Assembly Standing Committee on Budget

Good morning, everybody. Welcome back to the Assembly Budget Committee. I want to begin today by welcoming back our returning Committee Members and also by thanking all of our Members and especially our talented Subcommitee chairs for their hard work last year. I also want to take a moment to welcome several new Members of the Committee.

We are excited to have joining us today Assembly Members Coloza, Stephanie, Gallagher and Johnson. And we look forward to working with all of you. I also want to congratulate our new vice chair, Assemblymember Tangipa, as he assumes this important role.

And finally, I want to thank and acknowledge our former vice chair, the Republican leader Flora, for his service to the Committee. While we often disagreed on matters of policy. Uh oh, should we start that over? What? All right. Okay. Well, I want to make sure. I want to make sure that Mr. Flora heard me.

So we were just thanking our former vice chair Republican, the Republican leader, for his service to the Committee. And I was saying that while we often disagreed on matters of policy, Mr. Flora demonstrated to us that it's possible to disagree without being disagreeable.

And I think that's an important lesson and reminder for all of us as we head into the new year. Today's hearing officially kicks off our effort to craft the state budget and to craft a budget that delivers for California families and delivers on the most pressing challenges facing the state.

And we will begin this process with initial overview of the governor's January budget proposal. For today's hearing, we're pleased to have with us Erika Li from the Department of Finance who's going to present the administration's budget proposal. We will then have an opportunity to hear from our very capable legislative analyst, Gabe Pettic.

And we are also privileged to have with us Christian Griffith and our very capable Assembly Budget Committee team for any questions. After we hear from the Administration and the lao, I'm going to turn to Member questions and comments. And I will remind folks that we have just north of 40% of the Assembly serves on this Committee.

So in order for everyone to have an opportunity to have questions and comments, I'll ask folks to be mindful of the fact that we probably have a lot of colleagues that are going to want to talk today. And then with our remaining time, we will open to public comment.

And as a friendly reminder, we need to conclude our hearing prior to 1pm today because we have a floor session at 1pm but, but we are scheduled to have over 60 public hearings in the next several months, which is going to present us with the opportunities that we need to dive into the details to hear from stakeholders and Members of the public.

And so, just a friendly reminder that today is just the first step in that journey. And so to begin that journey, let's establish a quorum. Madam Secretary, can you please call the roll?

[Roll Call]

Thank you very much, Madam Secretary. So, as I mentioned, today is merely the first step in our five month journey as we work to deliver an on time balanced budget that addresses the biggest challenges facing our state.

Later this month, we will notice hearings in our budget subcommittees to allow for a more thorough review and consideration of all aspects of the state budget. And as I mentioned, we expect to hold over 60 public hearings in the next several months.

This deep engagement will be necessary as we are faced with a third straight year of budget challenges. Last year, we faced a $15 billion budget shortfall, a problem that we met head-on. But thanks to our robust rainy day fund and cash reserves, we had options that gave us the time to make thoughtful choices.

Ultimately, we made tough choices, and our hard work last year is part of the reason we have more time and space to consider the challenges before us. Like last year, our budget process must be guided by our twin goals of compassion and fiscal responsibility.

We know that we cannot balance the budget on the backs of the poor and our most vulnerable communities. We cannot ignore the real challenges facing middle class and working families. But we also refuse to ignore the real fiscal challenges facing our state, as well as the potential risks from outside economic factors.

And so, again, our task will be to balance the need to fund key programs and services with the need for fiscal prudence that this moment demands. And I'm confident that this Committee is up to that task. I'd also like to offer brief thoughts on a few key issues.

First, one of the biggest challenges in crafting the 2026 budget will be the impact from the loss of federal funds due to HR1 and and other hostile actions taken by the Federal Administration. While the state cannot fully backfill these funds, we will explore opportunities to help vulnerable communities that may be left without any support.

And we must continue to aggressively push back when the Administration seeks to deprive Californians of the rights and benefits to which they are entitled. To accomplish this goal, we will need to work in close partnership with our friends in the Senate and in the Administration.

Most importantly, we expect that the Administration will communicate with us proactively and frequently to avoid surprises in the May revision. We need that sincere partnership and we will do our best to reciprocate. Californians are depending on us. We also must do better on housing and homelessness.

The lack of resources for housing in the governor's budget is impossible to ignore and it does not reflect our prior commitments or our values. We can and must do better regardless of our budget situation.

And so we look forward to engaging with the Administration on thoughtful homelessness accountability language as we seek to maximize the impact of state resources. And finally, as the speaker and I have emphasized, we must continue to strengthen our oversight and accountability efforts, including through Our Budget Subcommitee 7 and under the very capable leadership of Chairman Hart.

We had some great successes in this area last year and we must continue that important oversight work in 2026. With that, I'm looking forward to the hearing today and to the important work ahead. And I now like to congratulate and invite our new Vice Chair to offer any opening comments.

Thank you. First, I want to say how grateful I am to serve on the Budget Committee and especially to my new role as a Vice Chair. I understand the responsibility that comes with this work.

Considering that the budget we pass is a lot about our values and what we're choosing to prioritize, it's important to remember that the proposal in front of us today reflects the Governor's priorities, not necessarily the values of the Assembly or this Committee.

What's deeply concerning to me this year is that both the LAO and the Governor's Department of Finance are warning us about historic, ongoing structural deficits that extend into the foreseeable future. And I believe that should give everyone a pause when the administration's own experts are raising red flags.

The Legislature has the responsibility to ask tough questions and demand fiscal accountability. Californians, the people we represent, can afford budgets built on wishful thinking or short term fixes that push cost onto future taxpayers. Our job is to be honest about the numbers, serious about the priorities, and responsible with the public's money.

I look forward truly to working with the chair and his staff to take on these challenges together. And thank you again for this opportunity. I look forward to working with every single Member of the Budget Committee to make sure that we're prioritizing our future, our kids future. And thank you for allowing me to serve with you today.

Thank you very much to the Vice Chair. We are now going to turn to the meat of our program. We're very fortunate to welcome back Erika Li from the Department of Finance to present the administration's budget. Thank you very much for joining us.

Thank you. Good morning, Chair Gabriel, Vice Chair Tangupa and Members of the Committee. I'm Erika Li, Chief Deputy Director of Budget for the Department of Finance, and I'm here today to present the 2026-27 governor's budget.

Before getting into the numbers, I think it's really important to be able to talk about the approach that we took and the framework for this year's Governor's budget. First, it is balanced, as it must be constitutionally in the budget year 2026-27.

However, this budget also recognizes that there are long term structural issues, imbalances starting as early as 27-28, and that it will be important to address those.

So while the governor's budget addresses the budget year, the Administration is proposing to also address the structural imbalance in 27-28 with additional proposals at the May revision when we will have more updated revenues, we'll have more updated expenditure data, and that will be difficult. It will be difficult.

I acknowledge that from the beginning it's been difficult over the past few years and we will need to work in partnership, as the chair just mentioned, with the Legislature in regards to addressing not just the budget year, but budget year plus one.

And we also look forward to hearing from the Legislative Analyst Office over the spring as they propose meaningful solutions as well. So with that, I will begin with some of the top line budget numbers. The budget this year has expenditures of 349, basically 350 billion, of which 248 of that is General Fund.

That is about a 19.9 billion increase from the Budget Act. The revenues have been upgraded since the Budget Act as a result of strong performance in the stock market, which impacts obviously our revenue, both our economic and our revenue forecasts. We are looking at roughly 42.3 billion more in revenues compared to the Budget Act.

And that's over the budget window, which is last year, this current year and then next year, which is budget year. We're seeing strength in revenues due largely to capital gains, pit withholding and very strong cash receipts. A significant portion of the pit withholding is from strength from the tech sector, specifically a handful of tech companies.

So that said, there is still a budget year deficit and I'll explain why that is the case. So because we have additional revenues, we do have calls on some of those dollars based on constitutional requirements.

Both Proposition 98 and Proposition 2. Prop 98 takes up about 14 billion of those additional revenues, while Prop 2 and other miscellaneous adjustments account for just under 5 billion. We also, just as a reminder, started this budget year with a shortfall of about 12.6 billion.

So even though we solved for the current year, we entered with a negative number. And so factoring that in, we also have some increases in expenditures, roughly about 9 billion there.

And as we have done over the last few years, we wanted to build a significant state fund for economic uncertainty that is basically one of our reserves, I like to call it our checking book account because those are calls on things that are may, may come up in the budget year that we have not assumed that we're, you know, that's why it's called the State Fund for Economic Uncertainty.

We want to make sure with all the uncertainty around us at the state and federal level that there are, there is a sizable amount in that reserve. Speaking about the out years, we are looking at about 22 billion in budget year plus 1 and over 20 billion beyond that.

And that is a structural deficit that was mentioned and that we have talked about that the LAO has also talked about. And again, I just want to say that we intend to be in partnership with the Legislature, not just at the May revision but through this spring to consider ways that we can start addressing that.

Again, it's important that speaking of that, that reserve of 4.5 million, we also have the rainy day fund which we've built up to 14.4 billion in the budget year. And we also have 4.1 billion in the schools Rainy Day Fund for a total of 23 billion in reserves. Again, reserves are vitally important.

We know that from the last few budgets where we have to tap into the reserves to help solve for past budget problems. The 2.9 billion deficit that we are projecting in the budget year is largely going to be addressed through suspending a current year true-up into the rainy day fund.

Now that's very technical, but it is a sizable amount 2.8 billion. And so our, if our deficit is 2.9 billion, that is the quote unquote solution that we are taking to address that.

And that is in line with what we did last year when we suspended and withdrew from, we suspended that deposit into the rainy day fund as well as withdrew from the rainy day fund as part of the 24 Budget Act Solutions. In terms of this budget, we are paying more of our long term, paying down more of our long term liabilities.

3 billion in the budget year. So despite freezing or sorry, what's the word suspending the current year true up, we are actually putting in 3 billion in the budget year to pay down our long term liabilities. And the plan is to pay about just under 12 billion of those long term liabilities over the next four years.

So given all those numbers, we have proposed what we call a workload budget. So there isn't significant new investments and, and there aren't significant cuts here. So we thought that was an important place to start. Again, we will have more updated revenues, we'll have more updated expenditure data coming into the spring.

But for now, what we are presenting, what the Governor has presented to you is a workload budget. Some of the highlights. I'll just go over some of the highlights in this budget before turning it over to my colleague here, Proposition 98.

So the education budget, which is basically a budget within our overall budget, is seeing notable adjustments because of the revenue increases about 21.7 billion over the budget window. So over those three years we are also paying up a settle up that we owed in 24-25 of 1.9 billion.

And so I think, I think that's important to address because at the time we funded the guarantee at the minimum. And since revenues have gone up, we do owe more this year.

And there is going to be, even though we paid that settle up that 1.9 billion for 24-25, we are proposing to create another settle up for 25-26 of 5.6 billion. And this is, this will be the settle up will be paid back later when we certify the proposition 98 in spring of next year.

And so I think that's just important to note that we did pay the 24-25 settle up. We are creating an additional settle up in 25-26. Despite that, we are this budget has the highest per pupil funding ever at 20,427 Prop $98 per pupil. If you add in all other funds, it's over 27,000.

