Senate Standing Committee on Budget and Fiscal Review

We'll come to order. We are at 1021 O Street, room 1200. I ask that all Members of the Committee come down as soon as you can. We do not yet have a quorum, so we'll begin as a Subcommitee and we'll establish a quorum as soon as we have enough Members here.

We will hear public comment after the items are after the item is presented and had discussion, and then we will have public comment. So today we will Hear Assembly Bill 101. The Budget act of 2025.

AB101 represents a budget plan agreed to by the Senate and the Assembly that includes approximately $324.7 billion in total spending, 231.9 billion of which is General Fund. The budget is balanced in the 2025-26 fiscal year and includes $12.3 billion in solutions. It maintains $13.2 billion in combined total reserves responsibly budgeting for economic uncertainty in future years.

And as we know, we have significant economic uncertainty right now because the current occupant of the White House has decided to upend the US and global economies with trade wars and trying to destroy science and other approaches that are economically destabilizing. This budget includes significant input from the Senate.

We have had 56 Senate Budget Subcommitee hearings, four full Committee hearings before today. And the package and the budget before us represents an enormous amount of work. I want to thank all of our budget sub chairs and our staff and every Member of this Committee for your Hard work.

I also want to thank our pro temple for his hard work. We faced some very hard choices in this budget. We came into this year projecting a balanced budget or even a small surplus. With the economic destruction that the President has chosen to engage in. That quickly change.

In addition to increased costs in the Medi Cal program which we're seeing across the country with increases to cost, increased cost with Medicaid generally. That's not unique to California. So we faced some hard choices.

But we've come to an agreement that protects critical services that communities across California rely on like health care, public education, higher education, food assistance, public transit, housing, and more significantly, the Bill fully protects funding for our K through 12 schools and fully protects funding for the UC and CSU.

The budget agreement fully rejects the May revisions proposed 3% cuts to the UC and CSU. I will say on a personal level, at a time when the occupant of the White House is trying to destroy higher education in this country, it's important for us to have the backs of the UC and the CSU.

This budget provides powerful tools to tackle our housing affordability crisis by reducing unnecessary process barriers to building the homes we need and by including funding for affordable housing and addressing homelessness. It provides General Fund loans to support Los Angeles recovery from the recent wildfires and to save our Bay Area public transportation systems from devastating service cuts.

It protects funding for health equity programs that provide reproductive and sexual health services for many Members of our community. And then the and there are many other things I could talk about including protecting for the next few years Prop 56, dental coverage and other items including community clinics.

I won't enumerate everything, but there are many, many things, many priorities that were cut in the May revise that we've either restored or we've been able to delay cuts for a few years to have time to come up with solutions so people are not experiencing immediate cuts to critical services.

We were of course forced to make some tough choices to balance the budget this year, particularly around Medi Cal.

And I want to acknowledge that immigrant communities across California and across the country right now are under assault by this Administration, including the military occupation of downtown Los Angeles which this Administration chose to inflict on L A and we're seeing Ayes raids in LA and elsewhere.

Point of order sir. This has nothing to do with the budget. Please get back to the budget.

Thank you for your comment. And so it's really important for us to we know that we need to support our immigrant communities and this budget does significantly scale back some of the approaches that the May revise takes to proposed for our undocumented neighbors.

We reduced the proposed premium by 70% and delayed it for two years and made some other changes to the governor's proposal as well. We want to and no one will be disenrolled as a result of this budget.

We thought it was incredibly important that people who are receiving receiving health care through Medi Cal continue to be able to receive that health care. We also the budget rejects various cuts to in home support services ihss including for undocumented residents, and including rejection of the changes to the restrictions on IHSS over time.

So it's been we're in a tough budget situation and I'm proud of the work that both houses of the Legislature have done to try to avoid the most harmful cuts, to try to delay others and to do everything we can to support communities up and down California through difficult budget times and difficult times in General.

Given everything that is happening, I want to really thank the Administration for working with us. We're already in conversations with the Governor based on what we now have with this two party agreement between the Senate and the Assembly. Again, thank you to everyone who helped make this possible.

And with that, I want to offer an opportunity for Vice Chair Niello to make any comments he would like to make about the budget.

Thank you, Mr. Chair. About the budget and our process, I. I feel kind of like a Yogi Berra ism.

Oh, no. Can we establish quorum? Yes. Lightning struck. You have a quorum and I worry that someone. My apologies, Mr. Vice Chair. And we can start with Yogi. No, no, I'm interested with the Yogi Berra illusion. Okay, let's establish a quorum and then we'll go back to the Vice Chair.

[Roll Call]

We have a quorum. Thank you, colleagues. Okay, Mr. Vice Chair. Yogi Berra.

Thank you. I'm sure everybody is hanging on. What the heck Yogi Berra has to do with a budget hearing. But this budget hearing to me feels like deja Vu all over again. You know what deja Vu is? That's making the present kind of feel like the past. Because we did all this yesterday in our Subcommitee meetings.

Usually, of course, our Subcommitee meetings meet to consider budget proposals, to pass or reject them, and then that informs the budget writing process, you know, that which happens behind closed doors in the dark of night. But this time, that opaque drafting process took place the night before last.

So our Subcommitee meetings, rather than providing input to the budget writing, actually ratified that budget on a piecemeal, line item, by line item basis. So we gather here this morning to consider the proposed budget as a whole. Actually having accomplished that yesterday. Yesterday was today. Today is tomorrow. It's deja Vu all over again.

Now, if this comes across as a bit of confusing gibberish, I guess maybe it is just consider this a tribute to the confused and what I think is a somewhat clumsy budget process this year. But I have a much more important point, a caution, as I continue to warn.

We are not doing anything to address our structural deficit driven by ongoing growth in program spending that is exceeding growth in revenue, creating projected future year deficits of up to $20 billion in each year. Now.

My friends on the other side of the aisle had a press Conference the other day and it was said we have pushed things out for two years because hopefully there will be a miracle and we find ourselves at a better point for revenues.

I would just point out that a budget that's based on hope is a budget that is destined for trouble.

Thank you, Mr. Vice Chair. We'll now go to Senator Blakespear followed by Senator Laird.

Thank you. Chair, could I just ask, are we going to be hearing a presentation or no?

Yes, we will have a presentation and folks can comment now or after the presentation, whatever you would prefer.

Okay, so you're running it that way? Either comment.

Yeah, but there will be a presentation and you're welcome to comment before or after.

Okay. I mean my preference would be that we hear the presentation, then we do all the comments. But if we're doing comments now, then I'll go ahead and make mine.

Yes, it's a Senator's prerogative. So there are other Senators who have commented now.

Okay. Okay, then I'll go ahead with my comments. Okay. Sorry. Just wanted to understand the run of show here. So I appreciate the really hard work that has gone into this budget. I want to recognize that this is my first full year on a budget Subcommitee and it's obviously a difficult fiscal situation that we're in.

And I know there's been an enormous amount of work and there are a lot of trade offs that need to be made in order to come up with a balanced budget, which we're statutorily required to do. And so I recognize that this budget is balanced and I'm of course happy about that.

I would say that when we're looking at a 12.3 billion in budget solutions and we are looking at revenue and borrowing of 7.8 billion, Fund shifts, deferrals and delays of 1 billion and then reductions of 2.5 billion, but that, excuse me, reductions of 3.5 billion.

But included in that is 2 billion that's coming from the rainy day Fund. I feel concerned that we are kicking the can down the road in making very difficult decisions and that I want to express that it's my hope that we are able to strategically right size our budget to be.

Have our expenditures be in line with our revenue. Recognizing that our revenue of course is coming from taxes that people are paying, but also we will always have more needs than we are able to fulfill.

And it's difficult for families to budget, it's difficult for businesses to budget, it's difficult for cities and of course it's difficult for our Federal Government and for our state but that's the hard work of doing this. And so I was.

I am concerned that our rainy day Fund, although it is going to be at 11.2 billion and then 2 billion in regular reserves, is relatively small. And I know that there is a proposed constitutional amendment that will go to the voters that could change the way that we Fund our rainy day Fund.

But as it stands right now, we are using money from our rainy day Fund. And it is important to recognize that we are not yet in a recession and that we may be. And that's really what our rainy day ultimately is for.

So I express some concern about the fact that we are not doing a bit more trimming of our expenses. Now I'd like to just express that I'm grateful for some of the things that I see in the budget and I just want to highlight them.

One of the things that I was hoping for was that any position sweeps, particularly in the budget sub that I'm on, which is budget sub 2, and we were talking about sweeps of positions in the Department of Fish and Wildlife, State Parks and State Water Resources Control Board.

There were 339 positions that those would be strategically done and not a blanket across the board elimination of open positions because they happen to be open, because that's not an evaluation of need. That's just clearing things because they happen to be open.

And there are some things, like game wardens where they go through a class of people who go through an academy and then they would be hired. And so the fact that they're open doesn't mean they're not needed.

Now I'm grateful that the vacant positions are no longer swept and it's not just for those 339, but it's all 6002 vacant positions are going to be reconsidered in the next budget, which is, I think, a better way to do it.

I'd like it to be a more strategic approach to eliminating vacant positions with the idea that we need to right size and adapt and change as our needs change, but to do it with less of a broad stroke.

I also want to recognize that There was Prop 4 spending and the Legislature's budget rejects expenditures which would have included 300 million in backfilling of existing General Fund climate programs. I think when the voters voted for the bond, they were expecting it to be new programs, not backfilling of the General Fund.

So I'm grateful to see that that is something that the Legislature's budget is rejecting. I think HHAPP is very important. Homeless Housing Assistance and Prevention Program and the Legislature's budget includes $500 million for HHAPP, which is 50% of what we funded in the last couple years.

Homelessness, particularly unsheltered street homelessness, continues to get worse every year in the State of California. And we need to be really focused, laser focused on helping people transition to living inside instead of living outside in the elements, which is not good for them or for the public. And so 500 million is better than zero.

And I'm grateful for the really strong push that the Senate put forward on that, but it's really important that we continue to focus on having that as a goal and making sure that our budget aligns with that. And unfortunately, the encampment resolution funds were zeroed out, which I think cities do use for important purposes.

So I would be in favor of that being reinstated if that was possible. Another thing I want to mention is that the Legislature's budget does contain measures that limit our medi Cal costs, which admittedly, objectively, were three times what we predicted.

