Senate Standing Committee on Budget and Fiscal Review

The Senate Committee on Budget and Fiscal Review will come to order. We're holding our hearing in the swing space at 1021 O Street. We are just a few shy of a quorum, so we'll establish a quorum as soon as a few more Members arrive, although we're doing better than usual. Usually, we'd have probably three Members at this point.

So, thank you colleagues for coming down. Public comment will be heard after all discussion has been presented. The bills that we are hearing today are AB 102, which is a budget bill junior for the 2025 Budget Act, AB 103, a budget bill junior for the 2024 Budget act in prior years, and then 17 budget trailer bills.

I want to note a few things. AB 139 and AB 140 will not be heard today. They will be heard on Monday. Those are two MOU—labor MOUs. And then, we will be—AB 130 will be heard today separately and will be presentation and discussion only. We will not be voting today on AB 130. This is the housing trailer bill.

Because there's not been full discussion in Budget Committee or Budget Subcommittees on some aspects of that Bill, we want to have a presentation and discussion today without a vote, and then we'll proceed from there. The Bill, to be clear, is not going away, but for today's hearing, it'll be presentation and discussion only.

And so, the way we're going to do it is we will have a presentation by the Department of Finance on everything except for AB 130. We will then have a Committee discussion on everything except AB 130. We'll then have a separate presentation on AB 130 and Committee discussion on that Bill.

There will then be public comment on everything and then we will be voting on all the bills, except for AB 130, and also, as noted, 139 and 140 are being deferred to Monday. So, together with SB 101, which is this—was the Budget Act of 2025—which this Legislature passed on June 13th, the bills before us today represent a budget agreement with the Administration.

The budget agreement includes $321.1 billion in total spending, 228.4 billion of which is General Fund. The budget is balanced for the 2025-'26 fiscal year and provides $15.5—$15.7—billion in combined total reserves for future years, including the Special Fund for Economic Uncertainties.

We face some very difficult choices in this budget, and it is never easy to balance a budget with the deficit that we faced, which was made worse by the actions of our Federal Administration. And so—and we also know that the road ahead will also not be an easy one.

We expect that there will be budget challenges in the coming years as well. And so, some highlights of this budget. We protect funding for our K-12 schools. We protect funding for public higher education in California, with no cuts to the UC and CSU. We provide a cost-of-living adjustment for child care.

So, this budget is deeply committed to education from very young to folks who are attending the best public University system on the planet. The Bill provides significant investment and commitment to housing through the Low-Income Housing Tax Credit, the multifamily Housing program, California Dream for All, and the Homeless Housing Assistance and Prevention Grants, HHAP.

It provides support, including via a loan to Los Angeles to help with wildfire recovery and to Bay Area public transportation systems to avoid devastating transit service cuts. The budget protects access to long term care and in home support service programs.

Unfortunately, as we have previously discussed, we did have to make some difficult decisions around Medi-Cal and those changes remain.

But we are not, we don't take these decisions lightly and we worked very hard to ensure that we were not disenrolling anyone, that we were not, in any way, impacting children and that the premiums that are being created are delayed for two years and we reduced those by 70% compared to the original proposal.

I want to thank everyone who's worked on this budget, including our budget sub chairs and all the Members of this Committee who participated at the Budget Subcommittee level, our budget staff, both in the pro tem's office and Budget Committee staff who have been working around the clock, the legislative analysts, and the Department of Finance.

So, with that, we will now go to Department of Finance for presentation on all bills—or no, I'm sorry. We'll ask the Vice Chair if he has any opening remarks and then we will defer other Member opening remarks until after presentation. My apologies, Mr. Vice Chair.

I was, I was in such a rush, and I think we have a quorum now. We have a quorum, so let's establish quorum and Vice Chair

Go ahead. Yes. Do it while you can.

[Roll Call]

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

Thank you very much, Mr. Chair. And I want to say that the reason that this hearing is at 10:00 rather than 9:00 is because I, I asked Senator Wiener the day before yesterday if we could put it back to an hour because our staff would need time to brief us.

And so, we needed that time before this hearing. So, I very much appreciate that accommodation. And the comments I'm going to be making are highly critical, but I want to stress that I certainly enjoyed working with you. We have our disagreements, but they're agreeable and pleasant.

But I just have to say, I've been involved in many public budget processes, both at the local and the state level, and this time is the most frustrating that I've ever experienced. My first brief on today's budget was before I received the Committee's report, and it was in the newspaper.

And that's no comment on our staff because we were going to meet this morning. I don't think any of them got very much sleep last night. One of these bills, 121, is 300 pages long.

There is no way that our staff member could have fully absorbed 300 pages from the time that it was received to the time it was discussed with us, even without sleep. Our staff did yeoman's work to brief us on what they could.

I'm going to be having more abstentions this morning than I would typically be comfortable with because I just don't know what's in the bills. And some of the bills even have contingent information that isn't specified.

And I'd go back to, I think it was two weeks ago when we had Subcommittee meetings after the floor vote, which I complained as being yesterday is today and today was yesterday, and.

The other really troubling part about this budget is it may all be for naught because this is dependent upon trailer bills that the Governor has said that he needs or he will veto the budget. And they're not even in print yet. We don't know what they say. So, I just have never seen a circumstance like this.

I'd like also to update a conversation that we had two weeks ago about the hope of a miracle with which the Legislature's budget was passed. And there were several of my friends on the other side of the aisle that defended that because it could happen.

I'd just like to point out that the UCLA forecast, which came out earlier in the year, last week came out and said they expect the economy to deteriorate. This budget that we see today, to the extent that I can understand it, still has a large dose of hope for a miracle, and it is seemingly less likely.

So, I look forward to the hearing. Perhaps some of the blanks in my mind, relative to what all of the details in the budget, will be cleared up a bit through the hearing process and so, let's get on the way.

Thank you, Mr. Vice Chair. We'll now turn it over to the Department of Finance for a presentation on all the bills except for 130, which will be presented separately.

Thank you. Good morning, Chair Wiener, Vice Chair Niello, and Members of the Committee. Erica Lee with the Department of Finance here to present on the package of bills before you, for the 2025 budget agreement. As identified at the May Revision, California was and continues to face uncertain economic and fiscal times.

After two years of solving for multi-billion dollar budget deficits, we are once again dealing with a situation that requires additional solutions to balance our budget. We have pulled back a lot of our one-time investments as well as made other reductions with the goal to maintain our priority investments.

Program costs, however, have continued to outpace revenues at the same time that we face the threat of significant reductions in federal support and therefore, we had to make some very difficult decisions to balance this budget in the next fiscal year, as well as address growing costs in the out years.

The budget agreement includes significant ongoing reductions to some of the costliest of our state programs, however, does maintain investments to the core of our health and safety net programs that support Californians that need them the most. It takes a balanced approach given the economic uncertainty driven by federal policies.

So, with that, I'll begin the overview of the budget agreement bills. There are a lot of bills, so I'm going to be as brief as I can. The first is AB 102, the budget bill junior that amends SB 101, the Legislature's proposed budget for 2025. Am I on the right one? Yes. Okay.

This Bill includes a shift of 1 billion from the General Fund to the Greenhouse Gas Reduction Fund to support CAL FIRE's fire protection activities in '25-'26.

It includes 39 million General Fund in 2025-'26 and 78 million General Fund in '26-'27 and ongoing to begin transitioning a portion of Firefighter 1 positions assigned to hand crews within the Department of Forestry and Fire Protection to a permanent firefighter employment classification. It authorizes approximately 170 million in accelerated climate bond funding to conservancies.

It includes total Proposition 98 appropriations for 2425 at approximately 118 billion. There is a 1.9 billion settle up obligation created in '24-'25. It also includes 2.1 billion ongoing Prop 98 General Fund to support universal transitional kindergarten making TK available to all four-year-olds in the 2025-'26 school year.

It defers 129.7 million in one time General Fund of 3% of the US—of the UC—baseline from '25-'26 to '26-'27.

There's a one time deferral of 3% of CSU baseline at 143.8 million one time General Fund. There are UC CSU provisional language that authorizes the UC and CSU to request a no interest short term cash flow loan from the General Fund to remediate impacts of these deferrals.

This Bill includes 4.2 million to support the reorganization of the Business, Consumer Services, and Housing Agency in '25-'26. 6.2 million General Fund in '26-'27 and 6.2 million in '27-'28, ongoing.

The budget includes 213.6 million or 105.1 General Fund for employee compensation, healthcare costs for active state employees and retiree health care prefunding contributions for active employees in '25-'26.

It includes 25 million in '25-'26 to establish the Clean California Community Cleanup and Employment Pathway Grant program which will address litter and graffiti abatement efforts, foster community engagement, and create career pathways.

This Bill effectuates statutory changes included in AB—SB 141—by shifting resources from the Cannabis Control Fund to the Cannabis Tax Fund to allow the Department of Cannabis Control to sustain existing enforcement activities without imposing fees—imposing fee increases—on existing licensees. Contingent upon the 2025 governor's reorganization plan taking effect, this Bill includes funds to support that reorganization.

The budget includes 5 million one time General Fund in '25-'26 to expand College Corps and 84 million General Fund in '26-'27 and ongoing for the continuation of this program.

The Bill also includes funding to continue implementing the Foster Care tiered rate structure which includes resources for state operations as well as local assistance funding for child and adolescent needs and strengths—needs and strengths—fidelity tools and training activities.

It also includes one time allocations of 83.8 million General Fund for the Home Safe Program, 81 million General Fund for Bringing Families Home, and 44.6 million General Fund for HDEP.

It provides 100 million one time General Fund to be spent across three years to multiple departments to Fund Proposition 36 implementation, and this Bill implements various General Fund solutions in the Medi-Cal program, which we'll hear more about in the Health Trailer Bill.

The budget includes—this Bill includes—savings from the implementation of a rebate aggregator to secure rebates for Medi-Cal members with unsatisfactory immigration status. It includes ongoing General Fund savings associated with the elimination of specialty weight loss drugs like GLP-1s, beginning in January of 2026.

The Bill also includes an expenditure plan including 303.9 million total funds in '25-'26 for reproductive health programs. Oh, that is the end of my talking points for SB, AB 102. So, moving on to the next Bill, SB, AB 103, which is the budget Bill junior that amends the 2022-'23 and 2024 budget acts.

This Bill includes sections 90 and 90.01 of the Budget Act of 2024 authorized augmentations of up to a cumulative total of 2.5 billion for response and recovery efforts the Eaton and Palisades Fires in January of this year.

