Assembly Budget Subcommittee No. 3 on Education Finance

Good morning, everyone. Good morning, and welcome to the Assembly's Budget Subcommittee #3 on Education and Finance. I am Chair Assemblymember David Alvarez, and I welcome you all to today's agenda. First, some housekeeping. We have noticed, as you all know, on the agenda part one and a part two, we depending on how part one goes, we may be able to get to part two this afternoon.

That will determine and we can certainly it'll be informed by the discussion, by the questions, by the comments. And, you know, we'll make a determination at some point, maybe right after the noontime break. We'll have a very short break during the noon hour. And we'll reconvene, for certain, at 01:00 in this room. And then we'll know probably by then when we reconvene whether we'll be able to get through the items that are noticed for tomorrow's hearing.

And so, we will we will make sure to keep you informed. And thank you all for for your participation today on these issues. So, we're gonna get started. Obviously, this this hearing is related to the May Revision of the Governor's January proposal on the state budget for both K12 and for higher education. And so we are gonna start first with the Proposition 98 update with the revision proposals by the Department of Finance.

So, I can have the folks who are here for this panel, which is Department of Finance and LAO, please come forward. We're going to hear the assumptions impacting Prop 98 guarantee and the rainy day fund for Prop 98. We'll start with the Department of Finance. Welcome.

Thank you, Mister Chair, members. Alex Shope, the Department of Finance. So within the three year budget window, the May Revision projects the calculated minimum guarantee to increase by about 28,000,000,000, relative to the 2025 Budget Act and 6,400,000,000, relative to Governor's Budget. So, just to go year by year to discuss some of those changes. In 24-25, the guarantee increases by 1,100,000,000, relative to the governor's budget for a total minimum guarantee of 124,900,000,000.

The May Revision also maintains, that full $1,900,000,000 payment on the outstanding settle up, obligation. Increases in General Fund, also increased the existing maintenance factor payment, in 24-25, to approximately 8,300,000,000, and that fully pays off, the outstanding maintenance factor obligation. In 25-26, the guarantee increases by about 3,700,000,000, relative to Governor's Budget for a new calculated, guarantee level of 125,100,000,000. Due to the improved revenue outlook in 25-26, the May Revision also reduces the proposed settle up from 5,600,000,000 to 3,900,000,000.

So, that means that the increase in the funded guarantee from Governor's Budget to May Revision is 5,400,000,000.

And that reduction in settle up is used to increase the discretionary deposit into the rainy day fund. Of course, the remaining settle up obligation, you know, reflects a level of continued uncertainty, continues to serve as a proactive measure to manage the budget, and avoid the over appropriation of Prop 98 when 25-26 becomes the past year rate, at which point statute, prevents the reduction of existing appropriations should the guarantee decrease.

Then finally, in 26-27, the guarantee increases by 1,600,000,000 relative to Governor's Budget for a total minimum guarantee of 127,100,000,000. All three years on the budget window remain in test one. The May Revision also maintains that same 24-25 split calculation as Governor's Budget.

So, community colleges are still funded about 391,000,000 above the split in that year. Moving to average daily attendance: due primarily to enrollment decreases across most grade spans, we are seeing a relatively significant drop in ADA when compared to the Governor's Budget projections. So, that includes a decrease of 64,000 in 25-26, and a decrease of 81,000 in 26-27. And, again, those decreases are relative to what we were projecting at the Governor's Budget.

So, moving to the public school system stabilization account, the state's rainy day fund, for schools. The May Revision includes true ups to the rainy day fund deposits, and the withdrawal from Governor's Budget. So, again, I'll go year by year. I'll provide that Governor's Budget transfer amount, then the updated amount at the May Revision. So in 24-25, there was a mandatory deposit of 3,800,000,000 at the Governor's Budget.

At the May Revision, that mandatory deposit is revised up to about 5,300,000,000. In 25-26, there was a total deposit of 664,300,000 at the Governor's Budget. So, that was comprised of a $424,300,000 mandatory deposit and a $240,000,000 discretionary deposit. At the May Revision, that mandatory deposit is revised up to 3,400,000,000, and the discretionary deposit, as I noted earlier, is also increased to about 1,600,000,000, for a total deposit in 25-26 of 5 billion. Then finally, in 26-27, there was a mandatory withdrawal of 407,100,000 at Governor's Budget.

At the May revision, that mandatory withdrawal is removed. So now, there's there's no withdrawal. There's no deposit in 26-27. And then with those revised transfer amounts, the ending balance in the reserve is about 10,300,000,000 and local school district reserve caps remain triggered in 26-27. And that concludes my remarks.

I'm happy to take any questions.

Thank you. We'll hear from the Legislative Analyst’s Office.

Thank you, Chair and members. Ken Kapan with the Analyst's Office. We'll be speaking from our publication this morning, and I'll focus by your marks on the Proposition 98 guarantee and the architecture of the Governor's plan. So, I was turning right to page one. The starting point for this May revision is the 6,400,000,000 increase in the guarantee relative to January.

It's obviously across the three-year budget window, but most of that is reflecting the spike the state is experiencing in 25-26. And these higher general fund revenue estimates somewhat offset by lower local property tax estimates. Turning to page two, another significant adjustment here. They're gonna -revision has a reduction of about 3,800,000,000 in cost estimates for the local control funding formula.

That's generally reflecting the Department of Finance showing up to data more recent data from the Department of Education; that doesn't increase the proposition 98 guarantee, but it has much of the same effect because it gives you more funding to spend on other school priorities.

Earlier this year, you had this - I think we had this question this committee about where are all these savings from statewide attendance and when does the state get to reallocate that to other things. And the answer essentially is right now is when that's happening. Scaling back to settle up proposal also means that there's 1,600,000,000 more available over school and community college programs compared with the Governor's January Budget.

Turning to page three, the estimates of the Proposition 98 guarantee and the LCFF savings both seem reasonable to us. The state has had surprisingly strong, revenue performance the past few months, driven by gains in artificial intelligence, a booming stock market, large growth in investment income.

And the May Revision builds is consistent with those trends, although we're still concerned about some of the stock market risks and these indicators that suggest the stock market could be overvalued. For schools, there continues to be this direct link between state revenues and the Proposition 98, guarantee with about 40% of any change in state revenue, falling on the school side of the budget.

Regarding that settle up proposal, we have the same basic assessment in January, which is that the Governor has a reasonable concern about revenue forecasting risk. But the delaying the payment is setting up the state for larger deficits and more difficult decisions for the budget overall moving forward. We think the smaller amount in the May Revision is an improvement.

It lessens the impact of that somewhat, but we'd still recommend an alternative in which the state sets aside enough funding to fully cover its estimate of the Proposition 98 guarantee. Makes non-Proposition 98 spending reductions as part of a broader plan to get the budget in balance and then uses the additional Proposition 98 funding to protect school programs in other ways. So, turning to page five and the spending overview, the plan before you has 17,800,000,000 in new spending proposals.

So, there's 10,900,000,000 from the Governor's Budget and another 6,900,000,000, that's new in the May revision. Bulk of that new spending is one time 10,300,000,000, but the other 7 and a half billion, is for increases to ongoing programs.

You'll cover the specific proposals a little later, but really, there's three, just three areas that account for about two thirds of that new spending. That's a discretionary block grant, cost of living adjustment, and additional base increases beyond the statutory cola, and 2,400,000,000 for this very large special education increase. Turning to page six, the other big ticket items here are many of the same proposals from January, eliminating payment deferrals, new funding for community schools, and the full restoration of the Learning Recovery Block Grant. Those amounts, unchanged from January. There are two new proposals that I think later in this hearing you wanna focus on.

Those are the additional one time funding for community schools and the extension or expansion of the literacy coaches proposal that are new in the May Revision. So, turning to page nine, skipping ahead of page here and our assessment. I think thematically, this mega vision is really revolving around three ideas: discretionary funding, support for district cost pressures, and then increases to existing programs.

So, about 70% of the new spending, would go towards, grants and other increases that generally benefit all districts and can be used in very flexible ways. School districts have received some very large increases in funding since 2019-20, but they still face some challenges related to inflationary pressure, managing the end of one time federal and state grants, rising special education costs, and some large increases in non personnel costs, insurance, and utilities.

And, discretionary funding, like the Governor's proposing, could help districts address those issues as well as their other costs and priorities. And then about 30% of what's before you, consists of targeted grants that come with specific requirements. As with the January proposal, there's not a lot here that's really new, but instead, most of these, proposals are building or expanding existing categorical programs. There are some advantages to that approach of funding this higher COLA and special education base increases. They get funding to districts quickly.

They're efficient to administer. Easy for districts to incorporate into their budgets. May Revision has some reasonable numbers here, but certainly other amounts could be reasonable as well. Turning to page eleven, one question that is important to ask for any budget plan is how well it would set you up to address a potential downturn.

And one positive feature of this proposal is that it contains a cushion, what we call a one time cushion, about 4 and a half billion in ongoing funds that are set aside for one time activities.

And that creates a buffer that helps protect ongoing programs if the Proposition 98 guarantee drops. It's not huge in the context of your total Proposition 98 package, but it is a powerful way to hedge against future drops and avoid backpedaling on ongoing programs. Important distinction here is that almost all of that cushion, in fact, four and a half point four out of the 4.5, is within the portion of Proposition 98 set aside for schools.

For the community colleges, almost all of the ongoing funding is dedicated to ongoing programs. The cushion is only about 127,000,000, and so they're a little bit more exposed to risks than schools are.

We think the Proposition 98, reserve is prudent. The 10,300,000,000 deposit is equivalent to about 10.3% of the total Proposition 98 guarantee. That's not huge, but it's indispensable if revenue drops and the state needs to stabilize programs, very quickly. So, we'd recommend you deposit at least as much into the reserve, as the governor proposes.

Turning to page 12, the plan before you wouldn't fully insulate schools and colleges from a severe drop, but it would probably allow the state to weather a few years of a mild revenue slowdown or perhaps the first year of something more severe.

The last time the fate state faced a really difficult tilt, revenue drop, was three years ago, and the fact that the previous budget had included a cushion and a buildup of the reserve balance meant that schools and community colleges came through that drop, better than most other parts of the state budget. State budget. Given some of the risks, we think you might wanna consider building even more budget resiliency, and we think you have at least two promising options to do that, in besides reserves. One could be giving districts an advanced payment toward their 27-28 allotments at the end of the coming fiscal year. This is essentially flipping the script on deferrals by giving districts their payments a month early.

And the next time the state needs savings, it could reverse that advanced payment rather than delaying cash payments from the current schedule. Another option could be to focus on pension costs. That would could mean setting aside funding to reduce pension liabilities and district contribution rates over time or to offset increases the next time, the systems, need to raise the contribution rates.

To the extent that you reject any of the Governor's proposals or you take our alternative approach to the settle up, you'd have one with one-time funding available, and both of those options would use funds in ways that protect ongoing programs, and make the budget more resilient. So, turning to page 13, I think our bottom line is that the May Revision is a reasonable starting point for your Proposition 98 plan.

There are many ways you can adjust and refine the exact amounts for most of these proposals, but the estimates of the guarantee seem reasonable, and there are some prudent features to build on that would protect your core programs and priorities. One final postscript turning to page 14. There are some notable differences between schools and community colleges in this budget. One, we already mentioned, state has a much larger cushion for schools, than the colleges.

But another one is that just in general, the state has more new spending proposals for schools and community colleges and, not just in absolute dollars, but in proportion to existing spending as well.

And that distinction really reflects a couple issues. The May Revision is setting aside a percentage for each segment, in 25-26, and 26-27 based on these historical percentages. And the pie, Proposition 98, is growing, so both segments are receiving more funding. But for the community colleges, a much larger share of that increase is absorbed by baseline cost and enrollment growth, leaving you less for new programs.

And that's really the opposite situation for schools where enrollment is falling and that's reducing costs and that's freeing up existing funding.

So, this is not a bad budget for the colleges, but compared to schools, they are in a little bit of a tighter position and they're more exposed to risk. That concludes our comments. Thank you.

Thank you. Thank you both. So, obviously, this is at the top of the agenda because it it has an impact on all of the proposals and everything we'll be discussing over the next day, perhaps day and a half, depending again on on the hearing today. So, there's gonna be probably a lot of interaction with with specifics on proposals, but I think it's an appropriate time for colleagues to to make questions about all of those things.

Let me start with the question that was that was posed in the agenda, assuming you all have had a chance to think about this: the 3,900,000,000 in settle up, which is lower than the 5.6 settle up in the Governor's proposal.

What was the reasoning for that number? What methodology was used by the administration to propose that number?

I don't, you know, I think similar to Governor's Budget, you know, there's no kind of single, like, formula we can point to, regarding the new sell off amount. But, you know, again, I think also similar to the Governor's Budget, after updating revenues, recalculating the guarantee, you know, I think we we see that new number as sort of a good updated estimate, you know, of the continued revenue volatility. Right?