And it's important that we do evaluate where these cost increases are coming from and whether our budget can afford them.

So reinstating a reasonable asset limit for seniors to qualify, eliminating coverage for certain drugs that are being used exclusively for weight loss, like Ozempic or Wegovy, and using Prop 35 money for its intended purpose of medical reimbursements, these seem like really good things.

There were substantially fewer things in the medical area than the Governor had proposed, and it's important to recognize that there was a lot of effort put into that. I'm not sure that this is a part of our budget that is currently within reason.

It seems that we might need to tighten a bit around our medi Cal spending, But it is what it is coming from the Legislature's budget. So I appreciate the hard work that went in there. And then the last thing I just want to mention is that the Legislature's budget includes 100 million to Fund Prop 36.

That's 30 million for trial courts to handle increased workload, and 50 million to the Department of Healthcare Services to support behavioral health programs. The voters pass Prop 36. It's important that we Fund it, and otherwise we would be breaking faith with the voters. And this is something that I'm grateful that the Legislature put back into the budget.

And then lastly, I'll just say that I do appreciate the support for the UCS and the CSUs and the deferred programmatic cuts. I think when everybody's taking a little bit of a haircut, it's okay to take a little bit of a haircut. I. That 8% was too much, but anywhere between 0 and 3% I was okay with.

And I'm grateful for the 15 million to the journalism fellowship program which is also part of that budget line item. So with that chair, I will yield back and thank you for giving me the opportunity to speak.

Thank you. I have three more Members and if again, if folks, anyone who could speak, wants to speak now, will of course be able to speak. We do have a presentation if you, if you would like to speak afterwards to have the additional context from the LAO. It's Senator's choice. Senator Laird

I'm not going to take long, but I appreciate the opportunity and I want to do two things. The first is, is I want to thank the budget staff which I did yesterday for the education ones in the budget sub hearing.

And I said they were just this side of zombie status and then later apologized and they said that was an accurate statement. So I know how around the clock people have been working and I want to thank them.

On the deja Vu issue, this is my 11th budget and it seems 11th on the Budget Committee and it seems like every time it's like the process was done in the dark. Well, in our extensive hearings we gave General direction that we wanted the middle class scholarship to not be cut. It isn't.

We gave direction, we wanted to give get to zero on the cuts to UC and CSU and they are here at a 0% cut is actually a cut because of inflation and labor contracts. So they are taking a haircut. But we really decided it was important to do that on, on K through 12, K through 14.

It's 2.3% increase under Prop 98, a difficult budget year. We figured out a way that they move ahead and There is a $500 million discretionary grant for school districts so that they can decide just given these financial circumstances how they can fill in the pieces.

So I think that all this was done in public hearings, in public with a direction with extensive public comment. So that is not out of light of day. That was with everyone as we moved ahead.

And the key point today is that the difference between the may revise and where we are in the budget in front of us is substantial. It really tried to address the toughest issues that were proposed in that budget. And so I think this is the best in impossible circumstances and look forward to supporting.

Thank you, Senator Laird. We'll go to Senator Smallwood-Cuevas.

Thank you, Mr. Chair. And I was reflecting on something that our Senator Vice Chair talked about in terms of this budget being destined for trouble.

And as I am getting tweets and messages about what's happening back at home, as our Governor is being threatened with arrest, as our neighbors are being disappeared before our very eyes, and we're going to be billed for the City of Los Angeles is going to be billed for the National Guard being called out, a city that is already reeling from wildfires and disaster.

It's not that we're destined for trouble. We're in trouble. And we're in trouble from many of the federal implications that we are trying to protect California from, including the fiscal compressions that our budget is undergoing. And that is going to certainly harm many Californians and has made this budget process very difficult. This budget is evolving today.

We are doing the best and have done the best that we can. I want to applaud staff for the many zooms and memos and updates and questions that have been answered as we've gone through this process and tried to figure out how can California make it through this turbulent time that we are facing.

And certainly we know there's more to come. Our work must continue to find the solutions that meet this moment. And I will be supporting the budget today.

But I want to be clear that it is our duty to protect our most vulnerable communities, particularly our immigrant and undocumented populations, our DEI and academic freedom institutions and programs that we hold dear, our students that are being targeted in this moment. The budget before us does protect some of our most impacted communities.

We're preserving housing programs like HAPP and Home Safe. We're restoring our civil rights investment so that we can protect our communities from discrimination and hate. We are ensuring that we're providing emergency aid to wildfire affected regions. And these are not just numbers. These are lifelines for so many Californians that we serve.

This budget also has some of the most deepest shifts in Medi Cal as we look at the cuts, and deeply disappointing for most of our vulnerable communities because we know our Legislature has fought to protect core services for all. And the growing cost pressures in historic budget shortfalls have forced us into very painful decisions.

Delays to coverage and increased premiums, particularly for undocumented Californians, are not a reflection of our values, but our reality of our fiscal constraints that we are trying to navigate. And even as we reject some of the governor's most harmful proposals, those compromises still come at a real cost to the people who rely on us the most.

As this budget comes forward. And we know there will be new ones that will need to come before us. That is not lost on what we are facing. But we have to weaponize this budget.

We have to weaponize this budget process for California to be able to protect against the onslaught of attacks from the Trump Administration and to ensure that we are not forcing our own hand to do what this Administration wants us to do, which is to reject our values and to offer our people up to harm.

We cannot do that dirty work, and we can't have that dirty work be reflected in our budget. We, we cannot turn our backs on the people, our constituents, who are bearing the brunt of so many of these attacks.

As I said, this is really not the end of our budget process, but the beginning of an unprecedented budget process for the State of California. And the federal Administration has made their plans clear.

As this budget continues to evolve and as we continue to work to struggle together to figure out ways to protect what's most important to us in California, we must preserve programs that we know Trump has put on our chopping block. Medi Cal DEI programs, reproductive health care, our arts culture, and so much more.

While I again will be supporting the budget, I will continue to engage closely with colleagues with budget to figure out solutions that also help us bring revenues to help us weather this horrific storm.

It has been an honor to work with so many of my colleagues with so much integrity through this process as we figure out ways to show a deeper commitment in the most troubling times that is facing our state. So I look forward to moving through this process, but fully expect there will be more to come.

Thank you, Senator. We're now going to go to presentations from and we'll have comments afterwards. Yeah, so we'll go to the legislative. We have Carolyn Chu with Legislative Analyst Office, followed by Jessica Holmes with the Department of Finance. And then we will come back to Senators, Senators Seyrato and Choi. I'll put you on the on the speakers list.

Good morning, Chair and Members Carolyn Chu from the Legislative Analyst Office. I've been asked this morning to give a brief overview of the Legislature's budget package presented in AB101. My comments will repeat some of the things you've already heard, but I'm also happy to answer questions when the time is appropriate.

As you know, this is the third year in which the Legislature has needed to solve for a deficit. Unlike the prior two years, however, solving the deficit this year requires making difficult choices about the state's level of ongoing core spending.

These choices are inherently difficult because the state's General Fund predominantly supports education and the social safety net programs. As has been mentioned, these decisions were necessary because the state faces a structural deficit and the underlying cost of ongoing services exceeds its revenues. The Legislature's budget package differs from the May revision in a couple of key ways.

In particular, it uses additional internal borrowing and leaves the Special Fund for Economic Uncertainties or the sfeu, the end of year balance at a slightly lower level than provided at the mayor vision 2 billion rather than 4.5 billion.

These two changes enable there to be greater capacity in the budget, which allows the solutions to be somewhat smaller as originally proposed by the Governor. Importantly, while the SFEU is slightly lower under the Legislature's budget package, the package does maintain the $11 billion remaining in the budget stabilization account.

As has already been highlighted, this is a critical tool for the legisl to use to respond to increased revenue reductions or the possibility for federal policy changes that would reduce support to the states. In terms of the ways that the Legislature's package differs when it comes to solutions, there are a couple categories that I'll highlight.

The first is Medi Cal. Medi Cal was a major area of solutions proposed in the May revision, in part reflecting that it's the second largest program after K14 education and it's one of the fastest growing programs in the state.

Under the Legislature's package, a number of the solutions proposed by the Administration are scoped down, including changing the asset test from $2,000 for an individual to the mid tier step that was enacted in about 2003 of $130,000 for an individual, scaling back the monthly premiums from $100 to $30, delaying the elimination of certain clinic payments as well as a few other delays in the MEDIHEL program in terms of changes and maintaining supplemental payments for family and women's health that were originally provided by Proposition 56 funds.

The Legislature's package also largely rejects changes in the IHSS or in Home Supportive Services program, specifically rejecting the reduction in the overtime cap and also enabling individuals in IHSS to remain in the residual program for six months in order to maintain services.

As already noted, the package also rejects the 3% reduction to the universities and instead implements a deferral to the universities but would allow them to access the cash within the budget year which would maintain their cash flow from the state.

The Legislature's package also rejects the employee compensation changes, including foregoing the provision of salary increases under the existing bargaining agreements with a number of the states bargaining units, as well as rejecting the language that would allow the Administration to unilaterally decrease compensation for state workers.

As also highlighted, there are a few key differences in the Legislature's package when it comes to augmentations.

These include the Middle Class the Middle Class Scholarship Program, a variety of housing and homelessness programs including the Low Income Housing Tax Credit, the Bringing Families Home Program, the Dream for all program, which provides down payment assistance assistance to first time home buyers multifamily housing provides a Future round of HAPP funding at $500 million and also includes the possibility for the expansion of the renter's credit to be worked on more in the future.

As noted also by the Chair, the Legislature's package provides a mechanism to provide loans to local governments in Los Angeles counties as well as Bay Area transit agencies in order to help them weather some of their current budget difficulties. And lastly, as already noted, the budget package includes funding for Proposition 36 implementation. With that, I'm happy to answer any other questions you may have.

Thank you. Department of Finance

Good Morning Chair Wiener, Vice Chair Niello and Members of the Committee. Jessica Holmes with the Department of Finance here to make comments on the Legislature's budget.

We are still in the process of reviewing all of the details of the two House budget proposal that was announced Monday by the speaker and the President pro Tem, but we'd like to make the following General observations.

