Senate Budget Sub4 — 2026-03-19

Thank you for the opportunity, but given the length of our session just concluded and this agenda, let's get going.

Thank you. Madam Chair and members of the committee, my name is Anthony Chavez and I'm the Chief Deputy Director of the Governor's Office of Service and Community Engagement, also known as GoServe. Joining me is Aubrey Fong. She's the acting Executive Director of the Office of Community Partnerships and strategic communications. Go Serve is established in 2024 by by the legislature to elevate paid service and volunteerism in the state, promote youth and community engagement and advance public awareness and outreach.

Sorry about that. And advance public awareness and outreach campaigns to tackle the state's California's most pressing challenges. Go SERVE consists of California Volunteers, Office of Community Partnership Communications, also known as OCPSC, and the Youth Empowerment Commission. We are happy to provide updates to our programs which aim to create economic opportunity and career pathways, develop future leaders and foster social connection. Under California Volunteers for California Service Corps, in 2526, we received over 36,000 applications for more than 11,000 positions. Four years into college Corps program, we've expanded the number of people who can participate and the number of campuses. 53 campuses will begin in the 2627 academic year, adding eight campuses from the current 2526 academic year. These campuses are awarded through a competitive request for application process based off a robust criteria. We had over 74 campuses apply in 2526. Over 3600 fellows have enrolled in the program. We track enrollment, retention and completion for this current academic year. We have a 98% enrollment rate, the highest enrollment rate since the inception of the program over for the last completed fiscal year we had the following outcomes. Enrollment for last year was 96%, retention was 92% and completion was 78%. College Corps continues to provide opportunities for AB540 eligible students. The outcomes for AB540 fellows are consistent with the non AB540 students. In response to comments that College Corps operates with high administrative costs and is more expensive to run than other similar volunteer and financial aid programs, we want to clarify this is not a financial aid program. It's very much a service and workforce development program to create an experience for a student that helps them launch their career and requires programming costs and support. A lot of the administrative costs identified by the LAO are associated with program design, evaluation of the program, education, outreach, several categories that are categorized as administrative costs but are actually program delivery costs. We have created efficiencies and the cost per student has been reduced since the first year of the program. To address concerns raised by the Committee, we have made changes for the 2026 cohort. We are reducing the administrative budget by 6% to fund additional College Corps Fellows. The program is structured to make College Corps more affordable to those who need it most while also giving them a brand new experience that are going to help them the rest of their lives. The Youth Service Corps program has created over 4,000 positions. Last year nearly 25,000 applications were received. The program is tracking outcomes including enrollment and completion. For the 2425 service year. Enrollment hit 100% for that youth Service Corps program. Benefits through the program include job readiness, mentorship and and skill development. The current cohort of the Climate Action Corps is over 400 fellows. The program tracks outcomes including enrollment, retention and completion and the program has reached a completion rate of 87%. The California Climate Action Corps is distinct from the California Conservation Corps primarily due to the focus on community and volunteer engagement. Climate Engagement Fellows creating new opportunities for Californians to take climate action in their community which helps build an awareness and the ethic of collective climate action. While the CCC serves youth ages 18 to 25 and focuses on field work and environmental projects and response to natural and man made disasters, the California Climate Action Corps is open to anyone age 18 and over and focuses specifically on community climate engagement in urban greening, organic waste and edible food recovery, and wildfire resiliency as well as workforce development for emerging climate leaders. California Volunteers conducts internal monitoring for all of its programs. We do annual risk assessments, fiscal desk reviews, site visits, provide ongoing monitoring to identify issues early and maintain program integrity and the organization also participates in in federal Payment Integrity Information Assessment audits to strengthen oversight and safeguard public funds. The Office of Community Partnerships and Strategic Communications, known as ocpsc, uses a data driven decision making to coordinate some of California's most important statewide public awareness and community outreach initiatives to help the state realize more inclusive and effective outcomes. Since 2022, OCPSC has supported nine state initiatives which have evolved along the state's priorities. OCPSC has realized the following results for the state facilitated over 10 million COVID 19 vaccination appointments, drove a 6% increase in notification of the dangers associated with extreme heat in a matter of weeks connected over 1 million Californians to rebates and Best practices for water conservation, had over 1.5 million direct conversations with Californians about what an Individual Taxpayer Identification Number is and its benefits and connected over 1.3 million Californians to Bright Life Kids and Saluna applications. Since the fall of 2022, OCPSE has released two rounds of grant funding for the Trusted Messenger Network. These cohorts of 129 and 147 grantees delivered over 4 million direct conversations, referrals, and assisted enrollment for California programs. OCPSE was created in statute in 2022 and has provided four years of funding from July 1, 2022 to June 30, 2026. The legislature did not extend its funding beyond this June. The funding for the Trusted Messenger Network grant program was ultimately only funded for two years. In the current budget year. OCPSC has been able to fund a smaller Trusted Messenger Network grant cohort of 50 grantees by identifying efficiencies within its remaining budget. This cohort started work at the end of January 2026 and will include activities on June 1, 2026 and thus far has supported over 4,500 students in claiming their Cal Kid scholarships totaling over $2.6 million enrolled more than 1,300 Californians in critical state programs found on OCPSC's California Community Resource Guide, with the top enrollments being saluna, calfresh, and caljobs. The 2526 budget included $5 million one time general fund for the OCPSC to launch a belonging initiative, 4 million has been committed and OCPSC launched the California Love California Strong in January of 2026 in alignment with the time frame outlined in the BCP. The outcomes for this initiative have not changed and is helping communities identify pathways to social connection by developing and launching the California Love California Strong brand Engaging Community partners to increase awareness of the state's programs that foster social connection through community engagement events and has been supporting service opportunities by uplifting California Service Corps opportunities. Results are being measured through engagement numbers, enrollment in state programs and enrollment in the California Service Corps. While the initiative has just recently launched, it has already hosted two community engagement events with over 100% attendance at each event and enrolled 1,300 Californians in state programs. The results for the initiative are on track. We are happy to answer any questions that you have. Thank you.

Hi, Henry Yang, Department of Finance.

and the administration appreciates the legislative support and the creation of Go Serve and for the ongoing funding for some of these programs.

for elevating volunteerism and service throughout the

these investments has led to meaningful and intangible intangible impacts on the ground providing

to to better their communities. And the administration has been mindful of the budget deficit and has included significant

while also scaling down Goser's operations. And this includes the $50 million in reductions to OCPSC in 202425 and and

And also there is a $10 million, $10 million ongoing reduction to the youth

million reduction to College Corps in 2025 26.

also preserving the core elements of Go

Thank you. Do we have any comments from the lao?

Thank you. So bringing it back to the committee. Any questions, comments from committee members?

Thanks for your question. Yeah, so Climate Action Corps is a statewide program run through one intermediary and they are placed in host sites where There could be two to 10 to 15 members in each host site. It is across the state. There's our, obviously we're trying to place them in geographic areas where there's needs and we have members all across the state from the north coast doing water helping in the watershed areas all the way down to San Diego area. In terms of diversity itself, you know, one of the challenges that we have in all the service providers programs and why we've launched a men's service challenge is primarily those that serve are of our female. And so we're trying to increase the men as part of that through the men's service challenges. One of the things that we're trying to increase in terms of diversity, I can't speak off the top with regards to the demographics. I can follow up with that. And then additionally the Climate Action Corps is part of an AmeriCorps model. So there's like performance metrics that are required as a part of that for outcomes based on the specific regions that they're serving. So I can follow up more on details on those regional impacts.

Senator Cabaldon Yeah, thank you, Madam Chair. And I want to under underline the remarks that my colleague just made about the importance of volunteerism and particularly just doing anything in the, in the analog world, the real world and the rationale for why the this program and the SEPTA programs were created. I know we don't have budget proposals before us, but in terms of the programmatic issues in evaluation, there are a couple things I'm particularly interested in reviewing and learning more about. I guess first is the comments that were part of the testimony regarding the engagement metrics in terms of connecting folks to a variety of, of programmatic opportunities for which they may be eligible. And the raw numbers are a first line indicator. But I think it would be useful for us to have a sense of over time in communities where the Corps is engaged, are we seeing significant increases in the actual utilization of those programs by folks who were eligible but not otherwise, or cross sectionally across the state to communities in which the Corps is particularly active have higher rates of improvement in actual, not just awareness of the programs, but actually signing up for them and being able to derive the benefits from them. So to understand what the actual impact is in terms of improving not just knowledge of or access to, but actual connection to those programs would be, would be very important and useful to know. And I guess the second one is just with respect to, I mean I, when, when this all was, was launched in a period where the state had a very aspirational agenda about all the things that state government could be doing. And obviously given the state's fiscal condition, we've got to, we have to take a look at the various activities that we're engaged in. But I think for me at least part of what was attractive about the concept was that we'd be developing something like Peace Corps, like that was at a very broad scale statewide and engaged in solving the problems. And so I guess this is not so much a question, but just like a series of increasingly boutique programs isn't really what I was signing up for. One for belonging, one for climate, one for this, one for that. None of which can achieve the scale to really, to really change. And part of the reason I mentioned this is that you know Even even though the watershed work was because we've been doing California Coastal Cleanup Day and other activities for a long time. And by coast that means including little creeks and sloughs in Senator Danilo's district and in mine as well. But I'm sure in Senator Hurtado's the coast is very broadly defined for coastal cleanup week. But you know, we're trying to, we're trying to dramatically expand volunteerism and these opportunities and not crowd out existing opportunities. And I'm not suggesting that's what's happening in that instance. But the challenge with boutique programs is that when they don't achieve that scale, it seems more, it seems potentially, it seems possible that folks who might otherwise, who are, who are volunteer minded college students or others might choose this program, but they may have been prepared to volunteer in other capacities in their communities previously. There's a disposition and an ability to do so to some extent that's obviously offset by the substantial financial commitments we make through the program. But just to understand the design of the program and it just seems every year it's a little bit more fractal. This year we don't have a new proposal, but it's in a variety of domains that don't seem any of them capable of achieving the level of scale that I think was the original hope. So maybe you could respond to that notion then if we have or can get data or find some academic or LAO partners that can take a look at the actual effectiveness at the engagement in the real world. Increasing and improving utilization of the programs that we're trying to connect folks to. That would be great.

