Senate Budget and Fiscal Review Subcommittee No. 2 on Resources, Environmental Protection and Energy

All right. Let's call this hearing of the Budget sub-committee to order. We're going to be discussing the rate may revision and we're excited to have some friends from the Department of Finance who are here to present Stephen Benson, Andrew Marsh and Eamon Nalband. They're all assistant program budget managers from Department of Finance.

We also have Rachel Ellers here who's from the LAO, who's going to be commenting on their presentations. And let's start with Department of Finance. I don't know how you've organized your presentations, but we're looking forward to hearing it.

Good morning, Chair and Members Andrew March with the Department of Finance. So as a Governor released last week, the Mayor revision presents a balanced budget, solving for a what the Department of Finance estimates to be a $12 billion General Fund problem in the budget year with ongoing deficits and a structural imbalance in the out years.

So the proposals in front of you today, one, help address that budget problem and two, propose other priorities that the Administration has released in the mayor vision. So we have a number of proposals before you. I'll be brief and just mention a few and then my colleagues from the Department of Finance will continue that presentation.

We have departments and other colleagues from the Department of Finance that are here to answer any questions that you may have on the proposals that I go over or any of the proposals in the agenda. So first, there are two pieces of trailer Bill language that are, I understand, very controversial regarding the Delta Gamayens project.

So this first, these two proposals are aimed at streamlining and process improvement. So that's one of the focuses of the mayor vision is to reduce barriers for projects and streamline government processes.

So for the Delta conveyance project, the trailer Bill proposal will streamline several administrative processes, saving money and time on the implementation of this important water infrastructure project.

For the water quality control planning TBL, these statutory changes will recognize the Water Board's actions to adopt or revise water quality control plans as actions by a regulatory agency to protect the environment and therefore falling within a categorical exemption from ceqa.

Second, what's been on the top of many people's minds is cap and invest, which the Governor has rebranded the cap and trade program to cap and invest. So in April, the Governor and legislative leaders announced their joint intention to extend the cap and invest program this year.

The administration's top priority is to extend the program beyond its 2030 expiration date to provide market certainty in this challenging time. There's an auction today. There's lots of uncertainty around what the auction may bring specific to the Greenhouse Gas Reduction Fund. The Mayor vision does not include a detailed spending plan for the Greenhouse Gas Reduction Fund.

Rather, it identifies two key priorities for the Administration, with the remaining funding to be discussed between the Administration, the Legislature and interested stakeholders on shared priorities.

The administration's top two priorities are continued funding for the High Speed Rail Authority of at least $1 billion annually and a General Fund solution to shift $1.5 billion from the General Fund to the Greenhouse Gas Reduction Fund to support fire prevention, fire control and resource management operations costs at CAL FIRE in 25-26 growing to $1.9 billion in 2930 and ongoing.

This proposal includes a General Fund backstop to protect operations in the event cap and invest. Auction proceeds fall below projections. With that, I'll turn it over to my colleagues to continue.

Good morning. Stephen Benson with Department of Finance. I will talk about just two things quickly. I'll do an update on the climate bond and on the efficiencies and vacancies drills that we did. So for the climate bond, the mayor vision includes a couple of updates.

Most of them were telegraphed in the Governor's Budget proposal that they were going to be coming in spring. There's a limited number of adjustments on the expenditure side. One of those is the affecting or accounting for the AB100 adjustments that did the wildfire and forest resilience appropriations in current year.

So we adjusted the implementation plan to account for that. And Then there's additional $24.3 million requested in 25-26 for programs that need some immediate needs in the coming fiscal year. So I can go into more detail on what those are and if there's questions about it.

But I'll leave it at that high level for now, unless you'd like me to go into more detail.

The other pieces of that are of the proposal are there's 79.5 permanent positions across 12 departments and then there's 2 million proposed in 25-26 for statewide bond cost activities that include sort of the statewide tracking and accounting and auditing functions that we do with all the GEO bonds that grows to 4 million annually ongoing over the lifetime of the bond.

It's estimated to be $75 million. So I will leave the bond there, but of course happy to answer any questions in more detail as we go forward with the hearing on the efficiencies and vacancy drills.

The biggest update or what's taken place since the Governor's Budget is really that we've taken so that the Governor's Budget the amounts that were provided were based on sort of the formulas, if you will, that were outlined in the control section. We talked about 7.95% reductions, 20% vacancy reductions at Governor's Budget.

The amounts put forward were largely sort of the calculations to come up with those sort of targets.

We've spent the time since the Governor's Budget having a number of conversations and continued work with the departments in terms of identifying and refining what's feasible without having significant public service impacts and to sort of account for the unique situations of each of the departments. So that's really what's been refined since that period of time.

Again, where our focus was on reducing impacts to core services, General Fund was sort of the primary focus. But as folks will note, there are a lot of special Fund savings included in that.

The, I guess, nexus there is that Control Section 4.05 specifically authorizes and directs the Department of Finance to look at all items of appropriation, regardless of Fund source, to look for efficiencies. So we did that and we've tried to identify places where there's efficiencies across Fund sources.

And some of the nexus with the special funds is they obviously don't all benefit the General Fund, but they do have the benefit of reducing the need for fee increases in the short term, whether it be the budget year or next couple of short term years.

Also, a number of our special funds have been running structural deficits where the annual expenditures exceed the revenues each year. And so these savings help to address that problem.

There are a number of funds we could talk about examples of that if there are questions on it, but I'll leave it there for now and turn it over to my colleague Eamon.

Good morning. I'll do a brief overview of proposals in the Olympic space and in the energy space. So the May revision includes statutory changes to support planning and Preparation for the 2028 Olympic and Paralympic Games in Los Angeles.

These changes are aimed at supporting planning efforts for the Olympics, including facility development, delivery of services, and other activities that complement the ongoing planning efforts. Trailer Bill language was posted just this past week. So it was a little bit late, but we apologize for that.

Included in that trailer Bill language were Trailer Bill for Activities permitting an activities permitting exemption from the California Coastal Commission.

So the proposed Coastal act exemption adds a new subsection to Public Resources Code that finds the Olympic and Paralympic Games are temporary events and that the duration of the temporary event includes any time required for construction, occupation and removal. It includes a CEQA exemption led by the Office of Land Use and climate innovation.

CEQA and CEQA guidelines currently have an exemption for the Olympic Games. There was an act in connection with the 1984 Los Angeles summer Games. That exemption, however, does not include the Paralympic Games and specifically excludes construction activities.

So the May revision proposal would amend Public Resources Code and provide an override of the California Code of Regulation sections related to CEQA guidelines. The proposal would add the Paralympics and delete the exclusion of construction of facilities.

Lastly, the LA Olympics Streamlining Trailer Bill proposal includes trailable language that would authorize Caltrans to use high occupancy vehicle lanes and high occupancy toll lanes and other lanes as part of the Los Angeles Olympics Games Route Network during the 2028 Games.

The games route network will involve sectioning off certain lanes, including high occupancy vehicle and high occupancy toll lanes and run Olympics only vehicles to transport people around during and in preparation for the Olympics.

Moving on to the energy space Briefly, the May revision also includes strategic investments in the energy system, including ongoing resources of 2.9 million in 12 positions at the Public Utilities Commission to support compliance and enforcement of safety standards of battery energy storage systems and energy generation facilities.

Additionally, at the California Energy Commission, the May revision proposes one time sorry, one time resources through 28-29 of 1.8 million in nine positions to support increased workload associated with the Commission's clean energy renewable power plant facility licensing programs, the OPT In Program and the Application for Certification program.

The resources support current anticipated workload associated with those permitting programs. Additionally related to this proposal, the May revision includes trail Bill language to modify the fee structure that supports the their power plant facility certification programs. So I'll end my comments there. And yeah, our team is available for any questions. Great. Okay.

Yes, Rachel, good morning.

Rachel Ehlers with the Legislative Analyst's Office. I'll keep my comments very brief given how much you have to talk about, but I wanted to just spend one moment on our overarching comments on the budget structure.

Since you haven't had a full Budget Committee hearing since the mayor vision was released this weekend, our office posted our initial comments on the overall budget. The key takeaways, I would say is first of all, we think the governor's revenue estimates are reasonable. They're in the ballpark of our revenue estimates.

You know, some years we start in different places, so it's a helpful starting place that those are in the same ballpark. We also agree with the Governor's definition of the budget problem. The Governor defines it as 12 billion. We think he's solved a $14 billion problem just depending on kind of what you determine as solutions or not.

But in the same ballpark overall. We think the approach and structure similarly are reasonable. But you have other options if there are components of the specific choices the Governor has made that you don't agree with.

But the overarching recommendations are not to delay or exacerbate the budget problem with the solutions that you choose, which is what we think. The Governor's approach meets that bar because we do continue to see out year pretty significant budget deficits.

Also, we think it's appropriate to focus on multi year budget solutions because of those out year deficits which the Governor's proposal does. We think it's important to maintain a prudent Reserve. Under the Governor's proposal, there would be $16 billion of reserves still at the end of 2526.

And given not only the deficits we see, but also the significant uncertainty on the horizon around federal spending and federal policy decisions, that maintaining a prudent Reserve for the coming years is really important. But all of that said, you could take a different approach and mix.

So now turning to the environmental proposals in the budget of that kind of $12 to $14 billion budget solution, the areas covered by this Subcommitee make up around 1.9 billion of that total. As we talked about in January, it's about 300 million of that is from shifting costs from the General Fund to Proposition 4.

That was about 270 million in January. And there's another proposal that makes it in May that makes it around 300 million. And then the notable new proposal of shifting 1.5 billion of CAL FIRE costs to the greenhouse gas reduction Fund, relieving that burden from the General Fund. And that would grow in that years under the administration's proposal.

So there are clearly trade offs with these proposals. It means less spending than was originally planned on other activities in order to absorb this. But those are really the choices you're facing unfortunately with this budget across the budget. And so, so it's really what do you want to do less of is the choice that you are facing.

You also could raise revenues. There's always. We want to always make sure that you know that you have that side of the balance too. When revenues and expenditures are out of balance. You can look at both sides of the ledger, but these are tough choices. So we do.

And I guess one of the other points is that if you don't like these package of solutions, given the overall shape of the budget, you will have to find significant solutions. Elsewhere, we do think it's reasonable to use the greenhouse gas reduction fund as a tool to help you meet your highest priorities across the budget.

And that's really the guidance we would give you. Figure out what your priorities are and then we can help you. And you have various tools of which Fund source to use. But think about what your highest priorities for spending activities are. As was noted, there are also some major policy changes brought forth before you.

As for the mayor vision and our overarching guidance for that is to if it doesn't have a direct nexus to passing and implementing the budget, defer without prejudice and give yourself the time to consider that you have very tough choices before you with this budget and you don't need to also spend your time thinking about some of these substantial policy issues that have in some cases been around for decades.

So to spend the next few weeks trying to solve those at the same time you're solving the budget problem, we think doesn't make sense and jams yourselves in a way that isn't necessary. So we would encourage you to take the time.

And that applies to the Delta proposal, the water quality management plan proposal, likely these Olympic related proposals that just came out less than 48 hours ago.

