CA Senate Budget Sub 4 agenda, May 19, 2021
Summary
The agenda of Subcommittee No. 4 of the Senate Committee on Budget and Fiscal Review, with Senator Anna Caballero, Chair, for Wednesday, May 19, 2021 at 1:00 p.m. in State Capitol Room 4203. The agenda has an Items for Vote Only section and an Items for Discussion section organized by department, covering topics such as the Franchise Tax Board's Golden State Stimulus outreach funding, the Department of Cannabis Control, Additional Small Business Grants and the Film and Television Tax Credit Expansion. An issue on the Earned Income Tax Credit refers to the American Rescue Plan Act. The agenda closes with a Homeless Hiring Tax Credit issue that carries the recommendation Hold open.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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“CA Senate Budget Sub 4 agenda, May 19, 2021.”
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Subcommittee No. 4 May 19, 2021
Senate Budget and Fiscal Review—Nancy Skinner, Chair
SUBCOMMITTEE NO. 4 Agenda
Senator Anna Caballero, Chair
Senator Sydney Kamlager
Senator Jim Nielsen
Wednesday, May 19, 2021
1:00 p.m.
State Capitol - Room 4203
Consultant: Nora Brackbill, James Hacker, Yong Salas, and Joe Stephenshaw
ITEMS FOR VOTE ONLY
0511 Government Operations Agency (GovOps) ...............................................................3
Issue 1: Census Funding Reappropriation ................................................................................3
0890 Secretary of State ........................................................................................................3
Issue 2: Oral History Program and Preservica Subscription ......................................................3
0950 State Treasurer’s Office (STO) ..................................................................................4
Issue 3: Jesse Unruh Building Relocation Costs .......................................................................4
1701 Department of Financial Protection and Innovation .................................................5
Issue 4: Adjustment to Debt Collector Licensing and Regulation (SB 908) ..............................5
7600 Department of Tax and Fee Administration (CDTFA) .............................................6
Issue 5: Used Motor Vehicle Sales Tax Gap ............................................................................6
7730 Franchise Tax Board (FTB)........................................................................................7
Issue 6: Reappropriation of Golden State Stimulus Outreach Funding......................................7
Issue 7: Earned Income Tax Credit -The American Rescue Plan Act and In-Home Supportive
Services (IHSS) .......................................................................................................................7
Issue 8: FTB Central Office Campus: Data Center Upgrades ...................................................9
7760 Department of General Services ............................................................................... 10
Issue 9: California Commission on Disability Access ............................................................ 10
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Issue 10: Contracted Fiscal Services Workload Increase ........................................................ 10
8940 California Military Department ............................................................................... 11
Issue 11: Santa Rosa: Sustainable Armory Renovation Program ............................................ 11
Issue 12: Los Alamitos: National Guard Readiness Center ..................................................... 11
8955 California Department of Veterans Affairs ............................................................. 12
Issue 13: Federal Veterans Administration Grant ................................................................... 12
Issue 14: Reappropriation ...................................................................................................... 12
ITEMS FOR DISCUSSION
0515 Business, Consumer Services, and Housing Agency ..................................................... 13
Issue 15: Homelessness Proposals ......................................................................................... 13
2240 Department of Housing and Community Development ................................................ 14
Issue 16: HCD Budget Summary ........................................................................................... 14
Issue 17: Major Housing Proposals ........................................................................................ 15
Issue 18: CalHFA Proposals .................................................................................................. 15
0650 Governor’s Office of Planning and Research .......................................................... 16
Issue 19: OPR Budget Summary ............................................................................................ 16
1115 Department of Cannabis Control ............................................................................. 21
Issue 20: May Revise Proposals ............................................................................................. 21
7502 Department of Technology (CDT) ............................................................................ 23
Issue 21: Technology Modernization Funding ....................................................................... 23
8940 California Military Department ............................................................................... 24
Issue 22: Headquarters Complex – Supplemental Appropriation ............................................ 24
0509 Governor’s Office of Business and Development ..................................................... 25
Issue 23: Additional Small Business Grants ........................................................................... 25
Issue 24: Film and Television Tax Credit Expansion ............................................................. 28
7730 Franchise Tax Board................................................................................................. 30
Issue 25: Golden State Stimulus 2.0 ....................................................................................... 30
Issue 26: Homeless Hiring Tax Credit.................................................................................... 34
Pursuant to the Americans with Disabilities Act, individuals who, because of a disability, need
special assistance to attend or participate in a Senate Committee hearing, or in connection with
other Senate services, may request assistance at the Senate Rules Committee, 1020 N Street, Suite
255 or by calling (916) 651-1505. Requests should be made one week in advance whenever
possible.
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ITEMS FOR VOTE-ONLY
0511 GOVERNMENT OPERATIONS AGENCY (GOVOPS)
Issue 1: Census Funding Reappropriation
Request. GovOps Agency requests to reappropriate up to $2.2 million from the 2019 Budget Act
appropriation for residual costs of Census activities.
Background. The 2019 Budget appropriated $87 million for Census activities. This request is
to use the existing funding to cover long-term IT costs of maintaining the Census website and
completing outstanding contract costs for Census. CDT provided estimated costs of maintaining
the Census 2020 website on an annual basis which total $742,000 through 2030. In addition,
Census has $1.5 million in outstanding contract costs for deliverables to be provided after June
30, 2021.
Staff Recommendation. Approve as requested.
0890 SECRETARY OF STATE
Issue 2: Oral History Program and Preservica Subscription
Request. The Secretary of State requests $225,000 General Fund in 2021-22 and ongoing to
reflect of funding for the State Government Oral History Program and digital preservation
subscription services from the State Library to the Secretary of State. This request aligns with a
corresponding reduction to the State Library’s budget by an equivalent amount.
Background. The State Government Oral History program, which is administered by the
California State Archives, has produced more than 200 interviews through partnerships with oral
history programs at California colleges and universities, capturing the stories of California’s
policy makers, legislators, and other key players in state history. The selection process for
previous interviews is nonpartisan, with the goal of illuminating key aspects of California
government history. Going forward, the SOS is creating a more engaging and inclusive State
Government Oral History Program, prioritizing a more diverse group of interviewees, not only
focusing on state officials, but capturing the stories of community leaders and other influential
individuals that are shaping the Golden State. The State Archives is also working to provide
broader access and awareness of the program and the resources that it provides.
Since 2016, the State Archives has utilized a digital preservation subscription to digitally
preserve historic electronic records. With state agencies moving toward paperless environments
and teleworking during the ongoing pandemic, it is anticipated that the State Archives will
receive increasing volumes of legacy electronic records that will be added to a digital
preservation subscription. From 2016 to 2019, the SOS was able to fund a digital preservation
subscription by deferring equipment purchases and utilizing salary savings; however, this was
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not a sustainable long-term solution. In 2018-19, $75,000 was allocated for the SOS’ digital
preservation subscription and funding routed to the State Library’s budget. The SOS maintained
statutory authority over the program and worked diligently with parties involved on an
interagency agreement. Funding was provided to SOS via a reimbursement process, for which
the SOS needed to pay for program costs from existing funds prior to reimbursement. An
interagency agreement was executed in in 2019-20 and was negotiated in May for 2020-21.
Staff Recommendation. Approve as requested.
0950 STATE TREASURER’S OFFICE (STO)
Issue 3: Jesse Unruh Building Relocation Costs
Governor’s Proposal. The May Revision proposes a one-time General Fund augmentation of
$1.2 million for relocation costs necessary to facilitate the renovation of its headquarters, the Jesse
Unruh building located at 915 Capitol Mall in Sacramento. The renovation is part of the State’s
Ten Year Sequencing Plan for the renovation or replacement of state office buildings in
Sacramento.
The proposal also includes the following budget bill language that allows the Department of
Finance, upon notice of the fiscal committees in each house of the Legislature and the Joint
Legislative Budget Committee, to authorize expenditures in excess of the amount requested.
Of the amount provided in this item, $1,222,000 is provided on a one-time basis to cover
the cost of relocating staff and building contents prior to the renovation of the State
Treasury Building. Notwithstanding any other law, the Director of Finance may authorize
expenditures in excess of the amount provided, if deemed necessary but not sooner than 30
days after notification in writing of the necessity therefor is provided to the chairpersons
of the fiscal committees in each house of the Legislature and the Chairperson of the Joint
Legislative Budget Committee, or not sooner than whatever lesser time the chairperson of
the joint committee, or the chairperson’s designee, may in each instance determine.
Background. An infrastructure study (“Infrastructure Study - Jesse Unruh Office Building”),
completed in 2008 and updated in 2013, identified a variety of fire and life safety, building code,
hazardous materials, and other infrastructure deficiencies in the Jesse Unruh Building. A facility
condition assessment completed in 2015 ranked the Jesse Unruh Building fifth in Sacramento and
ninth statewide for state-owned, DGS-controlled office buildings requiring renovation or
replacement.
