's work across the entire housing continuum from homelessness to homeownership.

Collectively, these changes strengthen HCD's ability to dig nimble, focus its work on delivering improved outcomes for Californians, including data collection that helps decision making, the administration of federal programs, the oversight of housing policy and accountability towards meeting housing and homelessness state law mandates and allows the state to give housing and homelessness the ongoing attention that these critical issue areas deserved. Thank you very much and I look forward to the discussion.

Thank you. Now Legislative Analyst.

Good morning. Paul Steenhausen with the Legislative Analyst's Office. We agree with the staff comment in the agenda that approving this proposed May Revision funding for the June budget before the Legislature decides its position on the plan is a little bit putting the cart before the horse.

Statute lays out a timeline and a process for the Legislature to consider the Little Hoover Commission's recommendations on the Governor's proposed reorganizations. And the administration wasn't able to get that plan to the Little Hoover Commission until last month.

So under this timeline, Little Hoover Commission has until June 4 to provide its report and its recommendations to the Legislature. The Legislature then has until July to make a decision on it, to review it and make a decision so the Legislature could approve it, amend it, reject it.

And as you just heard, there's a proposal before you may revision to provide funding, a fair amount of funding, especially in a time of budget deficit to start the process.

So given the legislative review is still in process Given the General budget condition and the proposed cost of this reorganization and the millions of dollars annually, we recommend the Legislature reject the proposal without prejudice.

Now, the Legislature could instead make a funding decision as part of next year's budget process, or if the Legislature chooses to make that decision later in the summer, maybe a budget Bill junior or something like that. But you have those options, you have it.

And we recommend you just wait for the process to come to a conclusion and then have the funding follow that agreed upon structure and vision by the Legislature. Thank you.

Thank you, Mr. Steenhausen. Let's open it up then to Members of the Subcommitee. Senator, how about you? Senator Niello.

Senator Cabaldon and I are both on the Little Hoover Commission. And so we discussed this last week or the week before. Whenever I'm losing track of time. I do not support the reorganization. Senator Cabalda does. Pretty much all of the rest of the commissioners supported the reorganization. So I was.

We didn't actually cast a vote, which is disappointing because being the only no vote is a character building experience and I missed that experience. But. I think the LAO's recommendation makes good sense to approve funding for something that we're not doing yet. Doesn't make any sense. I think you said it kind of is putting the.

It isn't kind of putting the cart before the horse. It most definitely is and we'll see what the rest of the Legislature has to say.

But as for the reorganization, as I said when we the Commission meant the contributing factors to the challenges we have in some, so far as this is concerned, is organizational policy direction and execution. And by and large my observation has been the challenges have been largely based upon policy and execution issues.

And I unconvinced that changing the organization is going to change that fundamental dynamic. But that's a decision for a later day, as I said, to apply approve funding for an activity that we haven't approved yet just doesn't make any sense at all.

So just one correction. I did not say at the Commission meeting that I support the reorganization plan. I said I didn't object to it in concept. But Senator Elo was right. The rest of the Commission, I think was between okay and enthusiastic, but the two legislators were not.

And so I wanted to drill into some of these questions because I think the Commission did not really dive into much of the detail here as it respects with respect to the budget. So I'm very interested in Lao's recommendation on this, but I want to still take the moment to probe some of the fiscal questions here.

So the with respect to the dollars needed in order to stand up the new agency and set up the integrated or the one stop process for affordable housing applications because the budget contains no new money for any affordable housing programs or for the homeless housing assistance and protection program and nearly all of the existing funds have been used up.

Aren't there or won't there be Quite a few AGPAs and staff services managers and a variety of other people in the agencies that are involved in reviewing, allocating and overseeing state funds for housing and homelessness that could be redeployed for the purposes of achieve of standing up the newer, the new entity and the new Committee.

Well, Senator, maybe I'll take a first pass at that. And I also have my deputy secretary Amy Monessaro from our Administration work that can talk a little bit more specifically about the budget. You know, we have been very conscious about fiscal prudence in establishing this reorganization.

We've been really thoughtful about the current constraints of our budget while also making sure that we maximizing our staff capacity in order to set up and facilitate the structural changes of the reorganization.

We are going to be using quite a lot of existing staff to set up the reorganization from HCD specifically, particularly staffing the new Housing Finance Development Committee and the Executive Committee, which will really be the place where we will be able to align and consolidate and coordinate all of our housing programs across the agency.

I wouldn't say that all of our funds are currently expended. We have billions of dollars that are currently not yet expended. And so the urgency to us around improving the structure of our programs and systems is to ensure that every dollar dollar that is being expended is done the best way we know how.

And so to us, we have our Homekey plus program. We have $750 million in our ASIC program. All of those resources are currently in local communities.

And we want to be able to support our local partners in making sure that our programs and services are delivered to the best of their ability, that we can deliver our housing more efficiently and quicker for all of the folks who need it. And so I don't, you know, we've scrubbed the numbers.

I don't see a lot of extra staff. We've been very prudent in terms of relying on as we separate the agency between consumer protections. We've been really thoughtful about that construction and making sure that the cost of that agency is actually a decrease pro rata cost to our departments within that agency.

And then in terms of our housing and homelessness agency, really thinking about how do we make sure that we maximize existing positions and really be discriminate around the new positions? So maybe I'd turn it over to Amy to speak specifically about the new and existing positions that we're bringing on.

Yeah. Thank you, Secretary. I would just add that in this first year, we've been really, really conservative with the number of staff we're going to add to our agency. Specifically in terms of AGPAs. We're not asking for any new resources until about halfway through the year.

We're working with our departments to establish work groups to operationalize a lot of the heavy lifting of work. It's a lot of work to stand up two new agencies. Well, one new agency and then rebranding the BCSH to Business and Consumer Services. We have to establish a lot of new delegations. We have to establish tax ID numbers.

It takes time. And so we are working with our departments to really help us shoulder that heavy lifting. We are asking for the AGPA about halfway through the year.

The thought being that once CHHA is standing, we will need an analyst who can help us process all of the technical documents, do a lot of the analytical work that goes behind purchasing, contracting, hiring, all of that. We're also asking for my counterpart for the Housing and Homelessness Agency. Again, it's an incredible workload.

We're hoping that that leadership on the housing side can kind of take half the work. So that really is the limit of the first year of administrative AGPAS and new staffing.

When we come to the budget year 2017 or budget year plus one, we are looking to add leadership to CHHA, Secretary, Under Secretary, as well as some General counsels. So we've really scaled back and looked at what's the minimum number of positions we need to run a housing and homelessness agency.

And of course we do are asking for a small handful of staff for hdfc. I believe it's five total. The thought being that HCD will help us support the Executive Committee and all of that work with existing resources. So you do see a small or. It's not small. You see, let me look at the exact dollar amount.

It's less than half of the entire operating budget for hdfc. But that is what we are are requesting through this proposal. The rest will kind of be transitioned from HCD to hdfc. So thank you for your question, but.

What about the existing staff? So if the Administration were coming here and saying, we would like to add $1.0 billion for homeless assistance and preservation and we would like to add a half $1.0 billion for low Income tax credits and a half 1.0 billion 1.0 billion for multifamily housing program.

You would also be coming with a request for more money to implement those if we hadn't been doing this every year for the last several years.

So if these programs were just brand new and we were adding $2 billion in housing and homelessness programs, of course the agency and ACD would be asking us for additional staff to implement all that work. Here we are and now we're not going to to do any of those things.

And you're saying it's going to cost us more to not do them just as it cost us more at the beginning to do them. And you're proposing to withdraw 30 plus $1.0 million of money that's already been appropriated for housing programs.

It's just so fantastical that we would that doing this efficiency measure would cost us more and cost us more in the out years. The startup costs are 4 million and then 6. 6 million ongoing. We're permanently going to be spending more money in order to achieve a more efficient system.

Except more efficient where we're not actually granting any money to affordable housing projects or to homeless efforts in the communities. Finance. Maybe you can weigh in on this question.

I wasn't quibbling about a single agpa, but simply this notion that whether we're coming or going, you're asking us to spend millions of dollars and ignore the fact that we are not.

And the Governor, despite the last five months of every, you know, this Committee and every other arm of the Legislature saying hey, we have to affordable housing is a key priority for California. So as homelessness we need investment in the May revised didn't propose anything.

In fact it proposed less money than it proposed in January with the, with the withdrawal of the appropriated funds.

Thank you Senator for the question. While there's no funding proposed in the May revision for 202526 there is still a large pipeline of funds that are available that need to be allocated. There's currently $3.4 billion in active notices of funding availability and these take time to deploy.

We don't want to flood the market with resources right away. Otherwise there will be over subscription among the federal resources that we have to leverage. The investment that we're proposing to make for the reorganization does cost some money at first, but we're hoping that it can help facilitate more efficient use of all future housing resources going forward.

But the requested appropriation is 6 million is 50% more in the out years forever for the new agency and for the new Committee.

The ongoing cost reflects that the initial upfront cost was meant to be as minimal as possible given that we're just trying to stand up the agencies in the budget year. And so I wouldn't draw a trend line between the budget year and the budget year plus one.

This 50% increase has to do with the startup costs for a new facility for change management contracts. So those will not be ongoing and are not reflected in the ongoing cost.

Okay, next question, which is. So the Housing Development and Finance Corporation, and I should say in the January version or the early version, the Administration proposed, you know, yet another entity which was a new Department at that time, or maybe it was in the draft proposal. A new Department plus the Committee plus the new agency.

And the proposal that was ultimately submitted to Little Hoover into the Legislature did not include the New Department, which I personally appreciated that. I thought that was a step in the right direction. But can you delve into?

Because the main feature, like the one thing that skeptics and supporters of the proposal do, I think all agree on, is that creating a streamlined, one stop, fully integrated application and award process for housing for the affordable housing programs is an essential objective for us to achieve.

But it's been set up as that's both the consequence of the agency and of the Housing Development and Finance Committee. Can you walk through a bit of how why are both needed in order to achieve that objective?

Senator, if I may, I can answer that question. I think you're referring to the Housing Finance and Development Committee. This is the home. This is the new infrastructure that is being stood up to integrate, to harmonize, integrate as far as consolidate the wide host of financing programs that are under the governor's authority.

We have over a dozen of programs just in acd, plus the California Housing Finance Agency, plus many other departments, some of them within the authority of bcsh, some of them outside of the authority of bcsh. You maybe have heard this before.

If you haven't, I will tell you California is number one for the fragmentation of the affordable housing finance delivery system. If you go and look at other states, they have been able to fix this problem. How California has gotten so fragmented is just a wide variety of reasons.

But the fact of the matter is that this reorganization proposal is about bringing under this Committee, an Executive Committee under an open process, ensuring that stakeholders are at the table. Just a way to really harmonize or further integrate the system that is so fragmented. So you're right that the original proposal had a Department of Housing Finance.

