Budget Sub4 — 2026-04-16 (partial)

Thank you. The Senate budget and fiscal review subcommittee four will come to order. We welcome public comment on all agenda items at the conclusion of our hearing. But let's start by establishing a quorum. For purposes of establishing a quorum, Senator Hurtado. Present. Senator Nilo.

Senator Cabaldon.

The focus of today's hearing is departments and programs related to economic development in California. We will hear from the Governor's Office of Business and Economic Development. We will then hear from the Governor's Office of Land Use and Climate Innovation. Before we begin, Vice Chair Nilo, is there anything you'd like to say?

Okay. We appreciate you, Mr. Vice Chair. Senator Cabaldon and Senator Smallwood-Cuevas. Okay. Let's move to agenda item number one. To start us off today, we will be receiving program updates and conducting oversight regarding the programs at the Governor's Office of Business and Economic Development, also known as GO-Biz. We are pleased to have GO-Biz Director Dede Myers with us to begin, and Director Myers will provide an overview of GO-Biz and the package of budget requests that GO-Biz has put before us this year. She will also offer implementation updates on two recent additions to GO-Biz program portfolio. Director, please proceed.

Thank you for the presentation, Director. At this moment, we'll take any questions or comments from the Department of Finance. Penny? Thank you. And any questions or comments from the LAO? Thank you.

Okay. Questions or comments from committee members? Senator Smallwood-Cuevas?

Yeah, thank you for that question. First of all, we haven't started giving out money yet. So this is a new program, so we're taking some time to make sure we set it up thoughtfully. The makeup of the advisory council, which is in statute, has a seat for black media. Sorry, Derek, I mean, what's the organization? Sorry, I'll get it. There's a very specific seat for a black news organization and also for a Latino-facing news organization. So that's one. I mean, that was very much part of the mission of this was to make sure that underrepresented communities who are often underserved by news organizations are supported. The second thing is we, again, the focus on this is to make sure that communities that have been underserved get more resources. So we are trying to build guardrails around the money to make sure, again, that it goes into those to provide preferences for organizations that have been overlooked in the past. That's still a work in process, but we're probably going to put a ceiling on the amount of money any one news organization can get. and we're going to put a floor so that even the smallest news organizations, there will be certain requirements that they'll have to show to make sure that we're funding news organizations and not other maybe well-intentioned nonprofits or what have you. So that's in process. We chose the John B. McClatchy Foundation. It is a foundation. It was obviously funded by the McClatchy family. It's no longer associated with the broader company. But they have a lot of experience in this work, and one of the reasons we chose them, one of the things that we, it was a competitive process, But one of the things they put forward that we thought was really compelling was their ability to reach out. They have relationships with news organizations, smaller news organizations. They've done grant distribution so they know how to reach those smaller organizations to make sure that they know there's an opportunity to apply. And then to provide the technical assistance so that those smaller serving operations that don't have resources dedicated to doing things like filling out grant applications will have the resources to do it. So that's very much top of mind. That's top of mind of the council, and it's a big focus of the work that we're doing.

Yeah, we do want to move as quickly as we can do so responsibly. so we're hoping that we'll be able to set some of the program guidelines by our May board meeting and then open the grant process in July and provide technical assistance and then be able to award the grants by early fall Thank you for that And then my other question has to do with California brand You know I sit on the Senate Oversight Committee for the Olympics and large sporting events

Yeah, so to the first part of your question about funding, the $20 million was allocated by the legislature, and it originally went into the fund that funds Visit California. Visit California is almost totally funded by an excise tax on tourism industries rental cars hotels restaurants And so they really kind of a public mostly private entity I on the executive committee of Visit California I think Executive California and their leader CEO Carolyn Boteta have done a fantastic job generally and I think will continue to do so. The $20 million was, I think the intention of it was a little bit broader than the sort of the tourism driving kind of work that California, that Visit California does so well, unlike the best destination marketing organization in the country for sure. I think the intention was a little bit more to not only to drive tourism, but to make sure that we're focusing on the narrative of the broader business and economic development work that needs to be done here, making sure that all the great work that you're doing and that we're doing together doesn't get distorted by disinformation, misinformation, and lies that are out there. And so slightly different purposes, and we're going to build the strategic campaign with the partner. We, again, are continuing to work through that process. We hope to have it done soon, and we hope to be able to move as quickly as we can because we can't afford to waste any more time letting untruths, half-truths, mistruths, intentional lies sit out there. So, again, slightly different than driving tourism. That said, we want to make sure that we lift up all the opportunities in California through this campaign and that we talk about the narrative, you know, inclusion is kind of at the heart of everything that we do. And so how can we make sure that we're telling the story of California in a way that lifts up all the different opportunities? So we will be working with our partner on that. We're definitely interested in that. We think, again, there's so many under just we just haven't talked enough about some of the places where investment could really, you know, be a win-win situation for the communities as well as for the businesses and job creators that want to come. And so happy to share more of that as we go forward if that's ever helpful, but it's definitely part of our strategic thinking. I hope that we can do more.

Yeah, and I hope that's something that we can work with on the Visit California side as well. Looking forward to working with you on that.

Thank you, Senator. Any other questions? Senator Cabaldon?

Right. You know, obviously, the first of the three buckets you talked about is job creation, right, because that is the foundation of our work. The others are also equally important. So if you look at incentives like jobs, I mean, the CalCompetes credit, right, that is contingent on creating a specific number of jobs that a company commits to in a specific, and there are benchmarks that those jobs have to meet. They have to be, they have to have benefits. They have to, you know, it's not a race to the bottom. So that's, so a lot of our incentives, and we have the employment training panel and some of the other incentives that are part of this broader program of conversation are in fact focused on and require job creation. There are industries increasingly that are becoming more automated. This is definitely a concern, and we hear a lot about it from our labor partners as well. One of the things we try to just look at and think about is what are the supply chains, what are the other ancillary benefits of some of these industries, right? So I was just at the space symposium in Colorado because our space industry is growing so fast, and we had a chance to talk with a company like Lockheed Martin that was a big part of the Artemis space project. We said we had 500 California companies had been engaged in that. He said he thought there were 7,500 who supplied Lockheed Martin's work on the Orion capsule alone. And so those are some of the kind of things we try to think about and incorporate. What are the ancillary benefits? And those are a lot of small businesses that create jobs in our local communities and are the spine of our local communities. But I think more broadly, we do need to constantly be conscious of that. Are these the kinds, and to your point, we've talked about shipbuilding opportunities, because those are, some of that can be automated, but a lot of that just brings good family-supporting kinds of manufacturing jobs back to California, which is a big focus of us. How do we make sure that we're doing what we can, creating opportunities and incentives for those kinds of jobs to locate here in California? So does that answer your question?

That is a big part in why we work so closely with the labor agency, right? Because one of the things we know is that particularly in some of these higher quality jobs, these manufacturing jobs, there's a lot of competition. And other states are on to like the value that California provides and they want those jobs and they providing a lot of incentives But one of the things we have is we have a really great workforce but we need more Right and we know that if we can provide a really good pool of not just four year degrees or PhDs of which we have more, we have more engineers and more PhDs and more Nobel laureates than any place in the country. But what about the technician level? What about those good two year or certificate kinds of programs that can train people for career track, family supporting jobs all over the state and help us continue to attract the businesses that we want here? They're high road businesses that pay a living wage, that manufacture things that we need and the country needs that will continue to drive our leadership. So we think about that a lot. We partner with the labor agency and others and industry. Industry we talk to a lot and even in these priority sectors, one of the conversations we have is, okay, what are the skills you need and how can we work together with our community colleges and other partners to make sure we're doing everything we can to drive the training that will, again, provide the qualified workforce that will allow us to continue to build.

Yeah, I would put it in the strength and sector, you know, just kind of in our ag production, food processing kind of just generally. But it also fits, and the California folks are very aware of the value of that as a brand-supporting, world-leading industry, but also something that's unique to us and very important to protect. I mean, the demand side is a big part of the problem, right?

Thank you. Mr. Vice Chair?

Yeah, there are a lot. I think people have tried to malign California using distorted facts that simply don't hold up. So I'll give you an example. I'm sure all of you have heard about how people are fleeing California. People are leaving in droves and record numbers of people leaving the state can't get out fast enough. Well, according to the U.S. Census Bureau in their 2024 report, California has the fourth lowest on a per capita basis of people leaving the state. It's just not true. People who are here are staying because they're part of the community. They like living here and they can be successful here. So that's one example of the kind of misinformation that's, I think, intentionally put forward to distort what's happening here. People say businesses are fleeing. Some businesses leave, but you may have all seen the PPIC report recently. They leave, but they don't take jobs with them. I mean, Tesla's a perfect example. It relocated to Texas, didn't take any employees with it, in fact, grew employee base here in California, and then came back, Elon Musk came back a year later to create a second headquarters in Palo Alto for all their R robotics driverless applications things like that because they couldn get the workforce in Texas that they needed You never hear about that You never hear about the fact that we have, we create more businesses, more small businesses in California every year. We have more unicorns than any state, any place else in the world. Those are startup companies worth more than a billion dollars. 62% of venture capital that went to American companies last year went to California companies because the kind of creative, innovative culture here is like no place else. We have more Fortune 500 companies than any state in the country. And so those are just some of the facts that you don't hear about that I think tell a much more complete picture of California. We were just with a startup company in the space industry who's based in Los Angeles County and he said there's no place in the country with a technician workforce like Los Angeles County. You just don't hear those kinds of things. So we want to make sure, not just because we're proud of our state and we're proud of the brand that we've built, but because it's important to our economy that our job creators, that the business leaders and decision makers around the country have a clear picture of the benefits of being here. There's some challenges, Senator. I would not dispute that, and we could talk about that anytime if you'd like. But the benefits are real and they're large, and it's important that we protect that because we want people to come here. We welcome them to come here. Bring your ideas. Bring your new industries. Invest. Bring parts. You know, you want your supply chain. We have 40 million people here. People want to be here because we have an incredible consumer base. So for all those reasons, we want to push back against the misinformation and the distortions that I think have tarnished our brand. And we're not going to take it anymore.

I very much agree with really everything, many of the things, almost everything you just said, Senator, almost everything. I don't want to box myself.

That would be troubling for both of us. But the California brand campaign is not intended to stop debate or conversation. We are very, we worked really hard to try to work with our private sector partners to help understand what are the biggest obstacles to investment in job growth. We know that they're the job creators. We're not the job creators. We want to be the job supporters. And so to do that, we have to really have honest conversations. We know that sometimes the regulatory environment is challenging. We're trying to streamline that by things like making it easier to build. We're trying to accelerate the time to permits. We're going to work with local governments on creating a permitting academy so that we can help them, we can help share best practices that we've learned and help them share best practices with each other so that we can accelerate, you know, move these things at the time cost of money we know can be challenging here. So it's not in any way to say we don't recognize the challenges that we face and we're not trying to focus on them, whether it's, you know, having a skilled workforce or having a regulatory environment that makes it too challenging. I'd be interested to talk to you more about adding how do we make sure we consider the cost to business of certain regulations.