So I just wanted to highlight that important factor that despite having a $5.6 billion shuttle up, Proposition 98 is still getting 18 billion more than it was at the 2025 Budget Act.

In higher education we have about 716 million ongoing General Fund for both the UC and the CSU that includes a fifth and final 5% base increase that was related to the higher education compacts.

We have also extended the deferral of a 3% base decrease in 25-26 by another year, but also have extended the short term loan provided to both UC and the CSU that was included in the 2025 Budget Act for climate and that there was as part of the 24 climate bond.

The budget allocates 2.1 billion of the second year of the 10 billion multi year investment plan and I think it's important to note 314 million of that is for wildfire landscape resilience in order to reduce the risks of wildfires.

We also have a new ZEV incentive of 200 million one time in special funds as well as statutory language that you'll see February 1st to establish a new light-duty ZEV incentive program in order to keep ZEVs more affordable and accessible for Californians.

In regards to health and human services, the budget includes additional funds as a result of the the HR one impacts.

There's about 1.4 billion in health and human services of which 1.1 billion is in the Medi-Cal program to reflect reduced federal match for emergency services as well as reduced hospital quality assurance fund program, the HQAF fees as well as in CalFresh. There's a net cost.

There were some savings and there's also some costs but there's a net cost due to the increased state share of the CalFresh Administration. In child care we have 89 million ongoing General Fund for GSS to administer child care programs.

That's a COLA as well as 11.5 million in one time Proposition 64 funding for child care infrastructure especially targeted toward communities impacted by the recent fires. And the last thing I'll mention is that the budget does include three tax proposals.

The first is requiring third party delivery services that facilitate orders through a website or mobile app, like GrubHub, Door Dash, to actually collect and remit taxes on behalf of the tens of thousands of businesses using their platforms. So this is not a new tax but it is projected to increase tax compliance.

Secondly, we are creating a new tax credit. We're proposing to create a new tax credit to incentivize companies that produce aviation fuel from renewable sources rather than crude oil. And and then lastly is the extension of the California competes tax credit which would have sun which would sunset in 27-28.

We're proposing a five year extension on that and I'll stop there.

I just want to thank thank you thank the Committee as it this is the beginning of the whole process as the chair mentioned and we're going to have a lot of opportunities to discuss this budget proposal as well as other proposals and agree that there needs to be partnership between the Administration and the Legislature in order to make some of those difficult decisions and the idea of meeting as the chair mentioned, the two north stars of being compassionate and making sure that we aren't hurting vulnerable populations also has to be balanced with the actual fiscal realities of this budget.

So we look forward to working with the Committee and with staff throughout the spring. Thank you.

Thank you very much for that. And I just want to emphasize I appreciate the commitment to partnership. I know that we've had really strong partnership in the past. I just want to underscore to make sure that the point to get lost.

I think what's important to us is the timing of that partnership and I suspect that the LAO will touch on this as well.

If the Governor is intending to propose significant solutions to balance out your shortfalls, I think it's really important that we have the opportunity to have conversations about those prior to the may revise so that they can get the public vetting that they deserve, so that we can hear from impacted stakeholders and so that Members of the Committee have the opportunity and Members of the Legislature have the opportunity to weigh in on that.

So I'm confident that that's the direction in which we're going to head. And I just appreciate your partnership here. I don't know if you wanted to respond.

Yes. Just wanted to say the sooner the better.

Excellent. That we are all, we are all in agreement. And with that happy agreement, I will turn it over to our very capable legislative analyst, Gabe Petek.

Okay. Well, good morning Mr. Chair Gabriel, Vice Chair Tangipa, appreciate being here and rest of the Members as well. I am here today to give our overview comments on the budget proposal. Hopefully you have before you a copy of the handout which is also on our [email protected] for anybody following along remotely.

And I also provided today a copy of our overview of the governor's budget report that we put out after the budget came out, because I'll reference that in my remarks.

So with that, I just want to begin by noting that in my comments today I am planning to largely focus on what our office views as the main risks facing the state budget.

This approach is a little bit different than maybe some of the overview presentations in the past where I might have walked through a more detailed accounting of the governor's deficit estimate and how we may differ from that because having looked through the proposal ourselves, the net result of the accounting differences really seem reasonable to us.

That's not where the action is, if you will. And so that being said, I will just touch briefly on the high level numbers that Ms. Li referred to, as you may be aware back in November, our office put out our fiscal outlook for the upcoming budget year.

We estimated at the time that the state was facing an $18 billion deficit. And then the governor's proposal identified a $3 billion deficit for the upcoming year. And so you know, that $15 billion delta. The main explanation for it is that the Administration, their revenue estimates are 30 billion higher than our revenue estimates through the budget year.

And then of course, as was mentioned, when you have higher revenues, there are higher constitutional spending requirements. So there are about 13 billion there. And then also across the rest of the budget, the Administration has about 2 billion in higher expenditures relative to our our forecast.

The couple of big provisions that I might allude to later, the Governor does propose this creation of a Proposition 98 settle up obligation of 5.6 billion and then also proposes to suspend the true up deposit to the budget stabilization or rainy day fund.

And then also the Governor does still propose about what we tally to be around 600 million in discretionary spending with we list that out in the appendix of that report. That's one reason I provided the report to you.

And then also does provide for a $4.5 billion ending special fund for economic uncertainties balance the kind of discretionary reserve for the State General Fund. So with that I would like to return to kind of the proposal as it relates to the risks that we see facing the state budget.

If you look at the first page of this handout, it's a very high level way of looking at the state budget. But if you just look at the proposed column for 26-27, you would note that the revenues and transfers are roughly 20 billion lower than expenditures.

And so the only way that the state can still have a balanced budget in that circumstance is because we have the carry in balance to make up the difference. And also, I must say, you know, the budget is just balanced.

It's precariously balanced in our view, even with a $42 billion upgrade to the revenue estimates through the budget year. When we go going to page two, this is where I'd like to begin the focus on what we think are the major risks facing the state budget.

And the first of these is that we view there to be considerable downside risk to these revenue estimates. The 42 billion upgrade is, as Ms. Li mentioned, very much driven by what's going on in the stock market, which has been on fire. And it's really benefiting from all of the optimism around artificial intelligence.

And yet when we look at the market and when we've done sort of an analysis of the history of market performance. We believe there is a elevated risk that we could be due for a market downturn at some point in the next year or so.

This figure on page two of the handout lists a few of the indicators that we're looking at. The first one on there is telling us that stock prices have gotten so high that the risk adjusted expected return that investors can anticipate has shriveled really down to 1.5%.

And that's normally it's three times that level in normal times, and it's only gotten down to this low rate in the summer of 2007 and in late 1998. So those are before the financial crisis started and before the dot-com bust. The other indicator that we're looking at is the amount of leverage in financial markets.

We're tracking the margin debt that investors are taking on. This is a very aggressive strategy by investors where they're borrowing from their brokerages to buy stocks. And that has increased by one third just over the past year and is also now three times the historic norm.

And that tends to correspond to periods when we're reaching a market peak. Then the last one just shown on here is just the extent to which households across the country are exposed to equity markets. Equity holdings are now 200% of disposable income, and it's far and away the highest measure we've seen in the past 70 years.

So all of this is telling us that the market is at least, at least at risk of experiencing a downturn. And so while we've all heard the old adage, this time is different, we cannot say it's not. We can't rule that possibility out.

But in good conscience, we cannot advise the Legislature to adopt a budget with that assumption. The next page talks about the other major risk that we think is facing, the state budget or the major challenge really, which are these structural deficits. And on this one, the Administration and our office are both in a general agreement.

We have both, as you see here, both of our offices estimate there to be large and persistent deficits. Now, the reason that we think this stands out as a particular concern at this time is that even though I've been talking about the stock market risk, we actually haven't had a downturn yet.

These deficits are existing in the absence of that. And so, in fact, the market has been up over, around, I should say today is down, but has is up around 50% over the last two years. So despite that, we will be going into what we would say is the fourth consecutive year of deficits.

And so even though it may not feel like it because of those recurring deficits, revenues have actually been growing throughout this period. It's just that now, as we're looking at it, it seems like they could be reaching something of a high-water mark. So that's another reason for our caution on the fourth page.

I try to just briefly, I think, speak to the question hanging over all of this, which is how did budget kit here?

It's a question that we get a lot and it's complicated, but this is a very brief explanation, which is that around four years ago, after experiencing two years of extraordinary revenue growth, the state went into a revenue downturn. We had a double digit revenue downturn.

And since then revenues have been growing and they resumed growth around that time and have continued to grow, but they have not caught up to the level of spending that was established during that period.

And so because of that, that's why we view this really as having transitioned from a cyclical type of a deficit to more of a structural deficit.

So then going to the fifth page of this handout here, the point is to address the core question that we think is facing the Legislature, which is do you want to take action to address these risks? And if so, how would you want to approach it?

You know, the governor's budget proposal does acknowledge both of these risks that I'm talking about, but stop short of making material proposals for how to address them.

At this time, at least in our overview document that I provided for you there, we did present several steps, three steps, very much at a high level of what the Legislature could do to begin addressing these risks and this challenge of the structural deficit. The first would be to adopt or use LAO revenues.

That would be a way of acknowledging the risk that I'm talking about in the markets and sort of building, building in it up front and kind of contending with it. The second one, and related to that, is then to tackle the budget problem, the $18 billion deficit.

If you our numbers would be the size of the problem that would have to be tackled or those numbers. By the way, I should say our deficit estimate was developed in advance of the November fiscal outlook. We did continue to have strong tax collections in December.

So if we were to update it, it might be a bit smaller than that. But anyway, so you would have a large deficit problem to address under our numbers. But even if you take the administration's revenue numbers, we would really recommend two changes at a high level.

The first would be regarding this Proposition 98, settle up obligation rather than take the freed up budget capacity that that creates and spend it, we think that amount should be put into a reserve.

The second one would be if, you know, if revenues, if we're going to assume in the budget that revenues are up by 42 billion, we really don't think this is the time that the state should be suspending its true up deposits to the rainy day fund. That runs counter to basic fiscal logic.

If revenues are so strong, we should be building up our reserve. And then the third high level point is we think that it would be very important for the Legislature to begin shrinking these multi year deficits trying to solve all we referenced 30, $35 billion structural deficits. The Administration has number more in the 20s.

That's a very difficult number to solve. And we would recommend at least identifying a plan for cutting that in half so like $10 billion this year, even if they aren't all adopted this year, developing the plan that then they could be implemented over the next couple of years.

So then lastly, I did want to just speak to this topic that the chair mentioned and was brought up about why not wait until May or why not wait until even, even next year.

And the main thing I would say about waiting until May is that, you know, the risk that we're talking about goes, you know, 17 more months essentially until the end of the upcoming budget year. We may not know in May whether or not the budget problem, the revenue problem or the revenue risk that I'm highlighting has occurred.

A lot of times there's a delay even when the revenues start to turn down, we don't really find out about it until after the fact. And so even in May, if things are looking good, that doesn't mean we're in the all clear.

And also I really don't think that it's ideal to wait until May if we have to make big difficult decisions for the public to have a part in this process and for the Legislature to be able to have full input and flexibility about considering its options and not wanting to jam the Legislature at the last minute I think is very important from our perspective.