Of course, reflecting the the improved outlook, but also kinda still still serving as that proactive measure, you know, against, you know, potential potential changes in the guarantee. Right?

Of course. So, you know, it's we've seen kind of big increases in the budget window, you know, understanding that that kind of volatility and and the risk to exist. I think this is this is kind of the new number that we are we are comfortable with to to sort of reflect that uncertainty.

What is the the 3,900,000,000 as a percentage of the - I'm trying to compare to past practice on settle up. How much - 3 point nine out of a 120, now updated number, of 127,000,000,000 in Prop 98 guarantee - how does that compare to the 25-26 settle up amount?

Do you mean - do you mean, like, the amount from the Governor's Budget?

In the current year, the adopted budget assumed, well, the Governor's Budget actually in January assumed a 121,000,000,000: what was he assumed in the budget? Do you do you recall? Do either of you recall? And then the current year for Prop 98?

In last year's budget, there was a $1,900,000,000 settle up, right, created, and that is still being paid off or paid back as part of this year's budget.

$1,900,000,000, but our Prop 98 as in our budget, we assumed a Prop 98 guarantee of how much for the current year?

In last year's budget? 24-25?

We had assumed that for last year, the 25-26, that was 121,400,000,000.

So, it's the Governor's Budget number?

I'm sorry. Excuse me: 114,600,000,000 in June 2025. Sorry.

114,600,000,000. And now we're at an assumed 127 point one or point two billion for the budget for the budget year and a three point - so, this is a doubling of the settlements amount. I really am trying to figure out the thinking: is it is that we think that it's that much more uncertain that our outlook would be doubling the amount of anticipated settlement settle up funds?

I mean, I think it does, you know, re-reflect, I think that continued uncertainty. Right? I think understanding sort of the significant changes that we've seen just within this budget window. Right? It's a $28,000,000,000 increase from just the the Budget Act last year, right.

That represents an increase, but I think it also points to just kind of a higher level of volatility than we were dealing with last year. So, I think that that's a lot probably reflects that. Okay.

And the the second question to me is related, although I understand why it's not. But the administration is proposing 10,300,000,000 in a rainy day fund for 98, of which only 8 point some of it is required. And there's an additional discretionary put in there. And so I'm trying to understand why the amount of discretionary was what it what it is and how all of this fits together to the uncertainty of potential future outlook for Prop 98.

And so, why the additional 1.6 and not, you know, an additional three or not adding the 1.6.

What's what's the reason behind that?

Well, that 1.6, I think more or less corresponds with a decrease, in the settle of amount. You know, I think, obviously, the improved revenue outlook, it, you know, it allowed us to reduce the settle up, but, you know, we're still looking at that uncertainty. So, I think we see, the increased discretionary deposit rate using that settle up to put and to bolster the reserve further.

It is is a measure that we can take to kinda sort of enhance the budget resilience that, you know, we've it's kind of been the theme rebuilding that from Governor's Budget, you know, in the May Revision.

To the LAO, do you have thoughts on that approach of making that number, that determination, in that way? What are your thoughts on the required versus the additional deposit there?

Yeah. There's nothing intrinsically special about 10,300,000,000 or any three per percent reserve. But I think that's a very good starting point, really managing the kind of volatility that the statement experienced next year. Probably, it would be more than that. I mean, a 10,300,000,000 that could be gone in a single bad year. But, we would urge you to think about the budget more of as a package than focusing on just one number.

So, you have all these tools that you can deploy for resiliency. You have the reserve, you have cushions, you have advanced payments, you have things you can do to help districts, discretionary grants, more or less cautious or optimistic assumptions that you can adopt. And the important feature would be that across all of those things, you've got something that you feel comfortable with, could address some of the downturn that's happening.

So, the more ongoing spending you commit to in this package, the more important it is to have a larger reserve that can protect that ongoing spending level.

This may be an unfair question to recall information from over fifteen years ago now, almost 20 now: what was the Prop 98 decline in the in the great recession? What was that number?

It was a close to 20% decline.

So, it was it was well over 15,000,000,000 at the time?

That's right. To give you the more recent example would be what happened in 22-23. The state had also close to a $10,000,000,000 reserve deposit at that time. And in a single bad year, all of that was taken out with a discretionary or required withdrawal, and the state still had to make some reductions to some one time grants.

Right. Let me move to the LAO's. Thank you for, you know, today's report, which you just presented. Obviously, there's much more to it. But in your final, page 13, sort of a couple bullets here, you're suggesting that we could consider adjustments to the May Revision ranging the size of the ongoing base increase.

Let me start with that: are you identifying what I think I'm identifying and it's not, you know, anything unique to me? I know others have talked about this. The Proposition 98 with declining enrollment and the LCFF, that decline is allowing for 98 to be used a lot more in non, I'll say, base LCFF funding, but for other purposes of 98. Is that what you're referring to?

Let's talk about that first: are you seeing that as a is that now a real - we can identify that as a trend and as an ongoing trend?

This has been I think this is reflecting the trend. The underlying trend is the decline in attendance, and that started, really probably five or six years ago, with all of the adjustments and some of the hold harmless mechanisms, state continue to fund districts at their pre-pandemic attendance levels for a while. And then I think more recently, it's been more about, well, how quickly are we going to update our LCFF estimates? And we have TK expansion and so a lot of moving pieces.

But I think what's happened now is that the states, with the latest data now finally able to close the books in some of that uncertainty, and we have a much better sense of what the ongoing cost of the LCFF is.

I think we would expect to see additional savings over time. Looking at some of the attendance numbers and the birth numbers recently, we have a better sense of who's coming into the system. TK has been fully expanded. We're in the midst of implementing the attendance recovery programs.

We wouldn't expect to see additional savings of the kind that we're see seeing right now on an ongoing basis, but the savings that are in the May Revision seem like they're permanent and there will be, at least, some additional savings over time from that declining enrollment.

So ,do you feel that the May revised proposal is more accurately reflecting what will be used on based on better data that's coming in what ADA will actually be for next year?

We do feel like that's the case. We've had some discussions. You know, I think sometimes we ask, well, did the LAO and Department of Finance talk to each other and can they get on the same page? And we've had a lot of discussions; I think, over the past year or so trying to make that happen. I think we feel like we've reached a place now where there's pretty broad agreement on what the numbers are and what they're going to look like.

Of course, there'll be a year from now, we'll still be talking about more adjustments, but I think they're going to be a lot smaller, moving forward than they were this year.

So then, we would like - while the the data is more more accurate and there's agreement and likely, again, less savings, doesn't that still create a delta in 98 for what LCFF is, given the current LCFF requirements in statute, including COLA and other things, and available in 98 for other programs?

Yes. Absolutely. If attendance - if school attendance, say, for example, we're following the same trajectory as the community college enrollment, which is growing, you wouldn't have the same capacity to adopt this much higher COLA and this big special education increase. A lot of that is is possible because of what's happening with attendance and these savings from lower lower costs over time.

Okay. We'll be talking a lot about declining enrollment and the impacts probably in the fall with some hearings, but this is important information. So, when you - to the LAO now getting to the specific bullet point of the ongoing base increase: are you suggesting that we could given this dynamic that's occurring? We could be looking at a base increase that is larger, or are you asking us to perhaps be more conservative?

Again, I think that was maybe more a comment about you have this trade off between what you wanna do in special education and the LCFF, And there's no one right mix of that. I think districts would tell you that both of those increases are helpful. Both of them provide broad increases across the board. Obviously, the LCFF is a little bit more weighted towards low income students, and English learners. But you have those kinds of choices to make and then obviously you have some other ongoing choices.

The big one is what you do with the Governor's community school's proposal, that 1,000,000,000 ongoing. If you don't adopt that proposal and we'd recommend it against that, then you have additional ongoing decisions to make about how you're gonna use that funding as well.

In your opinion, I don't get like a very clear direction: is your sense that the ongoing Prop 98 is appropriate? Is it conservative? Is it where does it fall on the spectrum?

I think we would say that the cushion, really the question is how much of the sort of ongoing proposition 98 needed in 26-27 is committed to ongoing purposes versus one time. And that cushion, that difference is about 4 and a half billion. And we would say on balance, that seems like a reasonable starting point. Obviously you could do a little bit more, a little bit less.

We wouldn't recommend, shrinking that cushion too much though, because if you don't have a couple billion in a cushion like that, then you're at much more risk for the possibility that things aren't quite as good as what the state is anticipating.

So, the overall mix of one time and ongoing, we think, is generally reasonable.

And we'll talk about the specifics of those one-time ongoing - it's own little category here in the policy proposals. But, you know, we hear often from school districts, you give us resources to do programs. We start up programs and the money goes away.

Overall, is there an assessment on what is being funded with those one-time ongoing and where that places districts to then if the money for some reason isn't there or there's a change in priorities with the new administration, what that does to those programs?

Yeah. We hear a lot of those things same things from districts as well. And I think there - I think districts will find I think what we've been hearing is that districts will find this very helpful for their budgets because the money is very focused on it's going to them in flexible ways and it goes into areas that directly address their cost pressure. The LCFF is how districts cover most of their pressures. Special education is the other big pot.

And so even though these increases aren't as large as say what the state was providing in in the 21-22 budget, they are very focused on the areas where districts are feeling the most pressure in their budgets.

So, you're - just to clarify, you're considering one-time ongoing things like the Discretionary Block Grant?

Well, the Discretionary Block Grant is another I guess that's just one-time and district could use that for any of their priorities. I think we've also heard, some districts have some ideas about how they would use that, things from updating curriculum, maybe addressing some infrastructure, challenges, training. In many cases, this governor has some very specific proposals for things that we think, well, maybe we should let districts use their one-time grants for those things if they're a priority.

The five point, the 5,000,000,000 is very large for a one-time grant. It wouldn't have to be that large necessarily, but we think it does make sense to at least include a Discretionary Block Grant, so that the state doesn't have to try to address all of the concerns that districts have.

They can use that money to fill in where they think it's most needed and helpful in their local budgets.

One last on TK-12, and then I wanna ask a couple on community college, not the policy discussion; we'll have that later. But on the paid family leave, what are the projections in terms of amounts that now are gonna be a requirement of locals to provide this leave?

And at least in budget, maybe vice presentation documents, it was mentioned that the COLA, the larger COLA now will cover that new requirement. What is the cost estimate from finance on what that is to well, first to TK to 12 to LEAs and then second to community colleges?

I have to defer to one of my colleagues to help with that.

And there's just the numbers. We'll talk about the policy later.

Hi there. Liz Mai with the Department of Finance. When we - when the the administration did our own estimates across TK through 12 and community colleges, it was a total of around $218,000,000. Obviously, there's a split. I don't have the exact split in front of me.

Is it roughly 11 to 89%?

Yeah. Yes.

Okay. And let me ask about now quickly on a community college front. Community college also had a block grant proposed in the January Budget, and there was no adjustments to that in the May revise. Is that correct?

I believe there were some adjustments, but I'll I'll defer to my colleagues who covers community colleges.

Mister, on page 16 of our handout, we have a comparison chart that walks through the community college differences.

Oh, very helpful.

So, the major differences for the colleges, and again, my colleagues will cover this later, but the major differences from January are really in what's going on with apportionments and the higher base increase for the students that are in funding formula. The other proposals haven't changed very much. I think Department of Finance could comment on that as well though.

Yes. Can you?

Phil Osborn, Department of Finance: the change to the student block grant in the May Revision is an upward revision of only about 607,000. So now the total is 100.6.

And and so why was the focus - is it just a matter of a function of of of total dollars? Why was the focus on the the COLA as opposed to other programs.

So, let me do my talking points here.

If I may, Mister Chair, just share an observation. I think this gets back to the earlier point about the state just not having as much funding available for the community college is as compared with schools. Simply aligning the community college increase with the school increase essentially absorbed all of the funding that was available, and so there just wasn't if you want colleges and schools to have the same increase, the same 4.31%, there just wasn't really much left over after that for other other augmentations.

And and because of the split: the eighty nine, eleven split?

Because of the split and because of the enrollment growth and the other, higher, SCFF costs as they're coming in.

Can can you remind me if the in I think it was before my time, so 20, maybe '22, '23, or '21, '22. There was a super cola at that time for '98. Was it a different cola amount for TK-12 than it was for community colleges? Have there has there ever been a different cola?

Yes. That hap that that's Okay. That certainly happens sometimes. A state often would say it's more common than not for the state to align the rates, but certainly there have been years where they've been different or they've been given out in different ways.

Okay. I appreciate all that. I'll turn it over now to my colleagues. I'll start with doctor Patel.

Thank you for your presentations today and our ability to do a little bit of a deep dive on prop 98. I do have a couple questions. One is based on conversations here. I just wanna go back, sorry, to last the previous cycles, 1,900,000,000 withholding. All of that ended up coming due and is now being settled up. Is that correct?

That's correct.

