Assembly Budget Subcommittee No. 5 on State Administration

Hello?

There you go. Alright. Good afternoon, everyone. Thanks for your patience, and welcome to the assembly budget subcommittee five on state administration today. My name is Assemblymember Jessica Cloca.

I am filling in for our chair, Assemblymember, Sharon Cork Silva, who could not be here with us today. We know that last Thursday, the governor released his updated budget, for twenty twenty six, twenty twenty seven. As we review the May revise, we know that there's so many real challenges that California continues to face, that the assembly continues to face, real fiscal challenges driven by a lot of economic uncertainty, revenue fluctuations, federal instability, and continuing growing demands on state services.

Today is the first of two May revise hearings, so we can continue to take part in the budget process, evaluate the proposals, assess the impacts to our respective districts and the communities that we represent, and most importantly, provide transparency in this process. We will hear all of the May revise proposals from the administration in nearly all of the issue areas.

Today will mostly be focused on state administration, and tomorrow's hearing, Wednesday, will be mainly be from proposals from the administration on housing and homelessness, taxes. And if we need to do anything from today that we haven't finished, we can take it up tomorrow as well. We won't be taking any actions today. All items will be left open. This is an in person hearing with all panelize panelists testifying in person.

We will take questions from members of the subcommittee after each panel. Public comments will be limited to thirty seconds each and will happen at the end of each issue. If you're watching from home or from your office and are unable to attend, this hearing in person, you may submit your comments via email to [email protected].

Lastly, before we go into the agenda in each of the issue areas, I want to take thank the governor's office, speaker Rivas and his team, our budget chair Gabriel and his team, and all of our staff and as well as our budget consultants who have been working really early mornings, really late nights, including over the weekend, making sure that we're ready for today's hearing as well as everyone in the audience.

Thanks so much for all of your work, and thanks as well to my team, team Colosa.

And welcome as well to, assembly member Liz Ortega. We just got started. So with that, we are going to take up issue one. Yes. Sorry.

We are actually going to move around, in the agenda before we go into the normal schedule. I know there's some schedule conflicts. We're going to take up issue six first from the public employment relations board. If you can kindly make your way up, we will take up PERB first. Feel free to begin and introduce yourself, and feel free to start on your item.

Testing? Okay. There we go. Thank you so much for the accommodation of taking us out of order. I appreciate it very much.

My name is Susan Davey. I am the executive director for the Public Employment Relations Board. Now, let Jarell introduce himself.

My name is Jarell Sorensen. I'm the deputy executive director at the Public Employment Relations Board.

PERB is a quasi judicial administrative agency tasked with overseeing the public sector labor relations for California. And then a little bit more, as of recent. We have, two proposals on the table for the May revise for your consideration. The first 1 is AB 1 from 2023, the legislature employer employee relations act, and we're requesting a $165,000 in one position in 2026 and '27 and ongoing to implement the requirements of this bill.

And then the second proposal that we have in the May revise is regarding AB 288, the this bill, we have requested a negative, allotment to reduce a to to request a total of $500,000 general fund in two positions for two years each and an additional $1,000,000 one time for the labor and workforce development agency to support the litigation cost regarding AB 288.

Thank you. Can we go now to the Department of Finance? Did you have any comments? No comments? Okay.

LAO's office?

Nick Nick Schroeder with

the LAO.

Both so both of the proposals would implement recent legislation, and one of them would be a reduction in their original January proposal, which we think is a reasonable production given the court's actions to enjoin the original law or parts of the original law, and the other proposal we also think is reasonable.

Thank you for that, and thank you for your presentation. And maybe just for as well as for my my own knowledge, since I know, this is my first year on the budget. So can you just give us, a summary of these two APs that you're requesting, adjustments for both a v one and a v two eight eight?

Sure. We are anticipating additional workload Rega Regarding a v one, the legislature employer employees relations act. This is the first time this, pool of employees will be, time for potentially this work group to organize and be ready to hit the ground running, which is why we're asking for this one, one position. So this bill grants exclusive jurisdiction to PERB to make determination as to, unfair practice charges, if they are organized and the union is formed.

And then AB 288? Okay. Great. Yes.

So AB 288, originally, on 01/01/2026, PERB had jurisdiction over the National Labor Relations Board items that were not being moved forward. There was a lack of a quorum earlier in the year. Since that time, the National Labor Relations Board has regained a quorum. I did read a note this morning that one of the positions will be potentially on August 2026. So that is still ongoing.

However, we do have an injunction currently, and we're not able to take on this workload at this time. So we've requested a reduction to reflect that we don't anticipate taking on any workload within this next year.

Thank you for that. And now we will turn it to any questions from members of the committee.

Do you have any kind of timeline when you're expecting the final ruling on a b

two eight eight? We're thinking eighteen months ish, so we think it should it might take a while to go through the courts.

Okay. Thank you, Assemblymember Ortega. And, now we'll go to public comment. Are there any members of the public that wish to make comment on, this this issue area on PERB? K?

I don't see anyone coming up to do comment. We will leave this item open. Thank you for your testimony.

Thank you so much.

The next item, we'll just go back to the normal schedule. On the agenda will be issue area number one, the governor's office of service and community engagement. Sorry. Hi. Feel free to begin when you're ready.

Good afternoon. My name is Anthony Chavez, and I am the chief deputy director of the governor's office in service and community engagement, also known as GoServe. This may revise item in front of you as a technical adjustment to reflect correct amounts outlined in the college core BCP approved by the legislature last year. It is a net zero in adjustment and is just technical in nature. Happy to answer any questions that you may have.

Can we go to the Department of Finance? Did you have any comment?

Victoria Chin, Department of Finance. Just to reiterate, again, this is just a technical adjustment to bring up the funding in the College Corps admin College Corps funding admin up to levels as approved in the 2025 budget. Okay.

Thank you. LAO?

Good afternoon. Natalie Gonzales with the LAO. We reviewed this proposal, and we have no concerns with the technical adjustment. Thank you.

Thank you. Any member any questions from members of the committee? Somebody member take it? Okay. No questions.

Yeah. I think from my end, thanks for your presentation. I had an opportunity to be out with your agency at Cal State Los Angeles in my district. I get a chance to experience and see college core in action, and you guys do a lot of work for a lot of students. It's one of the few ways in which they're able to get a stipend to afford the cost of living while they're in college.

So I just wanted to thank you for your leadership and the administration for your work helping engage our our young people. And just two quick questions for me before we move on to the next item. What is, like, the total operational cost of the program right now?

Yeah. So what we're requesting is 83,600,000, I believe it is. And of that, I believe 18,000,000 it would be for state operations.

Okay.

And that will fund over 4,000 college core students at 53, campuses for twenty six, twenty seven year.

Okay. And when's the next time you're in my district? I'm just kidding.

You can arrange that.

No. But I really appreciate that, and, yeah, we'll be following up with your office on some of the work that you do in Los Angeles. Thank you.

Thank you.

And sorry. Last item. Any members from the public wish to comment on this item for public comment? Okay. Seeing no one, thank you.

This item will be held open. Thank you. Alright. Issue area number two, secretary of State. Hi.

Welcome. Feel free to begin when you're ready.

Thank you. Good afternoon. My name is Kristen Dagscher. I am the interim chief financial officer for the Secretary of State's office. On behalf of Secretary Weber, thank you for the opportunity to present our items before you today.

Our first item is the Secretary of State Building Security Improvements. In response to a security incident in 2015, DGS and CHP completed an assessment to evaluate the secretary of State's facility security, resulting in the initiation of the SOS building security improvement project. The initial assessments along with subsequent assessment performed by CHP in late twenty twenty one have identified the need for major improvement levels of security in the following areas areas, excuse me, surveillance and monitoring, control movement, and restricting pass passage.

In April 2026, DGS re estimated the project based upon the fully defined plans and specifications submitted and approved by the state fire marshal. In contrast to the February 2022 estimate, which was an early high level projection based upon preliminary scope, conceptual design, and assumptions.

This request of $5,962,000 is needed to fully fund phase three for completing the business improvements to fully eliminate security vulnerabilities and ensure complete threat mitigation for the building complex. Our next item before you is the 2026 election security federal grant award. Through the consolidated appropriations act of 2026, Congress appropriated 45,000,000 for election security available to states to improve the administration of elections for federal office. Of that amount, California received an award of $1,930,000 and re with a required state match of 20% or $386,000.

Consistent with the requirements of, help help America vote act or HAVA, This funding may be used for voting equipment, voting processes, voting registration systems, election auditing, cyber and physical security, voter education and accessibility.

An additional allowable expense has been authorized combating AI generated mis and disinformation. The grant has already been dispersed and claimed. The grant is available until fully expended. The states have two years to make available the state match funds from the date of disbursement. Several contracts may be required for this effort.

Most will be with the counties to allow for funding the local implementation of the HAVA requirements, and the state operations line item will be used to further the requirements of HAVA at the state level. Our last item in front of you is the California State payroll system. The, Secretary of State was included in the second wave of the rollout of the state controller's office new California State payroll system, otherwise known as CSPS, and it's scheduled for August 2028.

The SEO informed participating departments of the allotments to be provided and the necessity of an inter agency agreement to allow for reimbursement of the cost for project related activities and tasks completed by the Department Agency readiness team or DART members.

The annual allocations are intended to support the department's completion of the CSPS readiness activities, which include readiness surveys and assessments, CSPS awareness activities and campaigns, departmental current state business process documentation, stakeholder engagement, modern modernizing payday campaigns, customized communication plans development, department department level change control governance structure, and attending CSPS related meetings as applicable.

However, as the project progresses, additional activities may be identified. The SOS did not currently have a reimbursement authority, so we worked with the Department of Finance, which resulted in this item. I have with me today, this subject matter experts on all of these. If you have any questions, we'd be happy to answer.

Thank you for your presentation. Can we go next the Department of Finance for any comment?

Jesse Romine, Department of Finance. No further comment at this time.

LAO's office.

Nick Schroeder with

the LAO.

We've reviewed the proposals and raised no issues at

this time.

Thank you both. Now we'll turn

it

to questions from members of the committee, if there are any. K. So you know questions. We will now turn it to actually, I have a few questions. In terms of some of the security improvements that you mentioned, can you just share what some of those are, what's being recommended, and do you for foresee this as being a long term project?

K. I'd like to ask Shannon Kaufman to come up. K. She is our business operations chief.

Good afternoon. I’m Shannon Hoffman, the Business Operations Bureau Chief for the Secretary of State’s Office. I’m sorry, could you repeat your question?

Yeah, no, I just wanted additional information around the security improvements that are being recommended. Can you share what those improvements are? And do you foresee this being a long-term project?

The improvements, as Kristen mentioned, are primarily related to the surveillance and monitoring, such as post circuit television cameras, key card access additions throughout the facility controlling movement. We, the—of the 530 plus thousand square feet office building, it is open to the public currently based upon build—building—design. So, we would be moving the core access to the public to only the first two floors and only a very limited section of the, of those areas.