So to the degree there are policy proposals in the budget that aren't directly related, we would suggest wait on those and give yourselves the time to give them the proper consideration that they need.

I would also remind you that there is some new spending proposed in the budget in January as well as some components in the May revision.

I think our overarching guidance there is probably makes sense to focus on your core existing programs before expanding any new spending out of the General Fund or even some of these special funds like the motor vehicle account necessarily will mean cutting elsewhere.

And so as you're weighing your priorities, does it make sense to add new activities in some cases? Maybe there may be some public safety related proposals. You know, there's some new flood spending, for example, that draws down significant federal funding. We think there's a strong case to add that new General Fund.

But again it comes at the expense of other activities.

What are some of the new expenditures.

That in the May.

So in January, sure.

In January there was 25 million for the Department of Food and Agriculture, which I know is not in the Subcommitee, but farm to School program, 10 million for the Museum of Tolerance, 7 million for parks, library passes. There's a transportation. I cover transportation too. But these are giving you a flavor of some of the new activities.

In the May revision there's new spending for as I mentioned, flood, there's also another food and agriculture proposal. So you know, they're all relatively modest, maybe 25 million or less, but they do add up.

And I think on our discretionary list across the budget of new discretionary spending, it's about $2 billion total across the budget from the General Fund on cap and trade.

I know you talked about this at length a couple of weeks ago, but in terms of the overall program structure, that would be another example where we think you don't need to do it in the next couple of weeks.

We do think doing it ahead of the 2030, well ahead of the 2030 expiration makes sense to give certainty. But these are major decisions that will affect your climate policies and spending policies for for many years. So give yourselves the time you need to make sure you're comfortable with the decisions.

And that's true on the spending as well. Some of the spending, for example. If you want to use GGRF as a budget solution, you will have to make those decisions along with the budget.

But for your overall spending plan, multi year spending plan, thinking about continuous appropriations, that will have impacts for quite a long time as allowance prices go up and down as well in the coming years and you may have more or less revenue.

So again, we would say take the time you need to to develop that plan that doesn't need to go with the budget deadline. Regarding Proposition 4, we've reviewed the mayor vision proposals. They're pretty modest. We think they're reasonable.

But we'd just remind you of the conversations we had back in January and February around that there are some pretty big policy decisions before you on the Proposition for implementation as well, especially around the programs that don't have a lot of detail in the bond.

And so do you want to defer those implementation decisions to the Administration or do you want to take some time and define those so you don't need to move ahead with those now? You don't need to sign off on a multi year spending plan for Proposition 4.

Now if you're not comfortable with the level of detail you have finally on the efficiencies that was mentioned drill that was mentioned by the Department of Finance. This isn't a budget decision before you right now because it was part of the prior year budget agreement and the Department of Finance has the authority to make those reductions.

But it does raise some questions, especially on the special funds, that there are positions and activity reductions happening on the special Fund side that don't necessarily help you with your General Fund problem.

And so we would encourage you, if you don't have time in the next few weeks, maybe over the summer or even next year, to take a look more carefully at those and make sure you are comfortable with those reductions.

And you do think that they are warranted, especially for special funds which are kind of based on a polluter pays or beneficiary pays model, to result in more government services. Does it make sense to make those reductions?

Are they truly efficiencies as thought of, or is it resulting in service reductions that maybe you're not comfortable with and want to take a harder look at with that? Our team is here from the LAO to comment and offer context on the items you're going to discuss. And thanks for having us.

All right. Lots to discuss. Well. There's so many different topics. Maybe we should start on Delta because I know that there's a number of folks here who have concerns I want to start by just asking about.

It's funny how some bills that we try to get into the budget trailer, folks from the Administration say, oh, we can't have a policy conversation in the budget. And then of course we see something like this with massive policy implications put into the budget. So.

You know, there's also, of course, we've been told over and over again that there's a way that they can move forward on the project without having to go through the Legislature.

So I just wanted to get a sense from you about how you might respond to concerns that these proposals don't belong in the budget process, that they should be deliberated in the regular bill policy process.

Yeah, thanks for the question. So as I mentioned previously, these are priority bills for the Administration and review them as sort of in line with the merit vision to make government more efficient and to reduce barriers to getting projects done.

So specifically to the water quality control plan language, to the extent that the language is passed that reduces cost for the water quality for the State Water Board to have to do the extra the work that we don't think is necessary in order for the water quality control plans because they're not relaxing any water quality standards.

So this is additional work that the state is spending money on where you don't see the benefit. Regarding the Delta conveyance project, every year of delay for that project adds around $600 million, which ratepayers would have to pay back.

So in the essence of affordability, to the extent that that project can be sped up and reduce those barriers, then the burden on ratepayers is less in the future.

You know, I know our Director for DWR is here. Maybe. Why don't we have Director Nemeth just come up? Just because I know we'll have a good discussion. You don't have to leave. There's an extra chair here. Yeah, I just think it might be helpful to.

Yeah. I mean, there's. Obviously, Eamon just wants out. I can't handle this. Okay. All right. I get it, man. I feel the same way. Okay, so let's. So let's ask you, Director, you know, let me just first ask you about the kind of the status of the Sierra Club v. DWR case.

And you're what the posture of the Department is right now through the judicial system. Are you looking to appeal that case or.

Sure. So just for the record, my name is Carla Namath. I'm the Director of the California Department of Water Resources. I also serve as a senior advisor to Governor Newsom on water. It's a pleasure to be here. I guess. Strange pleasures. You can't work in water without some very strange pleasures.

But truly, I appreciate the opportunity to engage with this Committee on this topic. It's very important to the Governor, which is why you see it before you hear it this morning. We anticipate litigation on this project. There's no question. There's already litigation.

I do want to be clear that the Delta conveyance related trailer bill language is not about CEQA exemption. There is trailer bill language for a separate process in front of the board. So for clarity's sake, it's less controversial. Yeah, for clarity's sake. The Department has already completed a CEQA document that was certified in December of 2023.

Not surprisingly, it prompted litigation. Under that law, that litigation is ongoing. We will be, you know, challenging that in court. And the judicial streamlining is really about getting a speedy decision through the courts more than anything.

And that speaks to my colleague's framing, as this is really about enabling projects to sort of have their due, if you will, and get to a decision so that we can proceed going forward.

I also do want to make the point that as we work our way through the next year and a half of the Newsom Administration, at the end of Governor Newsom's term, public water agencies will be asked to make funding decisions on the project. So there are several steps to go.

And what we are looking to do is make sure that on multiple fronts, including judicial streamlining, but also permitting at the Water Resources Control Board, and then also with constructing the project, we are eliminating delays after environmental review is completed, and we are working to eliminate any kind of delays, lengthy delays that could occur as a result of litigation.

Yeah, yeah. Though the judicial streamlining that's proposed goes way beyond CEQA. Right. I mean, it's. The infrastructure package in 2023 was very CEQA focused, but this is much more broad.

Right. And it is constructed around earlier iterations of judicial streamlining. And I'd like my colleague Chris Butcher to offer, I think, a more precise reading of the proposal.

Good morning. Chris Butcher, Office of General Counsel, Department of Water Resources the trailer bill includes 270 day streamlining of litigation. That language was crafted after language that's already in statute.

The state has for the last 15 years, as I'm sure you're aware, in a number of cases adopted 270 days streamlining for various projects, whether it's sports arenas or infrastructure projects. This language mirrors that it would cover more than ceqa, but the language currently in statute would as well.

With respect to the standard review proposed for injunctions, the Kings Arena Stadium and SB 743 in 2013 included similar provisions to allow a specified standard review for courts to consider whether to enjoin construction of that project.

So we're trying to piggyback on what's been done by the state before to advance one of the most important climate change projects that the state has in front of it.

Now, tell me about the implications in this proposal for Native American sites, because those are typically covered, I think, under the previous legislation.

Yes. So this actually was the first project to implement AB52, which required that the Department consider the Delta as an important tribal cultural landscape, which the Department did do. That's in our certified CEQA document. We are now in the process of developing that resource management plan.

And that resource management plan will have provisions for, you know, what might happen if, during construction of this project, there are sort of unforeseen resources uncovered.

So through implementation of AB52 + this plan, which allows us to really work with the tribes and understand known cultural resources and avoid those cultural resources, we believe that we are meeting the intent of that law and then with additional information around, you know, what to do when you're in construction, because you can't predict everything in advance.

And that's something that is being developed in collaboration with tribe. As a result of AB52, we did outreach to 120 tribes, and a handful of them came back and engaged with us in that process.

Okay. That's obviously going to be a continued area of concern. Okay, so back to this case. It's an interesting case. Right. So it's effectively, you know, called into question the. Well, in fact, it said that DWR doesn't have the authority to issue revenue bonds to finance, you know, dcp. So does this.

So I'd like to get a better sense of where this interplays with the case. Sure. And does this proposal authorize DWR to use revenue bonds for tunnel construction?

So the Department believes it already has the authority to issue revenue bonds for this part of the state water project. Again, a project of this level of controversy is going to draw a lot of litigation. That's expected. People very much need their day in court. Anticipating that, Senator, the Department brought a case to the court to confirm.

To validate our legal position, the department's legal position that we do in fact have the authority that was established in 2020. At the time, we were identifying a project that the courts ultimately found too broad. It was a project that was included in our financial documentation.

So in response to that, so, you know, we dispute the view that the court found that we don't have the authority. What the court said was we were too broad in our definition of the project. Now we have a definition of the project per the a CEQA document completed in December of 2023. And that's what we are.

Are bringing to the courts to validate our. Our legal position that we can in fact issue the bonds.

Right, but, you know, the, the, the trailer bill language says that it's existing law, but then, you know, but then why do we need to put it into the trailer bill if it's existing law? So, I mean, I guess it's clarity. I understand. Right. Are you appealing the case? Is that. What's that. What's going on with the.

Go ahead, Chris.

Yeah, the validation case is on appeal currently. Okay. So that. That is. You are there is. Right. Where's the status? Right. I'm sorry for not briefing is concluded on appeal. We're waiting for the court of appeal to set argument. We, you know, we believe that the description was not too broad and that's why we appealed it.

But you know, as stated the court's decision, and if you looked at the conclusion section of the ruling, the court specifically said that they very narrowly were just saying that the project description was too broad.

I mean, to what extent are we. Are you asking us to, you know, there's an active. So there's active litigation. To what extent are you asking us to inject ourselves again?

Since the issue in that case was whether the project description was too broad and this trailer Bill has nothing to do with that issue. This does not directly address the issue before the court appeal today. What this will do is avoid what we know is coming, which would be years of litigation over this question.

Whether the Department has the discretion, which we do believe it does, but recognize there would be, you know, lots of Expense and litigation involved in having that dispute resolved.

Okay. Yep. All right. Now, the bonding. The bonding idea. Can you walk me through how it works and how it. You know, we've got a lot of bonding challenges. You know, we've been talking about Prop 4, and we've got a lot of budget issues.

Walk me through how this particular bond works, this bond proposal, and how it might be similar or different to some of our other.

