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

Subcommittee 4 of the Senate Budget and Fiscal Review Committee will come to order. We are holding our committee hearing here at State Capitol Room 113. I'm asking that all members of the subcommittee be present in Room 113 so we can establish a quorum. We will provide an opportunity for public comment following the conclusion of the discussion item list, and at the moment we will go ahead and begin our order of business.

And today it is as follows, our agenda today involves budget proposals from the secretary of government operations, the department of technology, the office of data and innovation, and department of general services, and the financial information system for California. We have several matters on our discussion calendar as well as several matters on our vote only calendar. We will take up public comment at the conclusion of the agenda. We will now turn to our first item of discussion.

Agenda item one. Item one pertains to ongoing funding for the California Education Learning Lab. When ready, please proceed with your presentation on the item.

Thank you, Madam Chair, Lark Park. I'm the director of the California Education Learning Lab. We're a well established state funded higher education grant making program that is in our 8th year of operation. We fund intersegmental projects led by faculty of the UCs, the CSUs, and the California Community Colleges to promote innovation in teaching and learning and student success in STEM and other fields. Over our history, we've funded 120 projects all over the state, and we've reached more than 13,000 faculty and 300,000 students.

And our faculty grantees develop innovative curriculum, teaching resources, and technology tools, the vast majority of which are made available as open educational resources, which drives down instructional costs for students. The governor's proposal, in January proposes to move the administration of the California Education Learning Lab from the Governor's Office of Land Use and Climate Innovation to the Government Operations Agency. The LCI has been the administrative home for the Learning Lab for 8 years.

Although the program has been administered in partnership with the Foundation for California Community Colleges since 2020. That relationship would be unchanged with this proposal.

LCI's mission has narrowed and gov ops has also had new programs related to higher education and workforce, newly into the agencies such as the California Education Interagency Council, so it makes more sense to have the administrative home go from LCI to gov ops. The administration's proposal also has a restoration of Learning Lab's budget at $4,000,000 annually, which is about half the amount historically that the Learning Lab program has been funded at.

And the reason for this is so that Learning Lab can continue to push innovation in our curriculum and in our higher education system as we see incredible changes within the workforce. And for example, in 2025 we awarded $12,000,000 under an AI challenge, so that California could be on the forefront of understanding how AI impacts our classrooms and student learning across various disciplines. And so with me today, with your permission, is one of our AI Grand Challenge project leaders, Carl Whithaus.

Doctor Whithaus is a professor of rhetoric and writing and director of the writing program at UC Davis, and he is leading a multi institutional intersegmental collaboration on student writing and adapting student writing and critical thinking in the age of generative AI and large language models, which are ubiquitous across our institutions and our society now.

Excellent. Thank you for inviting me here today. So I'm Carl Whithaus, professor of writing and rhetoric at UC Davis, and I wanted to talk a little bit about the support that the Learning Lab has provided for the PAIR grant, which is Peer and AI Review and Reflection. We're working not only with faculty at UC Davis, but faculty at three CSUs, Sac State, Cal Poly Maritime, and CSU Bakersfield. We're also working with, four community colleges, American River, College of Marin, Glendale, and LA Mission College.

And part of what the $1,500,000 grant enables us to do is work with faculty members over the course of two years. We're working with 220 faculty members, will impact 12,000 students all told. And we're really thinking about the way that AI technologies can be integrated into the college level writing classrooms. Part of the challenge that we face is that faculty at colleges have a wide range of perspectives on AI.

A number of them believe that the way to go forward is to simply return to bluebooks and hand based writing instruction. And the AI grant that we have from the learning lab enables us to work with faculty who run the gamut in terms of range of attitudes towards AI and to encourage people to think about the writing technologies that students need to prepare them for the workforce.

So we don't wanna encourage cognitive offloading, simply not paying attention to the development of writing skills, but working with the type of tools that students will be using when they're in the workforce.

The other thing that the learning lab enables us to do is it really has conversations between faculty members at community colleges, CSUs, and UCs on the faculty level. It's important I've been at UC Davis for 19 years, and in fact working with this grant through the learning lab is the first time that I've had real opportunities for sustained conversation about deliverables with faculty members from across the state.

And so I think this is a valuable grant. It's a type of thing that isn't doesn't happen simply naturally among faculty members at colleges, and it lets us focus on how we can develop skills for students that will be transferable from the classroom environment to what they are doing in the workforce. And I'm happy to answer any questions folks have about the grant or my experience over the last year and a half working with the learning lab.

Thank you for your presentation. Does the Department of Finance wish to comment?

Kayla Lee, I'm in Department of Finance. Nothing to add available for questions.

Thank you. Does the LEO wish to comment?

Yes. Thank you. Good morning. Madam chair. Natalie Gonzales with the Legislative Analyst Office.

Additionally, professors at other campuses in the same discipline generally are not required to implement new curriculum or course designs that other faculty develop. Second, all three public higher education segments offer opportunities that aim to achieve similar objectives to learning labs.

Though we recognize that learning lab benefits some faculty and students, we recommend rejecting the governor's proposal to retain the program for four main reasons. First, learning lab projects are difficult to scale. Though some projects may end up being scaled, there is no mechanism in place to ensure that grant efforts are scaled once funding ends.

The state has also funded segment wide efforts, such as CSU's Graduation Initiative 2025 to help faculty enhance their instruction, improve overall student outcomes, and help close equity gaps. Third, federal and other non state grants are available for similar purposes.

We reached out to UC, CSU, and the colleges to learn about these opportunities. Each segment indicated that they provide regular professional development opportunities to help faculty rethink teaching methods and redesign courses, including ways to narrow equity gaps. Additionally, some faculty do have access to campus grants that fund projects focused on teaching and learning with some focused on AI.

For example, faculty can apply to federally funded grants that are focused on improving learning outcomes for STEM students. Some of these grants also include opportunity for intersegmental collaboration across the three segments. Despite concerns with potential federal cuts, the segments have reported that, thus far they are still benefiting from some of these grant programs. Fourth and finally, the state is facing a projected budget deficit and difficult decisions are likely to be on the horizon.

Why winding down the Learning Labs work now could provide a small amount of ongoing general fund savings that could help the state begin to address its projected budget deficit.

As a final note, we wanted to mention that if the legislature wants to continue to prioritize faculty innovation grants while still achieving some general fund savings, it could consider directing the California Education Interagency Council to look for intersegmental grant opportunities that instead use federal philanthropic or corporate dollars. Thank you and happy to take any questions.

Thank you. We turn to questions for the subcommittee. At this moment, I'll go ahead and begin by asking the Department of Finance, can you explain the decision to continue funding for the program in the current challenging budget, year given the budget decisions for the program in the last year's budget?

Yes. Kayla Landman, Department of Finance. Recent budget actions have established GovOps as the home agency for many higher education agencies and initiatives, and reinstating the learning lab under GovOps provides cohesion and statewide oversight and planning related to higher education systems. VotingLab's foundation and intersegmental collaboration will support the improved coordination between higher education and workforce, similar to the establishment of the California Education Interagency Council by legislation this fall.

Additionally, it is advantageous to maintain a state level grant program that can align state priorities and respond to changes that are needed in the higher education and workforce spaces.

Can you also explain why the learning lab has staff provided through the FCC and not through a budget proposal?

I would defer to the department to detail the specifics of that.

Yes. Our authorizing statute enables this relationship between the program and between LCI and the Foundation for California Community Colleges because LCI has not historically been an education focused agency. Having a relationship with the Foundation for California Community Colleges, was seen as beneficial to be in the higher education Colleges, was seen as beneficial to be in the higher education ecosystem and have ready access to their vast network as well.

My next question is, can the learning lab explain how much of the previous fund funding rounds went to grantees versus other costs?

Yes. So less than 5% goes into administrative expenditures. They're about 80% goes directly to grantees and institutions, and the remaining funds goes to supporting grantees, technical assistance, and the kinds of activities that will build community, and make the projects and the scaling efforts more successful.

And when you mentioned technical assistance, do you know what portion of the funds goes to technical assistance? And can can you give me an example of what that looks like?

Yes. So technical assistance can be everything from education about what open educational resources are, what kind of licenses that are available to be selected to become an open educational resource. Technical assistance is also in helping institutions understand how to apply for our grants, as well as how to administer the grants. Technical assistance also involves assistance with evaluation activities and what are the best practices in evaluation.

And so for instance, we have contracted with WestEd in the past to provide technical assistance to grantees so that they can better evaluate the projects.

Thank you for that clarification. Again, do you have an understanding of what percentage of the funds goes to technical assistance?

Again, 80% of the funds goes directly to grantees, 5% to administration, so it would be about 15% that goes to other types of activities, whether it's community building activities, educational activities, and technical assistance.

So about 15% is what you're saying goes to. Okay. And I think that's you said that technical assistance also goes to the evaluations, right? There's someone that, what you said WestEd?

Right? So, they provided technical assistance to grantees in order to help them do project evaluation. What are the best practices for evaluation? And so, educating our grantees about that was part of their contract.

Do they do that across the board with all grantees or just certain grantees and what have been some of the outcomes or positives and negatives of that?

Right. The contract with WestEd had several different levels of technical assistance. Most of it was on a voluntary basis, but they did one to one consultations. They also hosted webinars, they also developed templates. So it was something that we had encouraged all of our grantees to take part in some part of the technical assistance.

But do you do you believe that's been helpful? I mean

Yes. Very helpful. We do surveys, and we track who is taking advantage of these types of activities. And the surveys actually, find that those activities have been very valuable to the grantees.

Okay. I'll go ahead and check-in with my vice chair to see if he has any questions.

