Assembly Budget Subcommittee No 4 Climate Crisis Resources Energy And Transportation

Morning, Rachel.

Lee Scott will be starting this off, sir.

Okay, so good morning, everyone. Chair, members.

So do I, right?

Good.

I'm going to give everybody a piece of advice. The better thing is to take the microphone, put it to the side of your notes,

Now you can pull the microphone to you, is why I say put it to the side of your notes. there. Even pull it more if you don't mind. Thank you very much. It's just constant battle in this office. Thank you. Thank you. Okay, so good morning, Chair members. Thank you for the opportunity to be here today. My name is Lee Scott, Chief Budget Officer here at the California DMV. You're still not close enough. I'm sorry. How about this? See that? There you go. How about, all right, here we go.

Yes. Okay, so Lee Scott, Chief Budget Officer here. And with me today is our Director Steve Gordon, and Kristen, our policy expert. DMV has focused on two priorities today, federal compliance and modernization, both of which directly impact California's ability to access essential services. On state-to-state, this is not discretionary. It is a federal requirement under the Real ID Act. If California does not comply by February 27, our residents risk losing the ability to use their real IDs for air travel and access to federal facilities. We are the last state to implement this system, and the proposal before you ensures we meet the deadline while maintaining strong privacy protections. On DXP, this is our core modernization effort. It replaces aging systems that process billions in revenue annually and support over 30 million driver and vehicle records. We have reset the project, stabilized costs, and are now focused on delivering vehicle registration by the end of the calendar year 2026, using existing resources. So the proposals are about protecting access for Californians, safeguarding data, and ensuring DMV can continue to operate as a high-volume revenue-generating department for the state. I'm happy to walk through any details and any questions.

Bowen-Peterson Department of Finance, nothing to add.

Rachel Ehlers with the Legislative Analyst's Office. Regarding the state-to-state proposal, we understand there are legitimate concerns around the use of these data and personal information. However, in our review and conversations, it seems like the state's in a pretty tough place. We don't want to be the only state in the entire country that is not participating in this. The option of forcing Californians to have to have a passport in order to fly domestically doesn't seem like an equitable or practical solution. So really, based on our review, it seems like the big role for the legislature is to try and figure out what kind of guardrails we could put in place and what kind of options are available. But it does seem like moving forward probably is one of our only options at this point.

I know the answers to some of these questions, but I think it's very important that we at this public hearing get these answers out there.

Sure. Actually, I'd prefer if we could just sort of walk through how the system actually works. We can start with that. The PowerPoint could be supporting if there are particular questions, Mr. Chair. Steve Gordon, California Department of Motor Vehicles. I don't need to say it's from California. I'm not from Nevada, of course. But Department of Motor Vehicles, the essence of the system is this. We are loading first name, last name, date of birth, last five, a social security number, into this shared system, as has every other jurisdiction in the U.S. The goal of that is to be able to allow another jurisdiction, when a driver approaches him, applies for a driver's license in Nevada or in California, then it allows that system to be actually referenced as a pointer and points them to the other jurisdictions that that person may have held the driver's license. And then if they do find a match, then that state where that, again, the 99.9% use cases, that person is standing in front of the agent at a Department of Motor Vehicles, like California's department, and has filled out an application, supplied all this particular information. The application is now being completed by the agent. And the agent then is verifying that the driver history, where the driver came from, and by the way, most of us when we go to another jurisdiction, I know when I moved, I bring my driver's license with me because the state wants to know, well, where are you coming from? And so I'm presenting them with a full case, which would allow me, even with a complicated name like Kristen Tripkey to my right, you know, we're going to have a fully qualified query and we're going to be able to do essentially a one-to-one match. So we'll find it in the pointer system. In my case, let's say I moved to Nevada. Nevada would say, ah, Steve Gordon, his last state of record was the state of California. They would see a response from the state-to-state system, from the data that California has put into that system. They would see one response. They would see that information. They would select that response. And then at that point, they would then trigger a point-to-point-to-California request from Nevada to California to pull across the driver history record. And I want to underestimate the safety aspect of what you spoke about a moment ago, Mr. Chair. the driver history record contains my driver record from California or wherever else I lived We want to be able to move that from jurisdiction to jurisdiction so a driver can have multiple driver licenses and multiple records and hide bad driving behavior DUIs and so on And so the importance of actually sending that information along with the driver when they move to a new jurisdiction is paramount. And that's very important for us to have safety no matter where we go. Now, there are a lot of other questions about, well, what happens when and where? But the core system itself contains a pointer to another jurisdiction. Everything else, the driver history, the detail about their driver behavior, any additional information is actually stored by the jurisdiction that holds the driver record itself. So there's none of that information is actually being populated in this core system, but it's being sent, in my example, from California to Nevada based on a qualified request from Nevada. There have been questions about, well, what happens if this happens or that happens? There's, as with most systems, as is with state to state, there are layers of access controls. There's, of course, training and so on to make sure people are using it correctly. There's oversight by our association, AMBA. AMBA is an association that's actually run and operated by its members. We are a member of AMBA. And the top-level management of that system is done there. They're looking for anomalous behavior, as is, in my example, the state of Nevada. Once we get to the point where information is actually sent from California to Nevada, now California has visibility that that information has been requested, and in some cases has already responded when there's a one-to-one match. So we have visibility to who's requesting data on the state of California. And that way we'll be able to see, is it a particular jurisdiction, if there's an anomalous query, if someone's asking the same question over and over again, which seemed unlikely that that person would be visiting the DMV 27 times in one day. So we would have visibility to that. I would trigger an alert and beyond reporting that we'd be able to then take, not only with our neighboring jurisdiction, but also with ANVA. and we could potentially, if needed, request a cease and desist from AMBA to block any first transaction. And, of course, we can not supply the driver history record, which is where the detailed information about the driver. But in that driver history record, there is no information about the address, things like that, but it's strictly driver behavior. So I want to be clear, there's no information on address that goes. That's right. No information in the driver history record has the address or anything like that. Now, remember, the person is in front of the agent at the other DMV with their driver's license, which has an address on it. Correct. They fill that in application with their address on it because the DMV needs to mail them a driver's license. So there's a lot of other places where information is exchanged, but it's exchanged by the participant, not the state. I'm sorry. So there are a couple other topics you brought up. I want to make sure I didn't miss him. If I can now read my writing here. Maybe you want to step in. I think the point that we're trying to underscore initially is that there is an additional upload into the system, But it's not for if we're looking at it, it's not a database of Californians, if that makes sense. It's more of a pointer system. And so we're only uploading what is required by the state to state agreement that all states are agreed to of what we're going to upload into the system that we can find you. More than likely, when you did move to Nevada or you did move to another state, you probably would more than likely submit your driver's license, say this is my California driver's license. and more than likely we would be able to find out that Chair Bennett is who he says he is and we'll be able to find you in that initial upload. But there are no bulk searches. There are no queries. It's really, for me, the best way I've understood is transaction-based. So I need to physically be there in order for this system to start working. And the minimum query requires name and date of birth. So that's the minimum query. But again, the standard use case is you are when you're moving to another state, as I've done a couple of times. you're presenting your driver's license to full applications. You have a very full query that is very specific to you but you can minimally provide a name and date of birth which will generate then a response from multiple jurisdictions Because if let say you have a common name like Mike Smith you might get a bunch of jurisdictions that are responding to, yeah, I got a Mike Smith, but which Mike Smith? So anyway, so there are no bulk query capabilities. I think I know people are concerned with that, but there's no bulk queries built into the application or to the process.

Well, the hypothetical, so this is sitting inside of ANVA, following good business practice. First, they encrypt in transit, so when the data is being shipped from point A to point B, when we're making a request, all that information is encrypted. It's also encrypted at rest. So you can imagine that if you hack the system in this theoretical, you might get some visibility to some data, but the data that is important, especially the PII data, would be encrypted. So you wouldn't have visibility to any of that. And plus, the information as I mentioned, doesn't it contain anything beyond the first name, last name, date of birth, and the last five of Social Security, which would all be encrypted?

The matching criteria is not specific in federal regulation, but the federal regulations point to you need an electronic interchange for states to exchange this information. So that is required in federal regulation, and the only system that does that is the system at ANVA. So it's a bit circular, but it is indirectly pointed to in federal regulation. But the electronic interchange, and there's only one of them, is a requirement based on conversations with TSA, DHS, and other federal agencies.

I would assume. Chair, the point I was making, I guess, is that the standard use case is you're standing in front of the agent. You are there. They've visually identified you. You've provided that information. So they technically have requested their information to be moved. So in that sense, yes, they've been notified. That's in the standard use case.

No, there's nothing like that. But again, the jurisdiction, when that driver history record is requested, we'll have visibility to that. And if there's an issue where we see repeated.