We're pleased that the Legislature's budget incorporates a number of the proposals included in the Governor's May revision to control some of the growth in spending. However, some of these proposals are modified, deferred and or delayed.

In addition, there are a number of the Governor's proposals that are not rejected and while there are some new solutions I'm sorry that are rejected and while there are some new solutions, they are not of comparable savings. There are also additional investments of roughly 2.5 billion above the May revision.

As a result, the Legislature's budget does not achieve the same amount of budget savings as the May revision.

As we stated both at Governor's Budget and May revision, this year's budget is being developed under a lot of uncertainty as a result of actions by the Federal Government, particularly as it relates to the prospect of broad based tariffs on the economy and the final disposition of the mega Bill measure now pending in Congress.

We've already seen these impacts to our revenues as reflected in the May revision. With this in mind, the May revision had a sizable special Fund for economic uncertainties balance to account for some of this unpredictability. This is something that we believe is reasonable to build into the final budget.

Additionally, we believe it would be Prudent to continue to address the out year deficits, particularly in 2627 the year after the budget year. With all that.

That said, we look forward to working with the Legislature in the coming days to address these concerns and arrive at a budget agreement that is not just balanced, but one that builds budget resilience over the next several years so that we may continue to support the key programs that so many Californians rely upon. Thanks so much.

Thank you very much. Okay, we'll now come back to Members of the Committee. We'll start with Senator Richardson, followed by Senator Seyarto.

Thank you Mr. Chair and Members staff who just gave us a recap. Let me first of all start off my comments. I'm a Subcommitee chair of budget sub 5, which is corrections, Judiciary, labor and Transportation.

And I want to especially thank Nora, Diego and Eunice for their tremendous amount of hard work that they did in the process to go through many of these items so we could make the best evaluations.

With that being said, I do want to commend the chair and the staff for a few things that we were able to maintain. As the chair mentioned CSU and UC Investments, the ihhs.

I personally have a mom who we receive in home health care and if you're a person who works and we have baby boomers, it's becoming more and more important, not less important, to protect those positions and the programs. Also more specific to sub 5, we have programs even though there are cuts overall to the departments.

We're making great efforts to protect the programs that reduce recidivism. There has been tremendous amount of statistics that prove that inmates who actually go through programs recidivism can be as low as 5 to 7% as opposed to those who don't have access to the programs. They tend to come back more in the 40% range.

I want to commend the chair equally with putting funds to assist with Prop 36. When that Proposition was approved, there were no funds that were associated. So we were really left to implement the voters request and the voters direction. But we weren't given the resources to do so.

So to help with the courts, with the district attorneys, with all the different groups that have to support now those additional interactions that take place, the money had to get there to help and so I applaud the chair for that.

Lastly, I just want to point out that for future as the budget as we continue this process, this is one step now our team will be working with the Assembly to then go on and work with the Governor. I hope there will be a couple things that we can still consider.

One, the ERF funds, which have to do with encampments. Although we were able to restore 50% of the HAPP funds, the encampment piece is critical and I hope we'll keep an eye on that and see if there's any way we can help. Court appointed counsel right now for the appeal process.

Some people are waiting 2 and 3 years to be able to have their appeal process go forward. And that certainly is not justice. Murdered and missing children's program that the tribal nations have brought forward is equally important.

And then finally, I've been working with the consumer bureau with funeral and cemeteries and looking at the abandonments and the increase of abandonment cemeteries that we're going to have to deal with coming forward.

Lastly, to say I know someone, one of our colleagues made a comment about the budget and hoping for future better years, miracle and hope in the two years. I would remind everyone that within the next two years we have FIFA coming.

We have the super bowl, we have the Olympics, we have Paralympics, which we hope will contribute substantially to our bottom line of revenue that will come in. So I still believe in hope and miracles and I think that we will have an opportunity as we implement these tight changes to incorporate those going forward.

And with that, I thank everyone for their hard work and we will continue to work forward. Thank you.

Thank you, Senator Richardson. Let's go to Senator Syrto. Senator,

Thank you very much. And first of all, I want to start off like everyone else and thank the staff for all their hard work. Our questions, our comments are not a reflection on what you guys do.

You are just responding to the demands of the Legislature and the Administration and we get that. But that being said, I do have some questions. First question is, so this, this year's budget, General Fund, $232,000 or $232 billion, is that correct? . Okay. What was last year's.

I think it's 211. Okay. So you know when I go in and get a haircut because my hair gets too long, Believe it or not, it does. I don't expect to come out of there with longer hair. 10% longer hair. And that's what this is. We are asking to increase spending this year by 10%.

Inflation's down to like 3%. So what that says is, in spite of the concerns about the current federal Administration and all the uncertainties, I think what it says is, well, we seem to be wanting to spend even more Money than we had last year by much more, by three times the rate of inflation right now.

That doesn't make sense. It doesn't make sense to people in finance or in government finance. It doesn't make sense to anybody. I don't know why it makes sense up here in the state. So I want to talk a little bit about some of the things that are creating a lot of pressure on our spending.

The first one is that we are spending and looking at spending 210 to $12 billion on healthcare for citizens from other countries. And that's wherever you sit on that issue, whether you think that's a great thing to do or not. We have to figure out how to make that work better.

That means we have to figure out if we can get more revenue from the people that are participating in that process. Because we can't just. This is the second runaway train we have. We have our high speed rail, but now we have this too. It just keeps going up.

We started at $351,000,000,002 years ago for complete medi Cal and we were only supposed to be doing 2.8 for our new programs. Our expansion just this part of it is up to 10 to 12 $1.0 billion. If you don't see a problem with that, then we're never ever going to have a budget that's balanced.

And make no mistake, this is not a balanced budget. When you have to borrow $1.5 billion from a Fund and borrow, it's a loan. Apparently. We're going to loan ourselves 1.5 and then we're going to take money from reserves. That's not a balanced budget. That's an imbalanced budget being used with rainy day funds.

That concerns me a lot. We are spending $100 million on walking and biking projects. If we are in the predicament that we are in financially, I would think those are things that local governments can tackle according to what they have, what their needs are in those areas. $25 million to local governments for trash pickup.

We already have groups out there that do that. They don't need $25 million to do it. $20 million on top of $50 million so that we can wage lawfare basically on the federal Administration. And we are spending that money quickly, sometimes successfully, sometimes not very successfully.

We have 41 more million more dollars that we're giving to the high speed train on top of the 940 million it is receiving this year from cap and trade. We're going to have to make a decision about that eventually. And then there's the UI debt, folks, this is something that we should have paid down and we didn't.

We chose to send everybody a check for 300 bucks three weeks before an election. Cost us $10 billion to do that. And guess what? Right now we're going to pay. Not 638. I've been misquoted. It used to be 638 when we started the year.

It's $643 million on interest payments, not to mention what our businesses have to shoulder for the principal. So that's not working very well. And in a hearing earlier this year, it was indicated that within two to three years, that's going to be $1.0 billion a year. Well, we better start working on it.

And if we have $20 billion more to spend this year than we had last year, then I would think half of that should be spent paying that UI debt down because then we won't have to make all the cuts that everybody is talking about that we shouldn't be making.

So some of the things we should be funding Prop 36, my colleague from Encinitas, she said that should be funded and she is absolutely right. But we're not funding that. We're actually taking money from the probation officers, who are actually an important link in that whole public safety process to make this a successful program.

We're not investing in the court system like we need to to make this happen. So we're doing $100 million just this year, though. What about the years to come? You can't plan if you don't have more funding and you don't make a concerted effort to say we are going to spend. This is how much it costs.

We can figure out how much it costs, but we just won't. So we throw $100 million at it, take a bunch from the probation officers, weaken them, and then expect next year to be better based on we hope we have more revenue. Remember, the Olympics is like four years off, three years off, I guess.

So, you know, that money's not going to come down the, you know, come down to us anytime soon. We have an insurance problem in California and we have to figure that out.

And that might be a solution that we're going to have to look at responsibly and buy down some of this insurance risk that we have in California. We have reimbursements for developmentally disabled service providers that needs to be maintained at levels that work for them.

Our medi Cal reimbursement rates, MCO tax, all that stuff we did a couple years ago.

We were concerned that, okay, we're going to going to do the MCO tax and we're going to use some of it for the General Fund and then the feds are going to give us money to reimburse medi Cal, but we're going to use some of that money for reimbursements that we're not supposed to be making.

It's almost like money laundering. And you know what? That's where our Medicaid cuts are going to wind up being is they're not going to do. They're not going to reimburse US for the $10 billion of medical payments for citizens of other countries. They never have. And this year we're shifting even more money from the MCO tax.

Instead of increasing the amount of medi Cal payments for the people, the rest of the people, so that the hospitals can survive, we're shifting more out. That doesn't make sense. We need additional judgeships if we want Prop 36 to work sincerely.

We need to make sure that our judicial system can handle what they need to do the load that they're given in an appropriate way.

So that's just a few of the concerns I have about how we do budget. And the other one, talking about my colleague, you know, he mentioned this a little bit yesterday. I sat in sub 5 and we approved all of the different recommendations we had for this budget at 8 o' clock in the morning.

It was a great meeting. Our chair has done a great job this year. Four hours earlier is when the budget came out. How can the budget come out if we hadn't approved the stuff that we were talking about? Is that worth.

Are we even being considered the things we talk about in Sub 5, which include a few things that I've talked about here? No, that's the budget process. And these things should have been done weeks ago. We shouldn't be coming up on the June 15th. If we don't pass our budget, you know, nobody's going to get paid.

And so everybody's worried about that. They should be. Our budget process needs to start a little bit earlier, needs to be more concise. And you know what, it needs to be more inclusive. Because when you come out of budget negotiations and only one side is there really negotiating.

And I'm talking about the negotiating part, not the part where we're in our meetings and we get to spout off every once in a while, that's not a budget that reflects the values of all of California. That's a budget that reflects the values of some, but not all.

We need to work on doing a budget that reflects on all. And it also reflects on the things that we need to do to help people. Everyone, not just select groups of people, everyone to be more successful in their lives here in California. Tired of watching people move out along with their tax dollars. One other question.

Are tax revenues from income taxes? How are those up, down? We had a population increase last year of 138,000 people, according to some reports that I read. Where are we with. So our tax revenues, especially income tax, should be reflective of that.