Yes. Thank you very much. Apologize for being a little bit late. And if anything was covered before I was here that I asked about, I'll apologize ahead of time. Given that as the LAO points out, that there are professional development opportunities in our established higher education systems, UCCSU, community colleges, and other similar grant opportunities exist. What are the accomplishments of this program that those programs can't?

Well, first of all, I'd like to address the main point the LAO has made, which is that there are programs and opportunities available at campuses. While that's certainly true, there there are not enough opportunities. Professional development is an underfunded area across the board.

Also, not all professional development is the same. Most of our professional development is very project specific and innovation specific, and Centers for Teaching and Learning generally do more generalized types of professional development.

So, we believe that it's neither done in a sufficient quantity, as well the the quality and the subject area, vary quite a lot. So I would not say that the current efforts, while available, are sufficient. Additionally, the level of professional development needed now has been is greater than ever. I think COVID was very impactful in terms of trying to get faculty to learn how to teach remotely.

Now with generative AI and large language models being readily available to students, there is a really vast need for different professional development. And again, what is done in STEM fields is different than what is done in writing, which is different than what is done in career education.

There is not a one size fits all in professional development. In terms of what have our projects achieved, we see success rates of 10%, 20%, 30% in terms of increases in student performance for a lot of our projects. So while I can't say that every single project that we've funded can boast that level of student achievement advances.

A great many of our our projects actually can boast some significant, advances, both quantitatively as well as qualitatively in terms of the curriculum and the student experience.

Can you be more specific? You say 10, 20, 30% of increased performance. What do you mean by that?

C's to B's, B's to A's in terms of retention in the course, reduction in drop, fail, withdraw. So there are definitely a variety of student metrics that people can measure and our projects don't always measure the exact same thing, but we do see some significant impacts on student success with a lot of our projects.

Well, that's all laudable, but this is professional development, not student development. So, better grades and better student performance is great, but what happens when they graduate? What proof do you have about true professional development?

Well, the professional development is only one component of the program, and they usually accompany a project proposal that is based on something innovative in teaching and learning. So the impact on students is very important, that's why the professional development exists, but that is not actually the sum total of the program. It is not strictly a professional development program.

In terms of longer term student success measures, those are harder to come by because those, entail sort of longitudinal studies, and as you know, a student's career in higher education spans multiple years and these are not you know, a particular class that they took that was associated with a learning lab project, maybe just one part of their entire educational curriculum.

So we can only sort of see what the the near term impacts are, that are based on the projects, and we'd love the opportunity to pair up with Cradle to Career to see what some of the more longitudinal impacts would be on students' career success.

Cradle to career. This gets back to the core challenge that we have with education generally. The University of California San Diego, this is gonna sound like it's a little off topic but it's not, and I'll get to the point when I conclude.

The University of California San Diego recently issued a report where they have cited and discovered, discovered and cited that they have a 30 fold increase in remedial education needs in the last five years. And 70% of these remedial students cannot compute at the 8th grade level.

They're freshmen in college. They have graduated from high school with four point grade point averages or better because that's what the UC system requires, and they can't compute at the eighth grade level. Now COVID had a significant impact on our education. The good thing about COVID by the way, is that as you mentioned, those in higher education finally discovered that they really can teach remotely.

Not to everybody, but it provides a tremendous opportunity for adults that have some college but no degree, and they're working and they really can't go back to campus. That's a great thing. That's very good.

But the curse of COVID is a generation of kids whose learning out of the k-12 system is wholly insufficient number one and not recognized by the system 4.0 high school graduates that can't compute at the 8th grade level. Plus, writing skills are similarly deficient, but not quite to that, extent.

But separate and aside from the effect of COVID, we are spending significantly more per student in California than we did when I was in the assembly, which was a while ago.

But we are spending more and performance is less, is worse. Our achievement nationwide is substandard, completely separate and aside for the impact of COVID.

And I have to say, to concentrate on a program like this that is maybe somewhat compromised because of the input that's coming to colleges in the first place, which is the fault of the k-12 system. But to concentrate on this and not really do anything about that, is akin to fiddling while Rome is burning.

May I respond, Senator?

Sure.

I'm well aware of the report that you are citing. And so several months ago, the California Education Learning Lab initiated a project called the California Mathematics Alignment Project to better have K-12, especially high school collaboration with the California community colleges, the CSUs, and UCs because of these issues in math education that we are seeing. We have a lot of math faculty grantees who are alarmed by what they are seeing, and we understand that this starts before they come to college.

And so it is a very important project of ours, that we take better efforts to align the curriculum, the expectations, the pedagogy, to understand what is valuable about math education, and what is it that students need to learn and when they should learn it and to be more in sync. And to, again, support our our k-twelve teachers and have everybody in alignment with what students should learn.

So this is very much something that is on my mind and is a high priority for us, and we are well positioned actually to lead those conversations. We've already been leading those conversations because we already have a footprint within those three segments of higher education, and we have found k-twelve very much wants to have these conversations with us.

I'm happy to hear that. I would just suggest that concentrating on a program like this is, well I've said, like fiddling while Rome's burning. Maybe it's more like closing the barn door while the horses are already out, because these are kids, many of them that are victims if you will, of the underachievement of our k-12 system to begin with. We need to spend more time with the the problem of the source. But thank you for that information.

We'll move on to, Senator Cabaldon.

Yeah. Thank you, madam chair. I wanted to maybe pick up on some of what what the vice chair said, but also link back to the LAO analysis. But I have to say, I think I disagree with almost every sentence, because the point of the Learning Lab investments has been to try to spark, investigate, evaluate breakthrough innovations that will get at exactly these challenges. There are a lot more horses.

The great thing about people in California, we keep making more of them, and so there are a lot more horses in the barn. And so it is important to try to get this stream down. But faculty in my own district, in Vallejo, at the Maritime Academy or elsewhere, they are incredibly enthused about the work that happens here. I've seen the projects too, and they are they're it's not Quantum computing.

And so the notion that the funding formulas for community colleges because they're based on need or what have you, that they would, there's a fiscal incentive to improve the outcomes of students and therefore we don't need to do this innovation because institutions will do it automatically.

It's not curing cancer, but it is very, very important breakthrough innovation. We need to do things differently and Learning Labs is really in a position to be able to foster that through the intersegmental work that doesn't exist.

We've had a 30% completion rate at community colleges with these same exact funding incentives for generations. If that the funding incentives do not achieve without the tools in order to accomplish them.

So I just think that's not the answer, the funding systems. And then the individual institutional projects, so the community college faculty, yes, they receive flex days to go to professional development, some of which is random, some of which is purely discipline based and there's no coherent strategy around it and does not connect them to any other institutions.

And for the other segments and having been a faculty member and a CSU faculty member and a community college for the other segments its the same challenge. So it isn't that scale is not going to happen just because it's happening because departmental professional folks are going to the Physics Association conference. That's not unimportant at all.

But that's not where, you don't go to your discipline specific association annual conference necessarily for the latest innovations and how to apply them or to learn lessons about what may not be happening in physics, but is happening down the hall in biology or in computer science or artificial intelligence.

So these projects I do think given the level of investment relative to the budgets of the other of the segments themselves in tens of billions of dollars that this isn't, this is a wise investment that is needed in order to try to get to exactly this point is that we need to find and but also evaluate and figure out how to deploy because it is also not just coming up with new ideas. It's what's stopping them from happening.

You know, how do you once you have a great system that figures out how to fix the math challenge, that the vice chair has dealt with. You need to bring the parties together to actually make sure that the learning translates into policy change and the change in the classroom, that it doesn't get rejected by the, you know, having been an academic Senate member, it doesn't get rejected by the tendency of our colleagues to say, "well, why don't why would we do it that way?"

"We've been doing it this other way, since renaissance to Italy, why would we change?" And so to me Learning Lab, I mean obviously, we have the budget priorities that we've got to grapple with, which is why we're not, I believe the chair's argument and we hold it open.

But I do I think the criticisms are, for me, are not well taken about the fundamental purpose, the need and the basic design in my experience working with the learning lab and with as I say with other folks in my own district.

It's a positive force and it's well respected among faculty members and that's half the battle in many cases across all three segments and it gives an opportunity especially for the quote, unquote junior segments, to get access to the kinds of research and resources and materials and to contribute to them in a way that they can't do through the normal professional development programs.

So I support holding it open, but I do think there's a there's a lot of merit here as well. So thanks, madam chair.

Senator Smallwood Cuevas.

Thank you, madam chair. So I guess one of the things that I saw in a number of from LAO's report, but also in some of the background materials is there's a critique of duplication. And so I wanna make sure I'm understanding the LAO's concern in particular.

Can you speak, and maybe I missed it and I apologize for being late, but what is the specific gap that the learning lab is filling that is not being filled in our other higher education?

I mean, I I think the the Senator from from Solano County was was getting at this, but I wanted to hear from from you all to kind of help us really understand what differentiates what you do from from elsewhere in our higher education system, meaning it's not happening in those places.

Right.

No. Thank you very much for the question, Senator. We are a program that first and foremost funds innovation in teaching and learning, innovation in higher education. And so we have often been the first out of the gate to identify a field that we think, needs some focus, state investment, and collaboration from the three segments of higher education to work on a problem together. We do understand that, that being first out of the gate doesn't mean that people aren't following.

I think people should follow, right? You're identifying, you're being a pioneer for identifying what should be happening. And so intersegmental collaboration since the time of the master plan, has been, fraught, over time, and it happens to varying degrees. We are the first program that incentivizes, faculty collaboration on specific innovative projects.

So it is the power of people working on something together to solve a problem that generates the kind of, goodwill and understanding between the segments to see students as students, of our higher education system, versus just, these are my students here, and I only care about them here.