We will, if they select one of the candidates and request the driver history record, we will know.

We have some states that are joining in in the hostility towards California or the retribution towards California.

There's probably a few. I'm not a lawyer, but what I do know about the various agreements we have for using the system. So the first level would be severing them from being able to use the system. So there are agreements between every jurisdiction and AMVA. There are federal rules that regulate how this information can be shared, and there's state rules on this as well. So there are probably many different penalties and remedies for this. But the most pressing one would be severing their ability to connect once they violate the agreement to use the system. And even to maybe add on, and we could go back and double check this, but I think that state would be risking having their real IDs be non-compliant in that state. Every citizen that has a real ID in that state would no longer be accessed to... Go ahead, sir. Sorry. Assembly member?

Right. So the remedies are going to be legal. And so in our case, if there was an event, we would go to the state AG's office. We would seek legal counsel from the state AG. We would file some sort of motion to start some action in the court. But before that, we would go to the association to make sure if somebody is misusing that information, that they would be severed from the ability to communicate with that system until things are sorted out. And then back to the broader question, when information is exchanged, as I mentioned, once a driver record has been requested, the jurisdiction, California or some other jurisdiction, will know that has occurred. And we'll be able to see that pattern. And it'll be our job to make sure we're watching that pattern, acting on that pattern, to make sure we protect the constituents of California as we do today. And so it'll still be our job to make sure that those systems are protected and make sure that, in fact, we're watching who's doing what. And we do that, by the way, we do that with our employees all the way up to make sure that nobody's accessing things they should not be.

I think the only way I would answer that is that anything is theoretically possible. There could be a bad actor with access to the system, but we would see that bad actor today. We look at our business partners and so on, so we see that pattern. We would see that bad actor.

Maybe not, but on the second instance, you'd see a pattern with that person making these queries and maybe someone being subsequently arrested or whatever. So we would certainly be looking at those patterns, but it's very difficult to say, okay, you've got this other person and they're doing one time thing. So I'm guessing it's a bad actor, but we do have visibility to the data request.

Yeah, I'm not sure I'm following the hypothetical, Assemblymember. But again, when requests are made from our system, when that driver history record is requested, our job is to watch and see if there's any patterns that we are seeing that are unexpected. And I don't know if this would help as well, but there are pros and cons to California DMV going last. So there will be the 50th state to come on board. We've talked to multiple other states about exactly how the system is working for them or has continued to work for them. What kind of issues have they brought up? A lot of scenarios. I mean, we've talked to a lot of folks, but a lot of different scenarios. And so far, But that so far is a general statement. So far, nothing has happened. I appreciate the question and that something could happen in the future. But at the moment, it really is about someone moving to another state, verifying that they are who they say they are, that there's only one record, one ID for that person.

Right. We know even if it's not government, a government actor, it could be an outside actor. And so just saying, just trust us. We haven't seen it. It's not going to happen.

Again, our job is to make sure that we're watching who's accessing this data. Again, the only people that have access to this are other member jurisdictions. There's no federal government, no federal agencies, no external agencies other than driver license authorities like ourselves. Those are the people that have access. Could there be a bad actor in the mix? That could always be the case in any department anywhere. Our job is to watch for those patterns and make sure we take action, quick action, when we see something that we do not expect.

We would seek to quash whatever subpoena if they're trying to do that. We would go to the AG's office, as we've done, and with other subpoenas to seek to quash that based on whatever the foundation is that they're seeking that information.

Which agency?

Anvil only has a minimal set of data. And if we have in our contract that we will be notified if there is a request on our data by a non-state agency. We would notify, of course, our legal team. Our legal team would take action to the attorney general, who is technically our attorney, and we would chase that down to the courts. We haven't had that issue with this particular system. We have had odd subpoena requests for other things. We've gone to the AG, we've fought it in court, and we've won. So we're going to try to take all the prudent steps that you would expect us to take, because this is sensitive data, and we're trying to be, again, responsible.

any issues yet with abuse of this data? Yeah, so we were in regular communication with all the jurisdictions whether whether they are red or they're blue or they're purple. To date, as we've said, there have been no reported issues that we're theorizing here. So yes, and there are some that are very aggressive. Maryland is one who's taken on the federal government at every turn, and they're in the system. And again, we stay in close contact with all states to make sure we're aware of anything that they're seeing so we can see it early.

Well, you won't be able to get a real ID in Nevada. I can't speak for what the Nevada state laws are, but the key thing... But you won't be able to get a real ID. You won't be able to get a real ID, but the key thing that I would say that we have to be most worried about is the driver history record itself. And what we're trying to make sure is that you don't go to Nevada, you don't try to seek another license as Steve in it with three Ts versus two Ts, and be able to lose your driver history record. But it really would, I guess, depend on Nevada law, and I don't want to...

I think the driver history record, my understanding is driver history record does not include.

I think it's still morning. Good morning, Mr. Chair. Nice and loud. I think at that point, right, when you're providing that record, right, so your example was Director Gordon is in Nevada. He's applied. There is a request. So everything's been processed, and now there's that exchange between the two states and California. It's going to say, yes, you're making your request. Here is Director Gordon's information. All that information, including his current address that we have on his record, would be provided at that time.

Correct.

Yeah, so I mean, look, sorry. So back to trust, and we want to demonstrate trust. I've completed from your earlier comments. On this particular issue, Not sure what the laws are locally in a different jurisdiction, but there are federal rules in place with respect to sharing this information. So there certainly would be, I think the driver's license, the DLP, whatever that is. But there are federal rules in place about sharing this information, and they would be in violation of that. There are probably local rules. I can imagine in Nevada, back to this example, this bad employee, there would certainly be a violation of their work agreement. They'd be probably breaking a half dozen state laws for sharing information, making requests that are illegal. They've committed a fraudulent act of some sort by requesting this information. So I would think they would be covered by a half dozen laws. I don't know the specifics of each one of those. But certainly when we have employees that are looking up information, maybe they're trying to, you know, they have taken a bribe to help somebody get some information, they are often arrested, often charged under California law. So I believe there's no shortage of laws, but we certainly can get back to you with maybe some of the specifics.

Yeah, so I'll take the last one first, and maybe, Lee, you can go into the greater details. So today, the schedule has been revised a couple of times, so I don't want to say, oh, it's on the original schedule, but it is on the current schedule. It is still on track. We're actually making sure that we're moving some funds along with us into the request is to move funds along with us into the next calendar year, next fiscal year, because we wanted to make sure we did not spend those funds faster than we could have consumed them. So I would say based on the current schedule, course and speed, we are on track. Our goal is to launch the system, the vehicle registration portion of the system, this calendar year. So I would say yes to your question that we're on budget and we're on track for the system based on the revised budget and schedule. Yep. And I can even add on that we had three phases, occupational licensing, vehicle registration, and driver's license. And so occupational licensing is finished. So we're done with phase one. Vehicle registration will be done by the end of the calendar year. And that's why the bulk of the funding that is coming forward into next year, and we're reappropriating about 30 million into next year also. So we definitely haven't wasted any work that has been done. We can still build off of. So we've kind of shifted a little bit. I wouldn't say waste, and I wouldn't say that we're behind in schedule. I would more say that we are ensuring that we are keeping costs down, asking questions about why we are receiving certain costs coming in, making sure that we agree with them, that we validate them. And so by the end of the calendar year, VR will be finished, which is probably the most crucial part of the DXP system because vehicle registration, as we all, that's the bulk of the revenue that comes into the motor vehicle account. We collect about $15 billion a year. Roughly a third goes to cities and counties. Another third goes to Caltrans. The other third goes to the motor vehicle account, which is us and CHP. And so ensuring that this 60-year-old system doesn't fall apart and we can have it going forward and ready on schedule is probably the most crucial part.

For driver's licenses, we have already started it in the current year. We will get it even more off the ground next year. I think over the next couple of years we see dropper license come to completion There other legislative bills that have come across our desk that we have to then incorporate into DXP There various other things that we need to take into account to make sure that that deal stays on track. So it's not so much can DMV finish the original scope of how the project is working over the last couple of years in the current year and over the next couple of years as different legislation comes across our desk and it gets signed and it comes into play, we need to make sure that how do I not only follow the law, but then incorporate that into what our DXP system is going to look like.