What what? I'm trying to understand the uncertainty landscape, and I think I've asked these kinds of questions before

Yeah.

In the previous budget cycle versus the current budget cycle, which prompted the increase in withholding proposed for this year, Still substantially larger in the May revise.

Yeah. I, you know, I I think I'd I'd go back to kind of one of my previous answers, kind of looking at the large increases that we're seeing. Right? It's still, right, that same uncertainty, that we've been dealing with, but now, you know, we've seen pretty significant increases, in the guarantee. Right? Understanding that fluctuation, right, could have a downside as well. So I think that maybe speaks a little to some of the increase from last year to this year in terms of the settle up.

Okay. So when we think about that landscape, there is a likelihood that all of that will come due the 3,900,000,000 now that's proposed in the May revise withholding may also come due in the following budget cycle. So if we're I'm I'm just trying to put my head around this. So sorry as I as you hear me think out loud my thought process. We are as as we're putting more into the rainy day fund because we're predicting a lot more uncertainty in out years.

And so we wanna make sure we have that cushion, Yet we're also having a substantial withholding. How are we going to make good on that deposit or that that allocation if it does come due if we don't have that money?

Well, I mean, that's a that's a sort of sidestep the question, but I do think there is a little a little bit of an unknown to that. It it it sort of depends on what kind of the outlook is next year. Right? There's it could it could be, Ray, of course, that, you know, the revenues increase. You know, the state, the legislature feels, able to pay off that full amount, whether it's 3,900,000,000, whether it's less, more.

Right? The revenues could go down. The settle up amount could decrease with that. Right? If the guarantee goes down, I think, ultimately, that's to say, right, it sort of depends on, I think, you know, what what the outlook is is next year. Right, it will it will, come from, you know, the the general fund side of the budget. But, you know, ultimately, I think the the the sort of the main intent is kind of to work within those restrictions on prop 98, right, where we can't lower the appropriations.

Yeah. I'm I'm I'm just trying to understand what would be the prudent approach. Yeah. Go ahead.

Yeah. So this will answer we'll lean in a little bit into the question you probably have more in the full budget budget committee. But, across the budget overall, the mayor vision does make some important progress on addressing the state structural deficit. I think in January, we've been talking about deficits exceed structural deficits of more than 20,000,000,000. I think the mayor vision now we're looking at more than 10,000,000,000.

So that's notable progress, but one of our concerns is exactly to your point, doctor Patel, that next year, we have this $10,000,000,000 structural deficit, and the state very likely will owe, some or maybe all or more than the 3,900,000,000 that's set aside. To give you some sense of just the range of uncertainty, I think we've looked at past experience.

And typically, for the current year revenue estimates, there's really the range of about if we throw out the very extreme cases, that typically falls within a range of about 4% of the state's estimate that that it has in May. So a 4% swing in revenue would translate into about a 3 and a half billion dollar up and up or down swing, compared with the proposition 98 estimates that are before you right now for '25 '26.

So the 3,900,000,000 is, that's still probably that's still a larger amount than what you would need if you just want to manage that uncertainty with this tool, but it is moving a lot closer.

And I and I appreciate that we are moving closer, but I am concerned that we're creating future obligations. And, you know, in the science world, two dots makes a line, and now we're creating a trend on using this as a budget maneuver instead of working to tighten our accounting practices a little bit better, which I would prefer us to.

And certainly, I would lean towards supporting the LAO's recommendation of getting tighter on those calculations and perhaps putting more in the rainy day fund or at least allocating it on the Prop 98 side so that we can make good on those promises to our LEAs. And and just, you know, I'm I'm just thinking out loud here trying to to get my head wrapped around these financing budgeting issues. I'm concerned that we don't have a better way of mitigating against this uncertainty.

And I feel as though that the better way to do that for now until we can get a better handle on what those uncertainties are and and what's gonna drive them to actually allocate it on the prop 98 side. So we have it there ready to go. Because in the last cycle, we thought there was all this uncertainty of 1,900,000,000 and we ended up needing to allocate it. So and then putting that aside for now, another question is the discretionary block grant.

If we take a look at that specifically, that is allocated based on on just per pupil.

It's a straight per pupil allocation.

That's right.

One time money. Have there been any thoughts around using the LCFF formula for allocating that?

So I guess what I would say for this specific block grant, right, the the intent you know, it's fully discretionary. The intent is to help LEAs to address rising costs. And I think that the administration really use that as, you know, like, truly a problem that is affecting all, LEAs statewide, you know, whether they have a high and duplicated account or low. And so I think given that intent, we see the the per ADA as the kind of the proportionally best way to allocate this.

Okay. Thank you for that clarification. I can certainly attest to all districts are facing some genuine challenges across the board and some of them in very unpredictable ways as we try to implement some of the policies that have come across on these desks over the last several years. Another question I have is looking at the special education dollars that have been allocated.

I wanna commend the governor's office for taking a serious look at the rising costs of delivering special education and making sure that our students have the resources that they need.

I do wanna voice a concern that that money, unless more specifically targeted, could easily just be distributed across the board to address other costs as well. As we know, coming from school board world, that money will end up just offsetting costs across the board.

Is there has there been any thought in looking at specific allocations such as, funding the extraordinary cost pool, the low incidence fund, supporting some of the special education programs that have been rolled out over the past few years, like the alternative pathway to graduation.

Hi there. Liz Mai with the Department of Finance. I do want to note that the increase in special education can only go towards special education costs. I think the main feedback we've been hearing over the years from, the field has been just, rising costs broadly in special education, especially with the increase in identification paired with the decline, in enrollment. And so I think that's why you see kind of this broader approach still targeted towards special education specifically, but for usage across the board.

Okay. Thank you. I I understand that that's how it works technically, but having seen how budgets work on this LEA side, sometimes different things happen. So any is there any interest in putting more money towards extraordinary cost pool specifically for the low incidence fund?

Definitely can't say anything right now, but happy to continue these conversations.

Thank you. Those are all my questions for now.

Thank you, doctor Patel. Mister Fong.

Thank you so much, mister chair, and good morning to all our panelists. Thank you so much. And I appreciate the context and efforts around the settle up. And I know it's a 3,900,000,000 now, but anything we continue to reduce, the revenue set all up is something that I wanna continue to uplift here. In terms of our community colleges, and the chair touched upon a number of this earlier.

We know that the Portman funding has gone up and there's a a robust call of 4.3%. And appreciate the student support block grant at 101 to 1,000,000,000. In terms of apprenticeship cost, I know this is an increase in three. Was there a thought on on that? The apprenticeship costs.

Can you, excuse me, can you repeat that?

Oh, yeah. Absolutely. Thank you so much. In terms of the one time activities, this is an increase of $3,000,000 in apprenticeships or with that. Can you explain a little more of that detailed line item?

Oh, sure. So a a portion of the additional 2,630,000 in the May revision is needed to backfill monies redirected in the 2024 budget act, where we specified a portion of the RSI would would be redirected to the twenty one, twenty two, and twenty two, twenty three budgets. So that kinda created a a need to back to backfill that now. The rest is to cover a shortfall in the current year. First proposed in the governor's budget.

The additional amount is the result of updated numbers since the release of the governor's budget. The we got updated figures of about an additional 778,000 additional apprenticeship hours.

Okay.

And at the current rate of $10.32, we we came up with a with a bad amount.

Great. Thank you so much for that context. Appreciate that. In terms of the credit for prior learning, appreciate the amounts there as well. And then in terms of the enrollment growth, I know we've had robust discussions around enrollment growth and, you know, a lot of community colleges are seeing a significant growth in terms of enrollment.

Some of our campuses are seeing double digit growth there. And to our chairs point, I know that there's a number of the funds have been allocated, but just wanna get some additional thoughts on what we can do around enrollment growth.

So we'd be happy to to continue to talk with the legislature regarding growth, and we've heard from various stakeholders as well of the importance. We chose the an approach for the to to fund with the additional amount with a cola because we wanted to provide a more flexible discretionary pot of money that would, help all of the community college districts and not just those experiencing growth. So that that was that's kind of the thought process why we didn't.

We held the growth to the same amount that was proposed in the governor's budget.

Appreciate the context there. Thank you. And then the final question out on the community college space is strong workforce funds. Is there any potential augmentation there and really see it in the budget proposal? So I wanted to just check-in on on the strong workforce funds or is that another item?

No. There's no there's no proposal at this time to increase the strong workforce funds.

Okay.

Beyond beyond, there's the proposal for 9,700,000 over three years for the specific adult learner demonstration project, which is part of the strong workforce schedule in the in the in that item.

Yes. Thank you for that context. Elio, do you have any thoughts on the strong workforce funds?

Nothing to add, but I think one of my colleagues can add any comments we have at the, later panel.

Okay. Thank you so much, mister chair.

Thank you. One clarifying question on the cola for community colleges. It was stated here that it's for all districts. Someone from the LAO's office had and I'll ask you all to confirm. I thought it was only applying to districts where there was growth identified.

Can you clarify that?

Lisa Qing with legislative analyst's office to confirm the question is which districts this super cola applies to

right.

The cola, including the additional amount of the statutory percentage would apply to any districts that are receiving their students entered funding formula generated amount as well as districts that are on stability. There is a separate set of districts that are receiving hold harmless funding. They do not have a cola applied to their funding level. Under their projections from the mayor vision. There are seven districts in that category.

Okay, so only 7 that are, They're largely are all declining enrollment. Is that the dynamic here?

Yes. These hold harmless districts are largely districts that currently have enrollment that has not yet recovered from pre pandemic levels. And so they are still, funded based on a different approach. Historically, they've been largely concentrated in the Bay Area. I will also mention that there is a separate group of districts that are basic aid districts.

So their apportionment level is driven by their local property tax rather than any cola that's applied.

What are the, I think you said stable districts or?

stability.

stability? Yeah. What what are what classifies the district is that?

So district would be instability if, it's typically driven by a decrease in their enrollment from the previous year. And so their funding is based on their previous years. Students centered funding formula calculated amount adjusted for cola. There are 8 districts in this category projected for 26/27. They would receive any cola to the state provides.

But they'd be using the prior year before the decline occurred.

That's right. Their funding would be based on

And what happens going forward? What would those districts stand if the decline continues? How are they classified?

In any given year, a district's, funding method is calculated as the highest of 3 options.

Sure.

Their student centered funding formula amount, their stability amount, or their hold harmless amount. And so if a district starts to experience recovery in enrollment, they could move out of those stability or hold harmless categories onto the student centered funding formula.

Okay. Alright. Thank you for clarifying that. Appreciate it. Do you have any other questions on this panel?

Okay. Thank you. We are going to get into the specifics of all these proposals and I'm sure there'll be more and we'll seen be seeing all of you at some point. So let's move on to transitioning well here to the California community colleges proposal and the May revise. We've talked a little bit about the super cola, which is where you see the bulk of the changes in the revision.

But we will have Department of Finance first prepare, present their proposal. Then the California Community Colleges will provide their feedback, and then we'll hear from the legislative analyst office. Welcome to all 3 of you. We'll start with the Department of Finance.

Phil Osborne, part of finance. This is a start off with a few higher level talking points about the mayor vision changes and proposals for the community colleges. To start off, the as mentioned earlier, the education rainy day fund has been withdrawn. And the community college amount of that withdrawal is 44,500,000. The mayor vision provides an ongoing increase of a $197,700,000 of prop 98 general fund to reflect a change in the SCFF cost of living adjustment from 2.1% to 4.31%.

Of this amount, 1.44% is discretionary and 2.87 is mandatory. This increases the total proposed cost of living SCFF adjustment in 26/27 to April. The May revision also requires community colleges to offer employees up to 14 weeks of paid pre pregnancy disability leave. A portion of the discretionary cost of living increase of 146,400,000 is intended to be used to reimburse new community college costs related to this new requirement.

The May revision includes an ongoing increase of a 122,800,000 prop 98 general fund as a result of decreased offsetting local property tax revenues.

And the mayor revision provides a 1 time increase of $9,700,000 of prop 98 general fund of what available for use over 3 years to support the adult learner demonstration project. This program provides comprehensive services to assist low income adult workers to help move them into stable and higher paying jobs. The program's operated by the nonprofit United Resources Center in partnership with the community colleges. And I'd mentioned this earlier part of the strong workforce program.

The 2024 budget act provide provided $5,000,000 for this 1 time, and this would continue that.

To reflect a change in the cost of living from 2.41% to 2.87%, the May revision includes an ongoing increase of 6,100,000 prop 98 general fund for select categorical programs, in the and the adult education program. This increases the total cost of living adjustment provided in 2026-27 to $36,700,000. The specific categorical programs include adult education, extended opportunity programs and services, the disabled student programs and services, the apprenticeship programs, CalWORKs student services, mandates block grant, and campus childcare support.

The mayor vision includes an ongoing increase of $2,000,000 of Prop 98 general fund to maintain the governor's budget proposal to fund ..5% enrollment growth in 2627. This increases the total amount provided to support the .5% enrollment growth to 33,900,000.