I'd be delighted to have that conversation with you. We're working really hard in places to how do we bring these jobs back, and that forces us to have those conversations with our private sector companies who say we want to be here, but we have these challenges. So we really want them to come, so we have to solve those problems, not ignore them. I agree with that. Over to Moore. Yeah. Thanks. Well, thank you, Director. I appreciate it. I know you had a hard stop, so I will try to make my questions quick. But I appreciate you taking the time to answer everybody's questions here today. I kind of want to build off a little bit of the California brand campaign. And specifically, I mean, I appreciate the answer that you've provided. And really to help me understand what exactly it entails. I don't necessarily disagree with you that there is a need to improve the image of California. I also don't disagree with my colleague, with our vice chair, in terms of what else we need to do to improve the business environment for businesses to stay. but I guess I also wanted to mention that we have seen other states play a role in the state of California trying to lure businesses to those states through billboards, through ads. Do you see this California brand campaign as something similar in addition to adding that kind of component or is that separate? It's going to be nationally focused and we're still building it so But, yeah, I wouldn't rule that out, that we would have some kind of activation that might do something that would both advertise the benefits of relocating to California in another state or, you know, trying to, you know, as you do in a brand campaign, you try to do some things that are, you know, focused and some things that are attention grabbing. And it will be a combination of things in that line. But we wouldn't – we do that all the time. You know, we try to attract companies to be here. It's one of the things that the CalCompetes tax credit is for. It's for companies that are either that want to expand and grow. Either they want to move to California or they are thinking about moving out of California. We want to keep them here. So the answer is yes. And other states, Pennsylvania, Michigan, others have done similar kinds of campaigns. States like Texas and Florida have come here and tried to do stunts to try to attract businesses away. We don't want anyone to leave. So we try to fight that. But I wouldn't rule out any tactics like that. I mean, I wouldn't say the, I mean, I think it's more, we're trying to change the narrative and to try to really communicate with decision makers around the country. So I don't think it'll be focused necessarily on one particular state and stealing businesses from them. But I wouldn't rule out that there'd be some component of it that's got a little bit of that in it. Do you think the brand campaign would probably help with? Yeah, oh, for sure. I mean, that's our goal. And I think it will. I think correcting the misinformation and reminding people all the advantages of doing business here will be really helpful. I mean, people forget that we have a really strong supply chain. Our ports in LA and Long Beach and Oakland, we do 40% of the country's imports and a third of the exports. And those are all things that go into business. The proximity to the innovative capital of the world in both northern and southern California, Those are the kinds of things that are really important for business success, being in the middle of the ecosystem, right? Being where they have more access to capital, being where there's skilled workforce. You know, our higher education system is second to none, and it is the foundation, I think, of our economic success. So, yes, to all of the above. Okay, well, and then the last question I had is over, in the last four years, we've seen a significant increase in funds under GoBiz. What would you say are the top five areas of concentration of these funds? Well, just in no particular order. Obviously, we had a big increase in the film tax credit, which we see early signs of success. So we'll be watching that space, but we feel good about how it's going so far. We obviously had money through what's now called the Jobs First Program, was originally the Community Economic Resilience Fund. And so that's been a big addition to our budget, and one we think that has been really, really helpful. Really pleased with what we've been able to do with that. What are the other big areas of increase? We've had some increases in our international affairs and trade group, which we think is important, again, given California's proximity in the world. We've had programs that we've worked with you all on, including the California media fund, just new things that are new in our portfolio, but that we think are additive to the work that we do. So the California media fund, the brand campaign sort of fits into that as we see budget gross there. We've had just increase in staff again, which one of the things we're asking for today is more staff for the film commission to be able to do its work. We doubled the size of the program but didn provide additional analysts and staff for them to manage the big spike in application so I think that important We added a couple of other functions We added our innovative industries work It's not, well, it's a different position. So we've gotten some new funding around that. We're asking for more today because we want to take advantage of all the things that California has to offer. So those are some of the things I know that are top front and center for us. And we want to additionally have the resources to continue to do the work that you all have tasked us to do. Well, we appreciate your time today for answering all of our questions.

I would just say thank you for giving us the opportunity to share what we're working on with you. We look forward to continuing that. Please reach out to me at any time if you have additional questions or want to talk through something. Collaborate together, I hope, and just really think I'm very bullish on California's future. I know we have challenges, and part of that bullishness is, I think, our commitment to solving them. So thank you.

So good morning, Chair Taddo and members of the committee. My name is Claire Whitmer. I'm Deputy Director of the California Office of the Small Business Advocate. And I will be presenting on behalf of our office today our Director, Emily Bermejo. I extend her apologies for not being present today, but she had a previous commitment that couldn't be rescheduled.

I will do so.

Oh, no, you can go ahead if that makes more sense.

And then I'll step in after you. So OSBA's mission is to represent and elevate the voices of California's 4.3 million small business owners, the largest small business community in the country. And we do that in four core ways. We administer grant programs that are assigned to us by the legislature or by the governor's office. We curate fund and oversee a network of small business support centers across the state which we call SCALE Success Capital Access and Leadership for Entrepreneurs We work to increase the pipeline of loans and capital access for small business owners and we support the resiliency of our small business owners after natural disasters and other business interruptions through business resiliency training. And today I'm going to report on some economic outcomes of three of our programs that we have administered this year, starting with California RISE. And we are currently implementing a version 2.0 of this program. Today I'll summarize the outcomes of the inaugural cohort of the California Regional Initiative for Social Enterprises, which is what RISE stands for. It is the first statewide program of its kind in the country. We had a total appropriation for this inaugural cohort of $25 million, and we deployed $16.9 million of that in grants to 61 recipients across the state. Grant amounts ranged from $150,000 to $500,000, based on revenue ranges from under $2 million to over $5 million. Now, these recipients include nonprofits and for-profit businesses, but they all meet the criteria of employment social enterprises, and that is organizations that reinvest all of their earned income into jobs, training, or support for individuals facing barriers to employment. Now, California RISE is designed in that way to support workforce inclusion, but also to support business development of these organizations, these recipient organizations. And that approach is reflected in the outcomes. For example, 46 of the 61 increased their earned revenue over the course of the two-year program. 20 ESEs reported revenue growth that exceeded 50%. 36 of them secured new public sector contracts or grants, and 42 expanded their business in some way, a new location, a new product or service. So in four years, from 2021 to 2025, these 61 grant recipients collectively employed 14,301 individuals with barriers to employment, and 3,887 of these were new employees hired during the course of the program. So the program helps create new jobs for people from a wide variety of lived experiences looking for a second chance opportunity. It does that, yes, but it also supports through $6 million in technical assistance, the growth and scalability of these organizations themselves. themselves. So it expands their capacity to support and create those jobs beyond the performance period of the grant. It also creates awareness of that ESE model and helps make sure the ESCs are set up for success in California. So now we have a second round of funding, $17 million, and we have already executed a grant agreement with Redefine Alliance, formerly Rediff, and Greg will speak to that. And our project plan calls for the grant portal to open this summer. My team's current task is finding and naming a third-party administrator who will do the grant-making component, and that RFP closes April 23rd. So Greg will speak more to this but we are expecting a maximum grant size of for eligible ESEs for new grants But we also learned some things and version 2 will incorporate two new lanes of services Continuing services for the original 61 and an incubator program for organizations looking to become ESEs. So moving on to Performing Arts Equitable Payroll Fund. And I'm very happy today to report that as of this week, the State Comptroller's Office has now issued checks to all 100 recipients of the $11.6 million in payroll reimbursement funding. So this program works by looking at actual payrolls, representing specific payroll employees, and reimbursing the organizations for the expenses that they represent. So these 100 awardees represent a cross-section of California's artistic community with budgets ranging from $45,000 to $1.9 million. Our grant awards ranged from $11,471 to $296,295. That was the largest grant. The average award size was $124,000. So they reached organizations in 29 Senate districts, 42 Assembly districts, and they supported 4,700 production jobs. That's people directly involved in producing and performing productions. But it also supported an additional 7,406 downstream jobs. Think about ticket sellers or concession workers. So importantly, 46 of the grants went to organizations with annual revenue of less than $500,000. That was deliberate, and it was part of the program design. The grant formula was intentionally weighted to make sure that the smallest groups received the highest percentage of the grants because we wanted to have this grant money have the most impact on the organizations that received it. The committee members are rightly interested in knowing how this sector is faring now, the performing arts sector. And the honest answer is that the performing arts sector's COVID recovery is incomplete and fragile. California's performing arts sector grew at twice the rate of the broader economy between 2009 and 2019. And as we know, the pandemic erased all of that growth within a few weeks. So most recent data indicates that we are still below those pre-COVID and 19 baselines. Ticket revenue is recovering because the big shows have higher ticket fees. But that middle sector of ticket costs have not recovered and subscriptions, which a lot of organizations depend on, remain 30 percent below pre-pandemic levels. And many performing arts organizations just didn't survive. The San Francisco Chronicle has reported that 25 percent of Bay Area theater companies have permanently closed. So to speak on behalf of the recipients of the deployed funds, I'll quote from a thank you letter sent to California for the Arts and shared with us that said, the Performing Arts Equitable Payroll Fund grant from the state of California has made a meaningful difference for a ferry hunt. It is helping to support the payroll of the ten artists and staff who bring our magical performances to life. Since 2020, a ferry hunt has been struggling financially to stay open. This grant will help ensure that our small nonprofit can continue providing meaningful arts employment. And that is signed My Fairy Best from Debbie Rothstein, the producer of A Fairy Hunt, which is named the best children's theater in Los Angeles. So lessons that we learned from this program. So the eligibility requirements were very prescriptive and specifically designed in statue. So we learned a lot about how to implement those and support the statute. And because of the scaled down appropriation from the original ask, we made a deliberate choice to favor grants over administrative fees. And although our intent was good in that decision, it is fair to argue that it did prolong the timeline of our ability to deploy the grants. So verifying payroll data is very labor intensive compared to income tax data, for example, and we did learn a lot about how to do that. On the other hand, I will say a good thing that we learned is that the partnership with a public-facing organization that really enjoys the established trust of the arts community was a very good choice because it allowed us to keep that channel of communication open, even though the timeline of the program was delayed. I'll move on to our flagship program for technical assistance, which is the technical assistance program. Also, SIPP, the capital infusion program. So I'll just start by summarizing the economic impacts of the 24-25 tap year. We have a lot of data on this, so I'm only going to hit some highlights. I'm happy to provide more complete reporting if the committee would like that. So this is only a subset of the metrics we collect. Over seven program years since TAPE, now known as TAP, was created, we have supported more than 853,000 businesses. In this past year, unique businesses supported were 112,016. That included 3,788 brand new business starts. And just to speak to capital, we were able to support $54,748,000 in loans being landed with those businesses, as well as $432,000,000 in equity capital. So to just mention briefly demographic metrics, of those 112,000 businesses, 33,000 were owned by women, 36,000 are owned by minority small business owners, 3,000 owned by veteran businesses, 6,000 in rural communities, and 11,932 in low wealth communities. So we do feel that we are serving our mission of providing services to underserved business communities across the state. So SIPP, the Capital Infusion Program, is only a fraction of that funding, $23 million for TAP, $3 million for SIPP. And it is reserved exclusively for the five regional SBDC networks. So again, I can provide a breakdown by region of the outcomes of those, but they are additive and similar to what I've just quoted for TAP. So just to humanize these numbers a little bit, we worked hard this past year on expanding our database of small business success stories which I would invite you to peruse from the homepage of our website And I happy to say that there are examples from all four of your districts of a wide variety of businesses who have been reached and supported by the services that I've described here. So these stories include a bakery, but they also include a company that supports EV infrastructure, and an on-demand transportation company for low-income communities. So I believe that the subcommittee is interested in hearing about our capacity to meet the demand for federal drawdown. It is a hard thing for me to calculate, but I will say that when the Trump administration took office, We did calculate the amount of federal match that is represented by that $23 million of state funding meets $56 million in matching federal funding. And the bulk of that is from the SBA, yes, but also from the Departments of Transportation, Commerce, Department of Defense, et cetera. So there is a significant multiplier effect associated with TAP and SIP and that it allows these organizations to stack their funding. TAP represents the scale program, represents the large federal centers, and you'll hear from the SBDC shortly, but also represents nonprofits, chambers of commerce, economic development organizations across the state. And we are deliberately recruiting new organizations every year to meet demands that we observe, needs that we observe. I know that our centers are doing a lot right now, for example, to provide training about how to mitigate the impact of tariffs, which have obviously had a very detrimental effect on California's small businesses and small businesses across the state. We've also deliberately recruited CDFIs to our network, and that is to make sure that we are increasing that pipeline of loans, which became very significant this year when the SBA decided that they would restrict SBA loans from green card holders. But we have direct relationships with lending institutions that will provide loans to those small businesses. Likewise, again, in anticipation of some of these restrictions at the federal level, we have recruited new members of the TAP network to speak directly to businesses owned by immigrants and their employees. For example, Immigrants Rising and Public Council are new recipients of TAP funding this year. And we did put specific questions into our program announcement in order to attract those partners. So we think that there are myriad ways that we support California's small businesses, and you'll hear from some of our program partners on these three programs that I've just summarized. Thank you.