Yeah, so let me sort of take this. I believe there is a date, which I think is in fiscal 2029. 2029, yeah. But we are, Chair, we are releasing driver's licensing and ID cards in phases. There's a pilot ID card phase out right now. There will be a series of pilot smaller implementations of DXP. We're trying to build it in an iterative fashion, an agile fashion, which has been challenging from state procurement policies and how CDT and others want us to buy stuff. But we're trying to buy things and build things in smaller chunks so we can actually implement and not have the big bang that we're unfortunately going to be doing with the vehicle system. So you'll see if you went out to, well, there's a handful of select field offices today. You'll see ID cards being processed in the new DXP system today. And by the end of the calendar, you'll see all of the ID cards processed in the new system. Then we're going to add the next portion, the next slice of the bill. It could be a driver's license. It could be AB 1766. It could be a number of things that we'll be adding to the system. And by the time we hit 2829, the system will be complete. Everything will be modernized. We'll be able to turn off our legacy mainframes. CDT will have to repurpose those funds, resources, so they can actually work on modern technology like we're trying to do.

And it's also important to note, Chair, that when we work with Department of Finance in LAO and we submit our VCPs, more than likely the VCPs are only approved maybe one year at a time. That allows us to not only make sure that we're staying on track, but at least once a year, We get to come back and check in with you and let you know where we're at. And we can give updates, too, just because something might be delayed. It might be, well, because of X. And we would be of the same understanding of how that is. So this is an opportunity, and I hope that the administration will view this in partnership, and particularly the Department of Finance people will take this back. But we don't have a great track record of implementing tech updates in the state of California. Over and over again, we have literally blown it and wasted hundreds of millions of dollars. If you go back and look at everything all the way back from what they were trying to do with the Department of Justice and the court system and upgrades and all of that. So one thing that I think is missing is we just don't have expertise. Each department is not going to have the expertise they need to be able to compete with the vendors who do this all the time. And that is they contract with all these departments and, you know, we contract with these vendors and they try to help us do these IT implementation updates. Well, the vendors, it's like buying rare coins from an expert and you only do it once every 20 years. You're going to get, we need expert at the whole concept. And this is what I hope you can take, at the whole concept of it. So that IT is getting ready to do this. We have this expert team of X number of people that go okay make sure the contract has this make sure this We looking at this and that And then they go to another department and also help In other words they generic experts at implementation of IT That department doesn exist to my knowledge like it should in the state of California And so every department is sort of at the mercy of their limited ability to manage an IT implementation program with maybe they've got a couple of IT experts, but they're not experts at implementation. They're experts at the actual working of it, but not how do you implement these great big upgrades, et cetera, as we go forward. I would hope everybody would raise their voice and sort of saying that's an advantage.

And Chair, if I may comment, we are working, of course, with GovOps. I know they're looking at actually trying to do some of that work. We're part of that inner council. Because we agree with you that there needs to be that sort of competency. We also have to separate at the departmental level the what versus the how. Sometimes we come in and say, you know, I want this, and I want it to work exactly like my systems used to work, but in a modern technology. And you wouldn't want to do that with a modern tech. You want to take the best of that tech and put your what in that system. And that's something we have brought to the department. But these systems are very complex. And we've modernized a bunch of our edge systems as well, and we've put them into the common platform, a Salesforce platform, one customer record, one user record. But government is very, very complex. And there's a lot of rules. As you know, you write many of those rules. and it's maddeningly complex, but we are trying to suss out what needs to be there, making sure we're doing the right thing, make sure we don't violate the law, we can still collect the revenue we need to do, get vehicles titled and so on. Very important, but also government is extremely complex.

Yeah. Good morning, Mr. Chair and members of the committee. My name is Ben Belknap, Inspector General for the California High-Speed Rail. I have with me Amanda Millen. She's the Deputy Inspector General over Administration Investigations. For the last two years, we have been working with the administration and with members of the legislature to resolve some gaps we identified in my office's enabling statutes when comparing those enabling statutes to other Inspector General offices and to the professional standards for offices of Inspector General Current state law does not require that my office publish reports on various operational reviews of the High Speed Rail Project Rather, state law only requires an annual summary of findings and recommendations. I have at my discretion published reports for all the reviews and investigations that we've completed, but if pressed, I would not be able to point to a particular statute authorizing me to do so. State law also does not establish a framework for retention and disclosure of my office's work papers. We have, based on professional standards, prepared and retained work papers for each review we have conducted. Nonetheless, without a statutory framework, questions over the release of those work papers would be difficult and time-consuming to resolve. Appreciating the potential significance of these problems, the administration has agreed to carry a trailer bill that would establish the statutory reporting and work paper retention framework for my office. To provide further assurance that these problems would be resolved, Assemblymember Lori Wilson, chair of the Assembly Transportation Committee, decided to author AB-1608, which would establish the same reporting and work paper framework, but would also strengthen my office's ability to conduct its reviews in a timely manner by giving my office access to needed job classifications and authority to purchase needed goods and services. As a policy bill, AB 1608 had the benefit of a public debate as it moved its way through the legislative process. Based on feedback we received during that process, AB 1608 was amended, and this amended bill recently passed a floor vote in the Assembly. The administration has been following the discussion regarding AB 1608 and is considering amendments to the proposed trailer bill to be included in the upcoming May revision. One of the initial critics of AB 1608 was the First Amendment Coalition, a nonprofit that advocates for a free press and for the public's right to access government records. We met with representatives of the coalition, heard and addressed their concerns with amendments to AB 1608. As a result of these efforts, the First Amendment Coalition switched their position from oppose to support and stated in their position letter that the amended bill is a model framework for how independent offices of Inspector General can balance legitimate confidentiality needs with the public's right to know about government activities. The trailer bill you have in front of you today, even with those particular amendments not yet included, increases transparency on the high-speed rail project by establishing public reporting requirements as well as a work paper retention and disclosure framework. Those requirements do not currently exist in state law. Some individuals have expressed concerns that the reporting framework in AB 1608 and in the trailer bill allow for confidential reports. I want to address that concern. The leverage my office has to improve the high-speed rail project comes directly from public reporting of findings and recommendations. That is why I am pushing for, asking for a statutory framework that requires public reports. Nevertheless, there are certain situations, like pending litigation or weaknesses in information security, physical security, and fraud detection controls, where revealing details about those weaknesses would allow wrongdoers to take advantage of those weaknesses before the authority can address them. Therefore, in rare instances, pending litigation needs to be resolved or weaknesses that could be exploited need to be strengthened before full public reporting should occur. Generally accepted auditing standards The statutes of other inspector generals and auditors allow for confidential or redacted reports in these situations. AB 1608 would allow us to implement these same best practices, but as amended, establishes an even higher standard for transparency. The amendments to AB 1608, which the administration is currently considering, requires the inspector general to do three things. One, publicly articulate the underlying risk for which any report or portion thereof is temporarily held confidential. Two, to regularly assess and publicly assess—

Sir. One, publicly articulate the underlying risk for which any report or portion thereof is temporarily held confidential. Two, to regularly and publicly reassess that determination. Then, third, then to publish that report once the previously articulated risk is no longer substantial, meaning when the underlying weakness that could be exploited by those wishing to inappropriately benefit or harm the project is resolved. You will not find that type of framework anywhere else. That is why the First Amendment Coalition has chosen to support this model framework, and that is why I ask for your support of the revised trailer bill the administration is currently considering putting forward in the May revision. Thank you. Thank you very much.

Helen Kirstein with the Legislative Finance Office. We haven't identified any concerns with the proposed trailer bill language. Department of Finance.

Okay, thank you. Assuming the passage of this trailer bill, assuming that we do pass it, right, does your office have what you need to provide effective oversight? Is there something missing?

Thank you. I appreciate that. So, Assemblymember Wilson, I know you just arrived. I appreciate you being here. Assemblymember Conley also. Assemblymembers from the other side there, Gallagher and Tingba. We are at an item where your bill is being discussed, also 1608, with the trailer bill coming from the administration. So the inspector general just pointed out that there are some things in your bill that are not in the trailer bill, and that he identified those things as being essential in response to my question. does your office have what you need to provide effective oversight? He's identifying that he needs those things in your bill. In addition, if we just passed the trailer bill, we wouldn't have the full package that he's asking for. Subsequently, he also said there's something that's, I believe he said something that's not in your bill that he's suggesting should be in your, well, he's suggesting they need, not that it should be in your bill, but that they need, and that's this issue of what is a proposed agreement. And so I say that because I know you were just walking in, and I wanted to try to catch you up where that all is. I think I'll turn it over to you first if you're ready, because that's the only question that I have, and then I know that we'll get some comments about high-speed rail overall in a moment, and I'd like to stay focused on this part of it right now. Okay. Any other comments about this specific trailer bill? Assemblymember Gallagher.

You raise a great point, particularly about physical security. Right now, we're in construction. Yes, they have security there, but there are no customers yet. So maybe that particular element is not as crucial. But if you're talking about fraud detection controls, we are in the process of building something important. There's procurements going on. Any weaknesses in fraud detection controls need to be strengthened before I tell the world what those problems are and make the authority a target So the weaknesses you talking about are not actually the infrastructure portion of it but actually in the fraud detection That would be one category. So weaknesses in the infrastructure itself,

Yeah, let's say we found a weakness in their fraud detection controls in a particular area. In high speed, in the authorities?