Due to the invasive nature of the remodeling and renovation, STO staff and its operations are
required to temporarily relocate to the Paul Bonderson building, located at 901 P. St, for the
duration of construction. The STO is scheduled to begin moving in the spring of 2022 and the
project is slated to begin in June 2022, and is estimated to take three years to complete. There is
no alternative to remain in the current building location once renovations begin
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The STO is responsible for all staff (approximately 475) and equipment relocation movement
tasks, and for physical decommission and/or storage of defined office furniture and equipment
related to the vacated Jesse Unruh building.
STO is requesting one-time funding of $1.2 million in General Fund for the purpose of securing
services to perform tasks associated with completing moving activities for office
furniture/equipment, information technology infrastructure, and staff members.
Some of the required activities that must be completed are: tear down and remove modular
furniture cubicles; remove furniture from private offices; remove furniture from conference rooms;
remove contents of vault; disconnect electrical cables; move miscellaneous equipment and
cabinets; the move of 475 staff members’ related office equipment, files, etc.; and relocation of
information technology infrastructure to ensure continuity of operations (e.g. pulling fiber,
network needs, etc.) to the Paul Bonderson building.
Recommendation: Approve as budgeted.
1701 DEPARTMENT OF FINANCIAL PROTECTION AND INNOVATION
Issue 4: Adjustment to Debt Collector Licensing and Regulation (SB 908)
Governor’s Proposal. The May Revision proposes a reduction of the resources included in the
Governor’s Budget to license, examine, and regulate debt collectors under the provisions of SB
908 (Wieckowski), Chapter 163, Statutes of 2020.
The Governor’s Budget proposal requested an increase in expenditure authority of $10.7 million
Financial Protection Fund and 44.0 positions in 2021-22, $10.3 million and 51.0 positions in 2022-
23, and $10.9 million and 55.0 positions in 2023-24. The department requests a reduction in
expenditure authority of $4.9 million and 21.0 fewer positions in 2021-22, $5.3 million and 28.0
fewer positions in 2022-23, and $6.0 million and 32.0 fewer positions in 2023-24. The total net
resources needed to license, examine, and regulate debt collectors is:
$5.8 million and 23.0 positions in 2021-22,
$5.0 million and 23.0 positions in 2022-23, and
$4.9 million and 23.0 positions in 2023-24.
Background. The Governor’s Budget proposal was based on debt collection data provided by the
Consumer Financial Protection Bureau. From this data, it was estimated that the Department would
license approximately 7,000 debt collectors.
Since January 2021, the Department has received additional data from industry experts and other
states. Analysis of this more recent data indicates that the debt collector population in California
may be closer to 3,500 licensees. The data provided by industry included the number of debt
collectors operating in states throughout the nation. When comparing this data to US Census data
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on state population size, there appears to be a relationship between the number of debt collectors
operating in each state and that state’s population. Texas reported 2,372 debt collectors and a
population of 28.9 million. California, with a population of 39.5 million and more robust consumer
protection laws, will likely have closer to 3,500 debt collectors.
The decrease in the expected number of licensees, from 7,000 to 3,500, will reduce the program
workload and the number of staff needed to implement SB 908. This request reduces the number
of staff and the expenditure authority needed to license and regulate debt collectors.
The implementation of the Debt Collector program is intertwined with the resources the
Department received beginning in 2020-21 to register and oversee the new entities covered under
the California Consumer Financial Protection (CCFP) program. Debt collectors are a subset of
these expected new registrants and, as a result, some resources are being redirected from the CCFP
program to the Debt Collector program.
The subcommittee heard the Governor’s budget proposal on February 10 th.
Recommendation: Approve as budgeted.
7600 DEPARTMENT OF TAX AND FEE ADMINISTRATION (CDTFA)
Issue 5: Used Motor Vehicle Sales Tax Gap
Governor’s Proposal. The May Revision proposes $5.9 million General Fund in fiscal year 2021-
22 to reimburse the Department of Motor Vehicles (DMV) for the costs associated with the passage
of Chapter 8 of the Statutes of 2020 (AB 85) and Chapter 14 of the Statutes of 2020 (AB 82).
Background. To increase compliance among the industry, AB 85 and AB 82 were passed to
require used motor vehicle dealers to pay sales tax on their retail sales of vehicles at the same time
they submit a vehicle registration application. The CDTFA and the DMV are required by law to
partner to collect and administer the sales tax for used motor vehicle dealers, decreasing the sales
tax gap.
The CDTFA and the DMV have partnered as prescribed by AB 85 and AB 82. Used car motor
vehicle dealers affected by this new law will be required to pay the sales tax directly to the DMV
upon registering a motor vehicle. This will increase the likelihood that the sales tax will be paid
since used motor vehicle dealers are required to register motor vehicles associated with their in-
state retail sales. The DMV will provide reports indicating which vehicles have unpaid sales tax
so that the CDTFA can issue department assessed billings.
The CDTFA requests $5.9 million in 2021-22 to reimburse the DMV to develop and implement
an information technology (IT) solution ($4.4 million) to collect use tax from used motor vehicle
dealers and for the costs of administering this program ($1.5 million). Additionally, provisional
language is being requested making $2.15 million of the $4.4 million requested for the IT solution,
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contingent upon submittal and approval of the appropriate Project Lifecycle documents by Finance
and the Department of Technology, and after appropriate Joint Legislative Budget Committee
notification. The DMV is requesting $3.75 million in reimbursement authority for the costs
associated with the design of the IT solution and the administration of the program. The DMV will
conduct an industry assessment of used motor vehicle dealers and other program stakeholders to
develop and design the automated use tax collection process to ensure that the sales tax collection
process is effective and efficient for all impacted parties. The requested resources include one-
time staff and consultant costs to develop business requirements, perform project management
duties, implement Report of Sale System enhancements, and other automation efforts to meet the
business requirements developed by the program stakeholders. The requested resources also
include administration of this program and the additional workload associated with the collection
of use tax from approximately 2,500 used motor vehicle dealers that submit 497,000 transactions
annually to the DMV.
Without funding to reimburse the DMV for its costs, the CDTFA will not be able to successfully
implement this new law. These efforts will help address the sales tax gap known in the used motor
vehicle dealer industry and will result in an increase in sales tax revenue.
Recommendation: Approve as budgeted.
7730 FRANCHISE TAX BOARD (FTB)
Issue 6: Reappropriation of Golden State Stimulus Outreach Funding
Governor’s Proposal. The May Revision proposes to reappropriate $2 million or whatever greater
or lesser amount of the unexpended outreach funds appropriated to the FTB by AB 81 (Ting),
Chapter 5, Statutes of 2021, for the continued provision of outreach for the Golden State Stimulus.
Background. AB 81 appropriated $5 million from the General Fund to the FTB to be allocated to
existing California Earned Income Tax Credit for outreach contracts to provide increased
awareness of the Golden State Stimulus.
Recommendation: Approved as budgeted.
Issue 7: Earned Income Tax Credit -The American Rescue Plan Act and In-Home
Supportive Services (IHSS)
Governor’s Proposal. The May Revision proposes $2.8 million General Fund, one-time, and 45.0
permanent-intermittent positions in 2021-22 to allow FTB to proactively provide assistance to
those taxpayers who have already filed a return and are impacted by the retroactive provision
enacted in the American Rescue Plan Act (ARPA) and a recent opinion issued by the Office of
Tax Appeal (OTA) related to what qualifies as earned income for the purposes of computing the
California Earned Income Tax Credit (CalEITC).
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Background. There were recently two changes that impacted the calculation of CalEITC, Young
Child Tax Credit (YCTC), and potentially the Golden State Stimulus payments:
1. The ARPA was signed into law on March 11, 2021. One of the provisions of the ARPA
was a federal income exclusion of up to $10,200 ($20,400 for Married Filing Joint) of
Unemployment Insurance (UI) income received in the 2020 tax year. This would result in
a lowering of the taxpayers federal Adjusted Gross Income for the year, which is the
starting income for California’s EITC. For federal purposes, the IRS has committed to
proactively assisting taxpayers who have already filed a return to correct their federal EITC
without requiring them to file an amended return. For taxpayer’s who have filed a return
but did not originally claim the federal EITC, taxpayers are required to file a federal
amended tax return. FTB is proposing to adopt the IRS treatment. For taxpayers who have
already filed a return and claimed the CalEITC, FTB will allow the proper amount of
CalEITC onto these accounts without action from the taxpayer, where possible. For those
that have already filed a return and are now eligible for the CalEITC for the first time, FTB
will work with these taxpayers as desired to file an amended return.
FTB has identified almost 1 million taxpayers (as of 4/14/21) who have already filed a
California tax return for the 2020 tax year and the CalEITC may be misstated due to this
issue. Of these taxpayers, over 600,000 have claimed the CalEITC and have UI income.
Due to the newly enacted federal law provision excluding UI income, these taxpayers may
now qualify for a larger CalEITC or YCTC. As possible, FTB will adjust these taxpayers’
accounts and issue any additional refunds.
For another 300,000 plus taxpayers who did not claim the CalEITC on their original return,
but now might qualify for the credit, FTB will notify these taxpayers, and where
appropriate, provide FTB Form 3514 (California Earned Income Tax Credit) to claim the
refund.
2. In a recent OTA decision, it was held that certain IHSS payments can be included as earned
income for purposes of determining the CalEITC at the taxpayer’s election.