And then the other question is why not wait until next year and deal with the structural. Start dealing with the structural deficits then. And we again, you know, this is a point we've actually said before. It can make some sense to take a wait and see approach.

We, the LAO would not be in favor of making difficult cuts or imposing tax increases if they turn out to not be necessary. But in this case, you know, we did this analysis in our November outlook.

And, you know, if the deficit is in our numbers, 35 billion, so you could adjust this down, could be somewhat smaller, but it really takes a lot more than 35 billion in higher revenues to eliminate that deficit.

We estimated for the 35 billion, we'd really need about 60 billion in higher revenue every year of the outlook period because of these constitutional spending requirements that we have. So each dollar that we get, a big chunk of it has to go to fulfill our constitutional obligations, not just solve the deficit.

And so that makes it very implausible in our view that we will just naturally grow out of this. And in our best judgment, it seems that the problem would be much more difficult if you waited and tried to address a large 20 or larger budget deficit all at once.

And so taking a somewhat more incremental approach could make life easier for the Legislature. So I'll stop there. I'm here with some of my staff. We're happy to respond to questions that may come up. Thank you.

Thank you very much, Mr. Petek. And I want to thank you for the handout that you provided the Committee today. I did just want to respectfully suggest to all the Committee Members that I think it's worth perusing the longer publication that the LAO put out the overview of the governor's budget.

Again, not to take everything that's in there as gospel, but just because I think it surfaces a lot of the issues that we're going to have to grapple with and think and think through in a really careful and thoughtful way. So with that, I want to thank you both.

We appreciate that we're now going to turn to comments and questions from Members of the Committee. And for those that have joined us since we first opened up the hearing, I would I was respectfully reminding everybody that we have just north of 40% of the Assembly that sits on this Committee.

So I'm hopeful that we can be thoughtful about the need for colleagues to have an opportunity to, to speak today as well. And then I do want to reserve a little time at the end for public comment. I think it's important that Members of the public that have joined us have the opportunity to weigh in as well.

So with that, we will start a list for Members who would like to speak. I know that we have Mr. Bennett has asked to speak and Mr. Lee, and then we'll go from there. So you want to take it?

Thank you. Chair Gabriel I have six points I'd like to make and I'll try to do it as efficiently as possible. We're expecting the time constraints that we all have.

First of all, I appreciate that the Administration has included 19.6 million from Prop 4 to establish a financial assistance program, grant program for defensible space and zone zero mitigations. That's going to be an important issue.

But I raise questions about how do you allocate $19.6 million in a way that it actually has any kind of impact statewide in terms of our crisis. Which takes me to my next point. And that is, I think we have to recognize that California has passed a tipping point when it comes to wildfires.

Business as usual is not going to be good enough to deal with this. We have up to a $45 billion loss down in the Eaton and Palisades area. At this point in time, everybody's home insurance is going to reflect some increased costs. But we risk California becoming uninsurable or certainly not having sustainable insurance rates.

So with these property losses that are soaring, it's really important that we rethink our strategy. And the rethinking that I think is most important and I really appreciate my colleagues attention on this critical point.

And that is we have to put more priority on protecting people's lives and protecting their property, the structures, because that's where we're getting the huge economic impact, $45 billion worth of loss. And so right now I would offer that the state of California is mostly a forest protection first.

And then if the money stretches, we come back to doing something at the lives and structure area and we need to rebalance that. I'm not saying abandon the forest side of it, but we have a goal of trying to make sure that we clear a million acres a year.

We need to balance that goal with how many homes are getting hardened, how much defensible space is happening. Second point, it's really important we do not have the resources in California, particularly when you hear about the risk for us to harden the homes that need to be hardened in California, homeowners are going to have to do that.

What we have to do is come up with the incentives for people to harden their own homes. People in high fire risk areas are the ones that will most directly benefit. And many of those people are in income areas where they can afford to do it.

But we have to create the proper incentives for people to be able to do that.

So in sub 4, we will be diving deep into that particular issue, this sort of rebalancing and how do we make sure that we create incentives so that we can say five years from now, not only are we doing a million acres of forest clearing, but we're also, we've gotten a million homes hardened, then it's 2 million homes.

We have 5 million homes that have to be hardened. There is no way the state of California is going to pay to be able to do that. So that's the second major point that I wanted to make. This is a question for the Administration.

The incentives for the New Zealand incentives are for new car purchases as the priority this year. And I think that it's important that we also look at our heavy duty, our HVP program that the diesel and all of the pollutants that come from those and the impacts they have on low income communities.

So I question whether we should be heavily, so heavily for the passenger car and not have some balance there. And so can you tell me very briefly why you put this emphasis on the passenger car and pulled away from our commitment to the heavy duty vehicles?

I will turn to my colleague for that.

And if the colleagues will start walking up as I start the question, if you're the one that's going to be the question. I appreciate it. Just for speed purposes.

Hi. Erin Carson, Department of Finance. It's not a question of moving away from heavy duty. The ZEV incentive appropriation proposal is kind of in response to the rescission of the federal tax credit in the fall for ZEV passenger vehicles.

So what about the funding for the heavy duty vehicles that were decreasing?

The governor's budget doesn't propose to decrease any funding for heavy duty.

The HVIP program.

There's no proposal to decrease.

Great, thank you. All right. I was a misunderstanding there. All right. And then this is on GGRF and transit funding. I'm concerned that the multi year GGRF spending program that was approved in 2024 has been eliminated.

I know we have cost pressures with Cal FIRE and the GGRF Fund and SB840, but these cuts will have significant impacts on our transit agencies who are promised these funds with SB125. Can you give us a short 30 seconds on where you think you're going with these transit funding? With the transit funding.

Sure, James Moore with the Department of Finance. As you noted, those were originally part of the GGRF multi-year expenditure plan. However, in the final 2025 Budget Act that included the shift of CAL Fire resources from the General Fund to the DGRF, creating that shift necessitated in a zeroing out of the multi-year expenditure plan.

And so you are correct that those are not in the budget. This the government's budget does not propose to change what was happening in the in the 25 budget.

Do you do you anticipate that the CAL Fire in the long run will stay in ggrf or do you anticipate phasing that out and back to the General Fund?

The proposal as it exists now is only through 28-29.

Thank you. And can you confirm that the that the SB125 transit relief package, it's been cut? Was that a total of 250 million in GGRF in 26-27 and 460 million of GGRF in 27-28?

Those are the totals in the 250 in the budget year that you cited. 20 of that is outside of the SB125, although it is part of the competitive TIRCP program. But the 230, which is the 250 minus the 20 I mentioned, plus the 460 that you mentioned in budget year plus one, those are from SB 125 programs.

Okay. Thank you very much. And is this the complete elimination of discretionary funding in GGRF? It looks like that's what is in fact the case. All right. That it seems like the budget assumes a complete elimination of future year discretionary funding from GGRF.

Are you talking about specific to transit or in general?

All of the discretionary spending in GGRF? It looks like it's all gone.

One second.

That's my final question Chair

Good morning. Andrew March, Department of Finance. Yes, so as mentioned, so the Mayor of Vision proposed to zero out the the GGRF discretionary plan that was adopted in 202425 to make room for the Cal Fire shift and that was approved as part of the enacted budget. So there is no more additional discretionary.

Funding from that 24-25 plan. We'll revisit each year depending on GGRF revenues.

It is a significant change for the Legislature to not have any discretionary funding out of GGRF. And I've raised this before and I raise it again.

There's a question as to whether we should be funding Cal Fire, a very important permanent funding agency for us to fund from a source that is as temporary as GGRF and will should be by around 2050 heading towards zero in terms of that. So I wanted to get that on the record. Thank you very much.

I appreciate the answers.

Thank you very much. We're now going to go to Assemblymember Lee.

Thank you, Chair Gabriel. And I want to thank the work of the Department of Finance and Lao for all your hard work and stirring us through all these difficult times, I have three simple questions that I would like to just ask simple answers for since we are pressed on time.

First of all, we have to acknowledge, of course, we are in dire, worse budget situations because of Trump Administration pushing us to spend more money than we ought to. In CalFresh alone, we're spending almost 400 million new dollars just in Administration fees that the Federal Government through, I would argue California taxpayer dollars already covered before.

And I would hope that we would all agree on all political spectrum that using more of our California tax dollars to spend on Administration fees that now the Federal Government is forcing us to pay for is not the best use of California dollars where the Federal Government was perfectly okay with helping us deliver food to people who needed food, the basic necessity.

I wanted to ask the Department of Finance, in totality, like I mentioned, the CalFresh 400 million, roughly how much new spending are we now incurring because of Trump Administration's new legislation, new requirements on us? So what's the totality we're looking at?

So in the budget year, as I mentioned, for the health and human services area, as a result of HR1, we're looking at an additional 1.4 billion split between the Medi-Cal program and CalFresh.

And generally, I would say there have been other policy changes from the Federal Government and as was noted earlier, federal funding is either withdrawn or reduced. And in most cases we will not be in a position to backfill for those.

So these are dollars that for Administration purposes and, and changes in the share of costs that we will be paying as a result of HR1 specifically. But just generally, we have, I think, been very vocal about the fact that we can't afford to backfill where there.

Are significant losses of federal funding beyond the $1.4 billion. Maybe the loo can help on this. How much more money outside the Health and Human Services are we set to lose or spend more of?

That's the main policy area that we're at the LAO we are aware of.

But I was just going to add that in addition to this initial 1.31.4 billion in additional cost that's going to grow over the next several years in our fiscal outlook, it was reaching something in the order of 5 billion per year by later in this decade.

Right. Thank you. So in addition to all of our problems, we have at least $1.4 billion we otherwise shouldn't be spending that we are now forced to spend by the Federal Government, which is very bad brings me to my second question. I understand that the Administration proposing new tax credits.

So as we are looking at closing the deficit and being more responsible with the state budget, I understand they're also proposing two new tax credits. So I have a very simple question on that. One is there is a sustainable aviation fuel tax credit. What company would benefit from this tax credit specifically?

Colby White, Department of Finance. So for the Sustainable Aviation Fuel Tax Credit, any company that was selling sustainable aviation fuel or producing for use and sale within California would be, would be able to avail themselves of the tax credit.

And I understand there are not a lot of them on every corner block, so which company would it be?

Like I said, it's any company that would benefit.

Does the DOF not have an understanding of which company that would be?

Well, there are several that we're aware of. Yes.

Like which ones?

There's Phillips 66, World Energy. There's a couple other smaller ones. There may be a couple out of state ones as well.

Okay, very good. And since we are going to be examining new tax credits while the extension of California Competes, will the administration be working with the public and the Legislature on more oversight through the, through the policy process or it will solely only be the budget process?

I think in general oversight is obviously very important through whatever process, whatever means. You know, we get involved in the budget process, but we also have our staff who review all the bills that come out of Legislature and there is constant communication. So I would say for both processes.

Okay, thank you. Well, I would hope that we in the Legislature treat as seriously as, you know, we often don't like having big policy proposals inside the budget. I think new huge tax expenditure that we're unsure of who benefits and how much money and what's the benefit overall as we look at checking all the tax credits and what their benefit to the California taxpayer is. I think it would be beneficial beyond just the larger budget picture. And on page 41, that's my last question.