Oftentimes, our faculty, they learn from each other, and they get to understand what is the community college's experience with their students. And it provides a lot of value, and it provides flexible curriculum. For example, Doctor. Withehouse, the scale that they are getting on their project, 225 faculty members and how many students?

12,000.

12,000 students from a single project, from a single 1,500,000 investment, and all of those, how many partners is it?

Eight. Eight different partners, they will not just do this and then stop doing it. This will change the way they teach in their practice, which will impact the students that come after the the 12,000 students that they are impacting. This kind of scale is not usually done. It's not done at the faculty level and, the sort of economy of scale you're getting, in terms of how it impacts curriculum, normally you might see, oh, this faculty member is just doing this over there.

Eight.

We actually try to socialize the benefits very broadly. That's why the emphasis on open educational resources is so important, so that this is something that others can avail themselves of and take advantage of whether they're in this project or not.

And others take advantage because you're documenting this innovation. You're documenting and creating tools that then get sent out into the broader systems to incorporate, to consider, to join in with this kind of with the with the practices that are being experimented with. I'm just using that as a term, and perfected in this this learning environment.

That's absolutely right, which is, why evaluation is an important component so they can actually see this actually worked for students. This helped them. And it is also rare to have sort of that engine of promotion and of sharing, so that the state gets, better bang for the buck, so to speak, on its investment is that we actively promote successful curriculum, successful strategies, successful professional development, across the higher education ecosystem for exactly that point that you mentioned.

And would you say given that the way the structure is is being delivered, would you say that the the metrics that we receive in terms of the outcomes sometimes I am struggling to sort of see the way in which we can measure this to say, like, comparing this to another budget need. Right?

And saying, this is how this is how the metric we could use to see the value of the of the program and that kind of learning, it results in grades moving up, but it results in more enrollment. And how what is the metric that you think is the best way for us to evaluate? Because that also seems to be a little for for me, it's not as clear.

Can so I'm professor Carl Wikhouse from UC Davis, and I'll speak to your immediate question about possibilities for longer term longitudinal impact evaluation of Learning Lab projects. But I also just wanted to comment on, opportunities created by intersegmental collaborations and then also collapses of funding to support undergraduate teaching, despite the efforts across individually sort of in the siloed campuses, or siloed segments that doesn't happen without Learning Lab.

But I think one of the interesting things about this project for Impact would be a longitudinal study for workforce impact of Learning Lab projects. So how does it translate into career success, based on the projects that Learning Lab has done for the undergraduate students? And that could be something that would be structured and could evaluate be evaluated over long term, not just for the AI grand grants, but other projects that Learning Lab has done.

That also, one of the challenges that we face on campuses right now is while the community colleges, the CSUs, and UCs are trying to fund centers for teaching and learning, those are those funds are being restricted. At UC Davis, the College of Letters and Sciences now has a plan over the next three years to reduce the number of faculty by 54 through attrition. So we're losing faculty and being asked to do more with less.

And I can guarantee you that will translate to fewer opportunities for professional development through our center for teaching and learning. So maintaining learning lab funding, particularly focused on AI and innovative teaching and pedagogy right now is absolutely crucial.

If we lose this type of funding, we're gonna get small amounts of it on the local campuses, but we're also going to lose the chance to innovate not with the large supercomputing type of work that's being done, but really the usability that happens in the classroom and in having both faculty members and students work with these technologies on sort of the intimate levels of how do we use them in the in the day to day.

And that's really the opportunity that, Learning Lab provides for us that we're not getting otherwise.

I really appreciate that, and I appreciate any innovation in the education space, especially bringing the different, segments, intersegmental collaboration. I think collaboration is key. I think having, as the legislature, having data to help us really quantify the impacts, I think, in sort of layman's terms, I think is really, is helpful. And so maybe as we think about the evaluative process that we're taking, is it a longitudinal study?

Is it sort of looking more at direct improvements that we're seeing in the students and in the faculty that are actually participating, I think we I just feel like we don't have a good enough amount of data to sort of be able to say, like, this is this is fully, working.

But I appreciate the innovation and the opportunity for folks coming together, and I really thank you for that answer and helping to clarify that for me. Thank you.

Well, thank you. See no other questions or comments from the dais. We'll go we thank you for your presentation this morning, and we'll hold this item open and move on to the next agenda item, which is agenda item number two. And it pertains to proposals for the Office of Civil Rights within GovOps. So when ready, please proceed with your your presentation on this item.

Good morning, Madam Chair, committee Members. My name is Justyn Howard. I'm the deputy secretary for, fiscal and administrative, services at the government operations agency, and thank you for the opportunity to present today on the office of civil rights. The proposal before you is asking for $3,500,000 in 26-27 fiscal year and 2,800,000 ongoing to implement, two measures, AB 715, from last year as well as SB 48.

Under these measures, the Office of Civil Rights, which is established within the government operation agency, is tasked with working directly with the local education educational agencies to prevent and address antisemitism and other forms of discrimination and bias within California's TK through 12 education system.

The Office of Civil Rights is responsible for providing education, educational resources, training, and technical assistance to LEAs, administrators, and educators. Additionally, the Office of Civil Rights is being tasked with tracking, reviewing, and advising on complaints of antisemitism and other forms of discrimination submitted through the Department of Education's Uniform Complaint Procedures process. I will note that to date that we've done a lot of work behind the scenes in getting the Office of Civil Rights established.

We've established them as a separate and unique distinct program in our agency so that we have full transparency and accounting of their resources separate or apart from other programs within our agency. We've posted the position for the director, which is actively being recruited by the governor's office, appointments folks.

We've also posted the civil service positions, and they are open they're posted until filled. We are waiting for the director to get hired before we close those position openings. With that, we've also acquired space. We've acquired equipment. We've done everything else that we can possibly do.

I will note that this is a very new area within our agency. It's not something that we have a lot of expertise in. So until we get the necessary subject matter matter experts hired, it's gonna be very difficult to answer any detailed questions related about what the activities will be within this office. But we do expect to hopefully have somebody hired in the near future. And with that, I will do my best to answer any questions you have in this space.

Department of of Finance, do you have any comment?

Kayla Laimman, Department of Finance. Nothing to add available for questions.

Alexander Bentz, LAO. We have no concerns with this proposal. It just implements recent legislation, and it makes sense.

Thank you. And we bring it back to the dais. Senator Cabaldon?

News, I only have detailed questions. So the when the two bills were passed at the end of the last session, they were they were accompanied also by the the the follow on trailer bill that at least that originally allocated it, unlimited money for this project.

I think it actually did ultimately allocate, appropriate unlimited money for the project or, sorry, whatever money you thought was needed, not you personally, but that the administration thought would be necessary to implement and then we reached a side agreement that that was not actually going to be fully uncapped and that would be, I forget what the number was, a million or 2,000,000, something like that for the first year implementation, which is a half a year.

So those dollars are in play already or do what do you anticipate being the encumbrance of those dollars after the at the end of this fiscal year?

Well, I can finance might be able to give more detail, but I can let you know that as it relates to the current year portion that we did request resources from, which would have been funded through a mechanism in the existing budget act. To date, we're not going to need the bulk of that money because we are delayed in getting the director hired. We do have some hired. We do have some costs and expenses related to space and equipment and stuff that

we got, but it's going to be a drop in the bucket compared to what our initial estimates were.

Do you know of any other, unit in state government where a majority of the employees are appointed by the governor and confirmed by the Senate?

This would be the first appointed by the governor and confirmed by the Senate?

This would be the first to my knowledge of the 10 positions that we are requesting. Six of them as noted are governor appointees which are all subject to Senate confirmation. I will note however though, the agency itself, the office of the secretary is providing all the administrative work for this office.

So normally, if you stand up a new department stand alone, you're gonna have a bunch of other administrative staff and stuff, but we are absorbing that workload within the office of the secretary in terms of budgeting and accounting and HR and things of that nature. So we're not adding those additional staff.

So it may seem a little top heavy from that standpoint given the workload being absorbed by the agency.

And you noted that the director position is posted in the governor's office recruiting and you also noted the civil service positions have been posted and are in process. What about the coordinators under the Gonzales legislation?

So we have draft positions that are kind of ready to go. They're still under review, but we are waiting to get the director appointed before posting the discrimination coordinator prevention position. So once the director is appointed and we've got kind of then the dominoes will fall for the remaining positions.

And the law took effect or AB 715 took effect on January 1, and districts are required to comply with it. And there was a lot of ambiguity, lot of need for follow-up legislation to be sure, but then the law was passed and signed into law and it took effect on January 1.

And so districts and particularly teachers are now expected to teach only factually accurate material under under that statute, which is the whole a whole host of problems with that. I've been faculty member, like, you often teach using imagination, counterfactuals, storytelling, lots of teaching is not factually, it's not supposed to be factually accurate. But this is one of the enduring challenges in the bill.

So is there no without any without the operation being up and running, despite the appropriation that we made in the budget trailer bill, is there no guidance at all that's out there today on those challenging ambiguities from the statute?

At this time, no. We don't have the subject matter expertise to be able to put that kind of guidance out. We need to hire the people to be able to develop that guidance and materials to put out there for the faculty and teachers that you suggest.

Alright. And, maybe this is a question for finance, but the governors also proposed simultaneously the, the consolidation proposal that's in budget sub one, that's not in our jurisdiction, to sort of merge the State Board of Education, the Department of Education and reconfigure the duties of the superintendent so on and so forth.

Did Department of Finance or the administration consider moving any of these gov ops functions that are sitting there with technology and property acquisition and HR and what have you into maybe somewhere where they had some background? This one in Cradle to Career, for example, and and the inter interagency council.

Danielle Brandon with the Department of Finance. I would say, first of all, I can't speak to the proposal in sub one, and I believe that we are waiting for outcomes of that to make additional determinations. But right now, the government operations agency is the best place for these entities.

