Senate Budget and Fiscal Review Subcommittee No. 5 on Corrections, Public Safety, Judiciary, Labor and Transportation

Thank you. That's a very good idea. The Senate budget subcommittee number five on corrections, public safety, judiciary, labor, and transportation will begin in thirty seconds.

By when?

The Senate budget subcommittee number five on corrections, public safety, judiciary, labor, and transportation will come to order. Good afternoon, everyone. We are holding our committee hearing here in the capital, and all members are actually present, here in Room 12. So we're able to establish a quorum. Mister Diego, would you please, call the roll?

Senator Richardson?

Present.

Richardson present. Senator Durazo? Yes. Present. Senator Sayardo?

I'm here.

Present.

Thank you. Today's hearing will cover the governors may revision proposals across corrections, public safety, judiciary, labor, and transportation. We will be joined by representatives from the Department of Finance, Legislative Analyst's Office, and departments and agencies covered by the subcommittee number five. This is an informational hearing, and we will not be taking any votes today. This hearing will have three parts.

Part A is labor, part b is public safety and the judiciary, and part c is transportation. We will take public comments after each part of the agenda. So normally, this committee, we don't take public comments till the very end. We will be taking public comments in each section, and we're looking forward to hearing everyone's perspective on the issues before us today.

To ensure we have time for everything on today's agenda, we're asking presenters to keep their testimony under five minutes. And I would also like to ask my fellow committee members that we want to make sure our questions and rebuttals are concise as well. Do any members have anything they'd like to add before we begin? No?

Do we do two and a half minutes to one five?

We'll see. How's that sound for an answer? So for that, we're going to begin on part a, which is labor. Issue number one, covers the governor's May revision proposals, as I stated, regarding labor and public employment. First, we will hear from the various departments, and, please come forward.

We have with us today the Employment Development Department, the Public Employment Relations Board, the Department of Industrial Relations, Department of Human Resources. We might need some extra chairs here. The California Public Employees Retirement System, CalPERS, and also California Teachers Retirement System, CalSTRS. With that, why don't we start with EDD, the Employment Development Department?

Thank you, madam chair and members of the committee. I'm Caleb Horrell, admin deputy for EDD. There are, several items in the agenda for EDD, which I will, go over. The first item is the EDD Next, document management system proposal, which requests 20,000,000 in '26, '27 funded by the general fund and the disability insurance fund to continue the document management system project, which is a reportable project under the overall EDD Next modernization effort.

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, legacy system retirement.

Additionally, the proposal includes provisional budget bill language, to ensure that funding is only made available to the department upon approval of the special project report by the California Department of Technology. The second item that's included is the UI loan interest update. The '26, '27 governor's mayor vision includes an updated interest payment amount from the governor's budget estimate by $6,100,000 bringing the total estimated payment in '26, '27 to $668,300,000 The third item is our DI program admin and benefit adjustments.

For '26, '27, EDD is requesting an increase of approximately 4,300,000 from the disability insurance fund for updated administrative needs due to changes in workload estimates and time factors. Additionally, our disability insurance and paid family leave benefit estimates are being increased from our prior, estimates by 2,300,000,000 in '26, '27, and in the current year by 1,300,000,000.

These increases are, for the most part, being driven by increases in weeks compensated, claim duration, and the average weekly benefit amount in both of those programs. The fourth item in the agenda is related to our Workforce Innovation and Opportunity Act program. For '26, '27, EDD is requesting an increase of approximately 74,300,000 in the consolidated workforce program fund for state operations and a 95,600,000 increase to local assistance in that same fund. These increases are to align the WIOA funding with estimated federal allocations.

The next item in the agenda is related to our UI program admin and benefit adjustments.

04/ '26 '27, EDD is requesting a decrease of approximately $32,000,000 from the unemployment administration fund due to updated administrative needs, tying to workload estimates and time factors. Additionally, in the UI fund, our UI benefit projections are estimated to increase by approximately 65,700,000 in '26, '27 due to slight increases in claim duration. In the current year, in '25, '26, UI benefits are estimated to decrease by approximately 308,000,000. The next item in the agenda is related to the school employee fund benefit adjustments.

In '26 '27, EDD is requesting an increase of 12,300,000 for the SEF benefit payments.

And in '25, '26, EDD is requesting an increase of approximately 8,500,000 for SEF benefit payments. Increases in both of those years are primarily being driven by increases in the average weekly benefit amount in that program as well. The, last two items is, the emergency medical technician, reappropriation. This proposal requests a reappropriation of 883,000 of general fund, which was previously appropriated in '22, '23 in order to continue the targeted emergency medical technician training program.

And the last item, which is a technical correction item, is to align budget bill language with the proposed general fund reversion of 70,600,000 related to EDD Next that was already included in the '26, '27 governor's budget.

And that is the end of of the overview for those proposals. Myself and my colleague, Ajit Gurn, are here and, happy to answer any questions you may have. Thank you.

LAO and Department of Finance, do you have any objection if we go through the four areas and then you give all your comments, or would you rather do each one their section? What's your preference? What are you prepared to do?

Chaz Alamo with the LAO, it's your preference. We're happy to respond however you'd like us.

Is there any objection to us going through them all? No.

I mean, that's fine. That's your preference.

Okay. Yeah. So what we're gonna do is we're gonna go through all of your testimonies first, and then we'll give LAO and Department of Finance a chance to recap. You don't think it'll be too much? You're okay with that?

I'll speak for panel a. I'm not sure how my colleagues will manage for panel b and c, but for panel a, that's fine.

Okay. Sounds good. Well, with that, we'll move to the public employment relations board.

Okay. Good afternoon. My name is Jarell Sorensen. I'm the deputy executive director. There are two items on the agenda for the public employment relations board.

The first one is AB 288, which expands PERB's jurisdiction, to authorize workers, to petition PERB, to protect and enforce, their rights under the NLRB. The bill authorizes PERB among other things to decide unfair labor practices, pursuant to a specified timeline in order all appropriate relief, for a violation of those, civil penalties as prescribed.

The governor's budget includes, five point, 5,000,000 general fund in 22 positions in fiscal year '26, '27, and about 7,000,000 general funds, and 30,000,000 positions in fiscal year '26, '27, and 31 positions in '28, '29, and ongoing to implement AB 288. But there is, due to current litigation, regarding this matter, there is an injunctive relief, that prevents us from implementing 288.

And in response to that, we've asked for a reduction, to the governor's budget, request of 5,000,022 positions in fiscal year 2627, and 6,500,000 and 31 positions in '27, '28, and 31 positions ongoing.

The remaining 500,000 required in '26, '27, and 2728 will support litigation related workload, and there are the circumstances in which cases can move forward. The other item on the list is, AB 1, which extends PERB's jurisdiction to include, employees of the legislature. The legislature employee relations act provides employees as specified the right to form, join, join, and participate in the activities, employee organizations, and their choosing, and for the purposes of representation all matters, of employer employee relations.

The bill grants PERB jurisdiction to make initial determinations as to whether charges of unfair practice are justified and to grant specific remedies. PERB is also required to determine the appropriate bargaining units, and to, prohibit.

And then basically PERB's jurisdiction will include 1,900 new employees. And then at that time we'll determine how many bargaining units will be necessary. Based on preliminary historical, averages. When you look at 2003, for the court interpreters, there was about 1,800 in California, which we estimate with that new jurisdiction result in about average of 10 to 15 new unfair practice charges per year.

Plus the adjudication of representation petitions and impasse PERB is requesting funding position for authority for one non attorney legal support position in the labor relations specialist classification.

We have implemented a plan to hire a labor relations, practitioner that could assist in non attorney case processing, and the intent is to become more efficient in staffing hours and to make that position eventually permanent. And I'm happy to answer any questions you may have. Thank you.

Thank you. Department of Industrial Relations. Sir, you can stay. I think it is looking at it, it might be a little much. So we'll do these three, and then we'll pause for comments.

I was ambitious in thought with our time. Yes. Go ahead.

Good afternoon, madam chair, members. My name is Andrew Collada. I am the chief of administration here at the department of industrial relations.

Is the mic closer? We can't hear you.

I'm here to present on five proposals, budget proposals, and two, items for trailer bill. First item, the office of the director legal unit, reclassification proposal. The Department of Notarial Relations is requesting 388,000 annually from various special funds to reclassify eight existing vacant positions within DIR's office of the director of legal unit. This proposal will strengthen management capacity in both North And Southern California and establish a new Southern California office presence aligned with actual workload. The second item DIR is requesting funding for two continuing IT projects.

The first project is the electronic adjudication management system, modernization project with the depart division of the, workers comp division of workers compensation. The department is requesting 44,100,000 one time in '26, '27 from the labor and workforce development fund to continue modernization of the division of workers compensation EAMS program. 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.

The request includes a technical reappropriation of unencumbered prior year funds to ensure continuity of project activities through 06/30/2027.

The second, IT project, DIR is requesting 28,400,000 in 2627 from the labor and workforce development fund to continue the Cal OSHA data modernization project. This project will replace current outdated paper heavy processes with a modern case management system that improves efficiency, data quality, and compliance with state and federal requirements. The project is intended to improve Cal OSHA operations and provide more effective service to California workers and employers.

The third item is, DIR is requesting, 1,800,000 in '26, '27, and five positions from the occupational safety and health fund to establish a new CalOSHA emerging technologies unit focused on workplace technologies such as artificial intelligence, robotics, and autonomous equipment. This proposal will support the creation of a dedicated team that will enable CalOSHA to proactively identify and address workplace risk driven by emerging technologies.

The fifth item, is the, department of industrial relations is requesting a technical re appropriation of 2,300,000 in existing general fund authority to continue administration of the California Opportunity Youth Apprenticeship Program or COIA by aligning DIR expenditure authority with a grant liquidation period. Coia supports youth apprenticeship and pre apprenticeship opportunities. Next two items are trailer bill, items. The first is the assessment payment via electronic funds. This proposed, trailer bill, language will require payment of the annual employer assessment by electronic fund transfer.

The proposed, trailer Bill Language will create efficiencies for DIR related to payment processing through EFT as compared to paper checks. And the vast majority of insurers and self insured, employers already transmit their payments via EFT. The second trailer Bill Item is, the division of workers compensation administrative director salary amendment. The trailer bill will, language will remove a statutory cap on the salary of the division of workers compensation administrative director.

The cap exists only for the DWC, admin director and not for the other administrative directors over programs within DIR.

So this change will bring DWC leadership in alignment with other DIR leadership. And that concludes.

Thank you. So, we'll go for do we normally, we do LEO or Department of Finance first? Yeah.

We do. We can do financing right now.

Okay. So we'll start with the Department of Finance, and we're gonna start with the Employment Development Department, Public Employment Relations, and department of industrial relations. I'm sorry. My eyes were bigger than my belly. I just thought we could knock it all out.

But as I started looking through it and hearing you, I'm like, it's probably not gonna be feasible. So if you would take on these three, and then the subsequent ones, we'll do one each.

Hi. I'm Cynthia Elmore, Department of Finance for EDD and the Public Employment Relations Board. I have no additional comment. And for, Department of Industrial Relations, I would defer to my colleague.

Okay. No. Allison Hewitt, Department of Finance. No additional comments for these items, but we're available to answer questions for these three departments.

Thank you. LAO?