And everything else would then be corridored and key, key card access available only for staff on the other floors, to, to basically reduce vulnerabilities to areas in which the public does not need to have access to any longer, as we will be establishing a customer service, basically center, on the 2nd Floor for all of our public services, within the Secretary of State's Office to be received.

And this is literally the building next door. Yes?

Okay. And that's also a joint space with a museum?

Correct.

Yes. The museum is a tenant within the building. Correct.

Got it. Okay. As well as the beloved cafeteria there.

Yes.

Okay. Yes. Alright.

That will still be open and yes.

That was my main concern. No, and thanks for sharing that. That's really helpful. I think most folks go in and out of that building not really realizing that people—members of the public vote there.

You know, it's the space where people go get lunch. They go to the museum, and then it also functions as a voting place.

Yes. And there's also a daycare on-site additionally as well, so, we wanna make it as secure for all of the occupants and the visitors to the building.

Got it. Okay. And then second question for me, I know that the estimate jumped from 3.1 million in 2022 to 10.27 million in April 2026, which is three times more than originally anticipated. Can you just elaborate more what that increase, like, why we have 7.1 million, what's that attributable to, attributed to that construction cost, inflation?

Can you elaborate?

It is construction cost and inflation, as well as the original estimate was based upon conceptual design plans, whereas once the architects and engineers really got into the actual design of the building, as, as you've been in the buildings, there are some very unique architectural design to the building, so, it does limit certain things which need to have additional access points such as cutouts and, like, for roof level to put in an access panel to add additional cameras, things like that.

So, there's additional scope that was added in terms of actual construction needed to, to do all of the, the items that—necessary to address the vulnerabilities.

Okay, and then, has CHP signed off on phase three of the scope?

Yes.

Okay. And then, the second item that I had questions on was on the Help America Vote Act. You know, I know a number of concerns have been raised recently.

I don't wanna get too much into it but really wanted to understand what these grants could be used for in terms of capacity. I know there have been issues raised, for instance, by, even in this most recent election in our current ballot around things that have been printed. I know the Jewish Caucus had sent a letter to the Secretary of State with some very serious concerns. Could this grant help alleviate some of that?

Good afternoon, members of the committee. Nakesha Robinson, Deputy Secretary of State over the Help America Vote Act. So, with regard to the funding, the issue that you're speaking to is with—was with inside the voter information guide. So, it could help with, further educating in, with, within our office members—not members, I'm sorry.

Staff, to better proofread some of those materials before they go out in addition to the counties also helping them to facilitate some of their proofreading efforts before those documents are issued to the public.

Okay. And I, I, I know there's, you know, a lot of things being discussed right now, and you received the letter from our colleagues on the Jewish Caucus. I would recommend maybe this is a, a, a grant. Since we received these monies, I know it's meant to trickle down to the, the local level to help build that capacity, help with some of the things that you just mentioned with proofreading, that you continue engaging with the caucus and our colleagues on their very serious concerns.

Absolutely. Will do. Thank you.

Thank you. Okay. So, no other questions for me. I don't know if Assemblymember Ortega has a question. Yes, go ahead.

Related to your current questioning, so, what—I, I wasn't clear in your response. So, will these funds—can they be used for some of the things that were mentioned, or is it, it's already established what the funds can be used for and that's not covered?

Sure. No. So, the Help America Vote Act funds have a broad usage. My colleague earlier mentioned some of those uses. For example, it can go towards education and outreach, it—which would include the voter information guide. So, yes, those funds can be used for that.

Thank you, Assemblymember Ortega. Seeing no more questions from the committee, go to public comment if there's any members from the public that wish to give public comment.

Okay. Good afternoon. Megan Murray with the Weideman Group. On behalf of our, clients with the Partnership for the Advancement of New Americans, the Institute for Responsive Government, and other members of the California Democracy Partnership, We just wanted to convey that we're thrilled with the Governor's May Revision and includes commitment to protecting and strengthening election integrity and wanna sincerely thank the Governor's Office and the Assembly for prioritizing these critical investments.

While the brief mention of this effort in the May Revision lacked detail, we strongly support ensuring this investment in its final budget is focused on voter education and trusted messenger outreach, ballot curing, including immediate funding to keep the office of community partnerships and strategic communications operational, competitive grants to counties for ballot processing, equipment, and workforce to expedite account, and then, of course, vote centers and drop boxes to protect and expand ballot access.

And then, finally, cybersecurity, AG election monitors, and an election litigation fund. Thank you.

Thank you. With that, thank you for your presentation. We will hold this item open. Thank you.

Okay. Next up, we will go to issue item number three, Department of Consumer Affairs. Hi. Feel free to begin. Introduce yourself, and feel free to begin your BCP.

Sure. Thank you for having me here today. My name is Taylor Schick. I’m the Chief Fiscal Officer for the Department of Consumer Affairs. The Department has two proposals included in the Governor’s May Revise for your consideration today.

The first proposal is for the California Board of Pharmacy. The Board is requesting one time—a one-time budget increase of 1.7 million and 1.1 positions to start implementation of the Board's Business Modernization Project. Funding would support software acquisition, configuration, and staffing to allow the board to shift from its legacy information technology systems to a modern, cloud-based licensing platform.

The request includes budget the language that would make expenditure of this new funding contingent upon approval of the board stage four project approval life cycle documentation by the California Department of Technology. The second proposal before you today is for the Bureau of Private Postsecondary Education.

The Bureau is requesting a one-time backfill of $10,000,000 from the General Fund to repay a $10,000,000 loan taken this year to support recent litigation against the Bureau. By utilizing the General Fund to support repayment of the loan, it will sustain the Bureau's admin fund while providing time for the Legislative sunset review process to assess the Bureau's fee structure and implement fee increases needed to support ongoing operations.

The backfill would allow those fee discussions to focus solely on what fee levels are required to support the Bureau's ongoing operations and restore fund solvency without being impacted by the cost resulting from the litigation. The fee levels proposed by the bureau in their sunset report assume approval of the general fund backfill, and without it, the increase to the bureau's annual fees would need to be greater to account for repayment of the loan.

The proposal, the proposal also includes provisional language to provide the bureau with flexibility to adjust its budget authority to address a pending legal expense associated with the litigation that is expected to be finalized in fiscal year '26-'27.

And additionally, provisional language is being requested to authorize repayment of the loan to be made without interest. And I do have representatives from the department and subject matter experts that are happy to answer any questions that you may have today.

Thank you so much. Can we go next to the Department of Finance for any comment?

Taylor McGraw, Department of Finance. We have no comments at this time for the Board of Pharmacy.

Thank you. Two Taylors. Okay. LAO's office.

Hi. Heather Gonzalez with the Legislative Analyst's Office. We have—I'm here with my colleague, Lisa King. We have the two of us on, with comments on the Board of Pharmacy and also, private post-secondary. How would you—what order would you like to take those in?

You can go in that order that you mentioned.

Okay. Alright. With respect to the Board of Pharmacy, we reviewed this proposal and we're not raising any concerns at the time. We've—principal questions on an item like this involve the technology purchase. And typically, we would look at whether the project has had CDT oversight, any negative findings CDT might have uncovered in the process, whether the budget authority and funding sources are sufficient for the proposed costs, as well as the impacts of the new technology on business processes, staffing, and workflow.

Recognizing that it May Revise, we work within tight time constraints.

So, it's always possible concerns could develop in the future. In this instance, the responses we received from the Board, DCA, and Finance to our questions about these various things were all satisfactory.

Okay. Thank you.

Good afternoon. Lisa King with the LAO. I'll provide our comments in the Bureau for Private Postsecondary Education. On this proposal, we do have some concerns. In particular, we recommend rejecting the proposed $10,000,000 general fund appropriation for the Bureau.

As you've heard, the Bureau has already received a special fund loan that addresses its costs through the budget year. We have concerns about shifting some of those costs to the general fund, as regulatory agencies are intended to be self-sustaining with the revenue fully covering their costs. Those costs do, at times, include litigation, as in this case. We're also concerned that this proposal could set a poor precedent spurring other regulatory agencies to seek similar general fund assistance.

In addition, we have concerns with one of the proposed provisional language changes, the one that would allow the bureau to not have to pay interest on the existing special fund loan that was taken out in—earlier this year.

Department of Consumer Affairs indicates this would be the first time that a special fund loan between its bureaus interest free. To date, such loans have been paid back with interest to ensure that the few payers for the lending fund are kept whole.

If the legislature is interested in this proposal, it may want to consult with counsel to confirm whether providing such an interest free loan from a fee supported special fund would be allowable under Proposition 26, which limits the way that fee supported funds can be used. Thank you.

Thank you, LAO, for your presentation. I will start with the easier item first for the California State Board of Pharmacy. I also sit on Business and Professions Committee and know that there's, you know, a number of ways in which we're trying to modernize our state licensing. And I noticed, at least here in the materials, one of the updated systems that we are trying to modernize for the Board of Pharmacy is paying by credit card. Currently, it is—what's the process for applicants?

Is it mostly check, or how how do folks pay for their license?

I believe it is mostly a manual process, especially for new applicants, although there is a current online process for payers of renewals, to pay. But I can defer that question to the Board Executive Officer.

I think you had a colleague who was trying to go up.

So, the Executive Officer, Anne Sotogren, the Executive Officer for the, the board can respond with more detail.

Yeah. We do have the ability to accept credit cards for purposes of renewals, but all of our initial licenses are generally—are submitted through the mail with cash or, you know, Cashier's Check, those kinds of payments.

Okay. Thanks for sharing that. I just thought that was, you know, a really important update for people applying for licenses in the state, that they're able to pay and make it as easy as possible for us also to collect the monies. And so, I thought that was an important update. I don't have any more items for the Board of Pharmacy.

In terms of—one second. In terms of the Bureau for Private Postsecondary Education, does the agency want to respond to the LAO's concerns that they're raising around the $10,000,000?

I would just respond that that this request is being submitted respectfully. The idea is to lower the impact of the needed fee increase. So, even without this litigation, the bureau is in need of a fee increase and has been in need of a fee increase for several years. This would allow that fee increase that is being proposed to be substantially less than what it would need to be, had it been—had the loan not been basically paid for by the general fund.

And we do recognize that a lot of those fees that are paid for are essentially supported by students that are paying for enrollment at these schools.

And then, I would defer to Department of Finance for any further information they may have.

John Parsons, Department of Finance. Just reiterating that this would alleviate significantly higher fee increase to institutions, which may be passed on to students, and, and that wasprimary motivation.

Okay. So, you're saying that it's, it's not going to impact that fee increase or it is?

I'm sorry?

So, just can you just clarify, will the general fund lower payment? Will it, does it—does it not impact the separate fee increase to address the, the bureau structural deficit?