So this is the Department of Water Resources and the state water project issues revenue bonds for the construction and operations of the state water project that are paid back by our state water project contractors. There's a little more complexity than that, depending on where you are in the system and depending on which facilities you rely on.

But the State of California and California taxpayers do not pay for the construction, maintenance, operation of the state water project. Okay, Sorry. And so this is just that traditional revenue bond authority that we would do for any significant project, rehabilitating the state water project. So we would issue revenue bonds.

Our desire is to be able to issue revenue bonds. Again, we need to complete permitting processes. Local water districts need to make a decision in late 2026 about actually funding the construction of the project.

If they make that decision in the affirmative, then the Department goes out and issues revenue bonds right away to start construction of the project. And that does not have any bearing on General Fund or State of California obligations.

And just. Andrew Marsh, Department of Finance. Just to clarify further, when DWR for the state water project issues revenue bonds, in the official statement, it clearly states that these are not General obligation bonds. They are not backed by the full faith and credit of the state.

Unlike the bonds that the Legislature put on the ballot last year for the General obligation bonds, These are very different. They are not backed by the full faith and credit. Under no circumstances would General Fund be used to pay any of the interest or principal on these bonds.

DWR has been issuing revenue bonds for the state water project since, I believe, 1960. And so this authority is. Is long standing. And the General Fund has never been used to pay the principal or interest on these bonds.

Yeah. Yeah. Okay. And the debt service just works like a normal bond. Okay. Yeah. All right. I. Yeah. I mean, there's so many challenges here. I mean, including, I mean, you know, and I understand the need to try to put in greater clarity, but I, you know, there's.

I noticed all sorts of interesting potential implications in this language, including. It's one of the challenges, of course, when we're, you know, we all work really hard on very complicated Bills that very rarely make their ways to the governor's desk. And here we are just, you know, trying to think about the implications of so many things.

I mean, there was an interesting thing in Section seven related to water rights and you know, on water rights, you know, somewhat controversial topic in this building, you know, and you're asking for us to modify water rights and statute that, you know, apparently DWR doesn't have valid, you know, water rights for Delta Tunnel at this point.

So I guess one of the many things that came to mind was the extent to which the current water rights users would lose seniority if the Legislature effectively backdated DWR's water rights that apply to the Delta Tunnel.

So, yeah, maybe I can clarify, Senator. So the Department of Water Resources, the state water project itself, has a water right for the Delta Tunnel. We are petitioning the Water Board, which will have to happen. We're not suggesting that we do not have to petition the Water Board. The Water Board will look at our application.

They will hear the evidence around whether or not adding these points of diversion injures other beneficial users, both water users and the environment, and then they will impose conditions on that petition. That process is moving forward. There is nothing in statute that is. That is diminishing that process.

We are in proceeding with a water right extension petition in front of the board. That is something that we supplied to the board in 2009, and they were unable to act on that. There are a lot of overlapping considerations.

And what this trailer bill language does is provide an ability to separate those overlapping issues and proceed Again, this is a focus on, I think, proceeding with all deliberate speed on evaluating the Delta conveyance program and evaluating it as it relates to what's required specifically in code when you are adding points of diversion to an existing water.

Right. So we're. The trailer bill language is meant to separate some of the overlapping issues and provide clarity.

Okay. I need to read that more carefully and think about how it implicates all the other things we've been working on. So thank you for that answer. Now, there's another thing about judicial review in Section 8 that talks about how you can't. Judicial relief can't pause construction. Again, I understand that from an efficiency perspective.

I guess the question though is, you know, does that mean that if they. If there's some just cause that, you know, some sort of very extreme potential impact that might.

Something that may have been unforeseen that comes up that could impact environmental or water quality, does that mean that the court hasn't there's no remedy for pause if there's some enormous mistake or problem or challenge that has come up with regards to judicial review. The way we're reading it, it's very broadly written.

There is a remedy if there's anything that may be threatening public health or safety as it relates to the construction process.

Okay. Because I. So it's not just no judicial relief for paws of construction. Any judicial relief for pause is prohibited, is that right?

That's correct.

Okay. So there is a. There is an opportunity for the court to step in. Under what circumstances?

Imminent threat to health and safety.

Imminent threat to health and safety. Would that include a longer term deleterious impact on significant deleterious impact on water quality, for example, or the environment or habitat or.

So the trailer Bill provides the language for the court to use to weigh whether to enjoin. It doesn't bind the court's hands on whether they could determine an issue like that warrants an injunction. And again, this language came from SB 743 in 2013 that was used for the King's arena Bill. So this has been done before.

Yeah, but that's in the middle of a city.

This is a very different type of project. Okay, I gotcha. All right. I know my colleagues care a lot about this, especially a certain Senator from the Delta. Why don't we. I'll have some more questions, but I'd love to turn it over to Senator McNerney for this portion.

I'd love to kind of go subject matter by subject matter so we can also save trips back and forth to the dias.

I thank the Chairman, I hardly know where to begin, but I'll begin by saying I appreciate the governor's office for putting out a trailer bill. I mean, this is a difficult budget cycle. Some difficult choices were made and they're not going to be accepted by everybody.

So I appreciate and appreciate you, Director, appearing here today and being responsive to my office. I want to say something positive. So I'm going to say this. I appreciate funds for permitting for clean power plants being included, additional funds.

So there's something, there's a lot of positive in the budget, but we do have to talk about the Delta tunnels. And I think it's wholly inappropriate to include this Delta project, this Delta policy in a, in a budget fight. Here in a budget. Not a fight, but a budget discussion.

I know that the chair went over this a little bit, but. So let's start with the bonding authority. First of all, Andrew said that this is not going to be paid for by the state or by the, by the taxpayers of the State of California.

But what that means is that the ratepayers are going to be stuck with this. Now, my understanding is that from Senator Gabaldin is that AG doesn't look very promising. The return on investment is low. AG is likely to bow out, which wouldn't surprise me.

And that means that the ratepayers are going to be stuck with more than they expect. And not only that, but the unlimited bonding authority is pretty scary.

To be able to write bonds for a project we really don't know how much it's going to cost is going to be very, very difficult for people that are going to be benefiting from this to pay for. So just that.

But specifically, the trailer bill seeks to amend Water Code 11260 to expand the DWR's authority to bond for the Central Valley Project.

This language is an attempt, of course, to circumvent recent court cases that the Administration lost where the court said you don't have the authority without going back for another vote for the people because the Delta Tunnel project was not imagined in the original Central Valley project.

So since the DWR lost their case in the Superior Court, why should the Legislature allow the Administration to end run around the judicial branch and the will of the people? Why aren't you going back to the people? Why aren't you going back to the Legislature or ballot Proposition?

So, you know, we dispute that characterization of the Superior Court's decision, as my colleague mentioned earlier. And we two things in their conclusion. Their conclusion was that our description of the project was too broad. We are appealing that decision and we also have a much more refined description of the project.

Again, that's coming out of our notice of determination on our CEQA document from December of 2023. We believe that, that that will enable us to prevail in court. But I do. We do dispute the characterization that the court has said we do not have the authority to issue bonds on this project.

Okay, you can dispute that if you like, but we're right and you're wrong. Any rate. So it's my opinion that you're not pursuing the vote of the people because you know you'd lose again like you did back in the 1980s. So I think you're trying to in run that that possible outcome.

So what laws, if any, provide the basis for the proposed trader bill's claim that existing law allows the DWR to modify the central value projects covered at covered units to include facilities for transfer of water across the Delta or isolated from the delta flows. So in other words, what laws are you basing this on?

Sar enabling legislation. I would defer to Chris with specific language, but if I could. Senator, State of California has reaped the benefit of the state water project since the 1960s. It supports a $2.3 trillion economy that provides water to 2 in 3 Californians.

In my view, we absolutely have a responsibility to maintain and ensure that that state water project can work in the event of a catastrophic, catastrophic disruption and must be adapted and rehabilitated to respond to our changing hydrology. And that's what this project is designed to do.

We believe that it is a modernization of our existing state water project that is responsive to very real, very documented challenges. So that is something. As the Department is the owner operator of this project. We've had Californians paying into this ratepayers, just to be clear, we've had California ratepayers paying into this project for decades.

And the project itself, the state water project service area, if it were its own economy, is the eighth largest economy in the world. And this is a fundamental piece of infrastructure that needs an upgrade. So there's a lot of. Heaven knows, there's a lot of freight with this project in the past. I appreciate that enormously.

But I do believe that the last 20 years of defining a project and permitting a project and moving us to a project that is a quarter of the size as what we were contemplating in the 1980s had a fundamentally different purpose, is more critical than ever, and is essentially meant to keep the state water project able to reliably deliver water supplies with our changing hydrology.

Well, I think we agree that that's a critical need.

I think where we disagree is that how to accomplish that need, what the proposal is, is a massive infrastructure project of basically unknown cost and significant disruption and environmental damage, when that objective can be met without that sort of an infrastructure disruption, basically strengthening the levees, we have to do that anyway. Increasing groundwater storage.

San Joaquin county, which I represent, has a million acre feet groundwater storage capacity that's unused, including more recycling, using more recycling. I mean, there's plenty of ways to get around that.

And basically the Delta Reform act in Section 85021 states that reliance reduced reliance on Delta in meeting California's water future needs is important, is part of the mandate.

So why are we continuing to increase reliance on the delta and even increase reliance on the Delta when this is where Delta reform act says the opposite, it requires the opposite.

Right. And so we're not. Because we have to comply with the Delta Reform Act. And there is a provision in the reform act that requires the Department and its contractors to demonstrate with pretty significant detail the ways in which they are reducing their reliance on the Delta. So we will do that as part of the.

Of this project's approval. And just recall that none of the trailer Bill Language is about eliminating environmental approval. We have to go through that process, and we will. And we are required by law to demonstrate that.

We'll get back to that later.

Sure. Sure, I do. We do know the cost of the project to the best of our ability in 2025. It's a $20 billion project. It. It is alternatives to this project. One, replenishing groundwater bases and recycling water require a stable, reliable supply, especially when it's wet. I think we're all experiencing. These last three years.

We've had three good years, and I think it's been a couple decades since we've had three decent water years in a row. And that means what's coming is drought. Drought is right around the corner and we're all experiencing intense dryness followed by big, big storm events.

And our ability to move water, to get it into groundwater basins, to recycle, to use it more efficiently, requires an upgrade of the state water project so that it can respond to this kind of changing hydrology.

This has been a year when we have not been able to do that, when we have been very importantly, releasing water to protect surrounding communities from flooding. But we are releasing floodwaters at orders of magnitude, five times what we're able to move from the pumps in the South Delta. And that is.

That's just a fundamental inability of our existing infrastructure to respond to these changing hydrologic conditions. I very much share concerns about groundwater overdraft. Those groundwater basins need to be replenished, particularly in the Stockton Groundwater Sustainability Agency. Absolutely. But we need to have water to do that. So, you know, I respectfully. And we've.

I think we've been around this issue together in one way or another for quite a while, but I respectfully disagree about alternatives meeting the project purpose being available to state water project contractors.