I think we are sort of mirroring a system that is very similar to the way that tax exempt bonds and tax credits are allocated on the side of the governor's authority. And it is essential that this infrastructure is created in order to really fully integrate this system that is so fragmented.

And we are still, as my colleague from the Department of Finance mentioned, $3.4 billion just HAPP, a very desirable program for local jurisdictions to tackle homelessness, has hundreds of millions of dollars on spent going back to round one.

We are in round six of hap, so there's a lot of money out there so we can use the next couple years to continue to Fund these programs at the same time that we are building this infrastructure that is essential to fix a very broken and fragmented delivery system for affordable housing finance.

Okay, well, we can park that part of it. I continue to be skeptical that spending millions of dollars to harmonize programs that we are not going to be investing any new money in is a questionable approach. But returning to the speech, can you give me a sense?

I know I asked this a few months ago and I've asked this is not HCD or whatever the agency. It's in specific. But when folks have come with proposals for coordinating, focusing, harmony bodies, I ask pretty much the same question every time.

Can you describe what an agenda, what the action items on an agenda for this Committee might look like in two years? Like if I show up at a meeting and I'm ready to testify, what actions will this Committee be, will be undertaking that will achieve the harmonization that you're describing?

Well, we know what the catalog of programs that we have to address in form of further harmonizing, integrating, bringing this one stop shop idea that I think everybody wishes you even yourself mentioned. This is the number one thing that we all agree with. We know that catalog of programs.

What we need to do under this Executive Committee and this Housing Finance and Development Committee is to bring stakeholders to the table and have a conversation about multiple requirements.

How do we make sure that all of these requirements can be merged, can be combined in a way that we can truly fulfill the aspiration of a one stop shop for when developers in a few years come in, grab that state subsidy all at once.

And it's just a lot of work that this Committee will have to do to analyze how do we combine these requirements in a way that we begin building a system that is a truly one stop shop? It takes a long time.

We experienced that when we implemented AB434 at HCD where we had six programs that were integrated into only one competition. It took us almost three years. We're actually in the third year and we still are continuing to advance guidelines in a way that it makes sense for developers to align the criteria of six different programs into one.

These are the agenda items that we will have in this Committee meeting after meeting, after meeting with an open process that involves a wide range of local jurisdictions and developers to make sure that the process makes sense.

Director, those are objectives. But I'm telling you, if I show up and agenda item six is what is it? A set of recommendations to be made to the Legislature and the Governor about changing the programs? Is it an actual allocation round that's being curated by.

Because what you've described is really, that's a one time task force like let's bring it together.

Let's put all these pieces together, redesign the process and then the agents go do their thing and they can, you know, the directors can come together at the, at the, whatever it is, the monthly meeting that the secretary of Housing and Homelessness agency convenes of her Department directors and she can invite folks from the other agencies that deal with housing and homelessness too and can say that okay, here's how we're coordinating, right?

This is what we're doing. But why. So I'm trying to understand what the. Like, am I voting on a bond at the Committee meeting? Am I opening up a new round? Like what is my.

Without, without, without saying focus, coordination, leadership, without any abstract concepts, what is the action that I might be taking at one of these Committee meetings that cannot be done in an Executive staff meeting at hha.

I was describing the process to get to an agenda item that is ongoing, permanent, maybe year after year, maybe even more often, which is accepting applications for an integrated system of affordable housing finance. And the Committee being able to accept those applications, vote on the criteria and basically allocate the funding adequately.

But in a way that is truly a one stop right now. You maybe have heard the studies. Right now it takes just on the state site two or three funding sources for a developer to make sure that one affordable housing project goes to construction.

This just by bringing this closes the time and saves hundreds of millions of dollars to the affordable housing industry. So the agenda item will be yes, to accept applications and to vote on the criteria. And what are the meritorious applications that will obtain this funding all at once?

Thank you Mr. Chair for your passion and concern concerns and it's very good to be with you. Always good to see you, Secretary Moss.

But I have to say this is has been a troubling agenda item that has continued to Come up for the chair and myself as we really ask the question about justice delayed or justice denied. I understand the ship streamlining process, I understand this coordination.

What I am concerned about is the timeline of that because we can get into a paralysis analysis situation where we don't actually move the system in time to ensure that we don't lose ground on what the voters of California have led the country in in terms of saying that addressing homelessness is our number one priority and we're going to put our money where our mouth is.

And I want to make sure I'm hearing you the earlier comment that you made.

Are you saying that by not investing in homelessness this year services in a deep way by the Administration, are you saying that not investing in affordable housing this year by the same Administration does not delay our opportunity to meet the goals that we have laid out and instead we should solely invest in this exercise of collaboration and desiloing, which I think is absolutely right.

But I also know that in this place can be a four or five year Proposition and without failing, to me that creates a recipe for disaster. If we aren't clear about the timeline of this, what are the action steps?

And I hope that it is less than two years, that there is some real movement out of this new structure that on the face of it, makes a whole lot of sense. On the face of it, without an investment doesn't necessarily make sense.

And then to think this delay and what a delay could mean in addition to lack of investment is also a concern.

So help me understand how this isn't a situation where this is a delay that is going to turn into a denial of justice for folks who want to see a change in the number of people who are sleeping on the streets. And in my county we have the largest number of folks who sleep on the streets.

The folks who die on the streets every night look a lot like me in my community. We are the voters in LA County have voted to supplement to address this issue. We see we don't know what the federal action will be and now we see the state walking away, the Administration walking away from this investment.

So it's very, very difficult to hear what sounds conceptually as the right thing to do. And I know the Secretary Moss knows this business inside and out and I trust her direction on this. But what concerns me is the timeline piece and what it means when we also don't make the investment at the same time.

So just help me understand, understand our strategy for making this work. Because what we don't want to do what we don't want to do is lose ground as we are finally seeing the pit counts in my county come down. We do not want to lose ground in this moment.

Thank you, Senator. I'll start and then Secretary will elaborate. I wasn't saying. I think I was referring to the $3.4 billion as money that is still being administered currently, that it's still out there. Of course, we're not saying that those are all the investments we need. We are working very hard to.

There is progress being made in California. While the country has seen recently an increasing homelessness by 13%, California has seen, yes, it's still an increase, but much more modest, approximately 3 to 4%. So we are working very hard to deploy these resources effectively.

We are doing it also under incredible amount of diligence towards working with jurisdictions and if necessary, holding them accountable. You know, we have established a Housing and Homelessness accountability unit that works with every jurisdiction in the State of California on technical assistance and if needed, holding them accountable, working in partnership with the Attorney General.

You know, it's not an either or approach, it's both. We need to deploy those resources effectively. We need to make sure that we see the outcomes that we all desire to reduce homelessness and increase the production of affordable housing.

All I was trying to say is in the next couple years, the standing up of this agency and the standing up of this Committee to fix the affordable housing finance delivery system is essential so that in the future, when we have a more robust picture in the revenues and the budget that will increase the availability of homelessness and affordable housing funding, that system works better and it makes things faster, easier and less costly for those that are in the business of creating more housing that will in fact reduce homelessness.

At the same time, you mentioned looking at other states, what's the timeline, when will this be in place so that we.

We see these accelerated outcomes that we are hopeful that we will see as a result of this process. So, Senator, thank you for the question. I think that's part of why we are so passionate about moving this forward as quickly as possible. The reorganization is approved by the Legislature. We would begin implementation immediately.

This Committee needs to be set up quickly so that we can effectuate the changes that we are are talking about. That work would start right now. We want to be able to have that Executive Committee ready. We want to understand the scope of what the Committee is going to do.

I think to Senator Cabaldon's point around what are the outcomes of that Committee, all of that work will be Set up starting now. And so to us, you spoke about your constituents and the urgency that this is required.

We can't wait, in my opinion, to figure out how to reconcile the challenges of this budget picture, which I completely respect. But we do have billions of dollars that need to be allocated in a way that delivers on the outcomes that people expect from us.

And to me, for someone who spent more than 20 plus years trying to figure out how we can do this better, this is our chance. We do not have the luxury of pretending that we do not have a broken system that will facilitate housing for our communities faster and cheaper.

And that, to me, is the impetus for the urgency. That is why I believe that the Committee's work needs to start now. The agency, as Amy talked about, will be stood up in 2026.

But all of the work that you all have done over the last six years to stream to integrate our systems and programs, that work is underway. But this gives us a container to situate that work and accelerate it.

And so the work of this Committee will begin as soon as the reorganization is approved, if that is the desire of the Legislature. And I will say, you know, we know that resources are cyclical. I've been in California for 22 years. When there was money and when there was no money. That is this moment.

I do believe that resources will come again. And we want to be prepared to make sure that we are maximizing every single dollar that we have at our disposal toward these goals. And so, you know, the Governor has mentioned a bond.

There are going to be opportunities for us to facilitate resources over time in this much more rational, functional system that we think is our responsibility as public servants to Californians.

I believe in a little magic. So I'm going to say if you could wave the magic wand in your expertise in understanding the urgency and having intimate knowledge of the problem. What's the timeline for this? Should this move forward, what is the timeline for the action steps to be in place?

I mean, I could imagine we would begin seeing those materialize by the start of 26. It's going to take us time. I mean, look, part of what we also want to do is be incredibly respectful and supportive of our staff.

We can't sleep on change management of reworking, how our teams are thinking about the outcomes that we have to deliver as a part of this reorganization. So all of 2020, the remainder of 2025, in my opinion, is about making sure that all of the staff that are going to be repositioned in this organization are supported.

They understand the charge their responsibilities. They have the training and supports that they need to do what they've been doing. We don't want to see a disruption of services to our external stakeholders and of course to our housing pipeline.

But we want to make sure that we are supporting our staff through this transition and also doing the hard work of setting up the critical infrastructure of this Committee so that it can start moving on day one as soon as the agency is fully operational.

The sense is that this is a revolving rollout. It's not we're going to do this and then roll out this plan that then is outdated because we waited five years to put the plan out.

This is a rolling sort of these action steps and these deliverables, if you will, will be coming in a rolling basis as this team sort of tackles. And I don't know, I'm sure there's a very important strategic plan to this, but those priorities and those top line things will be rolling out soon as they start solutions.

And the ability to collaborate in this way is realized and approved by this Committee.

Absolutely. And also to say, you know, BCSH is only one agency that supports housing and homelessness work. We have Human Services Agency or the Human Services Agency, calsta, all of our departments across state government who currently sit on our interagency Council on Homelessness.

We want to create a container for those resources programs to come in and be aligned over time. And so that's what this is.

It's a rolling process for us to set up the infrastructure that we have control over today and invite the integration of the programs so we can get the biggest bang for our buck for all of the resources that the state is spending toward these issues. Thank you.