It, it will impact. So.

It will impact.

So, the proposed fee increase right now that the bureau has provided in their sunset report assumes repayment of that loan with the 10,000,000 from the general fund. If the 10,000,000 general fund isn't there to repay that, the—some of those fees that were proposed will need to be significantly higher than they would otherwise, be proposed.

Okay. Were there any other options that the agency explored other than requesting 10,000,000 from the general fund?

The only other option was looking at a higher fee solution that would support repayment of that loan over time.

Okay. I'll just go back to the committee. Were there any other questions from members of the committee? Okay. No questions.

Now, we'll turn to public comment. Are there any members from the public that wish to comment on this item? Okay. Seeing no one, we will go ahead and hold this item open. Thank you all for your testimony.

Thank you. Alright. Next step, we're gonna go to issue four with the Employment Development Department, also known as EDD, also known as the most popular agency in my district. That was a good thing. You guys put money back in people's pockets.

Okay. Whenever you're ready, please introduce yourself and go ahead and start on your item.

Thank you. Good afternoon, members of the committee. My name is Caleb Horrell. I’m the Admin Deputy Director for the Employment Development Department. Appreciate you inviting us here today to talk about the various proposals, as outlined in the agenda.

The first item that I will go over is the EDDNext document management system proposal, which is requesting 20 million dollars split evenly between the general fund and the disability insurance fund in '26-'27 to continue the document management system project. This is a reportable project under the overall EDD next modernization effort, which I know we've discussed previously.

The resources included in this proposal will enable EDD to support system enhancements necessary to implement the remaining tax forms and related functionality along with broader workflow, case management, workload management, staff oversight, system integration, and legacy system retirement. These additional forms and capabilities are essential to completing the full tax flow work—the full tax workflow modernization and cannot be delivered within the existing DMS scope, timeline, or budget.

These changes will require submission of a Special Project Report, or SBR, to the California Department of Technology, which the department is actively working on.

If all tax forms and functionality are not incorporated into the overall DMS project, it would present significant risks to the department and the overall modernization effort for DMS, including but not limited to maintaining a dual system effectively where both the legacy system and the, and the new system would be in tandem, would present funding challenges to maintain both additional hardware for infrastructure to support both, as well as workload efficient inefficiencies for the areas that would have to work in dual systems.

Also, as included in the proposal is provisional budget bill language to ensure that the funding is only made available to the department upon approval of that previously mentioned special project report by the Department of Technology. That is the first item. The second item is the UI loan interest. This item—due to the sudden and immense impact of the COVID 19 Pandemic, the UI fund became permanently insolvent beginning in June 2020.

As a result, in 2020, California began borrowing from the Federal Government to pay regular UI benefits in the state of California. Since the state became insolvent, interest has been accruing and is owed annually to the Federal Government. The '26-'27 interest payment is being updated from the governor's budget estimate by 6,086,000, bringing the total estimated payment to 668,300,000 for '26-'27. The third item in the agenda is our DI program admin and benefit adjustments. This item is for '26-27.

EDD is requesting an increase of 37.1 personnel equivalents and 4,300,000 from the Disability Insurance Fund for updated administrative needs due to changes in workload and time factors. No administrative changes are being proposed by the department for '25-'6. Additionally, we are updating our estimates for both our DI and PFL benefit payments, estimated to increase by 2,300,000,000 for '26-'27. And in the current year, DI and PFL benefits are estimated to increase by 1,300,000,000.

Increases in both years are being driven by increases in weeks compensated, claims duration, and the average weekly benefit amount for those programs.

The fourth item in the agenda is the workforce innovation opportunity act adjustments. This item, for '26-'27, EDD is requesting an increase of 74,300,000 in the consolidated workforce program fund for state operations and an additional increase of 95,600,000 in that same fund for local assistance. These increases are to align the federal WIOA funding with estimated federal allocations. No increases are being proposed to '25-'26 for either state ops or local assistance. The next item in the agenda is our UI program admin and benefit adjustments.

For '26-'27, EDD is requesting a decrease of approximately 208.9 personnel equivalents and about $32,000,000 from the unemployment administration fund for updated administrative needs due to changes in workload estimates and time factors. No administrative changes are being proposed for '25-'26. Additionally, in the UI fund, our UI benefit estimates are being updated. We are projecting a slight increase to UI benefits in '26-'27 of 65.7 million.

And in the current year, in '25-'26, we're projecting a slight decrease in UI benefits by about 308,000,000, primarily due to actuals for the first two quarters coming in slightly lower than prior estimates.

The next item in the agenda is the school employee fund benefit adjustments. In '26-'27, EDD is requesting an increase of approximately 12,300,000 for SEF benefit payments. And in '25-'26, EDD is requesting an increase of 8,500,000 for SEF benefit payments. Increases in both years are primarily being driven by increases in the average weekly benefit amount. The next item in the agenda is our emergency medical technician reappropriation.

This is a, a technical item. The proposal requests a reappropriation of 883,000 of General Fund, which was previously appropriated in '22-'23, to continue the Targeted Emergency Medical Technician Training Program. This program focuses on youth and those who may have barriers to employment for roles as EMTs. The reappropriation would allow for funds to be encumbered by 06/30/2027 and liquidated by 06/30/2029. And lastly, there is one remaining technical correction item.

This is in relation to EDD NEXT. As I mentioned, this is a technical item which would align budget bill—the budget bill language with a proposed general fund reversion of 70,600,000, which was already included in the '26-'27 governor's budget. And that is it for the EDD items.

That's it. Okay. Can we go next to the Department of Finance for any comment?

Cynthia Elmore, Department of Finance. Nothing specific to add, but in support of these May Revision proposals.

Okay. Can we go to the LAO?

Good afternoon. Chas Alamo with the LAO. The eight items, packages, part of the May Revision for EDD, kind of fall into two groupings. The first grouping is a series of programmatic adjustments that Mr. Horrell has just described. Those apply to the school employees fund, a small adjustment for the UI loan, a larger adjustment, but sort of within the range of normal practice for the UI program itself, and a relatively large adjustment for PFL and DI that I wanna circle back to.

The second category of, of sort of groupings are, are proposals related to EDD Next. And the one I, I—our office would like to flag for the subcommittee is the, the first proposal, the May BCP for the document management system.

It is a bit unconventional to proceed with a BCP outside of a BCP for a technology project because the DMS document management system is one of the key work streams in EDD's larger IT update effort, EDD Next, to sort of be tracking them in two different BCPs is, as I mentioned, a bit unconventional, but doesn't raise flags for our office in and of itself.

It might be worth a conversation with—sort of ongoing either here in this company hearing or, or over the next few months with the department about sort of what changed with document management system itself that necessitated the, the expansion of their scope. We understand and we recognize that technology departments evolve as we learn more about what's needed and as technologies themselves needed.

So, again, not a red flag in and of itself, but just something we wanted to, to notify the committee to, to attest to.

And finally, the, the last item in, in this package, number eight here, the technical adjustment, again, relates to the reversion of 70,600,000 general fund this year that's being scored as a budget solution that was the result of the administration deciding at this year to move forward with the DI and paid family leave portions of EDD Next first, and then to follow that up with the UI portions for the integrated claims management system.

Earlier, through the first five years of the project, it was planned to do both of those programs simultaneously, and they've now been separated. And that results in some near-term budget savings, but not necessarily ongoing savings for, for the program itself. Thank you.

Thank you, LAO. And now, we'll go to members of the committee if there's any questions. No? Okay.

I don't see any questions. I have questions, for myself. Eight items. Let me see where to start. I guess I'll start first with just reacting and responding to the LAO concerns.

Do you wanna share any response to some of the issues raised by the LAO?

Sure. I can take the first issue, which was about document management system and the request for 20 million—$20,000,000. In response to miss—Mr. Almo's—observation there, I would say that EDD Next is an agile project, and there are seven work streams within this project. As we work on one stream, we always look for opportunities to modernize and identify additional services that we can provide to our customer within the portfolio.

This is the case where paid family leave program was completely manual, and we modified that program last year.

As a result of that modification, we identified additional opportunities now that required us to make improvements as part of the DMS project, by taking those forms and more digitizing them and scanning them more efficiently as part of the document management system process. In addition to that, document management system is used to collect over a billion dollar every year using the tax remittance paper checks that come to EDD. EDD has identified additional processes, workload management operations within the tax remittance functionality.

And as part of that, EDD is, is adding that to the project scope to take that on, deliver it. This will help us, like my colleague mentioned, decommission the legacy system that was implemented twenty five years ago.

So, again, to summarize, this is a very agile project. We look for opportunities at every moment where we can streamline our functions, provide better services to our customers.

Thank you. And before you go to some of the other items, thanks for acknowledging, obviously, the 20,000,000 additional on top of what was already $145,000,000 for this project that was already requested. So, what's the revised total project estimate that you anticipate spending on EDD Next?

So, as part of the DMS document management system project, which is in question right now, this project's total cost is $97,000,000. And by adding 20,000,000 on top of that, it will be $117,000,000 in total.

Okay. Are there any concerns about the incompatibility of the legacy system and the new system that we have now? I'm assuming you're using you're actually using EDD Next right now.

That is correct. So, this, this, this project document management system, we have already implemented 65% of this project. There are four releases or other four phases of this project. Two have already gone live. So, unemployment insurance, paid family, and disability forms have already been converted to the new platform, to the new system.

We are leveraging it today. And the tax forms and the tax remittance are pending. That's what we are working on.

And I know we're obviously talking about dollars and cents today and the BCP, and I think how this translates to our constituents. Right? The people who are actually using the system, you know, on the front end, putting in the application for these different programs. Can you share, has there been any improvement as a result of EDD Next in what our constituents are, you know, receiving on their end? Is there you know, what does that turnaround time look like?

Absolutely. So, document management system, the key functionality is to scan the documents as soon as possible the moment we get them in, in our system. So, as part of DMS project, now we have the ability to scan documents in multiple languages. We have implemented text AWS, Textract, which can scan all the documents, even the handwritten notes, with over 98% accuracy. What that means for our end customers is that we can scan that form quickly, the application for PFL, for DI, for unemployment.

We can scan those forms, take the data in our systems, and process them for the downstream processes, the certification, the payments, much quickly than, than before.

Thanks for sharing that. I do think that's a really important point to make. I know since I first joined, this budget committee and, obviously, since the last, the, the first hearing with EDD, I know that, you know, we've received some positive feedback from constituents, as well as our team in the district office around faster turnaround times from EDD, so I do thank you for that. And if it has to do with this new document management system, then wonderful.

So, you know, I think that's ultimately what, you know, I'm really concerned about is how do we make it faster, more streamlined for, people who need help.

Yeah. Thank you. And then the second item, I don't know if you wanted to continue with some of what was raised by the LAO from any of the other.

...Talk about rest of the items. He's expert on those.