So in the design of that approach, did the administration consider flipping it so that our first, our first priority is to connect folks that are interested in volunteering to volunteer opportunities that already exists and then secondarily for those that can't, for financial other reasons, can't engage in those activities to provide, you know, a state, a state option as to try to grapple with this crowding out issue of like the most, the most excited, highly disposed to volunteerism Californians. If our current approach is we try to place them through the California Corps and then if we can't, then we turn to the existing volunteer opportunities exist in nonprofits and in public agencies throughout the state. I just wonder was that design choice was a consideration of flipping that part of the original design or have you looked at that since in order to use our resources first and foremost to connect volunteer potential volunteers with the with opportunities that are so that already exist and that are desperately needed at the Science center or in my district cleaning up waterways or elsewhere in the state.

Comments from our vice chair

First of all, for lao in the past, you've been critical of these programs in terms of not being wise investments. I think the wording is and that they're duplicative of other programs so competing with them and less cost effective than alternative programs. Could you speak to that?

Senator Ross Brown, again with the lao. So there are, yeah, there are various programs here that we have looked at in the past as part of past budget proposals. I'll maybe highlight a couple of the bigger ones that in recent budgets have gotten ongoing funding, both of which sort of began as just this sort of historical context, began as sort of temporary funding and then sort of were recently switched into ongoing budget proposals. And at the time when we analyzed them, we did raise some issues and concerns for the legislature. So the first I'll just highlight is the Youth Job Corps program as part of the 2023, 24 budget. When federal Covid relief funding was running out, the state made that an ongoing program with ongoing general fund. And at that time, I think some of the issues we raised were around that not really being sort of a traditionally core state responsibility, that they're, you know, it's fundamental for municipal governments to hire underserved youths on a temporary basis, and that's not typically a core state responsibility. And that there are a variety of other federal, state and local opportunities for those types of things, and that the evidence on program effectiveness was not really clear at that time. The other one I'll flag is the college core program, which you might remember was heard as part of last year's budget and ongoing funding was adopted for that program. The issues we raised at that time were that the we do recognize there are some benefits to the program, but that it largely operates outside of sort of an existing structure that the state has as part of its higher education system for both providing financial aid as well as community service opportunities that are oftentimes offered through the campuses themselves, and that the program has relatively high administrative costs. As you mentioned, over half of the funding or less than half of the funding was going to financial aid itself. The rest was going to administrative and operational costs. So higher administrative costs compared to some of our other at least, financial aid programs.

Thank you, Mr. Vice Chair. Well, on my end, in terms of my comments and questions, they're not necessarily so much focused on being critical, but rather asking questions about what safeguards are in place in regards to these programs. But I guess I'll start off with a happy note. Right. I will say that I hope the governor is listening somewhere out there because I'm about to give him a compliment. But I'm really, you know, it's my understanding that the men's service program is part of the CAL volunteers. And when I heard, first heard about this push that he, that he, that he's hoping to move forward, I was like, oh my God, this is desperately needed in the state. I mean. And he said it in the state of the state address. Right. He pointed to how, you know, men across the state are struggling. And this is an opportunity to create, to create a program that provides mentorship. And I'd love to hear a little bit more about what work you've done so far, what you have in mind, what does that look like? And what, you know, what particular issues are you looking to address?

Yeah, I mean, I think that this could be potentially a great program. Right. But I want to see all the positive benefits that are coming out of it. Right. I want to see that there's progress there because there's urgency behind, you know, focusing in and providing a program for, you know, for men across the state of California that would benefit from a program of this sort. And I guess moving on to an actual question is really around how does OCPSC monitor its grantees and subcontractors to ensure that state funds are being used as expected?

so we developed over the course from the infrastructure and lessons learned we were

My next question, if the legislature were to revert to the Cal Volunteers program back to limited term funding to help address the structural deficit, would that have what would you like to add on what the impacts would be, if any, on the current program participants?

Thank you. That's all I have for you all. Thank you for your presentation. And this item was for information only. We'll be moving on to agenda item number two. And at this moment, before we proceed, we're going to establish quorum. If consultant, can you please call the

Senator Hurtado.

Senator Nilo.

Senator Smallwood Cuevas.

Thank you. Quorum established. Okay. Agenda item 2. We will take up matters involving the Board of Equalization. I'd now ask the representatives of the VOE to come forward to the witness table for a department overview. Thank you for being here. And of course, ALEO and Department of Finance as well is welcomed. And boe, when you're ready to present, feel free to begin.

It's.

Thank you. Do we have any comments on this item? Well, on the overview from the LEO.

Thanks.

of Finance we have no comments either.

Thank you. Appreciated the overview and the really beautiful packet. I don't think we've had such a nice packet of all the information. I just had a question about the CDTFA's sort of special district style funding. I'm curious if there are mechanisms that function within the state level that supports communities where we have neighborhoods who are losing residents, small businesses due to all of the different sort of development that's happening in communities. I'm seeing a lot of this in parts of South Central la and I'm just curious are do we work with local jurisdictions on local revenue assessment tools? Are there any that exist that could help those businesses and those kinds of communities sustain economic corridors?

Right.

Sorry, I was looking at cdtfa. That was not for you. That was for a different. That was for a different, a different, a different group of folks. Sorry about that.

Do we have. Okay. I would like to ask just in terms of your overview and the work that you do. I know that BOE works closely at the county government level. And you know, how does the BOE interact and support other levels of government, cities or individuals with questions about property taxes? I mean, property. Rising property taxes is something that I frequently hear, you know, constituents talk about. And I just wanted to get an understanding to see if that that's something that, if there's a trend or anything of that sort that that's been noticeable there or any type of like more reassessments occurring or, or 2 or 218 notices that are going out. Can. Do you have any comment or on that, Mr. Young? Comment on that?

But I mean is, is that like something that you're seeing in terms of the calls and comments that are being provided to you to that particular office in terms of rising property values? Property taxes? Not values, but taxes.

Okay, and what about 218 notices? That is that something that you all that your office follows or tracks?

So I understand 218 notices. So just an example in my, in, in Bakersfield, there's a 218 notice. It's court going out to constituents for a surcharge and you know, I think wastewater or garbage, that kind of thing. And then it, it's, it's something that is added cost to them.

All right, I appreciate that.

Thank you so much. Okay, so then we will go ahead and this item was for information only. And we will go ahead and move to agenda item number three, continuing with boe. Item number three on our agenda is intergenerational real property transfers. So please proceed with your initial remarks that you would like to make on this item.

Thank you. Do we have comments from the Department of Finance?

Lao Alex Spence, Lao we have no concerns with this particular proposal. Thanks.

Senator Cavaldin thank you, Madam Chair. So the principal question for me whenever one of their budget items that

the implementation of legislation that passed the legislature and that was signed by the governor is is it is your request consistent with what we forecast at that time, what the understanding was what is this going to cost? Which this is the, the that analysis though anticipated some a small amount of funding in the in the current year, this exact amount in the budget year and then declining money in the future years. This is a proposal for one time funding at exactly the number that was was analyzed for. 26, 27. Is is that is this sufficient then once it's once these one time funds are expended for the, for the execution of the program or or should we expect additional budget requests in the. In the subsequent years.

Any other questions or comments from committee? Okay, so in regards to my questions given now that we are in spring of 2026, does Boe have any estimates on how many cases property transfers will fall under the flexibility provided under SB239?

Okay, well, thank you. Did you have a question? Okay, go ahead.

So.

Yvette Stowers, Executive Director, I understand your concern. And SB293 is really targeting the families in Altadena. That's really the target audience where you have the son moved into the grandmother's house and did not do the title transfer. And Assessor Pring recognized that and that's why he pushed for the bill. And that's why we understand as well, and we're devoted to making sure that we implement this law and not only implement it, but we do an outreach education, outreach so those affected by it will know that they have relief.

We're working directly with the assessor's office. We try not to step on their toes. They come to us, they ask for help, they come to us, us. They ask for publications and we push it out to them, but they have tracking mechanism and I know they know the difference. How many homes were destroyed Altadena. And I'm sure there's 2,800 and probably 95% of those homes did not get the right recording. There were family homes. I was raised in this home. What do you mean? I don't own this home home now. So it's an education. And I really appreciate assessor's praying for recognizing this. And we're just here to work in partnership with the assessor to make sure we get the tools out there.

Thank you.

Thank you.

Do we have any comments from Department of finance and the Lao?

Thank you. We'll take it back to the committee. Do we have any questions or comments from our vice chair?

CHRIS hill, FINANCE Just I would just note that we do think this project does meet the threshold of of necessity at this point in time.

Thank you Mr. Vice Chair. We'll move to Senator Cavaldin.

Thank you for the question.

I didn't see it in the, in the staff background and perhaps it's also not in the bcp, other than to note that the, the staff report says that historically audits have impacted the nature, the net change value of the assessed properties. And we would hope that that would, that would be the case. Do we have any like, ballpark order of magnitude sense of like what, what the. What the value to the people of California in terms of improved compliance, Tax compliance by some of the largest state assessed properties might, might look like.

So you probably told this to the Department of Finance, but didn't want to write it down. Like over how many, how long do you think it would take for us to remake the cost of this appropriation in terms of increased general fund revenue and property taxes? That's, we'd have to do some analysis on that. Certainly the, you know, the state assessed role is an important part of the property tax role overall and it does fund a host of city, county, special

But in terms of what the, you know, what the opportunity cost is to the tax rule of not doing this, I'm afraid we Department of Finance couldn't say today.