This is my last question. On page 41 of the Assembly Governor's proposed highlights sheet. You know, this is a good breakdown of all of our revenue sources and all these things. Just a reminder that, you know, California is home to more billionaires than anywhere else in the world except the People's Republic of China.

And they often pay less real taxation than our workers. And so it's very important to look at this chart, see who isn't exactly paying their fair share and who is gaining so much out of the AI stock bubble right now.

I won't have any questions about that right now, but I did want to point to a line that I was very intrigued by on this chart. So of all the revenue sources, it shows the percent change over time. There is a line just called "other" and it dropped for $9.2 billion in revenue to $4.4 billion. And that's a 51% decrease. What is generally "other" because that seems like a lot of money that we are now losing?

So the other revenues is related to both other revenues outside of the main revenues that are listed in that chart. Includes things like pooled money interest, for example, and that declined $800 million year over year. It also includes transfers. And in this specific case, the main driver there is loan repayments to special funds.

I think was mentioned earlier that we're back into a situation in the budget year where we're repaying special fund loans where this has been a solution in prior years. So in 25-26, we borrowed $1.8 billion from special funds, and in 26-27 we're repaying a billion dollars.

These are our own internal state of California special funds that we are repaying, correct?

Yes. And so that is a $2.8 billion differential right there. That explains a lot of that 5 billion. I mentioned 800 billion from the lower interest revenues, which is just lower cash balances in the state's pulled money account. And then I think the other, there's also lower unclaimed property revenue in that figure that you're referring to.

Okay, well I would just end my comment saying, especially as we're in deficit, we need to look for every single amount of money there is, especially when they're in the billions. That is significantly eye catching. But anything, even the triple digit millions is really important. Again, I want to thank the Chair for our incredible work and all your entire team, and thank you for allowing me to speak.

Thank you very much, Assembly Member. Appreciate that. We are now going to turn to Assembly Member Ahrens, and then Assembly Member Rogers.

Thank you so much, Mr. Chair, for your leadership, and I want to thank the panelists. I look forward to working with you and my colleagues on this committee as we review the administration's proposals and ensuring that California's voices are heard throughout this process.

I want to really just highlight and appreciate how many more meetings we are going to have in this budget process. I don't think there's ever been more transparent way of doing things. So I really want to appreciate the Chair's leadership on that.

I think it's also important that we have to identify more solutions to help Californians better afford the soaring costs of living, especially in my district in Silicon Valley, including for food, housing, and utilities, and protects access to education and health care.

And while the Governor's budget reflects a $2.9 billion shortfall for the upcoming year, an improvement on the LAO's projections of 18 billion, we are navigating significant uncertainty because of the federal government. Donald Trump and his executive branch continue to illegally withhold billions owed to Californians from everything from child care to infrastructure projects.

And MAGA Republicans in Congress have voted to gut funding for food aid and health care. California taxpayers send more tax dollars to the federal government than any other state by far. And this federal government continues to strip resources from California, robbing Californians and our communities of needed support that we have already paid for.

So our priorities have to be clear during this budget process. We need to address affordability, protect working families and our most vulnerable, and ensure that Californians get every single dollar that we are owed to by this federal government. Thank you, Mr. Chair.

Thank you very much, Assembly Member. We are now going to go to Assembly Member Rogers, and then Assembly Member Alvarez.

Thank you so much, Mr. Chair. I have a modest two questions. The first, Ms. Li, the Governor in his State of the State, made a nebulous sort of reference to helping LA fire victims to close the gap between the amount that was lost and the amount that insurance would pay.

It's an issue that we've seen in every disaster. When the budget actually came out the next day, there's just a quick paragraph about how the administration will work with the Legislature to come up with financing options for folks. So my question really is, how do you envision that playing out? Are you thinking of a fund that is actually funded by the Legislature, or are you looking at different types of borrowing and finance tools to help people to close that gap?

I would say yes, just generally. The Wildfire Fund that was mentioned at the State of the State is actually not part of this budget, but it is something that we understand is a significant problem.

But to be fair, there's a paragraph that says you will work with us so that in the May Revise, there will be tools.

Yes. There's nothing... There's no language at this moment. There's no funding that would go into a said fund. I just want to say that the recognition is there and that we do want to have discussions with the Legislature. As mentioned earlier, the sooner the better on all of these things.

We would be looking for creative mechanisms, financing mechanisms. All of the above, as you mentioned, would be considered so that we can have something that's meaningful that is potentially in the May Revision.

Do you have something you wanted to add? I would just also highly encourage you to continue to work with all of us. As my colleagues know, my community is still struggling to rebuild from the Tubbs Fire in 2017 as well. And so if you are coming up with solutions for folks in LA, don't forget that, whether it was the Camp Fire, the Tubbs Fire, or other disasters that have happened, that there are still folks that we need to be assisting to get home.

And I just don't want to get to May and have the administration suddenly surprised that they're hearing from legislators that it needs to be bigger than just one disaster. The second question I have is for DDS. So I don't know if you want to bring up the right person for that. So a couple of years ago, DDS did a new rate study, particularly for zero to five early intervention services, hired a contractor from out of the state who botched the survey.

And all of the service providers that we work with have said that the rate increases that were proposed or the amount that was supposed to go for reimbursement was, first of all, inadequate, and then never implemented. I know that there's a survey that's in the field right now to see what the actual impact on service providers is. Spoiler. In a district like mine that's much more rural, that has a bigger impact and we see people who are leaving the field.

There is in the state budget an acknowledgement that right now the reimbursement rate doesn't actually address the total cost to deliver services, and yet also says that it's not going to honor that this year and increase the reimbursement rate. So my question is what is DDS's plan, understanding that the amount that it costs to deliver services for disabled children in my community isn't being reimbursed?

Thank you, Assembly Member. Chris Odneal with the Department of Finance. I don't have those details on that survey in front of me, and I'll need to look back with the department.

What I would say is since 2021, when the rates study, the administration and the Legislature embarked on in a partnership to implement those new rates. And it's been an iterative process over the last several years working with different providers and taking in that feedback, and it's covering dozens of different rates in a lot of different service areas, including early intervention services.

And are things that I know that the department takes that into account, and they, you know, they are constantly looking at and concerning feedback, even on individual service provider by service provider basis. So that's what I can share with you right now in this moment.

And I think right now what we can tell you is about of the... Sorry. Of what's currently been invested in the budget right now, about $2.1 billion General Fund annually is attributed to those increased rates since 2021. So it's been a significant investment in the system. And I know that the department is working diligently with providers as needed to try to address those concerns as they can.

Yeah. I think I'll just leave it with a comment. It's been five years. Folks are still waiting. Even with a little bit of an investment, they're falling further and further behind as cost of living creeps up. And we have in front of us a budget with a deficit that proposes tax breaks.

As my colleague mentioned, while you have significant services in our community that can't actually afford to keep people in that profession and provide those services to some of our most vulnerable.

So you're gonna hear at least me and I'm sure some of my other colleagues asking that question over and over and over again because it does reflect the state's priorities that it's been five years and has not been fixed. So thank you.

Thank you for the feedback.

Thank you very much, Assembly Member. We're gonna go Assembly Member Alvarez, and then Assembly Member Patel.

Thank you, Mr. Chair, and thank you to all the panelists. Appreciate you being here. I have one general question. In the bulk of my questions, I think there'll be three, maybe four, will be on the education component of the budget that I have the pleasure of continuing to chair.

Generally, I heard something that concerns me, and I want to make sure we're all in agreement. The LAO talked about the, certainly, the structural deficit. And I'm looking at page one of the handout that was provided to us today by the LAO on the overview of the Governor's budget, which I want to reference in my one general question.

The Special Fund for Economic Uncertainties, which we have been collaboratively, the administration, the Legislature, preparing and trying to make sure we don't inflict as much pain on important programs in the state. We have been preparing by setting aside some significant reserves in the SFEU over the last couple years.

What I think I'm reading here, and I want either for you to confer or confirm or share if you have different perspectives on this. That for the proposed budget, we are reducing that by $20 billion, is what I'm seeing in this table. Mr. Petek, that's what you're presenting that's your... Want to confirm that?

Yes. I mean, basically, the current SFEU for the 2025-26 year reflects... My understanding is it reflects the really strong current year revenues coming in well ahead of what was anticipated. And so we didn't plan to have a $25 billion balance in the adopted budget, but it goes up because of how the current revenues are performing so well, so much above the budget assumption.

So that flows into the beginning balance for the next year and in the course of the year, as you see. As I, you're right, as I pointed out that, you know, we would end with this 4.5 billion. There's no required amount that has to be in that end balance.

So you know, the Governor's proposing to keep four and a half billion, which is kind of the historic norm actually for this planning purpose. But yeah, but it moves around because of the revenues performance over...

So historically it's been 4.5. I appreciate you clarifying that. We have intentionally done that amount, but you could always do more. However, in years of substantial potential revenue gains, as you stated, this year at least is anticipated by the, I think by both of you.

I think it's fair to say you both have said there's some at least anticipated growth that has happened. In years when that occurs, do we typically set aside more funding, increase the budget stabilization account? What does the Legislature typically do in years when there's revenue that exceeds expectations I guess?

Well, what happened in the kind of around the pandemic period when we had the unexpectedly strong revenues, there were some supplemental payments to or deposits to the budget stabilization account. A lot of it was allocated to one time spending.

And I think the point of my comment on this figure is that I think in some ways the current strength of the revenues in the current year sort of masks this underlying imbalance, which is I think what you're...

I understand that. Ms. Li, thank you again for being here. I think what caused my attention in this number is that it's reflected in that last column of the proposed budget where revenues are 227and expenditures are 248, a $20 billion difference. So is it fair or unfair?

Certainly like to hear your thoughts. To say that in this year compared to what is identified in the previous years where our expenditures and our revenues were kind of in line, off by a couple billion dollars one way or the other. But $20 billion is quite, quite different than the previous years. Is that and fair unfair characterization of the proposed budget?

Well, I would say first that every year starts with some prior year balance that comes in and that helps adjust for what you're seeing as like the true revenues versus true expenditures.

And in regards to, you know, setting aside enough in the SFEU, I would also go back to prior to Covid I think our SFEUs tended to be a little bit less than this 4.5 billion because it is not just demonstrating strong revenues, it's also demonstrating high levels of uncertainty. And that's why we over the past few years have built up a higher SFEU because we don't know what we don't know.

And some of the things, for example, the DREOA Fund comes out of the SFEU. So fires that are declared, or disasters in general that are paid for as pursuant to DREOA or the Governor's disaster declaration would come out of the SFEU.

Yeah, I think all that makes sense. I just, I'm trying to recall in prior years, as we started with the proposal, whether that level of imbalance of roughly $20 billion of revenues versus expenditures that are expected was of that magnitude or not.

I don't believe they were of this magnitude. I think this is also demonstrating some of the concern that we noted about expenditures exceeding, the growth of expenditures exceeding the growth of revenue.

Appreciate that. Thank you. Now to the topic of education. The IBA mentioned something, and I may have been confused in what I heard about the settle up of $5.6 billion not being utilized.