Maybe if my colleague from the LAO could go back over the other items that he raised.

Okay.

You had so many items. We've lost track, so. Go ahead.

Chas Alamo with the, the Analyst Office. I, I think one of the items that we wanna flag is the uncommonly large midyear adjustment to the Disability Insurance Paid Family Leave Program. Each May, EDD revises its current year and budget year projections for how much its major benefit programs will spend. And the $2,300,000,000 revision to DI and paid family leave is relatively large one.

It's worth probing. Several years ago, the legislature passed and the governor signed SB 951, a bill by Senator Durazo that substantially changed the state's paid family leave and DI programs. I think we're coming to terms now with the exact sort of magnitude of those changes, and I think this revision is a partially a reflection of that. By way of context, the DI program, together with paid family leave now, is paying about $15,000,000,000 a year in benefits.

So, substantially larger than the state's UI program.

There's not a specific question in there or a critique, but if the department wishes to respond, I'd be happy to.

Thank you. Please.

Yes. Thank you. Caleb Horrell, Admin Deputy for EDD. And, and, again, as, as my colleague from the LAO mentioned, SB 951 has, has clearly had an impact on this program, and, and some of which we definitely attempted to forecast what we thought that impact was gonna be. But, you know, there, there were, the, the—a big component with SB 951 was increasing the wage replacement levels in both the DI and paid family leave programs.

Previously, those wage replacement levels, somebody could earn on a DRPFL claim up to 60 to 70% of their normal wages. Post SB 951, it went from 70 to 90%. So, someone now is earning, on average, a higher amount. In addition to that, what, what we're seeing is that with SB 951, it also raised the—I say lowered the bar as far as who would be eligible for that higher replacement rate.

Under—prior to SB 951, someone earning around $30,000 annually would have been eligible for that higher, that 70% wage replacement rate.

Whereas post SB 951, someone earning 60 to $65,000 annually could now be eligible for that 90% wage replacement rate. So, we are not only experiencing an uptick in the program just because of a higher participation, because of that higher wage replacement rate. But in addition to that, we're paying out more because, on average, the, the benefit amount is higher. And so, that's why that adjustment is, is, is being proposed.

Thank you for sharing that. And I know you said you saw an uptick. Is it in the hundreds? Is it in the thousands? Can you elaborate a little bit more around what you're seeing?

Yeah. So, I guess, the, the, the major, I think, factor that we're seeing driving that benefit increase is, is that overall increase in that average weekly benefit amount. And I think, on average, we're seeing about a $200 increase in the average weekly benefit amount from what we previously forecasted.

Right. In terms of, like, the actual benefit amount, there's more each week. But in terms of the number of people, are we say—are we serving more people at the higher amount, or?

Yeah, I mean, so, first claim are what we would kinda count as far as one individual filing, which would be like a first claim filing. We are seeing, I, I would say, slightly higher levels of first claims being filed. We had estimated, I think, previously around maybe a 5% increase in participation. We may be seeing around a six to 7% increase in participation right now.

Again, with, with the, the larger of the two programs under the SDI umbrella being the DI program, it, it's, it's really, you know, event-driven.

Right? Someone has to be ill or injured in order to take DI. It may be more attractive to someone now to take that program or file a claim because of the higher replacement rate.

Okay. So, what I'm hearing from you is we're not necessarily seeing more people filing it, but they're just, the, they're, they're more they're more people eligible because of S—SB 951.

I, I guess I've counters—not necessarily more people eligible. I think the same amount of people eligible. Those that are eligible are receiving a, a much higher benefit amount, on average.

Thanks for sharing that. I'll probably follow-up with EDD on this afterward, just to understand this issue a little bit more. I do agree with LAO that the 2,300,000,000 readjustment is quite large. So, I wanna better understand what that looks like. And then, just turning to the other item, on emergency medical technician training re—reappropriation.

Can you just share what was the fiscal capacity challenges for this?

Yes. Thank you for the question. So, generally speaking, my understanding is, is that the initial contract went to the Riverside Emergency Medical Service Corps and one of the things that they had bid for in that contract was to not only operate the project so the recruitment training of the participants, but that they would be the administrative agent as well. So, they would handle the, the funding, the fiscal agent capacity, as well as all administrative type activities.

It sounds like once that project got going, that project operator came to the department and identified that, that they wouldn't be able to do all of those roles. So, this reappropriation will allow another entity to step in and still allow for the—that area in Riverside to have this EMT training. They just won't be acting in the fiscal agent, or admin capacity.

Okay. And then, how much of the original Riverside contract was spent before termination, and do you know what deliverables or outcomes were achieved because of these dollars that we're investing?

I don't—I don't have that amount on hand as far as what had been spent today, but can definitely follow-up with you about that.

Okay. Thank you. Now, we will turn it to public comment. Are there any members of the public that wish to give public comment on these eight EDD items? Okay.

Seeing no public comment, thank you all for your testimony. We will hold this item open. Next, we will go to issue number seven and eight. Oh, no. I'm so sorry.

We're gonna go to issue number five to the California Workforce Development Board. Hi. Feel free to introduce yourself and begin when you're ready.

Great. Thank you, members of the committee. Is this on? Hopefully. Jewel Ball.

I'm the Chief Deputy for the California Workforce Development Board. I have with me Emily Sunohara, who's our Deputy of Operations, Finance, and Business Services. Established, established in the California Unemployment Insurance Code, the California Workforce Development has a comprehensive scope of work focusing on developing and improving California's workforce investment system and supporting the alignment of statewide workforce initiatives with education and economic development systems.

The budget change proposal reflected in the governor's budget provided additional resources for the CWDB, the California Workforce Development Board, which included reimbursement authority related to an interagency agreement with Caltrans. The April 1 adjustment to the governor's budget simply updated the reimbursement authority to align with the finalized version of the interagency agreement.

Sorry. Thank you. Was that it?

Yeah.

Okay.

Now we'll go to the Department of Finance for any comment.

Cynthia Elmore, Department of Finance. Nothing to add at this time.

Thank you. LAO's office?

Alexander Bentz, LAO. We have no concerns with this proposal. Largely represents, as the department says, what was already reflected in the, in the January budget. However, it does shift a good deal of the expenditures from '27-'28 to '26-'27, but we have, we have no concerns with that. Thank you.

Thank you. Now, we'll turn it to members of the committee. Welcome, Assemblymember Ward. Is there any questions for members of the committee?

No questions. I have one question on this item. The 75% graduation rate target, Can you just share how graduation is defined? Does it include job placement or just program completion? Is there any outcome data from year one that you're that you can share to validate, whether or not this target is realistic?

Okay.

That's not in this.

Okay. We can definitely get the outcome data for you. Graduation is completion of the program, and we do track placement in apprenticeships, in jobs, in further education. We can we can get all that to you.

Okay. Thank you. And I'll be following up with your agency and your board directly as well. There's a few things that I'm working on that would be good to connect with you on.

Great. Thank you.

And with that, we're gonna turn to public comment. Are there any members of the public that wish to give comment on this item?

Good Afternoon. Liz Blum Gutierrez on behalf of Vera California in strong support of the jails to jobs proposal submitted by Assemblymember McKinnor, which creates real pathways to employment, for people at the pretrial stage of the criminal legal process. This investment strengthens public safety, addresses workforce shortages, and helps stabilize families and communities across California.

Thank you.

Hello, Chair and members. Kami Peer with NextGen California. Also here representing the Jails to Jobs initiative only because workforce boards are such a critical implementer of this pilot program. We urge the legislature to prioritize j to j, submitted Assemblymember McKinnor, and have appreciated the help from staff throughout the year. The cosponsors look forward to working with you all, and these include NextGen California, as well as Michelson Center for Public Policy. Thank you.

Thank you. With that, we will hold this item open. Thank you for your presentation.

Thank you.

Next up, we're gonna go to item seven and eight, Department of Industrial Relations.

Hi. Feel free to introduce yourself and begin your presentation when you're ready.

Hello. Good afternoon. Can you hear me okay?

Yeah.

Good afternoon, subcommittee members. My name is Josh Iverson. I'm the Chief Fiscal Officer at the Department of Industrial Relations. Industrial Relations has a few items under this issue for discussion. I'll go through them now.

First step, we have a proposal within the Office of the Director Legal Unit to reclassify some positions. The department is requesting $388,000 annually from various special funds to reclassify eight existing vacant positions within DIR's Office of the Director Legal Unit.

OD Legal is a critical unit that serves DIR across a wide range of functions, representing the director in workers' compensation matters before the appeals board, advising on public works, contracts, personnel, and public records issues, and housing the anti-fraud unit responsible for combating medical provider fraud in the workers' compensation system.

This proposal reclassifies eight positions to establish two supervisor one positions, three attorney supervisors, two assistant chief councils, and one attorney four.

This will strengthen management capacity in both Northern and Southern California and establish a new Southern California office presence aligned with actual workload.

Next up is the electronic adjudication management system modernization proposal. The department is requesting $44,100,000 one time from the labor and workforce development fund to continue modernizing the Division of Workers' Compensation, Electronic Adjudication Management System known as EAMS. EAMS is the backbone of California's workers' compensation adjudication process.

It supports over 250,000 dispute hearings annually across 23 district offices and houses millions of sensitive documents, including medical records that must be retained for fifty years under state law. Last year alone, the system processed over 7,400,000 document filings.

This funding continues the active modernization effort already underway. The California Department of Technology or CDT has approved stage three of the project approval life cycle or PAL process. DIR has shifted to a split procurement strategy separating the EAMS court system from other components to improve the likelihood of competitive, cost effective contracting.

We are also requesting a reappropriation of unencumbered prior year funds to ensure continuity of project activities through 06/30/2027. Next up, the department has a proposal, for the CalOSHA Data Modernization Project.

The department is requesting $28,400,000, from the Labor and Workforce Development Fund to continue the CalOSHA Data Modernization Project. The goal is to replace outdated paper heavy processes with a modern case management system that improves efficiency, data quality, and compliance with state and federal requirements.

CalOSHA currently relies on aging systems and manual workflows that create inefficiencies and increase administrative burden. This request continues a multiyear effort already funded in prior budget years.

The modernization effort is expected to create a centralized database, automate workflows, significantly reduce paper records, improve reporting and analytics, then provide online tools for public complaint and accident reporting.

The proposal also includes temporary staffing resources to support implementation, oversight, and new workload requirements. The project is intended to improve Cal OSHA operations and provide more effective service to California workers and employers.

Next up, again within Cal OSHA, proposal for an Emerging Technologies Unit. Cal OSHA is requesting $1,800,000 in five positions from the Occupational Safety and Health Fund to establish new Cal OSHA Emerging Technologies Unit focus on workplace technologies such as artificial intelligence, robotics, autonomous equipment, and other rapidly evolving systems.

CalOSHA states that current workplace safety regulations were designed around traditional hazards and lack specialized expertise and capacity to address emerging technologies.