FTB has identified about 100,000 taxpayers who have already excluded the IHSS income
from the CalEITC calculations, which now can be included as earned income. This includes
tax returns that have an open statute at this point in time. As possible, FTB will assist these
taxpayers to correct their CalEITC computation with an amended FTB Form 3514.
In addition, FTB has potentially identified another 100,000 taxpayers who did not claim
the CalEITC on their original return, but now might qualify for the credit as a result of this
decision. FTB will notify these taxpayers, and where appropriate, allow taxpayers to
provide FTB Form 3514 (California Earned Income Tax Credit) to claim their refund.
The requested resources are needed in order for FTB to issue the correct refunds to the most
vulnerable Californians quickly without adding financial burden and hardship to these individuals.
Recommendation: Approved as budgeted.
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Issue 8: FTB Central Office Campus: Data Center Upgrades
Governor’s Proposal. The May Revision $1.6 million General Fund for Preliminary Plans
($680,000) and Working Drawings ($937,000) phases in 2021-22. The project includes upgrades
to the existing data center within the existing Los Angeles building and Sacramento building;
HVAC systems and controls, upgrade of the entire electrical infrastructure, fire protection
upgrades, telecommunication upgrades and mechanical system upgrades to achieve mandated
energy efficiency requirements.
Background. The FTB Data Center is a continuous operation that houses critical IT infrastructure
allowing FTB to maintain day-to-day operations and generate revenue for the State of California.
FTB currently maintains a Tier III equivalent Data Center, indicated in SAM Section 4982.1,
which is housed in two locations in FTB’s Sacramento Central Office Campus in Sacramento. The
Los Angeles Building Data Center, was commissioned in 1985 and the Sacramento Building Data
Center, was commissioned in 2005. The total space of the two locations encompasses
approximately 26,000 square feet.
As a Tier III equivalent Data Center, FTB requires perpetual, uninterrupted power and cooling.
FTB Data Centers currently do not meet numerous required California executive orders and
statewide energy efficiency mandates. Resources requested in this will allow FTB to comply with
these standards.
The FTB Data Center is an interminable operation that houses critical IT infrastructure necessary
for FTB to provide critical services to California taxpayers. FTB’s return and payment processing
systems have a goal of zero downtime because they are utilized by California taxpayers and almost
6,000 FTB staff in processing 21 million returns and 14 million payments per year and serve FTB
compliance and service functions.
As technology has advanced, the data center equipment has become more efficient and requires a
smaller footprint. As a result, much of the current raised floor space has become vacant creating
an inefficient operating environment. These factors impede the FTB from meeting the Governor’s
executive order and related statewide energy saving mandates.
In the FTB Data Center located on our Sacramento, CA campus, much of the equipment that
supports the Data Center is out of date and at or approaching end of life (EOL). EOL equipment
is no longer supported by the manufacturer and presents a risk of failure to the department. The
Los Angeles infrastructure is 36 years old and the Sacramento infrastructure is 16 years old.
Neither have had any significant upgrades and both need to be refreshed. In 2020 alone, FTB
experienced 19 incidents due to aging equipment.
In order to ensure that stable and reliable IT services are delivered to California taxpayers, FTB
requires uninterrupted Data Center operations that meet statewide energy mandates, and address
current deficiencies related to aging equipment.
Recommendation: Approved as budgeted.
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7760 DEPARTMENT OF GENERAL SERVICES
Issue 9: California Commission on Disability Access
Request. DGS requests an increase of $99,000 General Fund to allow the California
Commission on Disability Access to expend its share of fee revenues collected over fiscal years
2015-16 through 2019-20.
Background. Government Code section 68085.35 was added by Chapter 755, Statutes of 2015
to require that of each $1,000 high-frequency litigant fee collected pursuant to Government Code
section 70616.5, $500 shall be distributed to the General Fund for use by the Commission, upon
appropriation by the Legislature, to supplement the Commission’s existing program funding.
Staff Recommendation. Approve as requested.
Issue 10: Contracted Fiscal Services Workload Increase
Request. The Department of General Services (DGS), Contracted Fiscal Services requests
$300,000 in ongoing authority comprised of the following funds: General Fund ($171,000) and
Central Services Cost Recovery Fund ($129,000). Additionally, DGS requests two positions to
provide administrative services for a new client, the Office of Energy Infrastructure Safety
(OEIS).
Background. OEIS is moving from the California Public Utilities Commission to the California
Natural Resources Agency. The workload associated with providing budgeting and procurement
services for OEIS will be absorbed within existing resources. Considering the size of the funds,
amount of transactions, and complexity of accounting, the workload associated with providing
accounting services cannot be absorbed within existing staff resources.
This proposal requests two positions to assume OEIS’ accounting workload. These positions will
enable DGS to effectively onboard and transition the requisite functions of this new client
agency and ensure that all operational and regulatory requirements are met without delay.
Staff Recommendation. Approve as requested.
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8940 CALIFORNIA MILITARY DEPARTMENT
Issue 11: Santa Rosa: Sustainable Armory Renovation Program
Request. The Military Department requests to withdraw the Santa Rosa: Sustainable Armory
Renovation project.
Staff Recommendation. Approve the withdrawal.
Issue 12: Los Alamitos: National Guard Readiness Center
Request. Due to multiple barriers in developing an agreement that suited both federal and state
joint use needs and additional contracting issues, it is requested that the remaining funds for the
acquisition and design-build phase for the California Office of Emergency Services and the
California Military Department (CMD) joint Los Alamitos: Southern Region Emergency
Operations Center funds be reverted, resulting in a reversion of $26,842,000 from design-build
and $190,000 from acquisition. This project will be discontinued.
Background. This project was originally approved in the Budget Act of 2016 to replace the
current Southern Region Emergency Operations Center, located on federally-owned real
property used by the Governor’s Office of Emergency Services (Cal OES) and the CMD in Los
Alamitos. The intent was to build a joint use facility that would include the Southern Region
Emergency Operations Center and a Los Alamitos armory for CMD.
The project has experienced delays and significant challenges related to securing appropriate real
property rights, as the project site is located on a larger property, which is owned by the U.S.
Department of the Army. CMD’s current use of the project site is from a license which is
terminable at the will of the U.S. Department of the Army, and only provides a personal property
right as opposed to a real property right. Therefore, this project is being canceled, the funds are
requested to be reverted and the planned joint-facility project discontinued.
Background. Approve the reversion of the funds.
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8955 CALIFORNIA DEPARTMENT OF VETERANS AFFAIRS
Issue 13: Federal Veterans Administration Grant
Request. The California Department of Veterans Affairs (CalVet) requests a one-time
augmentation of $7,725,000 Federal Trust Fund from the United States Department of Veterans
Affairs (VA) through the Consolidated Appropriations Act, 2021 (Public Law 116-260) for State
Veterans Homes. The funding will be used to support efforts to prevent, prepare for, and respond
to COVID-19 in CalVet’s eight Veterans Homes of California.
Staff Recommendation. Approve as requested.
Issue 14: Reappropriation
Request. CalVet requests to use deferred maintenance funding from the 2018 Budget Act to
make Americans with Disabilities Act renovations to two restrooms at the Yountville Veterans
Home. CalVet also requests to reappropriate funds to complete upgrades to a nurse call system
at the Yountville Veterans Home.
Staff Recommendation. Approve as requested.
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ITEMS FOR DISCUSSION
0515 BUSINESS, CONSUMER SERVICES, AND HOUSING AGENCY
Issue 15: Homelessness Proposals
May Revision. The May Revision includes $4.7 billion in proposals for homelessness. This is in
addition to the $2.1 billion in investments proposed in the Governor’s Budget, for a total 2021-22
homelessness package of $6.8 billion. This includes the following:
● Homekey Family Housing—$2.75 billion one-time funds over two years for the additional
acquisition and rehabilitation of facilities through the Homekey program. Of this amount,
$1 billion is targeted for families experiencing homelessness or at risk for being homeless.
This increases the $750 million proposed in January, for a total of $3.5 billion over two
years.
● Challenge Grants & Technical Assistance—$40 million one-time General Fund available
over 5 years, for the Homeless Coordinating Financing Council to provide grants and
technical assistance to local jurisdictions to develop action plans that will address family
homelessness and move the state closer to attaining functional zero family homelessness.
● Department of Social Services Homelessness Supports—The May Revision includes $475
million General Fund in both 2021-22 and 2022-23 to expand the existing CalWORKs
Housing Support program.
● Behavioral Health Continuum Infrastructure—The Governor’s Budget proposed $750
million one-time General Fund for competitive grants to qualified entities to construct,
acquire, and rehabilitate real estate assets to expand the community continuum of
behavioral health treatment resources. The May Revision increases the Governor’s Budget
proposal by $10 million Coronavirus Fiscal Recovery Fund (CFRF) and shifts $300 million
General Fund to the CFRF. In addition, the May Revision includes $1.4 billion ($1.2 billion
General Fund and $220 million CFRF) for the program in 2022-23.
● The May Revision includes $150 million one-time General Fund to support the stability of
the state’s FEMA-funded non-congregate shelter population and transition of individuals
from Project Roomkey into permanent housing following the September 2021 sunset of
the federal reimbursement availability from the pandemic.