All right, so I want to emphasize there's nothing that prevents. We already have an A team at the agency and at the Department. We already have an agency responsible for housing and homelessness and more. We already have one of the most expert, knowledgeable and creative leaders at that agency.

There's nothing that would prevent us from doing this sort of integration. In fact, as we first, I'm the Director, HED is already done this with some of its own programs internally. We don't have to reorganize state government in order to accomplish these objectives.

Personally, I would rather that we had budget language that simply gave the secretary the authority to do the integration rather than, and I know that's not going to be popular with all of my friends in the advocacy community who want us to take the time to do all of that, but you could do that the Secretary could convene that and do the integration work and we could deploy much more quickly while we still have any, while we still have some money in the bank.

The fundamental though for me is still the question of it's a cruel hoax to be investing state dollars in this while we are also essentially winding down these programs.

I share your hope and your optimism, but my reading of both the Department of Finance and the Laos documents about our out year fiscal condition doesn't suggest that we're just a couple of years away from being able to make investments that we're not doing today.

And coming from a city hall and hearing from plenty of affordable housing developers and mayors and supervisors in the district is we're not even doing some of these programs because clearly the state's not committed to them.

We can't mount effective homelessness programs right at the moment, as the Senator said, that we're turning the corner because the state is signaling as loud as it possibly could that we are no longer going to be an investment partner here by not just investing zero new dollars, but now also proposing to De appropriate inappropriate whatever the take back, claw back 30 plus $1.0 million.

So the conditions are not there in the world. So we're going to today we're going to leave this open. We will take public comment on it later.

I'm going to ask our staff if they would please prepare the draft because I would like us to the Subcommitee to consider when we take this up again, replacing the appropriation with language that appropriates a quarter of a percent where we can talk through the number of the amount of money that is appropriated in the 2025 Budget act for HAPP and MHP and the Joe Cerner Farm Worker program and the other unfunded programs for the, for the new agency.

If there's no money for the new agency for the, for any of our homeless and housing initiatives, there should not be this agency reorganization. If there is, then of course the agency needs to be stood up in order to implement it.

But we need to, we need to be clear that these, that these issues are closely connected to one another and that we will not be perpetrating this hoax, this cruel hoax on the people of California and the homelessness providers, the Housing Department developers and the communities that simply reorganizing state government, while not while withdrawing from the field of making new investments in housing homelessness is going to help us take advantage of the corner that's being turned and really solve the crisis on our streets and in our communities.

So we will leave this open for Today, as the discussions continue. Secretary, did you. I can see you've got something to say.

Well, I just wanted to respond to your point, Senator, around the connection between the resources and the reorganization. I just want to offer a perspective from prior to becoming secretary, I spent most of my career outside of state government, and before this Administration, there were no state resources allocated toward housing and homelessness.

So before this Administration, Administration, where we have year over year invested in the most critical issues that this state faces, this reorganization cements that structural infrastructure into state government so that no matter what Governor sits in that seat, this state institution will be present to advocate and secure resources for housing and homelessness.

So to me personally, to be able to have witnessed redevelopment go away in 2012 when there was no replacement for local communities to address our affordable housing crisis, to see in my own community in Oakland go from homelessness not being our top issue when I was Chief of Staff to 8,000 of my neighbors being on the street.

I want to make sure that we have the capacity when resources come and go, that this institution of housing and homelessness is a part of how we address the most critical issues of our time. And so I just offer that, yes, there is a responsibility to ensure resources and difficult budget years require difficult choices.

I'm simply suggesting that making sure that this structural infrastructure is here and perpetuity gives us a much better shot of not having this be a policy issue of concern or of not concern.

Appreciated. Let me just add, though, three of the last four governors have reorganized the agency in which housing sits, so the mo. So the notion of perpetuity. I'm hopeful, too. I hope we finally get this right. At the same time, the most most powerful letter to the future is an appropriation for housing and for homelessness.

And I hope we'll all continue to work together in the coming days and weeks in order to make that happen. Secretary, Director, thank you so much. All right, now we're going to move to establish a quorum, so would you please call the roll?

[Roll Call]

All right, now we're going to proceed to our regular business, a regular order, and go to item one, which is with go biz economic development proposals in the May revision. Welcome.

Department of Finance to lead off. Charles LaSalle, Department of Finance Today I'm going to be providing an overview of the proposals included at the May revision for the Governor's Office of Business and Economic Development.

Given the existing General Fund condition and projected declines in revenues, the May revision proposes to withdraw 60 million that was included at the Governor's Budget for the 25-26 for another year of support for the California Competes grant program.

Additionally, the May revision proposes to revert 11.5 million from the General Fund that was included at the 2023 Budget Act, which supports the Small Business Equitable Payroll Fund established pursuant to SB 1116 of 2023.

Separately, the May revision also proposes to include 230,000 in reimbursement authority in 25-26 for the Outsmart Disaster program, which is a statewide awareness campaign focused on providing California communities with resources they need to adequately prepare for and recover from disasters.

And three separate reappropriations, the first being 2.153 million for the Zero Emissions Vehicle program that was moved from moved to the Governor's Office and Business and Economic Development from the Governor's Office of Land Use and Climate Innovation as part of the 2024 Budget Act.

The appropriation, when it was originally at LCI, had an extended encumbrance period. This reappropriation aligns the GOBA's funding with the original appropriation that was included as part of the 20, which was included when the funding was appropriated to LCI originally.

Secondly, the May revision proposes to reappropriate 700,000 for the Containerized Ports Interoperability grant program from the 2022 Budget Act. This funding is to complete administrative workload as well as legislative reports that are required for the program closeout.

The final request is to reappropriate 240,000 for the women's Business Center's Enhancement Program, which was initially included in the 2022 Budget Act. The reappropriation would allow GO-Biz to cover administrative workload associated with closing out of the program.

Lastly, the May revision proposes to include provisional language that would allow the Department of Finance and GO-Biz to augment their budget by 650,000 to meet the federal match requirement in the event that GO-Biz receives a large award from the STEP program.

Thank you, Legislative Analyst.

Thank you, Chair. Rowan Isaaks, LAO. we just wanted to make a comment on the withdrawal of CalCompete's funding. As the Committee heard previously, our assessment of CalCompetes as a program as a whole is that it's generally well-structured and effective at economic development, especially relative to other tax program tax incentives and business incentives.

Having said that, we think that the grant, which is the subject of the proposed withdrawal, is a nice to have element of the program, but ultimately supplemental, that is the CalCompetes program will continue to function well even with the withdrawal of this money. The grant has been funded previously on a year-to-year basis.

So in 21, 22, 23, money was allocated for one year. And in the light of last year's budget problem, the funding was withdrawn. And so we have a budget problem as well this year. So withdrawing the funding is a reasonable choice to make.

Having said that, you know, there are other programs that maybe we view as less effective than CalCompetes at the goal of economic development that do maintain or receive new funding. And so to the extent that those programs maybe meet the bar for spending this year, maybe CalCompetes, we could be considered meeting that bar also.

So something to consider. Thank you.

You're not going to name names or. All right. Are there questions or comments for Members of the Subcommitee? Senator Smallwood-Cuevas?

No, I'm speaking of the CalGrants program, the 60 million.

Are you speaking of the payroll?

Can you just share: do we know the impact of the grant reversals? How many businesses, how many particular small businesses will be impacted by this and where?

Philip Shanda, Budget Officer here at GO-Biz, we don't have those numbers specifically here. We would have to get those for you.

Yeah, I'm just curious. I understand the LAO's perspective and I was looking through, I didn't see any analysis and I know this has been for some years. But I'm curious what types of businesses are hardest hit when these kinds of grants disappear or not funded?

CalCompetes kind of targets slightly different, kind of a slightly different market there. I think it's a little bit more focused on businesses that are trying to expand in California specifically, and we're trying to keep them from going out of the state. And so they might have resources, they tend to be a little bit larger.

And so they have the resources to kind of make that decision and figure out, okay, well, it may be better to have a factory over here in Arizona versus in California.

The reason I asked is there are a number of small businesses in my county that support the larger enterprises. And so when you say we are going to remove these grants, it does have an impact on those small community-based businesses that provide services downstream, right, to these larger enterprises.

So I'm just curious, who is most impacted and particularly when we look at the community level, when we decide that we're not going to locate those larger firms in a community, the ripple effect does have that impact.

So I was just curious if we had any data about what the impacts of these grants not being awarded may have on the small business community.

Well, you know, going downstream from the kind of target market, we don't have those analyses here, but we can look into it for you.

Great, great, I would love to hear that.

Nick Thomas, Department of Finance. I can also jump in on this. So as the LAO mentioned, there were three years of funding for the grant program. It was at 120 million dollars per year. I think ultimately there were 23 grants given out to companies and that's in addition.

So the grant program is also separate from the tax credit program. And so the tax credit program under CalCompete's continues to be funded in the budget year as well. I would note that.

But since the grant program is relatively new compared to the tax credit program, there isn't necessarily the same level of research that's been conducted on it relative to the tax credit program.

Yeah, I asked that question just because we get a lot of obviously the request to revert to discontinue, but we get very little in terms of what the impact is on that on the ground.

And that brings me to the other point about the equitable payroll piece because I think you, you raised this. And I understand those dollars were not funded, but this program was really over resourced. There were so many communities that wanted to participate in the Equitable Payroll Fund In my district.

I've heard these companies share how it's a survival, it's the way in which we employ neighbors and you know, with a region in LA County, about 21 billion in tourism, culture and arts primarily, it's something that we have deep concerns about when we see $11.5 million reversed in this proposal and we think that is a deep and problematic mistake.

Just curious, you know, is there a sense of why this program was, why this decision was made to revert these funds when within 10 days the portal was shut down because there were so many inquiries for these necessary resources?

Jesse Romine, Department of Finance. I would just say that we do recognize that the money was deployed or the money is out there for the program and the portal was recently closed.

I think regarding this reversion, it really just comes down to the General Fund and tough decisions have to having to be made in order to balance the budget and looking at the total scope of all investments that are out there in the budget in order to balance it.

This was one that we had ultimately selected to pull back. So I think it really just comes down to balance the General Fund out.

The funds were promised. Folks were anticipating those funds. Unlike the earlier program that had not been funded for several cycles, there was a commitment to the community to be able to use these funds and to not to then revert in the midst of the program is, it's a malicious sign of intent that I think folks see as a real failure and like kicking the arts and culture community while they're down.

And especially those, those smaller nonprofits. Most of these groups have budgets that are under $2 million. This is the difference between recovering from the pandemic and not recovering from the pandemic.

And I think for far too long, these are communities that have helped to shoulder the economies of many of these neighborhoods, particularly in places like South LA in LA County.

To pull back only pushes these entities into the realities of maybe closing their doors because they don't have the dollars to hire the folks that they need to keep these important businesses open. So I am not - there are a lot of decisions that are being made.