I think that's right, Julie.

And Greg, I'll pass to you.

Okay, Greg.

Good morning. I'm Susie Pryor. I am the regional director of the Central California Small Business Development Center Network. The Central California Network is one of five across the state. I thank you for the opportunity to talk to you just a little bit about what the SBDC does, what our women's business centers do, the roles we play in economic development in the state, and I want to make a couple of comments supporting the earlier remarks, particularly from the deputy director, about the importance of the TAP and SIP programs. My journey with the SBDC started as a small business owner. I walked into a small business development center and asked for help. As a result, over the last 30 years, I've started 10 small businesses, And my story is not that unique. So this is what we see with clients. If we can seed success early, we see multiple entrepreneurial ventures. Some of the names that strike us in the SBDC network are places like Elf on the Shelf and Spanx and Under Armour and California's own Santa Cruz Guitar Company. These are companies that are best in class. And what makes them so unique and what made my first early successes unique was that critical early guidance from professionals that actually know how to operate a successful small business and grow one I hope today just to humanize a little bit about how we do business and why we are so critically important. I hear frequently comments in settings like this where we talk about and brag about and should brag about California having the fourth or fifth largest economy in the world and I always wish they would just add and 99.8% of those businesses fueling this economy are small businesses because that is the case. As Claire mentioned, 4.3 million firms in California, they employ 7 million workers, account for more than 50% of private sector jobs and 90% of exporters. So small businesses, we know, underpin this economy. That holds true of all of the top five economies in the world. This is the secret sauce, right? It is small business development. Over the past three years, the California SBDCs have helped create more than 10,000 new businesses and supported over $4 billion in capital access for small businesses statewide. Oh, I might actually have a slide. I just have tiny numbers, tiny numbers. I'm going to try not to spend a lot of my time on numbers, even though I did put them on my slides. And we've also assisted nearly 130,000 businesses and touched over 415,000 jobs in this state. So with WBCs, our system reaches tens of thousands of entrepreneurs annually. And for those of you not familiar with our services, it's generally one-on-one counseling coupled with efficiencies gained through cohorts and training programming. Our client base closely reflects the demographic makeup of the state. More than 60% of SBDC clients are people of color, and more than half are women-owned businesses. We provide advising in 21 languages, ensuring that access to expertise is not limited by background, geography, or experience. The Central Valley, where I live, is one of the most productive agricultural regions in the world. It's also home to small manufacturers, logistics firms, food processors, and family-owned businesses. businesses like 68 Proteus in Salinas and Medima in Modesto and Garcia Brothers Trucking in La Grande. My organization helps these businesses modernize, access capital, meet supply chain challenges, and position for long-term growth. For many, the hardest part of this journey is what we call the valley of death, right? That's that period between a great idea and a sustainable business. And when resources are thin and margin of error is really small. We help companies navigate that moment, and those who are particularly strong cross the chasm into broader markets and long-term viability. That's why you see the type of innovation you see in California. It's extraordinary in this state. I want to make two other short points.

Thank you. We had some discussion of barriers, overcoming barriers to employment. I'd just like to point out that the ultimate barrier to employment is low educational achievement. Any organization involved in economic development should be vitally interested in the quality, particularly of K through 12 education. And the unfortunate fact is in California, our achievement in our K through 12 systems generally is not very good. And it is particularly bad in areas where there is the most potential for upward economic movement, disadvantaged areas and in particular black and brown kids, and we're failing them. Again, anybody interested in economic development should be vitally interested in that. I realize that's not your official charge, but it is subpar and it seems to be getting worse. But back to the issue of stimulating employment, if an incentive for two businesses for employing people is significant enough, it will result almost always in additional employment. That isn't the issue. The issue is how sustainable it is. Do you have data that tracks the continued employment of people who are initially employed based upon an incentive program two, three, four, five, six years later?

Yes, thank you for your question, Senator. And I know that Greg can speak from previous studies. So, Redefine has done a number of different studies, one with Mathematica, which was an RCT. We also have worked with EDD to get base wage data to see the longitudinal impact of employment social enterprises. So not related directly to California Rise, but just the employment social enterprise model and the effectiveness. And some of the data points that we found is that there were seven years of job retention after an individual left an employment social enterprise into their next phase of their career, whether that's private sector, nonprofit, whatever that may be. And then to your point, our intention is because the program was only 15 months long and data was lagging, Our goal is for 2.0 to build in some of those, to continue some of those partnerships, either with EDD or others, California Policy Lab, et cetera, where we could start to extrapolate and start to get some of that longitudinal data on wage growth, retention, recidivism, et cetera. I would appreciate it if you could get that information to me.

I'd like to see it. We also have, I didn't share it today, we're waiting for some final approvals. We have an 80-page evaluation that we did for our CA Rise 1.0. That doesn't go into all those, but you can look at some of the key KPIs that we had that we measured for the program and just kind of explore all of that as well. Okay, thank you.

Thank you, and thank you so much for that thorough overview. Can you all hear me okay? My mic is not been well. I'm going to borrow his mic, too. That way I'll double it. I really appreciated the information, and I feel like every legislator should have those first two paragraphs that you read through in terms of the impact and significance of small business. I don't think we understand that enough, you know, as we are looking for the big, you know, mammoth firm to come and invest and to create, you know, thousands of jobs. it is the aggregate of these smaller businesses that make the difference so really appreciate that and thank you for shouting out South LA Cafe my favorite coffee shop and that brings me to my question particularly about well I have two questions on the on the tap program so there are certain savvy business owners who do and have capacity to do good research, to have connections, who have the wherewithal to go through the process. How are you reaching those different small businesses that are at different capacity? I mean, South LA Cafe was just an idea and it really struggled and struggled and struggled, but now the owners are just these really amazing entrepreneurs that are so community grounded. But it takes time to get there. And sometimes that valley of death, is that what it was called? Folks don't make it. So I'm just curious, how are you reaching these businesses? And is there sort of a scaffolding or a tiering of how, what kinds of services that they get? And I'm particularly thinking about, you know, there's a business, Napoli Naturals, For example, great, great shop, just very quaint, homemade soaps and oils. They want to open a manufacturing company, right? And so it's like how do you go from that to take that next step? And how do you support them in their different stages of development?

I'd love to help get some of the marketing. Love to talk to you more about that. We can do more of that, but I appreciate the hands-on because I think that is a big part of this. helping with that relationship and building that confidence to move forward. My other questions are about the equitable payroll fund. And in the previous panel, I talked a lot about our cultural district. We have about 4,000 cultural assets, which are essentially small businesses, whether it's dance, music, arts programs in our district. And this is one of the areas that has become a vital resource And so I curious if the state had been in a position to fund all of the eligible applicants because quite a few, it closed, like, as soon as it opened, it was closed, and people were like, wait, we didn't even get a chance. Approximately how much funding would have been needed to meet that demand?

So based on that first round, are there any statutory or programmatic changes that you would make to that implementation to make it more efficient, more timely? Certainly we need more resources, but is there anything in the implementation that could help us eke out more resources that could help us go further?

I appreciate my ad, Senator.

So thank you very much for that overview and looking forward to connecting with you on some of the local TAP opportunities in my district. Thank you.

My name is Lauren Greenwood and I serve as the Senior Legislative and External Deputy for GO-Biz. Our California Film Commission under GO-Biz requests $472,000 general fund to support three permanent positions in the 26-27 and $472,000 general fund ongoing to support the expansion and modernization of the California Film and Television Tax Credit Program, made possible by the legislature and the administration last year. As detailed in the BCP, these positions include one motion picture production analyst who will assist in reviewing applications for the film tax credit program, one analyst, two, who will assist in implementing the new DEIA provisions in program 4.0, one research data specialist who will support in tracking, collecting, and analyzing data in the tax credit program. And then I'd like to introduce Leah Medrano, deputy director of the film and tax credit program for the film commission. We both are available for any questions. Thanks for the opportunity to present.

Rowan Isaacs, LAO. Yeah, given the increase in the size of the program as well as AB 1138, which increased the program's generosity and expanded it to a wider range of applicants, we think this is definitely a valid request and we recommend approving it.

So, thank you for that, for the update, and we worked really hard on the film tax credit, and when I say we worked really hard on it, we worked to make sure that we keep the jobs here in California, that we are competitive with other states in an industry that we created. And at the same time we wanted to make sure that we understood how all Californians could get access to the opportunity created by our tax dollars I did a bill in particular that looked at the tracking mechanisms that could be put in place and making sure that we had some data and transparency to understand who was being hired, where were they being hired from, and whether the public subsidies was expanding the opportunity. How are you all ensuring that our efforts, and particularly our efforts around the inclusion, both geographic, gender, racial, how are we making sure that those efforts are tied not just to the goals but to real outcomes? and where are you measuring them and are you looking at, will we be able to see trends in terms of disparities? Absolutely.

and then Leah or I are happy to go into the data that the commission's tracking. Good afternoon and thank you for that question. Senator Smallwood Cuevas. We, as Lauren had mentioned, we post our demographic information available on our website. Even though the numbers may not be where we would want them to be at the moment, we are cognizant of that information. However, we are very grateful to the efforts of the legislature, making sure that we have specific information about what are the accountability measures that approve projects receiving the tax incentives are doing in terms of demographic reporting. So at the moment, we had approved about 147 productions, and we are seeing a positive response in terms of productions opting into the new diversity provisions. And to date, we have about 90% of the productions opting into the diversity provisions. And with that specific provision opting into the program, We want to make sure that these productions are giving specific information on their best practices, inclusive hiring, equity education, what are the industry capacity building that they are providing when they are writing up these work plans and the interim assessments, and also the supplier diversity information that they would include in the work plans. And are we able to see the career pathway for those individuals who are in this data? Yeah, that's the outcome I'm also very curious about.

So as you probably remember, the film tax credit projects have to contribute to career pathways and career readiness programs. And career pathways provides apprenticeship training opportunities for those from underserved areas. And I believe we worked with your office, among some others, in 2024 to increase the reporting on the career pathways program. And so this includes trends and participation from our participants where the students are employed in California if they're working in another state. Aggregated, self-reported, and voluntarily provided ethnic, racial, gender, disability status of individuals. And to the extent that information is available, we'll be tracking this over five years. And then we're also including uplifts for projects that up to 2% of the initial credit amount for projects that employ trainees from a career pathways program. So I think you know career pathways are in round two program 4 The first awards are announced August 27th of 2025 Productions have 180 days to start principal photography so we're still in the process of kind of gathering this information, but we'll have a report on the work plans as well as Career Pathways in 2027, so next year.