Good afternoon. Chaz Alamo with the LAO. To start with the employment development department, the May revision proposals from the governor are largely customary adjustments that we see each year. They fall into two categories. Programmatic spending adjustments for the school employees fund, for a small change to the UI loan amount, a change to the UI case load, and a change to the case load cost for the disability insurance paid family leave program.

The other bucket that they fall into are adjustments for this the department's EDD NEXT technology project. The one item I do wanna highlight is the first item on the list, the document management system, BCP. DMS is a component of the state's EDD Next Technology Project. Oftentimes, we expect as the legislature and as staff to see a single BCP for a technology project each year.

We're seeing two this year and that's a bit unconventional, but it is because the state's budget calendar and the state's technology calendar don't always line up.

There was a development after the governor's budget was released related to EDD Next and this work stream, the document management system, that to move forward, at this time, the administration is proposing a May revise proposal related to it. We don't have any issues with the proposal, but just wanted to provide some clarity on that. The only other issue for EDD that we would comment on is the adjustment for the DI, paid family leave benefit costs.

As you know, Senator Durazo, SB 951 changed the program substantially increased worker wage replacement rates for both disability insurance and paid family leave and removed the the statutory cap on the wage contributions. And as a result, the department has sort of is better learning now how those program changes have changed take up and benefit costs for for DI and paid family leave.

There is a large current year adjustment and a, somewhat larger budget year adjustment, just north of $2,000,000,000, which is relatively substantial. And it just reflects the administration's sort of ongoing assessment of those SB 951 changes. I would point out that with SB 951, the state's DI and paid family leave program is now paying about $15,000,000,000 a year in annual benefits. And that's about three times larger than the state's UI program. So just to put these in comparison.

I'm told by my colleague that we have no additional comments or concerns with the per proposals. So with your approval, I'd move on to my comments for DIR.

Sure. Great.

The DIR may revision proposals are similar in that they are technical adjustments in most cases. We reviewed the two salary adjustments, find no issues with those two. There are two technology proposals. These are ongoing DIR technology modification improvements that we've been tracking for several years and don't see any red flags with. So I have no concerns with those proposals.

The one issue that we would like to raise is the proposal to establish a new emerging technologies unit at DIR. This would be several staff members to evaluate potential Cal OSHA health and safety standards and issues related to the use of AI driven systems that work alongside workers in the workplace. Typically, we'd ask for a workload justification for such a BCP, but given its nature as an emerging technology, there may not be a workload justification at this moment.

So the administration is in essence asking the legislature to adopt the same foresight that this will become a major workplace issue. And it's to your discretion to agree or disagree with them on that.

I think our office would recommend that in a year or two, we revisit the unit to see whether the workload is justified. Perhaps it's grown, and the unit could use additional resources, or the opposite could be true. So just flagging that, and happy to take any questions on those proposals. Thanks.

Thank you. We'll start off with Senator D'Arousso. Will you yeah.

Thank you, madam chair. Thank you to everyone. Just a a couple of questions on the EDD is and these are not complicated. I'll get to some more complicated ones. It began the EDD next began when we're in the pandemic era, and we're facing the the backlog.

So what measurable improvement in claim processing time, can you can you report, particularly for English limited English proficient claimants? In other words, what will the $20,000,000 produce, and what's the time frame for that?

Thank you, Senator, for that question. This $20,000,000 will help process the paper claim applications faster and in giving benefits to the to those claimants. So you talked about, people who are not proficient in English. So this this this document management system project is replacing a legacy technology implemented twenty five years ago. And with this new technology, we will be able to scan the documents coming in any language and read the text written on that document quickly, efficiently with very high accuracy.

Okay. Great. Thank you. Keep that going.

Thank you.

Thank you. With regards to the UI insurance loan, We're at 670,000,000 interest payment. So that's about 2 thirds of $1,000,000,000 and interest alone. So what is the administration's response to stop the bleeding rather than continue, you know, the interest the interest true ups?

There's no plan included. Oh, sorry. Cynthia Elmore, Department of Finance. There's no plan included at May Revise for, paying down the debt. But we expect continued discussions with the legislature.

See, you don't you don't have a specific plan. Is there a plan to do a plan?

Yeah. There's nothing specific in the budget, but the labor and workforce development agency has been made aware that they will be assessing different options for paying down the loan and dealing with the imbalance in the fund.

Mentioned with regards to disability insurance, does SDI have a demographic and geographic breakdown of the growth of utilization, especially low wage workers who are finally using the benefit at rates closer to their share of having contributed?

Yeah. Thank you for the question, Senator Durazo. We definitely appreciate that question, and we are actively working on pulling that demographic data. I think what has been previously shared is due to some of our existing system limitations that does create quite a bit of workload to do that, but we are actively working on it and expect to be able to produce that. I think our hope is by fall.

Okay. Thank you. With regards to PERB, their caseload is already strained. So this is with regards to the unfair labor practices adjustment. If the legislature accepts this reduction, will PERB functions be deferred?

Is there a backstop if the caseload comes in higher than you assumed?

We're hoping with the addition of this position that we're requesting, it will assist in some of those processes and intakes. So we're anticipating that it will provide some relief. We do have alternative plans in place to address some of the caseloads. But as you said, there has been a natural uptick in the last couple of years in terms of filings and requests for services.

And so we do have some additional relief coming through another AB position to hopefully absorb some of those caseload processing, but we do recognize the concern that you bring to our attention.

So with regards to if the caseload comes in higher than you assumed, what's the plan or the backstop?

The plan is to use all resources available as is. If we do find ourselves in a position where we do need additional resources, we will reevaluate at that point in time if a request is needed to put in for additional positions related to it. At this time, we think that in our initial analysis the position we're asking for should be sufficient for the regulations associated with this. But it's hard to estimate what the actual impact will be once the statute is implemented.

Thank you. Just jumping to the emerging technologies unit, AI driven productivity, surveillance, and algorithmic scheduling, pace of work tracking are already all examples that are already harming workers. Will this unit have the authority to act on those technologies, and how will you engage with worker employee organizations on it?

Give us a moment. We will have somebody respond to your question.

I guess we're waiting for you.

Allison Hewitt, with the Department of Finance. Senator Durazo, if you don't mind repeating your question. Thank you.

Sure. I was saying that AI driven productivity surveillance and algorithmic scheduling, pace of work tracking are already harming workers. So will this unit have the authority to act on those technologies, and engage with employee or worker organizations?

Yeah. So thank you for the question. Yes. So this unit is intended to address these emerging issues through having people who have expertise in this area and can assist us with drafting appropriate regulations that help protect workers and allow employers to utilize this technology. So it's both.

It's to enable employers to use this new technology and also to make sure that they do so in a safe way through both doing regulations and also during the pendency of the process of the regulation, assisting employers with obtaining temporary variances from our regulation so that they can safely use the new technology.

Right. We hear a lot of stories about the damage that's being caused, right, in the workplace and the harm it's causing in the workplace. So do you have included in your plan a proactive approach with worker organizations so that you can receive information ahead, or go to, you know, to people who know what's going on in the workplace? I just wanna make sure there's engagement with worker organizations.

I'm not certain if the BCP touches on that aspect. However, there was envisioned a person who would be at the top of this unit who would be engaging with stakeholders. That was part of the vision so that others who are busy within Cal OSHA are not taking on that role. We asked for a specific higher level position that would be the person doing the engagement. Okay.

So I assume that means the unions included as well.

Yes.

Okay. Thank you very much. And just one more on the COYA, on the career opportunity youth apprenticeship, which I'm personally very proud of. Thank you all very much. I just wanted to get a sense of, you know, the number of people, what you could tell me about the progress that's been made about young people going through this opportunity youth apprenticeship program?

Sort of a mini report?

I do. Hi. Jamie Mather, Division of Apprenticeship Standards within the Department of Industrial Relations. There have been three rounds of COYA so far. Round one has a performance period through December of this year.

Round two through December of next year, 2027. And round three through December of, or through March 2028. I apologize. We're just finishing up round one. It'll end in December.

So these are preliminary numbers. But at this point, there's been 816 opportunity youth served to date for round one. Round two is currently in flight, and 67 opportunity youth have been served to date, though we have 950 participants projected to be served. And round three was just announced on April 30. So we're doing all the contracting for that, but we have 1,424 participants projected to be served through that grant.

Okay. Anything else you wanna add to the progress?

We're currently collecting data on the effectiveness of the grant program, and we're happy to share that data when we have finalized data.

Okay. Great. Thank you very much. We didn't get to PERB, right?

Yeah. Okay. Thank you all. Thank you all very much.

Senator Seyarto.

Thank you very much. Let's go back to UI debt. One of my favorite topics. And thank you to Senator Durazo for clarifying that we don't have a plan. Last year, I think we had the same hearing and we asked for a plan, and we still don't have one.

So I'm gonna give you one. Here's the plan. We got $12,000,000,000 we didn't expect to have. We use $16,000,000,000 of it to pay down the UI debt, and then we have $220,000,000 of interest payments that we don't have to make anymore. And we can devote that to either the principal, or we can use that for other parts of the budget that we need it for.

When we have more money than we expected, what is, you know, the administration has come out. We had $25,000,000,000 apparently. So half of it went to education, and then the other half, the other 12, went here, or is available, basically. Why isn't there a plan to pay down this godawful debt? Because this $660,000,000 in interest is just money going out the window.

And then my second question for you is, the principal that is being paid by our businesses, how much is that per year that our businesses have to share to pay off that pot of money?

I'm Allison Hewitt, Department of Finance. I'm not in a position to speak to kind of the broader budget architecture. There have been projected deficits going out. There are still projected deficits in the out year, so there are some initial actions the administration is taking to shore up our reserves in the meantime.

There is, as my colleague shared, the Labor and Workforce Development Agency will be looking at options to pay down the UI principal and address kind of the ongoing structural deficit that continues to exacerbate the outstanding loan balance.

So I would flag that as well. In terms of what the impact to employers is, so if we look at tax year 2026, based on the outstanding debt, or sorry, based on the kind of federal unemployment tax act impact of that, it's estimated at $105 per employee, and that is anticipated to generate revenues of roughly $2,000,000,000. And that would be collected next year. That's for the current year that we're in.

So the businesses are paying $2,000,000,000, they're sharing and paying $2,000,000,000 a year to try to draw down this debt.

That is the mechanism that exists when states have outstanding debt.

Right. Right. Right. Right. Okay.

So I would like some serious consideration given to making a large dent in the UI debt that we have so that we can draw down that interest, but also start giving our businesses some tax relief from what they're paying per person, because that does translate into how many employees you wanna have. Eventually, you don't have enough money to hire more employees because you're paying all this debt. We should have paid this off many years ago and we didn't.

I think we can all call that a big mistake. So we'd like to move on to June.

Madam Chair, is there a way to ask a question related to that or do we waive?

You can, yeah. You can. Through the chair.

Yeah. Yes. Senator Durazo.

I just wanna ask the LAO office. Isn't one of the factors contributing to this debt the ongoing lower end payments made by employers and businesses as far as contribution? There are several factors, structural, and several issues. But isn't one right now the historic payments at the very low end compared to other states?

Senator Durazo, I'm Chas Alamo with the LAO. The state has long held a UI tax system that was insufficiently calibrated to generate the level of payroll taxes from employers that are needed to build up a reserve so that the state can withstand a downturn. Yes. That's how I would characterize it, but I think we are speaking the same thing. About a year and a half ago, our office released a plan to pay off the UI outstanding loan.