I don't know if you can, Mr. Petek, explain what you meant by that in terms of the administration is proposing that we wait until revenue either materializes or doesn't, as we did this year, to appropriate that money. You said though that if we did that that that would create a General Fund, further exacerbate the problem of the imbalance.

Well, my comment was that the 5.6 billion settle up means we would owe it if revenues meet or exceed the assumption in the future. But in the meantime, the budget is spending that amount of money on the non-Proposition 98 side of the budget. And so our view is that given the uncertainty that's out there and the things we're talking about, it would be better to not build that amount into the budget and to set it aside.

And so would it be 60%? Is it the 60/40 split in this case, roughly?

Well, roughly. I believe so. We're getting close to my Prop 98.

Just trying to get the order of magnitude that you are suggesting that the General Fund side, that we should at least be...

If it's all right, my colleague can help with that question.

Edgar Cabral with the LAO. So this is not a, this is a little bit different. This is not the sort of typical 60/40 split. This is not related to the amount of revenue. This is just a policy, a decision that the administration made in this budget to say we're going to spend $5.6 billion less than what's required under the current estimate of the minimum guarantee.

So if revenues were to be, you know, exactly what the Governor's January budget is projecting, then come May of 2027, the state would be, would owe this $5.6 billion.

And so I think that's the concern that we're raising is that if the budget is actually spending those funds right then when we get to next year, this is now another obligation that is not being accounted for right now that is going to contribute to even worsening budget problem next year.

Okay, well, we will have a Prop 98 day at subcommittee which further discuss this. So thank you. I am also wondering if the administration has started to look at how LEAs, local school districts are preparing for declining enrollment that we are seeing in across the state basically.

I know it's not every single district, but certainly the vast majority. And concern about one time money propping up some really difficult decisions that districts may be facing in the future with declining enrollment and how that's being analyzed.

Amber Alexander with the Department of Finance. Thank you for the question. We're certainly aware of the analysis that the legislative analyst recently put out around enrollment based funding, which did look at many of the impacts around declining enrollment from a budgetary perspective. We've continued to budget in a manner that provides local educational agencies with maximum flexibility.

One of the reasons that you do see the approach of the large 2.8 billion one time for the discretionary block grant, building upon a significant investment last year that took the same approach, allowing LEAs to be able to pivot to the extent that their local populations are fluctuating.

We've also continued to look at the implementation of proposals like the attendance recovery which was enacted in the prior two budgets as well, and making sure that les are implementing those programs and aware of those opportunities to be able to recover any funding as a result of those declines.

I appreciate that. I just want to point out for colleagues because we all hear from our local districts, while you will never hear me say that there's enough money in education, there has been a growth in education funding to our local school districts and there has been less students at our schools.

And so I think we need to and we will during Committee be discussing and having conversations about how declining enrollment and increased funding, how districts are responding to that in a way that's much more responsible so that we don't have to from the state level, continue to prop them up or sometimes people use the term bailout folks who haven't made some difficult choices when it comes to administrative functions in particular at school districts.

So that's to come. I just wanted to highlight now the theme actually is kind of enrollment for the three question, the three segments of education that I want to focus on. The next one is on community college. And I have a question regarding enrollment growth.

Last year, thanks to the partnership and work with the Administration, we did give our community college districts enrollment growth. We have seen there's this interesting dynamic happening where declining enrollment in K through 12. But people are looking to their community colleges to get an education primarily to find a job, get into the workforce.

And last year we combined in our efforts increased enrollment growth this year. Can you tell me about the decision to keep enrollment growth that we're funding at only 0.5%, I believe was the number.

Hi Michelle Nguyen with the Department of Finance. So there are two enrollment growth adjustments that are proposed in the governor's budget. The first one is in the current year fiscal year 202526. So we are proposing to fund working with the Chancellor's office.

We estimated that there is approximately 1% of unfunded enrollment growth in the current year. So we propose to provide funding for that. It's an estimate. We're hoping to true that up as we get better information going into May revision. So again, we are proposing some funding in the current year.

And so the way that the enrollment growth works is if you fund it in the current year, it rolls into the, into the budget year base. And so I think our thought is the combination of the current year enrollment growth plus the proposed budget year 0.5% enrollment growth is it's kind of effectively a 1.5% in 26-27.

And just one more thing I'll add when we do our estimates for the governor's budget for the budget year 26-27, in this case, we often have the least amount of data on enrollment that we're going to have and we'll usually get some better enrollment information from the Chancellor's office in February.

And I think so I think that's part of why we had kind of like a more conservative budget year amount.

I appreciate you walking through that. I think we'll obviously at the hearing discuss whether those numbers are reflective of the needs, seeing how student population is going towards community college and in record numbers, actually, which I believe is a good thing. Thank you.

Enrollment again, CSU, if you have someone from Department of Finance who works on CSU issues, this is one area where we have seen declining enrollment in some campuses and demand for growth in other campuses. And we had a hearing at my Subcommittee in the wintertime, and I'm curious as to.

I've never asked this to the Administration but wondering if there are any analysis that is done or what work is done to try and right size the budgeting that's happening at CSU.

One of the things we found out is that some campuses who have significantly under enrollment of their projected numbers are still being funded at those levels where there are other campuses where our California students want to go to and because they're impacted, they're not actually able to access those campuses.

So curious as to the level of analysis you've done to identify what those needs are for the CSU system.

Jennifer Louie with the Department of Finance the Administration historically budgets General Fund augmentation toward the CSU system, university operations, much of that decision making.

We work in collaboration with the CSU Board of Trustees and the CSU Chancellor's Office with acknowledgement that we support the current General governance structure of the CSU Board of Trustees and the CSU Chancellors to aid their respective campuses for overseeing all 22 campuses in the state.

Okay. I would suggest if you haven't had a chance to review the hearing that we had, there's clearly some lack of what I would say planning in terms of number of students that are attending some of our campuses. And I think we need to identify ways to serve Californians, more Californians in a better way.

And I think there's some work to be done there with the CSU to right size and adapt our system to serve students. Same thing goes for community colleges and obviously K through 12.

I think you hear the theme for our education budget Subcommitee will be about making sure that what we fund with our education dollars reaches the students the most number of students the most effective way. So look forward to that, thank you. Thank you, Mr. Chair.

Thank you very much, Mr. Alvarez. We are now going to just jump to Assemblymember Quirk-Silva.

Thank you, Mr. Chair, and thank you to the panelists. One of the things that might surprise people is I love the budget, even in a bad time, because budgets reflect our values and it's always about wants and needs.

So if we're doing our home budget, we all want to go off to Greece on a vacation, but we have to repair our roof, right? And we have to make those tough decisions. The roof or the vacation. Sometimes when we have a surplus, we can do both.

But in our moment, we see that we have to make tough choices, and they are heart wrenching. Whether it's health care, whether it's food, nutrition, we in California have to make hard decisions with the resources we have.

So I appreciate the hard work that the governor's team that the LAO put forward because it gives us the information, a map to how we need to move forward. I would definitely echo, we need the sooner, the sooner conversations, not the later conversations.

Once we get to the may revise, we are pushed into decisions we aren't always wanting to make. So for my colleagues up here, please allow us to be part of this. It is not just the governor's budget. We are part of this team. Secondly, rainy day fund.

How many of us were here when the rainy day fund was established? Aha. No one but me and Mr. Lackey who just left because guess what? California didn't have a rainy day fund before. Was it 2012 or 2013? 2014. Yes. And I was one of the legislators that voted on that.

And that rainy day fund has helped us balance this budget. So we should all give a little cheer to those legislators. Okay? Okay. Now questions, you know where I'm going to go with this. So the Governor was really excited to talk about the decrease in homelessness. I believe he said it was down 9%. That's good.

It's not good enough, but it's good. It's a trend in the right way. So I'm very confused by what has been put forward in the budget the last three years that makes us have to beg and haggle for housing dollars.

So my question under homeless, I have two questions under the homeless budget, can you outline any key priorities for the accountability language? We know there was a lot of discussion that. And what is the timing of the Trailer Bill Language, given that the funding is supposed to go out by September 2026.

And we ran up against this last year, as you may remember in our hearings where we were talking about this new agency that all of this homeless emphasis. So that question. And then secondly on the affordable housing and sustainable communities, we know that one of the there is some funding for the HHAPP 500 million. We appreciate that.

But there are no funding dollars for the low income tax housing credits and there is no funding for the multifamily housing program. So if you can speak to that. Thank you.

Yeah, I'll start at a high level and then hand it over to my colleague for some more details.

But I just want to note, and I don't think this Committee needs reminding of the billions and billions of dollars that we have already committed going through to the locals to assist with their needs in dealing with their homeless populations. We have seen a decline. It's not enough.

But we also are interested in understanding what counties are doing, what locals are doing. And I think the accountability measures are really vitally important. And specifically for the round seven, the 500 million that you mentioned, you will see language coming out as part of the Trailer Bill. Well, actually I'll defer to my colleague on that.

But in terms of the actual specifics, I think we're looking for housing element compliance, local encampment policies, pro housing designations, leveraging local resources, not just state resources and how they're combating the problem at the local level.

So I'll just say that in terms of accountability, understanding that we've already provided billions of dollars with this Administration and then in terms of the reorgance, your specific questions on the changes to ahfc, I'll refer to my colleague.

Yes, Meagan Tokunaga, Block, Department of Finance. I'll try to take your questions in order to regarding the accountability measures and the priorities for those accountability measures. I would just defer to the SB131 Trailer Bill that was enacted as part of last year's budget which identified six categories of accountability measures.

These range from housing element compliance to local encampment policies. There's a list of six different categories there. Regarding the timing of Trailer Bill Language, we would expect these accountability measures to be determined in the current budget cycle to be effective July 1, 2026.

And this is consistent with the language in SB 158 which specifies that round seven disbursements will be available to grantees beginning September 1st of 2026. Regarding how the homelessness efforts align with the new housing agency, a number of proposals in the governor's budget help continue the implementation of the new housing and homelessness agency.

Details are outlined in the budget summary. And so we see this as a coordinated approach to better utilize the state's resources for housing and homelessness. And then finally, you asked about the lack of investment in the state low income housing tax credit program.

Just I would defer to Director, Deputy Director Li's comments in the overview that this is a workload budget and so there haven't been significant expansions in any individual programs. Thank you.

Thank you. I was just going to add to the last point about the low income tax credits that this has actually been the case the last couple few years where the Governor did not initially propose and then the Legislature added the 500 million. And so that's one thing to remember.

But also the baseline amount remains in place, the 125 million in tax credits. And also I would just point out. That HR1, the federal Bill, did actually. Make available a lot more federal tax credits for housing. I mean, I know there's a lot of details we need to know about that, but there may be additional federal dollars that become available.

Thank you. And yes, we did note that in one of our recent housing committees that there could be many more units built, which is ultimately our goal. And so I will go on record as groveling and already begging for those dollars so that we can go $0 in low income tax credits and multifamily to many more dollars.

But I would also just end my remarks with to my colleagues, you heard what they're expecting to get housing dollars in your community. So I would make sure that you note the special list. Can you tell us where that list is?

From SB131, the Trailer Bill last year.

Right. And that will tell you what your counties or cities need to be complying with in order to receive those dollars because a Lot of times we will get complaints that our county or our local jurisdiction got no dollars. And a lot of times they don't even apply for the dollars.