This Bill makes amendments to expand eligibility under the Property Tax Backfill Provision to include dependent special districts, in addition to independent special districts. It eliminates the requirement for the California Air Resources Board to allocate a minimum of 125 million for the statewide Clean Cars for All in the 2022 budget.

This Bill adjusts funding for special education and financial aid programs to better align with needs. It includes a reappropriation totaling 357.8 million from the '22 and '23 budget acts to allow CDCR to cover a current year deficiency.

Additionally, the Bill includes a net zero shift of expenditure authority in the current year to support two items where deficiencies exist and allocates existing funds totaling 12 million to reparations to implement related legislation and to educate the public on the findings of the California Reparations Task Force. And moving on to the next Bill, which is AB, SB 116, the Health...Bill. This Bill includes enrollment freeze for full scope Medi-Cal expansion.

The budget includes ongoing General Fund savings associated with implementation of a freeze on new enrollment for full scope Medi-Cal coverage for the undocumented expansion population, effective January 1, 2026. It also includes $30 monthly premium for adults aged 19 to 59 with unsatisfactory immigration status.

Effective July 1, 2027. Includes the elimination of dental benefits for adults 19 and older with unsatisfactory immigration status, effective July 1, 2026. The elimination of prospective payment system reimbursement to clinics for state only funded services, effective July 1, 2026. It reinstates the Medi-Cal asset limit at 130,000 for individuals, or 65,000 for each additional household Member.

Effective January 1 of 2026. It establishes licensure and data reporting requirements for pharmacy benefit managers and it appropriates up to 75 million AIDS Drug Assistance Program, ADAP, Rebate Fund in '25-'26 for HIV and AIDS prevention and treatment services. The next Bill is AB, SB 118, the Human Services Omnibus.

This Bill revises the funding formula for the Juvenile Justice Realignment Block Grant Program, or JJRBG. It specifies that counties are responsible to pay for lost enhanced federal financial participation due to late community first choice option reassessments for the In-Home Supportive Services program.

It clarifies the use of Adoption Assistance Program funds for out of home placements in out of state residential treatment facilities. Moving on to AB, SB 120, this is the Early Learning and Child Care Omnibus. This Bill implements the following significant early childhood education related proposals.

It extends and increases the monthly cost of care plus payments for all subsidized child care providers through June 30th of 2026. It extends the existing reimbursement based on enrollment policy for all subsidized child care providers through June 30th of 2026.

It suspends the statutory cost of living adjustment for '25-'26 and codifies that funding for future cost of living adjustments, which will be implemented as rate increases for all subsidized child care providers. The next Bill is AB, SB 121, which is the Education Finance Trailer Bill.

This Bill allocates 1.71 billion one time Proposition 98 General Fund for the Student Support and Professional Development Discretionary Block Grant, to provide LEAs with additional fiscal support to address rising costs as well as fund statewide priorities.

It provides 480 million one time Proposition 98 General Fund to support literacy instruction aligned with the ELA ELD framework for all students, including for literacy coaches at high need schools, evidence based professional learning and literacy for elementary school teachers, and screening K-12—2nd—students for risk of reading difficulties.

It includes 400 million one time Proposition 98 General Fund to support teachers and improve access to the educator pipeline. It provides 160 million one time Proposition 98 General Fund to support the implementation of universal school meals, including funds for infrastructure and training, healthy food procurement, and recruitment and retention of food service workers.

It also lowers the average student to adult ratio from 12 to 1 to 2—to 10 to 1—in every TK classroom and it includes intent language that allocates up to 1.9 billion, '24-'25, Proposition 98 settle up funds to reduce ongoing deficits and protect core program funding for school districts and community colleges.

Moving on to AB, SB 123, the Higher Education Trailer Bill. This Bill defers $408.4 million of student-centered funding formula apportionments to community colleges. This deferral is scheduled for repayment in July of 2026 and helps avoid cuts to community college-based funding.

It appropriates 60 million one time Proposition 98 General Fund to establish the Student Support Block Grant for community college districts to support student needs, including assistance to students with food, housing, transportation, and other basic needs.

It provides 25 million one time Proposition 98 General Fund to develop a career passport that provides individuals with a secure digital tool that displays their preparation for employment, academic records and credit for prior learning.

It provides 50 million one time Proposition 98 General Fund for the Credit for Prior Learning Initiative, a community college system-wide initiative to award degree applicable or certificate applicable credit for prior student learning at each campus.

Moving on to the next Bill, it's AB, SB 124, the Resources Trailer Bill. AB—this Bill would enact various changes related to resources and environmental protection programs.

Most notably, it increases the forester registration fees and begins transitioning a portion of seasonal firefighter positions within the Department of Forestry and Fire Protection to a permanent classification, starting with those assigned to hand crews, and expresses the Legislature's intent to transition the remainder of the seasonal firefighter position to a permanent classification upon appropriation of funding for that purpose.

It also makes various other changes to Department of Water Resources, State Water Resources Control Board, Department of Parks and Recreation and Bay Conservation and Development Commission statutes. The next trailer Bill is AB, SB 127 for energy. This Bill would enact various changes related to energy and climate programs.

Most notably, it includes a fee restructuring of the Clean Energy Commission's opt in and application for certification permitting programs, an expansion of the Energy Commission's ability to contract with new types of block grant administrators for its Clean Transportation Program and various technical cleanup to the Energy Commission, Department of Water Resources, and California Air Resources Board statutes.

The Bill also appropriates 132 million from the Air Pollution Control Fund in 2025-2026 to the California Air Resources Board for the Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project from settlement funds resulting, you know, motor's consent decree. The next Bill is AB, SB 128, the transportation Trailer Bill. This Bill makes various changes related to transportation.

Most notably, it includes provisions related to streamlining in advance of the 2028 Olympics in Los Angeles, delays of certain DMV activities in light of the Motor Vehicle Account Fund condition, and re-establishing a fee needed to support the DMV's digital experience platform projects.

It also includes an appropriation for Caltrans to begin up to 20 million in Olympics-related capital work in '25-'26, if capital needs are identified.

The next Bill is AB, SB 129, the Labor Trailer Bill. This Bill requires the Department of Human Resources, in collaboration with the Department of Social Services, to appoint a statewide bargaining Advisory Committee to review the full cost of care for in home supportive services under a statewide collective bargaining model and for the Committee to submit a series of reports on key issues associated with any transition to statewide bargaining, among other things.

It ensures that specified state employer—employees—are eligible for non-industrial disability insurance beginning July 1 of this year and makes a 584 million supplemental pension payment to CalPERS, in partial fulfillment of Proposition 2 debt repayment obligations. Moving on to AB, SB 132, the Tax Omnibus Bill. This Bill includes several tax policy proposals.

I'll highlight a few. The Film Tax Credit Expansion increases the allocation cap under the Film Tax Credit Program 4.0 from 330 million per year to 750 million per year from '25-'26 to '29-'30.

It includes the Military Retirement Test Pay Tax Exclusion which excludes from income for state tax purposes up to 20,000 in military retirement income for tax years 2025 through 2029, subject to military retirees below a certain income threshold.

Wildfire Settlement Tax Exclusion is included in this Bill as well and it excludes from income tax all wildfire settlement payments paid from 2021 through 2029. It also includes the financial institution—it moves financial institutions from three factor to single factor—single sales factor—apportionments beginning in tax year 2025.

The next Bill is AB, SB 134, the Public Safety Trailer Bill.

This Bill authorizes the Board of State and Community Corrections, or BSCC, in cases where BSCC does not accept a county's corrective action plan to bring a civil action against a county to enforce compliance with minimum standards for juvenile facilities in the Superior Court in the county in which a facility is located.

It appropriates 5 million one time General Fund to the Department of Justice to establish the Tribal Police Pilot Program, which grants tribal law enforcement officers of specified Tribes State Peace Officer Authority on Indian land and elsewhere in the state under specified circumstances, and it provides incarcerated full-time college students with the same privileges received by incarcerated full-time workers which allows these students to work or participate in additional programming beyond their college classes.

And the next Bill is AB, SB 136, the Courts Trailer Bill. This Bill streamlines annual Judicial Branch reports to consolidate those submitted to the Legislature. It eliminates the Jury Duty Pilot Program consistent to address the budget shortfall.

It authorizes the sale of four Judicial Branch buildings and it appropriates 4.71 million one time General Fund to backfill the State Court Facilities Construction Fund. And the next Bill is SB, AB 137, the General Government Bill.

This Bill increases the Department of Financial Protection and Innovation's fees across various programs to sustain the Department's operations and programs costs and to address the long term solvency of the Financial Protection Fund.

And it extends the sunset for the Climate Catalyst Program that provides financing and credit support for eligible infrastructure projects consistent with the state's climate goals through December 31st of 2031. The next Bill is AB, SB 141, the Cannabis Trailer Bill.

This Bill authorizes the Department of Cannabis Control to receive cannabis tax funding to support the reasonable costs for enforcement against unauthorized commercial cannabis activity and the Track and Trace Program. This allows the Department to sustain existing enforcement activities without imposing fee increases on existing licensees.

It amends Cannabis Tax Fund or Prop 64 grants issued by the Board of State and Community Corrections to be awarded to local governments if it either allows the retail sale of cannabis in storefronts or allows for cannabis delivery in jurisdictions that that serve both medicinal and adult use consumers with a population of 10,000, instead of 3,500 residents or less.

And it requires the Board of State and Community Corrections to prioritize grant awards for local governments whose grant application includes illicit cannabis enforcement. And moving on to AB, SB 142, the Energy to Trailer Bill. This Bill extends the surcharge supporting the Deaf and Disabled Telecommunications Program at the CPUC until December 31st, 2034.

The surcharge expired on January 1st of 2025. And lastly, is AB, SB 143, the Developmental Services Trailer Bill. This Bill implements the following significant Developmental Services proposals. It adds new guidelines and processes in the Self Determination Program focused on improving its consistency and sustainability.

It specifies activities under the next decade related to addressing recommendations involved in the Master Plan for Developmental Services and it repeals the Parental Fees Program, redirecting staff to other service cost recovery efforts. And that is the end of our presentation for those set of trailer bills.

Thank you very much. Does the LAO have anything to add?

Hi, Mr. Chair, good morning, and Vice Chair Niello. No prepared comments. Gabe Petek, Legislative Analyst, but I'm here with some of our staff in case there are any questions we can assist with.