We have, in the course of a 97,000 page eir plus a 22,000 page second eir, we have looked at alternatives backwards and forwards, right side up and upside down, to really understand how to secure this supply. That does not mean that the delta itself doesn't continue to be vulnerable to climate change.

And that is something we need to roll up our sleeves on and work together. The Stewardship Council has Delta Adapts plan that I think the State of California needs to roll up its sleeves and do other things to ensure that we can manage flood protection, that we can manage water supply and water quality. That is absolutely.

That we need to do and do together. But there aren't, in our view, in our very studied view, there are not obvious, less expensive alternatives than securing the supply.

We're getting into a lot of issues.

Yeah, we are.

And we're going to continue to do that. So the bonding authority, is there a cap on that? What's the cap on the bonding authority that's being proposed here?

So thank you. The trailer bill is not asking the state to issue the sale of revenue bonds.

What this will allow us to do is to, in a cost effective way, get that decision before the water agencies that are choosing whether to participate in the project and they will weigh the costs and benefits of the project to, to their ratepayers in a public forum before they decide whether to participate.

Only after they choose to participate that they decide the cost of the project justifies their participation would bonds go out. So the amount of the bonds would be based in part on the decisions made by the water agencies in the future.

Well, have the contractors contemplated the type of rate increase that they'll be experiencing just to cover 20 billion? If that's the true cost?

I can't speak for them, but absolutely. I think if you follow their board members, affordability is an enormous question, enormous question across all water infrastructure projects, including this one.

So it's been repeated that the DWR doesn't anticipate any impact on the state's general fund. So, so why is this before the Budget Committee? And I know that Andrew said that the only link I can hear is that there's going to be a $600 million increase per year that this project doesn't move forward.

That's the only link you have, right? As a budget issue also.

I mean, this is a priority for the governor to put this forward and in the lineup.

Being a priority doesn't mean it's, it's appropriate to have it in the budget process.

That's definitely one view, and I respect that view. Our view is that this is a priority for the governor and we proposed it as part of the May revision to help make government more efficient and to help get this project done to help a large portion of the state adapt to climate change.

Okay, that was pretty clear there. Moving on. Eminent domain, and I'm concerned about the eminent domain appearance of this proposal. What am I supposed to say to my constituents whose properties are clearly going to be impacted by this? Are they going to lose rights?

I mean, what are you, what are you proposing here in terms of taking away people's property rights?

So we're not proposing to take away people's property rights. How, how this would.

I'll warn you when you're explaining you're losing. Okay, go ahead.

I would hope that measures to make government more efficient aren't losing, just generally. But that aside, the eminent domain issue, how it works right now is the department does an appraisal for a landowner's property and we give that to that landowner.Right now. Nine times out of 10, Senator.

This is implemented, right?

Absolutely. Nine times out of 10, Senator, you can imagine that appraisal is underwhelming to that landowner. The trailer bill language allows the department to receive an appraisal from that landowner and start the negotiation from there. Again, this is about efficiency and time savings.

So what that enables us to do, because we know out of lots of experience in real estate transactions and with eminent domain that, you know, when the department produces an appraisal, it almost always is unacceptable to the landowner.

So we want to start with an interaction with the landowner where they can provide us their appraisal and then talk about fair market compensation from there, which is what we are required to do under the law. So that's what this trailer bill provision is doing.

Well, I want to be able to guarantee my constituents that they're going to get a fair shake here. I don't have that comfort. Well, and what kind of precedent does this set for other projects in California?

I mean, the problem is California has a long history of environmental leadership, and I'm afraid that what this trailer bill does is set a precedent for weakening and lessening California's role as a leader, a national leader, and not only being a national leader, but providing our constituents with good environmental quality. Okay, back to judicial streamlining.

So what is the DWR's reasoning for why this project should be allowed to move forward with the same CEQA and judicial streamlining? For example, giving to football stadium or something that takes up maybe a few blocks in the same category as this, which would take up 40 miles of very disruptive operations? I mean, these are very.

I mean, the example you gave are good, but they're not in the same category as this.

I just, I have to refer to the fact that we have spent 20 years permitting this project. We will have spent more time in environmental review for this project than constructing this project. And so I don't think it's necessarily a fair comparison with stadiums that are done in a year or two time.

And so, you know, just fundamentally, I think we have, and again, I just fundamentally disagree with the notion that this trailer bill language subverts or undercuts or shortcuts environmental review. We have done an enormous amount of environmental review on this project. We have certified environmental document. We have a California Endangered Species Act permit.

We are in front of the Water Board. They will render a decision on this water rights petition and they will impose environmental conditions on it. It's. That's what we're really here to do is to.

Right. And the fact that you've been at this for 20 years gives you a clue that there's a problems here and that the people that this is going to affect are not going to accept this and that you're not going to be able to move forward with this one way or another.

So the real solution is to work and find a way to do the objectives without this massive, expensive, disruptive project.

The project has changed substantially as a result of public input over the last 20 plus years. As I mentioned, it's a quarter of the size of projects that were proposed in the 1980s, but it's also a third the size of what was originally proposed by Governor Schwarzenegger. A little more than a third. 6000 versus 15.

But there's been a lot of public input that led to this moment. This is also an issue that 20 years ago when we started this, I think there was a lot more collective understanding that there was too much risk for all kinds of uses in the Delta.

And even in 2005, we had a Delta Vision Report that identified conveyance facility as needed, one that's about this size. So again, in my view, we've had a lot of process, a lot of input. We have a project that is the right size.

I actually think that we've, you know, the adjustment of the project means that, you know, we've been doing our due diligence and our analysis is working and interacting with the public is working. Every time we interact with folks in the Delta, I absolutely understand that they do not want this project.

I mean, and the way that we have been able to work with one another is to say, you know, okay, again, they have opportunities to challenge this legally. Right? And so in all of our conversations with the Delta entities, when we are seeking public input, we. One, their input is reflected in the project that we see.

We hold open the notion that they will oppose it. And I understand that they will propose it and they will sue, that they will sue the project. They will also get their day in court.

What I am saying is that for the 27 million ratepayers that need to pay into this project, at what point is justice delayed, justice denied? We need, we're going to need decisions because we've been at this for so long, and delay in those decisions only makes things more expensive. And everything is getting more expensive.

And in water, inflation, tariffs, you name it, it's going to affect every investment. This one is no different. This one has the advantage of an economy of scale. So in terms of acre foot for acre foot. This is actually the most affordable water we have in California.

And what we are trying to do with this project is update our infrastructure to enable it to operate with a changing hydrology that we are already experienc. So it is upon us. Climate is upon us, in the water space, in the fire space, it is upon us.

And with each passing year we have fewer and fewer abilities to deal with our existing infrastructure in a sensible way that enables us to.

I personally would love to be in a space where every time there's a drought, we don't swing into emergency, you know, we don't need to pass, you know, we don't need to have executive orders, you know, suggesting it's an emergency. This project is essential for that and the reasons are only becoming more acute.

Well, I just want to finish and I'll yield soon. Thank you for appearing today. I certainly appreciate your sincerity in what you're proposing and testifying. But the summary is that it's going to be expensive, it's going to be disruptive. It looks like the trailer bill language is going to take away people's ability to adjudicate.

And I just don't think it pencils out. And I'm going to be opposing this. I know you know that. And we're not enemies.

Yeah.

We want to find a solution for the state of California that's not disruptive and not expensive. As expensive as this.

I appreciate your thoughtfulness, Senator. Thank you.

Yield back.

Yes, thank you. I'll be relatively brief on this. I just wanted to thank Director Nemeth for coming today in person to talk about this and express my concerns about the unlimited bonding authority, the fact that all members of the delegation who represent the Delta are opposed to it.

And I think in the same way that we, we want members to support our fire ravaged areas in Southern California, we also want to be able to support our colleagues in their position on this. I wanted to plumb specifically this question of. You've used a lot of language that to me seems like it's repair and maintenance oriented.

So for example, this is an adaptation, a rehabilitation, a modernization, an upgrade and adapting to vulnerable realities of climate change. But the question which I really want to put my finger on is does this increase reliance on the Delta or does this reduce reliance on the Delta?

So to me that is a critical part of this because I think there's a recognition that things need to be kept up in good working order. But increasing reliance on the Delta at the same time that you're saying that that the Delta Reform Act requires demonstrating ways in which we're reducing reliance on the Delta.

You know, those things are obviously at cross purposes there. So I'd just like to specifically ask that, is this project increasing reliance on the Delta or decreasing it?

It's not increasing reliance on the Delta. And all of our contractors with the Department will be required to demonstrate how they are reducing their reliance on the Delta.

So if you are in Metropolitan Water District of Southern California or Santa Clara Valley Water District, or Zone 7 Water Agency in the Tri Valley, what you need to demonstrate is that you are investing in all sorts of other water supplies in addition to the state water project.

And the totality of your ability to serve water to your constituents. The. The sliver of that pie you get from the state water project is shrinking. And that's how they will again, together with the department, we're the owner operator of the state water project.

We have our contractors, we have to work with our contractors to provide all of that information to the Delta Stewardship Council. So they will demonstrate their reduced reliance on the Delta as part of the Delta Stewardship Council's requirement to consider this under the Delta Reform Act.

But what you're saying is that the water agencies will be required to do these other things too. But actually there will be more water that's coming from the Delta than currently. Right?

Not over time. So we anticipate that the state water project will. Our ability to move water from our infrastructure will be reduced with the natural drying out of climate change will be reduced by about 23%. What this project will do is over time, it will recover about 10 or 11% of that.

It'll recover about half of that. That's what we mean when we say that this is a climate adaptation project. But it also means that all those water districts also have to prepare for how they're going to sort of recover. That additional 10% loss that's coming from that climate will wreak on the state water project.

Which is absolutely why having this supply and this sort of modicum of reduction in loss, if you will have that be more reliable, is hugely important to our water users to clean their groundwater basins, to recycle that water, to use it more flexibly, if you're Southern California, use it more flexibly when you have Colorado River supplies that are also changing.

So all of these pieces need to fit together. I'm sorry to be providing you a complex answer, but the water system and who contributes what and who has what portfolios is a complicated question. But this project. As part of permitting this project, all entities that receive water from this project will demonstrate their reduced reliance on the Delta.

Okay, I appreciate that explanation. Reduction in loss. It strikes me that there are many different policy areas where we try to condition something on doing something else that's harder and expensive. And maybe the technology or the permitting is not there yet for all sorts of various reasons.

So, you know, to me, it seems like if we're making something easier to get and they're paying a lot of money for it, that there may be less compliance on the other side of all these other solutions.

Which I think when we're looking at the water picture, we do need to be thinking about desalination and groundwater recharge and some very obvious things like not treating water and then putting it right back out into the ocean in the millions of gallons a day.

And that was my experience in local government on water and wastewater districts is that that's just what we do. And there's not as much urgency to make the changes in order to not do that and to reuse every drop as many times as we can.

So investing in this type of a project does seem like we're less focused on these other things that are. That are really the solutions to climate change.

Yeah, I was just going to say, you know, the governor did put out a. What we described as adapting to a hotter and drier California. And that was by design to set targets across, you know, water conservation, groundwater recharge, stormwater capture, et cetera.