● The May Revision includes $53 million in one-time General Fund resources to coordinate
encampment outreach services to connect individuals living along California's streets and
freeways with critical services, supports, and housing solutions. This includes:
○ Encampment Resolution Grants—$50 million one-time General Fund for the
Homeless Coordinating and Financing Council (HCFC) to partner with local
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governments and assist them with resolving critical encampments and transitioning
individuals into permanent housing.
○ Caltrans Encampment Coordinators—$2.7 million one-time General Fund for
Caltrans Encampment Coordinators to mitigate safety risks at encampments on
state property and to coordinate with the HCFC and local partners to connect these
individuals to services and housing. These resources will also help Caltrans
coordinate with the cleaning of trash and debris from encampment sites and
inspection of encampment sites for potential damage to Caltrans infrastructure.
● The May Revision includes $5.6 million one-time General Fund for HCFC to conduct an
assessment of local homelessness service providers and state funded homelessness
programs. The assessment will provide a detailed view of the range of services and
strategies that are utilized at the local level and help determine if state investments are
aligned with local homelessness response systems.
● Additional Funding at the Department of Social Services and Department of Healthcare
Services is covered in Subcommittee 3 on Health and Human Services.
Staff Recommendation: Hold Open.
2240 DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT
Issue 16: HCD Budget Summary
Proposal. The May Revision includes a number of budget proposals and the Department of
Housing and Community Development. Specifically, it include:
● Housing Law Assistance: IT Component—The May Revision includes $360,000
General Fund in fiscal year 2021-22 and ongoing to develop and operate a case
management system at the Department of Housing and Community Development (HCD)
to assist local governments in complying with housing element laws. This effort would be
part of HCD’s new accountability unit, as proposed in the Governor’s Budget.
● One-Time Deferred Maintenance—The May Revision includes $20 million in 2021-22
for remaining critical repairs and deferred maintenance needs at Office of Migrant Service
Centers. This brings the total proposed in the 2021-22 budget to $30.1 million.
● Foster Care Transitional Housing Extension—The May Revision includes $4 million in
2022-23 and $8 million General Fund ongoing to provide funding to support county
transitional housing services for young adults, with a priority on serving former foster
youth between the ages of 18 to 25.
Senate Committee on Budget and Fiscal Review 14
Subcommittee No. 4 May 19, 2021
Staff Recommendation: Hold Open.
Issue 17: Major Housing Proposals
Proposal. The May Revision includes $2.6 billion in one-time resources for a variety of major
housing proposals. These include:
● Affordable Housing Backlog - $1.75 billion one-time federal ARPA funds to help support
HCD affordable housing projects that qualified for, but did not receive, low income
housing tax credits and tax-exempt private activity bonds. This funding would serve as a
replacement for the financing provided by said tax credits and bonds. This could help
roughly several thousand units of shovel-ready affordable housing move forward quickly
rather than waiting for a potential future tax credit.
● Scaling Excess Sites Development–Housing Infrastructure—The May Revision
includes $45 million Coronavirus Fiscal Recovery Fund of 2021 in 2021-22 to expand the
state excess sites program to incentivize further affordable housing development on state
excess lands.
● Planning and Implementation Grants - $500 million one-time federal ARPA funds for
HCD to provide additional planning and implementation grants to regional entities for infill
developments, targeted towards the state’s climate goals and reducing vehicle miles
traveled.
● Affordable Housing Preservation - $300 million one-time federal ARPA funds to sustain
and preserve HCD legacy projects affordability requirements by funding affordability
requirements and other preservation or rehabilitation activities.
Staff Recommendation: Hold Open.
Issue 18: CalHFA Proposals
Proposal. The May Revision includes roughly $200 million in resources for several housing
programs at the California Housing Finance Authority (CalHFA). These include:
● An additional $81 million one-time federal ARPA funds to expand CalHFA’s ADU
program to inject a total of $100 million in available financing for ADUs. Accessory
Dwelling Units (ADUs) have become an increasingly popular and cost-efficient tool to
create needed housing. AB 101 (Committee on Budget), Chapter 159, Statutes of 2019
Senate Committee on Budget and Fiscal Review 15
Subcommittee No. 4 May 19, 2021
provided $19 million General Fund for CalHFA to finance ADUs for low- and moderate-
income households, which is anticipated to begin in July 2021. The additional $81 million
one-time federal ARPA funds requested here would expand CalHFA’s ADU program to
inject a total of $100 million in available financing for ADUs. Because ADUs have quicker
local approvals, this proposal could further expedite low-cost production and more quickly
increase the housing units statewide.
● $100 million one-time federal ARPA funds to CalHFA to expand its First Time Homebuyer
Assistance Program, which helps first-time homebuyers with making a down payment,
securing a loan, and paying closing costs on a home. The May Revision proposes to expand
the program to lower-income households and expand CalHFA’s lender network to help
address the wealth gap, particularly in disadvantaged areas throughout the state.
Staff Recommendation: Hold Open.
0650 GOVERNOR’S OFFICE OF PLANNING AND RESEARCH
Issue 19: OPR Budget Summary
Proposal. The May Revision includes several proposals at the Office of Planning and Research.
These include:
● Climate Resiliency Package - The Administration’s Climate Resiliency Package includes
several proposals at OPR. The total amount of these proposals is $481 million over three
years. These proposals were also heard in Budget Subcommittee 2 on Resources,
Environmental Protection and Energy on May 18th.
○ Transformative Climate Communities. $140 million per year for three years ($420
million General Fund) for the existing Transformative Climate Communities
program. The program is administered by the Strategic Growth Council (SGC)
funds the development and implementation of neighborhood–level community
plans that include multiple projects to reduce greenhouse gas emissions. This
program has previously funded grants to eight communities. The Governor’s
proposal would allow the program to fund grants to additional communities, but
SGC has not specified a number of new grants. This spending is considered to be
local assistance capital outlay and is excluded from the state appropriations limit
(SAL).
○ Regional Climate Collaboratives. $10 million General Fund per year for two years
to this existing program that provides technical assistance and start-up grants to
community groups to build the expertise, partnerships, and local capacity necessary
to develop successful applications for state funding programs.
Senate Committee on Budget and Fiscal Review 16
Subcommittee No. 4 May 19, 2021
○ Adaptation and Planning Grants. $25 million General Fund over two years for the
Integrated Climate Adaptation and Resiliency Program (ICARP). These funds
would support local and regional planning needs.
○ Vulnerable Communities Platform & CalAdapt Mapping. $5 million for ICARP to
fund the development of new data visualization tools.
○ Fifth Climate Assessment. $11 million to fund OPR’s workload in preparing the
Fifth Climate Assessment.
● Student Success Coach Grant Program—The May Revision includes $15 million one-
time to create a grant program that will establish student success coaches in communities
to nurture relationships with K-12 students and collaborate with teachers to help prepare
students with skills to achieve their goals.
● Precision Medicine: Adverse Childhood Experiences (ACEs)—The May Revision
includes $12,415,000 one-time to expand ACEs research which assists in detecting toxic
stress to prevent long-term health impacts of youth homelessness. It is also requested that
provisional language be added to specify that the resources provided are available for
encumbrance or expenditure until June 30, 2026 .
● California Climate Action Corps State Service Program—The May Revision includes
$4,683,000 and 5 positions in 2021-22, decreasing to $823,000 ongoing, to create service
opportunities to take on climate action such as urban greening, food waste recovery, and
wildfire prevention.
● California Volunteer’s Statewide Emergency Response Framework—The May
Revision includes $1,324,000 and 7 positions ongoing to maintain an emergency response
framework to prepare and train for future disaster response.
● Californians For All College Service Program—The May Revision includes $285.2
million one-time to create the Californians For All College Service Program in partnership
with the University of California, California State University system, and California
Community Colleges. This program will provide 12,500 part-time service opportunities to
college students in critical issue areas such as climate action, education and youth
development, specifically tutoring and mentoring, health, and disaster response. This
includes provisional language to specify that the resources provided are available for
encumbrance or expenditure until June 30, 2024. This proposal was also heard in Budget
Subcommittee 1 on Education on May 18th.
● Regional K-16 Education Collaboratives—The May Revision includes $250 million
one-time to provide support for a regional K-16 education collaborative grant program to
promote educational alignment across institutions and workforce and economic
development in specific regions. This request also includes provisional language to specify
Senate Committee on Budget and Fiscal Review 17
Subcommittee No. 4 May 19, 2021
the qualifications of the grant program. This proposal was also heard in Subcommittee 1
on Education on May 18th.
● Science, Technology, Engineering, and Mathematics (STEM) Teacher Recruitment
Grants—IThe May Revision includes $3 million one-time to provide grants to help recruit
STEM professionals into the teaching profession by connecting them with teaching,
tutoring, and speaking opportunities in K-12 schools. These grants are intended to address
the shortage of STEM teachers in California by providing learning and training
opportunities for potential future teachers, especially in under-resourced communities.
This request includes provisional language to specify the use of funds for these grants.