As these technologies expand across industries, they may introduce new risks involving human machine interaction, AI systems, automation failures, and cybersecurity issues affecting worker safety. The proposal would create a dedicated team to research new technologies, support regulatory development, review experimental variance requests, provide technical guidance, and improve consistency in enforcement and training statewide. It also includes a one time research contract to support technical analysis and policy development.

The goal is to allow CalOSHA to proactively identify and address emerging workplace risks before injuries occur while supporting safe technological innovation in California workplaces. Next step.

Within the division of apprenticeship standards, we have a proposal for, funding relating to the California Opportunity Youth Apprenticeship Reappropriation. This program is sometimes referred to as COYA. The department is requesting a reappropriation of $2,300,000 in existing general fund authority to continue administration of the COYA program. So this proposal does not request new funding. Instead, it extends expenditure authority through 06/30/2028.

So the encumbrance period aligns with the existing grant liquidation timeline. COYA supports apprenticeship and pre apprenticeship opportunities for opportunity youth. Young people disconnected or at risk of disconnection from education, employment, housing, or other support systems. Without this extension, DIR would lose the authority needed to continue funding staff responsible for administering the grants through the end of this, program period.

The proposal is intended to maintain continuity of an already authorized program, support California's broader apprenticeship goals, and ensure grant oversight continues through completion.

The department is also proposing to amend Trailer Bill excuse me, amend Labor Code via the Trailer Bill process. We are proposing the Annual Labor Code 62.5 employer assessment, require payment through electronic funds transfer.

The proposed amendments to labor code will require payment of the annual employer assessment by electronic funds transfer. This language is modeled after EFT requirements in statute for Franchise Tax Board and CDTFA.

The vast majority of insurers and self insured employers already transmit their payment via EFT, but there are still a few using paper checks.

Some annual payments can be up to $20,000,000. So payment via check can be cumbersome for the employer and insurer and presents risks for DIR. The proposed Trailer Bill language is expected to create efficiencies for DIR related to payment processing through EFT as compared to paper checks.

The department director has discretion to reduce or waive the penalty. And then, we also have proposed amendments to labor code regarding the Division of Workers' Compensation, Administrative Director Salary.

Currently, the salary for the Division of Workers' Compensation Administrative Director is listed in statute with the chairs of various regulatory boards rather than with similar division leads. This statute caps the salary and eliminates vacation accrual for this exempt appointee as opposed to the similarly appointed chiefs at DIR within CalOSHA and the Labor Commissioner's Office.

To correct this issue, we are proposing to remove this from Government Code 11553 and instead establish the position similar to the Chiefs of CalOSHA and the Labor Commissioner's Office in labor code. Those, conclude my opening remarks. Happy to take any questions.

I also have a few experts from the department, with me today.

Thank you for your presentation. We'll turn it now next to the Department of Finance for any comment.

Grace Henry, Department of Finance. Nothing to add.

Thank you. LAO's office.

Chas Alamo with the LAO. In reviewing the two salary adjustment proposals, they both seem reasonable to us. I'll note two of the items are for ongoing IT projects at DIR. We've been tracking those projects for several years now. They seem on course, so no issues with the the IT proposals as part of the May revision.

The newest item before you hear at this juncture is the proposal to establish an emerging technologies unit to cover sort of Cal OSHA related health and safety issues that might arise when AI driven systems interact with humans in the workplace.

Traditionally, our office would ask the department for something like a workload justification. Why is this new programmatic unit needed? What sort of issues are you seeing in the workplace? This is a unique circumstances.

These are emerging technologies, so there may not be a current justification. So we're taking it a bit on foresight from the administration. It suggests to our office that sort of paying attention to this unit over the next couple years, would be prudent for the subcommittee.

Potentially, the workload is there to be increased or to be decreased depending on how AI shapes moving forward in the physical workplace. Happy to take any additional questions or just follow-up on this particular proposal next year.

Thank you so much, Mr. Alamo. Next, we'll turn it to members of the committee. Were there any questions from members of the committee? Assemblymember Liz Ortega.

Yes. Good afternoon. This is a budget committee hearing. Correct?

Yes.

Just wanna make sure. So since we're in a budget committee, looking at numbers and discussing giving this department additional money, I'd like to review some of their recent performance numbers. This is for my colleagues too. The DIR is the number one department for unfilled vacancies at 31%

Yeah.

With unfilled positions. By comparison, the Department of Fish and Wildlife's vacancy rate is 14%. The California Highway Patrol is only 16%. Now, let's look at wage theft claims. In the legislature, we passed a law limiting the wait time for someone to recover their stolen wages to ninety days.

But despite that, the average wait time for wage theft claim currently sits at 854 days. Of those victims, only 24% received any payment at all. The numbers for Cal OSHA fines aren't much different. I had an audit. We've had hearings.

And of the total fines Cal OSHA issues, only 23% are paid. Compare that to CHP, where 82% of traffic tickets are paid within thirty to sixty days. But while we keep passing laws, some of my colleagues included to raise fines and shorten wait times. The DIR takes more and more time to collect less and less. Just seven years ago, Cal OSHA collected 50% of fines.

Today, it collects less than half of that. The wait time for wage theft claims was a 180 days. Today, it is five times that and more than six times what the law requires. The backlog of wage theft claims is 47,000. The workers' comp backlog is a 120,000.

So my question is for the DIR. If you need more money, why are we collecting the fines? In addition, I mean these numbers are black and white, and it's really an unfortunate reflection of California and what we really think about workers in this state.

So I'm gonna put it very simply. If you're asking for additional resources and additional departments, I suggest you start doing your jobs with the ones we have now because this is a failure in your leadership.

In terms of one of the requests that we'd have that you outlined, when it comes to the modernization of Cal OSHA, will this help your department send over to my Alameda County District Attorney the criminal file that they've been waiting on, which is when a with a case, where an employer killed three workers in my district in a period of eight years, will this modernization help get them that file?

Because as of a few days ago or a couple weeks ago, they still have not received it.

I don't believe I'm authorized to comment on open investigations at this time. However, I can say generally speaking, yes. The Cal OSHA data modernization project is intended to modernize all aspects of enforcement within Cal OSHA including, the Bureau of Investigations to which you refer.

And as we discussed at the assembly subcommittee number five hearing in March, we do have a proposal to add resources to the Bureau of Investigation within Cal OSHA.

You I had a whole list of questions here, but I'm not even gonna bother asking them because I've actually been asking these over and over again. And it's unfortunate that today you're here asking for additional resources, but none of those answers have none of those questions have been answered. I'll stop there.

Thank you, Assemblymember Ortega, Assemblymember Chris Ward.

Thank you, Madam chair. Maybe I'll just pick up there and and sort of just recede the question that for much of what we're looking at here, I wanna kind of know about our outcomes. And for the concerns that we are hearing and certainly getting in my district office as well too for the time that it takes to resolve a complaint for reducing the backlog as you heard from my colleague as well.

How do either the request that you're asking here for today, and I'll admit I'm sort of less sensitive sometimes when I'm thinking about some of these special funds as opposed to the very, you know, delicate general fund conversations and the competition we have for there. But there are other things that we could be doing with these special funds as to within the parameters of the jurisdiction of this department.

So how would some of these changes then align with a goal to improve some of these outcomes that we're desperate to hear? I'll just start with the beginning. For example, we wanna reclassify and increase management. And so these are the same positions. They're just the same workforce, just you know, working on a a reclassification and increased salary commissary thereof with, you know, existing people who how is that gonna improve our deliverables?

Are you asking specifically on the the reclassification of the positions within the.

That is one example. So you can respond to that example or you can respond to the kinda query generally.

Generally. Well, the resources we're requesting are for example, the data modernization project, the EAMS project. These are intended to modernize our systems and modernize our operations. For example, we've discussed previously Cal OSHA's heavily paper based, which is extremely inefficient. If you're in the field and you have the paper file with you, then the person in the office can't access the file and vice versa.

So with these, investments that we're asking the legislature to make in our operations the intended outcome is increased efficiencies. While there is an investment made upfront the return on the investment is what you're referring to outcomes.

Having updated, modernized systems allows access without regard to geographical location. It also will allow various division, programs or units within a division for example, within CalOSHA or within the Labor Commissioner's Office, plus Inter Divisional Communication. So CalOSHA can better communicate with, the Labor Commissioner's Office.

And those, efficiencies will speak directly to those outcomes that you're referring to.

Do you have goals?

Right now, the goal is to put these new system modernizations into use. That's the goal right now.

And what would the change in outcome be for, say, some of these, you know, significant improvements to system modernizations, electronic activity, electronic processing. Are you aligning those goals with any kind of specific targets, say, to reduce the time it takes to resolve a claim, to reduce the backlog, and to what extent? And or say to meet maybe statutory requirements.

Yeah. The budget change proposals that are included in the May revise that are focused on the IT systems may or may not include reference to specific goals. Continuing from our conversation in March where we had, a a couple proposals for the Judgment Enforcement Unit in Labor Commissioner's Office, the Bureau of Investigations unit within CalOSHA. Those budget change proposals did include specific goals and measurable outcomes as far as getting through the backlog.

And how have we met those goals?

I don't believe we've met those goals yet. We were asking for new resources in '26-'27 for those units. So bringing those new resources on would help us meet those goals.

Does LAO have a comment?

Chaz Alamo with the Leg Analyst Office. I think in response to Assemblymember Ortega, your questions about the wage claim delays to to focus there. As part of the 2020-2021 budget, the administration proposed a substantial increase in the number of staff members at DIR who help adjudicate settlements and hearings for wage claims.

That proposal the BCP, I can remember it, suggested that with the new staff approved, that the wait time for a a worker to to wait to fully adjudicate their claim would be cut in half. Obviously, that hasn't come to pass.

The wait time has increased substantially since 2020. Suggests that it might not just be a staffing issue. And I will take some of the responsibility here our office has looked into and the administration has attempted to look into. Administration has attempted to look into, but I don't think either group truly understands the key factors that are driving the wait times. They certainly could be statutory changes, more complexity.

Maybe the average case that a worker is bringing is more complex. Maybe employers have changed their behavior. Maybe the settlement process has changed from administrative perspective. I bring this up to raise the question that the State doesn't currently really understand what's driving some of these wait Log Wait Times for a program like wage claims.

And it's for our office and the subcommittee to really direct the administration and work together with the administration to first identify what's driving the delays such that we can together propose policy solutions and changes, whether that includes additional staff or statutory changes that can directly target what is identified as those drivers.

That's obviously well beyond the scope of a May revision of the subcommittee hearing, but I wanted to sort of contextually provide some historical context on wage claims in particular.

My experience with CalOSHA and other programs at DIR is that there are similar dynamics at play, that it's difficult to pin down exactly what's driving delays. And without that clear identification, it's very challenging for the administration or for the legislature to get in and suggest a policy change that has the improvement that you're looking for.