Yeah, thank you for the question. I can't remember if it's June or July of 2027, so we'll have that major summary of career pathways ways, and then some of the additional data like data points like zip codes, veteran status, which thank you for helping us kind of think through how do we be more inclusive in our reporting and data tracking along with set safety and other program metrics in terms of program performance. Great.

So in terms of apprenticeship, we are working closely with the California Department of Education. The apprenticeship program is one of the ideas that we have to include in the permanent regulations process as part of the career readiness program. Currently, we have five different options in our career readiness. productions are able to hire an intern, and these interns are paid, and they must perform at least 300 hours for the production. And they could also have teachers visit the set and provide professional skills tour and or do a panel. For these types of engagements, we do have a minimum eight hours to make sure that the individuals are gaining a full day experience and not just a two-hour. set visit. But Senator, I wanted to go back to your initial question about the actual numbers for Career Pathways. Since that program started back in 3.0, we've had 830 total participants under that program and productions have contributed 8.1 million dollars in order to fund these training programs that we currently currently have and out of those those are 329 projects that have contributed to support those organizations. Is that part of that 90%? Is that like a majority?

All productions that are a part of the program are in the internship or in the apprenticeship program, pathways program.

Well, I have a question for LAO. You probably knew this was coming. Last year when we considered this item in a budget committee, you had some things to say that I believed was quite relevant, but no comments today.

