Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government
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Speaker 1
We will now turn to our first item for discussion, and we will begin with the Department of Food and Ag. Will representatives of the department please come forward? And before we get into the specific budget proposals, we ask that the department representatives please provide us with the overview of the department status as well as major programs or developments. Please proceed.
Speaker 6
Alright. Good morning. Good morning, chair and members of the committee. I am Arma Cozzina, deputy secretary for finance and administration at the California Department of Food and Agriculture. Before we get started, I just wanted to say to pass on my regards from secretary Ross, who was unable to join us due to previously committed travel.
She sends her regards and will prioritize your next hearing. She's very apologetic that she couldn't be here herself. I want just wanna say thank you for having me here as a proxy and for affording us the opportunity to discuss CDFA's proposals for fiscal year 2627. As a brief overview of CDFA's work, first, just to brag a little bit about California agriculture. California leads the nation in agricultural production with nearly 63,000 farms and ranches generating approximately $61,200,000,000 in annual sales.
These farmers and ranchers play a key role in food security for Californians, the nation, and the world. The state leads national production both in variety and abundance with over 400 different crops, some exclusive to California, making up nearly half of the vegetables and over three quarters of the fruits and nuts grown in The United States. California or CDFA works diligently to safeguard this resilient food system and promote an equitable marketplace, cultivating a California grown food supply that is globally recognized for innovation, quality, and sustainability. In furtherance of that mission, we support a broad range of functions ranging from those that you might expect, protecting plants and animals from invasive pests and diseases, protecting food safety, maintaining inspection standards, to to functions that you might not expect, overseeing marketing orders and agreements, overseeing the network of California fairs, including their pivotal role in emergency response, and overseeing the state's weights and measure standards, something that my colleague will assure you is the backbone of commerce in California. The fiscal year 2627 governor's budget proposes approximately $685,000,000 in 2,059 positions for the support of the department.
This includes 213,500,000.0 in general fund, 190,900,000.0 in industry funds, 132,300,000.0 in federal funds, 74,800,000.0 in bond funds, which I know we'll discuss later, and 73,700,000.0 in other funds. Regarding the challenges we face as a department, the same forces that affect the agriculture industry at large also pose significant challenges for the department. Changes in international trade, climate, and land use all exacerbate pest and disease pressures on California's natural and working lands. This destabilizes our food system and industry funding while simultaneously increasing the demand for CDFA's programs. CDFA is proactively working to identify these risks to avoid future outbreaks and planning to ensure our programs can quickly respond to outbreaks when they when they occur.
For example, in '23 and '20 or 2023 and 2024, California addressed the largest invasive fruit fly response in state history through an integrated resource management approach, Swift comprehensive action, as well as support from yourselves, ensured that we achieved a 100% eradication, and both national and international markets remained open to California products. Similarly, when bird flu was first detected in dairy cows in early twenty twenty four, it marked a troubling evolution of an already devastating animal disease in the poultry sector. The state invested in expanded diagnostic and epidemiology capacity at CDFA and built a state of the art veterinary laboratory to support future response efforts. Through those efforts, there are currently no active dairy quarantines in the state, and we are better prepared for any future outbreak outbreaks of both pests or animal diseases. Any questions about our overview?
Speaker 1
Do we have any questions or comments from on the overview from committee members? No? Okay. No. We don't at this moment, so we'll go ahead and proceed to, the first agenda item.
Item one pertains to ongoing funding for the Farm to School program, funding and in addition to the trailer bill codification. When ready, please proceed with that presentation on that item.
Speaker 6
Absolutely. Thank you. So in addition to those core functions that we talked about just a moment ago, there are two initiatives where the department is focused in recent years with support from the administration and the legislature. These are air these are our climate smart agriculture programs and the farm to school program. Since 2019, the state has invested $590,000,000 to advance climate smart agriculture practices resulting in the reduction of approximately 27,700,000 metric tons of carbon dioxide equivalent.
These practices range from compost application to improved irrigation to methane production through manure management. Each practice and grant program was validated and overseen by staff within our office of agricultural resilience and sustainability. These staff also provide technical expertise regarding climate smart agriculture to advance state climate policy, assist stakeholders, work with local technical assistance providers, and support farmers throughout the state. Those farmers that that, adopt climate smart agriculture practices have then gone on to participate in our farm to school program. And for farm to school, the state has invested a $125,000,000 to transform the California school food system through the farm to school incubator grant program.
In just five years, this has grown to reach 49% of all California school children with projects that provide access to local climate smart and nutritious foods as well as lifelong nutrition and agricultural education. The 2627 budget proposes funding and trailer bill language that will continue this vital work and codify the Farm to School program. This includes $20,000,000 annually for the Farm to School Incubator Grant program, $1,300,000 one time, and $200,000 annually to build and maintain a customer relationship management tool that will effectively track program implementation and scale outreach throughout the supply chain, 3,200,000 on and $3,200,000 ongoing to ensure that the climate smart agriculture practices and markets are accessible to producers, particularly small scale and historically underserved producers, so that they can improve the resilience of their operations and hopefully participate in the farm to school program and that integral supply chain. Investing in farm to school and climate smart agriculture, we believe, is a cost effective strategy that simultaneously supports children, farmers, and local economies. Thank you for your consideration.
Speaker 7
Ahmed Seyam, Department of Finance. Nothing further to add. Happy to answer any questions.
Speaker 8
Good morning, chair and members of the subcommittee. Brian Metzger with the legislative analyst's office. We recommend that the legislature reject this proposal as presented, given the state's current budget condition and its limited capacity for supporting additional ongoing commitments. We appreciate that the program does appear to provide some benefits to farmers, schools, and students, but advised the legislature to prioritize funding to address urgent needs and mitigate near term risks. However, if the legislature were to fund this proposal, we would note that state and federal governments provide a total of about $5,000,000,000 annually for school nutrition programs.
Given these investments in school nutrition, the legislature could explore whether some farm to school activities could be potentially supported by monies the state must provide to schools to comply with Prop 98 constitutional requirements. Those grants allocated directly to schools through the incubator grant program, for example, could be counted as prop 98 expenditures, which could free up that non prop 98 general fund in this proposal.
Speaker 1
Thank you. And can you, provide me with a description of what additional programs or department duties will be created by the proposed trailer bill language?
Speaker 6
Absolutely. So looking at the trailer bill language, it codifies most of the pieces of the the Farm to School Act that have already been existing. But now that we have we are proposing ongoing funding, a lot of the language that we've had before has been, you know, should we have funding? We should pursue these activities. And so it would be to increase it would be to do all of the same incubator grant program activities that we've done before.
And then there are pieces. It would also codify the existing framework that we have for working with our partners at the Department of Education and Department of Social Services to make sure that we're kind of working jointly across these programs and realizing any efficiencies that there might be, creating programming for the Farm to School program in consultation with those departments to make sure that we kind of have a unified platform for agricultural education and leadership opportunities. And then what might be a little bit new is making sure that we collect data to evaluate program goals and implementation progress. We have done these types of evaluations in the past, they've been incredibly beneficial in helping us to improve the program. And so this would codify that, and I believe there's funding proposed to go along with that to make sure that we're doing regular program evaluation.
So those would be the new functions as part of the trailer bill language. And is any of that data gonna be managed by outside platforms? So we would hold the database internally. So all of that data would be part of our customer relationship management tool that is proposed here, and then it would be evaluated on a biannual basis by a third party evaluator. I believe there's been one evaluation in the past that is all public, and that was through I'm gonna it's I'm gonna blank on the name, but it's through, Berkeley that they did that that independent third party evaluation.
Speaker 6
The evaluation is to make sure that we are as effective as possible and that we are putting money into, we are distributing the money through our four tracks as efficiently as possible and putting the money where there's the most need in the state to identify if there are regions that we have not been able to access in the state and why, and then to help to help guide us towards solutions that might be able to better effectively reach those populations.
Speaker 1
So in your most recent evaluation, did you find that it's been pretty successful, or is there room for improvement?
Speaker 6
Sure. We found that we we generate I I apologize. Normally, I have a colleague here who can provide the exact information, so I'll follow-up with the exact numbers. But we provide we receive for every dollar that's invested in the program, the evaluation has has determined that it generates over $2 worth of value within the supply chain in addition to all the benefits that it provides for our school children. And so that was part of the evaluation.
And then in terms of where we can improve, we've reached forty nine percent of California school children, and so it's identified regionally where those 51% are that we still have yet to reach. And it has also made recommendations about how to do that. So one of the things that was recommended and that is part of our proposal is investing in the firm to school network to make sure that providers are able to do peer to peer education and be able to scale up what's working for their school district, be able to scale it up for similar school districts throughout the state, and to provide peer to peer technical assistance.
Speaker 6
That is a great question, and I will have to follow-up with you follow-up with that information. I I apologize. I don't have it with me.
Speaker 1
Okay. I I mean, I just went through the map briefly online, and it did show that there was you know, I represent one of the largest agricultural regions in the world, I would say, and it seemed that there was a lack of support there, which to me just it's it's an an area that's just underfunded, undersupported. I mean, there's just a lot of need. Right? Especially very food in insecure.
It's something that I think would really benefit from this type of program, but I didn't really see that that level of support that you would think would be there. So I just kinda wanted to point that out. I know that there's good intentions behind this, and and and and I wanna make sure that that as that it's as effective as possible while it's, in place. With that, I'm gonna go ahead and ask, committee members if there's any questions or comments on this item.
Speaker 9
Thank you so much for for that, overview, and and I think this is a a very important, program, but I did have some questions about it. One of the things that I noticed that in is sort of where are the schools and what kind of schools are benefiting from from this program. And in my district, it looks like the charter schools are in partnership more than our public schools, like our huge LAUSD student population, many of them living in food deserts, not getting access to to quality foods. So I'm wondering if you could walk us through what is the grant scoring process? How does that work?
How does income, student need, scarcity of fruits and vegetables, grocery stores, just overall community need way in that sort of scorecard rubric and process.
Speaker 6
Absolutely. I will follow-up with the specifics of of what is part of that grant scoring process. I do know that there are equity components to that, but I don't want to misspeak in what those exactly are. I will also note that there are pieces of the supply chain, such as kitchen infrastructure or training for staff that often make it training and capacity for staff to apply for these grants that are often barriers. And so that's where we are hoping to provide more technical support.
We do have a technical assistance portion of the grant program, but we also have regional regional administrators who work and do farm to school outreach. They they are there working with administration administrators, and that's what we would like to codify as part of this network. And that peer to peer support often alleviates a lot of the barriers to applying. So we there's there's the application process, and I do wanna get you that information on exactly how equity is accounted for in that. But if folks aren't making it to the application process, we also need to make sure that we solve those barriers.
And that's where we've tried to look at a very comprehensive approach to technical assistance and then to ongoing outreach in those areas. And, again, that's where peer to peer support is really important because we can provide as much outreach as we want. But if we don't understand the specific needs of those schools, they need to talk to a school administrator that does.
Speaker 9
Application process has the same result as not having access, meaning we just don't see a lot of our public schools and we have a tremendous amount of need. And this is a phenomenal investment in these kinds of programs to skip over the very communities that need them the most. So I I really would like to see to see that information. The other question I had, it was about the you you mentioned the value would evaluation process. Is there an equities component, evaluative component to how you look at where the resources are going and how effective those resources are being utilized?
Speaker 6
I believe there is. I wanna I wanna look at exactly how that was taken care of in the last evaluation, but yes, there there is an equity component to that and it's looking at both the producers that are able to sell into these systems and where there needs to be support on that side for them to implement the appropriate practices and then to access the supply chain on the producer side and then also for the schools. And certainly, when we're looking at that regional distribution and where there is unmet need, a lot of the recommendations are about addressing capacity issues that make it difficult for folks to access these funds.
Yeah. And
Speaker 9
and and that's helpful because I the the the supplier side is another question. We have a growing, out of necessity, really, urban farming movement in Los Angeles, particularly in South LA. And there are partnerships with black farmers, for example, in Central Valley and some of our urban farmers in Los Angeles and particularly South Los Angeles. And I'm just curious how those kinds of suppliers are identified and is the there a similar rubric in terms of what the equity sort of strategy is for, you know, making sure that it's the the students in those campuses that need it the most, but also that we're bringing in local and encouraging and helping to sustain some of the urban farming that's happening and particularly where they have partnerships with with black farmers who are disproportionately impacted by what's happening in the agricultural sector.
Speaker 6
Absolutely. And this is where I do have a colleague who can help me out with with speaking to kind of how we prioritize folks that are applying for our climate smart agriculture grants. And so I will invite up my colleague to to speak to that. But just in terms of the broader, you know, connecting these folks, we we do have we do prioritize folks when they receive climate smart agriculture grants. And to date, all of the producers that have all of the producers that have received funding through the farm to school program do implement climate smart agriculture practices as part of their operation.
And then in terms of connecting those producers and the local schools, that's that's farm to school network and those outreach coordinators that we have. And so those will be doing that work no matter what. We wanna make sure that that work continues, but we would wanna scale that up. We've also proposed as part of this budget proposal a position within our farmer equity office, and that and that person's sole duties would be to support the suppliers in the supply chain and address any barriers that folks have if they are from historically underserved populations or they're small scale farmers, making sure that they're able to access those those items. But in the meantime sorry, Tony.
Doctor Mata will come up and and let you know about how we we do prioritize those farmers within our climate smart agriculture grants.
Speaker 9
And as the good doctor comes up, if if if you could also really hone in on what supports are given to that relationship building, that would be helpful.
Speaker 11
Good morning, chair and committee members. It's great to be here. Just to speak specifically to the technical assistance. So we have a mandate to provide technical assistance through our healthy soils program, our state water efficiency enhancement program, and all and our alternative manure management program. We have to take somewhere between 520% of that funding and put it toward technical assistance.
And within that funding, we commit to at least 25% of those funds going to assisting socially disadvantaged farmers and ranchers. So we collect data on how our grantees provide that technical assistance and track progress toward that goal. We think that technical assistance is the best way to help those farmers access our funds, to them apply for the grants, to help them manage the grants once they have them, and to help them close them out. They also help us, collect data and information on the impact of those programs toward the state's climate sustainability goals.
Speaker 9
Well, I appreciate that and thank you for that that overview. I guess we're getting at sort of the the how it's done, but what what we don't know is, you know, what is actually being done. And I I hope that we can get more detailed information in terms of these schools that are disadvantaged, that are public schools, lot of title one students living in food deserts. Is this program really centering them and how much of the resources that they're getting, what are we doing to support those suppliers from disadvantaged areas and particularly in urban areas? And is that also being centered in terms of making sure that these regions have the best access.
We're not using the dollars to reach the most disadvantaged, and that's equity. I think we are the program is not doing what it's intended to do. So I I don't know that I don't have any answers to that. I hope you can provide those, before we take our next steps on this. Yep.
Yep. Thank you.
Speaker 3
Thank you, madam chair. First of all, I should have said this at the conclusion of your overview. The apology from your secretary, that is really an attest really to her responsiveness and attentiveness. I think it's not typical that the head of a department or agency appears before our committees in any case, and she usually does. And for her to specifically apologize because she can't be here is, as I said, really an attest to her, attentiveness.