And importantly, to address that long term imbalance in the tax system. One of the key points that we put forward in the plan is that we could take steps to pay off the $20,000,000,000 loan today. We could do that through a mechanism as Senator Seyarto has mentioned or another. But the problem with that single step is that tomorrow, we would have an outstanding balance with the federal government, because of that structural imbalance in our tax system.

So it is imperative that when the state endeavors to reform the system, it takes both actions.

That it refinances or pays down the outstanding federal loan, and it also fixes its own tax exemption at the same time. Otherwise, we find ourselves eighteen months or three years from now in a situation where the fund is again underwater, and we are again borrowing from the federal government in a program that is important to have, and that we don't want to avoid in all cases, but we just would like to do so less frequently and only under the most extreme circumstances.

Thank you.

And Mister Seyarto, reclaiming your time.

Thank you. I expect that would result in a massive tax increase for businesses to do that particular plan where we readjust how we have done ours and not wind up with a loan at the end.

Senator, the report is now aging, but I think the specific language we used was the reform as we put forward would represent a large tax increase to the employer community.

And that's in recognition of how stark the imbalance is. For two decades now, the state's tax system has not generated sufficient receipts to pay for the state's UI system. And that's just the reality, and the contrast is that the employer community would contribute more. The one caveat to that is under the federal repayment plan, the employer community contributes more one way or another.

They can either do so under the state system upfront to build a reserve, or they can do so afterward as we are now with the $2,000,000,000 assessment.

There is no free lunch in this system. We think from the state's perspective, it'd be best to be in the driver's seat and manage a reserve ahead of recessions, rather than following a federal repayment plan that is pretty inflexible and shows dramatic increases in the employer community contributions. So it is that balancing. We'd prefer that the state be sort of in charge, so to speak.

And when we're talking about managing the overall budget of the state when we have $350,000,000,000 but with $250,000,000,000 in general revenue, our general fund revenue, those are policy choices that we make, whether we make this a business friendly area and we absorb some of that through the taxes, because the businesses did not create the unemployment problem. And so the more we do that to them, the less businesses there are, which creates an even bigger burden on the ones that are left.

So that is a big mess that needs to be figured out, and that's what I mean. We need a real plan, and that's part of it. But I think there are other ways of funding some of it so that all of it is not laid on the backs of businesses, when some of them are in precarious positions.

So let's move on. Let's see. I think some of this was already covered. I'm a little bit confused here. It says the May revise on the unfair labor practices for AB 288 includes a decrease of $5,000,000 one time general fund.

And is there a decrease of 22 positions this year? Is that what that means?

Cynthia Elmore at Department of Finance. The reduction in positions is in contrast to the request at governor's budget.

Okay. So, and then the next number is $6,500,000 one time and 31 positions. Is that another reduction or is that an increase for the following year?

It's a reduction to the request.

So we're shrinking. Okay. That's okay. Very good. Let's see, next one.

The AIM system, I think we're, so now we're $71,700,000 in prior years and we need $44,100,000 more. And this, I think, has to be money well spent. Otherwise, we're going to lose the system for documentation, right, for the workers' comp system, the Adjudication Management System.

Grace Henry, Department of Finance. Can you please repeat the question?

Okay. So with this, it says the May revise includes $44,100,000 in one time increase from the Labor and Workforce Development. So the project has also received $71,700,000 in the past. So is this the number that's going to help us get this thing up and running to what it needs to be for the future, or are we going to be doing more of these in the future?

Yes. This is gonna get us to the end.

To the end. That's what I wanted to hear. Okay.

Mostly with California Department of Technology on this project.

Okay. So that's probably money well spent. Okay. I think the rest of these were pretty much covered. The one trailer bill language, the assessment payment via electronic funds transfer.

I remember this was something of an option for tax paying, and then all of a sudden it became mandatory, and then there was a fee attached to it if you didn't. So what percentage of our employers are already doing this, remitting via the EFT?

I believe it's about 80% to 90%.

Okay. So we just have a little bit, a few more people left?

Correct.

Okay. Because that'll be more efficient, I would imagine, and save time and also some money. I just hate to see people who can't do that because their technology doesn't allow for it yet, to be punished with fines. So, sure.

Ken Lau, chief counsel at the Department of Industrial Relations. The trailer bill language allows the director to waive or reduce penalties where there's good cause for it. And so I think the intent here is to sort of encourage insurers to pay via EFT because there's a lot of risks both to the self insured employers and the insurance companies and to the state with such sometimes the payments are millions of dollars and sending it through a paper check does present risks.

Nervous when you're dropping it in the box at the post office, right?

Yeah. Yeah. And it, you know, makes us a little nervous dropping it off at the bank too.

Alright. I'll give the microphone back to the chair so she can ask her questions, and I'll be finished for now. Thank you.

Thank you very much. Let me apologize to those of you here, the members present. I thought I had such a great idea, but when I saw the musical chairs going around, I'm like, wow. That was not smart. So much for good thinking, but it's always worth trying new ideas.

So I'm gonna start with my questions to avoid the musical chairs on EDD. So that might, yeah. I was afraid of that. Yeah. It's my fault.

I will do better in the next three. We'll stick to the script as Diego had for me here. My first question with EDD is about EDDNext. So do I have the right people here? Okay.

So just for members of the public who aren't privy and remembering all this information, how much, approximately, I realize you may not have it, you know, down to the dollars, but how much approximately have we spent on EDDNext thus far?

Thank you for the question, Madam Chair. So to date, there's been about $785,000,000 appropriated, and EDD has spent about $450,000,000 of that $785,000,000.

And how much more do you anticipate that you're gonna need allocated, if any? Do you have everything at this point?

As of right now, we have been requesting annual appropriations to continue the project. We do expect that to continue through the life cycle of the ICMS portion of EDDNext. And I think as we've discussed before in this subcommittee hearing, that timeline for ICMS is about a five year timeline with the beginning of DI and PFL starting that, and then UI is the back half.

So the annual portions are how much?

It, I would say it varies depending upon the estimate in the project documentation that we developed with CDT, but, like what we previously heard in this subcommittee hearing last month, we are, in the governor's budget there was a request for $145,000,000. So this $20,000,000 is on top of that for 26/27. And then moving forward, I think we would expect annual appropriations around those amounts until ICMS is completed.

And that completion is expected in approximately five more years?

Yeah. I think it's by 2031.

And then from there, you're gonna need how much to do the remaining portion?

After 2031, Madam Chair, we'll be paying the annual maintenance fees for these systems, and that could be anywhere from $30,000,000 to $80,000,000 every year, combining all UI/DI systems that we have. And Madam Chair, the big portion of the funds in BCP are for preventing the fraud and all the systems that we put in place during pandemic, for example, improving the call centers, the maintenance cost for call centers, implementing new systems to take intake systems from claimants as well.

So much of the cost that you saw this year as well in our budget proposal, $145,000,000, a vast majority is going to maintain the systems that were put in place during the pandemic era, and all the fraud prevention mechanisms, etcetera. That's what it's paying most of the money for.

So based upon that, do you anticipate, and this is probably a question for one of you too here in the front, do you anticipate that this will be set funds that will be in the governor's normal budget? I realize we have a new governor that'll be coming in in eight months. Or do you anticipate every year you're gonna be asking for an additional, you know, $30 to $80,000,000 or $165,000,000?

What I'm trying to get at is, at some point in the budget, are we gonna have what the true costs are?

And then when we're adding these additional requests, they're an anomaly as opposed to an every year request.

Allison Hewitt with Department of Finance. So we obviously can't state exactly what would be in the governor's budget next year. However, what I would say is that this is one of several IT projects where they're continuing. So this has been the approach for IT projects. There's benefits to it, which is we have to come before the legislature every year and ask for the funds and you grant them to us.

But this is a structural issue where if you're asking whether there are future costs associated for these projects, yes, there are. And they are not built into the budget because of the approach that we take for budgeting IT projects in these stages, because some of these projects are still under development.

Once these projects are fully operational, there will be kind of a one time settle up where we say, okay, here's the cost to, and my colleague cited the figures associated with that, but it's here's the cost to maintain and operate these systems. And that will be, as those systems become fully operational and they switch to maintenance and operations, there's an ongoing request and then, barring any change. But, yes, this is one of the facets of how we budget for IT projects generally.

The reason why I asked the question, and then I'll refer to you, Mister Alamo, if you wanted to chime in. At some point, I think we need to get a grip on how much we are spending. And what happens is right now, we're having more and more initiatives that are coming forward, and the pie of available dollars that we have is shrinking and shrinking and shrinking.

And at some point, someone needs to be looking at this ball and saying, this may be a great initiative, but we don't have enough money to be able to do, you know, whatever it is for this next thing that is also equally important. So I would just like to respectfully request, and I'll make sure to share this, of course, with the president pro tem.

But maybe in future presentations, you could say, okay, we need $165,000,000 for these following reasons. We anticipate needing x amount more over the next five years, which will continue, so hopefully we too would have some continuity. And then that way, we know, okay, this is coming.

This is coming. This is coming. So at some point, when we're a part of those bigger discussions of how much money do we really have to spend, we can speak intelligently. Because if it's always, you know, we have no idea how much more additionally is gonna be asked than the basic budget that you have, it makes it very difficult for us to plan and know what's available. Yes?

If I may clarify one point, and I'm gonna probably turn to my colleagues here. We do know how much the EDDNext project is anticipated to cost and where we're at in those estimates, so I'll turn it over to my colleague.

Yes. Agree with my colleague here. When the PAL process, project approval life cycle process, is approved by California Department of Technology, we do share the full plan, the full costing of the project. So any EDDNext project, the document management system, which is a current proposal right now where we are asking $20,000,000 more, the total cost of the project was $97,000,000, and with the addition of $20,000,000 more that we are asking, it'll be $117,000,000, Madam Chair.

Okay. I'm just saying when you do the May revise, at this point, it would be helpful to kinda just tie us in with that big picture so we know what we spent and what additional is coming. So then when you come again next year, we'll be like, okay, yeah, I remember that.

Okay. Mister Alamo, did you have anything you wanted to chime in?

Nothing substantive, Madam Chair. Anecdotally, our office has long struggled when we consider future IT costs. Are those discretionary dollars?

I think it's something that our office would be happy to work in a more formalized way with your staff on, on how to articulate these project costs alongside and in collaboration with the Department of Finance.

Thank you. I'm glad to hear it's not just me. Because it just seems like at some point, we're gonna need more and more programs, and we might as well just budget for that and plan for it versus this one off kind of thing. Okay. Time for musical chairs again.

Unemployment insurance is my next question.

Okay. So I recall one of the biggest causes of this additional loan payment that we're making had to do with the pandemic and the additional amount of funds that were required to help people. Isn't that correct, that a large portion that caused this loan was due to that, right?

You are correct.

Okay. And it's also correct that right now we're only paying on interest. We're not paying any principal. I have seen earlier in the year the LAO report that gave us recommendations. One of my jobs today is going to be, where I suspect language next week, to at least advise you of it now, and I'm advising the public.

So when we, and also my colleagues, when these items come forward. So one of the things I'm gonna be requesting, I support the unemployment insurance, obviously, payments and what we're talking about. But I'm also gonna be requesting, and building on my colleague's comments, that I think we really need to begin to address a plan of how we're going to pay for this, because it's actually costing us more money than if we were to come up with some sort of scenario.