Great. Thank you very much. Okay, we'll now bring it to the Committee for questions and discussion. If anyone has questions or discussion about any particular aspect. Okay, we're done. Wow. We're not normally this shy.

I think nobody just wants to go first.

Okay, well, I don't see any. Okay. Senator Seyarto.

All right. So, I would like to start with the bigger picture and make sure we have these numbers right. So, we're looking at revenues coming in at $209 billion, correct?

Yes. And I'd like to bring up a colleague for some of the...

Thank you.

Yeah. Here's the colleague. It's work. Oh, people leaving. Okay. They're running.

Yes, sorry.

Colby White, Department of Finance. So, yeah, total revenues and transfers in fiscal year 25-26 is 209 billion. Okay.

And last year, that number correlates to last year's number by how? I mean, what was last year's Number?

Fiscal year 2425. Total revenues, including transfers, was 222 billion.

So we have a decrease in that amount of 11?

Yes.

Okay. In this proposed budget, we're looking at $228 billion, correct? The revised amount that we've come up with. Yeah, General Fund. General Fund. Yeah, General Fund. That's what I'm talking about. So we have $19 billion in between of what we're bringing in versus what we want to spend. And we're going to borrow 2.5 from internal sources, right?

22.5 billion. And then we're taking 11 billion from our rainy day fund. What's the level of the rainy day fund? Once we've removed $11 billion.

Our total reserves will be 15.7 billion, of which 4.5 billion is the SFE, or checking account. The rainy day fund is then at 11.2 billion.

It's at 11 after we take out.

That was after the withdrawals from last year.

We have 11 left for next year to balance the budget for next year. Okay. So the reason I'm kind of, kind of fixated on these numbers is because we're presenting this to the public as a balanced budget.

It's only balanced because we're borrowing money and we're using reserves that are supposed to be for dire emergencies, and we're having neither of those. And yet we're going from 209 billion to 228 billion. And I think I related this last time we were told we needed to take a haircut.

And I think my comment was that when I go get a haircut, I'd expect my hair Shorter when I go in, not longer. And so this isn't a haircut. We're spending much more money than we bring in, and our economic condition is not. I don't know that it is solid for the next coming year.

So we may fall well short of that. And then we're going to be making more adjustments, so we're going to move on. I want to talk about the Medi Cal for all projections. Do you have somebody that is Medi calforol?

Yes.

And, you know, one of the reasons I'm picking on this is because, you know, we went to the disability, the disabled community and told them to find $100 million of cuts for the disabled community. But yet we're spending $12 billion, 10 to $12 billion on this program.

And I don't know that it's only going to cost that because we thought it was going to cost much less before. How did we get to. It's going to be between 10 and 12 $1.0 billion. What are the projected enrollments this year versus the enrollments we had last year?

Is that on? Jay Kapoor with the Department of Finance. So the projections right now are for the current year. So meaning the fiscal year that's about to total caseload for the UIS population is expected to be about 1.6 million. That is expected to increase slightly by about 800,000 in the next year.

But then we are expecting to see declining caseload numbers beginning in 2627 and we're looking at probably little under 1.6 million and continuing to decrease based on the reductions that are included in the budget agreement.

Okay, so there's a freeze of enrollment, but that's January 1st. So are we anticipating a rush to get under the wire between now and January 1st that we haven't anticipated in the costs for this program?

Because if I lived in anywhere in the United States and I was eligible for a program like this, if I just had to get to California by January 1st and sign up, I would do that. And so I don't.

I think we underestimated how many people would enroll in this program and that's how we got to where we are, where we thought it was going to cost like 6 billion and it cost 12. So that's.

I'm kind of curious if we have taken into account how many people we think are going to enroll this year before the deadline.

So what we look at is like kind of the trends, right? So. Up until the recent trends were showing a take up rate of around 16 to 18,000amonth, we think that's going to drop significantly.

And what I'm talking about is in the future those 16 to 18,000, they will only be eligible for restricted scope services for which we receive federal financial participation.

So yeah, the assumption that we used is that the enrollment has been hovering between I'm going to say like 15 to 18 per month that would would currently be eligible for full scope Medi Cal services going forward effective January. We're looking at them.

If that take up rate continues at that level, they would be only eligible for limited or restricted.

And is that based on previous years or is that just this year because factors have maybe changed?

We did take into account the increased enrollment that we we were seeing since the expansion. And so that is factored in, right.

A lot of the increased enrollment came from people that were still arriving and that has been curtailed a bit. So are we taking into account that curtailment? In other words, are we projecting too much?

I so that's we don't look at from we can't do an estimate based on what we see coming, like new population coming in. We all we can look at is how many are we seeing enrolling, actually enrolling into the program.

I would think the new population coming in, which was a plus 138,000 this year, we had a positive 138,000 people moving in this year that we would have some data that would tell us are we going to see enrollments increase from that or are we going to see enrollments go down?

So if they are again, if they are coming in now before the free starts, if they are eligible, they would be enrolled. But after January 1, if they are eligible, they would only be eligible for the restricted scope. All right.

Well, I would like us to have better numbers for that so that we can restore funding for some of the programs that are getting cut. That should not be getting cut. Disabled people should not be having their funds cut. We shouldn't be asking them to find ways to cut their funds. So I'm a little distressed about that.

Prop 36. So we funded it at 100, 100 million. What are our projections, what we would need to actually fund Prop 36. What's the delta?

So again, as I stated earlier in the cycle that the CDCR's population we have factored in the increased population as related pursuant to Proposition 36 and those numbers, those individuals will be funded as part of the population for CDCR. This budget agreement includes an additional 100 million and I will let my colleague discuss the details of that.

But in terms of the actual numbers that we were projecting, that was part of our Governor's Budget. This is in addition to that because.

The Prop 36 funding includes court costs and all of those other things. Right? Justin Adelman Department of Finance yes, the 100 million does include. Is that. Is that what we projected we would need when Prop 36 passed was $100 million. Well, we're still unsure.

That's why we're providing the 20 million initially for the because I heard the numbers like $400 million. So our delta is kind of like 300 million short. I think that includes and that should have been a priority. So let's talk about the CEC chair a 5% raise which comes to their salary, whoever it is.

So this was just a technical fix to something. Language that was passed two years ago that did not include everybody on that.

Right. I saw it. It moved from the regular CEC folks and now it's her turn or their turn. I don't know.

Well, it was. The expectation was for all of them. It was an error. It was an omission that we're addressing in this budget.

So for the next three years it's 5% or just this one year? It's 5%. 5% per year for three years.

Theresa Calvert with Department of Finance. I'll have to take a quick moment. And look at the bill specifically to. See the timeframe that it's in. But it would be the intentions be in alignment with how the other members of the Commission.

Right. Well, $36,000 over three years and it's an absurd amount for an appointed position. That's what it comes to. It's 11,700 the first year, it's 12,400 the next year, and it's about 13, $13,000 the following year. I don't know anybody in the state that's getting a raise like that. So I have a problem with that too.

We're granting CARB more authority. Good lord. Why? Why are we grant and is this a policy? Where does the cost come in with this new authority for CARB? Where does it fit in with the budget discussion that we're having today? Because that sounds like policy, not.

Good morning. Andrew March with the Department of Finance. So I think maybe the trailer bill that you're referencing is not included in the three party agreement for the Air Resources Board to have regulatory fee authority. If that's correct. It's not included in the trailer bills before the Committee today. I just read it. It's not there. No.

Okay, so I read something that's not there. Yes, that's correct. It's not in ABIM type. It would be in ABS B127, the Energy and Air Trailer Bill. And it's not included in there.

Okay, well, really quick then. I also am concerned about spending $20 million from our gas tax funds for the 2028 Games with no reimbursement from whatever revenues they make from those to be able to put back in. So we can build roads like we're supposed to with that money in other areas.

Because this $20 million, this isn't to add lanes, right? We're just redesignating existing lanes or are we building new roads?

And James Moore with the Department of Finance. This is part of the Games Route Network where we're repurposing existing lanes. We have a project initiation document that's underway with Caltrans that is going to conclude in the next few months.

The reason this language is in there is in case there are capital needs identified and needed in the budget year, it prevents delays that could negatively impact the Olympics.

I wish we could prevent delays with other projects throughout the state. Anyway, I'm going to let other people ask questions now, but as you can see, I have a lot of concerns about the budget. I think I am in alignment with the budget Vice Chair about the process.

And the reason I'm in alignment with him about the process is because if we had the process, these things wouldn't be questions. I think if we had a better process, we'd be able to deal with these and not have to come to this and just be upset about it.

So thank you very much for all your hard work. I know this is a lot of work in a very short amount of time. Thank you, Senator. Senator Ochoa Bogh.

Thank you, Mr. Chair, Members. First of all, I would like to thank my Republican consultants for, for actually who received this information with what felt like minutes to spare before the State of this hearing. And I'll be honest, this is quite the disservice to California and to the budgetary process.

It's really, really quick to have this turnaround so, so quickly. And this goes for all staff. I want to thank the staff for actually going through and trying to get this done. We had a bill that we're trying to get a briefing on this morning that was literally, literally 300 pages.

And she in good faith said, you know, I can't give you either support or oppose on this because this is 300 pages. And I just got it and I haven't been able to finish reading it.

So, you know, it does make for a transparent process that invites all our constituents and stakeholders to truly know what is going on with the fourth largest economy in the world.

However, I do want to take an opportunity to express my gratitude for the inclusion of several budget items that are going to make a real difference in my communities.

The funding for the California Indian Nations College in Palm Desert is going to ensure that its doors can remain open and our students can get the education that they are seeking. Thank you for this commitment from the state. Heartfelt thank you on that one.

With respect to the UC and the CSU, I appreciate that my legislative colleagues are providing for additional funding for these higher education branches, branches and look forward to learning more about the additional ways we can support these institutions with growth.

In addition, I am deeply thankful for the funding to help support the American Reproductive Center's fertility clinic in Palm Springs. This is a clinic that does vital work in the Coachella Valley to bring about new life and will continue to preserve or persevere despite being the survivor of a hateful bombing.

And thank you for acting so quickly to include this funding in this budget and for recognizing the needs and responding accordingly. Palm Spring has done an amazing job to come together and support its own and will continue to do so as well on that.

Those are my comments on several of the points and I just want to echo some of the concerns that were expressed by Senator Thierto, who spoke previously. And then I do have a question. With regards to the middle class scholarship borrowing, I'm really excited to see some of the funding priorities that were included in the educational funding.