Okay. Yep.

I do wanna note that CTC really is a data system, first and foremost, and we do have expertise in technology and data systems between fiscal CTC, and we oversee CDT and ODI, which are all the technology. So to some extent, it makes sense for CTC to remain separate in a point.

You know I serve on the CTC board. Right? I'm not I'm not convinced, but I mean, obviously, this is an ongoing we have them in accreting education we had the the regional k 14 collaboratives also that were in those were in OPSC, I think, which is also in DGS, which is in GovOps. And I also serve on the state allocation board, which is also the same way.

So we've over decades, but particularly in the last few years, we've really concentrated I mean, we should add the e to the GovOps name because it is the quasi education agency for anything that's been any new initiatives that have emerged in the last five or six years. So that is also a concern. But I think to me that it poses a significant challenge.

I hope the administration will have some strategy in the May revision about with this law that was passed and I would afford it and the governor signed it into law and it it requires a lot of and and there's litigation and other other out you know, there are consequences to it. And there's no guidance.

There's no safe harbors that district school districts or teachers can depend upon, and it was the reason why, that the budget allocation was made in order to start on January 1, and so now we've left the school community without the ability to have clarity about some important issues.

And then we will be substantially behind on the other diversity coordinators that were also contemplated to go along with this as a result of the So I understand the the position that the that the agency is in, but I think the administration does have a responsibility to, as do we, to resolve these challenges and to also do the ultimately, to do the cleanup on the legislation itself. So thanks, Madam Chair.

Thank you, Madam Chair. And I align my comments with the senators. Can you tell me how the agency plans to coordinate all of this with the LEAs? What's the process that you are thinking about in terms of the LEAs, the CDEs, the existing complaint process, the new structure how do we avoid duplication, replication, and more chaos at the school level?

Well, I'll say this. We have had a a series of meetings, and we have standing meetings with the Department of Education and as as to what is the best way to engage all the local education authorities once we have the appropriate staff hired.

And, that'll be part of the first set of workload that needs to be accomplished within the the office is basically laying out that plan and strategy for how to most effectively and cost efficiently provide the information, education, and assistance to the LEAs and what's the best format and manner to do it, whether it's going out in person and visiting folks, doing webinars, doing a host of things.

There there's a variety of ways that you can do it, but that'll be up to the new director once they get hired to help strategize the best way to achieve those results.

So that poor new director. Okay. So the new director is gonna have this challenge. And so you're saying and while this is being figured out, the new director is gonna come in and do this. There is a whole cleanup process that is happening on this policy.

So I'm confused. How do you see going through this process of acquiring and using resources to do this work that is under lawsuit that is also going through another legislative potential overhaul. Is that the best use of our funding, to start this process and then have to back redo it or do it again? Or, I mean, how how do has your agency dealt with this in the past? How how does this work?

I wouldn't say we've dealt with this specifically in the past. This is definitely unique to our agency. I will say that we are familiar to some extent with the legislation that's pending that adds an additional discrimination coordinate position, adds some deputy, discrimination coordinate positions as well. And it adds some new workload and, like, clarifies, like, the work that these folks are to be doing.

We do believe that the resources in here, we've asked for contract dollars to help to develop materials and things of that nature.

We obviously will not spend that until such a time as we feel that we have kind of a solid footing on what needs to be done and what's gonna be the outcome of some of these other efforts. To that extent though, the cleanup legislation doesn't remove all the at least in its current form, doesn't remove all the requirements that were in the previous bill.

So there is stuff that needs to be done and we will try to get the stuff done that does not have that overlapping uncertainty.

Okay. And what outcome should the legislature expect in a year that that would show that the office is improving the purpose the intended purpose, which is to address the climate or discrimination response. It feels like we're adding more layers, but what should we expect in terms of seeing the actual outcomes, and when can we expect to see those?

I don't know if I can speak to the outcome in terms of the materials being shared with the folks and how that changes that, but I can tell you from the implementation side, we should have our positions filled, we should have materials developed, we should be having the process of actually talking with and doing the outreach and education to the LEAs and educators and folks.

And we should have ourselves properly plugged into the CD complaint process and talking with them about what's the best way to provide guidance on their process as well. So those would be some of the initial outcomes that, at least in the current form, that I would expect us to have accomplished within the first year.

Within the first year. Okay. That that's good that we have some some benchmarks, and be good to see those in some form, so we can have a way of tracking on that, as we're investing. You know, this is a budget year like no other. I know we say that feels like every year that I've been here, but certainly this has been such a challenge with HR 1 and all of the other constraints and compression points.

So just be helpful to see some kind of benchmark on that. My other question is I wanna understand about SB 48 implementation and and understanding how the specialized coordinators will divide up their responsibilities. I'm also trying to understand there is a lot of work around who and what complaint response these coordinators will be addressing, and we wanna make sure, especially as you think about the limited resources in the midst of this sort of very, I wanna say complex implementation process.

We wanna make sure that we're allocating dollars in a way that is addressing the scale of the problem and where the problem is greatest. And so if you could walk us through your understanding of what are these specialized coordinator positions, what are their responsibilities, and how will that be implemented in terms of how is it shared across this team?

Well, I think that's a very good question and a very difficult question for me to answer. I will say that the discrimination complaint coordinators have are kind of segmented into very specific buckets, whether it's antisemitism, whether it's the LGBTQ, and I believe

Okay. Can you walk me through specifically what they are? That you're The ones? That you're hiring for exactly and who is gonna be

So we have the one related to anti semitism. Okay. And then the other ones are there is a race and ethnicity discrimination prevention coordinator. There is a gender discrimination prevention coordinator. There is an LGBTQ, and I believe the pending legislation will have the plus, discrimination coordinator.

And then there is did I get all five?

There's a religious.

And then there is a religious discrimination prevention coordinator as well. And then the pending legislation adds another one related to disability, I believe, if I recall correctly.

So this is my this is one of my sort of concerns in terms of how the work is gonna be spread across these positions. And I'm sure if you're thinking about the director's job description, some of it has to be they'll they should know what they are going they're responsible for. And so I is the allocation of these positions enough to address the scale of the unique concerns that each of these demographics will require.

It I'm challenged to understand how the religious disabilities, just because of looking at CRDs history and the years of discrimination complaints, how, the religious discrimination compares to a race and ethnicity discrimination. I mean, it's just in terms Yeah.

In terms of volume of work that.

The volume of work and how so are you is the sense that these will have overflow since, essentially, they will be trained in anti discrimination work and they will be able to support, or are they are we gonna have uneven levels where folks are some class of folks are gonna be in deep backlog and delay, which we know very well.

And this is from someone who's been watching CRD for a very long time where we have two years of backlog cases where black complaints are the number one and have the 90% folks who file complaints, they have a half a chance of getting any remedy. So I am very clear about the inequity of how civil rights protection works.

So I'm very challenged with how you have an equal number of coordinators assigned knowing that the volume when you talk about race and ethnicity, if you just look at the history of the last sixty years of Department of Fair Employment and Housing and then you go to deep CRD, we know damn well that the inequity exists and the outcomes are horrendous.

So I'm trying to understand what is the process that these dollars are gonna be invested to ensure that if we are saying we're fighting discrimination, that we have the real tools to meet the need, and that we are solving we're we are actually going into solving for the problem that we say we're going to solve for, which is to stop discrimination in our schools.

Well, I think it's a good question. I mean, I would say this. Once we get the positions filled and we have a better sense, and I don't wanna crush my colleagues over here, finance. But to the extent we need research this is a preliminary proposal based upon our initial understanding of getting the office up and running. If there is workload needs that are greater in one area versus another, we'll look to shift resources internally.

We have support staff. There is pending legislation. I don't know if that goes through or not, but if it does, that provides a deputy position related to the race and ethnicity area. We will shift resources where needed based upon the volume of work that those categories necessitate. So we will be nimble and flexible to make sure that we put the resources where they are once we have the positions hired and we see the volume of workload in these areas.

Again, this is new for us, so we will work with CDE to get an understanding of the complaints that are coming in this area, and then we will allocate resources accordingly.

Well, I understand you're trying to make lemonade here, and I wanna say and I and I appreciate that you are recognizing the challenges of this, but I think this is we are putting I think the good Senator said something about the horses leaving the barn and a cart before the horse or some great metaphor, but we this is not fully clear. It's not fully baked.

It has been a challenge, and it is setting up this department to do exactly what this department has always been, unfortunately, charged with, which is overburdened, underfunded, and not putting the resources where the resources need to go to deal with the scale of the problem. And here we are again. We have these coordinator positions.

We've laid them out, and there is no way that it is an equitable process that is going to solve for the problem that we say we're going to solve for, and that is to eradicate, eliminate discrimination in our schools and to create a responsive complaint process. So I have a lot of concerns with how this is gonna be implemented. I absolutely believe that we need anti Semitism protections in our schools.

We need to know that is a form of discrimination, and that discrimination is hard to fight. And if you start with an inequitable system, we're gonna have an inequitable outcome that is only going to compound the issue of racial discrimination in this state.

So I just hope that we come back and have deeper conversations because I am not prepared to support this as it is. I'm not prepared to support this as it is, because we have to make sure that we are not making a problem worse. This goal here is to make a problem better. And if we don't put the right investments in it, we don't have the right policy, you don't have the tools, then the state doesn't have the tools, and we're gonna fail.

Senator Cabaldon, you're recognized.

Yeah. Thank you for let me take for indulging me with one more bite, and that is just that just pick up the senator's analogy. I mean, we can lead DGS to drink to the lemonade, but we can't make you drink. And we haven't. So we haven't I mean, I wish we had begun implementation on January 1.