But we do think again, this is a project that should go forward because of, it's just necessary because of the antiquated nature of the existing system and all the time that it takes to manually upload all this data. Yeah, I'm inclined to agree with you. I just, you know, like the vice chair, I always have, you know, an angel over here and Lao on my other shoulder. So I'm trying to understand, not to the decimal point, but I think would we, you know, is this something that will. The increased audits, the stronger technical studies that will back it up, you know, are we looking at, you know, the, is this worth the cost? Because over the period of time that it's going to take us to fully solve the structural deficit, we will have already made back the cost of this new system in increased tax collections or is that a 50 year horizon or is that a 5 year horizon? I'm supportive of either way. I think this makes, this makes a great deal of sense and appreciate it coming forward. And again, I hope we look for more opportunities in partnership with the folks doing the work to achieve these kinds of efficiencies.

Okay. See no other questions or comments. I want to thank Senator Gabaldon. I think he pretty much asked the questions that I had in mind. I mean, I just wanted to again point out that just reading VBCP 18,000 hours entered manually. I mean, that's. Yeah. But I also want to just kind of warn in caution. Right. That a new system could also. I know that you're putting the new system in to reduce risk, but I also think that by putting in a new system, it also has some risks as well. And we want to make sure that we're diligent in. In this process and that it's one that tries to really minimize any kind of risk that there could be by implementing a new system. That's all I have on my end for this item. Okay. So we'll go ahead and thank you so much for your presentation. And we'll go ahead and will hold this item open. We'll move to agenda item number

We now turn to agenda items involving the Department of Tax and Fee Administration. So we begin with agenda item five on our agenda, which is a department overview. So I'd like to ask the representatives, I believe they're all here, to come forward to the table if you're not. Thank you for being here today, and please proceed with your initial remarks.

Good afternoon, Madam Chair and members of the committee. I'm Trista Gonzalez, director of the California Department of Tax and Fee Administration, otherwise known as cdtfa. Thank you for allowing my colleagues and me the opportunity to appear before you. I'll provide a brief overview and turn it over for any questions. CDTFA administers 42 tax and fee programs, the largest being the sales and use tax program. In fiscal year 2024, 25, $98 billion in revenue was collected which supports public services across the state. Of this amount, more than 30 billion was distributed to local governments, including California's 58 counties, 483 cities, and as of April 1, 2026, 486 special taxing jurisdictions. We have just under 4,000 team members with offices throughout California and in Chicago, Houston and New York. Our focus is fair and efficient revenue collection and enforcement activities that protect compliant businesses and the public. We have steadily improved our efficiency by reducing the cost to administer every $100 of revenue from $0.81 in fiscal year 2019, 20 to approximately $0.65 in fiscal year 2020, 24 to 25. This year's proposals that we'll. We'll address shortly. Strengthen our ability to enforce new laws involving flavored tobacco, intoxicating hemp and cannabis and maintain the systems that support California's revenue infrastructure. These resources allow CDTFA to continue removing illegal products from the market, protect our communities and ensure tax free fairness across industries. We remain committed to modernization, transparency and responsible administration of tax programs, of state tax programs. And I'm happy to answer any questions that you might have.

David Tan with the Department of Finance.

Okay. And comments from the LIO? No. Okay. Questions or comments from committee members?

So I'm not sure if I have exactly the answer to your question, but let me provide you a little bit of, you know, some of our taxes and how it gets filtered back to

So the sales and use tax one and a quarter percent goes, quarter percent goes back to the counties and 1% goes to the cities. And then those additional add on district taxes I mentioned are voter approved taxes. While we administer those taxes on behalf of the local jurisdictions, the locals themselves decide how the money is spent. We don't owe oversee that. So oftentimes those district add on taxes are for a certain purpose that is approved by the voters. I'm going to look at my colleagues here to see if you have anything.

Seth kirstein, LIO thanks for the question, Senator. So in terms of things, I don't think, I think I sort of just have maybe a brief comment on something that is perhaps a little bit related to what you're getting at. Not related to those types of districts specifically, but if your interest is in sort of things administered by CDTFA that are sort of within the range of tools that local governments use to manage their finances, sort of one key one is these sort of district sales taxes that sales and use taxes are sometimes called transactions and use taxes when they're in that form that are administered by CDTFA that are enacted by individual local jurisdictions as sort of add ons to the other parts of the sales and use tax rate. So one of the sort of one key piece of the statutory structure, structure governing how local governments can do that is a statutory 2 cent or 2 percentage point cap on the total amount of transactions and use taxes that can be enacted in a particular local area. So that's something that is on the books statutorily. However, it's very, very common for legislation to be enacted that are authorizes specific local areas to exceed that cap. And so in many cases there are rates that are higher than that. But so it sort of raises a question for the legislature whether you know, to consider whether to continue with that approach or if you're concerned about sort of the ability of local communities sort of in a more systemic or equitable way to sort of have that flexibility. Flexibility. It's conceivable that the cap itself could be revisited or adjusted. In fact, the legislature passed a bill to do so. It was either in 2015 or 2016. That was vetoed by Governor Brown. So this is a conversation that's been going on for a while and is something you may wish to consider.

Thank you for those comments. We have seen you know the more revenue sharing agreements and we have that information on our website and happy to share if anyone needs that data but you know, things are shifting. I really don't have any specific comments to add, but I appreciate your comments and our team is always available to help answer any questions that you might have in any of those scenarios.

Yes, yes we are reaching more and more. Let me I have a few comments

I can mention too. The highest rate I believe is for sales and use tax purposes is 11.25% at this at this time and that's in the cities of Palmdale and Lancaster. Taxable sales definitely has been growing steadily but sort of hit a plateau in 2022. I can give a little bit of information. In 201718 our sales and use tax revenue was just over $0.5 Billion and has increased to approximately $80 billion in fiscal year 2425. So that is quite a significant increase. In 2020 there were 341 of those special taxing jurisdictions and as mentioned in April there will be 486. So we have seen quite a shift in the tax rate based on those add on taxes. And I think you know we've seen some changes in laws as well. You know, with the online sales being a significant portion of you know, retail sales nowadays. Some of our focus has changed with respect to our workload and how we conduct business addressing those online sales. And you know you mentioned some of the local tax implications when, when there's warehouses in different locations and where those sales are made. We've also tried to make things more efficient at CDTFA and thanks to the legislature some of the bills that have passed. One of another recent bill to mention is the gosh what was the

which created the accelerated remittance program and that was dealing with the use cost car dealers where now they make they pay their Sales and use tax in many of their transactions directly to the DMV upon registration of the vehicles. So that was another effort to really help streamline our processes and just make collection of that tax, which is a big source of California sales and use tax revenue, more efficient. Those are a couple of the trends. I know we're going to talk a little bit more through our proposals in the cigarette and cannabis or cigarette tobacco and cannabis space where our CFO Jason Mallett will provide more details in all of those areas.

Yeah, Madam Chair, I just wanted to, I don't have a question, but just to really appreciate the line of questions and the points that you were making and particularly with respect to the, the incidence of local, of the local, of the sales taxes locally for warehouses and other and other transactions. And, and I mean, it is obvious it's a problem for all the reasons that, that you mentioned in the legislature and particularly the governor have been unwilling to deal with this in a systematic way. And the, the challenges becoming, with increasing automation and this phenomenon. There's, there are vanishingly small reasons for any local jurisdictions to zone for this kind of economic activity. When we were both members of the local governments here in the Sacramento region, we had to fight over some of these industrial and commercial facilities because they would produce good paying jobs in our communities and they would produce a reliable source of tax revenue. But today, many of these facilities, they have four people working in them and instead of 400, and you never know at what moment some other city will sign an agreement for a race to the bottom where all or 80% of your tax revenue is snatched away in one second. So if we want to have a strong economy statewide, we need to have communities have an incentive to allocate their land use decisions in a way that supports housing and other forms of economic development and particularly this sector. I don't know what we'll do about the robots, but we can do something about tax policy and simply allowing companies to make that decision. And upon advice of consultants, as you've indicated, game the system is not in the interest of the state's overall economy and it's certainly dangerous to our local communities. And we do need a state level policy solution to this. Appreciate you leading on this.

Good afternoon. I'm Brad Miller with the Department of Tax and Fee Administration, and I will be talking about a proposal where we want to address a compliance issue that's a result of confusion under existing law. So under the Marketplace Facilitator Act, a person that makes sales of $500,000 or more to California customers in a year and operates a marketplace to facilitate sales for other sellers is a marketplace facilitator. The law makes the marketplace facilitator the retailer for sales made through the marketplace and requires the marketplace facilitator to collect and remit the tax due on each sale. The law also provides an exemption for delivering network companies under the Marketplace Facilitator Act. However, a delivery network company may make an election to be a marketplace facilitator. Some delivery network companies have made the election.

Sellers utilizing delivery network companies are primarily restaurants, but other types of sellers utilize these DNCs as well. Audits conducted by CDTFA of restaurants have discovered many taxpayers are failing to report sales made through dncs. This is likely due to confusion about the responsibility to report tax. Since some DNCs collect and report the tax, the restaurant operator believes that all DNCs report the tax. This can be a very costly mistake. This proposal would make all DNCs a marketplace facilitator, alleviating the confusion and improving compliance. It would also shift the reporting requirement from thousands of small taxpayers payers to a limited number of larger taxpayers. We estimate that shifting the reporting requirements to the DNC's rules will result in approximately $44 million in sales tax revenue over a full fiscal year, 20 million of which would be general fund. This is money that customers are already paying to the retail which will now be paid to the state as required. California is unique by having a DNC carve out under the Marketplace Facilitator Act. Most other states that have a Marketplace Facilitator act include a delivery network company within the definition of a marketplace facilitator. This proposal would make California consistent with other states treatment of DNCs, and I'm happy to answer any questions you may have.

Madam Chair? J.T. creeden, Department of Finance. No further comments. Just here for questions.

Thank you. Alio no. Okay questions. Comments from our Vice Chair.

Correct.

Uber Eats, DoorDash, Instacart, Grubhub, those kind of folks, those are delivery network companies.

Correct.

The company facilitates the sale.