And once again, thank you. There are many, many there that I look forward to supporting. But with regards to middle class scholarship borrowing, this is probably to the finance or or chair we're supporting of an increased college affordability. We're very supportive of that process.

And I do notice that the budget increases funding for the middle class scholarship, but it looks like it uses a different approach that may borrow from future budgets. We've received no details about how this would work or what it looks like, so I think the public would benefit from more thorough explanation.

And should we consider this a loan from future budgets or what does that actually look like in the real world?

Yes, thanks for that question. So it is a different way of funding the middle class scholarship. It would be more in arrears. So you'll see that there is additional funding in not 25-26, but in 26-27 so that we can pay all of the awardees what they were committed promised in the next year.

So I will yield the floor to my colleague for details of how it currently works and how it would be different. And that's kind of what you're seeing in terms of the numbers from year to year.

Yeah. Jessica Deutschman, Department of Finance so currently the Student Aid Commission projects what they expect the student contributions to be. And at the end of the year they have to true up with whatever the appropriation was. This would allow for a 35% contribution for all students and then we were true up after the fiscal year.

I can go into more details or I can.

I'm sorry, one more time. So 35% commitment from the students and then what would.

So currently the Student Aid Commission projects what a 35% would cost, and they reduced student awards to fit within the appropriation. This would allow for everyone to get 35% and then we would true up the next year for however much that costs. True up meaning, like, if it went.

Over the appropriation, we would take from the next year, and if it went under, we would move that forward to the next year.

Okay.

Yeah. So it's a way for the student, a Commission not to have to project forward and then adjust student awards later.

And I would just add that there will be no gap in funding from switching from the current process to the future process.

Jennifer Pichella from the Ledge Analyst Office. The structure is a little bit different in that the way it's structured. The state will be loaning itself the money to cover the 25-26 costs, making an official appropriation in 26-27. So I think the Senator's question was about this loan mechanism, which is somewhat unusual.

It would be loaning just against the General Fund to pay the bill in 25-26 and then appropriate the official amount the subsequent year.

Okay. All right, perfect. Thank you.

Okay. Any Senators have questions or comments? Senator Durazo?

Yeah. Going back to the Medi Cal coverage, it's my understanding that within three years of all the information that I've gotten is that within three years a million people, a million Californians will lose their health care coverage. But I want to ask you were talking about trends and what you base your predictions on.

Does that include the federal, the raids, the violent raids that are taking place right now in California as far as impact.

So. Jay Kapoor, Department of Finance we did not take into account anything other than the trends that we have been seeing in the program.

Senator Menjivar.

A follow up to that Department of Finance. Can you walk through both the premium and the freeze? Is it that with the premiums we're going to get additional revenues, revenue because people are going to be paying that or are we going to where do we see the savings come from the premium implementation and the freeze.

So it's primarily, so it's two factors. One is the premium, the revenues that would, that would be generated from those premium payments. But the other part of it is that because it over it these, these policy changes kind of interact with each other. So you're, you will have a freeze on the population that will be paying premiums.

And again it's only the expansion population that is proposed that is being frozen as far as enrollment. The remaining UIs population, other UIs will still be eligible. So you will see those.

So the premiums are primarily generated by, I'm sorry the revenues are primarily, primarily generated by the premium but it's also adjusted to account for you know, as people disenroll they will, you know, not be able to re enroll after a three month grace period. So it's an interaction. So the savings are from people losing health coverage.

That is, that is part of the savings for the overall solutions related to this. So it is true that people will be losing health coverage. People will be losing health coverage to the extent they disenroll and they do.

Not complicated, they might move, they don't get the mail to recertify. Right.

And we currently, we currently have a three month period now that is utilized for people to cure if they, if they are disenrolled, you know, for any reason other than like they've, they've disenrolled because of the income doubt. So that would apply, that would continue to apply for this population.

Okay. So savings because people will lose coverage revenue because those who choose to and can afford a $30 premium will bring the additional revenue.

Essentially that's Correct.

Jason, is there anything else you can add? Yeah. Jason Constantouros and we can't speak to the estimates that are in the package here. These were developed by the Administration as part of that package.

But what I would generally say is that when you charge a premium or a copay, one of the intended effects of cost sharing is to it results in some people leaving the program or in the case of a copay, reducing services less. There is also revenue generated from the copay.

That part of the co pay proposal includes system changes to allow the state to collect revenue.

But a lot of the research suggests that a lot of the savings would come from people, people leaving the program that could be because they can't afford to pay the premium or maybe they could, but aren't willing to pay it for a variety of reasons, but those generally where a lot of the savings could be expected.

That said, it's very uncertain. There isn't a lot of really good experience to sort of track this. So there's a lot of uncertainty with these estimates.

At what point, given what my colleague just mentioned, with what's going on with the raids and just people not showing up to health appointments and so forth, at what point are we going to reevaluate, not reevaluate, have updated information on people falling out of or just refusing to participate in medi Cal?

So we will have updated caseload information as part of the next Governor's Budget, which is, you know, will be released in in January. At that time we'll have some some caseload, you know, data that, you know, will will show us what the latest trends are.

But what you have to kind of keep in mind is that this, this freeze doesn't go into effect until January 1, and then the premiums don't go into effect until until 27-28. So we don't know how much we're going to see that's different between now and then or between now and January.

So you need to keep, you know, we should keep that in mind that. Maybe for the May revise, then we. Possibly could have more, yes. More data for the May revision next year.

Okay.

And to your point, Senator, a lot of things can happen between now and then at the federal level. And so some of the delay is as a result of that uncertainty.

Okay. I have another question on the free diaper initiative. I'm just wondering if you can where we landed on this program. I know HCI is going to be getting the money, the 7.4 million, I believe, but what does the Program entail now?

Yes. Joseph Dawson, Department of Finance. So within the final budget agreement there were two appropriations. So within the Department of Social Services there is one time 7.4 million to go towards existing diaper bank operations. Whereas under HCI there is the governor's proposal at Governor's Budget of 7.0 in 25-26, as well as the 12.5 million in 26-27.

Sorry, Scott, I can't see. Sorry. Thank you. I appreciate it. Okay, so just to clarify, so some money is going to be getting sent to diaper banks to make them whole. The other money is going to be going to HCI to run the administration's lead free diaper initiative.

Correct.

And for the administration's free diaper initiative, where did we land on the program and what that's going to look like?

So the program operation is how it was proposed at the Governor's Budget. So the first year is providing a three month supply of diapers to newborn babies as distributed through the hospital system. And then the second phase coming from the 12.5 million will be from exploring the options of a commercial distribution model.

So the proposal that was included in the Governor's Budget is maintained, but in addition there's 7.4 million given to diaper banks.

Okay, so it's still regardless of income and only at hospitals.

Correct.

Okay, thanks.

Anything else? Senator Menjivar, Senator Niello, followed by Senator Laird and Senator Choi.

Thank you. Mr. Chair, a follow up question with regard to the issue that Senator Ochoa Bogh was talking about. There'll be spending this year that will depend upon allocations in the subsequent budget year.

And my question is what if for whatever reason, as an example, revenues that we're hoping for don't materialize and next year's budget can't make that allocation?

Are you speaking specifically about the Middle Class Scholarship Fund versus I think as in every budget cycle, we will have to evaluate what our revenues are and what our expenses are, what our priorities are.

At this point the commitment is to and the changes in the program were as a result of some of the issues that student aid addressed this year where we over committed and didn't want to provide less aid to students for which we've already provided a certain number.

And so the idea was to make sure that we are fully funding that amount of aid that was committed by the state to those students. But broadly your question is one that we have to face every year when we develop the budget is do we have enough funding for this and what.

Are solutions if we don't I certainly favor the middle class scholarships being funded. But as you pointed out at the outset, we have a structural imbalance in that established spending programs are growing faster than revenues are growing. This particular maneuver exacerbates that, makes it worse.

And it's a decision that has to a contingent decision that has to be made that puts in risk money that we're spending this year that we might not be able to fund in the following year. I realize every budget year we have these issues and generally I oppose them for exactly the reasons that I'm articulating right now.

I want to make a point with regard to Proposition 36. Senator Seyarto to already talked about that.

But I want to stress as I have before, that in my opinion, both when I originally supported Proposition 36 as well as now since it's passed, I think the most impactful part of that Proposition is getting people off of drugs, curing addiction. The treatment mandated felony essentially revives drug court, which was very successful before Proposition 47.

And this brings it back. But it requires a very important function that this budget is underfunding and that is the role of probation. In order for the treatment, the mandated treatment to be successful, the person recovering from drug addiction has to be supervised and has to be be accountable.

And that can't happen from the person who is dependent upon drugs, certainly not at the outset of the treatment. And the probation Department is in this budget compromised from fully effectively performing that function. And irrespective of the other issues with regard to Proposition 36, that concern concerns me tremendously.

Unless there's something in this budget that fully restores the funding that probation needs in order to appropriately provide that accountability and supervision.

I don't know exactly the amount you're talking about or what the cut was, but again, the three party agreement did provide 100 million of which 50 million is for county behavioral health grants. And no, it's not.

Yes, but it does not include the money for probation that was first of all reduced in the may revise and partially, I believe, restored by the Legislature's budget, but still a cut from what they need for supervision and accountability.

So yes, there's additional money for treatment services, but really you can mandate that a person addicted to drugs go for treatment to avoid the penalty. But if there's no supervision and no accountability, the chances for that person to succeed in the treatment is considerably compromised, maybe even to the point of. All.

Of them failing without the accountability and the supervision. I see a couple came up to the table. Perhaps you can educate me on this.

Drew Soderborg Legislative Analyst Office so in the two party deal there was funding set aside for probation. There was a 70 million in pre trial funding for pretrial programs. The two party deal did note that a portion that this funding and allowable use of that funding would be Prop 36.

The three party deal does eliminate that language, but potentially that funding could be used to support probation. But as you the deal also includes a net $5 million reduction to that $70 million in 25-26. So as you noted, there is funding that could potentially be used by probation, but it's not dedicated to Prop 36 specifically.

Justin Adelman, Department of Finance we agree with the LAO. We did return the 15 million to. Pretrial services that was reduced in the. Governor's Budget as part of the two party agreement.

And we added robust reporting and data collection to the courts funding associated with Prop 36 so that we can track over the next few years kind of what the situation looks like as far as people receiving treatment, what those outcomes look like, how their services impact their outcomes and additional information as we go forward so that we can track how it doesn't work because we're not providing the appropriate accountability and supervision.