That's, I think, somewhat unusual, but I find it typical of secretary Ross. These programs, were they initially initiatives internally from the department or from the governor and the administration?
Speaker 6
I was not around at the genesis of the program, but I do believe it was a real partnership between between the two. This is something that we've known was a real opportunity for integrating producers into the school supply chain, and it requires a really fundamental change to do that. You know, there's a change in kitchen infrastructure. There's huge changes in workforce and how and changes for producers and how they navigate a supply chain. So I think that there was a mutual recognition of the need, and then the program was developed in 2020, 2021.
I believe it was the first allocation of one time funding for the program.
Speaker 3
And when it was established, I heard lot of the overview accomplishments and the conversation that you had with senator Smallwood Quavis on some specific things. But at the outset, what was defined as specific measurable goals that was expected to be accomplished by the program, and, how have the results compared to that defined at the beginning?
Speaker 6
It's a great question. I believe the big audacious goal that we had at the beginning
Speaker 6
Yes. That we had that we had at the beginning was to make sure that every child in the state of California had access to locally grown, nutritious, climate smart foods. That's big. And particularly when you're looking at just one time funds, to achieve forty nine percent of children having access to one of these programs in five years is a huge accomplishment. I think what was identified in our most recent Farm to School Roadmap was how do we create metrics around whether or not that change is sustainable?
How do we make sure that this is a full transition and not a one time project? And so they've looked at different metrics that they can use. And again, I'm so sorry that my colleague is not here, I we can provide more information about that those recommendations in the road map. And then to say, okay, how do we get a 100% of our school children to be at a certain level kind of along that pathway? So there's a new kind of continuum that's proposed where we would say, you know, a school might have access to farm to school or to fresh produce once a week?
How do we scale that up to more access to fresh produce? How do we make sure that there is capacity at those schools to fresh cook those foods? Then how do we look at, you know, the next layer of doing educational opportunities with the children so that they understand where their food comes from, how it's prepared, and they can really take those benefits throughout the rest of their life. So I think there's a really big ambitious vision for this, and we're chipping away at that. I think we've made incredible progress.
I think that having an ongoing commitment to that will help us ensure that that transition is sustainable and is not simply one time, you know, projects that each that each district is able to do.
Speaker 3
Thank you. I appreciate that. The reason that I asked the question is because, actually, for the last three years, taking lead from the alleged analyst office, in order to bridge the gap of our structural deficit, particularly the unique nature of being with growing revenues and growing deficits, in order to assess where we can make adjustments in particular programs that have been either established or enhanced in the last five or six years, particularly when revenues were particularly flush, that we have to take a look at what programs were expected to accomplish at the beginning, specific measurable results. My concern is sometimes that's not done, but nonetheless, what, what are those expected measurable results? And at this point, what have we experienced?
And I'm I'll be asking that question with regard to other issues. I hope that that will be asked in all of the other subcommittee meetings too because that's the only way we can really assess where if we're going to cut back, where we can cut back. So that comment is more general, not on the specific program, but I would share the concerns expressed by the LAO on that.
Speaker 13
Thank you, madam chair. And I appreciate the the discussion about and and also the the vice chair's focus on the on the on what the goal here is. And I think part of the challenge is that the goal is way too big for what this program could possibly do. We're this program is, like, worth 4 or $5 per school child per year. It's not a it we if I think the the goal or or as I remember it, and this is not as is even worse than you, it was was that we would achieve that, what you described, that every child will have access to healthy foods.
But it wasn't the the but but by doing a set of things to to to to deal with the infrastructure, the supply chain, and and and and the and the structural connections between agriculture and schools. Not that the program itself was going to be a gold plated school lunch program. Right? So that that and that's a critical distinction. And and and I think we we so we tend to evaluate it like how many kids are getting are are getting but that's not the point of this program.
Because at $4 per kid statewide, it's not gonna change. Not every school can have it. And that's not a sustainable approach to to really changing the the underlying system. So I do think it the and it's one of the reasons why I I I think this this is I I share the LAO's concern about the impacts, but also that that to me that suggests that a permanent allocation it where it's not ripe yet. That this should be it should be in a policy committee, not in trailer bill language because these are live questions about how how to do that if we're gonna renew it at all.
And also, it it is a large one time one time allocation. And so we should be learning. I I, you know, I represent a significant not as significant as Senator Hurtado in in terms of total production, but not trivial. Just a a set of agricultural communities where this program is has been in many in many instances very successful at, you know, at at figuring out, okay, how do you how do you deal with the the contracts between individual farmers, emerging farmers, and institutional purchasers at the school districts? You know, the you know, how are you dealing with the structure of the system?
And per and and that includes things like education for the individual kids. But again, that's not that that's not scalable to do that through this program. So to have, you know, a couple dozen schools or a couple even a couple 100 in statewide, getting those services isn't isn't really that's not that's not changing the system. So I I would just encourage us to think about how, you know, what you know, about designing structural change. If we're not doing that, if we're mainly focused on, like, right now we wanna deliver something different for for school children, then I think LAO is exactly right.
If it's just about the food that's showing up at school, that's a prop 98 allocation, and and it should be done in that context. But that's not what this I from my mind, that's not what this program was was about. It was that's why farm is the first word in it, not the last. It really is about that. And the to is the second word because it's about that that distribution system, the production system, and making that simpler.
Making and the bureaucracy of trying to trying to connect to what is a big institutional purchasing system in a lot of in a lot of places, and then assuring that you have the the, as you say, the infrastructure to do the preparation and all of that. It becomes even more important after the passage of last year's legislation on on ultra processed foods as well to both the expectations and then the opportunity where we can change the market for that that that school purchasers are facing about what their options are in order to meet that bill's mandates, but also to support the the in a broad way, California agriculture. So I I think I I think there's a lot I'm I'm a big fan of the of at least how the how the project's been working. But I do think also that that that we need to get our we need to line up what our objectives are with how much we're actually spending and how we're how this money should be used principally to induce systemic structural changes, learnings, you know, best practices, model contracts, that sort of thing. As opposed to thinking about it mainly from from at the end result for the for the individual kids.
That's obviously the point, but we have to change the system in order for that to achieve any kind of meaningful scale at just at just this amount of money. But I do think a one time allocation makes more more sense as we've been doing for the last several years as we build through through here and through the policy committee, the longer term the longer term structure to try to accomplish that.
Speaker 1
Okay. Thank you so much for your presentation and on this item. This item will be held open, we'll go ahead and move to item number two, pertains to the climate bond expenditure plan, items related to the Department of Food and Ag. So, when you're ready, feel free to begin your presentation.
Speaker 6
Absolutely. Thank you. The budget includes, $74,800,000 in bond funds in fiscal year twenty six twenty seven for programs authorized under prop four for the Department of Food and Agriculture. These are, in essence, all of the funds remaining that have been specifically identified for CDFA in the bond. So this is in accordance with the approach that we proposed last year that essentially had three funding timelines for these programs.
The first group of existing popular programs were slated for kind of immediate implementation. Those programs include SWEAP, our healthy soils program, urban agriculture, fairground emergency response upgrades, and the invasive species program. Those funds were largely allocated in last year's budget, less a few administrative funds for administering the the grants over the course of a few years. And funding will be released either this spring or this fall depending on largely what is going to be best for the stakeholders that are receiving those funds. The one caveat is that such a large amount was allocated in the bond for healthy soils that you'll see that roughly half was allocated last year and the remainder was requested this year to make sure that we could get that money out smoothly.
For some of these programs, as I mentioned, you may see a small amount requested this year. That's the amount needed in fiscal year twenty six twenty seven to administer the program. The second group consists of new programs where we have existing capacity and stakeholder engagement. So those programs would have we had proposed an accelerated timeline with half of the funding allocated last year for one first solicitation and the other half allocated this year for a future solicitation. So those these programs are slated for public comment this spring and with the first solicitation in the summer.
Then And because they are new programs, we do these are the year round certified farmers market program and the mobile farmers market program. So we do have existing relationships in that area because they are regulated entities, but we wanna make sure that this is a new grant program that we're rolling it out correctly. And so we would do half of it in the first solicitation this summer, and then half in some future solicitation so that we can make adjustments as needed if we're not reaching the the populations that have been intended in the language of the bond. The third group are those new programs that have required more thoughtful development, engagement, and implementation. These programs, namely the regional farm equipment sharing program and the tribal food sovereignty program, received administrative funding last year for staff to begin developing the program parameters.
And this year, we're requesting the balance of the grant funds in the hope of releasing the solicitations early in 2027. Thank you. Any questions?
Speaker 7
Ahmed Seyam, Department of Finance. Nothing further to add. Happy to answer any questions.
Speaker 8
Brian Metzger, LEO. We find the administration's proposed climate bond plan, including this chapter, to be reasonable and consistent with bond requirements. As was mentioned, a lot of the funding has yet to go out. Some of that is because of the emergency rule making process that was associated with the bond measure, as well as other administrative processes that are more, you know, traditional. There's been recent legislation that's been signed to exempt the current year Prop four funds from the APA, so we may start to see some of those monies go out the door quicker, and there's also proposed legislation that's currently in the policy process to exempt budget year and future prop four funded programs from the APA as well.
We would note again, you know, as was mentioned, there are these new programs that are being proposed. If the legislature has certain goals or preferences for those programs, now is the time to consider those and put them into, statutory spending guidance. Thank you.
Speaker 1
Thank you. For me, what is the department doing to track and follow-up on the successes or challenges of the programs receiving climate bond funding?
Speaker 6
That is a great question. There are requirements as part of our bond tracking that we make sure to follow and in terms of making sure that the money is spent appropriately, that that we're doing regular audits of those funds, and that they are all going to eligible funds. In terms of the success metrics for the program, we have individual success metrics for each of those programs. We wanna make sure that regardless of the funding source, the success metrics for our traditional program our traditional climate smart agriculture remain the same. And so plus any additional guidance that we receive in the bond.
And so we can speak to kind of how we are following up on those metrics. I will call up Doctor. Mata as well to make sure that she touches on those, because those are the programs that are going out first. In terms of the metrics for these new programs where we are receiving funding, that's really something that we develop as part of the RFP process. We get public comment on that, make sure that we understand stakeholders the legislature and stakeholders' intention for those dollars, and then we follow-up on those metrics that are collected as part of the grant administration process.
But in terms of climate smart agriculture, I'll defer to my colleague. Well, before Oh, yeah.
Speaker 1
So you mentioned that that you are you do the audits for making sure that the funds are being used for what they're intended for in this in this area. So who who is, specifically in charge of those audits? I
Speaker 7
don't have that information for you right now currently, but I would get back to your office on that.
Speaker 6
I apologize. My understanding is that this is part of the that there is a process through through the general, like, bond administration process or through bond counsel that would determine at at how frequently those processes need to be checked up. I apologize. I I'm assuming that they had the same process as when we do audits on our regular audits on our regular grant programs through general fund or through GGRF. I I apologize for misspeaking.
But finance can follow-up on those processes for bonds specifically.
Speaker 1
Okay. So those are processes that are through the Department of Finance, I'd assume?
Speaker 6
They would be determined by the by bond counsel and through the bond like, the procedures for the the bond as
Speaker 1
Okay. Thank you. Alright. So if you if yeah. We have the doctor, the good doctor come on up.
Speaker 11
Good. Because I left my notebook the first time. We actually just released the solicitations for the Healthy Soils program and the state water efficiency enhancement program this Monday. Those are both block grant programs, so we give the grant to a a regional organization that then gives, subawards to farmers. We have a really rigorous performance management system baked into that block grant, and I was just taking a few notes as I was sitting there because I wasn't expecting this question.
Speaker 20
But we track all the basic things like acreage affected, greenhouse gases reduced, reduced reduced water use. We also are tracking things like payment times between when the block grantee gets funding and how quickly they pay the farmer for implementing those practices. We are gonna implement a survey for farmer customer satisfaction to make sure that the block grantees are performing well and interacting well with those farmers. We will track service in terms of technical assistance, including technical assistance specifically to socially disadvantaged farmers and ranchers, in terms of, people and dollars. So we have a really expansive suite of metrics, and targets for our block grantees to make really clear to them what we expect in the implementation of the program and make sure that it's meeting both the state's, goals and CDFA's goals.
Speaker 11
Additionally, within the solicitations, we've asked those block grantees to identify their own regionally or community relevant goals, and those will also be baked into their performance management and tracking. So I think we have a very robust system developed for making sure that these dollars, meet their intended purpose and have a big impact for agriculture in the state.
Speaker 1
Great. And I'm just a little curious on the healthy soils program. I know it's very much focused on, you know, farmers and their land and making sure making sure that the soil is is healthy. But, I mean, has there been any consideration to go, like, beyond, like, you know, soil that is perhaps, like, contaminated? Like like, for example, in the Central Valley, we Valley fever is a huge issue.
I mean, is that something that is part of the Healthy Soils program or considered to be part of it?
Speaker 11
The Healthy Soils program has to date been very grounded in greenhouse gas reductions because we've had both general fund monies and GGRF monies, and sometimes those have been swapped. We always make sure that each practice is grounded in a quantifiable greenhouse gas reduction. So, no, we haven't taken into account other soil health issues like that because mostly because of the funding source and the consistency where it comes from.
Speaker 1
Got it. Okay. Thank you. Questions from okay. We'll start with senator Cabaldon.
Speaker 13
Thank you. And so first with with with just with regard to these metrics questions and and and the measures, I, you know, I I definitely wanna second the the chair's urgency about the the need to to have effective program oversight audits and that that that also focus a lot on on outcomes as much as on sort of the process and out and the outputs. That it's it's very it's really essential that we both make both make sure that the money is being spent legally, which is sounds like that's what the Department of Finance system that we were talking about earlier is mostly focused about. We don't want it to be, you know, we don't we don't want fraud and abuse, but also we want effectiveness. And so that that that that those metrics really matter.
And the and but the flip side of it is we don't wanna over we don't wanna overdo reports and what have you to the point where, you know, as as Senator Smaller Cuevas said on the on the last item, where we disadvantage potential grant recipients who don't have the capacity to do all of that. To to, you know, go go off and report on this too. Just while you're at it, just for fun. Like, tell us tell us a little bit about this too. Right?
They're achieving that balance. So we're getting the information that we need, but we're also spending our resources on the outcome, and we're not disabling potential grantees that don't have a, you know, and also have a $10,000,000 foundation grant or had this isn't the twenty seventh grant that they are getting from from us. Right? Those those are also important. So getting that balance right, I think, is is also very important just to follow-up on on on the on on the chair's question.
The I wanted to query. You you had said in the last item that the the the funding for technical there's technical assistance provided that that address some of the issues that that that senator Small and Quivas had raised in in programs like the state water efficiency and enhancement program. Is that's part of the grants themselves?
Speaker 11
Yes. So we actually, for prop four, we have two tiered technical assistance. So first, we are developing an agreement with the UC Agricultural Natural Resources to provide technical assistance to applicants. So making sure that block grant organizations of all capacities have the ability to apply for and successfully get this money, we wanted to offer a little bit of extra help. And the bond actually allows for that specifically calls out the ability to use additional funding for technical assistance, specifically for serving disadvantaged communities, severely disadvantaged communities, and vulnerable populations.