just for the department to have additional resources to review all those applications that are coming in. What we don't want to see is them not having the manpower to actually thoroughly assess those applications and maybe make worse decisions on who should get those credits conditional on the size of the program being increased but like you mentioned we did make some comments about the proposal to increase the size of the program in itself But those notwithstanding, we think given that the legislature did vote to increase the size of the program, then this additional staffing is justified. Thank you. I will point out you were somewhat taken to task for those comments. And there have been times when I have disagreed with the LAO, but I don't take you to task for it because you do what you're paid to do. In this case, I just happened to agree with the comments that you made back then. The problem with this program, there's several problems. One is it's fleeting. We're providing incentives for a very limited period of time, a production. And to provide incentives for, as an example, manufacturing facilities make much more sense because once they're established, they stay. They're not fleeting. And we've talked about maintaining the industry here, and I understand the desire for that. We feel that this is sort of part of our protective existence. Hollywood is here. That's film production. But I fear that that's a bit of nostalgic aspirations, actually. The Wall Street Journal wrote an article about this and it said, it turns out that bribing studios with taxpayer dollars isn't a strategy to create a healthy industry. It's a way to be out bribed. It's kind of a race to the bottom. We offer tax credits and Georgia undercuts us. That's why I say it's fleeting. And in particular, the state of Georgia hemorrhages money on this credit, and that's who we're competing with. Auditors estimated that every dollar the state awarded studios, $5.2 billion between 2015 and 2022, again, that's our competition, It returned only 19 cents in tax revenue and 81% loss. Again, it's fleeting. It's a race to the bottom. And I realize we want to maintain the industry, but at what cost? So I realize I'm in a super, super minority on this. I was the only no vote on the floor on this. But I believe that personally that my arguments are much more persuasive relative to the advisability of this tax credit. We're just going to be undercut. I think we don't have any other questions or comments. So our chair has left me in charge, which is— The only thing I would add, Senator Nilo, is just, you know, this is also about making sure that Californians continue to work. And I think that part of this, a good part of this effort is not to be nostalgic, is to make sure the current workforce remains in California, because it's significant not just to Los Angeles, but to the entire state. And so, you know, I think we have over 3 million folks that are working in this sector, in this industry. There's a whole supply chain around it, and every, I would say, part of the state participates. and benefits from it. And so I think it's still hundreds of billions of dollars in terms of what gets produced by the film and television industry, and California does benefit from it. Is it restructuring? Yes. Do we have to figure out how we keep it here? Yes. I think the legislature all agreed on that, and I think it's important for us to keep Californians working. I just wanted to add that because I don't think it's a sentimental endeavor. I think it's one in which we are wanting to make sure that California continues to work and work strong in this sector. I am quite mindful that I lost the debate. And I agree with you principally with regard to the maintenance and development of job opportunities. But sometimes industries restructure and you need to look perhaps elsewhere and there has to be a return on the investment. And I just believe in this case, as I said, it's a race to the bottom. Our competition is willing to keep on undercutting us and that'll continue to happen. We'll go back and forth on that. So I would suggest we put the money perhaps in other areas that would produce more sustained job development with a better return. Senator Cabaldon, I can see your itching to utilize your microphone. Itching is probably, I'm more like LAO on this one. I'm not sure how much of a super minority you are in, but I think we're making a big deal out of one analyst, two, one research analyst, one, and one motion picture production analyst. That's all we have before us today. That battle on the underlying tax credit is done. We do want to make sure it's administered appropriately, that the law is followed, and that with the resources that we have that we outsmart Georgia at every possible turn given those dollars. So I support this particular item. It necessary and as even LAO has said it well justified Thank you So I think that is the end of this item, right? Are we moving on to item number four? We're on what? I'm sorry. I was like, we're on four. Hey, come on. I'm in charge here. That's okay. I was like, um, we're going to work. So this is item number four, Cal Competes Extension. Thank you, Mr. Vice Chair, and thank you, committee members, for the opportunity to be for you today. Batting cleanup for Director Myers on GO-Biz programs is a nice job to have, and we appreciate the opportunity to share more about GO-Biz proposals. My name is Emily Desai. I'm the Chief Deputy Director at GO-Biz. Our next proposal for your consideration is to renew the California Competes Tax Credit in its current form for an additional five years through fiscal year 2032-2033. Assisting me with the presentation of this item, we have the Cal Competes Deputy Director, Scott Dosick. To provide a quick review, the Cal Competes Tax Credit, first launched in 2014, it's designed to attract and retain businesses in California and full-time jobs by extension. It's the state's strongest deal-closing measure. It's strategically structured and administered to ensure that tax credit awards are a meaningful factor in an applicant's decision to decide to expand or locate in California. Rather than awarding applicants on a first-come, first-served basis, awards are determined based on evaluation factors, including the number of jobs projected to be created or retained, compensation paid to employees, the business's strategic importance to the state, and again, the extent to which the credit influences the applicant's decision to relocate jobs to California and more. Even when a business is awarded a credit, the efficacy of the credit continues to be tracked through a five-year contract in which the business agrees to hit certain employment and investment milestones. If those milestones are not met, we have a system in place to either withhold or claw back the awarded credits, which are then recycled for future use. As Director Myers noted, to date the programs awarded over 1,200 businesses supported the creation and retention of more than 160,000 full-time jobs. Extending the program an additional five years would help create the certainty that we know businesses are looking for and reinforce the state's dedication to ensuring high-quality full-time jobs are created and protected. Thank you for your time and we welcome any questions. Department of Finance, any comments? Yeah, Nick Thomas, Department of Finance. No additional comments, but available for any questions. LAO. Rowan Isaacs, LAO. So we are recommending that the legislature approve the extension of CalCompetes. The program is generally well designed, as we've testified in recent years, and there is recent empirical evidence suggesting that there is a net increase in job creation, not just jobs created in industries or for those firms that have been given awards. So that's a positive note for the program. One feature of the program that we've been asked about is the credit pool that exists within CalCompetes. And so one of the features of the program that actually is maybe can be described as a good thing or a benefit is this recapture process where if firms who make agreements with GoBiz don't follow through or are unable to for whatever reason GoBiz can recapture those credits so that there no explicit downside to the state in terms of award agreements for credits In excess, historically, almost half of those credits that have been awarded have never been actually claimed or have been recaptured. And so because of that, those credits are allowed to typically be rolled over into futures of the program. and that combined with the fact that awards in recent years have been below average, this has led to a really quick increase in the size of the total credit pool that's available in recent years and now stands at over $900 million for this fiscal year. And so thinking about the pros and cons of that, there is a strategic benefit to CalCompetes, to having this big pool in that macroeconomic conditions could change in the future and there might be a year or a number of years where there just happen to be lots of very good competitive viable applicants who would generate a net benefit for the state who we want to approve. And if we have this big pool of credits we can assign, then we can take advantage of those conditions. On the other hand, the sort of downside or the trade-off here is that there is a potential for the program's fiscal costs to spike. If there was a year where GoBiz was able to allocate a large portion of those 900 or so million credits that are available, that would significantly increase the fiscal cost of the program over the next several years. And so it's really about thinking about the trade-off of that. And so one thing, the legislature could just approve this program and not make any changes. If the legislature is interested in potentially making some changes to place some guardrails on how much the fiscal costs could increase in this scenario where a lot of the credits are drawn down in a single year or over a few years, it could consider limiting what percentage or what fraction of that pool could be drawn down in any given year. Or it could consider placing a cap on the maximum size that the pool could grow to. So in the former case where we placed a limit on how quickly you could draw down that pool of $900 million, that would sort of smooth out the fiscal costs over the years and wouldn't have a big spike. If a lot of credits were awarded in a single year, placing a limit on the size of the total pool of credits that could be accumulated would sort of, would limit the total fiscal impact of the program long term, but wouldn't alleviate sort of particular spikes in the fiscal cost of the program. And so just considering the state's, you know, long term budget situation, we just wanted to provide those options. If the legislature wants to approve the extension of Cal Competes. Thanks. Thank you. Bring it back to the committee. Senator Cabaldon. Yeah, thank you. Thank you, Mr. Chair. Thanks. I have pretty serious concerns about this proposal. I've had the opportunity to serve in some capacity in the administrations of five different governors, all the way back to P. Wilson. And there are two things that I know are to be true. One is that every incoming governor decides to approach economic development in a somewhat different way, sometimes radically different, that economic development is so close to their sense of driving the state's economy and its future that everyone puts a distinctive stamp on it. I've been through 16 different versions of every kind of economic development agency, trade agency, commerce agencies, the COBIS in its various forms. And then the other truism is that every outgoing governor wants to fix for it for the several years after their term their approach to economic development This is only the first item that we have that are in this category of the administration is proposing to tie the next governor and legislature hand into the future with respect to some of these programs. I'm a huge fan of Cal Compete. I've been persuaded of it partly because of LAO and its rigorous analysis here, but I don't see any benefit to us as a the legislature or the next administration to today, pre-extend the program for five years when it's not even expiring in the budget year. It already lasts for another year after, correct, the 27, 28. So I don't really see what the benefit is to doing this. Over that five year extension, we'd be committing ourselves to nearly a billion dollars of additional funding into that program. So it's not trivial, it's not like we're talking about three analyst positions. We're talking about nearly a billion dollars of a commitment. And that given other folks in LAO constantly reminding us that we can't afford out your commitments of even 10 or 20 million dollars, 900 million dollars is just not, it is not well justified in this particular case. So if we were voting on this today, I would not be prepared to support the extension and let the additional two years that we already have on the program and the $360 million that comes with that plus the $900 million that's already in the account, that seems sufficient to the task. And we don't have an interest in any single year in having $1.5 billion of tax credits cashed in anyway. So we don't need that level of capacity. We don't need to pre-fund a five-year extension two years in advance. either, and we should, so my own view is that as we get closer to this, I hope the governor will be considered, but if not, then we should consider rejecting this proposal. Thank you. Thank you, Mr. Vice Chair, and thank you for that overview. I agree in the support of CAL competes as a program and the work that's been done. I do know there was a proposal before us maybe a session ago about our aviation fuel and how we could use transportation tax credits to sort of fill the gap. And to me, that's sort of, you know, I was trying to solve one problem, but then maybe, you know, creating another coming from Los Angeles where we rely heavily on our roads and highways. So, you know, I think about, you know, I think we have to think about ways to be more creative when we have such a large carryover and to think about other gaps that need to be filled. And I think maybe that is one that we should explore as we are in this crisis around an energy crisis that doesn't seem to be going away anytime soon, that we sort of look to that option of maybe reallocating and shifting some of these credits into that space. The other question I had is just, you know, we're waiting for the big corporation to come that we can drop, you know, a huge investment in. I feel like we're, we all, we just had the presentation about how important small businesses are and also how they are struggling to be able to expand, to grow. And I'm curious if, you know, it's sort of like an organizer. We have this model where it's like the little fish, you know, a million little fish eat the big fish, right? Could we think about bundling some of the smaller, some of the small businesses in a way and seeing them as a collective enterprise that regionally, you know, could, you know, uplift and really create, you know, the job growth and the economic development outcomes that we're seeking. I mean, not certainly at the scale of, you know, and bringing a huge, you know, international firm that would, you know, open a manufacturing plant with maybe, you know, thousands of workers, but certainly we could sort of stitch these kinds of empowerment zones together and see some outcomes that can help, one, address some of the shortfalls in the other funding sources of small businesses, but at the same time help to scale those enterprises regionally in a way. So I just wonder, you know, how has GOBIS considered, whether there should be some additional updated metrics to better measure outcomes and how it can maybe be tied to more regional growth and participation with the small business sector in a different way. Senator, thank you so much for the question. Scott Dostick, Deputy Director of the California Competes Program. So a couple of different nuanced answers to your question. When the TAP program for OSBA was first created, it was actually pulled out of Cal Compete's resources. The annual allocation was reduced to create the TAP program, recognizing that a program like Cal Compete, a non-refundable state income tax credit, tends to not provide a lot of upfront economic benefit or monetizable benefit to small businesses that really need both direct technical assistance and seed funding in order to be able to grow. So a tax credit by its very nature is delayed gratification, if you will, delayed monetization. That said, we've actually seen quite a few of the smaller, smaller businesses taking advantage of California competes. There's no, we really do look at the opportunities for any business that can demonstrate that this credit is a material factor in their ability or willingness to grow in California. and that they don't directly compete with other local businesses that provide the same products or services, right? So the retail, retail service sector is going to struggle with the program. But for other small businesses, we've started to see them, especially the ones that like maybe they've done the R&D and they're ready to go to scale manufacturing and really try and make a go of it. We've seen them start to take advantage of California competes. The other fun synergistic opportunity we have is when we have a larger manufacturer coming, having the conversations with them about where are your suppliers located and who are your suppliers and how could we get them to apply to CalCompetes and bring your supply chain into the state, which then provides some benefits to you both in terms of ensuring the supply chain is working, but also cost effective within the state. I see the challenge. And I guess then my question is, is there a way of, is there a way the way that you pull the tax credits out of CalCompetes and into TAP they were somehow reformulated to be utilized in a way that did address the needs of small businesses I'm assuming that they were converted, or I don't want to say liquidated, I'm not sure if that's the right term, but they were turned into more cash grant type funds. I don't want to oversimplify legislation, but the long and short of it is the Cal Competes allocation was reduced, and then a new program was created unrelated to Cal Competes. It was other than we were the budget source for those funding because there had been a small business set aside for Cal Competes, and both the LAO and the legislature's concern at the time was that the majority of the small businesses that were applying where the local businesses that are really reliant on local demand for their growth, really where a nonrefundable tax credit didn't provide the benefit, so that the notion was reduce the Cal Compete allocation, and then ignoring tax credits altogether, taking that reduced allocation and taking those funds for the new program to directly benefit small businesses. Well, I guess in a budget year like we're in now, that sort of taking a hatchet to the $900 million in tax credits that you have and then really trying to, I'm going to use the term, and this is not the right term, liquefy them so that they could be cash, grants or funding to support. Businesses might not be something that can happen in this budget year, but it doesn't mean that in other years when you get such a huge carryover that there wouldn't be an opportunity to turn those funds into more accessible resources for smaller businesses and enterprise. That's what I'm, I guess I'm sort of reading between the lines of what you're saying, but that's what I'm kind of taking away from this, that it is possible. It just, you know, it's a decision that needs to be made, obviously, by another administration and certainly in a different budget time. And then on the staff question, what is that ability to sort of, can you shift, can some of the aviation shortfalls for aviation fuel, is it possible to re-sort of utilize these tax credits to address some of that gap that is existing? So not being intimately familiar with that proposal, any business in California that can demonstrate that this credit would be a material factor in job creation, and full-time job creation in the state is going to have the opportunity to be competitive in the application process. So whether it's the aviation sector or manufacturing services, IT, whatever it happens to be, we would love to see that application. And we'd be happy also to work with your office if there are specific industries or businesses you're working with and you want to be able to get a little more into the nitty-gritty offline, we'd be happy to walk through what that application process would look like for them. Look forward to it. Thank you. Chair? Of the applications you receive, total applications you receive, how many do you accept? So we receive any given round and it varies. Typically we get 100, 100 plus applications. The significant majority of the applications, and I don't have the specific numbers, but An overwhelming majority of the applications that we receive are from businesses that are not really very competitive in that they are reliant upon. Like a local retail retail service sector employers that compete with one another for market share and as opposed to looking for net job increases for the state of California So any companies eligible to apply but they not extraordinarily competitive and so for those businesses we reach out to them afterwards encourage