Okay. They were not monitoring a particular type of fraud scheme, like bid rigging. and let's say I want to criticize them about that, the absence of that, I would write my report and let them know, hey, you've got to fix this. I'm going to be publicly disclosing that you don't have these controls, but you need a period of time to close that loophole, to close that, so that people, you're not a target, you don't have fraudsters coming after you in that particular area until you've strengthened that weakness. Yeah, I don't know, that doesn't sound good to me.

If I can help, too, in terms of definition, we're not talking about fraud detection and detecting fraud and whether that could be disclosed or not, it's fraud detection controls. And I think that's been a key thing that people have picked up on the first part of the word and not the latter part around the controls. And to the chair's point, if some level of fraud is exposed currently today, they don't have to report that out publicly anywhere. That can be just between the Office of Inspector General and the High-Speed Rail Authority. What this now will allow them to do is to talk about the fact that fraud was detected, not how it was detected, and then later at a time disclose, after a period of time after it's been resolved, disclose how it happened.

I wanted to call you Ben. I didn't want me to be so familiar. But if there is fraud, that would be included in the report Absolutely Right But how you found the fraud and the weaknesses related to that would not be included right Yeah If those weaknesses continue to persist and have not been resolved then there would be only a period of time. Things that are confidential would be held confidential temporarily, not permanently. That's the fundamental difference between this framework and any other framework you'll find in generally accepted government audit standards or other enabling statutes. Which is remarkable, but again, I want to emphasize the preventative side of this, which is if his office finds the potential that somebody could access and drain an account, nobody's done it yet, but they just have identified that it's possible. He then goes to them and says, you've got to fix this because tomorrow I'm going to go public with, you had this vulnerability, we caught it. Fortunately, we caught it before everybody else did, but now we have to go public with this.

the issue, right? Yes. Okay, so that would come to life.

We were created two and a half years ago. Right, okay, so that was

years right now. Yes. And have you guys discovered

We published all reports at our discretion. Again, state law doesn't require that. And yes, there is something in our recent procurement report in which we found that they did not comply with state law on a particular amendment. And then I can't speak to anything we have ongoing.

It was not a change order. It was an amendment to an existing contract that we found violated state law. It added services to that amendment that were not in the original contract. Did it increase the cost?

How much? The particular part that was not allowable was $600,000.

Okay, so the whole amendment was $6 million. Okay.

Yeah. So I'm not going to get into the details of which numbers. Your ballpark is right. So it went from one number to a much bigger number. So let's say that. There are a couple of things. One is as you further design, as you further figure out where your right away is at, you start to realize what the costs are going to be. So some of it is cost realization. The other is delays associated with construction. Those have been really critical on this particular project. every jurisdiction along that long line has the ability to slow that project down, and in some cases have, and every utility along that line has the ability to slow that project down. The way those contracts with the design builders were designed, structured, those delays, the contractors could ask for payments for those delays. Those are probably the two biggest issues.

Is that normal? Or is this, would you say this is out of the norm? Yeah, I'm the inspector general for the California high-speed rail. I haven't done, like, wide studies on other construction projects, so I couldn't answer that.

So you wouldn't say that's out of the norm for an infrastructure project? I don't know what's, I mean, I'm very focused on the California high-speed rail project.

There was no inspector general over the California high-speed rail, and so I don't know the answer to that. Yeah.

I appreciate that. And I would like to offer my own additional answer to the question, and I think it is a good question for us to keep reminding people on. But the answer I would offer is when you launch a project like this based on a citizen initiative, you're going to start with a completely broken project. And this project was broken when it was approved by the voters because you would never, if state government was designing this, right, they would never have designed it the way they did, committing to things, starting construction before they had rights-aways, not having an inspector general on board, all of those kinds of things. So you you it hopefully this will be a lesson to the voters of California. Don't start big, complicated projects like this this way, because it was under it was underestimated the challenges. And it started and it started in a way that actually increased cost because of how inappropriately they sequenced the items. And so trying to get those items back into proper sequence and all of that then been a nightmare for this project. I'm not trying to defend anybody or anything else, but I'm saying that's you identified two major things. of it, identify the third is it was the absolute wrong way to start the biggest infrastructure project in the history of California. All right. Anything else on this item? I didn't. All right. Assemblymember.

There is no statute that says the OIG cannot produce a public report. There's no statute that authorizes me to do so either.

They've gone ahead and done it.

So are you talking about generally accepted government auditing standards or yellow book? Yes, on the yellow book. There is a section in the yellow book that does allow those who follow that particular standard to hold that information confidential. And there are auditors and OIGs that are required by statute to follow yellow book. I'm just shorthand. my office is not required by statute to follow yellow book. So that requirement is not a statutory mandate upon me. So no.

Is that often found in your reports that you've been able to put people under that those two issues have not come up yet.

the authorities, correct? It would stay confidential until that weakness is resolved. And we'd be pushing for that weakness to be resolved.

And excuse me, my role is partially to protect witnesses from being put in a situation where they have to answer questions that they are not responsible for and stuff. So I just want to emphasize that this is the inspector general. It's not his responsibility to come up with all of the solutions to how we build high-speed rail. His responsibility is to come up with, are we actually, you know, is there fraud? Is there abuse? are we not following the law, et cetera. So feel free to be able to just identify where your role is and where your role isn't. So I just want to emphasize that. Thank you.

You said change order.

So, okay, in your letter to High Speed Rail Board recommending the rejection of the proposed business plan, you cited several violations of state law, including the absence of a funding plan with estimates of funding gaps for completing the Central Valley segment. Given that the board will also be considering a new plan next month, would you agree that any of that business plan that the board approves would similarly be in violation of state law if it does not include a detailed funding plan? Could that be identified as a weakness?

Well, exactly. And that's what I see as a broad definition of weakness.

And I understand that you may not, you may openly release that, but as we've seen just this last week, the chair of High Speed Rail is not even the same chair from a week ago. And it's my worry that if a different inspector general is on this, that they can identify what you just stated right now as yes and hold that in confidentiality and keep that until when? And I'm going to interrupt here because that's exactly what we're doing here today is to decrease the likelihood that this is just being released because we have an honorable person in front of us. This is actually saying it must be released, right? This is what this trailer bill language is doing, exactly what you're asking for. So the implication, I think, is, you know, the implication is where we are going from a voluntary system that we have to commend the inspector general for voluntarily releasing it. He's coming to us and saying this shouldn't be if I'm gone. Somebody else should have to release. And the only thing, and I want to try to emphasize this difference, every weakness is not held in confidence. Only a weakness that can be exploited immediately by somebody for nefarious gain is held only long enough to close the loophole, not in perpetuity. It's just to close the loophole. So when he talked about this change order request or the other things that he's agreed to, he can't hold those in confidence. If this if if we if we pass either the bill or the trailer bill language, you can't hold those things in confidence because they're not things somebody could exploit. he'll have to say that right away. The only thing that could be held in confidence is something that could be exploited for somebody else's inappropriate financial gain. But Mr. Chair,

But you have been on that for more than 10 minutes in terms of this. And I think it's time for us to move on to some other aspect of this.

but I'm going to let the Inspector General make one more comment here and then move us along.

We appreciate you pointing those things out. Thank you very much. Assemblymember Wilson wants to be on. Assemblymember Rogers put his hand up. Do you want to respond directly here to this, or do you want to go on to Assemblymember Wilson? All right.

Assemblymember Wilson.

Okay. So let me handle the first question regarding financing of the project. So we do have a provision that requires us to look at proposed agreements. We would consider those agreements, whatever form they take, would be within that scope. And we want to make sure that that definition includes that type of issue. So I do have a role. I just want to make sure it's in statute, what those proposed agreements mean. I guess a third control that I should have mentioned to the Assemblymember is that confidential reports are not held by me. They do need to be provided by oversight bodies. So yes, the high-speed rail authority is one, of course, but the board itself. The bill talks about those who can act. So this is chairs of the assembly and transportation and Senate transportation committee and the governor's office. So those reports go somewhere to oversight bodies that can put pressure on them to act. Thank you.

I would only like to comment on one item, and that is that a concern I have is that if the trailer bill language passes without the other provisions that you have in your bill, that we may only get the trailer bill language and not get the provisions of your bill because that may not make it all the way through.

Because in answer to the question, does your office have everything you need to provide effective oversight, the Inspector General has identified some things that are in your bill that are not in the trailer bill. So from my perspective of this moving through Budget Sub-4, and I hope that all my colleagues would say, if it's going to go forward, it ought to be as complete as possible. It ought to have everything the Inspector General is identifying. And so that is what I will be likely recommending to my colleagues up here, that that be our position, is that, yes, let's move quickly, but let's not move quickly and leave out the two major things that have been identified that should be there.