The May revision also maintains the governor's budget addition of 1% ongoing growth beginning in 25/26 that then cascades into 26/27. The 1% ongoing growth equates to 55,300,000. May revision includes a one time increase of $607,000, in Prop 98 general fund to increase the student support block grant, which is flex which is a flexible block grant community colleges can use for various purposes, such as supporting students' basic needs and counseling services. This increases the total amount in 26/27 to 100,600,000.

As a side note, 60,000,000 of 1 time Prop 98 was previously provided in last year's budget.

May revision maintains the governor's proposals for 1 time and ongoing, prop 98 for various programs and purposes. This includes a 120,700,000 1 time, deferred maintenance grant, a $41,000,000 of which $5,000,000 is ongoing for the common cloud data platform, 38,100,000 ongoing for Calbright College, 37,000,000 of which 2,000,000 is ongoing for continued support of the credit for prior learning initiative.

The May revision also maintains the governor's proposal to provide a 1 time increase of 736,900,000 proposition 2 bonds to finance 10 new projects and 29 continuing projects at the community colleges. The May revision adds some reappropriations for certain design phases of some of these projects. And that's what I have.

And I happy to answer any questions.

Thank you. We will hear next from the community college.

Good morning. Imran Majid, director of fiscal advocacy for the California Community College's chancellor's office. I wanna first begin by thanking the governor's administration for maintaining the core investments included in the January proposal that will advance our vision 2030 priorities. This includes credit for prior learning, common cloud, deferred maintenance, dual enrollment and the student support block grant. We view these proposals as essential for expanding career and workforce opportunities for our working learners and adult students.

In terms of the specific May revise investments, we certainly appreciate the administration's proposal on unpaid pregnancy disability leave by providing flexible resource tied to the implementation of this policy. For context, about 55% of our faculty and classified staff identified as women. So this really is not just a gender equity issue, but a workforce recruitment and retention strategy, especially in light of declining birth rates across the state. We also appreciate the May revise proposal on the adult learners demonstration project.

Just taking a quick moment of personal privilege.

You know, when I think about this program and this pilot, I do think about people like my mom who has been in her in home supportive services worker for most of her adult life, but yet to this day still cannot read or write in English.

And so this pilot is really about ensuring our home care and childcare workers who are predominantly women of color and low income understand that, yes, college is for them through the flexible scheduling, stackable pathways, work based learning, and wrap around supports that this pilot provides. As was discussed earlier in the spring and has already been discussed, our community colleges continue to face significant needs around enrollment growth. Our college CEOs never wanna be in the position where they have to ration access.

So while we originally requested funding to support 3% enrollment growth across 25/26 and 26/27 with 2.5% attributable to 25/26 and .5% attributable to 26/27.

Our latest data and enrollment projections show that the system does have a need of 3.5% enrollment growth, across both years with 3% attributed to 25/26, and .5% attributable to 26/27. So we would ask you consider funding for 3.5% instead of 3%, and we could provide some updated numbers on what that would look like.

But, essentially, we would the 3%, normal growth in 25/26, and a .5% in 26/27, we estimate would cost the state about $221,000,000. The main revised for context provides about 89,200,000. So this would mean investing approximately 132,100,000 across both years.

Again, as was discussed earlier in the spring, we also have an outstanding request, to fund 2 policy proposals, one of which is to allow credit FTEs to be calculated using the higher of the 3 year average or the amount in the current year starting in 25/26. We estimate that proposal would now cost about 97,100,000 over 3 years. We would also ask the legislator and administration to consider eliminating the 10% cap on funded FTES growth starting in 2526. This will carry a cost of about 38,000,000.

So altogether between the, you know, the 2 policy changes as well as the increase in enrollment growth would cost about 357,200,000.

Of that, 89,200,000 was provided at May revise. So, essentially, we are asking for about $268,000,000 more to fund all 3 components. And I'm happy to repeat those numbers again once we get to q and a. I know that was a lot. Lastly, we also just continue to elevate the need for a cost of living adjustment for the student equity and achievement program.

Again, this supports high impact but labor intensive student services, whether that be counseling, tutoring, basic needs supports, and targeted outreach, specifically, again, targeted towards the students who have not had equitable access to higher education. And so we would ask for an aggregate cost of living adjustment of about 11.6%, which goes back to the last funding increase, and that would cost the state about $62,300,000. And with that, we are happy to answer any questions. Thank you.

Thank you. We'll hear from the legislative analyst office next.

Good morning again. Lisa Qing with the LAO. If you turn to page 6 of your agenda, you'll see a chart that compares the governor's spending proposals for the community colleges at the May revision versus the governor's budget in January. The last column of this chart shows the additional spending that's added in May. Of the 218,000,000 in additional spending added in May, vast majority of it, 205,000,000, is on the ongoing side, so the top half of the table.

So I'll begin my comments there. Among the ongoing proposals, we recommend prioritizing first funding the increase in the statutory cola from 2.41% in January to 2.87% in May. This additional $51,000,000 would help districts keep up with increases in their core operating costs while providing them with some flexibility to address local conditions. Beyond funding the increase in the statutory cola, we think the legislature has several reasonable options for additional ongoing funding at the community colleges.

1 of those options is to provide an increase above the statutory cola as the mayor revision does.

Another option is to redirect a portion of those funds to support additional enrollment growth as the chancellor's office is requesting. There is a case for supporting additional enrollment growth beginning in 2026/27 because we're seeing that more than half of districts are already above their current year enrollment growth targets. And as we discussed in earlier hearing the spring, there are a number of factors that could contribute to additional enrollment pressure beginning in 2026/27.

You could also consider using some ongoing funding to provide a cola for additional categorical programs, such as the student equity and achievement program. And finally, you could consider using some ongoing funding for 1 time purposes, such as the student support block grant mentioned in the previous item. If you were to do this, it

would increase the size of the 1 time cushion that my colleague can coupon was discussing, which is somewhat smaller in the community college budget and in the K-12 budget for 2026/27. Regarding 1 time spending proposals in the mirror vision. There is just 1 major new proposal, and that is the proposed 9,700,000 for the adult learner demonstration project.

We recommend rejecting these funds simply because districts in our view already have a number of incentives and funding sources to support the types of activities that would be provided under this pilot. Finally I'll conclude just a quick note on a portion of costs.

We are seeing that at the mayor vision, the estimate of just baseline apportionment costs is up 52,000,000 relative to the January budget. The mayor vision does not include an adjustment for this higher cost. And so we would recommend, including that 52,000,000 and 1 time for 2025/26 to cover current year apportionments costs coming in higher than projected in January. Looking ahead to 2026/27.

We do also think that there is a chance that portion of costs for the budget year could come in somewhat higher than projected under the mayor vision. Thank you, and I'd be happy to take any questions.

Thank you. Let me start with that last point, which I had not been as focused on, that the LAO just made, the apportionment costs you calculated as $52,000,000 if we were accurately reflecting data from new data? What is this information of this number based off of which information?

Yeah. So the 52,000,000 I cited is related to current near apportionment costs for 2025/26. Under the mayor revision, the administration working with the chancellor's office has developed an updated estimate of current near apportionment costs reflecting the most recent data they have received from districts. And that estimate is $52,000,000 higher than it was at the governor's budget. And so we are recommending building an additional 52,000,000 for that increase in current year costs.

Is that. How does that work on an ongoing basis? I mean, obviously, with future enrollment change that number?

So the way that the backup for the mirror vision works, any adjustments, any new data that is, feeding into the current year estimates is the new baseline for budget year estimates. And so the budget year estimates under the mayor vision actually already reflect the data update. It's just that the mayor vision doesn't include the 1 time adjustment in the current year for that additional cost. Okay.

Why was that not included in May revise?

Yeah. As noted by the LAO, there is that $52,000,000 pushment shortfall. We became aware of this late in the process and we're not able to incorporate it into the May

Okay.

Review. We're looking at options right now to close the gap include, including looking at additional unspent funding in the current year. We're happy to work with the legislature to address it as we move forward towards finalizing the budget.

Okay. Appreciate that clarification. The does the community chancellor's office have any other comments on that?

Executive Vice Chancellor of finance and strategic initiatives, Chris Ferguson. No. We would agree with the 52,000,000 that is based on our estimate and our model. We would also agree that that is built into the budget year and funded in the budget year moving forward. The net result, if that isn't funded, is a deficit factor on our entitlements or SCFF entitlements to districts, so student centered funding formula.

And what that means is the funds that they thought they would receive, they'll receive slightly less. And that deficit factor applies across the board. So even, you know, a hold harmless district would see slightly less as a result.

K. Certainly sounds something we should address before finalizing this. The let me ask about the adult learner demonstration project. This sounds a lot like a what I thought was a previous pilot program. The biggest the the most description I've received of it is just now, where it'd be focused among, it sounds like, in home supportive services workers.

Wasn't there another program happening just a couple years ago in this space?

Yes. So for context, the 24/25 budget act included $5,000,000 for this initial pilot. I believe the current pilot that was funded is scheduled to run out in November 2026. And so the funding provided by the administration is intended to ensure that it continues while also scaling it up across the state.

And so as I sort of mentioned in my comments, this pilot is really about, addressing some of the persistent, you know, higher education and workforce equity gaps that exist among low income working adults who have been traditionally underserved.

And so this is really about a partnership that we have with the United Domestic Workers to create that pathway to an accessible pathway to higher education where they are receiving targeted services such as, you know, childcare staff stipends, transportation, food assistance, technology support on a case management basis. And so, you know, this investment that's being proposed by the administration, as I sort of mentioned, is intended to scale it up.

Right now, it is only limited to about 20 community colleges across 5 counties, and those counties are those kinds are predominantly located in Southern California. And so this is really about bringing it more to the central and northern parts of the state. There are some, you know, outcomes that I can report on in the sense that, as of right now, about 1,100 students are enrolled in the pilot, and about 66 students have completed some of the initial programming and earned certificates.

But happy to speak more to that if you have any additional questions.

I'd be interested in the ongoing data analysis on this is now being called a demonstration project. So I'm assuming it's still previous 1 was a pilot. This is demonstration. Love to better understand how we're identifying the outcomes of students that are participating in this more robustly if that's not the case already in final budget. So we can talk about that at that time.

To the chancellor's office on the proposals for, growth over 2 years, the 10% cap. I captured, those 2 specifically. I got the total that you mentioned. Just curious how you and then so then there's this new mandate that is the, paid family leave, which doing rough math from the earlier response, we're talking somewhere in the magnitude of, like, $25,000,000 is your anticipated cost to this. Have you is that what your number you're working with?

Yeah. We don't have a specific number in our office, but that's consistent with the general range that we think this would be in, which is in the tens of millions in terms of cost. And the reason that we won't have and don't have a specific estimate is it varies depending upon who would qualify in districts. So each district will be in a slightly different position.

It will vary depending upon where districts are starting today in terms of what they provide their staff, as well as do they, you know, participate in, like, state disability insurance or other alternatives?

Yeah. And I think we'll talk about the policy, and I just caught myself also thinking about asking the follow-up question. But numbers wise, I think it's 25,000,000 cost as an assumed number from finance. Is that correct?

Anita Lee with the Department of Finance. Yeah. Our estimates are, you know, between 20 to 25,000,000.

Okay. So you're getting additional COLA. The cola required is now 2.87. You're getting 1.44 additional percent, which totals about 146,000,000. And so $146. 25 of that will be obviously pertaining to the paid family leave roughly, leaving you with an additional about a 120 there.

What is the thinking behind this additional cola and utilizing it for any of these needs that still exist, whether it's a growth, the cap? And then there was a third item you mentioned that I did not notate, that you're also seeking additional support for. What was the third item? Yeah.

It's removing the 10% cap as well as the greater of the 3 year average.

3 year average. Okay. Thank you.

And we would just note on the greater of the 3 year or current year, if you were to start that in the budget year instead of the current year, the cost would be around 38,000,000 instead of, you know, 90 plus million. With that, I think from our perspective, you know, flexible resources to our colleges are always a positive because it enables them to, you know, determine how to best allocate those resources.

That said, when it is provided as a cost of living adjustment, that is a negotiated collect or a negotiated issue with their local labor unions in terms of how that is deployed. You know, some districts will use a bucket system where they predetermine how it will be allocated. Others, you know, use traditional splits in discussions with their staff.

But at the end of the day, you know, it becomes a question of do you increase or increase the per unit cost using a COLA, or does it spread to having additional staff? And that would be a local decision if it's flexible. They might be able to do that. They might choose to do something different. But at the end of the day, you know, certainly, we're supportive of flexible resources.

We're supportive of additional funding for growth. And I think on the growth side, we would just advise the legislature to really focus on what happens when growth is not funded, but shows up on campuses, which is districts begin to right size their promo programming in terms of the number of core sections that are offered, which really gets back to what we saw in the Great Recession, which was, a restriction of access. Right?