So that's one thing we've done at a high level to support applicants to the block grant program. Then within every block grant, there's also technical assistance provided for farmers and ranchers to implement their practices and apply for those funds. So each block grantee is required to either themselves or partner with another organization to provide that on farm technical assistance to implement the projects like sweep and healthy soils.
Speaker 13
That we appropriated last year. It's not part of your $700,000 ongoing Yep. State state admin.
Speaker 13
Okay. Gotcha. I appreciate that. And then is is is MarketMatch in this this this program or is that in a different program? That Farmers Market MarketMatch?
Speaker 6
Okay. Apologies. No. That's not within this program. I'm trying to recall which piece of this we have through our office of grants administration or if it is through a different department.
So let me there are pieces that we have, like the Senior Farmers Market Nutrition Program, and of course, now that we're talking about it, it's going to completely escape my mind. The other piece that our Office of Grants Administration covers, But I'm not sure if that's specifically what you're referring to in terms of Market Match.
Speaker 6
don't have anything specifically by that name, but we do have programs that provide matching funds at farmers markets.
Speaker 6
And this oh, the CNET program, the Certified Nutrition Incentives Program. Yes, sorry, apologies. It's just a nomenclature thing. Yes, we do have the Certified Nutrition Incentives Program. That's through our Office of Farm to Fork.
That has previously been in partnership with the GUSNET program, the national we have received state funds that were then matched by federal GUSNIP dollars. Those GUSNIP dollars were not available in the last year, and so we received one larger one time appropriation for our California Nutrition Incentives Program. And that was for to cover two years of operation of the program in the hopes that the gustnant program would be reestablished. To my knowledge, that gustnant program has not been announced to date, and so I am not aware of federal funding match that is available at this time.
Speaker 13
So is the is the current year the second year of that? Yes. So in the budget year, there would be no money for CNIC?
Speaker 13
And therefore for market match? Is that is my understanding this right? So the so the budget year envisions and the administration's not proposing any any funding to to backstop that or the market match program in particular?
Speaker 13
Okay. Okay. That that that is a very, very, very important program. So I I do have to return to that at a different time, but obviously that's not that's not this item. And then I guess I I have a hot take question for LAO on this.
And more in the you know, it is it isn't required or necessarily even normal for when we when the voters authorize a bond that we try to spend every last penny in the first twenty four months. And I'm curious so I'm I'm curious, you know, we know I mean, because of your analysis and and department of fans, you know, the the the state's overall fiscal situation and, you know, both our current year revenue revenues that are and budget year revenues that we are projecting to be somewhat higher, but also the long term structural deficit. So when so I'm just I'm I'm curious if LAO has looked as as as has examined this this the policy question about because when we are in a point of of the of the deficits that that your office says forecast, that sort of countercyclical spending will be even more important than now. And so the the choice to to front load, you know, as much of the spending as possible in the in in the climate bond, and, of course, the only part that's on our jurisdiction is this. Is your office examining have you considered that that that question of whether it's wise from overall sort of a macro perspective in California's economy and public spending for us to to front load spending at at the point where we have the most money or whether we should be whether we we should be at least considering the question of whether bond funds might be over a longer period of time.
And I'm not proposing it. I'm just a hot take. I'm just trying to understand your whether you've thought about this this issue so that because when if we have the downturn in our our budget that you forecast, at that point, it will be really important that there is some some spending occurring in the California economy.
Speaker 8
Brian Metzger, LEO. The focus of our analysis with prop four has really been about, at least initially last year, what legislative input or process can be can kinda guide the use of prop four funding. And so when we were thinking about how to analyze the proposed governor's multi year spending plan for Prop four, which was proposed last year, there was a lot of thought given to making sure that the legislature on an annual basis as opposed to approving a multi year plan was able to provide that input, and kind of guide the way that the spending was going precisely to your point about if there were to need to be investments made over kind of a longer time horizon, if we had those deficits occur, the legislature would have more flexibility to make those decisions. So that's one. The second is there were some conversations internally about trying to understand kind of the program capacity, or the department's capacity to even get the money out the door.
And so a lot of those conversations were reflected in the appropriations that you see across the different programs, where some programs started off with a nominal amount of money precisely because they didn't have the capacity yet to get the money out the door. And so that's kind of the second piece that we talked about was even if you were to front load the money, could you even do anything with it that was going to be meaningful, given you didn't have the folks on the ground to accomplish it? As to given the level of structural deficits that we're talking about, the level of prop four money that would be available to ameliorate some of those potential consequences, we have not focused primarily on that given that the structural deficits are quite large, But it is certainly something that we could take back and think about more. Clarify, I'm not talking about
Speaker 13
as in order to backfill cuts. Instead, and or not even just brought forward, but sort of generally our our bond portfolio, It's a policy choice about over what period do we spend school bonds, housing bonds, climate bonds, and what have you. Just to to whether or not we are considering this question of, you know, your reports say that but that's at some at some year, that's inevitable that we will face, you know, very substantial deficits as you say. And just from a pure economics perspective, we're gonna need counters you know, we're gonna need spending to be happening in order to avoid California's government contributing to a substantial recession as well. So it's not so much like we should save the bond in order to backfill the general fund later as much as the macroeconomic question for the state as a whole.
But anyway, appreciate it. Thanks.
Speaker 3
Thank you, madam chair. The the three categories that were that you've mentioned are the one is the to protect communities and nature from the impacts of climate change. Then second, to reduce or remove carbon pollution where possible, and then in some cases, address existing environmental challenges exacerbated by climate change. So mostly we're talking about mitigation. And I think that's important because in the middle category where we're talking about potentially reducing carbon emissions, that's what the Air Resources Board is doing, of course.
And and my concern there is the reality that we can't affect climate change in California. To the extent that it's it's caused by man generated carbon emissions, we have absolutely no effect on that by reducing our carbon emissions in the state of California. So I'm not saying and I've been critical of what ARB has done because it has significant impacts on cost of living, But I've not said we shouldn't do anything. However, I said have said we should do it with caution, with the realization that whatever we do isn't gonna have any effect on climate change whatsoever. So the mitigation part of that is important to adapt to the things that are gonna be caused by climate change.
And so I emphasize the first and the third category, number one. Secondly, in establishing through these programs, getting back to comments that I made before, I would hope that in each case, we will have specific measurable goals that we want to achieve. And as senator Baldwin rightly pointed out in the previous program, your goal was, I said that you have an acronym. The the acronym is BHAG, and it stands for big hairy audacious goal. And any program should have a big hairy audacious goal, but that shouldn't be the measurable results because almost by definition, you're not likely to completely achieve that.
So you have to have achieve achievable outcomes too. So I would hope that that would be established at the outset of of those programs. But again, I wanna emphasize, I'm glad to see the efforts toward mitigation. But again, given that we emit less than 1% of global greenhouse gases, we're not gonna change the atmosphere. I I think we need to realize that.
Speaker 9
Senator Smallwood Cuevas. Thank you, madam chair. So my question had to do more about how the administration and your agency is thinking about sort of the workforce components of of these investments and particularly our intentionality around pathways, you know, are we making sure, and is it, you know, the state's, priority to make sure investments in the wildfire resilience are not, you know, just funding, you know, projects on paper, but also building long term economic opportunities for our workforce in terms of access to future of work climate resilient careers, in terms of looking at pathways for our conservation core, our fire camp folks, apprenticeships, which I know is also a priority. Are we connecting the dots? And do you have someone in your agency that is, you know, focusing on making sure that as these funds are being expended that we are, you know, very intentional about what kinds of, you know, multiplied opportunities come out of these investments, particularly as it pertains to workforce?
Speaker 6
That's a great question. For a number of our programs that are specifically I think it would be dependent on each program, would be my my overall answer. For our programs that are specifically related to infrastructure, we feel that it's been directed through the bond language that that go pretty exclusively to infrastructure. So, for example, the Fairgrounds emergency response upgrades, that was specifically for infrastructure as with the year round certified farmers markets and the and the mobile farmers markets. That's for infrastructure at those at those farmers markets.
When it comes to our climate smart agriculture programs, I think that's where the technical assistance component that Doctor. Mata was speaking of is really integral in making sure that there are those workforce opportunities, and that we are training folks in how to kind of scale up these practices on their farms, and then how to also, you know, do peer to peer education with other farmers and ranchers, and talk about the benefits that they've seen on their farm. And so, terms of workforce, I think that there are really opportunities there for those types of programs, as with the regional farm equipment sharing and the tribal food sovereignty programs that are still in development. And so those programs will both be available, we hope, for public comment in summer of this year. I would imagine that we would receive a lot of input as to how to and input and guidance on how to integrate those components into those programs.
Speaker 9
That there is an intentional focus on the workforce because this is these are significant investments. And my sense is that, you know, there should be some significant sort of outputs of career pathways and folks going into these great, you know, climate smart agriculture. That's future of work. Right? So that those would be good good jobs for folks.
Speaker 6
Absolutely. We don't have someone specifically focused on labor at the Department of Food and Agriculture, but we do participate in collaboration efforts with the Labor and Workforce Development Agency just as a broad category. In terms of specific metrics related to workforce for these grant programs, I'm not aware of any. We do participate in the workforce development opportunities that are being discussed very robustly at the Labor and Workforce Development Agency. And we are we do have a seat at that table and have discussions about how there are opportunities within these fields with labor and workforce development.
Speaker 9
I appreciate that. I do think when we're, you know, talking about, you know, hundreds of millions of dollars, billions of dollars, I think it's important to have an intentional metric around where where are some of the outcomes that make these investments sort of a return on investment where we are actually not just expanding the revenue, but we're generating some some revenue because we are investing in in people and particularly careers in some of these, communities where we're seeing recession level unemployment now. And, the senator talked about, you know, our economy and how we need to really be mindful of of of the precariousness of our economy, this question of affordability that constituents are talking about. So I I I would want to see and figure out ways to maybe work with you all on having some intentional, not broad, but specific, outcomes in terms of what careers are coming out of this work and who is getting the opportunity, to participate and be put on a pathway to good jobs. So thank you for that.
Speaker 1
Okay. Thank you. So we're going to move to agenda item number three. Item number three pertains to the elimination of vacant positions at Department of Food and Ag. Please proceed with your presentation.
Speaker 6
Thank you for your patience with our musical chairs. It's mostly CDFA, but I'm happy to blame finance for this one. Comment. So we understand that the governor's budget the governor's budget from last year included a reduction of four point two million and sixty nine point one positions resulting from control section 4.12, the sweep of vacant positions and associated funding. And we also understand that the JLBC is recommending rejecting elimination of the 35 of those identified positions.
Broadly speaking, most of the 69 positions that were identified at CDFA were unfunded positions that were being held vacant, while most others had been vacant for a significant amount of time, most due to being located in hard to fill locations or classic hard to fill classifications. The funding that was eliminated was not tied directly to the positions that have been identified as a large percentage of those positions, as I mentioned, were under were unfunded, but was allocated internally based on where CD CDFA could minimize the programmatic input impacts. We would say that CDFA is committed to ensuring that the the function we we maintain the functions as best we can, our core functions at CDFA with the funding that we have available. So to the extent that there is funding available for a position, we would look throughout the department for position authority to make
Speaker 6
able to hire for those positions that were, you know, incredibly impactful for our constituents and impactful in terms of implementing the legislature vision for CDFA.
Speaker 8
Sure. Brian Metzger, Elio. We were asked just to provide a brief overview of how this all worked because it can be kind of complicated, so just gonna try to run through this quite quickly. So, as is mentioned over the past several years, or a couple of years, I should say, the administration has proposed options for reducing costs at state departments, and one of those was to eliminate certain vacant positions. The legislature received a specific proposal on that last May revision to eliminate about 6,000 vacant positions across various departments.
Speaker 3
That didn't give the legislature much time to review all 6,000 of those positions, And so a final agreement was reached that allowed the legislature through the joint legislative budget committee to review about 1,000 of those positions. Those vacant positions included, you know, those that were part of the agreement were all proposed for elimination across nine particular departments, including CDFA, as well as vacant positions that were associated with implementing legislation that was chaptered in 2022 and 2023. In a letter to the Department of Finance in December, the JLBC did not concur with the elimination of about 650 of those thousand positions. And of the 650, as was mentioned, 35 are at CDFA, 21 of which are funded with special or other funds, and 14 of which are funded by the general fund. For those positions that are funded with special funds and with other funds, we recommend that the legislature maintain these positions consistent with the non concurrence from the JLBC.
Speaker 8
Doing so would not have an impact on the general fund condition and would avoid negative programmatic impacts. Those positions that are funded by the general fund because of the potential impact on maintaining the general fund condition, we would recommend considering them on their relative merits, given the overall budget condition. Thank you.
Speaker 15
Nate Williams with the Department of Finance. Nothing further to add, but happy to answer any questions.
Speaker 1
I'm gonna go ahead and allow members of the committee to ask questions first. I gotta organize my thoughts a little bit because it is a complicated item here. But I'll do we have any questions, comments from our vice chair?
Speaker 3
These general reductions, this is not directed at CDFA. This is, more Department of Finance and the administration. We had the elimination of of positions. We also had the unallocated expenditure reductions that departments and agencies were expected to come up with. And at the time, I said those largely will not materialize because we do that repeatedly and usually they don't materialize, not entirely, but largely.
And the elimination of positions often ends up the same way. It is a budget move that appears to reduce a deficit, but in the final analysis, as my friend Dave Cox used to always say, it doesn't materialize that way. So it's just my comment of a criticism of the strategy in the first place.
Speaker 13
I I I I I don't agree. I think I'd I'd agree with a lot of characterization, but I also think it isn't it is a necessary housecleaning, you know, having I I've also been a deputy director of a state agency before. And we we do need to positions that have been vacant for an extended period, we we need to wipe them off the books. We we and and as we the fact that we had this even this many that we did concur with, I think is is evidence of that. Whether it produces $5,000,000,000 of savings or not, that is I think that's a fair that's a fair point.
But as a pure state operations management and administration activity, it is important for us to to right size our our our our position even if it's even there even if some of them are are theoretical. So I've I've been supportive of these efforts and we we should continue to do them. On the special fund side, I I appreciate Elio's point at at the same time, you know, the we should be looking at the special fund positions on their merits also because the the special fund the special funds don't come out of nowhere. They are paid by somebody's fees or some or some penalties. They're they're they're real money.
And if we if there are, you know, a dozen or two dozen in this particular department of of of special fund positions that are that on their merits aren't needed, then they those positions should be eliminated. And if that means if there are savings to be had, those savings should be should be passed on to the revenue structure that's involved for those for those programs. So I don't think I would not just take special fund positions off the table and say, hey, since it's not a general fund, we don't care how much how much how many extra positions are on the books we should be doing with with with both with both of them. At the same time, you know, we do the the actual delivery of the of the services, the oversight, the audits, you know, programs like the the the Edgar Curry bill from from from last year. Like, these these but these need to get done and they need to be done effectively.
And not every vacant position, even if it meets those standards, should be eliminated. Right? That's why we have the review process and that's why I appreciate the work that both JLBC and LAO have done in that space. So, you know, my view is that we we we should be examining them all on their merits and I know you have done that to a large extent, But I but I don't and and that would result in maintaining at least some of the key ones like the a b four zero two implementation. But I think the special fund of positions deserve just as much legitimate scrutiny, and and they shouldn't get a free pass in in this process as well.