● Youth Workforce Development Program—The May Revision includes $200 million
one-time for grants to cities or counties to create or expand youth volunteer and job
opportunities. The funding, which will be administered by California Volunteers, will be
provided both directly to large cities on a per capita basis and to other cities and counties
through a competitive grant process. The goal of this funding is to increase employment
opportunities, such as part-time work or summer jobs, for youth to provide them an
opportunity to gain valuable work experience.
LAO Comments.
Climate Resilience
● Previous LAO Comments on Climate Resilience Proposal. We reiterate our previous
comments on the Governor’s climate resiliency package. To ensure the ultimate package
the Legislature adopts is coordinated, strategic, and comprehensive, we recommend
considering this package in tandem with other proposed packages—such as those related
to water, cap-and-trade, wildfire, and disaster preparedness—so that, in combination, all of
the Legislature’s climate-related priorities are reflected at its desired levels. Given the
magnitude of the spending and number of activities being proposed, the Legislature may
want to defer decisions on this package until later in the summer. This would allow to the
Legislature time to (1) learn more about the Governor’s proposals—especially for
programs and initiatives that are being proposed for the first time; (2) craft implementing
statutory language to ensure sufficient oversight and accountability (such as program
eligibility and prioritization criteria and data to be collected); and (3) incorporate key
legislative priorities, such as components of climate bond proposals that the Legislature
has been considering. Some key factors to consider:
● Are there certain activities or areas of focus that are high priorities for the Legislature that
are not included or sufficiently emphasized in the Governor’s package? For example, the
two legislative bond proposals include significantly more funding for activities to respond
to the threat of sea-level rise compared to the Governor’s package.
● What type and amount of support should the state provide for local governments as
compared to focusing on state-level activities and assets?
Senate Committee on Budget and Fiscal Review 18
Subcommittee No. 4 May 19, 2021
● What are the overall outcomes the state is seeking, and how will it know whether those
objectives are achieved? Should there be any additional focus on identifying and measuring
outcomes?
Higher Education California Volunteers Proposals
● California Volunteers: College Service Program. Provides $285 million ($239 million
American Rescue Plan and $46 million General Fund) one-time to support service
opportunities for documented and undocumented students at CCC, CSU, and UC.
● Key Information Lacking. The administration has not clarified many fundamental aspects
of this proposal, such as the problem the initiative is trying to address and how the initiative
would be evaluated. Moreover, it is unclear how this new program would interact with the
state's numerous financial aid programs. One existing program—the Dreamer Service
Incentive Grant program in CSAC—supports similar activities for financially-needy
undocumented students.
● Regional K-16 Education Collaboratives. Provides $250 million General Fund to establish
between five and eight regional collaboratives comprised of K-12 schools, community
colleges, and universities. The collaboratives would focus on developing streamlined
academic pathways that align with regional workforce needs.
● Reject. The state already provides education agencies billions of dollars annually to educate
students, coordinate their academic programs, and produce workforce-aligned degrees and
credentials. The administration has not justified the need for further funding to accomplish
these objectives.
Youth Workforce Development
● $200 Million Federal Funds For Local Assistance Grants. The May revision includes
$200 million in federal fiscal relief funds to make grants to local governments to develop
part-time summer employment service opportunities for youth. $150 million would be
allocated among the state’s 13 largest cities according to a population-based formula.
Counties and smaller cities would competitively apply for the remaining $50 million.
Grants would require a 1:1 match.
● Many Cities Have Successful Existing Programs With Similar Objectives. Providing
employment and service opportunities for youth has a variety of positive benefits ranging
from workforce development, to increasing civic engagement, to reducing youth
homelessness. Many California cities have successful programs that are administered by
public agencies or nonprofit organizations to increase employment and service
opportunities for the youth in their communities.
● Allocate All Grants Competitively. The Governor proposes to allocate most of the funds
based on a formula that would benefit cities that already have successful youth workforce
development programs. We think that it is important to consider how this new program
Senate Committee on Budget and Fiscal Review 19
Subcommittee No. 4 May 19, 2021
should relate to these existing programs. While additional funds would likely allow those
cities to improve or expand their existing programs, it is not clear that this would be the
best use of the funding. Perhaps these funds might be better used to incentivize other cites
to create or significantly improve such programs. Awarding all of the funds on a
competitive basis would allow for the best proposals to receive funding.
● No Direct AmeriCorp Nexus. California Volunteers has not clearly articulated a strong
justification for its role in administering these grants. While California Volunteers has
some administrative capacity for grant making, it’s expertise is in administering the federal
AmeriCorps program.
● Consider Providing Technical Assistance to Smaller Cities. Cities with successful
existing programs likely will be well-positioned to apply for and receive additional grant
funding. However, under-resourced cities might have a great need for these grants.
● Reconsider Proposal Timing. California Volunteers indicated a desire to get funds
distributed quickly and to perhaps provide grants for cities to use for the summer of 2021.
However, that time frame is unrealistic for two reasons. First, our understanding that many
local governments already have finalized their summer programing. Second, many local
governments would not have time to prepare their grant application between the time the
Budget Act is signed and the end of summer. Approving funds now to be allocated for
programs in summer 2022 would allow time for the grant program to be more fully
developed and marketed. It also would allow more time for local governments to prepare
their applications and get approval from their elected leadership.
Other California Volunteers Proposals
● No Concerns with Student Success Coaching Proposal. The Student Success Coach Grant
program would be established with $15 million one-time General Fund to create a new
focused AmeriCorps program targeting service at K-12 schools.
● No Concerns with California Climate Action Corps State Service Program. $4.7 million
General Fund for three years and then $823,000 ongoing to create service opportunities for
activities related to climate change mitigation. This proposal would expand the California
Climate Action Corps pilot program and establish it as an ongoing program.
● Reject STEM Teacher Recruitment. The STEM Teacher Recruitment Grant program
would be established with $3 million one-time General Fund to connect STEM
professionals with teaching, tutoring, and speaking opportunities in K-12 schools. We
recommend rejecting this proposal because it is disconnected from the state’s broader
teacher recruitment activities. The Commission on Teacher credentialing has historically
received a significant amount of funding for teacher recruitment, especially for the science,
technology and math fields.
Senate Committee on Budget and Fiscal Review 20
Subcommittee No. 4 May 19, 2021
● No Concerns with Statewide Emergency Response Framework. $1.3 million 7 positions
General Fund ongoing to maintain an emergency response framework to prepare and train
for future disaster response.
Precision Medicine
● No Concerns with Restoring Funding for Adverse Childhood Experiences (ACEs).
Previously budgeted funding for competitive grants for ACEs research was reallocated last
year from the California Initiative to Advance Precision Medicine (CIAPM) to address the
anticipated state budget problem. This proposal would restore $12.4 million to support
CIAPM.
Staff Recommendation: Hold Open.
1115 DEPARTMENT OF CANNABIS CONTROL
Issue 20: May Revise Proposals
Request. The May Revision proposal for cannabis includes the following:
Cannabis Equity and Inclusion Deputy Director Position. Creates a Deputy Director
of Equity and Inclusion to further the Department’s mission to implement progressive
cannabis policies and license and regulate commercial cannabis activity in a way that best
protects public health, safety, the environment, and local communities throughout the
state.
Cannabis Local Jurisdiction Assistance Grant Program. Includes $100 million one-
time General Fund for a grant program to assist local jurisdictions that have high numbers
of provisional licenses obtain California Environmental Quality Act compliance required
for annual licensure.
Provisional license program, among other statutory changes. Proposing additions to
the statutory changes put forward earlier this year. Chief among these is language to
extend the Department’s ability to issue new provisional cannabis licenses by six months,
to July 1, 2022, make explicit environmental compliance requirements before annual
licensure, and require the Department to promulgate regulations identifying steps that
must be taken for provisional licensees to show progress toward achieving annual
licensure. As of early April 2021, approximately 82 percent of the state’s cannabis
licensees held provisional licenses. Absent this extension, it is possible that a significant
number of these licensees could fall out of the legal cannabis system, significantly
curtailing the state’s efforts to facilitate the transition to a legal and well-regulated
market.
Senate Committee on Budget and Fiscal Review 21
Subcommittee No. 4 May 19, 2021
Sustainable California Grown Cannabis pilot program. Includes $9 million one-time
General Fund to collect data to establish best practices in: (1) reducing the environmental
impact of cannabis water and energy use; (2) pest management and fertilizer practices;
and (3) enhancing soil health.
Provisional language for transition period until new department is established.
Allows the Business, Consumer Services, and Housing Agency to act on behalf of the
new Department until the appropriate staff are hired, and also provides language that
helps transition positions from the three legacy departments to the new Department of
Cannabis Control.
Staff Comment. At its February 24 hearing, this Subcommittee discussed the Administration’s
proposal to consolidate the three cannabis licensing entities into one standalone department.
Provisional Licenses. The May Revise proposal folds in language similar to provisions in SB 59
(Caballero) regarding provisional licenses into the Administration’s proposal by extending the
sunset of the provisional licensing program to June 30, 2022 and removing the sunset of
provisional licenses issued prior to 2022. Additionally, the new proposed language exempts the
Attorney General’s office from representing the department during certain proceedings, and also
exempts certain statutes from the Administrative Procedures Act.