I know that's not popular.

I know, how are we gonna pay for it and all that, but the way we're doing this is just not, I think, in the best advice. So just be aware that I will be bringing something forward that says, I support this. However, I'm hoping next year that we'll be able to come to this committee with a better solution than just paying interest payments, but actually come to us in the January budget or in the May revise or something to say, okay.

Here's how we're gonna deal with this versus continually doing these interest only payments, which is not getting us where we need to be. Was that fair?

Understood. And looking forward to the discussions in the next few weeks as we go through the budget process.

Okay. Perfect. Alright. And then, my last question, which had to do with, DIR, this emerging technologies unit, my last musical chairs of this group. My question is, relating to the Emergencies Technologies Unit, can the department expand on what it foresees as the impacts of AI in the context of the workplace, safety and future building of jobs and so on?

I heard briefly what you said, but a big question. A few months ago, I took a tour up in Silicon Valley. I went to NVIDIA applied materials, and I'm trying to think what the third company was. And it became very evident to me that it wasn't a fight to keep back AI. AI is already here.

It's already here involved in our workplace. CEOs have admitted we can anticipate losing 50% of our jobs. So could you just give us a little more information on what your intentions are with having a technology unit? Because to me, I can see that just being another program that then you're gonna come back next year and say, I need 10 more employees and more and more. And it's like, what's the point if it's not gonna be substantive in terms of how we can preserve a future workforce?

So what are really your thoughts of how do you envision this emerging technologies unit operating?

Okay. Danielle Lucido, Chief counsel, CalOSHA. I apologize for not stating my name last time. The vision is so your first question had to do with AI. So to the extent that technologies in the workplace utilize AI, and that has an impact on worker safety.

In other words, the AI that's being used could result in an injury or a contact with a worker. This unit would consider that and would come up with regulations that told the employer what they needed to do in order to keep workers safe from the impact of that. So I'll give you an example. I don't think this exists yet, but something we've been dealing with is autonomous tractors, which are tractors that drive themselves.

And that's a type of work that we're currently trying to handle, and we have 1 safety engineer who's trying to address allowing the use of these, but first making sure that they're safe, and it's a lot of work.

So it could happen that these tractors are operated by AI. That could happen. So right now, we're considering how to address the issue of there not being a driver on the tractor, but they are operated by a human from a remote location. But it could happen that they're controlled by AI. And in fact, I'm not here with the engineers, so it's possible we already have AI operated tractors.

But you in the Port Of Los Angeles, you do at Masur Terminal.

So what these folks would do in this unit, and it's very small number of people, is they would figure out how this technology can be permitted to be used, but with guardrails so that we make sure that workers are not being endangered. The technology, if the employer can show us that it's safe, we have a pathway. And the people in this unit would figure out what is the pathway and write the to help draft the regulations and consider the safety of the technology.

And it wouldn't just be AI. It would be remote controlled things and things where a human is not operating them like robots.

And currently, there can be the use of robots. You know, we don't have a regulation about robots, for example. But if there was a use of a robot that endangered safety, this would be something that the unit could look into and put guardrails around through regulations.

Are you aware of any other departments that you partner with, whether it's EDD or human resources or whatever that's also considering an emergency technologies unit. Because what we don't wanna do is duplicate emergency technology units throughout all of employment related workforce, and we're just having 4 and 5 departments all kind of similar, but in different sections instead of 1 department looking at all of this?

I'm not aware that any departments that are, focused on workers are doing this. We did do some research. I am aware that, DMV has a unit, and, the engineers in our at Cal OSHA met with the folks who run the unit at the Department of Motor Vehicles. They're considering emerging technologies like the, taxis that don't have a driver in San Francisco. And we actually we consulted with them about what we might need in order to do work similar to what they've been doing.

And then I am aware of, Caltrans. Caltrans also has a unit, but that unit is quite large, and it's largely federally funded, although I think there is state funding for it as well. Caltrans has a unit that we met with, and and they have that unit focused emerging technology. And it's for their own use, I think, for Caltrans. Their unit is trying to help them use technology to achieve their work and to make the road safer.

So it's not the same thing, but they do have these units that are trying to address the issue of new technology and how to keep people safe and allow the use of it.

Okay. Mister Alamo?

Chaz Allen with the LAO. I just a point of clarification. There's been some discussion about AI powered automatic scheduling or sort of review of worker productivity, different elements of AI use that are sort of behind the screen and evaluating and managing workforce. As I understand it, the BCP is relatively clear and from chief counsel's comments that the emerging technologies unit would focus specifically on the physical workplace.

So when an AI or other autonomous physical product is moving or interacting with human workers in the workplace, the questions as to sort of other labor practices in the use of AI, I think are beyond the scope at this point of Cal OSHA's purview and would be potentially considered in other labor agency departments, but that's not a part of this emerging technologies proposal.

And I'm happy to stand corrected if okay.

Okay. Thank you. Alright. With that, it's time for musical chairs. We're going to have, hear from the Department of Human Resources.

And this time, we'll just do 1 at a time so you won't have to go through that. My apologies. Okay. Who's our lead presenter?

Good afternoon, Madam Chair. Monica Erickson, director of human resources. This proposal requests an increase of 12,300,000 in reimbursements and 1 position in the benefits division. The proposal for your consideration provides vital services to state employees. The employee assistance I know. Sorry.

Okay. Go ahead.

Thank you. The employee assistance program is a union negotiated benefit for all state employees. The new service contract effective 07/01/2026 consolidates department level contracts for specific services into 1 statewide contract, implements a hybrid pricing model with lower per employee per month rates based on actual services utilized, which will result in an overall annual savings to the state instead of the current fixed employee rate pricing model we have today.

The 1 position for a dedicated program manager is also necessary for administering the contract and supporting first responders with a high impact public safety departments. The state is required to maintain a continuous employee assistance program under various authorities.

The current service contract at 4,100,000 annually with Magellan expires on 06/30/2026, and covers basic counseling services at a fixed employee rate pricing model regardless of its utilization. High impact public safety departments such as CHP, Cal Fire, CDCR, and Parks currently have separate contracts for specialized services, such as critical incident stress debriefings, especially for their first responders. These contracts that departments hold also expire on 06/30/2026.

If the state renews the current statewide contract on 07/01/2026 with the existing fixed employee rate model and the coverage to include basic services, and the specialized services departments are currently receiving, it is estimated to cost the state $27,000,000 per year, regardless of utilization. The new contract includes a maximum annual expenditure of 16,700,000, and assumes CalHR's projected utilization rate of a 100%.

The actual you utilization rate is 15% currently. For fiscal stewardship, the contract includes contractor accountability provisions that include performance guarantees tied to key performance indicators, and formal reviews to occur every 6 months with financial penalties for non performance to be refunded directly to the state. The position included in the request is an estimated annual cost of a $154,000.

This position will serve as a dedicated program manager to oversee vendor performance, coordinate services for the first responder departments, monitor utilization trends, and ensure contract compliance statewide. That concludes my presentation and, available for any questions you might have.

Thank you. No one else to present from the department of HR?

No. Just me and, my deputy here, Nicole Griffith.

Alright. Department of Finance.

Joshua Winters, Department of Finance. Nothing to add.

Okay. LAO?

Nick Schroeder with the LAO. We're raising no concerns with this proposal.

Okay. Thank you. Senator Seyarto, you're batting first. Any questions? Pardon? I said I'm batting first. I struck down.

Uh-oh alright. Senator Durazo? Okay. I don't have wait. I think I did have 1 question.

So this increase is specific to providing additional services for our first responders and department of parks in your e EAP program. Correct?

Yes. It is the basic services for the rest of our state employees, including these critical incident services.

Okay. And they already had access to these services before. Right?

The critical incident services? They did, but departments individually had their own contracts instead of going through 1 statewide contract, which currently our contract does not provide those services. Is that correct? And they were limited.

So what specifically are the additional things that they're gonna get from this particular consolidation?

I'll turn this over to my colleague.

Thank you for the question. Nicole Griffith, CalHR benefits. So specifically, we are happy to bring enhancements to the EAP services, specifically for the first responders and employees. They will have, increased utilization and access to more clinicians. So currently, right now in our model they have access to like, call center representatives.

So now when they call in, they will have options to speak directly to clinicians that will be answering the phone. They'll have, trauma peer support tailored to first responder departments, trauma informed clinician networks, emergency access to services. So there's a 2 day appointment guarantee, and there's a financial penalty that'll back that if they don't meet it, they will reimburse the state financials.

In addition to that, the training staff that will be supporting the departments are Clinicians as well, and family members will have access to the same numbers of sessions as the employees do.

Sounds like a wise, request. No further questions from members? Alright. Thank you very much. We'll now turn to CalPERS, California Public Employees Retirement System.

Is anyone presenting for CalPERS? Please.

Hello.

Okay.

Good afternoon. I'm Stacy Guzman, CalPERS budget officer, and I'll just go right into my presentation. Thank you. The various CalPERS budget adjustments to multiple funds are primarily due to indirect costs associated with various items related to salaries, benefits, and administrative initiatives. Specific to the increase totaling 459,000,000, this relates to investment operating cost of 38,100,000, which is largely driven by the ongoing implementation of the investment data and technology modernization initiative.

This item also includes a 421,000,000 increase in investment external management fees, which is mainly due to expanded private asset allocations and more active management strategies. This is in alignment with the board approved investment plan for 2627. I would also like to note, we use performance based fee structures. So the increased cost means we are experiencing greater investment returns. This concludes my presentation.

Is anyone else gonna be presenting on behalf of CalPERS? Any of your other or just to support answering questions?

Just if you have any questions.

Okay. That was a quick presentation for 459,000,000 No?

We're happy to answer any other questions. I have Rob Patterson here from the investment office at CalPERS.

Yeah. No problem. I was just making a comment. No problem. Department of Finance, anything you'd like to add?

Joshua Winters, Department of Finance. Nothing to add at this time. No.

And LAO's office?

Nick Schroeder from LAO. We have no issues with the proposal.

Okay. Senator Durazo, your first step on this 1.

Thank you very much. And in that short report, in that concise report, 1 of the things that's pointed out is that the external investment management fees are the largest driver of the increase of the increase in the budget. So pension beneficiaries, including employees whose retirements depend on CalPERS, in my opinion, I've taken the position, have a right to know what businesses private equity managers are investing in and how those investments perform versus public markets.

So why do you think it's appropriate for CalPERS to pay higher fees to external managers and exchange, receive, and disclose far less information than is disclosed by publicly traded companies?

Thank you for the question. Rob Patterson, Copper's investment office. I lead the, investment performance group as well as the investment technology function. Maybe before responding to the specific question, give a little bit of context in terms of the strategy itself because I think that's important. When we look at the expenses, I very much we very much look at those as a byproduct of the strategy.

The strategy being a higher allocation to private markets like you're referencing, as well as a higher allocation to active managers. The impact of those is when we're looking at the asset classes, second part of your question, our highest expected return net of fees from an asset class perspective is private equity. And so whenever we're talking about any of the investment results, they're net of the fees that we're paying here. So net of those fees, highest returning asset class.

When we're looking at deploying the strategy, there's a couple of drivers.