Students aren't able to get all of the core sections they need to complete timely. Some students may stop out.

That's the net if there's unfunded growth in our system. Districts can't afford to sustain, long term. So that there's that trade off. Maybe someone would use the flexible resources of the 1.44% to sustain, but that would be subject to a local discussion. Whereas if it were in growth, it's very the choice at the district level is very clear.

It's core sections and staffing to support.

Okay. Thank you. I'll turn it over now to Mister Fong.

Thank you so much, Mister Chair. Thank you to all our panelists here. And to follow-up on the Chair's comments and questions around enrollment growth, you might have said this already as well, but to the chancellor's office. What is that number then that we're looking at in terms of making sure that we continue to incentivize and and find a growth. I know the prior meetings we had discussed upon that as well, but just really wanna get a much clearer understanding as to what that is.

I know that community colleges in my area around in East LA College, Pasadena College, Rio Hondo, Massa Antonecala. A lot of them have experienced a significant growth, and we hear that across the state as well through the numbers. But wanted to get the chancellor's office thoughts on what those

Yeah. I think overall, we are definitely seeing, you know, even compared to where we were in February and March, you know, based just on the latest projections that we have with because colleges are beginning to report their normal information, you know, starting this month. And so, essentially, you know, we had originally asked, the legislator and administration to consider funding two and a half percent enrollment growth in the current year, and now we are asking, for a 3%. So, essentially, going up by another half percent.

And so that would essentially cost about 221,300,000 ongoing.

And of so for context, 89,200,000 was provided at the May revise for the 1% enrollment growth. It was funded originally at 87,200,000 in governor's budget, and that increased 89,200,000 based on updated cola information. And so if you take the difference, essentially, we are asking for about a 132,100,000 for the 3.5% total.

And thank you for that context. So the 132,000,000 for the 3.5% Yeah. Enrollment growth would effectively help our community college campuses. I know the vice chancellor mentioned as well. We wanna continue to try to expand access versus restricting any types of programming on our campuses.

So I really appreciate all the context of the immigrant growth numbers and really get in the specific numbers there. So thank you for that context. And then secondly, on the adult learner demonstration project, I know you mentioned 1,100 students are going through the program now. Appreciate the $10,000,000 that I looked at for this to support this program. In terms of the scalability, well, with the additional 10,000,000, how many more community colleges can be served, with this program?

Yeah. That's a great question. I think we are looking for trying to find the data point, but, essentially looking to see if we can scale it up to about, additional 12,000 students. And so this would, again, as I sort of mentioned, expand the program throughout the state with the goal of ensuring that there's more representation from Central California, Northern California.

And we think, again, it's really consistent with the state's goals to ensure that we are reaching out that to that population who who may have not considered acts college in the past, who may have some college but no degree, really ensuring that we're bringing college directly to them.

Absolutely. I know you mentioned it earlier with EDW is initial. I think it's a 5 month dollar program that was funded a couple years ago and just really see the growth of that. And I just support services and everything is so critical. And so it's a really good value proposition for our state and really providing these opportunities for our adult learners.

And thank you for the context that will help provide additional opportunities for 12,000 additional students across the state, especially in Central And Northern California. So definitely throughout the state. Appreciate the context on the Roma growth numbers and appreciate all the updates there. Thank you so much, Mister Chair.

Thank you. We'll go on with Dr. Patel.

So I'm hearing loud and clear that there are concerns around funding growth, and we wanna make sure that we fund the growth. My experience, at the school board level, taught me that there are multiple funding options for our LEAs. Right? We have the rolling 3 year average. We have the current ADA or we have our growth opportunity.

Has there been any conversation around having something similar for our community colleges to the SCFF? So that there's a whole hold harmless for those that are declining, but that for those that are experiencing growth, that just gets baked into the formula.

Yeah. Historically, the colleges have thought about this and we our office has thought about this as well. But I think the core distinction there is a continuous appropriation versus not. So the LCFF on the K12 side is continuously appropriated. So their entitlement program is designed what for whatever case load comes in, that's ultimately what the formula would say would need to be funded and is funded.

Ours is subject to the budget act, and it has constrained growth levels. So effectively, without a continuous appropriation, it's whatever the state has funded for growth is the maximum level, and that's where it effectively gets capped. There are, you know, relatively minor exceptions in that, you know, we have some ability to grow back if you decline. You know, you have 3 years to get back to where you were at. It's called restoration.

And then, you know, we do have in our formula a protection that's a little greater than what's in the LCFF, and that is that absolute hold harmless level where districts have absolute certainty from 1 year to the next. Those districts will tell you that it's not optimal to be at that hold harmless level because, you know, prices and challenges, fiscally, increase every year. But, the LCFF does not have that same, level of protection.

Their hold harmless is on a per unit basis, so it still adjusts with case load. And it effectively has no impact at this point.

But, you know, certainly, we appreciate the case load. We appreciate the understanding. But from our perspective, it's about serving students, empowering the economy, seeing that economic mobility. You know, the hope being that long term, the better we can do by our students, the better higher education education can do by our students, the more economic vitality we see in California and the more revenues we see as as a response. So we'll do the best that we can with the resources that are available.

But the the funding structure, the entitlement structure is a bit different. And the 52,000,000 is an example of that because we're at a fixed budget level, a fixed appropriation level. If there is an increase, it does take an action of the state or the legislature in conjunction with the governor to fund it.

Okay. Thank you for that detailed explanation. Appreciate it. That's all I have.

Thank you, Dr. Patel. Great. I mean, it's a great question as we maybe we'll we'll table it for our, enrollment conversation overall, but this dynamic that's happening, with our TK-12 school districts and with community college different districts in terms of where there's growth, where there's decline, and how we respond to those 2 very specific needs, which are it's not based on the realities that they're living and that we are facing with our budget decisions.

So I think that's thank you for asking that because we probably need to visit that in-depth. Okay.

Any questions? The only question I have is Calbright College remains at the same amount. One of the questions we asked I asked specifically was about how many students are you enrolling? They had a very difficult time, if you all recall answering that very basic question. How many students are being served?

Do we now have a number for that?

Yeah. They're currently serving roughly 7,000 students, and the projection that they estimated for next year would be 8,500.

K. 8500 with a in appropriations of, 30. Is that an FTE calculation or is that a student body?

I believe that's a head count.

Head count. What's the FTE equivalent?

They because of their their program structure, that's a a difficult question to respond to because they don't have the traditional hour base in the same way that our other programs do.

How many students in the community college system?

K.

There are roughly 2,200,000 head count over 2,200,000 head count, and that results in roughly 1,100,000 to 1,200,000 FTES.

So it's about 50% on average.

I'm doing the rough calculation. 2,000,000 head count with a total community college budget of 1,400,000,000?

Yeah. So in terms of budget sorry. So the conversion was 2,200,000 headcount to 1,100,000 FTES. We have a generally our headcount is about 50% of FTES.

Right.

And then, you know, just in terms of total SCFF resources that flow to the colleges today, it's about 10,200,000,000 to 10,300,000,000 projected. So on average, that would be on a per FPS basis, you're looking at probably 9,000-10,000, you know, across all sources.

I'll ask the panel to please come forward. The Department of Finance will present the May revision proposal and specifically on implementing the workforce Pell provisions of HR 1, which we have discussed quite at length and the impacts that is having on all sorts of things in California and I'm assuming in other states.

Okay, alright. Thank you. Appreciate all of you on this. Obviously, some questions still there. Love to hear more as we go forward on the questions that we all share. Let's now move on to issue number three, which is the student Aid Commission.

Then we'll hear from doctor Daisy Gonzalez from the commission and then Natalie Gonzalez from the legislative analyst office. Let's kick it off with the Department of Finance.

Good morning, Chair Alvarez and members, Jennifer Louie with the Department of Finance. I will be providing an overview of the May revision proposal on California's implementation of The Federal Workforce Pell Program. The May revision provides $664,000 one time General fund in '26-'27 to support the California Student Aid Commission for state activities to implement and participate in the Federal Workforce Pell Program, such as determining program eligibility for Workforce Pell.

Accompanying this appropriation is a $1,300,000 one time general fund in '26-'27 for the government operations agency office of Cradle to Career data system to establish new workforce and earnings data languages to implement the Federal Workforce Help Program.

The funding for both CSAC and Cradle to Career is contingent upon the Department of Finance's review and approval of an expenditure plan specifying how they plan to use the funding.

This provides them with flexibility to adapt as additional federal and other guidance subsequently become available. They may revision also request statutory changes to support the state's implementation of the federal workforce as part of the workforce program as outlined in HR 1.

And this will make Pell Grant funds available to eligible students specifically for short term workforce training programs. This concludes my presentation. I'm available to answer your questions along with my colleague, Anita Lee. Thank you.

Thank you. Doctor. Gonzalez.

Good morning, Chair Alvarez. Good morning, committee members and distinguished staff. Doctor Gonzales, California Student Aid Commission. We are extremely optimistic about the implementation of workforce Pell because of California students. It represents 10 years of advocacy at the federal level to ensure that students, like the proposal that you just heard about with UDW for adult learners, could actually qualify for financial aid in the state of California.

However, it is an extremely complex program. It has not existed before anywhere else. It seeks to serve short term programs that are 8-15 weeks maximum. Our state currently does not have an infrastructure like this. It's also very important that acquiring the data that it would take to implement requires extreme partnerships with local institutions, particularly for those really small programs and more importantly for rural communities that may not have that infrastructure as well.

So, while it is a historic opportunity for California and we need extreme partnerships, I'm also here to tell you that because federal regulations just were released yesterday, there's a lot of opportunity for growth. As currently proposed, the trailer bill language has not really addressed what it would need for the California Student Aid Commission to fully implement.

Despite that, we're extremely optimistic because we need to create both the federal audit processes, all of the investigation guardrails, the regulations to help a program in each student go through the entire process, and then build the guardrails to ensure that students don't face disruption or any loss of aid. Workforce Pell will operate as a last dollar in program. That means all other aid has to be calculated before you can be eligible for Workforce Pell.

So, both our institutions and the California Student Aid Commission will have to be extremely vigilant to prevent additional federal audits or appeals and even litigation. I'm also really excited about AB 1543 IRWIN. It gives us the runway that we need to be able to address some of the implementation challenges that may come our way.

And lastly, while it is an extremely complex program, we're very optimistic about the barriers, the resource deficiencies, and centering our students as a part of this solution for California in the coming days. And so, I ask you as a committee to consider how we might get there.

And lastly, I'll just close-up by saying, you're asking the commission to do 11 brand new tasks. An IPA alone for the middle class scholarship took 9 months to negotiate across all segments in the state of California. Workforce Pell will need to align to new federal regulations, which requires every institution regardless of whether it's private or public to be able to be eligible, and it has to follow federal regulations.

And we simply cannot do that with one time funding. We're excited to be of service. We're excited to build a transparent system, build on the on ramps, the accountability, the regional equity, and so I thank you for your time today.

Thank you. We'll hear from the LAO next.

Good morning, chair Alvarez and members. Natalie Gonzalez with the LAO. As mentioned, workforce Pell grants are federal grants that will offer financially to students in short term career focused training programs. This program expands upon the current Pell Grant program, but has some key differences. The most notable difference is that the Federal Government has made it the responsibility of states to approve if a program is eligible for workforce Pell Grants.

As a result, states must establish processes for approving programs based on the federal requirements. The trailer bill language sets forth these processes. CSAC in consultation with other departments will be the authorized state entity to approve programs. Given the state has not implemented this type of program before, many state entities are involved. And as mentioned, federal rules are now just being finalized.

We encourage that the legislature be careful in developing the associated trailer bill language to ensure that the processes set in place are efficient, reasonable, and clear for all the involved parties. We'd be glad to work with legislative and department staff over the next few weeks or months as they finalize this language.

Additionally, the administration provides CSAC with $664,000 in one time funding in '26 '27 to implement the workforce Pell Grant program, and the administration also provides cradle to career with $1,300,000 in one time funding to implement the program. Though some one time funding will be needed for initial implementation costs, the amounts remain uncertain. Ideally, the legislature would have this information available before it was asked to appropriate associated funding.

Finally, we wanted to note that there will be ongoing costs to administer this program. The administration has not provided ongoing funding for those costs, nor has the Federal Government yet clarified whether federal funding will be forthcoming to states for administering this new federal program. Thank you. I'm happy to take any questions at the appropriate time.

Thank you all. Let's start, with the questions that were opposed here, for the Department of Finance. And then if CSAC would like to add anything, welcome to do so. What is the latest on the implementation of workforce power? Generally speaking.

Anita Lee with the Department of Finance. As I think you heard the LAO and also CSAC reference, we had final rules get issued yesterday, which is a little bit earlier than expected. We had originally been told, sort of more towards the end of the summer. It's a pretty hefty kind of rules package.

And so I think the administration, as well as others that are involved, are still in the process of reviewing what those final rules will look like, and determining to what extent the trailer bill language, for example, will need to be adjusted to account for that.