I mean, just real quick, maybe these are just clarifications. One thing that was brought up is like on the confidential reports, I think the language is only to committee chairs and the governor. Could we consider adding in vice chairs, you know, to that of the relevant committees? And look, I mean, it's similar like, hey, when we have like in the U.S. Congress, you know, the intelligence reports are given to both chair and vice chair.

Okay, well, yeah, I would ask that that be considered, and I think that would be helpful in the language.

So holding something confidential is the way the bill is written as amended is at our discretion. We don't have to hold it. We're not required to hold it confidential. I can imagine in a world in which they say they take a year, the OIG would just simply say, that's enough. We're releasing the report. It was discretion for us to hold it. Now it's discretion for us to release it. That's what I imagine would happen.

No, there's nothing in the bill that requires that. Likewise, there's nothing that requires us to hold a confidential to begin with. It is at the discretion of the Inspector General. And there's nothing that requires them to currently.

I mean, I'm sorry, to the high speed rail authority and or whoever else you gave it to. and if it actually had a dollar amount, you would be telling what the dollar amount. Certainly, yes.

No.

120 days.

So in the notification that required and the redetermination you would see that they have not fixed what I haven described in detail a problem in a particular area You would see that they haven done so

But I just want to make sure, too, that I appreciate your comments. When it comes to what can we do to make adjustments where maybe we do feel comfortable with where we want to be, I do want to make my point clear is I do believe the state of California should have modern infrastructure. I believe we should find ways to get there. And I agree with the Assemblyman Gallagher when it comes to, you know, I would feel a lot more comfortable with this if we put a specific you can only hold a report within in confidence in one year. Even if it takes six years to fix it, you know, that is the part where we need transparency. Because, again, when it comes to high-speed rail, we're six years beyond the full completion date of the San Francisco to L.A. period. So if we can lock that part in where it's an automatic release on that, I think we'd feel comfortable to it. And with some of the changes made that some of them in Gallagher, I think we can get a lot closer to that.

I was going to ask, and apparently it was asked when I wasn't here about DOF's concern about 1608. So I'm good, and I look forward to working to figure out how we can get the language in there in a proper way that addresses some of the concerns. I think that time period, one, putting a time period on it is just not valid because if you expose it, then you are running into the same problem and why it was held confidential in the first place. I agree with you, and I'm going to end with, I talked about the beginning of this project. In the beginning of this project, the concept of high-speed rail is not broken. The concept of launching high-speed rail with the process that they identified in the original initiative, that process was broken. And it, for example, it didn't even include an inspector general. It should have from the beginning and how much more helpful that would have been and how many billions of dollars if an inspector general right at the beginning would have been there saying, they're starting construction, that they're going to have to stop, and it's going to cause a big cost increase because they don't have the right-of-way for the next piece that they're going to. Those kinds of things would have been much better off. So it was a broken process from the beginning, and we're trying to fix that process as we move forward.

Thank you, Chair. I am Stephen Keck, the Chief Financial Officer of Caltrans. With me today is Keith Duncan, our Chief Budget Officer. He's going to start us off with this item. Thank you very much.

Mr. Chair, Assembly members, good morning, happy Wednesday. Again, Keith Duncan, Caltrans Budget Officer. Issue number four on today's agenda is a trailer bill proposal by the California Department of Transportation, Caltrans, to amend Government Code 14017, which was enacted in 2023 and authored by Senator Garazzo. As quick background, annually, California, specifically through Caltrans, We receive formula funds through the Federal Highway Administration that's invested into both our state and local transportation systems. Government Code 141017 required that Caltrans transfer a portion of those federal formula funds from the Infrastructure Investment and Jobs Act and transfer them to the California Workforce Development Board for investment into the state's high road construction careers program that creates reliable career pathways through delivery of high-quality training centers throughout the state. The challenge was and is in the use of these federal formula funds, all training purposes, projects, whatever the federal funds are used for must meet federal eligibility requirements. requirements. And when the bill was enacted, Caltrans, the Workforce Development Board, quickly worked to develop a scope of work, and we worked with the Federal Highway Administration, and over the course of about two years, we were unable to receive the necessary approval or federal authorization to use the funds in that manner. So unfortunately, because of that, we were unable to execute the interage agreement using those federal funds. But instead of simply just throwing our hands up and abandoning the idea. The intent of this proposal is to keep the intent of the bill, which was to amend the government code to instead of use federal funds, use state funds and redirect $30 million from the state highway account to be able to fund this effort. So I'm joined by a member of the California Workforce Development Board and we're available for any questions you may have.

Thank you, Mr. Chair. Frankie Menes with the Legislative Analyst's Office. The proposal raised no concerns for us. We understand that the federal funds aren't eligible for this purpose, and the administration's proposal is a reasonable approach for meeting the intent of SB 150 with state funds, albeit at a slightly smaller amount. So, I'm going to very quickly get to the two questions that we have. What funding for high road jobs in the transportation space already exists?

Hello, I'm Emily Sunahara, the Deputy Director of Operations and Policy Implementation. I'm in love with somebody that's right there on our microphone like that. I heard your instruction earlier. So the high road training partnerships are defined in the California Unemployment Insurance Code section 14005 as an initiative that is a model and it's industry-based worker-focused Training partnerships are incentivized with funding. The High Road Construction Career Program is specifically construction industry focused and invests in construction training projects, strengthens partnerships between local building and construction trades councils, workforce boards, community colleges and community based organizations, delivers structured high quality training that aligns with labor market needs. and provides career pathways for individuals to enter or advance in the construction industry. And for this specific partnership with Caltrans, they have received infrastructure investments that they are investing in projects around the state of California. So we specifically partnered on the High Road Construction Career Initiative to provide a qualified labor force for apprenticeships within Caltrans. When you say, you know, collaboration and cooperation amongst all these,

Absolutely. So construction apprenticeship programs are selective, and they require preparation for most applications that applicants oftentimes don't have. Many people who would excel as tradespeople often have no idea that apprenticeships exist, and they don't know how to access them if they did know they existed. So our program does outreach to workers from underrepresented communities who commonly face compounding barriers to apprenticeship. And we provide supportive services, training, and then a connection, a pipeline to apprenticeships. So we deliver a trained and qualified workforce to the apprenticeship doorstep.

And pre-apprenticeship training.

Well, to date, this has been a pilot program. So the initial investment from SB1 that was mentioned earlier was $5 million a year over five years. But there have been various funding sources to date that have fluctuating investment levels. And this one specifically will be $27 million in pre-apprenticeship training grants that will go out to all regions of California. One-time money?

And will the $27 million go out all at once, or will it be stretched over a number of years? So as of March 31st, all training programs funding has halted.

Thank you very much. Anybody else have questions on this Assembly member Hi thank you So I want to make sure I understanding this clearly Senator Durazzo had a bill that established this $50 million fund that was supposed to come from federal funding.

so we want to take $30 million out of the state transportation fund to apply for this. So that's, I have that understanding correctly. If we didn't do this program, what would that $30 million be spent on?

And a number, as transportation chairs, I got a number of fussy legislators when they got their shop deferral letters this year. So I'm concerned. So first of all, I support workforce development, especially within the transportation space. And so this isn't a matter of that. But the original intent when the bill was created, and I'm sure members supported it, was because it was a use of federal funds. So now that the federal funds don't longer exist, going now to another fund that is overprescribed. And like I said, members were fussy about that. And I count myself as one of them because several projects in my district got deferred for lack of resources. It feels like why are we then taking from that fund that doesn't have enough resources to do what it's supposed to do and then moving it over to here? And so I just want to, especially when that bill was related to particularly using federal resources.

But would it, though, because if there was $50 million and we were taking the $50 million out that came from the feds and to give it to there so we wouldn't be using for that, and this was some time ago, this was 2023, a surplus year, if I remember correctly. And now we're in a deficit year. We have shop projects being deferred. And to now stand it up based on the bill, it just seems odd. It just seems like a double negative. And I could be just thinking about it wrong.

Yes.

Okay. Thank you. Anything else? Hey, thank you very much. We appreciate this. We're ready to move on to issue number five, fleet replacement. Okay, and I'll be taking issue number five again, Stephen Keck with Caltrans.

Two questions that we put in our report, hopefully, and that is, any provisions to prioritize for disadvantaged communities these vehicles where there's going to be more air impacts?

Thank you. And any information on using plug-in hybrids versus full zero-admission vehicles?

Great. Thank you.

All right. Thank you. Any other questions? Yeah, Assemblymember Rogers.