So for example, DoorDash would facilitate a sale through their platform for a customer and a restaurant. And the person that actually delivers is typically an independent contractor for DoorDash or UberEats or whoever. So it is a little bit different than the Amazon scenario.

work for

Correct?

So currently the sales tax is supposed to be collected by the restaurant or the grocery store and paid accordingly, not the delivery company that themselves who charges a service charge for the customer that's receiving the goods. Is that how it's intended to work Currently.

So the compliance issue is just to make all delivery network companies the marketplace facilitator.

So the sales tax is collected on the goods delivered platform plus the service fee.

But in this case they have not been.

So we're clearing up the confusion by increasing the tax obligation of Consumers

What was that?

I think we've collided up against an impassable wall of semantics, if you don't mind. Because explicitly, currently, the delivery network company that is not a market facilitator, their service fees are explicitly and allowably not subject to sales tax. You could suggest that that's an oversight of the code because of the allowance that maybe it was never intended, but that's the way it is explicitly allowed. And to change that arrangement so that those network, delivery network companies that were not market facilitators now by definition become and their service fees are subject to sales tax where they weren't before. You say that's not a tax increase. Well, again, that's where we collide up against that impassable wall of semantics. If it's increasing the tax revenue, it's a tax increase. So that's my concern about this. It increases cost to consumers.

Because in terms of processing. Yeah, but not the tax. I understand your point. That's why I say we've collided up against an impassable wall of semantics. It is increasing tax revenue to the state as to what it was before, which increases cost consumers. And we have this affordability thing that we're talking a lot about now.

Thank you. My view is when we hit an impassable wall, we go over it, grab a. On top of it.

I'm a single guy that doesn't enjoy the approbation of couples and families who look at somebody eating by themselves in a restaurant. So I, I'm not a, I'm not an infrequent user of any of these services and I wanted to like, move to them more specifically by name. Just it's easier for me to understand. So if I, if I order from Fish Face on Uber Eats, then I'm currently UberEats. When, when they, when, when I, when I, the, the dollar figure comes up and I'm paying that amount, it includes the, the service fee and with the, with the taxation on the service fee currently and that, and then all that, all that money is paid directly to, or the taxes are all paid directly to, to government. Is that how it works for UberEats?

Okay, well, I'm asking about UberEats. You're welcome to answer for anyone who has voluntarily registered for the Marketplace Facilitators Act.

And in that case, the restaurant officials would be receiving the price of the meal. Net of taxes.

So let's say instead I order that on. Well, what I will say is doordash, but for you, I'll say as a, as a DNC that has not elected to be designated as a marketplace facilitator. So now I pay. But the amount is, let's assume their structure is otherwise the same. So now I pay, I pay the same delivery fee, but I'm not taxed on the delivery fee.

I'm sorry, I did mean service charge. Okay, sorry.

Right?

Okay, so I, so okay, so I am now paying, say the, say the service charges is $8 I'm now. Or $4, I'm now paying whatever, 40 cents less for the exact same, for the exact same product and delivery in the, by using a doordash or a non designated marketplace facilitator as opposed to UberEats or A, any other market designated marketplace facilitator for the same. For the same product.

Okay, then for the, for, for fish face for the restaurant. And I have not pre coordinated with the, with the two people that are working there at any one time. So they don't have an accounting department behind the, behind the scenes. It's like looking at each one of these. They don't have an attorney sitting in the restaurant evaluating each of these. So in the, in the first example, the market the Uber Eats or other Other DNC that is registered as a marketplace facilitator, they're receiving the price of the meal, net of the net of the tax and not including the service charge because the service charge was.

Is covered by in the second instance. Are they, they're receiving the whole amount that the consumer paid minus the service charge generally.

And the delivery fee or other other costs that are borne by the dnc.

Okay, but they are, but they are. But I guess the embedded in my question is they are receiving the amount, the amount equivalent to the taxes.

Yes. Okay. And, and so so, and part of the issue that you, that you noted at the beginning was some of them don't. They, they don't know the difference between the two because they're, and, and there's obviously there are more than just two delivery network companies out there. And so there's confusion there, which I, which I, which I understand. But then, so under this proposal, then the, the, the restaurant would, would. No, they would no longer get that. The, the, the tax the tax amount that they, they shouldn't have gotten in the first place if the, if the DNC had registered. So, so, so did they I mean, will restaurants on a, on a, on a significant scale under this proposal, even though they, they're obligated to remit that as taxes will less, should we expect less cash to be entering their accounts,

They're due to the state. But if, if there is the confusion that you were describing, then they're not being paid to the state, at least in some, some instances, and they're being booked as income essentially to their, to their restaurant, which and so under this, under, under the BCP or under the trailer bill language that's proposed, they would, the ones who were unaware and were confused would, would, would, would experience the same effect as having less income. They would also now be in full compliance with the law.

Okay.

Thanks.

Okay, so now I'm banging my head against the insurmountable. What. Wait, wait. Okay, so I'm going to I want to make sure I'm understanding. So if should this proposal move forward, should consumers expect to pay more for the items that they are ordering through

Yes, they would.

Senator, can I just add to that too? JT Creeden, Department of Finance that again, as mentioned earlier, that makes an assumption that there's an increased cost to these we're talking about just a few DNCs here that then pass along that cost to consumers. You could also, as I mentioned earlier, you could make the same argument that any savings on the small business and restaurant side gets passed along to the consumer as well as additional savings. And we haven't seen any evidence really from other states where most other states, these DNCs are currently marketplace facilitators and collect and remit sales tax already. And we haven't seen evidence of increasing prices or decreased business or any of that.

I'm not exactly sure. Their incentive, I mean, may be related to their ability to make the transactions easier for their their restaurant customers that they partner with. I it that's really a better question. For those that have made the election,

Well, that's what they're dealing with now is the confusion because some have made the election, most have not. And so they're, again, they're confused about when do they need to report the tax or not. And again, this would eliminate that confusion.

Yeah. What you're talking about is exactly the intent of the proposal is to simplify and create fair and consistent application of the tax law for all.

Well, it's volunteering now, right?

Okay, got it.

There's an election currently, if the proposal passes, then there's no more election.

Thank you.

Senator, if I can just, you know, add to that the that that is a legitimate policy question that we've considered. The intention was just broader tax compliance, but in in regards to the the exemption for the few DNCs, it really is giving them a comparative advantage that other businesses don't have. So as you said, it is definitely a policy question of whether we're putting our hand on the scale policy wise, giving them an incentive, and whether that there's a strong policy rationale or justification why those industries versus A not we don't think, we don't think so. We think it would make more sense to just have a broad, consistent application of the tax for all businesses across the board. And one of the reasons for the variance you see from state to state is because these are relatively new industries. These are relatively these sort of platforms. Right. And so tax policy and treatment of them has evolved over time. So we've seen different things in different states, but what we have not seen is we've not seen any data to your point about significant impacts on business and consumers. These businesses are continuing to grow, they're continuing to expand and, and businesses access new customers. Customers enjoy using the platforms. Nothing about this proposal, we think, hinders that.

I think we'd have to we'd probably have to take a look and get back to you specifically, because it varies quite a lot from state to state, state in the in the treatment, and a lot of it is sometimes done on a business by business basis, as opposed to how California does it with like the the statutory exemption. But I saw Seth jump and I think Lao might have a more information.

Thank you.

Right.

Good afternoon, Chair and members. My name is Andrew March with the Department of Finance. So, as the agenda notes, the Governor's budget includes a one to two dollar tax credit against the state diesel excise tax for sustainable aviation fuel, which for ease of just time, I'll refer to as SAF from now on. Sold for use in California from 2026 to 2036. The value of the tax credit is 1 to $2 per gallon of SAF depending on the carbon intensity as determined through the low carbon fuel standard by the California Air Resources Board. I'm joined by my colleagues from the California Department of Tax and Fee Administration and the California Air Resources Board and we're happy to answer any questions or clarify any statements made by the lao.

I believe that was the Department of Finance.

Helen Kirschtyn with the Legislative Analyst Office. Good afternoon, Chair and Senator. We're recommending rejecting this proposal. There are five main reasons for that we're recommending rejection. I'll go over them briefly and then we'll have plenty of time, hopefully for questions. So the first is that we think this fundamentally represents a pretty expensive means of decarbonizing the state. And we think in general the state should focus first on the most cost effective, effective approaches to decarbonization before proceeding to the more expensive approaches. The second reason that we're recommending rejection is that we think the environmental benefits of this proposal, which is really the stated, the main stated goal from the administration, we think those environmental benefits are subject to quite a bit of uncertainty and might be substantially less than estimated. There are a couple reasons for that. One of which is that one possible effect of this proposal is that we might basically switch out renewable diesel with sustainable aviation fuel. So basically swapping, to some extent at least, swapping one renewable fuel with another. To the extent that occurs, your overall net benefit, environmental benefit wouldn't be very large. Also, we note that in the research there's quite a bit of disagreement about the level of environmental benefits that these fuels provide. The third main point that we wanted to highlight is we think there's a huge amount of uncertainty about the magnitude of the potential loss of diesel excise tax revenue. So we think, for example, it could be that the losses are less than the Department of Finance estimates kind of is their max amount. So they've estimated between $165 million a year to $300 million a year. We think that possible it's significantly less than that. But we also think the revenue losses for the decel excise tax could be quite a bit larger too, potentially a billion dollars or even potentially more. So there's a lot of uncertainty there and there's a lot of potential risk to diesel excise tax revenues. Then fourth, we wanted to highlight that every dollar of that tax credit is one fewer dollar for our transportation programs. So these diesel excise tax revenues currently go to by formula to a few different programs. They go to Caltrans shop program which is highway maintenance and rehabilitation. They go to local streets and roads. So to the communities, the cities and counties that want to maintain their own roads. And they also go to a transportation or, excuse me, the trade corridor enhancement program. So again, depending on the size of the tax credit that's ultimately realized, we'll see a different amount of reductions to those programs, but they could be real reductions to Congress communities. And then fifth, we wanted to highlight that we think the proposal deviates from the spirit, not necessarily the letter, but the spirit of voter approved restrictions on these transportation revenues. So voters have passed constitutional restrictions on diesel and sales tax on fuels and basically said we want them to go to streets, roads and certain mass transit activities. This proposal in effect would divert those revenues instead to the aviation sector. And we think that's not consistent with the spirit. It so happy to take questions at the appropriate time.