I just think that when it comes to arts and culture, many neighborhoods down to the block level rely on these small businesses that are keeping those communities afloat.

So, you know, for every 100 jobs that this fund would create, there's about 156 other jobs in my area that get certain supported because of the ability of these businesses to continue to function and to expand the work that they're doing. So this is not just a gap, it's critical and it's one that folks were promised.

And I think we have to keep our promises when communities, and particularly our small businesses are relying on them.

I have a question for you, which is we have this item, the equitable payroll program, which was authorized in 2022, appropriated in 2023. We are here on the verge of the 25-26 budget. And then you have the two items for reappropriation that are for administrative costs for the Containerized Ports program and the Women's Business Center Enhancement Program.

Without getting into the details of the specific ones, and this is probably out of. I know it's out of my pay grades, maybe yours too. Is there, is GO-Biz capable of administering these kinds of programs? And I'm referencing kind of the conversation that we just had.

GO-Biz and GO-LCI, GO-LCI, are they represent a change in the way that state government has been organized since the 70s. Both units existed in much different forms for a long time. And they have maybe slowly, maybe not slowly for me, coming back here after being a staffer before.

But do they have the capability and the capacity to effectively implement the programs that we were assigning to them as though they were a full blown cabinet agency?

They're radically different in terms of how much program implementation that they are doing compared to their advice and counsel to the Governor on special projects before.

Hi, Jesse with Department of Finance again.

Yes, I think with the reappropriations here specifically, specifically we're nearing closeout with a lot of them with the Ports and Women's Business Centers and the move over for the Zero Emissions Vehicle Program, as my colleague had mentioned, it's really just to align with the initial appropriation date.

I would say, for like, specifically as it relates to the payroll, the payroll Equity Fund. And I'll defer to GO-Biz to talk about some of the implementation challenges there.

The reappropriation in 2023, because of the size of the reversions taking place that were coming from two other programs, it did take a little bit longer to implement and to get the resources out for the Payroll Equitable Fund. So there were some challenges there. And I'll defer to my colleagues at Go Biz to talk through some of those items.

Okay. If other Members of Subcommitee want to probe that at that level, I'm up for it. For me, it was more a question about just the organizational design.

I'm just raising, raising this question more broadly about whether this governor's office of, blank, approach as an alternative to normal departments and agencies is really effectively working because this is not the, it's not the historical pattern and it could be great. But I'm just, but these items sort of raise that...

...not even just a question, not even a flag at this point. So we can pursue that at a different time. If Members of Subcommitee want to go in depth about the rollout of the equitable payroll program, we certainly can. But necessary for my question.

I don't think we need to go in depth. The point I'm making here is that we have small theaters, we have small orchestras, we have, you know, events that do arts and culture in our parks. And regardless of what the structure is, the commitment was made, the dollars were promised, communities are waiting for them.

And so it's about the economics of whether we want these businesses to close because we are going to pull back on our commitment. Are we going to move forward with a very modest commitment to ensure that we hold on to these jobs and these cultural centers.

You know, we are the number one entertainment, arts, and culture employer of the nation in many respects. But we are spending, I think we ranked 35th in our per capita arts funding. And so, you know, we are, the arts is producing jobs, it's producing travel, it's adding to our GDP. But then we are reneging on these investments.

And I understand that the tax credits programs are continuing. I understand that there are decisions that have been made to not provide funding over a single series of years. But when we make the commitment to deliver the funding, people have done the work, they've done all of the application, they've been in the portal.

We should not be pulling the rug from underneath them. We should move forward with our commitments, particularly in this time. And I want to say these are the businesses that are going to bring the Olympics, the World Cup, Super Bowl, All Star Games.

These are the arts and culture workers that are going to make sure that California delivers. And certainly California is going to benefit from those sales tax and that revenue. So, you know, let's stick with our commitments, regardless of what the infrastructure. We should have discussed that before we opened it up.

How do we make sure that those dollars are put back in place so that those businesses can do what we need them to do for our state? That was the point that I wanted to, to make.

I'm the four oboist for the LA Junior Philharmonic. So I'm, I'm with you. I'm with you.

And look at you now. You see...

I don't know where it all went wrong. All right. Okay. If the pathways existed, maybe I'd be doing that instead of this. All right, thank you. So we're going to hold this item, all these items open from GO-Biz. Thank you. And we'll proceed to item two. I'm sorry, the second item in item one, which is the GO-LCI items.

It was a misreading. Okay, so, yeah, we're item two, housing related proposals in the May revision with Go Lucky and HCD. Alright, so are we proceeding with the presentation from the departments or from Finance today? From Finance.

Good morning, Senators. My name is Megan Tokanawa Block with the Department of Finance. The item before you is the May revision proposals related to housing. I'll provide some brief introductory remarks before passing it to a colleague for a specific proposal. As your agenda details,

in light of the estimated budget shortfall and the state's fiscal condition, the May Revision proposes one housing related solution. This solution is the reversion of 31.7 million in unexpended affordable housing funding.

Can you not hold the door open, please?

Thank you. This solution is the reversion of 31.7 million in unexpended affordable housing funding from prior budget acts. This reflects under subscribed funding from the Infill In- Infill Infrastructure Grant catalytic program and the Commercial Property Pilot Program, as well as unawarded 2021 infill infrastructure grant funds that were not projected to be used by the current liquidation deadline.

The May Revision also includes two proposals highlighted in the agenda. For the Department of Housing and Community Development, $902,000 and three positions for various accountability and compliance activities, including Public Records Act workload increases, Accessory Dwelling Unit related technical assistance and Codes and Standards division workload for the Community Development Block Grant disaster recovery program.

$417 million in one time federal funds to reflect federal disaster recovery related resources for 2023 and 2024 natural disasters that will be available to HCD starting in 202526. We are joined here by a number of representatives from agencies and departments. They are available to answer additional questions and provide additional detail.

As the agenda item is cross cutting among entities, I will now hand it off to my colleague, the Deputy Secretary for Housing to introduce a highli- an item highlighted in the agenda, the Climate Aligned Housing Proposal.

Thank you, Megan. Good morning, senators. I'm Sasha Kergan. I'm the Deputy Secretary for Housing at the Business, Consumer Services and Housing Agency speaking about the Governor's trailer bills for the housing. Sorry, distracted. The May Revision includes trailer bill language to enact various climate aligned housing policy reforms.

And this proposal will streamline housing permitting and accelerate production, providing a clear path for more housing and economic opportunity. The trailer bill will do the following. First, accelerate permitting and make a level playing field in the state by removing the current exemption for the Coastal Commission from the permit streamlining act.

Second, expand access to CEQA judicial streamlining by allowing housing projects over $100 million to use the same streamlined pathway that's currently available to smaller housing projects. The revisions would give housing applicants the option to demonstrate consistency with CARB's scoping plan instead of a quantitative GHG analysis sorry, greenhouse gas analysis.

And third, the proposal would create a statewide vehicle miles traveled or VMT mitigation banking system as a flexible option for developers to meet existing CEQA obligations.

This proposal will provide an option for developers to satisfy VMT mitigation requirements by paying a fee that will be set by the Office of Land Use and Climate Innovation into a fund that is administered by the Department of Housing and Community Development. These dollars will be used to finance affordable housing and related infrastructure near transit.

This creates a statewide mechanism to link VMT mitigation with affordable housing production and climate aligned land use goals. Each of these proposals is focused on removing barriers in a practical and cost effective way. If you have any questions about these proposals, I'm joined by Natalie Kuffle from the Governor's Office from Land Use and Climate Innovation. Thank you.

Alright, Legislative Analyst Office.

Thank you. Paul Steenhausen, again with the Analyst Office. Three overarching comments on this agenda item. First, over the weekend our office released it's a brief that summarizes the May Revision and provides our initial assessment of it.

One of the points is the Legislature faces really a challenging task over the next few weeks to review numerous budget proposals and then develop its own plan for how to address this renewed budget problem.

Given this challenge, we encourage the Legislature to focus on the fiscal picture- picture and defer more policy oriented May revise proposal including these climate aligned proposals you just heard about and that are referenced on page five of your agenda and defer them till later.

It can be later, it could be in the summer or it could just be something just to firm put his pol- part of the policy process.

Doing so would allow the Legislature to really focus on the budget situation right now, thinking through all the trade offs with the budget picture as well as give you time and capacity to really think through these proposals and- and understand them better, understand the potential benefits, implications and trade offs associated with them.

Second, with regard to the proposed reversion of the $31.7 million General Fund that would be budget solution. Certainly there are trade offs downsized reverting funds from these three HCD programs.

Given the state's budget condition though, and the fact that these funds which were appropriated a few years ago and still haven't been awarded, we think it's reasonable to revert the funds as savings toward the state's budget problem. Third, we reviewed the other budget change proposals described in your agenda. They're all at the bottom of page six.

It includes responses to workload from Public Records Act and Department litigation increases, anticipated receipt of federal funds and using remaining bond funds for- for housing. We don't have any particular concerns with those proposals, but happy to answer any questions you might have about them. Thank you.

Alright, members of the subcommitee, are there questions or comments?

Thank you, Mr. Chair, and thank you for the- the presentation and LO- LAO for that update on your analysis. I guess my question is, given the removal of the new state funding for HCD finance programs, how will the administration meet its housing production goals and what are you all doing to ensure that that happens?

Megan Tokanawa Block again with the Department of Finance. I'd also like to invite our colleagues from HCD to join the table, but I can kick off my response. The Department of Housing and Community Development has many dollars from prior budget acts that that are in the pipeline.

As I mentioned, there's $3.4 billion in active notices of funding availability. And so these resources will continue to be deployed to help us achieve our housing goals.

And also, may I share a little bit more, senator? Specifically, the Department of Housing and Community Development is working along various tracks every day, not only with funding but particularly with policy levers.

Some, and I won't belabor the point in the trailer bill, but some with the types of tools, including the Permit Streamlining Act, that promote predictability along the whole continuum of housing development from affordable to market rate, that predictability translates to cost savings when we have unpredictable permitting processes that creates uncertainty and more holding cost for the developer, whether affordable or market rate, that drives up the cost of development, that decreases the amount of affordability that can happen in that project.

And so the Housing Policy Division is working on several things, including housing elements, some of the sticks, as the senator has alluded to them before, but actually with a lot of technical assistance. And they lead with technical assistance to help remove barriers at the local level.

With all of the 539 cities and counties available to answer questions about the range of housing laws, financing our way through housing issues anywhere in the nation is not the only strategy.

California has led solutions in housing because we have complemented this with many policy and initiatives that you all have championed to be able to promote not only predictability but certainty so that housing can happen. And that is a major way that we are meeting our goals.

We're also doing it through things like implementation of our own excess sites program, making state land available, but making local land available through the Surplus Land Act, a tremendous amount of production through accessory dwelling units, as I know you know well.