The drivers being the strategy composition ultimately pay member benefits and to, improve our funding ratio, which we've demonstrated that we've increased significantly over the past couple of years. When we're looking at the changes again, mostly driven out of increased allocation to private markets, which is part of the board approved strategy. And then also, when we're looking at private markets relative to public markets and dollar terms, again, there's going to be higher dollars, but whenever we're looking at these, it's 10 of those fees.

And there's a couple of things that we need to be looking at in terms of the context or considerations. 1, when we're looking at the increase here, it is large in dollar terms, fully agree on that.

We also have to look at the size of the perf, the public employee retirement fund, which is as of a year ago, would have been approximately $550,000,000,000. We are now well north of $600,000,000,000. So when we're looking at these changes, it's not only further moving into private markets, it's not only further moving into active strategies. It's also the growth of the perf itself is driving its higher AUM is going to result in net increase in fees.

When we look at these, it's important that we look at these not only in dollar terms, but in percentage terms.

And so on a percentage term basis, we're looking at anywhere from 1/4-1/3 of a percentage point or 25 to 30 basis points as we would describe it. And that's relatively stable over time. The reason we're able to help keep that relatively stable over time is while we're lagging into private markets, we are also looking at co investments. Co investments allow us to sit alongside funds where we have low or no fees associated with that.

Again, less fees means more money to be able to pay our member benefits. And I'll pause there to see if there's any questions as a follow-up.

Well, I guess the bottom line question is that we're not getting the information from the private equity investments. We're not getting that specific information from them like we do with the public markets. And so why are we sacrificing the information that we could be getting, like we do through the public markets? Why are we sacrificing getting that information to be made available to us so that we can make even the even better decisions as to how we should invest?

So, again, it comes down to the higher return expectations of that asset class, and then also the amount of transparency that we have where we do have quite a bit of transparency related to those investments, which we make publicly available on our website. And then also we report fees on a lot of our private asset managers in our 2833 report. So quite a bit of transparency related to the underlying investments as well as the fees associated.

But you believe that it's okay to not have access to the more information. You don't think we need that?

I believe there's a bit of a trade off, in terms of sufficient level of information to which we can make informed investment decisions, while meeting our fiduciary responsibility to be able to generate returns and fund benefits.

So I understand you believe external investment managers perform well versus public markets, but there must be some individual investment managers that perform better than others. So why doesn't CalPERS already disclose how each of its alternative investment vehicles performs versus a public market index of similar investments?

I believe at present, we're meeting all, state requirements in terms of reporting obligations. And I think there was recent discussion around additional transparency that, I don't have any additional comments on at this point.

I'm sorry. What was the last thing you said?

I don't have any additional comments on that at this point.

Okay. So why should we increase CalPERS and CalSTRS budget to pay higher investment fees to, private asset managers like Apollo. Apollo, you must know, it is various concerns that have been raised about Apollo, publicly leading the attack on higher education that's been raised, to you, threatened federal funding for universities in our own state by authoring the Compact on Higher Education, owns markets supermarket chains that alleged labor law violations. Aren't these actions in conflict with Apollo's fiduciary duty, to participants of CalPERS and CalSTRS?

So I can speak specifically to CalPERS. I don't wanna represent CalSTRS in any way. In terms of what we're speaking about here, I wouldn't get into any specific managers or strategy level discussions beyond looking at the asset class itself, which is a very large portfolio, highly diversified, and where there are challenges with specific managers over time, taking that in consideration in terms of the capital that we decide to deploy into the future.

Okay. I want to put that. I really as you know, I believe very strongly in having more access to more information, more transparency from private equity. I think it's an important part of making decisions. I gave the example of Apollo and the things that Apollo is doing, I think, completely contradict what should be part of their mission, not just to make money.

But where do they stand as far as the people that are getting the benefits? That's an important thing. I'm not making less of it, but it's also important to know what kind of, investor we're, doing business with.

Thank you, Senator Seyarto. Did you have anything to add?

Yeah. So just clarifying. With the equity, private equity that we use, there's management fees for that. But the rate of return is so much better that it's covered with those management fees. We wouldn't be making that for the fund, which is for CalPERS members is the most important job you have that is my honor.

Sure there's money for retirement for their benefits. So, you know, that and that there is a trade off there. And I think most, most folks that are are dependent on their retirements, understand that and, would like, our our retirement boards to be, focused on just that which is getting the rate of return they need. So also so that local agencies don't have to make up as much of a big difference, in their contributions as much because all of that is balanced.

Because I kinda remember as we had these discussions before about, you know, do we do private equity?

How do we do these things? That was, you know, that was the comment. Do we do we do a 2% rate of return, or do we do a 12% rate of return? Of which a couple of percent might have to go, but we wind up with a 10% rate of return as opposed to a 2%. And I'd rather have the 10%.

So and if I can follow-up Yes. Completely agree, and I think an example is maybe important. Last year, we had an excess return of 1.7% in dollar terms that equates to $8,400,000,000, of which 90% of that came from private markets or external managers. We earned $7,500,000,000 in return in excess of our bench benchmark after we paid for fees.

Thank you. Did you

yeah. I think it's really important. This is not about whether or not we choose private equity or public markets. This is about getting the information. That's the issue.

It's about having access to the information, transparency in the process. And what I hear from you is that you don't care about the transparency. You don't care about the getting access to the information. You want the result, and that's that. And there's no reason why you have to in my opinion, you have to pick between 1 or the other.

There's no reason why we can't have full information and be able to pick between private equity and public markets whenever it's best to pick 1 or the other rather than have them decide it. So I just want to make that clear here. This is not about choosing better results or, return for the pension benefits. It's about having more information so that then it's a fuller decision. Thank you, Madam Chair.

Thank you, senators. As I sit here and listen to the discussion, to me, this is an example of why term limits is not really helpful. Because we as members have advocated a lot of our duty and knowledge and things that we work on to other commissions and other groups, and so we're not really involved in the weeds of it. We're just kind of it almost seems sometimes ceremonial that we're approving numbers, but there are other bodies that are evaluating, providing information, and so on.

And I think what you're hearing here today, similar to the last group that we had, that it might be helpful going forward. I don't believe this year we actually had a CalPERS hearing or something when it covered your area.

So it might just be helpful with the large amounts that we're spending, to actually have a hearing and just kind of talk about, what the board is doing, what are the investments that have been made, what have been the results, Who do we work with? What are some of the standards that you have in place? So just kind of helping to keep us in the loop, because we deal with a lot of paper.

If you can imagine your board deals with a lot of paper, imagine that times a 100 times of different groups that we work with. And this is very important.

The protection of people's retirement is 1 issue. But the other issue is and that's why frankly, we had a divestment from South Africa funds many years ago was because even though it was a good idea to invest in some things, we decided as a state and as a country that even though some things might have been more profitable, we didn't want to really frankly, support things that weren't necessarily consistent with our values. I'm not saying that's what we're doing now.

I'm just saying by us not having more information, I think it just speaks to the more informed we are. I'm sure you and your board are quite informed of the decisions that you're making, and I appreciate that.

I'm saying from us from a legislative perspective, because we're the ones that daily basis. You may have monthly meetings or quarterly meetings. I don't know how often you meet. But for us we're seeing employees who are a part of this plan on a daily basis who oftentimes ask us, well why are we doing that? Or how did they get that?

I realize these funds come from your own fund base, you know, that you're have the full authority to do what you're doing. You're simply informing us. But I would just suggest that next year, maybe we have a little recap that shares with us, you know, what is being done, how much is being done, with who is it being done, and just Kinda keep us, more in the loop.

So if we have concerns or suggestions of things that we've learned along the way, we can maybe, be helpful in sharing that, and it might be considered in future policies as you make them.

Why don't we take that back and see how we could accommodate that then?

Sounds fair enough. Thank you for your, report. The additional information was helpful, and so we'll look forward to moving forward. Thank you very much.

Thank you.

Thank you. With that, we will have now CalSTRS, California State Teachers Retirement Systems, to come forward, and then we'll be going to public comment. So if you wanted to comment on the section of labor, we'll be calling you very shortly. Okay. Who's going to lead off presenting? Yes, ma'am.

Good afternoon, Chair members. Kayla Landman, Department of Finance. Today, I will be presenting the May revision items that are related to CalSTRS. So to start, May revision includes $6,500,000 of ongoing general fund to reflect an increase in the state's contributions to CalSTRS as actual creditable compensation growth exceeded the estimated growth. The state's contributions to CalSTRS are calculated using the creditable compensation amount provided by the teacher's retirement board for the fiscal year immediately preceding June 30.

So the state's contribution for 2026/27 is calculated using the actual creditable compensation amount from 2024/25. Finance received the updated final creditable compensation amount from CalSTRS on April 15, and revised the state contribution amount accordingly. The second item, for the second item, may revision also includes just over a million dollars general fund in 2026/27 to reflect the state share of benefit overpayments identified by CalSTRS from the prior fiscal year as required by statute. Thank you, and I'm available for any other questions.

Mister Seyarto I think you're up first on this one. Question. Okay. Senator Durazo? Thank you.

I'm on the lines of my previous questions. Let me see. Let me catch up here. Kelsters, how were you convinced you made a in response to a legislative Bill that was before us. Your response was that transparency would have been more damaging to your investment strategy. Could you explain that?

Kayla, I'm in Department of Finance. I'll defer to my CalSTRS colleagues to answer that question. Thank you.

Sure. Joycelyn Martinez Wade, director of governmental relations with California State Teachers Retirement System. I'm not familiar with that quote at this point in time. We did not bring folks from our investment staff given the content of the May revise proposals.

Okay. So what does that mean? Nobody could answer anything related to the investment strategy?

I can speak to the collaborative model and where we're bringing more investment managers in house and the savings we're receiving from that, but and I may be able to answer some other questions, but I have not heard that quote.

Well, it's about the what I was talking about earlier about private private equity. So none nobody can respond to that?

So we, again, didn't prepare to bring the investment staff to this hearing given what's on the agenda, but we can come back to you with that.

Okay. And that's the basic question is, how were you convinced that, transparency was gonna be more damaging than not having more transparency with private equity.

Okay?

Thank you. Thank you. Yes. Senator Seyarto.

I think what they're talking about is if they're doing the investment strategy that they plan is to maximize our profits on our investments. And what they're afraid of, maybe they, you know, maybe they don't want to say it, is that we turn their investment strategy into a political football. And there are things that I think we all agree that we probably shouldn't invest in, but they probably already don't because they're smart people. I am not an investment strategist, especially for high dollar stuff like this. Pretty good with finances, but not that good.

And and that's why those folks are being paid the big bucks to do what they do. And and I think if they're getting out the information that you're requesting that they put out, then the next thing we do is we have 10 Bills saying we need to divest in this because it's not green energy, and we want more investment in something that gets 2% than 10%. That's what I think they need to try to avoid. They don't want to be a political football.

And we are a political football.

Senator okay.

So that's

No. Senator Sciardo, that's not what this hearing is about. Members are entitled to ask their questions. Members are entitled if they'd like more information. Members are entitled to ask those questions, and I don't believe that they're political footballs.

As I stated earlier, I believe a lot of why we have questions is because we're now, you know, a legislature that isn't here. We don't have people here for twenty and thirty years, unlike what we have the staff, who actually, frankly, understand all this and live and breathe it every single day. And so, unfortunately, we are responsible to make decisions. So it's all senators are within their rights to ask any questions and to seek the information from that. And that is not political.

This committee is not political. We're just here trying to get information to make our best decisions.