So I know the chair has a lot of questions, so I'll stop there.
Speaker 1
Thank you, senator Cabaldon. I'm still trying to organize my questions, but appreciate it. I'll I'll I guess I'll get started. Look. You know, it's been really unclear to me, you know, how long some of these positions have been vacant for.
It's unclear, what program they fall under, and it's also unclear, whether they have been difficult to fill, or whether they're needed or not. It's I would just based on the information that I have, it's very difficult to say. And, you know, the Department of Food and Ag is such an important department. It's I always say this. Right?
I represent an agricultural region, but food security is national security. And so, you know, if I sound a little bit, you know, difficult today, it's not because I I dislike you all. Really like you all. It's more so because I care and because it's food security. And so if if there's something that is missing, it could be very critical to our food supply chain.
It could be very to our own food security, you know, for Californians across the state. And so the questions come from from that and and knowing that it's very much unclear why some of these positions were removed. So I I was hoping to get an explanation from the Department of Finance because it seems to me just based on on what was selected positions that were selected, it was a decision that really came, I would assume, from the Department of Finance. And and if so, if that's the case, can you walk me through that process of how you how those just those decisions were made to to pick these positions?
Speaker 15
Sure. Nate Williams, Department of Finance. So just to kinda step back, you know, in 2024 when this the these efforts kind of began, Department of Finance took a look at what are vacancy rates across all state governments, and then kind of specifically broke it down at the department level. And we kind of came up with targets as to to what kind of savings we were looking to achieve through these and what kind of position reductions we were looking to achieve. And then we relied on the departments because they have, you know, this specific knowledge of where they might be able to find efficiencies in their own programs to really select the specific positions that went on that list.
I do kind of want to encourage members of the committee to to kind of look at this less as these are the specific positions that are going away and can never come back and they're completely gone and the work that's associated when we think about that position is not going to get done because these were vacant positions. And then the department does maintain kind
Speaker 18
broad administrative authority to reclassify positions as needed to to kind of fill those, you know, really important kind of critical positions as needed. So, this was kind of a snapshot at a point in time in 2024. We understand that these positions have kind of been in limbo, you know, since then, and so there could be there could be different operational needs that that the the department could address after these positions would were to be eliminated.
Speaker 1
So what was that decision making process for specifically the Department of Food and Ag? What was that what was the the thinking going into it? I mean, there's do you have any more specifics on
Speaker 15
As to how the Department of Food and Ag made the determinations to which ones?
Speaker 1
Was it the Department of Food and Ag that made that determination? Or is that in The working with the Department of Finance? What what who all was engaged?
Speaker 15
Yes. So so each department was relied upon to to make the actual determinations as to which which positions would fall on that list. So I would probably defer to the department. The specifics, a lot of departments use kind of similar criteria. So they would look at historical vacancies, ones that had been vacant for a long time or things like that too.
Those were kind of the easiest to select on their list.
Speaker 6
Sure. There are there are some of the positions that I could say and and each one is unique. But looking at looking at each position that was identified as to why it might have been on that list, we have positions in our rural field stations that are environmental scientists or veterinary positions that are very hard to fill, particularly at state rates. That's also for our pest prevention assistance. And so in those positions where we're doing field work in our rural communities and it's very difficult to recruit for those positions, I would imagine that they had been vacant for longer than six months, and that's why they were considered as part of our reductions.
For other positions, I know that
Speaker 1
So who in the department made was making that decision or providing that input?
Speaker 6
We worked together across the department, across all of our division directors to understand what was vacant and therefore available as part of this drill. We also worked to understand what our legislative mandates were and ensure that we had both the funding and the position authority to fulfill those mandates and where we had one and not the other. So there are positions, for example, within our division of measurement standards where we don't have requisite revenue to fill those positions. And so for those positions, you might see them on the list because they had been vacant for many years. So it it really is individual to each position.
We continue to work together as a department across the department to understand where we are where we have both funding and a mandate to to do an activity. The these might be the four the some of our core programs like the room rate program that I believe has been has been mentioned. For those programs where we do have a mandate and there is funding for that program, we do have, as was mentioned by finance, the authority to reclassify positions to ensure that we fulfill that mandate. And so we are actively and kind of continuously working to make sure that those core those core mandates are are fulfilled even with fewer fewer positions, open positions to do them.
Speaker 1
You know, as I was going through the list, I was really concerned about some of these positions that were eliminated or not filled, including, for example, the supervising auditor one, milk marketing, some of the investigator the investigators that are on the list. And and it you know, the time when you're seeing wine grape growers that are going bankrupt, that are struggling, you have you know, for farmers just across the state of California, you know, dairy men that are struggling and and and filing bankruptcy. What what is CDFA's public position over these positions in terms of if there's a need to exist or not like the ones that I just mentioned? You think they're they're they're not valuable or not needed?
Speaker 6
We are committed to fulfilling our requirements under legislation for those programs. So we are committed to ensuring that audits to specifically to those position, audits of agricultural and milk handler entities occur. We are committed to ensuring that that occurs within the budget constraints that we have. And should we have the budget to fill a position or should we have an open position that we have funding for within that program, we're committed to working across the department to ensure that there is position authority to fill that position and to fulfill that function.
Speaker 1
So has the CDFA conducted an assessment of whether the loss of these positions, investigative and audit positions in the for example, in the commodities program, if that would create additional financial hardships that could be driving the you know, these grower bankruptcies? Have you done any kind of assessment on that end? Or
Speaker 6
A specific assessment on that end, I would have to ask our milk marketing program and our marketing services branch, and we can absolutely follow-up with that information as to whether a specific assessment has been done regarding those positions and that function.
Speaker 1
Okay. And I just kinda kinda wanna give an example, but also make it a question. So the crush report aggregates pricing data submitted by the buyers of wine grapes and the handlers and processors who have a direct financial interest in the market price, the report reflects. Which c d a which CDFA staff are currently responsible for verifying the accuracy of what those handlers submit before it is published? And are any of those classifications among the positions that are being eliminated?
Speaker 6
That is within our division, or our marketing services division, but those positions are not identified here.
Speaker 6
I will double check on the the ones around the milk the milk marketing agree and the Quoter Administration program, but let me double check on that one. But Grape Crush is not listed here.
Speaker 1
So it sounds to me like there's there's something missing there for on the milk side on the or auditors for the for the milk producers, but not necessarily for the wine grape growers. Is there is there a reason behind that?
Speaker 6
We have not dropped any of those functions at the Department of Food and Ag. So whether or not these particular positions were full, we believe that we are fulfilling our legislative mandate for both of those programs.
Speaker 1
So are there any auditors under the, that that would oversee or supervise, the milk producers?
Speaker 6
Yes. How many? I will double check and get back to you with those numbers. Okay.
Speaker 1
Given that the that growers are experiencing financial collapse in the in some of these markets, that various reports help price, has CDFA reviewed whether the the data that it is publishing accurately reflects the handlers that are actually paying?
Speaker 6
In I apologize. In relation to these particular positions or in general?
Speaker 1
I would say the positions that it applies to. Auditors, the investigations. I mean, you run you you all run the department.
Speaker 6
Yes. We we believe that we are fulfilling the mandate, and that includes providing those reports and providing accurate data. We believe that we're fulfilling that mandate that as statutorily required
Speaker 1
regardless oversee that that information and the accuracy of that information.
Speaker 6
That's within our division of marketing our marketing services division, and that is within our marketing services branch, and they run the quota administration program. So we do have staff in that program that are fulfilling that mandate. I will get back to you with the exact number of staff in that program.
Speaker 6
We will follow-up with the the exact numbers for that program. I I do not know off
Speaker 1
the top of my head. Okay. Alright. Well, that's all I have at the moment. I also did notice okay.
Let's see. So there was a a supervisory auditor position for milk marketing, right, in 2024. Was that a position that that existed before? That 2024?
Speaker 6
That was a position that was position? The the milk marketing, the position that was that was listed on the for for sweep, that was a position that existed before and that had been vacant for more than six months.
Speaker 1
Okay. Because my understanding is it didn't exist for that. I went to the state controller's website and pulled the information of all the positions that are within the Department of Food and Ag. I spent many, many hours, late nights, going over this, so that's why I'm asking. It's not coming out of anywhere.
So that's it it seems to me like it was a fairly new position that was added and created, never filled, but then removed.
Speaker 6
Yeah. Let me let me go back and and double check on that position for you. I I do believe that the functions within that program are being met, whether or not that position specifically continues to exist. So let let me double check on that that program and that position.
Speaker 1
Okay. Well, if I have any additional questions that I didn't ask today, I'll make sure that I put those in writing to you all. But I appreciate your answers. If there's anything else that you would like to add? Okay.
Alright. Well, that wraps up agenda item number three. And we're moving on to We have one more. Okay. Agenda number four.
Speaker 6
Thank you for for your patience with me for four four whole agenda items. So this this budget proposal proposes an increase of 810,000 in indirect funding in fiscal year twenty six twenty seven and ongoing, as well as four positions to complete crucial information technology operation activities. The proposal is in response to a lack of sufficient resources, which has led to staffing shortages, outdated IT infrastructure, and increased operational risks, which threaten service delivery, security compliance, and CDFA's alignment with state my statewide mandates. This request will ensure that CDFA's applications are securely configured and continuously monitored for performance, enable CDFA's ITSD information technology services division to provide essential support to track, monitor, and audit IT requests, and then allow ITSD to transition from operating in constant triage mode to providing proactive strategic support for CDFA's technological initiatives. Happy to answer any questions.
Speaker 7
I'm Matt Sallam, Department of Finance. Nothing further to add. Happy to answer any questions.
Speaker 6
you for following up. We're very proud of that work, so we're happy to talk about it. As you as you recall, last year's BCP was focused on addressing CDFA's application vulnerabilities by migrating applications to newer platforms. We're not a 100% done. We manage over a 170 applications, a 150 of which are on legacy platforms that require constant maintenance and will necessitate future migration, hence, the technological deficit debt that we were hoping to work on.
We have chipped away at that with those five positions that were authorized last year. It has already been incredibly helpful. For example, we've put in place Microsoft Defender as an endpoint protection platform and have divested from a legacy system. We've also been able to develop and implement new security protocol that will increase our security score as it's determined in our annual assessment and audit from CDT and the Department of Military from a not great score to the minimum score for security. So up to a we're very close to a two out of four for our security requirements, which is a huge improvement for the Department of Food and Agriculture.
We've also doubled the number of applications. I know that that one fifty out of one seventy is a scary number. We've doubled the number of applications that are moving forward and are migrating to to up to date applications, and so we've been able to make really great progress in just the year that we had those authorized positions and funding.
Speaker 1
Okay. Is is the department facing any consistent emerging cybersecurity threats? And if so, what is it what department doing to mitigate them?
Speaker 6
We have been fortunate, that we have had great partnerships with CDT, with the Department of Technology, and we have not experienced any, major security threats in the past year. We believe that's because of our proactive work that we've done and our proactive collaboration with CDT to migrate some of these outdated platforms. We are continually working on updating our list of applications, the criticality of any security concerns, and then addressing them in that order. And we do work with CDT and the Department of Military to flag those items and then address them as they come up.
Speaker 1
And I don't know if you can share this or not, but if if there have been prior incidents that you're aware of, is there a particular area that we should be aware of that it was targeted?
Speaker 6
There was a in the previous BCP, I believe we mentioned that there was a a breach. It did not apologies. A year and a half ago is so far in my brain. I can come back to you with some of the details of that. We we did not.
There was not compromised compromised personally identifiable information that I'm aware of, and so we and we were able to identify and with the help of our partners at CDD, patch that breach very quickly. The security funding that was authorized in last year's BCP has really helped us in being more proactive in identifying those concerns, and that's why we have not had any issues in the past year.
Speaker 1
Good. I'll knock on it as as well. Obviously, cybersecurity is an area that I think very important to me. I did a piece of legislation on cybersecurity for food and water several back in 2021 because I was hearing concerns down in my district. And as I mentioned earlier, food food security is national security and c a CDFA, while it's a small department, it's a very important, department and making sure that we protect it as much as possible from cyber attacks and that that means we're protecting Californians from being food insecure.
So appreciate the work that you're doing in this space and I'll take questions from senator Kobolden.
Speaker 13
Yeah. Preferably for an offline response, I I would like to know the department's given the the the what what we funded and what you're implementing now on the cyber side. The the the the department's expectation of its security under under the quantum computing the the quantum threats to our cryptography cryptography protections. And then second, the department's both practices and intentions with respect to autonomous AI agents, both externally, but also externally in swarms of them, but also internal practices with respect to the ability of CDFA employees to install autonomous agents on their own state equipment or to allow network egress from their browsers, for for autonomous AI or or semi autonomous AI agents. Please don't answer this now, but would appreciate, an a separate response in writing.
Speaker 6
Always happy for the conversation, and and we are in compliance with all CDT policies regarding AI. Any
Speaker 1
other questions from committee members? Okay. Seeing none, we will go ahead and move to take public comment on the following items. 8570, Department of Food and Ag. Item number nine, dog importation, certificates of veterinary inspection.
Item number 10, livestock carcasses disposal. 0855, gambling control commission. Item number 11, information technology program support. Item number 12, tribal nation grant fund. 2,100, department of alcohol beverage control.
Item number 13, relocation of Palm Desert district office. And I will ask for a okay. We're gonna take comment, and then we'll move the on those items only, and then we'll go from there. Any any comments?
Speaker 29
Madam chair, committee members, staff, colleagues, my name is Martin Bork. I'm the executive director of the Ecology Center. We lead the market match program that was referred to earlier, which doubles CalFresh benefits at nearly 300 farmers markets statewide. It is funded by the California Nutrition Incentive Program at CDFA. Last year, this program delivered over 50,000,000 servings of fruits and vegetables to families in need while getting every dollar spent directly to California small farmers.
Speaker 18
Monday, we submitted a letter of support signed by a 182 organizations urging you to establish permanent general appropriation for CNIP in the 2627 budget. This program draws down federal matching dollars. And with the cuts to CalFresh and Medi Cal, California cannot afford not to expand this win win win program. We hope you will give it your full support. Thank you.
Speaker 1
Thank thank you. And I I just wanted be be a little more clear. We're only taking comment on items number nine, ten, eleven, twelve, and 13. Does anyone have a comment on items nine, ten, eleven, twelve, or 13? Seeing none, additional comments on these items.
We will go ahead and move to ask for a motion from our vice chair on those items.
Speaker 2
As to items nine, ten, eleven, twelve, and 13, senator Sartado? Aye. Senators Nilo? Aye. Senator Cabaldon?
Aye. Senator Small and Cuevas?
Speaker 1
We have the votes for those, four five items, nine, ten, eleven, twelve, and 13. And they are out. So we'll go ahead and, go back to our items of discussion. Moving on to item number five.
Speaker 19
Good afternoon, madam chair and members. My name is Clint Callum. I'm the director of the department of cannabis control. I appreciate the opportunity to be here today to discuss a little bit about the department and our request before you. I'll provide a brief overview of the department and then I will pass it to my colleagues to get into more detail.