And so that work continues, I understand and feel how difficult it is to be a constrained fiscal environment. I don't mean to undersell that, but I want to give you the confidence that there's a lot of work going on day to day.

And do we have a sense. Another 3.4 billion in the pipeline. How many projects will be delayed as a result of the lack of investment this- this cycle?

That is a good.

Or impacted. They're either delayed or impacted.

Sure. I can opine and weigh in to say that we are actually able to continue production even in the absence of additional state resources like the state tax credits. The first round of the Debt Limit Allocation Committee of three rounds this year did not include any state tax credits and those resources were oversubscribed.

So there are projects that are able to move forward without the additional state subsidy.

And do we know which ones won't and what that impact looks like?

From the reversion specifically?

Yes.

Maybe we could cover some of the programs.

Sure. So the- the three elements of the reverted funds include two programs that were under subscribed and they're from much older budget acts. This is from 2021, 2022 and 2023. Those funds were not.

They were over- They're under subscribed because there was not enough demand for the resources in the program that was created by statute. The IIG General program has funds that were not expected to be expended by the current liquidation deadline of next June.

And so because those funds are not already committed to projects, we're proposing to revert those funds because they could not be used in time.

So there- So there's no delay or any impact on any project with the reversion of these dollars. Okay, so the other question I had is enforcement action, because I think you talked a little bit about that. What will that look like for cities and counties if they fail to meet their obligation in reduce- in terms of reducing homelessness? Is there-

Does this impact that as well?

Senator, can I clarify, do you want to speak about their obligation more towards RHNA or more towards homelessness?

We could. I think we're speaking to both.

Okay, great. So on RHNA. Sorry. For the Regional Housing Needs Allocation. And I might ask Megan Kirkeby from the department if she wants to join as well.

We're about to have a big group. Excuse us. But it's a wide ranging issue with many implications. I don't see the funding as directly related. The cities and counties are continuing to meet their obligations by creating housing elements, working with the department to have them reviewed and ultimately approved.

And removing barriers to housing production looks a lot of different ways, and not always immediately committing funds, but rather making the right circumstances or setting the table for development to be able to happen without delay. And those are things that the localities can do.

I'm not saying it's easy, but localities can do that within their control, following state law, making sure that they're removing barriers to process. We do have ideas about some additional ways to make that happen to make it even easier, but those are things that are going on every day.

In terms of the- just the oversight, because that's one of the things that we have as the Legislature, we've been concerned about and have put tools in place to make sure that we have enforcement action capacity to ensure that those steps are being made and the streamlining and the processes-

processes are moving quickly so that we can address the- the reduction in our homelessness numbers. So do any of these dollars impact the state's ability to oversee what the cities and counties are doing and to make sure that they are meeting their obligation?

The HCD BCP does. But I think you're speaking to a different proposal right now.

Yeah, I guess I sort of see these things as running together because in terms of how much we're investing and what the resources are. So let's share what the over- what the shift or change or how you're dealing with that oversight capacity.

So- So certainly I think that oversight is really important to us.

You know, I think it's the theme of kind of what you all were talking about during the rework proposal as well is there's always going to be limited resources, but we want to make sure we get the maximum number of housing units per whatever resource we're putting out. And that's gonna be-

That's gonna be not one silver bullet of a strategy. It's going to be a combination of efforts. And so right now we actually have quite a bit of funding. And that's one of our strategies. Like what we need is to get per unit costs down.

And some of the ways we can do do that are some of the programmatic things you heard about this morning. Some of those are the permit streamlining act proposal you're hearing about right now. Some of those are coming from the HCD BCP that you're hearing about.

We're really trying to make sure that accountability is spreading as wide and far as possible because that's where we're seeing the gains. That's where we're seeing the timelines from entitlements come down. And every extra day we add between application to entitlement that made that home more expensive than it needed to be. Right.

So we want every single home that we put state dollars into to actually be less expensive so that when we do put forward $1.0 billion of housing funding, we get more out of it. And so what you're- what you- what-

I absolutely am always going to hear the concern of like, it looks like you're putting less money into the housing portfolio. Well, actually we have a lot of housing for right now. We have a lot of funding in the housing portfolio and we want to be able to stretch that predictably over time.

And so this isn't a time where it is essential for us to put in a ton more money into the housing funding part of the solution. But we need to make sure our programs are working effectively and that the actual cost of housing productions begins to come down. Now that won't last forever.

We're of course going to need housing funding to be part of the portfolio, but we always want to be maximizing that federal leverage. Right. So there's only so much we can put into the system per year before we create that backlog and actually add cost- per unit cost to the system. So to me, these all work together.

You're talking about how do we make sure we aren't having developers come to us six times? How do we make sure they come to us one time? How do we. And part of that is going to be about streamlining the ways in which we put housing funding out.

And then how do we get housing costs down for the market rate and the affordable. Because when we fix it for the market rate, it also makes our affordable dollars stretch further. Right. And then, you know, the- the third. Well, I guess I said all three.

Those are the- the three big strategies we're working on is funding our customer service and user experience experience and then the actual housing development cost, which we control through making sure people are following the law, setting the table and doing that streamlining.

Okay, so there is a lot here in- in- in the set of proposals. I just want to frame it up for us. When we- we took up the excess sites program, DGS came and presented an impressive portal and analysis work.

And we asked, so, you know, where are we on the hundreds of thousands of units that the Governor said would come from that project? And the response was a clear headed. Look, the- we have the sites, but the real challenge with- with- with housing in California is interest rates and financing. So the sites are there.

But the real challenge is interest rates and financing. The Governor who- or himself or whoever helped him write the May Revision narrative in the housing section described the same context, really, for the first time in years. The- The Governor's Budget narrative, the May Revision narrative, does not really focus on streamlining and all of that.

It says, given the interest rate climate and the lack of capital markets financing for so many projects, those are the main barriers that we're facing in California.

Someone else wrote the trailer bills and decided to focus us back onto permit streamlining and to focus on the issues of recalcitrant city governments and counties, kind of like we've done on homelessness, where we heard earlier today, California's turning the corner.

We've had the lowest increase in homelessness of- of the- of all the other major states, and also all the cities and counties are falling on our face. They're evil and they're incompetent, and we need to hold them accountable because they're not doing their job. Both things cannot be true.

The state itself is not solving homelessness, and we're not building very, very much housing directly. It is in partnership with the local communities, with affordable housing developers, with all the nonprofit service providers and what have you.

And so I- I- I think that- that lesson around that the state is learning itself, where it does try to engage in housing developments, including excess sites, but others as well, is that it's much more complicated and much more challenging than simply somebody coming up with the right site with the zoning to match it.

And as we heard earlier in the year, I think, actually from Ms. Kirkeby, you know, we- we are also making substantial progress on that side of the equation where local governments are through the, you know, I have already- I've only been here for six months. I've already voted on 18 different, you know, streamlining bills myself.

All those policies are playing out. And so I guess my- my- my concern as we go to the- the- the trailer bill language is that we keep playing that record again, you know, the oldies but goodies. It's, you know, we need to-

we really need to crack down on people not zoning when we then don't propose any funding to help people build. And yes, there are projects that can get through, you know, SIDLAC and whatever, get their funding without a tax credit. But that- that project is not in-

It's not in Woodland, it's not in Lodi, it's not in the rest of California. So, yes, there will always be projects that are just a few bucks away from being viable in San Francisco or Oakland or West LA, but that is not the case in the vast majority of California. Without these dollars, these projects don't get built.

And so we should. I mean a physician heal thyself. We've learned that lesson on our own projects, which is why we were told don't hold us any, you can't hold us accountable for excess sites because that's as much as the market can actually finance. But we are for affordable housing,

we are a non trivial part of that financing set. And so it is essential that we continue invest in those programs. And we're not even- we're not even reappropriating the funds, the 30 plus $1.0 million that are proposed for reversion, we're not even reappropriating those back to housing. And yes, I get the General Fund condition, we all do.

But it's a little hollow because the January Budget, which was essentially balanced, also proposed no money for housing. So even when we didn't have the- the significant budget challenges that we're facing today, the priorities that were expressed in the January budget also zeroed out any new funding for- for housing and homelessness.

So that's the context I'm trying to grapple with in terms of both what's being proposed here on the dollar side, but then on the trailer bill language because these are very big proposals and we have spent a lot of hours debating similar things in the policy committees and it's not clear to me how any of these relate to the budget questions that are- that are before us.

And so maybe if we could turn to those briefly in terms of the- the trailer bill- the- the trailer bill issues. Can you provide more background on how exactly this vehicle miles travel program mitigation program is supposed to work and- and what the, you know, and how we would anticipate. It's- It's a very large delegation of- of- of legislative power to go- to go-

lucky, I know you don't pronounce it that way, but it's a- it's a large delegation of- of our power. The way that it's drafted. We don't- We don't specify what the fee is or exactly how it will be said. We don't specify where the money's going to be spent or exactly how that's going to be done.

It is a reque- an extraordinarily broad request for- for a new fee and spending program over which we would have exercised no- no role in the design of it. And so it is absolutely essential that- that we understand very clearly today what it is, that is- how exactly this is going to work.

I understand that the problem that has been identified for VMT mitigation, you know, across the state and particularly in certain areas of the state, but- but how mechanically Is this intended to work? And why do you. Why do we need a very broad trailer bill approach to as opposed to regular legislation?

Do you want to start? Great. Thank you, senator. That's a great question. I would like to point out that there is a VMT mitigation Task force that was established last summer pursuant to the Governor's Executive Order EON224 that includes LCI, BCSH, HCD, Calsta, Caltrans, DGS and CARB.

So we have had the- the top minds on the executive branch working on this issue for quite a while and identifying how something like this would be implemented. There is some deference in the legislation, in the trailer bill language in order to allow that task force to fully flesh out what the guidelines would be.

But we also have assistance from academics, including Klee at UC Berkeley, who've been studying this issue of VMT mitigation banking for, I would say 10 years now.

So there has been a lot of work done on this topic and that would all be brought into this guideline process that LCI would develop that would help set the fee. That would then be used by a project applicant or a lead agency when they had a project that had a significant impact under VMT that they needed to mitigate.

They would be able to look at the guidance and- and calculate the appropriate fee and then deposit that sum into the Transit Oriented Development Program at HCD which would then fund housing based on the program guidelines for that.

So this nexus between housing and transportation is something that our state has led on. I know many of you are familiar with it. It has shown up in many of our programs and the way that we score our Affordable Housing Finance Program.

It's a synergy to be able to get more riders on transit if housing is located nearby. But there's also it's not just a densely urban proposition. This strategy works in communities around California, not only in highly dense urban areas.

That said, the Transit Oriented Development Program is one of the programs that's in the Multifamily Supernova Program at HCD just has not been funded for the past few years.

But it's one that's funded programs even an excess sites project that's just steps away and it's really helped solidify through GAP funding the ability to get affordable housing closer to VMT reducing strategies. In that way, there's a very clear nexus to this option for VMT mitigation.