No, we're not

So no. No, Mister Seyarto. No. So with that

would like me not to talk, then I'll go ahead and excuse myself from the hearing.

You can do whatever you like. I'm just saying I cannot partake in, you know, comments from 1 member to another. Just like you're entitled to ask your questions, and I agree with and I think you know I've been very fair and supportive, we have to be supportive of everyone's questions, whether we understand them, whether we agree with them. That's not the point. Every member has the authority and opportunity to ask them.

But your point is taken, and, we'll continue. Thank you. With that, was there anything else we needed to add? Okay. So I didn't have any further questions on this subject.

Thank you very much for everyone's participation for all the departments, and now we're gonna go to public comment. We're moving on to public comment for part a, labor issues only. To ensure that everyone has a chance to be heard, please limit your comments to 1 minute, and if someone else has already made a similar comment, please just add a me too and say you agree with other people that have spoken. Thank you, and let's begin. We have 1 minute per person.

And because we still have 2 more parts, we are going to actually keep track of your minute and we'll have to cut you off. But thank you for your participation. Please begin.

Liz Blum Gutierrez on behalf of Vera California in strong support of the jails to jobs proposal submitted by Senator Smallwood Cuevas and appreciate the support of this committee. Jails to jobs will create real pathways to employment for people at the pretrial stage of the criminal legal process. This investment strengthens public safety.

Gels?

This is about workforce development. Okay. Thank you. This investment strengthens public safety, addresses workforce shortages, and helps stabilize families and communities across California. Thank you.

Thank you.

Hello, Chair and members. My name is Joanna Vega Garcia with NextGen California. On behalf of NextGen California, a workforce priority that was not included in the May revise is a renewal of the Apprenticeship Innovation Fund. AIF is a pioneering formula funding model driving scalable and sustainable apprenticeships across California, and it is set to expire this fiscal year. We urge the legislature to prioritize the AIF renewal proposal submitted by Senator Becker.

Thank you.

Thank you.

Hi. Good afternoon. This is Maria. I'm with the California Network for Immigrant Worker Justice.

And I know we're all not on the agenda today, but this does have to do with labor. So we're here to share why our immigrant immigration enforcement emergency fund needs to be included in this year's budget. This is a proposed relief fund offering support to those Californians who are the backbone of our economy but who are impacted by violent immigration enforcement without any aid and losing income, their work, and in some cases, their life. But I'd like you to please hear from an impacted member. And I'll be handling translation.

They tried to locate her for weeks. Her children kept on asking for her, and they didn't know how to answer them. She like was denied the ability to make phone calls to family, and during this time, there was absolutely no financial assistance available to help cover her costs.

Without her income, her children are left without housing or basic necessities, and this is just one story out of thousands involving people who have no no access to any assistance while they and their families are in crisis. That it that is why it's crucial that you please include the immigration enforcement emergency fund in this year's budget. Thank you.

Hello, Chair members. Elmer Lazardi with the California Federation of Labor Unions. We are urging the legislature and the administration to provide PERB with $2,000,000 to provide adequate staff for mediation and conciliation services as well as to implement the right to organize for drivers for TNC companies and workers who cannot access National Labor Relations Board adjudication. Since 03/15/2025 to April 2026, PERB has done over 500 private sector mediations for unions and employers across industries. They're doing great work, and we would like to see that sustained.

In addition to mediation, AB1340 and AB288 gave PERB new responsibilities to adjudicate private sector labor disputes in absence of federal options, and it is critical that the budget include funding to implement these statutes in the absence of other recourse for workers to exercise their rights to unionize, collectively bargain, and to strike. Thank you.

And what was the specific line item?

This was related to PERB funding.

Uh-huh. Thank you.

Hello. My name is Leticia, and I'm part of the coalition in support of the relief fund for the for the immigrant for the impacted immigrant families. Hello. My name is Laura. I'm part of the immigrant coalition, and I am here in support, for you to, prove in support for the approval of the relief fund as an as immigrant community, this is affecting us, so we're asking you for your approval of the of the fund. Hello.

Good afternoon and thank you. My name is Elizabeth. I'm also here in favor of the proposal for the relief fund for immigrants. They are the ones who need it, who have those who have been detained and practically have been affected along with their families. As humans, we're here to work.

We're here to work, not to harm others. We just pay our taxes, leave off of work, and our families need your help. Thank you for your time. Hello. Good afternoon.

My name is Christina. I am here in support for the economic relief fund, for the workers. And, thank you for listening to us, and I hope to hear a favorable answer from you all regarding this. Thank you.

Department of Finance, did you have any response to LAO that you want to check?

Oh, Alina Petrichko, Department of Finance to address LAO's comments, we want to know that the unfair competition law fund is solvent in the budget year and ongoing even with the approval of antitrust requests and SB 694 request. This is based on updated revenues and expenditures since, governor's budget and the existing schedule of loan repayments.

For the completing organized retail criminal investigations proposal, we want to note that the resources are one time, and the administration is not proposing to address any new workload. And lastly, for the continuous appropriation for the victims of consumer fraud restitution requests, the statutory changes will provide operational flexibility to administer the payments and avoid delays.

And we also wanted to note that similar funds, with other departments are structured in a similar way and are continuously appropriated.

Thank you. Members, let's start with Senator Durazo. We'll let you back first today on this one.

Thank you, Madam Chair. With regards to the judicial branch, a question for the judicial council, does the judicial council believe the 20,000,000 in the May revise is sufficient to address both the cost increase and the vacancy crisis? It's been communicated from the California Federation of Interpreters that there is approximately a 100 court interpreter vacancies just in LA alone. So if you could address that. Thank you.

You know, thank you. Zlatko here from the judicial branch. We believe that the $20,000,000 is a wonderful start, and we will be assessing our need as we go forward as we always do. While there has been increases in costs, those have been funded through the redirection of our own funds, and these $20,000,000 will put us, I think, in a good place. And to the extent that there's additional resources needed, we will work with the Department of Finance and the legislature to to address those costs.

And so you're you're saying that that would be sufficient to address the vacancy?

It's gonna provide courts more resources whether or not there's there's still an issue of shortage of of as the LAO has mentioned of full time staff interpreters, but we are working to improve those numbers as best we can.

And there's also a request, authorizing the Department of Finance to augment that court interpreter appropriation midyear. Are you familiar with that? Is that something that the judicial council will support?

Henry in Department of Finance. Yes. We do have a current year request from Judicial Council for a mid year, current year augmentation. That's still current, still current under review. That would be forwarded to the JLBC when it's ready.

Okay. Thank you. And then, a concern about the equal access fund administrative rate increases. If you double the administrative cost cap, doesn't that mean fewer dollars reaching the legal aid organizations? And especially, of course, concerned because of the low income Californians who could be impacted.

So how will the judicial council ensure the increase does not impact those direct services?

Henry in Department of Finance. So, yes, while the rate increase would result in reduced grant awards across the board, we believe that impact to any individual program will be minimal, given that the decrease is going to be distributed across a large number of grantees.

Okay. And with regards to Department of Justice antitrust litigation, California stepping in as the federal antitrust work weakens. What sectors is the AG's office prioritizing? For example, health care consolidation or grocery or tech or housing, just to make sure that we're aiming at consumers and workers from monopoly pricing.

Jesse Romine, Department of Finance. Deferring that question to Department of Justice.

Hi, Senator Russell. This is Danielle Bannon, the chief of the public rights division. In regards to prioritization, it really it depends on what issues are coming up. There have been a number of industries lately in regards to antitrust matters that we're addressing. And so as they come up, we're been addressing them.

So currently, we have a couple different type of mergers that have been taking place, that have significant concerns and impacts in California, and those are the ones that we're currently focusing on. And we listed the five types of cases that we're currently addressing now. Previously, in 2023, it was more about big tech companies. Now and it was some grocery store mergers. Currently, we're having live entertainment spaces that have significant concerns.

We're having, other types of entertainment like, the news outlets where there's, potential of, anti competitive conducts occurring that is affecting California. Also, things like Life Nation and Ticketmaster, where consumers are spending their funds in these places. And so it's hard to predict, but usually as they arise. And so those

are the areas that we're currently focusing on now.

Okay. Thank you, and I appreciate you having to step up and do a lot more. On the Medi Cal fraud and elder elder abuse, I just wanna make sure that in doing those investigations that we distinguish between bad actor providers and beneficiaries who just are making enrollment mistakes, and that they not be confused into into the same category, which some people might try to do. So how would you how would you make sure that that happens?

Good afternoon. Jennifer Euler, Department of Justice, Division of Medi Cal fraud and elder abuse. Division of Medi Cal fraud and elder abuse does not investigate or prosecute beneficiary fraud. We only investigate and prosecute fraud perpetrated by providers of Medi Cal pro services. Okay.

Thank you. Thank you very much. And then with regards to the backlog of arrest disposition reports, Can someone tell me what the current backlog is and what would you expect to clear with the $2,000,000?

I'm sorry, Senator. I'm just the backlog of arrested.

Yeah. With regards to the, reappropriations, to process a backlog of arrest disposition reports.

Okay.

Good afternoon, Senator. I think you are referring to the LA Superior Court disposition records, reappropriation request. There are approximately 421,000 records.

That's the backlog? Yes. And how? And the 2,000,000 will address some of it, most of it? What what are you expecting to do with the 2,100,000?

The requested resources would fully address the the backlog.

Oh, okay. Good. Glad to hear that. Thank you very much. That's it, Madam Chair.

Senator Seyarto, regarding the judicial branch and the Department of Justice.

They need 3,900,000 in the general fund. One of the issues that we're having with our court system is that we have we have placed upon them the burden of of resentencing and some other items, but we did not increase the number of judges. And and is this to cover some additional judges that will, help offset the costs, for this mandate on our court systems? Or or what's that's what's the 3,900,000 for?

The requested 3,900,000 is for DOJ staff resources, primarily attorney resources who are continuing to work these cases. There are no judges included in this ask. It's a DOJ ask.

Okay. Because you guys can do a lot of of processing at the at that level at the DOJ level. But if there's no capacity in the judicial part of it, it doesn't do a whole lot of good. I think we're just spinning our wheels. So that's all.

I don't have any more questions.

Thank you, Senator Seyarto. I'm gonna start off with all of these items are certainly very important and worthy of support. I do wanna point out a couple in particular that I've gotten a lot of questions on within the judicial branch. I wanna support and applaud the effort to put more resources towards language access as we are certainly a very diverse state, and we need to make sure people are able to understand the justice that's being applied.

Regarding the appellant court security, we've seen across the country attacks on elected officials and people, and so certainly we want to make sure people who are doing the work are protected.

So I suspect in years that number will increase. And regarding Department of Justice, the efforts, comments have been made for weeks, and even today, talking about the medical potential fraud and elder abuse. I wanna highlight that that's one of the items here to cover, and we're grateful for your focus in that area. And any additional focus that we need to do to make sure Medi Cal fraud is not occurring and we're addressing it in the state It's very important.

With that, I do have a few questions regarding the judicial branch.

The May revision contains numerous reappropriations for courthouse construction projects, meaning that even though when when money is available, progress is not being made. The Senate's budget plan contains 3,000,000,000 in the lease in potential lease revenue bonds, because we know, new courthouses and improved space areas are desperately required, because we have many judgeships that we're not able to fill, because we don't have this space. What is happening, and what can we do differently to make headway on this issue?