That's the point of the budget now appropriation was for. But I think, for me at least, my second highest wish is that we now don't rush. That there are all these discussions happening about this, but then there are also the discussions that the governors has has led that would rescue the the the good spirited but beleaguered deputy secretary of gov ops to not be dealing with this. Right? It doesn't belong here.

It may maybe it belonged in CRD, maybe it belonged somewhere else, but it was it was it doesn't belong in GovOps in the first place. It does not make sense for there to be six gubernatorial appointees for what are but other than the director for what are our staff functions. It just it doesn't. And to have them report to another gubernatorial appointee and you're trying to supervise somebody who's separately appointed and and they're all confirmed by the Senate, it's none of that makes sense.

And so right I guess what's come what's become clear to me during this hearing is that it's not necessarily the best outcome for you to go brush to to do all these things and set up this this entity this way, and then have have these bigger challenges worked out at both legislative and otherwise.

So I would hope the governor, the the Department of Finance, and the agency would would contemplate that and and also consider what there was a lot of interest last year in not doing the the gubernatorial point the gubernatorial appointment issue, but we couldn't change the bill at the last moment. There was a lot of in a lot of questions about whether gov ops was the right agency. We couldn't fix that at the last moment.

It'll be much harder to fix that if May 14, the day before the May revise, you all announce, hey, good news. We just we just appointed six new people.

It'll be much harder for us to unwind that and get it right. So the difference between now and three weeks from now is not that big. And so to the May revise gods, if they happen to be listening, just, you know, encourage the administration to, to to do what it can to fix the administrative, the the structural administration side of this. Things like, factually accurate, some of the other core issues, that's only we can do that.

Now recognize we have you know, we we created this mess and I know you didn't ask for it.

But on the administrative side, I do think the administration has a role to play to assure that we're not creating this very unique, unnecessarily bogged down entity in the wrong agency when it's it is as critical as Senator Smallwood-Cuevas, sent in. We have to make sure that we get that right more and that's more important than getting it done on May 15 as opposed to June 1. So thanks, Madam Chair.

Thank you, colleagues, for your questions. Mister Vice Chair, are you sure? Okay. I just I know this is I don't recall the exact all of the details of the legislation that is in front of us. But on my end, when it comes to the data that's going to be collected, what are you do you have any plans?

Is that gonna stay private within? Do you have any kind of is is there anything that you have to follow in under under the those policies or

I'd have to get back to you on that. I don't know.

Okay. Okay. Alright. Sounds good. Well, thank you so much for your presentation today, and we will hold that item open.

We we appreciate you. Thank you. And next, we'll go ahead and establish a quorum. Jessica?

For the purposes of quorum, Senator Hurtado? Yes. Senator Niello? Here. Senator Cabaldon? Here. Senator Smallwood-Cuevas? Well, the quorum has been established. Madam Secretary.

Okay. A quorum has been established now. And now we will go ahead and just take I have to leave a little early. So we'll go ahead and take up the vote only items. Items on our vote only calendar include items six through 17.

At this time, we ask for public comment only on items six through 17. If you wish to comment, please make your way to the microphone now. Please begin by stating your name and your affiliation. And, and when it's complete, we'll continue with our agenda. Oh, we'll take the votes and then continue on with our agenda.

My apologies. We'll take public comment on items six through number 17. Come on up.

Good afternoon, Chair and Members. My name is Valerie Johnson. I'm with the California Edge Coalition. We strongly support the governor's budget request to establish and staff the office of the California Education Interagency Council. California's lack of coordination across its higher education and workforce systems contributes to unmet labor market needs, widens equity gaps, and leave students unable to access the supports that they need to succeed.

EDGE was a proud supporter of both AB 1098 and SB 638, the legislation that established the council, and this coordination is essential to bringing together siloed systems and ensuring investments in education and workforce development are maximized and guided by a clear vision for economic mobility for California students and workers. Funding the council is a critical first step, and we urge the committee to approve the item as budgeted. Thank you.

Thank you. Seeing no other individuals in line to comment, do I have a motion from our vice chair on items six through 17? And the items are okay. So that's items number 11, 12, 13, 14, 15, 16, and 17.

I will move those.

We have a motion by Senator Niello on items 11, 12, 13, 14, 15, 16, and 17. Consultant, can you please call the roll?

As to items 11 through 17 [Roll Call]

We those items are out. And now we go to 6, 7, 8, 9, and 10.

Do we have a motion on item 6, 7, 8, 9, 10? So moved. We have a motion by Senator Smallwood-Cuevas, and consultant, can you please call the roll?

As to items 6, 7, 8, 9, and 10. [Roll Call]

Thank you. Okay. Items 6, 7, 8, 9, and 10 are out. And now we are going to be moving to item agenda item number three. So item three pertains to the Office of Data and Innovation and a budget proposal for the digit for their digital service delivery teams.

And when ready, please proceed on your presentation. Thank you.

Good morning, and thank you, Madam Chair, and the committee for having us appear today. I am Jeffrey Marino, the director of the California Office of Data and Innovation. The Office of Data and Innovation is a relatively new department established in 2019 in governor Newsom's first budget. The department was created to bring a simple, yet critical discipline into state government. Understanding the needs of Californians, and using that evidence to improve how the state delivers services.

Our small team consists of experts in design, engineering, data science, analytics, and training. Too often, the state commits to solutions before the problem is fully defined. Our role is to bring data to those early decisions, so projects start smaller, build upon incremental success, and are therefore more likely to succeed. We do not stop with research alone. ODI is also a delivery partner.

We work side by side with the departments to design and build the tools, data systems, and digital services needed to solve those problems. Rather than creating dependency, we build capacity. For example, our team recently partnered with the Department of Social Services to build a machine learning model that is now detecting most unauthorized EBT transactions, and reducing response time from months to days, saving millions that was previously lost to benefit theft.

In partnership with CDSS, we were able to begin testing the solution within months, rather than years. Today, the team at social services are continuously improving the tool, and further reducing theft, and increasing savings.

We've partnered with departments across the state in similar ways, improving both how services work and how Californians experience them. Across this work, the pattern is consistent. When the state starts with real user needs and follows through with iterative delivery, participation increases, access improves, and programs perform better. With this proposal we have before you today, we request five positions and 1,250,000 in reimbursement authority. I want to thank you for considering the request before you.

It would allow us to expand this important work, helping the state deliver better outcomes while making smarter, more effective investments on behalf of all Californians. Thank you.

Thank you. Does the Department of Finance wish to comment?

Kayla Landman Department of Finance. Nothing to add available for questions.

Do we have comment from the LAO?

Yes. Xinma with the LAO. We have reviewed this proposal, and at this time, we have no concerns. The request for reimbursement authority, is a reasonable funding mechanism for ODI, and we think that it is consistent with ensuring that the departments are benefiting from ODI services or paying for them. Thank you.

Thank you. Do we have questions from our Vice Chair, subcommittee Members? Senator Cabaldon?

This is one of my favorite programs in state government.

The because it's it is it is small, but it uses that size to sort of be a nonthreatening agent of of change and innovation at the department level that in in areas that the agencies understand, to some extent, or they're open to learning about how, things can work more efficiently, and particularly how human beings can interact with the stuff the state government does either through licensing or for civic engagement, or in other ways.

So I'm I mean, obviously, we have our the variety of budget pressures before us, but I do think there's a lot of promise here. I'm very interested right now, for example, in with the new privacy committee that the Senate has set up. We've spent the last decade, not just us, but everybody in in the country and in the world on a notice and consent approach to privacy, which we all know is completely ineffective.

You know, we're as as the day goes by, if you're on a phone or a computer or what have you, you're interacting with, you know, dozens or hundreds of, do you accept this privacy policy and, you know, click yes to all or no to all or whatever, and you're like, I've been in queue for Taylor Swift tickets for the last five hours, and I just guide in the system.

And, of course, at that moment, you're not you just wanted to get it out of the way, or you're, like, obsessed with this handbag or this suit or something that you that it's the worst time, and it's completely unreal.

So over that ten ten year period, we've the amount of cognitive drain on human beings, the amount of friction in transactions and in interactions, has gotten dramatically worse and yet, thousands of companies know our exact location, what we ate for breakfast, what, I will say, five minutes from now. But we have not achieved those goals.

So a part of that is that we've said it's incumbent on users to in the interest of giving them full agency and transparency, we want users to make every single decision.

And so I the ODI is the is the sort of agency in these kinds of projects. I think I'm hopeful it's or, you know, where where we get breakthroughs and how can just an example on privacy.

How can people figure out what their privacy preferences are in a way that makes sense to them in plain language or using graphics or rankings or stories or what have you to approach and interrogate our individual privacy preferences and then apply those, across state government and maybe beyond, but to allow people to interact without the expectation that we're gonna make it super, super hard and annoying, just in order to protect privacy that we're not able to do.

So we're experiencing that with the Delete Act and the drop registry that tens of thousands of Californians are signing up for, or hundreds of thousands, and we give them a list of 500 data brokers with 17 data elements and say, peruse which you know, tell us which ones do you wanna continue to track your data. Well, nobody I mean, you have to be a really, really obsessive privacy advocate, and you have to be very privileged to have the time to investigate that.

So we need better tools. This is just one example where where we meet human beings where they actually are in their daily lives, in their cognitive load, in their digital experience in ODI, I think is both showing that they know how to do that or know how to learn about it, and then deploy and then importantly deploy it.

And so I hope the budget allows us to to meet this request because ODI, it's a small one, but these some of the ODI innovations, have outsized impact that more than more than justify the cost. So look forward to this coming back after May.

Any other questions or comments from committee? I would like actually to ask you a question on the, if you could, if you don't mind explaining a little bit more about your system for forecasting community water system outages and, particularly for the Central Valley, that's something that we face and and something that you have worked on. As you work on these issues led to success, I mean, can you just explain a little bit more about that particular project?