The department regulates the full cannabis supply chain and that includes cultivation, manufacturing, distribution, testing, and retail. We also have a law enforcement division focused solely on illicit market enforcement and that complements the regulatory work we do. If all of our budget proposals before you are approved, our total budget would be about $198,000,000 $104,000,000 of that is funded with licensing fees. The other $94,000,000 is funded with the cannabis excise tax, including $10,000,000 for academic research grants. To just give you a little bit of a scale of our organization, we have about 240 people in our compliance division.
They handle inspections and complaints on our licensed operators. They also operate our state reference lab. We have a little over a 100 people in our licensing division that handle applications, renewals, ownership reviews, and other licensing work. We have about 93 people in our law enforcement division. They're focused on illicit market activity, 75 of those are sworn, and 54 frontline detectives.
And then we have typical department organizational structures, legal services, admin, technology, and policy and program support. About us. We're we're just like every other regulatory agency. You know, we wanna provide consumer youth in environmental protection, but we're doing so in a really unique environment. We're eight years into a legalization, and only about 40% of cannabis consumption comes from the legal market.
So our focus in addition to what a regular regulatory agency does is increasing the proportion of consumption that does come from our legal market because that's one with testing environmental protections age gating, labor standards that are traditional that you would see. To be clear, I'm not advocating for more consumption of cannabis in the state, just moving and transferring over what does exist into the legal market. To deliver on that, there's not a single thing that we can do. There's many things that we have to do well. I would bucket them into four areas.
The traditional regulatory work, trusted and safe products, and that's the fidelity of what our typical regulatory agency does. Continued pressure on the illicit market, that's where our illicit market work comes in, working with local law enforcement federal agencies to kind of continue pressure on that activity. Increased consumer awareness and legal access for individuals. It's a really complex consumer market out there for folks and I think folks are actually interacting with cannabis that's illicit with not even knowing so. So there's work to be done on that front.
And then we have the obligation also to reduce friction on our operators in a way that doesn't compromise trust and safety to make sure that it's a market that's functional for them as well. These efforts work together and they'll help make the market more stable and accessible in the long term. Happy to answer any questions.
Speaker 1
On the overview? Overview? What is the overview? Their overview? Yes.
Well That's great. We'll go ahead and just move proceed with agenda item number five, if that's okay with you all. And item number five pertains to Department of Cannabis Control's requested enforcement and legal affairs workload adjustment.
Speaker 12
So we're gonna do a little bit of shuffling throughout this to bring in our subject matter experts. Okay. But I'll go ahead and start. So good morning, chair or good afternoon now, chair and members. My name is Christina Dempsey, and I serve as the deputy director of government affairs for the department.
This first budget change proposal before you is to strengthen enforcement against the illicit cannabis market. The illicit cannabis market in California remains widespread and deeply entrenched. In 2024, an estimated 12,800,000 pounds of cannabis were produced within California. Of that, 11,400,000 pounds were produced illegally, and only 1,400,000 pounds were produced in the licensed market. Consumers also face a confusing and difficult to navigate environment in which legal retailers are limited, and illicit cannabis and intoxicating hemp often pose as legal products.
As a result, roughly two thirds of cannabis sales occur outside of the regulated system. This is not just a regulatory issue, it's a public safety issue. Illicit operations are often tied to organized illicit operations are often tied to organized criminal networks and can involve labor exploitation, environmental damage, tax evasion, and risk to communities and consumers. The state has made progress through coordinated enforcement efforts, but the scale of the problem continues to outpace resources. The department's enforcement approach is targeted and intelligence driven, focusing on organized criminal activity, distribution networks, and financial facilitators,
Speaker 12
the highest harm cases, including those involving environmental damage, minors, or public safety risks. Even with this prioritization, there's a clear mismatch between workload and capacity. The department has about 75 sworn positions as as director Kellam was mentioning, and about 54 are conducting frontline investigative work. That amounts to less than one officer per county. The department receives about 1,500 complaints of illicit cannabis activity annually, but we are only able to close about 400 cases a year.
This has resulted in a backlog of approximately 4,000 illicit market cases statewide and grows by about 1,100 cases each year. This proposal does not attempt to close that entire gap. Instead, it is a prudent targeted investment to address a specific operational constraint that is limiting our effectiveness. This proposal includes two aspects. First is to establish a North State office.
This would be supported by eight sworn staff and a facility. Currently, Sacramento is our northernmost law enforcement office, which limits our ability to effectively investigate criminal activity connected to cultivation and distribution in Northern California. This results in increased travel time and operational costs, reduced ability to conduct complex multisite investigations, and challenges in building local law enforcement partnerships in the North. The Northern Region is a critical corridor for cannabis production and distribution, and expanding our presence there will significantly improve our ability to target that upstream activity. The second portion of this request is to strengthen our support infrastructure for our law enforcement division.
It would add three non sworn positions to support criminal case intake and intelligence and administrative functions. Today, these responsibilities often fall to sworn officers, reducing the amount of time they can dedicate to investigations. This change would allow sworn staff to focus on core enforcement work, improving efficiency, and overall impact. This is a measured and strategic proposal. It does not attempt to fully address the scale of the illicit market.
Instead, it targets a clear geographic and operational gap and improves the department's ability to deploy resources more effectively. In sum, the illicit cannabis market continues to operate at a scale that undermines the legal cannabis market and poses real risks to public safety and the environment. This proposal is a practical step to strengthen enforcement by expanding presence in a critical region, improving investigative efficiency, and better aligning resources with our enforcement strategy. We are joined today by our chief of our law enforcement division, Kevin McInerney, who's available to speak to illicit cannabis activity in California, our operations and approach, and the details of this request. Thank you for your consideration.
Speaker 1
Thank you. For the presentation, does the Department of Finance wish to comment?
Speaker 13
John Parsons, Department of Finance. DCC's proposal for a new field office in Reading along with additional sworn enforcement staff reflects a targeted investment and establishes a presence in Northern California, and additional legal staff will help DCC take on additional or increased cases related to environmental compliance, testing standards, and pesticide use. Thank you.
Speaker 1
Okay. We have quite a bit of cases. Right? Is that so those are statewide and they're increasing by about a thousand, you said, a year. Are those majority of the cases coming from the Northern Part Of California, Northern region?
Speaker 21
It's it's a mix and they come through from throughout the state. The the bigger issue is that many of the cases are interrelated and cross county lines and often cross state and lines and go out of the country as well. So putting another office in the North allows us to create a it it fills a strategic gap. Currently, if we are going to work cases that are connected to the North State, we have to have people travel sometimes six hours at a time before they even get there. Once they're there, they often have to do surveillance.
They have to coordinate with the local agencies. And our MOU allows us to work sixteen hours a day. So I need to reduce the amount of travel time, reduce the amount of overtime so that everything's fiscally responsibly done. But as I was saying, our cases are connected across the state. There's these are networked organizations that are doing this.
The the groups that are growing in the North are sending product to the South for processing and to be sold and distributed throughout to the rest of the state. Nothing's independent and no groups are independent. So we
Speaker 21
a better statewide presence in order to more strategically investigate these cases.
Speaker 12
I think it's also important to note on this is that I I think this is one of the places where DCC specifically adds value in in the law enforcement environment here. A a local law enforcement agency would not be able to conduct that same statewide operation because they're rightfully looking within their community, and this is the place where DCC adds value onto what is already happening at the local level is by taking that statewide view.
Speaker 1
I think that there's gonna be a lot probably additional challenges with having an office there. I mean, I I definitely support those efforts. I just it seems to me like that, you know, we probably could have some additional concerns around the safety of people that are in the office and it have is that also taken into account with this this budget ask?
Speaker 21
It is anytime we place an office. We're always concerned about the safety of our staff. For the most part, our offices are not public and we generally position our offices close to other law enforcement agencies and state agencies.
Speaker 1
I understand that, but I also understand that technology these days, and especially when it comes to organized crime, they're very much sophisticated when it comes to the type of technology that they have access to and can have get information that we know, that it's I mean, it seems like they just have some of those tools and information that that could maybe down the road put folks at risk. So I just wanted to kind of mention that and see if you guys have taken it on to co because I would imagine that folks that are working in that office are probably from around the region.
Speaker 21
They will be. We'll recruit from I mean, majority of our law enforcement are on average about fifteen year have fifteen years of law enforcement experience. So we'll be recruiting heavily from that area because it allows us to build relationships with the agencies that they came from. So have we taken that into account? We're always concerned about safety.
We we have fairly sophisticated security systems on every one of our buildings. We're we're always taking into account the safety of our people. But but it is a concern.
Speaker 1
Okay. So that's all taken. But you've taken that into account in regards to this budget request?
Speaker 12
Alright. I I do wanna add, there's a a very similar but different, risk to having officers travel up there. These are not large communities. They are very, they're communities where everyone knows everyone and everyone knows what's going on. And so, we have a team of six to eight people who are essentially caravanning up north, like, there are spotters who see us coming and inform on other people as we are moving.
And so, it creates a little bit of a moving target as well. So, there's a different sort of public safety risk by that is created by having the travel as well.
Speaker 21
Counter to add to that, counter surveillance is not abnormal, especially in the smaller smaller, more rural communities where everybody does know who everybody else is. We've had teams and the other agencies that we work with on a regular basis have had teams followed with drones as soon as they were in the area. So, this is this is something that, one, we're prepared for, but two, we're also cognizant of.
Speaker 1
Okay. Understood. Thank you. And I I come from a small little town. So, yes, we pretty much know everything that's kinda going on and who is new, who is not new.
I mean, it's it's that's just how small towns work. Okay. Any questions from committee? We'll start with senator Cabaldin.
Speaker 13
Yeah. So I've I've two lines of of these. So first on this specific the specifics of the request here. So the do you anticipate the number of complaints from the North States that are filed to go up as a result of your presence there as well or or not? I mean, we'll
Speaker 21
Yes. But it's not so much the complaints filed. A good portion of our cases are actually developed based on referrals from other law enforcement agencies. In fact, the majority of our best cases are. So once we build a presence in that area, the likelihood of us receiving more cases does go up.
Speaker 13
And then in this building, the North State is often thought of as a, like, a single place. But, of course, there is an enormous difference and distance between the North Coast, in particular, and the North Sacramento Valley as well of course is the Northern Sierra. Why why Redding for example and and not somewhere else in the North State as an example?
Speaker 21
It's centralized. It's centralized. It's on the I 5 Corridor, allows our people to go east or west, north or south relatively easily. It has it it tends to be kind of the hub for the the North State. It finding a location for an office is easier in that area and recruiting staff.
The further we go in one direction or the other or in any of the directions, the more rural it becomes and the more difficult it will be to fill the positions that we need to.
Speaker 13
Okay. And then sort of more more abstractly, you know, as listening to the director's opening comments and I I don't know if I'm noticing or just imagining the sort of change in the the language that we're using about this issue. And it reminds me of when when we were when as mayor trying to grapple with homelessness, which was urgent, urgent, urgent. And then I was like, well, we hope to have a ten year plan where we get the numbers from this to that or whatever. And so that there's a notion that, you know, our our goal over time is to, you know, change the '60, you know, the 6040 to you know, and we'll come back next year and we've we've made we made it 5545 and and yay.
But it's a I mean, it's a massive crisis for for security and crime and all of that. And, of course, for the for the market stability that the voters anticipated and that and for all of the all of the recipients of and the of of funds to support equity and everything else. And so it's a big deal for and I think sometimes we we also imagine that when we have things that are special funded that we don't care about them in a general government kind of a sense. Oh, like, oh, there's there's this money for this purpose and that's maximum amount that can be spent on it, and we shouldn't spend any money from the state as a whole on it. And so my question for you is, have have you thought about or maybe this is a question for finance.
In a in a in a in a year, whether it's this one or next year if some of the big AI companies do their IPOs, you know, a general fund surge. So a one time or a two year surge where we where the where the department really, you know, all hands on deck. We're gonna invest in and we're gonna and we're gonna disable we're gonna fundamentally disable the illicit market in California, not respond just to cases, but really go at the heart of the matter. Have has has the has the department considered what that what that might look like? And has the Department of Finance even entertain the notion of something more than sort of a you know, this is not trivial, this request, but it's also not transformational in terms of what we'll be able to do to the to the to this, like, very, very substantial imbalance in the illicit market.
Speaker 20
John Parsons, Department of Finance. I think this approach that that we're looking at here for governor's budget involves an incremental increase, sort of a slight transition rather than throwing significantly more resources into this, knowing that enforcement is going to take more than just this, as you said. But I think the value of having a presence in the northern part of the state was strong consideration.
Speaker 13
Alright. I I I I thank you for that. And also, I I I have been here long enough to understand the department's silence on this, and I get it. But, you know, as we look to the to the May revise and beyond, and there are gonna be a lot of priorities for us to grapple with. But I but I'm I'm raising this because it is very standard for us to think, this is special fund and we should, you know, unless and the special fund is also, like, in in its own dire fiscal situation because of the illicit market that that this is this requires a much a much more profound effort to try to to tackle the foundation of the illicit market and that we should be we and the administration should be considering, you know, given the the fact that we we are likely to have one time resources in total in the budget without necessarily having ongoing ones that we ought to, in addition to this proposal, be considering some sort of surge that is focused on on attacking the the the the the at at its legs, the illicit market and the structures that it depends on in order to thrive in California.
Thanks, madam chair.
Speaker 9
Thank you, madam chair. So I guess my question is, can you explain how much the state is currently spending on these enforcement efforts? And is there an analysis of the the outcomes of that investment in terms of closures, seizures, penalties? And are we able to measure the reduction in the illicit market overall? Also, if you could add to your responses, what is the sort of aggregate of enforcement in terms of what the state is doing, the federal is doing, local, and local governments?
Speaker 12
I'll try to answer that and then tell me any areas that that I missed. So the the law enforcement division that we have, I can get you an exact budget number. So Clint talked about about $9,192,000,000 dollars of our budget comes from the cannabis tax fund, which is not all law enforcement, not all illicit market. It does include a couple of other costs like the track and trace system for California. And so it's it's a smaller number than that, but you can think of that as the the sort of ceiling on that.
That is that funds the the about 75 sworn officers that our law enforcement division has. There's about an equivalent amount of officers in the Department of Fish and Wildlife, who focus, mostly on outdoor cultivation, throughout the state and environmental crimes related to that. Their lens is is similar to the lens of the rest of the department is looking at environmental impacts. On top of that, there is local funding that is given through the board of state and community corrections via a grant program for public safety offices at the local level That also comes out of the tax fund. It comes out of tier three of the tax fund.
It's a rotating amount of money that's available each year for that depending on how much is available in the tax fund, but they have accumulated a couple of years of of dollars there and are currently in the middle of an RFP for a $125,000,000 to local law enforcement related to this issue. In past grant fund years, this has gone to a mixture of both public safety and public health type of initiatives, and so you've seen some community reinvestment and some investment in law enforcement. But last year as part of the budget process and adoption of a trailer bill, the legislature did make a shift to prioritize that money for illicit market enforcement specifically. So we've spent a lot time with, BSCC this year as they've been developing that RFP, to ensure that the components of the RFP truly do support local law enforcement in this effort. Tell me your other parts of your question.
That's general funding. The coordination piece.