Small quiz. Be right back. I don't, I don't have any questions but I very much appreciate Alio's analysis of this and at least my, my initial, that's my initial thinking and I'm hoping to hear from others about, about it.

And I wish we had had this level of attention to when Valero was on the chopping block as well. But, but I think the analysis has been made and the impacts on, on the transportation fund and on what the voters approved for that and other decarbonization efforts are are well taken. So you know open to continue to about talk about it but I think LA would everyone the administration would be wise to consider the comments and the observation these analysis by the Legislative Analysis Office.

I'm sorry I missed the very quick presentation. You know, I understand the impact on local. I represent Los Angeles. Streets are very important to us. Freeways are extremely important to us. Can you talk a little bit about what we think the impacts are going to be quantifiably on the ground as a result of this change?

And if I might just provide a little bit of extra context, so the 165 million again, it's currently allocated by statute to the three programs that I mentioned. So if it's 165 million, and again a lot of uncertainty about that, it would be a reduction annually of 70 million to Caltrans's SHOP program. That's state highway maintenance and rehabilitation, $45 million or sorry, $49 million, excuse me, annual annual reduction to local streets and roads and a $46 million annual reduction to the Trade Quarter Enhancement Program. But of course, you know, should that be higher or lower, those numbers would would be changed proportionally

Yeah. So the proposal in front of you has no cap. I think it's something that's been discussed about whether there's a way to sort of cap the total amount of the credit. It would be difficult to sort of implement a cap. We Would have to think about a good structure to do that. You know, sort of setting an overall cap would create a first come, first serve sort of situation, which not be beneficial. But it's something that, you know, there could be reporting requirements included to provide additional information to the legislature. There are other tax credits where there is annual reporting to see the value of it. We have another tax credit that's sort of in the same vein as the manufacturing tax credit, which is sales and use tax exemption. And it's so general fund losses, but we backfill it with greenhouse gas reduction fund and that's sort of an annual report to the legislature that's done. So there could be other mechanisms that could be in play to sort of

But as it stands right now with the proposal that the administration has put forward, there is no cap on it. And it's really just capped by the total diesel excise tax liability of a particular firm. So for example, if a firm were to create 200 million gallons of sustainable aviation fuel, but their diesel excise tax liability was only $100 million, the value of their tax credit in that year would only be $100 million.

No, that's. That's helpful because I'm, you know, I'm concerned about the increased amount of revenue that could be lost on the transportation side as we may see the sort of the need for more and more and more of the tax credits to move into this area. And I absolutely agree. This is about maintaining good quality jobs in the state of California. At the same time, it's the tension, right. Always between these two things. I wonder if there is. If part of this rationale is to support the refinery operations in state production, how does the administration ensure the state. State is receiving clear environmental benefits in return for this new investment?

So as part of this proposal, in order to verify the carbon intensity of the sustainable aviation fuel, it has to qualify for the low carbon fuel standard, which includes sort of a life cycle analysis of the carbon intensity of the fuel. I'll let my colleague from the Air Resources Board clarify anything if they. Any other questions?

Appreciate the answer. I think it's recognizing we want to keep good jobs in California. We want to continue our environmental standards at the level that they're at. We also don't want to reduce workforce when it comes to repairing our roads and highways and streets. And certainly we know we need those things. So it's a lot to consider as we move forward with this and I hope we can think about should there be a need to utilize more of these tax incentives and taking them out of the transportation side, that there's a strategy for ensuring that there will be adequate funding to do the work that we need to do, especially at our, at our local level.

I just wanted to, to, to, to follow up because I think the, and you mentioned the film and tax credit and it's in its general fund relationship. And I think that for me that's, that's the, one of the major problems with this proposal is its reliance on the, on, on the tax credit on that, on the, on the diesel excise revenues, which I think has yet to be really addressed. Why we're doing it that way in a year where, where we have substantial short term general fund revenues. And given the fact that we are then spreading the cost of this across the entire state. The other dimension to that is I wanted to be, I wanted to understand, I know the, at least one of the SAF refineries in California does have diesel excise tax obligations that are, you know, are worth it in this is, is that true for, for all of the producers, for all of the, all of the jobs generating producers of SAF in the state, do they all have diesel excise revenue that would offset.

Okay. I mean, I'm trying to understand this part of it because we've been framing this up as a jobs issue and obviously that that is which is different from a SAF usage issue exclusively. Right. So.

Is that challenge principally the consequence of using a tax policy approach here or if we were a tax policy approach, I would just know that Culver City would lose money for streets and roads, that it had nothing to do with this decision. It will have no benefit from it. I mean, this is one of the threshold tax budget problems with this proposal from my perspective is that it has other consequences that it shouldn't have. Like if we want to do this, we should be considering the funding that we have available through the general fund or not. But we should be making those choices as opposed to forcing them on others. But we could also have. Because we could have a grant program or some other some other approach that may not be permanent but then may not also raise some of the commerce clause or issues the differential tax treatment might.

If I might. I think one potential option to consider is again, you can, I think you might may be able to do this through a tax credit. That's a different type of tax credit I throw out there. And I know my colleague who has the tax assignment may know more. But I believe, like, for example, we have the California Recompetes program, which I believe this committee is very familiar with, that provides tax credits. So it's through the tax system again, but it's, there are agreements with entities and it's focused on just California jobs. And so it's possible that that program or something similar to that program could be a type of model that could be used and you could make it refundable potentially, or other things. If there are other concerns. Again, we haven't recommended that, but it's one option. If the legislature wanted to approach this and then you could have some like, for example, for California competes, my understanding is that the state can claw back money and has clawed back money money if the agreements with those, you know, those companies are not fulfilled. And so that would be another advantage. I mean, one of the, I think other concerns that I've heard about is, okay, well, we provide this because we're really intending to target trying to keep one, maybe one or a few refineries in operation in the state. Well, maybe they close anyway because there are a lot of global factors that are affecting these refineries and then what recourse does the state have? So this mechanism doesn't seem particularly well suited to addressing those types of concerns either. And so, you know, the legislature, if it wanted to go down this route, maybe could consider other types of approaches as well, where they might be able to work that into a specific agreement. Anyway, just an idea.

Thank you. I'll try to keep it short. I'll just start by saying that I'm really uncomfortable with where we're at in terms of our situation in energy security in the state. And I know many know that I've been very vocal about, you know, certain policies and regulations, especially, especially those that are, you know, no offense, they're coming out of, you know, carb. And I guess one of the things I want to ask here today is would you say that it's fair to say that, you know, LCFS and the changes that had occurred earlier on kind of created pressure for some of these refinery, well, refineries or a refinery to convert or purpose them.

Now we're seeing the policy change happened in what, 2019, before the pandemic.

But didn't some of those conversions Happen like in 2020 or they began in 2020?

And, but the, and the first change that happened with LCFS that would, I would say, sent a major market Signal was what, 2019.

Okay. And, you know, I just, you know, I'm also a believer that I don't think that conventional fuels, I just think we're going to be relying on them for some time. And I think, especially with what's kind of going on, that's going to be the case. And I think that we have our goals, but we also have the hard realities. Right. And I think that there's all these things that occurred that now puts us in a situation of, you know, where people are worried. People are worried about refineries closing. They're worried about the cost of your gas going up. They're worried about losing their jobs. They're worried. And they're relying on us to take the appropriate steps and actions and do what's best for them. And so when it comes to this proposal, when it comes in general to the work that you do in your board and beyond, right. We got to do right by the people because at the end of the day, it impacts us all. Energy security is something that we all need. We need to have it. We need to have it here in the state of California. We need to provide that security to Californians. And I just don't think that they're feeling it right now. The other thing I also just wanted to point out and, or ask is there was mention about tax liabilities and incentives. I mean, do you kind of see this proposal as an incentive to move more so towards meeting our decarbonization goals?

Right. But that was a risk that could possibly happen. Right. I mean, I think there's, with change in administrations, there's change in policies. Right. Change in credits and grants and all sorts of things. And it's a risk, I guess, that comes along with new administrations.

I don't have a whole lot more to ask or comment at this point. I appreciate your response and I guess that we don't have any additional questions or comments on this item. I want to thank you for coming up and answering our questions and making your presentation, and we'll hold this item open. Thank you so much. I know we're continuing with CDTFA and I'm going to ask in the interest of time, if we can merge items 8, 9 and 10 all together to discuss them as a group. Is that okay with everyone? Thank you.

So.

All right, thank you, Department of Finance. Any further comments?

All right, thank you. Legislative Analyst Office thank you.

Thank you.

latitude to redirect staff to address workload needs.

If I may respond to the comment Mr. Kirstein made about the General Fund a bit more. So he had asked or recommended to cut our general Fund budget by the 5.6 million. I'd like to shed some light as to why we did not do a negative BCP for that. So first, just to frame this a bit first, Our revenues have increased 30% from 74 billion in fiscal year 1920 to 98 billion last year. In addition to that revenue increase. Our efficiency has improved by 20%. In 1920, it cost us 82 cents to collect every hundred dollars of revenue. That has since dropped to $0.66. So our efficiency has also grown. As you, as you know, there have been some pretty big budget cuts over the last couple of years. At CDTFA, we relinquished over 300 positions, which we believe is the largest of any tax department, and that resulted in a $50 million haircut to our budget. 30 of that 50 million was directly to the general fund. So we believe our general fund is appropriately sized. It's important to recognize that, you know, when we hire, it's very accretive to the state. So for example, every sales tax auditor generates $650,000 per year to the state. In addition, last fiscal year, our audit activities alone generated $850 million and our collection actions generated a billion three. Each of those individual buckets by themselves is greater than our entire department's annual budget. So putting this together, you know, we need the ability, we need the budget to advertise and hire and we think it makes much more sense to give us that budget to make more money for the state rather than prematurely impede our ability to advertise and hire and make, make the revenues for the state. We think that is a bad trade off and that's the reason why we did not do a negative BCP here.