Yes. So currently personal income taxes are running about as where was expected at the time of the mayor review. So we're not. We are not yet seeing sort of the shortfall necessarily anticipated for the budget year, but the revenues are currently holding on as expected.

So in spite of our population increase, they're basically staying level or below level.

That reflects some growth year to year, particularly in withholding. Withholding has continued to be an area of growth in terms of the personal income.

The withholding part. How about after we get done paying people back, the part that got withheld that turned into income tax refunds. In other words, our total income from income taxes that we're continues to grow.

Yes.

Not just withholding, but correct.

Yes. The underlying pit continues to grow.

What is it? Do we know? Have an estimate for next year?

Yeah. Colby White, Department of Finance. So with regard to looking at like if you look at the big three taxes together, for example, in 23-24, which has been finalized with the May Revision, we grew 8.1% over the prior year.

And then the forecast in the May Revision, which was downgraded, is still forecasts 9.1% growth in 24-25. We do project negative growth in 25-26 based on the impact of tariffs, economic uncertainty, reduced business investment and things like that.

With regard to these most recent two years, for example, either there has been significant growth in revenues.

I understand some of that projections on the negative growth was related to the stock market and things like that. Correct. Because of the tariffs.

That's correct. Also reduced employment and things...

That's also true.

Although the stock market isn't exactly reflecting that concern right now. Pretty much back up where it was.

All right, thank you. That's all. Thanks.

Okay. Senator Weber Pierson, followed by Senator Choi.

Thank you. Thank you Chair. I want to start like everyone else by thanking the staff. You all have done a tremendous amount of work in a very short amount of time. Definitely want to give a shout out to the staff for Sub 3.

I know that they have put in many, many, many hours trying to read over information, engage in conversations, produce documents and have meetings and stuff. So I want to acknowledge that.

I want to thank our Chair Wiener and the Pro Tem for the long hours of negotiation and deliberations with the Assembly and the deliberations that they will have in the upcoming days with the Governor and his staff.

You know, I do want to start off by saying that I do have some concerns with us dipping more into our rainy day funds. There's a lot of financial and fiscal uncertainty in the future.

You know, we are definitely going to have to have some very serious conversations about different sources of revenue if we want to be able to continue to do all that we're doing for the residents of California.

You know, that being said, this was an extremely difficult budget year, especially in my budget budget step three of Health and Human Services. Much of the discussions that we had in our budget was around in home supportive services and also the unsatisfactory immigration status population.

You know, so much of what we do in Health and Human Service area is severely, severely impacted as well by the Federal Government. Many budgets are augmented and backed by the federal dollars, much of which have been cut, are proposed to be cut or under threat of being cut.

And so what we have done here, I know we're going to have to go back and unfortunately do more based on what happens in Washington D.C. and that really is very, very unfortunate. You know, as stated, you know this year is not as bad as previous years in terms of our deficit.

This year is projected to be just one of many future difficult budget years. And in previous years we were able to find solutions by eliminating, you know, one time spending or other things that were a little easier to cut. But those options were not available to us this year.

And you know, I know that no budget is perfect. No one is going to be happy with everything. You know, I personally am concerned about our Prop 35 plan. I don't think that it really aligns with what the voters voted for.

However, I do believe that overall our budget continues to keep many of our promises to ensure that our most vulnerable Californians are safe and healthy. We rejected and have decided to fund and align are the values that Californians hold dear. And in order to uphold the critical health and social services that we hold dear.

I want to be very clear about something. We are not disenrolling anyone from Medi-Cal. I said it yesterday, I'll say it today and I'll say it tomorrow and Friday. We are not disenrolling anyone from Medi-Cal. No one who is currently covered will lose their health care coverage.

And in the future, if anything happens, administrative error, somebody forgets something, they get disenrolled. They do have six months to re-enroll. That was a promise that California made and that is a promise that we have kept within the constraints of our current realities.

Monthly premiums for our UIS population will be implemented. Our proposal is $30 a month and stops premium pay rates for our seniors and the seniors in the UIS population. We will not cut long-term care and in home support services for Californians with an unsatisfactory immigration status.

And this budget also recognizes the importance of our IHSS workers to their patients, their families, and more important importantly, the continuity of care. And that is why we will not be capping providers for 50 hours of in-home supportive services. And we know the seniors and elderly in our UIS population should not pay more for Medi-Cal.

And that's why that asset limit that was proposed in the Governor's May Revision of $2,000 asset test, we decided to bump that back up to where it was in 2022 of $130,000. So this does not punish our seniors who may have saved a little bit of money.

And California has been, and we are ensuring that we will always be, a reproductive freedom state, a state where other states will look to when they're talking about reproductive justice and women's reproductive rights and the ability to get comprehensive health care.

And so we will not be cutting funding to family planning services. We will hold the line against any cruel federal cuts to family planning services in this budget.

Additionally, one other part of this budget, at least within the Sub 3, which is critically important, is that we have ensured that there is oversight, making sure that organizations and programs that this state funds are held accountable.

We require data collection and audits to ensure that the programs we are funding are actually helping those that it is intended to serve. This budget, which has been negotiated by leadership, will hold the lines against those cuts which target our most vulnerable and stand in line with California values and promises.

Once again, I really want to thank our leadership, our Chairs, for their tireless negotiations and for the talks, the many, many, many talks that they will have to have in the week to come.

And again, I just want to remind everyone, especially in the area of health and human services, that because of what is happening at the Federal Government, unfortunately today is not the end. It is just the beginning.

We will be having many of these conversations in the next weeks and months to come, but I will gladly be supporting the budget that we will be presenting today. Thank you.

Thank you, Senator Weber Pierson. Next is Senator Choi.

Thank you, Vice Chair. I would like to also comment. Chairperson Scott Wiener and the staff members are working so hard to come to this point. Despite all the hard work this budget ends in many areas that I have questions. Basically annual state budget should be balanced. I wonder.

Basically, our state is a place so many people want to live and work and do businesses here. But because of a lot of regulations and high taxation, as you have seen, so many businesses have packed and left our state. Not only businesses, but regular people have left, a lot of them, to other states that they have chosen...

...they may see it as more favorable, such as Arizona, Texas or Tennessee, such areas. But even then there are some good light. We have seen that the population is trending up a little bit. As we see the state revenue largely all come from taxation, businesses and personal taxes.

So basic common sense is that we need to the state has to provide more incentives for businesses to start here and stay in this state. But the trend has, our policy has not been as such to entice those business to stay and to continue businesses and then attracting other businesses out of state.

So I think we need to really review our policies and taxation policies. How we can entice those businesses to do our their business in our state. And when you project based upon the revenue projections and expenditures based upon current programs. I mean you got to do balancing.

But continuously trying to spend the money spend the money without any limitations. I mean that is to me is causing this such an imbalance. I wonder what exactly amount of the deficit this year you are anticipating. The latest number I heard was $120 billion. And to balance it the revenue to balance the budget.

How many billion dollars will have to be borrowed from the rainy day funds. And only what the $7 billion will be remaining. Whether those numbers are correct and how this is $7 billion next year projections or revenue projections. How much that the remaining balance will be sustaining in the future years. That worries me.

And specifically a couple areas I would like to ask question is that I heard internal $1.5 billion cash borrowing internally. I wonder what the difference is. You know that is to the budgetary borrowing. Internally from where do you borrow that money from? Okay. And I don't see any.

We have seen the wildfire devastating damages and billions of dollars we have seen in Southern California. And largely those fires come from the high energy power lines. So I proposed a Bill to do a comprehensive study how much it will cost and what the status of the undergrounding of high power lines have done.

And shielded lines as necessary can be used. And then we can compare the cost. But unfortunately that my Bill died in the in the Committee. And to me prevention is a wiser way. Even though there's what 110, 100 million dollars have been allocated to hire permanent firefighters budget. But that is fire mitigation firefighting.

But no matter how many people you may hire firefighters against the recurring wildfires continuously firefighting and against a high wind. And no firefighters will win that fire once that fire erupts. To me they say wiser investment is preventing such a fire causes.

And my common sense is that over 90% of the previous wildfires were caused by the power line, downed power lines. So how we can prevent that and undergrounding is one of the sensible ways common sense for the future continues. No matter how much we may try to increase our ability to fight the fire.

But the fire is going to erupt every year. It will come up year after year. But can we find ways to stop the cause of the fire? If we stop the fire, then we may not need as sophisticated equipment or firefighters.

So in that address, I don't see any improvements or investments in the budget, which really is disturbing to me. One other area that you are in the deficit is that continuous Medi-Cal expenditures, regardless of the status of the person, legal status. I mean this is just attracting so many undocumented people to California and get covered.

I mean the humanitarian, the reasons you can say that how can we not cover. But this is an endless fight whether we should provide continuously regardless of their legal status. And then we come up with the budget deficit that is currently you are borrowing $1.5 billion.

And how much of those deficit in Medicare spending has been caused by the. By the expenditures that you provided for undocumented people? I would like to know.

And then also when you saw that the emergency situation that you could not take any new enrollments, but it's not going to take place until next January 1st, why can't we begin July 1st? I mean if there's an emergency situation, we can take the action right now. And that's the period we are inviting.

Hey everybody in the nation, you can come to California, enroll in our Medicare system which will be free for you. And the $100 premium was too high and cutting that down to $30, that doesn't make any sense either.

So for many of the concerns that I have in the Bill, but some of the questions I have raised, if you can answer me, I appreciate it.

Sure. So perhaps I could provide some framing comments about where the budget started and the use of the $7 billion from the budget stabilization account and then how the budget situation evolved over the course of the year and sort of where we find ourselves today and some of the solutions employed across the the May Revision and the Legislature's package.

So rewinding the clock to June 2024, at that time, the Legislature was looking at deficits in both the budget year, which is now the current year, 2024-25 as well as 2025-26.

At that time it was proposed and the Legislature undertook an effort to not only solve the budget problem for the upcoming budget year, but also for the next budget year. So the package in June addressed the budget year, which is what is constitutionally required to pass a balanced budget.

And then it also took proactive steps to reduce largely one-time expenditures, but also make a plan to withdraw $7 billion from the rainy day fund to help address that projected deficit for 2025-26.

And at that time, I think if I'm remembering correctly, the total solutions were around 20 billion for 2025-26, maybe a little bit north of that.