Because just to move from one project to another, we're not really frankly addressing the problem, which is that we do need new court houses, new court rooms, new space, so we can have new judges. And it's my understanding we can't have new judges unless we have new space to support them.

So what's being done to address this that we can do differently? So as we prioritize funding, which I intend upon doing in this session, that we can know that we're gonna make headway with these projects, that you have the systems in place to get the contractors? Is it CEQA exemptions that are required? What what is needed, for us to make headway in this area?

Amanda Garcia, Department of Finance. I can give a brief overview, and I'm sure the department can have a more detailed answer. But I think right now, we did not put forth any additional new court houses in May Revision, and the priority is there are several court houses in in the pipeline that Judicial is working diligently to finish.

They have seen some delays, and we we want to make sure that we've addressed the these in progress buildings, and then we are getting them completed as quickly as possible, before we add any new buildings. Right now, if we were to add additional courthouse buildings, there just isn't the bandwidth for us to be able to nimbly build them, and it would really just result in a delay of all of the projects.

So we really want to focus on the projects that we have currently in place, and then going forward, you know, we're happy to work together to come up with a plan to aggressively address the the need.

Okay. So I'll defer to the department, but my comment is if we're waiting, meanwhile, Justice is not being served. We have counties in San Bernardino and Riverside where they are deficient minimum 12 to 20 judges, track with what we have, understanding that these kinds of projects, just the planning stage alone, permitting and so on, is years. So when we wait a year to finally or two years to begin to address these locations, meanwhile, people are not being served in communities.

Earlier in the year, talking about the capability, I very specifically asked the question, do you have the capacity that if we were to provide additional funding, pushing for additional funding for Judd ships and additional funding for a lease revenue bond to deal with new construction and potentially to look at dealing with our outstanding maintenance that we have.

So how are you going to get your department to the point that you can handle potentially additional resources? Because the resource it's a rare time that we're actually asking this question that we're saying, if you were to have more money, how are you gonna be able to handle it when what we're seeing, we're not handling what we have.

And I think it's in short, you know, we are looking for, you know, the ability for the for the branch to to move its projects forward. We also have to recognize the budget as a whole and the part that we play in that, and the chief has been, you know, confidently saying that we need to be part of the overall budget strategy and that includes, you know, any contributions like the the reduction that we have in the fund for, facilities this year.

But we also, again, you know, understand that there are limitations and it takes resources to be able to move our projects, forward. And so that is a collaboration with all of you as far as what that takes. But as it stands right now, the projects that we have are what we are working on and focused on.

But it's my understanding the issue with these projects, you have the resources, but the projects aren't getting done. So there I've been told they weren't getting done because there were property acquisition issues, on and on and on of issues. So to me, what I've heard, and I've I've been working pretty diligently, as you know, on this piece, I'm hearing that it's not I'm not hearing that the issue with this, of the reapportionment of varying, courthouse construction projects, is due to you don't have the money.

It's due to these other circumstances that are happening. And so I'm asking, is that correct?

And if so, can we clarify what those other circumstances are? So if we're then going to direct more money, we need to make sure that we're not gonna have that money fall into the same problem. So my question is, is it a problem of, permitting and CEQA requirements? Is it a problem of, local governments not supporting? What are the problems that we're running into that's precluding us from completing the projects as you originally desired in the order that you desired?

And now we're reapportioning, we're moving around. And meanwhile, those projects aren't done, and then we have more projects that need to be done, for example, in San Bernardino and Riverside, that I'm hearing we're saying, we don't even wanna begin talking about that until we finish what we have.

And we'll have mister Ahmed speak to the specifics. But it is there all the topics that you described in terms of our challenges are real, and these are our existing projects that we are trying to complete the acquisition phase of. And for all the reasons that you described, they exist.

But again, we can have mister Ahmed speak more specifically to some of the local government challenges, the acquisition of the land, and the changing nature and landscape of local governments in which, we have three years ago, local government is saying we're good. And then and then new folks come in, and they change their, their approach on on the the siding.

Tamar Ahmed, Facilities Director for the Judicial Council. We currently have five projects that are in acquisition. We've had challenges meeting the schedule as far as acquisition for several reasons, including, in some projects, there weren't any, you know, land owners that were willing to sell to us. We after several negotiations in getting into CEQA, the land owner on one of the projects decided not to sell to us.

So we had to shift to another project to another site and start, you know, our environmental due diligence and our CEQA process on that piece of land.

Another property because we we had to go a mile away from where we wanted to go and there were three sites that were there and two of them really had challenges regarding the the topography. And in the third site that we landed on, it's a private property that is has the US Forest Service occupy a building and they cannot vacate it before 2028.

So we have locked up the place at least by doing a purchase option that allows the state of California to buy the property when they move out. So that got delayed because of that. Other two properties, they had to do with historical evaluations that had to be done as part of CEQA, And there were also some delays due to internal and external stakeholders that had to do some reviews and there were some delays there.

We are very I mean, we are closer regarding a lot of those acquisitions than we were a year ago, and we're hoping to fit push them over the, you know, the finish line in this coming budget year.

So given that your need is broader than these five projects, If we were to provide additional funding, how would you handle it?

You know, interesting, Senator Richardson. I think when we had the hearing, you gave us a homework of, you know, if we authorize certain amount of money, can you able to get it done? And we, you know, we turned in a budget that what we need in order to get it done. But one of the things that we also identified was is that we need additional resources in order to get it done.

And at this time, we're not able to quantify because we didn't have enough time to really figure out exactly what are the resources both in internal and external.

For example, when we get additional funds or if we get additional funds to do projects, there are impacts to the Department of General Services, which isn't, you know, handles our part of our acquisition. The State Farm Marshall and the plan reviews, these are all external stakeholders that would be impacted that we haven't studied, how would they be impacted, and what would our program affect, and how would it affect them.

So when did we have our last hearing to talk about this?

I'm sorry. I didn't catch that.

When did we have our hearing to talk about this approximately?

Oh, what? Was it February? Or

Yeah. And and we provided at the time the the the responses within the time frame that we were given, and we noted these were all challenges that were unknown, and that we couldn't speak on behalf of these other stakeholders, but acknowledging that they need resources to be able to help support us in the in the process. And it was also again, it was based on the scope.

So if you were to give us some specific projects, then maybe we might be able to scope specific costing and what our partners would need to support those.

Okay. So I'm gonna be doing some homework between tonight and the weekend, and I need to put together coherently what I think, at least from my perspective and hoping to have committee support of additional work that some of these projects that you have on your list that need to be done. And my concern is that we provide the resources, and you can't meet the challenge. That's my concern.

And so we need to have a honest discussion of how do we get there, because the current pace is not working.

The current system of how you do it is not working, and we gotta get something better. We've we just can't keep spending years and years and years, and then we're not getting to our goal, which is to actually, you know, build in court houses. I know we just opened one here in Sacramento, Great excitement and all of that, but it's not gonna be sufficient to build one courthouse every ten years or however long that took from start to finish.

We've got to do better because, again, we have communities where justice, for all intents and purposes, is being denied because they don't have the facilities and the judges to handle the load. And so who's bearing the burden?

The actual Californians who are trying to go all over varying counties to actually get judicial support. So I'm gonna do my part, of fighting and advocating for the additional resources.

What I need for you guys to really get a handle on is how to get this done, and I'm just not convinced that the current makeup of how you do this is sufficient, that you have sufficient enough people to make the right determinations, to advance, to get the right, you know, property acquisitions, to do all the things that are needed to be done.

And so, you know, if we're successful in getting additional resources, I really need for you to take the time necessary to determine how to get this done, because there are a lot of competing interests for these very few dollars that we have, and the last thing we want is to allocate a significant amount of money, and you come back and go, well, you know, we want to reappropriate, you know, a billion of this, because we're not able to make the proper acquisitions, and that's not fair, frankly, to Californians.

So I think you really have to seriously evaluate, do you have the sufficient team and capabilities to do what's outstanding that's required?

And what I heard from Department of Finance is you don't. They're basically saying we want you to focus on, you know, these dollars we have here to finish what we have, and they're not convincing me that you have the bandwidth. That's the word I'm searching for. That you have the bandwidth to handle what you have that's on the line and to handle additional.

And there's only gonna be so many times that you're gonna have agreement with members to say, we wanna help fund for you to do more.

You've got, I think, a unique group of people that are prepared to be helpful, but you have to be help you've gotta be ready to pick up the ball and run. I gotta have someone, a running back to pass it to. And right now, I'm concerned that by allocating these resources that you're gonna be able to run with the ball.

So I'm gonna do my part and figure out how to get you additional resources, that can be dispersed to these varying entities that you would utilize to help, but you've gotta be able to be thinking about where would these dollars need to go for you to pick up the pace and get this done. So I don't know is that development teams you bring on.

I don't know. But it's got to be more than our current system because our current system would only be handling three or four projects, five projects that we have, and we need double minimum. We're gonna need double that to be able to start getting at making sure people can have access to justice. So we need to see more is what I'm saying, And I I'm concerned that you can do it. The second thing, so that has to do with courthouse construction report re appropriations.

You know, it's just alarming. The last question that I wanna ask is the Supreme Court justice made a case for judges' salaries, and I received several letters and documents, excel sheets showing that other entities within the judicial system are making more than actually our judges are. So LAO and Department of Finance, I noticed there wasn't, I don't believe, a recommendation about additional judges or additional judges and salaries in the May revise.

And I just wanted to see if you had some comments about that, because that is something specifically the judge has meant the superior court justice mentioned.

Henry in department finance. So while the May revision does not include a general salary increase for judges, I would like to note that, they do receive an annual, incremental increase, that's formal driven, but that is tied to, the average salary increase increases for California state employees, which is set in statute.

And then as far as, additional judgeships, the budget also does not include resources for additional judgeships, but I would like to note that the governor did sign SB 75, which authorizes 26 additional judges, but that is subject to appropriation. And more recently, the 2022 budget act did include one time and ongoing resources to support 23 additional judgeships. And since 2019, the administration has committed to $82,000,000 general fund ongoing to support a total, additional 48 judgeships.

Okay. So if I heard you correctly, you said that the salary is actually dictated by prior statute.

That's correct.

Okay. So if we could work on understanding what that statue is and maybe we would need to write different language that would be more appropriate, to the judgeships and actually tie it to the other groups that they work with, as opposed to whatever state employees they're currently being compared to. And then, if you could get to me, and maybe you've ever already provided it.

But again, you know, I used to be a staffer, and one of the things we do is when electeds would ask ask questions, just give them more paper. Go for our paper, and, you know, maybe they'll go away.

But if you could give us more information or give it to us again on SB 75, what has been funded, the 23 judges, what is proposed to be funded, up to 48 judges. If you could give us, and I'm sure Nora has it, but if you could give it to us again, that information so I can look at what do we need to do to activate that funding to get these additional judges.

And then on our end, we're going to have to make a decision about making the commitment for the facilities to house these judges. Because as I understand, the problem isn't that we don't know we have a need for judges. The problem is we don't have the facilities and the courtrooms for the judges.

So we've got to figure out what we've got to get for you to be able to support everyone who wants to do better, but, you know, we need the rooms to actually put people in. So let's please get this information in, and we probably need to talk between now and the weekend. So I may be calling.