The program itself technically goes into effect in early July at sort of the federal level. And so that's just kind of an overview, and hopefully that addresses your question.

So then your hope is that we implement this through trailer bills so that it could be up and running by July 1?

So yeah, the administration's proposal has two components. There's one time funding as well as the trailer bill. The unifying theme under both of those is that we're really focused on those key activities that are necessary in the short run to get the program up and running. So we have that ability to sort of move forward.

That there is a recognition that there is additional federal guidance, the state has to figure out additional processes, etcetera. And so we're providing one time funding to basically get things going.

I just wanna be very clear from the administration's perspective, we do acknowledge that some level of ongoing funding is likely going to be needed. We just don't know what that looks like at this moment. And so we do think that our approach is kind of a prudent approach where we're providing some money.

There is budget bill language that provides both CSAC and C2C with a little bit of flexibility. They do have to provide, the Department of Finance with the spending plan, so we will know what they plan to do with it. But it gives them a little bit of flexibility so they can adapt as these new guidelines, come down.

K. And to CSAC, what are you, hoping that this one time $664,000, hearing that there's an acknowledgment that they'll be ongoing, but that this $664,000 will do to get this up and running. What is the plan?

First let me just state, we will not be up and running on July 1. We will not. And that is simply because the regulations just came out yesterday, and the existing data infrastructure does not exist in the state of California. We also need to align any program eligibility to California's short term workforce needs, and that is already a partnership with institutions with every single segment, hopefully workforce boards.

However, the $664,000 emergency regulations. The commission is not a state agency. It is a nonpartisan commission created to administer aid in the state of California, and it needs authority, for example, to do hiring. So the $664,000 would likely be all contractors. It's also really important that I acknowledge that emergency regulations take roughly 90 days.

And that is because when the commission begins its work, it must then go through a robust process, a public process. We've not been exempted from that. It's a forty five day window just to be able to disclose what those regulations would be. We also know that in partnership with c two c and segments, we will need to create the external facing and the internal facing web grant changes. So these are IT changes.

When a student logs in and they say, I'm enrolled here, and especially because it's a last dollar in program, the institution will need outward facing information and then the student will need to disclose.

Right now in regulations, every single dollar for example, last year, this body, the legislature adopted a recalculation amount of $300. So if a student, for example, gets a basic needs scholarship, an emergency grant just to not sleep in the street, we wouldn't need to recalculate their middle class scholarship.

But in this case, for workforce pill, you would. And that creates a lot of complexities. Our website system will have to take that into account for students and for the institutions as well.

Okay. I'm assuming finance has heard this feedback since you have been talking to stakeholders?

We have heard feedback from the impacted departments. The impacted departments have been having conversations with stakeholders. So that's certainly something that we've considered. We acknowledge that ongoing work is still required especially, for example, with the release of the roles.

The administration's proposal focuses on, in those initial steps, building on the existing data infrastructure that we have, and kind of focusing on that, getting it kind of right, kind of lessons learned on that side, and then leaving room for conversations where we need to fill in potentially the details in terms of how to handle other, for example, the private institutions, etcetera.

And so I think that is where, as laid out in your agenda and then also as brought up in comments, there is 8054 the policy bill that kind of complements. It's there as an option to the extent that we need additional changes, etcetera. So that's kind of how the trailer bill also kind of fits in.

But just to make sure we are all with set expectations that are appropriate, you've heard from who you who we expect to implement this, which is CSAC, that this is not an endeavor that's gonna happen on July 1. And it sounds like with the existing process and the proposed process of public review of regulations and all that, we're talking about months at best, potentially longer.

Yes. So those are some of the uncertainties that we're thinking of. So when I referenced the program being available in July, it's available at the federal level. It's absolutely fair that at the state level, it may not be available.

K.

And as part of the proposed trailer bill language in terms of hearing the concerns, there is, provisions in the proposed trailer bill related to emergency regulations, how long those can stay into effect, etcetera. And so we are listening, and we are hearing, and we are incorporating them, into the language. And we look forward to having continued conversations as we move towards finalizing the budget.

What are other states doing in this regard to try to be ready to go July 1?

We haven't done a comprehensive review of all states. I would say that our understanding is that a number of states are also in a similar situation where they are trying to figure out how exactly to implement the program in their states. I think it looks a little bit different. Just, you know, as a very key example. California doesn't look like Iowa.

It doesn't, you know, there are just some key differences, related to that. We are aware of, for example, Iowa, having launched their workforce pal or starting their workforce pal process this month. We don't have a lot of details, but we're just aware that that has has rolled out. We're certainly paying attention to what other states are doing to see if there are lessons learned that we can use in our process.

Do we have, your feedback on this question?

Yeah. I would just add, there are 3 other states that have taken action. In fact, Georgia, Kansas, and Oregon have already passed legislation to build their systems and they did that several months ago. There are 6 other states who are also in the process of their own legislation currently as we speak and now that the regulations have been published. And a part of their 2 things that we have noticed that really stand out, especially for the last 6 who have not adopted any legislation.

One, they are requiring a report to their legislature as a part of the first year of implementation because every single state expects some level of challenge as they're implementing. And two, as they are doing this, while while a governor in the state has been provided the authority to really micro target workforce needs to a program, it cannot exclude institutions by institution type. And so that is currently one of the, things and challenges for California. However, the six states have been incredibly, unique in their solutions.

While not excluding institutions, they have publicly in their legislation said, these are the five basic needs for this state and therefore, we're going to prioritize in our phased in approach these types of workforce areas.

I wanted to just bring up, so what does this actually look like on the ground for a student? What you're really talking about is energizing the community at the lowest denominator for some of the biggest workforce gaps in California. You're talking about a 15 week course for basic firefighters. That's the entry point. That is a short term program here in the state of California.

An 8 week fundamentals of dental assisting. You also have a 13 weeks automotive engineer repair. Those are short term programs in our state. And one more example for you, a 9.5 week certified nurses assistant course. Though they're all courses in California, and they're similar phased in approaches that other states have also taken into consideration.

K. Is any of that included the reporting mechanisms to the legislature and don't wanna discuss the bill, but 1534? That's just a yes or no.

I think1534, it has a lot of the guardrails that you would need to protect students and to be able to get what you need from institution.

Yeah. I would just make a comment before I go on to the next question. I'd love to, at the minimum, be included in communications with stakeholders on this as a chair of an appropriate committee related to this matter.

I don't know if mister Fong is included or not as a policy chair, but they think it'd be appropriate that at the minimum, the two of us be informed of what's happening, and get updated. So I'll just make that comment now. Is the Cradle to Career are they here?

Is anyone here from cradle to career? K. We can come forward, please, because you are a recipient of some funds. I'm trying to understand your role in this in this endeavor. If you could please provide testimony as to what you see your role in this very important process.

Thank you. Mary Ann Bates, executive director, Cradle to Career Data System. As I shared a couple of weeks ago in the same committee, Cradle to Career brings together and links data from a lot of the state level data partners who could be involved in this effort as well. So the Steve Mead Commission has been one of our partners from the start, as well as the segment level higher education entities.

And as of the spring, all 4 departments under labor and workforce development agency, as well as AICCU and the Bureau for Private Postsecondary Education more recently.

So what we we can offer is to work collaboratively with CSAC and with the other partners on exploring opportunities to leverage some of the existing legal agreements, data sharing infrastructure, and data linkages that we provide crucially for some of the verification of employment and earnings for the value added earnings calculation for workforce Pell.

Now as has been highlighted, there are a lot of details to still work through on how that can be done and whether the kinds of information that currently flows from these institutions to C2C would need to be updated with additional data elements to enable those calculations. So that's the the high level.

What would you find with your allocation? What types of activities would be funded?

Yeah. So there are a couple of new work streams. And again, we would work with the initial funds, and then there would likely be ongoing requirements for being able to link the state in perpetuity. But high level comprehensively connecting the state's official earnings data to that program participation data.

Preparing data reports by program that would detail whether the program participants met the job placement and value added earnings requirements of workforce Pell, applying state of the art privacy protocols that protect student personal information while still ensuring the program is implemented.

And as I mentioned, this work may also include updating data submissions we receive from existing data providers if they do not already submit data on their short term programs that may wish to petition for workforce Pell eligibility.

Do you already have agreements with each other with CSAC in terms of sharing data as in there is a system that's already operating?

That is correct. So we have one common participation agreement that all 16 of the currently data submitting, data partners of CTC have signed. The Student Aid Commission is one of those. The three public hires education segments are participating that all four of the labor and workforce development agencies departments as well. That's an umbrella overarching agreement.

And then the specific data elements that are shared each year are defined in file upload specifications that we develop with our data partners. So we've received data from the student aid commission, each year already from the higher education entities.

A crucial thing I want to lift up that CSAC mentioned is that the current data that flows to C2C may not include all of the local program level information for the short term programs that would be necessary. So it would require work collaboratively with our data providers on that.

I'm glad you're raising that because I'm trying to understand what the funding that's being requested by the administration would actually deliver for us. I wanna be very clear so that we have clear expectations. You've got a data system at the credits of career, which is operating. They've got certainly the support system, the technology to update data. It sounds like once a year, this program is gonna require regular data exchange on a regular basis.

And it would seem to me that we'd wanna find the technological support systems and that's a little bit more of the next issue, so I won't get too much into it. But with a student aid commission who can then deliver that data on a regular basis, I'm trying to really understand, again what the expectations are and and how these allocations get us to those expectations.

It just sounds really, really, really unreasonable that $600,000 will get a system up and running, given what other systems have cost in the state, including cradle to career over the years. So, can you help me better, put me at ease that this is the right amount at this moment and that this is not, that the expectations should be literally we just get this off the ground. There will be no data sharing. There will be no information sharing. That's gonna be at another time.

Yes. So we did in arriving at these numbers, we did have conversations with both CSAC staff and C2C staff to kind of better understand how they might be using these monies. To the chair's point, it is one of the reasons why the administration's trailer bill language focuses on our existing data structures that currently exist. We wanna leverage that, we already know that there are going to be some changes that need to be happening.

So for example, asC2C mentioned, there are some data elements that are missing. One key partner in this is actually the California Community Colleges. They do have a data sharing agreement with C2C. But we're acknowledging that, you know, as we get further federal and other guidance, they're gonna have to have conversations about what needs to change, how the information needs to flow, etcetera.

And so, that's why we're providing some some some amount of funding to kind of get that work going and then opening the door, leaving the door open for as part of the next budget cycle in terms of what those ongoing needs might look like.

So to the chair's point, we're trying to be very deliberative and prudent in terms of what level of funding and how that funding, is provided. We're the administration is also similar similarly thinking about accountability. I mean, it is one of the reasons why we're asking for a spending plan, one, before we release the funds so that we have an idea of how the money would be used.

As part of the trailer bill language, we do we built in kind of reporting requirements that are separate from whatever might be included in AB 1534. Happy to have a conversation about whether that's sufficient, whether, you know, the ledge whether legislative members and staff would be interested in more.

You know, we're happy to have that conversation. I think the the key thing that we just want to highlight is there are a lot of unknowns. Like so for example, we're actually not quite clear the total number of programs that would be eligible. That would that's gonna be part of the work. Once you kinda figure out the number of programs that are eligible, you don't even know if all of those programs will want to participate.

Right? It's gonna be a choice that they're gonna make. And so I think from the administration's perspective, we're hoping that a lot of as more information comes, there are more conversations that take place. We'll have a little bit more information to shape and inform sort of what future funding levels, look like down the line.

K.

Does that have one final I'm not asking more questions.

Just on this issue, just one final item. For the California Student Aid Commission and to limit liabilities and risk and lawsuits, it doesn't matter whether you're building a system for two programs or a thousand programs. You still have to build the system. So I would just add, this is about protecting California, our institutions from being federally investigated. I know you're all seeing the newspapers and more importantly for loss of funding for students.

The last thing I would just ask and what is in front of you is our advocacy letter. I would just ask for the opportunity to have placeholder language to at least come back with an official plan to actually implement and to leave the door open. Because what we are financial aid experts at the California experts at the California student aid commission and what we are seeing is there is immense need in California, particularly as Californians are trying to reengage and reenter the workforce.

That means that programs like Cal Grant c have the opportunity to be modernized. What do I mean by that?

That means students who are adult learners, who are in short term programs could leverage both state and federal aid as an on ramp to continue. Because what we actually want is not just someone to complete an eight week program in California. We want them to enter the workforce, come back to education so that they can get living wages in every single zip code in this state.

Thank you. I'll turn over to mister Fong next.

Thank you so much, mister chair, and thank you, for robust questions as well. Number of questions were asked, and I just wanted to follow-up on the conversation we're having on implementation to make sure this succeeds. It sounds like there's a lot of unknown skills in terms of the programs, the stackable credentials, the curriculum, the where the programs opt in. But this question is more for CSAC. Going forward, there's a proposal for 664,000 now, but going forward for successful implementation of this type of program.