Right. So we have a really good idea looking at the market that we will be able to purchase about 850 of the 1120 as pure electric vehicles. The remaining 270 will depend on what's available in the market. And the way that we prioritize that will be plug hybrids first electric if we can get it But if we can then plug hybrid then hybrid and then diesel and gas if we have to Gotcha Are you more constrained would you say by the amount of money that you have for purchasing vehicles and the uncertainty of the cost

Yeah, it's a good question. So at this point, the constraint, I think, is probably throughput for Caltrans. $225 million is a lot of money. 1,100 vehicles in a year is a lot of vehicles. I don't think we could probably process more than that. As I mentioned earlier, I think this is 100 different charging stations that we're adding with this. I don't know how many ports that equals, but there would be 100 of them that we're putting in across the state. And when we do that, we are able to work with local utility companies. Southern California Edison is really great. They've got a system where they will actually run the additional power to our stations for low or no cost to help us to put this infrastructure in. So I would say the limiting factor is probably throughput.

Yeah, I'm not aware of that. Can I get back to you with details?

I'll begin. Good morning, Chairman Bennett and committee staff. I'm Ty Meeks, Assistant Chief with the California Highway Patrol and Special Representative to the Legislature. With me today is Kathy McLeod. She's one of our budget managers with the CHP. I appreciate the opportunity to appear before you today to talk about the Department's budget and some of our budget change proposals. I'm also grateful to committee staff who has helped us prepare for this hearing. I can assure you that these proposals are crucial to our mission in saving lives and providing the highest level of safety, service, and security of the people of California. The first budget change proposal I'd like to address is for equipment and operating costs. The CHP respectfully requests a budget augmentation of $15.7 million from the motor vehicle count in current fiscal year 25-26, and $44.4 million from the MBA in 26-27. Historically, the CHP has been able to absorb equipment and operating costs within its baseline budget, often relying on salary savings from vacancies. And the department does not typically come forward with these types of requests, even when costs have risen due to inflation. The circumstances, however, affecting the department's baseline budget have over time accumulated to the extent that they are now impairing the ability to sustain baseline operations. Since 2006, the Department has received $34.5 million in ongoing budget augmentations for items including offices, vehicle replacements, air fleet replacement, automobile insurance, and fuel costs. Since 2020, the Department has been a good actor and worked alongside the legislatures and the administration in reducing and seeking reductions to our expenditures. Since 2020, the Department has absorbed $29.1 million in those reductions. So when considering those reductions, the Department has effectively received only $5.3 million since 2006 for budget augmentations. In fiscal year 24-25, the Department had 861 uniform vacancies and 685 non-uniform vacancies. As of May 1, 2026, the Department had 340 uniform vacancies and 593 non-uniform vacancies. The authorized positions count from fiscal year 24-25 to today remain the same at 7,630 uniform positions and 3,488 non-uniform positions. The distinction is more significant when focusing on uniform positions, which drive the largest salary savings. By the end of 2025-2026, the CHP projects 388 uniform vacancies, which includes normal attrition. By end of fiscal year 26-27, the CHP projects 236 uniform vacancies, which includes the four upcoming academy classes graduating this next fiscal year. These projections are a direct result of the recruitment efforts and the campaign BCP approved by the legislature in fiscal year 2022-23, which provided $2 million ongoing for three years. This investment by the legislature and the administration garnered over 30,000 applications in the year 2025 for the CHP, one of the best recruiting campaigns in the nation. And we give thanks to this committee, the legislature's, Governor Gavin Newsom and his team, for pushing that forward. I'd like to focus on two things, inflation and costs, real costs for the CHP. There are several examples. I'll share two examples where inflation and costs do not typically match up. Gasoline is one of those. In 2006, gasoline cost us $2.80 per gallon. Today, in 2025, $4.41 per gallon is the new cost. 2026 is even worse due to things on the national level. A fully outfitted patrol vehicle that previously cost the department $26,000 to outfit in 2006 now approximately cost the department over $100,000 to properly outfit. This is a 292% increase, almost 300%. Inflationary pressures have increased significantly since 2006 with a cumulative inflation rate of 73%. This includes particularly high recent increases of 6.6% in 2021-2022 and 5.7% in 2022-2023. As previously noted, the Department's ability to internally absorb these increases has been eroded by years of limited augmentations, more recent ongoing reductions, and rapidly rising costs across essential categories. The Department's operating expenses are growing faster than its base resources are being adjusted, making this request necessary to preserve core statewide public safety and transportation safety measures. I can testify to you today that we have set out to do what we have set out to do in 22 and 23 through this hiring process has worked. The Attorney General's office is reporting violent crime is down 5.9% from 23 to 24. Property crime is down 8 and auto theft is down 15 which is a direct reflection of what the high does We have also saved lives as it relates to traffic fatalities In 2023 fatalities were reduced by 340 In 2024, another 80. And in 2025, another 195. In three years, our combined efforts and our unified vision to reduce fatalities and to improve traffic safety has saved the lives of 615 individuals. This proposal is not vague or open-ended. This is not a discretionary expansion of CHP's mission. It is a targeted request to maintain the course we've started back together in 2022 and 2023 to reduce officer vacancies, increase public safety for all Californians. I can go on to the other two, which are capital outlay, if you'd like, or we can pause there for a second for any questions on operating budget and costs.

So we have two capital outlay proposals as well. The California Air Patrol requests $1.2 million from the General Fund for the incremental preliminary plans and full working draw phases for the Sawtooth Ridge site of the CHP Enhanced Radio System, also known as the CHIPRES project. The Sawtooth Ridge Communications site is in eastern San Bernardino County, is a mission-critical item within the CHIPRAS project. This provides communications coverage and facilitates interagency interoperability, ensuring communications and delivery of public safety resources during critical incidents. The second one, the CHP requests $1 million from the General Fund to identify suitable parcels for replacing up to three area offices to develop studies for those sites. These facilities are decades old, undersized, and unable to meet current operational needs. These facilities are also unable to meet seismic safety ratings for critical essential services buildings. For those questions, I'd defer to the Department of Finance to provide more information regarding the funding sources for that. I just want to express my appreciation to this committee. A project that we started on in 2022-23 has reaped its rewards. We have more officers in visual patrol, which has driven down the fatalities in this state and made this a great state and a safe place to live, work, and travel. And so I thank you for that. Thank you very much.

Rachel Ehlers with the LAO. I'll comment on the two capital outlay projects first because that's pretty straightforward. We reviewed them. We find them to be reasonable. However, we would recommend that in approving them, you shift the funding source from the general fund to the motor vehicle account. We have talked about the MVA quite a bit in this committee and how it has an ongoing structural imbalance. However, it does have sufficient funding this year to accommodate a small amount like this, $2.3 million. And we think it is the appropriate funding source. It's the user pays principle that folks who are using the roads help pay for the infrastructure that helps keep them safe. And we all know the condition of the general fund as well, so we would recommend that shift. Regarding the larger request for the operational funding, the $60 million, as the department noted, this isn't typical for them to come forth and ask for new augmentations for these kind of base utilities, vehicle insurance, that type of thing. They have historically funded it through their base budget, in part from salary savings from vacant positions. When we reviewed this in January, we didn't see evidence to suggest that they couldn't continue doing that, as they historically have, particularly given the vacancy data we had at that period. You can see on page 19 of your agenda, it still looked high. We have since worked with the department and gotten in January we recommended rejecting this proposal for lack of justification We have since worked with the department gotten additional information and revised our assessments based on two pieces of updated data One is the vacancy data they have shown us. It is coming down notably due to the recruitment efforts that the department noted and have been supported by the legislature. Second, this information about the base efficiency reductions that the department has taken over the past few years. This wasn't from sweeping vacant positions, as you talked about a couple weeks ago in your committee, but it was kind of the other category of taking efficiency money out. This really does leave them with flexibility to be able to meet some of their base operational costs. So four very fast points I want to highlight for you here. First is that, as was noted, this is core operations. This is vehicle insurance. This is utilities. This is not discretionary. So it really is in the interest of the state to ensure the department can meet these costs. Second, these are not one-time costs. These are ongoing, but the request before you is a one-time request. So this is going to come back before you. That leads to my third point, which is about the structural deficit ongoing problem in the motor vehicle account, where expenditures historically exceed revenues. So luckily the administration forecasts there's enough money in the fund to support this this year, but it's going to come right back before you next year. And then the fourth point is just looking, considering as you're dealing with another budget challenge, this is a highlight of the unintended consequences sometimes of making broad-based efficiency reductions for departments that when we sweep funding that we think is sitting there, departments were in some cases using it. And so this request essentially undercuts the savings that the state captured by making those efficiency reductions. So just, again, highlighting the importance of understanding a department's budget and how they're using their funding. With that, happy to answer questions.