I can add a little bit here. So when we hire someone, if we hire an inspector to do inspections, they may go to tobacco shops or cannabis dispensaries, or if we hire an accountant, they will reconcile various funds. We hire people to do a responsibility and then the demands of the, they allocate their time based on the demands of the job, in this case for cannabis. You know, as you know, there are a lot of challenges with cannabis. And you know, when we go to do an inspection of a tobacco licensee, for example, and we find cannabis is being sold there illegally, we cannot just leave illicit product on the, on the shelves. So we, so we seize that product and in this case, so that inspection would then become not only a tobacco inspection, but also a cannabis inspection. In this case, cannabis required more time, and so that is where we spent that time as needed. These are the same folks allocating their time as the demand of the market, you know, necessitates with regards to funding. So first, as Mr. Christine said, the cannabis tax fund is continuously appropriated up to 4% of revenues, or roughly $25 million. So we had ample room there. The thing is, we are as a Department, we're limited to how much money is actually transferred into that special fund. And also we have this public BCP process where we request an annual appropriation. In this case for Cannabis that's been $10 to 10 and a half million dollars a year. So we try to stay within our annual appropriation. But again, in this case, there was just so much elicit product out there, we cannot leave it on the shelves, not only for financial reasons, but also non financial reasons, you know, fair competition, public health, et cetera. And so we needed to spend the money to seize the product for enforcement. So that's, we consult, you know, each year we consult with Department of Finance very closely on our plan, our budget plan, and also potential shortfalls. So we work together with our partners and it was decided to use the general fund to fill that shortfall.

So yes, this is exactly the point. This is why, this is the essence of what legislative oversight is about, which is that the explanation that we heard, two explanations for why this happened, one of which made sense to me, sort of, which is that, you know, we're already on site, we need to do, you know, we need to, we need to meet our statutory obligation to enforce, although we still should be billing the appropriate, the appropriate count, whether they were, you know, whether they're principally general fund staff, if they are engaged in the cannabis activities, and they should, that they should, that should be properly accounted for. But then the other explanation was that we wanted to protect the Downstream other other uses and as said more elegantly than I did, that is, that is not an administrative decision. That is a legislative and gubernatorial decision very clearly. And it is not appropriate for departments to be, to be, to be making these kind of allocation decisions which are within their legal power, but they are in their legal power in order to administer the law, not to make policy choices about whether or not we want to protect downstream users of the cannabis fund by not billing that fund. So I just, I want, I want, you know, say that very clearly because it's the kind of oversight that this budget subcommittee has, has been focused on and I appreciate the chair's attention to and focus on, on doing this, but those are, those aren't easy choices and I wish we didn't have to make them, but we, we do have to make those, those calls and I, and I, and I look forward to, forward to trying to resolve these going on a going forward basis. I wanted to follow up also on the hemp side of the equation and that is with respect to, and maybe this also applies on the canvas side, which is the extent to which these, a couple or all three of these proposals will improve enforcement which we desperately need and hopefully also to help balance the, to achieve the right fund balance here. When you know, what, what's the trajectory, the magnitude and the indicators of, of how we're succeeding in those domains? How will we know when and at what level of outcome can we, can we expect?

Hemp.

If I could just say add one more thing too. Just.

in fact coordinate with finance on the use of the general fund versus the cannabis tax fund.

They didn't just do that unilaterally. They did go through proper channels.

Great.

Okay.

No worries.

Thank you. Any comments from Department of Finance?

Great. Lao. None. Okay, I will have no questions for you at the moment. Thank you so much for that presentation. And we'll hold this item open as well and move. And thank you again. I know it was a lengthy one for you all, but we'll move on now actually to item number 12. Now we turn our attention to agenda items involving the Franchise Tax Board. So item number 12 is an overview of the department and just begin when you're ready.

Yeah, you're good.

That works great.

I am Roger Lackey. I'm the Chief Financial Officer at the the Franchise Tax Board with me today is Abel Escobar. He is our director of our Financial Management Bureau. Today I'll be covering item 12, the overview of the FR the Franchise Tax Board as well as item 13 which is the EDR2 BCP. And Abel will handle our mainframe BCP. So for the overview mission of the Franchise Tax Board. Our Our mission is to help taxpayers to file timely and accurate tax returns and pay the correct amount. Excuse me, correct amount to fund services important to Californians. To accomplish this mission, we develop knowledgeable and engaged employees, administer and enforce the laws with fairness and integrity and responsible responsibly manage the resources allocated to us. We administer two of California's major tax programs Personal income Tax and Corporation tax. We are also unique because we also collect funds for several non tax programs. Delinquent debt for. For delinquent debt collection funds include vehicle registration, court ordered debt and we conduct audits for the for the Political Reform Act. The Franchise Tax Board helps administer programs responsible for approximately 78% of California's general fund which is approximately $166 billion for both personal income tax and business entities. Key items of interest we have approximately 6,500 permanent employees and we bump up closer to 7,000 with our temporary staff. During peak season we maintain offices in New York, Chicago and Houston within California. We also maintain offices in Southern California and the bay area. In 2025 we received and processed 23 23.1 million tax returns. That was 21.5 for personal income tax and 2.6 for business entity which is our corporations and our pass through entities. We also received and processed 5015 million payments totaling over $102 billion. Take note that withholding is remitted through the EDD and then the records are moved to us so that we use that during tax processing to ensure taxpayers are accredited. We also issued 15 million refunds to taxpayers totaling 28. Excuse me, $28.2 billion of which 3.5 million of those were refunds. For Cal EITC, we provided direct customer service to taxpayers for phone and chat of approximately 2.7 million taxpayers. And with that, that's a brief overview of our programs and I'll. Do you want to ask questions now or would you like me to go through the BCPS or come back? Are you sure? You seem like I'm ready to answer if you want to.

Item 13, the EDR2BCP. This is our final BCP supporting the enterprise data to revenue phase two EDR project. Before diving into the proposal itself, I'd like to share a little bit of background. In 2007, FTB introduced the Tax System Modernization Plan, a 30 year strategic vision comprising three major initiatives.

Each initiative spans approximately 10 years from planning through implementation, with each phase building upon the foundation established in the previous. Phase 1 the initial EDR project established our foundational enterprise platform and modernized both tax return and payment processing and correspondence workflows. Phase two the project that we're here for today EDR2 has moved our compliance workloads, audit, legal collection and filing enforcement onto the shared enterprise platform created in EDR1. The planning for this project, EDR2 began in 2016 and implementation efforts began in July of 2021. Implementation releases were carried out through a phased approach that allowed us to take small measured steps and to scale up, reducing risk of negative impacts to FTB operations and most importantly, taxpayers. We call it our Crawl Walk Run approach, also referred to as CWR. In 2023 we introduced the Personal Income Tax Audit and Protest workloads to the Enterprise platform. In early 2024 we incorporated the PIT collections workloads and later that year the remaining audit and protest workloads for pass through entity and business entity cases. In 2025 we transitioned the BE collection and legal workloads and later that year implemented both the Personal income Tax and BE filing enforcement workloads. Each implementation also brought new self services, expanded our modeling capabilities, added data visualizations and the ability to leverage additional data capture both for state and federal. In January the project successfully completed its final implementation release and we entered the warranty period which extends through the end of the 2026 calendar year. During the warranty period we will continue to focus on maturing the functionality and completing project closeout activity activities following the statewide process established a support funding for larger projects and annual BCP is required for new costs related to the year. This year's proposal is the final proposal for this project and the request and augmentation is as follows. 59.857 million in 2627 23.975 and 2728 17.635 in 2829 17, 17.64 and 2930, 17.637 and 3031 and ongoing and the full time equivalent of 20 permanent positions the 2627 fiscal year. The payment, which is larger, includes 32.8 million for the payment to the solution partners. In addition, the proposal includes 12 million for annually IT asset transition software and then Please note Throughout this project FTB has used a just in time approach to requesting resources, we're asking for resources for the same functions across the years as they have been needed. We have noted these ongoing limited term or one time cost in our BCP documentation. Lastly, statewide policy requires a special project report to be submitted when there is a 10% more increase in schedule or cost or when there is a scope change. However, due to the size and magnitude of the EDR2 project, the project is subject to a special condition where an SPR is also triggered if costs increase by 5 million or more. In January of this year, the EDR2 project project submitted and received approval for its third SPR for this project. While the project scope, schedule and date remain the same, the total project cost increased by approximately 17 million, or 2.2% of the total project. These additional costs are necessary as the project is 99% complete, it's entering its first year of implement, our final year of implementation, transitioning from development to the warranty period and operational support. As the State prepares to assume full ownership of the solutions. Targeted updates to staffing, infrastructure and support contracts are required to support maintenance and operation. As mentioned, the project is 99% complete and with a strong effort by our FTB staff and our solution partner, this project is a success and we look forward to finishing the project in the 2627 fiscal year. And with that I'll pass it over to Abel to cover our mainframe bcp.

Thank you for presenting on those three items. Do we have any comments from the Department of Finance?

Great.

we're not raising any specific concerns with either of these proposals. Thank you.

Me too.

The planning began in 2016 and so then the active project itself began in 2021. And so the planned cost of the, the project at the beginning, where are what we understand at the time related to the. Am I, am I close enough to the technology? I am talking about the ergpcp. So the planning at the time related to the project in terms of what we estimated the cost to be. And then working with the vendor, looking at tax, software, hardware, all of those things, those things are estimated out at that time. And then as you move through the project, you learn more details about the implementation, the infrastructure, what's required, changes in technology that are taking place. And so those adjustments have taken or have occurred over the life of the project, including the additional costs here for the spr.