And it's very hard to have all the details and numbers now, but going forward with the allocation, what would it take to really make sure that we're running a robust successful program on workforce panel?

Yeah. We did submit a BCP, and so the 664,000 is adequate right now to on ramp the program. Of course, that is one time funding. We also requested funding to be able to propose and serve every single program and every single segment of education that actually seeks to participate. As you know, when you're ramping up a program statewide, you need professional development, technical assistance.

And that means financial aid offices, our call center, they're all gonna start calling. And we also proposed as a part of that to meet that entire workload, a $4,500,000 outreach and statewide support portfolio. It was not included in the May revision. We understand why. We understand that as we're on ramping, it may take time, but we do see that as a really big gap area as institutions and segments and students are reaching out seeking to participate.

It could be a future consideration for the legislature.

And thank you for that context. So in terms of the technical assistance, the rules and regulations that we promulgated, the best practices just to really scale up this program at the various segments. It's gonna take, as you said, a a due amount of resources and time and for CSAC to really develop all these different procedures.

And so I think going forward, anything that we can do to continue to uplift the work there to make sure that it is a successful robust program to make sure that everyone's on the same page across our state in terms of all the different segments. Then I'll be very, very critical.

So thank you for that context. And in terms of the programs and the stackable credentials, I know there was mentioned dental assistant, auto repair programs, CNA programs. What would be the procedure for these folks these programs to opt in? I know you mentioned that they would have to opt in.

So currently, the way the trailer bill, language is laid out is, CSAC is going to be certifying eligibility. There there are currently we we have been aware that there might be some differences of interpretation in some of the federal requirements. And so from the administration's perspective, we chose to basically put the onus, the burden of justifying that, an l an institution's programs that are seeking eligibility meet all of the federal requirements.

And so they can they can make the case using the data that they have, etcetera, in terms of how they meet the federal requirements. And that's currently what's laid out in our trailer bill language.

In CSAC's role in terms of developing eligibility, they would be receiving the information. They would be able to, you know, assess what they've gotten. There's an appeals process that is built in. For example, there there is a denial or or sort of disagreement. And so that's just kind of a high level envisioning of the the flow of information.

And thank you for that context. And with how would the labor and workforce agency and some of the short term career programs that they have there and their partnerships they have with our community colleges, how would that intersect with the work that's happening here?

Do you sorry. Could I clarify the question in terms of are you asking what role labor workforce development agency Yeah.

The workforce development and the workforce development boards. I know they have a number of short term career pathway programs as well. And so we don't want to recreate the wheel. We don't have to. Right?

Absolutely. I'm gonna turn it over to my colleague, Allison Hewitt, who has labor in her portfolio.

Thank you.

Allison Hewitt, Department of Finance. So there's a a couple of ways that the labor and workforce development agency and the departments under the, a labor agency are incorporated into the trailer bill language. Again, building on the kind of existing state structure, but also conforming at least with we understand was in the proposed regulations in HR 1.

So first is the California workforce development board is a key consult has a key consultative role in terms of developing the process, and as well as, like, the programs that will be approved. So the California workforce development board has that expertise that they'll be lending as, CSAC is looking at eligibility.

There is also a process whereby the, employment development department will develop a list of, these categories of high skill, high wage, and in demand sectors and occupations, and that will be presented on a same timeline as the state's existing workforce investment and opportunity act plan. So we're, both the federal framework and then the states, the trailer bill language in front of you conform in terms of utilizing existing structures that exist for the workforce development, specifically, within the the two examples that I mentioned.

Appreciate that context. So thank you for uplifting that. And lastly, as the chairman should would love to be included along with the chair on any developments going forward. This is a lot of good work ahead on the workforce workforce Pell programs. Very excited about the opportunity ahead.

So thank you so much, mister chair.

Thank you. Doctor Paton.

I have a basic question as I'm trying to understand the implementation of workforce Pell. Do we have a general idea with the understanding that this is kind of like the last line of financial aid that a student might get in a short term certificate program. Do we have an idea of how much our students collectively would have the potential to bring in?

I'm I'm just trying to compare in my head how much we're potentially going to expend in budget to try to set up and establish this program and then how much benefit our students will actually receive.

From the administration's perspective, we did ask that question, and I think that the the stakeholders who are much smarter than us and have spent more time in this, have differing opinions. I think your concern is one that the administration shares in terms of, you know, balancing the benefit that comes that that California can benefit from and and students and the amount of money that we put in

and and that And risk.

And that is why that is why you see the approach that we take in terms of taking a limited amount of money, what we think is like a prudent amount of money to start that investment, figure out some of those details, have a better sense of what that could look like, and then adapt moving forward. That is a key question that we have not, from the administration perspective, have have not gotten a clear answer on. So

Yeah.

It does seem like it's a very complex landscape ahead of us. One with many unknown unknowns, so to speak. And and I do have concerns that we're not gonna be able to maybe I'm being a pessimist on this, but I'm I'm worried that we're not gonna be able to do everything necessary to make sure that we're implementing this program in a meaningfully successful way with limited liability and risk to this non state agency, non profit that's gonna have to oversee all of this implementation.

So just putting that out there that I wanna make sure that if we're gonna go in, it is adequately resourced and the investment is worthwhile to our students. Because if we're gonna spend all this money and we don't have the capacity, wouldn't it be better for us to just budget that directly to our students instead of setting up a whole new program?

I I would say from the administration's perspective, you know, these these are questions that we have asked ourselves as well. And we do find that that are question those are questions that we will continue to ask as part of the deliberative process. With the final rules being finalized, experiences in other states, that is sort of what we're saying where we're hoping to get better information on.

And so there is a little bit of a balance that we're striking in terms of identifying kind of that base level of resource that we think could be appropriate, again, to to get the ground to get the program up and up and running to get started. But we also similarly have that thought in terms of we we do wanna have a better understanding of what the entire program could look like, what those could look like.

And so I think that that I I know I'm I'm reiterating

this, but I think I hear you exactly what

I think we're thinking of. Yeah. We're we're focusing on, okay, let's use our existing structures first. Like, those are areas where, so for example, C 2 c, like, knows what that data flow looks like. We already know we have to make the like, we have to make changes in those areas.

And so that gives us a little bit of a foundation to work off of. And from those lessons learned, we can then it it clears the path for further discussions on other areas where it's maybe less established, and we have to have more work, more conversations. Obviously, from those discussions that can both have a budgetary as well as a policy impact. But those are things, from administration's perspective, we're just thinking those can trail. You know, you can take it in a phased in approach.

We can take it, in steps in increments. And so that from the administration's perspective is our approach for why we've presented the one time funding that you have before you as well as the trailer bill language.

Yeah. Thank you for that detailed explanation. And with that in mind, I do think it's prudent for us to make sure we have a pathway if this does seem to pencil out that we have some kind of guarantee that we're gonna be able to deliver on the resources that are necessary to put it forward. So is there a set aside for any certain amount to make sure that the commission has the resources necessary to start

rolling this program out? So for the budget year, for 2627, the 664,000 for CSAC and the 1,300,000 for c two c has actually been built into their budget. So it is available, but

they're to start on July 1. No.

No. No. So so the what we did is basically, we built in the budget. We built in the money as part of their budget, so it's available to them. They will then provide a spending plan.

Okay. And that's when the that's when we'll disperse the money. And so that ensures that they, one, have the flexibility to adapt to whatever information is coming forward and kind of an acknowledgment that what you've heard today in terms of how the money is potentially gonna be spent might need to change and and adapt slightly, but balancing it with accountability. Right? We'll get a spending plan so that when we come before the committee and you ask us that question, how was the money used?

We have that information in terms of this is how

the funding was used in in the budget year. And what if the needs are greater than that budgeted amount? So I think,

you know, from from the conversations is there there is quite a bit of work that still has to go on. It's unclear of money will be fully utilized. That's kind of one of the comments that you heard from the legislative analyst office. But to the extent that additional funds are available, there are other budget tools that we have that potentially could make resources available. And so that is a potential option.

Okay. Thank you.

Thank you. Thank you to all the members. Thank you to the panelists. We'll hold this issue open, but very related to this is the next one, a student aid operations funding inside for security where the commission will provide an overview of their operational request. We will hear from the same three panelists, finance, commission, and LAO.

Hello, Jennifer Louie with Department of Finance to Alvarez members. I will be providing an overview of the May revision for the California Student Aid Commission overall budget request. The May revision request includes several one time and ongoing adjustments for student financial aid, which includes 4,800,000 one time general fund increase in 25-26 and a decrease of 31,500,000 ongoing general fund in 26-27 for the Cal Grant program.

The next financial aid adjustment is the 95,500,000 one time general fund total programmatic reduction to trip the 25-26 middle class scholarship program in the 26-27 year. Thus, a a net decrease of 90,500,000 one time general fund accompanied by a technical correction of a 5,000,000 one time general fund increase.

Additionally, the 27-28 appropriation increases by 10,600,000 ongoing general fund. The trip, the 26-27 middle class scholarship board. These amounts cover the 35% unmet need level for the total cost of attendance for eligible resident undergraduate students for the 25-26 awards and the 17.5% unmet need level for twenty six twenty seven awards as proposed in governor's budget.

In addition, provisional language is also included in the mid revision for the middle class scholarship to specify that funding is provided to the California Student Aid Commission in arrears with accompanying appropriation provided in the year succeeding the award year. For example, and that for the twenty six twenty seven middle class scholarship awards, those awards are supported by an appropriation occurring in 27-28.

In addition, the May revision includes the technical, the withdrawal of the governor's budget proposal for the Golden State teacher program, which provides 14,400,000 general fund re appropriation. The withdrawal is a result of revised projections identifying the 21-22 appropriation as being fully expended. The May revision also includes statutory language to authorize issuance of new Golden State teacher grant awards on any unexpended general fund from the 2025 budget act until 06/30/2027.

The MiWay revision also continues the Golden State teacher grant with a request of 1,600,000 one time federal title two part a reimbursement funds. These one time federal funds support the Golden State teacher grant program for the 26-27 academic year with statutory language to request the award amounts remain at $10,000 In addition, the MAB revision also includes 16,200,000 ongoing federal individuals with Disabilities Education Act Fund reimbursement funds to extend the Golden State teacher grant program on an ongoing basis beginning in the 26-27 academic year.

The May revision also requests statutory language to accompany this increase in IDEA federal reimbursement with a target towards students seeking special education teaching credentials within accompanying statutory language change to increase those award amounts to $20,000 This concludes my presentation, and I am available to answer any questions. Thank you.

Thank you. We'll hear from the student aid commission next.

Thank you, Chair Alvarez. We're extremely, grateful for the administration's proposal on the middle class scholarship, as well as the Golden State teacher grant program, which are both a part of the governor's proposals. With respect to the Golden State teacher grant program, we're excited to see a a special focus on special education. This is a program that has trained 28,000 teachers statewide. 91% of those teachers seek to stay at that priority school.

So in terms of a an outcome for California, this is a program that is not just a grant, but is actually changing California's schools by bringing in diverse teachers. As it relates to our operational budget, I'll just add, we did request an IT redundancy server. The California Student Aid Commission receives 1,200,000 applications every single year. That means in total, we roughly have 2,200,000 datasets. Those are just students, not even their parents and their contributors who are also a part of our datasets.

We receive data from the California Department of Education, Military Department, Department of Social Services, Cal Kids. All of our higher ed and k through 12 institutions utilize our system. And as a part of this, we requested a redundancy server. We are a small commission with only one server. I know you all have cell phones, and many of you have their your own backup servers to protect your photos.

The California Student Aid Commission has one server. We did discover this as a part of an analysis that we voluntarily received from the California Department of Technology. We received 33 recommendations. We have moved forward with 15 of the recommendations. One of those recommendations is the server.

We also were then proactive and we were grateful to the California Department of Technology who gave us $91,098 in February to be able to move a server into cloud based. That is more economical than a brick and mortar server, which would be roughly over $800,000. We did resubmit a BCP for consideration, but I just wanna share what this would mean for California. If CSAC had a compromised server for

the state of California, we would not

be able to administer aid. That means our entire web grant system would go down weeks, if not months, of any data coming in or coming out. We would not we would then have to quickly buy a server, reconfigure it, get it up and running, use last month's data from CDT, upload it to be able to restart financial aid in the state of California.

This would, of course, disproportionately impact low income students who rely on financial aid to meet their basic needs, which creates equity issues for our state. Lastly, I'll just add, we have looked internally.

We have done everything that we can proactively, but it is the state's experts who are saying that we need this. We agree. We're trying to do something about it. As a part of this, I can confidently tell you we do not have the technical expertise to take this to a cloud based server. I just wanna leave you with this example.