them to reach out to the to a local SBDC through the OSBA or perhaps through one of their state programs that would better benefit their ability to grow. And then the total The total number of awards at the end of it can be anywhere from as low as two, three, or four to a dozen or two dozen. Out of a hundred? At over a hundred, yes sir. Separate and aside from the example you gave of those that you view as being maybe not appropriate to this sort of incentive, but others that you don't accept. Do you ever keep track of those and analyze how many jobs they might have created had they received the assistance? So a big aspect of our evaluation process is asking the business to explain to us the role that this credit is going to play in their ability to create those full-time jobs. So while we don't have the, I would say, either the expertise or the resources to do long-term tracking, we do use very high-tech tools like Google searches, right, to keep track of some of these businesses and to see what's happening. A lot of the times what we see is an applicant might make the case why they could choose not to expand in California if they're not awarded the credit. But then as part of our evaluation process, we're doing pretty deep research to figure out, have they already moved forward with their project? Have they already secured a lease, a long-term lease? Have they already purchased the property? And oftentimes in that conversation with them is explained in how CalCompetes work, like, hey, it's not just us evaluating, but there's a public meeting of our committee, live-streamed public meeting with five members where they might be asked questions. Are they prepared to go in front of this committee and say, yes, we did sign a 20-year long-term lease, but we are willing to assert publicly the jobs are still at risk? Oftentimes the answer is never mind. Thank you. We'll withdraw our application from consideration at this time. But we give them every opportunity to show us the credit's truly a material factor. But if it looks like all the evidence is pointing to the fact that jobs are coming anyway, it's very important to us that we don't have that windfall effect that has doomed other economic incentive programs. in the past that we're truly looking at this credit being the difference maker, the deal closer. Okay. And do you do any analysis of the sustainability of jobs that are created by past incentives? I'm sorry, what do you mean by sustainability? The assistance is intended to result in increased employment, right? Right. This year. are they still employed five years from now? Excellent. Yes, we do, Senator. And thank you very much for that question. So any company awarded a California Competes Tax Credit signs a five-year contract, and that contract lays out how much credit they can claim each year if they hire the people, create the net new jobs they committed to, the wages that they committed to, as well as the capital investments. So they report to us each year for those five-year periods and three subsequent maintenance years, so basically for eight full years. We get reports from them on their job creation, wages, and capital investments that they've made in the state. On top of that the Franchise Tax Board has the oversight of this program and they will conduct multiple times what they refer to as a books and records review It basically a limited scope audit to validate that the jobs really were created that the wages were paid and the investments were made. Okay, thank you. My pleasure. Do we have any other questions, comments? Okay, well thank you so much for your presentation. We're going to hold this item open and we'll move on to agenda item number five. Thank you, Chair. You're welcome. So continuing with GO-Biz on our agenda. Thank you, Chair Taddo. The next item GO-Biz has for your consideration is for our international affairs and trade team. The International Affairs and Trade Team requests $1.4 million ongoing to support our export promotion efforts and the California Export Program. This program is an existing program within the international team, one that was historically federally funded. It is a program that supports small businesses looking to expand into global markets, helping shoulder some of the risk, but providing that opportunity and benefit for small businesses as they do engage in exporting. So the success of this program, because it was built off of federal grants, we have good numbers in terms of the overall impact and the number of businesses served. That federal funding is not currently being provided to states anymore. Not only that, given the volatility of the federal funding, we've always had unmet demand as a result. And if you look at the original intent of the program, when it was first established under the Obama administration, It was originally intended by legislative intent to be one also supported by state dollars. It's something that across the country all states have historically participated in. So we appreciate the consideration of continuing with dedicated state funding for our export promotion program. We request $1.4 million to do so. Thank you and glad to take any questions. Do we have any comments from the Department of Finance? Jesse Romine, Department of Finance. The administration would just add that the objective of the request is to provide ongoing funding for GO-Biz to promote international trade by supporting small firms and giving them access to global markets as it's unanticipated that the federal state trade expansion order will be available in the coming years. Ongoing funding of this program will provide GO-Biz a stable complement of resources to support this workload rather than relying on a federal law to materialize. Comments from the LAO? Rowan Isaacs, LAO. So there are legitimate concerns about the future of many federally funded programs at the state level, which is, as the proposal is written, one of the main motivations for requesting the money. When we made our initial comments on this, there was no indication that the STEP program was under threat. It's possible that in more recent information, it might be unlikely that the program is available for this upcoming year. but we think in the broader context of the state facing reductions in lots of federally funded programs, you know, at Medi-Cal, you know, there are going to have to be priorities made by the legislature about which programs we should backfill with state money. And so then the question for the legislature is where on that priority list does this proposal fall? And so, you know, there are a couple of options that we had given in our comments that if we wanted to try and maintain the state's export promotion capacity while we wait for the eventual future of the STEP program at the federal level to unfold. With the current federal administration, the legislature could consider funding this program on a limited time. basis to give us more time to see if the STEP program is continued at the federal level long term or make it conditional on the federal money not being available. Thank you. We'll go ahead and take questions and comments from committee. Mr. Vicer, do you have any? Senator Smallwood-Cuevas. And I'm going to keep it short on this. I had an opportunity to visit South Korea recently, and they talked about how Texas and one other state had offices of development there. This is a country that says they want to invest $350 billion in the U.S. economy, and they see California as a core partner. and they wondered why we didn't have an Office of Development in South Korea. And so I'm just curious, how are we positioning businesses to be successful when we know there are international partners who want to do business with us? And how many of these businesses have received support through the program? and is there a sense of tracking how many have actually secured partnerships or contracts? And how do you determine, is it based on the business that you determine where you plant the flag or do you plant the flag and then identify businesses that could partner with international entities and help to bring resources back to California? I'm trying to understand how this works and I was surprised. And it was a very small state aside from Texas that was there. And it shocked me that we didn't have any formal sort of footprint in the region. I want to say also Koreatown is in my district. So we have the largest Korean population outside of South Korea in my district. So it just was surprising to me that we don't have a formal footprint there. Thank you for the question, Senator. This is one that our international team gets quite regularly because other states do have international offices. California back in the early 2000s and I think into the 90s did have international offices, and those were shuttered in the early 2000s. They were found to be quite expensive, and the ROI perhaps was not maybe what was expected. International offices are quite expensive, very expensive to maintain. I think California is in a good position that our brand recognition is such that when we think about doing business with overseas markets, there is opportunity, there is, you know, recognition of, you know, where there's, you know, opportunity to engage with California. It's why we are, you know, the top, if not for Texas and oil, we're the top exporting state. So California, I mean, there's an incredible number of jobs supported by international trade in California, and I don't think it's the position of this administration that we need international offices to continue to capitalize on that opportunity. But I would highlight that that's why this program is so important is because small businesses need to get access to that. And that's where we offer support. You asked about the number of businesses we've supported. With a small number of funding, we've actually supported 362 businesses over the past three years. Those businesses, you asked about impact. those businesses collectively have generated 143 million, just shy of $143 million in export sales. So those are the types of metrics that we look to quantify success when we work with a small business The way the program works is a small business you know might be looking to do compliance testing Perhaps they're a medical device manufacturer that's interested in expanding into South Korea because they do have such a, you know, a clear market for, you know, health care and medical devices. That company might need additional support to explore that market, but they might need to get their products licensed for the FDA equivalent, you know, in South Korea. our funding, and it's maxed out at $10,000 for a small business, so it's microgrants. That funding can help that small business test the waters of the medical device market in South Korea. So we provide funding like that. We're actually doing a health care trade mission to South Korea, we hope next year, where we are going to be bringing up to 10 small businesses that have innovative solutions in health care, and that are trade and investment representative who oversees Asia. We have three trade and investment representatives, and I should mention that because in the absence of having international offices, Diana is one. We have three dedicated staff with expertise within the regions of oversight to facilitate that trade and investment between strategic markets like South Korea. So Hanan, our trade and investment representative for Asia, will be leading a trade mission for 10 small businesses focused on the health care sector. We bring the convening power of the state. We do a California pavilion. We do business-to-business matchmaking. we help those businesses really sort of shoulder the risk of what it might look like to expand in Korea. I don't know if I tracked the last part of your question, but I hope that that helps explain a bit more about the program. You didn't share the partnerships, but you did share what revenues were generated in the number of businesses. So I appreciate it. Thanks. Absolutely. And I want to make sure that my district is connected, And if there are industries and businesses and small businesses that are going to be part of this match-to-match and mission that you all are going to do, we'd love to be in touch with you on that. We would love to provide follow-up information about all of our planned activities. Thank you. I was just going to add, as Emily said, Diana Dominguez, I'm trade investment representative and I cover the Americas in Oceana. So much of the way that we get around to not having boots on the ground in market is also leveraging our ecosystem of stakeholders. So we leverage our partners at the US embassies worldwide to service our California companies across all industry sectors. We work with American Chambers of Commerce that are on the ground. and there are many U.S.-based trade show organizations that have platforms in foreign countries that we leverage. And through those networks, we also build relationships with in-market experts like business consultants who then help us to build out these relationships. So we think creatively, as do other states who don't have boots on the ground, to maximize our presence in market. Thanks, Diana. Thank you. I mean, this is an important program with a lot of promise. I think LAO's comments are also important here, which is that making permanent long-term commitments in this budget environment, this has to go on our list of 800 things the administration is proposing for permanent funding, as well as the deep needs that we're facing already in ongoing programs that serve Californians and the impacts of H.R.1. So although I open to the idea it can simply be the federal government withdrawing funding and therefore we sort of automatically autopilot need to take over because we actively telling everybody else we're not doing that for food, we're not doing that for health care, we're not doing that for anything else. And it's got to go into that same bucket. I do appreciate the structure of the program. I mean, it is the case that Wyoming does have to go, you know, when I'm in the Philippines or in Taiwan or they, they, Wyoming has to, they do need an office if they don't have one because nobody ever heard of them. No shade on Wyoming, but everybody knows California. So we have other, we have other challenges that other states don't have, but sort of our visibility is not one. And when the trade and commerce officers were closed, it wasn't a big deal after that in California, but that's partly because, you know, to return to this gubernatorial musical chairs, Arnold Schwarzenegger, you know, one of the world's biggest stars was the governor of California. You really didn't have to convince people in Vietnam of, you know, you didn't have to tell them what California was. You didn't before that, but especially with him as governor. So it just gets to this point about the economic development is a very, at this, it's very analytics, very data-driven. A lot of us who've done economic development for a long time don't want to accept that. We want to think we just need to set up a table at the CES in Vegas and we're done or at the International Shopping Center Convention. And that's not the case. Like data, analytics, insurance, there's a whole lot of other stuff that is now accounted for in all of that. That being said, some mechanism for relations does matter, too. And it's why the programs like this don't need to be $10 billion, but they are important. So I hope we will have the resources to be able to grapple with, but we do need to keep this open. And so that we can weigh it against the many, many, many other general fund priorities that we're going to have to grapple with. Thanks, Madam Chair. Thank you. Can you speak a little bit to the return on investment in regards of the funds that have already been invested into? What is it, CalExport? Go ahead. Sure. So we track success in the program by export sales. So that is a business that's signed a dollar value agreement, perhaps with an international partner. Perhaps they signed an agreement with a distributor. Maybe they got a procurement opportunity with a foreign government. But I referenced in the past three years under which we've been administering the program, It's just shy of $143 million in collective export sales of those 362 unique businesses that have participated in the program. Is there anything in your budget change proposal that is different from last year's request? or anything that is different in the step program specifically oh in terms of like how this program would be administered versus how the step program is currently administered correct yeah no we we feel like it's a really successful model um it has strong accountability standards strong metrics um so we would continue it as as planned um in large part, focused on California companies, 51% U.S. content, etc., the criteria that we established to oversee the program. Okay. All right. Well, thank you so much for your presentation today. Appreciate it. And we will hold this item open. Thank you Moving on agenda item number six We are still on Go Biz So please proceed when you're ready. Excuse me while I navigate my brief here. Thank you, Chair. Our department requests $400,000 general fund ongoing to support one permanent position, which would be an assistant deputy director, and then one graduate student position to operationalize and expand GOBUS's work to attract, retain, and grow innovation and emerging technology sectors, including quantum and fusion in California. Director Myers talked earlier about the placemat that you all had in front of you, bets and accelerate sectors that include things like AI and quantum, cloud and data platforms, robotics, have tangible revenue streams, immediate benefit business use cases, and the potential to cut across all industries due to the ability to leverage decades of digitization, data growth, and access to cloud computing. Accelerating innovation cycles and the proliferation of record years in venture capital have led to the average lifespan of S&P 500 companies decreasing from 61 years in 1958 to just about 18 years today. This BCP, to support our innovation and emerging tech team, is really focused on supporting a repeatable statewide cadence of things like targeted sector convenings, demo days, monthly working groups, in-region activities, support for federal funding bids, and marketing and resources to support and advance these emerging and important sectors. So I'll stop there, but would just say that with one senior position who's here to my right supporting this work currently, the additional staff capacity will better position GOBiz to meet the demand to retain and attract these really important firms and businesses to grow and expand in California. Thank you. Thank you. Jesse Romine, Department of Finance. No further comment. Comments from LAO? No specific comments on this, just as part of our broader comments on making ongoing commitments to spending in light of the budget. Thank you. Questions from committee members, vice chair? Senator Cabaldon or Senator Smallwood-Cuevas? No? Okay. I just have one. It should be kind of brief and quick. I think, so is there like a reason, I mean, I know earlier there was a request for $20 million for the brand campaign. Is there a reason why this is different or this is, you know, why some of those funds potentially could not be used or integrated? I mean, that they're, and I know they're, again, they're different items, but they almost kind of seem very similar as well. Thank you, Chair. I think you're right in that they're similar in the sense that we feel that these would be very complementary to one another. But the $20 million is one-time funds dedicated for a broader brand campaign. This request is to support permanent and ongoing staff positions to help with the emerging tech sector. So while the brand campaign, once designed and implemented, certainly we hope we'll celebrate and attract these kinds of businesses with that one-time funding with the brand campaign, this is really about permanent staffing to work with those businesses, to help them navigate incentives, to work through and convene stakeholders and working groups to do those things that we outlined like support on federal bid requests, etc. All right, sounds good. Thank you so much for the presentation, and we'll hold this item open and move on to agenda item number seven. Continuing with Go Biz. And this is for the reappropriation of jobs first administrative resources. Please proceed when you're ready. Good afternoon, Chair Hurtado and Senators. My name is Derek Kirk. I'm the senior advisor for economic policy at GO-Biz. This request is for an extension of the encumbrance deadline on the administrative funds for the Jobs First Regional Investment Initiative. In the fiscal year 24 budget, the legislature and the governor appropriated $50 million a year planned for three years and extended the encumbrance and expense deadline for the program through June 30, 2030. This request would ensure that GO-Biz, the labor agency, and the Employment Development Department have the administrative funds necessary to support our grantees on the execution of their grants, as well as the long-term implementation of their regional plans. I'm happy to take your questions. Comments from the Department of Finance? Okay. Comments from Elio? No further comments. Okay. Do we have questions or comments from committee members? Senator Kowalden? I'm going to stipulate again about long-term commitments for extensions. I understand the