This is part of that because we wanted to show our work how all these pieces fit together to create that resilient future. I agree with you. We cannot have a water resilient future in California unless we're doing more recycling.

We really do need all of these pieces and all of these pieces actually need to work together expressly because we need to deal with affordability.

So my view this project and state water project water as being among the most affordable has to be part of the puzzle because we do need other water agencies to continue to invest in recycled water.

Okay. And I guess just finally I'll say that I do very much object to putting pure policy in this budget discussion. You know, we have now spent an hour and a half on something that is actually doesn't have to do with the budget. And I'd like to talk about all the budget issues and not this policy concerns.

And also the reality of going through committees and having policy discussions. There's a legislative process for a reason and it's part of us being a co equal branch and having 120 legislators weigh in on things. And so I object in principle to us having this discussion as part of the budget.

So with that I'll yield back as well. Thank you, chair.

Thank you, Chair. And also for detailed explanation. Unfortunately, I come from Southern California representing Orange County area. Obviously, Southern California has a problem of shortage of water, whereas abundance of water in Northern California. And I was amazed how our forefathers had such a vision to supply necessary water from Northern California by building water levees aqueduct.

And then also I had a tour of Colorado River supply lines and was so amazed. And I wonder listening to all of these debates objections if the earlier such two big projects encountered this kind of objections, whether they would have achieved what we have such a wonderful infrastructure. Now we are debating again.

Essentially, my understanding was that the Delta Conveyance Project was to enhance the state sea water project's reliability and the water supply, particularly in the face of climate change and sea level rise and earthquakes. I was hoping that the project would supply more water to the Central Valley and Southern California so that our farmland will be fully utilized.

And then also Southern California's drought issues and shortage of water problem can be solved. But it's also now listening to your answers is surprising. Rather than solving or, in other words, increasing the water supply for solving the problems that I have described it is less impacting. In other words, 30% cut around that figure will be reduced.

Less amount of water supply will be impacted by this completion of the Delta Project. And I was hoping that abundance of water will supply the Central Valley agricultural area and all necessary water to the Southern California.

But it is surprising why it just takes over 20 years of legal battle and essentially fighting against the environmental groups objecting to this problem. And this Delta tunnel problem is a project is solving the environmental impact the least amount by undergrounding is being a tunnel. How will it hurt so much?

What are the key point objections other than just objection to the objecting for the project. Such an important project. I think this government leaders, including our legislators and the governor's responsibility is to make sure that all necessary equipments, natural resources will be all supplied so that the welfare of the people of the state will be protected.

So under that the big concept of government policy, government rule, why our legislature here even on this dires, I hear some objectionable comments rather than supporting.

I'm so happy that this policy issue for the Delta Reconveyance Project that have been brought up so that we have this kind of chance to hear and then also to expedite necessary resources through this bond measures, which will not eat up our general fund, it is basically advancing necessary resources.

Eventually it will be all paid for by repairs. So having fought this long with the legal battles, the ongoing battle, the judicial process that you are talking about, what are their exact objections and the points they are fighting about this project? Can you explain?

Yes, and I'm certain your colleague, Senator McNerney, can also explain. So, you know, the objections are this is a 10 year construction project and it will be disruptive to people who live in and around it. There are lots of concerns about maintaining water quality. And I would say we have a lot of history in that space.

We have the State Water Project now. We have requirements to maintain water quality in the Delta. And you know, those are things that continue to be, to continue to provide concern for folks who divert water from the Delta itself.

Is it going to be water that's safe and high quality? And then just an overall concern around, you know, over pumping. I mean, what I would say is, you know, this project presents an image of, you know, sort of draining the delta. And that's something that we hear regularly. But we have the State Water Project there now.

Its current capacity is 15,000. The combined capacity of the state and federal state is about 10 8 that we can actually move. And so we've had that facility for a very long time. The department has a track record for maintaining water quality and other things. But those, I think are the primary issues that have people so concerned.

And you know, I understand trust in government and a lack of trust in government. My desire is that we can have a conversation about how the fact the delta itself is changing irrespective of this project.

This project, I believe as a steward of the state water project is necessary to enable the state water project to continue to operate. It doesn't mean we don't work on those other issues that are of primary concern to folks who live in the Delta. And we need to, we need to fully mitigate this project.

We have a 200 million community benefits fund to leave behind benefits as a result of this project. But there are other vulnerabilities in the Delta that, that we need to address for folks who live there.

Yeah, basically this is a welfare issue of the 27 million people and how many the farmland acres that was stated as like a 750,000 acres of farmland will benefit from this project. I hear three points that you are making. Number one is that the water quality issue.

I mean, don't worry about the water quality, just supply the water as natural.

It is and when the water is depending upon usage, you know for the farmland usage purpose or the drinking water purpose they will do the treatment as required before that's supplied to to the consumers and then also drainage issue of the water in other words will siphon off all the water from Northern California.

That's not the case because so much water right now flowing through the Sacramento water. Can you tell me how much water is being wasted? They are all flown into the ocean.

Those waters, excessive waters that they are wasted by being sent to the ocean can be sent to this Delta Water Project, the conveyance project and the irrigation project.

The recent points that I was expecting to hear was that in the beginning what I understood was that the endangered species of Delta smelts small fish issue is that the issue have been solved. One new issue is being brought up.

When I saw yesterday in the news that our member here mentioned that this little can benefit can be gained you know for this project I was so shocked to hear that. I mean this is a huge benefits of.

That the 270 million people Southern California and also 750,000 acres of farmland can be saved if continuously because of climate change. Continuously water supply will be reduced. Eventually this will be man made drought. And this land was made by God and also ordered for us to manage, not to protect. Insignificant.

I'm not against environmentalists, I would like to protect as much as possible. But when we compare human lives and our economy, that's necessary and water is an essential element for that and human lives versus little fish. And I don't know whether that issue have been solved or not.

And I would like to get really support of this Legislature that recognizing the importance of this project and we can minimize the unnecessary wasteful time in the court and over 20 years is unbelievable. You know, we have so many other big projects that we need to expedite. Sometimes we need to exempt from CEQA requirements.

This should be one of them.

Yeah, so very, two very different perspectives. Obviously. You know, just following up on one question, one point brought up with regards to water waste, you know, what is, do we have, you know, one of the many, one of the many areas of pushback is that we have done nowhere near as much as we ought to on conservation.

Right.

You know, you look at other countries and how much more effective and efficient they are on water conservation and here we are moving forward with this massively expensive and complicated project with a pretty mixed track record of big infrastructure recently as we're going to be talking about with the GGRF allocations, you know, what is the State of play with regards to conservation efforts?

And do you believe that we've been doing enough in that area?

Yeah, well, we're doing more. So one of the reasons why this project has changed, also changed over time is when we first started Talking about it 20 years ago, we didn't have groundwater management, we didn't have updated water conservation regulations, for example, and we didn't have direct potable reuse.

So California in the intervening 20 years has absolutely been innovating and doing those things. That's one of the reasons why the project is smaller, but nothing to the.

Pace of, you know, Australia or Israel.

I mean, well, so our, the conservation regulations that were promulgated by the Water Resources Control Board, I think two or three years ago has us down, has Californians down at about. I may have the numbers a little off, sir. So my apologies, but I believe it's about 42 or 44 gallons per capita per day by 2030.

That is an enormous amount of adapting that Californians have to do we also have significant restrictions on non functional turf? So, you know, if it's your mailman or, you know, mail carrier or the person who mows your lawn is the only person that walks on your lawn.

Those are lawns we have a lot of incentive to remove just in terms of limiting water use. So I believe California is doing a great deal to promote water conservation. And we've done many of the inexpensive things.

The things I think that are before us, which is really transformational landscape, you know, have costs associated with them, they take time. And I think importantly, don't replace the need to invest in this system.

Okay. I'd like to do a deeper dive into some of those issues, but. But we've got so much today. Appreciate it. I. I think we need to go on to dgrf. Thank you. So you're off the hook for now.

And you know, because it does, I mean, it does beg the question, right here we have this mass, this other massive infrastructure project that was promised be done. I thought I'd be riding back and forth by now on the train from Los Angeles and here we are continuing the spend. I don't know.

I mean, so let's start with that issue.

You know, I mean, here you are proposing cutting back on transit funding within the GGRF that actually provides support for transit construction and projects that are fully union jobs and they actually provide services to projects that people actually ride, you know, in our, you know, and so I'd love to get a sense of, okay, what.

So we're doing an additional billion per year for high speed rail. What's the, what is the, what's the plan here is this kind of bridge funding ultimately for a brighter day when we get some more resources from the Federal Government.

I'd like to get a better understanding of how we should be thinking about this, especially given the other cuts proposed on transit projects that are, I would say, far more utilized. Of course, transit rail hasn't started yet, but even the projections would suggest are far more utilized for the future will be far more utilized.

So let's start with that.

Yeah, just. I know there's been some confusion about the proposal that's included in the mayor vision. So mechanically, under the current structure for GGRF in order to, as the LAO calls it, make room for the CAL FIRE Fund shift. The 2024 discretionary plan for GGRF is not included in the mayor vision.

However, as part of our discussions with the Legislature to create a comprehensive GGRF expenditure plan, we anticipate that some of that Discretionary funding will be included. So we're not ruling it out or cutting it per se. We put forward what the administration's priorities are, which is at least $1 billion annually.

So it's not $1.0 billion on top of what high speed rail is receiving now. It's at least $1.0 billion in a new GGRF expenditure plan. And then the CAL FIRE Fund shift to provide General Fund relief. So just that clarification there.

As far as the transportation funding, we view it as part of the conversation that we'll be having with the Legislature to develop a comprehensive plan.

Yeah, I mean, tense start to the conversation. Yeah. I mean, what is. I guess the question is. Right. I mean, you know, yeah, there's a lot. There's a lot of confusion about just the State of the continuous appropriations and the may revision. So actually, to follow up on your question, on your comment, I mean, is, is there.

Should we. Should we be interpreting the may revise as the Administration changing any of the contingency appropriations in the may revise? No.

So we have not proposed any changes to current law. Really. We just view this as the beginning of a discussion with the Legislature. We understand that the Legislature has different priorities and that there's been a process that the Senate and the Assembly has been working through to develop, you know, to determine their own priorities.

So these are our two priorities, is at least $1.0 billion annually for high speed rail and then the General Fund.

And it's an amount rather than a percentage.

That's correct. Right. Okay. And part of that, as you'll hear from high speed rail, is to provide a stable and predictable funding source for high speed rail rather than something that is based on the fluctuations of auction proceeds.

Yeah. So. And it's actually up from last year's amount. Right. Is around 900 billion. 900 million or so.

We don't have. We don't. There's an auction happening today, so it's a little too soon for us to provide the amount for the current year for. For high speed rail, but I believe if you're looking at 23/24 it was somewhere around that.

All right. But effectively you are proposing a change in continuous approval. You're proposing it going from a 25% format to $1.0 billion minimum format.

I think that's. Yeah, that's one way to look at it. As far as what we would like to see in a, you know, In a renewed GGRF is instead of 25% annually for high speed rail, we would like to see at least $1.0 billion.