Several months ago, we had a sewage problem in our agency, and I wanna invite all of you to come and tour the California protecting our single server between that kitchen and the water were towels. And my staff up until 10PM at nighttime changing the towels, making sure that the water didn't get into our server room. And those are the stories from my IT team. I can tell you that I am more than happy to do what I can with the resources given, but I do not have the resources to configure a new server, get it up and running, maintain it.

But we do have the $91,098 from CDT, and we are hopeful that we can move forward in current year.

But this is not a one time cost. This is an ongoing cost to protect California's students, families, and their data.

Thank you. We'll hear from the LAO next.

Thank you. Natalie Gonzales with the LAO. We reviewed CSAC's May revision proposals and have some, issues for consideration that we'd like to share. As noted in the agenda, there's a proposal to provide $16,200,000 in $200,000 in ongoing funding for Golden State teacher grant awards for special education teacher candidates who commit to working in a priority school. The identified fund source is federal individuals with disabilities education act funds or IDEA funds.

We wanted to note that existing IDEA funded programs are being shifted into prop 98 to make room for this additional spending. Also, though this program is more targeted than the current program, if the legislature adopts the proposal, it could further narrow the definition of priority schools to those with the highest share of low income students and English learners. The current definition applies to schools that enroll over two thirds of the total student population.

The proposal also increases the award amount from $10,000 to $20,000 and the service requirement from two to four years. This has some trade offs.

On the one hand, the higher award amount will help grant recipients cover a larger share of their college costs, and the longer service requirement will help, keep special education teachers in these high priority schools for additional years. On the other hand, with a larger grant amount, fewer students are served, and there's also no clear indicator that a larger award amount is needed to attract more students. Additionally, the proposal includes no funding for ongoing administration administrative costs that CSAC will incur.

Finally, if the legislature rejects this proposal, it would free up funding for any prop 98 priority. The May revision also includes 1,600,000 in one time funding in 26-27 to extend the current Golden State teacher grant program for an additional year.

Though the identified fund source is federal two part a funds, funding is fungible with prop 98 general fund because the May revision funds one program with both sources. Consistent with prior recommendations, we recommend rejecting additional funding for the existing program, particularly because it is not as targeted. If the legislature rejects this proposal, it would also free up funding for any prop 98 priority.

Lastly, we wanted to share that the May revision includes additional budget bill language relating to funding the middle class scholarship program one year in arrears. If the state does continue to fund this program in this way, we think that the language is reasonable.

We do recommend, however, not funding the program one year in arrears and instead and instead returning to paying for middle class scholarship awards in the year in which costs are generated. This avoids creating an out year debt obligation to the state. Thank you.

Alright. Thank you. Let me try to start with, the issue of, this important cybersecurity issue. So the Department of Technology did an assessment, and this request is based on their recommendation for cybersecurity?

That is correct.

Okay. And it's a 92,000 initial with an ongoing cost. Is there an estimate for the ongoing cost, annual ongoing cost?

Yeah. The server has been estimated at $92,000 ongoing. We are also requesting the technical expertise to actually do this. It's called an I t s two in state service. Just one position one position that can maintain and configure this server.

It's our understanding that there are only three other agencies in the state that have a cloud based server as a part of this assessment. We only have four personnel at this time and none of them know how to do this.

Okay. The to finance the support system from technology, according to our agenda, ends in September. So what is the expectation for the security needs post September.

So the administration when the review vision, budget change proposal request came in from the student aid commission. The request was for budget year plus one for the 27-28 fiscal year. And so we acknowledge the Department of Technology appropriation for $92,000 and review their inter agency agreement, which indicated that the $92,000 was available for the budget year in '26 and '27.

And so we encourage the California Student Aid Commission to resubmit the budget change proposal for the fiscal year of 27-28, and onward to continue supporting the cloud server.

And what about the actual technological expertise for the the specialist?

So as for the specialist, the administration also is aware of a vacancy substantial a vacancy issue currently at the student aid commission. And so we provided a position authority associated with that position so that they may use their current vacancy savings to support that position authority. And and so as such, they could use their current savings as a result and toward supporting for that specialist.

Okay. And there are, I understand, four individuals who do IT specialty work?

Yes. They run our insurance.

Vacancy at the moment?

No. We run seven to eight different vacancies to be able to balance our books on a regular year. I arrived a year and a half ago. It will almost be two years at the July. And I did an analysis of every single unit, every single division.

It's also the reason why I brought in the California Department of Technology. Really grateful to the administration, the legislature who last year right sized the agency. Meaning, as you saw from examples even from today, the commission for years prior to my arrival has gotten workload and no staffing capacity or a way to sustain the workload ongoing. So right sizing the organization last year was really critical to really understand what is it that the commission is being asked to do.

So right now, we are operating on seven to eight positions just to balance our books.

All of the funding reverts back to the state legislature. Right now, we are estimated that a $100,000 will revert back to the state as a part of this year's spending.

Yeah. And I assume to the previous issue, you probably wanna have some sort of system backup system with this information on implementation of HR 1 and workforce.

That's correct.

So clearly, some need there exists. So I wanna further discuss that. Let me now ask about the the Golden State teacher grant program. And there's like, please be patient here because there's a lot of things moving. And so I'm trying to keep track.

And I understand that as was mentioned right now, primarily the conversation is around the special education educator pipeline, which is critically important and certainly needs exist. But my understanding is that there's also other federal funding that will support teacher educator pipeline issues through Golden State teacher grants. Is is can the LAO clarify that for me?

Yes. So there are, two separate proposals. The first is, as you mentioned, the 16,200,000 ongoing IDA funding, which would just be for special education teacher candidates. Those would be $20,000 awards with a four year service requirement, and those are, that is an ongoing program.

The second proposal is 1,600,000 one time funding in 26-27, and those are federal title two part a funds, and that would extend the current Golden State teacher grant program, which is set to end in 25-26 for one additional year using these federal funds.

Okay. I see now. And so the remind me of what the program funds now in terms of high need schools and high need teacher shortage areas by subject? What are the requirements on the program?

So right now, the Golden State teacher grant program, it it's limited. It it focuses on teachers in high priority schools, but there's, no, specific subject area targeting. And then their $10,000 awards with A, 4 year or two year service requirement is the current awards that are being issued.

And that would continue that?

For an additional year. Yes.

For those in that program, but for those in the special ed program, it'd be four years twenty.

Correct. And that would be an ongoing program. K.

And we did discuss a little bit in terms of areas of of needs, schools of need, but also subject matters of need, which sometimes gets left out of the conversation, such as bilingual educators and science and math, which are not required in the current program. Is that correct?

Correct.

Can I ask finance about that conversation, which we did have previously about focusing this in on those high need areas high need subject areas, I should say?

Let me defer to my k twelve colleague, Liz Mai.

Hi there. Liz Mai with the Department of Finance. So I know that we have had this conversation many times before. I think the administration still sees that there are shortage areas in a number of, places just kind of depending on region. So we want to still keep it, open ended while still, you know, prioritizing, like, priority schools that do have the most acute teacher shortages.

Okay. Well, sounds like our conversation last time didn't get any feedback in that direction. Doctor Patel, you're next.

Thank you for your presentations. I have a couple questions regarding specifically that server that somehow captivated me because I find that very shocking. We have very sensitive student data and financial data in those servers. In the plan that the IT department came and spoke to you about, was there any conversation around server redundancy to protect against cyber security threats?

Yes. And that is exactly what the recommendation is. We need a secondary redundancy server. The proposal went from an 800,000 brick and mortar on-site, then Department of Finance worked with this commission and they said there has to be a more economical version. The cloud based was then recommended.

Okay. So the the cloud based version of that recommendation is to protect that with a redundant server Yes. Protecting cybersecurity threats. Thank you. And then I'm looking at the agenda with the LAO's assessment in it.

I specifically want to look at public interest attorney loan repayment program, and there is a decrease in that program. That's page 11 of our agenda. And I'm just trying to square that with the likely increasing need in financial aid for these kinds of professional, degree pursuits for our Californians as we know that the one big beautiful bill federal policy now caps higher education borrowing. So at at this time, it would seem that we shouldn't be decreasing any loan opportunities for professional degrees. Law.

Hi. Jennifer Louie with Department of Finance. This is actually an adjustment from the governor's budget, and so it's it's reflecting actual participation. Okay. So if if for the next governor's budget development, if it increases, then we increase accordingly.

So we treat it like a standard, student financial aid adjustments between governor's budget and me. Excellent.

Thank you. Thank you for that clarification. Appreciate it. That's all I have.

K. Mister Fong.

Thank you so much, miss Sharon. Thank you so much to all the panelists. Just wanted to ask CSAG. Just wanna follow-up on a lot of questions earlier in terms of density server and then the the cloud base, but also how we can continue to uplift and support the work and efforts of the Canadian commission. You're doing tremendous work there in terms of obviously, providing offices for hundreds of thousands of states in California, if not millions.

And for the server and for the IT team, it sounds like you said you have seven to eight vacancies. Is that correct? And so seven to eight vacancies, if their positions have to be filled, what additional capacity would that bring for your organization? Sorry. I know it's not maybe on the agenda here, but but I get the context of the your statement earlier.

Got it. I heard two main question. The first one is, what can we do to better support California students, particularly those that need financial aid? Very happy to share that the class of 2026 just broke a brand new record. They have now set the record for the highest number of students who applied for financial aid.

That means sixty eight percent of the class of 2026 of the high school class has applied for financial aid. We, of course, have until June 30. That, of course, means more grants, more awards, and, all of those are really good news. Hopefully, they end up in enrollment and, of course, very soon graduation for higher education. How can we better support students?

Of course, I am not here to talk to you about Cal Grant reform, but I'm sure that many today will bring up Cal Grant reform. I also know, that I put out out there an invitation. Please please do consider coming to tour the California Student Aid Commission so that you can see what it looks like on the ground. I have a 153 positions that are authorized. They are incredibly hardworking public servants, and they really believe in the mission.

The other thing that you can do is we have until June 30, as I mentioned. And so even a video from you to your own constituents and their families, letting them know that California has options for them. There's the FAFSA and the California Dream Act application. If you're a mixed status family, California has a solution for you, and it's called the California Dream Act application. In terms of the vacancies, Assemblymember Fong, we carry those vacancies and and the our accuracy has gotten a lot better.

But they are for example, the SUNY commission right now has one and a half attorneys. We have one of those vacancies has been reclassified with CalHR. We go through a substantial process. It has we went out three times to fill the position. It got denied.

We then were able to reclassify it. As of two months ago, we finally, were approved to fill one of those positions as the highest attorneys for the state of California. It's called the CEA. That CEA will hopefully open up next month, which is in June, and it will allow us to have two and a half attorneys at the state agency. That time lag and the lag in terms of that specific position of Assemblymember Fong is CalHR requires a thirty day window.

You must publicly notice that you're headed in this way when you're reclassifying a position. But even then, I expect that we will carry the seven vacancies to be able to balance our books.

Please. Thank you for the context.

Just to follow-up on background. Jennifer with Department of Finance again. So the administration continues to monitor, the student aid commissions vacancy rate. And so, for example, for as part of the review for all BCP proposals, which is standard for all BCP requests from state agencies. The student aid commission for, is currently running at a vacancy rate of 22%.

And so we are deeply concerned by that vacancy rate that's continuing in the fiscal year of 2026. So that was part of our consideration for the BCP review. We continue to partner with the student aid commission to ensure that their state operations and local assistant programming remains operational. But that is a consideration for the point in time and part of the May revision review.

Appreciate the context as well. So thank you for the updates there. And you mentioned Cal Grant reform earlier in comments, and we know that number of champions up here that continue to press and advocate for the implementation of Calvary reform. So it's a conversation we're gonna continue to have going forward. Thank you, Mr. Chair.

Thank you. Without risking the the getting into the weeds, vacancy factors, though, are for the different departments. They are expected in order to achieve savings. Is that correct? From finance perspective?

Can you repeat the question?

Finance expects there to be a vacancy factor that is, maintained by departments to achieve savings?

There there generally is vacancy savings as a result of, for example, retirements in any given state agencies. So we do take into account for it, especially during a governor's budget development during the fall review for the schedule some 78 for salaries and wages. However, if there is a systemic issue of a high vacancy rate, that is also a consideration, for every PCP that is submitted during governor's budget in May revision.

And so when it occurs systemically, that is a pause for consideration because if a department cannot fulfill their their current positions, then appropriating for additional positions in a year where there is a structural general fund challenges, then that is a consideration that the administration needs to.

So you maintain a vacancy factor at the commission of seven positions?

Yeah.

And isn't that done as a budgetary tool to create savings for your department?

It is. So that we can stay, you know, solvent and that is something that the commission has carried over.

It's within so you can stay within your budget approved budget.

Yes. Correct.

So while it's not a policy, it's clearly what what happens if you overspend on your budget?

We would be back here in a hearing saying that we ran out of out of money. Happy to provide additional context on those positions that we are holding open. I don't know our vacancy rate, but the last time that I checked, it was not that high. And so I'm happy to also provide information on what positions have been posted. Where are they in the process?