Sure. I'd be happy to. And this is, a project that was worked on by the same team that worked on our DSS benefits theft project. And, this is a service that we refer to as our modern data or I'm sorry. Our data science accelerator.

And what we're able to do, and first starting with discovery with the teams who are actually tasked with tracking, these sort of data or sorry, water outages is first of all look at and when we talk about users and understanding user needs, we have to keep in mind that to a large extent, we're also talking about the state staff who are using processes that might be, or are often very cumbersome, or outdated, or manual in order to achieve their goals.

And so, in this particular case, this was one of those, one of those items where I believe there was manual sort of checking of each of these systems, and there was not necessarily a prioritization model in place for which would be likely to be experiencing outages.

And so in that case, our data science team was able to build a model that could predict based upon certain attributes that are measurable, which ones would be likely to, and therefore, that we should, be prioritizing in terms of, in terms of investigating the different water systems.

Can you also explain what steps ODIs taking to safeguard sensitive data as it works on projects using vendor AI services?

I'm sorry. Repeat the last part.

So can ODI explain what steps it uses to safeguard sensitive data as it works on projects using vendor AI services?

Vendor AI services. Yes. I mean, I think that there's multiple parts to that question. One, I would start with going back to the original generative AI executive order. The governor knew some issued in, I believe, September 2023.

And ODI played a very, critical role in executing on that executive order, putting forth, the many of the guardrails, also consulting on updated terms and conditions for our entering into agreements with some of these large language model providers. And so within those terms and conditions, the their data is safeguarded. It is established that none of the data will be used to train any of the models, and any of the products that we use in this regard are covered under these contracts and are considered enterprise agreements.

And so in that sense, they are closed systems that are the property of the state of California, of the Office of Data and Innovation, if that is the tool, that we're using under our licenses. I'll also say we have a very close connection to our partners of the California Department of Technology, and their the office of their, state information security officer.

And so while we follow all of the guidelines that are required by the Department of Technology before using any of these tools, we also have an ongoing dialogue, with CDT throughout that process to ensure that the data is safeguarded.

Okay. Well, I appreciate your presentation today, and we'll hold this item we'll leave this item and hold it open. We don't have any additional questions. Okay.

Thank you very much.

Thank you. Now we'll move on over to agenda well, move over to the Department of Technology. Will representatives of the department please come forward? Thank you. Would you mind, providing us with a quick overview?

Absolutely. I'm sorry. Can you hear me? Yeah. Mark Monroe.

I'm the Deputy Director for the Middle Mile Broadband Initiative at CDT. Happy to have the opportunity to speak with you today to provide a brief overview of the project. And I also wanted to note that, Deputy Miles Burnett is with us here to talk more broadly about CDT's budget after this. This endeavor is the largest publicly owned open access middle mile network in the country, with over 8,100 miles of fiber optic network.

In July 2021, SB 156 established the ambitious project designed to bring equitable, affordable, high speed broadband services to all Californians.

The historic investment made by governor Newsom in the legislature represents California's commitment to closing the digital divide. We have heard loud and clear that this is a priority for our state, and we are working to develop a network bless you. Sorry. Develop a network that will allow, California communities from tribes to urban centers to rural communities to take full advantage of our digital world. We are making tangible progress towards meeting this commitment.

In January, we activated the first 423 miles of the network along Highway 395. Just a few months later in April, the Bishop Paiute tribe became the first community in the state to to deliver Internet service to households using the the state's network and and infrastructure. This is an important milestone that reflects exactly why this historic investment matters. For communities that have long been underserved, this network is not just abstract infrastructure. It is access to education, health care, economic opportunities, and civic participation.

On construction, we are making steady headway. More than 70% of the network has been permitted so far, including 670 additional miles approved just since January. That progress reflects close coordination with Caltrans and with CDT's other partners in strength and streamlining what has historically been a complex process. At the same time, we are cognizant of challenges. While the construction timeline has shifted, our mission has not.

We remain fully committed to delivering this network at as quickly and efficiently as possible. By December 2026, we expect approximately 5,300 miles of fiber to have been completed with 4,300 miles ready to connect to last mile federal funding account or FFA partners, bringing service significantly closer to the Californians who need it most. We're also building the foundation for long term success. Following a competitive process, we recently selected Skyline Technology Solutions to operate this network for us.

As the operator, Skyline will be responsible for the day to day network and security monitoring.

Skyline brings 20 years of experience managing statewide fiber networks, including most importantly, Maryland's 3,300 mile broadband network. This this appointment marks a significant milestone in bringing high speed broadband services to unserved and underserved communities. Their decades of experience managing large scale fiber systems will help ensure reliable, secure service for Californians. We are also, decisively in, moving into operations and service. Earlier this year, we released pricing for core network services and have already engaged with dozens of FFA, last mile partners.

The overall response has been very positive and those conversations are translating into real service agreements and deployment plans. Ultimately, this effort is about coordination and impact. We are working closely with the CPUC, local partners, and service providers to ensure that this network is not only built, but fully utilized to expand access across the state. This is a complex but meaningful work.

Every mile we complete brings us closer to a California where broadband access is not determined by ZIP code, but is guaranteed, as a foundation to closing the digital divide.

Thank you again for your time and leadership, and, welcome any questions.

The Chair has cast caution to the wind and left me in charge. Fasten your seat belts. Just kidding. Department of Finance, any comments?

Ryan Bender, Department of Finance, nothing to add right now, but available for questions.

The agenda provides very comprehensive background on the middle mile broadband initiative, and we thank the department for their presentation. The LAO just wants to highlight a couple of things for the subcommittee. In terms of where the program stands, four twenty three miles of the 8,137 mile network is currently complete and ready to operate. The remainder of the network is expected to be completed by the end of this calendar year. And in terms of funding, Only as of February 2026, only 68,000,000 remains unencumbered.

Been significant progress in this project, but there are still major outstanding milestones ahead. One thing that we would like to know is the new, three party structure that the department has introduced, with the addition of the separate operator to oversee the day to day, operation of this

network. This is a completely novel arrangement for the state, and it raises some operational and accountability issues in the future. For example, if there is some service disruption or performance issues, it may not be clear which party is responsible for resolving it. We encourage the legislature to ask the department how responsibilities are clearly defined between CDT, the third party administrator, as well as this operator. And something that our office has flagged previously that remains concern is the long term sustainability of the network.

The network is a massive public infrastructure investment and the question of whether it can operate without ongoing state support is still open. We encourage the legislature to keep that in mind as the network moves into operation. Thank you.

Questions or comments from committee Members? Senator Smallwood-Cuevas.

Thank you, Mr. Vice Chair. And I began this, foray into this conversation in 2023 when I was just elected. At the time, there were two little girls doing their homework at the McDonald's in South LA because they did not have access to to Wi Fi. And for me, that's exactly why we did this project.

That's why we've invest over $3 billion into this project, and I'm glad to hear that it's making significant inroads, and that some of those neighborhoods, not all, are connected today. So we still are have made some progress, but we still have a long way to go in terms of making sure all of California has the digital divide bridged. I have some questions, obviously, concerns as we have made this investment.

It sounds like the invest the investments that we have made and the project forecast are now coming together and that am I right that this project will be completed? And it was at the 8,008 miles of middle mile line will be completed in 2026. Is that?

Correct. So the the 8,100 miles will be completed. That will be completed. We do expect some miles to slip into 2027. We're starting to work on on what that looks like.

As we move forward, what we're focusing on is the those FFA grant awardees. We need about 4,300 miles of the network to serve them. And so they'll be coming online throughout the latter half of this calendar year. And so we expect to be ready. We're working, closely with them with their their schedules for construction to make sure we build the right thing to the right place at the right time.

And so, we expect to have, approximately 4,300 miles fully functional by the end of this year, at least 4,300 miles. The 4,300 miles that would be needed to reach those FFA locations. And I mentioned that we we expect to have about 5,300 miles of the fiber actually pulled.

But it's just filling in the any gaps that might be, where we're permitting or construction is still being done that will push some of the the completion and the light up of all of the the remainder into 2027.

Yeah. And and knowing that we have a gubernatorial transition, you know, a project this scale, to me it's a risk, and especially the the points that the LAO lays out, which I think are really important in terms of who the authority to really oversee this project, both in its completion, but also in how this maintenance and all of the pieces that that are required.

It just it does concern me that we have this third party process now that, and I understand the third party is based in Maryland. It's a Maryland nonprofit. It's not a California, company.

Is now we have a new system that's being put in place to oversee it that's not even California based. And how do we hold that third party accountable when they even their full on operations, we don't have real access and oversight to it. So that that just raises a lot of questions for me. On the one year extension, why is a two year extension necessary? And what specific contract project milestones cannot be completed under the current deadline?

Is that the 4,300? Or what what is that?

Yeah. So I think so going back to the the $550,000,000 that was appropriated by the legislature and general fund in the past couple of years. Almost all of that has been already it's under contract. Right? It had to be encumbered by the end of this calendar year, and it was encumbered well ahead of that.

And so what we're trying to do here, it's kind of a belts and suspenders approach. The we're not worried about having an encumbered. I'm trying to account for a scenario where maybe in the 2027 as we're finalizing, we find out, oh, we need to maybe need to shift some miles from one of our partners to another one of our partners to make it go faster. Right? We're still as we're trying to finalize some of the permitting, there's just there there might be some unknowns.

And so, I'm just it doesn't change your authority. It's still $0. It's just that, right now there is this two year gap between, the 2026 when by when we have to have it encumbered, and the 2028 when we have to have it liquidated. And so it's it's really just trying to to look out and make sure that if we run into anything where we need to to do a last minute reallocation within the program to get it done faster, we have that authority. That's all.