And what is, what is $1.0 billion a year annually up to 2045. Get us with regards to high speed rail.

Yeah, thank you Senator. I'll take that question. Mark Tollefson, I'm the Chief of Staff at the High Speed Rail Authority with me. I have Jamie Matalka on the other side of the table who's our chief financial officer.

So in terms of the administration's proposal, which would provide the additional 15 billion a year that will allow us to essentially complete the Merced to Bakersfield segment, the 171 miles it's under design and construction today, that will also allow us to look at opportunities to get beyond the valley going towards either the north to Gilroy or in the south to Palmdale.

Having that stable funding source is really key for our project, key for any infrastructure project having that predictability. But in terms of high speed rail, it allows us the stability to actually have conversations with the private sector.

Gives us opportunities and the flexibility to look at other funding models that will help us to actually accelerate the work and move this project forward. You don't need $1.0 billion to look at other funding models, but in. Terms of the stability, we absolutely do need that in terms of the cost of the project.

The $15 billion will allow us to complete that Merced to Bakersfield section 15.

Okay, so that's what you need to. You need $1.0 billion a year until 2045 to complete Merced De Bakersfield.

So in terms of the overall cost for that segment, we're looking at about 38 and a half $1.0 billion to complete. With the additional funding it would provide us about 44 billion over that period through 2045.

It really becomes more of a cash flow issue for us to stay within that window of delivering that project between 2030 and 2033 that we set forward in our last business plan. So that's where having that stability, delivering. The project, meaning construction. Construction, correct? Yeah, actually having an operational segment between 2030 and 2033 from their said to.

Make operational with passenger serving by passenger service. And so the idea is that by doing the $1 billion annual to 2045, then you want to securitize the money to up front the cash and then we basically pay for it into the future.

Yeah, that's something that we want to look at. So having that stability allows us to access the different tools that are available to us.

We are in the process probably in the next couple weeks to put out a request for expression of interest out to the private sector to see if there are opportunities for partnership as we move forward, not guaranteeing that that's a route that we will go, but at least give us the options that are available to us in addition to looking at other tools to help manage that cash flow.

Yeah, what is. I mean, I know folks from Leo have got strong opinions about securitization. Do you want to speak to some of those issues?

Thank you, Mr. Chair. I have a couple comments that might help. Excuse me. Oh, sorry. Helen Kerstein with the Legislative Analyst Office. I have a couple comments just for some additional context. I think one thing is that there's a lot of uncertainty.

I think I know the authorities anticipates this will allow them to do Merced to Bakersfield, but I think there are a couple reasons why there's uncertainty about that. One is that the numbers that were, I think, mentioned before assumes that the project will retain the full federal funding that it's received.

So there's over $3 billion at stake or $4 billion. Right now they have about a $10 billion funding gap that they've identified. It was up from 7. Now it's 10. And so if they lose 3 to $4 billion potentially, and who knows whether that will be, whether that will happen?

I'm not saying it will, but we think that the federal Administration has signaled some, you know, some lack of support for this project. And they have a history in the past Administration of taking back funds. So that's certainly a possibility. We'd be up to about a $14 billion gap if that 1314 $1.0 billion gap.

If that happened. They're under this proposal, they get an additional 15 billion. It would be additional versus what current, you know, the current status is. So right now they're getting money through 2030. They'd be getting $1.0 billion potentially between 2030 and 2045, assuming it's a billion and not 25%. So they'd be getting $15 billion.

They could have a gap of. Even if costs don't go up of 10 to 14 million, that doesn't leave a lot of money for financing costs. So how do you pay interest? Because they need to bring that money up front. So one, there's just. Can we pay for all the interest costs that might be in play here?

Do they have a plan on that?

Yeah, that's the problem. There's no plan for financing. And we think also GGRF is, I think we discussed previously ill suited to securitization. So we think there are lots of questions about what you would need to do to make DGRF a appropriate to securitize and how much that would cost.

Yeah. In terms of the overall financing plan, that's something that we do plan to release as part of our supplemental project update report later this summer. As mentioned, we are having some of those conversations or starting those conversations with the private sector to see what might be available.

But the key to that is really signaling this stable funding source, you know, be it through 2045 or, you know, kind of how it ends up, you know, being set up. But that really does allow us to mitigate some of that risk or the private market, we'll see, you know, less risk for the project.

That will help us, you know, ultimately, you know, determine what amount of money that we'd have and how quickly we can actually deliver that Merced to Bakersfield segment.

What would you do with, let's say, $500 million a year instead of. If that, if that was all you.

Had, $500 million a year would just allow us to deliver significantly less. I would say at that amount, we would not be able to deliver Merced to Bakersfield. Within that 2030-2033 window, would you be. Able to deliver, you know, Fresno to Bakersfield?

What's the.

You know, it's possible. I mean, we'd have to go back and kind of run our. Run our. We'd have to run our numbers. But you get significantly less.

Yeah. Because, I mean, effectively you're asking us here, and I understand there's a lot of moving parts, but you're asking us to, in the same budget, ask.

You're asking us to significantly cut back on all these important urban rail transit projects to continue to pursue an incredibly expensive and, you know, ultimately rather speculative financial model and process with significantly lower ridership, even under the best of projections.

Obviously, we all dream for a day when the San Francisco to LA thing works, and that would be significantly higher ridership. But the kind of projections that are out there for even the best case scenario of Merced to Bakersfield are way below what you would.

The benefit we'd see to similar kinds of investments into the BART system or LA Metro or San Diego, et cetera. And yet that's all being. A lot of those projects are being slashed under the same budget proposal. I mean, under a different guise.

But I mean, in the end of the day, you know, why is that being cut? You know, to pay for this CAL FIRE shift.

Yeah. So under current, the current structure for ggrf, there are the continuous appropriations and then there's the discretionary funding. So in order to solve a budget problem, we made the decision under the current structure to utilize the greenhouse gas reduction Fund for CAL FIRE rather than make decisions about different priorities.

It's largely just a reduction to the discretionary plan. So I think the Governor's Budget, the discretionary plan was around $1.8 billion. You notice that there is a gap between 1.5 billion and 1.8 billion.

There's not, you know, we didn't sort of pick and choose what sort of out of the remaining amount because we view that as being part of the discussion that we have with the Legislature that sort of everything's on the table when we're talking about.

You didn't put everything on the table. You didn't put all programs within the GGRF on the table.

Well, we didn't spend all of the GGRF as far as our priorities is. What we're sort of discussing is that we understand the Legislature has priorities. So if you take the average for the last three years, GGRF has produced around $4.4 billion.

So if you take the two priorities that the Administration has put forward of at least $1.0 billion for high speed rail and then the $1.5 billion CAL FIRE, there's still a significant amount of money remaining that can be used for a number of things.

So to the extent that there's a desire to use it for the continuous appropriations as they are, or for various discretionary funding, aren't you growing CAL FIRE.

To 2 billion over the next few years?

So CAL FIRE. So based on, based on the proposal, excuse me, that we have by 2930, CAL FIRE would grow to 1.9 billion? Yeah, yeah.

I mean, look, I mean, things are getting squeezed. This is in a very serious way.

I mean, the kinds of things that are now on the chopping block that are really going to impact so many Californians, you know, in the basic provision of services, including in the transit and transportation realm, is, you know, I think calling into question, you know, a lot of very serious of some of the priorities here.

And you know, you know, absent a major federal support, which was always what was envisioned with regards to high speed rail, but it's never come, unfortunately.

It just becomes increasingly difficult to justify, especially when these other projects that are, you know, slated to be cut are also going to provide so much transportation benefit to Californians and, you know, good high quality jobs for the folks constructing them. So, you know, if people have any high speed rail related questions, let's ask them now.

But I know there's a whole, you know, other series of GGRF issues we want to raise. But before we go to my colleague, do you have any thoughts on the current federal review of funds that it would propose by the secretary who came into Union Station to cause havoc?

Yeah, I mean, you know, at this stage, you know, we've kind of been through this, you know, before with the previous Trump Administration. I will say, with respect to the overall compliance review, we have submitted over 100,000, you know, pages of documentation. We have met, you know, kind of all of the review criteria at this point.

So we are, you know, ultimately just waiting for any actions to come from that. But at this stage, you know, we are projecting that we still have those funds available to us.

Obviously, that is a risk, but, you know, to the extent that there is an adverse kind of action, which we don't believe there should be, you know, we will likely, you know, engage, you know, the Attorney General and, you know, really, you know, fight to keep those funds. Yeah.

Can someone give me a sense, I mean, one of the exciting things about, you know, Biden coming into the presidency, he was a big train guy. He loves Amtrak. He wrote every day.

You know, what's your sense of what we were able to get or not get and why from the Federal Government under the Biden Administration with regards to this project?

Yeah, I'll say that, you know, we were really successful kind of under the Biden Administration with being able to secure about $3.1 billion through the federal and state partnership program. So that was a huge infusion of money to the project.

So that's something that we're extremely grateful for in terms of kind of just the overall condition of kind of rail in the state. So as we think about some of the opportunities we have getting beyond the valley, for example, if we get that connection someday in Palmdale, that will allow us to connect with the High Desert Corridor.

That will allow us to connect into the Victor Valley to Brightline, which also got about $3 billion from the Biden Administration to really have that kind of Southwest rail network. So our connection in Palmdale would then meet up with the High Desert Corridor, which would be that stretch between Palmdale and the Victor Valley.

They're building that at that point, we would be able to connect with Brightline. Which someone's building that. So that's something that is part of the broader state rail plan for that connection.

But that's not a hypothetical idea.

No, it's a real project. You know, they do have some funding through, I believe, measure money. I don't have the specifics.

Palmdale and Victorville.

Correct.

So there's construction happening?

No, there's not construction. It is a project that is in the planning stages. They do have some funding. Who's building that? I believe it's the High Desert Corridor Joint Powers Authority.

Okay. And that's actually happening, you're saying that's the time frame on that?

Yeah, obviously with every project, you know, they would need to secure full funding to complete that. I don't know if my colleague. I guess my point is it's just a line on a map and some document somewhere. Or is that a real.

I'll say that it's more than a line on a map, but in terms of the actual delivery of that project.

You'Re talking about it like we're going to build the Palmdale and then hop on a train to Vegas.

I will say that it will take us time to get to Palmdale. It will take them time to connect a lot of time to Palmdale. It'll take brightline time to get their project started as well.

Yeah, but much faster than our project somehow. The brightline.

I will say that. So they really haven't broken ground on construction just yet, but at the same time, they have benefited from the utilization of our right of way or Caltrans right of way along the I15. Yeah.

So I think that allows them to move a little quicker because at the end of the day, we spent a significant amount of time not only kind of clearing the environmental for a project, but also acquiring all the parcels necessary to even start on the 119 that we're building right now. Yeah.

Let me ask you a question. To what extent does all the problems a high speed rail inspire aspects of your budget trailer build proposal on the Delta?

I appreciate the question, but the two projects are unrelated as far as it goes.

But, but in terms of the, you know, claims of government efficiency, I mean.