So please make sure your counties and cities have that list. Thank you.

Thank you very much, Assemblymember. I just, and I, and I hate to do this because we're having such a wonderful discussion. I just want to do a little bit of a time check for everybody else. We have about 27 minutes until session starts. We have nine Members of the Committee that are hoping to speak.

So and certainly we wanted to reserve a little bit of time for public comment, which I think is important. So I just wanted to respectfully suggest to people, again, we're going to have more than 60 hearings that are about to be noticed on the file. I think the subcommittees are an excellent opportunity to really dig deep.

Every question that's been asked, every point that has been made is an important one. But I think that there's really going to be an opportunity during those Subcommitee hearings to get into the detail.

And so what I might suggest to all of you is that this is a good opportunity to offer maybe higher level thoughts as opposed to questions about topics that you'd like to explore in greater detail during the Subcommitee hearing.

And I also want to apologize that we're not having all of the time to get into this in a more fulsome way. Because of the size of the Committee, this is the only room we can meet in. We're working around some significant scheduling limitations. And so this is the window that we were provided for this hearing.

So again, I really appreciate everyone's thoughtful comments, questions. They're really important. These are issues that absolutely deserve to be discussed in all of the detail that they're being discussed. The points that both of our Subcommitee chairs raised, the questions that they asked, are excellent ones and ones that we want to explore in great detail.

But we do just need to navigate this very limited time window that we have. And I do want to give an opportunity. We have some new Members of the Committee that would like to comment. So I want to make sure that everybody has the opportunity to do that.

So with that, we'll turn it over to our very wise and talented new Education Chair, Assemblymember Patel.

Thank you very much, Chair, for your leadership on this budget as we move forward. And also many thanks to the Department of Finance as well as the LAO for your work in providing guidance on some of our questions.

I will try to be very brief and just pivot my questions into two kind of high-level comments. One is I want to echo the sentiments of the Education sub 3 chair.

Assemblymember Alvarez brought up some points that I'm also very concerned about, including how we're managing declining enrollment with increased budget on Prop 98, but also specifically on the withholding of the 5.6 billion and the suggestion of putting that into a rainy day fund. We definitely want to be part of those conversations as we move forward.

These all have long lasting impacts, especially considering that if there really is this volatile market ahead of us, what are the guarantees around us receiving that money back? So looking at how we do these budget maneuvers and making sure that we're able to do the true up when it comes due.

And the second point I want to bring up is the cuts to IHSS and I want to tie that back again to our children.

When we look at cuts to the residual program, essentially eliminating that program, that can directly impact our ability to care for some of our most vulnerable members of our community, including our children with disabilities.

We know that there will be challenges with the redetermination process and eliminating that safety net at this critical time is a big concern to me. And I would like to offer that we find a way to bridge that or provide some kind of gentle landing for our folks out there.

Thank you very much, Assemblymember. Appreciate it. We are going to skip ahead. I know that Assemblymember Sharp Collins has some leadership responsibilities she has to attend to. So we're going to go to Assemblymember Sharp Collins.

Thank you. Thank you so much, Mr. Chair. I just wanted to kind of keep my comments brief and I do have one actual question. I do want to echo the sentiments of my colleagues right next to me when it comes down to the challenges that we face with our communities having recovery.

One thing that I haven't seen and it hasn't been really talked about. I know we keep talking about fires and other places that have fires, but I'm in San Diego and we had that historic flood and our families are still in need and they're still haven't been able to return to their homes.

If there's anything that we can do to make sure that we are have or having a all inclusive approach to all of the natural disasters, that would be greatly appreciated. Okay.

But also going back to Calfresh, I've had the ability with the luxury of actually meeting with counties about the increase of workload not just from the new families needed benefits, but from processing the applications in light of the federal changes.

So my question is where is the money for the increased workload and where does the Administration stand on increasing the benefits?

And I'm asking that because I did have a Bill last year that was actually trying to do everything we can to offset with what was to come, knowing that is $6, the average benefit is $6 a day. And I was hoping that we can obviously try to balance that to make.

To allow people to maintain their current benefits. So where we are with that particular process.

Yeah, I'm contem, Department of Finance. So the budget does not propose any changes to the allocations for any benefits. The changes that are proposed are administrative cost sharing due to HR1. So it's an additional cost of 362 million General Fund in 26-27 to account for the decrease in the federal cost sharing of 25 to 50%.

Okay. So as we continue to look at the impact of the federal changes, we just have to make sure that. That we remember our families need to eat.

So as benefits are continuously being cut, let's just try to figure out a way to make sure that we can keep food on their tables any way, shape or form as possible. Correct.

And looking forward to having those conversations. But as Director Li mentioned previously too, I think backfilling, what we're losing at the federal level is something that probably the budget's not going to be able to maintain.

I definitely understand that. But we have to figure out a way to make sure people are keeping food on their tables. Six dollars a day is nothing. And it's cut to three. We can't eat off of that. So let's look at the reality of it. But that's it. Thank you.

Thank you very much. Assemblymember. We are now going to go to Assemblymember Johnson. Assemblymer Johnson, welcome to the Committee.

All right, thank you for the welcome. Looking forward to lots of work. But I'm going to dive right in to keep my comments brief. I know we're in a time crunch today. I have specific comment context and then a question. Correctional Rehabilitation center closures and Prop 36 funding.

As an elected representative for the city of Norco in my district, a lot of concerns are being raised by local electeds and community Members regarding the planned closure and deactivation of this correctional rehabilitation center for later this year. In December, I wrote a letter to the Governor asking or requesting that this plan closure be rescinded and revaluated.

I'm extremely concerned about the impact of another state prison deactivation. This budget once again fails to adequately prop Fund Prop 36. But the voters have spoken loud and clear in California's want safe communities that require utilization of our state prisons for secure, secure capacities.

So my questions are really specific to for the Department of Finance, a quarter according to a letter written by Norco correction officers, or I call it the CRC just for lack of time and keeping it simple, they have open beds, low cost per inmates and more rehabilitation certification programs than most prisons.

So with those factors in mind, can you help me understand why the facility was selected for closure?

Anthony Franzoia, Department of Finance, the closure for CRC was determined by the Department according to penal code similar to the past, I think, foreclosures of previous adult institutions. I would note that there are of course, as you said, rehabilitative programs at CRC.

But the institution itself is mostly wood construction, which can be hard to retrofit. There's fire risk. It's also there's lots of ADA concerns at that facility. It's built on a kind of a sloped gradient.

And as the Department continues to make ADA investments at other facilities, it would just be, I guess more cost prohibitive at CRC to do that. So that's I think a major factor.

Okay, so with our overcrowded jails, this even that, still, even the investment in ADA and or refreshing the site, let's say to bring it to compliant is not an option is what I hear you saying. Because of penal code and cost effectiveness, Correct?

Correct.

Okay, so my next question I'll skip over then. That helps me a lot. I'm going to go to my last question which is when will we expect that the will of the voters is honored by funding Prop 36?

I will just to take a step back. Overall, there is still Prop 36 funding that's being maintained in the governor's budget. There is no, you're correct, there's no new funding proposed in the governor's budget. But the 2025 Budget act makes available through June 30, 2028 multiple pots of funding.

So that's $50 million for the Department of Healthcare Services to fund kind of county based diversion programs, substance use disorder programs, $20 million for the judicial council to address the increased court workload that goes along with Prop 36 cases.

$15 million for the judicial council to support pretrial services, and then $15 million for the office of the State Public Defender. And that includes grants to engine defense providers like public defenders.

I would also note that the governor's budget proposes $81.3 million for Prop 47 of that amount, about $53 million goes to BSEC, the board of State and Community Corrections. And BSEC has made Prop 47 dollars available for certain Prop 36 programs.

When we say new funding, has there ever been funding to Prop 36?

Again in the 2025 Budget Act? Those pots of funding that I mentioned are specific to Prop 36.

Okay.

But the proposition itself did not include a specific funding mechanism.

Okay. Thank you for that. Thank you for the time, Chair. I know we have to move on. Thank you very much.

Thank you very much, Assemblymember. And I just. I would note that I encourage you to spend a little time with our Public Safety Chair. There were, if I'm remembering correctly, several 100,000,000 dollars in funding in last year's budget that was devoted to the implementation of Prop 36.

It came from a variety of different sources and the Assemblymember spoke to this on the floor. So it's just can be a little confusing sometimes because we're drawing from multiple pots. But I do think it's an important point and I know that Mr. Schultz would be happy to spend some time with you on that.

Lots of questions. Thank you.

With that, let's go to our Vice Chair, Assembly Member Tangipa.

Thank you. And I will keep this as brief and as quick as possible so we can save a lot of the technical questions for the subcommittees. First and foremost, I just want to thank the Department of Finance and the LAO's Office for your quick analysis.

I know that hearing a lot of what you're saying and speaking the words is something that we have to translate. And it reminds me of the Key and Peele skit, which is the TV show of trying to pull out a lot of your technical terms and put it in layman's terms so the General population can understand.

So I agree with some of my colleagues. I do believe we are in unprecedented times. This is the first time in modern history where we have ran consecutive deficits for four years in a row. And that even includes the Great Recession. We're starting to see right now the record revenues for the state of California.

And I was looking at the governor's proposed budget. It seems like we're increasing on the personal income tax. Is that an accurate statement.

In terms of the revenues? The large part of the increased revenues is from personal income taxes.

And then we're also from the governor's budget. We're seeing an increase in corporate taxes. And it says because of improved economic forecast. Is that a correct statement as well?

It is. I would just like to add this is all relative to Budget Act. So based on what we thought at the time in regards to the economy and revenues, this is change from what was at that point expected.

So it's an increase in revenue on the personal income tax and an increase in revenue on the corporate taxes, correct?

That's correct.

Because of a positive economic forecast.

Yes. And again, change from what we thought at the mayor vision.

Thank you, I appreciate that. I wonder if that's MAGA Republicans fault too. So when we're looking at this, we've got to see that this is the fourth structural deficit in a row. Correct.

This is the fourth year in which we have a deficit.

And we're projecting three more years out, each one of those years being in a structural deficit.

That's correct. Beyond the budget year? Yes.

$20 billion in excess by the Governor's office and by the LAOs $35 billion in deficits year over year.

Correct.

So what sounds like to me is that this isn't a Federal Administration office. We know today, one year ago, the Federal Administration took office, but this is the fourth year in a row. So that means under the previous office before, we also had a structural deficit.

So it seems like the common denominator in this is the legislative body and the governor's office and this is up to us to handle the issues of our budget. This is not a revenue issue. As we just heard, we have had record revenues. This is a spending issue.

And it's our job to make sure that we can rein that in. I look forward to being the budget Vice Chair to make sure that we can prioritize the needs of Californians. Thank you.

Thank you very much. We are going to go to Chair Hart and then Chair Jackson.

Yes. Thank you. Mr. Chair, I have just one question. Last year we were building our budget. We were able to pause some of. The most draconian cuts that were going to be required by H.R. 1, the federal policies, particularly regarding health care. Because the federal regulations had not yet been issued. Where are we now in that process today?

In terms of pausing.

Well, the Federal Government has still not. Issued those regulations that would we would need to implement through our Medi Cal policy. So are they going to make those changes in the timeframe of our budget or are they likely to be extended Beyond June of 26?