Well, that's something we're gonna have to to watch and to make sure that we we understand that of the contracts and, you know, what we might need to see happen by 12/31/2026 so that, you know, we can resolve issues sooner and not have to move into 2027.

So I maybe there's another report that we can get to get a bit a better sense of where things will be by December 31 so we can have an idea of what what to expect and what authority might need to be supported. My other question has to do with the the revenues do not cover operating costs. Should that happen?

Because things do happen, and I'm just thinking about, again, the the question too about, system, who ultimately bears the financial risk of this if for some reason, this third party this operator, third party administrator, the state of Maryland, partnership, who's who's holding the bag?

Okay. Yeah. No. I mean, what what I'll say is that in the end, CD this is CDT's project. CDT holds ultimate responsibility over it.

I wanna be clear though, when when SB 156 was passed, and we we talk about a a third party administrator. Right? It it was the the state was doing something that the state had never done before. And frankly speaking for the order scope and magnitude, nobody no states have ever done before. And so, the legislature it was a good idea to to to require that CDT contract with a third party administrator to help manage all of this.

Right? And so, and so when we talk about a third party administrator, that's really what we're talking about. And so, there were some specifics in SB 156, and the when we went out to meet those the requirements, SCENIC was the entity that the only entity at the time that seemed to meet those requirements. They we contracted with them. They formed a subsidiary, Golden State Net, and we've contracted with them to be our third party administrator.

And so and that isn't changing. That statute requires us to use a third party administrator and it's it's fairly focused in in what what's required there. When when CDT originally contracted with GSN, the functions that were included were all basically development functions. Right? They're the one time things.

Whether we're buying sections or leasing sections or building sections, they were there to manage that. And they're very helpful for that. Right? Because they they've developed and managed these networks before. And so, while they weren't doing the development work themselves, that was Caltrans is doing a lot of it.

Caltrans did a lot of the design, and now we have about 15 different, partners that are actually doing the development work. And so we've used that third party administrator to help manage those. So as we look forward to operations, we all share the same concern. We we expect this network to to expect our operating cost to be covered by the revenues generated over the long term. That is that's always been our goal.

And so we've always looked at, as we go about this, how do we, minimize our operating cost so that we can we can do that? So when we talk about the operator, that's we still it's still our expectation with the third party administrator. They'll continue to help us manage the operator. Right? And so as the operator goes out and and actually does the day to day work, the TPA, the third party administrators can be very useful in helping us monitor their work.

Let's make sure the speeds are what they're supposed to be. Let's make sure the main the the repairs, any repairs that need to be made are made quickly. So there's a there's a number of their their expertise is gonna continue to be valuable and will continue to use CDT will continue to use that expertise in in managing that operator.

When we talk about the operator skyline, they one of the one of the really attractive the attractive aspects of skyline as an operator is that as a note of, there are not a lot of systems like this and Maryland has one. And they've been the operator for sixteen years.

So trying to find somebody who actually has experience in operating experience operating network like ours, that was we're very excited to find that. But they don't just they're not just Maryland based. They've got a presence in California for for some database purposes. And they do, they operate several other systems. I wanna say, departments of transportation in Texas, Florida.

There may be some other states in there. So they actually work around the country, operating, statewide networks. But and I tend to focus on Maryland because it's so much like ours, and being able to have someone who's operated a network like ours was just I was really pleased to be able to get that.

Yeah. That was my question. How did we determine that this was the best choice for the job and how does it fit into our original intent, which was that we would be providing service to those communities that had been left out and ensuring that it is a sustainable system that could that could provide services to these communities for for for generations to come. It sounds like they have the expertise. What were some of the other criteria for making that choice?

They very much understood what we're doing in terms of developing this network. And again maybe that comes along with their expertise and their experience. As we have laid out what the what the program is, they've they appreciate not just the mechanics of it, but the policy of it. They are very much about being able to reach those communities. They're very excited about that.

Obviously, their price was very competitive and that's also an important a really important component. So looking at at all of the things we were looking for in terms of being able to appreciate, not just the mechanics of operating network, which is obviously this doesn't work if it doesn't work. But also, having that experience and then understanding that really our policy goals of reaching the unserved and underserved communities. And that was that and the price all really helped us make that decision.

The legislature, know, sort of have some oversight, some data reporting to understand these last two year two years, the progress. Because part of our challenge in my first 23, 24, 25 was we just didn't get a comprehensive look at what progress we were making. Opportunity to see some of that analysis of how well they're doing.

Yes. Yeah. So they reporting on their performance, and and we'll be working with the the the TPA Golden State Net to make sure that we're having them report on the right things. But that's all part of what they'll be providing. We will also, as I think most are tracking, we do an annual report every March, and another one every September, I think.

So we'll continue to provide those reports. In addition to that, we have regular middle mile advisory committees every quarter. That's a great place for to get updates. But honestly, I would offer an open invitation for any anytime anybody wants to to come out and see what we're doing, or to we're happy to provide briefings. We really value the transparency, and we wanna make sure that whatever avenue works best, we are we provide that level of transparency.

Well, that will be helpful because what we wouldn't wanna see happen is to come back and say, you know what? That third party operator was best value, and then we turn out that not so much. So those progress reports will be helpful. The progress of this final leg will be helpful as we look at this extension. Should you receive that, I think it'll be helpful for us to understand.

Senator Cabaldon?

Thank you, mister chair and thanks to my colleague for seeing already many of the key issues that are here and she asked questions about the long-term financing, and you indicated that you anticipate, the operations will pay for themselves over time.

I'm wondering if you can give us a little more clarity about what that time horizon looks like?

So, we currently, CDT has not come forward with any budget request for funding. Now that we have an operator on board, then we're looking at that part of what CDT will be paying the operator for, well, in terms of operation, will depend on how much is operational. Right?

So, to the extent that, in other words, it requires more work to operate an 8,000-mile network than, we talked about 4,300 miles. Right?

So, we're looking at that and part of what that component of expenditures, that's going to depend on how we make progress in terms of building out the network and getting it operational. We talk about some miles moving outside of 2026, it continues to be our goal.

We're doing everything we can to keep it within 2026. So when you look at kind of the balance between revenues and expenditures, that's really what we're talking about in terms of, are we going to be able to balance that?

We haven't anticipated a need until now. We're now in the process of looking at, okay. We've got this network. What will the operating cost be?

Another component, big component of the operating cost is, one of the ways we're able to stay in budget and reach the full 8,100 miles, is that we were able to use, they're called indefeasible rights of use.

They're twenty-year capitalized leases and so the majority of the network initially, we will be we paying leases for, those leases include kind of the one-time upfront.

It's not, again, a capital cost but there's ongoing maintenance and operation costs. Just like the users of our network will be paying us, we also have to pay some of those. We only pay those costs when those segments are complete and we take receipts.

We've always looked at this as we're going to be done by 2026 and so, those are the two key components for expenditures and we're kind of revisiting that saying, okay.

Now if some miles are getting moved out, how might that affect that also is going to move out some of the cost associated with completing those miles and then the third component obviously, is the revenues. Right?

Our third-party administrator, Golden State Net, is part of our agreement with them, is that they are out doing the sales and marketing for the network.

So, their ability to generate revenue is going to be directly linked to the miles and the segments that we have complete and the marketability of those.

So those are all some things we're looking at right now and we have to kind of reassess, whether our expected ability in the short run, to be able to make this financially sustainable but over the long run, I mean, I think there's two things I'll point to.

Normally, in industry, you do have to make those up.

The way that SB 156 and the legislature funded this was that we don't have to make back the capital costs. Right? So that's going to, obviously, put a lot less pressure on CDT, to be able to kind of move forward without those added costs of trying to make that up.

But in industry, we would also have a near term forecast about when we might achieve revenue stability. I mean, part of the challenge here is that, as you know, last year when we when we took up the budget.

The administration refused to meet its legal obligation to provide the business plan to the legislature. So, we were unable in our hearing to understand these issues and then we've been getting a series, we got that late.

We get email notifications about the selection of the operator, both the communication but we've been getting a series of requests, without any more information than is absolutely the minimum required, in order to get an action approved.

But we need to know what the revenue picture looks like, and I don't think it's fair to simply leave that to the third-party administrator, which under the framework that you're now undertaking, doesn't have any hooks with respect to customers or the operator in particular.

So, I think that this is an issue we're going to need to continue to return to and although you said we're not asking for any money for operations and we haven't asked for any money for operations, the BCP, in response to Senator Smallwood Coevs' question.

The BCP specifically says without extension of the encumbrance period, CDT would be unable to access any unused contingency to help fund operations after 12/31/2026. So, it is anticipated that there is money potentially, that is in the encumbrance request that is for operations.

So, some budgeting must be happening for that period, and it must not balance out in the first couple years, otherwise we wouldn't have this language in the BCP. We've talked a little bit about this situation but what about then pricing?

Do we expect that the price, that the users of the system, and I don't mean end consumer, but the users of the system that, that price is going to be competitive and they will choose to use the backbone that we're creating?

Yes, we do and when we came out with the pricing earlier this year, we have now shared it with, I want to say, 47 of the FFA awardees and the overall response has been very positive in terms of affordability.

You indicated earlier in your testimony that the authorizing legislation, which directed the department to select a third-party administrator that was for the purposes, sort of like the start-up, the development costs and what have you.

Then as a result, you've moved towards this split system with a third-party administrator and then an operator, but I just want to read the specific statute.

Which says the office shall retain a third-party administrator to manage the development, acquisition, construction, so far so good, maintenance and operation of a statewide open access, middle mile, broadband network.

So, the plain language of the statute says that the third-party administrator is to be responsible for operation of the system.