I think as far as the, you know, for the Delta conveyance project, it's gone through CEQA and it's. And all of the different things.

So as Director Nemeth noted, it's really sort of about providing predictability for the water agencies, so can make a decision at the end of next year for their ratepayers of whether or not they're going to Fund the project.

Okay. Senator McNerney.

Well, this isn't exactly high speed rail, and I appreciate your last question. Interesting question. Well, it cuts to the GGRF funding discretionary expenditures in my district. The Valley Link project would link the Central Valley to The Bay Area to the BART over the Altamont Pass.

And it's very important, I think, in terms of greenhouse gas reductions, if we can get people out of their cars into the train be important. And the cuts are problematic to that and many to the Valley Link project and many other projects. So I can give you a couple examples.

But these are important projects through the Bay Area transit. And I just, I'm afraid to see these be cut, you know, in order to satisfy some other criteria.

Yeah, yeah, I think that's a broadly shared concern. Yeah. Senator Blake Spur.

Well, thank you for being here, Mr. Tollefson. It's great that you come from being so involved with rail that's not high speed rail. So you have really a picture of the whole state and now you're over at high speed rail. And I appreciate that you have that rich background.

I think my interest is in building a culture of rail in the State of California in all ways. And so that means supporting high speed rail, but it also means supporting the existing rail and future rail that we would have around population centers that already exist and people who are already dependent on transit.

And one of the things that I'm most concerned about is that GGRF currently raises approximately 4 to 5 billion per year, and the governor's proposal occupies about half of that. So 1 billion for high speed rail and 1.54 billion for CAL FIRE.

And then there are these other programs that apparently the Governor is less committed to, which I appreciate the explanation at the beginning that there was desire not necessarily to cut them, but not to support them, to allow the negotiation with the Legislature.

And the initial proposal being essentially half of GGRF being committed to the things that the Governor thinks are priorities. My concern is that, is that we continue to Fund rail and transit in some way. So we are notyou know, there's no capacity for that in the General Fund. And then the cutthe cuts are essentially deprioritizing.

The TIRCP and the Low Carbon Transit Operations program mean that 15%, so 10% and 5% that was going to Calsta and Caltrans are really at risk. And you know, I have a Subcommitee on the low sand rail corridor, which is 350 miles from San Luis Obispo to San Diego. That's the second busiest rail corridor in the nation.

And I recognize that high speed rail is not realistically going to be connecting to that or really affecting that in what I perceive to be my lifetime, given the realities of what it means to do these big infrastructure projects, projects and particularly all the barriers we have around right of way acquisition and litigation and CEQA.

And I think it is really instructive what's happening with the Delta projects because we just, it's very difficult to do big projects so we shouldn't be naive about the things that we'll be able to accomplish.

But I, you know, I really do hope that and am concerned about the fact that high Speed rail, as you said, it's already received more than 3 billion from the Federal Government, which has been critical funding.

But we also have a project that has been really quite slow and continues to promise things like investments from private industry and things that we're not seeing actualized really in other parts of our state.

When it comes to rail, we do see good partnerships with for example, our airports and concessions and parking and other things that are creating revenue. But I've yet to see any specifics around that.

It all can seem a little bit like hand waving to say, like, well, we're going have these other streams of revenue and as the LAO said, we don't have a realistic understanding of how you would be financing, paying the financing costs. And I think that's an important thing to raise that I don't think has been raised before.

So, you know, High Speed Rail was supposed to deliver a project update report every spring and I've yet to see that with an updated cost estimate this year. And I hope that you can tell me when that will be released.

But, but being able to right size the project, commit to its efficiencies and its delivery, you know, those are things that are just really important. They're important for public confidence, for the Legislature's confidence.

And I'd also just like to say to the negotiating team that I do hope we're able to include other sources of funding for transit and rail other than high speed rail. And so it seems to me like it does. It doesn't have to be those existing programs that are currently funding new capital projects.

I mean, I think we're at we have a fiscal cliff for many of our transit agencies in the state and we need to be funding operations. So it's not just new capital that's of need, but really being devoted to meeting some goals of increasing ridership and getting project delivery on time.

And those are just it basically is a back to basics idea around this transportation stream.

So with that, I'd like to just ask about the project update report, if that's coming and then, you know, any other thoughts on ways that we can get funding for transit and trains, particularly into GGRF or otherwise in the General Fund, which I don't currently see, or another form.

Well, great. Yeah, really appreciate it, Senator, and appreciate the work that we've done on Low San and a lot of kind of the support you've provided for rail throughout the state as we think about. I'll first address your question on the project update report.

So as you noted, in the spring we provided a project update report with some additional information to come later in the summer. We are still working on those updates. We have issued an update for the Merced to Bakersfield segment. So those are the numbers that we've referenced today.

The $38.5 billion really kind of looking at a range from 34.9 to the 38.5. So we have kind of done that, you know, bottomed up review of that component.

We're continuing to work, you know, north as well as south to to be able to provide an update for Gilroy to Palmdale this summer in terms of the exact date. Still kind of working through that. But you know, we will absolutely, you know, share information with the Legislature as it becomes available.

So we've committed to do that in terms of the overall structure. And I'll probably turn it over to finance to talk about other ways to Fund rail and transit in the state.

But just as we think about, you know, our ability to meet our climate goals in 2045, you know, I think mode shift and reduction of vehicle miles traveled is going to be a key piece to that, you know, kind of working.

You know, as I chaired the Transit Transformation Task Force, you know, one of the things that stuck out to me is that as we think about, you know, vehicle miles traveled, you know, about 28% of all of our car trips are over 10 miles.

And those 28% of trips account for about 75% of all of our VMT in the state. So that's where I really see rail fitting into that equation to help mode shift with some of those longer trips.

So as we talk about low sand, as we talk about in the valley, high speed rail, our projections right now in the valley from Merced to Bakersfield, we're looking at about 319 million vehicle miles traveled, reduced even more significant as we build out the full phase one.

So as we think about connectivity throughout the state, you know, the Valley is really going to be that trunk line. It is going to be important to have those connections to our other systems, you know, Caltrain to the north, Metrolink, Low San in the south. And then you're thinking about Those first and last mile connections. Right.

Of other transit service to get people to the stations to then ultimately ride. So it is really this kind of transit, you know, rail ecosystem that we are trying to build. But at the same time, I will pause there and defer to Department of Finance on some of the options that might be available.

As far as that goes for the GGRF expenditure plan, as far as if the Legislature has priorities for transit, we certainly are open to discussions and being able to allocate funding from GGRF to various transit programs.

Yeah. Okay. Well, let me ask you, just broadly speaking about the strategy. Here is the. I mean, so I'm getting the sense that I keep hearing this is a. We're starting a conversation. But I mean, effectively, the proposal you put on the.

On the table should basically just cut all discretionary funding and replace that with this ongoing funding commit for CAL FIRE. Is that. And then. And then you're just going to see where we push back. Is that the.

So in order to balance the budget, we have to propose a balanced may revision. So rather than foreclosing on discussions around continuous appropriations or presenting our own DGRF expenditure plan, we had to work within the existing. With existing law.

And so that means that under an existing law, in order to balance the budget and to provide a $1.5 billion solution so that we didn't have to make cuts to other critical programs in the health and human services space, we had to make room, as Aleo calls it, in ggrf.

So that's how it has to function under the current law for what we propose at mirror vision, as far as it goes for a GGRF expenditure plan for the future. These are our priorities, and we're under no sort of illusion that the Legislature has different priorities or may not agree with the administration's priorities.

And so that's where we look forward to having that discussion with the Legislature.

All right, but effectively, I mean, you know, you're backing down on, you know, nearly $1.0 billion in clean energy investments we agreed to on Diablo Canyon. You know, the over $1 billion in transit commitments we made in 2023. Are those now being called to those.

Are we effectively calling those commitments into question now with this proposal, or is it more. That's.

I mean, I think that's something. That's a great example of something that we expect to have discussions on as. As far as what GGRF is used for in the future.

Okay, so are there now. Is there anything in here? You know, you know, this all better than I do. Where programs have been proposed to be cut that will require the state to rescind already committed funds.

So I think that's limited to some of the transit programs. So I'll defer to my colleagues to speak to that.

Sure. Just briefly in the discretionary side, specifically, there are forward committed funds in the formula and competitive TIRCP programs as well as the zero emission transit capital programs. And those go largely in the budget year and the budget year plus one, as well as in the highways to boulevards program at Department of Transportation.

So if we just accept it, like if this was the final document that was passed into law, would that money that had already been committed be somehow clawed back?

So just to be clear, it's been committed, but the money has not been appropriated by the Legislature. So it's a little bit of a distinction there. So the money wouldn't be clawed back because the Legislature has the ability to appropriate it. And also it's dependent on auction proceeds.

So to the extent that GGRF auction proceeds don't cover it, then that money doesn't exist. Yeah. So it's forward committed funding.

But most agreements would include a clause that it's pending availability of funds subject to procreation of the. Sure.

So. Right. Okay. Now, a lot of conceptual kind of challenges associated with this proposal. You know, one of them that I keep hearing about is, well, okay, this is this volatile source, as you just said. You know, we never know how big the auctions are going to be.

Okay.

Right.

Certainly we've seen a lot of challenges with the auctions recently. Is this a good place to put an ongoing fundamental governmental responsibility associated with fire protection with this volatile revenue source that has a sunset date that we're supposedly hoping will eventually go away?

Yeah. So to that point we envisioned this and in the Mirrorvision proposal, there's language that allows the Department of Finance to should revenues from the auction proceeds come in lower than what GGRF can support for CAL FIRE, then we would make sure that CAL FIRE stays whole and use General Fund instead of that.

So there would never be a situation where CAL FIRE, where sort of CAL FIRE would be subject to the whims of the auction proceeds from ggrf. We would always maintain that CAL FIRE would be able to complete its core activities.

Yeah. And we haven't. Yeah.

Yeah, I mean, of course Jetta Fund is not in good shape. I mean, that's why you're doing this, right? I mean this is the whole situation. Had this ever been something discussed before? I mean, I'm just trying to recall back when this was first passed, was fire ever part of the conversation as a GGRF expenditure?

So currently there are two continuous appropriations or statutory obligations that Fund CAL FIRE. So there's the state responsibility area back fee or backfill that funds CAL FIRE and then there's also SB901 Healthy Forests funding. So there's approximately 290 to $300 million that is used for CAL FIRE that was envisioned as part of the reauthorization in 2017. 2018.

Okay.

Yeah, yeah. A lot of challenge to all this. Especially a lot of challenge to all this. Okay. I think Senator Choi has some as a question.

Yes. Back to high speed rail. You mentioned a while ago that you are looking into private partnership, meaning that somebody will step up for additional investment. Obviously nobody will give away their money and they need to have some financial interest in there. What, what form of opportunity are they looking for by partnering with us with their investment?

That's my first question. And that segment that you are right now working on, Mercedes to Bakefield, I kind of doubt that the high ridership as chair while ago raised a question about the ridership.

If there's already completed project from LA to San Francisco, that might be totally different demand, but this particular segment is not going to generate to my opinion that high ridership.