Speaker 12
Yes. And we can provide figures on the amount of illicit product that has been seized, the amount of search search warrants that have been executed as follow-up to this. So I'll speak just generally to effectiveness, but then I'd like Kevin to weigh in on this as well. So this it's challenging to measure effectiveness because in law enforcement, it's often measured by statistics, but statistics don't always show you effectiveness. So we can tell you how many seizures have been conducted, how many search warrants have been executed, how many plants have been cut down from illicit farms.
And that doesn't always tell you whether those plants came back the next year or months later, whether that store reopened sometimes days later. And so it's tough to measure effectiveness just from those statistics alone. This being an illicit market also makes measurement of even the size of it challenging. And so what we have even now is best estimates of what it is. I mean, by nature it's it's sort of underground activity.
And so one of the things that well, two of the metrics that we've been looking closely at is one is what is the best estimate of the size of the illicit market. And last year, the department published a market report where we had an economist really look at that issue. Probably could make a lot of arguments about what factors could be considered in making that sort of estimate, but that's where they came up with the best estimate based on federal seizures and law enforcement activity and then what we know about the market of 11,800,000 pounds being produced. That does not seem to be growing, but it does not seem to be getting smaller as legalization is going on. And so as we're looking at this, we should honestly be seeing increases in this activity because it is a a high value for criminal organizations.
It's a way that they can make a lot of money with fairly low risk, especially because of penalty reductions that have happened in this area, and we're not seeing it grow. And so what we can say is that our efforts are at least keeping it at bay. They might not be reducing it, but at least it's not growing. That's not a satisfying answer even to us of of what this looks like. But so that's one of the the measures that we look at.
And then, again, director Kellam talked about the 40% of consumption coming from the license market versus the illicit market. That number started out in the high teens in 2018, grew to the low 20%, about 23%, I believe it was, and then has plateaued at 40% for the last couple of years. So we're seeing consumers we saw some shifts to the legal market, but we're not seeing significant shift. And so what we what that tells us is that there's still money coming from consumers into the illicit market. And that those figures come from both national and state survey data of Californians and and who are consuming cannabis and and measuring their consumption.
And, Kevin, if there's anything else you wanna add.
Speaker 9
Thank you for that. And I would like to see some sort of analysis of the successes of of the work that's happening in the illicit market. I think my last my last question has to do with backlogs. I'm always concerned whether it's the civil rights department or labor agencies. I'm always concerned about backlog, and this is a sort of relatively new agency and already we're seeing significant backlog.
And I and I'm not quite well, I guess what I'm hearing is that even if this new office opens, it does not have any impact on that. What what is the is it a techno technological solution that's needed? What is the is it yeah. I'm not even sure the process of how this works. What what are you all seeing as a way to get a handle on this backlog?
Because to me, if you open another office, that means more backlog if we're not quite understanding what the problem is.
Speaker 33
I'm Clint Kellen, the director because we were talking about this a little bit yesterday in relation to even our licensed compliance complaints. You know, like any entity, you're always a little under resourced in relation to the work before you. And so it's not so much a matter of being able to address all the complaints, but of figuring out effectively which of those complaints merit the most attention, and then driving the work there. And then also, I think as Kevin mentioned earlier, it's really taking that information and figuring out how to make the most impactful investigations overall versus just changing down every individual complaint that we receive sometimes which don't have a lot of information they may be trying to mislead us a lot of gamesmanship in that process so the complaints is an element of showing you sort of the magnitude I think the the the estimated pounds produced in the state in relation to the legal market is quite significant and kind of showing you the scale. So there's a lot of work to be done, but the complaints themselves is not something that we're sort of like chasing, like we're gonna get this to zero.
Speaker 19
We're really trying to figure out how we can just be effective with the resources we have.
Speaker 3
Yes. With regard to the issue of being under resourced, when you're faced with an impossible task, you will always be under resourced. That's sort of the nature of the question and comment that I have. Do you expect that you will achieve any measurable reduction in the illicit market share through this effort or any other effort? Yes.
Realistically speaking?
Speaker 21
Yes. I think we will. I think it's gonna take time. I think it's gonna take effort. I think it's gonna take resources.
And I think it's gonna take a multimodal approach. And it's probably relatively infrequent that you're gonna hear cops say this, but enforcement is only a tool in the toolbox to eliminate this problem. This is gonna require a whole of government approach to resolve this issue. It's gonna require reducing consumer confusion. It's gonna require ensuring that we have a strong legal market.
Speaker 4
It's gonna require enforcement as well. And it's gonna require novel approaches at attacking the distribution cycle, making this more expensive for those that are in the illicit market for leveraging every single type of investigation that we can, pursuing tax evasion, pursuing money laundering, pursuing the weapons charges, not just the cannabis related crimes. They're all interrelated. And this is a poly polycrime issue, not a cannabis issue. So because the organizations that are heavily involved in this are doing this specifically because of the money behind it, The money is the thing that we need to attack more than anything else.
Speaker 21
So can we make an will we make a measurable impact? Yes. I believe we will. But I don't think it's every step we take is an incremental additional aspect of getting there. It's going to take time and it's going to take effort and it's going to take resources.
But, yes, I do think we will make a measurable impact.
Speaker 3
gonna be have make it illegal for people to consume marijuana from the illicit market?
Speaker 12
No. You will not see us come up here and propose to to reinstitute individual crimes like that related to consumption. I think consumers don't know. So this is, a situation where illicit stores often look very similar, if not identical, to legal retail stores. They don't know that they need to check if they're licensed or not.
They don't know that there is a difference between licensed and unlicensed stores. They don't know that there's a difference in product. And this emergence of intoxicating hemp has only served to complicate that situation more. So you've got smoke shops, you've got online retailers promoting hemp products as being wellness products, selling them in in sometimes in grocery stores, sometimes in stores that they're they're visiting, and and they think it's on the shelf and it's legal just like any other product that they see on a shelf. What we are doing on that front is we have a small amount of money.
It's only a million dollars a year, so we don't expect to change every Californian's minds or or be able to educate every Californian on this. But it's a a consumer awareness campaign that is focused on the importance of checking to see if your store is licensed before you go.
Speaker 3
And if the cost is less, think that's gonna make a difference to consumers?
Speaker 12
Yeah. So what we end up seeing, in the difference between the legal market and the illicit market is that, there is a cost difference, in the illicit market. It is lower priced than the legal market. Generally, it seems like they they look at what the prices are in the legal market and undercut it by 15% enough to entice a consumer in, but make the most amount of money that they possibly can. Something that was interesting for us last year was we watch some metrics related to the legal market, like the amount of sales that are occurring, the number of units that are sold, and there's been a lot of variability in in the total sales amounts.
But in general, we've seen the number of units sold increase over time After the excise tax was raised from 15% to 19%, we saw one of the first drops in number of units sold. It was pretty small overall, but it was it was notable that it was the first time. And then when that tax rate went back to 15%, it it continued its steady increase. So there is some evidence there that consumers are motivated by by price.
Speaker 31
Seth Christine, LAO. So just to sort of fill in a little more of the picture, I think your your question about sort of measurable sort of shifts in consumption also sort of related to a comment from senator Cabaldon earlier. The department referenced the number of units sold. They post very timely monthly data on that to the point that few few days ago when we checked, they'd already posted March data, which which we appreciate. And so we now have six months of market data from the period after the tax rate went back down to 15%.
Speaker 22
And so if you sort of compare that six month period to a year prior and that to a year prior, you can see, as the department was saying, this sort of slow but steady kind of progress. I think the the most recent six month period compared to a year prior is about two and a half percent more units sold. You go a year back about 3% more units sold. And given the very substantial difficulties in measuring the size of the illicit market accurately, you can reasonably conjecture, I think, that a quite a bit of that represents shifts from illicit to legal consumption rather than growth in overall cannabis consumption. And so just, you know, just to give you a sense of the magnitude of sort of where things have been headed the last couple years.
Speaker 3
My my comments are arise out of the fact that the voters were presented with an impossible project. By design, that proposition was developed by people that wanted to legalize the recreational use of marijuana, and they wanted to satisfy all objections, which is why there's multiple layers of approval, and many people supported it because they figured it was gonna be a bonanza of additional tax revenue. The whole thing was totally disingenuous. I was opposed to it. I voted against it.
And I find myself in a very frustrating situation here in the last several years, not so much this year and last year, but in the previous two years, lots of legislation proposed to try to make the legal market functional. And I voted in favor of every one of those, and it just frustrated the heck out of me. So I I come at this with a very I'm naturally an optimist, but I come at this discussion terribly pessimistic. And in order to accomplish the sort of of things that you articulated from the standpoint of resort of of enforcement would take resources that I don't think we're willing to put to this effort, given the other particularly given our structural deficit over the next few years and other priority. We would have to reduce other priorities in order to fund this by definition because of the structural deficit.
We approved a legal market along with the existent of a existence of a very efficient and effective illegal market. And they can reduce they can continue to reduce their prices if if we eliminated all burdens on the legal market. The problem is the illicit market was established far before that. They would continue to be able to undercut the legal market, and they just make less money. Maybe the only way we could address this, to go back to the voters and and and change was what was originally approved.
I'm getting a little bit off the budget side of this, but the problem is, as I said, in order to attack enforcement as you said and you're right. It would be a multiple dimensional effort that would be hugely expensive. And I have a hard time believing that the the this administration, this legislature would allocate those that amount of resources given that it would have to come from someplace else. So I'm just real concerned that we've been handed an impossible mission drawing on the title of that TV show.
Speaker 12
I think I mean, so you've you even said it that that some of even the the language that we use around this has changed over time. And and I think there is like, when this all started back in 2018 and and in those early years, there was a very different even perception of what the illicit market was. It it was a lot of the the attention at that time was on operators who maybe operated under the prop two fifteen days and then found themselves in a jurisdiction that newly banned under their authority given by prop 64, and then we're sort of in this place of like they were operating illegally because that was sort of their structural situation. And so there was a lot of language even around the illicit market in those early days that was about like bringing people in and and thinking about mom and pop businesses. And and I think in our experience, the evolution of this is that it is no longer a conversation about mom and pop businesses.
These are our organized criminal networks. And so I I do like we said, there's not just one single thing to do here. There are a lot of things that we need to do well in order to affect this. There are resource constraints here both on the department side and then in the larger budget issue that that we understand that you're considering. And I think the best that we can do here is just to come and sit before you and be as transparent as we can about what we are seeing and and what we think we can do there.
Speaker 13
I I very much appreciate that and agree with senator Danilo on on on on on most of what what he said. And and it's you know, we in we had an illicit market before prop 64. That they're created. We just didn't have a funding source earmarked. I mean, the whole market at that point was illicit in some ways, but we didn't have a funding source earmarked.
And it still posed public health and public safety organized crime issues at the time. And we were grappling that like we would deal with any sort of generic crime. And not every crime has a licensed community to pay for its enforcement. We do it because we want to live in a safe, secure, free society. But we have in this in this space now since prop 64 basically said, we're we're gonna spend whatever we have in the enforcement account here, which in the enforcement account is not as big as it should be because we have such a large illicit market.
So the illicit market is winning two times. Right? They're they're they're capturing far more than they should have the overall market, and then they reduce our our our our revenues in order to fight them. And so I I you know, my my view is that we do we we we need to we need to go at those organized crime systems in fundamental ways, and that we should I agree that we we have no money to be able to do this on a long term basis, but we have some near term resources that we should at least be considering deploying on top of the limited resources that are that are being paid by the by the licensure fees and what have you in order to to try to tackle this problem more fundamentally and not get to the point where just accepting, hey, you know, it's we're gonna do incremental changes and hope for the best. You know, I've there are too many of these areas where that's not worked out and very few examples where it has and that's not to and so I appreciate your continuing efforts to do this, but we have an obligation to to to see the to see the bigger picture and to see that just like any other crime, there is a larger public interest and larger taxpayer interest in making sure that we solve it.
Speaker 2
I you know, just to end with saying they're really pressed with all the information and just off the top of your mind, you know, providing us with detailed information about your operation, what you're doing, the needs, the drops, the increases. I don't know if I would be able to retain all that information and, you know, provide it off the top of my head during a hearing presentation, but I appreciate the work that you all do. And I think that, like my colleagues said, I I agree with them in terms of obviously, organized crime is becoming a larger issue, and it's not just with the illicit component of of the cannabis side of things. I think pretty soon and very quickly, if not already, we're gonna see that also with the fentanyl side of things too. I mean, I heard not too long ago that they're the the the the precursors that they bring from other countries are now they're they're finding, like, a way to make those within the country.
Speaker 1
And so if that if that point is reached, we're gonna need a lot more offices throughout all kinds of places. And, again, the illicit side has always existed. And, obviously, I think that we're just gonna continue to have these types of issues moving forward and and and growing. So appreciate the work that you all do. Thank you for the presentation, and we'll continue to move move forward on our agenda today.
Thank you. Open. And I think we are moving now to item number six. We got we got one more. Then we can go on to lunch.
Well, I think you've got two more for us.
Speaker 12
Okay. Our second budget proposal would support the department's cannabis system integrations project. So the department currently relies on multiple legacy IT systems to support licensing and compliance functions. When the department was created in 2021, it brought together three separate regulatory programs each using its own licensing platform. Those systems were built independently and were never designed to function as a single integrated system.
We have since sunset one of those platforms, but we are still operating with two separate systems today, do not communicate with each other. As a result, businesses are entering and maintaining license information in multiple places, and staff are working across systems to piece together information. This creates fragmented data, manual workarounds to collect to connect information, and limitations in our ability to efficiently oversee licensees and compliance activity. This proposal advances a multiyear effort to integrate those systems into a single cohesive platform. The goal is to create a system that provides end to end visibility across businesses operating within the cannabis market, improves data quality and accessibility, and supports more efficient licensing and compliance operations.
This proposal is fundamentally about improving how the department operates. An integrated system would allow staff to make faster, more informed decisions, improve our ability to identify risks and take timely enforcement action, and reduce administrative burden for both the department and licensees. It also strengthens the department's ability to maintain the integrity of the regulated market through better oversight and coordination. So in sum, this proposal is a modernization effort. It moves us from a fragmented from fragmented legacy systems to an integrated platform, supporting the the department's regulatory responsibilities.
And then we also have our acting chief deputy, Sean O'Connor, here who most recently served as our head of our IT division. Great.
Speaker 1
Okay. So we'll go ahead and turn questions to the subcommittee. Vice chair? Okay. I think everyone's ready for the next
Speaker 1
We'll we'll hold this item open, and we'll go ahead and move on to item number seven. And so item number seven pertains to Department of Cannabis Control's requested resources for new hemp enforcement and regulations under current cannabis framework. Please proceed.
Speaker 12
Our third budget change proposal supports the department's implementation of assembly bill eight. At a high level, this proposal request resources now I'm hungry, so I'm This proposal requests resources to target enforcement to support targeted enforcement and build the infrastructure needed to integrate hemp derived cannabinoid products into California's regulated cannabis framework. At its core, a b eight addressed a gap that has allowed intoxicating hemp products to proliferate outside the regulated system and ensures that intoxicating cannabinoids, regardless of whether they come from cannabis or hemp, are treated consistently. Today, these products can be sold outside the licensed cannabis system, often bypassing the testing, labeling, and age protections that are required of cannabis products, creating risks to youth and consumers and undermining the integrity of the of the regulated market. A b eight really does two things.