So, what's the legal theory here, for why the department believes that it had the authority to create this three-part system and higher compensate a private operator from out of state?

So, in terms of, you can go back to that code section, you can kind of see the section A right before it. It does give broad authority to CDT, to kind of do what the contracts necessary to make this.

You might note that, that subdivision A of Section 11549.53, does not say notwithstanding, Subdivision B.

So, the department seems to be relying on the notion that subdivision A gives it complete, free of any accountability whatsoever, the ability to do whatever it wants to without our authority.

That's that conclusion, I'm going to come to that conclusion partly because it's been directly said and you were about to say it as well just now.

Also, because we had the same experience last year with the business plan, sort of the lack of fidelity to the law, much less to the legislature's responsibility to oversee the project, seems plain here.

So, I think the budget committee staff and LAO have been quite kind with respect to this provision.

It has powers and authorities necessary to implement the chapter, does in no way, nowhere in the statute does it say, that supersedes the language that specifically says it's not a request, it's not a guidance.

It says that the office shall retain a third-party administrator to Blah blah Blah, to manage operation of the open access, middle mile, broadband network. So, I don't understand what the legal authority is to ignore the plain language of Subdivision B.

Yeah, I'm sorry. I should try to clarify. We're not saying that there's any attempt to ignore Subdivision B. So, when we read subdivision B, and it says, clearly. We're to hire a third-party administrator, to manage these activities.

Right? We talked about how we've used the third-party administrator to help manage the development and we have a number of partners that are actually doing the development. Right? But we've used the third-party administrator, as indicated here, to help manage that effort.

We're doing the same thing with the operator. We still have a third-party administrator, the same third-party administrator, which meet meets the requirements of the statute and they are still helping to manage the operation.

But just like we have other companies that are doing the actual development, and the third-party administrator is managing that. We have another company to serve as the operator, and we have a third-party administrator to help manage that activity.

So, does the Skyline Technologies then report directly to it? Because the statute does not say the third-party administrator is to help CDT manage operations. The statute says the third-party administration is to manage operations

But the way that the graphic that you provided is laid out, it implies that the operator's direct report is to CDT, and there's this sort of dashed arrow.

But the third-party administrator, even though it has the legal responsibility under the law to manage operations, that is sort of helping your department, which would be taking over direct responsibility for overseeing the operator. How am I missing this?

So, what we're trying to communicate there is, and this kind of goes back to some of the earlier conversation that ultimately, this project is CDT's responsibility.

So, CDT, as somebody has mentioned, that the third-party administrator serves as its hands and feet, in terms of actually managing the network and so you have an operator that is reporting to the TPA. Alright?

But in terms of what the goals are for the network and what TPA is managing too, that's still determined by CET, because we want to make sure that the California residents' interests are central.

Alright, I don't have it here. I'd love to see, at some point, the actual contractual arrangements here, to assure that Skyline is in its role as operator. That it is being managed by the third-party administrator, consistent with the plain language of the statute.

Of course, the administration is free to propose a change to that plain language.

But newsflash, if it does, I will personally insist that we also change to a division A, which is completely unhinged, unbridled at least the way it's being interpreted by the department. An unaccountable grant of authority that is no longer needed.

It was to like, move heaven and earth, literally, to build the system. We should not have this kind of a language that is interpreted by the department of giving it unfettered authority for the mere operation of a regular but critical, big.

But also, regular component of state government. We don't give this authority to the manager of the California Aqueduct or anything else. So, the administration should either propose a change to Subdivision B or follow it.

If they propose the change, we're going to have a discussion about what the future of Subdivision A is. So, this really is a critical project and for all the reasons that Senator Smallwood Cuevas mentioned.

We have most McDonald's in the rural parts of my district, are also not on broadband. So, I represent deeply urban places like Vallejo, as well as folks in the mountains, and the valleys of the Central Valley and the coastal ranges.

The project is so important that's why we're devoting so much energy and attention to it and appreciate the work and the accomplishment of CDT and the third-party administrator up to this point.

But obviously the next task is to make sure that when it's finished and two, that it operates and delivers the actual broadband services that we're trying to accomplish for the communities that we're representing. So, thanks, mister vice chair.

Thank you. I think we've exhausted all possible questions, but the last point that you're talking about, that we're talking about, is significant.

When the LAO completed her input to this discussion point, the way she described this project, if we had taken that snippet of what she said out of this room and placed it into transportation committee, I would have thought that she was talking about the high-speed rail project.

Now I'll just leave that there the way it is, but I'll come back to the issue that Senator Kibaldin was pursuing. My understanding is that at the outset, when Golden State Net was hired, that they indicated that they'd be willing to do all of these things, but they were not willing to be the operator.

So, if that's true, we knew ahead of time that we were going to run into potential conflict with legislative direction, that then the executive branch, by virtue of interpretation, was going to take a potentially different route. So, it seems to me that, that's what's happened.

The administration has interpreted legislative direction that is questionable. Now we want the project to succeed, but that's a pregnant issue that troubles me as part of the legislature, relative to the relationship between the two branches of government.

I'm not sure how we resolved that, except that perhaps the administration, to make sure that it's clean in its approach and this a pension, it's apparent, potential, glaring contrast between the legislature directed and what the administration has done for clarification.

Perhaps the administration should come back and ask for a change in the direction of the legislature, to coincide with what you have administratively interpreted.

If I could provide a little clarity on this, when we originally went into this in 2021, we did discuss all aspects of the project and statute with Golden State Net, with a third-party administrator, we did.

When we originally contracted with them, we contracted with them for that, again, the management of the development work. In 2023, we asked the third-party administrator, asked Golden State Net.

Understanding that the expectation is that you would per statute, manage the operation of the network. What would it cost to operate the network?

Their estimate at the time was, it came out to about well, the difference between revenues and expenditures over the first ten years was in the range of $450,000,000.

This was discussion with the third-party administrator.

Yes, so we had no money to operate it and certainly, that seemed like that was not in the best interest, it didn't seem what was consistent with certainly, the administration or the legislature expected in terms of needing that kind of operating subsidy.

Now, we acknowledge that the third-party administrator given, where they were, they would have needed to step up significantly. They would need to arguably go out and find an operator, not unlike we've done. Right?

But their estimate for doing all of that was significantly higher than and would have required an ongoing subsidy for at least ten years.

So, in looking at that we said, well, we need to explore other alternatives. The evolution of what's happened since then, and we've talked about this high level, in our middle mile advisory committee meetings that we have on the quarterly basis. We've talked a bit about this.

The bottom line is we have understanding from the beginning that this is a management function, understanding that we could always pay the third-party administrator to operate the network. The cost was much higher than we were expecting.

We have to make sure that this is best, the most affordable for Californians and is going to be financially sustainable, we've looked at other options and that's how we came to the current process, that we just completed and how we were able to select Skyline.

In terms of what we're expecting, in terms of operating it, again, we're still looking at it but we don't, you know, this is in our view, a much more responsible approach in terms of being able to move forward with operation, in a financially sustainable way.

Well, I certainly understand the challenge of managing the project, in a way that is fiscally responsible, but you did that in a way that interpreted legislative direction different than what it was. So, I get your point, but you solved it by circumventing the legislation.

If you'd come back to the legislature at that time and said, we have a problem with how you've directed this, based upon what it's going to cost to do it the way you direct and with the reasons that you just articulated, we need to change.

Now maybe I'm nitpicking on a point, but from a standpoint of the integrity of the role of our institutions, it may be a small point in the overall, but I think it's a significant point relative to, as I said, the integrity of the institutions.

So, I would suggest that the administration, in order to clear this up, should go back to the legislature to clarify this, so that what you've done becomes coincided with legislative intent.

That would be changed retroactively, but I suspect that we would entertain that, but we have this glaring inconsistency that as a legislator, it bothers me.

I understand.

Would I have your commitment, that you would pursue that direction?

I can certainly take back your concerns.

Would you then take it back and then let us know what the answer is?

Yes.

Thank you for presentation. We will now move on to our final item, number five. Same folks or changing chairs?

Vice chair and members of the committee, my name is Miles Burnett. I am the chief administrative officer for the California Department of Technology and I will be presenting a short summary of the CalTabs modernization project.

CDT requests $1,000,000 in technology services, revolving fund authority in '26,'27, and $550,000 in '27, '28, and ongoing to replace CalTabs with a modern SaaS billing solution.

CalTabs is a 20 plus year old, highly customized proprietary billing system used, by CDT to generate customer invoices and extensive billing data and billing reports.

The system is built on fragmented and outdated technologies, incorporates extensive custom code, and depends on tightly coupled processing logic that limits flexibility and scalability.

These technical constraints increase operational risk, complicate maintenance and enhancement efforts, and make the platform increasingly difficult to adapt to evolving business and security requirements.

Rendering continued reliance on the system unsustainable. This request, covers the procurement of subscription licenses and implementation services to configure, deploy, and transition from the existing platform to a modern secure billing system.

The new solution will streamline billing operations, enhance data quality, reduce technical complexity, and improve transparency for both internal and external stakeholders and with that, I'm here to answer any questions you may have.

Thank you. Department of finance, any comments?

Ryan Bender, Department of Finance. Nothing to add right now, but here for questions.

LAO?

Thank you. At this time, no concerns with the proposal. We think that an off the shelf software as a service approach, is more sensible and lower risk than a custom solution, and we think that the use of the revolving fund is an appropriate mechanism. Thank you.

Any questions, comments from committee? Nor do Aye, so thank you very much. This one's easier than the last one. Thank you. We will now take public comment on items one through five.

Anybody that has, input for us on any of those items, approach the microphone. Seeing nobody crowding their way to the microphone, it appears to me that this meeting is adjourned.