So as the fund is created, the fund would be deposited- deposited into the Transit Oriented Development Fund that would fund the Transit Oriented Development Development Program with priority to projects as Natalie defined them, can be housing and infrastructure that the TOD program supports. So that's the basics of how it would work.

And it's not an immediate set the fund, but rather, as Natalie mentioned, study and- and collaborate together to be able to develop it.

But and then what- what is the- what would the fee- what would might we anticipate it being? And if the fee is mitigating a large highway project through the middle of- of Ledera Heights or- or- or Modesto or Madera itself and with substantial air quality implications, then is this allowed then for a Todd application in La Jolla to receive those funds?

Or what's- how do we assure the nexus between what the original, I mean SB 743, which I think is the, you know, the instance of this- this was legislation by the- by our- by our then pro tem. It's been a major priority of the senate.

And so while I appreciate the work the administration has been doing on this, this is fundamentally a legislative question. You fee setting the design of the these- these- these policies and of course the modification of 743.

So I- I want to signal, I will, I, you know, I- I am not at all supportive of- of essentially transferring, repealing SB 743 and having it transferred to the executive branch to make all of the decisions. This is, these are clearly legislative issues and it implements absolutely these zero provisions of the budget.

And so we- we and so a one page proposal here on an issue that's very important. It really is. But it's also incredibly complicated that we have to make sure that the- that the legislature and our stakeholders are also involved in that- in that conversation.

Understood. I will be clear. This won't repeal SB 743. It builds on that framework and it maintains that this is an option under that framework. I'll take the location question and then, maybe Natalie, you can cover a bit more.

So thank you for the question to your point on whether or not a project in Ledera Heights or in Madera County that is a highway expansion would then see funds move to San Diego County. That's not how this is written.

By prioritizing funds towards affordable housing in the same region, the proposal ensures that mitigation is focused on providing direct benefits to the communities that are affected by the development that is triggering vmt. So we have thought of that and that is something that's very important in the 743 context.

And I'll turn it over to Natalie for the second part.

Thank you. So echoing Sasha's point, there would have to be that nexus. This is mitigation under CEQA. So it is governed by the rules and laws of CEQA in terms of mitigation. So there has to be additionality and nexus and all of those things that are highly technical, as you mentioned, senator.

And that's why we want to develop thorough and comprehensive guidelines to make sure that if developers choose to utilize this option, and it is just an option, that they- they can rest assured that they will be in compliance with CEQA, that it is appropriate mitigation under CEQA, because without that certainty, the program really doesn't work.

So that is what we hope to work out in these guidelines is what would this program have to look like in order to meet all of the legal requirements of CEQA, including that nexus requirement that you mentioned.

When you say developer with the language it does reference, it's the lead agency that makes that determiner determination, not a private developer.

Yeah, that's correct.

Okay, then we have the proposal on the hundred- lifting the $100 million cap. I know I don't know how many of these projects are.

I know I have one of them that is a several billion dollar project which I am absolutely not interested in CEQA streamlining on because it's a greenfield project in the middle of- of Aglin.

So I want to understand more about the- the pocket of projects that we are actually talking about with this $100 million, what it's intended to do and what the safeguards are when we're talking about. We are, we are.

Now we're experiencing this obviously in Solano County with mega projects by extraordinarily, by folks with lots and lots of wealth to be able to deploy and CEQA streamlining is not intended to advance those kinds of projects. So who is this that we're talking about?

So to be clear, this is judicial streamlining. So these projects would have a full environmental impact report. The streamlining would come if there's CEQA litigation. And then they would use those special rules of court that would get the litigation in the trial court and the court of appeal finalized within approximately 270 days.

To Sasha's point earlier about finality and certainty, that is the, the purpose of judicial streamlining. You can guarantee shovels in the ground by a certain date, even if there is CEQA litigation, which can help with financing as well. That's something we know about this program. The program itself has been around since 2011 when AB 900 passed.

And then this pathway for housing projects has been around since 2021 with that cap of 100 million. So projects, housing projects over 100 million would have to under the large infill project category. That is the same project category that stadiums use.

So essentially we're holding those housing projects to the same standard that we hold a large stadium project. Instead, there is this alternative pathway for smaller housing projects and there are guardrails on that, including that it must be located on an infill site. To your point, it would not be for greenfield development.

It has to be located within an MPO and consistent with a sustainable community strategy. And 15% of the housing development project has to be designated affordable. So those are the current requirements for that smaller housing project in addition to having no net additional greenhouse gas emissions.

And we did propose some language in the trailer bill about that just to make it a more objective standard for housing projects to make meet. They could show compliance with CARB scoping plan, which provides clear guidance for what a housing project would need to do in order to be consistent with the state's long term climate goals.

So you mentioned the scoping plan and the SES. So I want to turn next to the language about the proposed language about providing the option of showing consistency with the scoping plan as opposed to- to what?

No net additional greenhouse gas emissions.

So is there, I mean, these projects exist in- in regions that have not just the scoping plan, but they have either sustainable community strategies or alternative planning scenarios that have been adopted pursuant to our- our laws. Why is that not an appropriate. So that's the scoping. That's basically the scoping plan translated to the regional land use and transportation framework.

So the scoping plant doesn't exist in the vacuum.

So as the statute is currently written, applicants have to show both consistency with the sustainable community strategy for their region, but also show no net additional greenhouse gas emissions.

So the trailer bill just provides some additional flexibility on that no net additional greenhouse gas emissions language allowing them to show consistency with appendix D of the scoping plan which lays out the project specific characteristics that have to be met by a housing project to be consistent.

With the scoping plan as well as the- as well as the SES, APS. Okay. Alright. As you can see, these. I mean these there's. And I'm a freshman, so I'm just learning this stuff. But they're-

I mean, these are conversations that need to be had in a broader range of the legislature than just the three of us in half an hour. They're very big changes to- to- to policy that deserve their full consideration. Can I return to the- you've said a couple times today, I think you have, that we've got $3.4 billion in pipeline.

Does that include any Prop 1 money or is- do you know what share of that is Prop 1? Or.

Just about $2 billion for Prop 1? Apologies, these are not in my notes. So I'm going off the top of my head. More than $1.0 billion for veterans from Prop 1 and then about 800 million for what we would call General uses within the eligibility under Prop 1. HCD administers this under Home Key Plus.

So it's very similar to Home Key but with the expanded eligibility that the voters approved. In addition, there were other dollars that were Home Key eligible and so have been added. So it's actually more than $2 billion in this NOFA. I'm sorry, I'm looking at supportive glances in the crowd.

So yes, there is a good majority of it. That's from Prop 1, senator.

Okay, so- so a relatively small proportion is the- is the- is the sort of the proven affordable housing programs that we've talked about quite a bit in the committee. The low income, the- the Multifamily Housing Program, the Low Income tax Credits and, and the Portfolio Investment Program and others.

The Low Income Housing Tax Credit is not included in that- that amount. That's the type of federal leverage that we're using state funding and other sources and sometimes no state funding to access. Thank you for the notes. This is the NOFA calendar on HCD's website. The current multifamily super NOFA for this year includes $382 million.

Thank you. Jennifer Seeger who leads the Department, the Division of State Financial assistance. That includes $230- $230 million for Multifamily Housing Program, $120 million for the multifamily component of the Joserna Program, 20 million for the Infill Infrastructure Grant Program, and $12 million for the CalVet Program.

In addition to that, there is a Tribal Multi Family Super NOFA and then some dollars in the Permanent Local Housing Allocation Program.

This in addition to the Affordable Housing and Sustainable Communities program with the Round 9 program out now with $775 million and those dollars are used to leverage additional sources and the certainty that we've been talking about today that housing can. Get built and I don't know if you want to talk about the disaster. No, not right now.

Thank you. Thank you.

So but the total then for the- for this pocket of programs, not counting Prop 1, is in the ballpark of what we have otherwise been appropriating annually to these programs.

These programs vary, as you know. And so this is not the largest round of the Multifamily Super NOFA Program that we've had. But it is- it's supporting the main programs. And so it's, we are expecting good outcomes and good amount of demand.

And then so, and I appreciate the Governor in the May Revision in the narrative, you know, signals his support for a state bond on housing and infrastructure, which I very much appreciate. Welcome. That would obviously we wouldn't have- we would have no cash from that for another couple of years.

And, and it's, I mean, it's not- it's not an enormous amount over the life of a bond. So in terms of the dollars then that are left in these programs for this- this round and in the next fiscal year.

Without making any investments and with pulling back these $34 million, are- are we going to be able to, if- if the climate changes, for interest rates or for other financing, will we be able to, as the Governor like to say, meet the moment?

I would offer that we'll still be maintaining momentum through the range of strategies that Megan Kirkeby talked about today and the affordable Housing and Sustainable Communities program and Megan Tokanawa Block may want to pick up there.

That's correct. That there's no additional funding proposed at the May Revision given the fiscal constraints that we see.

But we're working to improve the effectiveness of the existing investments that we make through the reorganization plan, for example, and through trailer language that can help reduce costs and delays for housing development broadly, but including developments that are affordable and funded with state investments.

And you mentioned the affordable housing and Sustainable Communities program. And the Governor has a pretty substantial proposal on the source of funds for that program in terms of using those dollars for high speed rail. And I forget what else but a substantial draw on those funds?

What are the implications of- of that decision if the Legislature ultimately agrees for available funds in the affordable housing and sustainable communities program?

Certainly a point of clarity. The May Revision does not include a detailed spending plan for the Greenhouse Gas Reduction Fund. Rather, it identifies two key priorities that you alluded to, the high speed rail project and workload for CAL FIRE, with the remaining funding to be discussed between the Administration, key stakeholders in the Legislature on shared priorities.

And so the administration looks forward to developing a comprehensive plan that includes the continuous appropriations. So those will be determined in further discussions.

Alright. I guess, obviously I appreciate that and we look forward to those continuing discussions. Obviously, the challenge will be if a substantial amount of those dollars are- are devoted to those two priorities that the Governor has outlined, it just leaves less money in the pot for all the other priorities, including affordable housing and sustainable communities.

Which would mean yet another reduction as a result. And so it's definitely an item for concern if that program as well ends up being trimmed or cut or- or worse as a result of that- of that proposal.

Understood. If I may, and I won't take us back too far into the first proposal that you heard today, but to consider that the proposed California Housing and Homelessness Agency is intended to come up with an annual plan that allows us to assess the available funding to consider how to allocate it.

That's a really important part in any year to consider the available resources at the federal, state, regional and local level. And this is a dynamic funding environment that we're in now.

Some of the legislation that you passed with the regional housing finance authorities means we have new entities coming online thinking about how they're using their resources, and we will continue to bring all of our tools to bear. But I hear you. We will.