Do you have any figures and how much revenue will generate and how much that will cover the annual operational fee and what, where, how the private partner will have a financial interest by investing in the project.

Yeah, thank you Senator, I really appreciate the questions there. So if we talk about the types of private investment that is something that we're seeking feedback on.

So we, in the next couple weeks we'll be issuing a RFEI request for expression of interest from the private sector to really see what kind of their needs would be in terms of a partnership for the project. Really allowing us to continue to have those conversations in more detail.

I think a partnership could take a number of forms through just financing as well as an availability payment model looking at opportunities to commercialize service.

So that kind of ties into your ridership question, but also opportunities as you think about ultimately the tunnel between London and Paris, normal passenger service during the day and then being able to commercialize and use that same track to run goods movement in the evening.

So there's opportunities like that that can be explored as well as transit Oriented Development. So a lot of different forms that this could take. So that's why we are trying to really reach out to the private sector to dive into more details with what's possible in terms of your question on ridership.

So we are currently working on that modeling that will be completed as part of our supplemental project update report that we'll be providing in the next, you know, hopefully a month or so, you know, definitely, you know, this summer.

But we want to make sure that we are able to kind of cost everything out appropriately doing, you know, more of that bottoms up approach to make sure that as we've progressed to 30% design that we are capturing realistic costs, you know, for that whole Gilroy to Palmdale segment as well as identifying some of those updates with respect to ridership for the Valley.

So at this time you don't have any financial model what the ridership will provide and then also you don't have any particular suggestions for the private partnership incentive from your point of view other than RFP. You are waiting to hear what kind of beneficial benefits they are looking for.

I mean to me I don't know as if I was an investor what kind of financial benefit I can expect out of this project which after what the $95 billion over budget from the beginning 29 years ago this began and what the One Mile foundation had been raised, no rail been placed. I don't know.

Next mile will be another 29 years. I mean if there's a private partnership was interest then it could have been. Did you in other second rephrase my question.

Have you done such RFPS nationally or internationally from the beginning that would have been more successful if a proper company bidding was successful at that time all the responsibility would have been on that private partner with the investment with their vision internationally, some of the countries like China, Korea, Taiwan almost at the Taiwan two weeks ago and that they were very successfully running.

And I just mind boggling how in the world it takes such a long time and as a year go by that our cost continues to hike and who knows with the so far your track record. I mean next year, next 10 years, next 29 years where it will be.

I can kind of tell this will be just, you know, as people say, you know, train to nowhere. It'll be permanent project for professional job creation, you know, not completing the project as we originally envisioned. What is your vision?

Yeah, thank you Senator. I really appreciate the question there and I will fully acknowledge the challenges that this project has had from the start. But what I will say is that at this point we have environmentally cleared the project from San Francisco to Los Angeles.

We've acquired 99% of the parcels that we need in the valley to continue construction of that 119 as we build out into Merced and Bakersfield.

In terms of the, you know, past, you know, we have engaged with the private sector, you know, prior to, you know, my time at the authority, prior to our new CEO's time at the authority. But what we want to do is really kind of understand the interest there based on current market conditions.

We did hold a industry forum at the end of January where we had seven of the largest financiers concession years. You know, come here and meet with us and express interest in the project.

I think we're at a stage where we're really seeing some of the momentum moving forward with respect to the number of structures that we've completed in the valley that are underway.

With 96 of 119 miles of the guideway completed, we're looking at opportunities to procure commodities up front to really help shave down costs to save on the markup that we get from our design builders. So really implementing a lot of these, you know, tools to make the project more efficient, building smarter, building faster.

So that is something that has piqued the interest of the private sector. And again, we are hoping as we issue that RFEI probably 30ish days for individual or companies to respond back. But we fully expect to update the Legislature on those opportunities as part of our updated project.

Updated report, as you mentioned, that Federal Government has already announced that they are not going to Fund our high speed rail project anymore. So with that substantial amount of funding is now gone. Now your policy now relies upon cap and trade. Proceeds will be invested in that.

Do you think that cap and trade portion of funding will be enough to proceed a construction of the project and then operating all the associated personnel?

Yeah, we believe so. With the administration's proposal of the $15 billion through 2045 minimum of $1.0 billion per year, we do fully expect to deliver that Merced to Bakersfield operating segment. With respect to the federal funds, there hasn't been a clawback of those funds. So we do have those federal funds available to us today.

We don't expect that, you know, we or we fully expect that we've met every piece of that compliance review, but we are waiting to see what the Federal Government will do.

I will say that historically this project has been, you know, funded primarily through state funds, you know, 73%, I believe, you know, state funds, 27%, you know, federal. So we have not necessarily been reliant solely on kind of our Federal Government. We would love for greater participation from the Federal Government.

Most major projects are the complete reverse of that where, you know, we're seeing 70 to 80% federal, you know, 20 to 30% state. So at some point we are hoping, you know, to, you know, again, get that further infusion.

But to date, we don't see a huge risk with respect to the amount of federal funds that could potentially be clawed back as we will continue to fight to keep those funds within California because we do believe that we've met all the requirements of the project compliance review.

I hope you'll work it out. 27% is a significant, significant portion of the total. If you don't have that, I mean, it's not going to achieve your goals in time. What time frame do you anticipate, actually train rail will be placed in the train to begin the operation? Did you mention while ago, do you have any timeline?

Yes. With the proposal, if it is to move forward, we believe that we will be able to deliver service beginning in that 2030-23 or 2033 window.

As far as the next stages of kind of moving beyond civil, civil works and the infrastructure to develop the guideways for the construction package four, that we have about 22 miles kind of in the southern portion of the 119 miles that we're currently working on.

We believe that we'll be able to go out to bid for track laying as soon as next year. So that's a milestone that we're tracking towards.

So we believe that we are really turning that corner, getting into a new phase of the project, and we believe that that will really attract more, at least interest in the project from the private sector as we move forward.

But all of that schedule, all of the updates with respect to ridership, the full Gilroy to Palmdale segment, you know, of cost update, we'll deliver that with our supplemental project update report.

Thank you.

Okay.

All right. Thank you. Yes. Sorry.

Just really quick, I want to highlight, Mr. Chair, the point you raised. I think it's a really important one about the distinction between the intent that the Administration has put forth around the GGRF package and technically what the proposal is before you.

The intent is, as stated, is to kind of clear the decks and clear the table and start from scratch and decide what we want to Fund. The proposal before you is eliminating all of the discretionary funding and replacing it with CAL FIRE and leaving the statutory and continuous appropriations in place.

So if you were to move forward on July 1, those continuous appropriations are still in place unless you change statute. So if you truly want to clear the table, start from scratch and work on these, which we think is worthwhile, reauthorization is a good time to, to decide what your priorities are.

There are additional technical steps you need to take to do that, particularly as the fiscal year begins.

That's right. That's right. Okay. All right, thank you. All right, let's do a quick DFWS here. Thank you, guys. Thank you for being here. Just a quick couple questions about muscles and then we're going to move on to the efficiency cuts and then calrecycle. So, you know, we've got.

This is just an issue relating to, you know, the north coast. So if DFW can come up. But you know, we've got this golden mussel that's this freshwater bivalve that's been detected in California. It's invasive. It's posing a big threat to the waterways. So just a DOF question.

Is it possible for the the quagga zebra mussel funding to. How expansive is that funding? Could it be used for the golden mussel, which is this new challenge? Does that make sense? No, I'm sorry, can you repeat?

Okay, so we've got existing quagga zebra mussel on infestation funding, and I'm just wondering, we now got this new type of mussel that is clogging up the waterways.

The Quagm challenge was a long standing challenge, but now we've got this new infestation and I just wanted to get a sense and if you don't have answers for this right now, we can follow up later. But what the plan is associated with the golden mussel Challenge.

Is it possible to have the Quagga mussel funds be used on the golden mussel infestation, or is that not a viable path? Is there another plan? If you don't have an answer now, it's fine. We can follow up later.

But does anyone have any answers to that?

Yeah, Andrew Hill with the Department of Finance. It's something we'll certainly look into for you if you'd like. I don't have it. The answer to that off the top of my head. Okay.

Did Fish and Wildlife have.

Dan Reagan, Deputy Director, Fiscal Service Division with Fish and Wildlife. There's possibility that we'd have to look into it. Some of the quagga funding as well as zebra funding is specific to that species because it came in through a grant specific for that.

So we'd have to look to see if it could be shifted or the grant amended. Some of the other funding that supports it is possible, but again, we'd have to take a look at that and get back to you. Okay.

Just in General, can you give us a sense of how the department's thinking about the golden mussel infestation challenge?

Yeah, at a very high level, the Department has set up a task force to look to address the golden mussel infestation. We are working very closely with other departments as well to work through this, obviously with limited resources. We're doing everything we absolutely can. And I'd have to get back to you for any specific questions. Chair.

Okay. All right. Thank you. Okay. Well, then, so that brings us to another topic with regards to cuts and, you know, vision, wildlife. I mean, you know, talk about limited resources. Right.

We've discussed in this Committee several times about how Parks and Fish and Wildlife are arguably among the two most underfunded departments in the state government, given their statutory requirements and responsibilities and, of course, the public use.

Now the Administration is proposing to cut 13% of the vacant positions at DFW is much higher than the across the board 8% goal. And. You know what's interesting, that a lot of that's from most of it's actually from special funds rather than general funds. So it's not even there's not even a General Fund justification associated with it.

So and then, you know, so I guess, you know, I mean, my question for DOF and, you know, obviously we all understand that we need to have all departments help us address these massive problems in the broader budget.

And we also are aware of how much staffing has grown under the new Administration across the board, significant growth vis a vis the trajectories under the Brown Administration before. But I guess the challenge here is, you know, is an across the board cut a smart way of doing it?

And does this particular proposal as it relates to dfw, I mean, it's almost they're asking them to take more cuts even though we know they're extra underfunded.

So, you know, why is it that DFW has proposed for a 13% cut for the 8% efficiencies exercise than most of any Department in NRA when we know how underfunded they are already?

Daniel Ross Jones, Department of Finance so there are two efficiencies pieces that are coming in here that I just want to be clear on. One of them is a control section related to vacancies in terms of staffing.

The vacancies reductions were, as mentioned, across the board, sort of agnostic on Fund source because vacant positions may come from General Fund, special funds, mixture of funds. So forward. The other efficiencies drill, which you're referencing, the 7.95% that one was based on expenditures.

So the vacancies and the expenditures are two separate drills and those can overlay and have impacts discrete of one another.

Yeah, I mean, look, vacancies happen for all sorts of reasons, right? Retirements, promotions, etc. And I understand there's elegance to, to that because then you don't disrupt people, real living human beings in a job at a time. The flip side is it's a very, it's a rather haphazard circumstantial approach.

And you know, I guess I'm zeroing in on the challenge at DFW because we've heard and read studies about the real delta, other kind of delta that exists with regards to their statutory needs and requirements and then their funding.

And here we are almost, you know, I understand your answer, but it effectively leads to a more severe cut to an operation that is struggling to meet their, you know, their basic statutory responsibilities. And so I would encourage a relook, especially as it relates to DFW, given what we know.