No problem. Just a little history on the the judge's compensation that the the chief was someone addressing is there is a statutory provision, six eight two zero three, and mister Rang has referred to, but there's also been, and it's been almost a couple of decades since this has happened, but there's been extraordinary and special salary adjustments, recognizing sometimes the challenge of recruiting qualified applicants for the for the bench.

And so the chief is sort of focusing in on not the the regular kind of process that happens when the state bargains with, its 21 bargaining units and then the the judges and justices get a commensurate increase, but rather something outside of that, is what she was referring to. And so there are dual tracks that can be pursued in terms of funding additional salaries for judicial officers.

Okay. And mister Drew, I do have a copy of your LAO, I guess, recommendations. I'll be reviewing these also as a part of my homework and seeing if there's some things that we can incorporate. But thank you for your work, and it's always good to hear what are some possible solutions, that could fix the problem. So thank you.

Thank you very much. Any other questions for the judicial branch or for, the Department of Justice? Okay. Seeing none, thank you very much. We have next as a part of part b, emergency management and also corrections, and then we'll take and I guess board of state community corrections, which is a part of corrections, and then we'll take public comment on this part b.

So we will start off with emergency management.

So we, again, have emergency management that we're doing and corrections in this B section of part B. Okay. Who's going to present? Yes, ma'am.

Hi. Good afternoon. My name is Mary Rucker. I'm the Assistant Director of Administration at Cal OES. We are proposing a one time increase of $141,900,000 of State Emergency Telephone Number Account also known as Cetna in 2627 to support the implementation of the next generation nine eleven system.

This one time funding will support the deployment and transition the architecture from a regional model to a unified statewide system. The new statewide architecture resolves existing interoperability challenges, creates one cohesive network with public safety grade resiliency and significantly reduces operational complexity for our public safety answering points. California's nine eleven system is funded through and this proposal will not increase the state general fund deficit. Aetna is a surcharge on access lines in California that funds the legacy nine eleven system and transition to NG911.

California's Cetna fee is amongst the lowest in the nation and it will remain one of the lowest with this proposal.

Amongst States that charge fees, only seven States had lower nine eleven State fees than California. This proposal reflects a one time funding request that will first begin the transition to a unified system. Two, maintain the services of the current regional providers as the transition takes place. And three, update the call handling equipment used by the public safety answering points that are beyond the expected lifespan.

And four, ensure model reliable modern reliable system for the greater Los Angeles region prior to the twenty twenty eight Olympic and Paralympic games and a safer future for large scale events and beyond.

Would you like me to go through all the proposals first?

Yes.

Okay. The next one is the southern emergency operation facility. This request is for 11 positions and 105,000,000 general fund in twenty six-twenty seven, 9,100,000 in twenty twenty seven-twenty eight, and 4,800,000 ongoing to operate open and operate the southern emergency operations facility. Beginning in 2021 and subsequent budgets, the administration and legislature invested in the design development of performance criteria and construction of a new facility for emergency and disaster response in Costa Mesa at the site of the former Fairview Development Center.

The Southern Campus is a 39,440 square foot regional office and emergency operations center.

This property will include a twenty one four hundred and ninety thousand square foot warehouse, a maintenance shop, a radio communication tower and related operability infrastructure and capacity to host a multitude of federal state and local partners for the highest level of emergency management coordination. The project is scheduled to be completed and operational in 2027. This proposal will provide emergency operation, building and facility management, information technology, and security staff for the new campus and will be fully operational for the twenty twenty eight Olympics.

I'm also speaking on two grants. The may revise includes $40,000,000 on a one time basis for grants in our California State nonprofit security grant program which provides support for target hardening and other physical security enhancements to nonprofit organizations that are at high risk for violent attacks hate crimes due to ideology beliefs or mission.

And secondly, there also includes 25,000,000 as a victims of crime act supplemental funding one time allocation. This will significantly alleviate the service level reductions caused by lower federal funding available for these programs based on the current level of federal funds that we expect to receive later this summer or fall.

Okay. That's it.

That's it.

Okay. Department of Finance.

Matthew Perkey with the Department of Finance. Nothing further. We're just here for questions.

Heather Gonzales with the LAO. I will do the VOCA back fell and the non profit security grants first and combining them. Our general concerns about these are that consistent with their overall concern about the budget condition, we note that the administration's request for VOCA and the non profit security grant programs are for general fund given the state's fiscal condition any new general fund the legislature approves for these proposals will come at the cost of other general fund programs and or the ability to build budget resilience.

Accordingly, we just wanna encourage you to weigh the funding, for this proposal against your other general fund priorities, and additionally, we would note that with specific regard to the VOCA funds, the state is under no obligation to backfill, reductions in federal funding for that program. With respect to nine one one, the next generation nine one one, our recommendation is to modify.

We, support provisions that are designed to bolster the state's nine one one system to ensure that it is strong as it can be in its current state, including the funding request for call handling equipment, as well as request for support of the existing regional and legacy systems. We do not oppose funding the bridge contract, which is intended to transition the state to a statewide next generation nine one one system.

However, we note that OES signed the bridge contract before the legislature affirmatively endorsed endorsed the proposed pivot to statewide next generation nine one one strategy and while the legislature was still actively debating the best path forward for nine one one. That such a major policy shift was made while the legislature is actively considering options to increase oversight of this project is concerning. But again, we do not oppose this use of funds primarily because we see the bridge contract as contributing towards stabilizing the existing system.

With respect to our recommended modifications, we present four for your consideration. First, we recommend the legislature direct OES to allocate funding to dispatch centers for call handling equipment on a priority basis. We've consistently heard of problems with dated and failing call handling equipment that has not been updated because dispatch centers have been holding off while they waited for the new network. Updating call handling equipment is a key part of stabilizing the existing system.

So we agree with this use of funds, especially for those dispatch centers with the oldest or failing equipment, which we recommend prioritizing.

Second, we recommend that the legislature require OES to obtain independent third party project management oversight from the California Department of Technology or another independent vendor during project execution. The BCP only states an intention to do this and we think it should be a requirement.

Third, we recommend that the legislature adopt budgetary language to prohibit state funds from being used for a permanent statewide next generation nine one one network until it has received and evaluated the result of an independent technical assessment of the OES plan and an audit of the OES effort to date. This would ensure that OES cannot move forward with a permanent system until the legislature has had a chance to fully, evaluate the proposed changes.

The budgetary provisions are particularly important because the BCP states that OES intends to move quickly to secure a permanent contract by this fall.

This brings me to our fourth and final recommended modification and that's to ensure that the budget provides funding to the state auditor for costs associated with the technical assessment and audit. We estimate these costs could be a few million, and to the extent possible, we recommend that funds come from Cetna. And that's my comment today. I'm happy to answer questions.

Well, you dropped a bomb, didn't you? Any other comments? Before we get into our questions, would you mind commenting on her first comment, which stated that the department operated without the authority from the legislature Steve. To make the changes that were mentioned.

So, yeah, I'm happy to address the question. Thank you. I'm Steve Yarbrough. I'm the deputy director of public safety communications at Cal OES, and I would offer for the committee's consideration that line with the transition plan that we published last November and offered, I think we reported during the month of November to the legislature on what that transition plan entailed. We also submitted another report to the legislature and published an implementation plan on how we would go about.

So the actions we're taking here are in line with both of those plans that we published. So I feel like we have communicated what our intentions were. I think as we executed I think

the question was did you have the authority and did the legislature give you the authority to make the change, not whether you said, hey, we're thinking about making the following change. Am I correct?

On the question of authority, what what we're pointing to is that the legislature is currently considering bills and budgetary action that would materially impact the project. So that's our that's the central part of the concern is that you are in the process. Two bills just got off suspense in both houses last week that would impact the project or if enacted. You also have budgetary action that you've been considering.

So you were in the process of of reflecting on what your changes might be, and yet movement went ahead before you came to the conclusion of that.

So if you could answer that.

So I recognize the timing could be construed the way it was presented by my colleague from the legislative analyst office. I also would note for the committee's consideration that one of the reasons that we're moving forward is because of the timeliness of getting certain things in place in time for the Los Angeles Olympics and Paralympic Games that are coming in 2028.

So within the bridge contract, there is a clause that if appropriation for that for that contract does not materialize, we have an option to then obviously not move forward. The contract itself would no longer be a force and effect. So I don't view it as necessarily circumventing a process so much as it is lining things up so that we can take advantage of the time between now and the Los Angeles Olympics to serve the the community in Los Angeles area during that event.

Senator Durazo? Yeah.

I think there's a really important point to be made about the timing and not wasting the timing. I don't know. I appreciate the making sure that the legislature is not shut out of of the process, but there's a really urgent issue around the Olympics and the Paralympics that I just wanna make sure I mean, we just can't afford to not take that into account. It's, I guess, my only point.

Yeah. I I think that, you know, certainly we have to be ready for the Olympics. Certainly, safety is our number one priority in putting on the games. But to also add to the LAO's point, it's not that you don't have legislative ability through urgency and there's many things that we can do to, you know, we've been here. I've been here almost every Thursday all year.

So it's not like, you know anyone has conveyed a sense of urgency of something that had to be done so I actually see both points. I would caution though that what we don't wanna do and if I'm not mistaken, I think we've seen articles in the paper about this. What we don't wanna do is expend resources moving in one direction. It's one thing to say we have a bridge and well, if we don't get authority, we can pivot and do something else.

Well, meanwhile, though we've spent time and money in an area that we don't have, which I think is what the LAO is is bringing to our attention.

We spent time and money moving down a road that you in fact may not, you know, have the legislature agree, which is dangerous, because we all have our roles. There's three branches of government for a reason and they all need to be respected.

So, I would say that we're now at that end point from a legislative perspective to make these decisions but I would just caution if there's something urgently that needs to happen there's a process to follow and that process is to notify the legislature to give the legislature an opportunity to, you know, to concur. I don't believe I've gotten any calls from your department requesting to meet or to consider something, other than our normal hearing process. So, it really concerns me when I hear, these comments.

Yes.

To the Senator Durazo, to your comments, I would also like to just also, stress that we don't oppose the transitional contract, which does have the LA. The place where we're suggesting we should pause is on moving beyond that to the permanent, making the commitment to the permit making a permanent commitment to the system versus bolstering the existing system and providing some additional services to Los Angeles. That's where we hit the limit.

Okay. I wanted to address that question right off the bat. Senator Durazo, did you have other questions though for this section?

Yeah. Thank you, Madam Chair. I I think they're quick answers. What is the timeline for the LA region dispatch centers to be live on the NG nine eleven?

We're we're working with the Los Angeles area regional public safety answering points with the intention of bringing them on to the the NextGen nine one one network that will allow, of course, time for everybody to be very comfortable that we aren't making last minute changes before the the Olympic Games start, and making sure that we've worked diligently in the meantime so that everybody feels comfortable making that transition by that time frame.

So it's a collaborative process, making sure that we have plenty of time for testing and training.

And I assume that includes yeah. I was just gonna say. So the training, not just the equipment, not just having the equipment, but actual training and

That's correct. Yes.

Okay. Alright. On on on the other on the security grant?

On the security grant?

Uh-huh. Did we go through that? Yeah. Obviously, we everyone knows the rising threats that are facing black churches, LGBTQ centers. We just had several people killed, sacrificing their life at at the Islamic Center San Diego.

I just can you talk about how we would we intend to cover the distribution of awards and the grant application process? What's involved in that?