I apologize for the presumptive statement, but I'm terribly troubled by this. The whole point of Proposition 36 is to improve lives and if we don't succeed on that, we will continue to allow lives to be destroyed by the scourge of drug addiction.

So that continues to greatly concern me with regard to the transportation improvements connected with the Olympic Games. My understanding is that this doesn't include, based upon the previous discussion, it doesn't include any physical infrastructure improvements, it's just repurposing of lanes.

So therefore after the Olympics are over, it doesn't do anything to improve mobility from the standpoint of infrastructure improvements. Do I have that correct?

James Moore with the Department of Finance Broadly speaking, you're correct that we're not building tons of new freeways and things like that. There will be traffic management system elements that are going to be improved in the lead up to the Games that will be present present afterwards.

But the Games route network, which is really the chief project that gets mentioned, is really repurposing of existing lanes.

Why don't we then that the traffic management systems could be a legitimate expenditure of gas tax money. Why not just allocate gas tax money for those particular improvements and figure out another way for the other improvements that will only be temporary?

There are lots of ongoing conversations with the organizing Committee, the Federal Government, local governments about how exactly the funding will mix. But these are allowable uses of the state highway account to do these sorts of projects. And so that's what they're funded with so far.

Well, to use gas tax money, which is intended for infrastructure improvements and road maintenance. I would disagree that a temporary improvement of traffic flow for a special event is acceptable expenditure for gas tax money. So I would still maintain that point. Does LAO have any comment on this?

Rachel Ehlers with the Legislative Analyst Office. This is something we looked at when this was initially proposed and talked with the Administration about.

And there were indications that there are going to be at least attempts to try and use this traffic signs and that sort of thing that are going to be used for this Olympic route to help athletes get to the Games and not be stuck in traffic when their event is happening, that those types of improvements could potentially, potentially also be used afterwards.

But we're looking forward to seeing more details.

And I remember when the Games were last in Southern California, magnificently run by Peter Ueberoff. There were, if memory serves, virtually no traffic problems during that, which surprised a lot of people. Was there funding from the state from gas tax money to facilitate those particular projects? Does anybody's memory go back that far?

I don't have the funding specifics off the top of my head, but I can we can certainly work with your office to get you some more information.

I would be curious because I don't think it was so, so much for those improvements. Now we have also all of the money that the Governor asked for to Fund his reorganization in the budget. Does that mean. But that by approving this budget, we're also approving the reorganization.

Allison Hewitt, Department of Finance. So the funding is included in the budget, but there is provisional language that makes the expenditure of the funds contingent upon the Legislature acting on the governor's reorganization plan.

Drew Soderborg, LAO, we concur with that. That is what the language does.

Good, because I think that reorganization plan deserves much more consideration. Just speaking for myself now, one last point. Two years ago, I guess it was we had unallocated savings assigned to departments, I think 8% or 7.9% or so, which at the time I expressed significant skepticism toward, and we didn't achieve it.

So now this budget includes 125 million, increasing to 635 million in 28-29 for unallocated operational improvements within CDCR. What makes us think we're going to achieve it this time when we didn't before and haven't many times in the past when this same trick has been tried?

Thank you for bringing up that painful point.

So no malice of foresight, just dealing with facts.

Well, in last year's budget, we did include allocations for savings associated with sweeping vacant positions, as well as a reduction of a goal of 7.95% in our agencies and departments. And over many, many months working with departments, we were unable to meet those goals, although we did meet some portion of it over the past several spring.

And honestly, through working through some of the issues, we brought in an outside party to help us look at things a little bit differently and who, you know, who had a level of expertise outside of outside of California, but other state governments and other jurisdictions and to work with our programs, work with our own budget analysts to look at ways that we could become more efficient and provide solutions that we could implement going forward.

And so the CDCR savings specifically are not necessarily unallocated as before. We were just saying you will provide these savings. They are in specific areas where there are efficiencies that have been identified through the assistance of this outside consultant.

And I'll turn to my colleague for more details, but we believe with this additional work over many, many months that we have specific ways in which CDCR, specifically CDCR, can achieve these savings over time. So I'll turn it over to my colleague.

Hi, Kimberly Harbison, Department of Finance and as Ms. Lee said, we did work with an external contractor. They did some preliminary work and have identified areas where they believe CDCR can achieve operational efficiencies, and those include at headquarters by simplifying their structure and processes, assessing duplicative functions.

Also look at contract management to address things that might be fragmented across their system and try to unify it, centralize their purchasing strategy, their inventory strategy for products and goods, and have more spending oversight.

We will also look at overtime efficiencies that are related to aligning institutional staffing levels to demand, looking at scheduling practices, looking at the amount of time staff need to attend community like appointments for medical transportation and appointments and guarding, and then also looking at the overall healthcare delivery service model.

So there are specific areas that we want them to look at. It's not just a number out of the either.

Well, I truly hope that this does not give me the opportunity to again later on say I told you so. I truly hope it works. But even though we are in California, as I speak on this issue, metaphorically, I'm from Missouri. Those are the extent of my questions. Thanks.

Thank you, Mr. Vice Chair. We'll now hear from Senator Laird, followed by Senator Choi, Senator Cabaldon and Senator Wahab, although two of the folks are not here, so they might get deferred. So Senator Wahabi might come up faster than you think.

Senator Laird, thank you very much. I just want to make comments on two things because this is a chance. We spend so much time in extensive hearings going through every individual item that sometimes we lose sight of the aggregate things that are in the budget and the significance of of what we are doing.

And if you look at education, what happened in all our hearings is we gave direction about where we wanted to go. And actually in many, many issues this budget reflects that direction. And that's why I wanted to call it out. I mean, we really were concerned about the 8% cut to UC and then the 3%.

And this sort of addresses that in a way that I think gets to where we were trying to get the same thing with the California State University system, CSU. When the Governor proposed the May revise, there was a community college split where for two years it was retroactive.

It would have gone back and redone the budget for community colleges in a way that they would have been disadvantaged. And for those two years look back, that is not in this budget.

I think for the three parties that came to the agreement, that is great on the COLA for the Local Control Funding Formula and K through 12, there's a 2.3% increase, which I think is significant given the direction of this budget in General General.

And there is a $1.7 billion Fund that really is for discretionary grants to school districts and those school districts, whether it's struggling with fully funding special education or the fact that there's an enrollment drop or AB218 settlements. That Fund gives some ability for discretion to the school districts. And I think overall is very helpful.

There's the continued progress on universal school meals. There's facilities money in here. And in the hearing I had on Assembly Bill 218 and the settlements, there was a question about collecting data. How many settlements are we seeing in the school districts? And there's trailer Bill Language here that allows for collection of that data.

So it addresses that issue. And I feel like on those, I wish that we were a little closer on how we were settling up on Proposition 98, but we will continue to work on that. And then the last thing, and there were comments made and I think I wanted to herald the progress on the middle class scholarship.

Because if, as I have said before, if you look at the University of California and the fact that 2/3 of the students are now graduating without debt and one third are graduating with an average debt of $17,000, that is monumental progress. And one of the major reasons is the middle class scholarship.

And if there were questions raised about what's in the budget, and what happened was, is when there was a proposed reduction, it didn't necessarily take into account that there had been an expansion of the number of recipients of middle class scholarships. And then the cut was made.

So it wasn't as if we were going back to an old number. We were going back to an old number with thousands of more recipients. And so what that would have been is not just a cut to the the program.

It would have really lowered the grant amounts to the individual students that were on the middle class scholarship. So the needle was threaded here with what the exchange was about, which is it is really.

How do you figure out how to at least show that we're trying to do some restraint at the same time we're trying to make sure that those people are covered in the middle class scholarship. And what this arrangement does is thread the needle with that. And so that's why for me it really works.

And it, it's difficult because this is the time that a lot of parents and families and students are making the decision about what to do in the year and whether they have the adequate resources. And I think we're sending the signal that that will be there.

And if that's part of their decision making process, they can have that knowledge in knowing to do it.

So even though this was broken down into so many different things, if you just look at the aggregate of our work in the last four or five months, this budget reflects the directions that we wanted to go on the legislative side on those major issues in education.

And so I want to thank thank everybody and particularly the bleary eyed budget staffers that have worked on this. But, but I think also the Legislative Analyst has been helpful the fact that that finance really stretched in the three party agreements. This is in a very difficult situation. This is a reasonable outcome.

And I just think it's important to call that out as we have this budget in front of us. Thank you Mr.

Chair. Thank you Senator Laird. Senator Choi.

Thank you. I just want to add a few comments of my opinion. First of all, with this very difficult situation deficit budget or the step membership analyzing and making the presentation. I appreciate that everybody has different opinions and also Governor has a different opinion. And Republican side, the Democratic side, a lot of areas have been already mentioned.

So I may repeat a few of the things. But also to add my disappointment with the less money what to support or what not to support will be depending upon your set of criteria based upon your priorities. And I must say that many areas that I see that so disappointing.

In general the budget deficit should reflect some important human services areas and try to cut the areas that are non essential areas. But it is not the case that I see in this budget.

I was just informed in the beginning from the budget chairperson that $5 million that was going to be supported for the Orange County warm line which is for mental health hotline that cuts down a lot of burden on 911 system. And then also outcome is very effective.

Initially the chairperson recommended it was allocated but I am told that the Governor just struck that out out of his recommendation which is really hurting to me.

When you compare that kind of millions of people throughout the country they use that line but for abortion pills and the other like condoms for teenagers providing are they more priority for them for him. I cannot understand. And then also I just received the media statement on Prop 36. Many law enforcement agencies such as Sutter County.

I'm not going to read them all. A few of them here. Sutter County Sheriff and the California State Sheriff's Association. Napa Valley Attorney and also where's the California District Attorneys Association and there are several other law enforcement agencies listed here. They are making a comment on their disappointment on the lack of Support on Prop 36.

This budget is a slap on the face to the California voters and and the blueprint for the failure of Proposition 36. Voters overwhelmingly approved Prop 36 because they wanted a better, more accountable path forward addressing repeat drug and theft crimes.

The budget deal includes zero new funding for the county probation departments to supervise and connect individuals to treatment. No resources for frontline law enforcement to support interventions in the community. No funding to house arrests in county jails and provides in courtesy treatment.