Yeah, Bowen Peterson, Department of Finance. So I'll just go ahead and start off by saying the MBA at the 2025 enactment, it was projected to be insolvent with a balance of negative $180 million in 2627. And because of short-term revenue increases and the personal leave program from the ongoing budget negotiations, it ended up outweighing it and increasing that fund balance to the point it is at today. I need more data.

So we basically are able to build that in at the point in time and when we receive them. What are those short-term increases? Yeah, so in terms of the governor's budget, let me see if I have the exact numbers here in front of me.

Matthew Macedo, Department of Finance, if I may add.

So you thought salary growth was going to be higher than it was. And you thought new car purchases were going to be higher than they were?

I mean the number of new cars purchased, not the price of the new cars.

So you purchased fewer cars, and you got basically more retirements, et cetera, in short-term savings.

Maybe I can help clarify. So there's some positive on both the revenue side and the expenditure side.

Sure. But that's the forecast. And which gets me to the next thing. I mean, and you pointed out very well, and that is basically we're this year we're papering over an ongoing deficit with one time money. And I mean, a failing student in business school would even say you don't fund ongoing expenditures with one time money. That's what we're doing here at this point in time. But anybody in a business school would say, you don't set up your system like we've set up this system. This system should change. And I hope to take this back. I'd love to work with the administration. You have two professional departments that you want to operate professionally. And we've intertwined their budgets together. And it's appropriate for us to have the cost of a department be directly related, as you pointed out, to the users of that product. And so the users of the product basically are everybody dealing with motor vehicles. But what we're not doing is we're not appropriately tying the revenue that comes from those to the expenses that are there. we have political challenges trying to deal with this revenue and we hope we can get more cars purchased or whatever but that slowdown is very likely going to come In the next 18 months, two years, when we see economic crisis really hit the United States as a result of many inappropriate things we're doing at the federal level in terms of budget deficit and national debt, the crisis is coming. And that crisis will affect the funding in the motor vehicle account. I don't think we're ready to say, oh, we're going to cut highway patrol X amount. And so then we starve motor vehicle and have a real erosion there when the real solution is to make sure the public has trust in both of those departments because we don't have those departments run on a structural deficit. That means having the courage, and I'm willing to say this, having the courage to go out there and get our motor vehicle revenues somehow so that the fees are adjusted for inflation because that would make it more likely that we could then match our expenditures to inflation and be able to avoid the structural deficit that's out there. So we have a real problem. This year just highlights that. The other thing is you don't – a good business practice would be you don't fund your ongoing expenditures in your operation and maintenance from your salary savings, right? the whole point of having those positions, because then when you come along and you do a let's get rid of all the vacant positions and the cuts, you no longer then have those salary savings to be able to do that. We just think it's important for us from this committee and from all of us to be more honest about how serious our structural deficit is so that we start to actually take some action to solve this. because if we, I would offer this as the final thing. If we don't put ourselves on a firmer footing, we're going to lurch from crisis to crisis. And when you lurch from crisis to crisis, the public's confidence just goes down with each crisis. We should bite the bullet, say what we're doing, acknowledge there's going to be some temporary pain as we try to get ourselves back into the structural balance and make the decisions based on relative value. We value the highway patrol and we want X. We value motor vehicles and we value X. And then both make the hard decisions for the revenue and that. Now, I noticed a bunch of people pulled their microphones, so speak up.

Great. Thank you. Not everything is tied to inflation that we have. And the other problem is, even if it's tied to inflation, it's based on volume. And if volume drops so you again have to make accurate projections which is why I go back to my original question We made the wrong projections and projected a deficit and now we fortunate that we making a new projection But we need to be accurate. When you have accounts that are as precariously balanced as these, we need to be really good at our projections. And so I think we should very much be skeptical of a projection now that we're going to be in a surplus when we so significantly missed it, missed the boat with our projections before.

And then the line start start the gap starts growing again. It's a it's a big challenge. And the and the discipline that we have to have is we have to say, look, we are tying if what we decide to do is to tie our revenue to inflation, then we have to tie our cost to inflation or else we're going to have growing structural deficits. The federal government has not had the courage to do that, which is why we now have a budget deficit that is huge and has not been balanced since 1995. They can get away with that because they can enter into big national debts and print up money. But now the national debt is larger than our GDP, which is a formula. And all metrics would say when that happens, a country is destined for real problems and a loss of global leadership. A loss of global leadership means more economic pain for us. So they're just hard, hard situations coming. If you really care about the government services that we provide, then you have to care about being honest with people about what we have to do to try to solve it. So I appreciate that. But all the more reason. But if we do it with smoke and mirrors, we can't make the argument, hey, we have to hold cost at this, you know, because we've always done smoke and mirrors. But if we go, no, we're always holding cost to revenue growth, then you're much more likely to do that. But you can't do that unless you are consistent and honest and sort of out there. So appreciate the heads nodding. I appreciate all of us recognizing we have a problem. This is something we have to do collaboratively in partnership. And unfortunately, in the political world, it's something that too often people try to make hay on and try to score political points on, which is not going to address the structural deficit problem. So with that, thank you very much. Do we have anything else? Assemblymember Lackey.

Would you mind identifying what those other things that we're purchasing with these funds would be helpful? This is not a budget committee, but I will tell you I'm on the budget committee.

This is a budget committee. Well, it is a subcommittee, but I'm talking about the overall budget circumstances.

I just want to clarify, it's not something in budget sub four you're talking—you're talking about everything in budget. I am talking about everything in budget.

I thought it was something specific with the motor vehicle or whatever, right. Okay, got it.

I appreciate that. Anything else? Right. Hey, really appreciate this. Thank you very much. Go in peace. We're at. Thank you very much. Appreciate it. You're welcome. We're at non-controversial items. I believe. Okay. Do members have any questions on transportation GGRF funding? Yes. Go ahead. That's why we did it. We knew you had some questions, and we scheduled this item with nobody here for presentations. We don't have anyone here for presentation. Well, we have LAO here, and we do have committee staff here.

I consider this one of the really big issues of this subcommittee, and we've had some good discussion on it over the course of our hearings. But GGRF is not going to have enough money, it looks like, from credit sales to cover all the things that are in that extension of the cap and trade and the spending plan that was approved by SB 840. And so I have two really big concerns. One of them is the wildfire prevention funding that traditionally has been about $200 million a year out of that fund. And we always try to push for general fund money and other money to kind of go on top of that. But as I understand it today, under the formula outlined in SB 840, is it possible that that $200 million will not be funded under that formula?

and that would be about half of what we've seen in recent years for GGRF. If there were only $2 billion a year, that would not be sufficient to fund any of the Tier 3 programs, which would include the wildfire funding. You're talking about the SB 901 funding, excuse me, I think is what you're referring to, that $200 million a year. So there wouldn't be sufficient funding for that or any of the other programs in Tier 3, which includes transit programs, housing, safe and affordable drinking water, and community air protection. So, if we only had $2 billion, which is what they're predicting right now, what would get covered under GGRF? So, there are a few items in Tier 1, the manufacturing tax exemption, that's about $160 million. The state responsibility area fee backfill, that's about $90 million. There's a small amount for alleged council climate bureau. So those would be funded. And then there would be partial funding for tier two, which includes a billion dollars a year for high speed rail and a billion dollars a year for legislative appropriation. So under that scenario, those things would get funded, but wildfire prevention would not get funded. So those would be mostly but not necessarily completely funded. And then there wouldn't be any funding for Tier 3, which would include the Wildfire SB901 funding. And that's because of the formula that was established by SB840 last year. Is that right? So it's a combination of how the formula interacts with whatever revenue numbers come in and the changes that are being proposed by CARB, which could reduce the amount of revenue that comes into the program or to the fund. And in order to change, let's say we wanted to change that. Could we do that through the budget or would we have to change the statute in order to reorder that funding? So I think there are a couple of things I would note. One thing, one mechanism legislature could use is even within that existing statutory framework, it could use those discretionary dollars that are in Tier 2 and could use them to backfill some of the things in Tier 3 that wouldn't be funded. So you could do that within the existing statutory structure. You could also use, there's some GJRF funding that doesn't go through the SB 840 kind of allocation framework. specifically the administration under their trailer bill. I think we discussed this a little bit with the committee, but it was some weeks ago. They're proposing to clarify that interest earnings, for example, would not be subject to the SB 840 allocation process. So those are also ones that could be used for a variety of purposes outside of that framework. So I think that there are some mechanisms the legislature could use within that existing framework if it had other priorities. Of course, there are trade-offs. and other, you know, there are a variety of sort of commitments that have been made already. And then also the legislature always, you know, it could change the framework or, you modify that if it no longer conforms to legislative intent and desires. For your benefit, Mr. Gallagher, on the 19th, just next week, we will be doing a full GGRF hearing. Okay. Okay. So I can get into that then. Just I'll end on this. This is a problem, and I'm just going to point out some things that are in that Tier 2 right now. $25 million for seed funding for UC Climate Research Center $15 million for rebuilding Topanga Park $85 million for an entity chosen by the legislature to support climate-focused technological innovation-related research and deployment of climate solutions All of those are ahead of wildfire prevention funding and also our clean drinking water program. And we've talked about this in previous committees. I think those things need to get first priority and certainly ahead of high-speed rail. With all the problems that we've identified, I think we've got to stop saying we're just going to automatically send a billion dollars to a program that's got a lot of problems. When we have other priorities, it should be way ahead of that. And wildfire funding absolutely should be way ahead of that. And so I hope when we have those discussions that we'll move that priority. And if we need to make statutory changes as a result, I just wanted to have that information so that we can make the changes accordingly. Great. Thank you very much. Anything else on item seven? With that, we are finished and ready to move on to what? Okay. Yeah, I'm not really, I'm not sure I'm prepared. I'm happy to, should I say these? Say this right now before we start with the comments. Okay, in just a moment, we'll start with the public comments. I just have a few comments that we want to make sure get out there into the record, And that is for the DMV, the timeline to comply with the federal court order by the Alameda Superior Court to restore commercial driver's license for immigrants with federal work authorizations. We've had that question come in. We've had a couple questions come in from people about small transit agencies and delays they're facing with the Federal Transit Administration section that are receiving funds dispersed by Caltrans. And delays are up to two years, and so we will be trying to look into that and Caltrans' current average timeline for completing Section 5311 applications. Those are concerns that I just wanted to get on the record here as we began. And let's go ahead and go to public comment. You have one minute. All right. Well, thank you, Mr. Chair.