Cannabis Local Jurisdiction Assistance Grants. The Cannabis Local Jurisdiction Assistance
Grant program directs resources to the eight jurisdictions with the most provisional cultivation,
manufacturing, distribution, testing, microbusiness, and/or retail licenses issued, and provides
additional support to these identified jurisdictions who also have local equity programs. These
jurisdictions can use the funds for the following:
Review, technical support, and certification for application requirements.
Local government or other professional preparation of environmental documents in
compliance with the California Environmental Quality Act for permits, licenses, or other
authorizations to engage in commercial cannabis activity.
Mitigation measures related to environmental compliance, particularly those that promote
efficient water use and water conservation measures.
Other uses that further the intent of the program as determined by the Department of
Cannabis Control.
This grant program is intended to maintain stability across the supply chain and distributes these
one-time resources to a significant number of jurisdictions implementing local equity programs,
transitioning larger populations of legacy operators to the regulated market, and/or that are
located in areas rich in natural resources and require additional capital to meet environmental
compliance standards.
Other proposals. The May Revision also includes resources for the Sustainable California
Grown Cannabis Pilot Program, and a deputy director for cannabis equity and inclusion.
Senate Committee on Budget and Fiscal Review 22
Subcommittee No. 4 May 19, 2021
Legislative Analyst’s Office. “This proposal raises a number of issues for the Legislature to
consider, including:
Whether it is appropriate to use the General Fund to offset local costs that are
normally covered with local fees and/or licensees’ private funds.
Whether it is appropriate to subsidize the costs of annual licensure for only a portion
of licensees.
Whether structuring the program as a loan rather than a grant would be more
appropriate.
How DCC would ensure funding is prioritized for licensees who would not otherwise
be able to transition into an annual license.
How DCC would ensure that funding is allocated to licensees who are likely to be
able to operate successfully for the long-term.
How DCC will ensure jurisdictions that receive funds will fully pursue other avenues
of expediting the transition to annual licenses rather than relying solely on state grant
funds.
What activities DCC would authorize funds be used for beyond those explicitly
identified in the proposal.”
Staff Recommendation. Hold open.
7502 DEPARTMENT OF TECHNOLOGY (CDT)
Issue 21: Technology Modernization Funding
Request. CDT requests a one-time $50 million General Fund, available over three years, to
provide funding for an estimated 10 to 25 system stabilization improvements and solutions.
Background. According to the department, “during the COVID-19 pandemic, the state proved
it can deliver and stabilize critical state services in days and weeks, rather than the months and
years it normally takes to deliver IT projects. The availability of COVID-19 funding outside of
the standard budget process was a major factor contributing to these successes.
“Existing IT funding requests are subject to state budget and legislative processes. The budget
process is based on a standardized timeline that is not conducive to providing funding for IT
solutions in a timely manner. If approved, this proposal would provide a resource enabling the
timely funding of smaller and iterative modernization efforts without losing necessary oversight.
One example of the problem posed by the current IT funding timeline surfaces when
departments, in response to security audit and assessment findings or urgent threats, must wait to
implement security solutions as requests for funding move through the budget process. Another
example is when departments complete the market research and alternative analysis portions of
Senate Committee on Budget and Fiscal Review 23
Subcommittee No. 4 May 19, 2021
the Project Approval Lifecycle (PAL), but due to timing, may miss the window to submit a
funding request for the budget year.”
Proposed provisional language will also require CDT to report to the Legislature biannually on:
the use of funds, the progress of funded projects, the status and results of system assessments, as
well as the contents of the prioritized list. The department stated that projects less than $10
million would be eligible and would be determined after its Stage 1 business analysis document
is submitted to the Department of Technology.
Staff Comment. The Administration’s request proposes to remove standard legislative
oversight from IT projects that would normally go through the budget process. This year, the
Senate has adopted modernization projects with budget bill language that releases funds upon
approval of project documents to better align the PAL process with the budget process and help
alleviate some of the timing issues raised in this proposal.
Additionally, the 2019 Budget established the Office of Digital Innovation (ODI), and along with
it, $20 million for a continuously appropriated revolving fund called the Digital Innovation
Services Revolving Fund. The mission of ODI is to “deliver better government services to the
people of California through technology and design,” and is authorized to deliver services
including IT products. The revolving fund may be used to cover costs associated with approved
IT projects. If an IT project is submitted to the Administration with such urgency that it
necessitates bypassing legislative oversight, the Administration has alternative options it can
exercise to fund such endeavors.
Staff Recommendation. Hold open.
8940 CALIFORNIA MILITARY DEPARTMENT
Issue 22: Headquarters Complex – Supplemental Appropriation
Request. The California Military Department (CMD) requests a supplemental appropriation of
$25,855,000 one-time General Fund for the design-build phase of the Sacramento: Consolidated
Headquarters Complex project. The additional funds are necessary to secure project
management, construction supervision, engineering support and inspection services through the
duration of the project, and to address numerous required change orders and contractor re-
mobilization activities and related costs. The additional funds will allow the project to be
completed in 2021-22.
Background. At its May 12 hearing, this subcommittee discussed CMD’s Headquarters
Complex project, and the stop-work order issued by the State Fire Marshal in late March.
This request covers the following estimated costs:
Senate Committee on Budget and Fiscal Review 24
Subcommittee No. 4 May 19, 2021
Total project costs are estimated at $197,242,000 including acquisition ($8,831,000),
performance criteria ($6,889,000), and design-build (181,522,000).
Staff Recommendation. Hold open.
0509 GOVERNOR’S OFFICE OF BUSINESS AND DEVELOPMENT
Issue 23: Additional Small Business Grants
Proposal. The May Revision includes $1.5 billion one-time federal American Rescue Plan Act
(ARPA) funds for the California Small Business COVID-19 Relief Grant Program, which is
administered by the California Office of the Small Business Advocate (CalOSBA) within the
Governor’s Office of Business and Economic Development (GO-Biz). This would bring the total
investment in this program to $4.075 billion, including the $500 million initial investment in
November 2020 and the additional $2.075 billion expansion approved by the Legislature in
February 2021.
Background. Small businesses have been disproportionately affected by over a year of pandemic-
related closures and restrictions, with hundreds of thousands of businesses permanently shuttered
Senate Committee on Budget and Fiscal Review 25
Subcommittee No. 4 May 19, 2021
and many more on unstable financial footing 1. Despite improving economic conditions, small
business revenue is still down 28 percent and 35.7 percent fewer businesses are open compared to
pre-pandemic2. Roughly a quarter of small businesses reported in April that they would require
financial assistance or additional capital to survive the next few months 3.
There have been targeted small business relief grant programs at the federal and state levels, which
are described in detail below. However, these programs typically only covered a few months of
expenses, were oversubscribed, and are now largely out of funds. There are currently no open
programs at the federal or state level for general small business relief.
Federal aid. There are a number of related federal programs administered by the Small Business
Administration (SBA):
The Paycheck Protection Program (PPP) provides forgivable, low-interest loans to
businesses with fewer than 500 employees. However, it recently ran out of funding and has
stopped accepting most new applications4. As of May 2021, at least 600,000 California
businesses have received a total of roughly $100 billion in PPP loans5. The program tied
loan forgiveness to maintaining payroll and specified that businesses must use the majority
of funds on payroll expenses within a period of a few months.
The Economic Injury Disaster Loans (EIDL) Advance program provided grants of up to
$10,000 but ran out of funding in July 2020 6. However, a total of $25 billion is now being
used for Targeted and Supplemental Targeted Advances. These have been offered to
previous EIDL applicants or recipients who are located in low-income communities and
meet certain criteria related to business size and declines in gross receipts.
$16 billion has been designated for the Shuttered Venue Operators Grants to live venues,
independent movie theaters, and other cultural institutions with fixed-seating theaters. In
the first week, SBA reported receiving just over 10,000 applications for this program7.
$28.6 billion has been allocated for the Restaurant Relief Fund, which opened on May 3.
As of May 12, this program had received more than 266,000 applications representing over
$65 billion in requested funds, and $2.7 billion has been distributed to 21,000 restaurants8.
California Small Business COVID-19 Relief Grant Program.
At the state level, the California Small Business COVID-19 Relief Grant Program, administered
by CalOSBA, has awarded $2.575 billion in grants to impacted small businesses. The program
was initially authorized by Executive Order No. E 20/21-182 in November 2020, and received an
$500 million allocation from the Disaster Response-Emergency Operations Account. An
1 https://www.brookings.edu/wp-content/uploads/2020/09/PP_Hamilton_Final.pdf
2 https://tracktherecovery.org/
3 https://portal.census.gov/pulse/data/#data, https://smallbusinessmajority.org/sites/default/files/research-reports/April-COVID-19-small-business-
survey.pdf
4 https://www.nytimes.com/live/2021/05/04/business/stock-market-today#paycheck-protection-program-closes
5 https://home.treasury.gov/system/files/136/SBA-Paycheck-Protection-Program-Loan-Report-Round2.pdf, https://www.sba.gov/sites/default/files/2021-
05/PPP_Report_Public_210509-508.pdf
6 https://www.sba.gov/article/2020/jul/11/sba-provided-20-billion-small-businesses-non-profits-through-economic-injury-disaster-loan-advance
7 https://www.billboard.com/articles/news/9567342/shuttered-venue-operator-grants-first-week-application-statistics/
8 https://www.sba.gov/article/2021/may/12/recovery-smallest-restaurants-bars-administrator-guzman-announces-latest-application-data-results
Senate Committee on Budget and Fiscal Review 26
Subcommittee No. 4 May 19, 2021
additional $2.075 billion was appropriated in February 2021 as part of SB 87 (Caballero), Chapter
7, Statutes of 2021, which also formally established the program in statute. CalOSBA used
between four and five percent of this funding to contract with Lendistry, a California-based
Community Development Financial Institution, to administer the program.