No funding for key partners of treatment delivery such as county sheriffs and probation departments who are official for court ordered supervision and successful outcomes while only offering modest funds to county behavioral health agencies largely restricted to planning versus direct treatment in the local match requirements. Furthermore, the court received $10 million less than what the Legislature approved.

These are the few comments they are using. In the public media you can see very important areas the priority setting these conceptual areas is for the public benefits we need to put the priorities on.

But the $5 million cut on the warm line for the mental service hotlines that's very disappointing and I hope that finally we can recover some of the revenues this area critical areas needed a budget will be restore the later. Thank you.

Thank you. Senator Cho. May I speak Chair, just on one of your issues, the warm line I think you're talking about Calhope and there is 5 million included in the three party deal. So I just wanted to clarify that there is a 51,000,001 time for Calhope in 25-26.

Can you verify what our chairperson.

So. In the two party agreement there was the $5 million. There was also additional smaller funds specific to the Orange County warm line and to Parents Anonymous in Los Angeles as part of the three party negotiations. Once those items were removed, the Legislature obviously started supported including them because they were in the two party deal.

But in the three party agreement they came out. So that just to clarify if you want to add to that. Yes.

Guadalupe Manriquez with the Department of Finance. There is the final budget does include 5 million 1 time for CalHope. However, the final budget does not include funding for the warm line that you discussed.

So it remains and budget the 5.

Million for CalHope which is a separate.

Program than the one mental health hotline.

The CalHope 5 million. That's different. It is a warm line statewide. But that's different than the issue that you were raising.

I know that's the reason I said that was it was this. Yeah.

Yeah. So and again the. The Legislature proposed that additional funding but in the negotiations with the Governor it came out. So that was not a choice by the Legislature. It was part of the negotiation with the Governor.

So that's the reason I'm talking about what is important to the General public including myself and his view of priorities over a few things at that very personal Things that may not be really personal choice is kind of news or abortion pills. So those are the individual should be individual responsibility, not the state funded taxpayers.

Money will have to be supported in that kind of areas. A lot of like Medicare services last time when I raised a question how much more was was cost of supporting health care for non undocumented people to My memory was $8 billion. Was that correct? You know that alone cost is.

You can see $5 million for the General public mental health. That's more important than supporting health care for undocumented people.

Okay, next. Senator Cabaldon.

Yeah. Thank you Mr. Chair. It would not be a budget if there weren't things to be disappointed about. But I am very appreciative of the work of the chair and the leadership and the Budget Subcommittees and the Assembly and the Administration in coming to this overall deal. Let me say my disappointments first. Just for the record.

I wish we had reached an agreement on the cannabis tax increase. I'm very concerned that this industry that we're going to see less revenue as a result of the increase than we would have without it as well as severely hampering the legal industry and significantly advantaging the illicit and illegal activities around our state.

So I hope we remain committed to solving that issue. I know the time tax increase is scheduled to take effect next week, but that remains a problem. I do agree that additional funding for Prop 36 is going to be needed. The voters also voted for Prop 56 and for high speed rail and everything else.

So it's not just enough that the voters approved it. We have to make fiscal choices. So I appreciate some of the concerns that have been raised out in the field.

But I do think we're going to need to continue to make more investments on the ground in counties and probation in addition to continuing making more investments in mental and behavioral health. I not excited about the VLF appropriation. It is at the 75% of what's actually owed to those counties, none of which are in my district.

But that should be made whole in the VLF deal. So I appreciate and Chief Deputy spent a lot of time in my office trying to solve this. We continue to need to solve it. So I appreciate that it's here. But it is very challenging that for the first time it won't be at the 100% level.

I'm concerned a bit about the middle class scholarship. I absolutely support it and agree with the appreciate the creativity. We can't afford to move to a budgeting system though where everything is done in arrears.

So let's not let this become the new budget tactic where we just go spend whatever you want you need to spend and then come tell us the year after how much it was. That's antithetical to the very notion of budgeting. So I appreciate it's a good tool to use in this particular instance.

But let's please not get carried away with setting our budget on auto and then coming back and having to pay everything back in arrears. And I guess finally on the other given that this is likely to be the best budget, I will vote on 2025.

Given what's coming, I agree with several of my colleagues that we need much more money in our reserves than we have. And I recognize that's contrary to some of what I just said about what I'd like to spend money. But that's what budgeting is all about.

We need to have healthier reserves given the storm that is very much on the horizon and that's not even counting the out year issues that we already knew were in place. So we can't afford to draw down the reserves at a time that we need to be investing in them.

Having said that, excuse me, even though this is next to my district, I get these allergies every year to my own community. I'm very pleased with where we have arrived in several areas. First, in my own budget Subcommitee and Budget Subcommitee 4 on the Housing side, I do have a question. I just want to confirm.

Obviously it was a very significant priority for this House, this Committee, for me to restore funding for hap, the Housing Homelessness Assistance Program. And I know there's some confusion about this, but I want to confirm because we didn't cover AB132 because it's not ready yet.

But I just want to confirm what is my understanding is that AB132 will include include the appropriation.

So I know folks in the world who have read the documents, all that's been published so far is the budget bill which erases the language that include the intent language that said we intend to make an appropriation at a future date and people are understandably freaked out about that.

But that my understanding is that the three party deal and what we're going to vote on this week does include an appropriation for 26-27 for HAPP Round 7. Do I have that correct?

Yeah. So first, just to clarify, the housing bill you're speaking of is I think ABS B131, not 132. Yes. Sorry. Yes. The HAPP appropriation for 2627 will be as part. In part of that will be the allocation for the.

Terrific. Thank you. And so thank you. I know the Governor is a skeptic of the program, so appreciate the agreement. It's not enough money and we're going to need to make, we're going to be making these investments forever.

And so, you know, I hope we at some point move to an ongoing appropriation at a more substantial amount in addition to addressing some of the concerns the Governor has raised about accountability and effectiveness. We need to do that. But this, this is an important step.

And I'm also pleased that the agreement and the bill includes the $100 million for the encampment resolution program. That was also important, very significantly, that there's money in this budget for the low income housing tax credit program, the multifamily housing program, other programs that are important to build.

We have a lot of projects, housing units in the queue, affordable housing units, units in the queue. That the only thing that is stopping them from becoming roofs over people's heads is the lack of funding in these programs. And so this is a substantial piece. I know it's controversial as well with the AB607. AB609.

AB607, which passed through both of its policy committees in this house, and AB609, sorry, SB607, which passed out of both policy committees in this house and AB609 and passed the floor unanimously in the other house.

I've been through enough of these issues in just the last six months to realize trying to get at the structural problems about the cost of building, housing and infrastructure are so severe. And I think the Governor and many Members of this Legislature have raised this concern. I know there are a lot of issues about 6,769.

I do support those trailers. There's not every single word of it, not by a long shot. But we need, we need very substantial progress on the front of getting more for our dollars on housing and getting residents more for their dollars in purchasing or renting homes as well.

So I know that that is a controversial issue and it's still under, some of it's still under discussion, but I do think that the General notion is correct. Then lastly, I want to also Salute Budget Subcommitee 1 and the Administration for their, for the agreements on higher education and the public University systems.

There's also a nod to Sonoma State University in my district, which is a canary in the coal mine for what's going on at campuses throughout the state for declining enrollment that will be that's a very substantial commitment in order to cure that, but also to help other campuses avoid the challenges that we've had at Sonoma.

And then finally, I'm very pleased that at least as part of the budget, we do we don't have a Delta Trailer Bill in this package. Recognize the discussions. The work will continue, but it was very important that we not use this process to pierce through the appropriate policy and fiscal review in the Legislature over the coming weeks.

So, Mr. Chairman, thank you very much for the incredible amount of work. Also want to acknowledge Chief Deputy Director Lee and the teams of everybody for for putting together a budget that it's not the budget anybody would write by themselves.

It advances very critical priorities, makes some tough calls and tough choices, and hopefully sets us up in the best way possible for what we know will be the much harder next round to come once the Federal Government takes its actions. Thank you, Mr. Chair. Thank you, Senator Wahab.

I genuinely don't know where to begin on this budget. I will say that I have some deep concerns, but I want to first start by just thanking everyone for working on this. I know it's a lot. I know that this is we're looking at a deficit rather than, you know, revenue.

That's we could do whatever we want and Fund anything we want. But I do want to highlight a couple of concerns I have first and foremost, I am glad that AB 130139 and 140 are pulled.

I want to flag that I have significant concerns that I have addressed with leadership and that has to be resolved on a number of fronts, especially as we are talking about housing and we are talking about the progress that was made. We have highlighted very significantly about affordable housing.

And I don't and I have been very vocal about this and been criticized significantly about this from stakeholders that are benefiting from some of the things that we are doing. And yet the California public is not necessarily benefiting. And so I'm hoping that we address some of the concerns there.

So housing is one of the core issues that I am deeply concerned with. But overall, I do want to say that I am disappointed in the budget. And the reason why I'm disappointed in the budget is because there are themes here that clearly benefit wealthier communities.

And nobody is even highlighting that there are very clear themes that we are benefiting wealthy communities and ignoring some of the big issues that our society is focused on. There are also significant redundancies. And every time that we have had a budget hearing, I have talked about how so many programs are redundant.

And we are putting millions upon millions of dollars into programs that literally do the same thing. And if they don't do the same thing, their overseeing agency does the same thing. And if their overseeing agency doesn't do it, their sister agency does the same thing. And that's a concern. Right.

Our dollars are not going further for the basic requirements that the state should be operating in. I am concerned about reserves because we are going to have more and more issues as things move forward. We are. You know, I'll be very frank. You know, people are blaming the Federal Government.

I think that it's a lot of different things. Things. It's the international community and what we are seeing there. We are going to see a gas spike if we haven't already. We are, you know, seeing deep, deep concerns of our immigrant community and the community that largely is making up our workforce in California.

Some people will blame the President and the Administration. And yes, we are 10% in into the term of his presidency and that is going to have an impact for the next couple years. But I think we are spending a significant amount of money and also not highlighting again, the inequities that we see.

So, for example, the cost of living adjustment being suspended for childcare that impacts women and people of color the most. That does. Point blank. Right. We are seeing a medical freeze for undocumented individuals.

And if they are not getting the treatment that they deserve, they are going to be impacting their families because their families who are citizens are going to have to take care of those health concerns that arise, putting an impact again on California families. We see certain things being delayed, like the pharmacy benefit manager issue.