nature of the program. I would want to invest, before I could even consider being supportive of it, I would want to know more clearly what is the baseline minimum necessary in order to achieve the fiduciary and other obligations of the state. I'm not prepared to support a full program extension, with technical assistance and everything else, that should be a decision for the out years, not for us making a long-term commitment in the end of this administration. I appreciate the comment, Senator, if I can. I want to just specifically note that the request on this extension is for the administrative funds, which is legislatively capped at 5%. So just for your records and knowledge, it's $2.5 million of each of the $50 million appropriations that are used and it would be capped. The programmatic funds, which all of the programmatic funds that have been appropriated are fully encumbered and granted out. We're very proud of that today. I mean, so this is only for that $2.5 million cap, but we totally respect your comments. Yeah, I understand that, but we're not, at this stage, our interest in assuring the grantees are meeting the terms of their contracts and what have you. That's a different set of activities than the full, the 5% was anticipated for program design, for program rollout, program coordination. That's a different set than we gave out all the money and now you have to do what you said you were gonna do. You have to not spend the money inappropriately. The contracts all have to be legit and the audits have to be done. That's not 5% at that stage. So I would be prepared to support as a commitment, because we're talking about, again, a commitment for another several years after this administration, a commitment for the baseline necessary to assure that those grants are properly overseen. But in terms of additional convenings and that sort of thing, that's a programmatic issue that the legislature should decide is a priority general fund commitment before we approve that. Thank you Senator Capaldi And I would echo those same comments and concerns that Senator Caballon just expressed I don't really have much more to add. I mean, I would like to see some more detailed information about the program itself and this, you know, whatever successes you've had over, what is it, a year, more so than a year that it's been in place. And that would be very helpful in helping me make a decision on this. Thank you so much. Thank you. Okay. We'll hold this item open. We'll move on to item number seven. Not seven, eight. Okay, so we now turn to oversight and budget proposals under the Governor's Office of Land Use and Climate Innovation, also known as GO-LCI. Director Acefa, thank you so much for patiently waiting and for being here, of course, and we'll go ahead and allow you to proceed with your presentation. Great. Thank you, Chair Hurtado and committee members. Thank you for giving the Governance Office of Land Use and Climate Innovation, or LCI, to present our 2026-2027 budget. I am joined today by members of my executive team, and I will provide a high-level overview of the structure and statutory responsibilities of LCI. And then Senior Deputy Director Abby Edwards will provide specifics of our budget items. The Governor's Office of Land Use and Climate Innovation, or LCI, formerly the Governor's Office of Planning and Research, or OPR, was created by statute in 1970 as part of the Governor's Office, soon after the CEQA, or the California Environmental Quality Act, was signed by then Governor Ronald Reagan. SPR replaced then fragmented planning functions and consolidated them into a central governor-facing planning entity. From its inception, the office was tasked with implementing the California Environmental Quality Act and structured to serve as the state's long-range land use planning entity, working across all sectors and levels of government. This is local, state, and also federal. At its core, the statutory purpose can be distilled into three core functions. First, long-range policy planning, developing statewide goals, policies, and strategies on land use, growth, and development. Second, intergovernmental coordination, acting as a bridge between state agencies, local governments, and federal entities, reducing fragmentation and aligning policy. And third, technical guidance and oversight, providing planning assistance guidelines and review functions to local governments, including general plans and CEQA implementation. Increasingly the office has been tasked with building and maintaining data and technology that reduce the cost and time of CEQA compliance while preserving environmental quality For the CEQA Judicial Streamlining Program, as a recent example, LCI is the lead agency which drafts guidelines, conducts outreach to potential applicants, assist applicants throughout the application and submission process, perform technical and policy review, coordinate with state agencies such as Energy Commission, Natural Resources, Environmental Protection Agency, to name just a few, and recommend certification to the governor. LCI is also the state's comprehensive planning agency. While many agencies play a role in land use and climate, LCI is the only state entity tasked with thinking broadly and comprehensively across housing, transportation, conservation, infrastructure, ecology, public health, and community well-being. At the local level, the general plan guides long-range land use planning. LCI provides technical assistance to local governments through the general plan guidelines and monitors progress through annual progress reports submitted each year to the legislature. We are currently updating both General Plan and CEQA guidelines to reflect the more than 250 new laws enacted since 2017 and 2018, the last time the General Plan guidelines were updated. Across all of this work, climate resilience is a through line. A cornerstone of this effort is ICARP, or the Integrated Climate Adaptation and Resiliency Program, aligning efforts across local, regional, and state partners. We complement grants investments with data and tools that translate climate information into action. This commitment to science is reflected in the California Climate Change Assessments, which LCI provides every five years in partnership with key state agencies. The fifth assessment is nearly complete and will be released this October at the Resilient California Summit. At the federal level, LCI's military affairs function coordinates with the U.S. Department of Defense, local governments and state partners to reduce land use conflicts around military installations, strengthen installation and community resilience, and align defense-related investments with California's broader land use and climate priorities. LCI's work is also carried forward through the Strategic Growth Council, or SGC. Established in 2008 by Senate Bill 732, SGC is housed within LCI. SGC aligns policy, oversees investments, and engages partners across government and communities. LCI director serves as chair of the council which is made up of seven members of the governance cabinet and three public members members one each appointed by the governor the assembly and the senate Since its inception SGC has invested more than billion in communities statewide advancing transportation, housing, and climate priorities under SB 375, while supporting sustainable agricultural lands conservation under SB 862. In the next fiscal year alone, SGC will award nearly $1 billion in Prop 4 and Greenhouse Gas Reduction Fund or GGRF. Finally, I just want to note another entity with an LCI which is the Racial Equity Commission which was established under Executive Order N1622. The commission works to embed racial equity across state policies, programs, and initiatives. It provides guidance to address inequities facing historically underserved communities grounded in the belief that California thrives when all communities thrive. The commission has released the racial equity framework this past December. Now I'll ask Abby Edwards, our senior deputy director, to walk you through LCIS budget items. Thank you. Do you want any questions? Happy to take questions. Questions? Yeah, just on the overview, right, not on the specific items. So thank you, and thanks for being here. The state's role in the implementation of SB 375, SB 743 and other elements as part of the overall land use, transportation, climate and then housing integration that began just over a decade and a half ago. There have been a lot of issues raised. Full disclosure, I'm carrying legislation in this space and One of the challenges that we're grappling with is the sort of the disconnected state roles and the role of CARB versus other entities, other state agencies in that field. And one of the issues that's constantly come up is isn't this really, isn't this why we created both LCI but also the Strategic Growth Council in particular. And so I'm curious as to whether or not you evaluated our progress or thereof on the SB 375 side and if there are any insights that you might share with us about at the state operation, state government level, what we might do to improve our performance on the outcomes that we sought to achieve. Sure. I'll touch on it. We haven't done a specific evaluation about that, but what we have done in my office, specifically the land use team, consistently coordinates across CARB and all of the state agencies, as well as the external entities like Council of Governments. So the issue itself, SB 375, is an issue that is prime for some revision and maybe update. and LCI has facilitated for the last year or so in that conversation across state relevant agencies. Abhi could add more specifics on some of the work that we're doing in that space. Thanks so much for the question. I would defer to Natalie Kupfel, who's our Deputy Director of Land Use Policy. I would just emphasize that we're not regulatory agencies, and so our ability in this space is somewhat limited. So, Natalie, I don't know if you want to share anything else. Sure, thank you. One microphone is tricky up here. So yes, as Abby mentioned, we aren't regulatory agencies like CARB, so our role is not as explicit. But we do play a role through, as Sam mentioned, the interagency coordination that occurs at the Strategic Growth Council. But then also in thinking about how local governments can do better planning, and that happens through the general plan guidelines. As mentioned, those haven't been updated since 2018, and we are in the process of doing that work and really think that through that update of the general plan guidelines, we'll be able to convey what it means to build more sustainable communities at the local level, because ultimately land use control is at the local level, which, as you know, is one of the issues with implementing SB 375. Sorry about that. And so that is a role that we play. And then obviously our role in CEQA is hugely influential. You talked about SB 743. And that is a way that we can reduce vehicle miles traveled. Because now under CEQA, when you think about the transportation impacts that a project is going to have, you think about vehicle miles traveled. And one of the things that we are implementing at the moment pursuant to AB 130 last year is the VMT mitigation bank. And so that will be a way to turn significant transportation impacts that a project has into infill affordable housing as a mitigation strategy. So that will be another way that we can get closer to the sustainable communities that SB 375 envisioned. Thanks. Just to put a finer point on it, though, recognizing that neither LCI or more SCCR, regulatory agencies, But one of the fundamental, the core elements, but also one of the big challenges in SB 375 is the development of the targets. And so it's become clear to me that at least that one of the challenges is that, and that development is assigned exclusively to CARB because it's a climate target. And there are others that say that should be done exclusively by CTC because it's about the transportation plan. There are others who would say, well, the climate targets are also a function of our housing production, which is thanks to legislation a decade ago, RENA is also linked to these plans. And so as these conversations have been happening, everyone in the universe says, wouldn't it be great if there was an agency that brought transportation, climate, land use, economic development together? Wouldn't that be amazing? And then everybody looks at each other and says, we have that. and it's not regulatory. It doesn't have a staff of 10,000, but the question emerges is that because the challenge is mainly process-wise. I mean, it is the targets themselves, but those targets are in context. Like what is the best achievable climate target given a transportation plan, a land use map, and all of that? So my question is really about the potential. Obviously it not an assignment that could be taken up tomorrow with no additional resources But the potential for one of these two related entities LCIRSCC to play a different role in that constellation since it seems to line up so much with what the mission of both that law is but also the agencies Agree. And certainly the potential exists, but would require developing in order to effectuate it. Any other questions or comments on overview? No, seeing none. Okay, so at this moment, if every committee member is okay with it, we can merge items number 9, 10, and 11, and 2-1. I know some folks have to catch a flight and lights and, is that okay? There's consensus? Consensus on that. Okay, then we'll proceed if you don't mind. Thank you. Good afternoon, Madam Chair and members. My name is Abby Edwards. I'm the Senior Deputy Director at LCI, and I'll be going over items 9 through 11. So starting with LCI baseline resources, our three baseline resource requests this year balanced the need to maintain these essential services for California with the state's ongoing fiscal realities. These represent functions and efforts that were previously funded on a limited term basis and do not represent any new programs or an expansion of LCI's scope. They are intended to maintain the minimum operational foundation needed as a state organization, ensuring that we can meet our statutory duties and maintain core functions like reliable technology, grant facilitation, contract execution, so that existing state staff can continue to deliver meaningful results for California. For our information technology baseline resource requests, we're requesting $6.2 million in general fund in 2026 and 7 and ongoing to continue the implementation of IT services following the establishment of the IT office. For administrative and legislative baseline resources, we're requesting $3.4 million in general fund in 2026 and seven and ongoing to maintain baseline support for core administrative and legislative functions. Permanent funding is necessary to ensure LCI maintains basic operational stability and compliance. And lastly, our land policy baseline resources. We're requesting $900,000 in general fund in 2026 and 7 and ongoing to support existing positions within our land policy unit. These staff are foundational to managing our core land use planning and CEQA workload, providing technical assistance and ensuring that the state can effectively implement its land use priorities. priorities. Maintaining this capacity is critical to delivering timely, consistent, and high-quality outcomes across our portfolio. And additionally, as part of this item, we're requesting $949,000 in general fund annually beginning 2027 and 8 through 2031 to 32 to continue supporting existing positions responsible for implementing the judicial streamlining provisions established under SB 7 and SB 149. These rules are really essential to ensuring that priority projects move forward efficiently while upholding the integrity of CEQA and meeting the program's statutory requirements through sunset. So that is for our baseline resources. I'll give a quick overview for the climate bond, if that's how we would like to proceed. So for our request on the climate bond spending proposals given the shifting landscape at the federal level the work of LCI and SGC has become even more critical especially in the climate and community investments being proposed under the climate bond These efforts are helping California's most vulnerable, disadvantaged, and historically under-invested in communities better prepare for the growing climate challenges ahead. The Strategic Growth Council's Transformative Climate Communities and Community Resilience Center Program, along with LCI's Extreme Heat and Community Resilience Program, are in high demand and constantly and consistently oversubscribed. Together, they represent hundreds of millions of dollars in regional, local, and neighborhood-level investments designed to meet communities where they are to be reflective of their needs. For SGC's Transformative Climate Communities Program, we're requesting $37 million in 2026 and 7 for round 6 of the Transformative Climate Communities Program. These funds will go toward grants and also technical assistance. For the Strategic Growth Council's Community Resilience Centers Program, we're requesting $55 million in 2026 and 7 to make grants in the CRC program's second round of funding. The full 55 million requested will be going toward grant awards. And for LCI's Extreme Heat and Community Resilience Program, we're requesting 24 million to make grants for the Extreme Heat and Community Resilience Program for the third round of funding. The 24 million requests will go towards grants and technical assistance. And lastly, on the Cal Heat Score Implementation BCP, We're requesting 522,000 general fund in one position in 2026 and ongoing to carry out the statutory requirements under AB 2238 or Cal heat score. These resources will enable LCI to support local governments, tribes and community based organizations to use the heat warning system to support local decision makers and save lives. So those are the three items, happy to take any questions. I'm joined by my admin team and also the Strategic Growth Council to help answer any questions if you have them. Thank you. Do we have any questions or comments from the Department of Finance? Courtney Massingale, Department of Finance. No comments, but available for questions. Thank you. Questions or comments from the LAO? Yes. Good afternoon, Chair Hurtado and Senators. We have very short, brief remarks. As the department presented, the governor proposes to increase LCA's ongoing budget by $10.5 million from the general fund. Overall, our review found that the administration provided reasonable justification for these proposals. Cost increases have various reasons, including OPRs restructuring into LCI and GoServe, LCI civil service transition, and workload increase related to CEQA, grant responsibilities, and new statutory requirements. If these requests are not fully funded, LCI will not be able to provide the same level of service that it currently offers. However, on the other hand, approving these proposals would mean taking on a new ongoing general fund commitment. And in the context of the state's projected multi-year budget deficit, this would inevitably require reductions elsewhere or revenue increases. If the legislature is not willing to do this, then it could consider downscaling LCI's grant and statutory responsibilities, revisiting program implementation timelines, or readjusting associated resource needs. Thank you. Thank you. We'll go ahead and take questions, comments from committee members Mr Vice Really pretty quickly and very much to the point just recently the governor indicated that his May revision will include spending reductions And to augment general fund expenditures as this proposal does necessitates, because of our structural deficit, reductions elsewhere. And so I just don't think it makes any sense at all to be increasing general fund spending, frankly, for anything. Senator Cabaldon. Thank you, Madam Chair, and thanks to the vice chair. We could have finished hours ago. We just rejected all spending. Anyway, I appreciate the presentation. Just a couple of comments on this. The horse is out of the barn already. I personally wouldn't have supported the LCI moving into Silver Service and the changes that had happened had we known that just the IT cost alone, we're going to get this fire to control. It's supposed to be a purely ministerial change from the budget's perspective, and it's not turned out to be that. So obviously we need to keep an eye on that going forward that doesn't get even further out of hand. Second, would simply note on the heat score is that, at least my understanding is that when the bill establishing the program was before the legislature, at least our appropriations committee scored it at this amount, but it scored at this amount for design and development of the communications plan, not for implementation. And so having a permanent ongoing cost for the program was not anticipated when the appropriations committee took this up. And I don't believe from the tape that the Department of Finance said that it was something other than the analysis race. So this is one to keep an eye on as to whether or not it's an appropriate general fund expenditure given the comments of LAO, which are right on target. And then just lastly on the CEQA side, The judicial streamlining program sunsets and therefore the money that's here is one time cost, but the modernization project is forever? Am I reading that right? In terms of the additional costs? Thank you.