First, it strengthens enforcement in the near term by closing loopholes and codifying restrictions on sales of THC outside of the regulated market. Second, it establishes a unified regulatory framework for cannabinoids by integrating hemp into the cannabis system by 2028. Our proposal our budget proposal operationalizes that in two ways. So first, for targeted enforcement, there is a gap in the existing infrastructure that addresses enforcement of intoxicating hemp cannabinoids, which is illegal online sales into California. Enforcement in the hemp space is already coordinated across multiple state agencies, each with the clear jurisdictions.
DCC addresses illicit cannabis retailers, CDTFA oversees tobacco retailers, ABC oversees alcohol retailers, CDPH oversees food manufacturing, and hemp can appear in any one of those spaces. This proposal does not duplicate or expand that work. It instead fills a specific gap where there is no dedicated state capacity, which is online sales of intoxicating hemp products into California. To address that gap, this proposal includes a request for a civil enforcement unit to investigate online sales and pursue violations through civil actions. We are also asking for some field testing equipment to support our existing law enforcement operations and allow officers to make real time determinations in the field of whether something is cannabis or hemp, improving efficiency and enforcement outcomes.
Together, these resources would allow the department to complement and enhance existing enforcement rather than expand into areas already covered by partner agencies. Second, the proposal prepares for the fundamental shift in how the cannabis market is regulated. Today, the cannabis market the cannabis market operates as a closed supply chain. Under a b eight beginning in 2028, hemp will be allowed to enter and exit that system through controlled points. This creates new regulatory risks, particularly diversion of illicit products into the licensed market and inversion of products into the supply chain.
It also creates the risk of the emergence of synthetic or chemically converted cannabinoids, which has been a predominant issue within the hemp market. This portion of the BCP request builds the infrastructure to manage those risks, including inspection capacity to oversee entry and exit points, laboratory capacity to detect synthetic cannabinoids, track and trace system updates to monitor movement and identify anomalies, and policy and regulatory development to establish clear standards. This ensures that hemp will be integrated safely into the existing infrastructure without undermining the licensed market. In sum, this proposal ensures the state has the capacity to enforce against illegal activity today, address clear gaps in the current system, and build a framework that protects consumers and supports a stable regulated market over the long term.
Speaker 1
Okay. Thank you for the presentation. Does the Department of Finance wish a comment?
Speaker 3
Just to clarify, the previous enforcement item that we talked about, the first one was attacking while we talked about our multi level enforcement generally, that particular effort was attacking the cultivation of the product more so. Right?
Speaker 12
No. That effort is really just the illicit market in general. So that the first BCP, it's related to investigation of the illicit market in general. So I I think there's some perception that it is targeting cultivation because the recommended office is in the North State or the requested office is in the North State, but it does not target cultivation specifically. It's really creating more infrastructure across that entire
Speaker 3
This effort does though, and maybe I'm misunderstanding this too, seems to be targeting the the sales side of the equation as opposed to the cultivation side.
Speaker 3
In curveball into something that's unworkable in the first place. Sorry.
Speaker 12
If it wasn't already challenging to begin with. So in 2018 with the federal farm bill, hemp was removed from the Controlled Substances Act. And it it first led to an environment where hemp was being sold very openly and mostly derivatives of hemp that were sort of what we would refer to as more synthetic versions of THC, like Delta eight THC. But as over time as there was very little federal enforcement, that market became emboldened across the nation. This is not a California specific challenge.
And so, people started taking hemp, extracting CBD, converting it to delta nine THC, making novel forms of cannabinoids with hemp, and sometimes calling products and calling plants hemp when they were never hemp to begin with and they were really just illicit cannabis. So what we've seen develop over time is this environment where products are called hemp, but they really, their ultimate function for a consumer, are very similar to cannabis products. Very intoxicating, and then some with bad side effects if the conversion processes were occurring. So because this is a national issue and not just a California issue, what we now see is companies that are based in other states that make these products that sell them into California. So about a year and a half ago, there was an effort within California by the Department of Public Health to adopt emergency regulations that addressed sales of hemp products within California, but we still see a significant amount of online sales from those companies, mostly, again, outside of California selling into California.
So that's the the piece that is relatively new and that is not well addressed at this point that we are trying to address.
Speaker 3
It seems like generally enforcement in this area is sort of like a game of whack a mole.
Speaker 1
Okay. Seeing that we have no other questions at this time, we will go ahead and hold this item open and move to the next agenda item, item number eight.
Speaker 1
Thank you so much. Then we can go to lunch. Exactly. Well, I don't know. Can we?
Will I let you all? I don't know. Yeah. We still got public comment. Got a little excited there.
Yeah. I'm sorry? Okay. We could just go straight to the item. Okay.
Great. Overview.
Speaker 23
Good afternoon. Madam Chair, members of the subcommittee, and staff, I'm Anne Hawley, the executive director of the Cannabis Control Appeals Panel. And I'm joined here today by Christopher Phillips, chief counsel for the panel. Today, I'll address the panel's budget proposal for ongoing resources and anticipated workload. The panel requests 3,400,000.0 to sustain operations, maintain staffing, and carry out its mission.
This request supports 12 positions and operational expenses. Since its establishment, the panel has operated with limited term funding, and the proposal offers an opportunity to establish baseline ongoing resources for the panel. The stability, this stability is essential for the panel to effectively fulfill its responsibilities under proposition 64. The panel's caseload has been limited in recent years because of various underlying factors. First, statutory deadlines for phasing out provisional licenses over which the panel has no jurisdiction were extended, giving more time, to meet annual license requirements.
And then second, except for certain local equity retailer applicants, all provisional licenses expired on 01/01/2026. All licensees are now required to hold annual licenses which do fall under the panel's jurisdiction. Today, only 14 provisional licenses remain,
Speaker 9
to close to 7,700 active annual licenses. This shift has significantly expanded the number of licenses with full appeal rights before the panel, and we currently have two cases on the docket and expect the caseload to continue to expand. Some comparisons have been made between the panel and other state appellate bodies. Unlike the ABC appeals board, which has more than seventy years of presidential case law and well established legal framework, the panel operates within a much newer and evolving statutory and regulatory structure. With no presidential case law to guide future decisions, the panel must work through novel legal questions without prior decisions to rely on or guide decision making.
Speaker 23
This significantly increases the level of research, analysis, drafting required for each case. Ongoing funding will ensure that the panel has the resources to perform its critical role in providing due process and independent review. Thank you for the opportunity to present today, and I'm pleased to answer any questions. Thank you.
Speaker 1
Thank you for your presentation. Do we have a comment from Department of Finance?
Speaker 20
John Parsons, Department of Finance. Prop 64 established the panel to serve a permanent function to hear appeals by cannabis license holders With provisional cannabis licenses largely phased out as of this year, the governor's budget includes permanent funding at a baseline level to assist with the panel's workload and alliance with their permanent statutory responsibilities. Thank you.
Speaker 16
Hi. Yes. Heather Gonzales with the LAO. With respect to this item, we recommend that you modify the governor's proposal by providing funds to the panel on a three year limited term basis rather than ongoing. We recommend that you direct the panel to provide you with a workload justification and comparative analysis that shows how the panel's caseload, task, position, salaries, and budget compares to similar entities in state government.
This could include the alcoholic beverage control appeals board and any other state entity the panel deems appropriate. And our reasoning for this is as follows. First, although, the panel has been in existence for many years, it has only recently begun hearing appeals. Their first hearing was this March, and a second appeal is scheduled, I believe, for May. It's been argued that the reason this panel has had so few cases is because there were so many provisional licenses, and provisional licensees do not have appeal rights.
Speaker 19
If this reasoning is correct, then with the phasing out of most of the provisional licenses as of this past January, we should expect to see more cases reaching the panel, and indeed, we now have two. We do not know, however, what an average annual workload will look like yet, such as the number of cases, their complexity, or the actual amount of staff time and resources that will be needed going forward. Additionally, the sim a similar type of entity, the alcoholic beverage control appeals panel, has fewer staff, a smaller budget, and here's more cases. Now it can be quite tricky to compare government entities because even those that appear similar can have qualitatively different workloads, so we are not recommending that the legislature simply align these entities. Rather, in a few years, after we know better what the true workload will be, we recommend that you seek a comparative analysis that will allow you to benchmark the panel's workload, assess qualitative differences, and make any desired changes before funding is made permanent.
Speaker 1
Thank you for your presentation. I'm going to go ahead and just defer my questions and comments to my good colleague from West Sacramento.
Speaker 13
Thank you, madam chair. I I I believe LAO is 1000% correct on this question. The the the amount of money that that is we budgeted for the for for the panel and particularly for the members, just be be be to be very direct, is is not consonant with the with the the near term or the long term duties. And it's it's and there are many, many, many, many examples across state government where the cases are more numerous, more frequent, more novel, more complicated across a much wider range of topic areas. ABC is is a is a it is a simple the Alcoholic Beverage Control Board is an example, and I and I and I take seriously the the board the the this panel's contention that ABC might be simple and with a strong body of precedent.
But, you look at the at the at the water boards, maybe even a better example, both at the state level where the the state water board members hear a variety of of appeals for which they issue written decisions across a dizzying array of topic areas. Water rights appeals, water quality water quality control permits under the state and federal law, on and control plans, on and on and on, meaning every single month for days in order to do that. Their compensation is the same as as this board. Might be less. Regional I I the regional water boards, I served on one every single month for two days of dozens of hearings about sewer sewer plant appeals, water quality appeals, fish, chemistry, biology, federal and state law, and precedents.
Incredibly complicated, wide scoped. The composition there is $250 per meeting. A $180,000 is so out of per year is so out of scope for the number of of of appeals that this board is hearing that I think Elio's recommendation makes a lot of sense. In in in part because of the the testimony also by the panel, which is if the if the if part of what's at stake at issue here is the development of a body of precedent, that's not a permanent that's not a permanent task. And so, the notion of spending, you know, taking the first three years with the as a limited term approach to do that, to start to develop that that body of precedent has some merit.
I don't the one area where I said a 100%, maybe 98%, agree with Elio because I don't the where I would disagree is it's not the right period to benchmark what the long term is by itself. But it's clear to it seems to me very clear that the bench that the that the long term is not a a board that is earning a $180,000 to hear a handful of appeals in the same domain over the long run. It's completely out of scale to the rest of to the rest state government and to equivalent appeals board. So, you know, I I I would have a a great deal of concern about approving the the permanent allocation or an allocation at this this level. I understand what the statute is here, but from the prior items, the the funding in the cannabis control account, you know, we have we definitely have higher priority uses for that than than than $1,000,000 a year in compensation alone, not counting benefits for the appeals board that's hearing a half a dozen optimistically appeals during this year.
That's just not that that's completely out of scale to to the work. And so I I I have significant concerns about this proposal for when it it and I hope the May revise will address them and that that that the administration pays attention to the very legitimate concerns and analysis that the LAO has presented here today.
Speaker 1
That's why I didn't comment or question. He speaks for us, I guess, this item. Okay. Well, that that wraps up, this item. We'll go ahead and hold this item open, and we'll move on to public comment on items one through eight.
Now's your time, folks. Items one through eight, comment. One through eight. Thank you so much.
Speaker 11
Good good afternoon, chair and members. Rebecca Marcus of the Golden State Advocacy Group on behalf of the California certified organic farmers or CCOF and the California Climate and Ag Network in support of items one and two. We support the governor's continued investment in farm to school and the allocation of prop four funds. On behalf of CCOF, I would like to request a $15,000,000 investment to the California Underserved and Small Producer Program or CUSP. At CDFA.
Speaker 24
This is a crucial safety net program for farmers facing extreme conditions due to climate change. Additionally, CCOF is requesting $50,000,000 $15,000,000 to fund the healthy food procurement program at CDFA as outlined in assembly member Wilson's AB seventeen thirty one. This is an important complement to the farm to school program to link our local food producers with our schools. Thank you.
Speaker 17
Madam Chair Chris McHalee here on behalf of Fullwell, a nonprofit advocate for sustainable food. They support the $15,000,000 recommend or sorry request from AB seventeen thirty one by Assembly Member Wilson. We also think that this will help schools comply with last year's Assembly Member Gabriel's bill phasing out processed foods in schools. Thank you, madam chair.
Speaker 18
Hello again. Martin Bork, Ecology Center. Apologies for my earlier confusion. Appreciate Senator Cavaldo and your questions about market match and the senate program. I'm here to say on behalf of 182 organizations that we strongly support this budget proposal from senator Becker- to make this program ongoing and also to make it available at every market throughout the state.
It's a ten year old program and- it's proven success And every dollar spent on fresh fruits and vegetables is matched at farmers markets. It goes right into the pockets of small, underserved farmers. Thank you.
Speaker 25
Good afternoon. Thanks for the opportunity to speak. My name is Josh Hosnik, with Urban Village. We operate 10 farmers markets around the bay. I'm here to speak in favor of support of CNIP funding the market match program.
There's a few measures floating around right now to address hunger. I know that you've gotta pick and choose. This one really stands apart. And one, it it pulls down federal money. It's clear of confusion from earlier.
The farm bill that's currently moving through the federal legislature has GUSNIP funding intact, and it's really important that we bring those federal dollars down. The state of California missed one of the RFPs in '24 because the state didn't have the funds allocated on time. So this budget cycle is really, really important. 25,000,000 distributed last year went in the pockets of a thousand small farmers. Madam chair, almost half of that money went back to Fresno and Tulare.
Speaker 12
So your counties represented huge in receiving that money. That money in small farmers pockets has a three to one economic multiplier effect in those rural economies. So we're really getting a lot of bang for our buck here. With market match, you know, every every dollar spent is is food on on someone's table and gas in a farmer's tank. Thanks so much.
Speaker 32
Hi. I'm Alma Wilcox speaking on behalf of Alchemist Community Development Corporation, a Sacramento based nonprofit, about the funding request for the California Nutrition Incentive Program, which funds MarketMatch. I manage our CalFresh at Farmers Markets and MarketMatch program and see every week the difference that these programs make to California small farms and food insecure customers. MarketMatch helps households buy fresh fruits and veggies directly from certified local growers. And since 2020, MarketMatch usage has grown two and a half times over.
Speaker 26
And in just 2025, we directly facilitated $1,700,000 in CalFresh and MarketMatch transactions at just nine Sacramento County Farmers markets. With current CNET funding, only 40% of the farmers market statewide can offer MarketMatch. And we don't just want this program to continue, but to have the resources to support more California farmers and more hungry families. For these reasons, I support the full budget request. Thank you.
Speaker 21
Thank you, madam chair. Good afternoon. Darby Kernan on behalf of Public Health Institute and their program Roots of Change. We wanna, thank senator Cabaldon for his comments earlier about the importance of market match program. I'd like to align my comments with our colleagues in support of the CNIP which supports market match and the need for additional funding to maintain the program.
Speaker 16
Good afternoon madam chair and members Taylor Trifeau on behalf of a variety of agricultural associations. Like to comment on item three. We really appreciate the the questions and the thoughtful discussion about vacancy eliminations. Having an appropriately staffed CDFA is essential for food safety, pest and disease, animal health, and ultimately national food security. Some of these positions proposed for elimination are in rural areas.