It's always a process that we need to do to assess what resources are available and how to best deploy them.

Alright. Well, we are going to leave the item open. We will take public comment as well later in the session. But I just want to emphasize, you know, that housing is the cornerstone of the state's affordability crisis.

That for, you know, in every community, the small rural towns like the ones that I represent to the big cities, affordability on housing, the availability of housing and all of its implications for the workforce, force, for- for local- local economies, for the local little league, for everything, are incredibly profound. And I know we- the Governor and- and the Legislature share that commitment.

But I think- But make no mistake, the Senate is going to be pushing hard to assure that we are making the appropriate investments in- in the production of housing, not simply its administration, or its accountability, but actually roofs that are affordable to more and more Californians. And to- to meet that- that need, it's a desperate one.

And on homelessness, where- where we see signs of improvement, still significant issues on our streets. That it is- The one thing that we do know, it is not the time to stop investing, that we need to be smart. We need to hold folks accountable. We need- We need to learn. We need to deploy the best innovations and the proven practices.

But the one thing that we know will not work is for us to- is for the State of California to walk away from the- from solutions and from the communities that are trying to solve them. So we're going to hold this open today.

But just to reemphasize that- that this has been a core priority for the Legislature, certainly for the Senate as well, and we'll be returning to this through the coming days and weeks in the negotiations.

Thank you for your time, senators.

All right, next we're going to proceed to item three, which is homelessness.

Look at me again. I tried to sit down and they were reminded me.

Finance.

Megan Tokanawa-Block again with the Department of Finance. I'll provide a brief overview. The May revision proposes no new General Fund for homelessness programs in 2025-26 and it proposes no solutions that would red reduce current funding levels.

I should have mentioned regarding your recent questions that the Mayor Vision does propose allocating 200 million in Proposition 35 funds over two years for flexible housing pools, rental assistance and housing supports.

Flex pools help individuals with significant behavioral health conditions who are experiencing or at risk of homelessness enter and maintain stable long term housing, thereby increasing throughput along the behavioral health continuum. The Mayor Vision also retains $100 million General Fund in 2025-26 for encampment resolution Fund grants that were part of the 2024 Budget Act Homelessness package.

While the budget does not propose new funding for homelessness programs, funding will still be available in 2025-26 from the six prior rounds of the Homeless Housing Assistance and Prevention or HAPP grants and Encampment Resolution Fund grants.

We are joined by a number of representatives from agencies and departments and we are available to answer any questions the Subcommitee may have.

Thank you, LAO.

We don't have any specific comments on this. We're happy to answer any questions. But I did want to just mention you just heard from the Department of Finance about the HAP money for round six at $760 million that was appropriated in last June's budget.

And HCD is expected to award and distribute that money starting this summer, I believe in August.

Probably. Yeah, probably into the fall as well.

So I just wanted to mention that that's funding for HAPP that locals will have in the budget year, coming from the current year budget that's just ending.

Okay, please get that out quickly before she tries to revert it. All right, Members, Subcommitee questions or comments?

I feel like, Mr. Chair, this has been a reoccurring theme over the last cycles of our discussions and certainly today. I guess my question just because I'm still trying to get a sense of the impact here, can you give a sense of how many. Well, let me start here.

How will the Administration track the racial and geographic equity outcomes as we look at homelessness, particularly with the elimination. Right. Of some of the state General Fund dollars? That was a community where we saw disparities within the overall realities of our homelessness population. And when we now have made a decision to not make that investment.

I'm really curious because that was a genocidal situation. People are dying on the streets. So my question is, how are we going to track what that looks like? Like, and you know what you, even though I hear some dollars are coming out, what will the impact be on those populations in particular?

Absolutely. And I think, I think if we were, you know, I don't want to speak in hypotheticals, but you know, luckily we're not in that situation. We're not going to be in an impact situation where there's the decisions proposed in this budget would have a fundamental difference on outcomes at this time. That won't last forever.

But for now, you know, we, the HAPP program goes to continuums of care, local big cities and all the counties. And at this point we don't have, they aren't ready to receive more funding. They're getting out the funding they have from us as quickly as they can.

And so they aren't in a situation of experiencing a loss, I think they would say. But we need the predictability that the funding is still coming, certainly in order to plan appropriately.

But in terms of impacts to the human population or those pieces, this doesn't change that we still have more than half of our HAPP1 grantees that have not fully expended their funding. Right.

Of the HAPP 5 money, which is the two years ago piece, we only have two awardees out of the 79 that are even ready to ask us for their second half of HAPP 5 funding. So we aren't in a place yet where the, the communities that would get this money from us are ready to receive that money from us.

And we still have the $760 million to award in HAPP6, which we will happily award as jurisdictions come in and make those requests for us. And they can come in early August is the application deadline.

But I don't foresee this year having a situation where we would have a negative people outcome as a result of not putting in additional HAPP funding because we will in this fiscal year be putting out the $760 million in HAPP6 or in this upcoming fiscal year rather.

And I do think it's probably also an important takeaway that, you know, over time, I think the Legislature really rightfully saw that not all these awardees are created equal. And so we are going to have awardees that don't meet their obligation and expenditure deadlines, are not going to use all of their funding.

And that does allow us to redeploy that funding to Our awardees, our regions that are ready, more ready for funding. So, and I will say, you know, obviously, quick spending is not necessarily quality spending.

We're doing a lot of work with our grantees right now, you know, which is, I think, as we've all talked about in this Committee many times, when this was going to be one time funding, you run that differently than an ongoing program.

And we are establishing more protocols and priorities on that spending, that, that spending really go to more impactful uses, that it really be about ending homelessness, et cetera. So, you know, we are in, we are also in a pattern of working with our grantees who have been really successful on the spend down process.

But we aren't seeing as many of those system performance measure changes as we'd like to be seeing to figure out, okay, what did you spend the money on? Why aren't we seeing sort of the correlations?

And I think that gets to your first question, which I am not ignoring, but coming back to, we built into every round of HAPP our racial equity metrics.

So along with those system performance metrics where we say, hey, are we seeing the impacts of the homelessness system overall that we should be seeing if we're doing this type of investment, we have that across of six metrics underlying each of those six metrics.

We look at race, gender, ethnicity and other and other criteria to understand a region may be seeing great gains, but not seen holistically across those impacted. And that's not a good outcome either.

And so grantees, we look at their system performance metrics overall, but they also make commitments and develop a racial equity plan around their particular region's situation when it comes to disproportionate impacts on race. And that's like from where they start from as well as where they're going. Right?

It's not a good outcome also if we're solving but for only one segment of the population or we're leaving behind one segment of the population. And so that data has gotten much better in the past few years. I'm sorry to say it took as long as it did.

But I think, I think everybody I speak to wants, you know, I think Senator Cabaldon has made this point many times. Like locals want to solve homelessness, they want to do the right things in their community.

And if we can help them see, you know, where are they making great strides, where are they falling behind, that's going to be just good information for them, not punitive and help them get to a better place. And then also we're making connections between our regional partners that we weren't before of.

Hey, like regional partner X, who is similar to your region, has hit these milestones. Here are the strategies they are using. Here are some connections we can make to make. You know, we have regions that are having similar problems. We can create a peer network there to help them take that, take things further as well.

So those are some of the ways that I'm looking at the next year. But to your point, yes, it's very important that this, not we not sleep on this and that, you know, it's part of my role to make sure we don't leave money on the table.

And so that means going back to all those grantees that are having a harder time and figuring out what's wrong, you know, not just taking the money but figuring out what's actually happening.

I appreciate that because you know, I think about the Black population in LA County, it's about 6% but it's about 45% of those folks who sleep on the streets. So I often say if we could just solve what is happening in that small population, we would take a crisis to a more manageable problem.

So if we aren't tracking that, whether we're investing or not, then we know the problem is going to be so much worse if we aren't paying attention.

But that, and I'm glad to hear the sort of, the sense of this, at least in this year where we are not going to make the investment, we don't see those impacts.

What about the longer term and what, what is the sort of metrics that you use to determine at what year does this become a problem and how does that warning sort of get to us in the Legislature? And I absolutely agree with the Chair, no investment in homelessness, no investment in affordable housing is deeply problematic.

But what I'm hearing you say is that these, there's, there's some funding that is coming out. But there is a point where, you know, if you're not continuing that predictability, if folks are not able to plan for those dollars, we know the whole system begins to fall apart. So just I'm curious, what, what is that?

How are you planning for that longer term impact and what, where do you feel we need to be absolute clear about ensuring we're continuing the investments.

So I think a few things that were built into statute create some visibility for us as well as for the Legislature of, you know, there are obligation deadlines where you need to have made a plan for that money and then deadlines where you need to have spent that money. I think those are good clues for us.

You know, if we see people not hitting those obligation deadlines or being on track to meet those obligation deadlines, that shows us, hey, we have some issues here. We need to go step in.

But alternatively, on the other side, if we see people, you know, really ahead on those on the spending side, you know, again, we want to make sure that that is quality spending, not just spending it fast. And we want to see that we are having those impacts.

But because we have a program where we have this sort of, you know, depending the region, the regions form a little bit differently, but something in the neighborhood of 70 to 80 separate awardees end up tending to happen because sometimes the regions act a little bit more independently financially.

But, you know, we're not seeing people move at the same pace.

And so I think we're going to start to see some for those that are sort of ahead, we benefit from the fact that those that are having trouble deploying that amount of funds, if deadlines are missed, that does make that funding become available to redeploy to those folks that are able to deploy that funding more quickly.

And we would only want to do that in the context of effective deployment, of course. But, you know, I would say. I would say probably we could help the Legislature kind of look at the numbers and you all can form your own opinions as well.

But certainly I don't see an impact in the next fiscal year being a problem, given that we are still seeing people work on spending back to three years at this point.

No, and I want to say it's for the unpredictability of our federal realities, the unpredictable nature now of our tariffs and on industries. And we see there are already signals of layoffs happening in communities. And if you lose your job in Los Angeles County, you are on the street. There's. There's no if, ands or buts about that.

And I think we have this sort of great sort of data analysis and projection framework. But we also know these external pressures are real. And again, you know, in order for our regions to be prepared, there's got to be some commitment of the resources should things escalate to a point where we will need to marshal additional resources.

We want to make sure that backfill is there. So I appreciate the analysis and understanding that we're okay this fiscal year, but also very mindful of the hell that is breaking loose all around us.

And how do we ensure that we have dollars in place place so that again, we don't lose ground on the investments that we've made and we continue, you know, the improvement, you know, when we are at 33% and the rest of the nation is at 18%, that is improvement.

We don't want that to fall behind because we know who's most impacted. So I appreciate the presentation. I think the concerns about the lack of investment remain, particularly given the precarious nature of our state in the national framework.

Senator Niello.