The program was open to businesses and nonprofits with up to $2.5 million annual gross revenue.
Priority was given to impacted industries, underserved business groups such as businesses owned
by women, minorities or veterans or businesses located in rural and low-wealth communities, and
disadvantaged communities as indicated by socioeconomic factors such as unemployment rates.
Grant funds could be used for costs resulting from the COVID-19 pandemic, such as employee
expenses, working capital and overhead including rent, and costs associated with health and safety
restrictions such as purchasing PPE. Funds could not be used to cover costs already covered by
other relief or grant programs. The grants were excluded from gross income for state taxes.
The funding was awarded over six rounds: two open rounds for the initial $500 million, a closed
third round for previous applicants, a fourth round for nonprofit cultural institutions (with no
limitation on annual gross revenue), and finally two open rounds. The last round closed on May 4,
2021. Approximately 198,000 small businesses either have been or will be awarded grants, with
the majority going to the priority areas described above9. However, GO-Biz has reported that there
are over 180,000 remaining applicants, representing roughly $2.5 billion in requests, who did not
receive funding.
Proposed Expansion. The May Revision includes an additional $1.5 billion in federal ARPA
funding to provide three additional rounds of grants through this program. CalOSBA would first
administer two closed rounds to applicants who are currently waitlisted. Then, a final round would
be opened for new applicants, as well as waitlisted applicants, to capture any entities who have not
applied before or may still be on the waitlist.
Staff Comment.
Businesses excluded from previous relief efforts. Despite efforts to make these programs equitable
and accessible, stakeholders have reported that certain businesses have been consistently left out
of relief. All of these programs had applications that were only in English and only available
online, and some businesses were not able to get the technical assistance necessary to apply. In
other cases, businesses may not have had the required documentation, including tax returns and
personal identification documents. They may have encountered issues due to their immigration
status, especially if they are undocumented and did not already have a federal Individual Taxpayer
Identification Number. The Legislature could consider ways to increase accessibility for the final
rounds of the California Small Business COVID-19 Relief Grant Program, such as: requiring a
Spanish language application, increasing funding for outreach and technical assistance, and
extending the open application period to allow partner organizations to reach more businesses.
Open versus closed rounds. The proposal includes two closed rounds, where grants would only be
distributed to businesses who have already applied, and only one open round for new applicants.
9 https://static.business.ca.gov/wp-content/uploads/2021/05/SBCRG-Final-Awards-Data-as-of-5132021.pdf, https://business.ca.gov/coronavirus-2019/
Senate Committee on Budget and Fiscal Review 27
Subcommittee No. 4 May 19, 2021
It is not clear how competitive the remaining applicant pool is, or if it contains many businesses
who were not heavily impacted or not from priority areas. The Legislature could consider
switching the structure and/or order of these rounds to allow more new businesses access to relief.
Staff Recommendation: Hold Open
Issue 24: Film and Television Tax Credit Expansion
Proposal. The May Revision includes $30 million for a one-time expansion of the Film and
Television Tax Credit in 2021-22. The expansion would be used to target relocating television
series.
Background. Film and television production was halted by the pandemic-related public health
restrictions for several months in 2020. Unemployment in this industry was relatively high. While
employment in film and television production has not yet fully recovered, the situation has
significantly improved in recent months.
More than thirty states, including California, use tax breaks to attract film and television
productions. California allocates $330 million annually in credits, typically for 20 percent of
qualified expenses. The program is oversubscribed, with only 22 out of 61 applicants awarded
credits in the most recent round10. Georgia, which has an uncapped 30 percent tax credit and doled
out $870 million in credits in 2019, briefly overtook California as the top movie-production state
in 2016, although California has since reclaimed that title and dominates in television production 11.
Film and Television Tax Credit. The California Film Commission (CFC), housed within GO-Biz,
administers the Film and Television Tax Credit Program, which provides tax credits based on
qualified expenditures for eligible productions that are produced in California. The program was
established in 2009 with $100 million in credits awarded annually by lottery (“Film and TV Tax
Credit 1.0”), and was restructured and expanded to $330 million for 2015-16 to 2019-20 (“Film
and TV Tax Credit 2.0”). In 2018, the Legislature enacted the Film and TV Credit 3.0, which made
minor changes, including a diversity reporting requirement, and extended the credit until 2024-25.
The three iterations of the credit are summarized in the table from the LAO below.
10 https://news.bloombergtax.com/daily-tax-report/hollywood-seeks-to-be-film-king-again-with-expanded-tax-breaks
11 https://www.indiewire.com/2021/04/georgia-boycott-film-tax-credits-1234629128/, https://www.hollywoodreporter.com/news/general-news/feature-
film-production-georgia-outpaced-california-last-year-study-says-1006912/, https://www.hollywoodreporter.com/news/general-news/california-ranks-as-
top-filming-location-narrative-feature-films-1282548/, https://www.filmla.com/wp-content/uploads/2021/01/2020_TV_Report_WEB_v1.pdf
Senate Committee on Budget and Fiscal Review 28
Subcommittee No. 4 May 19, 2021
Source: LAO12
The current program allows a credit in an amount equal to 20 percent (for feature films or new or
recurring television series) or 25 percent (for independent films or relocating television series) of
qualified expenditures for the production of a qualified motion picture in California. The project
is defined as being in California if 75 percent of the shooting days take place or 75 percent of the
budget is spent within the state. Smaller budget projects, commercials, music videos, reality shows,
and documentaries are not eligible. Qualified expenditures do not include the amounts paid to
actors or directors, among other exclusions. Extra credits are available for programs that film
outside of Los Angeles or that include original music or visual effect expenditures. The credits are
nonrefundable and nontransferable, and apply to income tax liability. However, independent film
projects can sell the credits once, and all projects can choose to apply the credits to sales and use
tax liability or to income tax liability in previous or upcoming years.
The credit allocation is competitive and is based on the projected economic impact of the project,
measured by the number of associated jobs, the amount of money spent, and the facilities utilized
within the state. The applicant must provide documentation to CFC after the project is complete,
and the tax credit may be adjusted if the final information is different than the application. For the
Film and TV Tax Credit 1.0, roughly $183 million out of $800 million credits went unused because
the projects were not completed or ended up not meeting the eligibility requirements of the
program13.
12 https://lao.ca.gov/LAOEconTax/Article/Detail/388
13 https://lao.ca.gov/LAOEconTax/Article/Detail/388
Senate Committee on Budget and Fiscal Review 29
Subcommittee No. 4 May 19, 2021
Related proposed legislation. A number of bills have been proposed this year which would alter
this credit. SB 485 (Portantino) would allow additional credits to be allocated for studio
construction projects. This would be an uncapped and sellable credit. SB 611 (Allen) would
provide additional credits to projects that hire individuals from the Career Pathways Assistant
Director Program or an equivalent program. These credits would come out of the $330 million
allocation. AB 986 (Gipson) would make an additional $200 million credit allocation available
exclusively to independent films produced and staffed by minorities, at a rate of 40 percent of
qualified costs.
Proposed expansion. The May Revision includes a one-time expansion of $30 million specifically
for relocating television series, which are shows that move to California after having filmed their
most recent season outside of the state.
LAO Comment: No Concerns. While we have raised concerns with the effectiveness of this
program in the past, this proposal would have no fiscal effect in the budget year and only a very
modest impact on the state’s long-term budget condition. Moreover, decisions for relocating
television productions to film in California are somewhat more likely to be influenced by this
credit than are similar decisions for most other types of film and television productions.
Staff Recommendation: Hold Open
7730 FRANCHISE TAX BOARD
Issue 25: Golden State Stimulus 2.0
Governor’s Proposal. The May Revision proposes $8.1 billion for an additional Golden State
Stimulus (GSS 2.0) payment, including:
$600 payments for income tax filers earning up to $75,000 who did not already receive a
GSS payment (approximately 9.4 million filers).
An additional $500 to income tax filers with a dependent making up to $75,000
(approximately 4.3 million filers).
An additional $500 to Individual Taxpayer Identification Number (ITIN) income tax filers
that earn up to $75,000 and have a dependent (approximately 520,000 filers).
In addition, $3.4 million and 46.6 positions are proposed for the FTB to administer the GSS 2.0.