And that's forever?

And why is that?

but why do we need to continue to be doing that?

I think maybe the term modernization was confusing.

Then is there, we're not passing another AB 130, SB 131 this year, most likely I'm guessing. Is there a point where the curve, if the number of projects subject to CEQA declines, then we might expect that we will not be adding more money to state level CEQA implementation oversight? Or should we not expect any correlation between that?

So, sorry, Madam Chair, but so if the famous city of Culver City sends in a notice of exemption, this project for which they are the lead agency, is exempt because it's surrounded on three sides by housing, it's inside the city limits, and it's AB 130 exempt. So when it arrives at your office, is a human being reviewing all of, I mean, these sort of, I mean, is there no batch processing of fairly straightforward ones? Or is human judgment required for each of these now kind of broad statutory exemptions that exist?

Okay. Okay. I understand that. I think that, I mean, it still remains a budget priority question to me as to whether or not that compared to keeping a medical clinic. is as important, whether we need state level review for that purpose in the absence of evidence of substantial non inaccurate notices of exemption. So that would be an interesting policy question for some day other than today. But just given the state of the general fund, continuing to do that sort of activity at the state level relative to the kind of cuts that we're going to be grappling with in the rest of the budget, I think is an important open question. Thanks, Madam Chair. Any other questions from committee members? No? Okay. I think that Senator Kebaldin captured the majority of the questions I had so thank you Senator Kebaldin I guess the only other kind of question I would add to his remarks are regarding you mentioned the clearinghouse for the CEQA I mean, is there any kind of audit that has been done to make sure that it's functioning to the way that we need it to be?

So that was done by the Department of Technology?

Okay. Okie dokie. Well, thank you so much for your presentation and we will hold these items open. So then we can move to public comment. We'll go ahead and move to public comment. We will take public comment on all items on the agenda, including vote only items 12 and 13. When it is your turn to speak, please state your name, your affiliation. And so we have time for everyone to speak. Please limit your remarks to one minute.

Thank you.

Good afternoon, Chair Hurtado and members of the committee. My name is Kirk Blackinton. I'm representing Capitol Stage Company, which is a professional equity theater located here in Midtown Sacramento. and I want to talk about the Performing Arts Payroll Equitable Fund. First, we want to extend our deepest gratitude to Senator Rubio for her leadership in requesting $40 million to reopen the PAEPF. Capital Stage serves over 21,000 community members annually, and as a professional union theater, we provide essential livable wage jobs for local actors, designers, technicians, arts, administrators, and young professionals who are growing into productive members of the California workforce. We have an emphasis on hiring a diverse team in every sense of the word and emphasize lifting up voices that have been historically underrepresented in the arts and culture sector. Statewide, the demand for this program is undeniable. In its first year, 413 organizations applied, yet only 100 could be funded. Capital Stage was unfortunately one of the applicants that did not receive funds due to the limited amount available. Reopening this fund with $40 million would protect nearly 5,000 direct jobs and 7,000 downstream jobs that fuel California's creative economy. and specifically here in Sacramento in our case. For small nonprofits like ours, these funds aren't just a subsidy, they're a lifeline that ensures we can continue to pay artists fairly while producing bold, socially relevant theater that reflects the diversity of our state. We respectfully urge your support for this critical investment. Thank you.

Hello good morning Chair afternoon Chair members of the committee My name is Erin Anova and I am the Executive Artistic Director at Celebration Arts Theatre a small black theater founded in 1986. For nearly 40 years we've told unique stories that reflect the African-American experience in our country. We're also proud and appreciative recipients of the Performing Arts Equitable Payroll Fund Grant. I am here to share with you that the amount we received through the PAEPF grant is not abstract support. It has been literal. It's contributed to our survival. We are a four-person team. We were finally able to hire a development manager part-time. We're creating culturally specific theater that reflects our community. And without the PAEPF grant, we simply could not afford rising payroll costs while keeping our doors open. So many small arts organizations are closing. And in December, we were literally on the verge. When that happens, we lose the voices and stories that make California's cultural landscape so incredibly rich and diverse. We lose spaces where young people can be on stage and see themselves on stage and have their brilliance witnessed. But beyond payroll, the investment by the PAEPF grant sustained something deeper. Theater is one of the last places where a human being can stand in front of another human being and say, this is what it means to be alive. In times like these, we need the arts as sustainable containers where we can go to remind each other of what it is to be a human and our beautiful complexity. Ultimately, I'm also grateful that programs like PAPF recognize small arts organizations as assets and places to hear our stories, but we are also economic engines, employers, educators, and community anchors. We need your continued and expanded support to survive and thrive and serve, to employ and to strengthen the cultural fabric of this state. Thank you for your time and consideration.

Good afternoon. My name is Karen Reinstierna. I'm executive director for Central West Ballet in Modesto. We're the only professional ballet company south of Sacramento, east of the Bay Area, and north of Los Angeles, and have been in Modesto performing for almost 40 years. California ranks about 35th in the nation for arts funding at about 66 cents per capita. Although we are home to more artists than any state, employ hundreds of thousands of people, and contribute 7.5% of the state's GDP. Investment in the arts creates sustainability as our local dancers, artists, musicians, and actors don't have to move out of our communities or the state to pursue their careers and a paycheck. They'll stay in our cities and state, they'll buy homes, they'll spend money, they'll pay taxes. We won't have local dancers, artists, musicians, and actors if we can't offer a career path and a livable wage. Equally frightening, we won't have audiences in the future if there is no one to see and no one to learn from. We unfortunately did not receive the grant, but it would have helped our dancers and our company immensely. So I ask you to include the $40 million in the 26-27 budget and fund the Performing Arts Equitable Payroll Fund. Thank you.

Good afternoon. My name is Dara Dada with Cameo Network, an association of more than 400 small business providers, many of which are seed grantees. Please support a $45 million over two years renewed investment in the Social Entrepreneurs for Economic Development Seed Initiative. In recent years, Latino and immigrant entrepreneurs have started new businesses at twice the rate of the general population. The seed program provides an entrance into business ownership so these entrepreneurs can generate income to support their families and contribute to the economic vitality of their communities. Many grantees are Cameo members. For example, one member is using the grant to incubate 60 home child care businesses with an expected economic impact of $16.3 million in Monterey County. Show your support for immigrant workers and entrepreneurs and renew Seed 4.0.

Good afternoon, committee chair and staff. My name is Amy Chong. I am representing Inclusive Action for the city. We are a community development financial institution based in L.A. County. We support immigrant entrepreneurs, small businesses, street vendors, individuals who have a dream to pursue a career through entrepreneurship. The SEED Entrepreneurship Program is a program that will support small businesses throughout the state. We have seen the SEED program being a track record to support immigrants and entrepreneurs to ensure that they produce job quality for their communities, they support economic development in their neighborhoods and foster growth economically So we respectfully ask your support for the SEED 4 program and thank you for your support Hi good afternoon My name is Zen Trenholm I the Senior Director of Employee

Good afternoon, my name is Ashley De La Rosa on behalf of Building Skills Partnership. I am here today asking you to support economic mobility for all coalitions, budget requests of $45 million over two years to reinvest and recommit in the Social Entrepreneurs for Economic Development Seed Initiative. BSP represents a high-impact collaboration between over 90 janitorial employers, 60 commercial building owners, SEIU, USWW, and the broader community. Through this holistic approach, BSP continues to pave the way for an equitable future where working families can thrive positively, impacting low-wage BIPOC workers. SEED provides an opportunity to invest in people and lead high-quality jobs. SEED has helped raise the bar in traditionally low-wage industries. Worker-owner benefits from increased wages, better working conditions, paid sick leave, and ownership. Through SEED opportunities, workers don't have to face lower economic prospects or exploitive working conditions because of their immigration status or industry they work in. SEED has set a national president in the public investment for high road business ownership opportunities for immigrant workers and invites us to imagine what increased commitment to worker ownership can do for our communities. Thank you.

Good afternoon, honorable members. Thank you for the opportunity to speak today. My name is Edgar Ortiz speaking on behalf of the California Immigrant Policy Center in support of the million budget request from Senator Becker and Assemblymember Carrillo to sustain the SEED initiative The ability to work is something that not just allows individuals to be able to support themselves and their loved ones, but also gives them agency over the direction that their lives will take, which is something that all individuals, regardless of status, are deserving of. The $45 million request comes at a critical time as we're seeing that although the deportations and detentions that our communities are facing have created significant impacts, it's not the only way that the administration has been exerting economic impacts on our communities. As they're starting to follow through on their threats to de-document individuals and take away their work authorization studies, we're seeing people's economic means and ability to work be at risk across the country. This includes millions of individuals, including but not limited to the roughly 183,000 people who have DACA in California, as well as the 80,000 people from different countries like Nepal, Haiti, Somalia, etc. and others. And so because of this, combined with all the other Californians who don't have work authorization, if we see this fall through, we're going to be faced with a significant unemployment and non-employment crisis that, quite frankly, we're not talking enough about. And so in order to avert this, we recommend doubling down on this program, which has a proven track record and has been shown to be able to support individuals with the biggest barriers. Thank you.

Good afternoon, Madam Chair. Megan Murray on behalf of Lucid Motors. and we echo the comments previously stated from the Silicon Valley leadership group and really want to stress the importance of refundability for pre-profit companies that this would, by changing that program to allow refundability, would really unlock those credits and, again, create more jobs in the state. Thank you.

Okay, we have a motion by Senator Smallwood Cuevas.

Senator Hurtado?

Aye.

Aye.

Senator Cobaldon? Aye.

Aye.

Ford is here.

So moved.

Senator Hurtado?

Hurtado, aye.

Aye.

Senator Cabaldon? Aye.

Senator Smallwood-Cuevas?

Smallwood-Cuevas, aye. Four to zero. Okay, the vote is four to zero and item number 13 is out. And thank you everyone for your patience and cooperation and for your input and testimony and thoughtful public comments. We have concluded the agenda for today's hearing, and the Senate Budget and Fiscal Review Subcommittee 4 is now adjourned.