So then in January, both our office, the LAO, and the Administration anticipated that the budget would be roughly balanced, that the actions in June would be sufficient to have the upcoming budget year have that balanced budget, meet that balanced budget requirement.

Since that time, we've had both erosion in revenues and increased costs, so on both sides of the ledger. And that resulted in May in a projection of a deficit of about $12 billion. So that's the deficit that the Legislature is solving for now, about $12 billion. That's the current deficit.

So in the May revision, the Administration proposed a package of different types of solutions, including spending reductions, cost shifts, fund shifts, and those were the major categories. Not withdrawing additional funds from the budget stabilization account. Moving to this legislative package.

The biggest changes are that there's additional borrowing, internal borrowing, partially with cash, some from special funds, in order to help balance the budget. So you referenced the $1.5 billion that is internal borrowing. There's also increased cash borrowing for the Medi-Cal program through the earlier action.

Deliberate internal borrowing. What that means?

So there's two different kinds of borrowing that the state can undertake when it comes to internal borrowing.

One are special fund loans, wherein, on a budgetary basis, the state borrows funds from special funds to the General Fund, which creates an obligation for the state to then repay those special funds in the future.

The state has also undertaken in the past, and inclusive of last year, essentially internal cash loans, where the state utilizes the rather extraordinary cash position that the state finds itself in to help move money in order to cover expenditures on a cash basis and then later reflect those expenditures on a budgetary basis.

So one of the larger examples of this type of approach was used when it came to Proposition 98 last year, wherein, essentially, schools were provided about $8 billion more in cash in the prior year than the Proposition 98 guarantee would have otherwise said they should get.

So we had a misalignment between what the state had given to schools and what, on a budgetary basis, the state was required to have given to schools. So in order to bring these things into alignment, we essentially gave the states a cash loan that on a budgetary basis we are reflecting over the next few years.

The state recently did this, or is undertaking a similar approach, when it comes to Medi-Cal, where There was a $3.4 billion cash loan in the current year in order to cover Medi Cal expenses. And those budgetary costs will be reflected in the future.

So as it stands right now, we have differences between General Fund cash expenditures and sort of what the budgetary documents reflect for the General Fund. And eventually these things do need to come back into alignment.

And so those are the two sort of main types of internal borrowing that we can have on a special fund budgetary basis and on a cash basis. And the legislative package uses both, both special fund borrowing and cash types of loans.

And so in terms of the Legislature's package, the Legislature's package does increase the overall level of borrowing as compared compared to the May Revision. And then it also reduces the level of the special fund for economic uncertainties.

So the end of year balance estimate from 4.5 billion to 2 billion and those two actions in combination create, you know, about $4 billion in additional budget capacity that are used in the Legislature's package to reduce the scope of the solutions.

So paring back a number of those solutions as well as provide augmentations in certain areas of legislative priority. But the budget stabilization account remains at the expected level based on the June 2024 package of about $11 billion. So those resources are not used.

One, perhaps one last additional point I'll just add on is that the state does have a very, very strong cash position. The state has about $100 billion in cash. That's across all of the state's different funds. The General Fund, GGRF, you know, about 600 special funds that the state has.

So this is a way in which that the Administration originally proposed and the Legislature has used to try to help bring the budget into balance in the short term.

So in the $3.4 billion, the makeup of the...

Medi-Cal.

Medi-Cal. In that how much was due to supporting undocumented people? Do you know, do you have that data?

It's not. The way that we account for Medi Cal is not necessarily broken out by those in those specific categories of assistance.

You don't distinguish.

No. But you know, our office wrote a few different pieces on areas in which Medi-Cal costs are coming in above expected. The expansion to the the individuals with unsatisfactory immigration status is one category in which costs are notably higher than expected.

So in that category cost. That's what I'm asking.

But so the loan was not specific to that specific area of cost growth. It's not the only one. That is one. The senior population growth, senior and individuals with disabilities growth was another. As has pharmacy been another area of growth.

But there are others. Per Member per cost, per Member per month costs are running quite a bit ahead of expectations. We've not yet been able to get our hands around the underlying reasons for that.

That among many categories. I hear that, but I was asking undocumented category how much Medicare cost expenditure..

Is above estimates. We'd have to defer to the Administration on that particular item in terms of how far above cost they are. They have the better insight into that.

And I'll defer to my colleague Loriela.

Laura Ayala, Department of Finance. The cost to provide services for undocumented individuals in the May revision was approximately 2.8 billion higher than the 2024 budget act.

2.8 billion.

Two point what?

$2.8 billion. That's majority. Okay.

And there were- there were other costs in pharmacy as well. Over a billion for all MediCal- for all MediCal members. So there's- there were increases and there were other decreases. It's not a one for one. Accounting for the total.

By the number, do you know how many people are in that category?

There are approximately 1.6 million individuals.

1.6 billion people. Okay, thank you.

Okay. Senator Choi, is that all?

Yeah. And one more question I want to clarify. After borrowing the fund from the rainy day fund, how much will it be left in the rainy day reserve funds.

In the budget stabilization account is anticipated to have about $11 billion left at the end of the upcoming budget year. Yes. The borrowing does not come from the rainy day fund. It comes from sort of the pool of the cash resources.

We are not withdrawing from rainy day fund.

There is a withdrawal. There is a formal withdrawal from the rainy day fund that was planned as part of the 2024 Budget act of $7 billion. So that draws down the fund from about 18 billion to 11. It's not a loan. That is a withdrawal. And then there's the remaining 11 billion.

The remaining is 11 and a half.

Yes.

Thank you.

Okay. Thank you, Senator Choi. We'll now go to Senator Perez, followed by Senator Cabaldon and Senator McNerney.

So I want to begin first of all by thanking all of the staff that have worked on putting this together and, you know, getting us a balanced budget. And I appreciate, you know, both the chair, Senator Wiener, and our leadership for working so hard to get this done. These are really challenging times.

I recognize that we're facing a huge budget deficit and I share with my colleagues around, you know, the concerns of us relying on rainy day funds on our reserves in order to create a balanced budget.

But I think what you see here is us trying to maintain the values that we have here in California and make sure that we're continuing to provide the necessary life saving services that so many in our communities rely on.

You know, I was particularly proud to serve with Senator Laird on the Budget Sub One Committee and felt like we made significant progress around so many of the items that we prioritized. We've rejected all proposed cuts to K through 12 education.

We brought down the proposed 3% cut for the UC system and the CSU system down to zero. You know, we've also cut the or removed the cuts to the middle class scholarship and have actually increased funding that is going towards some of those necessary scholarship programs that we know so many of our students rely upon.

We see funding in this budget for literacy, something that we know is so necessary because California has struggled to see our numbers improve around literacy rates for students across the state.

And- And in addition to that also see funding included here for school nutrition based programs, expansion of those programs so that we are able to expand universal school meals, something that's very important to me.

I have legislation in this space so that we can offer school time meals to children even during the summertime months because we know that that is such a critical time for families. Other things that I'd want to highlight, including items that were included outside of my budget subcommitee is funding for children and youth behavioral health initiatives.

That was something that was incredibly important. We know so many of our young people are struggling and facing challenges with their mental health.

I can tell you, particularly in Los Angeles, for so many of our students that went through navigating the fires and are now facing the uncertainty of immigration rates in their communities and watching this happen across televisions and frankly across the State of California, it's been incredibly alarming, it's created a lot of uncertainty.

And these are the kinds of services that our kids need and that they rely upon. Other items that I'd like to mention is around our HAPP funding. You know, we've talked about this so much. Homelessness continues to come up as a priority for the entire legislature.

I'm sure if you went to any City Council, any LA County Board of Supervisors, you would find that this would come up as a top priority for pretty much any elected in the state. But we have to ensure that we're continuing to fund shelters that were providing adequate funding to actually get folks into housing.

Because if not we are going to see more encampments out on our streets. And we were able to put $500 million back towards this program. We know that this was something that was incredibly necessary.

As well as expanding the creation of affordable housing and adding $500 million of low income housing tax credits, which we know is so incredibly necessary because we need more affordable housing now more than ever. Especially as we're continuing to see folks fall into homelessness.

We need to better build out that safety net system so that we are able to support those folks that need affordable housing. The last thing I want to mention is the fires. I think pretty much everybody knows that I represent the Altadena and Pasadena area.

This has been a huge priority for me given the devastating impacts that we've seen the wildfires have on my community as well as Senator Allen's community in the Palisades. And we are going to need a number of resources in order to adequately recover.

Altadena has entire water systems that have been wiped out that are still not on. We have places in Altadena that still don't have access to clean water, places in Altadena that are still, that still don't have a permanent electrical infrastructure in place. These are things that need to be rebuilt. It is going to take time.

People need housing desperately. And frankly, there's been so many challenges that we've seen with FEMA. FEMA has a direct leasing program that they have refused to open up to the state because they are arguing that there is adequate housing available for those that lost their homes in the fire.

And so this is a program we've not been able to participate in because their methodology for determining who is eligible, it does not take into account a huge county like Los Angeles. And so they're using housing availability in the Antelope Valley to justify not allowing us to access those funds.

In addition to that, we've seen FEMA staff be cut significantly across the board, which has delayed resources getting into the hands of people that lost their homes. And this has created an absolute tragedy for my community. We are constantly dealing with phone calls to try to help people with navigating the recovery process.

This is almost 100% of what my staff does now, full time, on top of receiving phone calls constantly about ICE raids that are happening throughout our communities. So I cannot even begin to express how critical this funding and these dollars are. I appreciate that this, you know, has been identified as a priority in the budget.

Altadena in particular is an unincorporated community. It is not an incorporated city and therefore needs different resources than per se an incorporated would have access to. So really happy that that was included. And this is going to be an ongoing conversation.

As we know, as we've seen in paradise, the recovery process is going to take many years and I'm expecting this to take the next six to eight years. Finally, also want to mention that I appreciate that we've rejected the IHSS overtime limits that were placed.

We know that those workers are so incredibly important and so incredibly critical and ensuring that we're protecting them and making sure that they have the resources that they is incredibly, incredibly important.

But I also want to highlight something, and I think many of my colleagues have shared this already, which is, this is probably not the last time we'll be discussing this budget. We've seen attacks to our budgets already by the Federal Administration, particularly targeted attacks towards our education systems.