So the planning, the beginning of the planning. So working on through the, the rf, the rfi, the RFP process, the business problem analysis, all of that began in 2016 and then for the 2021 BCP. So the first one, so that's the cycle ahead. So 1819 would be when the, the cost and the, the estimates were being actually determined to put the project together to make our requests. And then each year as we've gone through the development of the project, there's been small adjustments to the SCOP costs. There has not been any change to the scope. So the delivery of what we anticipated from the beginning remains the same. The schedule itself remains the same. It's just adjustments to the cost. The overall project itself is 800, $802 million. And so as a, as a percentage of that, it's two, two and a half percent. So that's somewhat small. Small when you look at the scope of the overall project and the cost associated to the project. But I do understand, you know, $17 million is a lot.

So the first spr adjustment was 13.9. The second adjustment was 18.4 and then this adjustment is 17. So the total is 49.3 million over

Yeah. Each year that the. What's taken place is there's been a, when I, when I say adjustments it's really estimating. So when we started out, you start out a project and you're putting it together, you're identifying like this is what we expect it to take. This is the number of, this is the number of the pieces of hardware we might need. This is the software licenses that we might need. And so then as you get closer and you're actually implementing some of these different phases, then you're making adjustments to those. And so it's through those adjustments that the costs continue to increase over time.

So the M and O I think goes out five years. And so we'll go through the maintenance and operations to maintain the software, hardware services, any vendor related services. And so in terms of end of life, there isn't an end of life at this point. I think one of the things that we're talking about when we move forward to modernize.

methodology is what I'm talking is approaching is that you know we also have our mainframe BCP that, that we're talking about as well. Right. So the, the life of those systems when they're over like the. And then those things were in 1993, 94 when they're put together, our accounting systems that haven't been replaced, that which will actually be part of our EDR3 project, those are also built in the 90s and need to be replaced. So those are kind of. It could be end of life.

Our collections platform is over 20 years old. Our filing enforcement platform over 20 years old, our audit platform over 20 years old. So those were becoming. We asked about end of life service for the soft. The vendors not supporting some of the software getting more difficult for us to actually be able to maintain putting our compliance revenue streams at risk. So that's, that's when you ask like the end of life. That's kind of what's on going what can you do to maintain it. It's given over time. You're somewhat. One of the constraints if you want for to give you like a very firm answer is we're also going to be dependent on software as well. How do they maintain that? You know Pega is one of the case management software we use how long do they go ahead and they continue on. So I can't give you a definite date, but one of the reasons that we moved to being a more modern platform is that it is much more software cloud based. And so the ability to be agile and move forward and not have to build a very large mainframe accounting system, return processing system, that's the strategy that we were approaching. I know that was kind of a long.

But I was trying to provide context.

Right.

Not likely. I mean it's so. But I understand your point is.

The planning. So for our third project, we actually already internally are starting to work on that plan to kind of do. We were going to initiate the business problem analysis in this next fiscal year so that we can work through that and then lay it out for forward. So I do appreciate, I think we'd all like to move a bit quicker in terms of implementation. We are very deliberate about things. Part of that has to do with what it is that we're changing and that we're actually also set on a cycle when everything is actually focused on return processing. So there's very specific hard dates that we have to work through so that we have to take all of those things into account. Also have to take into account the dependency on the state for what we do in terms of business and how we support California and citizens. So we are very deliberate about how we go through it. But I will take it back and talk with my executive officer, our team about how can we accelerate our planning for our third project. So to avoid this conversation.

Yes, but a couple things.

So I didn't mean to pick on you, I hope you didn't take it that way. But so just if there's any other comments on the, on the other items in regards to what I just said and you know, concerns or if you wanted to say anything, feel free to.

Absolutely. Thank you Senator Cabaldo.

So there's different factors. Our FTB's IT department, they have a strategic plan where they look out several, like five years out and they're constantly evaluating the trends and the needs of the IT equipment. When it comes to the mainframe equipment, a mainframe consists of various components. This BCP here is for the server components of it. There's other components such as storage, tape. I don't have a visual here of all of the components, but there's different components. So this one focuses on the server aspect and also provides expanded storage capacity for, for all of the data that we're processing. So one of the things that our technology department does is they do periodic evaluations to see if we have enough storage to handle the data that FTB is processing. In this situation, it's reached end of market. And like, for the reasons that I mentioned, when products are reached end of market, there's limited support, there's limited parts availability, and we handle taxpayer data and we don't want to compromise having any risks with that. We also have a business resumption plan. And this is our, our mainframe is what we call tier zero. And that means it needs to be up within 24 hours to ensure that we can process payments and any other taxpayer information that comes through our systems. So FTB is continuously evaluating their IT needs and their needs of the mainframe. And you mentioned EDR3. When we start that planning of EDR3, we are going to evaluate the impacts of the EDR3 system against that mainframe and we'll make sure to share those accordingly.

Can I just. Yes. So, one, the strategy in terms of what we, in terms of building on what we've done is to make us more agile for that third leg in getting our accounting systems replaced. When we talk about the timeline or timeframe for that, the beginning of that project. And she. I'm sorry, ma', am, you're not gonna be happy when I say this, but

I, well, so our, so, so our time. So there's, I mean, there's the planning, there's the, you know, working on the funding, and then there is the implementation. And so the replacement right now, tentative. Our timeline is, is in 30:36. I'm sorry, 20:36. So you guys really do play beginning the project in 3031 and then replacing the mainframe by 2036. I'm tired too. A little lightheaded there. So when you're asking the different pieces that we're putting through the mainframe, we have to continue to evaluate that, to make sure that it's up and running, targeting that date for replacement placement. And that means that we have to be very strategic about how we plan the EDR3, how we also plan the maintenance on our existing mainframe that supports those accounting systems. And I can tell that's where your head is, where it's going. And again, I'll take your comments back so that we can talk through that, see if there's better strategies. We can talk with our friends at Department of Finance, lao GovOps, our three member board. You know, what is it that we can do to see if we can compress any of that without creating risks?

Okay.

I guess mine's 30.

I'm still trying to figure out what mainframe is. Well, thank you so much. I think that covers it all. I don't have any other further questions. I appreciate your patience. I appreciate your. Again, I don't. I hope you don't think I'm picking on you. I'm still learning a lot about the IT side of things and asking questions. I mean, I think this is just again, like common sense things that, you know, my constituents or our constituents would ask. Well, like what's going on here. Right. Like from someone that doesn't come from the IT world. I think this is something that would just something that would be asked and therefore I ask it. And I appreciate the response and willingness to share with us a little bit more and educate me a little bit more as well. So with that, I thank you. I think we're all done with agenda item 13 and 14. I think I lost track. And 12, and we're going to hold those open and we're going on to the next favorite part of this hearing, which is public comment. All right, we've come to the end of the discussion items on today's agenda. I really appreciate everybody's patience and I know many of you have been here for quite some time. But we'd like to invite members of the public who are present with us today to approach the microphone for public comment. Please form a line when it is your turn to speak. Please state your name, your Affiliation and so that we, I think we have enough time for everybody to say just, you know, a few words and we'll try to make sure that you all keep it to one minute, but please begin.

State Building and Construction Trades Council of California.

The state building trades is in strong

Good afternoon. Ada Welder, on behalf of Earthjustice Leadership Council for Accountability and justice and Union of Concerned Scientists. We're extremely concerned and urge you to reject the SAF tax tax credit proposal. Expert analysis shows the emission reductions from these fuels are meager at best. And this is now coming at a time when transportation funding is most needed to reduce our emissions. This tax credit would benefit out of state producers at the expense of these local transportation fundings. And while it's not in the proposal, we are extremely concerned about the implication today that this could be backfilled by GGRF funding which is already really overtaxed. Thank you.

Juanita Martinez, on behalf of World Energy, we'd like to say that on item

climate goals and expansion of the sustainable aviation fuel. However.

consider amendments to this proposal that would allow transferability under the current staff proposal.

to participants to be able to compete in the market. And so we ask for your consideration in transferability language. And unfortunately at this time we oppose unless amended.

All right.

My name is Jared Wittery. I am the senior director of operations

Because of good strong programs like the

to invest in its people, community and the world by converting 128-year-old refinery into

jobs as well as supports local businesses and nonprofits providing sustainable aviation fuel incentives supports those jobs and the local economy

I support the Governor's staff incentives program

Short Good afternoon Madam Chair members. Kathy Van Osten, MBM Strategy Group. I represent United Airlines. I'm also here to offer comments for Airlines for America. Alberto Turico could not be here. He's out of Town today, as are the Airports Council. So I've got them all. But just want to say I appreciated the conversation and the questions that were raised during the presentation on saf. SAF is really the most considerable means for airlines to reduce their emissions. Ground transportation, you know, ground equipment, very minuscule part of the emissions of the aviation community. And we've identified SAF as really the most substantial way to reduce emissions. Carbon by 80% with current technologies, with new technologies. E jet coming online, potentially reducing up to 99 to 100%. Particulate emissions down 50%. Sulfur down 100%. These are quantifiable emissions. They are approved through the LCF pathways, LCFs pathways. They have to prove their emissions, so they are quantifiable. I wanted to respond to your specific question, madam chair, regarding LCFS. We worked to bring SAF to the CARB in 2015, asked that we include it as an opt in fuel. We were successful in getting that in. And what that did, it did incentivize a California producer to the point where they could attract the investors necessary to expand. Expand their production. So it did incentivize. I wanted to respond to that question. Yeah. Anyway, we obviously very much support it. There is a way to maneuver this between the governor's office and the legislature to tailor this as specified. We do support this for in state production at this point in time and to really help maintain and create jobs. Thank you.