Thank you.

Thank you.

Thank you.

Thank you.

Thank you.

you. Nicole Wordleman on behalf of the Children's Partnership, echoing my colleagues' concerns around the DMV issue. Children rely on their parents for transportation to school, health appointments, and anything that makes them feel unsafe or jeopardizes their immigration is harmful to children's health, well-being, and safety. Thank you.

Mr. Chair, Brendan Rupicki on behalf of a number of clients. Santa Cruz Metropolitan Transit District, County Connection, Caltrain, San Mateo County Transit District, City and County Association of Governments of San Mateo, Solano County Transit, Monterey Salinas Transit, San Francisco MTA, Via Transportation, and the City of Santa Monica, echoing comments made by Michael Pimentel, the California Transit Association. Thank you very much.

Good afternoon, Chair Jeannie Ward-Waller for Climate Plan and the Leadership Council for Justice and Accountability, also adding on on behalf of Transform. I want to echo the asks by the transit proponents that you've heard from so far. We strongly support the funding for transit passes in the GDRF. We also urge the legislature to push back on the 15-day change regulations from CARB and the impacts to all of the Tier 3 investments through GDRF. Also, specifically on the Affordable Housing Sustainable Communities Program for Leadership Council, we have concerns with the split proposed. And if the legislature decides to move forward, we urge that you ensure funds still reduce greenhouse gas emissions and don't expand highways. Thank you. Thank you.

Good afternoon, Chair. My name is Jesse Schmidty, State Policy Director for Alliance San Diego. also here on behalf of San Diego Immigrant Rights Consortium, the Partnership for Advancement of New Americans, the Immigrant Defense Law Center and CFB Indivisible, in strong opposition to the administration's request of $56 million for California to join the AMBA state-to-state verification service. We sent a letter earlier this week to subcommittee members with nearly 200 organizational sign-ons in opposition to the governor's proposed data-sharing request and the accompanying trailer bill that seeks to weaken protections set forth in AB 60. The proposal raises profound concerns about privacy, public trust, and California's ongoing commitment to protecting vulnerable communities. When California passed AB60, the state made a promise that residents could obtain a driver's license without fear that their personal information would later be weaponized against them. Though S2S does not allow for mass data sharing, this type of system is ripe for abuse. We have seen here in California how automated license plate readers have been shared with other states, namely the Attorney General has sued the City of El Cajon for this very reason. We have the ability for legal action when these types of violations occur within the state. The second the status leaves Californians, we have no recourse. Thank you.

Good afternoon, Chair. Chris Lee here on behalf of the Sacramento Area Council of Governments, echoing the comments of SanDAG related to the Affordable Housing and Sustainable Communities Program and the Transit Association related to SB125 funding. Also, on behalf of the Sonoma County Transportation and Climate Authorities and the Eastern Contra Costa Transit Authority. I want to echo CTA's concerns about GGRF funding for those Tier 3 programs. TERSIP and LCTOP, very vital for both of those agencies. Thank you.

Good afternoon. My name is Daniela Rodriguez with Immigrants Rising. Similar to what other comments have been made, California has a donation in protecting immigrant residents, including the over 1 million AB60 license holders who obtain licenses under an explicit promise of safety. Entering a state-to-state data sharing agreement without clear and strong guardrails threatens to break that promise. Unfortunately, we have already seen how no contractual firewall has proven sufficient when federal agencies choose to compel access. We urge that the state pursue alternatives in genuine partnership with immigrant rights organizations and the communities most affected by such proposals. Thank you.

Good afternoon, Chairman. My name is Tuito with the Southeast Asia Resource Action Center. I also echo the speaker before me. We represent the largest group of refugees ever resettled in the United States. We have concerns until there is more clarity on the risks on vulnerable immigrant refugee communities. There are more guardrails to protect sensitive information around the exposure for a real ID contract, contract since it puts a target on the very communities California has committed to protect. Our state cannot build trust with immigrant communities on one hand and openly and quietly open a data pipeline on the other. And so we ask for this body to take this seriously to all Californians and act accordingly. Thank you.

Good afternoon. This is Leslie Bay for Climate Plan and adding on for the Leadership Council for Justice and Accountability. I'd like to ask the committee to invest an additional $200 million in the active transportation program in this year's budget. And Climate Plan additionally supports $15 million for e-bike incentives. These investments are critical for safety and access and will make it easier for Californians to get around their communities safely, easily, and affordably. Thank you.

Good afternoon, Chair. Sophia Fico with the Coalition for Clean Air. Echoing the past comments, investments in active transportation can save over 200 lives, reduce GEG emissions by almost 100,000 metric tons, improve public health accessibility, and reduce transportation costs burdens for all Californians. The active transportation program has funded over 800 projects so far. And last cycle, despite receiving almost 300 applications, the program was significantly cut. having only $150 million available to spend on those projects. The Sacramento Bee recently found that the active transportation program is just a hair less competitive than the admissions rate for Harvard University. We asked for additional funds for the program to ensure that it continues providing benefits to California, such as improving air quality, reducing emissions, reducing vehicle collision traffic, and providing transportation alternatives. Additionally, we're also concerned that CARB's latest proposal for cap and invest regulation would violate the integrity of the admissions cap while giving allowance to major pollutants, leaving little or no money for clean transportation. Thank you.

Hi, good afternoon. My name is Luz Castro. I'm with Inclusive Action for the City. I'm here in support of Assemblymember Berman's budget request of $30 million for the SOAR program. This funding will support landscapers' transition from gas power to electric equipment. In 2024, Inclusive Action for the City conducted surveys to better understand some of the most pressing and emerging issues that landscapers are facing, and the transition to electric equipment rose to the top. Because many local governments have bans on leaf blowers and gas equipment, many landscapers are being ticketed and criminalized. We urge the state to make a $30 million investment to support landscapers' transition and prevent them from further criminalization. Thank you.

Becca Kramer with the Electronic Frontier Foundation. We are extremely concerned with the DMV's plan to share Californians' information with AMVA pursuant to Real ID. AMVA is governed by the laws of the state of Virginia, not California. Moreover, because AMVA is a nonprofit, it is not bound by obligations of government entities such as due process, rule of law norms, and transparency measures such as public records requests. Put another way, once California provides access to drivers' information, we no longer control how that information is used or who sees it. The threat of federal authorities accessing California's personal information must be taken seriously, given the very real harms this administration has already inflicted using such data. California should not be complicit in the Trump administration's creation of a centralized database of all residents. The Supreme Court just gutted the Voting Rights Act. We should not contribute to a national ID database that could be manipulated to disenfranchised voters. Kansas has passed discriminatory laws revoking driver licenses of transgender people We should not be complicit in these harms We respectfully urge you to consider guardrails

Thank you.

You know, while we still have some advocates here in the room, I do want to remind everybody that besides making your oral comments, If you send in your language to our committee, that's your best way of making sure it gets memorialized really properly. So besides your comments, make sure you send your comments to our committee. Thank you very much. Thanks, Chair, for that reminder.

Thank you.

Thank you.

Thank you.