We are now facing threats of cuts to our K12 schools, to our colleges, to our universities over the guise of anti Semitism, over the guise of us not removing DEI programs and arguments by the Federal Administration that we are somehow creating discrimination and over our protection of trans students. This is absolutely absurd.

You have the federal administration attempting to move his own political ideologies and pressure them onto the state by threatening to cut some of our most necessary- necessary services for disabled students, for low income students, funding that we know that all of our institutions desperately rely on.

And in addition to that, we know that we are also potentially looking at additional major cuts if we see the big ugly bill pass. This bill would create huge tax breaks for billionaires, for millionaires, for corporations. And that in itself is going to create massive budget challenges for us here at the state level.

In addition, despite having this discussion around having cuts so that we could create these huge tax breaks for millionaires and for billionaires at the same time, we are also seeing millions be spent on ICE raids. I was told that this past week alone over $100 million were spent on the ICE raids that happened in Los Angeles.

And so this is a huge cause for concern. We have the National Guard, who's typically on the state's payroll being deployed in Los Angeles. Right now there is a fire that is happening in San Bernardino county and they are understaffed because the National Guard is busy responding to LA protest.

So I just want to highlight that we are going to be entering some very tough conversations. We are going to need to do things differently. We are in the middle of constitutional cris and to pretend like it's business as usual would be absolutely absurd.

I think we need to begin to have tough conversations about holding some of these same billionaires and some of these same corporations accountable. We are not going to continue to be able to cut our way to a balanced budget. And anybody who thinks that is absurd. We need to have a conversation around revenues.

And that includes us talking about the fact that you have large corporations that are actively and ensuring that their- their employees are not working full time so that they don't have to pay them benefits so that they can then rely on our own MediCal system and holding them accountable to pay for the services that they're utilizing.

If we are going to have corporations going to the Federal Government to get huge tax breaks, then we need to start having a conversation about taxing corporations at the same state level. Why are we constantly having conversations about tax breaks for billionaires and for large corporations, but we're never having conversations about tax breaks for working people?

And that is the conversation we need to begin having. Continuing to try to balance this budget on the backs of working people is not going to work. Continuing to try to move towards cutting our way to a balanced budget is not going to work.

We need to have the tough conversation around revenues and we need to have the larger conversation about what's happening across the board. When I talk to people every day, California doesn't matter which political party they are a part of. People feel like their pocketbooks are shrinking.

People feel like they're able to not spend as much at the grocery store because prices are soaring and they are making less and less. Wealth inequality is continuing to grow at a rapid rate. And it is not just here in California. I have family all over the country, Arizona, Nevada, West Virginia. And the feeling is the same.

So at some point we need to start holding these folks accountable. And this is having impacts in real time on all of us, on the very services that we're providing. And we need to start responding and fighting back. But what is happening in Los Angeles is not just unconstitutional, it is creating a budget crisis for us actively.

And I completely reject the idea that the federal administration has tried to justify that they need to make all these massive cuts to food programs and to health care and to all of these other necessary programs, but yet they can find $100 million in a single week to militarize our police forces, to go after protesters and to have tanks rolling down the street like they've initiated martial law so that they could perform ICE raids against garment workers.

So I appreciate the work that's been done here by the Budget Committee and the budget staff. These were very, very tough decisions to make and I think that they've done the best given the circumstances.

But I want to highlight that we are probably going to have to revisit these conversations and we need to have the tough discussion around revenue. Thank you.

Thank you, Senator Perez. Senator Cabaldon.

Thank you, Mr. Chair. First, as chair of the Subcommitee on General Admin, General Government, I also want to thank the staff of the Committee, particularly the staff that has worked on all the issues in Budget Subcommitee Number Four. And the members of that Subcommitee, Senator Smallwood-Cuevas and Senator Niello. We are the-

Our committee handles the miscellaneous category of everything else. And we were able to find several, many, many items to reduce and to cut hundreds of millions of dollars in order to try to contribute to the fiscal situation.

Many of our programs are special fund, but I'm also proud of the work that's been done in order to at least signal our- our future with respect to HAP. I hope that we will get to a larger amount and to an ongoing appropriation for HAP. Homelessness is not going away next year with half the money.

We must make a commitment on a permanent basis in the permanent services and shelter and forever housing in order for that to happen. And I'm also encouraged by the- by this bill's inclusion of some significant, inadequate but significant investments in affordable housing production that the number one barrier to affordable housing in California right now is financing.

And so the resources that are in this bill proposal before us for the low income housing tax credit for the multifamily housing program are critical and very much appreciate the work of the chair and pro tem and others to assure that they're there. We also need to invest in CalHome and other efforts as well.

But those are significant and I'm very proud that we've been able to at least move the ball forward. We have spent in our subcommittees 60 plus hours in a dozen hearings on this budget. And the priorities that have been expressed in our subcommitee are reflected in this.

Even though if you go down the top three or four, they're reflected. We had another 117 priorities that are not. But this is an important step for it. I think what's remarkable about this budget though and the budget bill that's before us is how precedented it is. This is a normal budget to be before us.

I've been in and around this building since 1989. This is the- This is the standard budget. I've been in city halls where we've had to close parks and fire stations and everything. This is a normal budget.

If you've gone to the emergency room, the triage nurse and the doctors are having to make real time, game time decisions about who get- who gets served and they've got that are- that are maddening. And then you have to get up in the morning and do it all over again every single day.

Families around California are doing- are making these kind of tough choices and tough calls every single day. And so although this is a challenging budget, we are not special in having to grapple with hard choices and we've neither in space or in time are we unique in California and in extent I think it's.

We should recognize that the pain that we are feeling is the same pain that households and small businesses and nonprofits are facing throughout California.

We have the last, you know, the seven or eight years of the stock market boom and then all the federal resources that came for the pandemic allowed us in some ways to think that our job was just to look around the world and see who needed stuff, who deserved something and what initiatives and great ideas should we launch.

And perhaps our discipline was eroded about what our real role here, which is to govern California, make sure that the essential services that we're providing are sustainable fiscally. And so I regret that we're in this situation as well.

I do know that in a week or two and then in a month, and then who knows, God knows how many times over the next coming months and years, we're going to look back on- on today, on June 11, 2025 thinking these were the good- this was the good times for the Budget Committee as we were able to advance a budget that is- that is awful in many ways, but it at least reflects our core- our core values in that sense.

So I share a lot of the concerns here about the- the trajectory that we're on, the deferrals that we've had to do, the reduction in the rainy day fan- the rainy day fund.

And I know that, that these discussions will continue because we do have to, we have to recognize that this is it's not a one year blip that we're facing. Even- Even if nothing else happens, which of course we know from- from, you know, based on what's going on in Los Angeles around the country, that more is happening.

But even if nothing else did, this- this is our future. All the projections from LAO and the Department of Finance and everyone else have confirmed over and over and over again.

And so I hope we continue to look with a skeptical eye about some of the- the deferrals and putting off of tough decisions because we need to make them and we also need to make be real about what we can do in order to meet all of the needs in California.

But I do think this is an important step forward. I also want to, from outside of my own subcommitee, particularly thank my colleague from- from San Diego and the members of that budget subcommitee who have had the toughest challenge because that is the largest growing part of our budget in health and human services.

And but that's also meant very, very hard choices. So very much appreciate their work. And then to thank the chair and the leadership for their steadfast advocacy for higher education and for UC and CSU. As has been noted by the chair of that subcommitee, there are cost of living issues and what have you that aren't addressed.

So there's a haircut there. But also there have been 7-800 million, maybe $1.0 billion of cuts already from the Federal Government to public higher education, particularly to our research institutions and our comprehensive institutions. And so we have to account for that as well.

And so appreciate that we have prioritized that, look forward to the negotiations with the administration, hope that we will continue to advance on homelessness and housing and also appreciate our work on the renters tax credit as part of this- as part of this proposal.

But let's hunker down because this is going to be, this is only step one, hard choices, but they're going to get harder.

And we- we have to- we've got to continue to- to budget responsibly in a way that's going to, that recognizes the challenges that Californians, small businesses and nonprofits are facing and that we're tackling it with the same seriousness that they are. Thank you, Mr. Chair.

Okay, thank you. And I also just want to note for members of the committee and for members of the public, if we do not finish the hearing by 1:15, we will recess and we will reconvene after Health Committee, which means late afternoon. So I just want to note that for everyone. Okay, next we have Senator McNerney.

Well, first of all, like everyone here, I want to thank the chair for your patience and hard work. It's been a difficult process and the staff who's worked so hard on this, it's clearly evident in the product.

California is truly a great state and our budget needs to reflect that and let that be the way of the future. Identifying our collective priorities in the senate has given the chair and the pro tem a tremendous hand in the negotiations in the budget moving forward.

Clearly, not everyone is going to be satisfied with the budget, but the budget does work for the people of California. And one thing I want to note clearly, with the challenges that we're facing, we cannot forget about the great expenses that climate change is going to be bringing upon us in California in future years.

But this morning I want to restrict my comments to things I'm happy about with the budget. And I'll forego now the things that I'm not so satisfied with. First of all, I'm very pleased that there's money for HVIP from the Hino settlement for the air quality in the valley.

Air quality is a big deal in the Central Valley. We have asthma, we have valley fever, other things that are detrimental to the quality of life. And this is a big help in that regard. I'm very happy about money from Hachap and Heap. Also very welcome in the Valley. Homelessness is an issue that pervades California.

We have our share of it in the Valley and this is going to be helpful. I'm grateful for funding for Delta levee repair in the Delta area. We live with levees with water that are higher than many of our city streets and homes that we want to make sure that those levees have integrity going into the future.

I'm also satisfied with the restoration of UC and CSU money. The University of California and the California State and the other private universities are a real jewel for this state and are real economic dynamism that help the state grow and be powerful and be wealthy and prosperous.

I'm grateful that the budget policy I'm grateful that this budget keeps policy issues out of the budget process and I don't really want to go into details on that. I look forward to continuing discussions on Prop 4 and GGRF funding. Thank you.

Thank you. And Senator McNerney, I can't promise that you'll be able to make the same statement over the course of the summer. So as our budget trailer bills come forward. But thank you for that. And next we have Senator Menjivar followed by Senator Allen.

Thank you, Mr. Chair. First, like so many of my colleagues thanking you and our pro tem, I know they fought like heck to get us to this point to pull us really far away from one of the most, most draconian cuts. So I do, I recognize that and I see that.