Speaker 28
They serve very specific needs of the farming population. So they're difficult to fill, but that doesn't make them any less important. Many of the positions are also funded through special funds, not general funds. So the state is not going to see a savings as a part of this. And, ultimately, the farm community is continuing to assess themselves.
So the the revenue is gonna continue to come into the state, but we will not be able to finance an actual position. That becomes a problem. And so considering that, we're requesting you reject item three at
Speaker 16
Hi. I'm Gail Delhant with Western Growers. And to use senator Nilo's words, what she said.
Speaker 17
Hi. Elise Landman here on behalf of Dairy Institute, commenting on item three. We are concerned in the impact these position cuts would have on CDFA's rapid response systems that protect livestock from threats such as avian influenza and other contagious pathogenic viruses. Rapid response systems are crucial to protecting livestock and keeping the supply of milk flowing to dairy processors. Thank you.
Speaker 35
Good afternoon, chairing members. My name is Yamile Perez Aragon. I'm with Community Alliance with Family Farmers or CAF. We represent over 8,000 small and underserved farmers across California. I'm here to urge this committee and the senate, to fund two vital safety net programs for our small farmer community.
Speaker 30
First, the local food purchase assistance program or LFPA. This is a unique program that builds bridges between small farms and food banks across California. It provides a stable market to small farmers, and it feeds families. Unfortunately, we're seeing over a $100,000,000 in federal cuts to institutional procurement programs, including LFPA. So the state must step up and resource its lifeline.
We respectfully request $45,000,000 in state investment to keep, this bridge and to keep this program going. Second, the California Underserved and Small Producer Program or CUSP. This is the state's only climate disaster safety net for small and underserved farmers. To date, CUSP has delivered over $24,000,000 in direct emergency relief. It helped more than 1,600 farmers during the drought alone, and 75% of those funds reached the smallest, most vulnerable farmers.
We need a $15,000,000 allocation from GGRF or general funds to keep this program ready for the next disaster. Finally, we support $14,800,000 in prop four investments for equipment sharing. Thank you.
Speaker 31
work with Fresh Approach, which alongside CAF and the California Association of Food Banks, works to administer the LFPA program. This is an incredible program that puts local farmers first. We support over 850 local farms, 45 food hubs and aggregators, as well as distributing this to over 50 food banks and distribution sites. This program touches every corner of California. And with that, we're respectfully requesting $45,000,000 to continue to care for California and have a program that supports multiple solutions against these multiple cuts that we're facing.
Thank you.
Speaker 32
Hello. My name is Jacob Weiss. I'm the general manager of Spork Food Hub and Fiery Ginger Farm, which is a produce distributor owned by farmers in West Sacramento. Yeah. You're probably familiar.
And also in Davis. We work with over a 100 farmers across the entire state serving food banks through the LFPA program, as well as the state correctional system and school districts. The impact of the funding from LFPA is it's insert it's incredible. Like, I can give countless stories of farmers who are beginning farmers and trying to enter this through their own version of the American dream, and this is a lifeline. This this is a a first step so that in thirty years we have farms in California.
We lose almost 5,000 farms every time they do the ag census in the state. And, you know, the stories that we hear from our farmers of being able to purchase additional land to grow food for food banks and school districts. We have a farmer in Gwenda, Yanez Farm, who purchased land last year and is now growing food. We have a farmer in Salinas, California who who leased an additional 10 acres to grow food for this program and school districts and prisons. We have a farmer in Madera, California who grows mandarins for the food banks, for the state prisons, for school districts.
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And these are real people and real money, so I think viewing LFPA and the funding for CDFA's Farm to School Program as investments is is a really important way to view how this can help propel California forward in the future. So thank you for your consideration.
Speaker 1
Good afternoon. My name is Maria Gomez Contreras. I'm the executive director and operator of Esperanza Community Farms and Esperanza Food Hub. We have been participating in the LFPA program in three counties, Monterrey, Santa Cruz, and San Benito Counties. In the last year and a half, we've started working with 30 growers, former farm working farm workers who are now operating their own business.
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So if you could imagine those sort of growers behind me and their kids, and the money that's been going into their pocket for them to be able to grow their acreage, double it, in some cases, 10 to 20. The the bills that they've been able to pay in the wintertime when in the past years they've not been able to have that kind of economic stability. On the other end, the 300 member families who receive a box of all a 100% organic, very fresh produce. Those are the families that are gonna be losing their basket, and they've been receiving it for well over sixteen months. And it's it truly has been a lifeline for them.
The creative the thing that I'm really excited about is that we we've been able to pair this with the specialty crop block grant to be able to provide technical assistance to the same growers, and we've we've connected them to schools so that the impact that this LPA program funding is having is gonna it's it's establishing a network of of growers that are collaborating to pull their produce to deliver to school districts. And before that, they weren't able to. And so we do need more time, so I I support the $45,000,000 that we're requesting out of the general fund. Thank you.
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Hi. Good afternoon. My name is Jenna Muller. I'm from Fullbelly Farm in Western Yolo County. We're a certified organic diversified farm.
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We employ over 80 people year round. And I'm also here to urge you to fund the $45,000,000 request for LFPA. I probably don't need to tell you, but, you know, farming is a difficult profession even in the best of times, and we're not in the best of times. We're facing very uncertain weather challenges, water challenges, rapidly rising prices. And so this program provides us with a mechanism to get our food onto the tables of folks who may otherwise not have access to high quality, healthy organic produce.
So for our farm alone, these dollars have purchased over $230,000 worth of produce that's gone to food banks, which is really amazing. And that for us is a really impactful amount of money that we can then invest in our our soil, our workforce, our communities, and it benefits all of all of Californians who really deserve access to to really healthy produce. Yeah. So it really will help us weather these uncertain times, and we would appreciate and urge you to fund the $45,000,000 request. Thank you.
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Good afternoon, chair members. My name is Shira Spector. I'm here on behalf of Fenton Strategies for the office of Kat Taylor, Tomcat Branch LLC, and more than 225 members of the school meals for all coalition. On item one in strong support of the governor's proposal for $25,200,000 in ongoing funding for the office of Farm to Fork and the Farm to School Incubator Grant Program. The program is helping to realize the full potential of California School Meals for All program by reducing barriers for schools to serve freshly prepared, locally grown, and sustainably produced school meals.
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I'm also here to urge the state to provide bridge funding to Save the Farms Together, the LFPA program, and keep the California Underserved and Small Producers program funded. Federal cuts threatened over $100,000,000 in farm to institution programs, and without this $45,000,000 state bridge, these partnerships will collapse just as SNAP is cutting. SNAP cuts are increasing demands on food banks. CUSP provides over $24,500,000 in direct relief to 1,652 farmers during drought and extreme weather events, with 72 to 76% of funds going to small and under underserved farmers. We respectfully request $45,000,000 to save farms together and $15,000,000 to sustain cusp.
Thank you.
Speaker 22
Hello, chair and members. My name is Oscar Sandoval. I'm the policy manager with the Center for Healthy Communities. And it's always nice to see other Central Valley people here. So thank you, chair Ortello.
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Our organization is primarily known for our SNAP and WIC advocacy work with our state's public colleges. However, we're here today to speak in favor of Market Match and CNIP. We also do a lot of work since we're housed at Chico State within the Butte County area to make farmers markets more accessible. In 2025 alone, we did a 136,000 in CalFresh benefits redeemed at farmers markets. We also helped with a 133,000 in market match incentives that local residents spent on Butte County Farmers Markets.
We also helped with 269,000 that went directly into farmers part farmers pockets. And this was a total of 399,000 in terms of total economic benefit impact Butte County. So, obviously, we want we're in strong support of these programs being funded statewide and just being funded in general. So we thank you for your time today, and I look forward to continuing to work with you. Hi.
Speaker 26
Good afternoon. My name is Kang Vang. Oops. Okay. I'm the owner and founder of Fresno Bipoc Produce Inc, a food hub in Fresno, and I work with and have helped over 200 small farmers.
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And I'm here today to urge you to increase and continue funding for LFPA and CUSP programs. These programs are critical lifelines for our small and underserved farmers. They have helped them not only to survive, but to grow as a business. And I've seen firsthand through these two programs, farmers were able to invest in their businesses. For example, buying new equipment, buying more supplies.
So investing in LFPA and CUSP is not just to support, you know, the small farmers. It is investment in equity, food security, and building resilient local food systems and economies. So I ask you again to prioritize and expand these programs for our small farmers. Thank you.
Speaker 25
Hi. My name is Jesus Castellano. I'm farming a stone fruit and grapes in Dinuba. And I like the farmers together stay on because we have a lot of fruit still there in the trees, and we need to move because we show our money and see what it can do because the pumps dry too, and there's a lot of money to make a new pumps, and we need a quite a bit of money. Thank you.
Speaker 23
Hello. My name is Ryan Gosser. I'm a farmer, and I'm also owner and producer of a food hub in Sonoma County called Feed. It represents 35 to 40 local producers. Most of
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organic. And we definitely have seen the impact of the the lack of funding for the local food purchase assistance program. I'm in here to encourage to to help bridge the $45,000,000 to help the co op itself provides fresh organic local produce for those who are in need of healthy and and enjoyable food. So there's nothing better than when you're sharing your love and your passion with the with the the community and getting to see the smile on their face when they're enjoying the product that you spend so much of your time growing, managing, and working with the earth for the people. So thank you for your time.
Speaker 5
Hello. Good afternoon. My name is Maddie Rohner, and I'm the general manager of the Tahoe Food Hub. We're located in Truckee, California in Nevada County. I'm also here to urge funding for LFPA.
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Just in our small corner of the state, this program has allowed us to support 34 different small farms in eight different counties, as well as feed over 700 different families in the Truckee and North Lake Tahoe area. The program helped bridge the gap for farmers during the slower winter season, and also provided much needed food for folks after we had a subpar winter, very long shoulder seasons, a lot of people were struggling financially, as well as being impacted by federal snap cuts. This program is incredibly impactful, keeping dollars within the community, allowing farmers to invest in their infrastructure and staff, as well as feeding people this amazing high quality produce that they deserve. And it's also been incredibly impactful for us as a food hub to be able to expand our operations, to be able to hire new staff, to be able to procure produce at a lower cost for school districts as well through bulk ordering. So I highly encourage you guys to include the $45,000,000.
Thank you.
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afternoon. I'm Andrea Chew, general manager of the natural trading company in New Castle. We're an organic farm growing vegetables and fruit on 40 acres, and we're one of the many small family farms in Placer County that have been farming for generations. We're proud to work with Maddie at the Tahoe Food Hub and be one of the farms that supply them food. LFPA funded purchases from partners like Sierra Community House Pantry have been a lifeline for our farm and our community.
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They've helped offset losses from years of economic uncertainty, and it's allowed us to create stable year round jobs and keep fresh organic food flowing to those who need it most. So I urge you to fund LFPA in this year's budget and to fund the $45,000,000 request so that small farms like ours can continue their longtime farming traditions and continue to feed their communities. Thank you.
Speaker 10
Hello. I'm Helen Dodd representing Farm to People, a Los Angeles food justice nonprofit in senator Smallwood Quivas' district. We're requesting $45,000,000 in general funding to save LFPA. Since 2023, we've been paired with the second largest food bank in the nation. And with that scale of demand, we've worked with over 80 local farm partners, some of whose farms were saved by LFPA.
For example, Mariela in Riverside extended the lease on her family's farmland, and Dave also in Riverside was able to stabilize an even crop plan all because LFPA provided guaranteed market access. Simultaneously, farm to people facilitated the flow of just harvested whole fruits and vegetables to mothers, kids, and families in LA struggling to make ends meet. Overall, LFPA's impact is clear from the 8,000,000 pounds of fresh food distributed throughout Los Angeles. Thank you for considering this critical food access initiative.
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Good afternoon, member, chair, and members. My name is Beth Smoker. I'm the policy director with the California Food and Farming Network. And I'm here in support of not I do support LFPA and CUSP and CNIP and Farm to School, a little break in the testimony you've been giving. I'm gonna speak in support of the 14.8 million for CDFA's Tribal Food Sovereignty Program and Prop four.
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California has the largest Native American population in the nation with over a 154 recognized and unrecognized tribes. Tribal communities were forcibly displaced by our government to remote locations with little access to grocery stores and limited land to harvest from, resulting in deep food insecurity, serious public health consequences, and the erosion of land tenure. This program would be CDFA's first designated designated program specifically for tribes in its one hundred and seven year history. It's time. By investing in indigenous led solutions rooted in centuries of traditional ecological knowledge, This program will build climate resilience and food security, not just for tribal for communities, but for all Californians facing climate crisis.
Thank you.
Speaker 27
Good afternoon. Josh Wright with the California Association of Food Banks. We wanna voice our support for the LFPA. The LFPA greatly increases food banks' ability to access varied and high quality produce like strawberries, mushrooms, and avocados. Our clients report to us that the foods from the LFPA improved long standing health issues and their quality of life.
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And we also want to voice our continued support for full funding for the farm to school program. We are proud to support these programs which help California's farmers provide school education and enable our food banks to better serve their communities. Thank you.
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Good afternoon, chair and members. Abby Halperin from the Center for Ecoliteracy. I was in support of ongoing funding for farm to school. I was going to talk about the blueberry farmer in the Central Valley that was saved by this program, about the food hub in Sacramento that grew from serving four districts to over 40, and about how LAUSD doubled its local procurement to over 4,700,000 from local farmers. But instead, I wanna also address some of the specific concerns that you all raised in conversation today.
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Equity was a big theme I heard in your conversations, and it's been built into the design of the program. In the scoring rubric for last year's grant, 25 to 35% of the points were directly based on the community need, ensuring that this program targets the schools and farmers who need it most, and it's working. 80% of the schools served are title one, and a 100% of the farmers in last year's grant are prioritized food producers. On evaluation, the comments you raised, this program has been extensively evaluated, and the results show that it's hitting or exceeding many of the metrics outlined in the Farm to School Roadmap. And on systems change, Farm to School is not about just one issue.
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It's supporting our families, our farmers, students, their education, and their health. And in a tight budget year, we should prioritize programs like Farm to School that have multiple benefits and are making the most of the state's incredible leadership on child nutrition programs. Thank you so much.
Speaker 5
Good afternoon chair and members. Sarah Brennan from the Weidmann group on behalf of next gen California in support of the 25,200,000.0 in ongoing funding for the office of farm to fork and the farm to school incubator grant program as proposed in the governor's January budget. Farm to school prioritizes students in underserved communities ensuring that those who rely on school meals have access to fresh and healthy food and it's working. In 2024 eighty percent of participating schools were title one because of lack of access to healthy foods in most acute and low income communities and communities of color. This program plays a key role in addressing long standing inequities while helping schools move away from heat and serve model that and more towards freshly prepared nutritious meals.
By investing in farm to school, California is helping ensure all students have the healthy food they need to learn and thrive. NextGen also supports establishing a permanent ongoing appropriation for the California nutrition incentive program enabling all certified farmers markets to match CalFresh spending on fruits and vegetables and expand access to the nutrition incentives for WIC participants and seniors making healthy California grown food more affordable in communities that need it the most. Thank you.
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