So my colleague had referenced that there's a 31% vacancy rate in DIR. Is that accurate?

I don't know that my records reflect that. There's been an improvements. I don't have it in front of me. I thought it was the neighborhood of the low 20% range, but I'm sorry. I don't have it in front of me.

Okay. Low 20% to 31%, but these are significant. So I might suggest that hiring people for which we have budgeted and the funds are available will help to improve the rate of investigations and the time delay that we have. And the budget, I assume has moved forward or would move forward for '26-'27 for these very same positions.

Absolutely, Assemblymember. I did not mean to suggest that hiring the staff would have no effect on the claims, simply that it may not be the exclusive sort of way to address these issues. The department has long struggled with elevated vacancies.

Part of that in our assessment long term stems from the department's headquarters in the East Bay, Unlike most of Sacramento or State Government operations being headquartered here, the salary differentials are more competitive in that area.

I once spoke with a hearing officer who was overseeing and adjudicating wage claims.

And a hearing officer is an Attorney, practiced almost like a quasi judicial member, very knowledgeable. And after she had left the the Division of Labor Standards Enforcement, the Labor Commissioner's Office, she mentioned to me that she had found a position in the public sector for much higher pay.

So there's an issue of compensation for these very high skilled, highly knowledgeable staff, that I think the department's grappling with and has made improvements over the last several years, but remains an outstanding task.

Thank you.

If I may ask.

Yes. Assemblymember Ortega.

I've asked this question in, as it relates to OSHA and the audit that we had. And I remember specifically asking the auditor if they were fully funded, fully staffed. And I also wanna remind us that not that long ago, we had a surplus in the budget. And so we had more money than we knew what to do with. And and so I asked, you know, if it was fully funded, fully staffed, would we be dealing with what I'm dealing today?

And his answer was, probably. Because it's much more than just vacancies. It's much more than just staffing. The vacancies has been an issue way before I got here for decades and has not been addressed.

But I wanted to show the difference in the vacancy rates because right now, endangered fish have more oversight than endangered workers, and that is a problem.

Thank you, Assemblymember Ortega, Assemblymember Ward. Thank you, in particular to Assemblymember Ortega, I know has been relentless in making sure that we got some answers around some of these very serious concerns that you're hearing from my colleagues around DIR.

And she obviously has tremendous expertise given her role as the Chair of Labor on those policy matters. So thank you for continuing to raise that. And I also share a lot of those concerns that were raised by my colleagues.

You know, I think just to circle back on one of those items that was raised around the vacancy gap, you know, we've talked about it in percentages. But in terms of the actual positions, you know, it's been about 28 to 32 unfilled positions every year between 2021 through 2024, 2025.

And so I guess the question for the director is, if you can't fill the existing positions, can you just share what your strategy is and why you're requesting, for these positions reclassified at a higher level if you can't fill the existing ones at a lower level?

Well, yes. Thank you for the question. DIR has a number of strategic initiatives underway. Several of them resulting from the audits. There was a recent audit of CalOSHA that we discussed.

There was another recent audit of the Labor Commissioner's Office. Both of those were conducted by the California State Auditor and required the department to put together corrective action plans. And, some of those corrective actions were multi year, and involving not only units within our department but other departments in the state as well.

For example, the it was it's been a few years now but Assembly Bill 171 granted that, CalOSHA and the Labor Commissioner's Office limited emergency hire authority, and also required DIR to work with CalHR and the State Personnel Board to do a comprehensive review of certain classifications. So through AB 171 and through the two audits performed by the California State Auditor, those workload studies are being done.

Those classification studies are being done. DIR is working with CalHR and the State Personnel Board to modify some of the minimum requirements on the classifications used in the department. Some of those efforts are ongoing to this day.

Thank you for that. I know there's also items here as it relates to creation of an Office in Southern California. Can you just explain what's the workload basis for establishing this new office, you know, the BCP site's insufficient capacity but doesn't, I think fully justify it? Can you elaborate?

Sure. I can take that one. Ken Lau, Chief Counsel for the Department of Industrial Relations. Many of our workers' compensation cases are located in Southern California where there's a larger population of workers and larger population in general.

Currently, how we have the our office set up is that we have our as, MR. Alamo mentioned, we have our headquarters in Oakland, and we have an office in Sacramento and then another office in Los Angeles.

And, Southern California is obviously a very large area, as you know, and so establishing a another office would create a parallel structure, up in with Northern California and Southern California having two, like a main office and then a smaller satellite office to deal with the workload.

Have you identified a city in Southern California for the second location?

So we're looking into Orange County because a lot of the work is located there. But because office space is at a premium right now, it's it's been difficult to identify a city. But that general area, Orange County, so that it could cover San Diego, and then sort of, like the coastal areas. I'm from San Francisco myself, so I'm not that familiar with the geography in Southern California, but that's generally what I've been told is, what we're looking at.

Okay. Have you looked into potential colocation with an existing agency that's already in Orange County or another part of Southern California?

Yes. So we've looked into a building in Santa Ana where where some of our divisions are already located. So Santa Ana is one possibility. Long Beach, which I know is not in Orange County, but we've also looked into that location, and we've toured a location in Marina Del Rey where the Division of Workers' Compensation has an office. But we've found that that does not meet our needs.

Okay.

And I know you've gotten a ton of questions on this already, and there's many more items to go through with yours that I still wanna go through. But how are you all, like, marketing and actually sharing with the public these job vacancies that have been vacant, you know, multiyear?

And I say that because there's a lot of people looking for jobs right now. Is there anything within these job descriptions that are requiring a certain type of work background?

Is there things recruiting folks from being able to apply and actually get these jobs successfully?

Because I think that's, you know, very frustrating to hear that there's the and I'm sure you're frustrated as well. But, you know, we really, I think, wanna make some serious progress here as I think what you're hearing from the committee.

Can you just explain, like, what you're all doing to change your strategy so that, hopefully next year, when we see you in this budget subcommittee that you can tell us you've cut the vacancy rate in half or made some serious progress?

Sure. I can speak more specifically with our office and then maybe more generally, and Josh can supplement. So what we've been doing in our office specifically, we have looked at the the job bulletins and the job postings and trying to make them more attractive to candidates, particularly in the areas where our salaries may not be as competitive. And so we're trying to highlight the the substance of the work, how important it is to protect workers and law abiding employers.

And and just some of the trying to target, we've gone to law schools, to try to attract more, more candidates.

And, we've looked at advertising or amplifying the the job bulletins on LinkedIn and other job boards related to unions. And we've found some success. And so we're constantly looking at revising the job bulletins. Initially, I think we required a a resume, a cover letter, statement of qualifications with extensive questions. And so we've tried to tighten that a little bit in order to draw a larger applicant pool.

So that's what we're doing specifically in our office. I've heard from other divisions that they're doing, like job fairs and others, and I don't know if you wanna elaborate.

DIRs attending job fairs and career fairs, advertising positions in multiple languages, having career fairs where they're titled how to get a state job, and partnering with CalHR to try to streamline the process for can candidates. We are required to go through CalCareers website and post all of our positions there. But, it's once the applications are released to the department, we're looking for ways to streamline and make that process more efficient.

Okay. I think Assemblymember Ortega, did you have a question?

Yeah. What I am missing from the May revise is two programs that are actually doing the work that your current department can't do. And those are two grants. One is the Workers' Rights, Workers' Rights Enforcement Grant, and then the California Workplace Outreach Project. Why aren't those included in this budget?

Those are programs that are actually working and making a difference.

Grace Henry, Department of Finance. The May revision is aligned with the Governor's Budget, which does not include any new investments in the California Workplace Outreach Project. And I'm apologize. I'm not familiar with the other one that you mentioned.

This is the California Workplace Outreach Program, commonly known as CWAP, has had funding allocated on a one time basis in annual budget acts over the past few years, and the May revision is consistent with the approach for the 2026-2027 budget.

Thank you. I'm gonna go down some of the other items that we haven't gotten to yet. Under the emerging technologies unit that the LAO raised, and around having a workload adjustment justification, can you just elaborate more on this request? What was your analysis assessment of why you're requesting this without this kind of analysis?

These emerging technologies are emerging very quickly. Well, we are aware that the Motor Vehicles, DMV, has a dedicated unit consisting of 11 positions, focused on autonomous vehicles. So we knew there was, some precedent there statewide.

Didn't wanna necessarily start with 11 because this was brand new to us. There's been a lot of outreach coming into our department from stakeholders, particularly on autonomous tractors in the agricultural community or industry.

And we had dedicated, one position from CalOSHA to that effort and then another Attorney spent the vast majority of their time working on that effort. So we knew two positions was going to be insufficient. So, we thought we would start our proposal with five. And, once we have those five positions filled, have a better understanding of what the workload is ongoing, we can always adjust up or down in the next year.

Thanks for sharing that. Do you know how many positions you have vacant right now?

I don't know that off the top of my head. No.

Okay. I do think that's something you should know. And I know that's been asked many times. And I say that because, you know, there's requests here in front of us asking for more positions that continue to be unfilled, not just one year, but obviously multiyear, and I do think that's very concerning. I do agree there's a lot of emerging, you know, industries and technologies that I'm sure you're all responding to.

I am, agree with the concerns of the LAO around whether or not five is what's, you know, needed to start this new unit when you have so many unfilled positions already.

Grace Henry, Department of Finance. The number of positions that are vacant in Cal OSHA particular is around, ballpark a 100 or so, and, the vast majority of those are going to be more on the enforcement side due to the difficulty with recruitment as it's already gone over with the Industrial Hygienist position, and the other safety health officers like the Safety Engineer Positions.

The as has been noted by the department, the Chief of CalOSHA, Chief Lee, and the Chief of the Division of Labor Standards Enforcement. The Labor Commissioner has they have both put together strategies for how to address these vacancies while there are ongoing classification and specification studies with CalHR, and we'd be happy to follow-up with more information on those efforts as well with your office.

Did you have a comment? Okay. And as it relates to these job openings, I think what you can hear too is there's, you know, not just a frustration but I think there's also an opportunity to work with the assembly, who represent each of us represents half a million people. We do outreach all the time.

You know, if you have vacancies, especially in the areas like the East Bay where you're having issues, the new office that you're requesting funds for that sounds like it's gonna be in Santa Ana, assemblymembers represent those areas and we know the community very well.

So if there's opportunities for us to help share these job opportunities with our constituents, I do highly encourage the agency to reach out to us and, you know, share updates with us outside of these hearings, which I know most of my colleagues don't have the opportunity to hear on this. I'm gonna move on now to another item. A question for the Department of Finance regarding the Labor and Workforce Development Fund.

Given that there's two proposals totaling, $72,000,000, can you share what the status is of the Labor and Workforce Development Fund?