Background. SB 88 (Committee on Budget and Fiscal Review), Chapter 8, Statutes of 2021,
created the Golden State Stimulus and Golden State Grant programs, which provided $600 in direct
relief to millions of low-income Californians who qualify for the California Earned Income Tax
Credit (CalEITC) or are recipients of other specific benefit programs. Specifically, SB 88:
Senate Committee on Budget and Fiscal Review 30
Subcommittee No. 4 May 19, 2021
1) Directed the Controller to make a one-time Golden State Stimulus tax refund payment in the
applicable amount to each qualified recipient, as follows:
a) $600 for a qualified recipient who is an eligible individual for the CalEITC who filed a
California individual income tax return for the taxable year beginning on or after January
1, 2020, and before January 1, 2021, who has been allowed a CalEITC for that taxable year
by November 15, 2021, and is a California resident on the date the Controller issues the
payment.
b) $600 for a qualified recipient who 1) filed a California individual income tax return on or
before October 15, 2021, for the taxable year beginning on or after January 1 2020, and
before January 1, 2021, 2) include on their return either their ITIN, or, if married, the ITIN
number of their spouse 3) reported California adjusted gross income of $75,000 or less,
and 4) is a California resident on the date the Controller issues the payment.
c) $1,200 for a qualified recipient who satisfies the requirements of both a and b.
2) Directed the State Department of Social Services to make a one-time grant payment in the
amount of $600 to each person who is one of the following:
a) An assistance unit as defined in Section 11450.16 of the Welfare and Institutions Code
under the California Work Opportunity and Responsibility to Kids Act.
b) A recipient of benefits provided under the Cash Assistance Program for Aged, Blind, and
Disabled Legal Immigrants.
c) A recipient of benefits under the Supplemental Security Income/State Supplemental
Program.
The recession caused by the COVID-19 pandemic disproportionately impacted low-income jobs
and exacerbated existing economic inequality in California14. As of October 2020, employment
rates for high-wage workers ($60,000) had returned to pre-pandemic levels, while employment
rates for low-wage workers (<$27,000) were down almost 30 percent 15. Many Californians have
reported food and housing insecurities and difficulty in paying for usual household expenses 16.
Three direct stimulus payments have been provided by the federal government since the beginning
of the COVID-19 pandemic. The March 2020 CARES Act package included $1,200 per adult and
$500 per child under 17 for individuals whose income was less than $75,000, and a reduced benefit
up to incomes of $99,000. The December 2020 aid package included an additional $600 per adult
and up to $600 for each qualifying child. The initial payment kept an estimated eight million
Americans out of poverty17,18. The third round of economic impact payments was authorized by
the American Rescue Plan Act of 2021 and provides $1,400 for an eligible individual with a valid
Social Security number ($2,800 for married couples filing a joint return) and $1,400 for each
14 https://www.ppic.org/wp-content/uploads/incoming-inequality-and-economic-opportunity-in-california-december-2020.pdf
15 https://www.tracktherecovery.org/
16 https://www.census.gov/data-tools/demo/hhp/#/?measures=EXR&mapAreaSelector=st&barChartAreaSelector=st
17 https://www.urban.org/research/publication/using-cash-payments-reduce-poverty
18 https://www.nber.org/papers/w27729
Senate Committee on Budget and Fiscal Review 31
Subcommittee No. 4 May 19, 2021
qualifying dependent. The third payment began to be reduced for individuals with adjusted gross
income of more than $75,000 (or $150,000 if married filing jointly).
ITIN-filers are typically excluded from federal aid, even though many are essential workers or
work in industries hit hard by COVID-1919. The March 2020 CARES Act excluded families if any
member filed using an ITIN, which also prevented millions of spouses and children who are U.S.
citizens or permanent resident immigrants from receiving the initial stimulus payment. Some of
those families became eligible in the December federal aid package and could receive the initial
payment retroactively. However, families where both parents use ITINs are still ineligible, which
has also prevented stimulus support from reaching more than two million U.S. citizen and legal-
immigrant children nationwide 20.
The GSS 2 proposal would bring the total investment in the GSS to $11.9 billion. The following
chart from the California Budget and Policy Center displays total GSS payments for tax filers
under both the first GSS and the proposed GSS 2.0.
LAO Comments. In the LAO’s review of this proposal, they suggest that the state should consider
focusing on filling gaps in the federal relief that has been provided to date. Federal relief efforts
during the pandemic have been unprecedented in scale. The state’s capacity to provide relief is
much more limited. The state, therefore, should ensure that its pandemic relief 1) targets those
most in need and 2) focuses primarily on those not served by federal programs.
The LAO points out that most households proposed to receive payments under the Governor’s
expanded Golden State Stimulus have already benefited from unprecedented federal pandemic aid.
As an example, as shown in the LAO figure below, an eligible family of four who would receive
19 https://calbudgetcenter.org/resources/about-2-in-3-immigrant-workers-excluded-from-the-caleitc-are-covid-19-essential-workers/
20 https://www.migrationpolicy.org/news/cares-act-excluded-citizens-immigrants-now-covered
Senate Committee on Budget and Fiscal Review 32
Subcommittee No. 4 May 19, 2021
a stimulus payment under the expanded proposal would, in total, receive more than $12,000 in
federal and state stimulus payments. An otherwise similar family, but with undocumented workers,
would receive much less overall—about $2,000—due to being ineligible for federal stimulus
payments. Given the significant overlap with prior federal efforts, the Governor’s expanded
Golden State Stimulus proposal would not significantly fill in gaps in federal relief. Based on cost
estimates provided by the administration, the LAO estimates that less than 10 percent of the
proposed stimulus funds would benefit taxpayers and families who have been ineligible for federal
aid programs during the pandemic.
The LAO suggests that a more targeted approached could fill the gaps:
Reworking Governor’s Proposal to Fill in Gaps in Federal Relief. Undocumented low-
wage workers have faced significant job losses and have not benefitted from federal income
support. The Legislature has options—to expand or redirect—the Governor’s broad
proposal in order to more equitably target state assistance to undocumented, low-wage
workers. Below, the LAO provides two examples of these options:
o Expand Proposal to Provide Larger Payments to Undocumented Workers
with Dependents. One option the Legislature could consider is simply to build on
the Governor’s May Revision proposal by increasing the payment amount for
undocumented families. As an example, by adding $2 billion in funds to the
Senate Committee on Budget and Fiscal Review 33
Subcommittee No. 4 May 19, 2021
Governor’s stimulus proposal, the Legislature could increase payments to
undocumented households with dependents who file using ITINs from $500 (under
the Governor’s proposal) to $4,000.
o Redirect Some Proposed Payments to Provide Larger Payments to
Undocumented Workers. As an alternative, a second option is to work within the
Governor’s budgeted amount for the May Revision proposal. As an example under
this option, the Legislature could limit the stimulus expansion to taxpayers with
income below $50,000 instead of $75,000. The remaining funds could be redirected
to increased payments for undocumented households with dependents who file
using an ITIN. Using the remaining funds in this way, the LAO estimates that one-
time payments to undocumented households could be increased from $500 to
$3,000.
Recommendation: Hold open.
Issue 26: Homeless Hiring Tax Credit
Budget Proposal. The Legislature is considering a proposal to establish a tax credit between
$2,500 and $10,000, per qualified individual hired, for employers that pay at least 120 percent of
the state of California’s minimum wage. Each eligible employee—certified by local Continuums
of Care—must work not less than a specified number of hours (depending on the size of the credit)
the year for which the employer is claiming the credit. A qualified employer would be able to
claim $30,000 in tax credits annually, with an allowable maximum of $30 million in credits
allocated annually statewide.
Background. According to a 2019 annual report by the United States Department of Housing and
Urban Development (HUD), which compiles the point-in-time (PIT) counts from regions across
the United States, California had 151,278 homeless individuals in 2019, which accounted for 27
percent of the nation’s homeless population. In this count, most individuals experiencing
homelessness across the nation lived in emergency shelters or transitional housing programs, while
nearly 72 percent (108,432 people) of California’s homeless population remained unsheltered.
While these numbers provide a snapshot of the state’s homeless population during a single night
in 2019, they likely underestimate the scope of the crisis because: (1) the HUD PIT count only
measures the homeless population on one day of the year, and (2) it does not capture everyone
experiencing homelessness, as some do not wish to be counted, while others cannot be counted
because their location is not known to the counters.
The COVID-19 pandemic has exacerbated the needs of California’s most vulnerable communities
and increased the risks for individuals experiencing homelessness, while the pandemic-generated
recession has put severe strains on employers and businesses. During the state’s crisis, it is now
more critical than ever to provide tools to serve one of California’s most vulnerable populations
that face significant barriers to employment.
Senate Committee on Budget and Fiscal Review 34
Subcommittee No. 4 May 19, 2021
The proposed tax credit is intended to streamline the hiring of homeless individuals while
providing incentives to businesses to provide these employment opportunities. The credit will
facilitate the hiring of homeless individuals who frequently experience stigma and systemic
barriers when attempting to attain employment. The purpose of the Homeless Hiring Tax Credit is
to encourage qualified employers that provide family-sustaining career pathways to hire and retain
employees from the homeless population.
Recommendation: Hold open.
Senate Committee on Budget and Fiscal Review 35
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