Yeah, I would say that our Department of Healthcare Services is in constant communication with the feds in the Facilities Federal Government in regards to the HR1 policy changes. I don't know and I don't believe we know yet when the regs will come out. But for as,

as much as we know this is current law and we are attempting to meet what we have understood to be the policy changes and the, the federal, the, the specific to HR1.

Okay, thank you.

Thank you very much, Dr. Jackson.

I'll just narrow it down really to one question for myself and that is do we anticipate more people needing food assistance or less in this budget?

I think with the expected HR1 impacts and changes and how that impacts CalFresh, we are looking at a decline in the actual enrollment for that program in terms of eligibility and actual benefits.

Obviously last year I talked about more that a wave of instability is coming and it has already started to hit us. Right. In terms of those who have begun to already lose food assistance. My, my concern is that for instance we, we were able to fund the California the Cal food program at about $80 million.

But this budget is only requesting 8 million General Fund. And so why are we not proposing a budget based upon the needs but we're actually decreasing food assistance for people in need?

Yeah, Department of Finance. The 80 million was one time investments that were made in the 2025 Budget Act. So those funds are actually still available to utilize in the current year. The 8 million funding goes back to our original ongoing allocation.

So you believe that the 80 million will take will be enough for us as we go through that budget here?

That is the amount of funding that's available in, in the current year.

That, that wasn't my question.

I, I would say that we need to continue to have those conversations with the Legislature, with stakeholders in regards to what the need is. As I stated earlier, we cannot physically backfill for every lost federal dollar.

But I think it's going to be important for us to work in partnership with the Legislature to see what are the priorities that should be funded and what can the budget bear.

No, absolutely. I would just submit this. That is the key function of a state is the health and welfare of its citizens. And you cannot get any more basic in terms of health and welfare than food and housing. And so I would just say ask that in the may revise that we really reflect that value.

We can't be everything to everybody, there's no doubt. And we have some tough decisions to make. But what we should not be doing, this traditional game we play, you propose something, we have to go and ask for more things like that. This is not the year for that.

I think that we've really got to make sure that, number one, that we have a budget that reflects what the needs are going to be in terms of food because more bad things happen when people get into survival mode.

And it's going to cost us a whole lot more money in the future to be able to deal with those impacts that happen. And then secondly, we have really got to come to the aid of our counties who are going to bear a lot of the brunt of this.

And we continue to put more and more financial burden on our counties. But it's going to be harder to keep people on the assistance that they qualify for if we do not give counties more help to be able to make sure that the everyday person is getting the assistance that they need.

So I would just say that we need a more reflective may revise as we move forward that really will reflect the hard choices we're going to have to make. But understand California's need to know we're going to have their back when it comes to making sure that their children are going to be able to be fed Right.

And that families are going to be fed. So I look forward to the discussions moving forward in our budget Subcommitee. But I want to do something differently this year. Right. And we got to make sure that we are not missing the mark because we're talking about too many people at stake. Thank you very much, Mr. Chair.

Thank you very much, Dr. Jackson. We are now going to go to Assemblymember Connolly, then Assemblymember Schiavo and then Assemblymember Schultz.

Thank you, Chair. Good morning, everyone. I'll limit it also to one General question, then a couple of comments on specific items. Are there any budget items the Administration believes are going to need immediate action by the Legislature to adopt? We all remember at the beginning of last year, supplemental DOJ funding, of course, the fires which were unanticipated.

Do you see any kind of of more immediacy around certain issues this year?

Yes, I believe there we are constructing a list of some of those things and what might be urgent prior to July 1st. Part of that is an allocation for reproductive health that we are looking at and we continue to have conversations, but at this point it's a short list.

We'll look forward to further discussion around that couple of Prop 4 items. I wanted to amplify Assemblymember Bennett around the $19.6 million for technical and financial assistance to help homeowners in wildfire vulnerable areas.

We will be taking a deeper dive in sub 4 on that, but I am very interested from the Administration standpoint what mechanisms will be used to monitor how the money is allocated and look forward to continued discussions on that. The Administration is proposing to spend $45 million in Prop 4 funds from the regional water conveyance projects.

Allocation for repairing existing infrastructure would look for more specificity around that what existing infrastructure does the Administration propose to repair? How were these infrastructure projects chosen? We can talk about that additionally offline and of course as a process goes forward.

And then finally, as chair of the ESTM Committee, appreciate the continued work of DTSC in the ongoing cleanup of communities that were contaminated by the former Exide battery recycling facility in Vernon. In total, how many years has the Exide cleanup taken? The answer is way too many.

But how close are we to ensuring these communities are no longer poisoned? I want to make this a big priority this year. So appreciate further discussion around that. Thanks.

Thank you very much, Assemblymember. We will now go to Assemblymember Schiavo, then Assemblymember Schultz and then public comment.

Thank you Mr. Chair. Thank you so much for the information today. I just want to start with something positive. I have an emerging teenager and I am practicing. So I want to say thank you for including funding in the budget around set events at landfills.

The overheating landfills as we know, as everybody knows, because I talk about it all the time. We have a burning landfill in my district, Chiquita Canyon Landfill, that's going to be burning for 20 years, making people sick. And we found out over the fall that there are actually 11 landfills that have waivers to operate at higher temperatures.

I imagine that this funding is because, you know, more work is coming in this space and it's very, very concerning what the environmental and health impact of that could be if these are not gotten under control as quickly as possible.

So that quick response from the state and regulatory agencies is going to be critical to make sure that we don't have the kind of disaster we have in my district and many, many other districts around the state. So thank you for understanding the urgency and importance of that.

I, you know, sit on the budget sub and am incredibly, incredibly concerned about the impacts of HR1, I'm really concerned that people are going to be losing health care and then hospitals, emergency rooms are going to be their number one source of health care in that, in that scenario.

And there's we need to figure out how we're supporting hospitals who are going to be bearing the brunt of this and supporting. I echo, you know, we need to think about really ramping up how we're working with counties and want to hear more about how that coordination with counties and hospitals is happening.

You know, it just feels really like there's this house of cards that is being set up by HR1 that is on the brink, completely collapsing and our health care system is really on the front line of what's going to be so profoundly impacted by that.

So last year we worked really hard to reverse a lot of the things in the initial proposed budget by the Governor and protect our most vulnerable. We're going to continue to do that again. But I think, you know, I echo my colleagues comments around doing it differently this year.

And you know, Assemblymember Jackson, I think what you're getting at is that this is, as everyone's saying, unprecedented times.

We have to work differently and we have to really work in partnership and come to the table instead of on opposite sides of the table, on the same side of the table to find solutions and come up with solutions together. And I hope that that's how we can all work together this year.

The other just one last thing I want to highlight. I share the great concerns around food insecurity. We're seeing it in our community. People are using food banks in record numbers. It is not fewer people, it is more people who don't have access to the food they need.

I'm really concerned that the budget reduces CAL Food, the assistance to food banks from what I think is 8 million down to 8 million from 80 million, which is devastating. Oh sorry, that wasn't my last name.

One final thing on housing, I authored a Bill, AB519, my first year in office, to streamline how affordable housing entities can go through their applications and like entities with HCD, CALHFA and other tax committees under the treasurer's office to consolidate the application.

We have been trying and trying and trying and trying and trying to see what the status of this is and we're not getting answers. I would love answers. You can call our office or I'm happy to sit in on the budget Subcommitee meeting and ask these questions, but we need to see progress on this.

I'm entering my fourth year. I did this my first year. And we all know housing affordability is a crisis. So look forward to hearing what the status of that process is and when that's going to be online and moving affordable housing more quickly in our state. Thank you.

Thank you very much, Assemblymember. And we will end with the pride of Burbank, Assemblymember Schultz.

Thank you very much, Mr. Chair. Pride of Burbank. That's quite a comment. I do want to just mention, by the way, happy to discuss public safety and public safety funding anytime. I live and breathe this stuff. Perhaps a fault.

I wasn't going to speak today, but I heard some comments from our vice chair and they did prompt three questions. I think they're relatively simple questions for any of the panelists. First question is, would you consider or would it be fair to characterize the state of California as a donor state?

And if so, could you just explain what that term means?

Yes. So California is a donor state, meaning that we send more taxes to D.C. than we then is provided back to us in terms of dollars.

Thank you. Second question is just ballpark. Approximately what portion of the California state budget comes from federal sources or is backed by federal dollars? zero, offhand, I think it was about 175 billion, 35.2% of the budget, roughly speaking, I could be mistaken.

And are you taking the Delta from the 350 to the 200?

Yes. That was my understanding. I could be wrong, but sizable. Yeah. Okay. Last question I had was, in the first 12 months of this new Administration in the District of Columbia, have there been clawbacks of federal funding to the state of California?

And if so, are we talking like tens of thousands of dollars, hundreds of thousands of dollars? Could you give us a sense of that?

Sure. And perhaps this is a more telling number, is that we have sued the Federal Government 53 times within this past year for what we believe are legal decisions, policies, edicts from D.C. i think that might be. We have been able to stay some of those freezes and actually draw down those dollars.

So I couldn't tell you what was at what was actually held back versus what is at risk. But just in terms of the number of times California has had to make legal action in pursuit of dollars that are rightfully ours, I think is also.

We're talking millions of dollars, not $20 or $100,000. We're talking about a sizable amount of money.

Billions.

Billions. Thank you. zero, okay. Thank you.

In terms of at risk. At risk, yes. Yes. Not necessarily held back.

Absolutely. When the Administration acts illegally and we take them to court and win. We try to bring that money back. The point I'm trying to make is this. With all due respect to the Vice Chair's comments, I agree with them insofar as this is a deficit that pre existed the Administration and we absolutely have to tackle it.

And I'll just note one Committee member's perspective. I really want to share the optimism of the Administration. I also think that the LAO has raised good points in their analysis and I think that we should be conservative of those revenue projections.

I think we should be relying on the Laos assessment just personally because I have concerns about the health of the stock market and how that might impact revenues. But with all of that said, I'll simply close with this.

I think an accurate and much more fair statement would be compared to the Vice Chair's comments that we had a problem, certainly. But this Administration is seizing the opportunity, taking advantage of that problem and ripping substantial funding from California and harming the very communities that so many of my colleagues are here to fight for.

I think it is shameful and I think should be called out for what it is. Thank you, Mr. Chair.

Thank you very much for that, Assemblymember. Appreciate all of the thoughtful commentary, questions, important points that were raised by the Members of the Committee. As you can see, a lot to dig into, a lot to discuss in our upcoming Subcommitee hearings. We are now going to transition to a very brief public comment period.

I'm informed that we need to adjourn the hearing no later than 1:15 for floor session. As was previously announced, there is an opportunity for those who are not able to provide public comment at the microphone to submit comments on the Assembly Budget Committee website that will become part of the record.

And I promise you, promise you, promise you there will be robust opportunities to provide public comment during our Subcommitee hearings. With that, before we jump in, allow me just to say thank you again to the Department of Finance, to Chief Deputy Lee, and also to all of the Members of the Department of Finance are here.

We see and appreciate your hard work. To our excellent legislative analysts and his entire team, I know you guys have worked very hard. I do want to note for the record that the LIO and I did not coordinate our styles ahead of time. But I do want to compliment him on his excellent sense of style today.