Grace Henry, Department of Finance. The fund balance for the the Labor and Workforce Development Fund has not been changed with the May revision. However, at the Governor's Budget, we were looking in the budget window that the projected fund balance was going to be around $295,000,000. So taking out the those proposals would be.

Thank you. I do have a question. Okay. I'm gonna have a question for another section under the assessments payment via electronic funds transfer.

Can you just share what share of the employers insurers are currently paying surcharges and assessments by nonelectronic means? Do you have any data on the payment breakdowns? I do think that this is an important modernization within your agency and one that I mentioned as well on the other item with the Board of Pharmacy in terms of modernizing our payment systems.

Certainly, it's near and dear to my heart as Chief Financial Officer of the department. We performed a comprehensive risk assessment that identified these incoming paper checks as a risk to the state. And it was also, interestingly enough identified by the State Treasurer's Office. So we knew something had to be done.

This is a multiyear effort that began about three years ago, when we started, encouraging insurance companies and self insured employers to pay, the annual assessment by electronic means, either EFT or ACH, we invoice on an annual basis.

And included in the invoice was a letter encouraging our customers to pay us by EFT and providing instructions on how to do so. We've also updated, our external facing website to allow for that. And we continue to send those letters repeatedly over and over again, to initially get the number of payers, paying by check down, to the point where if an insurance company or a self insured employer paid by check, we would actually contact them.

We would either call them by phone or send them an email and and remind them the preference would be for them to pay by electronic means and ask them what is the reason why they're not doing so. It reinforces, the preference but it also helps inform us on an appropriate path forward.

Some of the insurance companies said they didn't have the necessary authorization to do so. Over the last few years, we've gotten the portion of payers who pay by electronic means up from, in the mid 30% range, to the most recent assessment it was at 89%. So that means 11%, are continuing to pay by a paper check. So we felt the time had come to go ahead and make the changes in statute.

But the statute does allow the director discretion to reduce or waive the penalty or waive the requirement to pay by EFT if the reason if the director determines the reason to be what's the word I'm looking for?

Moving enough?

It's all.

So the director's discretion remains. So we don't necessarily have to have the stick. You know, we we tried to carry it for a while and now we have the thread of the stick but we don't necessarily have to use the stick. But if a payer certainly just simply refuses to then we do have the penalty.

Thank you for sharing that. I'll turn it over to the committee if there's any last minute questions. Okay. Seeing no more questions, we'll go to members of the public. Do you have any public comment on this item, item number seven?

Hello again, chair and members. Kami Peer with NextGen California, in support of the continued investment for the COYA grant program, also in support of a workforce priority that was not included in the May revise. So that's the renewal of the Apprenticeship Innovation Fund within DIR. AIF is a pioneering formula funding model driving scalable and sustainable apprenticeships across California, and it's set to expire this fiscal year.

We urge the legislature to prioritize the AIF renewal proposal submitted by, Senator Becker, and thank you and look forward to this conversation continuing.

Thank you. With that, we will hold this item open. Thank you. We will go now to issue number eight, proposed trailer bill language for the Workers' Compensation Appeals Board.

Good afternoon. I'm Katherine Zalewski, the chair of the Workers' Compensation Appeals Board. Labor code section 5909 requires the appeals board to act on a petition for reconsideration of a decision issued by a workers' compensation judge within sixty days. However, the petitions are filed with the division of workers' compensation and then transmitted to the WCAB once the judge has prepared a report and recommendation addressing the petition. The judge has fifteen days to issue that report.

Under former section 5909, the sixty days began to run when the petition was filed. Any delay in transmitting the case to the WCAB did not extend that sixty day period. As a result, the ability of the WCAB to act on a petition within sixty days was substantially limited. In order to meet the sixty day requirement, the WCAB often issued an interim order granting the petition for further study and then later issued a final decision, contributing to a backlog of cases awaiting final decisions.

Effective 07/01/2024, section 5909 was amended to allow the sixty days to begin when a case is transmitted to the WCAB.

Since that amended version took place, the WCAB has significantly reduced the number of cases in our backlog. On 07/21/2024, that number was 637. As of 05/18/2026 or yesterday, it was reduced to 457. Additionally, the number of cases granted for further study has been greatly reduced since we now have a true sixty day period to consider the merits of each case. This amendment is set to sunset as of July 1.

We're asking that the sunset be repealed and the amended version become permanent. I'm happy to take any questions that the committee members may have.

Thank you for your presentation. We'll turn it now to the Department of Finance for any comment.

Nothing further to add.

LAO?

No concerns with the proposal.

Okay. Thank you. Now, I'll turn it to members of the committee for any comment. Okay. I'll ask one question.

I know this bill removes the sunset entirely rather than extending it to a date certain. Can you just just explain that a little bit more? Why not do a two, three year extension with a reporting requirement versus getting rid of the sunset?

If the sunset comes back or if the start of the sixty day period ever reverts back to when the petition is filed, we're just going to recreate the issue that led to us asking for this amendment in the first place. The point of the amendment was to give the appeals board, as I said, a true sixty day period to act on a petition.

If we go back to having the sixty day clock start when the petition is filed, we're not going to have a true sixty day period because the clock will start when the petition is filed, but sometime will run off on the clock before the appeals board ever gets the petition or even knows that it's been filed.

That's just baked into the system when the clock starts with the filing, but you have that window where the judge has to review and then issue a report addressing the petition. So you actually have different clocks depending on how things play out at the district office level.

A judge may be on vacation or off on some type of leave and not get a report done within the fifteen days. It may take twenty days. It may take twenty five. That eats into the sixty days.

If you start uniformly on a permanent ongoing basis, that clock running as of when the case is transmitted to the appeals board, every case, every party on both sides of the case knows that there's a sixty day window in which the appeals board is going to review, consider, and act on the petition.

We wouldn't be able to have that if we ever sunsetted this provision.

Thank you for thank you for the answer. Now we'll go to public comment. Do any members of the public have any comment on this item? K. So you know when we're gonna go ahead and leave this item open.

We will go next to issue number nine, Department of Human Resources, may revision proposals. Okay. Yeah. There you go. Feel free to introduce yourself and begin your item when you're ready.

Alright. Thank you so much. My name is Sean Hammer, and I am the chief deputy director at the Department of Human Resources. And I am here to present a proposal that's a going to provide a vital service to state employees. Our proposal supports the state's Employee Assistance Program or EAP.

EAP is a union negotiated benefit for all state employees. The new service contract is proposed to be effective 07/01/2026, and it consolidates department level contracts for specific services into a statewide contract. It implements a hybrid pricing model with lower per employee per month rates based on actual services utilized, which will result in overall annual savings to the state. CalHR and departments like CDCR, Cal Fire, and CHP, all of our EAP contracts were set to expire 06/30/2026.

So this was a good opportunity to consolidate and achieve some state some statewide savings, for all of us.

The one position we're asking for in this proposal will create a dedicated program manager, which is also necessary for administering the contract and supporting first responders with the high impact public safety departments. So just a few other highlights. You know, the state is required to maintain a continuous EAP program under executive order B 96-82, government code section 19816.16, and applicable MOUs. The current service contract is 4,100,000, and that is with Magellan.

That is a contract that's expiring in in June 30th..

That covers basic counseling services at a fixed employee rate pricing model regardless of utilization. The high impact public safety departments such as CHP, Cal Fire, CDCR, and Parks and Rec, they currently have separate contracts that go beyond the standard Magellan contract for specialized employee assistance services such as critical incident stress debriefings, which is, again, for their first responders. As I mentioned, their contracts are set to expire June 30.

If the state renews the statewide contracts on July 1 as is with the fixed employee rate model and the coverage continues to just include the basic services. It's gonna cost the state 27,000,000.

But with CalHR entering the new contract effective July 1, the contract consolidates the services into one statewide service contract that covers all of the level of services state employees need. It transitions from the fixed employee rate pricing model to the hybrid model, which consists of a reduced baseline employee rate for the core services, and then it will utilize base pricing for the clinical services.

The new contract includes a maximum annual expenditure cap of 16,700,000, which is in comparison to the 27,000,000 estimated with just the renewal cost. And it assumes, CalHR's project projected utilization rate of 15%. The actual service cost could actually be lower if the utilization is below the 15% that we have projected.

For good fiscal stewardship, the contract includes contractor accountability provisions that include performance guarantees, tied to key performance indicators and formal reviews that will occur every six months with any financial penalties for nonperformance to be, refunded directly to the state. The staff program analyst position is nonsupervisory. That is included in our request, and that is going to support the statewide engagement unit in the CalHR benefits division. The estimated annual staff benefit cost is a $154,000.

This position will be the dedicated program manager to oversee the vendor performance.

They will also coordinate services for first responder departments, monitor utilization trends, and ensure contract compliance statewide. So for just for reference, CalHR's current vacancy rate is at 8%, and we're actively recruiting employees, to fill vacant positions, within the benefits division. We respectfully, request support for this proposal, and that concludes our summary, but we are open to any questions that you may have.

Thank you. Department of Finance.

Hi. Joshua Winters, Department of Finance. Nothing to add, but we are in support of this proposal.

LAO?

Nick Schroeder with the LAO. We've reviewed the proposal and raised no concerns at this time.

Questions from members? No. We don't have any other questions. Thank you. Thank you.

Any public comment on this matter? Seeing none? Thank you.

Okay. Wow. How's that room was? Wait. I wasn't here.

Can I recall that? Just kidding

Okay. We're now on issue item number 10. Thank you so much for your patience.

California Department of Technology, feel free to introduce yourself and begin when you're ready.

Madam chair, members of the committee, my name is Miles Burnett. I'm the chief administrative officer for the California Department of Technology. I'm going to present our two May revise well, two of our May revise issues before handing over to for item number 11. The first one is Poppy, California's digital assistant.

CDT requests a $1,000,000 budget augmentation in the technology services revolving fund for fiscal year '26-27 to support the scale up and ongoing operation of Poppy, California's digital assistant as a shared statewide platform for broader adoption across state departments.

Poppy is a secure centrally managed gen AI service provided by CDT to support state of California employees. It will allow staff to access approved large language models, excuse me, through a state managed environment with uniform security, compliance, and integrations. Built by state staff for state staff, Poppy acts as an intelligent assistant to automate routine tasks, support information discovery, and enable secure collaboration using internal and approved external data sources.

By centralizing the infrastructure, configuration, security, governance, and ongoing model management that individual departments would otherwise need to build on their own, Poppy substantially reduces the high initial and ongoing implementation costs that currently impede gen AI adoption. This platform will contain will create an efficient, effective, and secure Gen AI environment for state departments aimed at significantly enhancing government operations while protecting state data and avoiding duplicative efforts and expenses.

Finally, it directly mitigates data related risks by operating on the state's network under enterprise security standards with governance, logging, and privacy controls already established for participating departments.

Thank you. Next, we'll go to the Department of Finance for any comment.

Ryan Bender, Department of Finance. Nothing to add this time.