And we see ongoing drug price manipulation. We're not addressing that. We see a $125 million clean cars for all removal, which again hurts people trying to purchase on this mandate that we have to all have clean vehicles. So how do people afford that? Right. How do people compete? We have only $100 million for the homeless encampment issue.

That's a concern. We are rewarding CDCR for not even doing what they were told to do last year and cut back. And we are taking from the mental health and parole operations to basically reward punitive efforts versus the rehab efforts. We have a number of things that I am concerned with.

For example, we put $10 million for Chirp, the unaccompanied minors. And I have stated this over and over again with my colleagues. These are kids under 18, could be under 10 that deserve a lawyer and a social worker when they're talking about their immigration status as a full grown adult.

People don't even understand their legal rights, let alone any of their societal rights. And we're talking about children who don't even speak the language, who are not getting their full. The full amount was $33 million and we dropped that down to $10 million. We are harming people daily.

And this budget, as we always like to say, budget is a value system. This is a terrible budget. I'd like to ask what is the $5 million for the belonging campaign? Please tell.

Justin Adelman, Department of Finance.

Okay. And I'm sure that the undocumented kids who don't have access and or don't have a parent with them probably feel very alone as well. And we also are spending $1.0 million to UCLA to research social media. What is that?

Defer to a colleague on that.

If we're spending money, we need to know the answers of what we're spending the money on and why.

Jessica Deitchman, Department of Finance. Unfortunately, I'm coming up to tell you that I'll have to get back to your office on details of that investment.

Thank you. So this is the problem, and my Republican colleagues have referenced this many times. Yes, the budget process is transparent, but the details are not, and I'd like to know what the $6 million is related to genealogy for CSUs.

I can answer that.

Yes, I understand. So it's the program that has been a priority, right? It was not clear.

Yeah, I believe for the Black Caucus. That was around reparations.

And that was actually something that was negotiated in last year's budget, so they're just making it.

Thank you. As far as us suspending the 96-hour power for skilled nursing facilities, why are we doing that? So our senior community members have actually died in some emergencies and it's been well-documented and providing power is a necessity, especially for community members that literally rely on the power to survive.

Megan Sabbah, Department of Finance. That proposal is a solution included in the budget agreement and it also comes from hearing some feedback from the field that there's difficulty in implementing and meeting the timeline, so it's a delay of the requirement.

Okay. And what is the difficulty?

There are prohibitive costs for some of the facilities. It's also quite difficult. There's requirements for HVAC upgrades and kind of other like technical issues.

Okay. So we're delaying it even though, you know, we've been seeing fire after fire, power outage after power outage. I live, again, in a PG&E territory. If it sprinkles, we lose power, and so providing a little bit of requirements and kind of pushing these for-profit facilities that are making bank seems to be a complication there.

We are also, again, targeting some of the most poorest and most vulnerable residents with higher cost and fewer services across the board. We are not addressing what most regular Californians are concerned with on a daily basis, and I've said this a million times: people care about their housing, people care about their education, people care about good quality jobs, and a future that they actually can depend on.

We have a lot of redundant programs. We have programs that, honestly, if the California public looked line item by line item, they would not support this budget.

These are a lot of gimmicky programs that make people feel good and a lot of people in leadership--extremely affluent and don't actually look paycheck to paycheck--and we are funding those pet projects of them. And I've said this over and over and I've said it in private conversations, I've said it in larger group conversations, and I'm deeply disappointed that we continue to see this and yet we're going to say, 'hey, there are some people more deserving of these pet projects and then some people denied basic needs.'

That is what this budget is, and so, you know, I get it: we are on a deficit, but--and I think that there is room to negotiate some of these things and I will truly have my conversations--but we truly are not doing enough for the everyday Californian. And I want the administration to hear that, I want the other House to hear that, I want our leadership to hear that because it is not said enough, and we have a room full of people talking about the budget, and this is truly disappointing.

So I say that because I am worried about the future. Granted, right now we can, you know, tighten our belt a little bit, but moving forward, I truly don't want to see some of these things, right.

We have so many redundant programs, so many pet project programs, and we are not doing enough for the everyday person, and I can tell you, as a normal person, I don't think this does anything for anybody that I am representing. So thank you.

Yeah, and we can have a broader conversation about the fact that this doesn't cut K-12 public schools or UC or CSU and defers cuts to items that were in the May Revise, so I think I just respectfully say that there are things about this budget I don't like, but to say that this budget does nothing for regular people, I think, is an overstatement, even though we can all have our criticisms of the budget.

And there's been a significant decline in enrollment, there has been other concerns. People can't even afford school right now. So I will say, like I said, there are things that we can definitely dispute and disagree with, and I will be supportive of this budget, but I also think that deeper conversations need to be had.

Absolutely, and we're not cutting a penny from education or higher education, so I just want to--there are things about this budget I don't like, right. That--deficit year, it's a tough year for everyone but I appreciate that, but I think that to say that this does nothing for anyone, I don't, I don't agree with that.

So people who aren't going to school, I'd like to know a little bit more of what we can do there, and especially the undocumented population that does the work.

Senator Weber Pierson.

Thank you, chair. I want to start off by thanking the chair of Budget. This has been a very, very, very challenging year. You have done, I think, the best job that you possibly could in trying to get some of our Senate priorities through.

Want to thank our Budget staff on, you know, all of the subcommittees for all of their hard work. Want to start off with my role as chair of the California Legislative Black Caucus.

I'm sorry, is Senator Weber Pierson's microphone on? I'm not really...

Yeah. Can you hear me? I want to start off as my role as California Legislative Black Caucus and really thank the administration for working with us and keeping some of the promises that were made when we were in conversations and discussions and negotiations last year. What you have outlined that we have worked is not for the affluent.

It is not for pet projects. It is actually one step to righting the harms of Black Californians and in line with what was outlined in the California Reparation Task report, and so, you know, it also--to what Senator Wahab was pointing out, along with, you know, with the Genealogy Fund, it also is allowing CSU to become a nationally recognized institution to establish a methodology and a protocol that we do not have in this country at all.

And so, you know, I really want to thank you for working with us to keep that promise and ensure that the funds are allocated to the appropriate places to help right some of the wrongs that have occurred to Black Californians, regardless of their current social economic status.

Saying that, I want to move over to the healthcare portion and I would love for the gentleman to come back up and really talk a little bit more about this issue of Medi-Cal disenrollment rates. So my question begins with--because I was confused with some of the things that you were stating before. When you were doing these numbers, what is the traditional Medi-Cal re-disenrollment rate in the past?

I do not have that information at the top of my head. There is a normal--I mean there is a churn that does happen in Medi-Cal, so people are coming on every month and some people are coming off every month. I do not--apologize--but I do not have that specific churn amount.

And do you happen to know how many of those individuals in the past who have disenrolled have not been able to re-enroll within a three-month category? The three-month?

Do not have that either.

So how did you come up with the current numbers?

So the current numbers, again, are kind of based on what they see currently. So in other words, there is a--there is--there are individuals who will leave the program and then--but--and if it's because of some noncompliance, like maybe they, they missed their appointment or you know, they didn't, they submitted erroneous paperwork or something like that, they are given the opportunity to fully, you know, comply, and generally that has been like a three-month care period.

Now under current law, even if it goes be--if they come back, they can still come back after that three-month period ends, but they would not have been covered, you know, during that time. Under the proposal that you have that's part of the budget is if they are disenrolled after that three months because of noncompliance, they would only be able to come back in as limited, restricted scope.

Right, right. And so, you all came to those numbers based off of current numbers?

So we made some assumptions. There was an assumption that some, you know--there would be increased, you would have less individuals returning, right, because they would, once they got to the three-month, end of the three-month period, they would not be able to return to full scope.

So there was an assumption that there would be some level of increased disenrollments over time. I think the assumption was in the area of, I want to say, with all of the issues kind of--because they overlap with each other. I think there was the assumption somewhere around 20 to 22% eventually, and again, it's, you know, when we talk about the savings, we're talking about the cumulative--right--impact.

So you'll have, again, as I mentioned earlier, we think that about under these proposals that the current take-up rate, which is somewhere between 15 and 18,000, that those individuals would no longer--within that, you know, 19 plus age range--would no longer--would be enrolled in restricted scope. So you have less people coming in and then you have people disenrolling that would not be able to come back in.

Okay. And I guess I'm just trying to figure out where you got those projected numbers from.

So we, I mean that, those are, you know, that's part of the estimate process that we work with, with the Department of Healthcare Services fiscal forecasting folks, you know, to kind of come up with what the potential impact would be.

I do want to reiterate what our LAO colleague said earlier that, I mean, at the end of the day, you know, this is, we cannot say with any certainty. We're talking about--a lot of this is behavioral change and we don't know specifically how--you know, we cannot say with certainty that this is what's going to happen.

These, these estimates are going to change as we see actual trends, you know, after these, these policy changes are implemented, so as we see what those trends are, we'll make adjustments to the assumptions.

So there has been a question or a narrative put forward that this plan actively disenrolls those individuals or certain individuals. Is that what this plan is doing? Or the proposal, excuse me.

No. It, it does not actively disenroll those who are in, in the program under full scope as of January 1, 2026. So upon that date, no new individuals would be able to come into the program.

Is the bulk of the savings based on disenrollment or would it be based on less people coming in and potentially funding that you would be receiving from the premiums?

It's all of that. It's all of that. So it's both based on, you know, less new caseload coming in. There will be caseload that will--cases that will fall off, and then, you know, some revenues from the premium offset.

Is--what is the amount of patients that are newly enrolled on an annual basis? Do you have--

It's--so that was the 15 to 18,000 per month. That's, that's currently what the, what we've been seeing.

15 to 18,000 a month?

Yeah, somewhere in that range.

New enrollments?

People that would--so those are people that--yes--that are--well, I take that back. They may not be new enrollment, but that's the, the take up of, you know, every month. So they could--there, there could be included in that, there's those who would drop off and maybe come back in later. I'm talking about people that are entering the program on a monthly basis, you know, that likely will include those who maybe were in the program before and are coming back.

Okay, thank you.

Okay. Any other questions, comments? Seeing none. Thank you for that presentation. We will now go to the second presentation relating to AB 130, and so we'll do a presentation and a discussion of that item and then move to public comment. So who's going to be--

I will, chair.

Yeah. Thank you.

Erika Li with the Department of Finance, and here to present on AB SB 130, which is a housing trailer bill. The housing and homelessness trailer bill generally streamlines housing production and it includes creating a statewide vehicle miles traveled or a VMT mitigation banking program as a flexible option for developers to meet existing CEQA obligations.