Evan Giorcus on behalf of the Boeing Company in support of the SAF tax incentive proposal. We echo the sentiments of our airline partners and we appreciate the administration's administration's effort to provide an incentive to produce more staff in California. While Boeing is hard at work developing alternative technologies and each generation of planes is more fuel efficient than prior generations, SAF is the only pathway to zero emissions within the aviation sector, at least until 2050. Additionally, no replacement technologies currently exist to carry 150 passengers 1000 miles or more. And we look forward to contributing to the CARB and A4A working group to develop other efforts to expand the production and use of SAF in California to help reach our industry's goal of net zero by 2050.

madam Chair members. Mike Bellot speaking today for Delta Airlines and also Alaska. Not surprisingly, about saf, our message is simple. We have an obligation to do everything we can for the environment that's on the ground, in the air, and in the air. SAF is the answer. For now.

Thank you.

support of item number seven as well.

Thank you.

My name is April Hamilton, I live

the SAF program and I hope you will be too.

a resident of Walnut Creek, California in Contra Costa County.

SAF really is the only scalable path to decarbonizing aviation.

paying jobs and California's clean fuel future, which is exactly what the state has asked the industry to do. So I do support it and I hope that you will as well. Thank you.

This program helps support great jobs in

I respectfully ask for your support on this project.

Good afternoon. My name is Adrian Covert representing the Bay Area council and the 400 largest employers in the San Francisco Bay Area, speaking in strong support for item number seven, the Sustainable Aviation Fuel Incentive.

My name is Reuben Galvan. I'm a longtime resident of. I almost said Solana County. No, I'm a Contra Costa county, longtime resident there. I live in Pittsburgh. I worked since 2013, one of the refineries there. Not P66, but definitely have friends and family that work at P66.

This program helps support good jobs and

I respectfully ask for your support.

Hello Chair, members. My name is Jim Guffey. I lived in Fairfield in Solano County. I here today to support the Governor's Sustainable Aviation Fuel Incentive included in the budget. The program helps support local jobs, good paying local jobs California clean fuel futures. And I respectfully ask that you support it as well.

Good afternoon Madam Chair and members.

I'm a longtime resident of Contra Costa

I'm a proud member.

to work in the refinery industry to

I also have two brothers that have

one 35 years, raised families.

I just want to let you know that this is an area that is in great need of good wage paying jobs jobs. And so I. I am in favor

Thank you.

My name is Irida Arapichan and I'm here on behalf of the California Asphalt Pavement Association.

Aviation Fuel proposal which According to the LEO would steal as much as 3 billion over the next 10 years from funds that would be dedicated to repairing and fixing the roads. Our organization, along with others pushed hard to pass SB1 to secure road funding. And the legislator promised that the people would use that funding for repairing the roads. We strongly encourage you to reject this proposal and protect road funding and all the jobs that it creates. Thank you. Thank you.

My name is Mario Santa Cruz. I live in Stockton in the San Joaquin County. I'm a representative with mill Rice Local 102. I represent a lot of millwrights that work in the refinery industry. And I'm in support of the SAF Incentive and also also in support of the LCFS program.

Thank you.

I am a field representative of mail rights local 102 that represents represents thousands

in California and also work in these refineries.

the project, the SAF incentives, including in

Good afternoon Madam Chair.

State.

credit because it creates significant financial risk while delivering limited climate benefit.

diesel prices by 10 to 15 cents

tax revenues that fund road repairs.

costs are widely shared.

Thank you.

My name is Matt Kelly.

I am a member of Carpenters Local

Thank you.

Hello everybody.

I'm a field representative for 46 local 46 Carpenters and I am in support

Thank you.

Good afternoon, chair, members. My name is Alexander Hay Hampton. I am a member of Local 46 here in Sacramento and I strongly support the Governor's sustainable aviation fuel incentive included in the budget. Thank you very much.

Good afternoon everybody. My name is Richard Cruz, Carpenters union.

I applaud your guys endurance as well. Good on y'.

I just wanted to say that I standing here today in strong support of

I respectfully request your guys support as well.

Thank you.

My name is FA May Lampkins.

the union here and I am in

Thank you.

Thank you.

I'm a proud member of the UBC

of the staff incentives and I hope you guys will support it too.

Good afternoon Chair members. My name is Enoch Yalcopo, a resident

a member of a USW local 326. I come from a blue collar family

Good afternoon Chair and members of the board.

I live in Vacaville.

Sustainable aviation fuel is critical to reducing emissions in aviation and it works alongside the low carbon fuel standard, a proven program that drives investment innovation in cleaner fuels. I'm here to support the incentive.

Thank you.

Thank you.

Good afternoon.

member, 326 U.S. uSW. I'm support. I. I support the Governor SAF incentive plan. Sustainable aviation feels critical to reducing emissions in aviation and it works alongside the

fuels for work like. Like me.

It means keeping myself and my union brothers and sisters employed while building a cleaner future.

environment and our work workforce and I'm proud to stand behind it and I hope you guys do too. Thank you.

Hello, My name is Kevin Parish.

of the Governor's sustainable aviation fuel incentive.

SAF production in the state provides hundreds of good paying jobs for California families such as mine and strives toward a cleaner future as well. So I'd like to ask Your support in supporting the SAF initiative and continuing

Thank you.

Good afternoon, chair and members.

all to support the CEPH incentive and

Thank you.

aviation industry

Thank you again for your time.

Good afternoon, chair and members.

Let me tell you, I'm super proud to work there.

We've been transitioning, evolving, and we are

We've invested a lot of money and I'm asking that you help keep others

change or there may not be incentives there?

consider approving the governor's budget incentive plan

And we are very happy that we

And so I just want to say

Thank you.

I'm from Fairfield, California, Solano county.

clean and all that stuff and help

years, and my family depends on it and all that stuff.

things better, I'm here to support it.

Good afternoon, chair members.

I'm asking that you guys see if

You know, if you guys could support that, you will be supporting a clean future and also at the same time provides well paying jobs to help stimulate the economy. So I ask respectfully that you guys vote yes. Thank you.

Hi council, my name is Ronald Russell. I live in Sacramento, California and I work at the Phillips 66 and I support the Governor's SAF tax incentive and the LCFS program. Both are very important. Thank you.

Hello Chair and members. My name is Derek Henry. I'm a USW member, Local 326, retired Navy chief petty officer for 24 years and a resident of Fairfield, California. After serving my country for over two decades, I now work to support my family and the community through good paying union job. That's why I strongly support the Governor's SAF initiative. It strengthens our community, it strengthens our energy production and ensures renewable fuel manufacturing stays in California instead of moving it out of state. Sustainable aviation fuel is critical in reducing emissions in aviation. It works alongside lcfs, a proven program that drives investment in innovation and and cleaner fuels. I respectfully ask for your support for workers like me continuing conserving our community. Thank you so much.

Good afternoon council members. My name is Neil Jeanne Charles. I am a member of a local 46 here in Sacramento. I live in Rio Linda. Please don't laugh.

California has always led the way in renewable energy and I'm proud of California for that. As an avid hiker, I would like California to continue leading the way in supporting this saf in this incentive. I support it and I beg that you support this. And I pray that we continue showing the world, we continue leading the world in renewable energy. Thank you.

Good afternoon chair and members. My name is Michael Wilson and I live in the city of Vacaville in Solano County. I'm a proud member of Millwright's Local 102, a military veteran and more importantly a father of five. Our facility produces low carbon fuels today while supporting hundreds of good paying jobs. I'm here today to support the Governor's SAF incentive in the budget and lcfs and I ask that you support it too. My family depends on it. Thank you.

Shorter. Good afternoon Chair, committee members. My name is Derek Okafuji and I live in Stockton. No, I support the Governor Sustainable Aviation Fuel Incentive because this will support about 600 living wage jobs which was so desperately needed in the state. I am a proud member of the Millwright Local 102. I work at the Rodale facility that supports staff incentives and low carbon fuel standards and good local union jobs. The transition that we did at this plant was exactly what the state asked for. I ask that you support this. Thank you.

Good afternoon chair and committee members. My name is David Schoenthal. I live in the beauty beautiful city of Concord, California and I get the honor and privilege of working at the rodeo renewable energy complex put put into task by the by Phillips 66. I support the Governor's SAF tax incentive and LCFS program. Both are important to us and the state of California. I appreciate y' all have a great day.

Good afternoon. Good afternoon Madam Chair and members. Obed Franco here on behalf of Southwest Airlines regarding agenda item number seven. Southwest Airlines supports the Governor sustainable aviation fuel tax credit proposal and has already electrified 80% of its support equipment while also investing in more fuel efficient aircrafts. As as these efforts continue, SAF represents the next untapped emissions reduction opportunity that helps us and the state meet their shared climate goals. Thank you.

Good afternoon Madam Chair. Ted Wicker here, Fairfield, Solano County. I stand in support of LCF credits and the staff incentive. We've heard about jobs. I've been at that plant for 43 years now in the Union Oil of California days. The business adapts to the energy needs of California and this is what we're doing now. So when you hear about jobs, it's just not daily jobs, it's generational. The folks I worked with in the early 80s, they retired. Their sons and daughters are there. I am now working with the grandchildren of my original co workers. Please keep this alive. Thank you.

Good afternoon Madam chair and members. My name is Joe Jawad. I'M the USW Health and Safety representative at the renewal, or, excuse me, Rodeo Renewable Energy Complex. I'm also the United Steelworkers Local 326 president that, you know, our local has about 250 members that work at the Rodeo Renewable Energy Complex. We do the operations, the maintenance, the lab work needed to provide, you know, service to that, to that plant. And what I'm asking for you guys to support, as well as my support, is the LCFS program and the Sustainable Aviation Fuel Incentive help keep that, that plant alive. Also, I just. I just urge you guys, like I said, to support that. That's going to support jobs in the future for myself and all of our members. So thank you and appreciate your time. Have a good day.

I think roughly 80% of the public comment were residents of my own district in Solano County. I don't know who's operating the Sustainable Fuel center today because everyone seems to be here, but very much appreciate folks taking the time off of work and from family to be here and to give the message. There's a lot of. There's a lot of pain in our area with the Valeria situation and we can't take another hit. And it's very glad to see folks take the time to be here. And I know the chair is committed to this as well, so we will keep working on it. So thanks so much.