And with that also want to thank all of our Democratic and Republican staff. We have a lot of Members of our Assembly Budget Committee team here. I saw Aaron Gable's eyes light up when you mentioned Prop 98 Day, Mr. Alvarez.

So we're grateful for all of their hard work and also to the sergeants and all the people who make these facilities available. Thank you for the work that you do to allow this process to move forward. So with that I'm going to turn over to a very brief moment of public comment and then we will adjourn.

So thank you very much.

Good afternoon. Kim Rothschild, California Association of Public Authorities for in-Home Supportive Services. Opposed to the elimination of the backup provider program or any cost shifts to counties. Thank you.

Thank you. Chair and Committee Members, Trevor Nelson with the California Alliance of Child and Family Services coming to oppose the proposed changes to the Medi Cal Community Based Mobile Crisis Intervention Service Benefit, which shifts the benefit from a statewide mandatory Medi Cal benefit to a county optional benefit.

Looking to work for looking forward to working with you all in the future. Thank you.

Hello. Ryan McCarthy on behalf of Lucid Motors want to highlight two items that we think could be especially important for the electric vehicle market in California. One is the ZEV incentive that is proposed.

It's especially important to maximize the opportunity and deployment of EVs across the state by avoiding income caps or MSRP caps, supporting lease models and supporting in state manufacturers who are trying to grow and invest in the state. The second item is the Cal COMPETES program. We strongly support that program.

We think it can maximize effectiveness by adding refundability or transferability provisions to the program and we hope that's something the Committee considers. Thank you.

Mr. Chair and Members. Michael Pimentel here on behalf of the California Transit Association calling for the maintenance of the $230 million from the GGRF for the Zero Emission Transit Capital program. That's SB125, intended to be the fourth of five installments to keep transit agencies afloat.

And then did want to remark on the topic of medium and heavy duty vehicles.

Not only are we without funds at the state level, we're actively in a position of having funds rescinded from our transit agencies, causing them to move into conventional technologies and to look forward to the opportunity to have further conversation with you all on additional funds. Thank you.

Kenneth Hartman, Transformative Programming Works. We're disappointed that funding for the Wright Grant for Community Based Organizations providing programming inside California prisons didn't show up. And we are continuing to hope that. The Assembly Budget Committee will support that program. Thank you very much.

Chairman, Jaelson Dentas with Fulmini Strategies on behalf of Alameda County. We understand HR1 will force difficult choices, risking access to critical safe net services, shifting costs to the state and counties, and creating unfunded. Unfunding costs, challenges that must be addressed to the protection of vulnerable Californians.

On behalf of the Golden State Opportunity, we strong support California funding through the KAU EITC Education and Outreach Program, fee tax preparation and the IT and applications assistance. Thank you.

Good afternoon Chair and Members. My name is Monica Madrid. On behalf of the Coalition for Humane Immigrant Rights, I respectfully urge the state to invest in protecting access to Medi Cal and food benefits for communities excluded under HR1 and to ensure that there are no further cuts to medical on the backs of our immigrant communities.

We also ask for investments for high school DREAM Resource Centers and the E Save in program and and additional funding for immigrant legal services. These investments are critical to keeping immigrant families healthy, stable and able to contribute to California's economy and communities. Thank you.

Good afternoon, Mr. Chair Members. Amy Costa of Full Moon Strategies here on behalf of the Chief Probation Officers of California. We remain deeply concerned and disappointed that the proposed budget does not fully fund Proposition 36 which was passed by over 70% of voters. And.

And we know that in order for court ordered treatment to be successful, it must be fully funded. Thank you.

Good afternoon. Erica Murray, on behalf of the California Association of Public Hospitals and Healthcare Systems. As was noted, public hospital systems are bearing the brunt of the cuts from. HR1 and from cuts sustained from last year's budget.

We would urge you to do no further harm, restore the cuts from last year and protect the access to care for those most marginalized in California. Thank you.

Good afternoon. Michelle Gibbons with CHIAC representing local health departments. Appreciate the dialogue around HR1 and the impacts to not only the state but also to counties.

We look forward to working with you all to address the impacts of the cost on county indigent care programs and rebuilding the infrastructure that's necessary to accommodate the population that may be returning. Also note that the budget does not include money for public health information technology systems yet again again.

And would ask for the Legislature to really look at restoring those dollars. And lastly, asking the Legislature to fully fund county CCS programs. These programs administer CCS services to the most vulnerable kids in our state and continue to be underfunded with acknowledgement from the state. Thank you.

Good afternoon Chair Members. My name is Kamel Foster, President of My Character Reference. With HR funding challenges and HHS impacts like Medi Cal and CalFresh. My ask is simple. Fund enforcement of AB5, the worker classification law using ABC test. AB5 has a documented 33.25 million outreach contract. But outreach is not enforcement.

I'm requesting enforcement deliverables faster DLSC investigations, wage recovery results, platform oversight and public reporting. Thank you.

Good afternoon. Natalie Spivak with Housing California and representing a budget coalition of 63 housing and homelessness organizations statewide. We're very concerned that the Governor's proposed budget zeros out funding for key programs. This would undermine the significant progress the state has made in recent years to house low income Californians.

Our coalition urges the Legislature to prioritize approximately $3 billion for a critical set of programs that comprehensively addresses the spectrum of housing needs including building and preserving affordable homes and ending homelessness. Thank you.

Good afternoon. Marina Espinosa with the California Housing Consortium. We support the budget request that my colleague just summarized. We're very disappointed by the budget proposals lack of funding for the Low Income Housing Tax Credit Program and the Multifamily Housing program. We also look forward to seeing additional details related to the implementation of the Governor's reorganization plan.

Thank you.

Good afternoon Chair Members. My name is Tyesha Watts. On behalf of the California Housing Partnership, I am in agreement with my colleagues sentiments around affordable housing funding and just want to add that we are disappointed to see that LIHTC and multifamily housing programs were not included in the budget.

These are flagship programs that have a return on investment for us being able to serve our lowest of income persons in California. The comments around DOF stating that we have access to an expansion of federal credits, we can only draw that down with state funding.

So I'd like to see a commitment that we do invest state fundings in order to be taken advantage of those federal resources. I also want to add that we are making sure that we sustain the Low Income Weatherization Program.

This is our flagship program for decarbonization and ensuring that our housing production can be able to meet those needs needs. Thank you.

Good afternoon. Louis Brown Jr. on behalf of the Corporation for Supportive Housing. We're also a member of the coalition and support the coalition's ask. We just like to underscore the need to invest a billion dollars in new funding for the Homeless Housing Assistance and Prevention Program.

HAPP has been instrumental to some of the success that we're starting to see on homelessness. As the Governor mentioned, a 9% drop in unsheltered homelessness between 2023 and mid 2025. HAPP grantees helped to move over 90,000 people out of homelessness and into permanent housing.

And the HAPP set aside for youth has resulted in a 24% drop in youth homelessness across the state compared to double digit increases nationally. We've been able to achieve these results by investing in HAPP at a billion dollars a year. So we'd like to see a return. To that to ensure that we maintain.

Our progress and then turn to the return to the billion dollar level, which is where we're starting to see results. Thank you.

Good afternoon, Chair and Members. Keely O'Brien with the Western Center on Long Poverty. The Governor's proposed budget amplifies the cruel cuts in HR1 threatening the food, shelter and health of our most vulnerable. On April 174,000 legally present humanitarian immigrants will begin to lose calfresh benefits.

By the end of the year, 500,000 more immigrants or 500,000 more Californians face the same fate. This proposed budget provides zero new dollars for hunger prevention. Further, by leaving the safety net reserve zeroed out and shifting additional IHSS cost to counties, this budget would destabilize the systems meant to protect us.

Please protect our communities by pursuing progressive revenue solutions rather than safety net cuts. As the Chair expressed at the start of this hearing, we must not balance the budget on the backs of those who can least afford it. Thank you.

Good afternoon, Chair and Members. Diana Douglas with Health Access California. The Governor's January budget proposes doing nothing to help the roughly 200,000 immigrant Californians who will be removed from full scope Medi Cal coverage thanks to HR1.

These are lawfully present immigrants who are refugees, asylees, trafficking and domestic violence survivors who for decades these groups have had full scope Medi Cal coverage. And if we do nothing, then those folks would have only restricted scope, only having coverage for the most dire emergencies.

The Governor's budget also proposes to continue last year's cuts which include a freeze on new undocumented folks enrolling in Medi Cal premiums and elimination of dental.

We urge the Assembly to stand a partnership with advocates and push back against these cuts, protect those newly coming off of full scope Medi Cal as a result of H R1 and to push back against this state choosing to impose work requirements also on the state funded immigrant populations. Thank you.

Thank you very much. I just want to let everybody know I'm getting a lot of encouragement to end the hearing. I really want to see if we can get an opportunity to let everybody go through. But I'm going to request very strongly that people really try to limit their comments as much as they can.

I know all of you have really important points and I promise you you will have the opportunity to make them during our Subcommitee hearing. So we're going to keep going for another minute or Two, I'm going to lose credibility here, but if people could just make their comments quickly, I'd appreciate it.

Sounds good. Yes. Senor Rabancho with End Child Poverty California. As mentioned as Washington targets immigrants, communities and vulnerable families while holding massive tax or while handing massive tax breaks to the wealthy. We must refuse to balance budgets on the backs of our poorest families. So urging support with the words that Western center and Health Access California shared.

We are the fourth largest economy in the world. We. We shouldn't be balancing our budget on the backs of our poorest. Thank you.

Thank you, Mr. Chair. Eduardo Martinez here on behalf of Western Dental. We're the largest medical dental provider. When I thank the Legislature and the Administration for delaying a cut to provider rates, dental provider rates, unfortunately that means that these cuts are now set to take effect in July 1st of this year.

That'll push California to 48th worth of reimbursement which will really harm oral oral. Health across the state. Thank you.

Thank you, Mr. Chair. Angela Pontus on behalf of Planned Parenthood Affiliates of California in strong support of the early action proposal for reproductive health grants and asking the Legislature to take immediate action so the health centers can continue providing family planning services to medical patients.

Good afternoon. Andrew Shane with the County Welfare Directors Association. Appreciate the strong comments about the importance of our county eligibility workforce against HR1's cuts to CalFresh and medical. Just noting the CalFresh cuts are in. The current budget year. So if there is early action, we. Should be looking to implement the 20. Million that was provided last year.

Thank you so much.

Hello. Angela Hill, California Medical Association. As we talked about today, the healthcare system's under significant financial strain. The California Medical association looks forward to working with you all to preserve our healthcare safety net. Thank you.

Amanda Kirchner, on behalf of CWDA, we. We oppose the $233 million in the IHSS cost shifts to counties. We think that money is better spent. To help keep folks in their homes. So that they can safely age. We also oppose the implementation of HR1 work requirements on our immigrant population. Thank you.

Brian Spencer, behalf of the American College of OB GYNS District 9. Like to simply align our remarks with those of Planned Parenthood as well as. The California Medical Association. And on behalf of Ochin, we encourage. You to continue the funding of the. Healthcare plan workforce programs, particularly the one involving health information technology. Thank you.

That was perfect.