One of the criticisms certainly from me and I think complaints from local governments about the administration's approach toward funding is that it's one year at a time. So we have substantial sums of money from prior allocations that have not been deployed. To what extent do you think that could be?

One of the criticisms certainly from me and I think complaints from local governments about the administration's approach toward funding is that it's one year at a time. So we have substantial sums of money from prior allocations that have not been deployed. To what extent do you think that could be?

Because the local governments don't know what's going to come later. And this situation is complex and requires solutions that go beyond a 12 month period. So what's the point of starting a program when you don't know whether or not it's going to be funded subsequently?

And this budget is proving perhaps a perception that it indeed will not be funded beyond that.

I think that's a really fair comment. I think it is. Part of how we've tried to change our approach with the grantees is really encouraging the use of things like capitalized operating reserves. You know, yes, this might come out in one year, but you can obligate that funding over a five year.

You can over, over the entire grant term, right? So about a five year period. So you can take one year's worth of money and plan that out over five years and that would show as fully obligated under you're reporting to us. So we'd feel pretty good about that, right?

We'd say like, look, you took this and you said we want to have a plan in advance and you can create, spread that money out in a responsible sort of predictable way through one contract instead of having to like year over year make a new contract with this provider. Right. Like to redo a contract every year.

Like some of the grantees were already doing that of course. Right. But not everybody. Some people were really doing a new contract every year for things and, but this money is, can last for five years or we give you a five year grant term.

And so really trying to encourage grantees to think about this over a longer term plan. But yes, to your point, some of the unexpended money is on purpose, right. It's meant to, you want to spend it the last possible, you want to stretch it as far as you can. But so I think that is why?

The obligation metric I think is a little bit more important for us of like, have you actually planned out where this money is going over the long term?

And then to your point about the predictability piece, we are trying to embed that a lot more into the regional plans that they give us as well to like think through how state money would be paired with local state sources as well as things like the permanent local housing allocation funding.

So you know, every city and county in the state has access to money through the Building Homes and Jobs act every year, but not every jurisdiction currently uses all of those funds.

So like really trying to make sure everybody's tracking the ongoing funds that are going to be available and then thinking about how these funds can be stretched over turn one year into five years. And then yes, our hope is we do, we do have, you know, are able to keep putting state money into homelessness.

But right now we aren't doing that in sort of a year of like we're doing it when we have that extra funding available. And but there are some programs that do have been put into statute as annualized. So the permanent local housing allocation is something everybody has access to year over year, ongoing through the document recording fee.

So we want to make sure we call attention to those ongoing sources that do exist as well, make sure they're being fully utilized as well as things like the behavioral health funding, Behavioral Health Services act funding and those other resources as well.

Your implied strategy on the part of local governments to the state provides a single tranche of funding and then the local government has to impose its own plan, if you will, to convert that to multiple year funding.

That presumes that the amount allocated up front is sufficient to provide pursue a particular program on an ongoing basis, still not knowing whether there's funding beyond that. So I'd have to challenge that as being. It's not really, it's not much of a partnership between the state and local government.

The role of the state in my opinion, as opposed to specifying specific programs which was done for several years, 30 plus programs that the state defined and counties had to implement them in that fashion, suggesting that the problem in Los Angeles and Modoc are pretty much the same, which they're not.

And so in my opinion, the role of the state is to provide resources to local governments, well, counties specifically for health and human services programs. Counties have always been the health and human service providers. It has changed with homelessness.

But the role of the county in that model is to provide resources to local governments to pursue what's going to work for them and oversight. And the role of counties in that model is to define design programs that address the unique problems that each county has that's different than others.

And some counties will have more success than others and the others can learn by the sum. We've sort of abandoned that model of health and human service plan provision with homelessness, and I think that's contributed to the continued rise. CSAC has proposed some intent language and I don't know where it is.

I thought it was provided to the county, but it's just intent program to condense to establish a pilot program that coalition of counties could establish to be implemented in a few counties with funding for that to be discussed in the next budget cycle. 26-27. Now we have bigger problems in 26-27 than we do in 25-26 and beyond.

So that funding is obviously challenged. But it at least gets to the notion that the state will Fund counties to do things that counties think that they need to do to solve their problems and oversee that. Accountability is still important to oversee that. But counties implement what they think is going to work work for their particular county.

This would tend to get back to that. I don't know. I thought that CSAC had submitted this to the Committee. Maybe they submitted it actually to the Budget Committee, Senator Wiener's office.

But it is just intent language at this point and gets at the concept that I'm talking about about how the state has always implemented and managed health and human services in California in years past, quite different than we've been doing for homelessness, as I explained.

So I'm not sure how we catch up with this, but maybe we can talk about it subsequently.

Thank you, Senator Niello. Appreciate that. I haven't seen the language other than you just showed it to me, but I know there have been substantial conversations going on with the, with the counties, with others.

I know Senator Blakespear has been deeply involved in those as well, in part because in the January budget, the Governor in the narrative invited a conversation about this, indicating that although he wasn't including money for HAPP for the homeless for homeless programs in the budget, that he understood it was a legislative priority and that it was was important to him that we develop a tighter accountability about how the dollars are being spent.

That's not mentioned again in the May revise, which. But it's not erased either. Can you share with us any insights about the governor's view of homelessness, accountability and funding given the difference between the January and the May narratives?

Certainly, Senator, you're correct that no additional funding has been proposed, in part because the budget condition has worsened significantly. From the Governor's Budget to the May revision, we're now facing a $12 billion deficit solved in part by $12 billion of solutions.

But to the extent that future funding for homelessness is proposed, the accountability component would certainly be part of those conversations.

This is repeatedly in the top one or three concerns of Californians. And we although, you know, I know, I read the press reports and the statements out of this building and elsewhere about how we've spent so much money on homelessness and what do we have to show for it?

I mean, the reality is it's an infinitesimal amount of our budget that we have been devoting to combating homelessness. It's been a new budget allocation. So it feels like a big, big deal here.

But compared to every other element of the budget, which are not the top concerns or a sense of crisis among the people, it's not that much money.

And we've done it with the sort of very strange notion that if we just put $1.0 billion out there and we expect the problem to just be erased a year later, like it's just going to be over. We don't do that with crime or environmental protection or low reading scores.

Like we know we have to keep, we have to keep up the work on an ongoing basis. So just the very so yes, I think the big challenge here is that we don't have any money in the budget for the homelessness program.

But the more fundamental one is it should not be a year to year funding decision that is now a core part of our budget is the public expects, and they are right, that it is a fundamental state responsibility in partnership with the local agencies.

So and it is important for the effectiveness of those programs for the reasons that we've talked about.

Imagine you're the City of Vallejo and you're trying to hire a homeless outreach worker and you can't make an offer of permanent employment like you would for any other job in city government because you don't know whether there's going to be any money the year after that.

And as both Senators, both of my colleagues have been noted, and then you have a front page headline that says the state's spending zero this coming year. So even if you wanted to ask your City Council to approve it, the City Council would rightly say, but how can we sustain that over time?

So you end up contracting out or you look to volunteers, or you ask the Rotary Club to help you do anything that you can because the need is still there. And then we say, well, you're not spending the money, but it's because you can't. There's not that you want to spend resources effectively.

And if the effective need here is for, is for a social worker or for somebody to work on encampment resolution or it's to build a shelter or permanent supportive housing. But those projects require this like, complex web of funding streams that we've talked about before.

And you need to know the first money that you have in order to go get the other money. And if that money is, if that first source is uncertain, that the state will be back in the game. You just can't.

And so I think it's, you know, when we say, well, people haven't spent their money and I get, I get it, but I also, having come from local government, understand why you wouldn't, why you wouldn't spend your money.

And I look at my, you know, my constituents in Rohner park and they're, you know, they're right on the leading edge trying to do everything that they can. And, but they're constantly, every week they call.

Is it, you know, the money that we already is, the money for homekey that we got, is that, is that going to be taken away? And it's not. Let me just be clear. Those monies are out there. They have been appropriate, they've been awarded, they've been, you're starting the project. It's not going to be.

But, but when, you know, even the most sophisticated of cities say, I'm just not sure. Are you taking all my money away? I can't even do the projects I had. It does not induce the sort of partnership that we need. So I'm, I agree with the Governor on accountability.

I think we need, we now that we're now, you know, six or seven cycles into this, that we should have a tighter process, that cities and counties directly should be more responsible and more accountable for those dollars.

And we've created a much more byzantine process at the local level and we should have quantitative metrics that we are assessing towards and all of that. So all of that is true.

We haven't had the kind of conversations over the last several months that we should have in the coming, I hope we will have in the coming days about this because it is such a fundamental priority for the people of California and they are right and we need to make this a permanent program or some form of it improved in the ways that the Governor has said and that many of our colleagues have said as well.

But we do know that we are turning the corner in some ways at least they're hopeful indicators. But those are because of the investments that we have made, the systems that we're building, the shelter and the housing and the services that we are delivering on the streets with these dollars.

And the last thing we should be doing is stepping away. So we're going to hold this item open as well for the continued work. Appreciate both the Department, both departments and their presentations are in their words today. But we definitely need, we've got work to do on this item as well. Okay.

We've completed just under a third of our items, but I don't want to, I don't want us to believe that we're going to be here fortnight. That means we'll be here for six more hours. Those were some of our biggest items in many ways.

We still have some big ones coming, but those were a lot of our big ones all in a row. So now we're. So if you're here on a small item, don't think we're going to grill you for 45 minutes. We will not.

So we're going to proceed to item four, which is the Governor's Office of Land Use and Climate Innovation may revise proposals. All right. Department of Finance, are you leading us off?

Hi. Good morning, Lizzie Erie, Department of Finance. We're actually going to have the Department. Give a brief overview.

Good morning, Chair and Committee Members. My name is Will Robinson. I'm the Legislative Director of the Governor's Office of Land Use and Climate Innovation. We have a number of items before you all here in the May revision, including the January. Excuse me.

The governor's January budget proposed a transfer of the the California Education Learning Lab to the Government operations Agency. The May revision instead proposes the elimination of the program over two years.

This program maintains $250,000 General Fund in one position for one additional year in 25-26 to manage the phasing out of the program and then reduces 5.3 million General Fund in 25-26 and 4 million in one position in 26-27 and ongoing, fully eliminating the the program in 2026-27.

The May revision additionally proposes the adoption of trailer Bill Language authorizing technical changes to allow LCI to define how General plan annual progress reports are submitted through the establishment of standards forms and definitions in order to allow for the submittal to be consistent and easily accessible.

Also, the May revision proposes the adoption of trailer Bill Language authorizing technical which will allow LCI to update the definition of vulnerable communities for the purposes of the Integrated Climate Adaptation and Resilience Program, as opposed to being tied to a static statutory definition linked to a previous version of that excuse me, of the Climate Adaptation Resiliency Programs Resource Guide.

We also have a number of technical adjustments and I will defer to my colleague here.