I mean we removed trigger language from so many of the human service projects that we promised people was going to start at a certain time. We added back housing programs.

I know most people talk about the HAPP program, but in the human services world there's two really great housing programs that actually have a track record that we can hold accountable and it's really successful like bringing families home, you know, and programs for seniors who have been abused, foster youth reunification purposes.

And for the past few years, you've seen me in sub 3 really get into the weeds and be upset of certain things. But I voted for the budgets for the past two years, even with items that I wasn't fully happy about.

Like last year, the six month delay to DDS rate reform wasn't super happy about it, but I still voted on it because I'm not naive and thinking that, you know, just because I didn't get every we didn't get everything in our budget, we shouldn't vote for it. So I've voted on things that I didn't like.

But there's also certain things that morally I just feel are detrimental, especially as an LA Member representing areas that are under attack right now during a time that I know the Federal Government is going to come down and push us to do more cuts.

It just for me felt, why would we make- why would we do this to ourselves if the Federal Government's going to do it to us? I thought it was a bit prematurely.

I do recognize that we have a problem with our structural deficit, but we always seem to not struggle with cuts, but struggle with taxing our large corporations. And that dilemma confuses me as to why it's harder for us to tax large corporations and easier for us to accept cuts to people.

Our revenue streams have not changed, but as a great state, we've invested in so many services, services that are so beneficial to a lot of people. And I commend the administration, the body before me and the body before that, that is invested in our IGD population, our foster youth, or so many master plans that have happened.

But our revenue streams have not changed, even though we're investing so much. So I do believe that structural deficit can only be addressed if we change what revenues we get. Stores are closing, so our sales tax is reducing. We've had hearings on the gas tax revenue reducing.

But at the same time, large corporations continue to take advantage of our tax system through things like the water's edge loophole where corporations get to send their profits, some of their profits overseas so that they only get taxed in a certain bracket and we're not taxing them at the full capacity that we're able to tax them.

We taxpayers are subsidizing large corporations who refuse to provide employer driven health insurance to their employees, whether be it by putting them on part time because they know if they put them on full time, they have to provide them health insurance or refusing to increase their wages.

And if you increase your wages, you're no longer eligible for MediCal. So you keep them at a low wage. They have to be on MediCal. We're subsidizing a handful of corporations, we as taxpayers. So why is it so hard for us to look at that and not tax large corporations?

But it's okay and acceptable to break a promise that we made to community members. And I keep using this analogy for those who are married, in sickness and in death when we make a promise, we made a promise to a demographic that we were going to provide services.

We did not say footnote only when we have a healthy budget, footnote only when it's easy for us. We said we were going to provide this service in a sick budget and in a healthy budget.

And we've been providing some of these services to expansion since 2016, and we want to freeze for 19 and over when that's been in play since 2018 or 2019, if I'm not mistaken. So for 2019. So for six years now we've had this system and now it's a problem.

I think the principle for me is like, why are we making promises that we can't keep? People have already a decreased amount of trust in government, and when we continue to go back in our ward- on our words, it makes it even harder. And it's not just this program.

Sub 3 for the past 3 years has to defend- has had to defend programs that have been on the cutting board for the past three years. And these are programs that we made promises. And then two years later we say, oh, maybe not. We want to put a trigger when it's convenient for us. And if I get

some people at their core don't have a problem with freezing for individuals who don't have certain documentations at their core, they believe we should not provide health insurance to undocumented individuals at that core. I can never change that individual's opinion of this. Morally, I'm not okay with that. But this is also cutting people with legal permanent residence.

So I don't understand the justification. If you don't want to provide for those who are undocumented, this also freezes for people with proper documentation. The UIS population is not just undocumented people. It's legal permanent residents. That also baffles me if we keep saying you have to do this the legal way. They legally have legal permanent residents.

Why are we freezing MediCal for them? It's been difficult to manage or go through this budget and then also see people that look like me get arrested while working or who are pregnant and have guns pointing at them with their kids in their backseat.

Difficult for me to go back to my community and say, like, I stand with you in a rally, but I also am going to vote for something that takes away some of the things that we promised you. Morally, that's been really difficult for me. But I know there's a lot of great things in this budget.

There's a lot of great things. My leaders did an amazing job in fighting for so much of this. Again, that doesn't go unnoticed. It's just- It's a difficult vote to make, It's a very difficult vote to make. But I just wanted to make sure I shared some of the concerns I have.

I think we need to change our revenues. I think we need to really tax the top 1% and not look to attack our most vulnerable. But I do think the things that we were able to claw back, it's just those remaining things that really weigh heavy on my heart.

Thank you, Senator Menjivar, and I appreciate that. What going to close it out with Senator. Oh, yeah, Senator Niello. Oh, we have more. Okay. We're going to go to Senator Allen now.

Oh, gosh. Well, okay. I know we all need to move quickly. You know, obviously this is, this is.

We don't have to move quickly. I was just stating a fact before that, just for members of the public and for Senators to make sure that folks are available in late afternoon because if we're not done by 1:15, we'll come back in late afternoon. It was just factual. So I'm not trying to tell anyone not to speak.

No, totally. I just want to be respectful of everyone's time. So many difficult issues we're grappling with here and massive uncertainties. Thanks to the staff and everyone else who's been helping to work on pulling this together. We, you know, just echoing the comments made by Senator Cabaldon, the this is.

Unfortunately, we know even when we pass this, there's going to be. We'll probably have to come back in the fall given the uncertainties associated even with the tax returns from Los Angeles that haven't come in yet because of the delays after the fires. And who knows what numbers those will provide.

A couple years ago, we grossly overestimated what those receipts would look like. And, and it's one of the many, many factors that's led to some of our challenges that we have right now. So, you know, we know this is a draft. This is part of a broader negotiation that we're going to be having with the Governor.

You know, we're facing enormous headwinds and- and, you know, I just hope that we're able to land a deal.

Ultimately, the Governor, that is both, you know, both meets the needs that we have all the various values and important programs that we want to see protected while so making sure that we're not kicking really tough decisions off into the future that are going to make things even worse on the out years.

And I worry that there may be aspects of that in our strategy right now if not corrected. So certainly we're all expected to support this. We will be supporting this today. But this negotiation with the governor's office is going to be very consequential.

Thank you, Senator Allen. We'll now go to Senator Ochoa Bogh, followed by Senator Wahab.

Thank you, Senator Wiener. You know, budgets are so difficult in any case, at any level. We have to make them especially and make hard decisions when needed. But I want to echo some of the great comments that were made as far as the good things that are included in the budget.

Unfortunately, some of the things that are not included, you know, they are tough. But you know, I have the pleasure to sit on education sub one or sub one, and I'm grateful for the many items that they included in the budget, highlighting the making utmost whole our higher ed, which was great.

And let me highlight the adding the $400 million for middle class scholarships because we always take care of we usually take care of the folks that are in the low socioeconomic point of the ladder and the higher folks in the income ladder can manage and navigate, but our middle class is always usually overlooked.

So I'm so incredibly grateful for including that component in the budget. But I do want to talk about just reference, make some comments regarding the constant references to the Federal Government and how and what they're doing. But I do want to highlight that, you know, at the federal level, we're at $37 trillion debt.

The Federal Government is at $37 trillion debt. And that's a huge, huge concern for those that are good with math and are economists and for the future of our country.

So I want to say that yes, there are cuts to the state, but they have to make major cuts at the federal level if we're going to take that and try to address the debt at the federal level.

So let's bring that into the context in which we're having conversations on the federal aid that is coming to or not coming to the California State.

I also want to make some comments with regards to as it was brought up and though not related to the budget, but kind of related, as it was pointed out, the federal rates or the rates are happening in LA and the cost that is happening because of those rates. I want to just really bring into context Prop.

54 and the impact that it's having on the ability for federal agents to go after people that pose a federal safety or pose a safety, a public safety threat. S.B. I'm sorry, S.B. 54. Sorry, Prop . 54. S.P. 54. Sorry. Thank you for the correction, Mr.

Chair, because it does make an impact on their ability to do the work. And I set it on the Senate Floor that because of SB 54. Right. Sorry. That was before my time here in the Senate that does make the job difficult.

And I said on the Senate Floor that it does put people that are hardworking folks that are just trying to achieve their American dream at peril because they're swept away when we don't identify those folks directly. And in the work of literally picking those people up, other people are suffering the consequences.

I mentioned that on the Senate Floor. So it's the conundrum that California finds itself in. And so I just wanted to make sure that we put that into context in what we're working, what's happening right now in LA.

It's very sad and I wish we could reconsider our ability to communicate or not we but public safety officials communicating with the federal agents with regards to those that pose a public safe and are identified as cartel Members and people who are laundering money here in our state. So I just wanted to put that on the record.

I also wanted to address the issues with the cost of living in California and the cuts that the state has to make right now and this narrative that we've been hearing about the cost of living in California. You're absolutely right, it's incredibly expensive to live in the of California. But let's put whose policies have been in place.

Our Governor has been a Democrat Governor for almost 16 years. We've had a Senate with a majority Democrat leadership for 40 years and we've had an Assembly majority Democrat for over 20 years.

So let's rethink about the policies that this body, the super majority, which I don't belong to as a Republican, in the policies and the impact that it's having on the cost of living in California. So we can deflect to the Federal Government a lot. But they're also in trouble with the $37 trillion debt.

And we have to accommodate also with what we're having to face here in our state.

So as we're looking and we're moving forward, let's, you know, we can point fingers, we can, we can delegate blame, but let's look at what we're doing here with policy and the impact that it has on the quality of living for every Californian.

And I hope that we stop working in silos and echo chambers and come together and have conversations rather than blaming, facing blame. So let's have context in which we're working and having these conversations. Because let's be fair, let's be fair to the people of California. And with that, I yield it back to the chair.

Thank you, Senator Ochoa Bogh. We will now go to Senator Wahab, thank you.

So I just want to highlight, and especially for Members of the public, first, I want to thank our Chair and every Committee Member, every Subcommitee Chair, as well as the entire budget team, both from the governor's office to the LAO to internally, I just really want to thank all of you guys.

This is not a fun budget to discuss. Since I've been in the Senate, I will say each year we are talking about more and more cuts. So I was not in the prime when we had a lot of money and could do a lot of different projects.