Thank you. LAO office?

Xin Ma with the LAO. We have, no issues to raise with this proposal.

Okay. Thank you. Members of the committee, do you have any questions on Poppy or any of the items? Okay. I have a few questions about Poppy.

Can you just talk about any feedback on this tool? I know you mentioned it was for state agencies to better increase efficiencies. What has been the feedback? Do staff like using this?

Yes, ma'am. I'm going to invite up Chaeny Emanavin. He's a deputy chief's, chief state technology officer.

Hi. Good afternoon. Sorry. Hi. Good afternoon. I'm Chaeny Emanavin, deputy CTO. To answer your question, we have it in what we call early release. So we've artificially limited it to only 100 participants per department just so we can make sure that we don't overwhelm the system. Our initial feedback, through surveys and through qualitative and quantitative research has been very, very positive. Staff have been using it for the work that you would expect people to do day to day, taking large datasets and summarizing them.

We've heard anecdotally that it has helped some research that normally takes about forty hours. It's got it down to about eight hours because people haven't had to hunt and peck for data sources, and it's normalized those data sources. So we've been really pleased with this, and it's given us the feedback that we need to be confident in scaling this up.

Thanks for sharing that. So you said a 100 per agency are using it. Have you, expanded this rollout to assembly?

We have not yet. We wanted to make sure, it's a small enough implementation. We wanted to make sure that we didn't crash it. So we have about 3,000 folks in there right now from about 70 departments, which is a sample that we felt confident scaling up. And then when we are able to scale it up, we'll be able to open the doors more widely.

Okay. Is there, a timeline when you plan to roll it out for every, state agency and every, person working at the state?

Yeah. Absolutely. I'm happy to report that we're the universe hopefully doesn't strike me and everything, but we're slightly ahead of schedule. So the plan for release July 1 is still on track for that larger release.

Of this year?

Correct. In a few months. Okay.

Yeah. And I know you're still, working out this, you know, test of Poppy and with your smaller group of folks. Can you just share how Poppy is handling sensitive data between agencies that handle, you know, that information? There's obviously a lot of things happening right now. How are we protecting data, that's being shared through Poppy?

Yeah. Excellent question. It was one of the founding principles when we built Poppy was to make sure that it stays within our state boundaries. So it's within the data boundaries that we've created for all data. So when someone puts data in Poppy, the default is they're the only human on earth who can see that data.

Then you have the ability to share it with another individual or with your department or with your office or between departments. So an individual person has complete control over who sees that data. However, you cannot share it outside of our state boundaries. You basically have to have a ca.gov email address in order to be able to participate.

Okay. Thank you. I look forward to trying Poppy

Absolutely.

In a few months. Feel free to continue with the rest of your items.

Second May revise item. Office space facilities request. CDT requests a budget augmentation to consolidate all its staff at its White Rock corporate campus in Rancho Cordova to improve operational efficiency and effectiveness and address physical security needs at its current Ziggurat location. CDT requests a $999,000, augmentation in fiscal year '26-27. $878,000 of that is in, the technology services revolving fund.

$113,000 in general fund and $8,000 in the cost recovery, centrally, basically, our pro rata share. That in fiscal year '27-28 is $555,000 ask with $466,000 TSRF component, 84,000 GF component, and a $5,000 pro rata component. And that will have, that component will have annual increases due to security costs and and lease renewal costs of that nature that wrap up.

Okay. Thank you. Department of Finance?

Yeah. Ryan Bender, Department of Finance. Just wanna highlight that the main point of this proposal is relocating staff that have the from the Ziggurat to their centralized location at Rancho.

Thank you. LAO?

We have no concerns with the proposal. Okay.

Members, any questions on item number two? Okay. No questions from me. We can go to the next one. To the Middle Mile Broadband Initiative.

Welcome back.

Thank you. Thank you, chair and members. Mark Monroe, deputy director for the Middle Mile Broadband Initiative at CDT. We're developing an 8,100 mile network to bring broadband to communities across the state to unserved and historically unserved and underserved communities. We will be operational on the first segment of the network, you know, this July.

So we will be operational in the 2026-27 budget year. We have, as the agenda notes, we have, two, pieces of budget bill language, in our May revision proposals. We have, some reimbursement authority that we're requesting. Some may be tracking that we've been able to, remain in scope and in budget by developing a number of partnerships. In most of these cases, we would we we share construction costs, and we would transfer our money to the partner to build.

But there's a couple cases where the partner preferred to use the state's existing construction contracts to build. So we need to be able to have authority to receive those reimbursements, and those, will be estimated to be about $25,000,000.

Thank you. Department of Finance?

Department of Finance, nothing to add at this moment.

Thank you. LAO?

This is just a technical adjustment allowing the department to recover, their cost for the joint build projects, so no concerns to raise here.

Okay. Members of the committee? K. I have one question, just for this reimbursement authority. Can you just explain why the December 2028 liquidation deadline is needed if construction is supposed to be completed in December 2026?

Yeah. So originally, when the originally when the project started in 2021, the the goal was and it was federally funded. It was supposed to be done by the 2026. The current we currently expect we kind of announced this last January that we expect some segments to not be completed until 2027. So in terms of the the governor's budget proposal for for extending that authority, it's just to make sure, you know, we're we're gonna have it all under contract.

We pretty much already have it all under contract. Anyway, but we're just looking at, the unlikely scenario that, say, next January or February, we're trying to finish certain segments, and it makes sense to move money between some contracts. Under current authority, we wouldn't be able to do that, and this would allow us to do that.

Okay. So you're budgeting for extra time so you don't have to come back to this budget

Correct.

I'm just kidding. No. I understand. Thank you. I don't have any more questions on this item.

Now we'll do public comment on this item, if there's any public comment. Okay. Seeing none, go to your next item.

Alright. And the other, the other item is also, budget bill language. It's provisional authority. As I noted, we're gonna be, operational in '26-'27. Expect annual revenues to cover annual costs.

CDT anticipates that Golden State Net, our third party administrator, GSN. We expect them to generate at least $30,000,000 in revenues, in the '26-27, budget year. However, GSN has noted that because, much of the network is still under construction and it's not entirely clear what will be done by the end of the year, that the delays in completing the network or the uncertainty about what will be completed will, may delay the collection of revenues. And so, this is really just intended to be a backstop.

We need, know that we have contracts, for for operating the network, throughout '26-27 that need to be paid.

We expect to pay them with the revenues from those sales. But in the event that some of those revenues are delayed, we're asking for provisional language that would allow Department of Finance to increase CDT's budget by up to $30,000,000, which is the amount of revenues we expect to collect. So it'd be whatever subset of that that, we were unable to collect, and then the Department of Finance would be able to increase our authority.

Okay. Thank you. Department of Finance?

Yeah. Ryan Bender, Department of Finance. Nothing to add at this time.

Okay. LAO?

Sitting on with the LAO. We recommend rejecting this proposal. This proposal provides broad spending authority without sufficient legislative oversight. If the department ultimately ends up requiring additional funding to support network operations, we recommend that the administration pursue funding through the budget act process. This process includes statutory parameters and provides an opportunity for legislative review and oversight.

Thank you.

Thank you, LAO. Members of the committee? Okay. Would you like to respond to the LAO recommendation to reject your proposal?

Absolutely. Absolutely. So, I think, and maybe I misunderstood, but I think that's what we're trying to do is take it through the budget process. So we know we have contracts to operate this network starting in July. And so we know what that's going to cost.

Right? And so our ability to fund that for the full year depends on CDT's ability to collect $30,000,000 in revenues. And so, if the, if this weren't provided now, these are six these '26-27 costs. What this is the we feel this is the appropriate time to come look for '26-27 authority, should we need to be able to pay those costs in the budget year.

The other alternative I see, and this is a misunderstanding, would be to to wait and come back next year for funding.

But we know we have these contracted operating costs in '26-27 that have to be paid.

Okay. So the $30,000,000 is just based off of really what you expect to collect.

Correct.

I also just add as Department of Finance, that is why we proposed this as contingency funding and not an actual budget request itself. This is just in the event that we lack sufficient funds, and it does involve legislative notification to the JLBC in this request in this language.

And is this contingency funding in addition to what we heard earlier in the year? This is in addition, just to clarify.

The requests in the beginning of the year weren't for any additional funding. That was to extend some of the encumbrance deadlines that we had and also, I believe, to allow the revenue collection fund more authority over how the revenues that we collect are spent. We this funding request right here is because the funding the revenue picture is isn't fully certain in '26-27.

So this is just to cover any missing areas if we if our revenue projections don't come to what they are, what they need to be.

Okay. Okay. And then, you know, I'm also on Communications and Conveyance. Are you planning to come before that policy committee to provide any updates on this?

If we are invited, we will provide updates to anybody who asks.

Okay. Maybe we'll require it. So but I know you've been there already. But, I don't have any more further questions on this item. We'll now turn to public comment.

If there's any items or any members of the public who wish to comment on this item. K. Seeing none, we will hold this item, open. Thank you. Alright.

We are going to issue number 11. So with the California Department of Technology. We're gonna go into the budget bill language proposal for the American Rescue Plan Act Coronavirus Capital Projects Fund. Feel free to begin when you're ready.

Good afternoon. Matthew Perkey with the Department of Finance. We'd like to present this item, because it's pretty technical in nature and involves more departments rather than CDT. To provide some background context, in August 2021, state of California was allocated approximately $540,200,000 by the Federal Government under the American Rescue Plan Act's Capital Projects Fund Program.

In April 2023, the US Department of Treasury formally announced approval of California's plan to use its award the total award on the Last Mile Broadband Expansion Program at that's operated by the California Public Utilities Commission.

This program and this investment will increase access to affordable, reliable, high speed internet to over a 120,000 households across the state. Subsequent to this acceptance of our proposal, the CBC opened its first application window. And since then, they've awarded over 70 Last Mile projects across the state funding from California's CPF allocation. Currently, however, California has only drawn down or is in the process of drawing down about 11% of its federal allocation, about $60,000,000.

As such, and with the federal completion deadline for these Last Mile projects being 12/31/2026, the last day of this year, this calendar year.

Excuse me. Finance is proposing to add control Section 11.94 to the '26-27 budget act to provide finance with the necessary flexibility to ensure California maximizes its use of federal funds. Please note that this control section is based off control Section 1196, previously approved by the legislature and the administration, and previously utilized by the Department of Finance to mitigate risks regarding other types of federal funding related to COVID-19. And with that, I'm happy to take any questions.

Thank you for your presentation. Let's turn to the Department of Finance for any comment.

Department of Finance, nothing to add at this moment.

K. LAO?

We have no concerns with this proposal.

Okay. Members of the committee? K. Seeing none from the committee, and thank you for, you know, stating that upfront. That was one of the questions I was gonna ask you, was how we plan to, draw down the additional funds, given that the deadline is at the end of the year.