Under this option, developers could pay a fee that will support VMT efficient affordable housing near transit. The bill also expands existing CEQA streamlining tools to accelerate infill housing project--sorry--infill housing production as included by certain provisions in AB 609. It modifies the renters' credit.

The budget agreement includes a trigger item whereby if specified in a future budget bill with an appropriation, potentially beginning with tax year year 2026, the renters' credit shall be modified as follows: the existing nonrefundable credit amounts will be increased from their current levels of $60 for single filers and $120 for joint filers to $250 for renters with no dependents and 500 for renters with at least one dependent, regardless of their filing status.

It imposes a moratorium on the adoption of new state and local building standards, affecting residential units for six years through 2031 with certain exemptions. It addresses affordability for tenants and homeowners through a number of provisions that restrict monetary penalties by Homeowners Associations and protect homeowners from harm on mortgage debts they think were closed.

It enables the Department of Housing and Community Development to recycle previous funding by enabling developers to withdraw cash from existing HCD projects to promote the preservation, rehabilitation, or development of additional affordable housing projects. And lastly, there will be, as stated before, an additional housing trailer bill that we will be speaking about next week, and that is where the HAPP allocation is. And with that, I'm here with colleagues to respond to any questions from the committee.

Okay. Colleagues, any questions or comments? Okay. Seeing none, we are now ready for public--oh, yeah. Senator Durazo, I'm sorry, my apologies. Okay. On--this is on AB 130.

AB 130.

Yes. Senator Durazo.

Yeah, sorry.

Yeah, I know there's a lot, a lot going on today.

Yeah, I do have questions on the CEQA exemption for the housing and the labor standards.

I don't know if your microphone is on.

Yeah, I'm sorry. I'll just be louder.

Yeah, now we can hear you.

Okay. So I want to go through very sort of specific things that I understand are included or will be included or changed or amended. This bill would provide a CEQA exemption without any labor standards for projects up to 25 units? Except in San Francisco, where the threshold is ten units?

Yes. Meagan Tokunaga Block, Department of Finance. I believe that's correct.

Okay. Do you, can you explain why?

Sorry, could you repeat that question?

Yeah. The bill would provide a CEQA exemption without any labor standards for projects up to 25 units except in San Francisco where the threshold is ten units.

And she asked why.

And I asked why. Because your answer was yes.

Chair, if I can provide some overview context on the this portion of the trailer bill as helpful? So the bill creates a CEQA streamlined option in environmentally appropriate areas with some parameters set, and just to be clear, to answer your question, these are projects that are not currently subject to prevailing wage.

These are non-subsidized projects that have wage by county set in the bill, and so the threshold of 25 units is a small enough threshold that those wage rates are not applicable for projects of that small size.

Okay, but my question was, why the difference in the units in the threshold?

For San Francisco versus the other counties? I don't have that answer at my fingertips. We can follow up with you and your staff.

Okay. For projects greater than 25 units, or ten units in San Francisco, the bill could create new construction labor standards as an alternative to the Labor Code, prevailing wage, and apprenticeship requirements. So if--let's just take the County of Los Angeles. This would be a new established rate, right? Wage rate?

And in Los Angeles--and I don't really understand how this could even exist--but it says 60% of the construction workers shall be paid at a wage rate no less than $36 per hour. But 100% of the construction workers shall be paid at a wage wage rate of no less than $24 per hour.

That's correct. The bill sets different standards by different tiers of counties, Los Angeles falls in the middle tier of those three, and the formula is that 60% of workers must make a higher wage and that 100% of the workers must make that lower wage, and that there's some enforcement mechanisms built into the bill to allow for labor unions to have an avenue for ensuring that those wages are paid.

On top of that, though, the new wage rates would be reduced by the hourly cost of health benefits. So whatever--if it's 36 or if it's 24, is going to be even less because of the reduced by the hourly cost of health benefits. And one: could you explain why, why do that? And second is: what health benefits?

Where is the description of health benefits that you're talking about? Obviously, there's a health benefit and there's a health benefit. One could cost $2 an hour, one could cost $15 an hour. So how do you define what health benefits they are?

Certainly. The intent of reducing the cost of healthcare is that the bill is not intended to disincentivize employers who are providing healthcare from doing that and using this new streamlined CEQA option. And the healthcare definition in the bill notes healthcare coverage for construction workers, but details will be fleshed out.

Okay, so we have no idea what level of health benefits would be included here?

Well, any health benefits that are provided are not counted in addition to the wage rate because the intent is not to dissuade employers from providing any health benefits.

So we're incentivizing them by paying less because they will be paying less, right? If they get credit for the health benefit--which we don't know what that is--we're incentivizing employers to pay less.

I understand your concern. The intent was not to dissuade employers from providing that health benefit and not being able to access this new legislative tool.

There's no apprenticeship requirement.

Allison Hewitt. I think that's--we'd have to add that to the list of things to get back to you on. Apprenticeships are accounted for, but I don't believe there's any specific requirements to use apprenticeship or apprentice labor.

There's no requirement?

I think safest that we get back to you on that particular question.

Okay. Since we're voting or it's being presented here today, I really do hope that the responses are given quickly. On enforceability with these wage scales, I'll give you an example that I could see, but I want to make sure you look at it as well.

There would be no way to tell from looking at a worker's pay stub if the worker is within the 60% that must be paid the higher wage or the 100% which will be paid the lower wage. How would that be enforced?

So by codifying the requirements, employers that are violating that 60% threshold--they are therefore violating state law--but the bill also incorporates an enforcement mechanism which is to allow labor unions to bring in action in a court to ensure that the provisions of the bill are enforced. So the enforcement mechanism is built into the bill.

So you're saying anybody would have to go to court to enforce it?

The bill creates a mechanism for labor unions to be able to oversee the provisions.

Okay, and how do you get the information? The reports? The information of how--what every worker--who was the worker, what were they paid, all of that information, how would you get that? How would a worker get that?

Ultimately, because the bill is codifying these requirements, it's up to employers. Otherwise, they're violating state law.

Okay. Do you know what the, do you know what the percentage of wage theft is in this state?

I do not.

It's pretty high. Do you know how a worker in their pay stub would know if they're receiving the required minimum wage and how would they do that? Especially because there's an hourly cost of health benefits connected to the hourly wage, so if I'm working, how can I tell what I'm supposed to be paid?

The legislation specifies by county what the two tiers of rates are and then also notes that the Department of Industrial Relations will annually adjust those set wages.

Yeah, but remember there's two levels, the 60%, the 100%, and then there's even another level which is the cost of health benefits, which we don't know how much that is. We don't know what the employer is saying the cost of health benefits is. We don't have any of that information. So how does a worker enforce this?

They would compare their pay with the healthcare benefits included to the 100% floor.

Senator, if I may, I think, I just want to clarify; right now the projects we're talking about have no wage requirements associated with them. They do not have to be paid prevailing wage. So--right--what we're discussing is really about trying to set a rate for non-subsidized projects where there isn't a current requirement now.

So this is establishing a requirement, but there wouldn't ever have been a requirement for workers to be paid at prevailing wage if they were working on these projects. Because these are projects that are non-subsidized projects, this is an attempt at establishing a rate that balances market, the market and feasibility, but these wouldn't be projects that would otherwise be subject to prevailing wage. I don't know if that helps clarify.

Well, but the way to establish prevailing wage includes collective bargaining, it includes a lot which this is taking out of the process. The prevailing wage will not be done, will not be done on these projects but it has been done in California is to count on collective bargaining and other information but primarily collective bargaining. That's not included here.

Understand your point. I think the rates that are included in the bill were determined by canvassing with the construction trades, and so that's represented or reflected in the rates that are included in the bill.

I'm sorry, say that again? You canvassed--

The rates were determined in working with labor. They're not rates that were set by the administration or the Legislature in a vacuum.

Okay, well that's another set of questions which is--that my understanding is that the Building Trades were not included in coming up with this, so I don't know who you're referring to or who you can tell me who you're referring to.

Fair enough. That is our understanding. I'm happy to follow up with more information on which entities were engaged.

Okay, but you said that with a lot of certainty. You said with a lot of certainty that this was consulted with those who are out there in the field who know what--prevailing wages would know about that industry and you said they were consulted and you don't have any information as to who was consulted and when they were consulted.

That's the understanding as we sit here at the table. Understand your concern and happy to follow up with you very quickly so that we can sort this out and we can provide additional information.

And what's the timing of this? This was not brought to us. This was not included to us, included and given to us until--I don't know--a day or two, two days. I found out about it yesterday. So what was the thought behind excluding this or not providing this information to us until yesterday?

It was--generally the information was shared with legislative staff and others as a part of the three-party negotiations and this is what's reflected in the three-party agreement.

Well, that was not in ours. I don't know what you said--that was never presented to us.

Senator, we hear your concerns. We, we have your questions and we will respond with answers as soon as we can after this hearing.

Okay. This is a massive change. It's not a simple thing around the edges. It is a massive change. It challenges the role of collective bargaining in this state that had never been done before. And so you're presenting something at the last minute.

I don't know who you consulted with, and you reach this conclusion to completely change the structure for the way that workers in the construction industry with would be paid, something you don't even have answers to, and you're proposing it. So I'm really disappointed that such a huge change would be proposed with such little notice with not really talking it through, and that would have a huge impact across the board through the State of California. So I don't know why this is happening the way that it is. I'm extremely disappointed. That's it.

Senator McNerney.

I thank the chairman and I thank the presenters and I apologize to the folks that stand up before I raise my microphone. So a couple of quick questions. Under this bill, construction workers in San Joaquin County, which is my district, would be paid a minimum of $20 an hour. So why should the floor for skilled construction workers not reach the threshold we've set for fast food workers?

Meagan Tokunaga Block, Department of Finance. The wage rates were meant to be above the market rate for comparable work on these projects not going through this proposed CEQA streamlined process.

So, the construction workers would be better off going to fast food and flipping burgers?

Construction workers on projects not going through the CEQA streamline process we believe would be better off on projects that are utilizing this exemption.

So, in general, what's the rationale for creating this new minimum wage standard under CEQA streamlining?

To clarify, the proposal before you is creating a new option for developments to utilize a CEQA exemption. These projects are not otherwise subsidized. They wouldn't be set at wage floors, if not for this new option being proposed that allows a CEQA exemption for these specified projects.