So I also want to highlight the fact that you all may feel what is really being discussed here, we all are emotionally tied to this budget. And that is something that I want to really put into perspective, because regardless of whether you're a Republican or Democrat, we take the budget very seriously.

And I will say that we have colleagues right now that are also dealing with a lot of troubles in their own backyard. Right. We know in the State of California, Los Angeles has been hit significantly, not only with the fires earlier this year, and let's just be honest, they have not rebuilt in six months. Right.

It's not happening like that. It doesn't move that quickly. So there are people that are really struggling that are, you know, asking for support from their representatives. We also know that the raids have made people very uncomfortable. These are things we have never experienced ever in California in our lifetime.

And so I just want to put into context just the emotional feeling of how we are approaching this budget and what we are feeling today and all of the pressure that we feel to deliver to our community Members. Now, with that said, I do have a couple of questions. First and foremost, and I apologize.

I know that you guys probably went over this, but I just want to put it in context of what I'm going to be talking about. We have $11 billion in our rainy day funds. Correct. Okay. And we took out roughly how many billions of dollars to balance this budget.

I'm sorry, it's 13.2 in total reserves.

Currently.

Currently 13.2.

Okay. Yes. Under the Legislature's package, there would be $13.2 billion in total reserv, the BSA and the SFEU that would be enacted at the end of the year.

Okay. And then with 11.2 billion in the budget stabilization account, and then the 2 million for the Special Fund for Economic Uncertainties. Right. So I just want to make sure the 2 billion for Special Fund for Economic Uncertainties is to cover what the.

Special Fund for Economic Uncertainties is. The ending Fund Balance that the Legislature enacts each year. And so it is where there are resources available to respond to emergencies or deal with units unexpected costs. During the course of the year, the Legislature has enacted different levels of the SFU, often between 2 and $4.0 billion each year.

Thank you. And this $13.2 billion. If the state were to have a significant deficit moving forward, how long would this potentially bankroll the state?

Well, so generally speaking, the state's main rainy day account, the budget stabilization account, is as it's designed under Proposition 2. There are caps on the constitutional deposits, which is capped at 10%. There is also in this budget package, a proposal to increase that cap.

But as it stands, the BSA was only at about 10% of total General Fund revenue. So the deficits going forward, at least under the current projections, are in the order of $20 billion a year.

So the budget stabilization account, as designed, is not necessarily there to cover the ent of a deficit, but more to help smooth the glide path to bringing expenditures and revenues into alignment.

Okay. And so that is a concern I do have. You know, when we talk about city budgets as well, you know, for example, when we are freezing anything or there's a lack of funding or revenue streams, just like your household budget, you try to plan for roughly six months. Right.

So my concern is where do the tariffs come into place in this budget?

Well, so as I understand, and the Administration may wish to speak to this more, their revenue projections reflect their expected economic impact of the changing tariff policies at the federal level. Our office has similar revenue projections to the Administration, though we take a different forecasting approach.

Okay. If you would like to share.

Yeah. Colby White, Department of Finance. Not a lot to add there. As part of our May revision forecast, we included estimated impact from the tariffs. And so the mechanisms for its impact were multifaceted. For example, increasing economic uncertainty that many have talked about here, reducing business investment, reduced asset prices.

And all of that flowed through to our revenue forecast that was included in the Maverick division and is also part of the Legislature's budget. Do we have a dollar amount? Well, we estimated.

We did estimate as part of looking at, for example, if the tariffs hadn't been put in place and they were put in place, we estimated that over the course of the budget window that there would be. That it was about $16 billion.

Okay. And that was calculated within this budget. Right. In the original budget and then the May revise and currently what we have in front of us.

Yeah, it was part of. It was. It was comparing the May revision to A world that would have a hypothetical world that existed without any impact, without any tariffs.

Okay. So I also just want to put into context that we have to pass a balance budget by June 15. It is a requirement. I always feel very frustrated when we call these types of budgets balanced because we are taking from our savings, if you will. Right.

And so the honest truth is, yes, it's balanced technically, but we are also absorbing from our savings if an emergency were to happen. And right now, granted, we have a lot of concerns throughout the State of California. We still need to be planning for the future. I also want to highlight a couple of different things.

I think it is important to really talk about, you know, when we're talking about education, all of our departments, I have always consistently said that we do need to review what we have done.

All of the laws, all of the budgets, all of the spending, and all of the revenue streams for each Department and sector of our budget and really review what's working, what's not working. Some of my colleagues have talked about new revenue streams. Some have talked about cutting costs. Right.

My Republican colleagues have always consistently said, you know, we are spending too much. We have colleagues that have talked about essential services, and we have a lot of pet projects in this particular budget. We consistently tend to do that. And I don't think that we are prioritizing what we need to prioritize.

So with that said, I think some of the biggest concerns that we have is in the healthcare space. Specifically for me, I do want to prioritize seniors, women and children, folks with mental health and physical disabilities that are unable to advocate for themselves or potentially earn more revenue themselves, and they depend on basic health care.

I am disappointed that we are freezing the undocumented individuals. I understand why it was put in place, but I think that that is a large DisService to nearly 2 million people in California. Our counties, Alameda County, Santa Clara County, as well as LA County, has met with us stating that there shouldn't be a freeze.

There shouldn't necessarily also be pushed pushing people off the system, but a reduction in scope to make sure that these families get basic needs met.

But, and I want to highlight this, if their basic needs aren't met and they have growing health care concerns, and that impact of their healthcare concerns ends up translating to impacts to the everyday Californian, whether that is their family Members, their children, their spouses, their parents, whatever the case may be, and when we are talking about affordability, health care is one of the most expensive issues that a family deals with on Top of housing.

And so I think that our healthcare system as a whole needs to be reevaluated. I said this last year as well. We spend a significant amount of money. I think that there is bloat in our healthcare system and it is not streamlined, it is not efficient.

There's a lot of lawyers involved in health care and we are spending without actually getting a lot of service. So for me, going to the ER for less than three hours, I end up paying thousands upon thousands of dollars. Why? Right. For a three hour visit.

So this burden to a person who doesn't even have basic services to be able to get, you know, basic treatment.

We are again harming the larger public because it's not just about that one individual that may be undocumented or that one senior individual or that one, whoever it may be, it translates to an effect on their families and our community Members. So I always, I would like to revisit this myself personally. Right.

I think that we are not doing enough in the healthcare space. We are not analyzing enough, we are not pushing back enough. We are not doing enough for the average resident. So that is my personal feeling about this.

I also want to highlight that the loans that are being offered, and this is the part that I do have concern the interest rate to the loans.

The fact that we are giving a transit loan is concerning when we also have, you know, again, to rebuild La, let alone the other areas that have been impacted by a fire that still have not been rebuilt, let alone areas in Santa Cruz and much more in the Central Valley.

I think that sometimes, you know, again, we are not thinking of the whole state and that is a concern for me. I will say as Chair of Housing, I am very happy about our renters tax credit just because that touches my bill. I'm just going to be very honest with you. So that's a bias.

But I am also very happy about the Down Payment Assistant program that we have that largely helps folks be able to purchase their first home. Prioritizing development. As my colleague here stated, financing is one of the biggest problems, especially affordable housing, specifically because they have six buckets of funding.

But the HAPP funds should have been restored to $1.0 billion. My personal opinion, the HAPP funding has been one of the biggest requests of every single mayor that I have met with, from the San Francisco mayor to our local smaller cities that have been asking for has helped a lot of people.

We have a growing homeless population and largely those on a fixed income that are seniors that have worked their entire lives but still can't keep up. And my colleague here has also referenced affordability in California. We are not tackling people's daily affordability issue.

This has still been a very big disappointment to, I'm going to say myself as well as many others when we are trying to say that we are going to make California more affordable.

But how are we doing that when we are again, not prioritizing the health care piece, which I think is again, a big cost for a lot of families, nor as much as possible, the housing piece? The two biggest impacts in any person's life is housing and health. And as my colleague adds energy as well.

So I am disappointed in this budget. I am disappointed and I also know the reality of what we're facing. I also don't believe we are planning sufficiently enough for the future and potentially other deficits and other issues that are happening in California, as well as the impacts from the Federal Government as well as just the international economy.

You know, we are seeing problems there. We are a global market and I think we're going to have more and more problems. So with that said, I genuinely do appreciate all the work that you guys did. I still don't think that we focused on the areas that we should have focused enough on.

But I will be supporting this budget because this is what we have in front of us and we don't have enough time to again adjust things the way it should be. So thank you for your time.

Okay, thank you very much. I'll now go back to the Vice Chair to close out our comments and then we will go to public comment. So you've made means a closer. zero, actually I have a few few comments after you. You be the closer. You'll be the penultimate closer. Penultimate means next to last.

By the way, a word that is often misused. Yeah, often. So a lot of issues have been raised and I'm not going to repeat details, but I want to emphasize one very important point that I spoke to at the outset and that is the role of hope in this budget.

And my colleague to my left talked about still remaining to have hope, and she cited some extraordinary events that are happening in the state over the next few years. I am quite sure, though, that revenue estimates do not ignore the impact of those special events.

And with the revenue estimates that we have, we have a structural deficit of ongoing programs continuing to increase at a greater rate than revenues are increasing. And so far there is nothing seen to reverse that.

So I would repeat, a budget that's based on hope is a budget that will be destined to trouble in the future, we have to address that structural deficit. And I also heard several comments about the effect of the Federal Government and there will be impacts of the federal budget on our state budget.

As Senator Ochoa Bog mentioned, the Federal Government has a $38 trillion DEB. The Federal Government has a bigger problem than we do here by far. So to the extent that has to be addressed, it's obviously going to impact us and that will exacerbate our structural deficit.

And I'd also say a lot of the one time augmentations of revenue, particularly borrowing in order to convert continuing ongoing spending is going to make that structural deficit worse in the out years. So I just want to emphasize that 1.0. Our structural deficit is just sitting there and really not being addressed.

Thank you colleague. Thank you for this discussion and we will be getting the public comment in a moment. I do just want to say a few things.

First of all, there's been some, some discussion about the federal debt just in terms of looking at how that debt developed and especially in the explosive way over the last quarter century. Bill Clinton left us with a surplus and with paying down of the federal debt.